IN THE HIGH COURT OF SOUTH AFRICA CAPE OF GOOD HOPE PROVINCIAL DIVISION
Case No.: A 232/2007
In the matter between:

and
COMMISSIONER FOR THE SOUTH AFRICAN

JUDGMENT: 16 May 2008 DAVIS J:
[1] 	This is an appeal against the judgment of the Special Income Tax Court delivered on 15 March 2006, dismissing the appellant's appeal against certain value added tax (VAT) assessments raised by the respondent.

[3]	The respondent adopted the view that the appellant had received "imported services" as defined in section 1 of the Act and thus raised assessment for VAT on such services to the extent that  the services were used or consumed in the Republic otherwise than for the purpose of making  taxable supplies.

[5]	As Mr Emslie, who appeared on behalf of the appellant, correctly submitted, the appeal is 	concerned exclusively with questions of law, being the interpretation of various provisions of the Act in relation to facts which are essentially common cause between the parties.

The relevant legislation

[6]	Given that this appeal turns entirely on certain provisions of the Act, it is necessary to reproduce the relevant provisions.
	The charging provision in the Act is section 7(1), which provides as follows:
"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) on the importation of any goods into the Republic by any person on or after the commencement date; and
(c) on the supply of any imported services by any person on or after the commencement date,
calculated at the rate of 14 per cent on the value of the supply concerned or the importation, as the case may be."

[7]	The term "services" is defined as follows in section 1 of the Act:

"'services' mean anything done or to be done, including the granting, assignment, cession or surrender of any right or the making available of any facility or advantage, but excluding a supply of goods, money or any stamp, form or card contemplated in paragraph (c) of the definition of 'goods'.

"'imported services' means a supply of services that is made by a supplier who is resident or carries on business outside the Republic to a recipient who is a resident of the Republic to the extent that such services are utilised or consumed in the Republic otherwise than for the purpose of making taxable supplies".

"Where, but for this section, a supply of services would be charged with tax at the rate referred to in section 7(1), such supply of services shall, subject to compliance with subsection (3) of this section, be charged with tax at the rate of zero per cent where -
....

"the tax chargeable in terms of section 7(l)(c) shall not be payable in respect of-
a)	
b)	a supply which, if made in the Republic, would be charged with tax at the rate zero per cent applicable in terms of section 11 or would be exempt from tax in terms of section 12;".

[11]    The facts in the present dispute reveal that the services with which this appeal
is concerned, are imported services in that what was involved, was the supply of services made by a supplier resident or carrying on business outside the Republic to a recipient, the appellant, a resident of the Republic. The services were utilised or consumed in the Republic, otherwise than for the purpose of making taxable supplies. In general, imported services stand to be taxed at the rate of 14 per cent VAT in terms of section 7(1)(c)of the Act. The question for determining in the present case is whether another section of the Act was applicable to tax the transaction and, if so, which section.

Appellant's argument

Respondent's argument

[20] 	Mr Rogers submitted that, since section 11(2) was concerned with the zero rating of VAT, the 1997 amendment made, in effect, a cosmetic change to the legislation in that it made better sense to refer to the rate of VAT specified in section 7 (1); in particular because the rate of 14 percent was not referred to in either sub paragraphs (a), (b) and (c) of section 7 but only in the concluding part of the subsection. Accordingly, it was textually more accurate to refer to section 7(1), rather than to any of its sub paragraphs as had been the case prior to the 1997 amendment.

[21]    Mr Rogers submitted further that it was clear that section 11 was intended to

[22]    	Mr Rogers correctly contended that the overall solution to the meaning of the 1997 amendment, in particular, and the general scope of section 14(5)(b) of the Act in general, required an analysis of the overall scheme of the Act in order to fully grasp the implications of respondent's arguments.  It is to his argument about the scheme of the Act that I now turn.

[23] 	Briefly stated, section 7 provides for the imposition of VAT Section 11 provides for the zero rating of the supply of certain goods and services which otherwise would be charged with tax at the rate referred to in section 7 (1). Section 12 covers a range of suppliers of goods or services which are exempt from the rate of tax imposed in terms of section 7 (l)(a). Section 13 deals with the collection of tax on the importation of goods and section 14 with the collection of tax an imported services.

Evaluation

Conclusion

DAVIS, J
I agree
ZONDI, J
I agree
 									Schippers, A J