The Western Cape High Court dismissed an urgent application by Karino Homeland Distribution, a luxury liquor importer, seeking to partially uplift a lien imposed by the South African Revenue Service (Sars) over goods allegedly exported to Mozambique in December 2022.

The dispute arose after Sars detained a shipment of alcohol worth approximately R10 million, imported by Karino from Namibia on December 20, 2022. The consignment was declared to be in transit to Mozambique, with a customs value of R839,089 and no intention for domestic sale or consumption in South Africa.

According to the court’s judgment delivered by Judge James Lekhuleni, Sars requested information from Karino regarding the consignment’s whereabouts and its delivery address in Mozambique. Despite several correspondences and email exchanges, Karino failed to provide proof of exportation, leading Sars to believe that the goods were diverted into local consumption without the required duties and VAT being paid.

In February, Sars informed Karino of its intention to hold them liable for duties and VAT totaling R3 million. After Karino failed to produce the necessary documents, Sars issued a letter of demand in June. Subsequently, in July, Sars detained the entire stock value of Karino’s goods at a warehouse facility and imposed a lien.

Karino, realizing its inability to provide proof of exportation, admitted liability on July 27 and submitted a proposal to settle the debt in installments, which Sars rejected. The company then sought relief from the court, requesting a reduction of the lien and the release of a portion of the goods to enable trading during the festive season.

Judge Lekhuleni, while acknowledging Karino’s need to trade for commercial viability, emphasized the company’s obligation to pay taxes. He stated, “While I appreciate that [Karino] wants to trade to remain commercially viable, I must, however, stress that the applicant must ensure that it pays its taxes or proverbially gives Caesar what belongs to Caesar.”

The court ruled that the goods would be held as collateral until the debt is fully settled, citing Section 114 of the Customs and Excise Act, which empowers Sars to detain imported goods owned by a person in debt until the debt is paid.

The decision has significant implications for Karino Homeland Distribution, which now faces the challenge of settling the outstanding debt to Sars to regain control of its detained goods.