Small scale fuel distributor battling to get fuel levy refund

Full bench identifies errors by Sars and errors in earlier judgment as taxpayer’s eight-year wait continues.
The high court has given the revenue service 30 days to ‘apply its mind’. Image: Shutterstock

The full bench of the high court, Western Cape Division, on April 21 2022, in Tunica Trading 59 v Commissioner, South African Revenue Service (Sars), overturned a high court judgment handed down on February 23, 2021, awarding costs against Sars.

However, the eight-year battle isn’t over, and Sars has to reconsider the refund application.


Tunica, a licensed small-scale distributor of fuel, supplies fuel to foreign-going ships. Tunica had purchased fuel from Masana Petroleum Solutions for delivery to a foreign-going ship. Masana, 45% held by BP Southern Africa (BPSA), had a preferential supply agreement with BPSA. BPSA supplied the fuel from its manufacturing warehouse to Masana.

Masana supplies small-scale distributors like Tunica “so that BPSA can focus on its core business of supplying large bulk customers”.


Sequence of events

Tunica applied to Sars for a refund of the fuel levy on November 4 2014.

Sars gave notice on March 5 2015 that it would reject the refund application on the basis that “the fuel had not been purchased from a licensee of a customs and excise manufacturing warehouse”.

Tunica replied with a detailed submission, including that: Masana caters to smaller customers; BPSA is licensed distributor and is the effective controller of Masana; Tunica had paid the duties and levies for the fuel under the Duty at Source system (in terms of which duties are paid by each oil company on fuel at the point at which it leaves their warehouses or refineries; in other words, at source); and that Tunica was entitled to the refund as the fuel was delivered to a foreign-going ship (exported).

Sars rejected the refund application on April 1 2015, sticking to its assertion that Masana is an intermediary and that the fuel should have been purchased from the “licensee of a customs and excise manufacturing warehouse”.

Tunica appealed and on September 28 2015 Sars’s Internal Administrative Appeal Committee disallowed Tunica’s appeal.

Nearly 17 months later, on February 17 2017, Sars upheld its September 2015 decision.

Tunica brought a review application under the Promotion of Administrative Justice Act (Paja).

Two further applications for refunds, which were submitted to Sars in October and November 2014, are still under consideration by Sars.


Counsel for Tunica argued that Tunica had complied with all requirements, and that:

  • Sars’s rejection of Tunica’s refund application was premised on an erroneous interpretation of Section 64F of the Customs Act and contrary to Sars’s previous interpretation;
  • Sars’s insistence that the fuel must be purchased directly from the licensee of a customs and excise manufacturing warehouse is an error in law and fatally flawed;
  • Sars impermissibly relied on a number of technical and other requirements related to the transport of the fuel and not in terms of any legislation, rule or regulation;
  • Sars’s decision is fundamentally flawed and unfair, and it had put forward two different reasons for refusing the refund application; and
  • That Judge Desai in the high court judgment delivered on February 23 2021, incorrectly characterised Sars’s February 2017 decision as being not reviewable in terms of Paja or on the principle of legality, and failed to consider Tunica’s application for the review.

Counsel for Sars argued that:

  • Tunica should have appealed against the September 2017 decision;
  • Sars’s decision of February 2017 was an “internal decision” and is not reviewable, either in terms of Paja or on the principle of legality;
  • Judge Desai correctly decided the matter on the basis that it is a tariff appeal; and
  • Tunica’s claim “failed to comply with the relevant statutory provisions of the Customs Act”.


The court had to decide which decision by Sars should be appealed against – the September 2015 or February 2017 decision.

The court noted that in correspondence dated April 8 2016, Sars had “invited Tunica to clarify certain issues before the Commissioner makes a ‘final decision’”, and that: “To suggest that Tunica should have ignored the above correspondence and reviewed or appealed the September 2015 decision, is simply untenable …”

But that if Sars had expected Tunica “to provide documentation and submissions for no apparent purpose to an unauthorized official that cannot make any decision on the refund application … [such] a proposition is unsustainable as it would mean that Sars deliberately misled Tunica which would be reprehensible”.

On Sars’s argument that the November 2017 decision was made by a Sars official who was not authorised to make that decision, the Constitutional Court – in MEC for Health, Eastern Cape and Another v Kirland Investments t/a Eye & Lazer Institute – had held “that even where a decision has been taken without authority, it constitutes administrative action which stands until set aside”.

Read: Sars is showing its teeth

The court also found that Sars had contradicted itself in its April 8 2016 letter, as it stated that the “final response” to the September 2015 decision had not been taken by the commissioner.

The court concluded that the February 2017 decision is the “operative decision”, and that Tunica’s application in terms of Paja had been brought within the 180-day period. Therefore “Tunica’s application for the review and setting aside of the September 2015 and February 2017 must as a result be considered afresh”.


The court found that the commissioner “clearly committed an error of law” in refusing the refund application, and that his decision “is reviewable and needs to be set aside”.

  • The Customs Act “requires that the fuel must have been obtained from the stocks of a licensee of a customs and excise manufacturing warehouse and not only purchased directly from such a licensee”;
  • Sars also failed to take into account “that the fuel had been obtained from the stocks of BPSA, via Masana”; and
  • Sars could not support its decision; for example, there was no record of any meetings or minutes.

The finding by Judge Desai that the “September 2015 decision was a tariff determination was flawed”.

The February 2017 decision is clearly a decision in terms of the Customs Act and constitutes administrative action, and is reviewable.

The ship to which fuel was supplied “would of necessity be returning to its registered port and would clearly be ‘foreign going’”.

“Tunica provided extensive documents in respect of the delivery of the fuel and it is not clear what additional proof was required.”

Tunica’s appeal was upheld with costs, including the costs of two counsel.

The court declared Sars’s decisions taken in February 2017 and September 2015 to refuse the refund of excise duty and fuel levy paid invalid, and referred the decision back to Sars. Sars has 30 days to apply its mind.

A close reading of the judgment gives one the impression that Sars was determined not to pay the refund, kept on moving the goalposts, and requested more and more documentation from Tunica without ever documenting its own decision-making process.

Tunica has now been out of pocket for eight years.

Read: Sars versus taxpayers



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