THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 855/2021

In the matter between:
MOBILE TELEPHONE NETWORKS (PTY) LTD
APPELLANT

and

THE COMMISSIONER FOR THE SOUTH AFRICAN

REVENUE SERVICE

RESPONDENT

Neutral citation: Mobile Telephone Networks (Pty) Ltd v Commissioner for the
South African Revenue Service (805/2021) [2022] ZASCA 142
(24 October 2022)
Coram:
DAMBUZA ADP, MAKGOKA and GORVEN JJA and WEINER and
SALIE-HLOPHE AJJA
Heard:
9 September 2022
Delivered: 24 October 2022
Summary: Tax law – Value-Added Tax Act 89 of 1991 – declaratory order – under
which of ss 10(18) or 10(19) pre-paid vouchers fall – fact specific test – narrow basis
for declaration of rights in tax matters – clear, uncontested facts necessary – no basis
for declaration of rights.

__________________________________________________________________
ORDER
______________________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (Hughes J, sitting as
court of first instance):
The appeal is dismissed with costs, including those of two counsel where used.
__________________________________________________________________
JUDGMENT
__________________________________________________________________
Gorven JA (Dambuza ADP, Makgoka JA and Weiner and Salie-Hlophe AJJA
concurring)
[1] This appeal concerns the sale of certain vouchers by the appellant, Mobile
Telephone Networks (Pty) Ltd (MTN). The respondent is the Commissioner for the
South African Revenue Service (SARS).1 MTN provides a range of services to
customers. As part of its offering, MTN sells what it refers to in the papers as ‘pre-
paid multi-purpose vouchers’ (the pre-paid vouchers). Historically, the sale of the
pre-paid vouchers was dealt with by MTN as falling under s 10(19) of the Value-
Added Tax Act 89 of 1991 (the Act). On 15 November 2017, MTN sought a private
binding ruling from SARS under s 41B of the Act, to the effect that the sale of the
pre-paid vouchers could thenceforth be dealt with as falling under s 10(18) of the
Act.

1 For the sake of convenience, I shall refer to the respondent as SARS despite the Commissioner of SARS being the
party. The rulings mentioned hereunder are issued by the Commissioner but SARS as an entity gives effect to the
rulings. I am mindful of the distinction between the Commissioner and SARS but this distinction is not material in
this matter.

[2] On 4 April 2019, after an extensive exchange of correspondence, SARS
issued a private binding ruling to the effect that s 10(19), and not s 10(18), of the Act
applied. Aggrieved by the ruling, MTN approached the Gauteng Division of the
High Court, Pretoria, (the high court) for the following relief:
‘1.
Declaring that the supply by the Applicant of pre-paid tokens or vouchers for a
consideration denominated in Rand, entitling the holder to receive available services and products
on the MTN mobile network, as selected by the holder, to the extent of the monetary value stated
on or attributed to the tokens or vouchers (multi-purpose vouchers), constitutes a supply as
envisaged in section 10(18) of the [Act].
2.
Declaring, accordingly, that the supply of such token or voucher is disregarded for the
purposes of the [Act], except to the extent (if any) that the consideration for the multi-purpose
voucher exceeds the monetary value stated thereon.
3.
To the extent necessary declaring to be incorrect and/or setting aside the ruling issued by
the Respondent on 4 April 2019, to the effect that the pre-paid vouchers fall within the ambit of
section 10(19) of the [Act] and that value-added tax must accordingly be accounted for by the
Applicant when the voucher is sold to the subscriber.
4.
Directing the Respondent to pay the costs of this application.’
The high court, per Hughes J, entertained the application for declaratory relief but
dismissed the application with costs. It is against that order that MTN appeals, with
her leave.

[3] The legislative backdrop to the matter frames the dispute. Section 7(1) of the
Act levies a tax on ‘the supply by any vendor of goods or services supplied by him’.
And ss 10(18) and (19) provide:
‘(18)  Where a right to receive goods or services to the extent of a monetary value stated on any
token, voucher or stamp (other than a postage stamp as defined in section 1 of the Postal Services
Act, 1998, and any token, voucher or stamp contemplated in subsection (19)) is granted for a
consideration in money, the supply of such token, voucher or stamp is disregarded for the purposes
of this Act, except to the extent (if any) that such consideration exceeds such monetary value.

(19)   Where any token, voucher or stamp (other than a postage stamp as defined in section 1 of
the Postal Services Act, 1998) is issued for a consideration in money and the holder thereof is
entitled on the surrender thereof to receive goods or services specified on such token, voucher or
stamp or which by usage or arrangement entitles the holder to specified goods or services, without
any further charge, the value of the supply of the goods or services made upon the surrender of
such token, voucher or stamp is regarded as nil.’
The former attracts VAT only at the time a voucher is used to procure goods or
services rather than at the time the voucher is supplied. In the latter instance, VAT
is levied on the sale of a voucher but no further VAT is levied when the voucher is
‘surrendered’.

[4] MTN submitted that two types of vouchers supplied by it fall under the
different sections concerned. The first type specifies the goods which can be
obtained by using the voucher. An example given was a data voucher. What is
purchased is the right to use the volume of data purchased. It cannot be used to access
anything else. This type of voucher falls under s 10(19). The second type is the pre-
paid vouchers. These have a rand value and can be used to access a wide range of
services offered by MTN. They are not limited to specific services such as data.
These are, MTN said, ‘typically referred to as “airtime” vouchers’.2 These, it
contended, fall under s 10(18).

[5] MTN analysed the key difference between the two provisions.3 Under
s 10(18), the voucher specifies the value of goods or services that may be selected
rather than specifying the goods or services which the voucher may be used to
acquire from the vendor. Under s 10(19), the particular goods or services to which

2 Their emphasis.
3 SARS used slightly different wording but agreed on the distinction.

the holder is entitled are specified rather than their value. SARS submitted that the
enquiry was therefore whether:
a)
Airtime (the voucher) itself constitutes ‘goods’, alternatively whether what
can be exchanged for the voucher constitutes ‘goods or services’ that are specified
by usage or arrangement; or
b)
Airtime simply means the voucher itself, which is a form of currency that can
be exchanged for an unspecified number of goods and services, akin to a gift
voucher.
SARS contended that the pre-paid vouchers fall under the first of these and MTN
that they fall under the second. This is where the lines were drawn in the litigation.

[6] In essence, this appeal relates to two main issues. The first is whether seeking
a declaratory order was appropriate in the circumstances. The second is whether, if
so, the ruling of SARS was incorrect.

[7] As to the first issue, SARS submitted that the procedure utilised by MTN was
impermissible. There were three bases to that contention. It amounted either to a
review, an appeal, or an objection to the ruling, none of which are competent.

[8] Prayer 3, which followed the declarations requested in prayers 1 and 2, sought
to set aside the ruling. In general terms, decisions of functionaries may only be set
aside on an application for the decision to be reviewed. SARS submitted that no
review application was brought. In any event, no review could lie against the ruling
because the definition of administrative action in s 1 of the Promotion of
Administrative Justice Act 3 of 2000 (PAJA) requires the action in question to have

a direct, external and final effect.4 In the present matter, the ruling would only have
an effect once it was applied to an assessment. As such, it did not fall within the
definition of administrative action and could not be reviewed under PAJA.

[9] MTN conceded that the ruling did not amount to administrative action as
defined in PAJA and was not reviewable. It submitted, however, that, if the
declarators were granted and the ruling was not set aside, it would remain intact. But
such a ruling binds only SARS.5 SARS can withdraw it at any time unless the
withdrawal were to prejudice MTN. That would not be the case in this matter where
the ruling was against the interpretation contended for by MTN. In any event, SARS
submitted that the ruling would be withdrawn if it was contrary to declarations made
by a court. MTN accepted this to be the case and, as a result, conceded that it was
not entitled to the relief sought in prayer 3.

[10] As regards the application amounting to an impermissible appeal, SARS
contended that the ruling was not appealable, whether to the Tax Court or the High
Court. Section 32(1) of the Act specifies those decisions of SARS which are
susceptible of objection or appeal. Rulings under s 41B are not included. This much
was also conceded by MTN. It submitted, however, that the application did not
amount to an appeal.

4 The relevant parts of the definition of administrative action are:
‘. . . any decision taken, or any failure to take a decision, by-
(a)   an organ of state, when-
(i)   exercising a power in terms of the Constitution or a provincial constitution; or
(ii)   exercising a public power or performing a public function in terms of any legislation; or
(b)   a natural or juristic person, other than an organ of state, when exercising a public power or performing a public
function in terms of an empowering provision,
which adversely affects the rights of any person and which has a direct, external legal effect . . .’.
5 Section 82(1) of the Tax Administration Act 28 of 2011 (the TAA) which provides:
‘If an “advance ruling” applies to a person in accordance with section 83, then SARS must interpret or apply the
applicable tax Act to the person in accordance with the ruling.’

[11] That leaves the question of an objection. SARS submitted that there are no
provisions in the Act in terms of which to object to such a ruling. This is correct. In
terms of s 83(1) of the Tax Administration Act 28 of 2011 (the TAA), the ruling only
‘applies’ to a taxpayer when it is put into effect. Once again, the ruling would be
applied by SARS once a return had been submitted. Only at that point could an
objection be lodged.

[12] SARS drew attention to the special machinery created by the TAA for such
disputes between SARS and taxpayers. It submitted that the appropriate course to be
adopted by MTN was to utilise that machinery. It should submit a return which treats
the supply of the pre-paid vouchers as falling under s 10(18). SARS would
presumably reject such a return and issue an assessment based on the pre-paid
vouchers falling under s 10(19). MTN would then be entitled to object to the
assessment. If the objection was turned down, MTN could approach the Tax Court,
which is a specialist court, and lead full evidence in support of its contention. If
unsuccessful before the Tax Court, an appeal might thereafter lie to the full bench of
the relevant High Court or to this Court.6

[13] MTN conceded that this procedure was available to it. However, it submitted
that the application was not one which, in effect, objected to the ruling but was a

6 10 Lawsa 3 ed para 488 explains:
‘An appeal from the tax court lies to the full bench of the provincial division of the High Court having jurisdiction in
the area where the tax court sat, or in two circumstances to the Supreme Court of Appeal. Those circumstances are
where the court was initially composed of three judges and where the president of the tax court grants leave for a
direct appeal.’
As authority for an appeal lying to the full bench rather than the full court, the learned author says, in footnote 18:
‘The language of s 133(2) has not been amended to take account of the Superior Courts Act 10 of 2013. As a result it
is unclear whether an appeal from a tax court may lie to the full bench of a division sitting at a local seat of that
division. It is submitted that it can in the light of s 6(4)(a) of the latter Act.’

legitimate approach to the high court for a declaration of rights. In this regard, it
placed reliance on the matter of Commissioner for the South African Revenue Service
v Langholm Farms (Pty) Ltd.7 In that matter, Langholm Farms had submitted a claim
for diesel rebates. This triggered an audit by SARS. Following the audit, SARS
indicated that it would issue a revised assessment disallowing the claim on grounds
relating to the interpretation of s 75(1C)(a)(iii) of the Customs and Excise Act 91 of
1964. Langholm Farms approached the high court and succeeded in obtaining
declaratory relief. On appeal, this Court set aside the declaratory order.

[14] In dealing with an argument that the procedure of applying for declaratory
relief was not competent, this Court held:
‘SARS made it clear that refunds may only be claimed on fuel that was delivered, stored and
dispensed from storage facilities on the premises of Langholm. In so doing SARS expressed a
clear view as to the proper construction of s 75(1C)(a)(iii). Langholm disagreed and responded
with the application, in an effort to resolve this dispute. It is true that Langholm could have waited
and provided SARS with the documents it required for a revised assessment, and then challenged
such an assessment, and argued the point of law at that stage. The issue is whether it was obliged
to do so. In my view there was nothing objectionable in Langholm seeking clarity on an issue of
statutory interpretation that would clearly influence the outcome of SARS’ audit. If the court
accepted Langholm’s view of the proper interpretation of s 75(1C)(a)(iii) of the Act, SARS would
have had to return to the audit and re-assess its position in the light of any further information and
debate with Langholm. There was little point in Langholm entering into a debate or providing
further information when none of it would be at all relevant given SARS’ legal view. That is
exactly the situation for which declaratory orders are made and seeking one in the context of a
taxing statute was endorsed by the Constitutional Court in Metcash.’8

7 Commissioner for the South African Revenue Service v Langholm Farms (Pty) Ltd [2019] ZASCA 163.
8 Ibid para 10. The reference is to Metcash Trading Limited v Commissioner South African Revenue Services and
Another [2000] ZACC 21; 2001 (1) SA 1109 (CC) para 44.

[15]  SARS conceded that declaratory relief is competent in tax matters. Its
contention, however, was the ambit for the grant of declaratory relief in such matters
is narrow. It submitted that the present matter did not meet the required criteria. It is
not necessary to decide whether the application amounted to an impermissible
objection. This part of the appeal must turn on whether MTN made out a case for
the high court to entertain the application for declaratory relief.

[16] It is correct that courts have jurisdiction to grant a declaration of rights in tax
matters as was done in Langholm Farms. Metcash also made this clear:
‘But that does not mean that a court is prohibited from hearing an application for interlocutory
relief in the face of a pending VAT appeal, or from granting other appropriate relief. Nor does it
mean that the jurisdiction is theoretically extant but actually illusory. A court would certainly have
jurisdiction to grant declaratory relief to such a vendor if, for instance, it were to be alleged that
the Commissioner had erred in law in regarding the applicant as a vendor; or had misapplied the
law in holding a particular transaction to be liable to VAT; or had acted capriciously or in bad
faith; or had failed to apply the proper legal test to any particular set of facts.’9
In Metcash, Kriegler J referred with approval to the following dictum of McCreath J
in Friedman and Others NNO v Commissioner for Inland Revenue: In re Phillip
Frame Will Trust v Commissioner for Inland Revenue:10
‘I am in agreement with the finding of the Court in that case that where the dispute involved no
question of fact and is simply one of law the Commissioner and the Special Court are not the only
competent authorities to decide the issue - at any rate when a declaratory order such as that in the
present case is being sought.’

9 Metcash para 71.
10 Friedman and Others NNO v Commissioner for Inland Revenue: In re Phillip Frame Will Trust v Commissioner
for Inland Revenue 1991 (2) SA 340 (W) at 341I-J. The judgment of McCreath J was confirmed by this Court in
Commissioner for Inland Revenue v Friedman and Others NNO [1992] ZASCA 190; 1993 (1) SA 353 (A); [1993] 1
All SA 306 (A). It dealt with the merits of the declaration granted by him without discussion of the point at issue here.

[17] It is worth reviewing matters when the courts have exercised their jurisdiction
to entertain applications for declaratory orders in tax matters. The facts in Langholm
Farms11 were clear and uncontested. A discrete legal issue had arisen for decision.
No further factual information was necessary to resolve that legal issue. The dispute
was therefore ripe for a declaration of rights. In Friedman and Others NNO,12 the
high court was asked to determine the legal question whether a testamentary trust
was a person as defined in the Income Tax Act. There was once more an undisputed
factual situation on which the court was asked to pronounce. In Chancellor, Masters
and Scholars of the University of Oxford v Commissioner for Inland Revenue,13 the
respondent did not dispute the facts put up by the appellant or provide any additional
material facts.14 The matter turned on whether the appellant was liable to pay income
tax on income derived from the activities of its publishing branch. In Commissioner
for Inland Revenue v Shell Southern Africa Pension Fund,15 no affidavits were filed
by SARS in answer to the application for a declaration. There was no factual dispute
or lack of clarity. The issue was whether payment of a lump sum to a dependant of
a member of the pension fund at the discretion of the fund’s committee constituted
gross income or remuneration. And, finally, in the matter of Shell’s Annandale Farm
(Pty) Ltd v Commissioner, South African Revenue Service,16 the question was
whether Shell was liable for payment of VAT on compensation received for
expropriation. SARS was content to argue on the facts put up by the applicant.

11 Footnote 6.
12 Footnote 9.
13 Chancellor, Masters and Scholars of the University of Oxford v Commissioner for Inland Revenue [1995] ZASCA
157; 1996 (1) SA 1196 (SCA); [1996] 1 All SA 287 (A).
14 University of Oxford at 1202C-E.
15 Commissioner for Inland Revenue v Shell Southern Africa Pension Fund 1984 (1) SA 672 (A).
16 Shell’s Annandale Farm (Pty) Ltd v Commissioner, South African Revenue Service 2000 (3) SA 564 (C).

[18] The matters referred to above show that proceedings for declaratory relief in
tax matters are entertained only in limited circumstances. All of them dealt with
applications where there were clear and uncontested facts. That is the bare minimum
requirement for a court to entertain declaratory relief. Even where that is the case,
there are circumstances where a court will nevertheless decline to exercise its
discretion to grant a declaratory order. This was explained by Van Dijkhorst J in
Family Benefit Friendly Society v Commissioner for Inland Revenue and Another:17
‘When a Court has to determine whether it should exercise its discretion in favour of a declaratory
order considerations of public policy come into play. In matters like the present it is a weighty
consideration that the Commissioner for Inland Revenue is placed in an invidious position. He is
requested for a ruling, which he is not obliged to give. He gives an opinion ex gratia. Should it be
favourable the taxpayer accepts it. Should it not be in his favour and the taxpayer is free to
approach the Court to hear the dispute, then there is a danger that the Courts may be flooded with
cases wherein entrepreneurs seek certainty about their tax liability before embarking on new
ventures or schemes. The Commissioner would be in an invidious position if he is forced to defend
every tentative opinion he expresses in a Court of law.’
In other words, there are considerations other than the question concerning clear and
uncontested facts which weigh with courts. A primary concern is the opening of the
floodgates for applications to court where certainty is sought from the court prior to
applying a new strategy.

[19] In the present matter, the first question is whether there is a clear, uncontested,
sufficient, set of facts. The distinction between s 10(18) and s 10(19) of the Act is
clear. The latter applies where the goods or services to which the holder of the
voucher is entitled are specified on the voucher or, where not specified, where usage
or arrangement entitles the holder to such specified goods or services. On the other

17 Family Benefit Friendly Society v Commissioner for Inland Revenue and Another 1995 (4) SA 120 (T) at 126C.

hand, s 10(18) applies where there is no specification of goods or services, either by
indication on the voucher, or by usage or arrangement. The factual enquiry is
whether the pre-paid vouchers fall into one category or the other. Without that
enquiry rendering a clear answer, the grant of declaratory relief would not be
warranted.

[20] SARS submitted that the factual position was far from clear. It said that MTN
dealt with the application largely in the abstract. It had not put up sufficient or clear
facts to allow the court to finally determine the entitlement of MTN to apply s 10(18)
rather than s 10(19). In particular, the facts were not clear as to precisely how the
pre-paid vouchers functioned. MTN had provided no evidence of ‘how vouchers are
purchased, what information is provided to customers, and the manner in which
vouchers are actually used by customers’. In addition, the concept of ‘airtime’ has
evolved over time due to technology and the use of data and the like. In the result
SARS submitted that, on the facts presented, it was not clear what ‘airtime’ actually
connoted. Therefore the matter did not fall within the narrow purview of when a
declaratory order would be entertained in tax matters.

[21] MTN submitted that the facts were common cause. It might be so that certain
explanations were accepted by SARS. However, the sticking point was the nature of
what MTN termed ‘airtime’. The assertion of MTN was that airtime was not
something in and of itself – it should be construed as a right to the supply of services.
It explained that the pre-paid vouchers are purchased for a rand value. When
activated, the subscriber:
‘. . . can access any services on the network, up to the value of the voucher. As the selected services
are used or acquired, they are charged to the subscriber at the then prevailing tariff, and paid for
through allocation or redemption of the available pre-paid funds attributable to the subscriber . . .

The pre-paid amount is effectively currency from which the subscriber pays for the services
selected from time to time.’
In support of that contention, MTN explained its administrative approach to the pre-
paid vouchers. When such a voucher is activated, MTN ‘credits a sum of money
equal to the face value of the voucher to a ledger account linked to the relevant SIM
card . . .’. This was referred to by MTN as the subscriber’s ‘main wallet’. When the
subscriber accesses a service on the network, MTN debits the cost of that service
from the balance in the ‘main wallet’.

[22] MTN sought to compare the pre-paid vouchers to retail vouchers issued by a
shop or shopping centre. Retail vouchers are issued for a value and allow the
purchase of any goods stocked at the shop or centre up to that value. They effectively
function as currency when presented for the purchase of the selected item. So, too,
submitted MTN, the pre-paid vouchers. They are issued for a value. The holder can
redeem them for any services offered by MTN up to that value.

[23] SARS submitted that this, and further explanations of MTN, were far from
clear. It referred as an example to the terms and conditions governing the pre-paid
vouchers. These stated:
‘“Airtime” means the prepaid value which when loaded onto your mobile device enables you to
make or receive calls and/or send or receive SMSs and/or allows you to utilise internet services,
or content services on the MTN network.’
SARS also pointed to the document put up by MTN to explain what was meant by
Digital Services:
‘Digital services consist of content subscription services that allow MTN subscribers to subscribe
to and consume Digital services like Gaming, Music, Video, Text based notification services etc
in exchange for a daily/weekly/monthly/once off fee settled via airtime payment.’

[24] These explanations, it said, appear to support the notion that airtime is a
commodity, contrary to what MTN claimed. Airtime is what is acquired by way of
the pre-paid vouchers. It can then be utilised to obtain the other services offered by
MTN. Hence the word ‘settled via airtime payment.’ There was, accordingly, no
clear explanation of what is meant by airtime or how it functions. It seems to me that
the submission of SARS concerning this lack of clarity has considerable merit.

[25] SARS contended that there was a further less than clear aspect. MTN offers
an extensive range of ‘services on the network’ to holders of the pre-paid vouchers.
MTN submitted that the services offered were constantly expanding. In addition, it
said that when a particular service was accessed, the subscriber cannot expect the
cost to be the same as when the airtime voucher was purchased. When these were
accessed, the current ruling cost would be deducted from the subscriber’s airtime
balance. As a result, the services were not specified and did not fall under s 10(19).

[26] But MTN put up some nine pages listing the services offered by it. SARS
submitted that this tended to show that the pre-paid vouchers fell within s 10(19).
This was because, even though those services were not specified on the pre-paid
vouchers, the vouchers entitled them ‘to receive goods or services . . . which by
usage or arrangement [entitled] the holder to specified goods or services’. In the
result, SARS submitted that it was not clear that the services to which holders of the
pre-paid vouchers were entitled were not specified by usage or arrangement. If they
were so specified, the pre-paid vouchers would fall under s 10(19).

[27] Considerable difficulty was experienced during argument in obtaining clarity
on the nature of airtime as used by MTN and how the pre-paid vouchers function in
practice. This also applied to the question of whether the services offered were

specified by usage or arrangement. It seems to me that, at best, the factual position
as to both of these aspects is distinctly opaque. This is not a matter where there is a
set of clear, sufficient, uncontested, facts. The present matter therefore differs
markedly from those mentioned above where our courts have entertained
applications for declaratory orders in tax matters. In that regard, the high court erred
when it held that ‘no . . . further facts or information would alter the respondent’s
legal view’ and that ‘the applicant’s declaratory application is properly before this
court’.

[28] In any event, even if the facts were clear and uncontested, it is doubtful
whether this matter warranted the exercise of the discretion of the high court to
entertain the grant of declaratory relief. It was a classic case of MTN wishing to
obtain clarity from the high court on whether it could depart from its prior practice
of treating the pre-paid vouchers as falling under s 10(19) and apply a new approach
of treating them as falling under s 10(18). It seems to me that the nature of the dispute
lent itself more properly to resolution by use of the special machinery of the TAA
set up for that purpose. To hold otherwise might well result in a deluge of similar
applications.

[29] For these reasons, I consider that the application for declaratory relief was not
appropriate in this matter. That being the case, the second issue in the appeal as to
whether the ruling was correct or not need not, indeed cannot, be decided. This all
means that, although the high court incorrectly entertained declaratory relief, it was
correct in dismissing the application. The appeal must therefore fail. Both parties
agreed that the costs should follow the result. The use of two counsel was warranted.

[30] In the result, the appeal is dismissed with costs, including those of two counsel
where used.

____________________
T R GORVEN
JUDGE OF APPEAL

Appearances

For appellant:
M W Janisch SC
Instructed by:
Werksmans Attorneys, Sandton
Symington De Kok Attorneys, Bloemfontein

For respondent:
A R Sholto-Douglas SC (with him S Dzakwa)
Instructed by:
State Attorney, Cape Town
State Attorney, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
24 October 2022
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.

Mobile Telephone Networks (Pty) Ltd
v
Commissioner for the South African Revenue Service

Today the Supreme Court of Appeal dismissed an appeal from the Gauteng Division
of the High Court, Pretoria (per Hughes J). Mobile Telephone Networks (Pty) Ltd
(MTN) offers two kinds of vouchers: vouchers for goods such as data, which can be
used exclusively on data; and vouchers for a specified amount in Rands which can
be used to access a range of services on the MTN network (the pre-paid vouchers).
It sought a private binding ruling from the Commissioner for the South African
Revenue Service that the pre-paid vouchers fell under the provisions of s 10(18) of
the Value-Added Tax Act rather than s 10(19) which had previously been applied.
Section 10(18) in essence attracts VAT at the time the voucher is used by the
customer to obtain services rather than on its initial sale to the customer. The
Commissioner’s ruling was adverse to MTN, to the effect that s 10(19) applied. MTN
then approached the high court for declaratory orders to the effect that the pre-paid
vouchers fell under s 10(18). The high court entertained the application for
declaratory relief but refused the application on its merits.

On appeal, the Supreme Court of Appeal held that declaratory orders in tax matters
were competent. However, they were entertained in limited cases. Having reviewed
a number of matters where they had been entertained, the bare minimum
requirement was that the facts in the matter must be clear, sufficient, and
uncontested. The Supreme Court of Appeal held that the facts in the present matter
did not meet these criteria and, as a result, it was not appropriate to entertain the
application for declaratory relief. That being the case, the merits could not be
considered and the application was correctly dismissed by the high court, albeit for
different reasons. As a consequence the Supreme Court of Appeal refused the
appeal with costs.