Many of you may already have been on the receiving end of SARS correspondence threatening to reclaim diesel refunds previously allowed together with interest and penalties.
The diesel refund system is primarily regulated by the provisions of the Customs & Excise Act No.91 of 1964 and in particular Schedule 6 , Part 3, note 6 thereof. Note 6 (ij) sets out specific provisions relating to Commercial Fishing.
The SARS letters set out proposed adjustments to diesel refunds previously granted. The adjustments are generally based on the SARS contention that the claimant does not engage in qualifying activities. The alleged ground for this contention is that the claimant “is not the holder of any fishing permits” and that this is a requirement in terms of the said Schedule 6 ,Part 3.
As a result notwithstanding that a vessel owner (registered as a user) purchases diesel and uses the diesel in the activity of “sea fishing” in terms of a valid fishing permit , SARS argue that such a user is not entitled to claim a diesel refund due to the vessel owner not being the holder of the fishing permit. However, the provisions of Schedule 6 , part 3 (ij)(ii) (aa)(C) only require that the “master is in possession of a valid commercial fishing permit” issued in terms of the Marine Living Resources Act no.18 of 1998. There is accordingly no stated requirement that the permit must be in the name of the vessel owner (user) ie that the vessel owner is the “permit holder”. In addition, the vessel owner (user) also complies with one of the other key requirements that the sea fishing activity is “carried on by the user” ( (ij)(ii)(cc) ).
If we follow the logical conclusion of the SARS argument then only rights holders would be able to claim refunds as users. Thus if we take the small pelagic , hake trawl or rock lobster sectors for example (being TAC sectors) , even though there may be a number of rights holders’ permits on one vessel, SARS require that each of the rights holders should register as users , purchase the diesel and supply it to the vessel so that it can be used while catching their particular allocation. This in our view would be virtually impossible to implement from both the industry and SARS perspective. Moreover , SARS has only recently put forward this interpretation while industry has continued to operate as it has always done from long before the introduction of diesel rebates in the fishing sector. Most importantly the SARS argument in our view is not supported by a literal interpretation of the relevant provisions.
At a recent SARS workshop on diesel refunds held in Stellenbosch on the 20 February 2013 (which we attended), it appeared that the SARS position was motivated by a complete lack of understanding of the fishing sector both from an operational and legislative/administrative perspective. Not to mention that the SARS approach is certainly not in line with the spirit of the legislation.
At the end of the workshop the SARS presenters were aware of the universal objection by industry to their skewed interpretation. They therefore proposed that the fishing industry through a representative association make substantive representations to SARS regarding the application of the refund system in the fishing industry and if required propose changes to the legislative provisions.
Based on our recent experience in dealing with several of these SARS’ claims against users, if industry does not take decisive action now in dealing with SARS, the accumulative effect of the adjustments will be financially crippling to the fishing industry.
- Subject to legal advice , individual users faced with proposed adjustments should reply to and where required appeal against any unlawful claims by SARS; and
- Industry through a representative association must make clear , detailed and unified representations to SARS .
Should you require our firms assistance in dealing with this issue either on an individual client basis or at industry level, please contact our Peter Edwards at email@example.com .