Resolving customs and excise disputes with SARS - litigation [Part 4 of 4 part series]

​​​​​​There are various mechanisms to resolve disputes with SARS' Customs and Excise divisions. In this article, we consider the final mechanism: litigation against SARS.

In the first two instalments of this series, we considered the primary internal (pre-litigation) dispute resolution mechanisms in the Customs and Excise Act, 1964 (the Act), namely the internal administrative appeal and the alternative dispute resolution (ADR) procedure. In the third instalment, we briefly considered certain ancillary mechanisms, namely the request for reasons, the suspension application, and settlement by way of compromise. If none of these mechanisms suffices to resolve the dispute, the aggrieved person may decide to institute legal proceedings (litigation) against SARS. That mechanism is the focus of this final instalment.

Section 96 of the Act, read with the Rules to that provision, govern the practicalities and time frames of instituting customs and excise legislation. The first step is for the aggrieved person (the Litigant) to formally notify SARS of their intention to institute legal proceedings. This is done in terms of section 96(1)(a)(i) read with Rule 96.02 by completing and signing a form DA 96 (available on SARS' website) and delivering it to SARS by hand, post, fax, or email.

The DA 96 form sets out the details of the Litigant and their attorney or agent, must be accompanied by relevant supporting documentation, and it must clearly and explicitly set out the Litigant's cause of action (which may be submitted as a supporting schedule). The cause of action must therefore set out the facta probanda (i.e. the facts that need to be proved for the aggrieved person to make their case).

The first peremptory time frame in this context is imposed by section 96(1)(a)(i), namely that the Litigant may not serve any process by which legal proceedings are instituted before the expiry of one month after delivering the duly completed DA 96 form and cause of action. In other words, the Litigant may not actually commence litigation until SARS has had at least one month to consider the intended case. During this time, SARS will refer the matter to an appropriate senior SARS official, who will be tasked with investigating the matter, reviewing the merits of the case and, if appropriate, engaging with the Litigant to attempt to resolve the dispute outside of Court. In terms of section 96(1)(c)(i), the State, the Minister of Finance or SARS may, on good cause shown, reduce this one-month notice period by agreement with the Litigant. If that request is refused, the High Court may reduce the period upon application by the Litigant, where the interest of justice so requires (section 96(1)(c)(ii)).

The second peremptory time frame imposed on the Litigant in this context is the period of extinctive prescription, in terms of section 96(1)(b). This provision determines that the Litigant may institute legal proceedings against SARS no later than one year from the date when the right of action first arose. Often, the right of action will arise as a result of a SARS "decision" (defined in section 77A(1) to include any determinations or administrative acts; amendments or withdrawals of decisions; and even any refusal to take a decision). If so, the one-year period begins to run on the date of SARS' final decision in terms of an internal administrative appeal (see here for the first article in this series); or on the date when SARS advises an applicant for ADR that no agreement has been achieved at the conclusion or termination of the ADR procedures (see here for the second article in this series); or on the date that SARS advises an aggrieved person that the dispute cannot be settled in terms of the settlement procedures (see here for the third article in this series).

The prospective Litigant needs to determine exactly when the one-year period begins to run and ensure that they institute legal proceedings against SARS before that period prescribes. But in terms of section 96(1)(c)(i), the State, the Minister of Finance or SARS may, on good cause shown, extend this one-year prescription period by agreement with the Litigant. And if that request is refused, the High Court may extend the period upon application by the Litigant, where the interest of justice so requires (section 96(1)(c)(ii)).

Once the section 96(1)(a)(i) notice has been delivered to SARS and the one-month notice period has passed, but before the section 96(1)(b) prescription period lapses, the Litigant can institute legal proceedings at the appropriate division of the High Court. The Litigant is dominus litis (master of the litigation) and so determines the form that the litigation will take, meaning either application (motion) proceedings or action proceedings against SARS.

Application proceedings in customs and excise cases involve the filing of affidavits by the Litigant (as the applicant) and by SARS (as the respondent, although other respondents may also be joined, such as the Minister of Finance) which set out the relevant facts of the case, the parties' factual averments and their respective legal arguments. The litigation commences with the applicant filing a notice of motion setting out the relevant details of the parties and highlighting the relief sought by the applicant. The notice of motion is accompanied by the applicant's founding affidavit, which sets out the background facts in detail, the grounds for the relief sought, and the applicant's legal arguments. The founding affidavit must be accompanied by the relevant supporting documents to substantiate the applicant's case. If the respondent wishes to oppose the application, it must deliver a notice of intention to oppose, followed by an answering affidavit setting out the respondent's version of the facts and its respective legal arguments. Additional affidavits may follow after that (including a replying affidavit by the applicant, and possibly supplementary affidavits by either party). Finally, the matter may be set down for hearing in the High Court. At the hearing, the parties' respective counsel (advocates) will present their side's case before the presiding judge. Oral evidence is not presented at a hearing of application proceedings. The respective parties may only rely on the evidence set out in their respective affidavits and supporting documents.

In contrast to the above, if the case involves material disputes of fact, the Litigant should rather institute action proceedings against SARS. Doing so requires the Litigant (as the plaintiff) to issue a summons out of the appropriate division of the High Court and to serve it on SARS (as the defendant). In a customs and excise case, the summons will typically be accompanied by the plaintiff's particulars of claim, setting out in sufficient detail the relief claimed by the plaintiff against SARS and the grounds for claiming that relief. If SARS wishes to defend the action, it must serve a notice of intention to defend the plaintiff, and after that, it must serve a plea setting out its formal defence and the grounds upon which that is based. Counterclaims, replications, and pleas in reconvention may also follow (but it is not necessary to elaborate on such steps for the purposes of this article). When action proceedings ultimately proceed to trial, the respective parties will adduce oral evidence and call witnesses to present testimony as needed.

Each party's counsel will present their side's legal arguments, lead their witnesses through their oral testimony, and cross-examine the other party's witnesses. In the case of highly technical disputes, such as those pertaining to the interpretation and application of the Act, it may be prudent for the Litigant and SARS to appoint expert witnesses to give additional testimony. The evidence of an expert witness will focus on aspects germane to their particular area of specialisation and is intended to assist the Court to make a finding on those aspects.

Litigation is a complex process, and other possible steps may be taken in the course of a customs and excise case, either by the Litigant or by SARS. It is beyond the scope of this article to elaborate on all of the possible steps that may be taken in the course of litigation. In concluding this article and this four-part series, it is worth noting that litigation should generally be seen as a last resort in the quest to resolve a customs and excise dispute with SARS. Litigation is unpredictable, expensive, and time-consuming. A party aggrieved by a SARS decision in a customs and excise matter should, as far as possible, first seek to resolve the dispute by means of the internal mechanisms highlighted in parts one to three of this series. It is usually worth considering and pursuing each applicable internal mechanism provided for in the Act before resorting to litigation, even if doing so only serves to resolve some of the aspects in dispute. That way, if litigation is ultimately required as a last resort, some of the issues at hand may already have been resolved or at least sufficiently clarified.

Disputes of this nature should be referred to a customs and excise specialist attorney at the earliest possible opportunity (preferably when the dispute first arises, typically in the form of a SARS notice of intention to assess). Not only does that give the aggrieved person the best opportunity to resolve the dispute as early as possible, but the attorney can then advise and assist the aggrieved person with a view to pending or contemplated litigation from the outset. Such an approach holds many strategic benefits, not least ensuring that attorney-client privilege applies to all communications between the attorney and client, whether in oral or written form.

For more information, read the other parts of Resolving customs and excise disputes with SARS series below:

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