Source: Candice Collins
Under the Customs and Excise Act, 1964 (Act) invasive searches of houses and business premises that are not designated premises are permissible and a High Court has declared a law allowing such searches unconstitutional and void. On 8 April 2013, the Western Cape High Court in the matter of Patrick Lorenz Martin and Gaertner and 2 Others v The Minister of Finance, Commissioner: SARS and 9 Others, declared sections 4(4) to 4(6) of the Act unconstitutional. These provisions were held to be unconstitutional insofar as they allowed the South African Revenue Service (SARS) to conduct searches of undesignated business premises and private residences without a judicial warrant.
OSC, one of the applicants in this matter, is an importer and distributor of bulk frozen food stuffs. A dispute had arisen between OCS and a Canadian entity, Sloan Valley Dairies Ltd (SVD) regarding the sale of one of its products. As part of the dispute, VDS served papers on SARS which aroused a suspicion of fraudulent manipulation of the customs duty payable by OSC. In order to confirm its suspicions, SARS raided the business premises of OCS and the private residence of one of its employees, Mr Gaertner. SARS conducted these searches without a warrant and in the process copied various documents, copied data from the company’s IT system, searched computers and tablets of various employees and inspected personal computers at Gaertner’s house.
Gaertner and others approached the court on the basis that the relevant provisions conferred draconian powers of investigation to SARS and infringed upon a taxpayer’s right to privacy as guaranteed in the Constitution. These provisions empower officials to, without prior notice, enter premises, search and attach documents and to break windows, doors or walls to search in accordance with the Act. SARS contended that the provisions were justifiable infringements of the right to privacy because they authorised searches of “designated premises” without a warrant. SARS based its contention on the nature of the premises arguing that a search in a designated premise will not require a warrant whereas a search in a non-designated premise will require a warrant. In contrast, Gaertner based his contention on the nature of the search arguing that a routine search may be conducted without a warrant whereas a non-routine search requires a warrant in order to be conducted.
As is customary with constitutional challenges, the court conducted limitation exercise and concluded that the draconian powers conferred upon SARS were not justifiable and violate constitutional rights to privacy. The court held that routine searches without a warrant are acceptable only in relation to industry players, ie people who are registered, licensed and operate warehouse and rebate stores under the Act. However SARS cannot conduct a search without a warrant on people who are not regulated by the Act. As a result, the court suspended the offending provisions for a period of 18 months and introduced temporary ones which will apply until Parliament remedies the situation. This decision will only take effect once the Constitutional Court approves it.
The proposed temporary provision significantly narrows SARS’ powers during statutory searches. SARS can only search undesignated premises without a warrant if the person in charge of the premises consents after being informed that they are not obliged to admit SARS without a warrant. In addition, SARS now has to adhere to strict guidelines when conducting a search, for example, a search may only be conducted during ordinary business hours; the person in charge of the premises must be informed of the nature of the search; an inventory must be supplied where copies are made or documents are removed and the search must be conducted in strict regard for decency and order.
This decision is to be welcomed because clarifies the rights of taxpayers and the ambit of SARS’ powers during the search process. It also brings the customs industry in line with some aspects of the new administration dispensation in the tax arena. For example, the Tax Administration Act, 2011 prohibits entry into domestic premises without a warrant unless the dwelling is used for trade. The proposed guidelines for the search process are also similar to those laid down in this new tax law.