Billionaire-backed mining giant worth R1.4 trillion achieves legal victory against SARS

SARS suffered a setback as the Supreme Court of Appeal ruled in favour of Glencore and confirmed that joint ventures can qualify for diesel refunds based on operational reality rather than strict legal form.

In April 2026, SARS suffered a rare loss in the case of Glencore Operations SA v CSARS, which was heard in the Supreme Court of Appeal (SCA).

Shepstone & Wylie Attorneys’ tax executive, Johan Kotze, and partner, Freek van Rooyen, explained that the case 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 under 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,” Kotze and van Rooyen explained.

While the scheme is intended to support economic activity, it comes with strict compliance requirements – as shown by past judgments.

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, they said.

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,” Kotze and van Rooyen explained. However, the SCA adopted a different stance, overturning the High Court’s decision and ruling 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. The court 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,” they said.

“In short, the court prioritised the commercial and regulatory reality of the arrangement over its formal legal structure.”

Implications for businesses in South Africa

According to Kotze and van Rooyen, this case is significant for businesses because it reinforces several practical principles.

First, the ruling showed that 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.”

Kotze and van Rooyen explained that the SCA also made it clear that alignment across regulatory regimes is key.

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

The court also confirmed that joint ventures are recognised structures. “Many industries operate through JVs,” Kotze and van Rooyen said.

“This judgment confirms that such structures will not automatically be disadvantaged purely because rights are held in one partner’s name.”

The court also criticised SARS for failing to consider its discretion to allow refunds in appropriate cases. In particular, the court pointed to the taxman’s discretion under Note 5 of Part 3 of Schedule 6 of the Act.

Even where there is technical non-compliance, the revenue service is still obliged to consider whether fairness justifies relief.

Finally, Kotze and van Rooyen said this case places a limit on SARS’s appeal powers. A further issue in dispute was the powers of an appeal committee constituted under the Act.

The SCA found that SARS’s internal appeal committee – being a creature of statute – acted
beyond its powers.

It did so by dramatically increasing the amount it reclaimed and introducing new grounds during the appeal process. As such, this ruling strengthens taxpayers’ protections in disputes.

Kotze and van Rooyen explained that, for business leaders, 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.”