Online Reporter
Fidelis Munyoro-Chief Court Reporter
The Zimbabwe Revenue Authority has secured a landmark legal victory after overturning a High Court ruling that had compelled it to issue Tax Clearance Certificates (TCCs) to Pacific Cigarette Company, despite the firm being under corporate rescue.
The Supreme Court ruling, handed down last week, clarified the limits of corporate rescue protections under the Insolvency Act. Justice Antonia Guvava, delivering the judgment, held that Zimra’s refusal to issue the certificate did not constitute an enforcement action.
Justice Guvava stated: “The appellant’s refusal to issue the TCC was not an act of enforcement but a lawful administrative consequence of unsatisfied tax obligations demanded by section 34C of the Revenue Act.”
She emphasised that Zimra had acted within its statutory mandate, noting that withholding a TCC when tax liabilities remain unsettled could not be classified as an enforcement measure under section 126 of the Insolvency Act.
The dispute arose from ZIMRA’s decision to withhold a TCC from Pacific Cigarette due to outstanding tax arrears in excess of US$19 million, even though the company had been placed under corporate rescue in 2023.
Pacific Cigarette argued that Zimra’s stance violated the statutory moratorium that suspends creditor claims and enforcement actions during corporate rescue. The High Court had agreed, ruling that withholding the certificate amounted to prohibited enforcement under the Insolvency Act.
Zimra appealed, maintaining that the non‑issuance of a TCC was an administrative act rather than enforcement. The Supreme Court upheld this position, referencing the South African case Murray N.O. & Another v Firstrand Bank Ltd, which defines enforcement actions as formal legal measures emanating from judicial processes.
Justice Guvava explained: “The essence of ‘enforcement’ lies in invoking the coercive power of the courts to compel compliance with a legal obligation. Routine administrative actions, including withholding a TCC, do not meet this threshold.”
The court also noted that the statutory obligation to pay taxes arises automatically and independently of enforcement mechanisms. It concluded that Zimra’s actions were entirely within its legal mandate and did not breach the moratorium imposed by the Insolvency Act.
The judgment underscored the importance of maintaining Zimra’s discretion in tax‑compliance matters, with Justice Guvava warning against judicial overreach: “Courts are not at liberty to re‑write legislation under the guise of interpretation.”
The ruling strengthens Zimra’s authority to enforce tax compliance while drawing a clear distinction between administrative conduct and legal enforcement. It also sets a significant precedent for future cases involving companies under corporate rescue.
The appeal was upheld with costs, and the High Court’s ruling was set aside. The Supreme Court concluded: “The application is hereby dismissed with costs.”
