Author: Caroline Rogers and Megan McCormack of ENSafrica
In an unreported decision, Jen-Chih Huang and 13 others v Commissioner of SARS and others with case number: SARS 4/2013 and dated 18 November 2013 (“the Unreported Judgement”), Tuchten J of the North Gauteng High Court handed down an important judgment in relation to information and documentation obtained by the South African Revenue Service (“SARS”) in terms of Part D of the Tax Administration Act No. 28 of 2011 (“the TAA”).
The Unreported Judgment concerned an inquiry in terms of Part C of the TAA that had been convened to begin on 11 November 2013 and which had been preceded by a successful application by SARS for a search and seizure warrant. Prior to the commencement of the inquiry but after the search and seizure had been carried out, the applicants in the Unreported Judgement brought an application to have the granting of the search and seizure warrant reconsidered (“the reconsideration application”). Pending the outcome of the reconsideration application, the applicants applied to the court on an urgent basis seeking the postponement of the inquiry proceedings and the prevention of the use of documents and information obtained in the search and seizure from being used in the examination of any witness in the inquiry proceedings.
In deciding whether to grant the urgent relief sought by the applicants, the court considered the status of information obtained under a search and seizure warrant which may potentially be declared invalid, as well as the powers of a presiding officer in an inquiry under the TAA in relation to unlawfully obtained information and documentation.
Status of information obtained under a search and seizure warrant which may potentially be declared invalid
The court confirmed that, although SARS has broad powers under sections 59 to 64 of the TAA to search premises for and seize relevant material (as defined), such a search and seizure can only take place under the authority of a warrant issued by a judge. In this regard, the court held that an ex parte application for a search and seizure warrant is a judicial proceeding to which special procedural rules apply. In particular, any person affected by an order made ex parte may apply for the reconsideration thereof. Such a reconsideration application will essentially involve a rehearing of the application with additional material, usually in the form of a reply to the relevant allegations, provided by the persons bringing the reconsideration application.
To the extent that a reconsideration application is successful, and the search and seizure warrant is set aside, the court setting aside a search and seizure warrant may direct that some or all of the seized material be returned to the applicants. However, such an order is not inevitable, as section 66(4) of the TAA empowers the court to allow SARS to retain the seized material (or copies thereof) in the interests of justice. In considering whether or not to grant such an order in terms of section 66(4) of the TAA, a court may have regard to whether the material seized is material which the taxpayer ought under the TAA, to have been made available to SARS on request.
Powers of a presiding officer in an inquiry under the TAA in relation to unlawfully obtained information and documentation
Tuchten J held that the powers of a presiding officer in an inquiry under the TAA relate only to the imposition of criminal sanctions for the failure to give evidence or produce documents or things at the inquiry and do not extend to the evaluation of the success of challenges relating to unlawfully obtained information and documentation. The court further held that a presiding officer may not exercise discretion under section 66(4) of the TAA, as this discretion is vested only in the courts.
The court noted that it was not required to consider the prospects of success of the reconsideration application and, having regard to the fact that SARS would suffer little prejudice should the applicants be granted the relief sought (as the inquiry proceedings would continue and the evidence process merely be postponed until such time as the outcome of the reconsideration application is decided) held that the applicants should be excused from providing evidence at the inquiry proceedings. The court further held that no documents or information obtained by SARS in terms of the search and seizure warrant could be used in the examination of any witnesses at the inquiry. The court clarified that this order would not prevent SARS from making use of any document or information obtained from a source other than the search and seizure.
This judgment is an example of the provisions of the TAA at work and serves to indicate that it remains open to a taxpayer to challenge SARS’ exercise of its wide powers to seize information and documentation, where appropriate.