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Critical assessment of the constitutionality of the South African customs legislation
ABSTRACT
Before 1994, most if not all pieces of legislation were subject to the sovereignty of Parliament and the law enforcement powers of the executive, which enabled the development of the authoritarian and oppressive system of the apartheid era. The Customs and Excise Act 91 of 1964, hereinafter referred to as CEA, is a piece of legislation thought to be very critical in the promotion of international trade, but it could be a serious stumbling block if its provisions and application were the subject of constitutional scrutiny and found to be not constitutionally compliant.
The Constitution of the Republic of South Africa, 1996, hereinafter referred to as the
Constitution has created a democratic state based on the supremacy of the Constitution, the rule of law and the Bill of Rights, amongst other values. The Bill of Rights protects the fundamental rights of individuals when they are dealing with organs of the state, which includes members of the police services and to a certain extent Customs officers. For purposes of this dissertation, focus will be more on conduct of the Customs officers when executing their roles at ports of entry and/or exit, and during inspections in what is commonly known as pre-entry facilities like Bonded Warehouses.
Before the advent of the Constitution, the CEA was silent about the searches to be conducted and goods to be seized without due regard to the right to privacy of the persons being searched. In the instance of the seizure of the goods, without providing such a person the right to state his/her case in terms of the provision of the Promotion
of Administrative Justice Act 3 of 2000, hereinafter referred to as PAJA. Since the enactment of the Constitution there have been additional constraints on search and seizure powers. Not only are there now constitutionalised standards against which such legal powers are measured, but there is also the possibility of excluding evidence obtained in the course of a violation of a constitutional right.
In the light thereof, the CEA could not withstand the constitutional attacks it has encountered, given that most of the decisions against the Commissioner have also demanded of him to amend the provisions of the Act in question. Although the Tax Administration Act 28 of 2011, hereinafter referred to as TAA (also administered by Commissioner of SARS) is considered as progressive, it is arguably also not fully constitutionally compliant. This dissertation will therefore focus on issues that led not to the amendment of the CEA but to the total overhaul thereof, even to the extent of giving it new titles, which according to me make it more progressive and business-friendly than the current Act.
Key Words: Customs, Constitutionalism, Right to privacy, Commissioner
TABLE OF CONTENTS
ABSTRACT ……………………………………………………………………………………………….. i
LIST OF ABBREVIATIONS …………………………………………………………………………. iii
Chapter 1
1.1 Introduction… …………………………………………………………………………………………… 1
1.2 Purpose and Scope of the Act………………………………………………… 2
1.3 Problem statement ……………………………………………………………………. 3
1.4 Reserch question ………………………………………………………………………………..7
1.5 Conclusion ……………………………………………………………………………… 7
Chapter 2
2.1 Purpose of the Chapter ……………………………………………………………………………….. 9
2.2 Background information on searches ……………………………………………… 9
2.3 Constitutional issues … ……………………………………………………………………………… 12
2.4 Conclusion … …………………………………………………………………………………………….. 12
Chapter 3
3.1 Introduction …………………………………………………………………………. 13
3.2 Discussion of various decided court cases ……………………………………… 20
3.3 First National Bank of SA v Commissioner of SARS …………………………. 20
3.3.1 Gaertner and Others v Minister of Finance and Others …………… 27
3.4 Cases dealing with the PAJA ……………………………………………………… 36
3.4.1 Deacon v Controller of Customs and Excise ………………………… 38
3.4.2 Wong and Others v Commissioner for SARS …………………………. 39
3.4.3 Container Logistics (Pty) Ltd v Commissioner of Customs and Excise.42
3.4.4 Commissioner of SARS v Formalito ……………………………………. 44
3.4.5 Fazenda v Commissioner of Customs and Excise ……………………. 47
3.5 Conclusion ……………………………………………………………………… 49
Chapter 4
4.1 Introduction …………………………………………………………………………… 51
4.2 Catalyst for Change …………………………………………………………………. 51
4.3 Consultation process ………………………………………………………………. 54
4.4 Parliamentary process ……………………………………………………………… 60
4.5 Conclusion ……………………………………………………………………………. 64
Chapter 5
5.1 Introduction …………………………………………………………………………… 65
5.2 Purpose of the New Acts ……………………………………………………………. 66 5.3 Issues introduced by the new Acts ……………………………………………….. 67
5.3.1 Duties of an Officer ……………………………………………………………….. 67
5.3.2 Chapter 33 of the Customs Control Act ………………………………………… 70
5.3.3 Administrative Penalties …………………………………………………………… 76
5.3.4 Voluntary Disclosure Relief ……………………………………………………….. 78
5.3.5 Internal Administrative Appeals …………………………………………………. 79
5.4 Conclusion… …………………………………………………………………………………………… 80
Chapter 6
6.1 Introduction ………………………………………………………………………….. 83
6.2 The Issues …………………………………………………………………………… 83
6.3 The Impact on the New Acts (Control & Duty Acts) ………………………….. 84
6.4 Conclusion ……………………………………………………………………………. 90
REFERENCE LIST ……………………………………………………………………………………. 91
Chapter 1
1.1 Introduction
The practice of collecting taxes has been in existence for a very long time, as also mentioned in the Bible as being executed by the tax collector. The most commonly known taxes are, of course, those relating to what is commonly known as direct taxes, on which government relies to protect its domestic economy. Income tax and Value Added Tax (VAT) are examples. The other type of taxes that focus will be placed on is that on imported and locally manufactured goods, which is called Customs and Excise tax. This tax is commonly enforced by customs officials at ports of entry. They also play a role in ensuring compliance with the country’s domestic customs legislation[1] .
This field of the economy (customs) commonly referred to as that of imports and exports, and one of the responsibilities of a customs administration is the collection of duties. On the other hand, customs is often considered a department, which frustrates trade and/or travel by means of the application of its numerous administrative processes and procedures, which cause delays because of the numerous interventions arising from the need to collect duties and taxes.[2]
In the International Convention on the Simplification and harmonisation of customs procedures, (Revised Kyoto Convention) ”customs” is defined as:
[t] he Government Service which is responsible for the administration of Customs law and the collection of duties and taxes, and which also has the responsibility for the application of other laws and regulations relating to the importation, exportation, movement or storage of goods.[3]
The CEA came into operation on 1 January 1965, and for the first time provided both customs and excise matters in one piece of legislation. Initially there had been the Customs Act 55 of 1956 and the Excise Act 62 of 1956, until they were consolidated into one piece of legislation. The Act is unique in the sense that most countries favour separate customs and excise legislation.
The CEA is amended annually and may be for various reasons, inter alia in respect of taxation proposals, to introduce new principles, and importantly to perpetuate amendments. Amendments are effected by notice in the Government gazette.4
1.2 The Purpose and scope of the Act
The purpose of the Act is to provide for the levying of customs and excise duties and a surcharge; for a fuel levy, for a Road Accident Fund levy, for an air passenger tax and an environmental levy; the prohibition and control of the importation, export or manufacture of certain goods; and for matters incidental thereto.
In the unreported case of Micro and Peripheral Distributors(Pty)Ltd v The Minister of Finance and Commissioner of Customs and Excise,5 Hartzenberg J stated the following regarding the scope of the Act:
The construction of the Act indicates that the legislature created a vehicle to collect revenue in an orderly manner.
- Cronje Customs and Excise Service1st ed Int-6.
- 1997 JOL 648 T.
This emphasises the fact that the Act is more about the collection of revenue than enforcement.
In Tieber v Commissioner for Customs and Excise6 Goldstone J stated that if one were to have regard to the scheme of the Act, it would appear clearly that its main purpose is to ensure that customs and excise duties are paid on all goods which are brought into the Republic other than goods in transit. The point in issue then is how Customs enforces compliance on goods imported into the Republic. It is on the basis of this research that the author explores the manner the CEA has been enforced and the Commissioner‘s actions in an attempt to ensure collection of duties on imported goods.
The purpose of this dissertation therefore , after having exposed the provisions of the Act that are non compliant with the provisions of the Constitution of the Republic in certain extent , but to also highlight areas where the New customs legislations had remedied such non compliance.
The scope covered by the Act are matters relating to the general duties and powers of the officials, which forms part of the discussion in this paper, the detention of goods , internal administrative appeal and Dispute Resolution, seizure of the goods , administrative penalties as well duties that constitute a debt to the state (Lien).
1.3 Problem statement
The CEA was promulgated some fifty years ago, before the enactment of the
Constitution, and as such, the above statement is applicable thereto. It therefore means that the CEA was promulgated before the dawn of democracy in South Africa, and thus it is not aligned with the Constitution and the Bill of Rights. Like most of the legislations ( if not all )that were promulgated before 1994, they were not consistent with the Bill of Rights in the Constitution.
However other writers contend that that the relevance of older decisions taken in interpreting the then provisions of the CEA is affected by the subsequent changes and amendments to customs and excise law, e.g. customs value concepts and the [4] interpretation of tariff classification provisions before and after 1 January 1965 (when the present Act came into operation). The main purpose remains to ensure that customs and excise duties are paid on all goods, which are brought into the Republic other than goods in transit.[5]
The rewriting of the new customs legislation was prompted not only by constitutional imperatives but also apparently by the need to align it with the Revised Kyoto Conventions (hereafter referred to as RKC),[6] . The RCK provides a model framework for Customs control and therefore considered as a blue print for a modern, efficient and cost effective customs system. In view of South Africa having acceded to this convention, it was determined that a fundamental restructuring of our customs and excise legislation was required to amongst others, give effect to Kyoto and other binding international instruments9. The focus of the proposed study will be on the constitutional issues as reasons for the rewriting of the new customs legislation. In support of the above-mentioned statements, Rautenbach10 outlined the principle that is fundamental when dealing with legislations before 1994 as follows:
The Constitution applies to all laws that were in force when the Constitution took effect, therefore laws, which were inconsistent when the Constitution took over, were invalid from the moment the provisions of the Constitution came into effect.
Like other legislation, the CEA has been at the centre of constitutional scrutiny by the Constitutional Court, as highlighted below. Some of the sections that were so scrutinised, amongst others, were section 4,[9] section 88,[10] section 91[11] and section 114.[12]
When the Commissioner endeavoured to address the constitutional issues that were raised in various Constitutional Court judgements, the amendment of the Act seemed the only option at first.
The question remained as to whether the perpetual amendment of the Act would be a solution to address all the issues raised and to ensure its alignment with the constitutional imperatives expected of an organ of state such as the South African Revenue Services (SARS).
In its Customs News Bulletin,15 SARS also admitted that to keep pace with the new challenges the CEA has been extensively amended over the past years. However, the basic structure of the Act remained unchanged and it still contains rigidity reminiscent of the era in which it was legislated. The amendments made over the past fifty years have made it impossible for the CEA to serve as a vehicle for implementing a modern system of customs control in accordance with international trends, best practice and the constitutional imperatives. It is for these reasons that there had to be a solution to the constitutional attack on the CEA, in an endeavour to arrive at possible solutions, which will be discussed in detail in this dissert
There are few cases, which will be discussed in Chapter 3 below, wherein the provisions of CEA were declared constitutionally invalid.
The principle held in those cases was that an effective customs legal framework is required to ensure the establishment of transparent, predictable and prompt procedures meeting international standards as required by the stakeholders i.e. importers, exporters and traders in general.
The other contributory factor is that most of the existing customs procedures are generally in accordance with international principles, especially as set out in the original Kyoto Convention that was signed in 1973, and was established under the auspices of the Customs Cooperation Council, which in 1994 underwent a change of name to the Customs World Organization. It is self-evident that these institutions laid a good foundation for national customs regimes throughout the world, including South Africa, but the South African CEA was still too stringent to evolve with time.
The other framework, which is a source of customs practices, was developed for the Southern African Customs Union (SACU), which is the oldest customs union in the world, and is comprised of the following members: Botswana, Lesotho, Namibia, South Africa and eSwatini.16 Again, the question is asked in what way SACU contributed to modernising the CEA to address issues in a more progressive way, particularly taking into account the Constitution.
- South African Revenue Services 2014 http://sars.gov.za.
- Cronje Customs and Excise Service issue 21 Int-8.
1.4 Research question
Does the legislative development in South African customs and Excise comply with the constitutional requirements?
This research will show that there are some provisions of the CEA that we deemed by the courts to be inconsistent with the provisions of the Constitution as alluded above.
The promulgation of the New Acts (namely Customs Control Act [13] and the Customs Duty Act[14] ) had addressed the issues that the current act was found foul of addressing. This statement will be elaborated on when dealing with the New Act in details in chapter 5. It is however important to mention that new Act addressed adequately the provisions of the CEA , that were vague , ambiguous and inconsistent with the Constitution .
1.5 Conclusion
It will be demonstrated that the new Customs legislation has addressed this anomaly; however, the fact that these new Acts are not in place yet, it means the only existing Customs legislation is the current CEA. The commissioner will for now have to administer the current Act as it is except for where there are amendments prompted by the courts or initiated by the Commissioner to assist with smooth application of the Act . For purposes of this dissertation, focus will therefore be on those sections that were declared unconstitutional by the courts.
In Chapter 2, this dissertation will first deal with the principles in the Constitution that set out how the Constitution should be addressed. These are the following,
- The limitation clause
- The application of the constitution
- Interpretation
In Chapter 3 the dissertation dwells on the cases where the Commissioner of South
African Revenue Services had either to amend or to give effect to the provisions of
the Constitution where the courts had decided against his actions, in some instances as being unconstitutional, and in others or just simply being unlawful conduct by customs officials
Chapter 4 deals with the process of writing the new Acts, and most importantly the views expressed by the interested parties during the consultation processes and the views expressed by the members of both the national legislature and provincial
legislature.
Chapter 5 deals with the new Acts themselves and focusses on the provisions that have made an impact in the new era, when the Acts came into effect. Here the dissertation deals with the provisions of the new Acts, to demonstrate that they represent a total departure from the current CEA, and discusses the new developments of the new Acts. It is important to mention, however, that since the new Acts are not in force as yet, there could not be any legal authority pertaining to the new legislation, be it in case law or any legal writings.
Chapter 6 of this paper deals with the conclusion remarks from each chapter discussed and how they addressed the issue at hand.
[1] Levendal A case study of the Customs Administrative Penalty Provisions as contained in
the Customs and Excise Act No 91 of 1964.
[2] . Colesky A comparative study on Customs Tariff Classification 1.
[3] Chapter 2 of the Revised Kyoto Convention (2006).
[4] 4 SA 844 (A).
[5] Colesky A comparative study on Customs Tariff classification 51.
[6] South Africa Acceded to Convention in May 2004
[7] Macqueen http://www.polity.org.za.
[8] Rautenbach and Malherbe Constitutional Law 26.
[9] Gaertner and Others v Minister of Finance and Others 2014(1) BCLR 38 CC
[10] Wong and Others v Commissioner for SARS 2003 JOL 11010 (T)
[11] Commissioner of SARS v Formalito 2005 5 SA 526 (SCA)
[12] First National Bank of SA v Commissioner of SARS 2002 4 768 (CC)
[13] No 31 of 2014
[14] No 30 of 2014
Critical assessment of the constitutionality of the South African customs legislation
