Z.s. (Private) Limited V Zimbabwe Revenue Authority

### Preamble
Judgment No. SC 165/20
1
Civil Appeal No. SC 91/20
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DISTRIBUTABLE	(168)

Z.S.     (PRIVATE)     LIMITED

v

ZIMBABWE     REVENUE     AUTHORITY

SUPREME COURT OF ZIMBABWE

BEFORE MAVANGIRA JA, BHUNU JA & CHITAKUNYE JA

HARARE:	11 SEPTEMBER 2020

E.T. Moyo, for the appellant

T. Magwaliba, for the respondent

MAVANGIRA J:	This is an appeal against the whole judgment of the Fiscal Appeals Court of Zimbabwe in which the court a quo struck off the roll the appellant’s appeal against the respondent’s decision.

Before us the parties reached agreement on the impropriety of the appeal but failed to reach agreement on the issue of costs. Mr Moyo, for the appellant, was of the view that there should be no order as to costs. Mr Magwaliba, for the respondent, on the other hand, contended that the respondent is entitled to its costs. He submitted that this was so because the respondent’s position has consistently been that the appellant’s remedy was to object to the respondent’s decision and not to appeal to the court a quo as was done by the appellant. Despite the respondent having pointed this out to the appellant, the appellant had persisted with the appeal.

After hearing the submissions by both counsel on the issue of costs, we delivered an ex tempore ruling ordering that each party was to bear its own costs. On 14 September 2020 the appellant’s counsel wrote a letter addressed to the Registrar in the following terms inter alia:

“In giving its ruling on costs the court gave some brief reasons for its decision. May we request that you provide us for our record with the full judgment of the court i.e. with the aforesaid reasons as opposed to just a court order?”

The full reasons for the order on costs now follow.

On 28 April 2016 the appellant wrote to the Commissioner General of the respondent stating inter alia:-

“We refer to your letter dated 23 March 2016 … together with the attached notices of assessments stated above dated 30 March 2016.

In terms of section 32 of the Value Added Tax … we hereby lodge our objection to the matters and assessments raised, the details of which are contained in the body of this letter. …”

On 13 July 2016 the respondent replied:

“I acknowledge receipt of your letter … in which you are objecting to the notices of assessments issued to yourselves.

Your presentations are being considered and you will be advised of the decision in due course.”

The respondent’s decision was communicated to the appellant in its letter dated 30 December 2016, which letter reads:

“Your letter of objection dated 28 April 2016 in which you objected to Value Added Tax assessments quoted above refers.

…

…

3.3 	… I have drawn the conclusion that you offered a service to the principal which should be income earned in the hands of ZSS.

3.4 	You are therefore advised to determine the income that relates to the services you offered to the principals. This should be declared as income against which input tax should arise. Although you incurred expenses that you recovered from the principals. (sic) May I draw your attention to the fact that a supply of a service to the principal was made and Value Added Tax should have been charged.

3.5 	Based on the above comments the grounds of objection are allowed in full. However, VAT is still to be accounted for on the services offered to the principals by ZSS based on the open market value principle in terms of section 3(4) of the VAT Act (Chapter 23:12). You are therefore required to amend all your VAT returns to account for output tax related to such transactions.” (the underlining is mine)

It is clear from a reading of the letter that the appellant’s objection was allowed on all the grounds that it had raised. It is also clear that after allowing the objection on all grounds, the respondent proceeded to make a decision requiring the appellant to account for VAT for services offered and to amend all its VAT returns as directed.

Instead of objecting to this new decision the appellant lodged an appeal with the court a quo. At the hearing before the court a quo the respondent’s counsel raised the preliminary point that the appellant had no right of appeal against the Commissioner General’s directive to adjust the input VAT claimed by incorporating the output tax due from the commission payable to the appellant.

The court a quo upheld the preliminary point taken by the respondent’s counsel and struck the appeal off the roll with each party paying its own costs. It was the appellant’s dissatisfaction with the decision of the court a quo that led it to appeal to this Court.

I do not find it necessary to do an examination of the pertinent statutory provisions that ought to have informed the appellant to object, if it was dissatisfied with the respondent’s decision. This is in view of the fact that after the matter and the relevant provisions were ventilated before us, the appellant’s counsel came round and realised or appreciated that the appeal to the court a quo was not properly noted. It could only be the respondent’s decision on an objection to the second decision, had one been raised, that would have entitled the appellant to approach the court a quo on appeal.

Mr Moyo submitted before us that this Court should not make any order of costs in this matter and cited s 10 of the Fiscal Appeals Court Act, [Chapter 23:05] in support of his contention. He further submitted that whilst the Fiscal Appeals Act applies to the Fiscal Appeals Court, it nevertheless reflects a principle that ought to generally govern matters of this nature.

In response Mr Magwaliba submitted that the cited section is only applicable to the Fiscal Appeals Court. He submitted that no rule provides that this Court cannot award or should be loath to award costs in a tax matter. Furthermore, that the appeal is frivolous as it was persisted with notwithstanding repeated “submissions” from the respondent since 2017 to the effect that the appellant had adopted a wrong procedure. He further submitted that there was no reason for the respondent to incur costs in this matter.

Section 10 of the Fiscal Appeal Court Act provides:

“The Court shall not make any order as to costs unless it is of the opinion that the decision appealed against is grossly unreasonable or that the grounds of appeal therefrom are frivolous; but in either event it may make such order as to costs as it thinks fit.”

It was our view that on the face of it, it appears that the intention of the lawmaker was to avoid burdening litigants in tax matters with costs unless there were issues of frivolity in the decision appealed against or in the grounds of appeal. We also opined that even if s 10 is not directed for application by this Court it is a useful guide that may assist the court. In any case, it is trite that costs are at the discretion of the court. See Wasserman v Ruskin, 1918 AD 63 at 66 where it was held that:

“The rule of law is that all costs unless expressly    enacted are in the discretion of the judge. This discretion must be judicially exercised but it cannot be challenged taken alone and apart from the main order without his permission.”

It was also our observation that the defect in the appellant’s case arose from its failure to raise an objection with the Commissioner in terms of s 32 (1) of the Value Added Tax Act before approaching the Fiscal Appeal Court on appeal.

It was our further view that on a perusal of the record of proceedings and in particular, the respondent’s letter of 30 December 2016, the appellant’s confusion might have arisen from the fact that the respondent made a fresh decision in the process of making a ruling on the initial objection. The appellant should have objected to this fresh decision if dissatisfied or aggrieved by it. It was thus our view that the appellant’s conduct in persisting with the appeal and its grounds of appeal in such circumstances, could not be said to be frivolous.

For the above reasons, in the exercise of our discretion and as pronounced in our ex tempore judgment, we ordered that “Each party shall bear its own costs.”

BHUNU JA               		 I agree

CHITAKUNYE AJA          	I agree

Scanlen and Holderness, appellant’s legal practitioners

Zimbabwe Revenue Authority Legal and Corporate Services Division, for the respondent