Search and Seizure: With or Without a Warrant?
02 May 2013
Posted by: Author: Heinrich Louw
Source: Heinrich Louw
While search and seizure procedures relating to general tax matters have recently received an overhaul by the introduction of the Tax Administration Act, No 28 of 2011, similar provisions in the Customs and Excise Act, No 91 of 1964 (Act) relating to search and seizure have remained static for a very long time.
A recent case in the Western Cape High Court has significant implications for SARS’s power to conduct search and seizure operations in terms of the Act. The judgment in Gaertner and others v Minister of Finance, the Commissioner of the South African Revenue Service and others (case no 12632/12) was delivered on 8 April 2013. The facts were briefly as follows:
The taxpayer’s business had bought (and imported) several consignments of milk powder from a Canadian company. The Canadian company sued the taxpayer’s business for non-payment in respect of the sale. The invoices relating to the sale were attached to the summons. The Canadian company (potentially out of spite) also delivered a copy of the summons to the South African Revenue Service (SARS). SARS compared the invoices attached to the summons to the invoices presented by the taxpayer’s business on importation for purposes of customs duty, and found that there were discrepancies. The discrepancies indicated that the taxpayer had under-declared the value of the imported milk powder, possibly by fiddling with the invoices.
SARS subsequently conducted certain searches at the taxpayer’s business premises as well as at his private residence. SARS did so in terms s4(4) of the Act, which allows for such searches without a warrant or consent.
Between 20 and 30 officials arrived at the taxpayer’s business premises (in batches) and informed the taxpayer that they were there to inspect his business’s licenced warehouses. The taxpayer was under the impression that it was a routine search. The taxpayer was later informed that they were actually investigating under-declaration of customs values, but no further details were provided.
When the taxpayer asked whether the officials had a warrant they informed the taxpayer that it was a search in terms of s4(4) of the Act and that no warrant was required. The officials subsequently
embarked on their search. They made copies of certain documents but did not provide the taxpayer with an inventory of what was copied. The officials accessed the business’s computers and copied
electronic data. The officials also removed the milk powder from the warehouse.
The next day officials returned and made mirror images of the server, various business computers, and the taxpayer’s personal computer and iPad, among others. These computers obviously contained data beyond the scope of any investigation into fraudulent invoices. The officials refused to define the parameters of the search.
After not having found what they were looking for at the business premises, 14 officials conducted a search at the taxpayer’s private residence. They did not provide the taxpayer with any reasons for the search nor did they inform the taxpayer of what they were looking for. They searched his entire home, went through his personal belongings and accessed his home computers.
The taxpayer applied to the Western Cape High Court for relief and asked for an order declaring that s4 of the Act is unconstitutional, that the searches were unlawful because of how they were conducted, and that SARS returns all items and electronic data taken or copied.
After instituting the said legal proceedings there was some bargaining between the taxpayer and SARS and SARS offered to return the items and electronic data taken or copied (which it did) and also to pay the taxpayer’s legal costs. However, SARS did not concede (at least not at that time) on the issue of s4 of the Act. The matter therefore proceeded to court.
Section 4 of the Act provides that:
(4)(a) An officer may, for the purposes of this Act:
(i) without previous notice, at any time enter any premises whatsoever and make such examination and enquiry as he deems necessary;
(ii) while he is on the premises or at any other time require fromany person the production then and there, or at a time and place fixed by the officer, of any book, document or thing which by this Act is required to be kept or exhibited or which relates to or which he has reasonable cause to suspect of relating to matters dealt with in this Act and which is or has been on the premises or in the possession or custody or under the control of any such person or his employee;
(iii) at any time and at any place require from any person who has or is believed to have the possession or custody or control of any book, document or thing relating to any matter dealt with in this Act, the production thereof then and there, or at a time and place fixed by the officer; and
(iv) examine and make extracts from and copies of any such book or document and may require from any person an explanation of any entry therein and may attach any such book, document or thing as in his opinion may afford evidence of any matter dealt with in this Act.
(b) An officer may take with him on to any premises an assistant or a member of the police force.
(5) Any person in connection with whose business any premises are occupied or used, and any person employed by him shall at any time furnish such facilities as may be required by the officer for entering the premises and for the exercise of his powers under this section.
(6)(a) If an officer, after having declared his official capacity and his purpose and having demanded admission into any premises, is not immediately admitted, he and any person assisting him may at any time, but at night only in the presence of a member of the police force, break open any door or window or break through any wall on the premises for the purpose of entry and search.
(b) An officer or any person assisting him may at any time break up any ground or flooring on any premises for the purpose of search and if any room, place, safe, chest, box or package is locked and the keys thereof are not produced on demand, may open such room, place, safe, chest, box or package in any manner.
It is quite evident that these provisions give SARS officials an unrestricted power to enter any premises without warrant and without consent for purposes of administration of the Act. The provisions clearly have the potential of severely infringing on a person’s right to privacy, and also other rights such as dignity. For example, they allow for a SARS official to enter a taxpayer’s private home in the middle of the night, without a warrant and without prior notice, and if a police officer is present, to enter the
premises by force.
By the time the matter was heard in court, SARS had effectively conceded that the provisions could be constitutionally invalid but the extent of such invalidity remained disputed. SARS insisted that it should have unrestricted powers to perform warrantless searches at designated premises (such as customs warehouses), whether those searches are routine searches (to generally check compliance) or non-routine searches (targeted searches based on suspicion).
The taxpayer contended that in the case of a non-routine search a warrant should always be obtained. The court agreed that nonroutine searches without a warrant are generally unacceptable but held that such searches will be justifiable where designated premises (such as warehouses and rebate stores) are concerned, and only to the extent that the search concerns the licensed business activities at
the designated premises.
The taxpayer did not specifically pursue the issue of routine searches, but the court held that warrantless routine searches will be justifiable where registered persons and licensees under the Act are concerned.
It further also appears that it was conceded that a warrantless nonroutine search of someone’s private home would not be justifiable.
Having come to the above conclusions, the court found it necessary to provide officials with guidelines as to how to conduct warrantless searches in a manner that would balance a taxpayer’s right to privacy
with SARS’s interest in the administration of the Act.
The court offered the following guidelines –
- Entry should take place during ordinary business hours, unless the matter is urgent on reasonable grounds;
- The persons in charge of the premises should be informed whether it is a routine or non-routine search. If it is a nonroutine search for which no warrant is required, the official must inform the person in writing of the purpose of the search. Where the matter is urgent on reasonable grounds and the person cannot be informed in writing the person must be
- Only those officials whose presence is reasonably necessary to conduct the search should enter the premises (presumably to curb any display of 'rampant triumphalism');
- The person in charge should be entitled to be present and observe all aspects of the search;
- If anything is removed from the premises the person in charge is entitled to an inventory of the items so removed and if anything is copied the person is entitled to a list of all such
material copied; and
- Decency and order should be strictly observed during the search.
The court did not make any order as to the unlawfulness of the particular searches conducted at the taxpayer’s business premises and his private home because the parties had already effectively settled the matter out of court. SARS returned the items and electronic data taken
or copied and offered to pay the taxpayer’s legal costs.
The court did however declare that s4(a)(i) and (ii), s4(4)(b), s4(5) and s4(6) of the Act are inconsistent with the Constitution and invalid. This declaration of invalidity was not made retrospective and the court gave the legislature 18 months to remedy the defective provisions. As a temporary measure, the court’s conclusions and suggested guidelines have to be read into the Act.