Glencore Operations SA (Pty) Ltd and Others v Commissioner for the South African Revenue Service and Another

Glencore Operations SA (Pty) Ltd and ARM Coal (Pty) Ltd formed the Goedgevonden Joint Venture (JV) to mine coal in Mpumalanga. A mining right was issued to Glencore under the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), subject to the condition that Glencore exercise the right jointly with ARM in accordance with the JV agreement. The JV was registered as a separate VAT vendor and as a 'user' for diesel refund purposes under the Customs and Excise Act 91 of 1964 (CEA). The JV claimed diesel rebates for fuel used in its mining operations. SARS initially disallowed refunds of approximately R5.1 million for the period June 2012 to September 2014. During the internal administrative appeal, SARS and the National Appeal Committee (NAC) raised, for the first time, that the JV was not entitled to refunds because it did not hold a mining right in its own name. The NAC increased the disallowed amount to approximately R83 million and upheld the disallowance. The Gauteng Division of the High Court, Pretoria, upheld the NAC's decision, finding that the JV did not comply with Note 6(f)(ii)(cc) of Schedule 6 to the CEA. The appellants appealed to the Supreme Court of Appeal.

• Whether a joint venture that conducts lawful mining under a mining right held by one of its members, but subject to a JV agreement incorporated into the right, is 'the person in possession of the necessary authorisation' under Note 6(f)(ii)(cc) of Part 3 of Schedule 6 to the CEA.
• Whether SARS has a discretion under Note 5 of Part 3 of Schedule 6 to pay diesel refunds to another person on good cause shown, and whether SARS lawfully considered and exercised that discretion.
• Whether the National Appeal Committee had jurisdiction to entertain the appeal where the original determination fell within the monetary jurisdiction of the Regional Appeal Committee.
• Whether the NAC could introduce a new ground of disallowance and increase the amount of liability beyond the original determination during the internal appeal process.

The appeal is upheld with costs, including the costs of two counsel. The order of the high court is set aside and in its place is substituted: (1) The applicants' appeal against the determination of the National Appeal Committee is upheld; (2) The determination of the National Appeal Committee is set aside; (3) It is declared that the third applicant, the Goedgevonden Joint Venture, complied with Note 6(f)(ii)(cc) of Part 3 of Schedule 6 to the Customs and Excise Act 91 of 1964; (4) The first respondent, the Commissioner for the South African Revenue Service, is ordered to pay the applicants' costs, including those consequent upon the employment of two counsel.

A joint venture that is not the registered holder of a mining right may still be 'the person in possession of the necessary authorisation' under Note 6(f)(ii)(cc) of Schedule 6 to the Customs and Excise Act 91 of 1964, where the mining right is granted subject to and incorporates a joint venture agreement that makes the joint venture the substantive entity lawfully authorised to conduct mining. Even if strict formal compliance with Note 6(f) is absent, good cause may exist for SARS to exercise its discretion under Note 5 to pay a refund to another person, and a failure by SARS to consider and exercise that discretion constitutes a reviewable irregularity. An internal appeal committee's jurisdiction is determined by the amount in dispute at the time of referral and cannot be created retrospectively by the committee's own decision to increase the liability. An appeal committee lacks the power to introduce a new ground of disallowance not relied upon in the original determination, or to increase the taxpayer's liability beyond that reflected in the determination under appeal.

The Court observed, in passing, that the four-year delay in the NAC's decision did not in itself invalidate the decision. The Court also remarked that a construction of the legislation that left no entity eligible to claim diesel refunds for lawful mining activities would negate the legislative rationale for the refund mechanism and result in the fiscus retaining levies on activities the Legislature intended to subsidise.

The judgment is significant for its interpretation of diesel rebate provisions under the Customs and Excise Act in the context of joint-venture mining structures. It rejects a rigid, formalistic approach in favour of a purposive and contextual interpretation that aligns the CEA with the MPRDA and the VAT Act, ensuring that lawful mining conducted through joint ventures is not arbitrarily excluded from fiscal incentives. The decision also clarifies the limited jurisdiction and powers of SARS internal appeal committees, holding that they may not raise new grounds of disallowance, exceed the original determination's liability, or retrospectively acquire jurisdiction by escalating the amount in dispute. Finally, it affirms that SARS's discretion under Note 5 must be rationally exercised where good cause exists, and that a failure to do so is reviewable.