Barnard Labuschagne Incorporated v South African Revenue Service and Another

BLI, a firm of attorneys, was the subject of a tax judgment when SARS filed a certified statement on 15 December 2017 in the High Court under section 172(1) of the Tax Administration Act 28 of 2011 (TAA), recording that BLI owed SARS R804,747. The certified statement was based on BLI's self-assessments for value-added tax, employees' tax, unemployment insurance fund contributions and skills development levies. BLI did not challenge the correctness of its self-assessments; rather, it contended that the certified statement was wrong because BLI had made payments which SARS had failed to appropriate to the relevant assessed taxes. BLI brought an application to rescind the tax judgment. SARS opposed the application on the main ground that a tax judgment taken under sections 172 and 174 of the TAA is not susceptible of rescission. BLI responded that if such tax judgments were not rescindable, sections 172 and 174 were constitutionally invalid. The Minister of Finance was joined as second respondent in view of this alternative constitutional challenge.

• Whether a certified statement filed under section 172 read with section 174 of the Tax Administration Act is in principle susceptible of rescission
• Whether a dispute about alleged payments made in respect of self-assessments falls within the scope of Chapter 9 of the TAA
• Whether sections 172 and 174 of the TAA are constitutionally invalid if tax judgments are not rescindable
• Whether recent High Court judgments correctly applied binding precedent on rescindability of tax judgments

1. Leave to appeal granted. 2. The appeal upheld. 3. The High Court order set aside. 4. The rescission application remitted to the High Court for hearing before a different Judge to determine the merits. 5. Costs incurred to date in the High Court to stand over for determination in the remitted proceedings. 6. Respondents to pay applicant's costs in the applications to the High Court and Supreme Court of Appeal for leave to appeal. 7. Respondents to pay applicant's costs in the Constitutional Court.

A certified statement filed with a court under section 172 read with section 174 of the Tax Administration Act 28 of 2011, which is treated as a civil judgment, is in principle susceptible of rescission under section 36(1)(a) of the Magistrates' Courts Act or under the common law in the High Court. The power of SARS to withdraw or amend certified statements, the 'pay now, argue later' rule, and the fact that certified statements may be filed while objections or appeals are pending do not alter the rescindable character of such tax judgments. While the 'conclusive evidence' provisions in section 170 of the TAA and the dispute resolution procedures in Chapter 9 considerably narrow the scope of bona fide defenses available to taxpayers in rescission proceedings, disputes that do not concern the correctness of assessments or decisions subject to Chapter 9 procedures may be raised in rescission proceedings. A dispute about whether payments have been made to discharge a tax liability is not a matter covered by section 170 or section 105 and may be raised as a bona fide defense in rescission proceedings.

The Court observed that the judgment was initially delivered on 4 March 2022 but was rescinded by the Court of its own accord when it emerged that SARS had filed written submissions of which the Court was unaware, and the final judgment took account of all written submissions. The Court noted that if there are distinguishing features of the customs and excise regime that might affect rescindability, they were not apparent from the judgment in Hamid and it was unnecessary to decide that point. The Court expressed concern about the High Court's adverse remarks about BLI, including criticism based on the erroneous view on rescindability, which informed the decision that the merits should be heard by a different judge on remittal. Rogers AJ noted that in the relatively rare situations where a High Court regards it appropriate to grant declaratory relief on legal questions relating to assessments, the 'unless a High Court otherwise directs' proviso in section 105 may apply. The Court emphasized that its affirmation of Kruger II and Metcash must not be misunderstood - these judgments make clear that the 'conclusive evidence' provisions considerably narrow the scope of bona fide defenses taxpayers can raise.

This case is significant for reaffirming the principle of stare decisis (binding precedent) as a core component of the rule of law in South African constitutional democracy. It corrects a trend in recent High Court judgments that failed to apply binding Constitutional Court and Appellate Division precedent. The judgment clarifies that tax judgments obtained through certified statements under the TAA remain susceptible of rescission, consistent with earlier law under the Income Tax Act and VAT Act. It delineates the scope of disputes that must be pursued through Chapter 9 objection and appeal procedures versus those that may be raised in rescission proceedings. The judgment is important for tax administration, establishing that while taxpayers' rights to challenge assessments are limited by 'conclusive evidence' provisions and Chapter 9 procedures, certain defenses (such as disputes about whether payments were made) remain available through rescission. It reinforces constitutional safeguards against purely administrative collection mechanisms by preserving judicial oversight through rescission.