South Africa: ENSafrica Tax In Brief - Issue 113

case law

• Canyon Resources (Pty) Ltd v CSARS (68281/2016) [2023] ZAGPPHC (30 November 2023)
  
  
  • This is an application for the setting aside and substitution of the determination by the Commissioner for the South Africa Revenue Service (“Commissioner” or “SARS”) regarding the diesel refunds claimed by the applicant under rebate item 670.04 provided for in the Customs and Excise Act, 91 of 1964 (“Customs and Excise Act”).
  • The High Court dismissed the applicant's claim and upheld the determination by SARS on the basis that the applicant did not produce sufficient evidence on which the High Court could find that SARS' determination was incorrect.
  • Find a copy of the judgment here.
• SAMU v Commissioner for the South African Revenue Service (VAT 1788) [2023] ZATC 14 (30 August 2023)
  
  
  • This is an appeal against an additional assessment raised by SARS. The Tax Court in this matter had to determine whether the appellant was entitled to claim input tax in respect of expenses it incurred to provide accommodation and meals to certain employees, as well as whether SARS, the respondent, was entitled to impose an understatement penalty of 10%.
  • The employees in question were based on construction sites and were provided with accommodation and meals.
  • The Tax Court disallowed the input tax claim on the basis that the appellant is not in the hospitality entertainment business and did not charge its employees for the meals and accommodation so provided.
  • The Tax Court ordered SARS to remit the understatement penalty on the basis that the appellant's behaviour amounted to a bona fide inadvertent error due to the following factors:
    • The value-added tax (“VAT”) returns are compiled by personnel employed in the different division of the appellant whereafter these are subjected to scrutiny not only by the senior finance manager but also by the Internal Audit department;
    • The finance department was assured by the audit department that the input tax under those circumstances was claimable; and
    • The appellant's external auditors did not raise any concern about the appellant claiming input tax in respect of the provision of meals and accommodation for employees.
    • Find a copy of the judgment here.
• JT International Manufacturing South Africa (Pty) Ltd v CSARS (29690/14) [2023] ZAGPPHC (10 October 2023)
  
  
  • The High Court had to determine whether:
    • The provisions of rebate item 460.24, read with rule 19A are peremptory, particularly insofar as timeous compliance with the provisions of the rule is concerned; and
    • The Commissioner has a discretion under section 75(10)(a) of the Customs and Excise Act, or alternatively the common law, to ex post facto, with retrospective effect, exempt the applicant from compliance with Rule 19A.09c of the Rules to the Customs and Excise Act.
  • The applicant did not comply with the rules of the Customs and Excise Act. The High Court found that, assuming all customs and excise processes were duly followed, the Commissioner would have been entitled to exempt the applicant from whatever prescripts of a Rebate Item or process occasioned after the fact.
  • The High Court dismissed the applicant and held that:
    • The rules are incorporated to the Customs and Excise Act and are peremptory unless a rule or its context expressly indicates that it is not;
    • The bona fides of the applicant and the facts causing the present issue are of little relevance. What is relevant is the applicant's compliance or non-compliance with the Customs and Excise Act; and
    • Neither the proviso to section 75(10)(a) nor the common law authorises the Commissioner to exempt non-compliance with the conditions prescribed by the Rules to the Customs and Excise Act.
  • Find a copy of the judgment here.
• Arcelormittal South Africa Limited v CSARS (2021/26916) [2023] ZAGPJHC (14 August 2023)
  
  
  • The High Court in this matter had to determine whether the applicant, in terms of the relevant rebate item 670.04, read with Note 6, Schedule 6/Part 3 of the Customs and Excise Act, was entitled to claim refunds on diesel purchased by it to power locomotives travelling on rails in its steel manufacturing plant.
  • The court held that, on a proper interpretation of the expression “rail freight”, particularly having regard to the context in which the words are used, it is clear that the legislation does not contemplate granting manufacturers refunds in respect diesel used for locomotive rail transport within their production plants. On this basis, the applicant was not entitled to the refunds on diesel in terms of rebate item 670.04. It follows that there is no basis for any of the relief sought by the applicant.
  • The application was dismissed.
  • Find a copy of the judgment here.
• Mbali Coal (Pty) Ltd v CSARS (81950-2019) [2023] ZAGPPHC 1792 (5 October 2023)
  
  
  • This is an appeal in terms of the provisions of section 47(9)(e) of the Customs and Excise Act against the determination made by the Commissioner in terms of which it disallowed the applicant's diesel refund claims.
  • It was contended that the diesel refund claims were in respect of qualifying or eligible mining activities and that the applicant had provided sufficient records, which meet the legislative requirements, to substantiate its quantification of the diesel refund claim.
  • The High Court held that:
    • The diesel refund claims were not in respect of qualifying or eligible mining activities on the basis that they clearly encompass activities carried out after the mineral had been extracted from the ground; and
    • The requirements of a logbook cannot possibly be met as the source documents themselves do not identify the activity that is being undertaken and do not label whether the activity is eligible or noneligible
    • The appeal was dismissed.
    • Find a copy of the judgment here.
• Fast (Pty) Ltd v Commissioner for the South African Revenue Service (IT 14305) [2023] ZATC 13 (24 August 2023)
  
  
  • The Tax Court had to consider two interlocutory applications. Both the applicant and the Commissioner sought to amend the respective statements that they had filed in court. Neither party consented to the amendment sought by the other party, thus compelling each party to seek the court's approval for its intended amendment. The two applications were heard separately on the same day. Due to the facts relating to the assessment and appeal being the same, the court issued one judgment.
  • The applicant opposed the Commissioner's amendment on the basis that it constituted a justification of the Commissioner's additional assessment on grounds that were absent when the assessment was made.
  • The court held that the Commissioner is allowed to rely on a new ground, as long as the new ground does not constitute a change of the whole of the factual or legal basis of his assessment. Should that occur, the Commissioner is obliged to withdraw the assessment and replace it with a new one. For it to constitute a new ground for the whole of the factual or legal basis of the Commissioner's assessment, the ground stated in the SARS rule 31 statement of grounds of assessment must in substance be different from that in the assessment. The court allowed the Commissioner's amendment on the basis that the evidence the Commissioner relied upon to make its assessment in the first place remains the evidence it intends to rely upon to make out its case at the appeal.
  • The Commissioner opposed the applicant's amendment on the ground that it is prohibited by rule 32(3). The Commissioner further argued that the amendment should be refused because the applicant inordinately delayed in bringing the amendment, and as a result thereof the Commissioner has suffered prejudice that cannot be cured by a costs order.
  • The court held that the applicant is only barred from raising a ground that is completely novel, one that was not at all raised in the objection filed in terms of rule 7. The court refused the applicant's application to amend its rule 32 statement of grounds of appeal to the extent that it raised novel grounds.
  • Find a copy of the judgment here.

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