dyton mupawaenda
Fidelis Munyoro-Chief Court Reporter
PACIFIC Cigarette Company, which entered voluntary business rescue following a US$19 million tax demand from the Zimbabwe Revenue Authority (ZIMRA), has secured approval from the High Court for an urgent hearing of its tax dispute.
The tax collector’s demand, comprising US$19 315 233,82 and Z$79 845 954,36, rendered Pacific insolvent, threatening the operations of Zimbabwe’s second-largest indigenous tobacco producer.
Central to the dispute is Pacific’s argument that the tax demand infringes insolvency protection and so its formal request for a tax clearance certificate from ZIMRA should be granted, thus recognising this argument as valid.
The authority, through its tax and revenue management system, established conditions for issuing such certificates, formalised in Public Notice 91/2023 on December 19, 2023.
Pacific asserts compliance with these conditions yet faces contested liabilities following ZIMRA’s revised taxation approach for toll manufacturers.
This change saddled Pacific with the disputed tax obligations, compounded by ZIMRA’s garnishment of its bank accounts to make sure the money was paid.
The urgent application, filed under a certificate of urgency, met resistance from ZIMRA, which raised procedural objections to dismiss the application, or at least to have the dispute placed on the ordinary roll and be heard when it reached the top of the list.
Justice Gibson Mandaza rejected ZIMRA’s preliminary points, affirming the urgency of Pacific’s application and directing the case to proceed.
In his ruling, Justice Mandaza said the draft order under challenge required adjudication on its merits, specifically concerning whether a company under corporate rescue is exempt from tax obligations.
The court acknowledged that corporate rescue, a process governed by insolvency laws, aimed to enable companies to reorganise their affairs without undue liabilities.
Justice Mandaza noted that exemptions granted during corporate rescue had to be assessed on a case-by-case basis and could not be presumed at the earlier stages.
The determination of Pacific’s eligibility for such exemptions, the judge ruled, could only occur during substantive proceedings when the legal teams from both parties could present and argue their cases.
Pacific is represented in the corporate rescue process by Reuben Mukavhi of Rubaya-Chinuwo Law Chambers, appointed as the business rescue practitioner on October 4, 2023.
Pacific, founded in 2005 by Mr Adam Molai and formerly known as Savanna, produces the Pacific, Pegasus, and Branson brands.
It’s survival has relied on toll manufacturing agreements, wherein it produces cigarettes for other companies.
Pacific contends that ZIMRA’s shift in taxation policy for toll manufacturers precipitated the liabilities in question.
The case continues to centre on whether the tax obligations imposed on Pacific during its corporate rescue contravene established insolvency protections or represent enforceable liabilities under Zimbabwean law.
Online Reporter