Cape Town - The company that made headlines over allegations of meat relabelling just over a year ago has successfully challenged the constitutionality of important tax-related legislation.
The Western Cape High Court found this week that sections of the Customs and Excise Act were invalid and unconstitutional.
The judgment comes after a five-hour raid on the Muizenberg premises of the company, Orion Cold Storage last year.
However, the court’s declaration of invalidity has been suspended for 18 months to give legislators time to amend the law.
In the interim, it has provided a reading-in of terms which will render the applicable sections constitutionally acceptable in order to safeguard the rights of those who may be searched while the order is suspended.
The judgment will also not affect raids carried out in the past because the court ruled that its order would not apply retrospectively.
Sars spokesman Adrian Lackay said this week that the revenue service was pleased with the suspension and had started with the process to amend the act.
He added that the draft customs bills, which are part of the complete rewrite of the act, “already revised the approach to searches when they were published for public comment in 2009 and 2011”.
Lackay said Sars was not surprised by the judgment because it had conceded the point on the constitutionality of the sections.
“The declaration of invalidity must proceed to the Constitutional Court for confirmation and Sars is therefore studying the judgment, to decide on the possible points it will place before the Constitutional Court.”
The ruling was made in an application lodged by Patrick Gaertner, director of frozen foods importer Orion Cold Storage.
Gaertner lodged the application after between 20 and 30 Sars officials carried out the search at its premises in May.
They sealed the entrance to the premises, no one was allowed in or out and staff members were asked to stand clear of their computers.
An additional raid, involving 14 Sars officials, was carried out at Gaertner’s home in Silverhurst Estate, Constantia, on June 1.
Both raids were carried out without warrants after Sars suspected that Orion had fraudulently manipulated invoices which formed the subject of court proceedings between Orion and Sloan Valley Dairies Ltd.
However, when officials arrived at the Muizenberg premises, they initially gave Gaertner the impression that it was a routine inspection and later told him that they were investigating the under-declaration of customs values of certain imported goods.
In court papers, however, they admitted that they were not truthful about their reason for the searches, saying they were concerned that, with a fuller explanation, Gaertner might have caused his staff to remove or conceal files.
In Gaertner’s application, he alleged that the applicable sections of the act infringed his constitutional right to privacy.
In the judgment, Judge Owen Rogers said the nature of the right to privacy was an important one and that Sars’s purpose of limiting that right was to ensure that the act was complied with and that taxes imposed were duly declared and paid.
“That is a very important purpose in the public interest – non-payment of taxes inhibits the government’s ability to fund its manifold programmes of action,” he said.
Judge Rogers added that the minister’s papers indicated that in the past financial year Sars had confiscated more than 750 000 pieces of under-declared and illegal clothing worth R483 million.
Referring to the arguments before him, the judge said the respondents correctly did not contend that the impugned provisions of the applicable section were justified to their full extent.
He distinguished between routine searches and non-routine searches, where officials suspect non-compliance with the act.
He found that warrantless routine searches of businesses or people were justifiable to the extent that the searches related to the business for which the person or business was registered or licensed.
In addition, he found that warrantless non-routine searches were justifiable only in respect of pre-entry facilities, licensed warehouses and rebate stores to the extent that the search related to the business of the facilities.
However, he ruled that warrantless searches were not justifiable in other cases, particularly that of unlicensed premises or people, as well as non-routine searches of registered people or premises for purposes other than that for which the business is registered.
However, saying that the searches at Orion’s premises and at Gaertner’s house were “on any reckoning heavy-handed”, he added that guidelines need to be incorporated to properly balance the searched person’s right to privacy with Sars’s interest in infringing that right.
The guidelines included:
l Searches should only take place during ordinary business hours unless another time was necessary on grounds of urgency.
l Only those officers whose presence is necessary should enter.
l Sars should provide an inventory of all items removed from the premises or documents copied.
Weekend Argus