Case  CCT94/23; CCT 98/23; CCT 66/23; CCT 72/23 & CCT 320/23
[2025] ZACC 02

Hearing Date: 15 & 16 August 2024

Judgement Date: 31 March 2025

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Monday, 31 March 2025 at 10h00, the Constitutional Court handed down a unanimous judgment authored by Rogers J in five consolidated applications for leave to appeal concerning the interpretation and application of section 105 of the Tax Administration Act 28 of 2011 (TAA).

Section 105 of the TAA provides that a taxpayer must challenge an assessment in the Tax Court unless the High Court directs otherwise, which is to grant a “section 105 direction”. The five cases all raised questions as to whether taxpayers require such a direction in cases where taxpayers seek to judicially review an assessment, or seek a declaratory order related to an assessment. Relatedly, the case concerned whether section 105 of the TAA ousts the jurisdiction of the High Court until a section 105 direction is granted.

In United Manganese (Pty) Limited v Commissioner for the South African Revenue Service (UMK), the taxpayer sought to review additional assessments based on alleged procedural irregularities and to obtain declaratory relief on a point of law. In Rappa Resources (Pty) Limited v Commissioner for the South African Revenue Service (Rappa), the taxpayer launched a review application without first objecting to the assessments and sought to compel SARS to produce a rule 53 record. In Forge Packaging (Pty) Limited v Commissioner for the South African Revenue Service (Forge), the taxpayer applied for leave to appeal the High Court’s refusal to grant a section 105 direction for a review based on alleged non-compliance with section 42(2)(b) of the TAA. In Absa Bank and Another v Commissioner for the South African Revenue Service (ABSA) the taxpayers sought to review the South African Revenue Service’s (SARS) intention to issue assessments under the general anti-avoidance rules. Finally, in Lueven Metals (Pty) Limited v Commissioner for the South African Revenue Service (Lueven), the taxpayer applied for declaratory relief before assessments were issued, with both parties initially agreeing the case was suitable for determination by declaratory order.

The Constitutional Court found that section 105 applies to both review and declaratory applications that effectively dispute the correctness of tax assessments. Until a section 105 direction is granted, the High Court’s jurisdiction to hear such matters is conditionally suspended. This means that a taxpayer cannot compel the production of a rule 53 record until the High Court has decided whether to grant a section 105 direction.

The Court rejected the “exceptional circumstances” test that had previously been adopted by the Supreme Court of Appeal for granting a section 105 direction. The Court held that neither the language of section 105, nor its context and purpose, justified such a heightened test. Instead, the Court held that the test is whether there is justification for departing from the default remedy of appeal to the Tax Court, which may be tested by asking whether the departure is appropriate or whether there is good cause for it.

The Court provided general guidance on factors relevant to granting a section 105 direction. It emphasised that it will generally be inappropriate to grant a direction if the taxpayer has not first objected to the assessment and if SARS has not yet given a decision on the objection. The Court also stated that a factor militating against a section 105 direction is where the taxpayer is pursuing other grounds by way of an appeal to the Tax Court, as piecemeal adjudication is generally undesirable.

The Court further held that the closer a review ground is to a permissible ground of appeal in the Tax Court, the less likely it is that granting a section 105 direction will be appropriate. However, where a taxpayer raises a pure point of law, a section 105 direction may be appropriate, though the High Court must consider whether there are advantages in favour of High Court adjudication over Tax Court adjudication, such as creating precedential value or governing future assessments. In addition, Court held that a section 105 direction may be appropriate in cases where there are egregious and wilful procedural irregularities.

In relation to the individual cases, the Court ruled the following:

(a) In UMK, the Court found that neither the review relief nor the declaratory relief sought by the taxpayer was appropriate for High Court adjudication, and thus a section 105 direction should not be granted. The Court thus granted leave to appeal but dismissed the appeal.

(b) In Rappa Resources, the Court confirmed that until a section 105 direction is granted, the High Court's jurisdiction is conditionally suspended, and thus the High Court could not order production of a rule 53 record. The Court thus granted leave to appeal but dismissed the appeal.

(c) In Forge Packaging, the Court refused to condone the late filing of the taxpayer's application for leave to appeal, as the taxpayer did not enjoy reasonable prospects of success. Based on this, the Court dismissed the application.

In the Absa, the Court granted the taxpayers leave to appeal, overlooking peremption in the interests of justice. The Court found that the two issues raised by the taxpayers were indeed pure points of law, and although the presence of other disputes about the assessments militated against High Court adjudication, it allowed the High Court’s section 105 direction to stand. The Court granted leave to appeal the order of the Supreme Court of Appeal and held that the remaining issues in the appeal will stand over for later determination in accordance with directions to be issued by the Court.

(e) In Lueven, the Court held that since no assessment had been issued when the taxpayer applied for declaratory relief, section 105 did not apply directly. The Court found that the Supreme Court of Appeal had erred in declining to decide the merits of the case. Therefore, the Court granted leave to appeal the order of the Supreme Court of Appeal and held that the remaining issues in the appeal will stand over for later determination in accordance with directions to be issued by the Court.

The Full judgment  here