AfGTI Case Alert 5: Nu Africa Duty Free Shops (Pty) Ltd v Minister of Finance and Others (CCT 29/22; CCT 57/22; CCT 58/22) [2023] ZACC 31; 2023 (12) BCLR 1419 (CC); 2024 (1) SA 567 (CC) (3 October 2023)
This summary focuses on the trade aspects of the decision. It does not speak to the administrative law aspects of the court’s decision.
Factually, before 1 August 2021, diplomats were entitled to a full rebate on the duty ordinarily payable in respect of products bought by them from any of the retailers, provided that such goods were either for the official use of their mission or for personal use. Before the impugned amendments, diplomats could buy limitless amounts of alcohol and tobacco products duty-free.
In 2019, the Minister of Finance and the Commissioner saw abuse in the system where certain diplomats were buying duty-free tobacco and alcohol in South Africa and then proceeding to sell them in the domestic market. Consequently, the Minister set up a review of the treatment of duty-free shops, including the regulatory framework governing duty-free shops, in a Budget Review dated 20 February 2019. It was found that the fiscus was losing substantial income in respect of the duties on those products.
After a public comment process, acting under section 75(15)(a)(i)(bb) of the Customs Act and section 74(3)(a) of the VAT Act, the Minister published in the Government Gazette amendments to certain Schedules to the Customs Act and the VAT Act that essentially introduced a quota system. In this regard, the main issue before the court was that, first, the Minister’s decision to amend the Schedules and the Commissioner’s decision to amend the Rules constituted administrative action which was reviewable under the Promotion of Administrative Justice Act 3 of 2000 (PAJA). Second, it was argued that the challenged amendments, as well as the decision to make the amendments, must be reviewed and set aside based on the principle of legality.
The Minister responded by contending that section 75(15)(a)(i)(bb) of the Customs Act allowed him to amend Schedules 3, 4, 5 and 6 whenever he found it expedient in the public interest. The Minister explained that section 48(6) of the Customs Act allows ‘parliamentary oversight or supervision’ and thus the Minister’s discretion is not unfettered. Finally, the Minister argued Parliament had not delegated its plenary legislative power to amend the Schedules to the Minister but had simply empowered him to take certain action that is valid until Parliament approves or rejects it, acting in terms of section 48(6) of the Customs Act.
The court explained that this case was not about the label of these powers, but rather, this case was about the separation of powers, and, in that regard, what is constitutionally permissible. The court then explained that we do not have an absolute separation of powers between the three arms of the state. If the delegated power is ‘plenary,’ it would probably be constitutionally impermissible than if it is merely ‘regulatory’.
The court explained that sections 43 and 44 of the Constitution bestow national legislative authority on Parliament. Parliament is allowed to delegate subordinate regulatory authority to other bodies to make “secondary legislation” or “delegated legislation” such as regulations. The key consideration here is in the substance of what is being delegated. Delegating power to make subordinate legislation within the framework of a statute that permits delegation is constitutional. However, it is unlawful to assign plenary legislative powers to another body, as it violates the separation of powers.
The court then explained that section 75(15) of the Customs Act empowers the Minister to amend Schedules to the Customs Act whenever he finds it to be expedient in the public interest, rational, lawful, and in line with the purpose of the legislation. When the Minister amends Schedules to the Act, he is not exercising primary or original legislative powers. Parliament’s entitlement to delegate does not only depend on the pure form of the amendments to the Schedule but also the nature and extent of the delegation. Therefore, the answer lies in the substance, nature, and extent of the delegation instead of the form. Thus, the delegation must not be ‘overbroad or vague, and the authority to whom the power is delegated must be able to determine the nature and scope of the powers conferred.’
To establish whether a delegation violates the Constitution, the enquiry must be context-specific, and one must consider the scope and degree of the delegation, the subject matter, and the strength of the constraints therein. The claim that the Executive can never amend a Schedule to an Act is an absolutist rule. It would mean that the Minister would have to seek parliamentary intervention before addressing wanton abuse. Fiscal policy requires that fiscal measures be used as soon as a loophole has been found to prevent people from taking advantage of the situation. That would be in the fiscal and public interest. Our idea of separation of powers allows for such necessary interventions by one arm of government on another in the interests of efficient and effective fiscal regulation. Parliament’s involvement under 48(6) of the Customs Act ensures that the measures can either be long-term or permanent.
Thus, the court held that the legislative delegation for the Minister to amend the Schedules was constitutionally permissible. This is also because the Executive is better placed than Parliament to understand the day-to-day needs and demands of administering the matters contained within the Schedules to the Customs and the VAT Act, and thus promotes co-operative governance and enhances efficient governance, both of which are constitutionally required. Parliament made this choice with its eyes wide open and trusted the expertise of the Executive in this regard, and this works well because Parliament retains sufficient oversight. Therefore, the court held that, considering the aforementioned factors, Parliament’s delegation in respect of the Customs Act and the VAT Act was constitutionally permissible.