Judgment summary
The plaintiff, Mr Selwyn Trakman, acting as receiver for the creditors of Silver Lake Trading 447 (Pty) Limited (Silver Lake), brought proceedings against the Commissioner for the South African Revenue Service (SARS) to recover diesel refunds for the period January 2017 to October 2018. Silver Lake had only registered as a diesel refund user on 21 December 2018, after mining operations had ceased and after the company had been placed under provisional liquidation [2], [3].
The parties agreed to have the principal issue determined by way of a stated case [1]. That issue was whether registration as a diesel refund user entitles a registrant to claim refunds for a period of two years preceding the date of registration [1].
The court held, applying a contextual and purposive interpretation of the Customs and Excise Act 91 of 1964 (CEA), that registration is a prerequisite for claiming diesel refunds and cannot be backdated. Silver Lake's claims for the period before 21 December 2018 were therefore disallowed [29], [30]. The application was dismissed with costs, including costs of two counsel on scale C.
Background
Silver Lake was engaged in coal mining at the Thutsi Mine Uitgevallen, Open Pit, operating under a mining right granted by the Department of Mineral Resources [2]. In May 2016, Silver Lake entered into a mining agreement with Stefanutti Stocks Mining Services (SSMS) for the provision of mining services [2].
Silver Lake encountered financial difficulties between April and September 2018, leading to the commencement of business rescue proceedings in April 2018 [2]. A written post-commencement funding agreement was concluded between Silver Lake and SSMS on 14 November 2018 [2]. Mining operations by both SSMS and Silver Lake ceased in November 2018, and Silver Lake was placed under provisional liquidation on 19 December 2018 [2].
On 21 December 2018, Silver Lake registered for a diesel refund in terms of section 75 of the CEA and rebate item 670.04 of Part 3 to Schedule 6, read with Note 6 of Part 3 to Schedule 6 of the CEA [3]. Silver Lake submitted claims totalling R29,751,201.63 for the period January 2017 to October 2018, subsequently reduced to R23,216,589.42 [3].
SARS rejected Silver Lake's refund claims on the basis that the company was not entitled to refunds for periods before its registration as a diesel refund user [4]. SARS rejected Silver Lake's administrative appeal on 28 May 2021 [5]. Silver Lake appealed to the High Court in terms of section 47(9)(e) of the CEA and simultaneously filed a review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and section 172 of the Constitution [6]. The case was referred to trial due to material disputes of fact, and the parties ultimately agreed to have the issue determined by way of a stated case [6].
Core dispute
The central question was whether registration as a diesel refund user under the CEA entitles a registrant to claim diesel refunds for a period of two years preceding the date of registration [1].
Silver Lake argued that section 75(4A)(b)(ii) of the CEA allows diesel refund claims to be submitted within two years from the date of fuel purchase and does not require the claimant to have been registered at the time of purchase or use [7]. Silver Lake further relied on SARS' own Diesel/Biodiesel Refund Guide, which had stated that retrospective claims within two years from the date of diesel registration were permissible, provided conditions in Note 6 to Rebate Item 670.04 were met [8]. Silver Lake also invoked the contra fiscum rule [10].
SARS contended that registration as a diesel refund user is prospective only, so refunds may only be claimed for purchases made after registration [11]. SARS argued that the two-year period in section 75(4A)(b)(ii) concerns only the time within which a return must be submitted by an already-registered user, and does not create entitlement to refunds for pre-registration periods [14]. SARS also noted that the Diesel/Biodiesel Refund Guide relied upon by Silver Lake had been withdrawn in 2013 [11].
Court findings
The court applied a contextual and purposive approach to statutory interpretation, drawing on established principles set out in multiple Supreme Court of Appeal and Constitutional Court decisions [17], [18], [19], [20].
The court confirmed that a diesel refund is a privilege, not a right, and that strict compliance with all conditions may be required of a claimant [21]. The scheme was introduced to promote international competitiveness in primary sectors including mining, but subject to an administrative regime aimed at minimising fraud and ensuring fiscal affordability [22].
Section 75(1C)(b) defines 'user' as a person registered for a diesel refund as contemplated in section 75(1A) [25]. Note 6(a)(vii) defines 'user' as a person registered for VAT and also registered for diesel refund purposes as contemplated in sections 75(1A) and (4A) [27]. The court found that section 75(4A)(b)(ii) governs only the period within which a registered user must submit a claim; it does not address whether a user may claim refunds for diesel purchased and used before registration [26], [30].
The court held that registration is required before a person may participate in the diesel refund scheme, referring to section 75(1A)(b)(ii), section 59A, Rule 59A.01A(a)(vi) and (viB), and Rule 75.25.03 [29]. Registration for diesel refund purposes cannot be backdated under the CEA [28], [30]. It was common cause that Silver Lake only became registered for diesel refund purposes after it had ceased its primary mining production activities [15].
The court rejected Silver Lake's reliance on the withdrawn Diesel/Biodiesel Guideline, finding that the guideline had been withdrawn in 2013, long before the present dispute arose, and that granting it indefinite applicability was not legally justifiable [31].
The court held that the contra fiscum rule did not apply because there was no irresoluble ambiguity in the legislation once it was properly interpreted [32].
Outcome
The application was dismissed. The applicant was ordered to pay the costs of the respondent, including costs of two counsel on scale C [Order, para 1 and 2].
Major issues / areas of contention
- Whether a diesel refund user registered under the CEA is entitled to claim refunds for the two-year period preceding the date of registration [1].
- Whether section 75(4A)(b)(ii) of the CEA, which requires refund claims to be submitted within two years of fuel purchase, creates an entitlement to pre-registration refunds or merely regulates the time for submission by an already-registered user [7], [14], [26], [30].
- Whether the definition of 'user' in section 75(1C)(b) and Note 6(a)(vii) requires registration to have been in place at the time of fuel purchase and use [25], [27].
- Whether registration for diesel refund purposes can be backdated under the CEA [28], [30].
- Whether Silver Lake could rely on SARS' withdrawn Diesel/Biodiesel Refund Guide to support retrospective claims, given that the guide was withdrawn in 2013 [11], [31].
- Whether the contra fiscum rule applied in circumstances where the court found no irresoluble ambiguity in the legislation [10], [32].
- Whether a diesel refund is a privilege requiring strict compliance with all conditions of the CEA, applicable Schedules, Notes and Rules [21], [28].