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IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE: YES
Case number : 118/99
In the matter between :
THE CHAIRMAN OF
THE BOARD
ON TARIFFS AND TRADE Appellant
and
VOLKSWAGEN OF
SOUTH AFRICA
(PTY) LTD First Respondent
DIRECTOR-GENERAL : TRADE
AND
INDUSTRY Second Respondent
CORAM : Smalberger, Nienaber, Harms JJA, Mpati and Mthiyane AJJA
HEARD : 10 November 2000
DELIVERED : 30
November 2000
Summary: Customs and Excise Act 91 of 1964 - repeal of
note 5(vi)(a)(ii) to rebate item 609.17 of Schedule 6 - effect thereof - whether
right to approach the Board on Tariffs and Trade for a recommendation in terms
thereof survived the repeal - s 12(2)(c) of the Interpretation
Act 33 of
1957
JUDGMENT
NIENABER JA/
NIENABER JA :
[1] To the uninitiated the Customs and Excise Act 91
of 1964 (“the Act”) is a labyrinthine piece of legislation. This
case is concerned with one of its many provisions, note 5(vi)(a)(ii) to rebate
item 609.17 of Schedule 6 to the Act (quoted below)
and more particularly with
the aftermath of its repeal.
[2] The first respondent (henceforth referred to
simply as “VW”) is a South African manufacturer and exporter of
motor
vehicles. In terms of Part 2 of Schedule 1 to the Act excise duty is
leviable on motor vehicles manufactured in the Republic of
South Africa.
Section 75(1)(d) of the Act, however, allowed for a rebate or a refund
(depending on the circumstances) on such excise
duty for the purpose of the
Export Incentive Scheme for the Motor Industry (Phase VI). The calculation of
the amount of the rebate
(up to a specified maximum) depends on the extent of
the manufacturer’s foreign currency earnings which would in turn depend
on
the volume of its exports of locally manufactured vehicles and component parts.
VW as a manufacturer was liable for excise duty
but as an exporter it qualified
for the rebate. But because the permitted rebate was subject to a ceiling any
surplus to which it
would otherwise have been entitled would have been of no
value to it. To cater for that situation note 5(vi)(a)(ii) to rebate item
609.17 was enacted. It read:
“ii) A customs and excise manufacturing warehouse may cede any specific amount of foreign currency earnings in respect of motor vehicles exported by such warehouse, as specified in a certificate issued by the Director-General: Trade and Industry, on recommendation of the Board on Tariffs and Trade, to other customs and excise manufacturing warehouses ...”
(For the purpose of the Act VW is defined as a
customs and excise manufacturing warehouse. The Director-General referred to is
the
second respondent and the Board is the appellant, represented by its
chairman. I shall refer to the appellant simply as “the
Board”.)
A cession effected in terms of the note would entitle the cedent warehouse to
whatever consideration it was able
to negotiate for the cession and would
entitle the cessionary warehouse to claim a corresponding rebate on the excise
duty otherwise
payable by it.
[3] This note was deleted in its entirety
with effect from 1 September 1995 when the Phase VI Scheme was replaced by the
new Motor
Industry Development Program.
[4] Prior to the repeal VW had
applied for and was granted a rebate in respect of vehicles manufactured and
exported by it. Likewise
it applied for and was granted certificates permitting
cessions of excess earnings.
[5] VW did not, however, enjoy the full extent
of the rebates to which it was in fact entitled. This came about as follows.
In order
to calculate the amount of the rebates to which a manufacturer was
entitled not only the foreign currency earnings from exports were
taken into account but also the foreign currency usage i e the value of
goods imported by the manufacturer. The latter was set off against the
former. During May 1991 rebate item 609.17 was amended. There was a
long-standing
issue between certain of the manufacturers, of which VW was one,
and the Department of Finance, represented by the Commissioner of
Customs and
Excise (“the Commissioner”) about its effect. It was whether
all royalties and licence fees paid by a local manufacturer to its main
licence holder overseas in respect of vehicles manufactured in
South Africa
under licence should be included in the amount of foreign currency usage or only
such royalties as had “a value
for customs duty purposes”. The less
the amount of royalties and licence fees to be included in the foreign currency
usage,
the greater the amount of foreign currency earnings available for the
purpose of rebate and cession. VW took all reasonable steps
at the time to
ascertain the correct legal position regarding the payment of royalties and the
consequent assessment of foreign currency
earnings. Until 12 June 1996 the
Commissioner continued to insist, notwithstanding the amendment, that all
royalty payments be included in the calculation of foreign exchange usage,
regardless of the dutiability thereof. It was put thus
(and not denied) in a
letter from VW to the Commissioner, dated 12 March 1997:
“2. As you are aware an amendment was made to the notes of Item 609.17 in May 1991, which effectively implied that only royalties with a value for customs purposes should be included in the foreign currency usage for the calculation of the Phase VI rebate.
However, this amendment was not brought to the attention of affected manufacturers and Customs erroneously collected duty where royalty payments had been included in the accounts, irrespective of whether such royalties were properly dutiable in terms of s 67 of the Customs and Excise Act.”
In the result VW made its initial assessments for the purpose of processing its applications for submission to the Board, preparatory to the issue of the requisite certificates by the Director-General, as if the amendment had not been effected. Indeed, as late as 31 August 1995 (the very date of repeal) the Commissioner wrote
“You are informed that the full excise duty payable for the quarter 1 June 1995 to 31 August 1995 must be brought to account in the normal manner.”
This meant in effect that VW’s foreign
currency earnings were reduced, resulting in less excess foreign currency
earnings being
available to it for cession to other warehouses.
[6] In order
to regularise matters in accordance with its own understanding of the true legal
position in the light of the 1991 amendment
VW on 12 March 1997, after the
repeal of the note, wrote to the Commissioner requesting
“permission to extract exports previously included in the quarterly Phase VI accounts of VW and to cede these to Mercedes Benz SA (Pty) Ltd (“MB”) for inclusion in its accounts for the same quarters.”
The letter proceeds:
“6. In order to achieve the maximum rebate in the quarters for which royalties were declared, VW was required to include excessive exports, which would have been ceded to other manufacturers, if the royalty payments were correctly omitted.
7. We therefore propose that, in order to level the playing fields and place VW on the same basis as the other two manufacturers in this regard, the Commissioner grants permission for the relevant accounts to be historically amended in so far as:
7.1 permitting cessions to MB of excess exports which were included in accounts in order to compensate for the royalty payments included therein,
7.2 granting a refund of
duty with regard to accounts in which the maximum rebate was not achieved,
and
7.3 granting time extension in order to amend these accounts from the
date the mistake was made in May 1991, as was permitted for
the other
manufacturers.”
What VW sought was permission to cede, notwithstanding
the repeal of the provision allowing such cession, that part of its foreign
currency earnings which, because of the erroneous view held by the Commissioner,
it was previously obliged to commit to its own account
in order to earn the
maximum permissible rebate instead of having a greater surplus available for
cession.
[7] The Commissioner responded on 3 April 1997 as follows:
“Permission is granted for the cession of excess foreign currency earnings included in the excise accounts of Volkswagen of S.A. (Pty.) Ltd. to Mercedes-Benz of S.A. (Pty.) Ltd. retrospective to May 1991 provided the conditions stipulated in Note 5 (vi)(a) to rebate item 609.17 of Schedule No. 6 to the Customs and Excise Act are complied with and proof is produced that the so-called royalties are in fact not dutiable in terms of the said Act.”
The Commissioner accordingly conceded the
correctness of VW’s standpoint, thereby releasing for ex post facto
cession so much of VW’s foreign currency earnings as had previously been
consigned in the calculation of the excise duty payable.
The amount thus made
available for cession was in the order of some R20 million. Proof that royalties
were in fact not dutiable
in terms of the Act, as stipulated in the letter, was
in due course produced.
[8] In terms of repealed note 5(vi)(a)(ii) such a
cession could, however, only be effected after the issue of a certificate by the
Director-General upon the recommendation of the Board. On 15 April 1997 VW
accordingly approached the Board but on 30 July 1997
the Board resolved not to
make a recommendation “as the BTT [the Board] would be required to execute
powers in terms of legislation
which is no longer applicable”. In its
letter to VW, dated 25 August 1997, it was stated that the Board had
“come to the conclusion that there is no legal premise upon which the Board could perform the actions/powers that they are requested to perform with regard to the permit. The Board would in effect be required to execute powers in terms of ‘legislation’ which is no longer applicable.”
[9] Despite further representations made
by VW to the Board broaching both the correctness and the inconsistency of its
approach,
the Board at its meeting of 10 September 1997 refused to deviate from
its previous stance and reiterated its refusal to support VW’s
application. This decision was conveyed to VW on 25 September 1997.
[10] VW
thereupon launched the current proceedings in the Transvaal Provincial Division
of the High Court against the Board as first
and the Director-General as second
respondent, to review the Board’s refusal to consider VW’s
application on the merits.
No specific relief was sought against the
Director-General who abided the decision of the court and took no further part
in either
the proceedings in the court below or in this court.
[11] The
matter came before Van Dijkhorst J who granted an order in the following
terms:
“1. The decision of the Board on Tariffs and Trade that it was no longer empowered to make recommendations to the Director-General of Trade and Industry in terms of repealed note 5(vi)(a)(ii) to rebate item 609.17 of Schedule 6 to the Customs and Excise Act 91 of 1964 upon the applicant’s application, is set aside.
Each party is to pay its own
costs.”
The appeal comes to this court with leave granted by
it.
[12] The critical issue before this court is whether the repeal of note
5(vi)(a)(ii) disempowered and thereby precluded the Board
from thereafter
considering a recommendation to the Director-General which, as stated earlier,
was a prerequisite for the issue of
a certificate by the latter. The argument
before this court turned in the main on the thrust of s 12(2)(c) of the
Interpretation
Act 33 of 1957 (“the Interpretation Act”) which
provides as follows:
“Where any law repeals any other law, then unless the contrary intention appears, repeal shall not -
(a) ...
(b) ...
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any law so repealed.
(d) ...
(e) ...”
This provision, like
many others in the Interpretation Act, is in conformity with the common law (cf
Bartman v Dempers 1952 (2) SA 577 (A) at 582B-C). Repeal legislation is
for the most part directed at matters future rather than matters past.
Pre-repeal
business must generally speaking be dealt with, unless a contrary
legislative intention is apparent, as if no repeal had been enacted
(cf
National Iranian Tanker Co v MV Pericles GC 1995 (1) SA 475 (A) at
483I-J; Minister of Safety and Security v Molutsi and Another 1996 (4)
SA 72 (A) at 88D; 97G-98B; Unitrans Passenger (Pty) Ltd t/a Greyhound
Coach Lines v Chairman, National Transport Commission, and Others 1999 (4)
SA 1 (SCA) at 7A-E). This, incidentally, was also the Commissioner’s own
approach. On the day before the repeal
took effect, 31 August 1995, he issued,
in response to prior representations made to him on behalf of VW, an instruction
to the effect
that all royalties had to be taken into account, thereby reducing
the amount of foreign currency earnings accessible for cession
during the
preceding period.
[13] The Interpretation Act speaks of “accrue”
and of “acquire”. Different words in a statute when juxtaposed
would normally connote different concepts. “Accrue” has been held
to bear a narrower meaning than “acquire”
(Mahomed NO v Union
Government (Minister of Interior) 1911 AD 1 at 11). A right
“accrues” when all the conditions for its existence in relation to
the particular beneficiary
are met (cf Transnet Ltd v Ngcezula
1995 (3) SA 538 (A) at 551E-F; 552E-G); a right is “acquired” when
all the conditions for its existence are met and the
particular beneficiary in
addition avails himself of the statutory provision concerned by some individual
action or effort on his
part (Mahomed NO v Union Government, supra, at
9-11; Rustenburg Platinum Mines Ltd v Motletlegi NO and Another 1954 (2)
SA 597 (T) at 603C-H; Dys v Dys 1979 (3) SA 1170 (O) at 1173H-1175A);
Minister of Public Works v Haffejee NO 1996 (3) SA 745 (A) at 754D-G).
The section envisages a prior entitlement which was specific and not general,
actual and not abstract,
live and not hypothetical.
[14] What VW sought to
implement was the right to cede its foreign exchange currency earnings to
another warehouse. That right was
implicit in note 5(vi)(a)(ii). Also implicit
was the ancillary right to approach the Board for its recommendation upon which
the
implementation of the right to cede depended. The Board’s
recommendation was as such not a “purely procedural provision”
(cf
Minister of Public Works v Haffejee NO, supra, at 752A-753C; Minister
of Safety and Security v Molutsi and Another, supra, at 90G-H). It was at
the level of this ancillary right to have the matter considered by the Board
that VW’s quest for permission
to cede its surplus foreign exchange
earnings was impeded; and it is with that right and the Board’s refusal to
give effect
to it that this case is primarily concerned.
[15] The initial
question, then, is whether that right, in the unique circumstances of this case,
accrued to VW prior to the repeal
of the note. The circumstances are unique for
the following reasons:
Factually and legally VW qualified to approach the
Board, prior to the repeal of the note, for its recommendation in respect of the
full complement of its excess foreign currency earnings, not only in respect of
that portion for which permission to cede was duly
granted in the past but also
in respect of the surplus above that figure for which permission to cede was now
sought - what for
the sake of brevity I shall call “the
super-surplus”. The reason why VW did not initially ask for the
Board’s
recommendation in respect of the super-surplus was the view then
taken by the Commissioner that VW did not qualify for it. As was
stated by the
Board itself in its papers the assessment of the figures submitted by
manufacturers for permission to cede any excess
was based on what was described
as “the honour system”. In those circumstances VW was honour-bound
to comply with the
Commissioner’s directives on what, after all, was his
area of concern. At the same time VW, in common with other manufacturers,
pursued all efforts to persuade the Commissioner that his view as to the basis
of calculation was wrong. Not to have deferred to
the Commissioner while
negotiations were pending would have been foolhardy on VW’s part. The
result was that VW was constrained
to over-value and hence over-assess its
foreign exchange usage, thereby reducing its foreign currency earnings figures
which in turn
reduced the excess (above the level required for the calculation
of the maximum rebate) which would otherwise have been available
to VW for
cession to other warehouses. It was suggested in argument that VW should have
sued the Commissioner before the repeal
for a declarator rather than to follow
his instructions as to the method of processing its request for permission to
effect the cession.
That, in my opinion, is to impose a counsel of perfection.
The repeal after all supervened while the matter was still under discussion
with
the Commissioner. Those discussions culminated in the Commissioner thereafter
conceding the point and in stating that he was
satisfied that for his part VW
qualified for permission to cede the super-surplus in the amounts quantified by
VW and approved by
the Commissioner. It is, I think, fair to conclude that had
it not been for the Commissioner’s special insistence on how the
surplus
was to be calculated VW would have approached the Board prior to the repeal for
its recommendation in respect of the entire
amount for which, properly
calculated, it qualified at the time; and that had it not been for the repeal
the Board would have given
the shortfall its full consideration after the
Commissioner had changed his mind.
[16] What VW now sought to do after the
Commissioner acknowledged that not all royalties had to be taken into account in
calculating
the surplus it sought permission to cede, was to rectify the
pre-repeal position by seeking supplementary permission to cede what
had now
been determined to be the correct amount. As such the permission sought went to
the amount rather than to the entitlement.
This is not, therefore, a situation
where VW, never having applied for permission to cede its excess foreign
currency earnings prior
to the repeal, now seeks to do so for the first time
after the event.
[17] Prior to the repeal VW had fulfilled all the
requirements which in fact and in law entitled it to approach the Board for
permission
to make its recommendation in respect of the super-surplus; and from
its side VW had taken all the steps realistically open to it
to advance its
request for permission to effect such a cession. After the repeal it remained,
as it would have been before the repeal,
a matter for consideration by the Board
and the Director-General.
[18] Seen in this light the right to approach the
Board for a recommendation in respect of the super-surplus in order that
“the
relevant accounts be historically amended” (see paragraph 6
above) accrued to VW prior to the repeal of the relevant note.
[19] There has
been some suggestion that this conclusion might not be in conformity with the
authorities. I do not think so. The
facts of this case are unparalleled in any
of the cases cited or that I have consulted. The conclusion is in line with
the principles
stated and developed in the decisions of this court commencing
with Mahomed NO v Union Government, supra. There is one decision, not of
this court, that I should perhaps mention as an exception to the rule. It is
the Privy Council decision
in Director of Public Works and Another v Ho Po
Sang and Others [1961] AC 901 (PC); [1961] 2 All ER 721 (PC), a judgment
that has been referred to twice in this court but never analysed or followed
(cf
Gunn and Another NNO v Barclays Bank DCO 1962 (3) SA 678 (A) at 684D-F;
Transnet Ltd v Ngcezula, supra, at 552B-C). A building owner in
Kowloon, Hong Kong, wished to develop a site. In order to do so he would have
had to demolish an
existing building in which there were tenants. That
required, in terms of a certain statute, a rebuilding certificate from the
Director of Public Works. As soon as the Director gave notice of his intention
to grant such a certificate tenants who would be
affected by it could appeal to
the Governor who had the final say in the matter. The building owner duly
applied for a rebuilding
certificate, the Director duly gave notice of his
intention to grant it and the tenants duly appealed to the Governor. But before
the Governor could give a decision the statutory provision governing the matter
was repealed. In terms of the applicable Interpretation
Ordinance the repeal of
an enactment would not affect “any right ... acquired ... under any
enactment so repealed”.
After the repeal the Governor gave his consent
and the Director issued his certificates. The tenants sought a declarator that
the
Director after the repeal had no authority to do so. The Privy Council
eventually found in favour of the tenants that the building
owner, prior to the
repeal, had no more than a hope that a certificate would be granted to him and
hence that he did not acquire
a right thereto. In my respectful opinion many of
the dicta in the judgment are less than persuasive, the result is
inequitable and, I would venture to suggest, contrary to the approach of
this
court in Mahomed NO v Union Government, supra, and the decisions
following it. Furthermore, the statutory provisions and facts under
consideration in that matter differ materially
from the present. In short, I
disagree that the approach outlined in paragraph 18 hereof is in any way in
conflict with our own
authorities. In my opinion the repeal of the note
accordingly did not disempower and preclude the Board from considering and
deliberating
about VW’s application for permission to cede its
super-surplus.
[20] That conclusion effectively disposes of the appeal. I
propose nevertheless to add a word about VW’s ultimate right to
cede.
That right was conditional. The conditions (the recommendation of the Board and
the certification by the Director-General)
were extraneous to and independent of
the efforts of VW. At the outset VW had to establish the factual foundation
for a right to
cede i e a foreign currency earnings excess. That was the area
of concern of the Commissioner. Thereafter VW had to approach the
Board. The
Board’s area of concern was doubtless the policy considerations it was
enjoined to apply in terms of the Board
on Tariffs and Trade Act 107 of 1986.
Finally VW had to obtain a certification from the Director-General. There is in
my opinion,
in the peculiar circumstances of this case, much to be said for the
approach that once VW had fulfilled the factual preconditions
for its claim (a
foreign currency earnings excess) and had applied to the Board for its
appraisal, as VW had in fact done, it had
“acquired”, for the
purpose of s 12(2)(c) of the Interpretation Act, a right, albeit a conditional
one, which had to
be considered on its merits by the Board. As has been stated
earlier VW’s current offensive, properly analysed, is to correct,
with
retrospective effect, the calculation in respect of the amount (in line with the
adjustments approved thereto by the Commissioner)
it now wishes additionally to
cede. It is to the difference in the amounts recommended earlier and the
amounts for which a recommendation
is now sought, that the Board will be called
upon to apply its own policy judgment in accordance with the behests of the Act
which
governs its functions. The fact that a repeal of the enabling section
had in the meantime intervened should not, in my opinion,
debar VW from
advancing its claim to the Board.
[21] In my opinion the court a quo
was accordingly right in its conclusion that the decision of the Board (that it
was no longer empowered to make a recommendation
to the Director-General) should
be set aside. VW, so we have been informed from the Bar, does not insist on
costs being awarded
to it on appeal.
[22] The following order is made:
“The appeal is dismissed.”
...........................
P M NIENABER
JUDGE OF
APPEAL
Concur :
Smalberger JA
Mthiyane AJA
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