SARS Secures Victory in High Court Over Company's Detained Goods Worth Over R3m

In a recent high-profile case, the South African Revenue Service (SARS) emerged victorious after the Western Cape High Court denied the request of Karino Homeland Distribution to release part of its stock detained by SARS. The company, which specializes in importing luxury liquor brands, was held accountable for an unverified consignment allegedly exported to Mozambique in December 2022, which subsequently led to SARS imposing a lien over the company's goods valued at R10m.

Karino Homeland Distribution had sought an interdict to compel SARS to reduce the lien to an amount just sufficient as security for the debt, which was above R3m, and to release some goods for the company to continue trading and resolve its indebtedness to SARS. However, the court, presided over by Judge James Lekhuleni, dismissed the application including with costs, emphasizing the legal obligations of the company to provide proof of export and the authority of SARS to detain goods in compliance with the Customs and Excise Act.

The company imported a shipment of alcohol from Namibia on December 20, 2022, which was supposed to be in transit to Mozambique. Given that the consignment wasn't intended for local sale or consumption its duties and VAT were deferred, pending proof of its export. SARS' inquiries into the shipment's location and subsequent emails were met with evasion from Karino, which ultimately failed to produce satisfactory proof of export.

SARS, suspecting that Karino had diverted the stock for local consumption, thus avoiding the due taxes, made its move to demand the owed duties and VAT in a letter of demand issued in June, followed by the detention of the company’s complete stock of goods to ensure debt recovery. By the end of July, when Karino admitted its liability given its inability to prove the export, SARS rejected the proposal to settle the debt in installments, prioritizing the enforcement of tax law and leaving the company to seek legal redress.

Judge Lekhuleni's ruling focused on the principle of tax compliance, holding that the detained goods served as collateral until the debt was paid in full, duly upholding section 114 of the Customs and Excise Act. He noted the disastrous impact on Karino's trading ability but underscored the importance of fulfilling tax obligations.

The case serves as a stern reminder to companies regarding the importance of maintaining transparent and accurate records, especially in cross-border transactions, and the robust powers of SARS to enforce tax laws and ensure revenue protection. The upholding of the lien over Karino's goods sends a clear message about the consequences of failing to comply with tax regulations and the seriousness with which SARS pursues tax liabilities.