Court victory for SARS monitoring tobacco warehouses via CCTV cameras

The Gauteng High court has handed the South African Revenue Service (SARS) a significant victory in its ongoing attempts to plug fiscal gaps due to illicit tobacco trade by installing CCTV in warehouses.

SARS and the fiscus loses estimated R8-billion annually due to the illicit trade of tobacco.

The Fair Trade Independent Tobacco Association (FITA), representing 80 percent of licensed cigarette manufacturers in Southern Africa took SARS to court in an attempt to stop the installation of the surveillance.

The judgement was handed down with costs by acting judge Jacques Minnaar on 29 December in the North Gauteng High Court.

In two separate applications, 11 tobacco companies sought to prevent SARS from implementing “Rule 19.09” promulgated under the Customs and Excise Act

The Act requires registered licensees who manufacture or store tobacco products to allow SARS to install CCTV monitoring equipment at licensed customs and excise warehouses operated by tobacco manufacturers.

The new rule was introduced in an attempt to curb the illicit trade of tobacco products which resulted in “a significant tax gap costing SARS and the fiscus approximately R8-billion every year” noted Minnaar.

Stalling

SARS had informed all of the companies concerned of its intention to implement the new rule aimed at accounting for every product manufactured and imported on which duty must be paid.

Warehouses are licensed as custom-control areas which means that a condition for a licence is that SARS officials are granted unrestricted access to install these cameras.

The tobacco companies argued that the new rule is unconstitutional and that it was an unjustified violation of the right to privacy, dignity and property.

While some of the companies had argued that SARS had given undertakings not to proceed pending a review application of the new rule, no such agreement had been made, noted the court.

The review application was launched by FITA applicants in November 2022 and is pending before the court.

“It is clear that SARS at all times that it intended to implement the new rule and in the absence of an undertaking which was expressly sought, this explanation does not bear scrutiny,” said Minnaar.

Not only that, said Minnaar, but one  of the applicants had only applied for and was granted a licence after the rules had  come into effect. The tobacco companies  had been, noted the judge, “fully aware of the new rules when they applied for the licences and agreed to be bound by them”

While the tobacco companies had been aware of the rollout and had received implementation notices they had waited till November 2023 to launch their applications.

Attempts to install cameras in June had been unsuccessful as SARS officials had been barred from entering the premises. This had not been disclosed to the court by the companies in their founding affidavits, Minnaar noted,

“There is no doubt that SARS has never given the impression or created the expectation that it would not implement the rule,” he said.

The companies were all aware of the installation of CCTV cameras at British American Tobacco and Gold Leaf in February 2023 the court said, Because of the delay in launching their application with absent explanation the tobacco companies failed to meet the requirements to interdict SARS. DM