The diesel fuel levy refund regime under the Customs and Excise Act (CEA) has long been a critical component of fiscal policy for the mining sector. It is designed to alleviate the cost burden associated with primary production activities. However, its interaction with the Mineral and Petroleum Resources Development Act (MPRDA) and the Value-Added Tax Act has presented complex interpretive challenges, particularly where mining operations are conducted through joint venture structures.
These challenges came into sharp focus in the dispute between Glencore Operations SA (Pty) Ltd. (Glencore), ARM Coal (Pty) Ltd. (ARM), and SARS concerning the entitlement of a VAT-registered mining joint venture to claim diesel refunds despite not holding a mining right in its own name.
In a landmark judgment delivered on 9 April 2026, the Supreme Court of Appeal (SCA) ruled in favour of the taxpayers, adopting a purposive and context-sensitive interpretation of the relevant statutory provisions. The Court’s decision provides important clarification on the meaning of ‘possession’ of a mining authorisation for diesel refund purposes, the legal status of joint ventures under South African mining and tax law, and the proper exercise of administrative discretion by SARS.
The legislative framework
Under section 75(1A) of the CEA, ‘users’ can claim a refund of the fuel levy if the fuel (including diesel) is used in compliance with Note 6(f) of Part 3 of Schedule 6 to the CEA. Note 6(f) provides various qualifying criteria for claiming diesel refunds, including that qualifying mining activities are carried on ‘by the person in possession of the necessary authorisation granted or ceded in terms of the [MPRDA]’ (Note 6(f)(ii)(cc)).
One of the challenges faced by diesel ‘users’ is the view adopted by the South African Revenue Service (SARS) that a joint venture cannot be ‘in possession of the necessary authorisation’, even where the holder of the right (usually one of the joint venture partners) explicitly contributes and authorises its use in the joint venture agreement.
The facts and issues in dispute
Glencore and ARM concluded a Joint Venture Agreement in 2006, forming the Goedgevonden Joint Venture (JV) to mine coal near Emalahleni in Mpumalanga. Glencore holds a 49% interest and ARM a 51% interest in the JV.
In 2008, a mining right was issued to Glencore under the MPRDA, subject to the condition that Glencore would exercise the right jointly with ARM in accordance with the JV agreement. The JV was registered as a VAT vendor and as a ‘user’ for diesel refund purposes under the CEA.
SARS audited the JV’s diesel refund claims and disallowed the refunds on the basis that the JV was not entitled to any fuel levy refunds because it did not hold a mining right in its own name.
Glencore and ARM challenged this decision in the High Court, which upheld SARS’s disallowance of the refunds on the basis that the JV did not hold the relevant mining right.
Glencore and ARM argued that a purposive interpretation showed the Note 6(f) requirement was indeed met, as the JV was lawfully authorised to conduct mining. In the alternative, the appellants argued that even if the JV did not strictly comply with Note 6(f), SARS had a discretion under Note 5 of Schedule 6 to allow refunds to be paid to a third party on good cause shown, and that SARS had unlawfully failed to exercise its discretion to consider or decide that request.
SARS argued in response that the wording of Note 6(f) is clear and unambiguous and restricts refunds to the holder or cessionary of a mining right. SARS maintained that the reference to the mining right in the JV agreement did not elevate the JV to the status of a ‘holder’ of that right; and that Glencore remained the ‘holder’ for purposes of Note 6(f). SARS further contended that the obligation to exercise the Note 5 discretion did not arise because the JV was not entitled to any refunds in the first place.
The SCA judgment
The SCA upheld the appeal on all issues in dispute and set aside the order of the High Court.
The Court found that the JV met the requirements of Note 6(f). It reached this conclusion through a purposive and contextual interpretation, examining the notarial deed granting the mining right and the JV agreement, and considering the purpose of Note 6(f), which the SCA found was to ‘confine refunds to diesel used in lawful mining operations undertaken under valid MPRDA authorisations’.
The Court held that the joint venture structure was an integral component of the mechanism approved by the Minister for the lawful exploitation of minerals – in other words, that based on the application, the JV agreement formed part of the facts considered by the Minister in granting the authorisation, and therefore, part of the authorisation itself.
The Court also agreed with the appellants that interpreting Note 6(f) to exclude the JV would be inconsistent with the architecture of fiscal legislation, namely the interplay of the VAT Act (which requires JVs to register separately as VAT vendors), the CEA (which ties diesel refunds to VAT registration), and the MPRDA (which permits mining inter alia via joint ventures). The logical consequence of SARS’s interpretation of Note 6(f), as confirmed by SARS’s counsel in argument, would be that no entity was entitled to claim diesel refunds in respect of the mining operations being jointly conducted by ARM and Glencore, negating the legislative purpose of the refund mechanism.
With regards to the exercise of the discretion by SARS under Note 5, the Court found that even if the JV did not strictly comply with Note 6(f), SARS was obliged to exercise its discretion under Note 5, which permits payment of a refund to ‘any other person’ on good cause shown. The Court rejected the High Court’s conclusion that the Note 5 discretion only arises where the claimant is already entitled to a refund, confirming that ‘…the CEA itself, by conferring discretion, expressly contemplates that strict formal compliance may yield to substantive justice’.
In summary, the Court did not displace the text of Note 6(f) but interpreted the phrase ‘person in possession of the necessary authorisation’ contextually and purposively, having regard to the terms and conditions of the mining right itself, the broader statutory framework (which would produce an absurd result on SARS’s reading), and the purpose of Note 6(f). Importantly, the Court held that ‘possession’ of the authorisation need not mean formal registration as the holder of the mining right, but extends to the entity that, by virtue of the mining right’s own terms, is exclusively authorised and required to conduct the mining operations. The Court therefore found that the JV met the requirements of Note 6(f) and that it was entitled to the refunds.
Key takeaways from the SCA judgment
The SCA’s decision affirms the need for contextual and purposive interpretation of statutes with reference to the broader aims of fiscal legislation – in this case, the ‘incentive the Legislature intended to provide to enterprises through the refund mechanism’. In giving effect to the intention of the authorisation requirement of Note 6(f), the SCA’s judgment ensures that the diesel refund regime operates in a manner consistent with commercial reality and legislative purpose.
The judgment confirms that ‘possession’ of an authorisation under Note 6(f) extends to the entity exclusively authorised and contractually obliged to conduct the mining activities in question. Although the SCA placed considerable emphasis on the fact that, in this specific instance, the JV agreement formed part of the mining authorisation itself (by virtue of the disclosures made to the Minister in the mining right application) we are of the view that the purposive approach adopted by the SCA should encompass the subsequent cession or granting of use of a mining right as well.
Equally important is the Court’s treatment of SARS’s discretion under Note 5 of Schedule 6. By rejecting a narrow interpretation that would render the discretion meaningless, the SCA reinforced foundational principles of administrative law, including the duty to properly exercise discretionary powers where legislation expressly provides for them and the jurisdictional facts requiring their exercise exist.
By: Adele De Jager, Executive – Tax, Bowmans and Julia Choate, Partner, Bowmans
