The Commissioner for the South African Revenue Service v Trend Finance (Pty) Limited and Trend Gear Enterprises (Pty) Limited

Trend Finance and Trend Gear Enterprises imported three consignments of shoes from China via Hong Kong for delivery to Pep Stores and Foschini. When the consignments arrived in South Africa, the Controller of Customs refused to release them. Trend made provisional payments totaling R100,000 (first consignment), R300,000 (second consignment), and R600,000 (third consignment) under DA70 forms to secure the release of the goods pending investigations into possible underpayment of customs duty and VAT. The first consignment was released in March 1999 and the other two in August and September 1999. On 29 March 2001, the Controller wrote to Trend demanding underpayment of R363,371.09 and imposing a penalty of R732,903 (later reduced to R695,508) in lieu of forfeiture for the first consignment. The Commissioner alleged that Trend had undervalued the goods by claiming to have purchased them from Textrade at lower prices (US $3.20 and $2.95 per pair) when they had actually been purchased from Kedah at higher prices (US $5 and $4.45 per pair) agreed with Pep. No similar determinations were made in respect of the second and third consignments. Trend brought motion proceedings seeking to set aside the determination and penalty, and to recover all provisional payments.

• Whether Trend had discharged the onus under section 102(4) of the Customs and Excise Act of proving that the proper duty had been paid on the first consignment
• Whether the transaction value determination made by the Commissioner in respect of the first consignment should be set aside
• Whether the Commissioner's power to detain goods or retain security under sections 88(1)(a) and 93(1)(c) of the Customs and Excise Act is subject to a temporal limitation requiring action within a reasonable time
• Whether the Commissioner could be compelled under PAJA to make a determination of transaction value in respect of the second and third consignments
• Whether the provisional payments made in respect of the second and third consignments should be refunded in the absence of a determination by the Commissioner

1. The appeal succeeded only in part regarding the costs order of the court a quo, which was varied. 2. Trend was ordered to pay costs of the oral evidence hearing (with exceptions for 5 November 2002 and apportioned costs for 17-18 May 2004). 3. Otherwise, the Commissioner was ordered to pay Trend's costs in the court a quo. 4. The main appeal was dismissed. 5. Trend was provisionally ordered to pay half the appellant's costs of appeal, including costs of two counsel (subject to further written submissions). 6. Trend's cross-appeal was dismissed with costs, including costs of two counsel. 7. The order directing the Commissioner to repay R300,000 and R600,000 (in respect of the second and third consignments) with interest was upheld. 8. The penalty of R695,508 imposed in lieu of forfeiture remained set aside. 9. The determination of R363,371.09 in respect of the first consignment was upheld.

The power conferred on the Commissioner under section 88(1)(a) of the Customs and Excise Act to detain goods for the purpose of establishing whether they are liable to forfeiture, and the power under section 93(1)(c) to impose conditions (including payment of security) for release of detained goods, are subject to an implied temporal limitation. These powers may only be exercised for a period of time that is reasonable for the investigation contemplated by the Act. Once a reasonable period has elapsed, the Commissioner loses the right to retain either the goods or any security paid to secure their release. Continued retention beyond a reasonable investigation period would constitute arbitrary deprivation of property contrary to section 25 of the Constitution. The Commissioner's power to determine transaction value under section 65(4)(a) is discretionary, not mandatory. There is no duty on the Commissioner to make such a determination. Therefore, the provisions of PAJA dealing with failure to take a decision (sections 6(2)(g), 6(3) and 8(2)) cannot be invoked to compel the Commissioner to make a determination of transaction value. Under section 102(4) of the Customs and Excise Act, the importer bears the onus of proving that proper duty has been paid, and this onus must be discharged on the balance of probabilities having regard to all relevant evidence and commercial probabilities.

The court noted that the Customs and Excise Act is premised on a system of self-action and self-assessment, with the majority of imports occurring without any determination by the Commissioner. The court observed that although the Commissioner performed an administrative action when imposing conditions for release of goods, there may have been a contractual element insofar as Trend was free to accept or reject the conditions imposed. The court acknowledged that finding in favor of the Commissioner necessarily involved finding that Trend attempted to defraud the fiscus, that false documents were produced, and that perjury was committed - inherently unlikely illegal conduct - but held that the probabilities nevertheless favored the Commissioner. The court commented that had SARS investigators been able to show payments beyond those reflected in the Textrade invoices, the case against Trend would have been proved conclusively, but noted that not even criminal law requires conclusive proof. The court recognized the significance of the fact that despite wide investigatory powers under section 4(4)(a), SARS could not trace any payments beyond those claimed by Trend, yet this was insufficient to discharge Trend's onus.

This case establishes important principles regarding the temporal limitations on the exercise of statutory powers by SARS under the Customs and Excise Act. It confirms that the power to detain goods or retain security pending investigation is not unlimited in time and must be exercised within a reasonable period, failing which the right to retain goods or security falls away. This provides important protection for importers against indefinite deprivation of property. The judgment also clarifies the distinction between rights and duties in administrative law, holding that the Commissioner's discretionary power to determine transaction values under section 65(4)(a) cannot be converted into a mandatory duty enforceable under PAJA. The case illustrates the application of section 25 of the Constitution (property rights) to customs matters, reading a temporal limitation into detention powers to prevent arbitrary deprivation. It also demonstrates the high evidentiary burden on importers under section 102(4) to prove proper duty was paid, and shows how courts will assess credibility and commercial probability in customs valuation disputes.