Assmang (Pty) Ltd v Commissioner for the South African Revenue Service and Others (311/2024) [2025] ZASCA 121 (29 August 2025)

Case Note

Assmang (Pty) Ltd v The Commissioner for the South African Revenue Service and Others
[2025] ZASCA 121; Case no 311/2024 (29 August 2025)

Reportability

Although the Supreme Court of Appeal marked the judgment “Not Reportable”, its discussion of the diesel‐refund scheme under the Customs and Excise Act 91 of 1964, the meaning of “wet” and “dry” contracts, and the stringent record-keeping requirements in Note 6(q) has clear precedential value. The judgment synthesises earlier authorities, clarifies the evidential burden resting on mining houses that seek Schedule 6 rebates, and emphasises the limits of post-hoc constitutional challenges introduced late in the litigation process. Consequently, the decision will guide the industry, SARS auditors and lower courts alike, rendering it reportable in substance if not in formal annotation.

Cases Cited

Canyon Resources (Pty) Ltd v Commissioner for the South African Revenue Service (68281/2016) (GP) (27 March 2019);
Commissioner, South African Revenue Service v Glencore Operations SA (Pty) Ltd [2021] ZASCA 111; 2021 (4) All SA 14 (SCA);
Commissioner, South African Revenue Service v Levi Strauss South Africa (Pty) Ltd [2021] ZASCA 32; 2021 (4) SA 76 (SCA);
Prince v President, Cape Law Society, and Others 2001 (2) SA 388 (CC);
Savoi and Others v National Director of Public Prosecutions and Another 2014 (5) SA 317 (CC);
Tholo Energy Services CC v Commissioner for the South African Revenue Service [2024] ZASCA 120;

Legislation Cited

Customs and Excise Act 91 of 1964, especially ss 47(9), 75(1A), 75(1C) and Schedule 6 Item 670.04;
Income Tax Act 58 of 1962;
Value-Added Tax Act 89 of 1991;
Tax Administration Act 28 of 2011;
Constitution of the Republic of South Africa, 1996 (ss 36 and 172).

Rules of Court Cited

Uniform Rule 16A (constitutional notice procedure).

HEADNOTE

Summary

The appellant, Assmang (Pty) Ltd, sought to overturn SARS’s determination refusing diesel-levy refunds claimed under Schedule 6 Item 670.04 of the Customs and Excise Act. The High Court had dismissed the application after oral evidence on whether the appellant’s fuel supply arrangements with three contractors were on a “wet” or “dry” basis and whether statutory record-keeping obligations were met. It also rebuffed Assmang’s late constitutional attack on ss 47(9)(c) and 75(1A)(f). The Supreme Court of Appeal confirmed those conclusions and dismissed the appeal with costs.

Key Issues

First, the court had to decide whether the contractors were engaged on a dry basis, which alone would entitle Assmang to claim refunds. Second, it examined compliance with Note 6(q) record-keeping, particularly the requirement of logbooks demonstrating the journey of every litre of diesel from purchase to eligible use. Third, it considered the procedural and substantive propriety of the constitutional challenge introduced midway. Finally, it touched on the legality of penalties mooted in SARS’s original demand.

Held

The court found that, despite contractual labels, the economic substance of the arrangements was “wet”: contractors bore the fuel cost through deductions from their invoices, effectively purchasing diesel from Assmang. Such transactions are non-eligible for refunds. In addition, Assmang’s LAS dispensing records did not constitute logbooks contemplated by Note 6(q); they failed to trace actual utilisation in primary production activities. The constitutional challenge was held to be impermissibly late and factually unsupported. Consequently, the appeal failed on all grounds, and costs were awarded against Assmang, including those of two counsel.

THE FACTS

Assmang operates large-scale iron-ore and manganese mines in the Northern Cape and is registered with SARS both as a diesel “user” and a VAT “vendor”. To conduct drilling, loading and hauling it contracted Aveng Moolmans, Blue Sky Carriers CC and Blue Chip Mining. Each contractor drew diesel from on-site Engen bowsers procured at Assmang’s preferential rate.

The written contracts with Moolmans and Blue Sky expressly priced services on a “wet rate”, capping diesel at roughly one-third of the total consideration. Monthly adjustment tables calculated the actual litres consumed and deducted the diesel cost from the gross service fee. The Blue Chip agreement, though styled “dry”, operated identically in practice: diesel supplied by Assmang was set-off against the invoices. Contractors therefore absorbed fluctuations in consumption, benefiting if they used less fuel than the cap and bearing penalties if they exceeded it.

Assmang’s Liquid Automation System electronically recorded each bowser delivery by timestamp, nozzle tag and machine unit number. However, once fuel entered a contractor’s mobile tank its onward use was neither logged nor correlated with particular mining phases. When SARS audited the period June 2011 to October 2013 it concluded that the arrangements were wet, that LAS data were insufficient as logbooks, and that R39,5 million previously refunded should be repaid with interest and penalties.

THE ISSUES

The Supreme Court of Appeal framed its enquiry around three interconnected questions. It first interrogated whether, in substance, the contracts could be re-characterised as dry despite explicit wet-rate clauses and the consistent practice of invoice deductions.

Secondly, it assessed whether Assmang satisfied the stringent documentary duties under Note 6(q). That note demands a complete audit trail from purchase to eligible use, encompassing purchase invoices, storage movements, logbooks for each machine, and differentiation between eligible and non-eligible activities.

Thirdly, the court considered the admissibility and merit of Assmang’s constitutional attack on ss 47(9)(c) and 75(1A)(f), which bar interest on refunds until a determination is overturned. The question was whether the challenge was properly pleaded, whether factual foundations existed, and whether the court should entertain it once the main merits failed.

ANALYSIS

The court adopted a substance-over-form approach, reasoning that Item 670.04’s remission scheme is anti-avoidance in nature. Where contractors ultimately pay for diesel through any mechanism—direct invoices, credit notes or set-off—they are operating on a wet basis. The evidence showed that monthly spreadsheets calculated diesel usage, assigned Engen’s pump price and reduced the service-fee payable; the contractors therefore bore fuel risk and cost. Such dealings align with Canyon Resources, where a similar “conversion” device was rejected.

Turning to record-keeping, the judges emphasised that LAS outputs, while sophisticated, merely proved dispensing. They did not document the particular task, location or machine operating context, nor did they separate primary production from other ancillary or ineligible uses. Note 6(q)(dd) contemplates contemporaneous logbooks capturing date, place, purpose, eligibility classification and supporting source documents. Without that granular narrative SARS is unable to verify the quantum of eligible litres, and the deeming provision in s 75(1C)(d)(ii) disallows the claim.

On the constitutional issue, the court cited Prince and Zondi to stress that constitutional points must be pleaded upfront, buttressed by evidence and subjected to a s 36 justification analysis. Assmang raised the matter five years after pleadings closed and only weeks before trial, filed no supplementary affidavit, and led no witness on it. The challenge was therefore procedurally deficient and, given that the appeal failed on merits, academically moot.

REMEDY

Because the appellant failed to establish any statutory entitlement to Item 670.04 refunds, the court affirmed the High Court’s order dismissing the review and substitution application. It consequently upheld SARS’s demand for repayment, without deciding the separate penalty question because SARS had never imposed one under s 91 owing to lack of taxpayer consent.

Costs followed the event. The court found the matter sufficiently complex to warrant two-counsel fees for the respondents but not three. No declaratory or structural interdicts were issued since no constitutional invalidity was reached.

LEGAL PRINCIPLES

The judgment reinforces four principles. First, in tax law substance prevails; contractual wording cannot convert a wet arrangement into a dry one if economic reality shows the contractor funds fuel. Second, a taxpayer claiming rebates under Schedule 6 bears a strict evidential burden to produce a full audit trail; electronic pump records without utilisation logbooks are inadequate. Third, statutory provisions deeming non-compliance to disqualify refunds are strictly applied: failure to keep records disentitles the claim irrespective of bona fides. Fourth, constitutional challenges must be pleaded timeously and factually substantiated; courts will not render advisory opinions when the dispute is moot or the pleadings incomplete.