Commissioner for the South African Revenue Service v Virgin Mobile South Africa (Pty) Ltd

SARS issued additional income tax assessments against Virgin Mobile South Africa (Pty) Ltd for the 2014, 2015 and 2016 tax years. The taxpayer lodged an appeal on 22 May 2019. In terms of Tax Court Rule 31, SARS was required to deliver its statement of grounds within 45 days but failed to do so. After reminders, the taxpayer delivered a Rule 56(1) notice on 13 October 2020 calling on SARS to remedy the default within 15 days, failing which default judgment would be sought. SARS complied within five days by delivering its Rule 31 statement. Despite this, the taxpayer applied for default judgment. SARS responded by launching an application under Uniform Rule 30, read with Tax Court Rule 42, contending that the default judgment application was an irregular step because the default had been cured. The Tax Court dismissed SARS’ application, and the majority of the Gauteng Division of the High Court upheld that decision. SARS appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The order of the High Court was set aside and replaced with an order upholding SARS’ appeal, setting aside the Tax Court’s order, declaring the taxpayer’s application for default judgment an irregular step, and ordering the taxpayer to pay the costs of that application.

The judgment provides authoritative clarity on the interpretation of Rule 56(1) of the Tax Court Rules and resolves conflicting approaches in the Tax Court. It establishes that compliance with a Rule 56(1) notice cures the procedural default without the need for a condonation application, thereby promoting procedural certainty and efficiency in tax litigation. It also affirms that certain procedural orders of the Tax Court are appealable where the interests of justice so require.