Shipping lines and other release agents should ensure that the South African Revenue Service (Sars) has officially released the goods being imported before handing them over to the importer or the importer’s representatives.This advice comes from Siphesihle Ngubane, a partner at Shepstone & Wylie, following a recent judgement in the KwaZulu-Natal High Court in an appeals case between MSC and Sars. The case involved a penalty of R521 442 imposed by Sars in lieu of forfeiture. MSC argued that the EDI release notification for the container in question constituted a valid release under the Customs and Excise Act and that Sars had wrongly penalised the company. Initially, MSC lost the case, but they were granted leave to appeal in February 2022 and recently won the appeal, with costs awarded in their favour."It is critical to have strict procedures in place to ensure that all goods stopped by Sars or any other government department are correctly documented, preventing any incorrect or erroneous releases," said Ngubane.He said the MSC vs Sars case had highlighted that if these procedures were not followed, penalties could be imposed, including a forfeiture amount equal to the value of the goods if they had already been released. “This means one will need to plead for mitigation of the forfeiture and penalties, provided good cause can be show n.”In the MSC case, a container from Madagascar on board the MSC Toronto was put on hold in the Navis system, followed by a manual detention by Sars. MSC was required to move the container via a scanner to a customs-licensed depot in Durban for a physical examination. The notice indicated that a decision on the container would be made once certain documents had been received.An MSC employee responsible for handling the detention was on leave at the time, and the detention notice was not uploaded to the MSC system. On the same day, the hold on the Navis system was released. According to Sars, the purpose of this release was to allow the movement of the container to the depot for inspection. However, Sars also issued an EDI notification ref lecting that the container had been released.MSC considered to be in breach of Act Based on this notification, the container left the terminal and was released by MSC to the clearing agent, which Sars deemed illegal. Sars stated that the container had to be physically examined and signalled its intent to declare forfeiture because MSC had released the container to the importer despite a detention notice. MSC argued that it had not had the container searched due to an administrative issue and that a valid release was in place. MSC further maintained that the goods declared were accounted for and that Sars had suffered no loss, thus there was no need to impose a penalty. Nevertheless, Sars considered MSC to be in breach of the Act and imposed penalties of R521 442.According to Ngubane, the extended court case between MSC and Sars highlights the importance of ensuring that those responsible for uploading stops or authorising releases are well-informed about what constitutes a stop and when goods can be released. "There should be more than one person handling stops and releases, and any communications regarding stops should go to a general email address accessible to all relevant persons. This ensures no communication is missed if one person is unavailable, reducing the possibility of mis-releases. Standard operating procedures need to be in place as a double-check before stopped goods are released to ensure compliance," he said.Considerations before litigationWhen asked about what the industry should consider before litigating a matter, Ngubane emphasised the importance of having a strong prospect of success since litigation is costly and time-consuming. "If you are unsuccessful, you will have to pay Sars or the other party’s costs," he explained. "Before heading to court, the industry must ensure it has a full chronological history of the events. This information should be provided to Sars throughout the internal process and must clearly ref lect why, when considering the relevant provisions, the party should not be held liable or why there are mitigating factors allowing Sars to reduce any of the amounts demanded. Sars, in any decisions it makes, must show that it has considered all representations made by the relevant party and provide proper and adequate reasons for its decision."MSC victoriousNgubane noted that MSC had managed to walk away victorious from the appeal due to its ability to provide all this information. "The significance of this ruling is that it showcases that Sars must properly consider all information provided to it in making any decision. Sars must ensure that its decisions are procedurally fair, that all relevant facts are considered, and that irrelevant facts are disregarded. The decision must be impartial and rational, considering the circumstances of the case," he said.He also highlighted the necessity for Sars to provide proper and adequate reasons for its decisions at the time they are made. "Any failure in this regard renders the disputed decision reviewable," Ngubane concluded.
