A recent decision of the Supreme Court of Appeal has brought important clarity to the limits of SARS’ powers and the scope of the Commissioner’s discretion, when taxpayers fail to meet technical customs requirements. In JT International Manufacturing South Africa (Pty) Ltd v Commissioner for SARS, delivered on 4 April 2025, the SCA overturned SARS’ strict approach and confirmed that the Commissioner does have authority to condone certain instances of non-compliance.

The judgment signals a shift away from a rigid, zero-tolerance interpretation of customs rules where the fiscus suffers no prejudice and fairness calls for leniency.

Background to the Dispute

JT International Manufacturing South Africa (JTI), a licensed importer, rebate user and operator of a customs and excise manufacturing warehouse, brought twelve consignments of tobacco into the country between January and July 2011. These imports were entered under rebate item 460.24, which provides full relief from excise duty if specific requirements under the Customs and Excise Act, 1964 are satisfied.

One of those requirements, contained in Rule 19A.09(c), obliges the importer to submit a ZRW document within 30 days after entering the goods for home consumption. While the goods were placed in JTI’s licensed warehouse as required, the ZRW documents were never submitted.

During a SARS audit in 2012, the omission was detected. SARS concluded that JTI had forfeited the rebate due to non-compliance and issued a demand for more than R60 million in duties and VAT.

JTI then asked the Commissioner to use the discretion in section 75(10)(a) of the Act to retrospectively excuse the failure to file the ZRWs. The Commissioner declined, insisting the provision did not apply. Both the National Appeals Committee and the High Court upheld SARS’ interpretation, reasoning that the discretion only applies when importer intends to change the use of goods after importation.

JTI appealed to the SCA.

The SCA’s Interpretation of Section 75(10)(a)

The SCA was asked to determine whether the Commissioner had misunderstood his discretionary powers. The court held that:

1. Section 75(10)(a) does empower the Commissioner to excuse non-compliance with the conditions of rebate 460.24, including the ZRW requirement
2. The discretion is not limited to situations where imported goods are later used for a different purpose
3. Even where a rebate condition has not been met, the Commissioner must still consider whether exemption should be granted

The court made it clear that the Commissioner cannot simply refuse to consider exercising discretion by claiming that no such power exists. However, while the Commissioner is permitted to condone non-compliance, he is not obliged to do so. What is required is a proper decision, one way or the other, based on the evidence and circumstances.

What the Decision Means for SARS and Taxpayers

The SCA’s ruling reinforces several key principles:

1. Rebate items come with strict conditions, and taxpayers must ordinarily comply fully to claim the benefit.
2. Where the Act grants the Commissioner discretion, SARS cannot adopt an inflexible stance or interpret the statute in a way that eliminates that discretion.
3. The Commissioner must meaningfully apply his mind to requests for exemption, fairness, the absence of prejudice to the fiscus, and the purpose of the rebate must all be weighed.
4. A refusal to consider discretion, or a misunderstanding of the statutory powers, is legally reviewable and may be set aside.

This judgment therefore strengthens taxpayer protections by confirming that SARS cannot rely on a rigid or incorrect interpretation of legislation to deny the exercise of a lawful discretionary power.

Conclusion

The SCA’s ruling underscores the importance of fair administrative action in the customs environment. While taxpayers must comply with rebate conditions, the Commissioner cannot disregard his statutory discretion when the law clearly permits him to consider condonation. Where SARS refuses to apply that discretion or applies the legislation incorrectly, taxpayers are entitled to challenge the decision in court.