CIV/APN/67/2004

IN THE
HIGH COURT OF LESOTHO

In the
matter between:

LESOTHO
REVENUE AUTHORITY APPLICANT

AND

MASTER OF
THE HIGH COURT 1st RESPONDENT

BIKARAMJITH
SOOKNANAN 2nd RESPONDENT

(LIQUIDATORS
OF SILVERSIDE TEXTILES (PTY) LTD)

ATTORNEY
GENERAL 3rd RESPONDENT

MOOSA
HOLDINGS (PTY) LTD 4th RESPONDENT

JUDGMENT

Delivered
by the Honourable Mr. Justice W.C.M. Maqutu On the 2nd April, 2004

INTRODUCTION

1. On the
17th February, 2004 Mr. Mosae for applicant and Mr. Mpaka for second
and fourth respondent appeared before me with an
urgent application.
The court (in the interim) by consent granted the following:

1. Dispensed
   with the normal modes and periods for service provided for by the
   Rules of court.

   
   

2. (a)
Interdicted the respondents from including in liquidation of the
estate of Silverside Textiles (PTY) Ltd (in liquidation
certain
property located at Maseru Industrial Area pending finalisation of
this application.

2. 2.
   The court further directed that opposing papers be filed on or
   before the 27th February, 2004. Replying papers be filed on
   or
   before the 3rd March, 2004. The matter was to be heard on the 8th
   March, 2004.

   
   

3. 3.
   On the 8th March, 2004 the matter was argued. Mr. Mosae appeared for
   applicant while second and fourth respondent were represented
   by Mr.
   Kemp and Mr. Mpaka. Argument was heard and judgment reserved to 2nd
   April, 2004.

   
   

APPLICANT'S
CASE

4. Applicant
   is the Lesotho Revenue Authority whose deponent is Thabo Khasipe the
   Commissioner of Customs Excise is charged with
   collection of custom
   duties in terms of the Customs and Excise Act of 1982. The authority
   of applicant's deponent to make the
   affidavit descends from Mr.
   Kevin Donovan by special power of attorney dated 12th February, 2004
   who in turn had been authorized
   by General Power of Attorney dated
   18th November, 2004 to act for the Lesotho Revenue Authority by its
   Board of Directors.

   
   

5. The
   Master of the High Court as first Respondent was nominally cited as
   an insolvent estate was involved. The third respondent
   was cited
   because government was involved through the Master of the High
   Court.

   
   

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6. The
   second Respondent Mr. Bikaramjith Sooknanan is the liquidator of
   Silverside Textiles authorized to take control of assets
   of the
   company in terms of Section 188 of the Companies Act of 1967. While
   Moosa Holdings (Pty) Ltd is cited as an interested
   party that
   brought Silverside Textiles (Pty) Ltd under liquidation.

   
   

7. 7.
   When Silverside Textiles (Pty) Ltd. (in liquidation) had problems
   because their goods were detained at Ficksburg Border Post
   they had
   written to applicant. See paragraph 1 of the founding affidavit. In
   looking into the matter applicant claims it discovered
   that
   Silverside Textiles (Pty) Ltd (in liquidation) were clandestinely
   engaging in the storage and supply of rebated goods therefrom.

   
   

8. In
   applicant's "LRA 3" dated 14th November, 2004, Silverside
   Textiles (Pty) Ltd enclosed documents from Lekim Textiles
   Industries
   (Pty) Ltd in which it alleged the understanding is that "duties
   were paid as indicated on the invoice."
   Applicant is requested
   to investigate this fact.

   
   

9. Silverside
   Textiles (Pty) Ltd had bought materials from Lekim Textile
   Industries (Pty) Ltd. Such materials had been brought into
   the
   country duty free to manufacture goods exclusively for export
   outside the Common Customs Area. If such goods were sold within

   Lesotho or within the common Customs Area, duty had first to be
   paid. On the 14th November, 2003, applicant's manager clearance
   had
   said that Lekim Textile Industries (Pty) Ltd had not paid duties on
   goods sold to Silverside Textiles (Pty) Ltd. Consequently
   duties and
   penalties would have to be paid.

   
   

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10. Because
    Silverside Textiles (Pty) Ltd. (within Lesotho and the Common
    Customs Area) was in possession of goods acquired from Lekim

    Textiles Industries (Pty) Ltd for which full import duties had not
    been paid - Silverside Textiles (Pty) Ltd could be in breach
    of the
    law unless full duty was instantly paid with penalty. Worse still it
    was disposing these goods within the Common Customs
    Area without
    first having paid duty, thereby compounding the initial criminal
    act.

    
    

11. Since
    "LRA 3" from Silverside Textiles (Pty) Ltd and the letter
    from Applicant marked "LRA 4" are both dated
    the 14th
    November 2003 it becomes uncertain that applicant had made
    investigations before it wrote "LRA 4". In "LRA
    4"
    applicant informed Silverside Textiles (Pty) Ltd that they shall
    consult SARS for further details concerning the detained
    goods.

    
    

12. On
    the 28th November 2003 applicant wrote to Silverside Textiles (Pty)
    Ltd informing the company that in terms of Section 109
    of the
    Customs and Excise Act No. 10 of 1982 has placed the goods in the
    warehouse found in the possession of Silverside Textiles
    (Pty) Ltd
    under embargo. Such goods were to remain where they are until the
    embargo is lifted.

    
    

13. 
    Applicant added that in Terms of Section 103 Silverside Textiles
    (Pty) Ltd was to disclose and prove the following:

    
    

1. The
   person from whom the goods were obtained.

   
   

2. The
   place where duties thereon were paid and date of payment

   
   

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Particulars
of entry for home consumption marks and number of packages and other
articles concerned - which shall tally with marks,
numbers and
documents brought in proof of payment.

14. Applicant
    was further informed that the goods would be sold in 90 days at an
    auction. Consequently the company was requested to
    indicate within
    one month if applicant intended to claim the goods.

    
    

15. On
    the 1st December, 2003 Silverside Textile (Pty) Ltd per applicant's
    "LR 6" responded and referred to a meeting with
    the Mr.
    Muso who acted for applicant. The company blamed Lekim Textiles
    Industries (Pty) Ltd for not having paid duties although
    the company
    had paid them to Lekim Textiles Industries (Pty) Ltd.

    
    

16. The
    company averred that it was an innocent purchaser. The company
    demanded the return of the goods and possession of the warehouse.

    Attached to "LRA 6" are the invoices from Lekim Textiles
    Industries (Pty) Ltd with a date including the words "INCLUDE

    ALL DUTIES". The invoices of Lekim Textile Industries (Pty) Ltd
    seem to back up Silverside Textile (Pty) Ltd that the price
    the
    company paid included duties. What Silverside Textile is not in a
    position to prove is that Lekim Textile Industries (Pty)
    Ltd
    remitted the duties to applicant.

    
    

17. Silverside
    Textiles Industries (Pty) Ltd. In applicant's "LRA 6" says
    it is prepared to consider paying without prejudice
    and request for
    a round table conference between the company and applicant. On the
    10th December 2003 applicant wrote "LRA
    T to Silverside
    Textile' (Pty) Ltd that the invoices of Lekim Textile Industries
    (Pty) Ltd do

    
    

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not prove
that duties were paid to applicant. Consequently applicant was
advised that:

"Customs and Excise has ruled that in accordance with Section 88
of the Customs and Excise Act 1982 all the goods as well
as the plant
in which the goods are currently housed be subjected to forfeiture.
You are advised to note that forfeiture of the
goods and plant shall
not affect the liability that you may have to other penalty or
punishment that may arise vi-a-vis yourselves
under the above stated
Act or any other law"

18. On
    the 15th December 2003 the fourth respondent obtained an order of
    provisional liquidation urgently against Silverside Textiles
    (Pty)
    Ltd Ex parte (on account of urgency. Without the other interested
    parties being heard). In terms of the provisional liquidation
    order
    second respondent was appointed provisional liquidator. In terms of
    that order second respondent was authorized to take
    control of the
    assets of Silverside Textiles (Pty) Ltd in terms of Section 188 of
    the Companies Act of 1967. On the 13th January
    2004 applicant
    received second respondent's letter "LRA 8" inviting
    applicant to be present when "an inventory
    of goods left"
    at the warehouse was taken. These goods had been placed under
    embargo by applicant. On the 26th January 2004
    the provisional
    liquidation order become final as it was not opposed.

    
    

19. On
    the 23rd January 2004 applicant had written "LRA 9 a" to
    second respondent stating that the Customs and Excise Division
    had
    "ruled that both the goods and the warehouse in which the goods
    were housed when discovered were subject to forfeiture."

    Applicant reiterated that decision still stands. The applicant in
    its affidavit at

    
    

6

paragraph
10 of its founding affidavit says it requested second respondent to
omit the property from the inventory."

20. First
    and second respondent (according to applicant) never responded to
    applicant's letter, but "proceeded to the premises
    in question
    and began locking the gates and taking control of the premises in
    all likelihood preparing for liquidation process."
    It is not
    clear from applicant's affidavit - when respondents did what they
    did. There is applicant's letter "LRA 9"
    purportedly
    written on the 4th January 2004, but which from its contents could
    not possibly have been written on that date. I
    will assume that it
    could have been written on the 4th February 2004. hi it applicant
    said it takes the view that to all intents
    and purposes the goods
    and the warehouse ceased to be part of the assets of Silverside
    Textiles (Pty) Ltd.

    
    

21. It
    was in order to maintain its position regarding the embargoed goods
    and assets of Silverside Textiles (Pty) Ltd that applicant
    has come
    before this court to ask for an order in the following terms:

    
    

1. Interdicting
   respondents from including in liquidation of the estate of
   silverside Textiles (Pty) Ltd (in liquidation) certain
   property
   located at Maseru Industrial Area pending finalisation hereof.

   
   

2. Declaring
   certain property at Maseru Industrial Area besides National Motors
   and next to Imperial Fleet Services and formerly
   belonging to
   Silverside Textiles (Pty) Ltd (in liquidation) to be lawfully
   forfeited to applicant with consequences that such
   property is not
   subject to be included in

   
   

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the
assets of Silverside Textiles (Pty) Ltd by 2nd respondent.

3. Directing
   respondents to pay costs only in the event of opposition hereof.

   
   

4. Granting
   applicant any further and/or alternative relief.

   
   

RESPONDENTS'
ANSWER

22. Second
    respondent says if applicant did not want the embargoed goods to be
    included among the assets of Silverside Textiles (Pty)
    Ltd (in
    liquidation) - applicant should have opposed the confirmation of the
    provisional liquidation order. Consequently second
    respondent has
    the statutory to take control of all assets of the insolvent, to
    preserve them and to liquidate them and pay those
    who file claims.
    Second respondent says he was still gathering information and
    seeking advice from senior counsel when applicant
    brought this
    application.

    
    

23. Second
    respondent says he has taken steps to take control of the warehouse
    and its contents as he should do. The warehouse was
    leased from
    fourth respondent. The lease dated 23rd October 2003 is annexed.
    Second respondent questions the basis of applicant's
    claim that the
    warehouse is forfeited. Second respondent claims the entire seizure
    of the goods and the underlying decisions
    are tainted because
    applicant has never provided second respondent with an inventory of
    goods that were rebated from Lekim. Such
    seized goods have to be
    "clearly identified and inventoried". On grounds of
    deliberate vagueness (according to the
    second respondent) "the
    embargo and forfeiture are simply void".

    
    

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24. Second
    respondent says he was surprised to meet with opposition when he
    invited applicant and its officials to the warehouse to
    make an
    inventory. Second respondent further says there are items of the
    insolvent in the warehouse that have nothing to do with
    the current
    dispute. Applicant by denying second access to the premises is
    obstructing second respondent from performing his
    statutory duties.

    
    

25. Second
    respondent says once goods in the warehouse - which may or may not
    still be there - have been inventoried, competing rights
    will be
    addressed. Non-rebated goods and materials will be returned. Second
    respondent says he is counterclaiming for the return
    of the
    warehouse and the goods in it - and annexes "SI" which is
    a list of orders that second respondent seeks.

    
    

26. The
    managing director of Silverside Textiles (Pty) Ltd also made a
    supporting affidavit to second respondent. He denies that the

    materials or garments were rebated and that duties were not paid. He
    says not even the barest evidence was given to support applicant's

    allegations on this aspect. Consequently he cannot prove or disprove
    such allegations. The Managing Director of Silverside Textiles
    (Pty)
    Ltd says he was led to believe that duties had not been paid on the
    company's goods detained in Ficksburg and approached
    applicant for
    assistance as he verily believed duties had been paid.

    
    

27. The
    Managing Director of Silverside Textiles (Pty) Ltd says the company
    had no reason to get licences for importing and manufacturing
    goods
    for export, outside the Common Customs Area that was not the
    company's line of business. The company was not engaged in
    any such
    clandestine activities as applicant alleges. Consequently when
    problems arose, applicant could approach

    
    

9

applicant
openly. The company bought goods for sale in Lesotho. Lekim has been
a supplier and manufacturer of textile goods in Maseru
for some
years. It is therefore difficult to identify and link to a specific
batch of material imported under rebate. Only Lekim
and Customs and
Excise can know the truth.

28. If
    Lekim acted dishonestly only documents can tell. Only applicant
    would have the detail of the goods in question, their value
    and
    duties payable. The Managing Director adds that "under the Act,
    the obligations to pay duty on rebated goods rests on
    the actual
    importer and the applicant holds security for that. Lekim has closed
    down, consequently it is impossible for the company
    to get the
    details applicant seeks. The Managing Director says it is applicant
    that has the statutory power to investigate Lekim's
    affairs and
    which can even seize its documents.

    
    

29. The
    Managing Director of Silverside Textile contests the forfeiture of
    goods especially the warehouse that contained the items.
    He also
    shows that the warehouse contains the company's property not bought
    from Lekim including pieces of equipment belonging
    to the company.
    He says Applicant never applied its mind to the issue raised by
    applicant. He also says applicant is visiting
    its failure to
    supervise Lekim's rebate on the company. Furthermore applicant is
    violating the company's Constitutional rights.

    
    

30. Osman
    S.M. Moosa as Managing Director of fourth respondent made an
    affidavit. In it he stated that he owned the warehouse in person
    -as
    an individual. He annexed the Deed of Transfer annexure "MI"
    which showed he bought from Mohamed Salim Karim the
    property on plot
    number 12282 - 342 for M30,000.00 on the 31st March 2003.

    
    

10

Osman M.
Moosa then sublet the said property to Moosa Holdings (Pty) Ltd on
the 23rd June 2003 the rental being Ml.00 only. Moosa
Holdings (Pty)
Ltd in turn sub-let the said property to Silverside Textiles (Pty)
Ltd on the 23rd October 2003 rental being M12,000.00
per month.

31. The
    deponent of fourth respondent Mr. Osman S.M. Moosa expressed
    surprise that the company Moosa Holdings (Pty) Ltd had sublet
    the
    warehouse yet he had not given notice to fourth respondent and to
    the deponent personally of applicant's intention to seize
    the
    warehouse or that applicant has ruled that it is forfeited. That
    being the case there can never be a valid seizure. The warehouse
    in
    fourth respondent's submission can house a "plant" but it
    certainly is not a plant.

    
    

32. Applicant
    being aware that fourth respondent is innocent of the activities of
    Lekim which is the one applicant was dealing with
    cannot declare the
    deponent's warehouse leased to fourth respondent's and in turn
    sublet the Silverside Textiles (Pty) Ltd forfeited.
    Such an act of
    applicant is invalid and unconstitutional because it is arbitrary
    seizure of property. As the creditor of Silverside
    Textiles (Pty)
    Ltd 4th respondent was entitled to liquidate it to protect fourth
    respondent's interests. Applicant's conduct
    is an abuse of power.

    
    

APPLICANT'S
REPLY

33. Applicant
    in reply averred that he had no interest in the liquidation of
    Silverside Textiles (Pty) Ltd. That is why he did not
    oppose it.
    Applicant insisted that the warehouse had been forfeited to
    applicant despite the rights fourth respondent claimed
    to the
    warehouse.
    

    
    

11

34. Applicant
    further added that second respondent has no right to protect and
    preserve the warehouse, because the right of Silverside
    Textiles
    (Pty) Ltd "to the warehouse vanished when forfeiture was
    effected".

    
    

35. Applicant
    further said in reply that it had no obligations to furnish
    Silverside Textiles (Pty) Ltd with an inventory of goods
    in
    question. All it had to do was to place an embargo on the goods as
    well as the warehouse they were in. It was for the company
    to say
    what did not constitute rebated goods.

    
    

36. Applicant's
    Customs officials in applicant's view had no obligation to accept
    second respondent's invitation to the warehouse.
    Second respondent
    (according to applicant) had no business to visit it. Second
    respondent is not being specific about goods that
    are in the
    warehouse, that are not rebated. The admission in "LRA 6"
    that duties were paid LEKJM is proof that duties
    were not paid to
    applicant. Ignorance that duties have not been paid does not absolve
    Silverside Textiles (Pty) Ltd.

    
    

ROLE OF
TAXATION IN GOVERNMENT AND THE STATE

37. Taxation
    and revenue collection are the oldest source of empowerment of
    government. Without it a modem state cannot exist. In
    the days of
    feudalism taxes in kind went to the feudal lords - who in turn
    reluctantly paid part of them that was due to the
    King who was the
    central authority in the State. The functions of government in the
    olden days were to maintain law and order,
    to protect life and to
    defend a country from external enemies. Since we inherited our form
    of government from the United Kingdom,
    the British form of
    government is our reference point.

    
    

12

38. It
    was over the collection of revenue in the form Customs that the
    Stuart dynasty in Britain had a crisis that eventually made
    Britain
    temporarily a republic. It was over revenue collection and taxation
    that the Boston Tea Party sparked of the war of independence
    gave
    birth to the United States of America. The Old Regime in France and
    its monarchy collapsed because the existing taxes and
    revenue
    collection could no more meet state expenditure.

    
    

39. It
    remains a fact that taxation was at the root of the creation of
    Parliament in England in the thirteenth century in the days
    of Simon
    de Montford. It was through the lever of taxation that the House of
    Commons wrested power from the House of Lords. At
    the birth of the
    United States of America during the war of independence, the
    rallying cry was "no taxation without representation".
    In
    France when the Old Regime wanted to raise taxes, the States General
    (a form of representative parliament) was convened when
    it had not
    met for over two hundred years.

    
    

40. These
    historical developments have led to the acceptance that through
    taxation - in Parliamentary democracies individual financial

    resources and property can be legitimately taken with that
    individual's presumed consent through elected parliamentary
    representatives.
    Consequently nothing is allowed to stand in the way
    of revenue collection and taxes - because the survival of the state
    and the
    continuing of governance depend on the solvency of the
    State. It is not surprising (in modern times) that extraordinary
    powers
    are given to the revenue collections organs of the State.

    
    

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41. . In
    a modern State too much is expected of the government and the State.
    The role of government is no more confined to issues
    of national
    defence, maintenance of law and order, and protection of life and
    property. Government responsibility, now covers,
    national education,
    health, town and country planning, provision of water, electricity
    telecommunications, agriculture, poverty
    alleviation and old age
    pensions Morrison in government and Parliament 3rd Edition at pages
    301 or to 302 concludes:

    
    

"If governments were to be able to carry out its obligations to
the country in this difficult situation it had to be given
the
necessary statutory powers by Parliament, largely free from any
restriction on the subject matter ... With us taxation became
a major
weapon for economic planning. It was maintained at a high rate to pay
for the developing social services, including education
and housing
and social insurance, but to limit purchasing power to avoid 'too
much money chasing too few goods', and to provide
for necessary
capital investment."

42. Courts
    and legal policy have had to adapt to this expanded role of
    government. Courts are obliged to protect the rights of the

    individual while not impeding government and the State from meeting
    its increased obligations to society through revenue collection.
    The
    Principles of State Policy in the part.III Constitution of Lesotho
    oblige the government, courts and other organs of the
    state to
    recognize more and more socio-economic rights (through legislation
    and otherwise) incrementally as the countries economic
    capacity to
    meet them grows. This means an expanded revenue and more taxes will
    be needed to meet these obligations.

    
    

14

43. So
    long as there is accountability of organs of government within the
    country - the rule of law is accepted as existing. "In
    this
    respect the practice of the Romans deserved admiration; Magistrates
    of all denominations were accountable for their administration

    except censors." See Montesquiew The Spirit of the Laws Volume
    I Book V Chapter 8 page 65. This expectation that power will
    be
    exercised fairly and reasonably by authorities (who will one day
    account) is part of the civilization from Western Europe
    that we
    inherited from ancient Rome. It is this rule of law that Dicey in
    the Introduction to Study of the Law of the Constitution
    speaks of.

    
    

44. Parliament
    was once the place at which governments and statutory authorities
    account. In a modern State Parliament is increasingly
    becoming the
    organ through which governments of the day implement policy. It
    makes laws and has such numerous and widespread
    responsibilities
    that it cannot police organs of government. It has been forced to
    give too much power to Ministers, public officials
    and statutory
    bodies. Courts are not designed to police the exercise of government
    powers. They can only hear limited grievances
    concerning the method
    adopted in the use of these powers. They also check whether the
    empowering law has been followed in the
    exercise of statutory
    powers.

    
    

45. In
    Commissioners of Customs and Excise v Cure and Deeley Ltd [1962] I
    QB 340 the courts found themselves dealing with delegated

    legislation that authorized Commissioners to fix any sum that they
    saw fit. This assessed sum became final unless the tax-payer

    satisfied the Commissioner that some other sum was due. The court
    found the

    
    

Regulation
invalid because it purported to prevent the tax-payer from

15

proving
in court the amount of tax actually due. The regulation substituted
for tax authorized by Parliament some other sum arbitrarily

determined by the Commissioners.

PURPOSE
OF THE CUSTOMS AND EXCISE ACT 1982

46. The
    long title of the Customs and Excise Act 1982 states the purpose of
    the Act as being:

    
    

1. To
   provide for the levying of customs, excise and sales

   
   

duties and surcharges.

2. The
   prohibition and control of the importation, export or

   
   

Manufacture of certain goods, and

3. Matters
   incidental thereto:

   
   

47. The
    Section 3 of the Act charges the Director with administration
    subject to the direction of the Minister including the
    interpretation
    of schedules of the Act. Sub-Section (2) provides
    that:

    
    

"The officer shall perform his duties and exercise his powers
under this Act with due regard to any lawful instructions issued
by
the director."

48. It
    will also be observed that nothing in the Act authorizes the
    Director not to act lawfully or to overcharge or otherwise take
    more
    than is due from an individual. Indeed Section 78 makes provision
    for refund of amounts overpaid; if there is no set-off.

    
    

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49. Chapter
    XI of the Act enforces compliance with the Act by imposing
    punishments for offenders. Among the offences is using false

    documents and making false declarations - see Section 85 of the Act.

    
    

50. What
    we are concerned with are goods irregularly dealt with - against
    which Section 88 (1) refers to "any goods imported,
    exported,
    manufactured, warehoused, or otherwise dealt with contrary to the
    provisions of this Act ... or any plant used contrary
    to the
    provisions of this Act in the manufacture any goods shall be liable
    to forfeiture wheresoever and in possession of whomsoever
    found."

    
    

51. Nowhere
    is a warehouse mentioned. In any event a warehouse is not a plant
    "used in the manufacture of any goods." Furthermore
    in the
    papers before me there is no allegation of manufacturing. "Plant"
    in Section 2 (e) dealing with definitions
    "includes vessels,
    utensils, appliances, and fittings". I was taken aback to find
    applicant had extended the meaning
    of "plant" to include a
    warehouse.

    
    

52. Before
    powers of forfeiture of contraband goods are exercised, it must
    according to the statute be a fact that they are as (claimed)
    in
    this case being "warehoused" or "otherwise dealt with
    contrary to the provision of this act." The issue
    that I will
    visit later is whether applicant can simply make a bare statement
    that duties have not been paid without proving
    or showing the
    possessor of the goods, grounds and reasons for saying so. In other
    words applicant can refuse to show and discuss
    with second
    respondent or Silverside Textiles (Pty) Ltd evidence on which
    applicant relied for his ruling.

    
    

17

53. 
    Contrary to what Mr. Kemp argued there is no specific procedure in
    the Act for the exercise by the Director of the discretion
    to seize
    the material and the goods that are liable to forfeiture. The
    Director can seize goods that are liable to forfeiture,
    or which he
    has "reasonable cause to believe are liable to forfeiture under
    this Act." In other words the goods should
    as a fact be liable
    to seizure or alternatively if there are reasonable grounds to
    believe they are liable to seizure. There
    has to be evidence and
    facts that guide his decision.

    
    

54. Section
    90 provides that courts of competent can be approached for the
    release of the goods and materials that are liable to forfeiture
    if
    within one month of the date of seizure the possessor or owner of
    the goods asserts his rights of possession over the goods.
    If that
    is not done the goods shall "be condemned and forfeited."

    
    

55. Section
    94 gives the Director the discretion may require that unpaid duty be
    paid as a condition of release of the goods plus
    charges incurred in
    connection with the detention of goods. This discretion in my view
    must be exercised fairly impartially and
    justly and must be
    conditioned by the circumstances of every case. In this case the
    party liable to paid duties if it diverted
    rebated goods to the
    domestic Lesotho market was Lekim Textile Industries (Pty) Ltd. If
    ascertained duties had not been paid
    by Lekim Textile (Pty) Ltd in
    the absence of special circumstances there were no reasons not to
    demand them from Silverside Textiles
    (Pty) Ltd. Applicant's counsel
    conceded this point.

    
    

18

REFUSAL
OF APPLICANT TO HAVE INVENTORY MADE

56. Applicant
    before proceeding further in the matter (in terms of Section 109)
    when he suspected that duties had not been paid was
    entitled to
    place an embargo of the goods in the warehouse of Silverside Textile
    (Pty) Ltd to enable investigations to begin.
    Implied in the placing
    of an embargo is the need to take an inventory of the contents of
    the warehouse so as to identify specific
    goods on which duty has not
    been paid. In other words after a definite, clear and open
    investigation, only then could applicant
    seize the goods which in
    time should be liable to forfeiture.

    
    

57. As
    the primary object of the investigation and the Act as a whole is to
    get duties to be paid, the value of the duty to be paid
    should have
    been known or ascertainable. This in my view is dependent on the
    inventory that would enable applicant to focus on
    specific goods.

    
    

58. There
    is vagueness and complete lack of specificity about the goods
    seized. Applicant still has to go and take an inventory and
    direct
    seizure against identifiable goods - should duties not be paid.
    Applicant cannot make rulings without facts on what he
    has not
    identified. It is not the subject alone who has to set forth clearly
    and explicitly what he claims against the State
    in terms of Section
    97. Applicant is under the same obligation to set out clearly and
    explicitly what he seized from the subject.

    
    

19

RECONCILING
THE CUSTOMS AND EXERCISE ACT 1982 WITH THE CONSTITUTION

59. As
    already stated too much is expected from the State. Consequently
    Bagehot in The English Constitution at page 309 commenting
    on the
    United States of America's System of Taxation in 1872 said:

    
    

"Everywhere the opinion was expressed that taxation in all
possible forms should immediately, and to a large extent be made

effective and imperative; and congress spurred up, and rightfully
relying on public sentiment to sustain their action, at last
took up
the matter resolutely and in earnest, and devised and inaugurated a
system of internal and direct taxation, which for its
universality
and peculiarities has probably no parallel in everything which has
heretofore been recorded in civil history, or is
likely to be
experienced hereafter. The one necessity of the situation is revenue,
and to obtain it speedily and in large amounts
through taxation the
only principle recognized -if it can be called a principle - ...
wherever you find an article, a product,
a trade, a profession, or a
source of income, tax it! And so an edict went forth to this effect,
and the people cheerfully submitted".

60. Bagehot
    could not belief what he saw, he thought it could not happen in
    Britain. Today all over the world people have to live
    with more and
    more taxes for their modern states and economies to run. These taxes
    are being imposed in democratic countries
    in which arbitrariness and
    failure to observe human rights is not the norm. Arbitrariness is in
    fact forbidden. To protect the
    democratic system and to make taxes
    not to be odious, and more and more taxes to be imposed, the powers
    of taxation have to be
    exercised fairly and reasonably - and not be
    abused.

    
    

20

61. Section
    of the Constitution of Lesotho has recognized the freedom from
    arbitrary seizure of property as one of the fundamental
    human
    rights. In respect of taxation the Section 17 (4) (a) Constitution
    allows the taking of an individual's property:

    
    

"To the extent that the law in question makes provision that is
necessary in a practical sense in "a democratic society
for he
taking of possession of any property, interest or right -(i) in
satisfaction of any tax, duty, rate, or other impost;"

62. Section
    156 (1) of the Constitution enjoins the courts, government and all
    organs of the state to recognize and apply all pre-existing
    laws
    such as the Customs and Excise Act 1982 as if made in pursuance of
    this constitution. But these laws "shall be construed
    with such
    modifications, adaptations, qualifications and exceptions as may be
    necessary to bring them into conformity with the
    Constitution.

    
    

63. Courts
    have always avoided interfering with rulings of administrative
    authorities (duly empowered by statute - unless "they
    are so
    unreasonable as to justify the inference that there had been no real
    exercise of judgment...") see Innes CJ's remarks
    on page 102 of
    Crown Mines Ltd v Commissioner For Inland Revenue 1922 AD 91. In
    that case the tenor of the judgment was to the
    effect that the
    Secretary For Inland Revenue might deny a tax refund at his
    discretion and courts would not interfere unless
    he was grossly
    unreasonable. Such thinking was acceptable in those days.

    
    

64. However
    Cloete J in Stroud Reley & Co Ltd v Secretary For Inland Revenue
    1974 (4) SA 534 at pages 539 to 540 said:

    
    

21

"It seems to me that in dealing with the matter of this nature
the respondent is required firstly to enquire into the facts.
If
after such an enquiry he is satisfied that the amount paid is in
excess of the amount chargeable under the Income Tax Act, he
is bound
under the Income Tax Act, as a matter of duty, to authorize a refund
to the tax payer ... In the later respect he says
no discretion, in
the matter in spite of the use of the word "may" in the
Section which authorizes him to make a refund."

65. It
    seems to me that Section 88 of the Customs and Excise Act 1982 is
    part of a scheme and cannot be read in isolation from other

    Sections. Read collectively they are fair and reasonable and require
    the Director of Customs to enquire into the facts before
    making a
    ruling. For applicant to have embargoed a warehouse and its
    contents, followed by a refusal to have an inventory taken
    of the
    contents of the warehouse was unreasonable because he was duty bound
    to do so. To rule that he has seized goods he could
    not specify was
    irregular.

    
    

66. Sachs
    J in declaring a regulation that gave officials powers that could be
    greater than what the Act provides in Commissioner
    of Customs and
    Excise v Cure & Deeley Ltd [1962] I QB 340 at 369 said
    "secondly, it renders the subject liable to pay
    such tax as the
    Commissioners believe to be due, whereas the charging sections
    impose a liability to pay such tax as in law is
    due." At page
    370 Sachs J found it unacceptable for courts to be bound "upon
    the ipse dixit of the competent authority,
    inevitably be bound to
    hold that a denial of justice to the subject was something that
    could properly be termed necessary."

    
    

67. Section
    17 of the Constitution protects property from arbitrary seizure. In
    Section 17 (4) (a) (i) of the Constitution it is permissible
    for the
    law in question to make "provision that is necessary in a
    practical

    
    

22

sense in
a democratic society for the taking into possession or acquisition of
any property, interest or right - (1) in satisfaction
of any tax,
duty or rate ..." This provision in the Constitution captures
the essence of the spirit and the manner in which
drastic powers of
bringing the necessary revenue through - taxes and duties are to be
exercised.

68. Consequently
    Mr. Kemp for respondent was right to quote (as summing up the manner
    applicant should have proceeded) the following
    passage in Deacon v
    Controller of Customs and Excise 1999 (2) SA 905 at 918 EF:

    
    

"In this matter it would not have been difficult for respondent
to afford the applicant the opportunity to be heard. This
was clearly
not the common situation where, for example the applicant had
knowingly been a party to the evasion of payment of Customs
duty.
Here applicant was an innocent party. His situation called for a
proper investigation by the respondent and full ventilation
on by the
parties of all the relevant facts before the respondent took the
decision to seize the motor vehicle. I gain the distinct
impression
that the respondent took the view that once it was confirmed that
duty was payable in terms of the Act, he was entitled
to invoke the
provisions of Sub Section 87 and without the need to have regard to
the provisions of Section 33 of the Constitution."
- per Horn
AJ.

69. While
    the South African Constitution to which Horn AJ referred to in the
    abovementioned passage from Deacon v Controller of Customs
    and
    Excise may not be identical - I believe it is based upon the same
    sentiments as Section 17 of the Constitution of Lesotho.
    The
    affidavits and the correspondence in this case show clearly that
    applicant refused too meet Silverside Textiles (Pty) Ltd
    at a round
    table conference so that he could satisfy that company that real
    possible

    
    

23

offender
(who allegedly did not pay duty) Lekim Textile Industries (Pty) Ltd
had in fact not paid duties.

70. Not
    only did Silverside at page 3 of applicant's "LRA 6"
    suggest a round table conference, the company was asking for

    negotiations on the whole issue since its invoices that the company
    sent to applicant claimed duties had been paid. Applicant
    never put
    its cards on the table by showing how it came to the conclusion that
    Lekim Textile Industries (Pty) Ltd had in fact
    from applicant's
    record never paid the duties in question. Applicant refused to have
    an inventory taken when second respondent
    invited applicant to join
    second respondent in taking an inventory.

    
    

71. What
    applicant is doing and is asking this court to reinforce is the
    denial of information to the second respondent and Silverside

    Textiles (Pty) Ltd (in liquidation). Sack J in Commissioners of
    Customs and Excise v Cure and Deeley Ltd (supra) at page 356
    said
    such conduct "enables the Commissioners to take into account
    evidence obtained under conditions of secrecy upon the
    footing that
    is not disclosed to the subject; it enables the Commissioners so to
    announce their determination as not to reveal
    what is wrong in the
    return; it enables them to withhold from the tax payer information
    even as to what are the goods or transactions
    upon which the tax is
    determined to be due."

    
    

72. In a
    practical sense in a democracy when property is lawfully taken by
    the authorities there must be openness, transparency,
    reasonableness, and fairness. - See Ridge v Baldwin [1964] AC 604.
    In this case applicant does not seem to be aware, that evidence
    of
    breach of the provisions of the Act or grounds for suspecting that
    there is a breach of the provisions of the Act is a pre
    condition of
    imposing an embargo

    
    

24

or
detaining the goods that are ultimately liable to forfeiture. There
are (in fairness and in law) no grounds for withholding evidence
or
grounds for doing so to the subject. It is the disclosure of these
grounds that triggers an onus or an obligation on the subject
to
prove that the facts that prima facie show a breach of the Act or the
suspicion of failure to comply with Act are wrong or baseless.

73. .
    While the procedures outlined in the Sections 89, 90 and 91 of the
    Customs and Excise Act 1982 are important and should be followed,

    what is important are the reasons for these procedures. Selkowitz J
    in Ideal Fastners Corporation CC v Minister of Finance [1996]
    1 All
    SA 373 at page 377 where he said:

    
    

"Statutory provisions which require notice of proposed legal
proceedings to be given to public bodies or specific officials
in
their representative capacity, ... are intended to ensure sufficient
time is given to the body or representative to make the
necessary
enquiries, to take the necessary decisions, to seek the necessary
evidence, and to consider policy matters because actions
of large
departments ... are performed by a large diversified staff, often by
a myriad of people throughout the country."

74. It
    not applicant alone who should have an opportunity to prepare - the
    subject must equally be given information so that the subject
    can
    act reasonably. What disturbs me is that from the imposing of
    embargo and the implied seizure of the goods on 28th November
    2003
    per "LRA 5" and the notice that was given by Silverside
    Textiles (Pty) Ltd that the seizure was being contested
    - per "LRA
    6", nothing was done to gather evidence and to check the facts
    to enable appropriate policy decisions to
    be taken. An exchange of
    information that might have led to the admission of guilt or
    liability in terms of Section 91 of the
    Act was refused. No steps
    had been taken through an inventory to

    
    

25

determine
the exact goods that were being seized. No facts were placed before
this court that showed that the investigations that
followed an
embargo ever took place. What this court has is a bare allegation of
applicant that it took place.

75. Mr.
    Mosae for applicant has conceded that the ruling of the applicant of
    the 10th December 2003 that is contained in "LRA
    7" that
    the unspecified goods currently housed in the warehouse have been
    forfeited was premature and void. But this is
    not the end of the
    matter this is the basis of the interdict and the declaration sought
    against the respondent. If applicant
    withdrew the application, then
    that would be end of the matter - but applicant still insists on the
    broad all inclusive interdict.

    
    

76. I
    could not understand why applicant continued to insist that the
    warehouse was a plant inspite of the fact that it was not included

    in the Act. Plant was clearly defined in Section 2 (1) of the Act as
    including "vessels, utensils, appliances and fitting."
    Yet
    Mr. Mosae persisted in maintaining that the warehouse was forfeited.
    The rights of third parties were not considered and
    the fact that
    they could only be included in the forfeiture if they were in pari
    delicto with both Silverside Textiles (Pty)
    Ltd and Lekim Textiles
    (Pty) Ltd Section 88 (1) refers to the forfeiture of "goods ...
    warehoused" and not the warehouse
    itself.

    
    

77. I
    have already said the powers that applicant has in respect of custom
    duties must be interpreted and reconciled with the Constitution.

    They can only be applied in terms of Section 17 (4) (a) (1) "to
    the extent that the law in question makes provision that
    is
    necessary in a practical sense in a democratic society."
    Consequently I noted what

    
    

Mr. Kemp said when he referred to Magid J's remarks who said in

26

Minister
of Finance & others v EBN Trading (Pty) Ltd 1998 (2) SA
319at329B-F:

"It seems to me to accord better with the human rights culture
of the new South Africa ... that in cases involving wrongful

imprisonment or the wrongful detention of goods that it should no
longer be necessary for plaintiff to establish consciousness
on the
wrongdoer of the wrongful character of his Act. Certainly I can see
no compelling reason to differentiate between the wrongful
detention
of a person or his property."

78. Of
    even greater importance in exercising power, is to keep in mind in
    terms of Lesotho Constitution - in a practical sense the
    democratic
    nature of our society. Consequently, while keeping the importance
    revenue collection powers of applicant and the extraordinary
    powers
    conferred, I can only quote Magid J's in Minister of Finance &
    others v EBN Trading (Pty) Ltd supra at page 329F "Having
    such
    extraordinary powers there is no reason at all why he should not use
    particular care in using them." What in the past
    seemed to be a
    discretion when dealing with the rights of property under the Act,
    is now a duty under the Constitution.

    
    

THE
SPIRIT OF THE REVENUE COLLECTION LAWS

79. It
    seems to me that applicant has missed the spirit behind the tax and
    revenue collection statute. They have to be understood
    along with
    their history and the Constitution of Lesotho. They are meant (in
    terms of Section 17 (4) (a)) to collect revenue
    in a firm, fair and
    urgent manner in so far as necessary and practical with a democratic
    state. Arbitrariness, oppressiveness
    and unjustness are not the
    essence of tax collection in a democratic State.

    
    

27

80. It
    was to protect the people against these very arbitrary and unfair
    practices that the House of Commons came into being and eventually

    became in effect the main chamber of the British Parliament. Courts
    of justice have to see that these drastic power that Parliament

    gives to revenue authorities are exercised in the manner that the
    House of Commons assumed power in order to protect and promote
    - the
    interests of the people and without arbitrariness or abuse.

    
    

81. For
    the benefit of the people as a whole, for the running and the
    maintenance of the State on which the security and general welfare

    of the State, the Long Title of the Customs and Excise Act 1982
    provides for the levying of customs sales duties, and surcharges.
    As
    Mr. Mosae has correctly observed the correct amount of duty should
    be levied. For this principle he refers to the case of
    First
    National Bank & Another v Commissioner South African Revenue
    Service & Another 2002 (4) SA 768. Mr. Kemp for second
    and third
    respondents did not challenge these powers. What is in issue is the
    use to which the powers are used which frustrate
    the ascertainment
    of duty (if any) due to which applicant is entitled.

    
    

82. The
    detention and ultimate forfeiture of goods is only legitimate if it
    promotes the collection of duties and revenues. The powers
    are so
    drastic and extensive that "the custom debtor need only be in
    possession and control of the premises, not of the
    thing itself; in
    fact, she could be unaware of the presence of the thing on the
    premises in question." Vide First National
    Bank ofSA &
    Another v Commissioner South African Revenue Service & Another
    (supra) at page 748 C.

    
    

28

83. What
    creates problems is that applicant does not wish for the goods in
    the warehouse to be ascertained through an inventory. Furthermore

    applicant is not expeditiously ascertaining duty payable. That
    cannot be the intention of the legislature. Ackermann J in the

    Constitutional Court of South African correctly observed about
    Section 25 of their Constitution (which is not dissimilar to Section

    17 (4) (a) (1) of the Constitution of Lesotho)":

    
    

"The purpose of Section 25 has to be seen both as protecting
existing private property rights as well as serving the public

interest, ... and also striking a proportionate balance." -
First National Bank of SA & another v Commissioner South African

Revenue Service & Another at page 794 C.

84. It
    becomes questionable whether there is no arbitrariness where what is
    necessary and reasonable in a democratic society within
    Section 17
    (4) (a) (i) of the Constitution is ignored and when unnecessary
    delays that despoil the subject occur after power
    is exercised.
    Arbitrariness was defined by Holmes JA in Johannesburg Liquor
    Licensing Bord v Kuhn 1963 (3) SA 666 at page 671
    C as follows:

    
    

"Arbitrariness connotes caprice, or the exercise of the will
instead of reason or principle, without consideration of the
merits."

85. The
    President of the Court of Appeal Mr. Justice Mahomed in AG &
    Another v Swissborough Diamond Mines (Pty) Ltd & 5 Others
    1991
    -96 LLR 27 at page 31 said:

    
    

"Respect for the rule of law is crucial for a defensible and
durable civilization. Whatsoever be the parameters of any meaningful

debate on the meaning of the rule of law... law must be rational and
just; and ultimately that

29

civilization itself is imperiled when these fundamental values are
not defended by the rulers of any country .... All these premises

appear fundamentally to be invaded by the Revocation Order. It
invades to protection of property without any compensation and
without any reason to support such invasion."

86. What
    was in issue in the above case of AG & Another V Swissborough
    Diamond Mines (Pty) Ltd was the use of powers of legislation
    which
    the legislature of the day was using with impunity and
    arbitrariness. The issue was not whether the power to legislate

    existed - but rather the manner and use to which the power was put.
    Mr. Mosae referred me to the USA case of Mr. Keson Corporation

    Division of Alcoholic Beverages & Another 496 45 18 (1990 where
    the Court said about revenue collection powers:

    
    

"To protect government's exceedingly strong interest in
financial stability in this context, we have long held that a State

may employ various financial sanctions and summary remedies, such as
distress sales, in order to encourage tax payers to make timely

payments prior to the resolution of any dispute over the validity of
the tax assessment."

87. I
    think the USA case for Lesotho is being used out of context. All the
    powers inducements and even potential threats in tax collection
    must
    be applied in such a way as may be necessary in a democratic state
    to collect taxes and revenues for the State in a rational
    and just
    manner. The intention of the legislature is not to intimidate,
    oppress and create

    
    

30

grievances in the public but "to encourage tax-payers to make
timely payments."

88. If
    we look at the long title of the Act, the purpose of this scheme of
    legislation is to ensure collection of duties, forfeiture
    of the
    goods is only a by product of the process of collection - especially
    where innocent third parties are involved. Surcharges
    and penalties
    for delays in payment of duties assist in their collection and
    deters would be evaders. "We are here concerned
    with statutory
    provisions in Customs and Excise legislation that deprive an owner
    of property for some one else's debt."
    First National Bank &
    Another v Commissioner South African Revenue Service & Another
    (supra) at page 801.

    
    

89. It
    seems to me that the Customs and Excise Act 1982 read as a whole and
    applied with constant reference to Section 17 (4) (a)
    (i) of the
    Constitution represents the rights of the subject. The problem in
    this case is that applicant ignored the Constitution
    and the
    parameters it sets in the application of this law. The necessary
    reasonableness in a democratic society that the Constitution
    has in
    mind in the application of the law is the reconciliation of the
    rights of an individual with those of society at large.
    This is done
    by trying to "establish a fair balance between the public
    interest served and he property interests affect.
    .Per Ackermann J
    in First National Bank & Another v Commissioner South African
    Revenue Service & Another (supra) at page
    806 E referring to
    Article 1 of the First Protocol of the European Human Rights
    Convention.

    
    

31

90. Lesotho
    has no problem with existing laws, it need not individually weigh
    them so long as they are capable of being reconciled
    with the
    Constitution. The revenue collecting authorities have to apply them
    as modified by the Constitution. Section 156 of
    the Constitution
    clearly states that they remain the laws of Lesotho in so far as
    they do not conflict with the Constitution.
    The Customs and Excise
    Act 1982 is easily reconcilable with the Constitution of Lesotho.
    Its provisions had to be harmonized
    with the Constitution.
    Consequently they cannot be read in isolation.

    
    

91. There
    is no problem with the embargo. This interdicts the removal of goods
    from the warehouse. As a step towards ascertaining
    duties, the
    embargo cannot be faulted. It should have been followed by the
    taking of the inventory so that it could be possible
    to know the
    goods that are liable to be seized and whether all contents of the
    warehouse were liable for duty.

    
    

92. It
    is only after an open and transparent investigation in which an
    exchange of information between applicant, Silverside Textiles
    (Pty)
    Ltd and second respondent has occurred that seizure can be
    considered. In the case before me applicant is using the provisions

    of the Act to frustrate its own investigations and to deny the
    company and second respondent information. The embargo should
    not
    deny second respondent access to the goods and information that
    establishes that the goods are liable for duty and how much
    it
    should be.

    
    

93. The
    problem that applicant created is that of losing sight of the
    objective of the Act and making the means to an end - the end

    itself. Revenue collection is the purpose and the end for which
    powers under

    
    

32

the Act
were conferred. In the case before me applicant concentrated on the
powers conferred - completely ignoring the rights of
the subject
which go together with the exercise of these powers. In the end the
identity of the goods that are liable to duty and
the circumstances
and the reasons why duties were levied were kept hidden to the
subject. The duties payable could not be determined
for over three
months. Applicant was leisurely exercising power for power's sake -
not for the urgent purpose for which it was
conferred.

CONCLUSION
AND COURT ORDER:

94. 
    Second respondent has been appointed as liquidator by this court to
    gather the assets and liabilities of Silverside Textiles
    (Pty) Ltd.
    He has brought a counter - application in which he asks "that
    applicant be directed to restore possession of
    the warehouse / and
    its contents." Since second respondent shows he has never been
    in possession of the warehouse and its
    contents, I can see no reason
    for the application as framed by second respondent. What second
    respondent through out wanted was
    to have access to the warehouse
    and to take an inventory with the applicant.

    
    

95. Applicant's
    right, interest and entitlement which Mr. Kemp concedes is payment
    of duty. Applicant has conceded through its counsel
    Mr. Mosae that
    in terms of the Act, applicant must have duty paid on rebated goods
    in terms of the Act now that they are for
    the internal Lesotho
    market in the Common Customs Area. Both parties agree that once
    duties are assessed and paid, second respondent
    is entitled to the
    rebated goods. It seems applicant vision was clouded by the dust of
    conflict - and should have from the beginning
    co-operated with

    
    

33

second
respondent to ascertain the unpaid duty so that it could be assessed
and paid.

96. Consequently

    
    

IT IS
ORDERED:

1. That
   applicant's application be and is hereby dismissed with costs.

   
   

2. Second
   respondent and applicant are directed to jointly take an inventory
   of the goods in the warehouse to enable the goods
   (if any) that
   are subject to payment of duty to be ascertained.

   
   

3. The
   embargo should be lifted by applicant when custom duties that
   might be found due have been assessed and paid on the rebated

   goods that Silverside Textiles (Pry) Ltd bought from Lekim
   Textiles Industries (Pry) Ltd.

   
   

W.C.M.
MAQUTU

JUDGE OF
THE HIGH COURT

For
Applicant : Mr. Mosae

For 2nd
and the 4th Respondents: Mr. Kemp and Mr. Mpaka

34