Value Added Tax

View Appeal
SC28-16 : ZIMBABWE REVENUE AUTHORITY vs PACKERS INTERNATIONAL (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GOWORA JA and HLATSHWAYO 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] and the Income Tax Act [Chapter 23:06], ...

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 Value Added Tax Act [Chapter 23:12].

The system of collection of value added tax (VAT), as embodied in the Value Added Tax Act [Chapter 23:12], 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 section 28 of the Value Added Tax Act [Chapter 23:12], 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 Value Added Tax Act [Chapter 23:12]. 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 USD19,696,645=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 the '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 upliftment and suspension of the original garnishee order, whereafter it shall replace it with a fresh garnishee order for the sum of USD905,801=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.”…,.

The court further found that the appointment of FBC Bank as agent in terms of section 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:

(i) Whether ZIMRA is entitled, at law, to issue garnishee orders and appoint agents for the payment of value added tax.

(ii) Was the court a quo entitled to mero motu pick a dispute on behalf of the parties and determine the matter on the same?

(iii) Was the court a quo, at law, empowered to remove the garnishee order and impose an interdict against ZIMRA?

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES
Ruled By: MATHONSI J

Valued Added Tax (VAT) is a statutory levy which should be paid by operation of the law. The tenant does not have to agree to pay it in order for it to be levied.

SC03-21 : AFRITRADE INTERNATIONAL LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: PATEL JA, BHUNU JA and BERE 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.BackgroundThe appellant is a foreign company incorporated in the British Virgin Islands and ...

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 Reserve Bank of Zimbabwe (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, to the RBZ in 2008.

After conducting investigations, the respondent raised taxation schedules against the appellant for outstanding value added tax (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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....,.

Identity of Importer: Zimtrade or Reserve Bank of Zimbabwe (RBZ)

The second and third grounds of appeal pertain to the identity of the importer of the goods in question. Was it the Reserve Bank of Zimbabwe (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.

Counsel for the appellant 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 Reserve Bank of Zimbabwe (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.

Counsel for the appellant relies on the provisions of sections 37(1)(e), 39(1) and 40(1) of the Customs and Excise Act in support of his submission that the entries in question were made by the Reserve Bank of Zimbabwe (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.

Counsel for the appellant also relies on other documentary evidence to buttress the appellant's position.

In particular, he refers to an opinion by the Reserve Bank of Zimbabwe's lawyer, dated 17 June 2009, a letter of 1 July 2009 from the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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, counsel for the appellant 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 Reserve Bank of Zimbabwe (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.

Counsel for the respondent 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 section 2 of the Customs and Excise 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 Reserve Bank of Zimbabwe (RBZ) which was not the importer.

As regards the bills of entry, counsel for the respondent points to the definition of “entry” in section 2 of the Customs and Excise 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 Reserve Bank of Zimbabwe (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.

Counsel for the respondent further submits that the bills of entry were not prepared by the respondent or the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ), counsel for the respondent 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, counsel for the respondent submits that the draft agreement between the appellant and the Reserve Bank of Zimbabwe (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, counsel for the appellant 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 Reserve Bank of Zimbabwe (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 section 12 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, counsel for the appellant submits that the opinion of the Reserve Bank of Zimbabwe's lawyer, dated 17 June 2009, were based upon facts given to him by the RBZ itself. The Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ) as the importer. The declarants on the first seven (7) bills were representatives of Big Star Cargo Services, while the declarants on the next five (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, while the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ) and various other named but un-identified persons. The purpose of the meeting was to explain “the operations of BACOSSI project.”

According to the officials of the Reserve Bank of Zimbabwe (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)…,.

“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 p122:

'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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ) and its subsequent stance relating to the payment of VAT claimed by the respondent.

In their letter to the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ) should pay that tax in local currency before any legislative change was introduced; and

(iii) Thirdly, even if the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ) and ZIMRA.

The lead Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (RBZ), a meeting was held between the RBZ and representatives of West Group.

The meeting, held on 7 October 2009, was chaired by the Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe'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 re-assessment 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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 section 12(2) of the Civil Evidence Act, a copy of a public document is admissible in evidence as prima facie proof of the facts stated therein.

By virtue of section 12(3) of the Civil Evidence Act, 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 section 12(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 section 2 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 section 37(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 Customs and Excise 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) of the Customs and Excise Act 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 section 2 of the Customs and Excise 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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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 Reserve Bank of Zimbabwe (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, counsel for the appellant 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 Reserve Bank of Zimbabwe (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.

Counsel for the respondent 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 section 6(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 section 6(1)(b) of the Value Added Tax 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 section 6(1)(a) of the Value Added Tax Act, it is the supply of goods and services in the course or furtherance of any trade that attracts liability to pay VAT;

(ii) While section 6(1)(b) of the Value Added Tax Act pertains to the payment of VAT on the importation of any goods into Zimbabwe.

By virtue of section 6(2)(a) and section 6(2)(b) of the Value Added Tax Act, the tax payable under section 6(1)(a) is to be paid by the registered operator, and the tax payable under section 6(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 section 23 of the Value Added Tax Act.

Section 23(1) of the Value Added Tax Act 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 section 23 prescribe the procedural requirements for registration for VAT purposes.

In terms of section 23(4)(b) of the Value Added Tax Act, 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 Value Added Tax Act from the date on which he first became liable to be registered in terms of the Act.

The word 'supply' is defined in section 2 of the Value Added Tax 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 Reserve Bank of Zimbabwe (RBZ).

Having regard to the definitions of 'trade', 'supply' and 'supplier' in section 2 of the Value Added Tax 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 section 6(1)(a) of the Value Added Tax 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 section 6(1)(a) of the Value Added Tax Act, as an entity subject to VAT, and that it was quite properly and lawfully registered for VAT purposes in terms of section 23(4)(b) of the Value Added Tax 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 Value Added Tax Act and that it was therefore liable to pay VAT on the goods that it supplied, as required by section 6(2)(b) of the Value Added Tax 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 section 6(1)(b) as read with section 6(2)(b) of the Value Added Tax 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 counsel for the appellant, 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 Chief Executive Officer (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 Chief Executive Officer (CEO) of the holding company of Douglas & Tate, the agent of the appellant, as a public officer and representative registered operator was above board because Douglas & Tate acted as an agent of the appellant in Zimbabwe.”

Counsel for the appellant submits that the appointment of the Chief Executive Officer (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.

Counsel for the appellant points to section 61(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) of the Income Tax Act makes it clear that the appointed person must be an official of the importing company and not an official of an agent company.

Counsel for the respondent submits that section 61(4) of the Income Tax Act is not the only relevant provision. Section 61(8) of the Income Tax Act is equally relevant as it allows the respondent to penalize the agent of any defaulting company.

Subsections (1), (2) and (3) of section 61 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 Income Tax 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.”…,.

By dint of section 61(8) of the Income Tax Act, any company which fails to comply with section 61 “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, section 61(9) of the Income Tax Act 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 section 2 of the Income Tax 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 section 53(1)(a) of the Income Tax Act, a “representative taxpayer…, in relation to the income of a company, means the public officer of the company.”

Section 54(1) of the Income Tax 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, section 54(5) of the Income Tax Act 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 sections 47, 48 and 49 of Part VIII of the Value Added Tax Act, pertaining to representative registered operators.

In terms of section 47(a) of the Value Added Tax Act, the person responsible for performing the duties imposed by the Act upon any company is the public officer contemplated in section 53 of the Income Tax Act.

Section 48(2) of the Value Added Tax Act 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, section 49(2) of the Value Added Tax Act 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 monies 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 section 61(4) of the Income Tax Act [Chapter 23:06] and section 47(a) of the Value Added Tax Act [Chapter 23:12].

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 section 53 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 Chief Executive Officer (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 mis-applied 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 Chief Executive Officer (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 section 47(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, section 61(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 Chief Executive Officer (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 section 3 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 Chief Executive Officer (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.”

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

This is an appeal against the judgment of the High Court sitting at Masvingo, delivered on 24 June 2020, which dismissed with costs the application made by the two appellants for a declaratory order and an interdict.FACTUAL BACKGROUNDThe two appellants are sugar-producing giants in the Lowveld while the first respondent ...

FACTUAL BACKGROUND

The two appellants are sugar-producing giants in the Lowveld while the first respondent (Zimbabwe Revenue Authority) is the statutory body charged with revenue collection in Zimbabwe. The remainder of the respondents are either sugar cane farmers or associations representing such farmers (Zimbabwe Sugarcane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers, Farai Dumo Augustine Musikavanhu and Roy Bhila).

The respondents will be referred to in this judgment, for convenience, as Zimbabwe Revenue Authority and the farmers respectively.

The appellants and the farmers entered into two types of agreements, either a “Cane Milling Agreement” or a “Cane Purchase Agreement” in terms of which the appellants would either provide milling services to the farmers and market their sugar and molasses or outrightly purchase the sugar cane.

The dispute which arose between the parties did not involve the outright purchase and sale of sugar cane. As such this judgment does not deal with that scenario at all. The judgment concerns itself with the cane milling agreements entered into between the parties.

In terms of the cane milling agreements, the charge for milling and marketing services, payable by the farmers to the appellants, was calculated in terms of a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. It was fixed at 23 percent of the proceeds the farmers would get; meaning that, the appellants would retain 23 percent of the proceeds while remitting the balance of 77 percent to the farmers.

Regrettably, in fixing the milling and marketing charge, the appellants did not include Value Added Tax (VAT) as required by law. It follows, that, no Value Added Tax was paid by the appellants to the Zimbabwe Revenue Authority in that regard.

It was in the process of auditing the appellants Value Added Tax (VAT) assessments for the period 2009 to 2017 that the Zimbabwe Revenue Authority decided that the milling and marketing charges of 23 percent of the proceeds levied by the appellants against the farmers attracted VAT.

The Zimbabwe Revenue Authority proceeded to issue assessments of value added tax (VAT) for those years and demanded payment of same from the appellants. These assessments related to the past supplies where the appellants ought to have, but failed, to collect and remit VAT to the Zimbabwe Revenue Authority.

The appellants objected to the assessments which objections were all disallowed by the Zimbabwe Revenue Authority. The appellants appealed to the Fiscal Appeals Court but paid the assessed value added tax (VAT) to the Zimbabwe Revenue Authority notwithstanding.

An appeal does not exonerate a tax payer from paying the assessed tax.

After effecting payments to the Zimbabwe Revenue Authority, the appellants sought to recover such value added tax (VAT) from the farmers on the basis that they were obliged to charge and collect the VAT from the consumers of the service, the farmers, but had not done so.

The appellants were of the view, that, it was only fair and reasonable that the farmers should re-imburse them of the value added tax (VAT) paid by them to the Zimbabwe Revenue Authority.

There being no convergence between the farmers, who had obtained advice from the Zimbabwe Revenue Authority, that, the 23 percent Division of Proceeds ratio was inclusive of value added tax (VAT), and the appellants, the latter filed an application in the court a quo.

In their application, the appellants sought declaratory relief that they were legally entitled to continue charging and collecting value added tax (VAT) from the farmers - over and above the 23 percent milling charge.

The appellants also sought to be reimbursed the monies they paid to the Zimbabwe Revenue Authority on past assessments.

In addition, they accused the Zimbabwe Revenue Authority of interfering with contractual issues between them and the farmers by rendering advice to the farmers on the value added tax (VAT) dispute.

Accordingly, the appellants sought an order interdicting the Zimbabwe Revenue Authority from what they called “gratuitously interfering in pricing and contractual issues” between them and the farmers.

The application was opposed by the Zimbabwe Revenue Authority and most of the respondents.

DECISION A QUO

It was the view of the court a quo, that, the entire dispute revolved around the interpretation of section 69 and section 72 of the Value Added Tax Act [Chapter 23:12].

Regarding the past supplies of sugar cane to the appellants, the court a quo found, that, the literal meaning of section 69 of the Value Added Tax Act suggests, that, it is irrelevant whether the registered operator has charged VAT or not. If the price does not reflect the tax component, section 69 of the Value Added Tax Act operates such that there is a presumption that a price not reflecting VAT included that tax.

It was the finding of the court a quo, that, the section serves to “estop” a registered operator, who has not reflected value added tax (VAT) on the price, from denying that the price includes that tax.

It also found, that, section 69 of the Value Added Tax Act precludes such registered operator from subsequently claiming VAT not reflected on the price.

In the court a quo's view, permitting the appellants to recoup value added tax (VAT) in retrospect would render nugatory the deeming provision of section 69 of the Value Added Tax Act as the deeming provision cannot be interpreted to mean different things to two different people.

Regarding the claim for value added tax (VAT) on present and future supplies of sugarcane, which the contracts of the parties are still silent on, the court a quo took the view, that, it was up to the parties to re-negotiate or clarify the terms of their contracts in order to plug the existing lacunae.

If they do not, then, section 69 of the Value Added Tax Act will continue to apply.

The court a quo was not persuaded that a case was made for an interdict against the first respondent.

It recognised, that, the appellants had made a formal request to the first respondent to intervene and educate the farmers on the tax implications of their agreement. They could not, thereafter, cry foul after such intervention.

In addition, the court a quo found no evidence of the first respondent's interference with the pricing issues between the appellants and the farmers.

On the question of costs, the court a quo found no basis for departing from the general rule, that, costs follow the result. It dismissed the application with costs granted in favour of only those respondents who participated in the suit.

The appellants were aggrieved. They noted this appeal to this Court on the following grounds;

GROUNDS OF APPEAL

1. The learned judge of the court a quo erred and misdirected himself in finding that section 69 of the Value Added Tax Act [Chapter 23:12] operated to preclude the appellants from recovering value added tax (VAT) for past supplies on an alleged milling service which the first respondent considered to have been rendered to farmers.

2. Further, the court a quo erred and misdirected itself in failing to pronounce, definitively, on the appellants right and entitlement to charge, levy, and collect value added tax (VAT), and the farmers respective obligation to pay same, in addition to the value of the alleged milling service, with respect to current and future supplies pursuant to the first respondent's decision to impose tax.

3. The learned Judge of the court a quo erred and misdirected himself in failing to find, that, the letter by the first respondent to the farmers, with respect to the farmers tax obligations, strayed upon purely contractual matters which it was not competent for the first respondent to prescribe to parties.

4. The court a quo erred in awarding costs against the appellants, and in favour of the respondents in general, and, at any rate, most especially as it relates to the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents in particular.

ISSUES

The grounds of appeal may be four, but they speak to essentially two narrow issues for determination in this appeal. They are:

1. Whether or not the court a quo erred in refusing to grant the declaratur and the interdict.

2. Whether or not the court a quo erred in granting costs against the appellants.

SUBMISSIONS ON APPEAL

Counsel for the appellants anchored his arguments on the legal effects of the decision taken by the first respondent, contained in its letter dated 9 September 2019. Following meetings held by the parties, the first respondent determined that:

“1. The VAT Act, under section 6, provides that VAT shall be charged and levied where a service is provided. Facts at hand indicated that millers provide milling services to the farmers and they retain 23% from the sugar proceeds…,.

Given the above legislative requirements, VAT is therefore applicable on the milling fees, and, as discussed in the meeting, VAT is recovered as depicted in the following scenario…,.”

It was submitted, that, the moment the first respondent made the decision to commence recovering value added tax (VAT) on milling services, when, prior to that, it had not done so, the provisions of section 72(1) of the Value Added Tax Act [Chapter 23:12] were triggered.

The section provides:

“(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax on increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

To the extent that value added tax (VAT) was only imposed on the milling fees, by letter quoted above, so the argument goes, when it had not been claimed previously, the appellants were entitled to recover it from the recipients of the milling services by virtue of that provision.

It was submitted, further, that, the deeming provisions of section 69 of the Value Added Tax Act do not preclude the appellants from recovering the value added tax (VAT) paid to the first respondent. This is so because the section is a shield in the hands of the revenue collector. It is an administrative tool for the facilitation of easy collection of taxes without disruptive disputes with registered operators.

In counsel for the appellants view, section 69 of the Value Added Tax Act cannot be used to estop the operator from recovering value added tax (VAT) paid to the collector.

Per contra, counsel for the first respondent submitted, that, given that the contracts for milling services did not reflect value added tax (VAT), section 69 of the of the Value Added Tax Act applies. To that extent, in respect of past supplies, the contract price is deemed to be inclusive of VAT.

It was submitted further, that, in the absence of an agreement with the farmers to vary the contract price, even by the application of basic principles of Contract Law, the appellants could not unilaterally vary the price by levying value added tax (VAT).

On the effects of section 72 of the Value Added Tax Act, it was submitted, that, the section may be regarded as a law–changing provision. In the event that the law changes to include value added tax (VAT), where it was not applicable, so it was argued, or to increase the applicable VAT, then, by dint of section 72 of the Value Added Tax Act, the agreement is varied accordingly.

The net effect of those submissions is that the section has no application where value added tax (VAT) was excluded in the agreement when it should have been included.

Regarding the alleged interference with contractual rights and obligations by the first respondent, counsel for the first respondent submitted, that, the advice rendered by the first respondent was not only at the invitation of the appellants themselves but also in fulfilment of a statutory obligation. The first respondent is obliged to educate taxpayers on their tax obligations.

The requirements for an interdict were not met.

Counsel for the rest of the respondents in attendance, in chorus, associated themselves with submissions made on behalf of the first respondent.

ANALYSIS

In as much as the record of appeal and the submissions made by counsel are heavy, what has to be decided has become very narrow indeed. The entire appeal turns on the effect of the deeming provision in section 69 of the Value Added Tax Act [Chapter 23:12].

In particular, whether it operates to prevent a registered operator who has fallen foul of the law, by not reflecting value added tax (VAT) on the price of goods and services, from later recouping the VAT demanded by the first respondent from the consumer.

A fortiori, whether section 72 of the Value Added Tax Act applies to a situation where the registered operator has excluded or not reflected value added tax (VAT) on the price of goods and services even though the law required such registered operator to levy and reflect VAT on the price.

Section 72 of the Value Added Tax Act varies the contract price by the margin of value added tax (VAT) imposed or increased subsequent to the contract being concluded.

I agree with counsel for the first respondent, that, it is a law-changing provision as it clearly relates to the imposition of a new tax or the increase of an existing tax.

It is common cause that the burden of paying value added tax (VAT) lies with the consumer of goods and services.

The system of value added tax (VAT) collection existing in this jurisdiction was succinctly summarised by the court in Zimbabwe Revenue Authority v Packers International (Private) Limited 2016 (2) ZLR 84 (S)…, thus:

“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 section 28 of the VAT Act, to submit returns to the Commissioner of Taxes ('the Commissioner') every month, calculate the VAT due on the return, and make payment of such 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.”

In terms of the value added tax (VAT) collection system which is in place, while the burden to pay resides with the consumer of goods and services, the registered operator bears the burden of collecting VAT and remitting it to the revenue collector.

Where the registered operator has omitted, as required by section 6(1) of the Value Added Tax Act, to include value added tax (VAT) on the price, section 69(1) of the Value Added Tax Act is activated to deem VAT to be included in whatever price is pegged by the operator.

Section 6(1) of the Value Added Tax Act is very clear in its wording, it 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 course or furtherance of any trade carried on by him:”

What it means is, that, by failing to charge, levy, and collect value added tax (VAT) from the consumers of their milling services, the appellants breached, to their peril, the peremptory provisions of section 6(1) of the Value Added Tax Act.

By operation of section 69(1) of the Value Added Tax Act, the 23 percent charge for milling services was taken to include VAT for all intents and purposes.

The court a quo cannot be faulted for finding, that, whether by inadvertence, oversight, or misinterpretation of the nature of the contract, the consequence of the failure to specifically include value added tax (VAT) are that it is deemed included in the milling price.

The deeming provision cannot be applied differently on the registered operator and the consumer.

As regards the question whether section 72(1) of the Value Added Tax Act rescues the appellants from the consequences of their failure to comply with the peremptory provisions of section 6(1)(a) of the Value Added Tax Act, it is clearly a matter of statutory interpretation.

In my view, the simple grammatical meaning of the words “whenever the value added tax is imposed or increased in respect of any supply of goods and services…,” is that, in the first instance, there would be no tax on such supply and the law steps in to impose a tax.

In the second instance, the law would have imposed a tax on the supply but it moves in to increase the value of tax.

In both instances, the parties would have contracted in certain terms before the law changes.

Upon change of the law, section 72(1) of the Value Added Tax Act comes in to vary the terms of a pre-existing contract to either impose or increase the tax.

I do not agree with counsel for the appellants submission, that, upon conducting an audit which revealed that the appellants were rendering a taxable milling service while not levying and collecting tax, the first respondent imposed a tax.

In my view, the law had already imposed the tax, but the appellants were committing an infraction by not reflecting it.

Again, the court a quo was correct in concluding, that, there was no imposition of a “new tax” nor an increase of chargeable tax.

Accordingly, section 72(1) of the Value Added Tax Act has no application and is certainly not available to the appellants.

Counsel for the appellants did not prosecute the issue of the interdict sought against the first respondent with any degree of enthusiasm.

It is not without reason that this is so:

(a) Firstly, evidence placed before the court a quo shows, that, the appellants invited the first respondent to intervene and educate the farmers on the tax implications of their contracts with the appellants. That the first respondent interpreted their contracts in a manner not favourable to the appellants can scarcely found a cause of action.

(b) Secondly, and more importantly, the requirements for the grant of an interdict were not met.

I can only advert to the fact that the court a quo made factual findings relating to the failure by the appellants to prove that the first respondent had interfered with the contractual issues.

It also made a finding that the advice rendered by the first respondent was only confined to value added tax (VAT) matters falling within the statutory province of the first respondent as a revenue collector.

Surely, one cannot be interdicted from carrying out a lawful duty.

The court a quo also made a finding that the use of the term “gratuitously interfering” was too imprecise and unenforceable.

On appeal, the appellants failed to set out a basis for interference with those findings.

It is trite, that, it is only where the factual findings of the lower court are clearly irrational, to an extent that no sensible court seized with the same facts could have reached such a conclusion, that the Appellate Court will interfere: see Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S); Shuro v Chiuraise SC20-19.

No such threshold was attained in the present case. As such, this Court cannot interfere.

It remains for me to deal with the question of costs.

The court a quo granted costs against the appellants in favour of those respondents who participated in the proceedings.

It premised its decision on the general rule that costs follow the result.

Its attention was not drawn to the widely held principle, in tax cases, that, the High Court or the Special Court, is loathe to make an order as to costs save where the claim is held to be unreasonable or the grounds of appeal are frivolous: see section 65(12) of the Income Tax Act [Chapter 23:06].

On appeal, counsel, again, did not address that issue at all.

It occurs to me, that, the court a quo was incapacitated in respect of costs by the failure to bring its attention to the prevailing jurisprudence on such costs. As a result, it misdirected itself, a misdirection entitling this Court to interfere with its exercise of discretion.

There is nothing in this case suggesting that the appellants case was unreasonable or that it was frivolous.

Quite to the contrary, they raised quite pertinent issues which required the court to embark on a detailed interpretation of the law. The same applies to the appeal.

In my view, this is a classic case in which the costs, both a quo and in this Court, should not be awarded to any party.

In the result, it be and is hereby ordered as follows:

1. The appeal, in respect of grounds of appeal 2.1, 2.2, and 2.3 is dismissed with each party to bear its own costs.

2. The appeal, in respect of ground of appeal 2.4, is upheld.

3. The judgment of the court a quo is amended by the deletion of paragraph 5 and its substitution with the following:

“5. Each party shall bear its own costs.”

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

The parties in this application are embroiled in a bitter dispute over the implications of their failure to specifically include Value Added Tax (abbreviated herein as “VAT”) matters in agreements for the milling of sugarcane.

The applicants are both companies duly incorporated in terms of the laws of Zimbabwe whose names over the years have become synonymous with sugar and sugar cane production in Zimbabwe. They grow, source, and mill sugar-cane and market its products. They carry on this agro-based business in and around the Lowveld towns of Triangle and Chiredzi.

The first respondent is the Zimbabwe Revenue Authority (ZIMRA): a statutory body whose chief mandate is to assess, collect, and enforce the payment of all revenues on behalf of the State. It is established in terms of the Revenue Authority Act [Chapter 23:11].

Save for the 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila), the rest of the respondents are organisations representing the interests of sugarcane farmers in the Lowveld (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugar Cane Farmers Trust, Commercial Sugar Cane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugar Cane Development Association Royal Trust, Chipiwa Mpapa Mill Group and Chiredzi Productive Cane Growers Association).

The 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila) respondents are individual sugar cane farmers.

They were probably singled out on account of the positions they hold as Members of Parliament for the Chiredzi South and Chiredzi North constituencies respectively over and above their roles as sugar-cane farmers. They also occupy and serve in specialised Parliamentary capacities.

BACKGROUND

Solely for purposes of convenience and brevity, the second to eleventh respondents (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers Association, Farai Dumo Augustine Musikavanhu and Roy Bhila) will be referred to simply as “the farmers” and the first respondent as “ZIMRA”.

It is common cause, that, pursuant to the terms of either of two types of written agreements between them, the farmers supply the sugar cane that they produce to the applicants. These contracts are generally referred to by the parties as the “Cane Milling Agreement” and the “Cane Purchase Agreement.”

Under the former, the basic idea (as is implicit in the name) is that the applicants merely provide a milling service to the farmers. In addition, the applicants also proceed to market, on behalf of the farmers, the sugar and molasses thereby produced as well as other by-products, and, thereafter, remit to the farmers the proceeds thereof after deducting the expenses associated with the milling of the sugarcane and marketing of the sugar and the other by-products.

It is further common cause, that, under the cane milling arrangement, there is an existing agreement that the charge for the milling is calculated according to a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. This ratio currently stands at 23 percent of the proceeds which the applicants retain in the wake of the marketing of the products of the milling process. The farmer gets the remainder.

The Cane Purchase Agreement operates differently.

According to the parties, this agreement involves a direct and complete sale of the sugar cane by the farmers to the applicants with risk and benefits passing to the latter upon the delivery of the cane.

During oral submissions in court, counsel for the applicants referred to a rather convoluted method by which the purchase price of the cane is computed under this arrangement; suffice it to say that there is no convergence as among the parties as to whether the supplies of cane that gave rise to the current dispute constitute a Cane Milling Agreement or a Cane Purchase Agreement.

Be that as it may, it is common cause, that, in a decision (which has since been appealed against to the Fiscal Appeals Court), the first respondent determined that the set-up which currently obtains, chiefly characterised by the distribution of proceeds arrangement, constitutes one which attracts value added tax (VAT).

Therein lies the genesis of the dispute.

This is because the simple question to be answered is whether the 23 percent retained by the applicants, post the milling and marketing, incorporates value added tax (VAT) (as contended by the farmers) or it does not (as maintained by the applicants).

It is further common cause that the Zimbabwe Revenue Authority (ZIMRA), having made the decision that the aforementioned arrangement was one that attracts value added tax (VAT) in terms of the law, and that the applicants were therefore legally obligated to have, all along, charged and collected from the consumers (i.e. the farmers) and remitted the amounts so collected to it, directed that the said amounts be paid to it.

In compliance with that decision, the applicants aver, that, they have since calculated the outstanding amounts in this regard and remitted the same to the first respondent.

Through the current application, the applicants seek;

(i) A declaratory order to the effect that they are legally entitled to recover from the farmers the value added tax (VAT) which they have since paid to the first respondent; and

(ii) Secondly, that they are legally entitled to continue charging and collecting value added tax (VAT) from the farmers over and above the 23 percent milling charge.

The applicants also take exception to the fact that the first respondent (through some of its officials) took it upon itself to render certain advice to the farmers which advice they contend amounts to an unwarranted interference in matters that are purely contractual.

Part of that advice related to the first respondent's interpretation of the tax implications of the failure to include value added tax (VAT) matters in the cane supply agreements.

The terms of the declaratur sought by the applicants are captured in the draft order annexed to the application which reads:

“Wherefore, after reading papers filed of record and hearing counsel, IT IS ORDERED THAT:

1. The application succeeds with costs.

2. It be and is hereby declared that -

(a) The conduct by the first respondent to give advice to the applicants and the second to eleventh respondents on what are purely contractual matters is ultra vires its functions and responsibilities as an administrative authority and therefore unlawful.

(b) To the extent that they are liable to pay VAT for milling costs, the applicants are entitled to charge, levy, and collect such VAT in accordance with the VAT Act on and in addition to the value for the milling charge.

3. The first respondent be and is hereby ordered and directed to refrain from gratuitously interfering in pricing and contractual issues between the applicants and the second to eleventh respondents.

4. The respondents shall, jointly and severally, the one paying the others to be absolved, pay the applicants costs of suit on an attorney–client scale.”

The applicants raised a number of arguments in support of their contention that they should be permitted to recover that which they have since paid to the Zimbabwe Revenue Authority (ZIMRA) in the wake of the latter's aforementioned determination.

The main thrust of their argument, as I see it, however, is that the very fact that the Act makes it clear that the burden to pay the tax in question rests on the consumers, who in this case are the farmers, yet it was them (applicants) who were compelled to pay it, necessarily implies that they can recover the same from the farmers.

Reliance was placed, inter alia, on the elucidation by GOWORA JA, of the tripartite relationship in the value added tax (VAT) equation. This was in the case of ZIMRA v Packers International (Private) Limited SC28-16 where the following exposition was made:

“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;”

And further that:

“…, 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.”

Flowing from this basic premise, according to the applicants, are two applicable precepts that emanate therefrom, namely, unjust enrichment and equity.

The latter, though not specifically pleaded in their papers, was nevertheless amply canvassed during the oral submissions in court.

Regarding unjust enrichment, it was averred, that, should the court not find in the applicants favour, an injustice will ensue in that the respondents will have been unjustly enriched at their expense.

For the requirements and application of the principle of unjust enrichment, the following cases were cited as authority; Industrial Equity v Walker 1996 (1) ZLR 269 (H); Chioza A.M. v Siziba S.W. SC04-15; and Trojan Nickel Mine Ltd v Reserve Bank of Zimbabwe HH169-13.

It was contended, that, the facts of this case point to the fact that all the pre-requisites for a finding for the applicant on the basis of unjust enrichment have been met.

The nub of the equity argument is that justice and fairness simply demand that the applicants be allowed to recoup from the farmers that which they paid to the Zimbabwe Revenue Authority (ZIMRA) in compliance with the latter's determination.

It is clear that this is merely an extension or adjunct of the unjust enrichment contention.

The applicants further referred to various sections of the Act which, in their view, fortify their position. Reliance was placed in this regard to section 9(2) which provides as follows:

“The value placed on any supply of goods or services shall, save as is otherwise provided in this section, be the value of the consideration for such supply, as determined in accordance with subsection 3, less so much of such value as represents tax: Provided that -

(a)…,.;

(b) Where the portion of the value of the said consideration which represents tax is not accounted for separately by the registered operator, the said portion shall be deemed to be an amount equal to the tax fraction of that consideration.”

Similarly, reliance was placed on section 9(5) of the Act which provides:

“Where goods or services are deemed to be supplied by a registered operator in terms of subsection (2) or (8) of section 7, the supply shall be deemed to be made for a consideration in money equal to the lesser of -

(a) The cost to the registered operator of the acquisition, manufacture, assembly, construction, or production of goods or services, including -

(i) Any tax charged in respect of the supply to the registered operator of such goods or services or of any components, materials, or services utilised by him in such manufacture, assembly, construction or production;

(ii) Where such goods or any right referred to in subsection (2) of section seven, when held by the registered operator, constituted trading stock as defined in section 2 of the Taxes Act, any further costs, including tax incurred by him in respect of such goods or right;

(iii) Any costs, including tax, incurred by the registered operator in respect of the transportation or delivery of such goods or the provision of such services in connection with the transfer of such goods or the provision of such services as contemplated in subsection (8) of section seven; and

(iv) Where such goods or services were acquired under a supply in respect of which the consideration in money was in terms of subsection (4) of this section deemed to be the open market value of the supply or would in terms of that provision have been deemed to be the open market value of the supply were it not for the fact that the recipient would have been entitled under subsection (3) of section fifteen to make a deduction of the full amount of tax in respect of that supply, such open market value to the extent that it exceeds the consideration in money for that supply: or

(b) The open market value of such supply.”

THE POSITION OF THE RESPONDENTS

The third (Zimbabwe Cane Farmers Association) and fourth (Mkwasine Sugar Cane Farmers Trust) respondents did not ultimately participate in the proceedings on account of the fact that the former did not file any opposing papers and the latter filed its heads of argument outside the prescribed time and was therefore barred.

In a similar vein, there was no appearance by or on behalf of the sixth (Hippo Valley Productive Farmers Association), ninth (Chiredzi Productive Cane Growers Association) and eleventh (Roy Bhila) respondents on the day of the hearing.

Effectively, therefore, only the positions of the first (Zimbabwe Revenue Authority), second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were before the court.

ZIMBABWE REVENUE AUTHORITY's POSITION (ZIMRA)

Regarding the implications of the failure by the applicants and the farmers to specifically incorporate value added tax (VAT) matters in their Division of Proceeds (DoP) arrangements, ZIMRA articulated two distinct positions, namely;

(i) That which relates to past supplies of cane; and

(ii) That which attends to present and future supplies of cane.

In respect of past supplies of sugarcane, the Zimbabwe Revenue Authority (ZIMRA) averred that a proper construction of section 69 of the Value Added Tax Act shows, that, in the absence of the express mention of value added tax (VAT) component in any price for goods or services, then the price will be deemed to contain the said tax.

As far as the alleged impropriety of the advice it rendered to the farmers, it contended that whatever advice it gave to the farmers was not only within its legal powers to give but also that it did so at the behest of the applicants.

It further averred, that, it has a duty to provide education to taxpayers not only to impart knowledge of the same but also to inculcate and engender a spirit of compliance.

First (ZIMRA) respondent's position on VAT implications for present and future supplies of cane

In its papers opposing this application, the Zimbabwe Revenue Authority (ZIMRA) does not commit itself on what the tax implications in respect of present and future supplies are. It opted, instead, to confine itself to the question of past supplies.

However, it soon became apparent that its position is that the applicants are not only at liberty to charge, levy, and collect from the farmers the said tax, but that they are in fact obligated to do so.

It suffices, however, to note that this does not address the issue of whether this will be over and above the 23 percent being charged for the milling of the cane.

THE FARMERS POSITION

As earlier stated, only the positions of the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were effectively before court.

Save for a few instances of divergence (which will be highlighted below) the farmers were united not only in their resistance to the application but also on the grounds thereof.

The rallying point in their opposition to the quest by the applicants to recover the tax for past supplies was section 69 of the Value Added Tax Act. Their position essentially mirrors that of the Zimbabwe Revenue Authority (ZIMRA).

Over and above the import of section 69 of the Value Added Tax Act, however, a few additional arguments were presented to buttress their position and these are:

1. The very fact that the Zimbabwe Revenue Authority (ZIMRA) has determined that the 23 percent milling charge includes value added tax (VAT) as far as the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents are concerned, is dispositive of the whole dispute.

They go as far as contending that the decision of ZIMRA is binding.

They further assert, that, in their view, the applicants have merely abdicated from their responsibility to remit the value added tax (VAT) so collected to ZIMRA and the consequences attendant thereto cannot be visited on them.

2. That the endeavour, on the part of the applicants, to recover the value added tax (VAT) they paid from them amounts to an attempt to vary the implied terms of their contract.

3. That, as far as the fifth (Commercial Sugar Cane Farmers Association of Zimbabwe) respondent is concerned, its cane supply arrangement with the applicants is governed by neither a cane milling agreement nor a cane purchase agreement, but, rather, by what it terms a “memorandum of understanding.” A copy of which was attached.

4. A further point raised by the fifth respondent (Commercial Sugar Cane Farmers Association of Zimbabwe) was that the very fact that invoices relating to disbursements of the individual farmer's share of proceeds is silent on the collection of value added tax (VAT) necessarily implies that VAT was included in the 23 percent milling charge.

During oral addresses in court, yet another argument was presented, namely, that, the Division of Proceeds (DoP) ratio was decided upon by the Minister responsible for the superintendence of the sugar sector, namely, the Minister of Industry and Commerce.

It was averred, in this regard, that, during the negotiations leading up to those figures (of 23 percent and 77 percent) it was in the contemplation of the parties that value added tax (VAT) was incorporated in the 23 percent milling charge.

In apparent departure from the positions held by the other respondents, the seventh respondent (Zimbabwe Sugar Cane Development Association Royal Trust) maintained that section 69 of the Value Added Tax Act applies to all supplies of cane; past, present, and future.

THE ISSUES

In my view, there are two broad issues up for determination in this dispute, and, from each, two sub-questions arise. The two broad questions are:

(1) Whether the 23 percent cane milling charge includes or excludes value added tax (VAT); and

(2) Whether there has been an unjustifiable interference by the first respondent the Zimbabwe Revenue Authority (ZIMRA) in purely contractual matters between the applicants and the farmers.

The sub-questions in respect of (1) above are:

(a) Whether or not the applicants are entitled to recover from the farmers value added tax (VAT) which they (i.e. applicants) paid to ZIMRA for past supplies; and

(b) Whether or not the applicants are entitled to charge, levy, and collect from the farmers value added tax (VAT) over and above the 23 percent milling charge.

The sub-questions from (2) above are:

(a) Whether the applicants have satisfied the requirements for the declaratur sought in paragraph 2(a) of the draft order; and

(b) Whether the applicants have satisfied the requirements for the interdict sought in paragraph 3 of the draft order.

WHETHER THE 23% CANE MILLING CHARGE INCLUDES OR EXCLUDES VALUE ADDED TAX (VAT)

This is arguably the most significant question as it lies at the very heart of the dispute.

As indicated above, the applicants used various arguments in support of their contention that the 23 percent milling charge must be taken as excluding value added tax (VAT).

They relied, inter alia, on subsections 2 and 5 of section 9 of the Value Added Tax Act.

I however fail to see how section 9(2)(b) of the Value Added Tax Act assists the applicants.

Section 9 of the Value Added Tax Act, in general, is aimed at the determination of the value of supply of goods or services. Paragraph 2(b), in particular, is a proviso to the general provision that the value to be placed on any supply of goods or services is the value of the consideration.

This proviso however addresses a situation where the registered operator neglects to separately account for the value of the consideration which represents tax in which case it will be deemed to be the tax fraction of the consideration.

Implicit in this proviso is that the tax fraction is to be calculated from that consideration: not in addition to the consideration. A fraction of something is a piece, part, portion, or component of something. Put in context, therefore, the tax fraction is incorporated in not excluded from or to be added to the 23 percent milling charge which is the consideration.

Sub-section (5) of section 9 of the Value Added Tax Act equally does not avail the applicants.

It is simply a method aimed at assisting in the computation of the consideration of the supply of the goods or services in question in instances of “deemed supply”. The basic idea being that this involves a calculation of all the expenses incurred in or attendant to the acquisition of the goods or services (or any lesser amount) or simply the open market value of such supply.

Needless to say that this provision does not even come close to unlocking the current legal logjam, let alone assist the applicants....,.

The real issue as I see it, lies in the interpretation of sections 69 and 72 of the Value Added Tax Act and their application to the facts of this matter....,.

REGARDING PAST SUPPLIES OF CANE

As indicated earlier, in this regard, the Zimbabwe Revenue Authority (ZIMRA) relied almost exclusively on the provisions of section 69 of the Value Added Tax Act (and the farmers adopt a similar stance) which provides as follows:

“69 Prices deemed to include tax

(1) Any price charged by the registered operator in respect of any taxable supply of goods or services, shall, for the purposes of this Act, be deemed to include any tax payable in terms of paragraph (a) of subsection (1) of section six in respect of such supply, whether or not the registered operator has included tax in such price.”

According to ZIMRA, the significance of this section is that where the price/charge (which, in this case, the milling price which is pegged at 23 percent of the value of the proceeds from the cane) is silent on the value added tax (VAT) component thereof, it is deemed, ex lege that VAT is included in that price.

Put in perspective, therefore, according to the first respondent, the Zimbabwe Revenue Authority (ZIMRA), it is deemed that the consumer of the goods or service (in this case the farmer) has already paid value added tax (VAT) in that price, and, by logical extension, all the registered operator (in this case the applicants) needs to do is to remit it to ZIMRA.

Any purported attempt to recover the same from the consumer is untenable because that would not only amount to taxing the consumer twice but also runs contrary to the tenor and spirit of that section.

The Zimbabwe Revenue Authority (ZIMRA) further contended, that, doing so would inevitably lead to a fresh computation of the value added tax (VAT) payable because the one calculated and subsequently paid by the applicants was on the basis of section 69 of the Value Added Tax Act.

In a nutshell, accepting the position adopted by the applicants would yield higher figures for the value added tax (VAT) payable.

The applicants took a contrary view and argued;

(i) Firstly, that there is no need to resort to the deeming provision of any legislation when in fact the issue in question is adequately provided for elsewhere in that Act.

This is because, so the argument goes, it should only be resorted to in instances of omission on the part of a party with the duty to comply with a statutory obligation.

(ii) Secondly, they contended that section 69 of the Value Added Tax Act only serves to remove as a potential defence in situations such as the present when ZIMRA demands from it the value added tax (VAT) component of any price where same is not expressly stated therein.

However, according to them, it offers no sanctuary to a consumer when the registered operator now seeks to recover from him (i.e. consumer) that which they paid pursuant to ZIMRA's decision.

In my view, the position adopted by the applicants cannot be sustained.

Firstly section 9(2) and section 9(5) of the Value Added Tax Act, which they relied on, have already been found to be of no application to the current dispute.

Secondly, the plain and literal meaning of the section suggests that it is irrelevant whether or not the registered operator has in fact charged the tax in question; where the price does not reflect the tax component thereof it is presumed that the tax is incorporated in that price.

In other words, the phrase “whether or not the registered operator has included tax in such price” operates a twin blow to the registered operator: it serves to estop him from denying that the price in reality did not include tax in a bid to avoid accounting for the tax to the Commissioner. At the same time, it precludes him from purporting to claim from the consumer the tax that he may or may not have collected from the consumer.

The question of who bears the obligation under the Value Added Tax Act to pay the tax (who is obviously the consumer), which the applicants expended so much effort on, is hardly the issue.

To contend that section 69 of the Value Added Tax Act should be construed so as to permit the registered operator to pursue the consumer for the recovery of the tax they paid to the Zimbabwe Revenue Authority (ZIMRA) would, in my view, run contrary to the clear intention of the legislature.

The legislature must obviously have been alive to the fact, that, in most day to day supply of goods and services, the customer disappears without trace soon after the transaction.

How then would the registered operator be able to recoup the tax that he claims he did not in fact charge and collect?

Even if the customer could be traced, there would be an unnecessary proliferation of disputes between him and the registered operator as to whether the price included value added tax (VAT) or not.

It would create unnecessary uncertainty and confusion in the market place where the consumer will never know whether or not the price charged includes value added tax (VAT) and where he always runs the risk of being informed ex post facto that the price he paid actually did not include tax.

If the applicants are permitted to recover the tax in question from the farmers then the deeming provision will be rendered nugatory. It would mean the price cannot then be deemed to include tax - it is as simple as that.

Further, related to the above, the deeming provision cannot be interpreted to mean two different things to two different people.

The interpretation that the applicants want to foist on section 69 of the Value Added Tax Act will result in a mathematical or accounting incongruence and an absurdity in logic.

The Zimbabwe Revenue Authority (ZIMRA), in its papers, vividly illustrate the mathematical inconsistency that will arise when they juxtapose the outcomes of the two contrasting positions using the hypothetical figure of $1,000 as proceeds for the sale of sugar thus:

(a) Where section 69 of the Value Added Tax Act is invoked

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30

(b) Where the applicants recover the section 69 ($30) VAT from the farmers

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30
VAT due after the applicants recover the $30 VAT from the farmers = 15% ($230-30+30) = $34.50

What the applicants are moving the court to accept will also yield a further absurd result in the following context:

Where, from the standpoint of the first respondent, the Zimbabwe Revenue Authority (ZIMRA), vis a vis the applicants, value added tax (VAT) is deemed to be included in the price; yet, from the standpoint of the applicants vis-a-vis the farmer, the price is deemed not to include the tax.

It could never have been the intention of the legislature to produce such an absurd or anomalous situation.

The net result of the interpretation should be uniform, consistent, and certain not only to the parties but also to other persons similarly situated.

Section 69 of the Value Added Tax Act effectively places the registered operator on guard on the consequences of his failure to specifically include in his price the value added tax (VAT) component thereof.

Viewed differently, it is the responsibility of the registered operator to ensure that value added tax (VAT) matters are addressed in his dealings with the consumer. It is not a responsibility that the registered operator jointly shares with the consumer because the duty to account to the Commissioner ultimately rests with him (i.e. Registered Operator).

There can never be a conflation of the roles, duties, and responsibilities among the various parties: the burden to pay the tax lies with the consumer (the farmer), the duty to charge, collect, and remit the tax lies with the registered operator (the applicants).

In the context of this case, whether occasioned by inadvertence, oversight, or a mis-interpretation of the nature of the contract, the consequences of the failure to specifically include the value added tax (VAT) are that VAT is deemed included in the milling price.

During the proceedings, resort was made by the applicants to section 72(1) of the Value Added Tax Act which provides as follows:

“72 Contract price or consideration may be varied according to rate of value-added tax

(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax or increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

In my view, this provision is meant to address the adjustments that may have to be made in contractual situations wherein, at the time the offer was made, there was no value added tax (VAT) imposable on that contract or it stood at a certain level; however, by the time the acceptance is made, that type of contract, by operation of the law, now attracts VAT or had been increased.

The imposition of or the increase in the value added tax (VAT) was not in the contemplation of the parties thereby necessitating an adjustment in the price.

This provision is clearly not applicable to the current dispute.

There was no imposition of a “new” tax which hitherto did not exist, nor was there an increase of the value added tax (VAT) chargeable and payable.

The parties merely failed to take into account a tax which was already in existence.

PRESENT AND FUTURE SUPPLIES OF CANE

Therefore, against the backdrop of a finding that the parties (whether through inadvertence, oversight, or mis-apprehension) failed to address value added tax (VAT) matters in their contracts, one cannot legitimately vouch for the perpetuation of the status quo.

It behoves the parties to re-negotiate or clarify the terms of their contract to plug that lacuna.

It suffices to state, that, failure to do so may very well result in section 69 of the Value Added Tax Act being continuously invoked.

I did not get the impression from the concession made on behalf of the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents that they are necessarily agreeable to the charging of value added tax (VAT) by the applicants over and above the 23 percent milling charge.

What I gathered was a concession merely that the applicants can charge, levy, and collect value added tax (VAT) from the farmers in compliance with the requirements of the Value Added Tax Act....,.

1....,.

2. The application for a declaratur, as sought in paragraph 2(b) of the draft order, as it relates to past supplies of sugar cane, be and is hereby dismissed.

3. In respect of present and future supplies of sugar cane, it is hereby ordered that the applicants and the 2nd-11th respondents are at liberty to re-negotiate and/or clarify the terms of their contracts to specifically incorporate value added tax (VAT) issues and proceed on that basis.

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against ...

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.

The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against a contrary determination of the respondent.

Introduction

The appellant is an International Business Company incorporated on 19 May 2005 in the British Virgin Islands in Guernsey in the Channel Islands but is not permitted to trade in that jurisdiction. The respondent is a body corporate responsible for the collection, amongst other imposts, of value added tax in Zimbabwe.

The Facts

The original intention of the appellant in Zimbabwe, prior to 1992, was to invest in property and participate in the construction of the Chitungwiza road…,.

Instead, the appellant became a supplier of basic commodities to local companies that included the WG (hereinafter referred to as the holding company).

It concluded an agency agreement with D & T, a subsidiary of the holding company, in 1992.

By 1999, it was supplying basic commodities under a US$10 million line of credit registered with the Reserve Bank of Zimbabwe to the holding company and other local customers…,.

On 1 October 2007, the Governor of the Reserve Bank of Zimbabwe unveiled the Basic Commodities Supply Side Intervention, BACOSSI, facility designed to end the chronic shortages of basic commodities in Zimbabwe…,.

The facility commenced in May 2008 and continued until the introduction of the multi-currency regime on 29 January 2009.

In May 2008, officials of the Reserve Bank of Zimbabwe (RBZ) amongst whom was the Governor and the Senior Division Chief Strategic Planning and Special Projects (SDC) visited the warehouse of D & T in Chitungwiza. The RBZ was referred to the appellant by D & T.

The appellant and the Reserve Bank of Zimbabwe (RBZ) commenced negotiations which culminated in the purchase of the non-Bacossi basic commodities that were in the D & T warehouse valued at US$7,987,207=54. The two parties also concluded an agreement in which the appellant supplied basic commodities to the RBZ, in Zimbabwe, the bacossi goods, valued at US$11,698,174 between July and September 2008.

The Baccossi Agreement was reduced to writing…, but was not signed by the parties apparently because the appellant was unhappy with the preamble to the agreement.

A verbal agreement, purportedly concluded between the Reserve Bank of Zimbabwe (RBZ), represented by the Governor, and the appellant, represented by a named Ukrainian lady, governed the supply relationship between them.

The respondent conducted a tax investigation of the purchases, in foreign currency, of the Reserve Bank of Zimbabwe from the appellant for the period between May 2006 and September 2008. The investigations revealed non-payment of value added tax (VAT) on the supplies made in that period…,.

They also revealed that D & T was paid commission, in terms of an agreement between them, on the invoiced supplies from 1 January 2006 to 31 January 2009.

On 9 February 2009…, the respondent made written demand on the Finance Director of the holding company, who was also the public officer of D & T, for the payment of value added tax (VAT) on the invoiced income paid to the appellant during that period.

On 13 February, a meeting was held at the Reserve Bank of Zimbabwe (RBZ) between the Senior Division Chief Strategic Planning and Special Projects, the investigators of the respondent, and the liaison officer of the appellant, who was also the Sales and Marketing Director of the holding company of D & T, the appellant's agent.

On 12 March, the respondent appointed the CEO of the holding company of D & T as the public officer for the appellant in terms of section 61 of the Taxes Act on the ground that his company was closely linked and connected to the appellant's local trading activities.

The CEO objected to the appointment on 17 and 20 March 2009 on the ground, that, he was not an agent, employee, director, or signatory to the bank account of the appellant; but, the respondent did not relent in its demand.

On 20 March 2009, at the respondent's offices, a meeting was held between three representatives of the respondent and two tax advisors from a local firm of accountants.

In reply to counsel for the respondent's oral submissions, counsel for the appellant disputed that the appellant was represented at the meeting and suggested that the tax accountants represented D & T.

The purpose of the meeting was to get the respondent's version on the value added tax (VAT) issues pertaining to both the appellant and D & T.

The VAT head from the tax advisors provided the respondent with two letters of his firm's mandate to represent the client.

It is inconceivable that he would not have received full instructions from his client, as he indicated, were that client D & T.

I am satisfied, from the heading of the minutes minuted by the tax advisors, that, they represented the appellant and not D & T.

In any event, the briefing given him by the respondent related to the alleged activities of the appellant, including the payment of 0.1% commission on the gross sales of the appellant in Zimbabwe to D & T.

On 30 March, the public officer of D & T disputed the legality of the appointment of his CEO as a public officer for the appellant. He, nonetheless, compiled and delivered the monthly breakdowns of the income received by D & T during the period from January 2006 to 31 January 2009 requested in the letter of 9 February.

On 25 March 2015…, the appellant wrote to the respondent objecting to the appointment of the public officer outside its registered place of business in Guernsey and to the tax liability claim.

The basis of the objection was that it did not maintain offices nor employ staff nor was it a value added tax (VAT) registered operator obligated to charge VAT on goods purchased from its foreign based operations and supplied to clients in Zimbabwe.

The relevant part of the letter reads:

“We object to your claim that we have a tax liability in Zimbabwe as we do not have a self-established presence in the country. Our involvement with Zimbabwe clients, and the West Group, is limited to the supply of our stock to agents who operate on a commission basis to store and handle our stock that we hold in Zimbabwe, for which we have always operated with Reserve Bank Approval.”

The objection by the appellant, of 25 March, and the further objection of its compulsorily appointed public officer, were dismissed by the respondent on 31 March 2009.

On 1 April, the respondent proceeded to appoint the holding company, and its subsidiaries, as an agent for the collection of value added tax (VAT) due from the appellant, purportedly in terms of section 48 of the Value Added Tax Act…,.

On 3 April 2009, the appellant, through its authorised signatories, wrote to the CEO of the holding company appointed as its public officer and copied the letter to the head of investigations of the respondent, and the Senior Division Chief Strategic Planning and Special Projects on the tax enquiry conducted by the respondent disputing tax liability on two grounds:

(i) The first was that it was not the importer; and

(ii) The second was that the sale to the importer, the Reserve Bank of Zimbabwe (RBZ), took place outside Zimbabwe.

I believe exhibit 2 may have been written by the compulsorily appointed public officer for the appellant between May 2009 and 17 June 2009, and not on 15 April 2008, as it is highly unlikely that the author possessed prescient powers to predict the events that were to take place between January and May 2009.

It was addressed to the prospective external legal practitioner of the Reserve Bank of Zimbabwe (RBZ).

The writer summarised the history of the relationship between the appellant and the holding company and one of its subsidiaries, D & T, before and during the bacossi period. He also dealt with the relationship between these parties and the Reserve Bank of Zimbabwe and exonerated the appellant from value added tax (VAT) liability.

In response, on 17 June 2009, the external legal practitioner of the Reserve Bank of Zimbabwe (RBZ) wrote a six page legal opinion to the Senior Division Chief on the US$4m tax dispute….,.

The legal practitioner in question had apparently held a meeting, on 21 April, with the Senior Division Chief of the central bank and two representatives of the holding company. He believed, that, his mandate to protect the interests of the Reserve Bank of Zimbabwe (RBZ) coincided with the interests of the appellant. He had engaged the lawyers of record of the appellant.

He identified the common problem to be the demand for value added tax (VAT) on the appellant in respect of the supply of Bacossi goods and its agent on commission received from the appellant.

Apparently, the appellant declined to supply him with information on its business profile, shareholders and directors, summary of significant business activities in the 12 months to the date of the letter and on the nature and extent of its business activities in Zimbabwe, its certificate of registration, any Board resolutions on Bacossi transactions, and its local call account.

In the absence of this information, he could not state, with certainty, that the appellant was not conducting local trading activities nor exclude it from value added tax (VAT) liability other than on the mere say so of its agent, D & T.

He advised that the Reserve Bank of Zimbabwe (RBZ) was liable for the payment of value added tax (VAT), in local currency, on the basis of the bills of entry that identified it as the importer.

He urged the Reserve Bank of Zimbabwe (RBZ), for strategic reasons that he set out in the opinion, to tender the duty in local currency hoping, that, if the respondent accepted the payment, the appellant would automatically be exempted from liability.

On 1 July 2009, the Senior Division Chief wrote to the appellant's legal practitioner of record. She confirmed the importation of Bacossi goods and the acceptance of liability for value added tax (VAT) by the Reserve Bank of Zimbabwe (RBZ)….,.

On 20 August 2009, three members of the respondent investigations team held a meeting with four RBZ employees at the RBZ amongst whom was the Senior Division Chief (SDC).

In that meeting, the Reserve Bank of Zimbabwe (RBZ) repudiated the concession made by the Senior Division Chief (SDC) and laid liability at the doorstep of the appellant.

However, in view of the national importance of the project and the profile of the major beneficiaries, the Reserve Bank of Zimbabwe (RBZ) resolved to seek exemption for payment of value added tax (VAT) on these goods from the Ministry of Finance by 25 August 2009.

A further meeting was held on 7 October 2009, in the Governor's boardroom at the Central Bank, between the Reserve Bank and the holding company, to discuss the appellant/RBZ value added tax (VAT) liability of US$3.2m….,.

In attendance were the Governor, his advisor, bank secretary, and a strategic planning executive for the Reserve Bank of Zimbabwe (RBZ) and the Sales and Marketing Director, indicated in exhibit 2 as the liaison officer of the appellant, and another officer of the holding company.

Notwithstanding that the respondent was not claiming value added tax (VAT) from the central bank, the Governor prevaricated on whether the Reserve Bank of Zimbabwe (RBZ) accepted liability or not. In one vein he accused the Senior Division Chief (SDC) of erroneously accepting liability for the central bank without his express authority, and, in the other, he was prepared to pay the VAT as long as it was charged in Zimbabwe dollars.

The Sales and Marketing Director for the holding company declined to answer for the appellant insisting that D & T acted as liaison for the appellant as the foreign supplier and local buyers.

The underlying suggestion from her contribution was that the appellant was not liable for value added tax (VAT).

In addition, the concluding remarks of the meeting suggested the existence of minutes of meetings between the Reserve Bank of Zimbabwe (RBZ) and the appellant.

The investigation prompted the respondent to raise against the appellant schedules for outstanding value added tax (VAT) on both the non-Bacossi and Bacossi transactions, initially on 17 March and later on 15 July 2009, in the sum of US$6,302,712=13 inclusive of interest and penalties, which it corrected by the exclusion of zero rated products on 13 October 2009 by reducing the amount to the sum of US$6,249,496=70.

The computations of the principal value added tax (VAT) due in each month for the non Bacossi commodities were in the sum of US$1,198,081=13. The respondent added an equal amount in penalties and a further amount of US$206,799=52 in interest and requested payment of US$2,602,961=79 for the non-Bacossi commodities.

In regards to the Bacossi commodities, it claimed a principal sum of US$1,754,726=10 and a penalty in an equal amount and interest from 21 July 2008 to 23 October 2009 in the sum of US$137,082=72 totalling US$3,646,534=92….,.

The appellant lodged an objection to the assessment in terms of section 32 of the Value Added Tax Act [Chapter 23:12] through its legal practitioners of record on 25 September 2009.

It also applied for condonation from the Commissioner for filing the objection outside the normal time limits. It set out four grounds for condonation and eight grounds of objection.

The respondent dismissed the condonation and disallowed the objection.

The appellant appealed both decisions to this Court on 12 October 2009. The respondent filed its reply on 12 November 2009.

In the objection, the appellant denied ever doing business in Zimbabwe and indicated, that, the local transactions were imports carried out by the holding company, the Reserve Bank of Zimbabwe (RBZ), and other local companies.

It averred, that, the appellant was authorised by the Reserve Bank of Zimbabwe (RBZ) to sell the goods in foreign currency using free funds from non-resident entities.

It supplied goods in bond to its local agent, D & T, for commission.

The local buyer took delivery of the goods after paying the appellant from free funds.

On receipt of payment, the appellant instructed D & T to pay duty and value added tax (VAT) before releasing the goods.

The appellant averred, that, the value added tax (VAT) claim on non-Bacossi goods constituted a double claim for VAT already paid by D & T.

The appellant called the evidence of the founder and chairman of the holding company and director of D & T.

He confirmed the foreign status of the appellant and its relationship with D & T before the Reserve Bank of Zimbabwe came onto the scene.

The holding company, D &T, and the appellant, were not related companies.

The contact between the appellant and D & T was facilitated by his Russian partners in 1992.

The relationship between the appellant and D & T was one of principal and agent.

The Central Bank appeared on the scene in May 2008. At that time, the agent, D & T, imported the goods into Zimbabwe that were supplied by its principal, the appellant.

The Central Bank concluded two agreements with the appellant:

(a) The first related to the purchase of the goods stored in the warehouse that had been imported by D & T, referred to in the appeal as the non Bacossi goods.

(b) The second agreement concerned the Bacossi goods under which the Central Bank directly imported in excess of 400 truckloads of goods from South Africa between July and September 2008.

At Beitbridge, the goods were checked against the bill of entry before they were taken to the bonded warehouse, and, unlike direct home consumption imports, the bill of entry was not surrendered at that stage.

D &T stored the Bacossi goods for the Reserve Bank for a fee.

The relationship between the appellant and D & T was suspended during the duration of the Bacossi imports.

The goods were received and secured by the Reserve Bank of Zimbabwe (RBZ).

The Reserve Bank of Zimbabwe (RBZ) would take the goods from the warehouse once D & T received a release order from the appellant confirming receipt of the purchase price, and, after D & T had paid duty and value added tax (VAT) for the goods.

The clearing agent invoiced D & T for clearance fees; D & T, in turn, added these to the storage fees for the account of the Reserve Bank of Zimbabwe.

He identified the South African export documents and the Zimbabwean import documents encompassing pp33-90 of exhibit 1. Amongst these documents were local bills of entry that identified the importer as the Reserve Bank of Zimbabwe.

The witness confirmed his managing director's assertion, in the letter of 30 March to the respondent, that, D & T was not paid commission by the appellant during the subsistence of the Bacossi imports.

It was on the basis of this evidence, that, counsel for the appellant submitted, that, the sole witness was credible and reliable in all material respects.

I do not agree with the contention by counsel for the appellant, that, the witness was a credible and reliable witness who gave his evidence well.

Under cross examination, he contradicted material parts of his evidence-in-chief.

He abandoned his earlier version that the relationship of principal and agent between the appellant and D & T was suspended during the Bacossi imports. He categorically stated, in cross-examination, that, the relationship did not change for both the Bacossi and non Bacossi imports as the appellant continued to pay D & T, in foreign currency, commission at the rate of 1% of the value of each transaction.

The appellant maintained its grip on the goods in the warehouse and directed its agent to pay duty and value added tax (VAT), and, thereafter, release the goods after confirming receipt of the transaction value of each consignment from the Reserve Bank of Zimbabwe.

He incorrectly stated that value added tax (VAT) was paid for the non-Bacossi goods.

That VAT was never paid was demonstrated by the abandonment of the double claim ground at the hearing of this appeal.

He did not participate in the discussions that culminated in the agreement between the appellant and the Central Bank. He was not privy to the terms and conditions of the agreement. He did not interact with any of the directors and authorised signatories of the appellant.

He had met an officer of the appellant whose name appears in the last paragraph on p112 of exhibit 1 once in Harare.

He was not a director, employee, or official of the appellant or the clearing agent.

His version on the motivation of the clearing agent to invoice D & T rather than the Reserve Bank of Zimbabwe (RBZ) was not confirmed by evidence from the clearing agent or the Central Bank.

He did not produce any evidence to show that D & T included the charges of the clearing agent in the storage fees levied on the Central Bank.

The evidence of the sole witness left gaps that could only be filled by the directors, employees, officials, or agents of the appellant.

His averments preceding the incorporation of the appellant, on 19 May 2005, underscored his unreliability and the need for the testimony of the active officers or agents of the appellant.

It is simply incomprehensible how he could have dealt with the appellant before it was incorporated.

The respondent's investigation established that the Reserve Bank of Zimbabwe (RBZ) purchased non Bacossi goods between May 2006 and June 2008 contrary to his testimony that the purchase started in May 2008.

I am satisfied that he was not a credible and reliable witness.

Rule 5(c) Documents

The respondent did not file Rule 5(c) documents within 14 days of entering his reply as required by Rule 5.

The material correspondence contemplated by Rule 5(c) would consist of the notice claiming the outstanding value added tax (VAT), the letter of objection, and the Commissioner's response to the objection.

Rather, at the hearing, and soon after the appellant had closed its case, counsel for the respondent produced the purported documents from the bar.

The documents consisted of a letter of objection dated 21 October 2014, a set of original value added tax (VAT) assessments issued by the respondent against the appellant on that date for the period May 2006 to August 2008, the letter of objection of 25 September 2009, and the unsigned agreement on the supply of basic commodities between the appellant and the Reserve Bank of Zimbabwe.

It did not file the ruling dismissing the condonation sought and disallowing the objection.

In the letter of objection, the appellant refers to “assessments, the last of which are dated 15 July 2009.”

The earlier assessments of 17 March and 22 May and the letters of 24 June and 10 September 2009, referred to in the notice of appeal, were not produced in evidence nor did they form part of the Rule 5(c) documents or the pleadings.

The respondent must simply comply with the law to obviate unnecessary delays associated with his failure to abide by the law in this regard.

The documents constitute a type of record of proceedings, which helps this Court understand the real dispute between the parties and the basis on which the determination appealed against was made.

That the objection was dismissed on the ground that it was filed out of time was only disclosed in the respondent's reply to the notice and grounds of appeal.

Rule 5(c) documents are simple documents that the respondent always has in its possession - even before filing his reply. This kind of dilatoriness on its part is totally inexcusable.

The respondent is directed to comply with Rule 5(c) in all future cases.

Condonation

At the pre-trial hearing of 17 September 2014, by consent of the parties, the delay in the filing of the notice of objection by the appellant and the failure to file Rule 5(c) documents timeously by the respondent were condoned.

The Issues

The four issues referred for appeal were:

(a) Was the appellant the importer of the goods in question into Zimbabwe?

(b) Does the appellant operate a business in Zimbabwe?

(c) In terms of section 6 of the Value Added Tax Act [Chapter 23:12] who was responsible for the payment of value added tax (VAT) on the imported BACOSSI goods, and, separately, on the imported non-BACOSSI goods?

(d) Was the appellant liable to pay any outstanding value added tax (VAT) in foreign currency?

I proceed to resolve each issue in turn.

Was the appellant the importer of the goods in question into Zimbabwe?

It was common cause, that, the onus was on the appellant to establish the identity of the importer of the basic commodities in question.

Counsel for the appellant submitted, that, the evidence of the sole witness called by the appellant, and the documentation produced, established, on a balance of probabilities, that, the Reserve Bank of Zimbabwe, rather than the appellant, was the importer.

Counsel for the respondent submitted, that, the evidence and documentation showed the appellant as the importer.

The Import Documentation in Exhibit 1

The exportation of goods from South Africa is facilitated by the production of the Republic of South Africa Exchange Control Declaration F178…, also known as the foreign currency payment declaration and the South African bill of entry.

The F178 foreign currency payment declarations in exhibit 1 were marked SL15 to SL20 for ease of reference….,.

These were issued to the appellant for the basic commodities destined for Zimbabwe.

Attached to the foreign currency declarations are commercial invoices of the South African vendor, indicating both the purchaser and vendor and the purchase price….,.

The South African vendor is indicated as the exporter/consignor. The appellant is shown as the consignee.

Attached to some of the foreign currency declaration forms are customs road consignment notes/delivery notes CIF Harare and export clearing and forwarding instructions raised by the transporter.

The vendor is described as the shipper while the appellant is described as the consignee….,.

The customs road manifest placed the responsibility for customs clearance and delivery of the goods under official supervision at the destination on the appellant as consignee.

The appellant paid the South African clearing agent….,.

The customs road freight manifest…, identified the two different clearing agents in South Africa and Zimbabwe. The consignee in Zimbabwe, on one of the road manifests, was D & T.

The Zimbabwe Customs and Excise require the South African exchange control declaration and the commercial invoice of the South African vendor and their attachments for the goods to enter Zimbabwe.

Zimbabwe Revenue Authority Bills of Entry, Form 21, together with commercial invoices issued in the name of the appellant, were presented, accepted, and processed by Zimbabwe Customs at Beitbridge.

The commercial invoices, from the appellant, were generated by the appellant under its letter head….,.

The importer is shown as the Reserve Bank of Zimbabwe (RBZ), delivery CIF Harare to the agent of the appellant on condition the goods are not released unless pre-paid to the offshore account in the appellant's name with the Royal Bank of Scotland.

The local bills of entry, Form 21, are marked SL and WP in exhibit 1….,.

All the SL bills of entry were generated by the clearing agent MCFZ between 25 July and 8 August 2008 while all the WP bills of entry were generated by a different clearing agent, BCS, between 20 and 28 June 2008.

These bills identify the appellant as the exporter/consignor and the Reserve Bank of Zimbabwe as the importer/consignee.

No duty was charged for all the SL consignments while duty was demanded from the declarant/clearing agent for two (2) of the WP consignments.

The ones for which no duty was levied were released on the strength of the customs release orders attached to each bill of entry. There are invoices issued by MCFZ to D & T account Reserve Bank of Zimbabwe (RBZ) for import handling fees….,.

The invoices of 31 July and 26 August 2008 show that the clearing fees submitted to D & T were inclusive of value added tax (VAT).

It was on the basis of the bills of entry that counsel for the appellant submitted that the appellant was not liable for value added tax (VAT) as it was not the importer.

In his supplementary written heads of argument, filed with the leave of the Court on 27 January 2015, he relied on section 12 of the Civil and Evidence Act and R v Karge & Anor 1971 (3) SA 470 (T)…,.

Section 12 of the Civil Evidence Act reads:

“12 Public and Official Documents

In this section —

'public document' means a document —

(a) Which was made by a public officer pursuant to duty to ascertain the truth of the matters stated in the document and to make an accurate record thereof for public use; and

(b) To which the public have a right of access;

'public officer' means a person holding or acting in a paid office in the service of the State or a local authority.

(2) A copy of or extract from a public document which is proved to be a true copy or extract or which purports to be signed and certified as a true copy or extract by the official who has custody of the original, shall be admissible in evidence on its production by any person and shall be prima facie proof of the facts stated therein.”

In R v Karge & Anor 1971 (3) SA 470 (T)…, HIEMSTRA J stated that:

“A public document is one made by a public officer in the execution of a public duty; it must be intended for public use and the public must have a right of access to it (Northern Mounted Rifles v O'Callaghan 1909 TS 174 at pp176-177). The mere production will furnish prima facie proof of the contents, provided that it is the public duty of the person who keeps the register or the records to make entries satisfying himself of the correctness thereof.”

Counsel for the appellant submitted, that, these bills of entry were public documents that were proffered and accepted, in terms of the Customs and Excise Act, established that the Reserve Bank of Zimbabwe (RBZ), and not the appellant, was the importer.

In his response of 4 February 20105, counsel for the respondent conceded, that, the bills of entry were public documents provided by the respondent for the entry of goods into Zimbabwe.

He, however, forcefully argued, that, the other evidence led by the appellant, together with the unsigned agreement of the supply of basic commodities between the appellant and the Reserve Bank of Zimbabwe (RBZ) eclipsed all reference in the bills of entry of the RBZ as the importer.

It is indisputable that Customs officials employed by the respondent are public officers who hold paid office in the service of the State. The bills of entry are public documents whose contents are prima facie correct.

I accept, that, the evidentiary onus to disprove the correctness of the contents of the bills of entry shifted to the respondent.

The respondent used the unsigned agreement as an antidote for the bills of entry.

The preamble indicates, that, the appellant was represented by the liaison officer, who it will be recalled was also the Sales and Marketing Director of the holding company, while the Reserve Bank of Zimbabwe (RBZ) was represented by its Senior Division Chief, Strategic Planning and Special Projects.

The preamble further suggested local incorporation and a local business address for the appellant.

The main body of the agreement identified the products, their quantities and transactional values.

The main features were that the appellant was responsible for delivering the goods CIF Harare or any other destination in Zimbabwe and was to be paid cash on delivery weekly for three (3) months. It was also responsible for weighing, inspection, and packaging at loading sites outside Zimbabwe where the Reserve Bank of Zimbabwe (RBZ) could conduct random inspections at the appellant's expense. The RBZ undertook to facilitate expeditious clearance of the goods at the Zimbabwe ports of entry.

While the respondent had the duty to disprove that the importer was the Reserve Bank of Zimbabwe (RBZ), the true, overall, and unchanging onus to prove the correct terms and conditions in the agreement reached between the appellant and the RBZ lay on the appellant.

In other words, 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.

The evidence placed before the court, by the appellant, was that the agreement was not signed because of what counsel termed “erroneous information in the preamble.”

The erroneous information related to its place of incorporation and business address.

I agree with counsel for the respondent, that, 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 Reserve Bank of Zimbabwe (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 that the appellant was the importer.

The strategic planner for the Reserve Bank of Zimbabwe (RBZ) stated, in the minutes of 13 February 2009, that, the appellant was responsible for the importation of basic commodities under the bacossi project and that the goods in the Chitungwiza bonded warehouse belonged to the appellant from where they were received, secured, and dispatched by the RBZ.

She also stated that D & T was a representative of the appellant that looked after all the interests of the appellant in Zimbabwe.

She was supported by other officials of the Reserve Bank of Zimbabwe (RBZ) such as the Special Advisor to the Governor, in the minutes of 20 August 2009, and the Governor on 20 October 2009.

She even intimated the existence of cross-shareholding between the appellant and D & T preceding the bacossi project.

She, however, subsequently confirmed, that, the Reserve Bank of Zimbabwe (RBZ) imported the Bacossi goods from the appellant and accepted liability for value added tax (VAT) in her letter of 1 July 2009.

The concession reinforced the assertions of the public officer for D & T in his letter to the respondent of 30 March 2009, the testimony of the sole witness, the letter of the appellant of 3 April 2009 to the purported public officer and copied to both the Reserve Bank of Zimbabwe (RBZ) and the respondent, the purported public officer's letter to the prospective external legal advisor of the RBZ, erroneously dated 15 April 2008, and that legal advisor's letter to the RBZ of 17 June 2009.

The onus to call evidence to establish what the correct factual position of the Reserve Bank of Zimbabwe (RBZ) was lay on the appellant.

This much was admitted by counsel for the appellant, in his heads of argument, by reference to Commissioner of Taxes v 'A' Company 1979 (1) RLR 29 (A)…,; 1979 (2) SA 409 (RAD)…,; 41 SATC 59 (RAD)…,.

The appellant did not produce the bill of entry from South Africa which would have shown who the exporter of the goods from South Africa was.

The sole witness stated, that, the importer of the non-bacossi goods was D & T.

The definition of 'export' and 'exporter' in section 2 of the Customs and Excise Act [Chapter 23:02] and 'exported' and 'export country' in section 2 of the Value Added Tax Act denote the removal of goods from Zimbabwe.

Exporter is defined in the Customs and Excise Act as “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.”

On the other hand, to import is “to bring goods or cause goods to be brought into Zimbabwe” and an “importer in relation to goods includes 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.”

In my view, 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 the appellant, in the bill of entry, as an exporter.

An importer is identified with ownership or possession of the goods or beneficial interest in the goods before entry and the fulfilment of the requirements of the Customs Act.

Entry is defined, in section 2 of the Customs Act “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 documents generated in South Africa show that the Reserve Bank of Zimbabwe (RBZ) was not the owner nor possessor nor beneficiary of the goods before the correctly filled and signed bills of entry were presented to customs officials of the respondent.

Rather, these South African derived documents show, beyond even a shadow of doubt, that, the goods were for the benefit of the appellant who owned and possessed them before any of the bills of entry were presented to customs officials.

Even though the sole witness stated that D & T was the importer of the non-bacossi goods, it was clear that it was operating as an appendage of the appellant.

There was preponderance of evidence establishing that D & T acted at all times as an agent importer on behalf of the appellant.

I am satisfied, that, notwithstanding the contents of the bills of entry and other documents complied 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 interest in them before they entered Zimbabwe; who brought them or caused them to be brought into Zimbabwe.

I hold, that, the appellant was the importer of both the non-Bacossi and the Bacossi goods....,.

In terms of section 6 of the Value Added Tax Act [Chapter 23:12] (VAT Act) who was responsible for the payment of VAT on the imported BACCOSSI goods and separately on the imported non-BACCOSSI goods?

Both counsel were agreed, that, the obligation to pay duty and value added tax (VAT) rested with the importer.

Counsel for the appellant contended, that, the Reserve Bank of Zimbabwe was the importer and submitted that it had the obligation to pay value added tax (VAT). Counsel for the respondent, on the other hand, identified the appellant as the importer who had the duty to pay VAT.

Section 6(1) and (2) of the Value Added Tax Act state:

“6 Value Added Tax

(1) 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 course or furtherance of any trade carried on by him; and

(b) The importation of any goods into Zimbabwe by any person on or after the 1st January 2004; and

(c) The supply of any imported services by any person on or after the 1st January 2004; and

(d) Goods and services sold through an auctioneer (as defined in section 56(6)) by persons who are not registered operators.

(2) Except as otherwise provided in this Act, the tax payable in terms of -

(a) Paragraph (a) of subsection (1) shall be paid by the registered operator referred to in that paragraph; and

(b) Paragraph (b) of subsection (1) shall be paid by the person referred to in that paragraph; and

(c) Paragraph (c) of subsection (1) shall be paid by the recipient of the imported services; and…,.”

I have already found, that, the appellant was the importer.

It was liable for payment of value added tax (VAT) in the pre-Bacossi and during the Bacossi era.

Whether value added tax (VAT) was due on entry or on release of the goods from the bonded warehouse, for home consumption, does not exonerate the appellant from payment of VAT.

Again, on the basis of my findings in regards to registration, I am also satisfied, that, it was liable even under section 6(1)(a) of the Value Added Tax Act. It supplied goods after 1 January 2004 in the course or furtherance of its business activities.

I am satisfied, that, the appellant was liable to pay value added tax (VAT).

Was the appellant liable to pay any outstanding Value Added Tax (VAT) in foreign currency?

It was common cause, that, the appellant received payment for the goods that it supplied in foreign currency.

Counsel for the appellant contended, that, the provisions of section 38(4) of the Value Added Tax Act, promulgated by section 16 of the Finance Act 2006 (No.6 of 2006), rather than the present section 38(4) of the Value Added Tax Act, substituted by section 29 of the Finance Act (Act 3 of 2009), is applicable in determining the appropriate currency of payment for value added tax (VAT).

The 2006 section 38(4) of the Value Added Tax Act reads:

“(4) Notwithstanding section 41 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] and the Exchange Control Act [Chapter 22:05]; where a registered operator receives payment of any amount of tax in foreign currency in respect of the supply of goods or services, that operator shall pay that amount to the Commissioner in foreign currency.

In this subsection 'foreign currency' means United States dollars, Euros or any other currency denominated under the Exchange Control (General) Order, 1996, published in Statutory Instrument 110 of 1996, or any other enactment that may be substituted for the same.”

The 2009 amendment introduced a new paragraph (b) and extended the definition of foreign currency to include the British pound, South African rand, and Botswana pula.

Section 38(4) of the Value Added Tax Act presently reads:

“(4) Notwithstanding section 41 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] and the Exchange Control Act [Chapter 22:05]; where a registered operator —

(a) Receives payment of any amount of tax in foreign currency in respect of the supply of goods or services, that operator shall pay that amount to the Commissioner in foreign currency;

(b) Imports or is deemed, in terms of section 12(1), to have imported goods into Zimbabwe, that operator shall pay any tax thereon to the Commissioner in foreign currency.

In this subsection 'foreign currency' means the euro, British pound, United States dollar, South African Rand, Botswana Pula or any other currency denominated under the Exchange Control (General) Order 1996, published in Statutory Instrument 110 of 1996, or any other enactment that may be substituted for the same.”

Counsel for the appellant submitted, that, the appellant was not obliged to pay value added tax (VAT) in foreign currency as it was not a registered operator and did not receive payment of any tax.

I have already determined, that, the appellant was required to be registered under section 23(1) and (3) and (4)(b) as read with section 56(1) and (3) of the Value Added Tax Act and can be treated as would a registered operator.

In my view, in terms of section 69(1) of the Value Added Tax Act, the failure to charge or receive value added tax (VAT) does not exonerate the appellant from liability as VAT is deemed to be included in the purchase price.

Section 69(1) of the Value Added Tax Act reads:

“69 Prices deemed to include tax

(1) Any price charged by any registered operator in respect of any taxable supply of goods or services, shall, for the purposes of this Act, be deemed to include any tax payable in terms of paragraph (a) of subsection (1) of section six in respect of such supply, whether or not the registered operator has included tax in such price.”

I have already found that section 6(1)(a) of the Value Added Tax Act applies with equal force to the appellant.

Value added tax (VAT) is deemed to be included in the purchase price.

The appellant bears the obligation to remit value added tax (VAT), in foreign currency, to the respondent.

Thus, even if section 38(4)(b) of the Value Added Tax Act is held to have come into force on 30 January 2009, after the non-bacossi and bacossi importations, the appellant remained liable for payment of value added tax (VAT) in foreign currency under the 2006 amendment....,.

Costs

I am satisfied, that, the appellant's objection raised important legal points on the status of a bill of entry. The grounds of appeal were not frivolous.

Disposition

Accordingly, the appeal is dismissed with no order as to costs.

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SC28-16 : ZIMBABWE REVENUE AUTHORITY vs PACKERS INTERNATIONAL (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GOWORA JA and HLATSHWAYO JA

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES
Ruled By: MATHONSI J

SC03-21 : AFRITRADE INTERNATIONAL LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: PATEL JA, BHUNU JA and BERE JA

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

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Value Added Tax

View Appeal SC28-16 : ZIMBABWE REVENUE AUTHORITY vs PACKERS INTERNATIONAL (PRIVATE) LIMITED Ruled By: ZIYAMBI JA, GOWORA JA and HLATSHWAYO JA

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES Ruled By: MATHONSI J

SC03-21 : AFRITRADE INTERNATIONAL LIMITED vs ZIMBABWE REVENUE AUTHORITY Ruled By: PATEL JA, BHUNU JA and BERE JA

Appealed SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

View Appeal HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: ZISENGWE J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY Ruled By: KUDYA J

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Zimbabwe

View Appeal
SC28-16 : ZIMBABWE REVENUE AUTHORITY vs PACKERS INTERNATIONAL (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GOWORA JA and HLATSHWAYO JA

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES
Ruled By: MATHONSI J

SC03-21 : AFRITRADE INTERNATIONAL LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: PATEL JA, BHUNU JA and BERE JA

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J