THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

CASE NO: 103/2014
Reportable

In the matter between:

DIRECTOR OF PUBLIC PROSECUTIONS,
WESTERN CAPE                                                                                    APPELLANT

and

MOHAMED SHAKIEL PARKER                                                          RESPONDENT

Neutral citation:   Director of Public Prosecutions, Western Cape v Parker
(103/14) [2014] ZASCA 223 (12 December 2014).
Coram:

Brand, Shongwe, Leach, Pillay et Willis JJA
Heard:

21 November 2014
Delivered:

12 December 2014

Summary:
Criminal law – failure to pay value-added tax in terms of Value-Added
Tax Act 89 of 1991 – charged with common law theft – whether relationship between
registered vendor and South African Revenue Service is a trustee relationship.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from:
Western Cape High Court, Cape Town (Dlodlo J and Van
Staden AJ sitting as court of appeal):

The appeal is dismissed with costs, including the costs occasioned by the
employment of two counsel.
___________________________________________________________________

JUDGMENT
___________________________________________________________________

Pillay JA (Brand, Shongwe, Leach et Willis concurring):

[1] Step-in-Time Supermarket CC (the CC), a registered Value-Added Tax (VAT)
vendor and the respondent, its sole representative were charged in the regional
court, Belville, Western Cape with a number of counts under the Income Tax Act 58
of 1962 (the Income Tax Act) and the Value-Added Tax Act 89 of 1991 (the Act)
respectively. Apart from these they were charged with sixteen counts of (common
law) theft of money allegedly collected in respect of VAT. The charges under the Act
related to the CC’s failure to submit VAT returns under s 28(1)(a) of the Act between
the period February 2001 to February 2006, while the theft charges were based on
the CC’s failure to pay VAT over the same period. The charge sheet alleged,
however, that all sixteen crimes of theft were committed on 23 October 2006, that
being the date upon which the VAT returns for the CC were eventually filed.

[2] The CC and the respondent pleaded guilty to all the charges and were duly
convicted after the respondent submitted a written plea in terms of s 112 of the

Criminal Procedure Act 51 of 1977 (the CPA) on behalf of both. The magistrate for
purposes of sentence grouped the convictions and sentenced the respondent as
follows:
(a) On counts 1 to 6 (ie the charges under the Income Tax Act) : A fine of R 3000 or
18 months’ imprisonment suspended for four years on condition that he is not
convicted of contravening s 75(1)(a) of the Income Tax Act, committed during the
period of suspension;
(b) On counts 7 to 37 (ie the charges under the Act): A fine of R 10 000 or 2 years’
imprisonment suspended for four years on condition that he is not convicted of
contravening s 58(d) of the Act, committed during the period of suspension;
(c) On counts 44 to 60 (ie the sixteen charges of common law theft): 5 years’
imprisonment in terms of s 276(1)(i) of the Criminal Procedure Act.
Since the CC did not appeal, it is not necessary to set out the sentences imposed on
it.

[3] The trial court granted the respondent leave to appeal against the sentence
imposed in respect of the theft, ie 5 years’ imprisonment in terms of s 276(1)(i) of the
CPA, to the Western Cape High Court, Cape Town. Prior to the scheduled hearing of
the appeal, both the appellant and respondent were, however, requested by the
court below to prepare and argue the following:
‘1. Should the appellant have been charged with theft (counts 44 to 66) in view of the
judgment in AJC Olivier v Die Staat. [ie AJC Olivier v Die Staat (A153/2005)(22 September
2006).]
2. On what basis can the matter under consideration be distinguished from that matter.
3. Was the said unreported judgment of Olivier disclosed to the legal representatives of the
appellant prior to the pleas in terms of Section 112 of the Criminal Procedure Act?

4. Does this court have the inherent jurisdiction to set aside this conviction, based on the
authority of Olivier’s case.’
In consequence, the respondent, as appellant, successfully applied to the regional
court for leave to appeal against the convictions for theft. It is common cause that the
respondent, representing the CC, did not pay VAT to the South African Revenue
Service (SARS).

[4] The court below (per Dlodlo J and Van Staden AJ), held that the respondent
did not commit theft of the VAT, essentially on the basis that the money in question
belonged to the vendor and not the commissioner of SARS. The convictions for theft
(counts 44 to 60) were consequently set aside together with the sentence in terms of
s 276(1)(i) of the CPA. The court below also referred to other aspects in its judgment
but it is not necessary to deal with those herein.

[5] The appellant (the State) requested this court to decide the following legal
question:
‘Whether a VAT vendor who has misappropriated an amount of VAT which it has collected
on behalf of SARS can be charged, with the common law crime of theft.’
At the hearing before us counsel for the State was asked about the underlying
reason for the appeal. The motivation for the question arose from the fact that a
failure to pay VAT is a statutory crime under s 28(1)(b) read with s 58 of the Act
which is punishable with a sentence of two years’ imprisonment. Counsel for the
State then explained that the reason why it approached the court was because the
penalty and punishment prescribed by the Act were too lenient for certain cases of
misappropriation of VAT. It follows that a conviction for theft would pave the way for
sterner sanctions and that is what the prosecuting authority sought.

[6] In contending that the court below had erred in answering the question stated
in the negative, the State argued that the court started out on the wrong premise by
asking whether SARS became the owner of that money. In collecting VAT, so the
State’s argument went, the VAT vendor acts as an agent for SARS. It follows, so the
argument proceeded, that a VAT vendor who uses VAT for purposes other than to
pay to the Commissioner misappropriates those funds and is therefore guilty of theft,
despite the fact that the vendor may be the owner of that money.

[7] In support of this contention, the State sought to rely on those decisions of
this court which provide authority for the following propositions: Where X holds
money in trust on Y’s behalf or receives money from Y with instructions that it be
used for a specific purpose and X misappropriates that money by using it for a
different purpose, X commits theft of the money. In these types of cases the rule that
one cannot steal one’s own money is no bar to a conviction. Y, according to these
decisions, has a special interest or property in the money. However, unless X is
obliged to keep the money in a separate account, he does not commit theft if, at the
time he uses the money for a different purpose, he has at his disposal a liquid fund
large enough to enable him to repay it (see eg S v Gathercole 1964 (1) SA 21 (A) at
25; S v Visagie 1991 (1) SA 177 (A) at 182-183; S v Boesak 2000 (1) SACR 633
(SCA) paras 96 and 99).

[8] In support of the proposition that the VAT vendor who collected VAT is in a
position of trust vis-à-vis SARS with regard to that money, the State sought to rely on
the following:
(a) The provisions of s 7(1) of the Act which reads:

‘Imposition of value-added tax
(1) Subject to the exemptions, exceptions, deductions and adjustments provided for in this
Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be
known as the value-added tax –
(a)
On the supply by any vendor of goods or services supplied by him on or after the
commencement date in the course or furtherance of any enterprise carried on by him;
(b)
. . .
(c)
. . .
calculated at the rate of 14 per cent on the value of the supply concerned or the
importation . . .’
(b)
The statements in Metcash Trading Ltd v Commissioner, South African
Revenue Service 2001 (1) SA 1109 (CC) paras 15 and 17 that ‘vendors are
entrusted  with a number of important duties in relation to VAT’ and that ‘vendors are
in a sense involuntary tax-collectors’.
(c)
The decision of this court in Estate Agency Affairs Board v McLaggan 2005
(4) SA 531 (SCA).

[9] I do not believe, however, that s 7(1) of the Act either expressly or impliedly
creates a relationship of trust. On the contrary, it is clear to me that the relationship
created by the Act is one of a debtor and his creditor. At the time the respondent was
charged, s 40 of the Act was still in operation. That section pertinently described VAT
‘when it becomes due or is payable’ as a ‘debit to the State’. In addition the section
provided for SARS to civilly sue a vendor for outstanding VAT together with the 10
per cent penalty (and interest) provided for in s 39. Section 40 has since been
repealed by the Tax Administration Act 28 of 2011 (the 2011 Act) which similarly
makes provision for SARS to recover money due to it by way of litigation (see

chapters 11 and 12 of the Tax Administration Act). Consequently it is clear that the
Act provides for a debtor-creditor relationship as between the vendor and SARS. The
procedures allow the commissioner to resort to litigation in order to recover tax debts
(s 169 of the 2011 Act) and even institute sequestration, liquidation or winding-up
proceedings, as the case may be (s 177 of the 2011 Act). Therefore should a vendor
fail to pay any tax, penalty or interest, (when it is due and payable) the commissioner
is entitled to sue the vendor for payment. The vendor can also, simultaneously, be
charged in terms of s 58 of the Act for failing to comply with the Act. Significantly, the
offences referred to in s 58 are confined to non-compliance with the Act and do not
include common law theft.

[10] The argument based on Metcash misconstrued and quotes out of context the
comments made by Kriegler J. What Kriegler J said in para 15, after broadly
discussing what the Act compels the registered vendor to do in calculating and
paying VAT, was that ‘In the result vendors are entrusted with a number of important
duties in relation to VAT’. In this sense ‘entrusted’ might very well be replaced with
‘burdened with’. In other words the vendor is expected to comply with various
sections of the Act which serve to safeguard the operation thereof and minimise the
effects of its weaknesses. The learned judge certainly did not suggest that a trust
relationship or one resembling that as between a trustee and a beneficiary of a trust,
had been created. Second, counsel for the appellant misconceives the import of the
Metcash decision in citing the judgment as authority for the proposition that VAT
vendors are involuntary tax-collectors on behalf of SARS, and are therefore in a
position of trust and would commit theft if they appropriate such collected VAT for
uses other than to submit it to SARS. What the learned judge in fact said at para 17

is ‘that vendors are in a sense involuntary tax-collectors’. The omission to consider
the phrase ‘in a sense’ has far reaching consequences which give a totally different
meaning to what the learned judge intended. It is clear that he did not classify VAT
vendors as official tax-collectors but explained that ‘in a sense’ they could be
described in this way. All the learned judge was conveying is that VAT is payable on
every sale and that details of the manner of calculation of VAT, the timetable for
periodic payment and the amount to be paid are statutorily controlled and it is left for
the vendor to ensure compliance therewith. This is quite different from imposing the
status of a formal tax-collector or a trustee of SARS on a registered vendor.

[11] The State’s reliance upon Estate Agency Affairs Board v McLaggan was also
wrong. This case related to the cancellation of McLaggan’s fidelity fund certificate.
The element of dishonesty was of importance on appeal not to determine whether or
not he was guilty of theft, but rather to determine whether McLaggan’s fidelity fund
certificate should indeed lapse by reason of dishonesty. And, importantly, he was in
fact charged in terms of s 58 of the Act regarding the non-payment of VAT and not
with common law theft. The submission made by the State on the strength of this
case that the respondent’s misappropriation of VAT was seen as dishonest and
therefore it amounted to theft, is clearly misplaced.

[12] During argument counsel for the State had difficulty in indicating when exactly
the vendor should be regarded as having misappropriated the money which had
been collected as VAT. At one stage she contended that it was on the 25th day of the
month following that period, when the net amount of VAT becomes due and payable
in terms of s 28(1)(b) of the Act. But that only tells us when the vendor’s liability

arises. At that stage the vendor’s position would be no different from eg the tax payer
whose assessment for income tax had been made (see eg Metcash para 16). Even
counsel for the State baulked at the suggestion that this taxpayer would be guilty of
theft if it uses the assessed amount for a purpose other than to pay its assessed
income tax. This proposition is clearly in line with the allegation in the charge sheet
that the respondent had committed theft in respect of the net amounts that were
reflected in the VAT returns of the CC which were eventually filed on 23 October
2006. But this contention raised problems of its own. First, it would mean that the
vendor who files a return steals from SARS while one who does not will not be guilty
of theft. Secondly, since VAT is calculated on an invoice basis it could mean that the
vendor had stolen VAT which it had not yet received.

[13] Confronted with these difficulties, counsel for the State then changed tack by
suggesting that the relationship of trust arises every time the vendor collects VAT
and uses that money for purposes other than paying it over to SARS. This
proposition again created problems of its own as is shown by the following example.
If the vendor sells an article for R100 together with R14 VAT it would, on counsel’s
argument, be guilty of theft of the R14 if it uses it for another purpose, unless it has a
liquid fund to enable him to repay. The fact that on the next day his indebtedness is
cancelled out by input tax would make no difference. Neither would the fact that it
would be able to pay whatever VAT becomes payable on the 25th day of the month
following the tax period.

[14] In the light of this example, the concept of a trust relationship between the
vendor and SARS which forms the bedrock of the State’s argument is clearly

unsustainable. The answer to these difficulties suggested by counsel, namely that
the Director of Public Prosecutions would never charge the vendor under the
circumstances contemplated in the example, provides no answer at all to the
question whether a crime has been committed. The law cannot depend on whether
or not the DPP decides to enforce it.

[15] It is clear that the Act is a scheme with its own directives, processes and
penalties. The relationship it creates between SARS and the registered vendor is sui
generis – one with its own peculiar nature. The Act does not confer on the vendor
the status of a trustee or an agent of SARS. If it did, the vendor would either have to
keep separate books of account or alternatively, would have to be sufficiently liquid
at any given time in order to cover the outstanding VAT. The Act makes no provision
for this situation nor does it seek to compel a vendor to keep separate books of
account in respect of VAT.

[16] To find that the Act creates a trust relationship (in whatever form) would
require an innovative approach. The Act, in particular s 58, does not incorporate theft
as an offence. If the State wants the legislature to do so, or if the sentences provided
for in s 58 are found to be inadequate, the obvious solution is to approach the
Legislature. For the courts to extend the crime of theft to resolve the State’s
difficulties, would be contrary to the principle of nullum crimen, nulla poena sine
praevia lege poenali (without a law, no charge is possible).

[17] For these reasons the question of law as formulated by the State must
therefore be answered in the negative. In the event the appeal against the judgment

of the court a quo must fail. This brings me to the question of costs. Section 311(2)
of the Criminal Procedure Act provides that, in dismissing an appeal of this kind, the
court may order the State to pay the costs which the respondent may have incurred
in opposing the appeal. The respondent in this matter had a clear interest in the
outcome of the appeal. Moreover, I believe that in all the circumstances a costs
order which includes the costs of two counsel, is justified.

[18] Accordingly, the appeal is dismissed with costs, including the costs
occasioned by the employment of two counsel.

_________________
R PILLAY
JUDGE OF APPEAL

APPEARANCES:

FOR APPELLANT:

Adv B Hendry-Sidaki

Instructed by:

Director of Public Prosecutions, Cape Town

Director of Public Prosecutions, Bloemfontein

FOR RESPONDENT:

Adv M Salie with Adv S Gcelu

Instructed by:

Parker Attorneys and Conveyancers, Cape Town

Phatshoane Henney Attorneys, Bloemfontein