PATEL
JA: This
is an appeal against the judgment of the Fiscal Appeal Court
dismissing an appeal against the determination of the respondent
requiring the appellant to pay value added tax (VAT) on the
importation of certain goods into Zimbabwe.
Background
The
appellant is a foreign company incorporated in the British Virgin
Islands and operating from Guernsey in the Channel Islands. The
respondent is a body corporate responsible for the collection of VAT
and other imposts in Zimbabwe.
The
appellant was a supplier of basic commodities to local companies,
including the West Group of Companies (West Group). In 1992, it
concluded an agency agreement with Douglas and Tate (Pvt) Ltd
(Douglas & Tate), a subsidiary of West Group. By 1999, it was
supplying basic commodities to West Group and other local customers
under a US$10 million line of credit registered with the Reserve Bank
of Zimbabwe (the RBZ).
On
1 October 2007, the RBZ unveiled the Basic Commodities Supply Side
Intervention (BACOSSI), a facility designed to end the chronic
shortages of basic commodities in Zimbabwe. After negotiations
between the appellant and the RBZ, the latter purchased certain
non-BACOSSI goods, valued at US$7,987,207.54, that were in the
Douglas & Tate warehouse. The appellant also supplied BACOSSI
goods, valued at US$11,698,174.00, to the RBZ in 2008.
After
conducting investigations, the respondent raised taxation schedules
against the appellant for outstanding VAT, on both BACOSSI and
non-BACOSSI transactions, initially on 17 March 2009 and later on 15
July 2009. The total charge raised was US$6,302,712.13, inclusive of
interest and penalties. This was subsequently corrected, on
13 October 2009, by reducing the charge to US$6,249,496.70.
The
appellant lodged an objection to the assessment on 25 September 2009.
It also applied for condonation for the late filing of the objection.
The
respondent dismissed the application for condonation and disallowed
the objection.
The
appellant appealed against both decisions to the Fiscal Appeal Court
on 12 October 2009. The respondent filed its reply on 12 November
2009. At a pre-trial hearing on 17 September 2014, the delay by the
appellant in filing its notice of objection as well as the failure by
the respondent to file its documents timeously were both condoned by
consent.
Judgment
of the Fiscal Appeal Court
At
the hearing of the matter, the appellant called the evidence of one
Kenneth Sharpe, who was the founder and Chairman of West Group
and a director of Douglas & Tate.
He
confirmed the foreign status of the appellant. His evidence was that
West Group, Douglas & Tate and the appellant were not related
companies.
The
court a
quo
found that he was not a credible or reliable witness. This was
because he contradicted material parts of his evidence-in-chief under
cross-examination. Furthermore, his evidence left gaps that could
only be filled by the directors, employees, officials or agents of
the appellant itself.
On
the merits, the court a
quo
relied on the documentary evidence, i.e.
the unsigned agreement between the appellant and the RBZ and the
relevant documents generated in South Africa, to find that it
was the appellant that imported the goods in question into Zimbabwe.
It was the appellant who beneficially owned and possessed the goods
before they entered Zimbabwe and brought or caused them to be brought
into the country.
It
was accordingly held that the appellant was the importer of both the
BACOSSI and non-BACOSSI goods.
The
court further found that the activities of the appellant in Zimbabwe
from 2004 onwards, which were carried on continuously and regularly,
constituted trading in the country for the purposes of VAT liability.
The appellant was not a registered operator, but every trader is
liable to be registered for VAT purposes and is deemed to be a
registered operator as the principal for goods supplied or imported
on its behalf by its agent.
The
appellant was carrying on the business of supplying goods through the
agency of Douglas & Tate, which released the goods only
on the instructions of the appellant after the latter had received
payment in accordance with the relevant waybills and invoices.
The
court held that the appellant was the importer of the goods in
question and was therefore liable for the payment of VAT in both the
pre-BACOSSI and BACOSSI eras when it supplied goods in furtherance of
its business activities.
Furthermore,
the appellant was required to be registered and had to be treated as
a registered operator. Its failure to charge or receive VAT did not
exonerate the appellant as VAT is deemed to be included in the
purchase price. Additionally, it bore the obligation to remit VAT in
foreign currency in accordance with the legislation in force at the
relevant time.
As
regards the appointment of the Chief Executive Officer (CEO) of West
Group as the public officer of the appellant, the court found that
this was above board. In terms of the governing provisions, the
respondent was allowed to compulsorily appoint the CEO of West Group,
the holding company of Douglas & Tate, which was the agent of the
appellant in Zimbabwe, as its public officer and representative
registered operator for the collection of VAT.
With
respect to the appellant's argument that the respondent had used an
arbitrary exchange rate to convert Rand denominated transactions to
United States dollar values, the respondent averred that the relevant
invoice values together with the appropriate conversions were
supplied by the appellant's own agents. The court found that the
onus was on the appellant to establish that the conversions were
arbitrary. However, it did not lead any evidence in this regard and
the respondent's averments were not denied.
In
the event, the court held that the appeal before it was not
sustainable in its entirety. However, the appellant's objections
raised important legal points and its grounds of appeal were not
frivolous. The appeal was accordingly dismissed with no order as to
costs.
Grounds
of Appeal and Relief Sought
There
are six grounds of appeal in
casu.
They impugn the judgment of the court a
quo
in the following respects:
(i)
Rejecting the evidence given on behalf of the appellant as being
unreliable.
(ii)
Holding that the appellant, and not the RBZ, was the importer of the
goods in question.
(iii)
Holding that the respondent was entitled to go behind the contents of
the bills of lading which it had processed and approved to find that
the appellant was the importer of the goods into Zimbabwe.
(iv)
Finding that the appellant operated a business in Zimbabwe.
(v)
Holding that the appellant was to be treated as a registered operator
and finding that the appellant was liable to pay VAT on the imported
goods.
(vi)
Considering the issue of whether or not any company had been lawfully
appointed as an agent to pay any tax due by the appellant, and in
finding that such an appointment had in fact been lawfully made.
The
appellant prays that the appeal be allowed with costs and that the
judgment of the court a
quo
be set aside and substituted with an order allowing the appeal a
quo
with costs and directing the respondent to withdraw the contested VAT
assessments issued by it against the appellant in this matter.
Preliminary
Issues
Mr
Magwaliba,
raised two preliminary objections to the notice of appeal.
(i)
The first was that paragraph 2 of the order to be substituted a
quo
lacks exactitude as to the specific notices of assessment to be set
aside.
(ii)
The second was that the first ground of appeal is too wide and does
not identify the specific evidence that was found to be unreliable.
This ground does not allow the respondent or the court to identify
that evidence.
In
response, Mr Mpofu,
for the appellant, argued that the prayer in the notice of appeal is
exact as to the notices of assessment to be set aside. However, if
the prayer needed to be amended, he moved that it be so amended.
As
regards the prayer, I agree with Mr Mpofu
that paragraph 2 of the order to be substituted a
quo
does specifically identify the VAT assessments that are to be
withdrawn, in relation to both the goods concerned as well as the
period covered. Therefore, I do not think that the objection taken is
valid or that the draft prayer calls for any corrective amendment.
As
for the first ground of appeal, Mr Mpofu
was quite correctly prepared to abandon this ground. Consequently,
the fist ground of appeal was struck out by consent.
Identity
of Importer: Zimtrade or RBZ
The
second and third grounds of appeal pertain to the identity of the
importer of the goods in question. Was it the RBZ, as is contended by
the appellant, or was it the appellant itself? Also relevant in this
context are the contents of the bills of entry that had been
submitted for processing and approval by the respondent's
Department of Customs and Excise.
Mr
Mpofu
submits that a bill of entry is a document that is filed by the
importer.
In casu,
one such bill of entry filed and approved in August 2008 identifies
the appellant as the exporter/consignor, based in Guernsey. The
importer/consignee is identified as the RBZ. All the other relevant
bills of entry in this case contain the same information as to the
identities of the exporter and the importer. The bills of entry were
issued in terms of the Customs and Excise Act. Mr Mpofu
relies on the provisions of ss37(1)(e), 39(1) and 40(1) of the Act in
support of his submission that the entries in question were made by
the RBZ as the importer.
The
respondent incorrectly took the position that the appellant was the
importer of the goods concerned because it owned the goods before
they entered into Zimbabwe from South Africa. The respondent, which
bore the evidentiary burden in this respect, did not place any
evidence before the court a
quo
to disprove the correctness of the bills of entry.
Mr
Mpofu
also relies on other documentary evidence to buttress the appellant's
position.
In
particular, he refers to an opinion by the RBZ's lawyer dated 17
June 2009, a letter of 1 July 2009 from the RBZ to the appellant's
lawyers, and the minutes of a meeting held on 7 October 2009 between
the RBZ and representatives of West Group. These documents, so he
submits, make it clear that the RBZ was the importer, the only
unresolved issue being the currency in which VAT was to be paid.
Turning
to the unsigned draft agreement between the parties, Mr Mpofu
submits that the court a
quo
wrongly relied on this draft to counter the bills of entry.
The
respondent itself indicated in its reply that it did not know whether
or not the agreement was reduced to writing. It further confirmed,
through its counsel, that it was not relying on the drafts as
conclusive evidence of the agreement between the appellant and the
RBZ. Consequently, so it is submitted, the unsigned agreement had no
validity and could not be used as an antidote to the bills of entry,
as the court a
quo
purported to do.
Mr
Magwaliba
submits that the provisions of the Customs and Excise Act that are
relied upon by the appellant do not address the question at hand.
What is more relevant are the definitions that appear in s2 of the
Act relating to the meaning of the terms “import”, “importer”
and “entry”. The court a
quo,
so he submits, correctly applied these definitions to find that the
appellant was the owner and importer of the goods in question before
they crossed the borders of Zimbabwe. Thus, the respondent was
entitled to pursue the party that was statutorily liable to pay VAT
as the importer, i.e.
the appellant, and not the RBZ which was not the importer.
As
regards the bills of entry, Mr Magwaliba
points to the definition of “entry” in s2 of the Act which makes
it clear that the information contained in a bill of entry must be
correct. Most of the declarants on the bills in
casu
were employees of Mitchell Cotts Freight Zimbabwe, a freighting
company. Therefore, so he submits, it was not the RBZ but the
freighting agent that completed the bills of entry.
The
evidence indicates that the freighting agent was paid by the
subsidiary of West Group, i.e.
Douglas & Tate, which acted for the appellant.
Mr
Magwaliba
further submits that the bills of entry were not prepared by the
respondent or the RBZ or by any other official. Consequently, no
presumption of regularity could attach to them and their designation
of the RBZ as the importer is therefore not reliable or conclusive.
With
reference to the alleged admissions of liability by the RBZ, Mr
Magwaliba
argues that the opinion tendered by its lawyer on 17 June 2009 is not
binding. Again, the letter from the RBZ, dated 1 July 2009, was
rejected by the Advisor to the RBZ Governor at a meeting held with
the respondent's officials on 20 August 2009. Furthermore, the
RBZ's expression of its willingness to pay the VAT invoices in
Zimbabwe dollars, at its meeting with West Group on 7 October 2009,
was conditional on seeking legal opinions on the matter.
Finally,
Mr Magwaliba
submits that the draft agreement between the appellant and the RBZ
affords evidence of the negotiations between and intention of the
parties at some point. The terms contained in an unsigned agreement
can be relied upon unless they are disproved by the party who asserts
that the agreement was not intended to be binding. The court a
quo
was therefore correct in relying upon the contents of the draft
agreement in
casu.
In
response, Mr Mpofu
submits that the contents of the bills of entry are crucial because
they were officially accepted for the purposes of importation and the
liability to pay tax. They show that the RBZ, which had a beneficial
interest in the goods at the time when entry was made, was the
importer of those goods. There was no evidence to rebut the contents
of the bills of entry. In this respect, the fact that the freighting
agents signed them as the declarants is irrelevant.
In
terms of s12 of the Civil Evidence Act, a bill of entry, being a
public document, does not have to be made exclusively by a public
officer. The bills of entry in
casu
were made on ZIMRA forms and their contents were accepted by ZIMRA
officials. Furthermore, copies of any documents kept by a public
official can be used in evidence.
Lastly,
Mr Mpofu
submits that the opinion of the RBZ's lawyer, dated 17 June 2009,
were based upon facts given to him by the RBZ itself. The RBZ clearly
relied upon that opinion in order to accept liability to pay the VAT
claimed in Zimbabwe dollars.
There
is a total number of 12 bills of entry on record, covering the period
from 20 June 2008 to 26 August 2008. All of these bills identify
the appellant as the exporter and the RBZ as the importer. The
declarants on the first 7 bills were representatives of
Big Star Cargo Services, while the declarants on the next 5
bills were representatives of Mitchell Cotts Freight Zimbabwe. There
can be no doubt that, prima
facie,
the entries on these bills of entry support the appellant's
contention that it was not the importer of the goods in question.
The
draft agreement relied upon by the respondent appears to have been
drafted at some stage in 2008. It identifies the appellant as a
company duly incorporated in Zimbabwe and whose principal place of
business is situated in Harare.
The
appellant is designated as the seller of specified goods, valued at
US$12,759,114.00, while the RBZ is designated as the buyer of those
goods.
The
agreement was not signed by either of the parties.
In
its reply, the respondent intimated that it had “no knowledge of
whether the agreement in respect of the supply of goods was reduced
to writing or not”. However, the respondent annexed to its reply
the minutes of a meeting held on 13 February 2009 between officials
of the RBZ and various other named but unidentified persons. The
purpose of the meeting was to explain “the operations of BACOSSI
project”.
According
to the officials of the RBZ, the appellant “was responsible for
importation of basic commodities”. They further explained that the
appellant “is not duly incorporated in Zimbabwe and does not have
offices in Zimbabwe as indicated on the contract of agreement in
ZIMRA's possession”. Furthermore, “only a verbal agreement was
reached between the governor and Tania, the Ukranian representing
Afritrade International. There is no written agreement between
Afritrade International and RBZ”.
The
learned judge a
quo
highlighted the principal terms of the agreement and reasoned that
“the onus to establish that the terms and conditions in their
agreement were different from those captured in the unsigned
agreement was on the appellant. The appellant did not lead any
evidence on this aspect”.
Furthermore,
“the unsigned agreement placed the duty to import the goods into
Zimbabwe on the appellant. Again, the delivery of the goods cost,
insurance and freight Harare strongly suggests that the appellant
imported the goods into Zimbabwe. It would not make sense for the RBZ
to undertake to expeditiously facilitate the quick clearance of its
imports. The obligatory cost, insurance and freight Chitungwiza
bonded warehouse delivery clause and the expeditious clearance clause
suggests [sic]
that the appellant was the importer”.
In
principle, an unsigned agreement cannot ordinarily be relied upon as
creating a valid and binding contract. However, the surrounding
circumstances, including prior dealings between the parties
concerned, may give rise to the prima
facie
presumption that the terms and conditions embodied in an unsigned
agreement represent the true intention of the parties. The burden
then shifts to the party disputing the authenticity of the agreement
to show that it was not intended to be binding.
This
position was affirmed by this Court in Associated
Printing and Packaging (Pvt) Ltd & Ors
v Lavin
& Anor
1996 (1) ZLR 82 (S), at 87:
“One
must mention the fact that the written document, Annexure F, was not
signed. The seller apparently declined to sign it. The law on this
point is set out in Christie op
cit
at p 122:
'This
principle, that the burden of proof is on the party who asserts
that an informal contract was not intended to be binding until
reduced to writing and signed, was adopted by the Appellate Division
in Goldblatt
v Fremantle
1920 AD 123...'
In
Woods
v Walters
1921 AD 303 at 305 Innes CJ referred to the above passage and added:
'It
follows of course that where the parties are shown to have been ad
idem
as to the material conditions of the contract, the onus of proving an
agreement that legal validity should be postponed until the due
execution of a written document lies upon the party who alleges it.'
In
this context, it is of significance that Mr Morris, the seller,
declined to give evidence on oath, or to call any witnesses.”
It
is common cause that there was an agreement between the appellant and
the RBZ governing the importation and supply of the BACOSSI goods.
This agreement was reduced to writing but was not signed by the
parties, ostensibly because the appellant was unhappy with the
description of its country of incorporation and principal place of
business in the preamble to the draft agreement.
In
any event, the BACOSSI goods were imported into Zimbabwe and
delivered to the RBZ in Harare as specified in the unsigned
agreement.
Given
this background, it seems to me that the court a
quo
was correct in finding that the contract between the appellant and
the RBZ was on the terms and conditions stipulated in the draft
unsigned agreement, unless the appellant was able to prove that its
contract with the RBZ was on some other terms and conditions.
Inasmuch as the appellant did not adduce evidence of any other
agreement between the parties, the learned judge a
quo
correctly concluded that the appellant was bound by the terms of the
draft agreement. It follows that those terms must be taken as being
correct in their designation of the appellant as the seller and
importer of the goods in question.
The
next issue concerns the legal opinion submitted to the RBZ and its
subsequent stance relating to the payment of VAT claimed by the
respondent.
In
their letter to the RBZ, dated 17 June 2009, its lawyers took the
following position:
“From
the documentation we were shown, the Reserve Bank imported the
Bacossi goods. The imported goods are VAT taxable and the tax is
charged on the importer (RBZ in this case). …….. . The VAT
payable on the importation of goods into Zimbabwe is payable by the
importer and not by the supplier of those goods. Accordingly, if
ZIMRA were to rely on the provisions dealing with imports the Reserve
Bank would have to pay the VAT. …….. . We therefore advise the
Reserve Bank to urgently pay Zimra in local currency. This should be
done before Parliament resume [sic]
and pass the Finance Bill which may have changes on the currency to
be paid on all outstanding taxes. …….. . Government departments
cannot take each other to court. …….. . We do not therefore
believe that ZIMRA can go to court against the Reserve Bank.”
Three
things emerge from the legal advice contained in this letter:
(i)
The first, based on the importation documents, presumably the
relevant bills of entry, is that the RBZ was the importer of the
BACOSSI goods and was therefore liable for any VAT leviable on those
goods;
(ii)
The second is that the RBZ should pay that tax in local currency
before any legislative change was introduced; and
(iii)
thirdly, even if the RBZ were to be levied for payment of the VAT
due, ZIMRA would not be able to pursue its claim against the RBZ
through the courts.
Pursuant
to this opinion, its addressee (Dr Mombeshora) wrote on behalf of the
RBZ to the appellant's lawyers. The nub of this letter, dated 1
July 2009, was to confirm that the RBZ “imported BACOSSI goods”
from the appellant and that the RBZ “accepts liability to ZIMRA for
this VAT”.
However,
this purported admission of liability to pay the VAT was subsequently
condemned and rejected at a meeting held on 20 August 2009 between
officials of the RBZ and ZIMRA. The lead RBZ representative (Dr
Kereke) “opposed the writing of the letter by Dr Mombeshora; in
fact it was shocking to him and the governor. …….. . It was not
proper to write such a letter to take responsibility of payment of
tax of a supplier. …….. . The letter was not RBZ policy. ……..
. The bank will revoke point number three of the letter which gave
liability of Afritrade International to RBZ.”
Following
this volte-face
by the RBZ, a meeting was held between the RBZ and representatives of
West Group.
The
meeting, held on 7 October 2009, was chaired by the RBZ Governor. It
was noted that “a bank employee erred in assuming the liability on
behalf of the Bank without the express authority of the Governor”.
It
was further noted that “there could perhaps be some business
transactions held between Dr Mombeshora and Afritrade that he
[the Governor] could not verify or vouch for”.
At
any rate, “The Governor had no problem paying the VAT invoice as
long as it was stated in Zimbabwe Dollars. …….. . However, he had
asked Dr Mombeshora to seek legal opinion on the matter internally
and externally”.
At
the conclusion of the meeting, “the Governor suggested to West
Group to obtain all the invoices and have them assessed by an
accounting firm and advise on the correct VAT due. The records should
cover pre-bacossi and bacossi importations”.
What
is evident from all of the foregoing is that the RBZ's acceptance
of liability to pay the VAT due on the BACOSSI goods, albeit in
Zimbabwe dollars, was not unequivocal or unqualified. It was
conditional upon the reassessment of the relevant records and the
need to seek further legal opinion.
Very
significantly, this qualified acceptance of liability was largely
predicated on the legal advice given to the RBZ on 17 June 2009, not
all of which advice was necessarily correct. The basic premise of
that advice hinged upon the contents of the importation documents
that were shown to the RBZ's lawyers.
As
I have already stated, ex
facie
the contents of the bills of entry in
casu
the appellant was the exporter and the RBZ was the importer of the
goods in question. In light of the factual findings made by the court
a
quo,
it becomes necessary to evaluate the legal correctness of those
entries in the specific circumstances of this case.
Section
12(1) of the Civil Evidence Act [Chapter
8:01]
defines a “public document” as a document made by a public
officer for public use.
In
terms of s12(2) of the Act, a copy of a public document is admissible
in evidence as prima
facie
proof of the facts stated therein.
By
virtue of s12(3), a copy of a document, other than a public document,
the original of which is in the custody of a State official, is also
admissible in evidence.
In
casu,
there can be no doubt that the bills of entry produced in evidence
are admissible documents within the contemplation of s12(3) of the
Civil Evidence Act. The fact that the entries therein were not made
by a public officer or official of the State does not detract from
their status as admissible evidence, for the obvious reason that
their originals were, or should have been, in the custody of a State
official.
The
court a
quo
was very much alive to the presumption of regularity attaching to the
bills of entry. It accepted that those bills were “public documents
whose contents are prima
facie
correct” and that, therefore, “the evidentiary onus to disprove
the correctness of the contents of the bills of entry shifted to the
respondent.”
The
court a
quo
then proceeded to examine the definitions of the terms “importer”,
“exporter” and “entry” in s2 of the Customs and Excise Act
[Chapter
23:02].
The learned judge found that “the business activities of the
appellant fell outside the definition of 'exporter' but squarely
fit the definition of 'importer'. It was a misnomer to refer to
the appellant in the bill of entry as an exporter”. He then
concluded that “notwithstanding the contents of the bills of entry
and other documents compiled by or at the instance of the appellant
to the contrary, the appellant was the owner or possessor of the
goods who also had a beneficiary [sic]
interest in them before they entered Zimbabwe who brought them or
caused them to be brought into Zimbabwe”. He accordingly held that
“the appellant was the importer of both the non-Bacossi and the
Bacossi goods.”
In
terms of s37(1)(e) of the Customs and Excise Act, where goods are
imported by means other than ships, aircraft, trains or pipelines,
the time of importation of goods into Zimbabwe is deemed to be the
time when the goods cross the borders of Zimbabwe.
Section
39(1)(a) of the Act requires every importer of goods to make entry of
those goods at the point of entry at the time of importation.
Section
40(1) prescribes the manner in which entry of imported goods is to be
made. It requires the person making entry to, inter
alia,
deliver to the proper officer a bill of entry with full particulars
as prescribed or required, make and subscribe to a declaration in the
prescribed form as to the correctness of those particulars, pay the
duty due on the goods, and produce all bills of lading, invoices, or
other documents relating to the goods or their value.
Turning
to the salient definitions in s2 of the Act, the term “entry” in
relation to clearance of goods for importation means “the
presentation in accordance with this Act of a correctly completed and
signed declaration on a bill of entry in writing”.
The
term “export” means “to take goods or cause goods to be taken
out of Zimbabwe”. Correspondingly, “exporter” means “any
person in Zimbabwe who takes goods or causes goods to be taken out of
Zimbabwe, and includes any employee or agent of such person and the
owner of such goods as are exported”.
Conversely,
“import” means “to bring goods or cause goods to be brought
into Zimbabwe”. The definition of “importer” is expanded to
include “any owner of or other person possessed of or beneficially
interested in any goods at any time before entry of the same has been
made and the requirements of this Act fulfilled”.
Having
regard to the foregoing provisions governing the entry of imported
goods and the relevant definitions cited above, as applied within the
context of the dealings between the appellant and the RBZ, I am
inclined to agree with the conclusion arrived at by the learned judge
a
quo.
The
critical entries contained in the bills of entry are patently
anomalous and misleading for the following reasons:
(i)
Firstly, the appellant cannot conceivably be said to be the exporter
of the goods in question out of Zimbabwe. It was obviously the
consignor of the goods into Zimbabwe, but certainly not their
exporter out of Zimbabwe.
(ii)
Secondly, given the manner of and circumstances surrounding the
importation and entry of the goods into Zimbabwe, the RBZ cannot be
described as the importer of those goods. It may well have been the
ultimate consignee of the goods in Harare, but it was not their owner
or possessor at any time before entry of the goods was made or at the
time of their importation, i.e.
when they crossed the borders of Zimbabwe at the port of entry in
Beitbridge.
There
is nothing on record or in the evidence adduced to show that the RBZ
had any form of control over the goods at the time of their
importation.
On
the other hand, the appellant was quite evidently the party that
brought the goods or caused them to be brought into Zimbabwe. It was
also the only party that can accurately be described as the owner or
person possessed of or beneficially interested in the goods at any
time before their entry was made or at the time of their importation.
(iii)
Thirdly, there is no evidence of any direct linkage between the RBZ
and the freighting agents involved, i.e.
Big Star Cargo Services and Mitchell Cotts. They were clearly not the
agents of the RBZ or acting on its behalf at the time when they
declared themselves on the bills of entry as the importer's agents.
There
is no evidence on record to show that the RBZ itself was privy to the
particulars contained in the bills of entry or that it could vouch
for their correctness.
Indeed,
this is abundantly clear from the meeting that was held between the
RBZ and the representatives of West Group on 7 October 2009, when it
was decided that West Group was to obtain all the relevant invoices
and records, for assessment by an accounting firm, so as to advise
the RBZ on the correct amount of VAT due.
On
the other hand, there can be no doubt that it was the appellant that
generated or caused to be generated the accompanying bills of lading,
invoices and other documents relating to the imported goods and their
value.
Moreover,
when subscribing to the particulars contained in the bills of entry,
the freighting agents, as declarants, were evidently acting on the
instructions and as the agents of the true “importer” of the
goods in question, to wit, the appellant.
In
the final analysis, I am amply satisfied that the court a
quo
was perfectly correct in holding that it was the appellant that was
the importer of both the BACOSSI and the non-BACOSSI goods. In the
premises, the second and third grounds of appeal cannot be sustained
and must accordingly be dismissed.
Conduct
of Business or Trade: Registration as Operator
The
fourth and fifth grounds of appeal attack the judgment a
quo
in the finding of the court that the appellant operated a business in
Zimbabwe and consequently holding that the appellant was to be
treated as a registered operator liable to pay VAT on the imported
goods.
The
evidence-in-chief of the Chairman of West Group (Kenneth Sharpe) was
that there was no cross-holding of shares between West Group and the
appellant. He further testified that none of the officers of the
appellant was on any of the boards in West Group and that the
appellant did not have and never had any personnel in Zimbabwe.
He
also confirmed the details in his earlier written statement
pertaining to the type of business that was being conducted by the
appellant with Douglas & Tate, a subsidiary of West Group. This
was to the effect that Douglas & Tate was holding various items
which had been put in its warehouse on behalf of the appellant. The
arrangement between Douglas & Tate and the appellant was that the
former would act as an agent of the latter.
On
the basis of this testimony, Mr Mpofu
submits that there was nothing to contradict the appellant's
position that it did not operate any business in Zimbabwe. The
appellant is a foreign company that conducted business in South
Africa to acquire goods for the RBZ. It did not undertake any gainful
occupation or activity within Zimbabwe itself and it had no employees
in Zimbabwe. Consequently, so it is submitted, the learned judge
erred in holding that the appellant was required to be registered for
VAT purposes.
Mr
Magwaliba
counters that, in terms of the governing legislation, VAT is payable
by any person, local or foreign, who is an importer. Whether or not
that person carries on any trade in Zimbabwe is irrelevant.
The
appellant, so he submits, is obliged to pay VAT as an importer.
Furthermore,
it is common cause that the appellant operated in Zimbabwe through
its agent, i.e.
Douglas & Tate. The appellant therefore carried on business
partly in Zimbabwe.
As
regards registration as an operator, the law permits the respondent
to deem a person to be registered from the date he becomes liable to
pay VAT. Accordingly, it is argued that the respondent competently
deemed the appellant to be a registered operator for VAT purposes.
In
terms of s6(1)(a) of the Value Added Tax Act [Chapter
23:12],
VAT is to be charged, levied and collected on the value of the supply
by any registered operator of goods or services supplied by him in
the course or furtherance of any trade carried on by him.
Additionally,
by virtue of s6(1)(b) of the Act, VAT is also leviable on the value
of the importation of any goods into Zimbabwe by any person.
My
reading of these provisions is that they afford two separate and
distinct taxing bases for the levying and payment of VAT:
(i)
Under s6(1)(a), it is the supply of goods and services in the course
or furtherance of any trade that attracts liability to pay VAT;
(ii)
while s6(1)(b) pertains to the payment of VAT on the importation of
any goods into Zimbabwe.
By
virtue of s6(2)(a) and s6(2)(b), the tax payable under s6(1)(a) is to
be paid by the registered operator, and the tax payable under
s6(1)(b) is to be paid by the importer of the goods in question.
In
the latter instance, it is not necessary that the importer should
also be carrying on any trade in Zimbabwe for VAT to be levied.
The
registration of persons making supplies in the course of any trade is
governed by s23 of the Act.
Section
23(1) stipulates that every person who, on or after 1 January 2004,
carries on any trade and is not registered becomes liable to be
registered. Subsections (2) and (3) of s23 prescribe the procedural
requirements for registration for VAT purposes.
In
terms of s23(4)(b), where any person who is liable to be registered
has not applied for registration, that person is deemed to be a
registered operator for the purposes of the Act from the date on
which he first became liable to be registered in terms of the Act.
The
word “supply” is defined in s2 of the Act to include “all forms
of supply, irrespective of where the supply is effected”.
The
term “trade” is equally broadly defined to mean “in the case of
a registered operator, other than a local authority, any trade or
activity which is carried on continuously or regularly by any person
in Zimbabwe or partly in Zimbabwe and in the cause or furtherance of
which goods or services are supplied to any other person for a
consideration, whether or not for profit, …….. “. In similar
vein, a “supplier” means “in relation to any supply of goods or
services, …….. the person supplying the goods or services”.
In
casu,
it is common cause that, at all material times, it was the appellant,
acting through Douglas & Tate as its agent, that supplied both
the non-BACOSSI and BACOSSI goods to the RBZ.
Having
regard to the definitions of “trade”, “supply” and “supplier”
in s2 of the Act, the appellant was unquestionably the supplier of
those goods, who supplied them in the course and furtherance of a
trade carried on by it, within the contemplation of s6(1)(a) of the
Act.
The
fact that such supply might have been effected before, at the time
when or after the goods in question arrived at the Beitbridge border
post is quite immaterial, as is the fact that the appellant conducted
its trade only partly in Zimbabwe. Again, it is equally irrelevant
that the appellant was an entity incorporated in Guernsey, but not in
Zimbabwe, or that its principal place of business might have been
situated outside Zimbabwe.
It
follows from the foregoing that the appellant was liable to be
registered in terms of s6(1)(a) of the Act, as an entity subject to
VAT, and that it was quite properly and lawfully registered for VAT
purposes in terms of s23(4)(b) of the Act.
It
also follows that the court a quo
cannot be faulted for holding that the appellant was to be treated as
a registered operator in terms of the Act and that it was therefore
liable to pay VAT on the goods that it supplied, as required by
s6(2)(b) of the Act.
Alternatively
and in any event, in light of my earlier conclusion that the
appellant was the true importer of the goods in question, it would
also be liable to pay VAT on their importation, in terms of s6(1)(b)
as read with s6(2)(b) of the Act.
Appointment
of Agent to Pay Tax
The
sixth and final ground of appeal takes issue with the findings of the
court a
quo
in connection with the appointment of an agent to pay tax and that
such an appointment had in fact been lawfully made.
As
was correctly observed in argument by Mr Mpofu,
this ground is only relevant if the other grounds of appeal are
unsuccessful.
On
12 March 2009, the respondent appointed the Chief Executive Officer
(CEO) of West Group as the public officer and representative of the
appellant on the ground that West Group was the holding company of
Douglas & Tate, the appellant's agent in Zimbabwe.
The
CEO objected to this appointment but his objection was dismissed by
the respondent on 31 March 2009.
The
court a
quo,
relying on various provisions of the Income Tax Act and the Value
Added Tax Act, held that “the appointment of the CEO of the holding
company of D & T, the agent of the appellant, as a public officer
and representative registered operator was above board because D &
T acted as an agent of the appellant in Zimbabwe”.
Mr
Mpofu
submits that the appointment of the CEO of West Group was invalid,
particularly as the respondent initially conceded this point by
cancelling the appointment and dealing instead with the appellant's
legal practitioners, but then later overrode its own concession.
Mr
Mpofu
points to s61(4) of the Income Tax Act to submit that this provision
completely excludes the propriety of the appointment and that it was
clearly misconceived.
Section
61(4) makes it clear that the appointed person must be an official of
the importing company and not an official of an agent company.
Mr
Magwaliba
submits that s61(4) is not the only relevant provision. Section 61(8)
of the Act is equally relevant as it allows the respondent to
penalise the agent of any defaulting company.
Subsections
(1), (2) and (3) of s61 of the Income Tax Act [Chapter
23:06]
provide for the appointment of a public officer, being an individual
residing in Zimbabwe, to represent every company which carries on a
trade or has an office or other established place of business in
Zimbabwe. Such individual, who must be a person approved by the
Commissioner of Taxes, must be appointed within one month of the
company commencing its operations in the country. Section 61(4) of
the Act stipulates that “in default of any such appointment, the
public officer of any company shall be such managing director,
director, secretary or other
officer of the company
as the Commissioner may designate for that purpose” (my emphasis).
By
dint of s61(8), any company which fails to comply with s61 “and
every person who acts within Zimbabwe as agent or manager or
representative of such company” incurs a monetary penalty for every
day during which the default continues.
Additionally,
s61(9) enables any notice, process or proceeding under the Act to be
given to, served upon or taken against the public officer of the
company and, in his or her absence, “any officer or person acting
or appearing to act in the management of the business or affairs of
such company or as agent of such company”.
The
word “agent” is defined in s2 of the Act to include “any
partnership or company …….. when acting as an agent” and “any
person declared by the Commissioner to be the agent of some other
person for the purposes of this Act”.
Section
53 of the Income Tax Act sets out the persons who are representative
taxpayers for the purposes of the Act.
In
terms of s53(1)(a), a “representative taxpayer…….. in relation
to the income of a company, means the public officer of the company”.
Section
54(1) of the Act subjects every representative taxpayer to the same
duties, responsibilities and liabilities as if such income were
received by or accruing to him or her beneficially as well as
liability to assessment in his or her own name in respect of such
income. However, s54(5) makes it clear that any tax payable in
respect of an assessment made upon a public officer is recoverable
from the company itself.
Turning
to the Value Added Tax Act [Chapter
23:12],
the provisions relied upon by the court a
quo
are to be found in ss 47, 48 and 49 of Part VIII of the Act,
pertaining to representative registered operators.
In
terms of s47(a), the person responsible for performing the duties
imposed by the Act upon any company is the public officer
contemplated in s53 of the Income Tax Act.
Section
48(2) empowers the Commissioner to declare any person to be the agent
of any other person for the purposes of the Act, including the
payment of any amount of tax, additional tax, penalty or interest due
from any moneys held or received by him or her as an agent or
intermediary of the other person.
In
similar vein, s49(2) stipulates that every representative registered
operator shall be liable for the payment of any tax, additional tax,
penalty or interest chargeable under the Act in relation to any
moneys controlled or transaction concluded by him or her in a
representative capacity, as though such liability had been incurred
personally.
The
key provisions for consideration in the present context are s61(4) of
the Income Tax Act and s47(a) of the Value Added Tax Act.
The
former enables the Commissioner to designate the public officer of a
company in the absence of an appointment of such officer by the
company itself. The latter, as read with s53 of the Income Tax Act,
identifies the public officer as the person responsible for
performing the duties imposed by the Value Added Tax Act on any
company.
Apart
from identifying the public officer of a company as its principal
representative for all tax-related purposes, the other provisions in
both Acts that I have alluded to earlier also impose various
responsibilities and obligations upon other specified individuals.
These include any person who acts as an agent, manager or
representative of the company and anyone declared by the Commissioner
to be the agent of the company.
It
is trite that the provisions of a statute must be construed
holistically, within the context of the statute in which they appear
as well as any statute in
pari materia.
In
this respect, the learned judge a
quo
quite properly took into account “the architectural design” of
both the Income Tax Act and the Value Added Tax Act which allow the
Commissioner to compulsorily appoint public officers and agents for
the collection of VAT and other taxes.
On
this basis, he found that the appointment of the CEO of West Group as
a public officer and representative registered operator of the
appellant was perfectly lawful.
With
great respect, the learned judge appears to have misconstrued and
misapplied the provisions that he relied upon to arrive at that
conclusion.
(i)
First and foremost, it is common cause that there was no corporate
nexus between West Group and the appellant. The fact that Douglas &
Tate, a subsidiary of West Group acted as an agent of the appellant
in Zimbabwe, did not justify the imposition of corporate
responsibility upon the CEO of West Group simply because the latter
was the holding company of Douglas & Tate.
(ii)
Secondly and more significantly, the learned judge seems to have
stretched the concept of contextual construction well beyond the
permissible limits.
In
terms of s47(a) of the Value Added Tax Act, it is the public officer
of a company that is responsible for performing the duties imposed by
that Act. Such public officer is ordinarily appointed by the company
itself or by an agent or legal practitioner vested with the authority
to do so. And in default of such appointment, s61(4) of the Income
Tax Act enables the Commissioner to designate a “managing director,
director, secretary or other
officer of the company”
as its public officer.
Without
doing critical violence to the clear and unambiguous language of this
provision, it is difficult to imagine how the CEO of West Group, an
entity that had no managerial, directorial or shareholding connection
with the appellant, could possibly be regarded as an officer of the
appellant company.
I
am fortified in this position by having regard to the extremely
onerous obligations imposed upon the public officer or registered
representative operator of a company as well as the highly punitive
consequences and liabilities attaching to the failure to fulfil those
obligations. Amongst other things, there is the possibility of being
subjected to monetary penalties, legal process and tax assessments as
well as the liability to pay, albeit in a representative capacity,
taxation debts incurred by the company.
I
do not think that the lawmaker would have intended the visitation of
such punitive measures upon the officers of an entirely separate
corporate entity.
Both
at common law and by virtue of s3 of the Administrative Justice Act
[Chapter
10:28],
the Commissioner of Taxes, as an administrative authority, is
enjoined to act fairly, reasonably and lawfully in the performance of
his or her statutory functions and duties.
In
the instant case, I am of the considered view that the compulsory
appointment of the CEO of West Group as the public officer and
representative registered operator of the appellant was patently
unfair, unreasonable and unlawful.
In
this respect, the court a
quo
clearly erred in upholding this appointment.
Disposition
To
conclude, the first ground of appeal is struck out by consent. The
second, third, fourth and fifth grounds of appeal are dismissed. Only
the sixth ground of appeal succeeds and is therefore upheld.
As
regards costs, the court a
quo
quite properly declined to award costs against the appellant on the
basis that its objection raised important legal points on the status
of a bill of entry and that its grounds of appeal were not frivolous.
I am inclined to agree and adopt the same approach on appeal.
It
is accordingly ordered that:
1.
The appeal partially succeeds in respect of the sixth ground of
appeal.
2.
Each party shall bear its own costs.
3.
The judgment of the court a
quo
is set aside and substituted as follows:
“(i)
Subject to paragraph (ii) below, the appeal be and is hereby
dismissed.
(ii)
The respondent's appointment of the Chief Executive Officer of the
West Group of Companies Limited as the public officer and
representative registered operator of the appellant be and is hereby
set aside.
(iii)
There shall be no order as to costs.”
BHUNU
JA: I
agree
BERE
JA: (No
longer in office)
Gill,
Godlonton & Gerrans,
appellant's legal practitioners
ZIMRA
Legal & Corporate Services Division,
respondent's legal practitioners
