GOWORA JA: The appellant, (hereinafter referred
to as “ZIMRA”) is an administrative authority established in terms of the
Revenue Authority Act, [Chapter 23:11]. It is tasked with the obligation to collect
taxes and other statutory dues and fees under various legislative instruments
including the Value Added Tax Act, [Chapter
23:12], the “VAT Act” and the Income Tax Act, [Chapter 23:06], the “Taxes Act”.
The respondent (hereinafter referred to as (“Packers”)
is a private limited company duly registered as such under the laws of
Zimbabwe. It operates fast food outlets
and grocery shops throughout the country and is a registered operator in terms
of the VAT Act.
The
system of collection of VAT, as embodied in the VAT Act, involves the
imposition of tax at each step along the chain of manufacture of goods or the
provision of services subject to VAT.
Consequently, every registered operator is required in terms of s 28 of
the VAT Act, to submit returns to the Commissioner of Taxes every month,
calculate the VAT due on the return and make payment of such calculated
VAT. Due to the sheer volume and
complexity of the VAT collection system, ZIMRA lacks the capacity and manpower
to effectively monitor each and every transaction liable to VAT and as a
consequence it is heavily reliant on the self-assessment process by registered
operators. However, in order to ensure
that operators comply with the requirements to render returns and collect VAT,
ZIMRA conducts periodic investigations as well as audits.
ZIMRA
and Packers have had a dispute on the manner in which the latter has been
performing its obligations to file returns and render VAT to the Commissioner
under the VAT Act. As a consequence, during the period extending from 20 May
2013 to 12 March 2014, ZIMRA requested Packers to submit returns for the period
extending 2009 to 2013. On 12 March
2014, ZIMRA gave notice to the effect that failure by Packers to comply with
its request by 17 March 2014 would result in assessments being estimated and
issued. On 17 March 2014 ZIMRA advised
that it was in the process of compiling the assessments in question and that in
due course it would advise Packers of its obligations in relation to VAT,
income tax and P.A.Y.E. Ultimately, the
assessments were issued and sent to Packers.
On
2 May 2014 Packers filed an objection to the assessments with the Commissioner
who upheld one of the objections and dismissed the rest. Packers did not pay the assessed taxes
resulting in ZIMRA placing a garnishee against a number of bank accounts of
Packers held with FBC Bank for collection of an amount of USD 19 696
645-44. When Packers got wind of the
garnishee it launched the urgent chamber application which is the subject of
this appeal, in which Packers sought the setting aside of the garnishee order
and an order stopping ZIMRA from interfering with 'applicant's business
operations'. The application was accompanied by a Provisional Order in terms of
which was sought interim and final relief as appropriate. Subsequent to this, Packers
appealed to the Fiscal Appeals Court challenging the decision of the
Commissioner in rejecting the objections.
On
25 June 2014 the High Court issued a final order in the following terms:
IT IS HEREBY ORDERED THAT:
1.
The
respondent uplifts and suspends the garnishee order placed on applicant's
accounts with FBC Bank, immediately and forthwith, until the appeal that is
pending before the Fiscal Appeals Court is finalised.
2.
The
respondent shall allow a period of seven working days to elapse after the
up-liftment and suspension of the original garnishee order, where-after it
shall replace it with a fresh garnishee order for the sum of USD 905
801-32(Nine Hundred and Five Thousand Eight Hundred and one Dollars and thirty
two cents), which shall remain in place until the appeal is finalised or
payment is made in full, whichever comes first.
3.
The
respondent shall not unlawfully interfere with applicant's business operations
and its day to day activities, including the placing of its officers at
applicant's business premises
In
determining the urgent application, the High Court found that the liability on
the part of a registered operator under s 36 of the VAT Act remains extant and is
not extinguished by the noting of an appeal unless the Commissioner directs
that the obligation falls away pending finalisation of the appeal. The court further found that the appointment
of FBC Bank as agent in terms of s 48 had been done lawfully. It therefore
refused to accede to the request to revoke the appointment.
However,
in an apparent volte face, the court a quo went on to consider the
reasonableness of the exercise of discretion by the Commissioner as viewed
against the provisions of the Constitution and the Administrative Justice Act [Chapter 10:28].
ZIMRA
was aggrieved by the order and has appealed to this court on a number of
grounds.
ISSUES ON APPEAL
The issues raised by ZIMRA for the appeal
may be summarised as follows:
-Whether
ZIMRA is entitled at law to issue garnishee orders and appoint agents for the
payment of value added tax.
-Was
the court a quo entitled to mero motu pick a dispute on behalf of
the parties and determine the matter on the same.
-was
the court a quo at law empowered to
remove the garnishee order and impose an interdict against ZIMRA.
Whether
ZIMRA is legally entitled to issue garnishee orders for the payment of taxes
assessed as being due and owing.
It
was contended on behalf of ZIMRA that the court a quo deviated from the cause
of action as pleaded by Packers and gave relief framed on alleged
unreasonableness on the part of ZIMRA which was raised by the court mero motu. It was contended further that
if the court a quo had confined
itself to the lawfulness of the conduct of ZIMRA, it would have correctly found
that the actions of the latter were lawful and consequently it would have
declined the prayer to issue the interdict.
The
VAT Act provides a detailed mechanism for vendors to keep certain records and
to periodically calculate, account for and pay value added tax to the
Commissioner. The Act as a whole and,
in particular, its provisions relating to assessments and the payment recovery
and refund of tax provisions found in Part VII of the VAT Act are indispensable
tools for the prompt collection of tax due. From an economic point of view, the provisions
of the VAT Act are meant to ensure a steady, accurate and predictable stream of
revenue for the fiscus.
These
provisions are an embodiment of the principle “Pay Now Argue Later”, suggesting
that an appeal would not have the effect of suspending payment. The principle is aimed at discouraging
frivolous or spurious objections and ensures that the whole system of tax
collection in the country maintains its efficacy. This serves the fundamental
public purpose of ensuring that the fiscus
is not prejudiced by delay in obtaining finality in any dispute. I examine
hereunder the principal provisions.
Section
6 of the VAT Act provides:
“Subject to this
Act, there shall be charged, levied and collected, for the benefit of the
Consolidated Revenue Fund a tax at such rate as may be fixed by the Charging
Act on the value of-
(a)
The
supply by any registered operator of goods or services supplied by him on or
after the 1st January, 2004, in the furtherance of any trade carried
on by him.
(b)
…….not
relevant.”
Payment
of tax under the relevant Act is provided for in terms of s 28 which reads:
“28
Returns and payments of tax
(1) Every registered operator shall, within the
period ending on the twenty-fifth day of the first month commencing after the
end of a tax period relating to such registered operator or, where such tax
period ends on or after the first day and before the last day of a month,
within the period ending on such last day—
(a) furnish the Commissioner with a
return in the prescribed form reflecting such information as may be required
for the purpose of the calculation of tax in terms of section 15; and
(b) calculate the amounts of such tax
in accordance with the said section and pay the tax payable to the Commissioner
or calculate the amount of any refund due to the registered operator.
[Subsection substituted by Act 5 of 2009 and amended by Act 10 of 2009, by Act
3 of 2010, by Act 5 of 2010 and by Act 9 of 2011] (1a)… [Subsection repealed by
Act 5 of 2009]
(2) Every registered operator who is registered
in terms of Part IV shall within the period allowed by subsection (1) of this
section furnish the return referred to in that subsection in respect of each
tax period relating to such registered operator, whether or not tax is payable
or a refund is due in respect of such period.
(3) The Commissioner may, having regard to the
circumstances of any case but subject to section thirty-eight, extend
the period within which such return is to be furnished or such tax is to be
paid.”
Section
27 sets out four categories of operators and tax periods for the submission of
returns and payment of assessed VAT by the operator are then regulated
according to the category of the respective operators. Tax periods for the four
categories range from one calendar month to two, or such other period as may be
approved by the Commissioner in relation to category D.
The
anchor to the provisions on recovery of tax is s 36 of the VAT Act which excludes
the suspension of payment of tax upon the noting of the appeal. Section 36 provides in relevant part:
“36 Payment of tax pending appeal
The obligation to pay and the right to
receive and recover any tax, additional tax, penalty or interest chargeable
under this Act shall not, unless the Commissioner so directs, be suspended by
any appeal or pending the decision of a court of law, but if any assessment is
altered on appeal or in conformity with any such decision or a decision by the
Commissioner to concede the appeal to the Fiscal Appeal Court or such court of
law, a due adjustment shall be made, amounts paid in excess being refunded with
interest at the prescribed rate (but subject to section forty-six) and calculated from the date proved to the
satisfaction of the Commissioner to be the date on which such excess was
received, and amounts short-paid being recoverable with penalty and interest
calculated as provided in subsection (1) of section thirty-nine.”
The learned judge construed the provision
in question thus:
“My reading of s
36 is that the liability to pay remains extant until the appeal is finalised or
in the alternative, unless the Commissioner directs that the obligation to pay
falls away until the pending appeal is finalised. Applicant in this matter has not argued that the effect of the
noting of the appeal is to extinguish its obligation to pay. Section 33
of the VAT Act provides for the circumstances in which an aggrieved person can
appeal to the Fiscal Appeals Court, against the exercise of discretion by the
Commissioner. The right to appeal against the exercise of discretion by the
respondent's officers to the Commissioner is provided for in terms of s 32 of
the VAT Act.” (my emphasis)
Packers lodged an objection in terms of s
32 of the VAT Act and when the objection did not wholly succeed, it filed an
appeal after the garnishee order had been placed against its account. The learned judge found that although Packers
was challenging the appointment of an agent by the Commissioner to collect the
VAT assessed as being due and owing, ZIMRA had acted lawfully in relation to
the appointment of FBC Bank as such agent for the collection of tax. In
considering this issue the court a quo, in
my view correctly, came to this conclusion:
“This obligation
on the part of the appointed agent is not subject to any other law except s 48.
Section 48 overrides anything that is contrary to it which may be set out in
any other law.”
In
my view the issue of the appointment of the agent and the garnishee order are
intrinsically linked and the law in respect to the two is critical in the
resolution of this inquiry. Section 48 provides as follows:
“48 Power to appoint agent
(1)
For
the purpose of subsection (2)— “person” includes—
(a) a bank, building society or
savings bank; and
(b)
a partnership; and
(c)
any officer in the Public Service; and
(d) any prescribed person in relation
to a prescribed service.
(2)
The
Commissioner may, if he thinks it necessary, declare any person to be the agent
of any other person, and the person so declared an agent shall be the agent of
such other person for the purposes of this Act, and, notwithstanding anything
to the contrary contained in any other law, may be required to pay any amount
of tax, additional tax, penalty, or interest due from any moneys in any current
account, deposit account, fixed deposit account or savings account or any other
moneys—
(a) including pensions, salary, wages
or any other remuneration, which may be held by him for, or due by him to, the
person whose agent he has been declared to be; or
(b) that the person so declared an
agent receives as an intermediary from the other person.”
Thus,
the sharp end of the VAT system is s 48 of the Act which allows the appointment
of an agent. In a proper and logical
construction of the provision, payment by the agent is by means of a garnishee
against any account to the taxpayer's credit held with the agent. In any event, tax under the VAT Act consists
of monies that have been taxed on goods and services paid by consumers for
onward transmission to the Commissioner.
All that is required of an operator is to calculate the amount so paid,
submit a return and make payment. A
refusal to pay or failure to do so on the part of the operator would result in
the imposition of a garnishee. Therefore, once the tax assessment was made, the
imposition of the garnishee was a possibility. In my view, no other conclusion
is possible. (This finding by the court
ought to have put paid to the enquiry into the lawfulness of the garnishee.)
Packers
had alleged before the court a quo
that the garnishee imposed a hardship on its operations. In my view, s 36
creates a remedy for the amelioration of possible financial hardship faced by
an individual taxpayer and allows the Commissioner to suspend payment pending
an appeal. However, the Commissioner cannot exercise the discretion mero motu. He can only do so upon consideration of facts
presented to him by a taxpayer who wishes to benefit from the exercise of
discretion by the Commissioner. As a
consequence, the taxpayer bears the onus
to place the necessary facts before the Commissioner regarding the hardships
facing him should the obligation to pay not be suspended. For as stated by the learned DEPUTY CHIEF
JUSTICE in the case of Mayor Logistics
(Pvt) Ltd v ZIMRA SC 7/14:
“As the facts on which the Commissioner
would exercise the discretion would be within the exclusive knowledge of the
taxpayer he or she must place them before the Commissioner.”
It
follows therefore that, whilst s 48 of the VAT Act is concerned with the
Commissioner's power to appoint an agent for purposes of collection or recovery
of tax, s 36 of the same Act enshrines the taxpayer's duty to pay tax. The two are inextricably linked in that the
decision to use one method of recovery is determined by whether or not any
facts have been placed before the Commissioner on whether or not there exist
hardships which would justify a suspension of the obligation to pay assessed
tax by a taxpayer. What was before the court a quo was a plea for mercy as opposed to the enforcement of an
existing right. Once the discretion in s
36 is exercised in favour of the suspension of the obligation to pay tax, then by
parity of reasoning, it follows that the discretion to appoint an agent in
terms of s 48 falls away.
The obligation to pay the amount of tax
assessed as being due and payable is imposed by s 38 of the Act. In considering
the VAT collection system in general the following observations emerge. Section 36 does not serve to protect any
right of the taxpayer but to preserve the right of the Commissioner to be paid
and to collect the revenue. It also secures the obligation of the operator to
pay unless such obligation is suspended by the Commissioner upon request. As a consequence the discretion to suspend
payment in terms of the said section is that of the Commissioner. In Mayor
Logistics (Pvt) Ltd v ZIMRA (supra)
his Lordship MALABA DCJ, had this to say:
“Failure to fulfil an obligation [to pay
tax] may be due to a variety of circumstances. The legislature decided to place
responsibility for deciding whether or not the particular circumstances of a
taxpayer entitle him or her to a directive suspending the obligation to pay the
assessed tax on the Commissioner. A court of law would be acting unlawfully if
it usurped the powers of the Commissioner and ordered a suspension of the
obligation on a taxpayer to pay assessed tax pending the determination of an
appeal by the Fiscal Appeals Court.”
It
is not in dispute that the court a quo
made a finding that the actions of ZIMRA were lawful. As a consequence, it
should have been obvious that there was no legal basis upon which to grant an
interdict. S 48 is not subject or
subservient to any other law. This is
clearly expressed in the provision itself. It is my conclusion therefore that
in terms of the wording of the section, the Commissioner's power under s 48
cannot be subject to s 14 of the Fiscal Appeal Court Act. Once a person is declared an agent in terms
of s 48 the person so appointed is duty bound to pay the assessed taxes
notwithstanding the provisions of any other law.
As
a consequence, it follows that ZIMRA is entitled not only to appoint an agent
for the collection of assessed tax, it is also entitled to garnishee the
taxpayer's account through the agent for the collection of tax. The decision by
the court a quo to discharge the
garnishee in the circumstances of this case was contrary to the law and constitutes
a misdirection.
Whether
the court was entitled at law to pick a dispute on behalf of the parties and
determine the dispute on that basis.
It is contended on behalf of ZIMRA that
the learned judge in the court a quo
went beyond what was asked of the court and reframed the issues for
determination on behalf of the parties. At issue is the decision by the court
to delve into the following questions:
(i)
What
the court a quo perceived to be the
unreasonableness of ZIMRA's conduct despite its lawfulness.
(ii)
The
failure on the part of ZIMRA to adhere to the provisions of the Administrative
Justice Act in the exercise of its discretion presumably in the assessment and
the placement of the garnishee against the account of Packers's bankers.
(iii)
The
failure by ZIMRA to have regard to the provisions of s 68 of the Constitution
in the exercise of its discretion rendering its actions unreasonable,
disproportionate or substantially unfair.
The court a quo considered that it was necessary to review the actions of the
respondent and it stated:
“It is my respectful view that s 48 does
not oust this court's inherent power of judicial review of an administrative body,
to scrutinize the exercise of discretion by that body, at any time and to
ensure, on the limited grounds provided in s 68 of the Constitution and s 3 of
the Administrative Justice Act, that there has not been any element of
'Wednesbury unreasonableness'.”
It seems to me that the criticism of the
approach taken by the learned judge is not entirely unwarranted. Having dealt
with the lawfulness of the actions of ZIMRA, the court a quo then deviated and
sought to review the imposition of the garnishee on the basis of alleged
un-reasonableness. In its cyclostyled judgment, the court a quo remarked:
“I propose to start by looking at what the highest law
in the land has to say about the exercise of discretion by an administrative
body. Section 68 of the Constitution of Zimbabwe provides that Section 3 of the
Administrative Justice Act provides as follows Section 2 provides for
Interpretation and application. Respondent by his own description in para 5 of
its notice of opposition is an administrative authority. My reading of the
interpretation section of the Administrative Justice Act is that any action
taken by the respondent or any of its employees, is administrative action, and
that in exercising discretion in any administrative action, the conduct must be
reasonable, and substantively and procedurally fair. Applicant has not denied
that the respondent's actions were lawful. My understanding of applicant's
contention is that the exercise of discretion by the respondent was not
reasonable, in the sense of violating the provisions of s 3 (1) (a) of the
Administrative justice Act, and s 68 of the Constitution, in the sense that the
exercise of discretion was not reasonable, or proportionate, or both
substantively or procedurally fair to it.”
Once
it was conceded by Packers that the conduct by ZIMRA was lawful, such
concession effectively defeated its cause of action as it rendered the
perceived unlawfulness of ZIMRA's actions nugatory. If the court found as a
fact that the appointment of FBC Bank was properly made in terms of s 48 of the
relevant Act, it begs the question in what circumstance the discretion to
appoint the agent may become subject to review on the basis of alleged
unreasonableness. Despite this, the court was however persuaded to consider
whether or not the actions of ZIMRA were reviewable.
The court proceeded to examine what it
considered to be the irrational attitude of ZIMRA in having issued a garnishee
for an amount of twenty million US Dollars, and it concluded by stating:
“Imposing a garnishee order of twenty
million on applicant's account was not procedurally fair because s14 of the
fiscal Appeals Act stipulates that the disputed amount of the tax assessment be
suspended pending the determination of the appeal. It was not substantively
fair because there is no provision, in s 32 of the VAT Act for objection to the
Commissioner against the imposition of a garnishee order.”
The court found that Packers had a prima facie right conferred on it by s
68 of the Constitution and by extension, in terms of s 3 of the Administrative
Justice Act to conduct that is reasonable, proportionate and both substantially
and procedurally fair. As a consequence, it resolved to interfere with the
exercise of discretion by the Commissioner to impose a garnishee.
The basis of the application in the High Court
was that ZIMRA had bestowed upon itself powers that it did not have and that it
was as a result acting as if it was a court of law in issuing a garnishee. It
was further alleged that in issuing the garnishee ZIMRA was acting in an
unconstitutional manner as the figure upon which the garnishee was premised had
been arrived at in an arbitrary manner. It was alleged that there was no law
that empowered ZIMRA to act in the manner that it did and that if such law
existed then the law required realignment with the constitution. It was contended that the court had the power
in terms of s 14 of the Fiscal Appeal Court Act to suspend payment of tax which
was not due.
An application such as the one before the
court a quo must be disposed of on
the basis upon which it is made. Thus, it stands or falls on its founding
affidavit. The application sought to challenge the lawfulness of the garnishee
of Packers' accounts. It is evident that Packers did not make an application to
the High Court to review the Commissioner's decision to impose a garnishee.
Notwithstanding the fact that Packers did
not at any stage of the dispute claim a right founded on administrative law,
which is evident from the nature of the pleadings, the court a quo on its own went on to determine
the issue on that basis. It was never contended by Packers that the decision by
the Commissioner to impose a garnishee was procedurally unfair.
As regards the question of lack of constitutionality
that the court a quo dealt with, the
essence of the complaint of Packers is stated thus:
“The Respondent's
conduct is clearly unconstitutional as the figure it is claiming has been made
arbitrarily without any justification whatsoever. It is arbitrary in the sense
that the Respondent estimates the figure it feels Applicant should pay and
proceeds to garnish the same. Respondent has deliberately ignored the figures
given by the Applicant voluntarily and chose to rely on an unjustified estimate.”[1]
A court of law cannot go outside the
pleadings on a dispute before it and pick a dispute for the litigants completely
and utterly unrelated to the papers before it nor can it dispose of the matter
on the basis of the issue so raised by it. Packers did not raise an alleged
violation of a constitutional right and yet the court a quo went on to invoke
the provisions of s 68 of the Constitution and fashioned a remedy in favour of
Packers out of the same. There is persuasive authority to support the principle
that a court cannot at law pick a dispute on behalf of litigants. In Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others the court held:
“Where a litigant
relies upon a statutory provision, it is not necessary to specify it, but it
must be clear from the facts alleged by the litigant that the section is
relevant and operative. I am prepared to assume, in favour of the applicant,
for the purposes of this case, that its failure to identify with any precision
the provisions of PAJA upon which it relied is not fatal to its cause of
action. However, it must be emphasised that it is desirable for litigants who
seek to review administrative action to identify clearly both the facts upon
which they base their cause of action, and the legal basis of their cause of
action. I turn now to deal separately with the three grounds upon which the
applicant sought leave to appeal.”
The court a quo proceeded on the premise that the question of the
reasonableness or otherwise of the appellant's lawful actions in performing a
lawful function was before it. It was
not. Therefore, the question of substantive fairness adverted to by the court a quo
has no basis at law. Packers did not challenge the administrative functions of
ZIMRA by way of review. The 'reasonableness' upon which this case was decided
was not an issue before the court because the issue was never about ZIMRA being
an errant administrative authority. The
Administrative Justice Act was not the basis of the application before the
court a quo and the court a quo
ought not to have determined it on that basis. Its determination of the dispute
on an issue not properly before it was a gross misdirection.
In addition, the court a quo inferred from the papers filed by
Packers that s 68 of the Constitution was apposite in the determination of the
dispute before it. It ought not to have
made such inference. It was up to
Packers to plead its case properly. In
addition, whether or not the sums had been arrived at arbitrarily was a dispute
properly placed before the Fiscal Appeals Court as an appeal. The court a quo was not empowered at law to
determine the quantum due and owing. The whole judgment of the court a quo was underpinned by findings which constituted
a misdirection warranting interference by this court.
Whether
the court a quo was at law empowered
to remove the garnishee order
The power of ZIMRA to make Value Added Tax
assessments is to be found in s 31 of the Value Added Tax Act. Subsection (3) of the same provides:
(3) Where —
(a) any person fails to furnish any
return as required by sections twenty-eight,
twenty-nine or thirty or fails to furnish any
declaration as required by section thirteen;
or
(b)
the Commissioner is not satisfied with any return or declaration which any
person is required to furnish under a section referred to in paragraph (a); or
(c) the Commissioner has reason to
believe that any person has become liable for the payment of any amount of tax
but has not paid such amount; or
d) any person, not being a
registered operator, supplies goods or services and represents that tax is
charged on that supply; or
(e)
any registered operator supplies goods or services and such supply is not a
taxable supply or such supply is a taxable supply in respect of which tax is
chargeable at a rate of zero per centum, and in either case that
registered operator represents that tax is charged on such supply at a rate in
excess of zero per centum; the Commissioner may make an assessment of
the amount of tax payable by the person liable for the payment of such amount
of tax, and the amount of tax so assessed shall be paid by the person concerned
to the Commissioner.
(4)
In making such assessment the Commissioner may estimate the amount
upon which the tax is payable
(5) The Commissioner shall give the person
concerned a written notice of such assessment,
stating the amount upon which tax is payable, the amount of tax payable, the
amount of any additional tax payable in terms of section sixty-six and
the tax period, if any, in relation to which the assessment is made, and—
(a)
where the assessment is made on a seller referred to in
subparagraph (i) of paragraph (b) of subsection (2), send a copy of that
notice of assessment to the owner referred to in that subsection; or
(b) where the assessment is made on an
owner referred to in subparagraph (ii) of paragraph (b) of subsection (2), send a copy of that notice of assessment
to the seller referred to in that subsection.
(6) The Commissioner shall, in the notice of
assessment referred to in subsection (5),
give notice to the person upon whom it has been made that any objection to such
assessment shall be lodged or be sent so as to reach the Commissioner within
thirty days after the date of such notice.
The power to make the
assessments which are the substance of this dispute is not in doubt. Indeed,
the court a quo made a finding that
the actions of ZIMRA right up to the appointment of an agent under s 48 of the
VAT Act were lawful. However, notwithstanding the finding by the court a quo
that the Commissioner had acted lawfully in all respect, the court went ahead
and imposed an interdict against the collection of any sums in excess of USD
905 801.32. This was on the premise that it was the amount of tax which Packers
acknowledged as being due and owing. In
addition, ZIMRA, in consequence of the order by the court a quo, could not collect on the stated sum before the expiry of a
week from the date of the order.
The decision to remove
the garnishee and impose an interdict against the placing of further garnishees
was based on what the court stated to be an irrational exercise of the
discretion bestowed upon the Commissioner under the VAT Act.
ZIMRA has argued,
correctly in my view, that in stating so the court a quo misdirected itself.
An interdict serves to
protect a right not an obligation. The papers filed on behalf of Packers did
not identify any right that ZIMRA had threatened. The court a quo found as a matter of fact that
ZIMRA had acted in terms of the law in assessing VAT which remained unpaid.
Once this finding was made including the further finding that the agent had
been appointed lawfully, there was no lawful justification at law for
suspending payment for a week.
I am fortified in this
view by the remarks of the learned DEPUTY CHIEF JUSTICE MALABA in the Mayor
Logistics case (supra) to the following effect:
“The subject of the application is not the
kind of subject matter an interdict, as a remedy was designed to deal with. An
interdict is ordinarily granted to prevent continuing or future conduct which
is harmful to a prima facie right, pending final determination of that right by
a court of law. Its object is to avoid a situation in which, by the time the
right is finally determined in favour of the applicant, it has been injured to
the extent that the harm cannot be repaired by the grant of the right.
It is axiomatic that the interdict is for
the protection of an existing right. There has to be proof of the existence of
a prima facie right. It is also
axiomatic that the prima facie right is protected from unlawful conduct which
is about to infringe it. An interdict cannot be granted against past invasions
of a right nor can there be an interdict against lawful conduct. Airfield Investments (Pvt) Ltd v Minister of
Lands & Ors 2004 (1) ZLR 511 (S0; Stauffer
Chemicals v Monsato Company 1988 (1) SA 895; Rudolph & Another v Commissioner for Inland Revenue & Others
1994 (3) SA 771.
The applicant accepted in the founding
affidavit that the respondent acted lawfully in enforcing the obligation to pay
the tax notwithstanding the noting by it of the appeal to the Fiscal Appeal
Court against the correctness of the assessment. It did not allege any unlawful
conduct on the part of the respondent which would justify the granting of an
interdict. It also accepted that at the time the respondent put in place
measures to collect the tax, the provisions of ss 36 of the VAT Act and 69(1)
of the Income Tax Act were binding on it. That means that the applicant had no
prima facie right in existence at the time not to pay the amount of tax it was
liable to pay to the fiscus. Sections
36 of the VAT Act and 69(1) of the Income Tax Act protect a duty, not a right”
The fact that Packers had launched an
appeal with the Fiscal Appeals Court against an assessment is not such right as
would justify interference by the court. The court could only act to protect a
litigant if it was established that the Commissioner had acted illegally in
assessing taxes, imposing a garnishee and appointing an agent for the
collection of the tax so assessed. In addition the appeal was launched after
the garnishee was imposed and, even assuming that the garnishee was illegal, the
interdict could not serve to protect conduct that had already been effected and
was thus in the past.
The import of the provisions of s 48 is to
provide a mechanism by which the Commissioner is enabled to collect taxes due
and remit the same to the fiscus. Its import cannot be, as found by the learned
judge in the court below, to protect registered operators from what is
described as “litigation in terms of other laws for the act of forwarding money
in their clients' accounts to the respondent.”
In addition, the issue of
the quantum of tax due was not before the court a quo, and as a consequence it could not lawfully replace the
garnishee properly issued with one for a lesser sum. It could not at law preclude ZIMRA from
acting lawfully, after making the finding that at law, the Commissioner is
permitted to garnishee a taxpayer after assessment of taxes.
Secondly, contrary to the
finding by the court a quo that there
is no room to lodge an objection against the imposition of the garnishee, a
perusal of s 32 confirms that such right exists and is available to a
registered operator. The imposition of a
garnishee is not a bar to the raising of an objection. The garnishee order is not the substantive
tax assessment, it is merely a collecting mechanism. As a result, the objection
can be directed against the tax assessment and if the objection finds favour
with the Commissioner of Taxes, the garnishee can be adjusted or revoked and
amounts so collected can be returned to the taxpayer with interest.
In construing the powers
of ZIMRA under the VAT Act, the court perforce had to examine the provisions of
s 14 of the Fiscal Appeal Court Act which reads:
“14
Payment of tax pending appeal
Where any person has given notice of
intention to appeal in accordance with section eleven or thirteen payment
of so much of the tax which he has been called upon to pay as would not be
payable by him if the appeal were allowed shall be suspended until the appeal
has been decided, unless the Commissioner whose decision is the subject of the
appeal otherwise directs.”
The court a quo concluded that in view of the
provisions of s 14, Packers should not be required to pay the amount reflected
on the garnishee, the reason being that the noting of the appeal suspended the
actual payment of the portion that Packers was disputing. The court found that the Commissioner was
required to state in specific terms and in writing to the operator that
notwithstanding the noting of the appeal, he was directing that the full sum
being demanded be paid. The court opined that by imposing a garnishee it was
arguable that the Commissioner had directed that the full sum be paid.
It was common cause that
the appeal had been noted after the garnishee was imposed. Even assuming that
the appeal was noted before the garnishee was imposed, the statement by the
court a quo in relation to the
provisions of s 14 of the Fiscal Appeal Court Act was in direct contradiction
to its earlier finding in its construction of s 36 of the VAT Act. The two
sections could not be construed in isolation from each other. Whilst s 36 of
the VAT Act applies strictly in relation to the VAT Act, s 14 of the Fiscal
Appeal Court Act applies to all relevant Acts in terms of which ZIMRA is
empowered to assess and collect taxes and other dues on behalf of the fiscus.
The dispute before the
court a quo was premised on the
powers of ZIMRA as exercised under the VAT Act. In light of the seeming
contradiction of the sections, the court had to consider the dispute in the
light of the two sections. The court a
quo could not lawfully have made a determination of the dispute on the
premise of the two sections without construing them together. The court a
quo however, dealt with the two Acts and the two sections in isolation. The result of this decision was that the two
Acts appeared to be in conflict with each other. As a consequence, the court went on to find that
the actions of ZIMRA were lawful in relation to s 36 of the VAT Act, and, that
those same actions were unlawful when viewed against s 14 of the Fiscal Appeal
Court Act. What was in issue was the
powers bestowed on ZIMRA by the legislation and the court failed to properly
construe the legislation which dealt with those powers. The misdirection is in my view obvious.
Having found that the
actions of ZIMRA were lawful, the court a
quo could not bar the appellant from performing a lawful function. Thus the interdict issued against ZIMRA is an
unlawful interference with its powers under the VAT Act.
The
nature of the relief sought in the Provisional Order
Finally,
it falls upon this court to examine the nature of the relief sought by Packers as
against the order actually issued by the court a quo.
The
relief sought both in the main and in the interim is substantially the
same. This is a practice by litigants
that is strictly discouraged by the courts and the law on this point is set out
Kuvarega v Registrar-General & Anor 1998
(1) ZLR 188 (H) wherein CHATIKOBO J held:
“Before concluding
this judgment I must deal with a procedural matter which, regrettably, seems to
present difficulty to many practitioners.
…….
…… The practice of seeking interim relief,
which is exactly the same as the substantive relief sued for and which has the
same effect, defeats the whole object of interim protection. In effect, a
litigant who seeks relief in this manner obtains final relief without proving
his case. That is so because interim relief is normally granted on the mere
showing of a prima facie case. If the interim relief sought is identical to the
main relief and has the same substantive effect, it means that the applicant is
granted the main relief on proof merely of a prima facie case. This, to my
mind, is undesirable especially where, as here, the applicant will have no
interest in the outcome of the case on the return day.”
I
fully associate myself with this interpretation of the law. The court a
quo should not have related to the application before it in the face of this
apparent and fatal defect. What it did
was to grant an order which had the effect of a final order on the strength of
a prima facie case. The parties before it were not asked to argue
on the final order. They argued only on
the interim order and the court a quo,
regardless, proceeded to grant an order which was neither prayed for nor argued
upon. The Zimbabwean legal system
remains adversarial and the dispute is between the parties. On this basis as well, the order of the court a quo begs vacation.
DISPOSITION
In
my view, the court a quo allowed
itself to be preoccupied by the catastrophe that could potentially befall
Packers and dealt with the matter on that basis without determining the true
dispute between the parties as pleaded in terms of the relevant law.
In
doing so the court seriously misdirected itself. Its decision cannot be allowed
to stand and must of necessity be vacated.
In the premises the following order will issue.
IT
IS ORDERED THAT
1. The appeal be and is hereby allowed with costs.
2. The order of the court a quo be and is hereby set aside and
in its place the following is substituted:
'The Application be and is hereby
dismissed with costs.'
ZIYAMBI JA: I agree
HLATSHWAYO JA: I agree
Kantor
& Immerman, appellant's legal practitioners
Manase & Manase, respondent's legal
practitioners
