Background

The applicants operated fuel facilities in Gauteng and Limpopo. The South African Revenue Service (SARS) suspected the applicants of engaging in illegal fuel blending activities involving the mixing of kerosene with diesel, and the sale thereof to the public. In principle, this practice is considered illegal because kerosene effectively attracts less tax than diesel, and by blending it with diesel and selling the mixture as “diesel”, businesses profit while not properly accounting for the taxes.

SARS obtained search warrants to search the premises under section 88 of the Customs and Excise Act 91 of 1964 (Customs and Excise Act). These warrants allowed SARS officials to inspect the sites, seize records and equipment, and test fuel samples to confirm the alleged mixing. During the inspections, SARS detained multiple fuel storage tanks, tanker vehicles, laboratory equipment and electronic devices.

The search revealed several indications of illegal fuel blending including the following:

• Laboratory equipment, including test kits for detecting chemical markers added to kerosene. The presence of these kits suggested that the applicants were removing the chemical markers from kerosene to disguise it as diesel.
• A filtration system using sand and activated charcoal, commonly used to remove markers from kerosene. The system also included pumps and flowmeters, indicating large-scale blending operations. Field and laboratory tests showed that samples taken from storage tanks contained kerosene without its regulatory chemical markers, suggesting that blending and adulteration had occurred.
• Tests on fuel samples from tanks and tanker vehicles revealed the presence of kerosene mixed with diesel but without the expected chemical markers, a clear indication of tampering to avoid detection and evade fuel taxes.

During the investigation, access to these locations became a major point of contention.

SARS placed security personnel at the entrances of the facilities, restricting entry to essential personnel only. This measure prevented unrestricted access by the applicants’ employees and representatives, particularly concerning the storage tanks and processing areas.

While SARS did not entirely prevent the applicants’ employees from entering, they limited access strictly to instances deemed necessary. SARS argued that unrestricted entry would allow tampering with evidence or interference with the detained items, such as the adulterated fuel tanks and laboratory equipment.

The applicants applied to the High Court to have access restored.

Issues before the court

Preliminary/procedural issue

SARS argued that the applicants failed to comply with section 96 of the Customs and Excise Act, which requires advance notice before initiating legal proceedings. The applicants had sent notice only one hour before seeking court action, which SARS deemed inadequate.

Main issue

The applicants sought a court order on the grounds of spoliation, claiming that SARS had unlawfully deprived them of their peaceful possession of the premises. They argued that Inspacial Properties, as the owner of the premises, had a lawful right to access, and Alliance Fuel claimed a right to access based on its operational presence at the sites.

The applicants argued that section 88 of the Customs and Excise Act only permits SARS to detain movable goods – such as the fuel tanks, laboratory equipment, and vehicles – but does not authorise it to effectively detain immovable property by restricting access to the entire premises.

The applicants contended that the warrants did not expressly authorise SARS to block access to the premises. They insisted that SARS was only entitled to remove detained goods from the premises and that the blocking of general access was both beyond the scope of the warrants and unauthorised by law.

Court’s findings

The court ruled that the applicants’ notice under section 96 was invalid, as it failed to provide the one-month advance period required, or sufficient justification for shorter notice. This failure undermined their legal standing to challenge SARS’ actions. The court nevertheless proceeded to deal with the merits.

The court upheld SARS’ authority to restrict access to the premises. Given the scale of the alleged illegal activities and the interconnected layout of the fuel tanks, restricting access was necessary to prevent tampering with evidence and interference with the detained items.

The court accepted SARS’ argument that, due to the layout and complexity of the operations, detaining only the tanks and equipment without restricting access to the entire premises would have been ineffective. The court found that SARS’ actions aligned with its duty to enforce customs and excise laws and prevent tax evasion.

The court found that the applicants failed to establish a clear right to unrestricted access. The contention that SARS was required to allow complete access was deemed unfounded given the evidence of extensive tampering and adulteration of fuel on-site.

The court therefore dismissed the spoliation application, validating SARS’ right to control access under the circumstances. The applicants were denied unrestricted access, and the controlled access implemented by SARS remained in effect. Costs were reserved pending further considerations.

Comment

Section 88 of the Customs and Excise Act provides that:

• A SARS officer, magistrate or member of the police force may detain any ship, vehicle, plant, material or goods at any place for the purpose of establishing whether it is liable to forfeiture under the act.
• A ship, vehicle, plant, material or goods may be detained where it is found or shall be removed and stored at a place of security determined by the officer, magistrate or member of the police force, at the cost, risk and expense of the owner, importer, exporter, manufacturer or the person in whose possession or on whose premises they are found, as the case may be.
• No person shall remove any ship, vehicle, plant, material or goods from any place where it was detained or from the place of security.

If a ship, vehicle, plant, material or goods is liable to forfeiture under the act the SARS Commissioner may seize it.

From the above, it appears that the section may only be relevant to movable goods as, (i) only ships, vehicles, plants, materials or goods are included; (ii) the common theme appears to be goods that can be removed (illegally) by any person or to a place of security by SARS; and (iii) the relevant goods are differentiated from the premises/place.

However, section 4(12) of the Customs and Excise Act provides that a SARS officer may lock up, seal, mark, fasten or otherwise secure any warehouse, store, room, cabin, place, vessel, appliance, utensil, fitting, vehicle or goods if they have reason to believe that any contravention under the Customs and Excise Act has been or is likely to be committed in respect thereof or in connection therewith.

Whether section 88 is relevant or not, it appears that section 4 gives SARS the powers to lock up and/or seal any place in any event.

What could be interesting is whether a government institution in writing advises a subject of acts taken or to be taken, but using the incorrect section of the relevant legislation, whether administrative justice has been served or complied with in accordance with the Promotion of Administrative Justice Act 3 of 2000. It may be found that use of incorrect legislation can potentially not properly advise the subject of the criteria they are required to meet.