Murowa Diamonds (Private) Limited v Zimbabwe Revenue Authority & Anor (Minister of Finance and Economic Development N.O.)

### Preamble
Judgment No. SC 72/21
1
Civil Appeal No. SC 112/20
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DISTRIBUTABLE:		(69)

MUROWA     DIAMONDS     (PRIVATE)     LIMITED

v

ZIMBABWE     REVENUE     AUTHORITY     (2)     MINISTER      OF FINANCE      AND      ECONOMIC      DEVELOPMENT      N.O

SUPREME COURT OF ZIMBABWE

BHUNU JA, UCHENA JA & CHITAKUNYE AJA

HARARE: 1 JUNE  2020 & 7 JUNE 2021

D.Ochieng, for the appellant

S. Bhebhe, for the first respondent

L.T. Muradzikwa, for the second respondent

UCHENA JA:	This is an appeal against the whole judgment of the High Court dated 20 January 2020, dismissing an application to strike down s 58 of the Income Tax Act [Chapter 23:06]  for violating the right to equal protection of the law and the right to administrative justice as provided by ss  56 and 68 of the Constitution of Zimbabwe, 2013.

FACTS

The detailed facts of this case can be summarised as follows:

The appellant is a diamond mining company duly incorporated in terms of the laws of Zimbabwe. In terms of ss 244 and 245 of the Mines and Minerals Act [Chapter 21:05] it must pay an annual royalty to the government on diamonds sold by it and income tax in terms of the Income Tax Act [Chapter 23:06] (“the Act”). The first respondent the Zimbabwe Revenue Authority is a Government Department created by the Revenue Authority Act [Chapter 23:11]. It is responsible for the collection of taxes. The second respondent is the Minister responsible for the administration of the Revenue Authority Act.

In 2017 a dispute arose between the appellant and the first respondent on whether or not the royalty the appellant pays to Government is tax deductible in terms of the Income Tax Act. The appellant argued that it is revenue expenditure and therefore tax deductible. The first respondent argued that it is capital expenditure and therefore not tax deductible. The first  respondent issued a revised tax assessment together with interest and penalties.

The appellant objected to the revised tax assessment pointing out that royalties are a deductible expense. The first respondent dismissed the objections on the basis that royalty payments are not a tax deductible expense. Correspondence and various meetings failed to resolve the dispute.

The appellant appealed to the Special Court for Income Tax Appeals. It in addition to the appeal to the Special Court for Income Tax Appeals applied to the court a quo for the striking down of s 58 of the Income Tax Act which entitles the first respondent to issue and enforce garnishhe orders against persons who owe the taxpayer money which the first respondent then collects directly from the taxpayers debtor.

After hearing submissions from the parties on whether or not s 58 of the Income Tax Act should be struck down, the court a quo held that s 58 of the income Tax Act was valid and dismissed the appellant’s application.

Aggrieved by the decision of the court a quo, the appellant noted an appeal to this Court on the following grounds:

GROUNDS OF APPEAL

“1.	The learned judge in the court a quo erred in finding that section 58 and/ or section 69 of the Income Tax Act [Chapter 23:06] were not inconsistent with sections 56 and 68 of the Constitution of Zimbabwe, 2013, and in particular erred in finding:

-	That they were not inconsistent with the right to equality before the law and the right to equal protection and benefit of the law; and

-	That they were not inconsistent with the right to administrative conduct that is impartial and both substantively and procedurally fair.

2.	The learned judge in the court a quo erred in finding that section 58 and/ or section 69 of the Income Tax Act [Chapter 23:06] were not inconsistent with Appellant’s right to be treated in a lawful, reasonable and clear manner as enshrined in section 3 of the Administrative Justice Act [Chapter 10:28].

3.	The learned judge in the court a quo erred in finding that section 58 and/ or section 69 of the Income Tax Act [Chapter 23:06] were not inconsistent with Appellant’s right to a fair hearing, the audi alteram partem rule and the rules of natural justice.

4.	The learned judge in the court a quo erred in finding that section 58 and/ or section 69 of the Income Tax Act [Chapter 23:06] were necessary, reasonable and justifiable in a fair and democratic society.

5.	The learned judge in the court a quo erred in finding that section 58 and/ or section 69 of the Income Tax Act [Chapter 23:06] were justifiable by virtue of the provisions of section 86 of the Constitution of Zimbabwe, 2013.”

HEARING OF THE APPEAL

At the hearing of the appeal we asked counsel for the parties to address us on wherher this Court has jurisdiction to hear an appeal on the Constitutional validity of a statute. The parties’counsel made submissions in which they all submitted that this Court has jurisdiction to hear an appeal on the constitutional validity of a provision of a statute.

The appeal therefore raises two issues for determination.

Whether this Court has jurisdiction to hear an appeal on the Constitutional validity of a provision of a statute.

Whether or not s 58 of the Act should be declared constitutionally invalid for being inconsistent with ss 56 and 68 of the Constitution.

SUBMISSIONS MADE BY THE PARTIES

Mr Bhebhe, for the first respondent in his supplementary heads submitted that this Court has jurisdiction to hear appeals on the constitutional validity of a statute. Mr Ochieng for the appellant and Mr Muradzikwa for the second respondent agreed with him. The parties are therefore agreed on this issue but that does not resolve the issue. The law is not established by an agreement between the parties. It originates from recognised sources of the law like statutes and common law. I will therefore proceed to determine the correct position of the law despite the parties agreement on what they believe to be the law.

Mr Ochieng submitted that s 58 of the Income Tax Act undermines the appellant’s right to just administrative action. He further submitted that a debtor  is entitled to  its right to fair administrative action. He argued that the process of enforcement is subject to the constitutional provisions. He contended that people in like positions should be treated equally. Counsel for the appellant asserted that debtors are equal to each other and to creditors which means that the State should also be equal to its income tax debtors. He submitted that s 3 (1) of the Constitution is founded on respect of the rule of law and that the reasoning of the court a quo was contrary to it. He submitted that it is not enough to say that the State is different from its citizens or the debtor from the creditor because the Constitution makes them equal.

Counsel for the appellant argued that the issuance of garnishee order in terms of s 58 of the Act is unreasonable as it is issued by the creditor who also proceeds to execute it against the judgment debtor. He argued that enforcement of the payment of taxes should be done by the who is an officer of the Court. He argued that s 58 purports to allow the first respondent to attach any assets as it deems fit whilst some assets cannot be attached for instance food and clothes as provided in the High Court Rules, 1971. He further argued that attaching money meant for wages erodes the appellant’s protection from the law. He argued that first respondent’s exercise of power in in terms of s 58 is contrary to s 68 of the Constitution as there is no oversight to its power of that power.

Counsel for the appellant further argued that the provisions through which the tax payers liability is enforced should be ‘subject to the provisions of the Constitution. He contended that s 58 should be subject to controls so that fairness is achieved as the powers it gives to the first respondent are too extensive.

Mr Bhebhe for the first respondent submitted that the appellant did not challenge the constitutionality of s 69 of the Income Tax Act in the court a quo. He argued that the mention of s 69 in grounds of appeal is made on the realisation by the appellant that failure to challenge s 69 makes the argument irrelevant because s 58 exists as a result of s 69. He contended that if the appellant’s obligation to pay tax and the first respondent’s right to receive the same is not objected to, then nothing can hinder the execution in terms of s 58. Counsel for the first respondent further contended that once it is accepted that s 69 is lawful, then s 58 on the powers of first respondent’s recovery of tax debts cannot be faulted. He averred that s 58 being at the tail end of the process, does not give the first respondent the right to recover but is merely an enforcement mechanism. He further averred that the appellant accepts that tax collection and the use of a garnishee mechanism is universal and necessary for the effectiveness and efficiency of the tax collection system. He further submitted that failure to rely on garnishing in terms of s 58  can result in tax money being spirited away. He averred that reliance on s 58 prevents a debtor from spiriting away money  due to the first respondent as tax. Counsel for the first respondent argued that tax has to be collected without fail as it is the lifeblood of any State. He further argued that the collection  of tax in terms of s 58 is universal and the appellant is asking the court to stray away from the position which obtains in most jurisdictions. Mr  Bhebhe submitted that the right to equality does not mean treatment of creditor and debtor in the same manner because tax payers do not like paying tax thus measures which appear draconian have to be enforced so that there is an effective system of payment of taxes. He further submitted that the tax collector and tax payers relationship is not an ordinary debtor-creditor relationship but one in which the law empowers the first respondent to enforce payment to avoid unnecessary delayed payment of taxes.

Mr  Muradzikwa for the second respondent submitted that the second respondent was only cited to assist in determining the constitutionality of s 58 and has no interest in the matter or the relief sought.

In response, Mr Ochieng for the appellant submitted that in terms of the Constitution where tax is lawfully due, its collection must be lawful. He averred that s 58 does not flow from s 69, as it depends on the liability to pay tax whatever the source maybe and that the appellant is seeking the removal of an arbitrary tax collection procedure.

APPLICATION OF THE LAW TO THE FACTS

Whether this Court has jurisdiction to hear an appeal on the Constitutional validity of a statute.

The law on whether or not the Supreme Court has jurisdiction to hear appeals on the constitutional validity of statutes is provided for by ss 169 (1) to ( 3) and 175 (3) of the Constitution which provide as follows:

“169 Jurisdiction of Supreme Court

(1) The Supreme Court is the final court of appeal for Zimbabwe, except inmatters over which the Constitutional Court has jurisdiction.

(2) Subject to subsection (1), an Act of Parliament may confer additional jurisdiction and powers on the Supreme Court.

(3) An Act of Parliament may provide for the exercise of jurisdiction by the Supreme Court and for that purpose may confer the power to make rules of court”.

“ 175 (3) Any person with a sufficient interest may appeal, or apply, directly to the Constitutional Court to confirm or vary an order concerning constitutional validity by a court in terms of subsection (1).”

The parties interpreted the provisions of the Supreme Court Act and the Constitution as meaning that this Court has jurisdiction to hear appeals from the High Court when it holds that a challenged statutory provision is valid.

As already explained above the fact that the parties have agreed on the interpretation of these provisions does not mean that the correct interpretation of those provisions has been established. The law is not established by an agreement between the parties. It originates from recognised sources like statutes, common law and precedents. It is the duty of the court to state what the law is. It can therefore agree or disagree with the interpretation of the parties. I will therefore proceed to determine the correct position of the law despite the parties agreement on what they believe to be the law.

The issue of whether or not this Court has jurisdiction to hear an appeal on the constitutional validity of a statute was decided in the case of Mfundo Mlilo v The President of The Republic of Zimbabwe SC 179/20 at pp 12 to 14  at paras 34 to 38 where Garwe JA (as he then was), said:

“[34]  Section 175 (3) provides that an interested person may appeal or apply directly to the Constitutional Court to confirm or vary an order concerning constitutional validity by a court in terms of subs 1. Whilst the subsection refers to subs (1) it also refers to “an order concerning constitutional validity”- and not constitutional invalidity. An order concerning constitutional validity is exactly that. It is not limited to orders concerning constitutional invalidity only.”

This paragraph makes it clear that appeals on both constitutional validity and invalidity can be appealed directly to the Constitutional Court. On p 13 para 35 he went on to explain the effect of ss 169 (3) and 175 (3) as follows:

“Taken together, therefore, ss 169 (3) and 175 (3) simply mean that an order of constitutional validity or invalidity may be appealed against directly to the Constitutional Court”---

At para 36 he while commenting on a submission that an appeal against an order of constitutional validity should lie to the Supreme Court, said:

“In any event the submission that an appeal against an order of constitutional validity should lie to the Supreme Court and not the Constitutional Court would result in a patent absurdity. The Supreme Court is an appellate court and does not itself deal with matters at first instance. It does not itself declare, at first instance, an Act of Parliament to be valid or invalid. Its powers in terms, of s 22 of the Supreme Court Act, are to confirm, vary, amend, or substitute the order appealed against. If it amends the order of the lower court, that amended order becomes the order of the lower court. Similary were it substitutes an order, that order becomes the order of the lower court”.

At para [37] he,  while demonstrating the absurdity said:

“—the Supreme Court would not itself have the power to refer the order to the Constitutional Court for confirmation. The record would have to be returned to the High Court. Only the High Court would thereafter have the jurisdiction to refer the order of constitutional invalidity to the Constitutional Court for confirmation. Such a process would be convoluted and unnecessary. An appeal from an order of constitutional validity directly to the Constitutional Court would resolve the issue of validity or invalidity once and for all.”

He on p 14 para 38 concluded by saying:

“In the final analysis however, it is clear to me that the intention of the legislature was that appeals against both constitutional validity and invalidirty be determined by the Constitutional Court, which has the jurisdiction to make the final decision in this regard. Consequently the appeal noted to this Court is invalid and for that reason the matter ought to be struck off the roll”.

I agree with the decision of this court in the Mfundo Mlilo case (supra). The appeal by the appellant to this court is therefore invalid.

On the issue of costs both parties were of the view that this Court had jurisdiction to hear the appeal. It would therefore be fair that each party should bear its own costs.

I therefore order as follows:

1.	That the matter be and is hereby struck off the roll.

2.	That each party shall bear its own costs.

BHUNU JA: 			I agree

CHITAKUNYE AJA: 		I agree

Coghlan, Welsh  & Guest, appellant’s legal practitioners

Kantor & Immerman,1st respondent’s legal practitioners

Civil Division of the Attorney General’s Office, 2nd respondent’s legal practitioners