Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Before: Acting Justice HJ De Waal
Date of hearing: 22 November 2023
Date of judgment: 18 January 2024 (handed down electronically)
THE PETROLEUM OIL AND GAS CORPORATION
OF SOUTH AFRICA (SOC) LTD
and
THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE
THE MINISTER OF FINANCE
JUDGMENT
DEWAALAJ:
Case No: 8808 / 2020
Applicant
First Respondent
Second Respondent
Introduction
[1] The Applicant ("PetroSA") is the licensee of a customs and excise manufacturing
warehouse (known as a "VM"), which is situated at Mossel Bay. Manufactured fuel
levy goods, as defined in the Customs and Excise Act 91 of 1964 ("the Act"), attract
the payment of an excise duty and a fuel levy and a Road Accident Fund ("RAF") levy.
Schedule 6, Part IF of the Act deals with the excise duty and Part 3 deals with the fuel
and RAF levies.
[2] Then there are also Rules adopted under sl9A of the Act ("the Rules"). Relevant for
present purposes are the Rules relating to customs and excise warehouses in which
excisable or fuel levy goods are manufactured or stored and the Rules relating to the
manufacture, payment of duty and controlled movement of fuel levy goods. The Rules
numbered 19A are general Rules and those numbered 19A4 are specific Rules in respect
of fuel levy goods.
[3] The excise duty and the levies are payable to the First Respondent ("SARS") when the
fuel goods leave the VM. 1 They are then deemed to have been entered into the country
for home consumption, even though they may be destined for exportation to
neighbouring countries, such as Botswana, Lesotho, Namibia or Swaziland ("BLNS
countries") or other African countries. Exports to BLNS countries are referred to as
"removals" and exports to other foreign countries are referred to as "exports".
[ 4] Once they leave the VM and the duty and levies are paid, the fuel goods become "duty
paid stock:'. However, in terms of s75(1)(d) read with Schedule 6 of the Act, a licensee
is entitled to a refund of the excise duty and the fuel levies in respect of removed or
1 Rule 19A4.02(a)(i).
2
exported goods provided that the statutory requirements are met. In tenns of s77 of the
Act, such a refund may b~ set-off in the licensee's monthly excise account (DA160
account).
[5] The present matter is concerned with the question of whether PetroSA is entitled to a
refund in respect of certain transactions concluded during a specific audit period, more
particularly from May 2015 up to and including March 2017 ("the audit period"). It
is common cause that the duties and levies were paid on the fuel goods and that the set
off was effected by Petro SA. The question is whether Petro SA was entitled to the set
off ( effectively a refund of the duty and levies paid) on the basis that if the fuel goods
were removed or exported and PetroSA complied with the legal requirements for the
refund.
Factual background
[6] The audit referred to above included a letter of engagement from SARS to PetroSA
dated 17 May 2017; a SARS notice of intentto assess dated I 6 August 2019; a response
from PetroSA dated 29 November 2019; and a letter of demand from SARS dated
18 February 2020.
[7] The letter of demand, which sets out the final position taken by SARS contained three
findings adverse to PetroSA.
[8] Finding I was that PetroSA underdeclared volumes removed from PetroSA's VM
resulting in underpayments of duties and levies. Finding 1 was abandoned by SARS in
its answering affidavit before this Court. Nothing more need to be said about this
finding.
3
[9] Findings 2 and 3 are determinations in tem1s of s47(9)(a)(i)(bb )2 of the Actto the effect
that Petro SA is not entitled io the off-set because:
9 .1. Export acquittal documentation was absent, inadequate or not provided in
substantiation of the account set-off. This will be referred to as "Finding 2".
9 .2. Fuel had been exported from unlicensed facilities, i.e. the fuel was not removed
or exported from a storage tank owned by or under control of a licensee of a VM
or a special customs and excise storage warehouse ("SOS"). This will be
referred to as "Finding 3".
[1 OJ The matter is complicated in that it involves some 10 000 transactions which took place
during the audit period. PetroSA' s claim for a refund concerns a variety of transactions,
namely:
10.1. Fuel goods transported by rail from the PetroSA's VM to an unlicensed facility
in Bloemfontein and from there removed to Botswana or Lesotho by road or
by pipeline.
10.2. Fuel goods purchased by PetroSA from oil companies such as BP, Shell, Sasol
and Chevron, which were uploaded and removed or exported to African
2 Section 47(9)(a)(i) provides as follows:
"(9) (a) (i) The Commissioner may in writing determine-
(aa) the tariff headings, tariff subheadings or tariff items or other items of any Schedule under which
any imported goods, goods manufactured in the Republic or goods exported shall be classified;
or
(bb) whether goods so classified under such tariff headings, tariff subheadings, tariff items or other
items of Schedule 3, 4, 5 or 6 may be used, manufactured, exported or otherwise disposed of or
have been used, manufactured, exported or otherwise disposed of as provided in such tad ff items
or other items specified in any such Schedule.
The present matter is not concerned with the classification of goods (para (aa) above) but with whether the fuel
goods had been exported as provided in the items (para (bb) above).
4
countries from unlicensed facilities, including from PetroSA's own facilities
at Bloemfontein and Tzaneen; the pipeline networlcat Tarlton; and facilities at
Waltloo and Alrode.
10.3. Fuel goods removed or exported through intermediary traders to the ultimate
customer in another African country.
[11] Prior to engaging into the relevant transactions, Petro SA consulted with and provided
its business model to SARS in 2012. SARS did not object to the business model at the
time. The relevance of this will become clear later.
[12] PetroSA is appealing against the two determinations in terms of s47(9)(e) of the Act,
which provides as follows:
"( e) An appeal against any such determination shall lie to the division of the
High Court of South Africa having jurisdiction to hear appeals in the area
wherein the determination was made, or the goods in question were entered for
home consumption."
[13] In some tax matters such as the present one, a Court is required to decide an appeal on
the merits, i.e. whether the determinations (Findings 2 and 3) are right or wrong. In the
present matter this includes assessing whether the determinations are contrary to a
practice generally prevailing during the audit period, as contemplated in s44(11A) of
the Act, which practice was allegedly that fuel goods removed or exported from
unlicensed facilities qualified for set-offs. It also includes assessing whether the
determinations are based on a sound interpretation of the Act and whether Petro SA' s
business model was approved by SARS in a determination.
5
[14) Apart from the appeal on the merits, PetroSA submits that:
14.1. In its answering papers in the appeal, SARS raised a number of new grounds
on which it claims that PetroSA was not entitled to the set-off, namely that the
fuel had not been removed or exported (inclnding that the records of home
affairs do not support the claim of exportation); that PetroSA was not the true
exporter (the intermediaries were); and that Petro SA did not make use of a
licensed remover of goods in bond ("ROG") for the removals.
14.2. SARS may not introduce new and different justifications for the
detenninations in its answering papers. These new justifications must be
struck out on the basis that they are irrelevant (they did not form the basis of
the determination) and vexatious (they contain allegations of fraud which do
not appear in the letter of demand).
14.3. Finding 2, at leastthe pai1 which found that the acquittal documents pe11aining
to some of the intennediaries were non-compliant was made in a procedurally
unfair matter. This pai1 of Finding 2 was not made in the letter of intent and
Petro SA was not given an opportunity to deal therewith. Petro SA has instituted
a review in respect of this part under the Promotion of Administrative Justice
Act 3 of 2000 ("P AJA") on the basis of procedural unfairness. This is the
PAJA review.
14.4. The determinations and/or the Rules are irrational. This is the constitutional
review.
6
[15] In Case No 21471, PetroSA successfully applied to the Gauteng Division of the High
Corni, Pretoria for the suspension of payment, pending the outcome of the present
appeal.3 The Judgment, per Makhubele J, reserved the costs of that application for
adjudication in the present matter.
[16] ln what follows, I deal with the nature of the appeal and the strike-out and thereafter
with the merits and the P AJA and constitutional reviews. Before that it is necessary to
dispose of two other interlocutories (other than the strike-out).
Interlocutory applications
[17] Firstly, leave was sought by PetroSA for the admission of a supplementary founding
affidavit, on the grounds set out in said affidavit dated 31 July 2020. The introduction
of this affidavit was not opposed by SARS and its contents were dealt with in the
answering affidavit. Leave for its admission is granted, with the costs occasioned by
the application to be costs in the cause.
[18] Secondly, little more than a month before the hearing, on 18 October 2023, PetroSA
brought an application for the admission of a further affidavit containing evidence
regarding the licensing of Tarlton as an SOS. The application is opposed by SARS on
grounds set out in affidavits filed on 19 November 2023 (the day before the hearing).
lf granted, SARS seeks a proper and adequate opportunity to deal with the further
evidence. In other words, a postponement will be required. At the outset of the hearing,
counsel for PetroSA, Mr JP Vorster SC, who appeared with Ms HJ Snyman, indicated
that his client was not proceeding with this application. In the circumstances nothing
3 Tue fu]I citation is Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd vs The Commissioner
for the South African Re,,enuc Service Case No: 21471 / 2020. I shall refer to this Judgment as tbe Gauteng
Suspension Judgment.
7
further need to be said about it, save that SARS is entitled to the costs occasioned by
opposing this applicationc
The nature of the appeal and the strike-out
[l 9] It is common cause that the appeal is a wide appeal, involving a complete rehearing and
determination of the merits.
[20] PetroSA however contends that this does not mean that the scope of the appeal can
extend beyond the correctness of the determinations made by SARS. In other words,
PetroSA contends that it remains an "appeal" against what was determined by SARS
and that the nature of the determinations accordingly limit the scope of the appeal.
SARS is not entitled to make new determinations in its answering affidavits. The appeal
is not a "tabula rasa", as counsel for PetroSA called it.
[21] In this regard, counsel of Petro SA referred me to the following dictum in
Commissioner SARS v Levi Strauss SA (Pty) Ltd [2021] 2 All SA 645 (SCA); 2021
(4) SA 76 (SCA) (7 April 2021):
"[26] I do not think this argument is open to SARS on these papers. An appeal
under s49(7)(b) of the Act is an appeal against the determination. While it is an
appeal in the wide sense, involving a complete re-hearing and determination of
the merits, it remains an appeal against what was determined in the
determination and nothing more. It is open to SARS to defend its determination
on any legitimate ground, but it is not an opportunity for it to make a wholly
different determination, albeit one with similar effect." (my underlining)
[22] With respect, it is not entirely clear what the SCA meant with the statement that it was
open to SARS to defend its detemunation on "any legitimate ground". Would it
8
include, as was contended by Mr J Peter SC who appeared for SARS, that SARS could
rely on an entirely new basis for the determination thatPetroSA was not entitled to the
set-offs? Not so, in my view. I say so for the following reasons:
22.1. Firstly, the SCA in Levi Strauss held that the appeal remains an appeal against
what was determined in the determination and "nothing more". What is
"determinecf' is not simply the outcome of whether the taxpayer is entitle or
no( to the set-off, but the basis for that outcome, i.e. the reasoning. That is
"what" is determined by SARS.
22.2. Secondly, the Full Bench of this Division put matters beyond doubt when it
held in Tunica Trading 59 (Proprietary) Limited v Commissioner, South
African Revenue Service [2022] ZA WCHC 52; [2022] 4 All SA 571 (WCC);
85 SATC 185 (21 April 2022) at para [89] that: "In its judgment at page 13
line I 0, the court a quo said the following: It was the discovery of the non
compliance and widespread fi-aud that triggered the auditing of all claims
including this one". In refusing the appeal the court clearlv considered factors
far wider than those which formed the basis o(the September 2015 decision.
In fact, it considered the process launched by SARS as an audit and it then
sought to determine for itself whether all the regulatory provisions had been
met. This approach was clearlv impermissible. The existence of a wide appeal
does not mean that an appellate authority may extend the enquily beyond the
ambit of the decision which is being appealed. The rehearing must be related
to the limited issue of whether the party appealing should have been
successful." It is the "basis" of the determination which is appealed against,
not just the outcome.
9
22.3. Thirdly, Tunica Trading refers to the SCA decision of Groenewald NO and
Others v MS Developments (Cape) (Pty) Ltd 2010 (5)cSA 82 (SCA) at
paras 24-25 where the SCA held that the appellant's reasons define the ambit
of the appeal, the sole issue being whether the appellant should succeed for
the reasons it has advanced.
22.4. Fourthly, the appeal is decided on motion by a Court. It would be unworkable
if the respondent can introduce a new basis or justification for the
determination in its answering papers. How would the appellant !mow about
such a new justification of the determination so as to enable it to deal with
same in the founding affidavit? Surely it cannot be fair to allow a respondent
to introduce a new justification in the answering affidavit and then non-suit the
appellant on that basis that it then seeks to make out a case in reply?
22.5. Finally, what would be the purpose of the initial investigation by SARS if the
Court is required to reassess liability entirely? I do not believe that the
legislature had in mind two totally separate and independent processes. In my
view the initial investigation must form the basis of the determination and the
appeal. The Court is ill-equipped in motion proceedings to assess the matter
entirely afresh years down the line. Take the present matter as an example: it
is now seven years after the (beginning) of the audit period. As pointed out by
counsel for Petro SA, how can it now be expected to obtain and produce records
from third parties such as affidavits from truck drivers to counter an entirely
new basis for the determination?
[23] In researching the issue 1 came across an unreported judgment of Moloti A.T sub nom
Tholo Energy Services CC v Commissioner for the South African Revenue Service
10
[2023] ZAGPPHC 1590; 47405/2020 (3 February 2023), which I do not believe I was
rcforrccho by counsel. In this judgment, the learned Acting Judge held as follows:
"[51] ... since this appeal is a rehearing of the matter on the merits, the
respondent was permitted and entitled to rely on additional grounds disallowing
the refund of the Applicant. The additional grounds were legitimate and formed
a nexus with the initial determination. The respondent did not provide a wholly
different determination. The determination never changed. The determination
was that the Applicant's claim for a refund was refused.
[52] This was the final determination of 20 July 2017. The additional grounds
relied upon by the respondent in his answering affidavit, did not mean that the
respondent changed his determination of 20 July 2017. The character of an
appeal being a hearing de novo, provided the respondent with an opportunity to
provide additional grounds for refusing to grant a claim for refund. It was
therefore permissible in law for the respondent in his answering affidavit to
provide additional grounds of refusing the claim for refund. There is certainly
nothing wrong with such an approach. The respondent, for the purposes of
appeal, is not bound to solely rely on the reasons provided on his determination
of 20 July 2017. There was therefore nothing unfair by the respondent in relying
on the additional grounds."
[24] To the extent that it is suggested in Tholo that the determination is simply that the
refund is disallowed and that SARS, as a respondent in the appeal, may introduce any
new basis for such a "determination" in the appeal proceedings before the Court, Tholo
is inconsistent with Tunica Trading, to which I am bound. I in any event fully agree
with the reasoning in Tunica Trading, and attempted to expand thereon above.
[25] Given this conclusion, the new justifications of the determination listed above and
sought to be introduced in paragraphs 39, 40, 49.3 and 61 of the answering affidavit
cannot be considered and are irrelevant. They fall to be struck out and there is no reason
11
why costs should not be awarded against SARS in respect of the strike out application.
I should add that whiJstthe new _justiJieations are largely contained in the challenged
paragraphs they have spilled over to others as well, paragraph 60 of the SARS
answering affidavit, for example. To the extent not struck out, the new justifications
should simply be disregarded as irrelevant.
[26] In any event, although not necessary to decide, I doubt that there is merit in all ofSARS'
new allegations. PetroSA could only deal with these in its replying affidavit to which
I must have regard in assessing the veracity of the new allegations. I will briefly deal
with the new justifications below.
[2 7] Before I do so, I should at this point record that on 12 January 2024, when this judgment
was nearly finalised, two judgments were handed down which appeared to me to be
potentially relevant. They are BP Southern Africa (Pty) Ltd v Commissioner for the
South African Revenne Service (801/2022) [2024] ZASCA 2 (12 January 2024) and
BP Southern Africa (Pty) Ltd v Commissioner for the South African Revenue
Service (2021/49805) [2024] ZAGPPHC 1 (12 January 2024). I invited further written
submission regarding the relevance of the judgments. SARS submitted further
submissions. I shall refer to the judgments as BP SCA and BP Gauteng, respectively.
[28] My views on the new justifications are as follows:
28.1. It is clear from the materials presented by PetroSA to SARS that the fuel goods
were in fact exported. Sufficient evidence was submitted by way of affidavits,4
4 In BP Gauteng. the Court held that the best evidence of the fact that the fuel goods crossed the border would be
an affidavit from a person who physically took the fuel across the border. In that case such an affidavit was not
produced. In the present instance Petro SA' s position is that, where necessary 1 acquittal of export entries was
based on affidavits. The factual position is accordingly not the same as in BP Gauteng. SARS contended that
12
the attachments thereto,5 as well as the CNI and CN2 fonns. The latter
according to SARS in a connnunication of September2021, serve as definitive
proof of exportation and are printed from SARS' own system. 6 The dispute in
the present matter has been about whether there was material compliance with
mandatory criteria for claiming the refund / set-off and not whether there had
in fact been removal or exportation of the fuel goods.
28.2. I also do not agree with the new allegation that PetroSA made fraudulent
representations, for instance that it falsely represented that it exported the
foods whereas in fact intermediaries took delivery at the depots and was
responsible for the export from there. As stated above, as early as
16 May 2012, PetroSA disclosed its business model, including the
involvement of the intermediaries and ask SARS whether the intended practice
would be acceptable. In response and in a letter dated 6 August 2013, SARS
Petro SA did not obtain approval to submit affidavits as proof of export in the absence of the relevant original
export documentation.
5 As an examp1e, the following was provided in respect of Tswana Fuel transactions:
• Affidavit from Turners Shipping reflecting inter alia that the goods were delivered at the delivery
destination.
• SAD 500
• SAD 502
• Customs release notification
• Road manifest
• Pro forma invoice
• CN 1 and CN2
• Signed delivery notes
• Assessment notice issued and end6rsed by the Botswana Revenue Service
• SAD 500 endorsed by the Botswana Revenue Service
• Road delivery docket issues by Transnet Pipelines at Tarlton
• Valve Seal Sununary.
6 In BP SCA, the following is stated:
"[8] When any fuel is transported by road for export purposes, the removal must be done by a licensed
remover of goods in bond, unless the licensee or a licensed distributor carries tbe goods. After the
exportation of the fuel, the exporter claim.s a refund based on all the documents relating to the movement
of the fuel from South Africa to the foreign country. The final documents, the customs notification
documents (CNI and CN2), are refen-ed to as acquittals."
13
indicated that PetroSA should make due clearance as the exporter. This was
not based on technicalities. Petro SA retained title of thc,_fuel:goods until the
trucks crossed the border and it was accordingly the exporter as defined in s 1
of the Act. The Act contains a broad definition of the tenn "exporter".7
PetroSA was clearly as exporter as defined because it was a party who was
"ben~ficially interested8 in any way whatever in any goods exported".
Petro SA had various terms of payment with its customers, some of which were
on a credit basis so that it retained a beneficial interest in the goods at the time
of export. Moreover, the INCOTERM (2010), which PetroSA agreed with its
customers since 2014 was on a free carrier ("FCA") basis in terms of which
the seller carry out and pay for all export and transit clearance formalities. The
seller (PetroSA) was therefore responsible for the export.
28.3. PetroSA disclosed that it was not using its own transport and obtain copies of
the ROG licences at the time of exports. The name and registration number of
the ROG was recorded in the road freight manifest. PetroSA contends that
there is no reason to doubt that the transporters nominated were not in fact
being utilised as the transporters for the consignments concemed.9 In my view,
7 In terms of the Act, "exporter" includes any person who, at the time of exportation-
(a) owns any goods exported;
(b) carries the risk of any goods exported;
(c) represents that or acts as ifhe is the exporter or owner of any goods exported;
( d) actually takes or attempts to take any goods from the Republic;
( e) is beneficially interested in any way whatever in any goods exported;
(f) acts on behalf of any person referred to in paragraph (a), (b), (c), (d) or (e), and, in relation to
imported goods, includes the manufacturer, supplier or shipper of such goods or any person inside
or outside the Republic representing or acting on behalf of such manufacturer, supplier or shipper."
8 Tue term "beneficial interest' has a wide meaning. See, in general regarding the term: Independent
Community Pharmacy Association v Clicks Group Ltd and Others (CCT J l/22) [2023] ZACC 10; 2023 (6)
BCLR 617 (CC) (28 March 2023).
9 The position was different in BP Gauteng, where at para 35 of the Judgement it was recorded that it was accepted
in argument that BP bad no idea whether the specimen consignment or indeed most of the assignments was
removed from the Tarlton tank by a licenced removers of goods.
14
had this issue been properly raised it may have created problems for PetroSA.
But it shows how difficult it is to deal with matters not raised in the letter of
intent, but many years down the line in the answering affidavit. It ought to
have been raised during the audit process.
[29] I now turn to deal separately with Findings 2 and 3, as per the letters of intent and
demand.
Finding 2
(i) The original determination as per the letter of intent and letter of demand
[30] The determination in the letter of intent followed by the letter of demand in respect of
Finding 2 was that Petro SA did not submit a request for approval to the relevant excise
office in order to submit affidavits as proof of exp01t in the absence of the relevant
original export documentation.
[31] The requirements to substantiate a set-off are contained in the Rules, more particularly
in Rule 19A4.04(b)(ii)(ff). This Rule requires duly completed copies of forms SAD
500 and 502 to accompany the monthly account in support of set-off of the duty against
the amount due and payable on that account, or an application for a refund of duty by
the licensed distributor.
[32] It is a requirement to obtain proof of the export as prescribed in the Rules.
[33] However, Rule 19A4.04(e) makes prov1S1on for an affidavit to be provided in
circumstances where a person cannot produce a document containing a statement or
15
declaration. Prior approval is not required for reliance on the Rule.10 The Rule merely
requires the person, for purposes of acquittal, to furnish an affidavit regarding the
circumstances in which the document was lost; a declaration to the effect that the goods
were duly delivered at the destination in the prescribed bill of entry or other document
under cover of which the goods were removed; and supporting documentary evidence
as may be required by the Cormnissioner. This procedure was relied upon by PetroSA.
[34] In the letter of intent, SARS contended that, without supporting docun1entation, the case
officers could not verify that the product was duly exported.
[35] PetroSA disputed this in the letter of response, indicating that the affidavits included
copies of the export docun1ents.
[36] In my view compliance, or at least material compliance, with the requirements of the
Rules were proven by PetroSA. This was done through provision of affidavits; the
SAD500 and SAD502 documents; the CNI and CN2 documents; as well as the delivery
notes which recorded that fuel had been delivered in the country of destination. The
purpose of the requirement, which is to provide proof of removal or export, was
achieved. In Allpay Consolidated Investment Holdings (Pty) Ltd and Others v
Chief Executive Officer of the South African Social Secnritv Agency and Others
(2014 (I) SA 604 (CC); 2014 (I) BCLR 1 (CC), the Constitutional Court held as
follows:
10 See, also, the Gauteng Suspension Judgment where the following is recorded at para 72:
"[72] The commissioner complained that the applicant did not seek approval to use affidavits. The
applicant stated in the founding affidavit that there was no such requirement in the legislation to seek
approval to submit an affidavit. The commissioner does not address this avennent in the answering
affidavit."
16
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"[30] Assessing the materiality of compliance with legal requirements in our
administrative law is, fortunately, an_ e_xgcise unencumbered by excessive
formality. It was not always so. Formal distinctions were drawn between
"mandatory" or "peremptory" provisions on the one hand and "directory" ones
on the other, the former needing strict compliance on pain of non-validity, and
the latter only substantial compliance or even non-compliance. That strict
mechanical approach has been discarded. Although a number of factors need to
be considered in this kind of enquiry, the central element is to link the question
of compliance to the purpose of the provision." ( my underlining)
[3 7] In the present instance I am satisfied that there was material compliance with the
requirements in the Rules and the purpose of the requirements (to provide proof of
removal / export) was achieved.
(ii) The new determination in the letter of demand
[3 8] Petro SA contends that, in the letter of demand, SARS made further determinations in
respect of Finding 2, which had not been foreshadowed in the letter of intent. This
relates to the entities Masiquame (sic), World Marine, Seraj, AIP Botswana, Afrolinl(
and Mount Mero and more particularly claims by SARS that in respect of these clients
there were further deficiencies in the documentation, namely that:
38.1. dates as per the SAD500 (fieldl8) differed from the declaration dates on the
SAD 500;
38.2. numerous transactions did not have customs stamps on the export side;
38.3. for numerous transactions, the dates on the CNI and CN2 are a few months
apart; and
17
38.4. no commercial invoices were provided for various transactions.
[39] PetroSA contends that these detemiinations were made in a procedurally unfair manner
and contrary to PA.TA as it was never given an opportunity to deal with them in the
letter ofresponse. PetroSA also contends that some of these alleged shortcomings were
formulated in an impermissibly vague manner.
[ 40] PetroSA nevertheless dealt with the alleged shortcomings in its founding affidavit. A
review under P AJA based on procedural fairness and impermissible vagueness is only
brought in the alternative.
[ 41] I do not believe that the shortcomings are material witliin the meaning of the term in
Allpay. Certainly, given the following further evidence provided by PetroSA in the
founding affidavit in the review, which were not pertinently disputed in the answering
affidavits or at the hearing, the new alleged irregularities cannot be regarded as material:
41.1. The explanation for the differing dates on the SAD500 is that the one is the
date of processing and the other the date of re-printing.
41.2. Moderriisation of the acquittal system and the introduction of e-filing in 2013
meant that export documents are no longer stamped by SARS officials at the
South African border.
41.3. The date on the CN I is the assessment date and the one on the CN2 is the date
of re-printing.
41.4. The commercial invoices were provided for transactions where this was
queried
18
(iii) The review (brought in the alternative)
[ 42] My finding on the merits disposes of the need to decide the PAJA review, which was
brought in the alternative. 1 should however add that, contrary to what was contended
by counsel for SARS as the hearing of the matter, there can, in my view, be no doubt
that a determination made by SARS amounts to administrative action as contemplated
in PAJA. 11 It would theoretically be possible for an appeal and review to be brought
simultaneously in respect of different aspects of the same determination.
[43] There is however a lot to be said for the approach adopted by PetroSA in this matter,
which is to focus on dealing with the merits of new allegations in the letter of demand
even if they are contended to be reviewable on the grounds of procedural unfairness. I
say this because if the review were to be successful in the present instance ( which I do
not find to be the case) remittal would have resulted in an unnecessary waste of time
and money. This is not a matter where the taxpayer was prejudiced by the new points
taken in the letter of demand and they could have - and were - dealt with in the appeal
along with the rest of the determinations. The position is different in respect of new
justifications raised by SARS in its answering affidavit. I dealt with the prejudice
caused thereby above.
11 Albeit taken in terms of a different empowering provision, the Full Bench confirmed in Tunica Trading that
SARS determinations are administrative actions. The Court held as follows:
"[87] The decision by the court a quo that the Febrnary 2017 decision was a section 96 decision which
did not constitute reviewable conduct, either in terms ofPAJA or on the principle oflegality was clearly
inconect. TI1e February 2017 decision was quite clearly a decision in terms of section 77F of the Customs
Act and was administrative action. The decision was taken by an organ of state exercising a public power
in terms of legislation and bad a direct, external legal effect which adversely affected Tunica's rights.
Similar decisions by the Commissioner were he]d by the Constitutional Court to constitute administrative
action. It follows that the February 2017 decision is reviewable."
19
[44] For these reasons the review need not be decided and it follows that there is no need to
determine the application for exemption from the duty to exhaust an internal remedy
either.
Finding 3
[ 4 5] The third finding, which applies to all the export entries in the Schedule A to the letter
of demand was that the set-off was disallowed because the fuel goods were removed or
exported from unlicensed facilities. In respect of this finding, PetroSA makes the
following arguments (all in the alternative):
45.1. On a proper interpretation, the requirements of Rule 19A4.04(a)(ii) had been
complied with.
45.2. SARS issued a determination in a letter dated 6 August 2013 on the issue
which PetroSA complied with.
45.3. A practice generally prevailing has come into existence in terms of which
refunds were allowed for removals from unlicenced warehouses, provided that
it was duty paid stock.
45.4. On the interpretation advanced by SARS, the determinations and/or
Rule 19A4.04(a)(ii) read with s75(l)(d) and the relevant rebate items and notes
thereto are irrational, to the extent that they provide that refunds may not be
set-off when fuel is removed from an unlicensed facility. [The Second
Respondent ("the Minister") was joined due to this challenge to the Rules.
The Minister filed a notice of intention to oppose but no answering papers.
The Minister was also not represented by counsel at the hearing.]
20
[ 46] I deal with Finding 3 by first providing a description of the applicable legal provisions
and the parties' submissions and then deal with the four alternatives, albeit not in the
same order as they are set out above.
(i) Legal provisions and the parties' submissions
[ 4 7] The refunds were disallowed on the basis that the fuel goods were removed / exported
from unlicensed facilities. More particularly, the determination was that the
requirements of Rule 19A4.04(a)(ii) had not been complied with. This Rule provides
as follows:
"[ii] Where fuel levy goods are removed for any purpose specified in these rules
requiring compliance with a customs and excise procedure either in respect of
the removal, movement or receipt thereof, such goods may only be so removed
from a storage tank owned by or under control of a licensee of a customs and
excise manufacturing or special customs and excise storage warehouse."
[48] PetroSA's advances two possible interpretations of the Rule in the alternative:
48.1. Firstly, PetroSA contends that Rule 19A4.04(a)(ii) does not require that the
fuel be removed from a licensed facility but merely that it must be removed
from duty-paid stock, as envisaged in Rule 19A4.04(i)12 and that the (first)
removal must be from a storage tank owned by or under the control of a
licensee of a VM or licensee of a SOS. PetroSA argues that there are no further
requirements and that, if this is so, the set-offs must be allowed because all of
12Rule 19A4.04(a)(i) provides as follows:
"Any fuel goods removed for any purpose by the licensee of a customs and excise warehouse must be
removed from stocks which have been entered or are deemed to have been entered for home consumption
in accordance 1,:vith the provisions of these rules, hereafter referred to as duty paid stock."
21
the initial removals were from duty paid stock, either from PetroSA's VM or
the VM of other licensees.
48.2. Secondly, and in the alternative, PetroSA contends that even if the Rule
envisages two or more removals, first from duty-paid stock and thereafter from
any other facility until the fuel goods leave the country, there was compliance
because the second and further removals were from storage tanks owned by or
under control of a licensee. Petro SA argues that there is no requirement that
the storage tanks themselves must be licensed. In this regard, PetroSA
contends that it is the owner of the Bloemfontein and Tzaneen depots from
which the removals took place; that the facilities at Waltloo, Alrode and IVS
are under control of Total and Shell, both VM licensees; and that VMs are
jointly in control of Tarlton and whilst there, the fuel is accounted for as stock
• of the relevant VM. 13
13 Petro SA placed some reliance on the decision of the FuJI Bench in Tunica Trading. That case dealt with the
issue of whether fuel goods exported by a licenced distributor in terms of s64F of the Act had been obtained from
stocks of a licensee. In that matter, even though the fuel emanated from BP's VM it was supplied from a depot
remote from BP' s refinery, i.e. also not from a licensed facility. The Full Bench summarised the issue before it
as follows (my underlining):
"[I 7] On 1 April 2015, SARS rejected the refund application on the ground that the fuel was not
"purchased from the licensee of a Customs and Excise manufacturing warehouse" namely BPSA, but
was instead purchased from what SARS termed "an intermediary" namely Masana, which had purchased
it from the "licensed manufacturing warehouse". According to SARS, it was of the view that it was the
"intention of the legislator" in the provision of Section 64F(l )(b) that the fuel must be acquired from the
licensee of a customs and excise manufacturing warehouse. The wording in s64F clearly permits refunds
of duties and levies in respect of fuel 'obtained' from 'stocks of a licensee of a customs and excise
manufacturing warehouse', which are the large oil companies like BPSA and Shell and to deliver it for
export which includes supplying fuel as stores for foreign-going ships.
[68] In my view, on a proper interpretation of the wording in s64F of the Customs Act, the
requirement that a distributor must have obtained the fuel "from stocks of a licensee of a customs and
excise manufacturing warehouse" cannot be interpreted to restrict the refund to cases where the fuel was
purchased directly from such a licensee, but must include cases where the fuel is purchased from an
intermediary like Masana, where the fuel is in fact from the stocks of such licensee, and obtained from
those stocks even if not purchased directly. In fact, it is not in issue that at least from 2010 until
October 2014, SARS itself had interpreted the Act and rules in such a manner that the refund would be
made in these circumstances." (my underlining)
Whilst recognising that the purchase may be made through an intennediary, the Full Bench did not address the
issue of whether the fuel goods must be removed from a licensed facility or whether, as contended by Petro SA) it
22
[49] SARS contends that both of these interpretations would undermine the legislative
• scheme b<',cause once in unlicensed premises the fuel goods leave the controlled
environment and it may be mixed with imported fuel or replaced. If this happens there
would be no way of proving the goods' provenance because there is no requirement for
procedures to be adhered to enable such proof in respect of unlicenced facilities. It is
contended further by SARS that Tarlton is owned and controlled by Transnet which is
not a licensee and that it would be absurd to contend that the fuel stored there is under
control of a licensee, such as Petro SA, BP and others.
[50] For the reasons set out in the next part dealing with the practice generally prevailing
during the audit period, and in the conclusion, it is not necessary to or indeed
appropriate to decide on the interpretation point.
(ii) Practice generally prevailing
[51] In the notice of motion PetroSA seeks a declaration, in terms ofs21 of the Superior
Courts Act 10 of 2013, to the effect that a practice generally prevailing, as envisaged in
s44(11A) of the Act, had come into existence. This practice pertained to duties and
levies set off by licensees on their DA 160 accounts in respect of fuel goods removed
or exported from unlicensed storage facilities.
[52] As stated above, all the refunds set off by Petro SA during the audit period, involving
thousands of transactions have been disallowed, mainly on the basis that the storage
facilities from which the product was ultimately removed prior to export, was not a
suffices that it is duty-paid stock which is removed from a storage tank owned by or under the control of a licensee
of a VM or a licensee of an SOS.
23
---___ !
licensed warehouse in terms of the Act. This underlies the (initial) claim of SARS for
repaymentofrefunds and related liabilities of over Rl billion.
[53] Section 44(1 lA) of the Act provides as follows:
"(l lA) Notwithstanding anything to the contrary contained in this Act, there
shall be no liability for any underpayment on any goods if the duty which should
have been paid was, in accordance with the practice generally prevailing at the
time of entry for home consumption, not paid or the full amount of duty which
should have been paid at the time of entry for home consumption was, in
accordance with such practice, not paid, unless the Commissioner is satisfied
that the amount of duty which should have been paid was not paid, or that the
full amount of duty was not paid due to fraud or misrepresentation or non
disclosure of material facts or any false declaration for purposes of this Act."
[54] PetroSA contends that, on the assumption that SARS' interpretation of
Rule J 9A4.04(a)(ii) is correct, that the duty which ought to have been paid was not paid
as it had been refunded in accordance with the practice generally prevailing at the time.
[55] Section 44(1 lA) of the Act has been interpreted in CIR v SA Mutual Unit Trust
Management Co Ltd 1990 (4) SA 529 (A). In that Judgment the approach to the
section was relaxed somewhat in that the SCA held that personal knowledge and
approval of the alleged practice by the Commissioner is not necessary. The approach
to be followed is described at p.536E-I as follows (my underlining):
"It seems to me, with respect, that what was stated by Berman J, as set forth
above, places insufficient emphasis upon what is actually done in the different
offices of the Department of Inland Revenue in the assessment of taxpayers. I
also am of the view that it may be misleading to suggest as a requisite personal
knowledge and approval of the practice on the part of the Conm1issioner.
24
Although in terms of s 2(1) of the Act the Commissioner is the official
responsible for carrying oytJhe pyoyi§ions oqhe Act, under s 3(1) the powers
,- -•• ••, •, .-->•••••-,,•, .•. ,O••- s" .• ;
and duties thereby imposed upon him may be exercised or performed by him
personally or by any officer engaged in carrying out the provisions of the Act
' ... under the control, direction or supervision of the Commissioner'. At all
events, a practice 'generally prevailing' is one which is applied generally in the
different offices of the Department in the assessment of taxpayers and in seeking
to establish such a practice in regard to a particular aspect of tax assessment it
would not be sufficient to show that the practice was applied in merely one or
two offices. Moreover, the word 'practice', in this context, means 'a habitual
way or mode of acting' (see The Oxford English Dictionary meaning 2.c); and
consequently, in general, it would also not be sufficient to show that, in regard
to an aspect of assessment, a ce1tain attitude had been adopted by the assessors
concerned only in some instances."
[56] It is further well-established that the onus rests on the taxpayer to show on a
preponderance of probability the existence of the practice generally prevailing at the
time of assessment.14
[57] I shall revert to the details of the alleged practice further below. There is a preliminary
issue which concerns the legal point taken by SARS that s44(11A) of the Act does not
find application as the case is not concerned with :underpayment or non-payment of
duty", but with PetroSA's claim for refunds. I do not believe that there is merit in this
point. As pointed out by counsel for PetroSA:
57. l. The duty and levies which had been paid at source had been refunded to
PetroSA by way of set-off in terms ofs77 of the Act.
14 SA Mutual Unit Trust at p. 538D.
25
57.2. After SARS determined that PetroSA was not entitled to the refund, there was
an nnderpayment or non-payment of the duty inct)w sense that the duty and
levies which ought to have been paid was not paid, in accordance with the
practice generally prevailing.
57.3. Section 76A(l) provides SARS with a right to obtain repayment of such a
refund which was not payable in the first place. This is a claim for non
payment of the duty and levies.
[58] To this I should add that the legal point taken by SARS is somewhat difficult to
understand, given that the determination in the letter of demand is that Petro SA is liable
to pay the amount of Rl 0 17 3 51 881.32. It is obvious that SARS alleges and
underpayment or non-payment in that amount.
[59] I now tum to deal with the evidence regarding the alleged practice generally prevailing.
[60] ln written submissions made after the hearing, at my invitation, PetroSA summarised
the evidence in its papers on which it relies for the practice generally prevailing as
follows:
60.1. PetroSA has been exporting fuel levy goods from inter a/ia Tarlton and
Bloemfontein with the knowledge of the Commissioner by road smce
1 November 2013.15
15 In the Gauteng Suspension Judgment the same version is recorded:
"[85] On whether even if the Commissioner was aware of it and permitted it to happen and now
intends to stamp it out, :Mr. Vorster argued that he entitled to stamp out practices that he no longer wishes
to allow. The argument is that on the facts presented to this court, the practice has been prevailing since
about 2012 and if the Commissioner wants to clean out the practice, he cannot do so retrospectively."
26
- ____ I
60.2. SAD 500 and SAD 502 fonns were not submitted by the VMs with their
DA160 accounts but these fom1s were kept by the VMs.
60.3. PetroSA and other oil companies have been subjected to audits by officials
from different SARS offices across the country, and to the best of Petro SA' s
knowledge, set-offs applied in respect of exports from unlicensed facilities
were never disallowed until the 2018 letter of demand.
60.4. According to Turners Shipping Pty Ltd ("Turners Shipping"), during the
period in which Turners Shipping acted as clearing agent for PetroSA there
were never any issue raised by SARS in respect of set-off being applied by the
VMs (PetroSA and the other oil companies), where the goods were exported
or removed from Tarlton on the basis that Tarlton is an unlicensed facility.
60.5. The origin of the fuel was not monitored by Transnet at Tarlton.
60.6. The VMs applied set-off of the duties and levies on their monthly excise
accounts in respect of fuel injected to Tarlton through the pipeline network,
from where the fuel was exported or removed to BLNS countries. The fuel is
sold duty free as the VM remains the exporter of record and the fuel is not
destined for local consumption. The relevant VM then claims duties and levies
back from SARS, by way of set-off on the monthly excise account.
60.7. This practice has been ongoing for a considerable period and despite regular
audits conducted by officials from various offices, SARS has never raised any
concerns in respect of the set-offs so applied by the oil companies, until the
27
r
latter half of 2018, when it raised the alleged non-compliance in a letter to
[61] On the basis ofthis sunnnary of the evidence, PetroSA contends that the practice which
has developed is therefore the following:
61. I. Fuel was injected by the VMs to Tarlton through the pipeline network.
61.2. The origin of the fuel injected to Tarlton was not monitored.
61.3. The fuel which was sold for export (from Tarlton and other unlicensed
facilities) was sold duty-free by the VMs.
6 J .4. The relevant VM was declared as the exporter of record on the export bill of
entry.
55.1 The relevant VM claimed the duties and levies by way of set-off on their
monthly excise accounts.
61.5. The SAD 500 and SAD 502 were not submitted with the DA160 excise
account but copies were kept by the VMs.
[62] I should say that given my findings as set out above, the alleged practice can be
narrowed down (as set out in the founding affidavit by PetroSA) to the following:
"During the audit period set-offs (refunds) were allowed in respect of fuel levy
goods removed or exported to African countries from unlicensed facilities,
provided that fuel levy goods were duty paid stock."
28
[ 63] In a written response submitted after the hearing, again at my invitation, SARS contends
as follows:
63 .1. The legal test which Petro SA must satisfy is set out in SA Mutual Unit Trust
(referred to above).
63.2. The elements of the practice alleged to have developed by PetroSA, referred
to above, consist entirely of concluct on the part of Petro SA, and possibly other
oil companies within the hearsay belief of PetroSA's deponent.
63.3. None of these elements are attributed to a practice applied in the different
offices of SARS, either generally or at all.
63.4. The only references to SARS identify non-conduct on the part of SARS in not
disallowing set-offs until the letter of demand, notwithstanding audits; not
raising any issue in respect of set-off being applied where goods were exported
from an unlicensed facility; and not raising any concerns in respect of set-offs
until the latter half of 2018.
63.5. None the passages identify any direct evidence of a practice positively applied
by SARS. At best for PetroSA, it seeks that the Court draw an irrference that
SARS applied a practice and this practice was applied generally in different
offices of the SARS.
63 .6. In order to draw the inference of a practice generally prevailing, it must be the
only reasonably probable inference.
29
63.7. The observations that notwithstanding audits, the set-offs were not disallowed
until they were disallowed and that no iss11es or concerns-were raised, until
they were raised in the latter half of 2018, do not lead to the only probable
conclusion that SARS actually applied a practice in endorsing these refund
claims. The observations are consistent with another reasonable and equally
probable, if not more probable, inference that PetroSA, and the other oil
companies, were fottunate to get away unimpeded for as long as they did, until
it was noticed by the SARS whereafter the issues and concerns were raised and
the refunds disallowed.
[ 64] 1 should emphasise, at this point, that the above constitutes summary of the submissions
of the parties. In order to assess the matter, I need to analyse the evidence presented in
the papers filed in more detail.
[65] In the papers, PretroSA's evidence about the practice generally prevailing starts by
describing the context within which the matter should assessed. That context is as
follows:
65.1. There was an important development in the regulatory framework which
underpins the argument for the practice generally prevailing. The
development is the introduction of the duty-at-source ("DAS") regime which
came into operation on 2 April 2003. Under DAS, excise duty, fuel levy and
the RAF levy are payable when the fuel goods are released from the VM. It
was recognised in the Explanatory Memorandum to the Act's amendment that
this will have the effect of diminishing the number of licensed storage
warehouses. Most oil companies still made use of storage facilities, as they
were connected to the pipeline network but since the fuel leaving the VM was
30
duty-paid, it was no longer considered necessary to store fuel in a licenced
facility.
65 .2. Tarlton is owned and operated by Transnet SOC and has a storage capacity of
some 30 million litres. Tarlton is mainly used for storage and distribution of
fuel locally and to neighbouring African countries. Tarlton is central to the
export and distribution of fuel (locally). It was specifically built for this
purpose. Tarlton was deregistered as an SOS pursuant to the introduction of
the DAS regime and it has only recently been licenced again as an SOS.
65.3. During the audit period, Total had unlicenced facilities at Waltloo and Alrode
and Petro SA had unlicenced storage depots at Bloemfontein and Tzaneen.
65.4. Whilst unlicenced under the Act, the facilities were however licensed under
the Petroleum Pipelines 60 of 2003 ("PP A").
65.5. The reform was part of an attempt to facilitate exports into African countries
and a competitive fuel market, as opposed to hindering it.
[ 66] I now turn to the more specific evidence of the practice generally prevailing during the
audit period furnished by PetroSA in their papers:
66.1. Subsequent to the introduction of the DAS regime, SARS indicated at
meetings, held inter a/ia in November 2006, with the South African Petroleum
Industry Association, who represents the collective interests of the petroleum
industry, that SARS was deregistering SOS warehouses.
31
66.2. In a Petroleum Products Taxation meeting held on 16 February 2007 with
• SARS, it was recorded that warehouses were closed down in 2003 when DAS
was introduced.
66.3. In a further Petroleum Products Taxation meeting held on 18 May 2007, SARS
informed the meeting that warehouses, licenced before 2 April 2003, should
be deemed de-licenced.
66.4. In May 2012, Petro SA' s clearing agent, Turners Shipping engaged with SARS
concerning Petro SA' s new business model and whether or not it complied with
the legal framework at the time. It was inter alia stated that the duty will be
paid in accordance with DAS requirements and that the product will be moved
through Tarlton to Botswana. In its response, SARS did not mention that
exports from Tarlton ( or Tzaneen or Bloemfontein) will not be permitted.
66.5. Petro SA has thus been exporting fuel levy goods from unlicensed facilities at
places like Tarlton, Tzaneen and Bloemfontein, with the knowledge of SARS
from 2012.
66.6. From 2012 PetroSA has been audited by officials of different SARS offices
across the country and set-offs for exports from unlicenced facilities were
never disallowed (until the 2018 audit).
66.7. An affidavit of Mr Kurnarasen Gopalan was presented by PetroSA. He is the
National Petrochemical Manager of Turners Shipping. Mr Gopalan has been
in the employ of Turners Shipping from 2005. The latter acts as clearing agent
of many oil companies and has had an office at Tarlton from 2003. Turners
32
Shipping is doing clearing work for the majority of oil companies and it is the
only clearing agr,nt -which renders clearing services from Tarlton. Turners
Shipping's Mr Gopalan confirmed that different offices ofSARS and different
oil companies acted in accordance with the practice generally prevailing in that
set-offs were permissible even if the export was from an unlicenced facility,
such as Tarlton. Because of the different geographical areas in which the
refineries were situated, audits were conducted by different offices of SARS
over the years. These were regular audits conducted on various oil companies.
SARS never raised any concerns in respect of set-offs on the basis that Tarlton
was an unlicensed facility (until the disputed audit in 2018). Tarlton has been
used for exports since 2003.
66.8. An affidavit of Mr Timothy Wynn La Fontaine was also filed. He is a retired
SARS official with extensive knowledge of the fuel industry, including
operations at Tarlton. He explains that after the introduction of DAS, licences
of storage facilities were cancelled and all the product stored at Tarlton was
duty paid. SARS officials from Durban, Alberton and Bellville Offices would
perform excise audits and set-offs were allowed for exports from Tarlton, an
unlicenced facility.
[ 67] The above allegations are not challenged by SARS at a factual level at all. The detailed
factual allegations regarding the alleged practice generally prevailing made by
Messrs Gopalan and La Fontaine are left entirely uncontested. Apart from that, SARS
has not provided evidence of a single instance of disallowing set-offs based on export
from an unlicensed facility in the period 2003 (after DAS came into operation) to 2018.
The inference must be drawn that it cannot come up any evidence contrary to the alleged
33
practice. In the answering affidavit it is merely stated that the contention about the
practice generally prevailing is denied. A legaLargnmenb~ craised-twthe effect that the
present case is not concerned with non-payment or underpayment (which argument I
dealt with above). The only relevant fact alleged by SARS on the issue of the practice
in the answering affidavit is against it. It is namely stated that SARS accepts that
Tarlton was an unlicenced facility. The knowledge that SARS had of the operations at
Tarlton indeed appears clearly from the answering affidavit. The fact that Tarlton was
operating unlicenced, to the knowledge of SARS and for a long period of time, is
accordingly common cause.
[68] In my view, on the facts of the present matter, PetroSA has discharged the onus and
proved that, during the audit period there was a practice generally prevailing to the
effect that set-offs (reftmds) were allowed in respect of fuel levy goods removed or
exported to African countries from unlicensed facilities, provided that fuel levy goods
were duty paid stock. I base this finding on the following:
68. I. The background and the fundamental changes brought about by the
introduction of DAS and the resultant closing oflicenced warehouses.
68.2. The evidence presented, particularly the uncontested evidence of
Messrs Gopalan and La Fontaine, that the set-offs were allowed in respect of
Tarlton, repeatedly and consistently by different offices of SARS over a long
period of time ( at least a decade) and this was done in audits of various oil
compames.
68.3. The fact that SARS knew that Tarlton was unlicensed and that the origin of
fuel at Tarlton was not monitored and could, (hypothetically) include both
34
imported and locally manufactured fuel. Given the importance of Tarlton for
removals to Botswana,16 in particular, it is inconceivable that,;unlessthere was
a practice to the contrary, SARS would not raise the issue of disallowing set
offs in respect of an unlicensed facility in the many audits described by
Mr Gopalan.
68.4. Then there is also the business plan of PetroSA which recorded the use of
Tarlton. Again the fact that it was unlicenced was not raised by SARS.
[69] In my view it is not necessary to grant the declaratory relief in terms of the Superior
Courts' Act in respect of the practice generally prevailing. In my view it suffices to
uphold the appeal and to set aside the determination in the letter of demand on the basis
there is no liability in terms of s44(1 lA) of the Act as during the audit period set-offs
(refunds) were allowed in terms of the practice in respect of fuel levy goods removed
16 The Gauteng Suspension Judgment recorded the following, albeit under the heading "Applicant's
Submissions:
"[ 45] It is also common cause that the Tarlton and Tzaneen storage facilities are not licenced in terms
of the Customs Act. This fact has always been known to the Commissioner because before PetroSA
consulted SARS before adopting the business module.
[ 46] Respondent's counsel in his heads of argument argues that there is insufficient evidence
regarding the licensing arrangements. However, this is not disputed in the answering affidavit.
[47] The manner in which the applicant has conducted its business is consistent with Industry
practice. This is not disputed in the answering affidavit. The practice of set-off was explained in the
applicant's founding affidavit. It is the practice envisaged in Section 44(1 !A) of the Customs Act and it
came into existence in the manner in which set-offs are applied and accepted by SARS of acquittal and
or export documents in respect of fuel export from Tarlton.
[48] The Commissioner is precluded from claiming any of the amounts set out in Schedule A of the
letter of demand because the expmts and set-offs have been subjected to audits over many years by
officials from various offices of SARS across the country. The audits were not only conducted on the
applicant, but also other oil companies and until recently, SARS allowed the exprnts and set-offs to
continue in the manner described above.
[ 49] The answering affidavit doesn't dispute the factual averments. The Commissioner only dispute
the lawfulness of the practice but not the facts set out by the applicants. The counsel for the respondent
argues (in the supplementary heads of argument) that there isn't sufficient evidence regarding the practice
generally prevailing."
Given the Gauteng Suspension Judgment, SARS was a]erted to its failure to contest the, practice generally
prevailing at a factual level. It nevertheless failed to do so in the appeal.
35
or exported to African countries from unlicensed facilities, provided that fuel levy
,goods were -rruty pard stock
Other grounds on which Finding 3 is challenged
[70] My conclusion regarding the practice generally prevailing renders it unnecessary to
decide:
70.1. The dispute about the interpretation of the Rule 19A4.04(a)(ii).
70.2. Whether SARS issued a determination in a letter dated 6 August 2013,
approving PetroSA's modus operandi which PetroSA (allegedly) complied
with.
70.3. Whether the determination and/or Rule 19A4.04(a)(ii) read with s75(1)(d) of
the Act and the relevant rebate items and notes thereto are irrational, to the
extent that it provides that refunds may not be set-off when fuel is removed
from an unlicensed facility.
[71] 1 should say that the interpretation of the Rule 19A4.04(a)(ii) could have far-reaching
implications and given that it was common cause at the hearing that Tarlton had recently
been licenced again as an SOS, the issue may not arise again. That is another reason
for not engaging with this fundamental issue.
Orders
[72] In the result, I make the following orders:
36
72.1. Leave is granted for the admission of the Applicant's supplementary founding
affidavit dakr.L'3 J.July.::.S!-020;:w:i-thcosts to be costs in the cause.
72.2. The A pplicant shall pay the First Respondent's costs occasioned by the
opposition to the application brought by the Applicant on 18 O ctober 2023 for
the admission of a :further evidence.
72.3. Paragraphs 39, 40, 49.3 and 61 of the First Respondent's answering affidavit
are struck out.
72.4. T he appeal is upheld and the detenninations in the letter of dem and from the
First Respondent to the Applicant, dated 18 February 2020, are set aside.
72. 5. Other than the costs in subparagraphs 1 and 2 above, the First Respondent shall
pay the Applicant's costs in this Court, such costs to include the costs of two
counsel.
72.6. The First Respondent shall pay the Applicant's costs in respect of the
Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd vs The
Commi ssioner for the South African Revenue Sen'ice Case No : 21471 /
2020, such costs to include the costs of two counsel.
DE WAALAJ
Act~ Judge of the High Court
Cape Town
18 January 2024
37
APPEARANCES
Applicant's counsel: JP Vorster SC and HJ Snyman
Applicant's attorneys: Shepstone & Wylie Attorneys
First Respondent's counsel: J Peter SC
First Respondent's attorneys: MacRobe1i Attorneys
38