The Supreme Court of Appeal's recent ruling on diesel rebates has significant implications for farmers and mining entities in South Africa. This article explores the judgment's key points and what it means for compliance with diesel refund requirements.
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The Supreme Court of Appeal judgment in Glencore Operations SA (Pty) Ltd and Others v Commissioner for SARS and Another is of broader significance than a mining dispute. The decision constitutes an important precedent for all entities engaged in primary production, including agriculture, mining, and forestry, that submit claims for diesel refunds.
The judgment confirms that compliance with diesel rebate requirements remains stringent, documentation-intensive, and subject to Sars audit. However, Sars is not entitled to reject a valid claim solely based on technical form where the underlying activity is lawful, authorised, and consistent with the purpose of the diesel refund scheme.
The judgment was handed down on 9 April 2026. The central issue was whether the Goedgevonden Joint Venture qualified for diesel refunds under Note 6(f)(ii)(cc) to the rebate item of Schedule 6 to the Customs and Excise Act, No. 91 of 1964, despite the formal mining right being held in Glencore’s name rather than in the name of the joint venture.
Summary of the facts
In 2006, Glencore and ARM Coal entered into a joint venture agreement to conduct coal mining operations at Goedgevonden in Mpumalanga. Glencore held a 49% interest, and ARM held 51%. The joint venture was registered as a separate entity for VAT purposes and as a diesel refund user.
In 2008, a mining right was granted to Glencore in terms of the Mineral and Petroleum Resources Development Act. The mining right was not commercially independent, as it required Glencore to exercise the right jointly with ARM in accordance with the provisions of the joint venture agreement.
The joint venture utilised diesel in its mining operations and paid the applicable fuel levies. Sars conducted an audit of the diesel refund claims for the period June 2012 to September 2014. Initially, Sars sought to recover approximately R5.1 million, inclusive of interest. During the internal appeal, Sars introduced a new ground, contending that the joint venture was not entitled to any diesel refund on the basis that the mining right was not registered in its name. This resulted in the disputed amount increasing to approximately R82.98 million.
The High Court upheld Sars’ position. The matter was subsequently referred to the Supreme Court of Appeal.
The judgment
The Supreme Court of Appeal overturned the decision of the High Court.
The Court held that the proper enquiry was not confined to the name in which the mining right was registered. The mining right, notarial deed, and joint venture agreement were required to be considered collectively. On this basis, the mining right authorised mining activities to be conducted through the joint venture structure. The joint venture was an integral part of the authorisation mechanism for the lawful exploitation of the mineral resource.
The Court further addressed Sars’ discretion under Note 5, holding that this discretion cannot be rendered ineffective by requiring that it only be exercised where all formal requirements have already been satisfied. The purpose of the discretion is to prevent unjust outcomes in circumstances where rigid formalism would undermine the legislative intent.
The Supreme Court of Appeal also found that the National Appeal Committee had acted ultra vires. Sars’ original determination was for approximately R5.1 million, and the subsequent escalation to approximately R82.98 million was based on a new ground introduced during the appeal process. The Court held that the internal appeal process does not permit Sars to formulate a fundamentally different assessment or to increase the taxpayer’s liability beyond the original determination.
The appeal was upheld, the order of the High Court was set aside, the determination of the National Appeal Committee was set aside, and it was declared that the Goedgevonden Joint Venture complied with Note 6(f)(ii)(cc).
What it means for farmers and diesel rebate claimants
This judgment does not relax the requirements for diesel rebate compliance. Farmers and other claimants are still required to maintain accurate VAT registration, diesel invoices, storage records, usage logbooks, delivery notes, eligible-use calculations, and evidence distinguishing qualifying from non-qualifying use.
For farmers, the principal issue is aligning legal and operational structures. Many farming operations utilise trusts, operating companies, landholding companies, partnerships, leased land, shared diesel storage, and inter-entity cost recoveries. Sars audits present a significant risk where the entities responsible for purchasing, storing, utilising diesel, conducting the farming activity, and submitting the VAT201 claim cannot be reconciled.
The judgment provides taxpayers with a substantive basis to challenge Sars where a diesel refund claim is disputed solely on the grounds of a formal discrepancy. Where the activity is lawful, qualifies under the scheme, and is supported by coherent agreements and records, Sars is not entitled to disregard the substance of the transaction.
However, insufficient evidentiary support remains fatal to a claim. Diesel rebate claims should not be reconstructed after the commencement of a Sars audit. Claims must be supported by a comprehensive, litigation-ready compliance pack before any enquiry from Sars.
The judgment reflects commercial sensibility. Sars is entitled to enforce strict compliance with the diesel refund system, but is not entitled to administer the scheme in a manner that undermines its statutory purpose.
For farmers, the practical implication is that legal structure, VAT registration, operational arrangements, diesel records, and rebate claims must be aligned. The substantive merits of a claim will only protect the taxpayer where the supporting documentation is sufficient.
* Oberholzer CA(SA), MCom (Tax), is the CEO of Fyncor Advisory Services.
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