Court name
Supreme Court of Zimbabwe
Case number
SC 131 of 2002
Civil Appeal 254 of 2000

Commissioner of Taxes v Astra Holdings (Pvt) Ltd. t/a Puzey & Payne (254/2000) (SC 131 of 2002, Civil Appeal 254 of 2000) [2003] ZWSC 131 (27 March 2003);

Law report citations
Media neutral citation
[2003] ZWSC 131


REPORTABLE (114)

















Judgment
No S.C. 131\2002


Civil
Appeal No 254\2000

















THE
COMMISSIONER OF TAXES v ASTRA HOLDINGS
(PRIVATE) LIMITED t/a PUZEY & PAYNE











SUPREME
COURT OF ZIMBABWE


CHIDYAUSIKU
CJ, CHEDA JA & MALABA JA


HARARE
MAY 23, 2002 & MARCH 28, 2003








L.
Mazonde
,
for the appellant





A.P.
de Bourbon S.C.,

for the respondent








MALABA
JA: This is an appeal from a judgment of the Fiscal Appeals
Court dated 10 February 2000, setting aside an assessment
to tax
raised on the respondent (“Astra Holdings”) by the appellant
(“the Commissioner”) on 3 March 1997 in the amount of
$681 724,81
for the period July 1995 to December 1996 and on 19 March 1997 in the
amount of $377 493,18 for the period January to
3 March 1997 and
directing that the said amounts be refunded to the respondent with
interest at the rate of 25% per annum from the
date the money was
received by the appellant to the date of refund. There was no order
as to costs.





Astra
Holdings is a company incorporated in terms of the laws of Zimbabwe
carrying on the business of selling motor vehicles to
members of the
public under the style Puzey & Payne. It is a registered
operator for the purposes of the Sales Tax Act [Chapter
23:08] which
provided under section 4(1) that:-





“4(1)Subject
to this Act there shall be charged, levied and collected for the
benefit of the Consolidated Revenue Fund a tax at such
rate as may be
fixed by Parliament on the sale value of __________







  1. …







  1. …







  1. …







  1. motor
    vehicles and other goods sold by motor dealers, whether on their own
    account or on behalf of other persons …”












The
sale value of goods on which the tax was to be charged was defined in
section 2(1) of the Act as:-






“the
total sum payable by the purchaser or client under the agreement for
the sale of the goods … and included






  1. any
    amount that may be charged to the purchaser or client in respect of
    tax payable.”









Section
2(1) of the Act excluded from “sale value” “any sum payable
outside Zimbabwe” in relation to a service supplied.
“Service”
was defined to exclude “goods” with the effect that no exemption
from tax liability was granted or could be claimed
under the
provisions of the Act for the sale of motor vehicles in Zimbabwe.






Section
5(1) of the Act provided that:-






“5(1)The
tax mentioned in section
four
shall be payable ____________







  1. …







  1. in
    the case of a motor vehicle or other goods sold by a motor dealer
    ______







  1. where
    the motor dealer is the agent of the seller, by the motor dealer on
    behalf of the seller;







  1. where
    the motor dealer is the seller, by the motor dealer.”









It
is common cause that up to the end of June 1995 Astra Holdings, as a
registered motor dealer, charged and collected sales tax on
the
purchase prices of motor vehicles it sold to members of the public in
Zimbabwe and paid the money to the Consolidated Revenue
Fund. From
July 1995 to 3 March 1997 Astra Holdings did not charge and collect
the tax on motor vehicles it sold to members of
the public who paid
the purchase prices in foreign currency. Astra Holdings said it was
acting upon advice contained in a letter
addressed by the Principal
Tax Examiner to another motor dealer (Haddon Motors) on 1 July 1995.
The letter read:-







“SALES
TAX: EXEMPTION FROM TAX ON GOODS BOUGHT USING MONEY FROM A
FOREIGN SERVICE





I
refer to our telephone interview on 4 May 1995 concerning the above
mentioned subject.





This
is to confirm that goods or services bought using foreign funds
(money from a foreign source) are exempt from sales tax.





‘Foreign
source’ in this case means:






  1. Payment
    using foreign bank drafts.







  1. Payment
    using foreign cheques.







  1. Payment
    using foreign credit cards






but
does not include payment in Zimbabwe cash.





I
hope this clarifies the issue.”









It was not
disclosed to the court
a
quo

how the letter which was a private communication between the revenue
and another taxpayer came to be in the possession of Astra Holdings.

The letter was taken to mean that motor vehicles sold in Zimbabwe
and paid for locally in foreign currency were exempted from sales
tax.






Astra
Holdings made reference in its case to the court
a
quo

to another letter addressed to AMTEC Motors by an Assistant
Commissioner of Taxes on 8 February 1996. I shall consider later
the
question whether or not the learned President should have placed
any weight at all on this letter in deciding upon the justification
of the action of Astra Holdings in not charging and collecting sales
tax on motor vehicles sold in Zimbabwe and paid for in foreign
currency.





Suffice
to say that when revenue officers inspected Astra Holdings’ books
and monthly statements submitted to the office relating
to all sales
of motor vehicles transacted, they discovered that the motor dealer
had failed to pay sales tax on motor vehicles sold
locally and paid
for in foreign currency.






The
Principal Tax Examiner caused the assessment to be made for the
amounts on which tax was payable. As a result of the assessment
the
two amounts mentioned in the order of the court
a
quo

were found payable by Astra Holdings. The assessment was made in
the exercise of the power conferred upon revenue officers by section
18(1) of the Act. It is provided therein that a revenue officer who
has reason to believe that a registered operator has failed
to pay
tax in respect of motor vehicles sold, may cause an assessment to be
made of the amount upon which tax is payable, unless
the sale in
respect to which the assessment is to be made was transacted more
than three years before the date of the proposed assessment.





On
17 April 1997 Astra Holdings lodged with the Controlling Officer a
written objection to the assessment. The grounds for the
objection
were that Astra Holdings failed to charge and collect sales tax on
motor vehicles sold by it and paid for locally in foreign
currency
because it reasonably believed that the letter of 1 July 1995
represented the policy of the Department of Taxes towards
motor
dealers. It was pointed out that during the relevant period
external auditors and inspectors from the Department of Taxes
examined Astra Holdings’ books on two occasions. It was not
indicated to it that failure to raise sales tax on motor vehicles
sold locally and paid for in foreign currency was unlawful. The
authenticity of the letter of 1 July 1995 was not questioned.





It
was also pointed out that the monthly tax returns sent to the
Department of Taxes on behalf of Astra Holdings had annexed to
them
schedules indicating the types of motor vehicles sold, names of
purchasers, amounts paid in foreign currency and “exemption”
from
tax. The argument was that the reason why revenue officers who
received the monthly returns failed to query the fact that
sales tax
was not being charged and collected on motor vehicles paid for
locally in foreign currency was that it was the policy of
the
Department of Taxes not to have sales tax levied on motor vehicles
paid for in foreign currency.





The
paragraph in which the letter of 8 February 1996, addressed to AMTEC
Motors was referred to reads:-





“It
would appear that subsequently the Department of Sales Tax Branch
Harare advised our client that Annexure “A” (letter of 1
July
1995) contained an error in that it should have related to “services”
only.






However, on
the 8
th
of February 1996, the Inspector of Taxes addressed AMTEC MOTORS (PVT)
LIMITED a dealer in motor vehicles whose business is very similar
to
our client and a copy of that letter is annexed hereto as Annexure
“B”. It is clear that the policy adopted by the Sales
Tax
Department, would relate to all dealers and not simply to AMTEC
MOTORS (PVT) LIMITED.”








It
seems to me that the letter of 8 February 1996 was referred to by
Astra Holdings’ legal practitioners to prove the existence
of an
alleged policy of the Department of Taxes not to demand payment of
sales tax from motor dealers on motor vehicles sold and
paid for
locally in foreign currency. It was not referred to as proof of
what influenced Astra Holdings’ decision not to charge
and collect
the tax from purchasers of motor vehicles who paid in foreign
currency as the learned President found in the reasons
for judgment.





After
considering the objection the Commissioner disallowed it. The
reasons given for the disallowance were that the letter of
1 July
1995 contained an error of law in that the exemption from liability
to pay tax on sales of motor vehicles paid for locally
in foreign
currency was unlawful. There was no provision in the Act which
granted an exemption from tax in respect of motor vehicles
sold
locally by registered operators. He pointed out that the letter was
a ruling on questions asked by the addressee on a specific
matter and
for that registered operator’s interest. There was no intention
that the letter should be used by the whole motor
trade industry.
It was pointed out that before relying on the letter as representing
the policy of the Department of Taxes not
to demand payment of sales
tax in respect of motor vehicles sold in Zimbabwe and paid for
locally in foreign currency Astra Holdings
should have sought its own
ruling from the department.





On
19 September 1997 Astra Holdings appealed to the Fiscal Appeals
Court. Its case was stated in these terms:-





“6. The
said assessments arise out of a failure on the part of the appellant
to charge sales tax on vehicles that were paid for locally
in foreign
currency.







  1. The
    failure to levy sales tax arises out of a direction by the
    respondent made under reference number ST/NRO/LM/705. A copy of
    that direction is annexed hereto and marked Annexure “A” (letter
    of 1 July 1995).







  1. Appellant
    has since established that respondent wrote to AMTEC Motors
    (Private) Limited on 8 February 1996 expressing a similar
    view.







  1. …







  1. …







  1. …







  1. …







  1. Further
    and/or in the alternative by issuing Annexure “A” the respondent
    is now precluded from claiming sales tax from the appellant.”













The Commissioner responded in
these terms:-






“2. Ad
paragraph 7






The
contents of this paragraph are denied. The direction in question
was not made to appellant and cannot be utilised by it.
Respondent
avers that the failure to levy sales tax in fact arose out of a
misconception of the law by appellant.









3. Ad
paragraph 8





Save
for saying that the contents of this paragraph are irrelevant and
that the view expressed was wrong, the contents hereof are
not
denied.






6. Ad
paragraph 13






Respondent avers that the
grounds relied upon are bad in law in that respondent cannot be
estopped from collecting tax lawfully due
to it; respondent has not
waived any rights it may have against appellant; finally Annexure
“A” was not issued to appellant
and so cannot be relied upon by
it.”








Astra
Holdings called its Financial Manager Mr Edmore Ndudzo to give
evidence. He confirmed that the decision not to charge sales
tax in
motor vehicles paid for in foreign currency was taken on the basis of
the letter of 1 July 1995. After saying Astra Holdings
used to send
to the Department of Taxes monthly tax returns to which were attached
schedules with details on the cars sold, names
of purchasers and
amounts paid in foreign currency on which sales tax was not charged
he was asked:-





“Q. Mr
Ndudzo can you just explain to the court what the attitude of Puzey
and Payne is in this matter?







  1. Our
    attitude in this matter is, to start off with our role in this whole
    aspect is that we are not the tax payers, we are merely
    collecting
    tax on behalf of the Commissioner of Taxes. The taxpayers are our
    customers. We had it in writing that we shouldn’t
    collect this
    tax if the transactions were paid for in foreign currency and I am
    told although this was before my time with Puzey
    and Payne that at
    the time there was also a check with the officials at the Tax
    Department whether that letter that we relied on
    was really
    authentic or not and the answer was it is an authentic letter. So
    we had it in writing that we shouldn’t collect
    tax if the money
    was paid in foreign currency and we didn’t collect tax and for now
    the Tax Department to claim that tax from
    us when we are clearly in
    a position where we cannot recover from the customers is putting us
    in a very injudicious situation.
    So we feel that we have really be
    unjustifiably treated …”









The
case submitted to the Fiscal Appeals Court on behalf of Astra
Holdings was, therefore, that it was not the person liable to pay
the
sales tax but was merely obliged in terms of the legislation to
collect tax on behalf of revenue. The argument was that as
a
collector of tax, Astra Holdings could not have acted contrary to the
ruling of the revenue officer to the effect that it was not
necessary
in the particular circumstances for it to collect the sales tax. It
was unfair for the revenue to change its mind and
issue a
retrospective order for the payment of such taxes against Astra
Holdings as a collector who had acted upon the ruling of
the revenue
officer that the tax should not be collected.






The
learned President did not decide the question whether or not Astra
Holdings was a taxpayer in terms of the relevant legislation.
He
found that the advice given by the revenue officer in the letter of 1
July 1995 represented as the policy of the revenue department
that
tax should not be levied on sales of motor vehicles the purchase
prices of which were paid in foreign currency. It was the
learned
President’s view that Astra Holdings acted in terms of the advice
contained in the letter of 1 July 1995. He held that
it was an
abuse of statutory power for the Commissioner to change policy on the
levy and collection of tax on motor vehicles paid
for in foreign
currency without prior notice to Astra Holdings of the intended
change and to demand from it the unpaid tax retrospectively.





He
said:-





“In
this case it is clear that officials of the Department advised motor
dealers that in the case of vehicles bought using funds from
a
foreign source, the sales were exempt from sales tax. The appellant
acted on this advice and did not collect the tax from those
purchasers of vehicles who used funds from a foreign source. Prior
to getting the advice from officials of the Department, the
appellant
collected sales tax from all purchasers of vehicles, including those
who used funds from a foreign source. It was only
after obtaining
the advice from the officials that it changed its practice. … In
respect of the demand for unpaid sales tax,
I consider that it would
be unfair if the Department, having advised that the sales in
question were exempt from sales tax, were
to be permitted to demand
the sales tax. It is not as though the appellant has collected the
extra money from the buyers of the
vehicles and thereby gained
greater profits. The buyers were advised that the sales tax element
was not payable. The change of
policy and demand for sales tax that
was not collected is, in my view, equivalent to a breach of contract
or a breach of representation.”









On appeal,
Mr
Mazonde,
for the Commissioner argued that the learned President misdirected
himself in holding that the letter of 1 July 1995 represented
as a
policy of the Department of Taxes not to claim sales tax on motor
vehicles in respect to which the purchase prices were paid
in foreign
currency on the ground that such sales were by law exempted from tax.
He said it was clear from the recorded evidence
that Astra Holdings
had not in its individual capacity inquired from the Commissioner
whether the sales in question were at law exempted
from sales tax.
Reliance by Astra Holdings in a letter addressed to another motor
dealer, not in any way related to it and without
evidence as to what
sales the questions of exemption had been raised by that motor dealer
in its private communication with revenue
was not sufficient for the
purposes of establishing a relationship between revenue and Astra
Holdings the violation of which would
be equivalent to breach of
contract or breach of representation giving rise to estoppel at
private law.






Mr de
Bourbon
,
for Astra Holdings, conceded that the Commissioner had a statutory
duty to collect tax to which revenue had a right. He, however,
argued that in exercising statutory powers in the discharge of his
statutory duty, the Commissioner was required to act fairly towards
the taxpayer. It was his contention that having advised Astra
Holdings that sales of motor vehicles for which the purchase prices
were paid in foreign currency did not attract tax and the latter
having acted upon the advice, it was unfair for the Commissioner
to
change “policy" without prior notice of its intention to do so
and then backdate the claim for the unpaid tax. He also
said the
Commissioner was guilty of a breach of the principle of fairness in
that he claimed the unpaid tax from Astra Holdings which
in terms of
the Act was not a taxpayer but a mere collector of taxes.





I
consider the point that Astra Holdings was not a taxpayer. It
appears to me that section 5(1)(b) imposes upon a motor dealer
the
obligation to pay the tax charged and collected on the sale value of
the motor vehicles he would have sold to members of the
public. The
tax is payable by him when the purchase price on which it is levied
is in his possession after the sale transaction
has been completed.





Nowhere
does the Act provide that the sales tax is payable by the purchaser
of the motor vehicle. Whilst the motor dealer has
to charge and
collect the tax in order to be able to pay it to revenue he is the
taxpayer for the purposes of the Act.





I
turn to consider the question whether the learned President was
correct in holding that the decision by the Commissioner to
retrospectively
assess Astra Holdings to the unpaid sales tax and
claim its payment was an abuse of power. The Commissioner’s
fundamental duty
under the Act is to collect the tax created and
imposed on the taxpayer by Parliament for the benefit of the fiscus.





In
exercising the powers conferred upon him for the proper discharge of
the statutory duty the Commissioner is required, by public
law, to
act fairly towards taxpayers as a body or as individuals. He also
has a duty to act fairly to the fiscus.





The
unfairness complained of in this case arose from the error of law
committed by the revenue officer who wrote the letter of 1
July 1995
upon which Astra Holdings acted when it stopped charging and
collecting sales tax which on the proper construction of the
statute
was due to revenue. It appears to me that acting on the letter of 1
July 1995 would not have been compatible with the proper
discharge of
the Commissioner’s statutory duty.





Section
18 of the Act gives the Commissioner the power, in appropriate
circumstances, to assess a registered operator to tax
retrospectively,
provided that no such assessment can be made in
respect of any sale which was transacted three years before the date
of such proposed
assessment. It would have savoured of unfairness
to the fiscus had the Commissioner not put right the error of law and
invoked
the powers conferred upon him by section 18(1) of the Act.






In Preston
v IRC
[1985]
2 All ER 327, Lord TEMPLEMAN said at 339E-341a:-






“Counsel
for the taxpayer submitted that is, as Lord SCARMAN announced in the
Self
Employed

case ((1981) 2 All ER 91 at 112), the commissioners owe a duty of
fairness to the general body of taxpayers the commissioners must
equally owe a duty of fairness to each individual taxpayer. I
agree, but a taxpayer cannot complain of unfairness merely because
the commissioners decide to perform their statutory duties, including
their duties under s 460 to make an assessment and to enforce
a
liability to tax. The commissioners may decide to abstain from
exercising their powers and performing their duties on grounds
of
unfairness, but the commissioners themselves must bear in mind that
their primary duty is to collect not to forgive taxes. And,
if the
commissioners decide to proceed the court cannot in the absence of
exceptional circumstances decide to be unfair that which
the
commissioners by taking action against the taxpayer have determined
to be fair …





The
court can duly intervene … to direct the commissioners to abstain
from performing their statutory duties or from exercising
their
statutory powers if the court is satisfied that ‘the unfairness’
of which the applicant complains renders the insistence
by the
commissioners on performing their duties or exercising their powers
on abuse of power by the commissioners.”








The
Commissioner’s decision to exercise the power to assess Astra
Holdings to the unpaid tax was not driven by improper motives.
Its
purpose was to achieve the very objective for which the power was
conferred upon him.






In HTV
Ltd v Price

[1976] 1 CR 170, cited in
Preston’s
case,
supra
at 339, the Price Commission misconstrued the counter inflation price
code and changed its mind as to the treatment of Exchequer
levy as an
item in the costs of television companies allowable for the purpose
of increasing their advertising charges within the
limits prescribed
by the code. The effect of the change of mind of the Price
Commission was to deprive the companies of an increase
of advertising
charges which they were plainly intended to enjoy and which they
badly needed in order to remain viable.






It was held
that the decision by the Price Commission to rely upon an error of
law in an attempt to enforce the code, was unfair
to the television
companies and amounted to an abuse of power. It appears to me on
the authority of the
HTV
case,
supra,
that the error of law committed by the revenue officer who wrote the
letter of 1 July 1995 had already brought about unfairness
to the
fiscus by depriving it of the sales tax which was due to it.
Continued maintenance of the
status
quo
would have resulted in further injustice.





The
learned President did not, however, consider the case from the point
of view of the unfairness suffered by the fiscus. He,
instead, held
that the decision by the Commissioner to correct the mistake and
assess Astra Holdings to the tax it ought by law to
have paid,
amounted to an abuse of power. He was of the opinion that, if the
Commissioner was not a public officer his conduct
would have entitled
Astra Holdings to an injunction or damages based on breach of
contract or breach of representation giving rise
to estoppel.





The
Commissioner was found guilty of unfairness to Astra Holdings because
his conduct of correcting the misconception of the law
and assessing
the latter to unpaid tax retrospectively without having given the
company notice of the intended change of “policy”
was said to be
equivalent to a breach of contract or a breach of representation.





For
the learned President to have arrived at the decision that the
conduct of the Commissioner amounted to an abuse of power in
the
sense that it was equivalent to a breach of contract or a breach of
representation, he ought, in my view, to have first decided
whether
or not the relationship between the revenue and Astra Holdings which
admittedly could only have been based on the error of
law contained
in the letter of 1 July 1995, could pass for a contract or
representation giving rise to estoppel. The learned President
did
not make that finding of fact which was a pre-condition to the
correctness or otherwise of the decision he made.





The
question must be stated and answered. Can it be said that in
writing the letter of 1 July 1995 which contained the error of
law
the Commissioner, by the revenue officer, purported to contract with
Astra Holdings or purported to represent to it that the
statement was
true and that thereafter he would not assess it to unpaid tax which
was by law due to revenue. In other words did
the Commissioner bind
himself to accept as valid the actions of Astra Holdings regarding
the non-payment of the sales tax based upon
the error of law?





There
is no doubt that the purported contract would have been born out of
the mistake of the law requiring that sales tax be charged
and
collected by the motor dealer on all motor vehicles sold locally.
Although unknown to the parties it would have been in contravention
of the law for Astra Holdings not to charge and collect the sales tax
which the statute required it to collect.






In my view
such an arrangement would be null and void
ab
initio.

It is a bargain the Commissioner could not make at law because it
would have the effect of being in breach of his statutory duty
to
collect tax which is due to revenue. It is one thing for revenue to
enter into an arrangement with a taxpayer on how, in the
exercise of
its managerial powers, it will collect tax, but it is another for it
to seek to decide that a particular tax imposed
by Parliament is not
due from a taxpayer when in fact it is and in so doing disclaim the
right to the tax and abandon the statutory
power to collect it. In
R
v Board of Inland Revenue ex p. MFK Ltd

[1997] 1 All ER 91 BINGHAM LJ said at 110d-j:-






“I
am, however, of opinion that in assessing the meaning, weight and
effect reasonably to be given to statements of the Revenue the
factual context, including the position of the Revenue itself, is all
important. Every ordinarily sophisticated taxpayer knows
that the
Revenue is a tax-collecting agency, not a tax-imposing authority.
The taxpayer’s only legitimate expectation is,
prima
facie
,
that he will be taxed according to statute, not concession or a wrong
view of the law (see
R
v A.G. ex p. Imperial Chemical Industries plc

(1986) 60 TC 1 at 64 per Lord OLIVER). Such taxpayers would
appreciate, if they could not so pithily express, the truth of WALTON
J’s aphorism: ‘One should be taxed by law, and not be untaxed by
concession’ (see
Vestey
v IRC (No 1)

[1977] 3 All ER 1073 at 1098, [1979] Ch. 177 at 197). No doubt a
statement formally published by the Revenue to the world might
safely
be regarded as binding, subject to its terms, in any case falling
clearly within them. But where the approach to the Revenue
is of a
less formal nature a more detailed inquiry is, in my view, necessary.
If it is to be successfully said that as a result
of such an
approach the Revenue has agreed to forego, or has represented that it
will forego, tax which might arguably be payable
on a proper
construction of the relevant legislation it would, in any judgment,
be ordinarily necessary for the taxpayer to show
that certain
conditions had been fulfilled. I say ‘ordinarily’ to allow for
the exceptional case where different rules might
be appropriate, but
necessity in my view exists here. First, it is necessary that the
taxpayer should have put all his cards face
upwards on the table.
This means that he must give full details of the specific transaction
on which he seeks the Revenue’s ruling,
unless it is the same as an
earlier transaction on which a ruling has already been given. It
means that he must indicate to the
Revenue the ruling sought. It is
one thing to ask an official of the Revenue whether he shares the
taxpayer’s view of a legislative
provision quite another to ask
whether the Revenue will forego any claim to tax on any other basis.
It means that the taxpayer
must make plain that a fully considered
ruling is sought. It means, I think, that the taxpayer should
indicate the use he intends
to make of any ruling given. This is
not because the Revenue would wish to favour one class of taxpayers
at the expense of another
but because knowledge that a ruling is to
be publicised in a large and important market could affect the person
by whom and the level
at which a problem is considered and, indeed,
whether it is appropriate to give a ruling at all. Second, it is
necessary that the
ruling or statement relied on should be clear,
unambiguous and devoid of relevant qualification.”









The onus
was on Astra Holdings to prove the existence of a contract or
representation on the terms of the contents of the letter of 1 July
1995. It was unable to give details of the circumstances in which
the letter was written because it was a private communication
between
revenue and another taxpayer. It was not correct to say, as the
learned President did, that Astra Holdings was advised
by revenue not
to charge and collect sales tax on such vehicles paid for in foreign
currency.





It
is not known whether the letter was intended to be circulated
generally in the motor trade industry. The statement in the letter
is far from being clear and unambiguous to found a contract or
representation giving rise to estoppel. The purported definition
of
“foreign source” makes no sense.





I
am of the opinion that the conclusion reached by the learned
President that the Commissioner’s conduct was equivalent to a
breach
of contract or a breach of representation was influenced by
some inaccurate findings of fact which he made.





At
the beginning of the judgment he said failure by Astra Holdings to
charge and collect the sales tax on motor vehicles paid for
locally
in foreign currency “started because of two letters that were
written to two other motor dealers”. That statement of
fact is
not supported by evidence. The letter of objection to the
assessment to tax dated 17 April 1997 alleged that the letter
of 8
February 1996 had no bearing at all to the decision by Astra Holdings
to stop charging and collecting sales tax on motor vehicles
paid for
locally in foreign currency.





When
that letter of 8 February 1996 was written the decision had already
been taken and implemented in July 1995. The case Astra
Holdings
submitted to the Fiscal Appeals Court clearly stated that it
discovered after the assessment to tax that revenue officers
had
written a similar letter to AMTEC Motors on 8 February 1996. That
caused the Commissioner in paragraph 3 of his case to say
that
reference to the letter of 8 February 1996 by Astra Holdings was
irrelevant to the consideration of factors which influenced
its
decision to stop charging and collecting sales tax on motor vehicles
paid for in foreign currency. The letter of 8 February
1996 would
therefore have been irrelevant to the question whether the
Commissioner purported to enter into a contract with Astra
Holdings.





The
learned President also based his conclusion on a finding that Astra
Holdings received the “two letters”; checked with Revenue
whether
they were authentic and only after having been told that they were
authentic did it proceed to act on them. In this regard
he quoted
Mr Ndudzo as having said:-





“In
February 1996 the appellant was given copies of the letter written by
an Assistant Commissioner of Taxes to another motor dealer,
in which
the dealer was advised that no sales tax was payable where payment
was made in a foreign currency. When the appellant
was given copies
of the letters that had been written to the two other dealers, it
checked with the Department and was told that
the letters were
authentic.”








A
reading of the evidence recorded from Mr Ndudzo does not support the
view that he said Astra Holdings received a copy of the letter
to
AMTEC Motors in February 1996. The only evidence he gave on the
letter reads as follows:-





“Q. Now,
I think in addition to the letter that you are holding which perhaps
could be marked exhibit “A”. I think there was
a letter written
to AMTEC Motors which was also brought to your attention?






  1. That’s
    correct.







  1. This is a
    letter dated 8 February?







  1. Correct.”









There
was no allegation in the evidence that the letter was received by
Astra Holdings on 8 February 1996 as the learned President
found.
That evidence would have contradicted the statement made by Astra
Holdings in the letter of objection to the assessment
to tax as well
as in the case submitted to the court
a
quo
.





In
his testimony Mr Ndudzo alluded to hearsay evidence which he said was
to the effect that a check was made with revenue whether
the letter
of 1 July 1995 was authentic. There was no reference in his
evidence to a check on the authenticity of the letter of
8 February
1996. The hearsay evidence given by the witness did not indicate
the form the inquiry on the authenticity of the letter
of 1 July 1995
was said to have taken.





There
was no hint from the learned President as to why reliance was placed
on the evidence considering its nature. There had been
no mention
in the letter of objection to assessment of such checks having been
made nor was there mention of such checks in the case
stated for the
court
a quo.





Astra
Holdings’ case had always been that it relied upon the letter of 1
July 1995 which it admitted had not been addressed to it.
It said
that it believed that the letter represented the policy of the
Department of Taxes. It had not been Astra Holdings’
case that it
relied on direct confirmation of the authenticity of the letter by
revenue. Astra Holdings knew that the Commissioner’s
case had
always been that it should have sought its own ruling on the matter
rather than act upon a letter not intended for its digestion.





In
the light of all these facts it is clear to me that the learned
President should not have relied upon the hearsay evidence as proving
that Astra Holdings checked with revenue the authenticity of the
letter of 1 July 1995. Without the reliance on the hearsay evidence
there was no basis upon which the learned President could have
assumed that the Commissioner purported to contract with or make a
representation giving rise to estoppel to Astra Holdings. Finally,
the learned President was of the opinion that the Commissioner
was
guilty of unfair treatment of Astra Holdings in that he failed to
consider legitimate expectations which had been created in
the mind
of the latter that before change of “policy” was effected motor
dealers who had acted on the letter of 1 July 1995 would
be informed
in advance and the change effected prospectively.





The
question whether or not the principle of legitimate expectation is
applicable to a decision of a public body depends upon the
particular
legislation in terms of which the decision was taken. It is clear
in this case that the legislation required that sales
tax be charged
and collected by the motor dealer on all motor vehicles sold by him
locally. The legitimate expectation created
in Astra Holdings as a
motor dealer would, in the circumstances, be that it should be taxed
according to the law.





I
cannot think of legitimate expectation arising out of an error of law
to the effect that a tax which is due to revenue should not
be
collected. The expectation by Astra Holdings in that regard would
be that it should remain untaxed by the mistake of law.
That surely
would not be a legitimate expectation.





As
I said there was unfairness to the fiscus. There was no unfairness
to Astra Holdings in acting upon the error of law contained
in the
letter of 1 July 1995. In
ex
p. MPK’s
case,
supra,
Judge J said at 114b-c:-





“The
correct approach to ‘legitimate expectation’ in any particular
field of public law depends on the relevant legislation.
In
R
v A.G. ex p. Imperial Chemical Industries plc

(1986) 60 TC 1 the legitimate expectation of the taxpayer was held to
be payment of the taxes actually due. No legitimate expectation
could arise from an
ultra
vires
relaxation of
the relevant statute by the body responsible for enforcing it.
There is, in addition, the clearest possible authority
that the
Revenue may not ‘dispense’ with relevant statutory provisions
(see
Vestey v IRC (No 1
and 2)
[1979] 3 All ER
976).”








I
agree with the observations.





The
appeal, accordingly, succeeds with costs. The judgment of the court
a quo
is set aside and substituted with the following:





“The
appeal is dismissed. There will be no order as to costs.”








CHIDYAUSIKU
CJ: I agree





CHEDA
JA: I agree





Civil
Division of the Attorney-General’s Office
,
appellant's legal practitioners


Wintertons,
respondent's legal practitioners