The South African Revenue Service (SARS) may search any third parties on the premises identified in a warrant and seize a third party’s property suspected of being relevant to a taxpayer who is under investigation for non-compliance.
This was the finding of the Supreme Court of Appeal (SCA) when it dismissed an appeal by Kapeel Bechan, from whose vehicle was items were seized during a search-and-seizure operation two years ago. Bechan is the sole director of the second appellant, Bechan Consulting (Pty) Ltd.
In March 2022, SARS obtained a warrant, in terms of the Tax Administration Act (TAA), to search the premises of Bullion Star, a gold refinery in Rivonia. The High Court issued the warrant because there was reason to believe that Bullion Star had committed various tax offences.
The warrant also authorised SARS officials “to open or cause to be opened or remove and open, anything which the officials suspect to be relevant material of Bullion Star”.
The search-and-operation at Bullion Star was among several similar operations carried out at the business premises and homes of individuals in the gold and banking sectors as part of SARS’s investigations and audits into illicit financial flows and trade in the gold, alcohol, clothing, cigarette, and tobacco sectors.
Read: SARS searches homes of employees in the gold and banking sectors
In February this year, Bullion Star obtained a High Court order setting aside the warrant. SARS is considering an appeal against that order.
The SCA said the setting aside of the warrant was irrelevant to Bechan’s appeal. The SCA decides whether the judgment appealed from is right or wrong according to the facts in existence at the time it was given and not according to new circumstances that came into existence afterwards.
Items placed in vehicles on the premises
SARS’s version of the events is that its officials arrived at Bullion Star’s premises at about 11.25am but were granted access at about 11.50am. While SARS officials were waiting at the gate, they saw people removing items from the building and placing them in vehicles.
Upon entering the premises, SARS officials noticed a Toyota Fortuner parked on the premises. They saw numerous files, notebooks, and electronic equipment inside the vehicle.
Upon being informed that Bechan owned the Fortuner, SARS officials asked him to unlock it so they could search for material relevant to Bullion Star.
When Bechan indicated that he could not find the vehicle’s keys, SARS officials obtained the services of a locksmith to unlock the Fortuner and other vehicles on the premises. On opening it, they invited Bechan to participate in and be present during the search.
SARS compiled inventories of the items found in the Fortuner. These included 10 laptop computers, four cellphones, and various financial documents pertaining to Bullion Star.
In their Notice of Motion, the appellants claimed the return of only two laptops and two cellphones. Despite the exchange of numerous letters in which SARS tendered the return of the seized items on proof of ownership, the appellants disavowed any knowledge of the other laptops and cellphones.
Attempt to have the items returned
In April 2022, the appellants applied to the High Court in Pretoria for the return of items listed in paragraph 2 of their Notice of Motion by way of the spoliation remedy.
The appellants contended that:
- SARS had unlawfully seized their property of which they were in peaceful and undisturbed possession;
- the seized property was not found on the premises but was stored in the Fortuner, which was parked in a general carpark outside the premises; and
- the scope of the warrant was limited to Bullion Star’s property for the specified period of assessment and did not extend to their property.
SARS opposed the application. Its core defence was that it did not unlawfully dispossess the appellants of the items in question, because it had acted in accordance with the terms of a validly issued warrant under section 60 of the TAA.
It had returned some items to the appellants but was unwilling to return the two laptops and two cellphones because, without access to their passwords, it was unable to determine whether they contained material relevant to Bullion Star.
The High Court dismissed the application, as well as the application for leave to appeal against its dismissal. The appellants subsequently applied to the SCA for leave to appeal, which was granted.
Any relevant material can be seized
In its decision, the SCA considered the sections of the TAA pertaining to SARS’s search-and-seizure powers.
Section 59(1) provides that: “A senior SARS official may, if necessary or relevant to administer a tax Act, authorise an application for a warrant under which SARS may enter a premises where relevant material is kept, to search the premises and any person present on the premises and seize relevant material.”
Section 60(1)(b) empowers a judge or magistrate to issue the warrant referred to in section 59(1) if satisfied there are reasonable grounds to believe that relevant material likely to be found on the premises specified in the application may provide evidence of the failure to comply or the commission of an offence. (SCA’s emphasis.)
“Properly construed, these provisions are location- and not taxpayer-specific. They contemplate that persons other than the taxpayer may be present on the premises identified in the warrant and in possession of material relevant to the taxpayer,” said Acting Judge of Appeal Fayeeza Kathree-Setiloane, who wrote the judgment.
The phrase “to search the premises and any persons present on the premises and seize relevant materials” in section 59(1) clearly indicates that SARS officials may, on the authority of a warrant, search the taxpayer, as well as any third parties on the premises, and seize any relevant material in their possession.
“It is immaterial that the seized items are not in the possession of the taxpayer when seized. If they constitute relevant material as defined, they may be seized from a third party who is on the premises,” Kathree-Setiloane AJA said.
Section 61(3) of the TAA does not limit the execution of a warrant to the business of the taxpayer. It contemplates that in executing a warrant, SARS officials may search anything on the premises identified in the warrant, if they suspect that it contains relevant material. “This is clear from the ordinary grammatical meaning of the word ‘anything’, which is used in section 61(3)(a). This word is broad enough to include a search of vehicles parked on the premises identified in the warrant.”
Mere suspicion is sufficient
The appellants contended that the execution of the warrant was unlawful because the SARS officials did not have reasonable and probable cause to search the Fortuner.
But the SCA disagreed. On the objective facts, SARS officials had reasonable cause to suspect that the Fortuner contained material relevant to Bullion Star. They saw files, notebooks, and electrical equipment inside the Fortuner before searching it. In addition, while waiting to gain access to the premises, they saw items being removed from the building and being placed in vehicles parked on the premises.
The appellants submitted that SARS officials had to know with certainty, before searching the Fortuner, that it contained material relevant to Bullion Star.
The SCA said the lack of certainty about the relevance of the material did not mean the SARS officials did not have probable cause to search the vehicle. In terms of section 61(3)(a) of the TAA, nothing more than a suspicion that the Fortuner contained material relevant to the taxpayer was required.
“Raising the threshold for the execution of search-and-seizure warrants, as the appellants would have it, would impact negatively on their efficacy in bringing tax offenders to book. As investigation tools, search-and-seizure warrants play a vital role in achieving the core objective of the TAA, which is to ensure the effective and efficient collection of tax,” Kathree-Setiloane AJA said.
The SCA dismissed the application with costs.
