Commissioner of the South African Revenue Service v Formalito (Pty) Ltd

Formalito (Pty) Ltd, a licensed arms dealer, imported firearms and ammunition into South Africa. SARS received information that Formalito had under-declared the value of imported goods by using incorrect tariff codes on bills of entry between 1998 and 2000, resulting in an underpayment of customs duty, ad valorem duty and VAT amounting to R696 652.95. SARS demanded payment of the underpaid duties and imposed an additional amount in lieu of forfeiture under s 88(2)(a) of the Customs and Excise Act, ultimately fixing this penalty at 50% of the value of the goods (R1 896 456). Formalito successfully reviewed these decisions in the High Court, which set aside both the duty claim and the forfeiture. SARS appealed to the Supreme Court of Appeal.

The appeal succeeded. The High Court order was set aside and replaced with an order dismissing the review insofar as it related to the claim for underpaid duties and VAT, setting aside the forfeiture decision, and remitting the penalty issue to SARS for reconsideration. SARS was ordered to pay the costs of the review application.

The case authoritatively interprets 'false declaration' in s 44(11)(a) of the Customs and Excise Act as requiring knowledge of falsity, clarifying the distinction between 'incorrect' and 'false' declarations. It also reinforces administrative-law principles that an organ of state must follow its own policies or justify any deviation, particularly in the imposition of penalties.