Dear Madam/Sir

Question

TAXPAYER: ILANGABI INVESTMENTS 12
VAT REFERENCE NO: 4730232248
AUDIT PERIODS: 03/2021 to 06/2023
TAX TYPE: DIESEL REFUND
AMENDED LETTER OF REJECTION / DEMAND

The South African Revenue Service (SARS) sent Letter of Intent dated 17
August 2023 via email to Hennie.
Having fully investigated Client compliance with the diesel refund provisions,
created and governed by section 75 of the Customs & Excise Act, No. 91 of
1964 (‘the C&E Act’), read with Part 3 of Schedule 6 thereto.
1. The investigation into the Client compliance commenced on 15
February 2023
2. Client did not comply with the requirements of the diesel refund
provisions because of which they were not entitled to the diesel refunds
paid to them.

As a result of the above findings, and by virtue of the provisions of sections
47(9), (10) and (11) of (‘the C&E Act), read with section 44(11) (a) thereof, the
Commissioner is entitled to, and hereby disallow refunds (fuel levy and road
accident fund levy) in as far as it was claimed by the client or that the refunds
were not duly claimable, in respect of diesel bought and used by them during
the audit period.
3. Facts (audit findings)
3.1 Logbooks / Proof of Payments / Invoices / Diesel Tank
(i) Logbooks
The Logbook received is only the part of the bowser, showing diesel
dispensed to the assets but it doesn’t show activities or what was the
assets doing. The bowser Logbook has no connections to the tank as it Letter of Demand: Page 5 of 17
does not indicate from which tank the diesel was dispensed from and
how many litres.
No opening and closing balance from the tanks and diesel is not
traceable from purchase to the tanks, to the bowser and to the assets.
The bowser Logbook supplied does not meet the required standard.
Storage Logbook was not provided,
(ii) Proof of Payment
The bank statement provided does not have the name of the client.
The diesel used in the mining operation must be purchased by the client.
(iii) Invoices
Tax invoices for diesel purchases were not provided but proforma
documents which cannot be accepted as tax invoices. The tax invoices
must show the diesel supplier, vat number of the supplier, type of the
fuel which is diesel, name, and address of the buyer, which is the client,
quantity of diesel purchased, price and amount in rand.
The proforma documents is not accepted as tax invoices.
(iv) Diesel tanks
The diesel tanks are placed at Brinkor, the sister company and not at
the mine. The delivery notes are showing diesel as being delivered at
langabi but the tanks are places at Brinkor the sister company that is
manufacturing bricks.
The diesel tanks must be placed at the mine premises.
nor did it comply with the provisions of Note 6 to Part 3 of Schedule No. 6 of
the C&E Act.
The view is based on the following:
The Commissioner is therefore of the view that the distillate fuel in question
were dealt with contrary to the provision of the C & E Act as set out above and
demand all refund which were not duly payable to client in terms of section 75
of the C & E Act.
(i) Logbooks
Only the part of the bowser was Provided, showing diesel dispensed to
the assets but it doesn’t show activities Performed by the assets. The
bowser Logbook has no connections to the tank as it does not indicate
from which tank the diesel was dispensed from and the litres dispensed
are not recorded.
No opening and closing balance from the tanks and diesel is not
traceable from purchase to the tanks, to the bowser and to the assets.
The provided logbook for the bowser does not meet the required
standard.
Storage logbook was not provided.
According to Schedule 6 Part3 Note 6(a)(xi) "logbooks" means
systematic written tabulated statements with columns in which are
regularly entered periodic (hourly, daily, weekly or monthly) records of
all activities and occurrences that impact on the validity of refund claims.
Logbooks should indicate a full audit trail of distillate fuel for which
refunds are claimed, from purchase to use thereof. Storage logbooks
(ii) Proof Of Payment
The bank statement provided does not have the name of the client.
The diesel used in the mining operation must be purchased and paid for by the
client.
Schedule 6 Part 3 Note 6 paragraph (q) (ii) stipulates the requirements for the
“Keeping of books, accounts and other documents for the purpose of this item”
as Purchase documents must be in the name of the user.

Responding to the client’s supporting documents submitted
manually in September 2023
(i) Logbook
The Logbook submitted after the letter of intent, is the same logbook
that the client emailed during the audit , it is still not meeting the
requirements of Schedule 6, as stated in the letter of intent and again
in this letter.
(ii) Proof Of Payment
The bank statement to proof that client purchased the diesel used in
the mine was still not submitted with the other supporting documents
received after the LOI.
(iii) Invoices
Client submitted the invoices from Plus X Petroleum, but the Vat
number on those invoices is for the company called Andisa Katiso
Holdings, the different company with its own registration number.
The invoice is invalid.
(iv) Diesel tanks
Client submitted an affidavit from department of environment stating
that the tanks cannot be placed on mining site.
The requirement of Schedule 6, that diesel must be delivered to the
premised still stands, and in these instances, diesel is also delivered
to Brinkor, the sister company manufacturing bricks and using diesel
in its operation too. It cannot be proven by SARS that the diesel
reached the mining site of Ilangabi Investments 12.

Sincerely
________________ __________________
Auditor Operations ManagerISSUED ON BEHALF OF THE COMMISSION
I am from South African Revenue Service from Internal Appeal commity , I want to reject the claim put by Illangabi client. I NEED TO WRITE THE OUTCOME LETTER TO THE CLIENT REJECTING THEIR APPEAL

Answer 1

South African Revenue Service
Internal Appeal Committee
[Your Address]
[City, Postal Code]
[Email Address]
[Phone Number]
[Date]

Ilangabi Investments 12
VAT Reference No: 4730232248
[Client’s Address]
[City, Postal Code]

Subject: Outcome of Appeal Against Diesel Refund Claim Rejection

Dear [Client's Contact Name],

We refer to your appeal submitted regarding the rejection of your diesel refund claims for the audited period from March 2021 to June 2023, as detailed in the amended letter of rejection/demand dated [insert date of the rejection letter]. After thorough consideration of your submission and the supporting documents provided, we regret to inform you that the appeal is rejected for the reasons outlined below.

1. Logbook Submission:
   The logbook provided continues to fail to meet the standards set forth in Schedule 6, Part 3 of the Customs and Excise Act, 1964. The logbook lacks essential details regarding activities performed by the equipment utilizing the diesel. Furthermore, it does not demonstrate a clear audit trail from the point of purchase through to usage. The absence of a storage logbook further exacerbates this non-compliance.

2. Proof of Payment:
   The bank statements submitted do not establish that the diesel was purchased by Ilangabi Investments 12, as they do not bear the client's name. According to Schedule 6, Part 3 Note 6(q)(ii), purchase documents must be made in the name of the user to be valid.

3. Invoices:
   While you provided invoices from Plus X Petroleum, these invoices contain a VAT number corresponding to another entity, Andisa Katiso Holdings, which renders them invalid for the purposes of claiming a diesel refund.

4. Location of Diesel Tanks:
   It has been established that the diesel tanks are located at Brinkor, a sister company, rather than at the mining site of Ilangabi Investments 12. Despite the affidavit received from the Department of Environment regarding tank placement, the regulatory requirement remains that diesel must be delivered and stored at the mining premises in order to substantiate claims for refunds.

5. Inability to Prove Delivery to Mining Site:
   The current state of documentation does not adequately demonstrate that the diesel claimed as a refund was utilized specifically at your mining operations, as discrepancies arise regarding delivery to the adjacent manufacturing site.

Given these findings, we must affirm that the diesel refund claims put forth by Ilangabi Investments 12 are invalid, based on the justification of non-compliance with the stipulated requirements of the Customs and Excise Act.

You have the right to further appeal this decision to the Tax Board. Should you wish to pursue this option, please refer to the appropriate procedures outlined on the SARS website or consult a tax professional for guidance.

Thank you for your attention to this matter. Should you have any questions or require further clarification, please do not hesitate to reach out to us.

Sincerely,

[Your Name]
[Your Position]
South African Revenue Service
Internal Appeal Committee
[Your Contact Information]