Introduction
This case considers an application made by the second applicant (Kestrel Network Solutions (Pty) Ltd) to the North Gauteng High Court which arises from business rescue proceedings in respect of the second applicant and to which the first applicant (Grant Chittenden N.O) was appointed as business rescue practitioner on 30 May 2013. The Commissioner of the South African Revenue Services (CSARS), in his capacity as first respondent, opposed the business rescue proceedings and also did not issue a tax clearance certificate (TCC) in terms of sec 256 of the Tax Administration Act (No. 28 of 2011) (hereinafter referred to as ‘the TAA’). Consequently, an application was launched by the first applicant, which is still pending, in terms of sec 153(1)(a)(ii) read with sec 153 of the Companies Act (No. 71 of 2008) to have the CSARS’ vote against the business rescue proceedings set aside based on the fact that it was inappropriate as well as an application in terms of sec 8 of the Promotion to Administrative Justice Act (No. 3 of 2000) (PAJA) to launch review proceedings against the negative decision in respect of the TCC.
Facts
Kestrel Network Solutions (Pty) Ltd (KNS) commenced with business rescue proceedings on 27 May 2013 which was opposed by the CSARS at a subsequent creditors meeting held on 23 August 2013. KNS thereafter submitted an application in terms of sec 153(1)(a)(ii) read with sec 153 of the Companies Act (No. 71 of 2008) to have the CSARS’ vote against the business rescue proceedings set aside based on the fact that it was inappropriate. During the above proceedings, KNS received a notice from the Department of Defence that its TCC will expire on the 22nd of February 2013. KNS did not take a pro-active approach to ensure that it receives a TCC as soon as the current one has expired and only applied for a new TCC on the 5th of February 2014. Two days later, on the the 7th of February, 2014, SARS declined the application for a new TCC. In response to this an application was made to the High Court on the 13th of February 2014.
Section 256(3) of the TAA, states the following:
‘(3) A senior SARS official may provide a taxpayer with confirmation of the taxpayer’s tax compliance status and may confirm that the taxpayer is tax compliant by issuing a tax clearance certificate only if satisfied that the taxpayer is registered for tax and does not have any—
(a) outstanding tax debt, excluding a tax debt contemplated in section 167 or 204 or a tax debt that has been suspended under section 164 or does not exceed the amount referred to in section 169 (4); or
(b) outstanding return unless an arrangement acceptable to SARS has been made for the submission of the return.’ (own emphasis added).
The court highlighted the fact that a TCC should only be issued if a senior SARS official is satisfied that the requirements of the section are met. KNS had an outstanding tax debt of just below R 12 million which has not been suspended in terms of sec 164 of the TAA at the time of application for a new TCC, which according to Grant Chittenden NO is not a debt as contemplated in sec 167 (instalment payment agreement) and 204 (compromise of a tax debt) of the TAA.
It was common cause among the respondents and Baqwa, J, that a decision on the issuance of a TCC constitutes an ‘administrative action’ as defined in sec 1 of the PAJA and that the applicants may, if they are dissatisfied with the Commissioner’s decision and wish to challenge it, launch review proceedings provided for in sec 8 of the PAJA. It was pointed out with reference to Oudekraal Estates (Pty) Ltd v City of Cape Town and Others 2004(6) SA 222 SCA that in the absence of such review proceedings and pending the finalisation of such proceedings that the decision not to issue a TCC remains in place and is of full force and effect. It was also pointed out that the relief applied for by the applicants are final, as sec 256(3) of the TAA does not provide for the issuance of an interim or provisional TCC.
The court held that should a TCC be issued to KSN, it would create a precedent that would negatively affect SARS’ tax administration, because every taxpayer whose application for a TCC has been denied would simply be entitled to approach the court for an order compelling SARS to issue a TCC without having to address the merits of the refusal. Baqwa, J made the following obiter at par 12:
‘Quite clearly that would cause chaos within the country and tax administration would come to a standstill.’
It was further pointed out that KSN did not take timely action to ensure that it obtains a new TCC as it waited eight months to apply for a new TCC.
Held
The court held that the fact that the non-issuing of a TCC is likely to cause KSN actual or impeding harm does not entitle them to amandamus compelling the court or the CSARS to issue a TCC. It reiterated that KSN should have treated the TCC as a priority and should have addressed it at the time of the business rescue proceedings and that, as a result, the applicants failed to make out a case for the relief sought. The application was consequently struck off the roll with costs.