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What is relevant in a record of review?

In a judgment delivered on 17 February 2020, the Gauteng High Court dealt with a matter regarding a “record of review”, and its relevance relating to a review application brought by the Applicant in the matter, Medtronic International (“Medtronic”), on the refusal by the South African Revenue Service’s (“SARS”) refusal to reduce certain interests and penalties imposed on its Value-Added Tax (“VAT”) statement of account.

Medtronic was the victim of large-scale fraud to the value of approximately R460 million and as a result, fell behind with its tax obligations (the payment of VAT in particular). To correct the situation, it approached SARS through a Voluntary Disclosure Programme (“VDP”) application and entered into an agreement with SARS. Generally, the VDP programme does not allow for the reduction in interest due to non-payment of taxes. Medtronic, therefore, applied for the remission of interest in terms of section 39 of the Value-Added Tax Act, No 89 of 1991 (“the VAT Act”). SARS refused this application on the basis that the VDP agreement entered into between the parties was already in effect and, presumably, did not deal with interest.

Medtronic proceeded with review proceedings to overturn that decision, based on various points of law (including the principle of legality). Consequent to the launching of the review application, SARS delivered the record of proceedings (as it is required to do) to enable Medtronic to formulate its review arguments. After considering the record, Medtronic concluded that it does not comply with the requirements of a “record of review”. This was based upon the fact that various documents, such as the main application, internal memoranda, directives, policy documents, records of deliberations, and minutes of meetings, on which SARS based its decision, were not included. SARS claimed legal professional privilege on various documents relating to advice from legal advisors and claimed it was confidential information. Medtronic proceeded with a further legal notice, requiring SARS to dispatch the necessary documents. SARS failed to respond to this notice, as it contended it has complied with the necessary rules and that there was no further need for compliance.

The question arising from this dispute is: What is relevant in the “record of review”?

The court held that where a party requires evidence as to the interpretation of statutory provisions for those responsible for administering the provision, the courts may invoke the so-called Bosch-principle to tip the scales in the favour of those responsible for the administration of the legislation. The principle entails that evidence of a prior and consistent interpretation of a statutory provision by those responsible for the administration of legislation is admissible. In this instance, SARS had decided not to invoke this principle. The court considered the additional records requested by Medtronic and it sided with SARS in that the Bosch-principle was not applicable. Furthermore, the documentation sought would not further the interpretation of the statutory provision on which Medtronic intends to rely in a manner opposed to that which SARS has done. The court considered the documents that SARS had not provided as part of the “record of review” to be irrelevant. Ultimately, the court’s premise was that relevance is not dependent upon the pleaded issues in the initial review application. Relevance remains to be determined by the decision sought to be reviewed.

The take-away from the judgment is that an applicant will not always have full access to all SARS’s internal records as part of a review application. It is, therefore, important to ensure that when review proceedings are lodged, applicants appreciate what constitutes a proper “record of review”.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

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