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Case was brought by the Fair-Trade Independent Tobacco Association, representing several smaller tobacco producers. From Moneyweb.

Sars says cameras act as ‘a deterrent to unethical behaviour’. The judge found the continuous ability to search ‘created by a lens without distinction’ to be an issue. Image: AdobeStock

A plan by the South African Revenue Service (Sars) to install 24/7 camera surveillance in cigarette warehouses has been interdicted by the Pretoria High Court following a case brought by several smaller producers, some of them represented by the Fair-Trade Independent Tobacco Association (Fita).

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This follows the introduction in August 2022 of a new rule under the Customs and Excise Act requiring any warehouse used for manufacturing or storing tobacco products to be placed under “constant, continuous and permanent surveillance” via CCTV.

The tobacco producers argued that the new rule contained unconstitutional licensing conditions and infringed on their right to privacy, dignity and property.

Sars claimed that the new CCTV rule was part of a package of measures intended to combat rampant tax evasion in the tobacco industry.

In February 2023, Sars commenced installing cameras at two of the largest tobacco companies, British American Tobacco SA and Gold Leaf Tobacco – neither of which is a member of Fita and did not join the court proceedings.

New rule

Sars argued that it was empowered to issue the new rule under the Customs and Excise Act, which gives it authority to licence customs and excise warehouses and to issue licensing regulations and rules. Tobacco warehouses are required to be licensed under the act for the manufacture and storage of tobacco products.

The new rule required tobacco producers to ensure that the CCTV equipment installed by Sars has a clear and unobstructed view of the premises and that measures are put in place to prevent the equipment from being damaged, manipulated or interfered with.

The rule requires CCTV surveillance of all manufacturing, packaging and dispatch areas. Violations of the rule can result in fines and imprisonment for up to one year.

Filings attached to Sars’s papers before the high court explained that it has been difficult to verify the integrity of values presented on documentation provided by licensees of custom excise warehouses.

While Sars admits that dishonest conduct may never be eliminated, the CCTV cameras – with AI support – would act as a deterrent to unethical behaviour. These cameras would be monitored from a central control room and assist audit inspections by allowing customs officers to review videos of dispatch areas and request documentation relating to a particular dispatch.

Sars cited several other countries that had implemented similar measures. 

The Pretoria High Court ruling notes: “For present purposes it is significant to appreciate that none of the comparable countries referred to by Sars in the document justifying the implementation of the impugned rule are countries founded on democratic values nor do they appreciate the supremacy of the Constitution like South Africa.”

Unfettered discretion

Fita argued that the CCTV rule gives Sars unfettered discretion that is not subject to any objective legal standard, and its implementation required no rationality on the part of the tax agency.

Tobacco producers also argued that there was a danger that CCTV footage under Sars’s control could fall into the hands of a competitor or illegal trader and that they had no recourse should Sars’s IT systems be hacked.

The CCTV rule explicitly required the recording of number plates, as well as the make and colour of vehicles arriving or departing a dispatch or loading area. Such information falling into the wrong hands could result in loss or harm should the tobacco products be stolen.

“Sars counsel making light of this example forgets that the protection of compliant licensed taxpayers should surely outweigh creating a potential opportunity for illicit traders to obtain tobacco products,” reads the judgment.

One tobacco producer, Bozza, sought protection from Sars ‘overreach’, citing an incident in October 2023 where Sars notified it of a pre-planning site visit, the purpose of which was to determine the number of CCTV systems required to monitor the manufacturing, packaging, storage and loading/dispatch area – even though the rule makes no mention of monitoring storage areas.

This, the court found, demonstrated a disconnect between the rule and the notice of implementation issued by Sars prior to installing CCTV equipment.

There are no guidelines for implementation, the court found.

Bozza also argued that Sars failed to show what harm, if any, Sars would suffer if prevented from installing the cameras.

Sars ‘missing the point’

Fita contends that while searches by customs officials anywhere on the premises are to be expected, this does not extend to continuous monitoring and recording for playback value.

Sars argued that silent CCTV monitoring would avoid interruptions to production.

“Sars appears to miss the point,” notes Judge Linda Retief in her ruling.

“Silence is not the trigger, but rather the continuous ‘search ability’ created by a lens without distinction. The continuous ability to playback footage is a perpetual means to search and continual means to collect evidence in spaces and at times which fall within the legitimate expectation of the privacy purview.”

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There was also no evidence provided to the court that any of the tobacco companies named as applicants in the case were connected with acts of illicit trade or were not tax-compliant.

Among the applicants in the case were Fita, Best Tobacco Company, Carnilinx, Folha Manufacturers, Home of Cut Rag and Protobac.

Sars was interdicted and restrained from implementing the CCTV rule pending the outcome of a separate application seeking to set aside the rule.