BUSINESS LAW &TAX
FEBRUARY 2025 WWW.BUSINESSLIVE.CO.ZA
A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW
Sars reminded of its manners High court strengthens •taxpayer rights, urges respect and
BUILDING BLOCKS
fair treatment Andries Myburgh & Emilé Cronje ENS n the landmark decision of ASPASA NPC and others v C: SARS (2024), the high court addresses a variety of procedural challenges raised by the Commissioner for the South African Revenue Service (Sars) but also provides essential clarifications on two key legal issues: the high court’s directive under section 105 of the Tax Administration Act, 28 of 2011 (TAA) and the interpretation of the specified condition “bulk” in respect of aggregates in Schedule 2 of the Mineral and Petroleum Resources Mineral Royalty Act, 28 of 2008. These aspects have farreaching implications for taxpayers in general and the aggregates industry specifically.
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HIGH COURT REJECTS SARS’ PROCEDURAL TACTICS Sars employed a multifaceted procedural strategy (no less than six preliminary and procedural grounds of defence) to obstruct the applicants from approaching the high court on the merits of the
case, namely a statutory interpretation matter to ensure their compliance with the Mineral Royalty Act. Despite these tactics, Sars itself had requested a special allocation from the Deputy Judge President of the Gauteng High Court, emphasising the urgent need for clarity on the interpretation of “bulk” to address the industry-wide concerns under the Mineral Royalty Act. The high court categorically refuted Sars’ procedural objections as deemed disingenuous, noting that its arguments focused on procedural barriers, despite its acknowledgement of the broader significance of resolving the legal standoff between it and the aggregates industry.
JURISDICTION One of those procedural barriers raised by Sars was section 105 of the TAA which generally restricts tax disputes to the tax court unless the high court directs otherwise. The provision aims to streamline tax litigation and ensure that disputes primarily follow the administrative remedies established in the TAA. However, the court identified appropriate or exceptional circumstances in
/123RF — JUANENRIQUEDELBARRIOA this case that warranted deviation from the default position. These included: ● The purely legal nature of the issue; ● The widespread implications for the aggregates industry; and ● The inability of the tax court to issue an industrybinding declaratory order. The court highlighted the efficiency and certainty provided by a single high court decision rather than a series of tax court decisions, each binding the immediate parties. By granting the section 105 directive, the court reinforced the role of the high court in addressing legal questions in “tax matters” of
significant public interest and industry-wide relevance. This sets an important precedent for taxpayers seeking declaratory relief from the high court to obtain clarity and certainty on statutory interpretation issues. The court’s decision comes amid a growing body of cases challenging the scope of section 105 of the TAA. Taxpayers should not be dismayed by the recent string of Supreme Court of Appeal cases barring the high court from considering pure legal issues, as this judgment reaffirms the high court’s vital role in addressing legal issues in tax matters. Several pending judgments in the Constitutional Court are
poised to be seminal in shaping taxpayer rights and the boundaries of the high court’s inherent jurisdiction in tax matters. Interpretation of the condition “bulk” and the purpose of the Mineral Royalty Act The interpretation and the meaning of the condition of “bulk” in Schedule 2 of the Mineral Royalty Act as it relates to aggregates was the crux of the dispute. Sars argued that “bulk” referred to aggregates at any stage, including post-beneficiation. In contrast, the applicants contended that “bulk” should be interpreted as the state of aggregates in their unprocessed form, at the “muck pile” (ie the unprocessed condition immediately after extraction). The court adopted a purposive approach, analysing the text, context and purpose of the Mineral Royalty Act. The court noted that “bulk” in the context of the Mineral Royalty Act carries a technical meaning aligned with the industry’s understanding,
THE INTERPRETATIONAL PRINCIPLES OUTLINED COULD INFLUENCE DISPUTES IN OTHER MINING ROYALTY MATTERS
rather than the meaning in In parlance. common upholding the applicants’ interpretation, the court concluded the condition “bulk” in Schedule 2 means the shot rock (ie blasted rock) at the quarry face prior to any beneficiation. Thus, aggregates at the muck pile are in the condition stipulated by Schedule 2 as it is commercially viable at the mine mouth, reinforcing that royalties must be levied at the condition of the first saleable point. The Mineral Royalty Act, as the court observed, serves two fundamental purposes — promoting beneficiation rather than penalising it and ensuring fair compensation to the state for the extraction of mineral resources. These dual objectives underscore the critical role of mineral royalties in balancing economic activity with national interests. The court rejected Sars’ interpretation as it effectively nullified section 6(2)(b) of the Mineral Royalty Act, which accounts for changes in mineral condition postbeneficiation. The Sars approach, the court reasoned, would discourage beneficiation, impose disproportionate royalties through the increased value through the process of beneficiation, and is inherently discriminatory as to determine a royalty based on an increased value CONTINUED ON PAGE 2