Cash and carry king has assets frozen and gets hit with R1.2bn tax bill

The SA Revenue Service (SARS) has swooped on Edrees Hathurani, the controversial cash-and-carry tycoon at the centre of a bribery scandal involving the regulator, the Financial Services Board (FSB).

On Friday morning, SARS officials served a court order on Hathurani's Africa Cash 'n Carry, a warehouse-style business in southern Johannesburg which sells 15000 products from cosmetics to electronics, effectively freezing its assets.

The court order confirms that SARS believes Hathurani and his companies owe a tax debt of R1.23-billion.

This comes weeks after the 63-year-old Hathurani claimed sensationally that he had paid R12-million in bribes to former FSB finance boss Dawood Seedat to make his tax problems "vanish".

Hathurani's admissions cast a cloud over both the FSB and SARS, suggesting officials at both state institutions could be bribed.

Alhough Seedat resigned immediately from the FSB, the regulator's CEO, Dube Tshidi, said an "internal audit" was under way to determine if any cases handled by Seedat had been "compromised in any way".

But far from vanishing, Hathurani's tax problems deepened on Thursday, when North Gauteng High Court Judge Eberhard Bertelsmann granted a preservation order against him and his companies.

In affidavits submitted to the court, SARS investigators said it was necessary to freeze Africa Cash 'n Carry's assets to stop it "divesting its business and assets to a connected entity, Africa Cash & Carry Crown".

The SARS affidavits paint a damning picture of how Hathurani went out of his way over many years to cheat on tax, even going so far as to have a system designed to hide sales from the authorities.

For example, under one company he used to own called Jumbo Cash & Carry, SARS says Hathurani under-declared sales by "manipulating the point-of-sale system".

Jumbo did this by issuing a quote to a customer, rather than an invoice - which made it appear that no sale had taken place. It found similar accounting problems at Africa Cash 'n Carry. The court order was served on the company on Friday morning.

Saleem Ebrahim, the lawyer for Hathurani and Africa Cash 'n Carry, confirmed that four people closed the doors of Africa Cash 'n Carry on Friday. "There were also three other groups of about seven people each that went to three other shops - Continental, Taz Supermarkets and Extra Trading.

But Ebrahim denied the claim that assets had been transferred - except for R161-million, which he claimed was stolen by one of Africa Cash 'n Carry's former directors, Cassim Aysen.

However, the SARS affidavit said Hathurani's company has been probed repeatedly by the tax authorities "over many years".

The first inquiry began in 2002 over whether Africa Cash 'n Carry was "round-tripping" exports - essentially pretending goods were exported so it could claim VAT refunds on these products. A separate tax probe found that Africa Cash 'n Carry had "underdeclared" its revenue as it was manipulating its sales.

SARS was able to get full access to its sales data only for a few months, from July 2008 to March 2009, which allegedly showed a R91-million shortfall between what was recorded and what was declared.

For these months, "this calculation resulted in its reported sales for the period (R1.4-billion), falling short of the actual sales by R91-million".

Africa Cash 'n Carry disputes SARS's calculations, however.

"They say we owe them R1.2-billion, but we don't think we owe them anything," said Ebrahim.

SARS relied on affidavits filed in court in the legal fight between Hathurani and Aysen in which it was alleged Africa Cash 'n Carry was divesting of assets to convince Bertelsmann to appoint a curator, Cloete Murray.

While the assets are frozen and under Murray's control, the directors can continue with their day-to-day business. But if they want to sell assets, they will need to get Murray and SARS's consent.

This means that all Africa Cash 'n Carry's assets remain under the curator's control. Hathurani also apparently owns a R2.1-million holiday property in Durban.

This new twist comes after a video surfaced last month of Seedat allegedly receiving money from Hathurani to make his tax problems disappear.

Hathurani said he paid the money because he was "petrified and could not think straight".