JK Motors (Pvt) Limited t/a Flo Petroleum v Zimbabwe Revenue Authority

### Preamble
1
HH 380-21
HC 3826/21
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JK MOTORS (PVT) LIMITED t/a FLO PETROLEUM

versus

ZIMBABWE REVENUE AUTHORITY

HIGH COURT OF ZIMBABWE

MUZOFA J

HARARE, 17 & 21 July 2021

Urgent Chamber Application

M. Tshuma with S Ndlovu, for the applicant

E. Mukucha, for the respondent

MUZOFA J: This is an urgent chamber application in which the applicant seeks a provisional order for the suspension of a garnishee placed by the respondent pursuant to an income tax assessment.

The applicant is a duly registered company which carries out business in the supply of fuel and other oil products. The respondent is an administrative body whose mandate is to collect taxes and other statutory dues and fees.

The respondent engaged the applicant in April 2021 with an initial audit request for the period 1January 2019 to 31March 2021. The parties engaged. A dispute ensued as regards the proper assessment of the applicant’s tax obligation for the period 2019 and 2020.Subsequently the respondent advised the applicant by letter dated 4 June 2021 of its tax shortfalls. For the year 2019 the total shortfall was ZWL$1007 531.77 and US$376 187.91.The shortfall for 2020 stood at ZWL$1 350 833.35 and US$430 357.38 respectively. The respondent required the applicant to pay the shortfalls ‘forthwith to avoid other recovery measures being instituted.’Various meetings were held to get a consensus on the amounts due. The respondent wrote a second letter to the applicant responding to issues raised by the applicant and demanded that the applicant respond to the issues raised in the 4 June 2021 letter. Despite submissions made by the applicant parties could not agree. On 28 June the respondent wrote another letter this time, accompanied by a formal assessment. In the letter respondent noted that the applicant has failed to pay its 2019 tax despite calls to pay forthwith. The respondent issued a tax assessment dated 28 June 2021 in the amount of US$376 187.91.The payment was due within 30 days from the date of the assessment.

It is not in dispute that on 29 June the respondent placed a garnishee on the applicant’s accounts. The applicant engaged the respondent to uplift the garnishee to no avail, thus it approached this court on an urgent basis for the following relief,

“FINAL ORDER SOUGHT

That you show cause why an order should not be made as follow;

That the provisional order be and is hereby confirmed.

The assessment issued by the respondent under reference number 122155 against the applicant be and is hereby set aside.

The Respondent shall refund to the applicant monies deducted from the applicant’s accounts pursuant to the assessment under reference number 122155, within 30 days of the granting of this order.

The respondent be and is hereby interdicted from instituting any and all collection measures under reference number 122155

INTERIM RELIEF SOUGHT

The garnishee instituted by the respondent against the applicant pursuant to assessment reference number 122155 be and is hereby suspended.

SERVICE OF THE PROVISIONAL ORDER

The Sheriff of the High Court/or the applicant’s legal practitioners be and are hereby permitted to serve this order on the respondent or its legal practitioners.”

The applicant submitted that the respondent’s conduct to recover the disputed amounts due was premature and unlawful. After advising the applicant of its procedural rights to formally file objections and pay within 30 days, in an act of show of power it immediately placed a garnishee to recover the amounts. On urgency it averred that the need to act arose when the garnish was placed on 29 June 2021.The applicant did not sit on its laurels, it immediately engaged the respondent to uplift the garnish. When it became clear that the respondent would not relent, the applicant then approached the court on an urgent basis.

The application was opposed. A point in limine on urgency was taken for the respondent. On the merits, respondent dedicated most of the opposing affidavit on the backgroundto the matter. It is evident that when the parties engaged they could not agree on the amounts. Respondent alleged a non-committal attitude by the applicant. It conceded that it served the applicant with an assessment and an appointment of agency to recover the outstanding taxes simultaneously.Mr Mukucha for the respondent appeared not clear about the facts. In one breath he insisted that the garnishee was based on the4 June letter. At the end of his submissions he seemed to insinuate that the garnishee was based on 28June tax assessment. It was submitted that the respondent as the administrative authority has the unfettered right to impose a garnishee where the amounts due are not paid on time in terms of s 72(5) of the Income Tax Act.

I dismissed the preliminary point on urgency.A matter is urgent if it cannot wait to be dealt with as an ordinary court application. The circumstances which might give rise to urgency include the potentiality of irreparable prejudice to the applicants if the interim relief being sought is not granted. This court has held in numerous cases that the hearing of a matter on an urgent basis is preferential treatment to an applicant who is allowed to jump the queue of other pending matters. The applicant must demonstrate by his action that he treated the matter as urgent. Self-created urgency until the day of reckoning will not justify urgency.

In this case, immediately after the garnishee was placed the applicant engaged the respondent to uplift it. Besides disputing the amounts assessed, the applicant made it clear that the placement was in contravention of the procedural rights accorded to the applicant by the respondent. I do not accept the submission by the respondent that the need to act arose on the 4th of June when the applicant was advised to pay forthwith. By that date the applicant had not placed a garnishee on the applicant’s accounts. There was no cause of action by then.  It is for those reasons that the preliminary point was dismissed.

On the merits, thedeterminant issue in this case is whether the garnishee order was properly issued.

Assessments are made in terms of section 51 of the Income Tax Act. Subsections (2) and (3) thereof provides the process for a valid assessment. A notice of assessment must be served on the taxpayer setting out the amount of tax payable and where such amount is payable. The taxpayer must be given notice of its procedural rights that any objections to the assessment must be filed within thirty days of such notice. Where an assessment falls short of these provisions, it cannot give rise to a valid garnishee order. In Barclays Bank of Zimbabwe Limited v Zimbabwe Revenue Authority HH 162/04 the court faced with a document alleged to be a notice of assessment and after considering the requirements of a valid notice of assessment it concluded,

‘In the process of serving the taxpayer with the assessment and hearing objections , the Commissioner should comply with the provisions of the Act as their administrative acts have far reaching consequences of a garnishee on the taxpayer.’

The respondent’s statutory obligation to collect taxes and dues must be exercised within the confines of the Act. Where its conduct falls short of the enabling Act its conduct is susceptible to be set aside.

In this case, the submission that the garnishee is based on the letter of 4 June clearly demonstrates that the garnishee was not based on an assessment as envisaged by the Act. The letter as it implies to be, is not a notice of assessment. The letter narrates the background to the applicant’s finances and refers to the Act and how the applicant has not complied with the law. It then sets out the shortfalls for the year 2019 and 2020.It also demands payment forthwith.

A few issues arise from the letter. Firstly it does not advise the applicant of its procedural rights to object within thirty days. Secondly the letter made an assessment of the 2020 tax and demanded an immediate payment. It was conceded and properly so that the 2020 tax was not yet due. By Public Notice Number 26 of 2021 issued on 26 March 2021 the respondent extended the due dates to 31 August 2021.It cannot be conceivable therefore that the garnishee was based on the letter. If it is so the garnishee was sitting on no assessment, this was an irregular assessment and therefore cannot beget a regular garnishee. I therefore accept the applicant’s submission that the garnishee was based on the 28 June 2021 assessment.

The 28 June assessment was properly entitled ‘Manual Notice of assessment for Income Tax’. In its remarks section it advised the applicant to make paymentwithin 30 days of the date of issue of the assessment and to make objections in writing within the same period.

Despite clearly setting out the 30 day period within which the applicant was expected to pay the assessed amounts, the respondent immediately placed a garnishee order. In its opposing affidavit the respondent avers that the garnishee order was placed because the applicant did not take the respondent’s demands to pay in the three letters seriously. Despite that perception, it was incumbent for the respondent to place the garnishee within the confines of the law. In my view this was a big brother approach. The respondent had not issued a formal notice of assessment, it relied on the letters. Even after issuing the notice of assessment it immediately placed a garnishee in blatant disregard of the law. The engagements that took place after the receipt of the 4June 2021 letter cannot be said to be within the contemplation of the formal objections. As matters stand the applicant must be afforded its procedural rights. The respondent could lawfully garnish after the expiration of the 30 days.

In such an application for an interdict the applicant must establish a prima facie right even if it’s open to doubt, reasonable apprehension of irreparable harm, that there is no alternative remedy and that the balance of convenience favours the granting of the interdict. See Zesa Staff Fund v Mashambadzi SC 57/02.

I am satisfied that the applicant has established a prima facie right. It is evident that the respondent breached the applicant’s procedural rights as provided in the Act. The irreparable harm is in disabling the applicant from functioning effectively. The applicant is an ongoing concern with liabilities and obligations to its employees and creditors. The garnish order has already affected its operations and it hasbeen reduced to a cash business which isimpossible in the type of industry within which it operates. I don’t agree with the respondent that there is no irreparable harm since the money was due it had to be paid either way. The issue is not whether the proper amount was assessed neither is it on whether it is due or not. The issue at this stage is whether the garnish order was properly issued. It was not and it has resulted in dire consequences. As matters stand the applicant has no alternative remedy. In terms of the assessment and the respondent’s subsequent conduct the applicant could not file any objections within the 30 days since the garnish order was operational. The best that the applicant could do was to engage the respondent for the upliftment of the order when that failed it approached this court. I am satisfied that there was no alternative remedy.

In weighing the balance of convenience the court has to consider the prejudice to either party in the event the order is granted or not. If the order is granted the applicant’s rights to procedural rights would be restored, the crippling financial effects of the order would be suspended and it can provisionally operate while it properly engages with the respondent. I find no prejudice on the part of the respondent. The applicant at this stage is not seeking to set aside the tax obligation, the relief sought is for the suspension of the garnish order. On the return date the parties will argue of the substantive issues.In the main the applicant must and will pay its tax obligation.

On the whole the order must not have been placed in the circumstances of this case. If it is accepted that it was based on the letter of 4 June 2021 it sat on nothing since this was not an assessment at all. Therefore it would be unlawful. If itsat on the assessment of 28 June 2021 it was prematurely placed and therefore null and void, it is of no effect. The application must succeed.

Accordingly the provisional order is granted.

Gill, Godlonton & Gerrans, applicant’s legal practitioners