Court Rules in Favour of Mining Joint Venture in Diesel Refund Dispute
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The Supreme Court of Appeal (SCA) has overturned a High Court ruling and found in favour of a mining joint venture that was denied diesel fuel levy refunds by SARS. The case has important implications for joint ventures and any entity operating under shared or conditional mining rights.
The parties and the background
Glencore Operations SA and ARM Coal formed a joint venture, the Goedgevonden Joint Venture (the JV), to mine coal in Mpumalanga. The mining right was registered in Glencore's name, but the right was expressly granted on the condition that mining could only take place through the JV together with ARM. This arrangement was required by the Department of Mineral Resources as part of B-BBEE compliance.
The JV was registered separately as a VAT vendor and as a diesel refund "user" under the Customs and Excise Act (CEA). It paid fuel levies on diesel used in its coal mining operations and claimed refunds of those levies.
What SARS decided
Following an audit covering June 2012 to September 2014, SARS disallowed the refunds. SARS argued that under Note 6(f)(ii)(cc) of Schedule 6 to the CEA, only the registered holder of a mining right, in this case Glencore, could claim diesel refunds. Because the mining right was not in the JV's name, SARS said the JV did not qualify.
After an internal appeal process, the National Appeal Committee (NAC) agreed with SARS and increased the amount to be repaid from R5 million to R82.9 million, introducing a new basis for the disallowance that had not been part of the original determination.
What the High Court decided
The High Court upheld the NAC's decision. It found that the JV was not the holder of a mining right, that the NAC had not acted outside its authority, and that SARS had no obligation to exercise a discretion in the JV's favour.
What the SCA decided
The SCA disagreed on every key point and upheld the appeal in full.
On the mining right question, the court found that although the mining right was formally registered in Glencore's name, it was in substance granted to both Glencore and ARM operating jointly through the JV. The Minister of Mineral Resources had expressly made the JV agreement a condition of the mining right, and compliance with it was required for the right to remain valid. The JV was the only entity authorised to actually conduct the mining. Applying a substance-over-form approach, the SCA found the JV met the requirements of Note 6(f).
On SARS's discretion, the court found that even if the JV had not strictly complied with Note 6(f), SARS had a discretion under Note 5 of Schedule 6 to pay refunds to another person on good cause shown. The circumstances clearly justified its exercise, including that the mining was lawful and MPRDA-compliant, that the JV had paid the levies, and that SARS itself had registered the JV as a user and VAT vendor. The court found SARS's failure to even consider exercising that discretion was unlawful.
On the NAC's jurisdiction, the court found that the NAC had no authority to hear the appeal in the first place, because the original amount of R5 million fell within the Regional Appeal Committee's jurisdiction. The NAC also exceeded its powers by introducing a new ground for disallowance that was not part of the original determination, and by increasing the amount demanded from R5 million to R82.9 million. That increase was not a recalculation, it was an entirely new assessment, which only SARS officials have the authority to make. The entire NAC determination was set aside.
SARS was ordered to pay the costs of the appeal, including the costs of two counsel.
What this means for accountants
This judgment has several practical implications for practitioners advising mining clients or entities operating through joint ventures.
First, joint ventures can claim diesel refunds. The SCA has confirmed that a joint venture may qualify for diesel fuel levy refunds under the CEA even if the mining right is not registered in its name, provided the right was effectively granted to, and exercised through, the joint venture structure. Substance takes priority over form.
Second, SARS's discretion under Note 5 must be taken seriously. SARS cannot simply refuse to consider a discretionary refund request on procedural or technical grounds. Where a claimant has a compelling case, SARS is required to engage with it. Practitioners should document and formally invoke this discretion where clients face refund disallowances on technical grounds.
Third, appeal committees cannot invent new grounds or increase amounts. The NAC overstepped by raising new issues and dramatically increasing the amount in dispute. This judgment confirms that internal appeal committees are limited to deciding the appeal before them, not to conducting fresh assessments. Practitioners should challenge any attempt by SARS's internal committees to expand the scope or quantum of a determination during the appeal process.
Fourth, jurisdictional boundaries matter. The referral from the Regional Appeal Committee to the NAC was not properly authorised. Jurisdiction must exist at the time an appeal is lodged and cannot be created retrospectively by the committee's own decisions.
Also read our article: diesel refund increase to 100% for mining sector users from 1 April 2026. Clients in mining, farming, and primary production who rely on diesel refunds should ensure their claims are carefully structured and that all contractual and registration requirements are in order.