Mohammed Amin Yusuf Shaikh v Standard Bank of SA Limited and South African Revenue Services

Shaikh was a manager of Nexor 188 CC trading as Classic Distributing Company, a wholesale shoe business. In January 2004, SARS officials conducted a search at Classic's premises and discovered that the company had underdeclared the value of imported shoes by submitting false invoices reflecting lower values. This resulted in underpayment of customs duty and VAT. Classic failed to pay the difference demanded by SARS on 16 February 2004. SARS then turned to Shaikh personally under section 103 of the Customs and Excise Act 91 of 1964, which imposes vicarious liability on managers. When Shaikh also failed to pay, SARS issued two notices (on 28 March 2006 and 8 May 2006) under section 114A of the Customs Act appointing Standard Bank (where Shaikh held an account) as his agent, instructing the bank to pay amounts totaling R1,245,724.33. The bank complied and paid R699,920 and R539,993.29 respectively. Shaikh challenged the validity of these notices, arguing they were ultra vires because they referenced only section 114A of the Customs Act but sought to recover VAT, which he contended could only be recovered under section 47 of the VAT Act 89 of 1991.

• Whether SARS was entitled to recover VAT through an agent under a notice that referred only to section 114A of the Customs and Excise Act 91 of 1964 without also referring to section 47 of the VAT Act 89 of 1991
• Whether the erroneous reference to a statutory provision or failure to refer to the applicable section renders a notice for recovery of VAT by SARS invalid
• Whether section 13(6) of the VAT Act incorporates section 114A of the Customs Act
• Whether Shaikh incurred liability for VAT under section 103 of the Customs Act

The appeal was dismissed with costs. The decision of Lopes AJ in the Durban High Court dismissing the two points in limine raised by the appellant was upheld.

Where an empowering statute does not require that the provision in terms of which a power is exercised be expressly specified, the decision-maker need not mention it. Provided that the enabling statute grants the power sought to be exercised, the fact that the decision-maker mentions the wrong provision or omits to mention the correct provision does not invalidate the legislative or administrative act, as long as authority for the action exists and the conditions for its exercise have been observed. In the context of tax recovery, SARS is not required to cite section 47 of the VAT Act in a notice appointing an agent to recover VAT, where such authority clearly exists under that section, even if the notice only references section 114A of the Customs and Excise Act.

The court noted that the appellant's counsel had conceded that there would have been no problem if the Commissioner had not mentioned any statutory provisions in the notices at all, and that under those circumstances the agent would have been obliged to pay. This concession highlighted the purely technical nature of the appellant's objection. The court also observed that the reference to section 114A was in order insofar as SARS also sought to collect customs duty which arose under the Customs Act, and that the appellant did not challenge the validity of the notices in this respect.

This case establishes an important principle in South African tax and administrative law that technical errors in citing statutory provisions do not invalidate administrative actions where the authority to take such actions clearly exists. The judgment reinforces the principle of substance over form in administrative law, particularly in the context of tax collection. It clarifies the interaction between the Customs and Excise Act and the VAT Act, confirming that SARS has flexible mechanisms to recover tax debts and that procedural technicalities regarding citation of provisions will not defeat valid exercises of statutory power. The case is significant for tax practitioners and administrators as it provides certainty that recovery notices will not be invalidated on purely technical grounds where the underlying authority exists and has been properly exercised.