In collaboration with Professor Jackie Arendse, Subject Head: Taxation, Eduvos
Four recent judgments show SARS targeting compliance failures rather than the underlying activity.
Four judgments handed down between August 2025 and April 2026 form a significant body of diesel rebate case law. Three taxpayers lost their disputes with SARS and one won. Each conducted genuine qualifying activities in mining, fuel distribution, or coal extraction. Taxpayers were unsuccessful in proving their claims because of incomplete logbooks, wet/dry contractual terms, claims made before registration and obtaining fuel from incorrect sources. Together the four disputes involved more than ZAR 140 million in claims. These cases and existing jurisprudence confirm that the rebate is a privilege, not a right, and strict compliance with every condition is essential for a successful claim.
What is a diesel rebate
The rebate under section 75(1A) of the Customs and Excise Act 91 of 1964 (Act), claimed under rebate item 670.04 of Schedule 6, lets qualifyig users in mining, farming, forestry and offshore fishing reclaim the general fuel levy and the Road Accident Fund levy on diesel used in primary activities. From the April 2026 return, onland claimants may claim a refund on 100% of eligible diesel, up from 80%. SARS is also building a standalone diesel refund registration system that will result in claims made off the VAT return. A fuller refund and a dedicated platform will make claims easier to process and scrutinise.
Where the three losing claimants went wrong
In Assmang (Pty) Ltd v CSARS (SCA, August 2025), SARS disallowed R39.5 million. Assmang had supplied diesel to its subcontractors under contracts labelled wet rates, then argued the financial reality was a dry arrangement referring to an incentive scheme that penalised over-consumption and rewarded savings against a contractual amount. The SCA was not persuaded. The contractors paid for the diesel through deductions from their payment certificates, and the incentive scheme confirmed rather than rebutted the wet characterisation as it meant the contractors could profit from fuel made available to them.
The logbook finding is more instructive. Assmang's system recorded the date, time and quantity of fuel dispensed into each vehicle. The court held this was insufficient. A logbook must provide a full audit trail from purchase to use. Once diesel enters a vehicle, the records must show what that vehicle did with it. A reasonable assumption that a drill rig used its fuel for drilling does not discharge the requirement. Dispensing data establishes that fuel entered a vehicle. However, this data does not establish qualifying use, which is what the rebate turns on.
In Tholo Energy Services CC v CSARS (Constitutional Court, January 2026), a distributor collected diesel from various PetroSA facilities and exported it to Lesotho, claiming refunds on the levies paid. The court upheld the disallowance on two independent grounds. First, the fuel was not collected from PetroSA's sole licensed manufacturing warehouse at Mossel Bay; collection from other facilities does not satisfy that requirement. Second, Tholo held no valid ITAC export permit, which Government Notice R92 of 2012 requires for diesel exported to any country outside South Africa, including those in the SADC region. The court rejected the argument that established industry practice could displace the legislative requirements.
In Trakman NO v CSARS (High Court, March 2026), Silver Lake Trading, a coal miner placed in liquidation in late 2018, had its liquidator register it as a diesel refund user in December 2018, after mining had ceased, then claim ZAR 23 million for fuel used between January 2017 and October 2018. The court dismissed the claim. Section 75(1C)(b) defines a user as a person registered for a diesel refund. A user can only claim from the date of registration for eligible fuel usage whilst registered. The two-year period in the Act is a filing deadline for registered users, not a window to claim for pre-registration periods. There is no mechanism to backdate, and no ambiguity that could attract the contra fiscum rule.
The one win, and what it cost
In Glencore Operations SA (Pty) Ltd and Others v CSARS (SCA, April 2026), the only taxpayer victory, the original disallowance rested on whether the activities were primary production within Note 6(f)(iii) of Schedule 6. Only on internal appeal did the National Appeal Committee raise entitlement of the user to claim. The Goedgevonden joint venture between Glencore and ARM Coal did not itself hold the mining right, which was registered in Glencore's name. This escalated the disallowance from around ZAR 5 million to ZAR 82.9 million. The SCA found for the joint venture on substance over form. The mining right could be exercised only through the venture, the venture structure was a condition of the right itself and approved by the Minister, and the venture conducted all mining operations. SARS's insistence on formal identity between the holder of the right and the operator would have meant no entity could claim for the jointly conducted operations at all, defeating the scheme's purpose.
What claimants should check now
The four judgments identify five points every diesel rebate claimant should review.
- Characterisation of subcontractor contracts. The financial risk of the fuel must sit entirely with the claimant. Any mechanism that shifts part of that cost to the contractor, whether a cap, a deduction, an incentive scheme or net invoicing, puts the rebate at risk regardless of the contract's label.
- The logbook. Records must show the specific qualifying activity each vehicle performed for each dispense event. Recording when and how much fuel was dispensed, or that a vehicle was on site, is not enough. The rebate also requires proof of qualifying use.
- Registration timing. Registration must be approved on eFiling before qualifying fuel is purchased. This is particularly important for businesses in financial difficulty or under restructuring. Fuel purchased before the registration date cannot be claimed as a rebate.
- Distributors exporting fuel under the duty-at-source scheme. The fuel must be collected from the specific licensed manufacturing warehouse, and the claimant must hold a valid ITAC export permit for every exported load.
- Joint venture structures. Where a parent holds the mining right and a venture conducts operations, the mining right deed and the venture agreement must together establish that the right authorises mining only through the venture and that the venture is the entity conducting the qualifying activity.
The rebate rewards qualifying use, but the claim is successful only when the contracts, the records, the sourcing and the registration can all survive strict scrutiny by SARS.
