Image: Katrin Bolovtsova 
SARS adopted a multi-pronged procedural strategy, presenting six preliminary and procedural objections to block the applicants from seeking High Court intervention on a statutory interpretation matter related to compliance with the Mineral Royalty Act. Despite these efforts, SARS had requested a special allocation from the Deputy Judge President of the Gauteng High Court, citing the urgency of clarifying the interpretation of “bulk” due to its industry-wide impact.
The High Court dismissed SARS’ procedural objections, describing them as disingenuous. It criticised SARS for focusing on procedural barriers instead of addressing the broader importance of resolving legal ambiguities impacting the aggregates industry.
Jurisdiction
A central procedural issue was section 105 of the TAA, which restricts tax disputes to the Tax Court unless the High Court permits otherwise. This provision aims to streamline tax litigation within the administrative remedies established in the TAA. However, the High Court identified exceptional circumstances warranting its intervention, including:
- The purely legal nature of the dispute;
- The broad implications for the aggregates industry; and
- The Tax Court’s inability to issue industry-wide binding declaratory orders.
The court emphasised the efficiency and legal certainty provided by a single High Court decision, which could pre-empt a series of inconsistent Tax Court rulings. By granting the Section 105 directive, the court reinforced its critical role in addressing significant legal questions in tax matters of public interest.
This judgment sets an important precedent for taxpayers seeking declaratory relief in the High Court for statutory interpretation issues. It also counters recent Supreme Court of Appeal rulings limiting High Court jurisdiction, reaffirming the High Court’s role in tax matters of substantial public interest.
Interpretation of the condition “bulk” and the purpose of the Mineral Royalty Act
At the heart of the dispute was the interpretation of “bulk” in Schedule 2 of the Mineral Royalty Act as it relates to aggregates. SARS argued that “bulk” included aggregates at any stage, including post-beneficiation, while the applicants contended that “bulk” referred to aggregates in their unprocessed state, immediately after extraction (at the “muck pile” - the unprocessed condition immediately after extraction).
Using a purposive approach, the court analysed the text, context, and purpose of the Mineral Royalty Act. It concluded that “bulk” refers to the shot rock at the quarry face before any beneficiation. This interpretation aligns with the industry’s technical understanding and reinforces that royalties must be calculated based on the condition of aggregates at their first saleable point.
The court underscored the dual purposes of the Mineral Royalty Act: to promote beneficiation and ensure fair compensation to the State for mineral extraction. SARS’ interpretation, the court reasoned, would discourage beneficiation by imposing disproportionate royalties on the increased value resulting from processing. Such an approach would create discriminatory outcomes, penalising aggregates while sparing other mineral-bearing ores.
Strike-out application against SARS’ allegations and treatment of taxpayers
The High Court also granted the applicants’ strike-out application against several statements in SARS’ answering affidavit. The court criticised SARS’ conduct, describing its language as intemperate and hostile toward taxpayers. SARS accused the applicants of abusing court processes and acting in bad faith, despite previously issuing a non-binding opinion supporting the applicants’ interpretation of the Mineral Royalty Act.
The court emphasised that taxpayers approach the judiciary not to undermine SARS but to ensure compliance with statutory obligations. It condemned SARS’ contradictory stance and lack of professionalism, stating that such behaviour is unbecoming of a public authority tasked with administering tax law fairly.
By awarding costs on a punitive scale, the court sent a strong message that taxpayers are entitled to respectful and fair treatment from SARS, particularly in matters of statutory interpretation.
Significance of declaratory orders beyond this case
The judgment highlighted the significance of declaratory orders issued by the High Court. Such orders provide binding authority and faster resolution of legal disputes compared to the Tax Court, reducing the risk of inconsistent rulings and unnecessary litigation. The court’s emphasis on judicial efficiency and legal certainty benefits both taxpayers and SARS by clarifying contentious legal provisions.
Conclusion
The decision in ASPASA NPC and Others v C: SARS (2024) is a landmark ruling with far-reaching implications for tax administration and statutory interpretation. By rejecting SARS’ procedural objections, granting the section 105 directive, and clarifying the meaning of “bulk”, the High Court has reinforced its vital role in resolving complex legal disputes.
For taxpayers, this judgment is a reminder of the power of the High Court to resolve complex legal disputes and the importance of holding administrative authorities to account. Mining taxpayers, in particular, should note the broader interpretational principles established by this case, which could significantly impact their tax obligations in future disputes. DM
To access the full judgment, click here.