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Tholo Energy’s ‘schemes’ exposed

Business

  • Illicit procurement and transportation of fuel
  • SARS disallows tax refunds

Staff Reporter

In a damning judicial verdict, Tholo Energy Services CC and Tholo Lesotho’s deceptive practices were brought to light as the South African High Court dismissed the former’s appeal and slapped them with substantial costs.

The ruling, based on a meticulous examination of evidence and legal provisions, exposed a calculated scheme to unlawfully claim tax refunds, leaving a trail of deceit and financial burden.

Presiding Judge Molotsi, in a scathing indictment, declared: “The Applicant (Tholo Energy Services) did not comply with the refund requirements… It stands to reason that the appeal must be dismissed.”

The case centered on Tholo Energy Service’s audacious attempts to claim refunds totaling R4,254,924.80, based on spurious grounds.

Tholo Energy Services, according to the judgement, is a close corporation incorporated in terms of South African law.

The sole member of the company is Thabiso Moroahae.

The company was registered in South Africa as a Licensed Distributor of Fuel and Licensed Remover of Goods in bond.

The registration took place on January 25, 2015, and the license was renewed in 2016. The company is a transporter of diesel and petroleum products in Southern Africa, importing, exporting and removing diesel.

Tholo Lesotho, on the other hand, is a private company incorporated in Lesotho, “by Mr Moroahae, who is also its shareholder and its sole director,” the judgement states.

It states further that: “Tholo Lesotho carries on a business in Lesotho and supplies fuel to its customers in Lesotho. Tholo Lesotho sources fuel that it supplies to its customers from South Africa.”

The judgment revealed a web of deceit spun by Tholo Energy Services CC, involving the illicit procurement and transportation of fuel, all orchestrated to unlawfully pocket hefty tax refunds.

“During April to June 2016, the Applicant (Tholo Energy Services) allegedly purchased 25 consignments of diesel fuel from PetroSA at Mossel Bay. PetroSA is a licensee of a customs and excise manufacturing warehouse at Mossel Bay,” it reads.

The fuel was exported to Tholo Energy Services’ clients in Lesotho which are Tholo Lesotho.

“PetroSA invoiced the Applicant and payment to PetroSA was made on behalf of the Applicant by Tholo Lesotho,” reads the judgment.

Tholo Energy Services submitted refund claims to the South African Revenue Service (SARS) on March 17, 2017, seeking reimbursement for certain taxes.

However, their hopes were dashed when, on May 3, 2017, SARS notified them of their intention to disallow the refund claims.

This decision, though, was temporarily revoked on May 9, 2017.

Nonetheless, on July 20, 2017, SARS ultimately issued a final disallowance of the refund, citing various reasons.

Among the grounds for disallowance were allegations that Tholo Energy Services violated section 64F(1)(b) of the Customs and Excise Act, 91 of 1964, which stipulates that fuel must be loaded at licensed customs and excise manufacturing warehouses.

While SARS acknowledged that the fuel was purchased from PetroSA, it said it was not obtained from excise manufacturing warehouse at Mossel Bay.

It said the fuel was obtained from the storage tank in Bloemfontein operated by PetroSA. The storage tanks in Bloemfontein are not licensed as customs and excise manufacturing warehouse.

Additionally, it was alleged that Tholo Energy Services lacked the necessary International Trade Administration Commission (ITAC) permit for the fuel goods to be removed to Lesotho.

Undeterred by the initial disallowance, Tholo Energy Services pursued an internal administrative appeal, lodging it on July 31, 2017.

This appeal process involved multiple stages, including representations made by the Tholo Energy Services to the SARS’s appeal committee on October 27, 2017, and the submission of additional documents and information on February 1, 2018.

Furthermore, the appeal committee conducted an inspection in loco at various premises where fuel was manufactured and stored, eventually confirming on December 10, 2018 that the fuel was not obtained from a licensed manufacturing warehouse.

Despite the appeal committee’s decision being upheld on March 7, 2019, Tholo Energy Services persisted in their efforts to challenge the ruling.

On October 8, 2019, they served a DA96 notice in terms of section 96(1) of the Act SARS, initiating further discussions.

However, SARS, after requesting additional documents and information from the company, responded on July 15, 2020, relying on additional grounds to refuse the refund claims.

This triggered the company to approach the High Court of South Africa, Gauteng Division in Pretoria.

Dissecting the fraudulent practices, the High Court laid bare a series of blatant violations. After thorough consideration of all the evidence presented, it established the following key facts:

  1. Tholo Energy Services did not acquire the fuel from PetroSA’s customs and excise warehouse in Mossel Bay.
  2. Instead, PetroSA arranged for Tholo Energy Services to collect fuel from Total’s storage tanks and depot, which are not located at PetroSA’s customs and excise manufacturing warehouse.
  3. Tholo Lesotho, not Tholo Energy Services, paid PetroSA for the fuel and transported it to Lesotho using their trucks.
  4. Tholo Lesotho sourced the fuel from various locations, including Bloemfontein, Alrode, and Tzaneen, none of which are licensed customs and excise warehouses.
  5. Tholo Energy Services failed to export the fuel levy goods or remove them to Lesotho as required by relevant provisions.
  6. There is no evidence demonstrating that the fuel transported to Lesotho was manufactured by PetroSA or locally manufactured.
  7. SARS licenses warehouses based on specific premises, not the warehouse owner, and the Act prohibits licensees from acquiring fuel from any source or storing it elsewhere.
  8. Note 12(b)(iii) stipulates that fuel obtained from a licensee must be wholly and directly removed for delivery by a licensed distributor. However, there is no evidence that Tholo Energy Services, as a licensed distributor, obtained fuel from PetroSA’s warehouse in Mossel Bay.

“It is therefore odd, for the Applicant to claim for a refund under the circumstances wherein the provisions of section 75(1)(d) indicate the person who may be entitled to a refund. Since the Applicant was not a purchaser, it is not entitled to a refund,” read the judgement.

Moreover, the ruling exposed Tholo Energy Services’ disregard for legal protocols, as they failed to obtain the requisite export permits mandated by the International Trade Administration Act.

Judge Molotsi emphasised: “The Applicant ought to have known that it was required to have an export permit. It is no defence that the Customs and Excise Act, its Rules, do not refer to the ITAC issued permit.”

“It therefore stands to reason that the appeal must be dismissed. There is no reason why costs should not follow the result. Accordingly, the following order is made – The Applicant’s appeal in terms section 47(9)(e) of the Act is dismissed with costs.”

The matter was heard on November 1, 2022, and judgment delivered on February 2, last year, with this publication only becoming aware of the judgment last week.

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