8 July 2010
3M South Africa (Pty) Ltd v CSARS [2010] ZASCA 20
Professor R C Williams
This decision of the Supreme Court of Appeal is its most illuminating to date on the court’s view in regard to the issue of a collateral challenge in the context of a disputed tax assessment.
In this case SARS argued that the taxpayer was not entitled to invoke the provisions of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”) because the application for review of the Commissioner’s decision had not been instituted within 180 days, as required by PAJA, and it was consequently time-barred.
The taxpayer’s response to this argument was that it was not invoking judicial review as a remedy to set aside an unlawful administrative act, but was instead raising a “defensive” or “collateral” challenge to the validity of the act, as foreshadowed in the judgement of Scott J in National Industrial Council for the Iron, Steel, Engineering & Metallurgical Industry v Photocircuit SA (Pty Ltd 1993 (2) SA 245 (C) at 252J-253D.
In the latter case, Scott J had said that the most obvious example of a collateral challenge to an administrative act would occur in the context of a criminal prosecution, where the validity of the administrative act came under challenge, not for the purposes of judicial review, but in order to determine the guilt or innocence of an accused person.
Scott J said that, in such circumstances, the accused would not be precluded from raising the invalidity of the administrative act merely on the grounds of delay. In practice, administrative acts were “reviewed” in criminal and enforcement proceedings many years after they were performed.
In the present case, said the Supreme Court of Appeal, the Commissioner was seeking to coerce the taxpayer into compliance with its demand for import duty, and the taxpayer was defending itself by mounting a collateral challenge to the validity of the underlying administrative act in respect of which SARS’s coercive power was purportedly exercised.
In these circumstances, said the court, SARS’s defence based on delay – whether in terms of PAJA or the common law – was “simply not available”.
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