R35 Million Demand Set Aside Because SARS Failed to Read the File
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QI Logistics (Pty) Ltd v CSARS (180/2025)
You submitted the documents. You provided four lever-arch files of export records. You asked for reasons. SARS gave no indication that it had engaged with any of it before issuing a R35 million demand. That is exactly what happened to QI Logistics, and on 3 July 2026, the Supreme Court of Appeal said it was unlawful.
What happened
QI Logistics is a licensed customs clearing agent. In 2018, it processed the paperwork for 67 consignments of fuel being transported by road from Mozambique through South Africa to Zimbabwe and Botswana. QI did not own the fuel and had no control over how it was transported. It was acting on instructions from another clearing agent, preparing the required customs forms to clear the consignments through the border.
In 2019, SARS audited the movement of those fuel consignments and found that some of the customs entries were missing border-post endorsements confirming arrival and exit at the relevant border posts. SARS issued a notice of intent to raise a debt, initially claiming around R47 million.
QI responded. Through its customs consultant, it submitted detailed written representations and four lever-arch files of acquittal documents, the export records that clearing agents are required to obtain and retain to prove that goods were properly exported.
SARS issued a second notice of intent that substantially repeated the earlier allegations. It then issued a letter of demand on 3 July 2019, requiring QI to pay R14.2 million in import duties and R20.9 million in penalties in lieu of forfeiture, a total of R35 million. The reasons given in the letter amounted to little more than a repetition that some entries were not endorsed at the border. There was no engagement with the documents QI had provided.
QI asked SARS in writing to explain why the documents were insufficient and on what basis the forfeiture demand had been made. SARS never responded.
The High Court got it wrong
QI took the matter on review to the Gauteng High Court, which ruled against it. The High Court found that the key question was not how limited QI's role had been, but whether QI had satisfied the statutory requirements to prove due export. On that basis, the High Court held QI liable.
QI appealed, and the Supreme Court of Appeal disagreed with the High Court's approach entirely.
Why the Supreme Court overturned the demand
The appeal court identified two separate and serious flaws in how SARS had made its decisions.
The first was procedural irrationality. A decision-maker exercising a public power cannot ignore detailed evidence placed before it and then issue a demand without explaining what was wrong with that evidence. SARS was required to engage with QI's export documents and explain why they were insufficient, whether because they were incomplete, unreliable, legally inadequate, or inconsistent with other customs records. The letter of demand did none of this. It simply repeated that some border endorsements were missing. That is not a rational decision-making process, and a decision that fails to engage with the relevant material is unlawful and can be set aside on review.
Importantly, the court confirmed that SARS could not fix this by providing explanations in its court papers after the fact. When a decision is irrational at the time it is made, later justifications in litigation do not save it.
The second flaw related to the penalty in lieu of forfeiture. Under the Customs and Excise Act, SARS has a discretionary power to demand an amount in lieu of forfeiture where goods liable to forfeiture cannot readily be found. This is not an automatic consequence of finding a clearing agent liable for duties. It is a separate decision that requires separate consideration. Before making that demand, must exercise the discretion rationally, taking into account relevant considerations such as the nature of the breach, the agent's actual role, the explanation offered, any prejudice to the revenue, and whether the penalty is proportionate. The affected party must also be given a proper opportunity to make representations specifically on the forfeiture question before the decision is made.
SARS did neither. It gave no reasons for the forfeiture demand and never invited QI to respond to the prospect of a forfeiture penalty. The court found that SARS appeared to have treated the forfeiture demand as automatic once liability for duties was established. The Court inferred that SARS had proceeded on the mistaken assumption that forfeiture automatically followed duty liability
What happens next
The matter goes back to SARS for a fresh decision. SARS must properly engage with QI's documents, explain why they do or do not establish due export, and separately consider whether a forfeiture demand is appropriate, giving QI a proper opportunity to be heard on that issue first.
The court did not decide whether QI is ultimately liable for any duties. That question remains open. What the court decided is that the process used to reach the original demand was unlawful, and the demand cannot stand.
What this means for your practice
If you act for clearing agents, importers, or exporters, this judgment has practical value beyond the specific facts.
SARS has a legal obligation to engage with evidence submitted in response to audits and notices of intent. If a client submits detailed representations and export documents, and SARS issues a demand without addressing that material, the demand is potentially vulnerable to review. A bare statement that endorsements are missing, without engaging with the acquittal documents provided, is not enough.
Always request written reasons when SARS issues a demand your client disputes. Under PAJA, SARS is obliged to provide adequate written reasons when requested. If it fails to do so, that silence is legally significant. PAJA creates a presumption that a decision was taken without good reason if adequate reasons are not provided. In this case, that supported the Court's inference that SARS had not properly engaged with the evidence.
Forfeiture demands deserve separate attention. If SARS issues a demand that includes a penalty in lieu of forfeiture, check whether your client was given an opportunity to make representations specifically about the forfeiture component before it was imposed. If not, that part of the demand may be independently reviewable, even if the underlying duty liability is not.
And finally, do not assume that submitting documents is a formality. This case shows that detailed, well-organised acquittal records, submitted timeously, formed the foundation of a successful legal challenge. The four lever-arch files QI provided were central to the court's finding that SARS had failed in its obligation to engage with the evidence.