Eskom v Bojanala Platinum District Municipality and Rustenburg District Council

Eskom paid regional establishment and service levies (RSC levies) to various local authorities including the two respondents for several years. In 1995, following advice of senior counsel, Eskom objected to additional levies. Southwood J upheld its objection in 1997, and the Supreme Court of Appeal confirmed in Greater Johannesburg Transitional Metropolitan Council v Eskom 2000 (1) SA 866 (SCA) that section 24 of Act 40 of 1987 exempted Eskom from paying RSC levies to local authorities as they formed part of 'the State'. Despite winning these cases, Eskom continued paying RSC levies, partly under protest. After the SCA judgment, Eskom instituted actions against the respondents to recover RSC levies paid: R316,416.02 from the first respondent (levies paid January-December 1998, summons served 2 January 2002) and R2,636,595.94 from the second respondent (levies paid January 1991-December 1998, summons served 3 December 2001).

• Whether Eskom's claims for refund of RSC levies paid without liability prescribe after 30 years under section 11(a)(iii) of the Prescription Act 68 of 1969 (relating to taxation debts) or after 3 years under section 11(d) (relating to other debts)
• Whether section 11(a)(iii) operates in favour of both the tax gatherer and the taxpayer or only in favour of the tax gatherer
• The proper interpretation of 'any debt in respect of any taxation imposed or levied by or under any law' in section 11(a)(iii)

The appeal was dismissed with costs, including the costs of two counsel. The High Court's finding that Eskom's claims had prescribed (except for those covered by tacit agreement from mid-October 1997) was confirmed.

Section 11(a)(iii) of the Prescription Act 68 of 1969, which provides for a 30-year prescription period for 'any debt in respect of any taxation imposed or levied by or under any law', operates in favour of the tax gatherer (the state) only, and not in favour of the taxpayer. A claim for refund of taxes or levies paid without liability does not constitute a 'debt in respect of taxation' within the meaning of section 11(a)(iii). Such refund claims constitute 'any other debt' under section 11(d) and are therefore subject to a 3-year prescription period. Payments made in respect of levies not properly chargeable are not taxes but something else, and the debt underlying a claim for refund is not a tax debt imposed or levied under any law.

The court assumed, without deciding, that RSC levies properly assessed, due and payable would constitute 'taxation' for purposes of section 11(a)(iii). The court noted that the phrase 'in respect of' is capable of wide and narrow meanings depending on legislative intention and context, citing Mak Mediterranee Sarl v The Fund Constituting the Proceeds of the Judicial Sale of the M C Thunder 1994 (3) SA 599 (C). The court observed that generally the prescriptive period for condictiones is 3 years, whether for or against the State or for or against individuals or legal personae. The court expressed the view (with respect) that the decision in Sage Life Ltd v Minister of Finance and SARS (unreported, TPD, case no 24379/00, 10 October 2001) was wrongly decided insofar as it held that section 11(a)(iii) operates in favour of taxpayers.

This case establishes important principles regarding the application of prescription periods to tax refund claims in South African law. It clarifies that the extended 30-year prescription period for taxation debts under section 11(a)(iii) of the Prescription Act 68 of 1969 operates only in favor of the tax gatherer (the state), not in favor of taxpayers seeking refunds. This interpretation has significant practical implications for taxpayers seeking to recover taxes or levies paid without liability, as such claims are subject to the ordinary 3-year prescription period. The judgment demonstrates the courts' approach to statutory interpretation of prescription provisions and the balance between the interests of the state and taxpayers in the context of tax collection and refunds.