The Commissioner for the South African Revenue Service v Rappa Resources (Pty) Ltd

On 29 March 2021, SARS issued assessments to Rappa Resources for the payment of VAT, penalties and interest. Rappa was advised it could lodge an objection under section 104 of the Tax Administration Act 28 of 2011 (TAA). Instead of following the objection and appeal procedure prescribed in sections 104 to 107 of the TAA, Rappa launched an urgent review application in the Gauteng Division of the High Court on 28 April 2021 seeking to review and set aside the assessments. Rappa demanded that SARS disclose the record of its decision under Uniform rule 53(1)(b). When SARS refused, Rappa launched a separate application on 3 June 2021 under Uniform rule 30A compelling SARS to deliver the record. SARS argued that Rappa's review application was not competent as it had not been sanctioned by the high court in terms of section 105 of the TAA. Initially, Rappa contended section 105 did not apply, but later amended its notice of motion to seek an order under section 105 'insofar as it might be necessary'. The high court (Dippenaar J) granted an order on 16 September 2021 compelling production of the record, but postponed sine die the question of whether a directive should be issued under section 105. SARS appealed with leave from the high court.

• Whether a high court has jurisdiction to entertain a review application challenging a tax assessment without first granting a directive under section 105 of the Tax Administration Act 28 of 2011
• Whether a high court can order the production of the record under rule 53 before determining whether it has jurisdiction under section 105 of the TAA
• The proper interpretation and application of section 105 of the TAA which provides that a taxpayer may only dispute an assessment by objection and appeal unless a high court directs otherwise
• Whether the default procedure for tax disputes is the objection and appeal process under the TAA or review proceedings in the high court
• What constitutes 'exceptional circumstances' justifying a high court directive under section 105

The appeal was upheld with costs, including those of two counsel. The order of the court below was set aside and replaced with an order dismissing the application with costs, including those of two counsel.

In terms of section 105 of the Tax Administration Act 28 of 2011 (as amended in 2015), a taxpayer may only dispute an assessment by means of the objection and appeal procedure prescribed in sections 104 to 107 of that Act, unless a high court directs otherwise. The default rule is that tax disputes must be taken to the tax court. The high court does not have jurisdiction in tax disputes unless it makes a directive under section 105 authorizing a departure from the default procedure. Such a directive will only be issued in exceptional circumstances. Before the high court makes such a directive, it has no jurisdiction in the review and cannot make an order compelling delivery of the record in terms of rule 53. A court must have jurisdiction at the commencement of proceedings for its judgment or order to be valid. The high court cannot postpone the logically anterior question of whether it has jurisdiction while simultaneously exercising coercive powers incidental to that jurisdiction. Where the high court has not made a directive under section 105, its orders in the review proceedings (including an order compelling production of the record) are nullities for want of jurisdiction.

The court noted that the tax court conducts a 'revision' or complete rehearing, not an appeal in the ordinary sense. It has wide powers including the power to determine the legality of assessments on grounds of review. A taxpayer cannot circumvent the appeal procedure simply by characterizing the challenge as one directed at legality rather than merit. The court acknowledged that it is neither desirable nor possible to define precisely what constitutes 'exceptional circumstances' justifying a directive under section 105, as each case must be considered on its own facts. However, what is ordinarily contemplated is something out of the ordinary, unusual, uncommon or rare. The court noted that whether exceptional circumstances exist is a matter of fact for the court to decide, not a matter of discretion, though whether to grant a directive if such circumstances exist does involve discretion. The court observed that an order under section 105 is not simply to be had for the asking - a proper case must be made out on the papers for the high court to authorize a departure from the default rule. The court declined to remit the matter to the high court (as occurred in the Constitutional Court's Standard Bank judgment) because here there was no cross-appeal and the postponed jurisdictional question was not a live issue that remained to be determined.

This case is a definitive authority on the interpretation and application of section 105 of the Tax Administration Act 28 of 2011. It establishes that: (1) The default dispute resolution mechanism for tax disputes is the objection and appeal procedure, not judicial review in the high court. (2) A high court lacks jurisdiction to entertain a review application challenging a tax assessment unless it first grants a directive under section 105 in exceptional circumstances. (3) A high court cannot exercise incidental powers (such as compelling production of the record under rule 53) before determining whether it has jurisdiction. (4) Taxpayers cannot simply bypass the statutory appeal procedure by characterising their challenge as one based on legality rather than merit. (5) The 2015 amendment to section 105 fundamentally changed the position, removing the taxpayer's election to proceed directly to the high court. The judgment reinforces the principle that courts must determine jurisdiction at the commencement of proceedings, and that specialized tribunals (like the tax court) should generally be the first instance forum for disputes within their competence. It also confirms that tax appeals are complete rehearings with wide revisionary powers, including the power to consider legality challenges.