Delta Beverages (Private) Limited v Zimbabwe Revenue Authority

The applicant, Delta Beverages (Private) Limited, operated a beer processing plant in Belmont, Bulawayo, which was a licensed premises under s 128 of the Customs and Excise Act. Between 2007 and November 2010, the applicant incurred significant beer losses (10-15% of production) at the bottling and packaging stage, consisting of product spillages, under-filled bottles, and quality rejections. The applicant attributed these losses to deteriorated and antiquated equipment and power outages. During 2008-2009, the applicant experienced critical foreign currency shortages due to hyperinflation and a volatile macro-economic climate, preventing it from purchasing new equipment or spare parts from KHS AG in Germany. At the end of 2008, the applicant obtained funding and conducted extensive repairs and refurbishment of packaging lines in July 2009, reducing losses to an average of 5% by October 2009. In November 2010, a new packaging line was commissioned at a cost of US$16 million, reducing losses to below 2%. The applicant kept the respondent (ZIMRA) informed about the challenges and efforts to reduce losses. On 7 September 2010, ZIMRA demanded US$2,120,368.56 in excise duty (including 100% penalty) for the period February 2009 to July 2010. The applicant challenged this, arguing it was entitled to remission under s 146(2) of the Customs and Excise Act as it had taken every reasonable effort and precaution to prevent losses. ZIMRA denied the remission, stating the applicant had not taken sufficient precautions, had failed to disclose losses properly, and treated them as adjustments to stock in excise returns.

• Whether the applicant took every reasonable effort and precaution to prevent beer losses during the manufacturing process as required by s 146(2) of the Customs and Excise Act [Cap 23:02]
• Whether the applicant was entitled to remission of excise duty on beer losses incurred during the manufacturing process
• Whether the applicant properly disclosed beer losses to ZIMRA in its excise returns
• Whether the matter could be determined on the papers in an application or required oral evidence at trial

The matter was referred to trial. The papers filed would stand as the summons and declaration on the one hand and notice of appearance to defend on the other. The respondent was ordered to file a plea within 10 days of service of the order, after which the matter would proceed in terms of the rules.

Where a dispute involves complex factual issues that cannot be resolved on the papers, particularly where one party has raised specific factual allegations that remain unresponded to by the opposing party, the matter is incapable of resolution without hearing oral evidence and must be referred to trial. In matters involving remission of excise duty under s 146(2) of the Customs and Excise Act, the determination of whether a manufacturer took every reasonable effort and precaution to prevent losses is a factual question that may require oral evidence where material disputes exist.

The court observed that it was unfortunate that the respondent did not seek leave to file further affidavits subsequent to the applicant's answering affidavit in order to respond to the specific details given relating to the respondent's previous involvement and attitude to the applicant's situation. The court noted that the matter, besides involving huge amounts of money, was of such importance that full ventilation must be allowed in order for justice to be done. The court also noted the apparent inconsistency in ZIMRA's position regarding whether the plant was a warehouse or deemed to be a warehouse.

This case illustrates the application of s 146(2) of the Customs and Excise Act [Cap 23:02] regarding remission of excise duty for losses incurred during the manufacturing process. It highlights the requirement that manufacturers must demonstrate they took every reasonable effort and precaution to prevent losses to qualify for duty remission. The case also demonstrates the limits of motion proceedings in resolving complex factual disputes, particularly where significant factual allegations remain unresolved and require oral evidence. The case is significant in the context of customs and excise administration, particularly regarding the treatment of manufacturing losses and the relationship between manufacturers and revenue authorities in disclosing and accounting for such losses.