Tholo Energy Services CC v Commissioner for the South African Revenue Service (378/2023) [2024] ZASCA 120 (6 August 2024) (2024)

THESUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable

Case No: 378/2023

In the matter between:

THOLOENERGY SERVICES CCAPPELLANT

and

COMMISSIONERFOR THE SOUTHRESPONDENT

AFRICANREVENUE SERVICE

Neutralcitation: Tholo Energy Services CC vCommissioner for the South African Revenue Service (Caseno 378/2023) [2024] ZASCA120 (6August 2024)

Coram:SCHIPPERS, HUGHES, WEINER and KGOELEJJA and TOLMAY AJA

Heard:10 May 2024

Delivered:This judgment was handed down electronically bycirculation to the parties’ representatives by email,publication on the SupremeCourt of Appeal website and released toSAFLII. The time and date for hand-down is deemed to be 11h00 on 6August 2024.

Summary:Statutory construction – Customs and Excise Act 91 of 1964(the Act) – s 47(9)(e) appeal against tariffdetermination – refund claim for fuel and Road Accident Fundlevy by licensed distributor of fuel –fuel not obtained fromstocks of licensee of customs and excise manufacturing warehouseenvisaged in s64F(1)(b) of the Act – exportedwithout permit – not manufactured in Republic – notwholly and directly removed to countryin customs union – notdelivered by licensed remover of goods – determination correct– appeal dismissed.

ORDER

Onappeal from: GautengDivision of the High Court of South Africa, Pretoria (Molotsi AJsitting as court of appeal in terms of s47(9)(e) ofthe Customs and Excise Act 91 of 1964):

Theappeal is dismissed with costs, including the costs of two counsel.

JUDGMENT

SchippersJA (Hughes, Weiner and Kgoele JJA and Tolmay AJA concurring)

Introduction

[1]The appellant, Tholo Energy Services CC, is a licenseddistributor offuel (LDF) as defined in s 64F(1) of the Customs and Excise Act 91 of1964 (the Act). In March 2017 the appellantsubmitted to therespondent, the Commissioner of the South African Revenue Service(the Commissioner), four claims for a refundof fuel and RoadAccident Fund (RAF) levies under the Act, totalling someR4.25million, in respect of 25 consignments offuel (diesel)exported to the Kingdom of Lesotho (the refund claims).

[2]On 20 July 2017 the Commissioner made a determinationunder s47(9)(a) of the Act, in terms of which he disallowed therefund claims (the determination). They were disallowed on the basisthat the appellanthad not complied with the requirements for refundsprescribed by the Act and the Customs and Excise Act Rules (theRules).

[3]The appellant lodged an internal administrative appealagainst thedetermination to an internal appeal committee (the appeal committee)of the South African Revenue Service (SARS). Theappeal committeedisallowed the appeal and confirmed the determination.

[4]The appellant then appealed the determination to theGauteng Divisionof the High Court, Pretoria (the High Court), in terms of s 47(9)(e)of the Act. It sought an order declaring the determination invalid,alternatively reviewing and setting it aside; and that thedetermination be substituted with one allowing the refund claims.

[5]The High Court (Molotsi AJ) dismissed the appeal withcosts, on thebasis that the appellant had not complied with s 64F of the Act andits rules, nor the requirements prescribed inSchedule 6 to the Act.The High Court also found that the appellant had removed the fuel toLesotho without the requisite permitissued in terms of theInternational Trade Administration Act 71 of 2002 (the ITA Act), bythe International Trade AdministrationCommission (ITAC). The appealis with its leave.

Facts

[6]The appellant’s sole member is Mr Thabiso Moroahae.He is alsoa shareholder and the sole director of Tholo Energy Services (Pty)Ltd, a private company incorporated in Lesotho (TholoLesotho). Itcarries on business in that country and supplies fuel mainly tocompanies operating in the construction and miningindustries.

[7]Between April and June 2016, 25 consignments of fuelof approximately40,000 litres each, were collected on behalf of the appellant fromdepots of the Petroleum Oil and Gas Corporationof South Africa (SOC)Ltd (PetroSA), for removal to Lesotho. PetroSA is a licensee of acustoms and excise manufacturing warehouse(a refinery) in MosselBay, also known and referred to in the papers as a ‘VM’.

[8]The appellant alleged that it had purchased the fuelfrom PetroSA andthat payment was made by Tholo Lesotho. SARS disputed this. Itcontended that Tholo Lesotho sourced the fuel itsupplied to itscustomers from South Africa, but used the appellant’sparticulars and credentials in its transactions withits SouthAfrican suppliers and when dealing with SARS. The appellant deniedthis contention in reply and stated that it had actedin its own nameand capacity as a LDF and licensed remover of goods under the Act.

[9]It is common ground that the fuel was not obtained fromPetroSA’sVM in Mossel Bay. Instead, 22 consignments of fuel were acquired fromPetroSA’s storage tanks at its depotin Bloemfontein. Theremaining three consignments were obtained from PetroSA’s depotat Tzaneen (two consignments) and fromTotalEnergies at Alrode,Alberton (one consignment).

[10]All 25 consignments of fuel were removed to Lesotho. It is alsocommon groundthat on the dates that they were so removed, theappellant had not been issued with an export permit; and that PetroSAdoes nothave a VM in Bloemfontein, Tzaneen or Alrode.

[11]On 17 March 2017 the appellant submitted the refund claims. SARSrequestedit to furnish further information. Subsequently SARSaudited the refund claims and assessed whether the appellant hadcompliedwith its obligations under the Act and Rules, and whether itqualified for a refund.

[12]On 27 June 2017 the Commissioner sent a letter of intent to theappellant inwhich it was informed that SARS was of the primafacie view that it had not complied with the provisions of theAct, nor with the requirements for a refund of duty specified inSchedule6 to the Act read with the Rules. SARS informed theappellant that the Commissioner intended to disallow the refundclaims andgranted it an opportunity to respond to the letter ofintent within 21 days, by producing evidence that the fuel was dealtwithin compliance with the Act. The appellant was specificallyrequested to furnish proof that the fuel had been purchased from thelicensee of a VM and of the actual litres exported; and that it wasin possession of an export permit.

[13]On 30 June 2017 the appellant responded to the letter of intent. Itstatedthat duty at source had been paid at the VM when the fuel waspurchased; that the actual quantities of fuel loaded were reflectedon the bills of lading; and that it never applied for a permitbecause SARS had informed it that permits were not required forexport to BLNS countries (Botswana, Lesotho, Namibia, Swaziland) inthe common customs area of the Southern African Customs Union.

[14]On 20 July 2017, after considering the appellant’s submissionsto theletter of intent, the Commissioner made the determination. Therefund claims were disallowed on the grounds that the appellant hadnot complied with the following provisions of the Act and Rules:

(a)ss 75 and 76;

(b)s 64F read with rules 64F.01 and 64F.07;

(c)s 19A4 read with rule 19A4.04 and Note 11(b) of Part3 of Schedule 6to the Act;

(d)rebate item 671.09 of Schedule 6; and

(e)rebate item 671.11 of Schedule 6.

Theappellant was informed that it was entitled to lodge an internaladministrative appeal against the determination, as envisagedin s77A-H of the Act.

[15]On 31 July 2017 the appellant, assisted by its attorneys of record,lodgedan internal administrative appeal. The grounds of appeal, insum, were these. SARS’ interpretation of s 64F(1)(b) wasincorrect. The appellant had substantially complied with the refunditems in Schedule 6 to the Act. At the relevant times, therewas apractice generally prevailing that ITAC permits were not required forexports to BLNS countries.

[16]On 20 October 2017 and pursuant to the appellant’s request, itsattorneymade oral representations to the appeal committee. MrMoroahae, the appellant’s director, was present when therepresentationswere made.

[17]On 5 December 2017 the appeal committee asked the appellant toprovide furtherinformation and documents. These were furnished bythe appellant on 1February 2018. Subsequently, on 7 May 2018the appealcommittee inspected various premises where the fuel hadallegedly been manufactured and stored. On 10 December 2018 theappealcommittee disallowed the internal appeal, on the basis thatthe fuel was not obtained from the stocks of the licensee of a VM asrequired by s64F(1)(b) of the Act.

[18]On 8 October 2019 the appellant delivered a notice of its intentionto institutelegal proceedings against SARS, as required by s 96(1)of the Act (the s 96 notice). In the annex to the s 96 notice theappellantset out its cause of action, essentially that SARS’determination that the fuel was not obtained from stocks of thelicenseeof a VM and that an ITAC permit was required to export thefuel, was incorrect.

[19]Subsequently SARS requested the appellant to furnish additionalinformationand documents to enable it to evaluate the intendedlitigation. The appellant provided the information and documents on31 Marchand 30 April 2020.

[20]On 15 July 2020 SARS responded to the s 96 notice. It informed theappellantthat its appeal under s 47(9)(e) of the Act ‘isan appeal de novo’ which required the appellant to ‘provecompliance with the provisions of theAct, in particular but notlimited to rebate item 671.11 read with the notes thereto, section75and section 19A read withthe rules thereto’. SARS went on tosay that ‘the Commissioner is entitled to oppose the intendedlitigation on differentor additional factual and/or legal bases thanthose contained in the letter communicating the decision to refusethe four refundclaims dated 20 July 2017 and the subsequent internaladministrative appeal decision dated 10 December 2018’.

[21]SARS’ response to the s 96 notice, in summary, was this.

(a)PetroSAobtained the fuel from other oil majors and there was no evidenceregarding the origin of the fuel.[1]

(b)The fuel was obtained from unlicensed premises.

(c)The appellant did not pay PetroSA for the fuel. Instead,payment wasmade by Tholo Lesotho.

(d)The export entry had to be supported by the PetroSA invoiceand notan invoice issued by the appellant. The latter invoice did notreflect the correct volume and value of the fuel, whichas a resulthad been incorrectly declared.

(e)The refund claims were not accompanied by the requisite customsdeclaration form.

(f)The fuel was not removed by a licensed removerof goods in bond.

(g)The fuel was not wholly and directly exported to the purchaser.Therewere significant discrepancies regarding the amount of fuel loadedaccording to the bills of lading, and what was declaredfor export onthe export bill of entry and the delivery notes.

(h)The appellant was not in possession of an export permit.

Submissionsin this Court

Appellant’ssubmissions

[22]The appellant submits that the Commissioner’s reliance on newgroundsfor the determination is ultra vires (beyond thepowers of an administrator). Once the determination was the subjectof proceedings under Chapter XA of the Act, soit is submitted, itbecame a final decision subject to a tariff appeal in terms of s47(9)(e) and the Commissioner could not amend or vary suchdetermination to the appellant’s prejudice.

[23]The appellant contends that upon making the determination, theCommissionerwas functus officio (an administrator is notentitled to revoke or alter a decision in the absence of statutoryauthority to do so). The Commissioner,so it is contended, could notchange the determination by supplementing the grounds for it and thefindings. Even if this werepermissible, SARS cannot vary thedetermination without granting the appellant an opportunity to makerepresentations; an amendeddetermination must be issued; and theappellant must be given an opportunity to dispute the amendeddetermination.

[24]Consequently, so the appellant submits, this Court should interpret s47(9)(e) of the Act – pre-constitutional legislation –in the light of the Constitution and the provisions of the Promotionof Administrative Justice Act 3 of 2000 (PAJA). It is furthersubmitted that SARS’ additional findings regarding thedeterminationare ‘administratively unjust, procedurallyunfair, and constitutionally invalid’; and that these groundsfall outsidethe ambit of the determination and do not form part ofthe justiciable issues in the tariff appeal.

[25]The appellant therefore contends that there are only two issues inthe tariffappeal. The first is whether a LDF is required to obtainfuel from a VM itself, or whether it must be obtained from ‘stocksof the licensee of a VM’ anywhere in the Republic; and thesecond, whether an export permit issued by the ITAC is a requirementfor a refund.

[26]As to the first issue, the appellant’s argument, in summary, isthe following:

(a)The Commissioner ignores the wording of s 64F(1)(b) of theAct, which requires the fuel to be obtained from stocks of thelicensee of a customs and excise manufacturing warehouse, not thewarehouse itself. PetroSA is the licensee of a VM. The VM cannot bethe licensee of itself. There is no provision in theAct, the Rulesnor the items in Schedule 6, which requires a LDF to obtain the fuelfrom the VM itself.

(b)Rule 19A4.04 provides that fuel levy goods removed for anypurpose bythe licensee must be removed from stocks which have been entered ordeemed to have been entered for home consumption(duty paid stock);and where such goods may be removed for any purpose, they may only beso removed from a storage tank owned byor under the control of thelicensee.

(c)The Commissioner ignores the fact that SARS itself introducedtheduty-at-source scheme, with the result that all fuel removed from aVM is duty paid stock. Consequently, there is no obligation,expressor implied, to acquire the fuel from a VM.

(d)In TunicaTrading[2]a full court held that a LDF which obtains fuel from the depot of alicensee (and not from the VM itself) is entitled to a refund.

[27]Regarding the second issue, the appellant submits that it didnot requirea permit and that it did not export the fuel. It contendsthat the Act, the Rules and the relevant item in Schedule 6 to theActdifferentiate between a ‘removal’ of fuel levy goodsto a BLNS country and the ‘export’ of goods to othercountries, and that the provisions of the ITA Act are inapplicable tothe refund claims.

[28]The appellant also contends that the alleged impermissible additionalgroundsfor the determination, namely that there is no proof that thefuel was manufactured in South Africa; that it was not transportedbya licensed remover of goods in bond; that it was not wholly anddirectly removed for delivery to Lesotho; and that payment wasmadeby Tholo Lesotho and not PetroSA, have no merit, for the followingreasons. During the inspection in loco SARS had establishedthat the fuel was locally manufactured and originated from PetroSA’sVM in Mossel Bay. The appellantcomplied with the requirement ofremoval by a licensed remover of goods, since the appellant and TholoLesotho (which removed thegoods) have the same member, director andshareholder. Although Tholo Lesotho paid PetroSA for the fuel, theAct does not requirethe LDF to do so.

Respondent’ssubmissions

[29]Counsel for the Commissioner submits that the main issue in thisappeal isthe correctness of the determination: whether the fuel wasexported as provided in rebate item 671.11 in Part 3 of Schedule 6 tothe Act, which is relevant to the more general question, namelywhether the appellant is entitled to the refunds claimed.

[30]It is submitted that in exercising its appellate jurisdiction andconsideringthe correctness of the determination, the High Court isrequired to conduct a complete rehearing of the merits of the matterwithor without additional evidence, and to make its owndetermination. This necessarily means that the High Court was notlimited tothe grounds on which the Commissioner made thedetermination.

[31]In summary, the Commissioner contends that the fuel was not exportedin accordancewith the requirements of rebate item 671.11 asrequired, for the following reasons:

(a)There is no evidence that the goods were manufactured in SouthAfrica.

(b)The fuel was not obtained from stocks of the licensee of aVM.

(c)The fuel was not wholly and directly removed for deliveryto Lesotho.

(d)The fuel was not transported by a licensed remover of goods.

(e)The fuel was not removed by a LDF, the appellant.

(f)The appellant did not pay the debt in respect ofwhich the refund wassought.

(g)The fuel was unlawfully exported to Lesotho without the requisiteexport permit.

Issues

[32]This appeal raises three issues:

(a)The first is the nature of an appeal in terms of s 47(9)(e) ofthe Act. More specifically, is the Commissioner confined to thegrounds for disallowing the refund claims, or is he entitledtoadvance additional grounds for refusing them?

(b)The second is whether the High Court was correct in dismissingtheappeal on the grounds of non-compliance with s 64F(1)(b) ofthe Act and the appellant’s exportation of the fuel without anITAC permit.

(c)The third issue, namely whether the refund claims wererightlyrefused on additional grounds, arises if the Commissioner is entitledto do so.

Thenature of an appeal under s 47(9)(e) of the Act

[33]Section 47(9)(a)(i) provides:

‘TheCommissioner may in writing determine–

(aa)the tariff headings, tariff subheadings ortariff items or other items of any Schedule under which any importedgoods, goods manufacturedin the Republic or goods exported shall beclassified; or

(bb)whether goods so classified under such tariffheadings, tariff subheadings, tariff items or other items of Schedule3, 4, 5 or 6may be used, manufactured, exported or otherwisedisposed of or have been used, manufactured, exported or otherwisedisposed ofas provided in such tariff items or other items specifiedin any such Schedule.’

[34]Section 47(9)(b)(i) states:

‘Wheneverany determination is made under paragraph(a)or anydetermination is amended or withdrawn and a new determination is madeunder paragraph(d), any amount due in terms thereofshall, notwithstanding that such determination is being dealt with interms of any procedure contemplatedin Chapter XA or any proceedingshave been instituted in any court in connection therewith, remainpayable as long as such determinationor amended or new determinationremains in force: Provided that the Commissioner may on good causeshown, suspend such paymentuntil the date of any final judgment bythe High Court or a judgment by the Supreme Court of Appeal.’

[35]Section 47(9)(e) provides:

‘Anappeal against any such determination shall lie to the division ofthe High Court of South Africa having jurisdiction to hearappeals inthe area wherein the determination was made, or the goods in questionwere entered for home consumption.’

[36]In PahadShipping[3]this Court considered the nature of an appeal in terms of s 65(6)(a)of the Act, against a determination by the Commissioner of thetransaction value of goods. Referring to the distinction betweenthetypes of appeal in Tikly,[4]Streicher JA said:

‘Theparties dealt with the case as if it was an appeal in the wide sense,ie as if it was a complete re-hearing of the case anda freshdetermination of the merits of the case. Correctly so, in my view,for the following reasons:

(a)The Act does not require of the respondent to hear evidence, to giveany reasons for his determinationor to keep any record ofproceedings. As was held inTikly(supra) at592B–C, these considerations militate completely against the“appeal” being an appeal in the strict sense.

(b)It is implicit in the provisions of section65(4)(c)(ii)(bb)to the effect that the determination by the respondent ceases to bein force from the date of a final judgment by the High Courtor thisCourt that the court must itself make a determination upon appeal toit. That eliminates the appeal being a review in thesense set out in(iii) above (seeTiklyat 591H–592A).

(c)As there is no provision for a hearing before the determination ofthe transaction value by therespondent the Legislature must, in myview, have intended “appeal” to be an appeal in the widesense.’[5]

[37]Accordingly, an appeal in terms of s 47(9)(e) is an appeal inthe wide sense, but it remains an appeal against the determination.As Wallis JA explained in Levi Strauss:

‘[A]nappeal under s 49(7)(b)ofthe Act is an appeal against the determination. While it is an appealin the wide sense, involving a complete rehearingand determinationof the merits,it remains an appeal against what was determinedin the determination, and nothing more.It is open to SARS to defendits determination on any legitimate ground, but it is not anopportunity for it to make a wholly differentdetermination, albeitone with similar effect.’[6]

[38]The appellant concedes – as it must – that the appeal inthis caseis an appeal in the wide sense, which involves a completerehearing and redetermination of the merits of the matter, with orwithoutadditional evidence or information. Indeed, this isspecifically authorised by the empowering provision.

[39]Not only isa court permitted to admit new evidence or information in as47(9)(e)appeal,but it also relies on the parties’ assistance in consideringnew evidence and information in those proceedings toassist it toarrive at the correct decision. In ToneleriaNacional,[7]this Court stated that it was regrettable that the parties had nottendered evidence in the court of first instance on productsthat hadto be classified and the industry in which they are produced, in anappeal against a tariff determination. The Judge hadto conductresearch on the Internet to obtain this information.

[40]It follows that the appellant’s argument that theCommissionerwas not entitled to raise additional grounds for thedetermination in the s47(9)(e) appeal; and that this wasadministratively unjust and procedurally unfair, has no merit. TheCommissioner was entitled to raiseadditional, legitimate grounds forthe rejection of the refund claims, as was done in the answeringaffidavit. The High Court waspermitted to decide the correctness ofthe determination on the additional grounds. And it must be stressedthat these groundsdid not change the determination at all –whether the fuel had been exported in compliance with the relevantprovisions ofthe Act, the Rules and the rebate items in Schedule 6.

Wasthe High Court correct in dismissing the appeal?

Thestatutory and regulatory provisions

[41]Section 75(1) of the Act, insofar as isrelevant, provides:

‘Subjectto the provisions of this Act and to any conditions which theCommissioner may impose–

. . .

(d)in respect of any excisable goods orfuel levy goods manufactured in the Republic described in Schedule 6,. . . a refund of theexcise duty, fuel levy or Road Accident Fundlevy actually paid at the time of entry for home consumption shall begranted to theextent and in the circ*mstances stated in the item ofSchedule 6 in which such goods are specified, subject to compliancewiththe provisions of the said item and any refund under thisparagraph may be paid to the person who paid the duty or any personindicatedin the notes to the said Schedule 6:

Providedthat any rebate, drawback or refund of Road Accident Fund levy ascontemplated in paragraph(b),(c)or(d),shall only be granted as expressly provided in Schedule 4, 5 or 6 inrespect of any item of such Schedule.’

[42]Section 64F reads, inter alia, as follows:

‘Licensingof distributors of fuels obtained from the licensee of a customs andexcise manufacturing warehouse

(1) For purposes of thisAct, unless the context otherwise indicates–

“licenseddistributor” means any personwho–

(a)islicensed in accordance with the provisions of section 60 and thissection;

(b)obtainsat any place in the Republic for delivery to a purchaser in any othercountry of the common customs area for consumptionin such country orfor export (including supply as ships' or aircraft stores), fuel,which has been or is deemed to have been enteredfor payment ofexcise duty and fuel levy, from stocks of a licensee of a customs andexcise manufacturing warehouse; and

(c)isentitled to a refund of duty in terms of any provision of Schedule 6in respect of such fuel which has been duly delivered orexported ascontemplated in paragraph(b);

(2). . .

(3)(a)In addition to any other provision of this Act relating to refunds ofduty, any refund of duty contemplated in this section shallbe subject to compliance with the requirements specified in the itemof Schedule 6 providing for such refund and any ruleprescribing anyrequirement in respect of the movement of such fuel to any suchcountry or for export.’[8]

[43]One of the rules prescribing requirements regarding the movement offuel forexport, and on which the Commissioner relied, is rule64F.04. It provides, inter alia, that:

(a)a LDF whoobtains any fuel from stocks of a licensee of a VM, must, in additionto any other document required to be completed inrespect of anyprocedure prescribed in the Act, provide an invoice or a dispatchdelivery note which must at least contain thelicensed name, customsclient number and physical address of the LDF who obtained the goods,the licensed name and customs numberof the licensee of the VM, andthe physical address of the storage tank from which the fuel wasobtained;[9]

(b)thebusiness name and address of the person in the country of export orin the common customs area to whom the goods are removed;[10]and

(c)‘Inaddition to the requirements specified in rule 19A.04, theinvoice issued by the licensee of the customs and excisemanufacturing warehouse to the licensed distributormust reflect the rate of duty and amount of duty included in theprice to the licensed distributor’.[11]

[44]In making the determination, the Commissioner also relied on rules64F.01 and64F.07:

(a)Rule 64F.01(a) defines, inter alia, ‘fuel’ as‘fuel as defined in section 64F and includes “fuel levygoods” contemplatedin rule 19A.01(c)’. Itprovides that a ‘manufacturing warehouse’ means a‘licensed customs and excise manufacturing warehouse’;and that a ‘refund’ means ‘a refund of excise duty,fuel levy or Road Accident Fund levy as provided for in items623.11,671.09 and 671.11 of Schedule No 6’. Rule 64F.01(b) statesthat except as otherwise provided in s 64F and its rules, theprovisions of, inter alia, the rules for s 19A, and s 64D anditsrules, apply to any activity of, or in connection with, a LDF.

(b)Rule 64F.07provides that an application for a refund must be on form DA66 andmust be supported by the invoice from the licenseeof the customs andexcise warehouse from whom the goods were obtained.[12]

[45]Rule 19A4.04, inter alia, provides:

‘19A4.04 (a)(i) Any fuel levy goods removed for any purpose by the licensee of acustoms and excise warehouse must be removed from stocks whichhavebeen entered or are deemed to have been entered for home consumptionin accordance with the provisions of these rules, hereafterreferredto as “duty paid stock”.

(ii) Where fuel levygoods are removed for any purpose specified in these rules requiringcompliance with a customs and excise procedureeither in respect ofthe removal, movement or receipt thereof, such goods may only be soremoved from a storage tank owned by orunder the control of alicensee of a customs and excise manufacturing or special customs andexcise storage warehouse.

. . .

(v) When any fuel levygoods are transported by road for –

(bb) removal to aBLNS country;

. . .

(dd) removal to arail tanker, a ship or an aircraft for onward removal for export suchremoval shall only be by a licensed removerof goods in bond ascontemplated in section 64D unless the goods are carried by thelicensee or licensed distributor using owntransport.

(b)(i) (aa) When fuel levy goods are exported, includingsupply as stores for foreign going ships, entry must be made thereofon form SAD 500at the office of the Controller before loading.

(bb) In the caseof a removal by a licensed distributor each such form shall bear theinvoice number of the licensee of the manufacturingwarehouse fromwhom the goods are obtained.’

[46]Note 11(b) in Part 3 of Schedule 6 to the Act states that anyapplication forthe refund of a fuel or RAF levy is subject tocompliance with s 64F and its rules, rule 19A4.04 and any other ruleregulatingthe export of goods.

[47]Item 671.09 provides that goods liable to the fuel levy and RAF levyare obtainedby a LDF as contemplated in s 64F, from stocks of thelicensee of a VM. This is reiterated in item 671.11 in terms of whichtheappellant applied for a refund, which states that such goods aredelivered to a purchaser in any other country in the common customsarea by a LDF, subject to compliance with Note12. In turn, Note12 provides that any load of fuel obtained from the licenseeof a VM‘must be wholly and directly removed for delivery in any othercountry in the common customs area by the licenseddistributor inorder to be considered for a refund of duty’.

[48]In terms of tariff heading 2710, a permit issued under the ITA Act isrequiredto import or export restricted goods. Diesel is specificallylisted as restricted goods.

[49]In sum, then, in order to qualify for a refund of duty, the appellantwas obligedto meet the following requirements:

(a)The fuel must have been manufactured in South Africa (s 75(1)of theAct).

(b)It had to be obtained directly from stocks of the licenseeof a VM(s64F(1)(b) read with rule 19A4.04(a)(i) and(ii)).

(c)The appellant had to produce an invoice from the licenseeof the VMto the LDF – the appellant, not an intermediary – showingthe licensed name, customs client number and physicaladdress of theLDF and the storage tank of the licensee, from which the fuel wasobtained (rules 64F.04(c) and 64F.07(b)(ii)).

(d)The fuel must have been removed by a licensed remover of goodsinbond (rule 64F.06(b) and (d) read with rule19A4.04(v)(bb) and (dd)).

(e)It had to be wholly and directly removed for delivery to thepurchaser in Lesotho (Note 12(b)(iii)(aa)).

(f)The appellant had to obtain an ITAC permit.

[50]Itmust be emphasised that each of these requirements must be met,failing which a refund of a fuel or RAF levy may not be granted.Thisis because a rebate of excise duty (or a refund of fuel levy) is aprivilege and strict compliance with its conditions maybe exactedfrom the claimant. In BPvSecretary for Customs and Excise,[13]approved by this Court in ToyotaSouth Africa,[14]afull court held:

‘[T]herebate of excise duty is a privilege enjoyed by those who receive it.It has been stated that it is neither unjust nor inconvenienttoexact a rigorous observance of the conditions as essential to theacquisition of the privilege conferred and that it is probablethatthis was the intention of the Legislature . . . Moreover, theprovision is obviously designed to prevent abuse of the privilegeandevasion of the conditions giving rise to such privilege and againthis supports the view that a strict compliance with therequirementslaid down is necessary.’

[51]Consequently, the appellant’ssubmission that ‘[t]he right to a refund is not dependent onactual compliance with allsections of the Act (and the schedules),unless expressly stated’, is wrong. Moreover, the abovestatutory and regulatoryprovisions and in particular ss 75(1) and64F(3)(a)of the Act are cast in peremptory terms. A refund ‘shall begranted to the extent and the circ*mstances stated in the itemofSchedule 6’; and any refund of duty is expressly subject tocompliance with the requirements specified in the Schedule6 itemsand any rule prescribing any requirement relating to the export offuel. And rule 64F.06(d) requires any load of fuelobtained from the licensee of a VM to be wholly and directly removed(from the VM) for export, beforea refund may even be considered.

[52]Inaddition, the use of the phrase ‘subject to compliance with’in s64F(3)(a)and s 75(1) of the Act; and rebate item 671.11, is deliberate. Thismeans that a claimant for a refund of duty must satisfy therequirements of those provisions, failing which a refund may not begranted.[15]

[53]What is more, the appellant ignores s102(5) of the Act, which requires it to show that the determinationis wrong. It providesin relevant part:

‘If. . . in any dispute in which . . . the Commissioner or any officeris a party, it is alleged by. . . the Commissioner or suchofficerthat any goods . . . have been or have not been . . . exported,manufactured in the Republic, removed or otherwise dealtwith or in,it shall be presumed that such goods . . . have been or (as thecase may be) have not been . . . exported, manufacturedin theRepublic, removed or otherwise dealt with or in, unless the contraryis proved.’

Wasthe fuel exported in compliance with the statutory provisions?

[54]Theappellant provided no proof that the fuel was obtained from thelicensee of a VM. In support of its submission that this isnot arequirement in terms of s64F(1)(b)of the Act, it relies on TunicaTrading.[16] In that case, a fullcourt of the Western Cape Division of the High Court, Cape Town (theWCHC), held that a LDF is entitled toa refund of customs duty and fuel levies, because s 64F(1) requiresthe LDF to obtain or acquire – not purchase –fuel fromstocks of the licensee of a VM. This, so the WCHC reasoned, wouldinclude a case where fuel is purchased from an intermediary,butemanates from stocks of the licensee of a VM. The appellant thereforesubmits that aLDF which obtains fuel from a depot of the licensee and not from a VMitself, is nonetheless entitled to a refund of duty.

[55]However,most recently this Court held that the WCHC’s interpretation ofs64F(1)(b),is incorrect. The WCHC disregarded theitems specified in Schedule6 to the Act, and the rulesprescribing the requirements in relation to the export of fuel.[17]Consequently, its order granting the LDF a refund of the customs dutyand fuel levy in that case, was set aside.

[56]This Court’s findings in Commissioner SARS v Tunica Trading,may be summarised as follows:

(a)On its plain wording, s 64F(1) states that aLDF means a person who obtains fuel ‘from stocks of a licensee’of a VM. This means that the fuel must beacquired from stocks kept on the premises of the VM. Put differently,the LDF must obtain thefuel directly from the licensee’sinventory at the VM. The fuel may not be acquired from anintermediary.

(b)Thisinterpretation is consistent with the plain language of s19(1) and (2) of the Act: a VM is a warehouse(iepremises) specifically licensed for the manufacture of dutiable goodsfrom imported or locally-produced materials. It is alsoconsistentwith the definition of ‘manufacturing warehouse’ in rule64F.01(a),which means a ‘licensedcustoms and excise manufacturing warehouse’ – not a depotnor unlicensed premises.[18]

(c)The plain wording of s 64F(1)(b) is buttressed by theimmediate context. Section 64F(1)(c)states that a LDF is a personwho ‘is entitled to a refund of duty interms of Schedule No. 6’. This is underscored by s64F(3)(a)which expressly states that such refundis ‘subject to compliance with the requirements specified inthe item of ScheduleNo. 6’, namely rebate item671.09,which requires the fuel to be obtained from stocks of the licensee ofa VM, and any rule prescribing requirements forthe movement of such fuel for export.

(d)Consistent with s 64F(1)(b) which requires fuel to be obtaineddirectly from a licensed warehouse, rule 64F.06(c) requires aclaimant for a refund, in addition to the requirements specified inrule 19A.04, to furnish the invoice issued by thelicensee of the VMto the LDF, which must reflect the rate and amount of duty includedin the price to the LDF. This is the clearestindication that the LDFmust obtain fuel directly from the licensee of a VM, fromstocks kept at the VM. This construction is reinforced by rule64F.06(d) which requires any load of fuel obtained from thelicensee to be ‘wholly and directly removed’ (from theVM) for export,or delivery to a BLNS country, before a refund ofduty may even be considered.

(e)The text and structure of the relevantprovisions are entirely consistent with the purposes of the Act,which include the controlof importation, export and manufacture ofcertain goods. The purpose of licensing storage and manufacturingwarehouses is to enablethe Commissioner to control the entry to,storage at, and removal of goods from, such warehouses. The licenseeof the warehousehas control over goods held in it and must ensurethat the goods are not released for home consumption, without therelevant dutybeing paid. If such goods were so released and soldwithout duty being paid, SARS would not receive the duty that wasotherwisepayable and a fraud would be committed on the fiscus. Forthese reasons, s 64F(1), the Rules, and the items of Schedule 6requirethat fuel be obtained from a controlled environment.

[57]The unchallenged evidence is that interms of the ‘duty at source’ scheme, the excise duty andfuel levy is paid bythe licensee of the VM. Section 64F(1)(b)says so in express terms. The LDF pays the licensee of the VM a priceinclusive of the duty and levy and although it sells forexport at aprice excluding the duty and levy (an ‘export price’),the LDF is required to pay the duty and levy tothe VM and canrecover same by applying for a refund from the Commissioner. It istherefore not surprising that rule 64F.06(c) requiresthe LDF to furnish the invoice issued by the licensee of the VM tothe LDF, which must reflect the rate and amount ofduty included inthe price to the LDF.

[58]The appellant failed to establish thatthe fuel was obtained from stocks of the licensee at a licensed VM,as the Commissioner rightlydetermined. The fuel was removed fromPetroSA’s depots in Bloemfontein and Tzaneen, and fromthe depot of TotalEnergies in Alrode. The undisputed evidence is thatnone of thesedepots is a licensed manufacturing warehouse. Solely onthis ground, the appeal in terms of s47(9)(e) of the Actwas correctly dismissed.

[59]Three consequences flow from the appellant’sfailure to comply with s64F(1)(b) of the Act, which alsoshow that its appeal was correctly dismissed. First, the appellantcould not, and did not, establish thatthe fuel was manufactured inSouth Africa (s 75(1)). Second, it could not produce an invoiceissued to it by the licensee of theVM, showing (i) the rate and theamount of duty included in the price to the LDF (rule 64F.04(c));and (ii) the licensed name and customs client number of the licenseeof the VM (the licensed warehouse), and the physical addressof thestorage tank from which the fuel was obtained (rule 64F.04(a)(ii)).And third, the appellant could not demonstrate compliance with rule19A4.04(a)(ii): the fuel was not removed from a storage tankat a licensed warehouse, owned by or under the control of thelicensee.

[60]As to its exportation of the fuelwithout an ITAC permit, the appellant submits that no ‘exportof fuel levy goods occurred’,because the Act, the Rules andNote 12 differentiate between a ‘removal’ of fuel to aBLNS country and the ‘export’of fuel to other countries.Then it is submitted that the SARS’ External Oil Directive‘does not trump the appellant’sentitlement as LDF to itsrefund’.

[61]These submissions however do not bear scrutiny. The ExternalOil Directive states, inter alia, that all mineral products (whichinclude diesel produced from crude oil) ‘require an exportpermit which must be obtained in advance of the export’,issuedby the ITAC; that when fuel levy goods are exported, entry must bemade thereof on a declaration at the office of the Controller;andthat in the case of export by a licensed distributor, eachdeclaration shall bear the invoice number of the licensee of theVMfrom whom the goods are obtained.

[62]It is common ground that the appellant failed to comply withthese provisions, and that it was not in possession of an exportpermitissued by the ITAC. SARS published on its website a list ofrestricted goods which are allowed to exit South Africa only oncertainconditions. Diesel is included in that list and it isspecifically stated that an ITAC permit is required to export fuel.

[63]It follows that the appellant’s submission that an ITACpermit ‘is irrelevant insofar as it concerns the refundprovisions’has no merit. So too, its submission that SARS –an organ of state bound by the principle of legality – may notinsiston compliance with the law. And as stated in the answeringaffidavit, an applicant applying for a licence as a LDF is requiredto acknowledge that it is acquainted with all legal requirementsrelating to the activity to be undertaken in terms of the licence,and agrees to comply with those requirements.

[64]The submission that the fuel was not exported, is likewisewithout merit. Section 6(1) of the ITA Act empowers the Ministerresponsiblefor trade and industry (the Minister) to prescribe thatno goods of a specified class or kind may be exported from theRepublic,except on the authority of a permit. The Minister did so inNotice R92 published in Government Gazette 35007 dated 10 February2012, in terms of which the goods described in Schedules 1, 2, and 3to the notice, shall not be exported except on the authorityof anexport permit issued under s 6. Fuel levy goods such as petrol anddiesel, are included in Schedule 1.

[65]Section 1of the ITA Act defines ‘export’. It means ‘to takeor send goods, or to cause them to be taken or sent,from theRepublic to a country or territory outside the Republic’. Itaccords with the definition of ‘exportation’by the WorldCustoms Organisation: ‘The act of taking out or causing to betaken out any goods from the Customs territory.’[19]

[66]The appellant exported the fuel to Lesotho. There is no scope in theITA Actor the External Oil Directive for an interpretation that thefuel was not exported, because Lesotho is a member state of theCustomsUnion. The s 47(9)(e) appeal was rightly dismissed onthis ground also. It goes without saying that the appellant failed toshow that the determinationis wrong, as envisaged in s 102(5) of theAct.

Theadditional grounds for refusing the refund claims

[67]These grounds may be dealt with shortly. As stated, a claimant for arefundof excise duty or fuel levy must strictly comply with therequirements for such refund. The appellant’s failure to complywith a single requirement would justify the rejection of its refundclaims.

Fuelnot manufactured in South Africa

[68]The appellant alleges that during inspections it wasestablished thatthe fuel was locally manufactured and originatedfrom PetroSA’s VM in Mossel Bay. It contends that ‘theorigin of thefuel is irrelevant’.

[69]The contention that the origin of the fuel is irrelevant, is directlyat oddswith s 64F(1) and (3) of the Act, the Rules and the items ofSchedule 6. Since the appellant did not obtain the fuel from alicensedwarehouse, it failed to show that the fuel was manufacturedin South Africa, as contemplated in s 75(1) of the Act. In fact, oneof the reasons for the determination was non-compliance with theprovisions of s 75(1). The appellant’s claim that it wasestablished that the fuel was locally manufactured, is unsustainableon the evidence. None of the depots from which the fuel wasobtainedis registered with SARS as a VM.

Fuelnot wholly and directly removed

[70]Assuming that the fuel was manufactured in South Africa (which wasnot established),it was first removed from a manufacturing warehousefor home consumption to the depots in Bloemfontein, Tzaneen andAlrode. Thereafterit was removed from those depots to Lesotho.

[71]This is nota direct removal as contemplated in rule 64F.06(d),which states that the fuel must be wholly and directly removed fordelivery to a BLNS country, in order to be considered for arefund ofduty. The movement and storage of fuel in storage tanks, prior toexport (or removal), does not comply with the requirementthat thefuel be ‘wholly and directly’ exported.[20]Similarly, Note 12(b)(iii)(aa) provides that any load of fuelobtained from the licensee of a VM must be wholly and directlyremovedfor delivery in any other country in the common customs area.For this reason also, the appellant did not qualify for a refund ofthe fuel and RAF levy.

Fuelnot transported by licensed remover of goods

[72]Note12(b)(ii)(aa) renders an application for a refund subject tocompliance with rule 64F and its rules. Rule 64F.06(b)provides that unless the LDF uses own transport, fuel wholly orpartly transported by road must be carried by a licensed removerofgoods in bond as envisaged in s 64D of the Act.[21]

[73]It is common ground that Tholo Lesotho, which transported the fuel toLesotho,is not a registered remover of goods in bond. On this basisalso, the refund claims must fail.

Fuelnot delivered by LDF

[74]Item 671.11 of Schedule 6 to the Act states, inter alia, thatgoods liableto the fuel and RAF levy is delivered by a LDFcontemplated in s 64F, subject to compliance with Note 12. Both item671.11 andNote 12(b)(iii)(aa) require that the fuel must be removedfor delivery in a country in the common customs area by the LDF.

[75]The appellant failed to comply with this requirement. The fuel wasdeliveredby Tholo Lesotho to the purchaser in Lesotho. It is not aLDF. However, the appellant says that the nationality of the driversand origin of the vehicles were disclosed to SARS, and that TholoLesotho has the same member, director and shareholder. All ofthis isirrelevant and does not change the fact that on this basis too, theappellant did not qualify for a refund.

Conclusion

[76]SARS also claims that the appellant is not entitled to a refund ofduty onthe ground that Tholo Lesotho, not the appellant, paidPetroSA for the fuel and there is no evidence that the appellant paidanylevies. By reason of the conclusions to which I have come, it isunnecessary to deal with this ground; nor the challenge to thedetermination on the basis that it is reviewable on the groundscontemplated in the PAJA, alleged in the founding affidavit.

[77]The following order is made:

Theappeal is dismissed with costs, including the costs of two counsel.

A SCHIPPERS

JUDGE OF APPEAL

Appearances:

[1]An oil major is a licensee of a customs and manufacturing warehouse,such as BP Southern Africa (Pty) Ltd and TotalEnergies SouthAfrica(Pty) Ltd.

[3]PahadShipping CC v Commissioner for the South African Revenue Services[2009] ZASCA 172; [2010] 2 All SA 246 (SCA).

[4]Tiklyand Others v Johannes NO and Others1963 (2) SA 588 (T).

[5]PahadShippingfn 3 para 14.

[8]Emphasis added.

[9]Rule 64F.04(a)(i)and (ii).

[10]Rule 64F.04(a)(vi).

[11]Rule 64F.04(c),emphasis added.

[12]Rule 64F.07(b)(ii).

[13]BPSouthern Africa (Pty) Ltd and Others v Secretary for Customs andExcise and Another 1984 (3) SA 367 (C) at 375H-376D.

[14]ToyotaSouth Africa Motors (Pty) Ltd v Commissioner, South African RevenueService 2002 (4) SA 281 (SCA) para 45.

[15]BPSouthern Africa(Pty)Ltd and Others v Secretary for Customs and Excise and Another 1985 (1) SA 725 (A) at 734B-E; 735H-I and 737A.

[16]TunicaTradingfn 2 above.

[17]TheCommissioner for the South African Revenue Service v Tunica Trading59 (Pty) Ltd[2024] ZASCA 115.

[18]Emphasis added.

[19]Glossaryof International Customs TermsDecember 2018, published by the World Customs Organisationhttp://www.wcoomd.org.

[20]KepuTrading (Pty) Ltd v Commissioner for the South African RevenueServices(3516/18) [2022] ZAGPPHC 1026 (28 December 2022) paras 42-43.

[21]Section 64D(1) of the Act provides:‘Noperson,exceptifexemptedbyrule,shallremoveanygoodsinbondintermsofsection18(1)(a)orforexportintermsofsection18A,oranyothergoodsthatmaybespecifiedbyruleunlesslicensedasaremoverofgoodsinbondintermsofsubsection(3).’