The proof is in the burden, not the pudding

Burden of proof

A taxpayer should be able to provide proof to SARS in respect of assertions made. For example, where the taxpayer claims an income tax or input tax deduction or asserts that an amount is exempt. Recent court cases in the indirect tax sphere, makes it clear that the ability of a taxpayer to provide proof regarding the tax position taken, can make all the difference.

Claiming diesel refunds

In Sandbaken Boerdery (Pty) Ltd v Commissioner for the South African Revenue Service and Another (053180/2022) [2025] ZAGPPHC 54 (21 January 2025), the taxpayer appealed a decision by SARS to disallow diesel refunds claimed.

The taxpayer undertakes mixed farming activities, and claimed refunds for diesel used in its farming activities. The provisions of section 75(1A)(a) and (b), read with item 670.04 of Schedule 6, Part 3 of the Customs and Excise Act No. 91 (1964) contains specific requirements that should be met if a taxpayer wants to claim diesel refunds for qualifying activities.

The taxpayer was unable to provide SARS with valid tax invoices for diesel purchases and the logbook provided did not contain details on opening and closing hour meter / odometer readings, distance, duration of use and purpose of utilisation.

The failure by the taxpayer to provide proof that the relevant legislative requirements were met, resulted in the Court ruling that the taxpayer was not entitled to claim the diesel refunds and that SARS was correct in disallowing the claim.

Acquittal of customs duties

In Woods Warehousing (Pty) Ltd v Commissioner for the South African Revenue Services and Others (2022/026798) [2025] ZAGPPHC 162 (14 February 2025), SARS assessed the taxpayer for approximately R7 million in duties.

The taxpayer imported goods and stored them in a licensed customs and excise storage warehouse. This means that the payment of customs duties is suspended until such time as the goods are released from the warehouse. Where the goods are exported and not entered for home consumption, then no customs duties become payable.

However, the Customs and Excise Act No. 91 (1964) contains specific requirements in this regard. One of the requirements is that the goods should be released to a licensed remover and properly exported.

The taxpayer released the goods for export to an individual other than the one listed on the bill of entry. Following an investigation, SARS could not find any proof that the goods were indeed exported and issued letters of demand.

While the taxpayer attempted to argue that it was a victim of fraud, the Court rejected this argument. The Court reiterated that compliance with tax law is on a self-regulation basis and that it was the responsibility of the taxpayer to prove that the goods had been exported. As a result, the Court ruled in SARS’ favour.

Customs classification

In the case of FTTX and Energy Warehouse (Pty) Ltd v Commissioner for the South African Revenue Service (2022/5522) [2025] ZAGPPHC 140 (31 January 2025) a dispute arose regarding the customs classification of certain goods.

Upon importation, the taxpayer described the goods under consideration as “FCST01131 Fiber Optical Splice Closure – 8 Core”. When classifying goods for customs purposes, the interpretative approach is to ascertain the meaning of the words used in the headings of the tariff book, to consider the nature and objective characteristics of the goods and then to select the most appropriate heading.

SARS was of the view that the goods were articles of plastic, while that taxpayer submitted that the goods were connectors for optic fibre, cable and bundles.

The Court held in favour of the taxpayer. The outcome of this case reiterates the importance of using proper descriptions when declaring goods for customs purposes. Appropriately describing the goods may well prevent disputes with SARS.

Have your cake and eat it too

SARS is under a lot of pressure to contribute additional revenue to fill the revenue gap caused by the suspension of the VAT rate increase. It is expected that there is going to be an increase in verification and audits by SARS in all areas of tax and especially in the indirect tax sphere.

Preparation is key. Taxpayers should ensure that they familiarise themselves with the relevant legislative requirements and be able to prove that all the requirements have been met. Indirect tax compliance is not about whether or not a provision is perceived to be practical or fair. It is about meeting the legislative requirements and providing proof thereof. 

Now is the time to perform an indirect tax health check and ensure that any gaps are rectified and addressed. This will help taxpayers to weather the burdensome storm of proof, and to confidently respond to any SARS request.

Contact our Indirect Tax team if you need assistance with any of your indirect tax affairs.

Author:

Evádne Bronkhorst