Law effective date: 29 November 2019
The Supreme Court of Appeal recently overturned a decision by the High Court. The impact of the decision is that farming enterprises are only entitled to a diesel rebate in respect of diesel physically delivered at the premises of the farmer. This will have both a historic and future impact on farmers that purchase their diesel directly from outlets not situated on their farms.
The Customs and Excise Act regulates the diesel refund scheme. Essentially a diesel refund may be claimed where the diesel has been used for certain qualifying activities.
With regards to farming enterprises, the legislation refers to diesel delivered to the premises of the qualifying user. Many farmers have been claiming the rebate in respect of diesel acquired at diesel outlets not situated on their farms on the basis that the reference to delivery at the premises of the farmer only indicates one basis if acquisition, not at the exclusion of any other. The critical test should be the purpose for which the diesel was actually used.
In the recent case of CSARS v Langholm Farms the Supreme Court of Appeal held that only diesel delivered to the premises of the qualifying user qualifies as eligible purchases on which the rebate may be claimed.
This has the impact that SARS will now be in a position to disallow diesel rebates incorrectly claimed in the past, as well as limiting the level of diesel rebates going forward. This is likely to place an additional financial burden on many farming enterprises.
It will also create certain practical challenges. For example, delivery of produce to the primary market is specifically included as eligible activities. If delivery trucks have to be re-fuelled on their way to the primary market, the diesel purchased on-route would not qualify as qualifying purchases. This flies directly in the face of the specific illegible activities and could never have been what the legislator intended.
Be it as it may, a Supreme Court of Appeal judgement constitutes law. Until the Customs and Excise Act is amended (if it is amended), we are stuck with a new status quo!