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Commissioner for the South African Revenue Services v Sassin and Others (6927/2014) [2015]

23 October 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical


In this motion proceedings SARS seeks judgment in an amount of R41 253 533.50 against the taxpayer  and  Trojin Feeds (Pty) Ltd  of which the taxpayer was the sole director.  SARS further seeks a declaratory order against the taxpayer and also seeks certain ancillary relief against the third to thirteenth respondents.  The third respondent, Ms Francois Jane Sassin  is the wife of the taxpayer.  The fourth to thirteenth respondents are all trusts of which the taxpayer and a Mr Jose Alberto Delgado are trustees.  The claims against Ms Francois Jane Sassin and the other respondents are for certain specified amounts paid to them by the taxpayer allegedly from the ill-gotten gains received by the taxpayer from Badenhorst as a consequence of the fraud.

While it is common cause that Badenhorst was integrally involved in the VAT fraud, the main issue to be determined is whether, from all the available evidence, the taxpayer can also be held liable and to what extent.  A finding on this issue of necessity involves a finding that the taxpayer was fully aware of the fraud being perpetrated by Badenhorst against SARS and that he was a party to it.

On 30 October 2013 the North Gauteng High Court sanctioned the holding of an inquiry in terms of section 50 of the Tax Administration Act.  The inquiry was authorised to inquire into certain non-compliances or contraventions committed by Badenhorst, Benietha, the taxpayer, Trojin Feeds and Ms H Janse van Rensburg, within the provisions of the VAT Act, the Income Tax Act 58 of 1962 and the Tax Administration Act in the period 1 March 2008 to 31 July 2013.  Further,  the inquiry has  to investigate whether Badenorst/SA Global and the taxpayer had made use of fraud, art or contrivance in order to obtain a refund under a Tax Act.  The present application flows from the evidence gathered by SARS in the section 50 inquiry.


The court held that no matter how strongly SARS may feel about the taxpayer’s involvement with Badenhorst and whether this amounts to fraud, is a matter that cannot be decided on these papers.  The position adopted by SARS in these proceedings is that a finding of fraud must be made against the taxpayer based on so-called ‘evidence’ gathered by it, without affording the taxpayer an opportunity to cross-examine his accusers and/or to give oral evidence in order to clear his name.  In the court view, SARS difficulties are compounded even further by its failure to prove the authenticity of the section 50 inquiry evidence.

Further, in attempting to show that the taxpayer was aware of the fraudulent scheme conducted by Badenhorst and that he was a party to it, SARS relies on the evidence that was gathered at the section 50 inquiry. The court held that there are several difficulties with it. Firstly, SARS simply failed to prove the authenticity of that evidence in its founding paper.  Secondly, the transcript put up by SARS is incomplete. Thirdly,  the evidence given by witnesses (in the absence of the taxpayer) at the inquiry was never tested under cross-examination. That evidence in the court’s view, amounts to hearsay.

In conclusion, the court held  that section 56(4) of the Tax Administration Act  does not legislate for the use of evidence "against a person”, which is the usual pointer to the use in civil or criminal proceedings, but rather for its use in proceedings "involving the person or another person”.  Moreover, section 56(3), read with section 69 of the Tax Administration Act, confirms that the evidence taken at the section 50 inquiry of the Tax Administration Act must be kept confidential. 

In addition, there is some substance in the argument advanced on behalf of the taxpayer to the effect that to permit the use of evidence compelled at a section 50 inquiry in subsequent civil proceedings against any taxpayer, would mean that SARS would enjoy an unfair advantage against such taxpayer for at least two reasons:  the first is that it could compel a taxpayer to put up his/her version under oath and to then use that version against him/her; and the second is that it would render the compelled hearsay evidence of other witnesses against such a taxpayer to be admissible against him/her in the absence of an application under section 3 of the Law of Evidence Amendment Act 45 of 1988.

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