S (PVT) LTD v ZIMBABWE REVENUE AUTHORITY 2014 (2) ZLR 580 (H)

Flynote

Revenue and public finance — value added tax — deductions allowed — input tax — when may be claimed — need for operator to submit claim timeously

Revenue and public finance — value added tax — tax on goods or services supplied — meaning of "supply" — wide meaning to be given to — supply of goods by operator in lieu of payment of cash for goods supplied to D operator — supply treated as sale in operator's books of account — not a settlement in kind

Headnote

The appellant company in these two appeals was a manufacturer of steel and steel products.

In the first appeal, the facts were that in 2008 another company in the business of making steel products supplied, at the request of the appellant, fuel and groceries imported from South Africa. The appellant did not settle the debt on delivery of the goods. At the commencement of the multicurrency regime in February 2009, the appellant created a liability in its booksof account in favour of the other company for the indebtedness. In due course it settled the debt by providing steel of equivalent value to the debt. It issued invoices and delivery notes for the transaction. The appellant's tax agents, a firm of chartered accountants, in a letter to the respondent, described the transaction as barter trade and further treated it as a sale in a subsequent letter. The appellant initially treated the transaction as a sale, but later altered it to "cost of sales". It did not collect or remit VAT on the transaction. The respondent treated it as a barter trade and assessed the appellant for VAT. The issue on appeal was whether the provision of the steel constituted a "supply" of the steel or a payment by means of steel.

In the second appeal, the appellant and a third company concluded an agreementin terms of which that company, a scrap metal supplier, supplied scrap metal which the appellant converted into finished products for the scrap metal supplier's use. In return for the processing, the appellant would receive one tonne of finished steel products for every five tonnes of scrap processed. Both companies raised debit notes showing the value of the metal supplied and the VAT owing. The amount in each debit note were identical. The appellant submitted a VAT return for other transactions but did not declare the supplies of finished steel products supplied. It also failed to claim for input tax for the scrap it received. When the respondent audited the appellant's tax returns it directed theappellant to submit amended VAT returns. The appellant did so, and claimed input tax for the scrap it received. The claim for input tax was disallowed. The issue was whether the claim was validly made in terms of s 15(2)(a) of the Value Added Tax Act [Chapter 23:12].

Held, that, under s 6(1)(a) of the Act, VAT is charged on the supply, on or after 1 January 2004, by any registered operator of goods and services in the course or furtherance of any trade carried on by him. All these elements were present, the only issue being the nature of the transaction. The word "supply" was not defined in the Act, other than as including "all forms of supply". It thus had a wider connotation than its usual and ordinary meaning. The appellant received goods from the other company and set off the debt through the supply of steel of equivalent value. The contention that the appellant treated the set off as a payment was not borne out by the facts. Before VAT was assessed, the appellant treated the transaction as a sale of steel in its books of accounts. It issued invoices to the other company, as well as delivery notes. The transaction was a sale. It was a sale for which the appellant did not receive cash but offset the cash due against the debt owing. It was not a settlement in kind.

Held, further, that the contra fisum rule of construction of tax laws entails interpreting the law so as to impose the smaller burden on the taxpayer. However, there is little reason why the interpretation of fiscal legislation should be subjected to special treatment which is not applicable in the interpretation of other legislation. Ultimately, the true intention of the legislature is of paramount importance, indeed decisive. If the language of an enactment is unambiguous, that is the end of the matter. Where the meaning is unequivocally expressed, there is neither need nor room for ancillary aids to interpretation.

Held, further, that the essential factors on which a deduction of input tax is based are (a) a tax invoice, debit note or credit note must have been provided in accordance with s 20 or 21; (b) the tax invoice, debit note or credit note must be provided within the period in which the registered operator is required to furnish a return in terms of s 27 or s 28, or 12 months, whichever is the longer; (c) the tax invoice, debit note or credit note must be held by the operator; and (d) the tax invoice, debit note or credit note must be held at the time any return in respect of that supply was furnished. Items (a), (c) and (d) applied to the appellant. The appellant fell into category C as a registered operator, which meant that it had to furnish its return within 10 days of the end of its taxable period. Like every other registered operator, it had a grace period to do so of 12 months from the last day of the month from which it was supposed to furnish the return. It did not do so, either during the ordinary period or during the grace period. It only did so two years later, after receiving a directive in terms of s 30 from the respondent. Accordingly, the respondent was correct in disallowing the claim for input tax.

Editor's note: The judgment number is given as FA-5-13 (fiscal appeal judgment 5 of 2013). At the time of preparing this volume of the Reports, the HH (High Court, Harare) number for the judgment was not available.