Strict compliance with the Customs and Excise Act is essential for claiming fuel levy and Road Accident Fund (RAF) levy refunds, the Constitutional Court has ruled, in a case involving cross-border diesel supplies to Lesotho.
In its judgment delivered on January 16 in Tholo Energy Services CC v Commissioner for the South African Revenue Service, the court dismissed Tholo Energy Services CC’s appeal and upheld SARS’s disallowance of refund claims totalling approximately R4.25 million.
Shepstone & Wylie partner Freek van Rooyen said the ruling clarified several long-standing issues in the fuel industry around rebate claims for exports and supplies to BLNE countries (Botswana, Lesotho, Namibia and Eswatini).
“Although the decision confirms that fuel levy and Road Accident Fund levy refunds are subject to strict statutory compliance, it also applies to the refund of excise duty and levies in respect of exports to non-BLNE countries,” he noted in his analysis of the judgment.
“The decision therefore provides clarity on several long-debated issues affecting cross-border fuel supplies.”
Tholo, a licensed distributor of fuel, supplied diesel to customers in Lesotho during 2016. The diesel was collected from inland depots in Bloemfontein, Tzaneen and Alrode rather than directly from a licensed customs and excise manufacturing warehouse (VN). The levies had been paid under South Africa’s duty-at-source regime, and Tholo applied for refunds on the grounds that the fuel was removed to a BLNE country.
SARS refused the claims, arguing that the statutory conditions for the rebate under schedule 6, item 671.11 had not been met. Litigation followed in the High Court, Supreme Court of Appeal and Constitutional Court, all of which ruled against Tholo.
The Constitutional Court confirmed that an appeal under section 47(9)(e) of the Customs and Excise Act, 1964, was a wide appeal, permitting SARS to rely on additional grounds not originally stated in the determination.
Key findings included:
*Fuel intended for export or removal to a BLNE country must be obtained directly from stocks at a licensed VM.
“Fuel collected from unlicensed depots does not qualify, even if those depots are operated by a company that holds a VM licence elsewhere,” Van Rooyen explained.
*A valid ITAC export permit is required for diesel exports; arguments that such permits were unnecessary due to industry practice for BLNE supplies were rejected.
*Additional SARS grounds were upheld, including that the fuel was transported by an unlicensed affiliated entity, the claimant did not personally pay the levies, and common ownership did not satisfy statutory licensing and payment requirements.
“Licensed distributors and VM licensees exporting fuel must ensure strict compliance with the rebate item requirements, including the sourcing, transportation, and documentation requirements. If not, SARS will disallow such refunds,” Van Rooyen noted.
The judgment serves as a reminder that refunds remain a privilege, contingent on full adherence to the Act’s provisions, with implications extending beyond BLNE supplies to broader excise duty and levy refund claims for exports.
Source: Shepstone & Wylie
