SARS gets bloody nose with tobacco CCTV camera interdict

16 May 2024

The Gauteng High Court has ruled against the installation by the SA Revenue Service of video cameras to monitor tobacco warehouses.

The Gauteng High Court has bloodied the SA Revenue Service’s nose for too hastily implementing regulations to install CCTV cameras in tobacco customs warehouses.

In December 2023 the Gauteng High Court handed SARS a significant victory in its ongoing attempts to plug fiscal gaps due to the illicit tobacco trade by installing cameras in warehouses to fulfil new licensing requirements.

The new licence conditions compel registered licensees who operate premises for the manufacture and storage of tobacco products to allow SARS to continually monitor activities and bonded goods in certain areas with CCTV equipment.

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

In that instance, Judge Jacques Minnaar found that SARS had every right to implement “Rule 19.09” promulgated under the Customs and Excise Act regardless of the outcome of a judicial review application launched in 2022.

This week, on 15 May, in the same court, Judge Linda Retief granted interim relief in the matter brought by the Fair-Trade Independent Tobacco Association (Fita) alongside six of its members to halt the implementation of Rule 19-09.

In its main application, Fita contended that the introduction of the rule was unconstitutional and stood to be set aside, alternatively declared unconstitutional.

The second application was launched by Bozza Tobacco (Pty) Ltd together with five other independent licensees in terms of the Customs Act [collectively, Bozza applicants].

The Bozza applicants sought to intervene in the main application and also wanted the court to offer interim relief from the implementation of the CCTV rule.

Broader package

SARS argued that the rule was introduced as part of “a broader package of initiatives to address illicit trade of tobacco products, which in turn results in rampant tax evasion in the tobacco industry, and to foster tax compliance”.

In February 2023, SARS commenced with two installations at British American Tobacco South Africa and Gold Leaf, two of the largest tobacco product manufacturers in South Africa.

The regulation also made provision for “transitional arrangements in respect of licence holders on the effective date of the rules”.

Retief said it was “significant to appreciate” that none of the comparable countries referred to by SARS in the document justifying the implementation of the impugned rule “are countries founded on democratic values, nor do they appreciate the supremacy of the Constitution like South Africa”.

The question that arose with the granting of interim relief, Retief added, was whether the tobacco companies “substantively possess a prima facie right which requires interim protection against the discharge and/or implementation of the impugned decision”.

She added that SARS’ contention that the CCTV cameras would only be monitoring the pre-identified areas of a licenced tobacco product warehouse on implementation “is factually not correct having regard to the notice of implementation”.

Furthermore, no guidelines existed for SARS in the implementation stage of the rule.

The court sought to “exercise its discretion by striking or finding a balance when considering what is in the interest of justice”, said Retief.

Read more in Daily Maverick: As 2024 Budget shows, SA’s legal cigarette market continues to haemorrhage

Factors considered were that SARS was requested to provide an undertaking that it was aware of the main application, that the applicants complied with section 96 by first requesting a reduction of time before the institution of legal proceedings.

The fact that the Fita applicants, as far back as 27 July 2022 – “a time before the promulgation of the impugned rule” – had indicated that they would challenge the rule if promulgated, spoke to “the foreseeability of legal action and the success with the interim relief too is a factor to be weighed”.

Retief ruled that the Fita applicants’ non-compliance with the periods provided for in terms of section 96 of the Customs and Excise Act 91 of 1964 be condoned.

Furthermore, pending the final determination of the application, SARS was restrained from implementing the rule.

SARS was also ordered to pay costs. DM

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