SCA ruling in favour of Glencore reshapes diesel refund landscape for joint ventures

Johan Kotze and Freek van Rooyen

In a rare loss for SARS, the Supreme Court of Appeal (‘SCA’) in Glencore Operations SA (Pty) Ltd vCSARS (April 2026) provided valuable guidance for joint ventures in the mining sector participating in the diesel refund scheme. The heart of the case was a dispute over diesel refunds in terms of refund item 670.04 read with Note 6 of Part 3 of Schedule 6 of the Customs and Excise Act, 1964 (‘the Act’). These refunds allow qualifying businesses to recover part of the levies paid on diesel used in primary production activities, such as mining. While the scheme is intended to support economic activity, it comes with strict compliance requirements emphasised by past judgments.

What was the issue?

Glencore and ARM Coal operated a coal mine through a joint venture (JV), known as the Goedgevonden Joint Venture. The JV used diesel in its mining operations and claimed diesel refunds from SARS. Following an audit, SARS disallowed the claims — initially a relatively modest amount, but later escalating the claim to over R80 million. The key argument from SARS was technical: the JV itself did not hold the mining right. Instead, the mining right was formally registered in Glencore’s name. According to SARS, only the legal holder of the mining right could qualify for the diesel refunds. Since the JV was not the registered holder, it was not entitled to claim payment of the refunds. The High Court agreed with SARS. However, the SCA adopted a different stance.

What did the SCA decide?

The SCA overturned the High Court decision and ruled in favour of Glencore and its partners. The Court focused on a critical interpretive question: what does it mean to be “a person in possession of the necessary authorisation” to conduct mining? Rather than adopting a narrow, technical approach, the SCA applied a substance-over-form analysis. It found that:

• The mining right, although formally registered in Glencore’s name, could only be exercised through the JV.
• The JV structure was not incidental — it was a condition of the mining right itself, approved by the Minister.
• The JV actually conducted all the mining operations and used the diesel in lawful, authorised activities.

On this basis, the Court concluded that the JV was effectively the entity authorised to mine and therefore qualified for the refund. In short, the Court prioritised the commercial and regulatory reality of the arrangement over its formal legal structure.

Why this matters for business

This case is significant because it reinforces several practical principles:

1. Substance matters more than form

The Court rejected a rigid, formalistic interpretation. Even though the JV was not the registered holder of the mining right, it was the real operational entity. The judgment confirms that courts will look beyond legal form to commercial reality.

2. Alignment across regulatory regimes is key

The SCA emphasised that the Act, mining law (MPRDA) and the VAT rules must be read together. A fragmented interpretation can produce absurd results — such as no entity being able to claim a refund at all.

3. Joint ventures are recognised structures

Many industries operate through JVs. This judgment confirms that such structures will not automatically be disadvantaged purely because rights are held in one partner’s name.

4. SARS discretion must be exercised properly

The Court also criticised SARS for failing to consider its discretion to allow refunds in appropriate cases. In particular, the Court emphasised SARS’s discretion under Note 5 of Part 3 of Schedule6 of the Act. Even where there is technical non-compliance, SARS must still consider whether fairness justifies relief.

5. Limits on SARS appeal powers

A further issue in dispute was the powers of an appeal committee constituted in terms of the Act. The SCA found that SARS’s internal appeal committee (being a creature of statute) acted beyond its powers by dramatically increasing the amount it reclaimed and introducing new grounds during the appeal process. This strengthens taxpayer’s protections in disputes.

Key takeaway

For business leaders, the message is clear: compliance remains critical, but courts are willing to adopt a pragmatic, commercially sensible approach where structures are legitimate and activities are lawful. The judgment is, in our view, a strong endorsement of common-sense tax interpretation — ensuring that incentives like diesel refunds achieve their intended economic purpose, rather than being defeated by technicalities. Businesses operating through joint ventures should, however, ensure that their structures and authorisations are clearly aligned and properly documented to withstand SARS scrutiny.

Johan Kotze is a Tax Executive and Freek van Rooyen is a Partner at Shepstone & Wylie Attorneys