Linda Shoes (Pvt) Ltd v Zimbabwe Revenue Authority

### Preamble
1
HH 356-21
FA 06/20
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LINDA SHOES (PVT) LTD

versus

ZIMBABWE REVENUE AUTHORITY

FISCAL APPEAL COURT OF ZIMBABWE

ZIYAMBI AJ

HARARE, 6 April 2021 & 8 July 2021

Preliminary Issue

Adv R Mabwe & E. T Moyo, for the appellant

Adv T Magwaliba & K Renza, for the respondent

ZIYAMBI AJ:

[1] At the commencement of the hearing of this appeal, Mr Magwaliba advised the Court that the parties had agreed to request a determination on the preliminary issue, raised in the issues for determination in the pre-trial hearing minute filed by the parties in this matter- which is, whether there is before the Court a valid appeal in respect of which the Court can assume jurisdiction. The parties agreed that a determination of the preliminary point would be dispositive of the appeal.

[2] Briefly, the relevant facts forming the background of the matter are as follows.  On 12 March 2020 the respondent’s Commissioner wrote to the appellant advising it of its value added tax liability.  The letter, headed ASSESSMENT NO: VAT, read in its main part:

“Dear Madam

Value Added Tax- BUSINESS PARTNER NUMBER: 200042216.

Please be advised that your value added tax liability is ZWL12 302 838. 43. This amount should be paid forthwith…”

The appellant, a company registered according to the laws of Zimbabwe, was in the business of making and supplying shoes to local markets. It initially carried on trade as a shoe retailer but later decided to concentrate on manufacturing and retail operations.  To house its shoe manufacturing operations, it purchased land on which it built suitable premises which were registered in its name.    In or about March 2020, the appellant sold the said premises to Econet Group Pension Fund for the sum of $97 150 000.00. The appellant duly paid capital gains tax on the sale.  However, the respondent determined that the transaction was also subject to VAT and, upon receipt of the letter quoted above, the appellant made payment of the full amount, allegedly under protest, and then lodged with the respondent a letter of objection. The letter, dated 25 March 2020, read in part:

“Pursuant to the provisions of section 32 of the Value Added Tax Act (VAT Act)

[Chapter 23:12] we hereby lodge an objection to the matters and assessments raised, the details of which are contained herein.”

There followed two objections by the appellant and a prayer that the objections be allowed and the assessment for VAT be set aside. The objections having been disallowed by the Commissioner, the appellant filed this appeal.

The respondent’s submissions

[3] Mr Magwaliba submitted that the invalidity of the appeal stems from the fact that no assessment was issued by the respondent which can be appealed against in terms of s 32(1)(b) of the Value Added Tax Act [Chapter 23:12]. The letter of 12 March 2020 does not meet the mandatory criteria set out in terms of the law as an assessment. What constitutes an assessment is settled and the appellant is aware of what an assessment should be since it attached a valid Capital Gains Tax assessment in respect of the same transaction (dated 12 March 2020) to its own appeal papers.  In raising the preliminary point, the respondent relied on judgments of this court which make it quite clear that for a right of appeal to accrue, there must be a valid notice of assessment in existence. For example, in Barclays of Zimbabwe Ltd v ZIMRA 2004 (2) ZLR 151 at 154A-155C, the point was made clear that for a valid objection to be noted, there must be a valid assessment in existence or some other decision as may be specified in the Act. Accordingly, no appeal can lie against the respondent on any other basis except as specified in the Act.

The appellant’s submissions

[4] The appellant’s submissions, as I understand them, are as follows:

The matter is resolved on the principle followed in Muchini v Adams which is, that anything done contrary to statute is void.  The letter from the Commissioner has the words “assessment no.” written on it and is an assessment. It is followed by Annexure D to the Notice of Appeal which is a letter of objection dated 25 March 2020 and Annexure E which is the Commissioner’s response to the objection dated 17 August 2020. The respondent concedes it issued an assessment which did not comply with s 31(5) of the VAT Act yet, notwithstanding such non-compliance, no remedy was proffered for the wrong committed by the respondent. The VAT assessment was done pursuant to s 31.  In terms of s 31(4), the Commissioner estimates the amount which the taxpayer is liable to pay. The letter under mention stipulates that amount and that it is to be paid forthwith.  In furnishing the assessment the respondent forgot to comply with s 31(5), more specifically, the document failed to specify the right to appeal and the basis of assessment. The respondent has received payment in respect of an invalid assessment.  Payment has not been returned. The notice of assessment was done in contravention of s 31(5).  Once that is conceded, any subsequent action is illegal. The respondent concedes it made an assessment which is illegal and ought not to be allowed to benefit from its own wrong. The court should not assist the respondent in furthering an illegality

[5] The Fiscal Appeal Court is a creature of statute.  It is established by s 3 of the Fiscal Appeal Court Act (“the Act”). It has jurisdiction to hear appeals “in terms of this Act”. These are appeals from decisions of the Commissioner as provided in ss13 and 18 of the Act. Section 18 deals with appeals relating to customs and excise and is not relevant in this enquiry. Section 13 provides:

“13 Appeals from decisions of Commissioner

(1) Any person who is dissatisfied with a decision of a Commissioner given in terms of a tax Act may appeal to the Court against that decision.”

I turn to examine whether the appeal is against a decision by the Commissioner given in terms of a tax Act. A tax Act is defined in s12 of the Act as:

“the Value Added Tax Act [Chapter 23:12] or the Stamp Duties Act [Chapter 23:09], as the case may be”.

We are here concerned with the Value Added Tax Act (“the VAT Act”). Decisions and assessments by the Commissioner given in terms of the VAT Act are specified in s 32(1)(a) and (b) of that Act set out below. All decisions are governed by subs 1(a), (c) and (d) and all assessments by subs (1) (b). Paragraph (b) relates exclusively to ‘any assessment made upon him under sections thirty-one, sixty-six or sixty-seven’.  It is common cause that the subject of the dispute is not a decision in terms of subs (1) (a), (c) and (d) but an ‘assessment’ as described in subs (1) (b) namely, one made in terms of s31 of the VAT Act. s32 of the VAT Act provides as follows:

“32 Objections to certain decisions or assessments

(1) Any person who is dissatisfied with—

(a) any decision given in writing by the Commissioner—

(i) in terms of subsection (7) of section twenty-three notifying that person of the Commissioner’s refusal to register that person in terms of this Act; or

(ii) in terms of subsections (6) or (7) of section twenty-four notifying that person of the Commissioner’s decision to cancel any registration of that person in terms of this Act or of the Commissioner’s refusal to cancel such registration; or

(iii) in terms of subsection (8) of section forty-four of the Commissioner’s refusal to make a refund;

or

(b) any assessment made upon him under sections thirty-one, sixty-six or sixty-seven; or

(c) any direction or supplementary direction made by the Commissioner and served on that person in terms of subsections (3) or (4) of section fifty-two;

(d) any decision of the Commissioner implementing or interpreting regulations made under section 78 in connection with fiscalised electronic registers, and any assessments of amounts of tax due arising from the operation of such registers;

may lodge an objection thereto with the Commissioner…” (Emphasis provided)

Assessments made under s31

[6] It is also common cause that ss 66 and 67 are irrelevant to this enquiry. The dispute centres on whether or not the assessments are ‘made under s 31’. The relevant provisions of s 31 are set out hereunder.

“31 Assessments

(1) ...

(2) ...

(3) Where—

(a) any person fails to furnish any return as required by sections twenty-eight, twenty-nine or thirty or fails to furnish any declaration as required by section thirteen; or

(b) the Commissioner is not satisfied with any return or declaration which any person is required to furnish under a section referred to in paragraph (a); or

(c) the Commissioner has reason to believe that any person has become liable for the payment of any amount of tax but has not paid such amount; or

(d)…

(e)...

The Commissioner may make an assessment of the amount of tax payable by the person liable for the payment of such amount of tax, and the amount of tax so assessed shall be paid by the person concerned to the Commissioner.

(4) In making such assessment the Commissioner may estimate the amount upon which the tax is payable

(5) The Commissioner shall give the person concerned a written notice of such assessment, stating the amount upon which tax is payable, the amount of tax payable, the amount of any additional tax payable in terms of section sixty-six and the tax period, if any, in relation to which the assessment is made, and—

(a) where the assessment is made on a seller referred to in subparagraph (i) of paragraph (b) of subsection (2), send a copy of that notice of assessment to the owner referred to in that subsection; or

(b) where the assessment is made on an owner referred to in subparagraph (ii) of paragraph (b) of subsection (2), send a copy of that notice of assessment to the seller referred to in that subsection.

(6) The Commissioner shall, in the notice of assessment referred to in subsection (5), give notice to the person upon whom it has been made that any objection to such assessment shall be lodged or be sent so as to reach the Commissioner within thirty days after the date of such notice.” (Italics for emphasis)

[7] Section 31 sets out the terms on which the Commissioner may make an assessment of the tax payable. Subsection (4) allows the Commissioner to estimate the tax payable and subs (5) requires the Commissioner to give to the taxpayer concerned a written notice stating the following:

the amount upon which tax is payable,

the amount of tax payable,

the amount of any additional tax payable in terms of section sixty-six and

the tax period, if any, in relation to which the assessment is made.

In addition, subs (6) requires the Commissioner to, in the notice of assessment referred to in subsection (5), give notice to the person upon whom it has been made that any objection to such assessment shall be lodged or be sent so as to reach the Commissioner within thirty days after the date of such notice. The requirements of subs (5) and (6) are mandatory. They were not complied with.  What the appellant received was a letter which does not comply with the requirements of s 31.  Because of the non-compliance, the letter in question was not an assessment in terms of s 31 of the VAT Act.  The decision communicated to the appellant was not a decision in terms of the VAT Act but rather a decision contrary to the terms of the VAT Act.

The right of appeal

[8] Since the decision sought to be appealed against is not ‘a decision of a Commissioner given in terms of a tax Act’, the appellant does not fall within the class of persons on whom a right of appeal is conferred by s 13 of the Fiscal Court of Appeal Act. That being so, this court has no jurisdiction to entertain the appeal.

[9] In addition to the above, because subs (5) and (6) of s 31 of the VAT Act were not complied with there could be no valid objection in terms of s 32(1) which only allows for objections to assessments made under s 31. It would have been prudent for the appellant to await the issue of an assessment and thereafter proceed in terms of s 32 to lodge an objection.  The action of the appellant in lodging an objection to the letter was premature.  As a result, the appeal which was lodged on the basis of an objection to a non- assessment was also premature.

[10] Accordingly, the preliminary point succeeds.

This Court cannot assume jurisdiction to determine this appeal and it is hereby struck off the roll with costs.

Scanlen & Holderness, appellant’s legal practitioners

ZIMRA Legal Services, respondent’s legal practitioners