Island View Storage (Pty) Ltd v CSARS - HC 12262/2012 KZN - 8 April 2014
24 June 2014
Posted by: Author: Lesedi Seforo
Author: Lesedi Seforo (SAIT Technical)
This case considers whether rebate
item 624.50 in schedule 6 to the Customs and Excise Act No. 91 of 1964 ("the
Act”) is applicable to a taxpayer who had ethanol stolen from their storage
facility, which was licenced by the South African Revenue Services (SARS) as a
customs and excise warehouse in terms of section 19 and 21 of the Act.
Rebate item 624.50 in schedule 6 to
the Act provides for a rebate of duty where goods which are subject to excise
duty are proven to have "been lost,
destroyed or damaged, on any single occasion in the circumstances of viz major (i.e.
an act of God) or in such other circumstances as the Commission(er)…deems
exceptional while such goods are…in
any customs and excise warehouse.”
The case alternatively considers
whether the taxpayer is entitled to a section 76(2)(d) refund.
This provision requires the Commissioner
to consider any application for a refundfrom
any applicant who contends that he has paid any duty or other charge (under the
Act) for which he was not liable because the goods concerned were damaged,
destroyed or irrecoverably lost by circumstances beyond his control prior to
their release for home consumption.
Island View Storage (Pty) Ltd (IVS)
conducts business as a third party liquid bulk storage facility within the port
of Durban. The storage facilities are licensed by SARS as a customs and excise
storage warehouse in accordance with the Act.
On the 29th June 2009 IVS
discovered a loss of 35 839 kg of ethanol from its warehouse. After conducting
an investigation into the matter, it was discovered that the ethanol was stolen
by certain individuals in collaboration with one of its employees. On 1 July
2009 IVS reported the theft to the police, who traced approximately 13 000 kg of
the ethanol to a storage house in Pinetown. On 20 July 2009 the said ethanol
was moved back to IVS’s premises. Theft of the ethanol was subsequently
reported to SARS on 24 July 2009.
On 31 May 2010, SARS addressed a
letter to the applicant demanding payment of R3. 46 million in respect of
excise duties in terms of section 20 (5) of the Act. This provision calls for
the payment of excise duty to SARS where goods stored in a SARS designated customs
and excise storage warehouse are subsequently removed from the warehouse.
Section 20(5) is however subject to any item in any Schedule to the Customs and
The dispute between SARS and IVS was
over whether or not the stolen ethanol qualified for rebate item 624.50 in
Schedule 6 to the Act.
IVS’s alternative contention was
that in the event the court deems the rebate to be inapplicable, the duty
qualifies for a refund in terms of section 76(2)(d) of the Act.
SARS’ argument was that the Schedule
6 rebate was not applicable because while IVS had furnished a detailed
chronological sequence of events leading up to the loss of the ethanol, they
had failed to furnish the most crucial piece of information: the actual
underlying cause of the loss incurred. Because of this, the Commissioner
considered the loss to be mysterious and not to have occurred under exceptional
According to IVS, an employee on
duty the evening of the theft had fallen asleep while on duty. When later confronted
by his superiors, he confessed to being a participant in the theft. A
disciplinary enquiry was held and he was dismissed. IVS representatives
presented a piece of paper to the court purporting to be a statement from the
guilty employee where he admitted to the course of events as presented by IVS.
The court did not look favourably
upon the fact that no affidavits were presented from the guilty employee or the
colleagues to which he had supposedly confessed. After an analysis of all the evidence, it was
held by Chili AJ at paragraph 14 that:
circumstances surrounding the loss of the said ethanol…are in my view nothing
more than a conjecture and hearsay information.”
It was therefore concluded that the
Commissioner had not wrongly exercised his discretion in finding that the loss
had not occurred under exceptional circumstances.
Regarding the issue of whether IVS
was entitled to the refund in terms of section 76(2)(d), the following was held
by Chili AJ at paragraph 19:
problem in so far as the applicability of section 76(2) (d) supra is concerned
is that the section deals with goods that have been ‘irrecoverably lost’ and
goods that are meant for ‘home consumption.’ Regard being had to the applicant’s
own version that the ethanol that disappeared from its warehouse was
subsequently recorded from a warehouse in Pinetown, I am unable to say that the
said ethanol was irrecoverably lost. Furthermore, it is the applicant’s own
version that the said ethanol was not meant for home consumption. For the above
reasons I am of the view that section 76 (2) (d) does not find application.”
The appeal was dismissed with
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