MAYOR LOGISTICS (PVT) LTD
ZIMBABWE REVENUE AUTHORITY
CONSTITUTIONAL COURT OF ZIMBABWE
HARARE, JULY 11 & 22, 2014
L Uriri, for the applicant
U Sakhe with him A Moyo, for the respondent
MALABA DCJ: In Chambers.
This Urgent Chamber Application was placed before me because the Chief Justice was not available to hear it. The application raised two questions for determination. The first question is whether an interim order suspending the operation of legislation compelling payment by a taxpayer of the amount of tax liable to be paid notwithstanding an appeal to the Fiscal Appeal Court or pending a decision of a court should be granted pending the hearing and determination of the main application challenging the constitutional validity of the legislation by the full bench of the Constitutional Court. The second question is whether an order should be made directing that the main application be heard on an urgent basis.
The facts which gave rise to the questions for determination are these. The applicant is a company incorporated under the laws of Zimbabwe carrying on the business of supplying transport services and selling of fuel. The respondent is an administrative authority established in terms of the Revenue Authority Act [Chapter 23:11]. It is entrusted with the responsibility of assessing taxpayers for tax liability and collecting revenue due to the fiscus in terms of the Value Added Tax Act [Chapter 23:12](“the VAT Act”) and the Income Tax Act [Chapter 23:06] (“the Income Tax Act”).
The applicant has been a registered operator in terms of the VAT Act since October 2010. As from 2010, the applicant has been supplying transport services to and purchasing fuel for sale at its service station from an entity called Sakunda Energy. It has always been aware of its obligation to charge value added tax on the invoices for the transport services supplied to Sakunda Energy. Instead of submitting returns of value added tax based on the invoices on the transport services supplied, the applicant set off the costs of fuel purchased from Sakunda Energy against the invoices for the transport services and submitted returns for value added tax in respect of the balance.
The respondent commenced investigations into the tax affairs of the applicant in October 2013. Upon examination of the applicant’s books of account, the respondent concluded that the applicant had under-declared the value added tax charged on the invoices on transport services supplied to Sakunda Energy, as a result of the setting off of the cost of fuel purchased against the value of the invoices for the transport services. The applicant was advised of the under declaration on 11 December 2013. The respondent was of the view that the value added tax on the invoices, was liable to be paid to the fiscus regardless of the purpose for which transport services were supplied.
On 7 February 2014, the respondent issued the applicant with an assessment of value added tax liability in an amount of US$1 619 161.32 including penalties and interest. According to the respondent, it was what the applicant and Sakunda Energy were doing in their business transactions as revealed by the examination of books of account, which produced evidence of tax evasion.
The applicant was dissatisfied with the tax liability assessment arguing that it did not owe the whole amount of the value added tax assessed to be due and payable. On 27 February 2014, the applicant lodged a formal objection with the Commissioner against the correctness of the assessment in terms of s 32 of the VAT Act. The allegation was that the respondent had adopted a wrong method of assessing the applicant’s tax liability. The respondent was accused of having misunderstood the nature of the applicant’s business operations. Correspondence was exchanged on the matter between the parties between 14 and 17 March 2014. The Commissioner disallowed the objection in respect of the assessment of value added tax liability on 13 May 2014. The applicant noted an appeal to the Fiscal Appeal Court against the correctness of the assessment on 23 May 2014.
On 27 May 2014, the Commissioner reminded the applicant of its continuing obligation to pay the amount of the tax assessed to be due and payable, notwithstanding the noting of the appeal to the Fiscal Appeal Court. On 30 May 2014, the applicant’s tax consultant simply expressed a view to the respondent that it would be prudent to await the outcome of the appeal.
Concurrently with the review of the applicant’s value added tax affairs, the respondent carried out an assessment of the applicant’s income tax liability. The respondent assessed the applicant’s income tax liability to be an amount of US$2 066 652.84 including penalties and interest. On 3 June 2014 it sent to the applicant, a complete tax computation for both value added tax and income tax. The respondent threatened to put in place measures to recover the taxes in terms of s 48 of VAT Act should the applicant fail to pay the money voluntarily. It later appointed three of the applicant’s bankers and Sakunda Energy as agents for the payment of the value added tax assessed to be due and payable.
On 5 June 2014, the applicant filed an application with the Constitutional Court in terms of s 85(1) of the Constitution, challenging the validity of ss 36of the VAT Act and 69(1) of the Income Tax Act. The allegation is that the legislative provisions violated the applicant’s fundamental right of access to the courts enshrined in s 69(3) and the right to administrative justice guaranteed under s 68(1) of the Constitution. The applicant sought, as the relief, a final order declaring ss 36 of the VAT Act and 69(1) of the Income Tax Act to be ultra vires ss 68(1) and 69(3) of the Constitution and therefore void.
Simultaneously with the filing of the main application, the applicant filed the urgent chamber application seeking an order that the main application be heard on an urgent basis. It also sought interim relief in the following terms:
“INTERIM RELIEF GRANTED
- Pending the hearing and finalization of Applicant’s appeal in the Fiscal Appeal Court, Applicant’s obligation to pay value added tax and income tax be and is hereby suspended.
- Respondent be and is hereby ordered to forthwith provide written reasons for its decision to compel payment of value added tax and income tax pending Applicant’s appeal to the Fiscal Appeals Court.”