Zimbabwe Revenue Authority v Zimasco (Private) Limited

The Zimbabwe Revenue Authority (ZRA) conducted a tax review of Zimasco's mining royalty obligations and in December 2022 issued an adjusted royalty assessment for the period January 2019 to September 2022, claiming royalties were owed on chrome ore concentrates and ferrochrome products. The reassessed liability totaled ZWL$604,922,007.31 and US$7,052,406.64. Zimasco objected, arguing that these products were mineral-bearing products, not minerals, and that no royalty rates had been prescribed for mineral-bearing products during the relevant period. Zimasco is engaged in mining and smelting chromite ore to produce high carbon ferrochrome. Ferrochrome is produced by subjecting chromite ore to smelting processes in electric arc furnaces using reductants and fluxes, resulting in an alloy chemically and physically distinct from the ore. In May 2023, Zimasco sought a declaratory order from the High Court that chrome ore concentrates and ferrochrome were exempt from mining royalties during the disputed period.

• Whether chrome ore concentrates and ferrochrome qualify as 'minerals' or 'mineral-bearing products' under the Mines and Minerals Act
• Whether royalties were payable on mineral-bearing products between January 2019 and September 2022 in the absence of prescribed royalty rates
• Whether ferrochrome, as a man-made alloy, falls within the definition of 'mineral' under section 5 of the Mines and Minerals Act
• The correct interpretation of sections 244 and 245 of the Mines and Minerals Act read with the Schedule to Chapter VII (section 37) of the Finance Act
• Whether retrospective amendments to the Finance Act could create liability for periods before the amendments
• The applicable principles of statutory interpretation in fiscal legislation

The appeal was dismissed with costs. The High Court's declaration that the respondent (Zimasco) was not liable to pay mining royalties on chrome ore concentrates and ferrochrome for the period January 2019 to September 2022 was upheld.

The binding legal principles established are: (1) In fiscal matters, no royalty obligation can arise without both an enabling provision and a clearly prescribed rate in a charging provision - the absence of a prescribed rate is dispositive; (2) Where the Schedule to the Finance Act prescribes royalty rates only for 'minerals' and is silent on 'mineral-bearing products', no legal liability to pay royalties on mineral-bearing products arises during that period; (3) Tax and royalty obligations are statutory in nature and cannot arise by inference or implication - strict construction mandates that ambiguity or silence must be resolved in favor of the taxpayer; (4) A 'mineral' under section 5 of the Mines and Minerals Act is defined as a substance occurring naturally in or on the earth which has been formed by or subjected to a geological process - a processed mineral converted into an alloy not found in the earth's crust no longer retains its character as a mineral; (5) Retrospective definitional amendments cannot create fiscal liability where none existed at the material time - the correctness of a court decision is determined according to the law in force when the decision was made; (6) The introduction of a new statutory provision expressly imposing royalties on mineral-bearing products confirms that no such liability existed prior to that provision coming into force.

The Court made several non-binding observations: (1) The legislative omission of royalty rates for mineral-bearing products during the disputed period was 'not an oversight' but 'reflected a conscious legislative omission'; (2) The Court distinguished between different types of mineral processing, noting that 'separation of dirt from a mineral by sluicing would clearly not' cause it to lose its character as a mineral, while conversion into an alloy would; (3) The Court emphasized that in the Zimbabwean context, 'a mineral royalty payable in terms of section 244 of the Mines and Minerals Act constitutes a fee paid by the holder of a mining right to the mining commissioner for the right to dispose the mineral resources from a mining location', being payable on the ad valorem value of mineral resources extracted; (4) The Court noted that the burden lies with the revenue authority to demonstrate an explicit statutory basis, including a prescribed rate, for any claimed fiscal obligation; (5) The Court observed that courts reject attempts to impose taxes or royalties by analogy, and taxation must be imposed by express words, not through inference or stretching statutory terms.

This judgment is significant in Zimbabwean tax and mining law for several reasons: (1) It reaffirms the strict construction rule in fiscal legislation that no tax or royalty can be imposed without clear and express statutory authority; (2) It establishes that liability for mining royalties requires not only an enabling provision but also a clearly prescribed rate in an effective charging provision; (3) It clarifies the distinction between 'minerals' and 'mineral-bearing products' under the Mines and Minerals Act; (4) It confirms that ferrochrome, as a man-made alloy, does not fall within the definition of 'mineral' and that processing which converts a mineral into something not found in the earth's crust causes it to lose its character as a mineral; (5) It establishes that retrospective legislative amendments cannot create fiscal liability for periods before the amendments where no such liability existed; (6) It confirms that the correctness of judicial decisions must be assessed based on the law in force at the time the decision was made, not subsequent amendments; (7) It provides guidance on the interpretation of enabling versus charging provisions in fiscal statutes, emphasizing that silence or omission in charging provisions signifies no liability rather than an oversight to be remedied by implication.