Case: Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service
Court: Constitutional Court of South Africa
Case number: CCT 320/23
Citation: [2026] ZACC 24
Judgment date: 23 June 2026
Judge: Theron J (unanimous Court)
Tax: Value-Added Tax
Legislation: Section 11(1)(f) of the Value-Added Tax Act 89 of 1991
Issue: Whether supplies of refined gold derived from second-hand or recycled gold qualify for VAT at the zero rate.
1. Overview
The Constitutional Court’s decision in Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service is an important judgment on the interpretation of the zero-rating provisions contained in section 11(1)(f) of the Value-Added Tax Act 89 of 1991.
At the centre of the dispute was a deceptively simple question:
Can gold that was previously manufactured into items such as jewellery, subsequently recycled and refined back into qualifying gold bars, be supplied to a prescribed purchaser at the zero rate of VAT?
Lueven Metals contended that it could.
SARS contended that it could not.
The Constitutional Court agreed with SARS.
The Court held that section 11(1)(f) does not merely look at the form in which the gold is supplied at the end of the process. The historical manufacturing processes through which the gold has passed are also relevant.
Accordingly, gold derived from second-hand jewellery and other recycled gold does not qualify for zero-rating where that gold previously underwent a manufacturing process other than refining or manufacture or production into one of the forms permitted by section 11(1)(f).
The appeal was consequently dismissed.
2. Background to the dispute
Lueven Metals (Pty) Ltd (“Lueven”) trades in and refines precious metals, including gold, and is a registered VAT vendor.
Its business included purchasing second-hand gold, such as scrap jewellery, and supplying refined gold.
Lueven entered into an arrangement with Absa Bank Limited under which it supplied gold bars refined to a purity of at least 99.5%.
To produce those bars, Lueven deposited less pure gold scrap and gold bars with Rand Refinery. Rand Refinery melted and refined gold received from Lueven and other depositors and ultimately delivered refined gold bars to purchasers such as Absa.
For a number of years, Lueven treated its supplies of gold to Absa as zero-rated.
That treatment had an important VAT consequence.
Lueven did not charge output VAT at the standard rate on the supply to Absa, while it was nevertheless able, subject to the normal requirements of the VAT Act, to deduct input tax incurred in acquiring the second-hand gold.
Following an audit in 2021, SARS challenged this treatment.
SARS concluded that the second-hand gold acquired by Lueven had previously been subjected to manufacturing processes. In SARS’ view, this historical manufacturing meant that the subsequent supply of refined gold did not satisfy section 11(1)(f).
That disagreement ultimately reached the Constitutional Court.
3. What does section 11(1)(f) require?
Section 11(1)(f) provides for zero-rating where gold is supplied to specified purchasers, including the South African Reserve Bank, the South African Mint Company and qualifying registered banks, provided the gold satisfies the requirements stipulated in the provision.
The Court identified three requirements for zero-rating:
- the supply must be made to a prescribed purchaser;
- the gold must be supplied in one of the prescribed forms; and
- the gold must not have undergone a manufacturing process other than refining or the manufacture or production of one of the prescribed forms.
The third requirement became decisive.
The prescribed forms include forms such as bars, blank coins, ingots, buttons, wire, plate, granules and solution.
The question was therefore not simply whether the final product supplied to Absa was a qualifying gold bar.
The Court had to determine what Parliament meant when it referred to gold “which has not undergone any manufacturing process other than” the processes permitted by the provision.
4. Lueven’s argument
Lueven essentially argued that the focus should be on the gold being supplied in the present transaction.
Once second-hand gold had been melted and refined, its previous physical form had effectively disappeared.
On this reasoning, the historical fact that the gold may once have formed part of jewellery or another manufactured product should not determine the VAT treatment of the newly refined gold.
Lueven therefore contended that the relevant requirements were effectively satisfied where:
- the recipient was one of the prescribed purchasers;
- the commodity supplied was gold; and
- the gold was supplied in one of the prescribed forms.
Lueven also pointed to the practical realities of refining.
At Rand Refinery, newly mined and second-hand gold could be commingled during the refining process. Once refined, it may no longer be physically possible to distinguish one source of gold from another.
Lueven further relied on the broader VAT system, explanatory material, SARS binding class rulings and legislation governing precious metals in support of its interpretation.
5. SARS’ argument
SARS adopted a stricter textual interpretation.
It argued that the words:
“which has not undergone any manufacturing process other than”
must be given independent meaning.
According to SARS, Parliament was not concerned only with the final form of the gold.
The provision also imposes a separate requirement concerning the processes that the gold has previously undergone.
If gold was previously manufactured into jewellery or another non-prescribed form, that historical manufacturing process remains relevant even if the item is subsequently melted, refined and converted into a qualifying gold bar.
Refining may remove the previous physical form of the gold, but it does not erase the historical fact that the gold underwent a manufacturing process.
The Constitutional Court accepted this interpretation.
6. The Constitutional Court’s approach to interpretation
The Court approached section 11(1)(f) using the established principles of statutory interpretation.
Legislation must be interpreted by considering:
text, context and purpose together.
These are not separate enquiries performed in isolation. They form part of a single interpretative exercise.
The Court therefore examined the actual wording of section 11(1)(f), its context within the VAT Act and the competing arguments concerning its purpose.
Importantly, the Court did not allow a proposed policy objective to override wording that it regarded as clear.
That aspect of the judgment extends well beyond transactions involving gold.
7. The decisive third requirement
The Court found that Lueven’s interpretation would effectively deprive part of section 11(1)(f) of meaning.
The requirement dealing with the form of the gold and the requirement dealing with the manufacturing processes undergone by the gold perform different functions.
The second requirement asks:
What form is the gold in when supplied?
The third asks:
What manufacturing processes has the gold undergone?
If Parliament were concerned only with the final form of the gold, there would have been little purpose in including the additional words dealing with manufacturing processes.
The Court therefore rejected an interpretation that would make those words redundant.
8. Why recycled gold failed the test
The difficulty for Lueven was the history of its gold.
The Court described the process, in substance, as involving three stages:
- the gold was previously manufactured into another form, such as jewellery;
- it was subsequently refined; and
- the refined gold was manufactured into one of the prescribed forms.
The first stage was fatal to Lueven’s zero-rating argument.
Although refining destroyed the gold’s previous physical form, it did not change the historical fact that the gold had previously undergone a manufacturing process into a non-prescribed form.
The Court therefore concluded that recycled gold of this nature had undergone a disqualifying manufacturing process.
This meant that Lueven’s supplies could not qualify for zero-rating under section 11(1)(f).
9. Newly mined gold is different
Lueven argued that SARS’ interpretation could create difficulties even for newly mined gold because newly mined gold also undergoes processing before reaching its final form.
The Court rejected this argument.
It noted that newly mined gold may be cast into dor bars before undergoing further refining.
However, refining and production into bars fall within the processes contemplated by section 11(1)(f).
The legislation does not prohibit gold from being refined more than once.
The critical distinction is therefore not simply between processed and unprocessed gold.
The relevant enquiry is what type of manufacturing process the gold has undergone.
Historical manufacture into a non-prescribed product, such as jewellery, is materially different from permitted refining and production into one of the prescribed forms.
10. The broader VAT system could not override the wording
Lueven also relied on the general operation of VAT.
VAT ordinarily operates as a tax on value added through the production and distribution chain, with registered vendors deducting qualifying input tax and accounting for output tax.
Lueven argued, among other things, that VAT generally concerns the current supply rather than every historical form that goods may previously have taken.
The Constitutional Court was not persuaded.
Zero-rating is an exceptional VAT treatment applying to specifically identified transactions.
General propositions concerning the operation and neutrality of VAT could therefore not override the specific wording Parliament chose in section 11(1)(f).
This is an important principle for VAT practitioners:
A taxpayer cannot establish zero-rating merely by demonstrating that the proposed treatment is commercially sensible or consistent with broad VAT principles. The transaction must satisfy the specific statutory requirements for zero-rating.
11. The Explanatory Memorandum did not assist Lueven
Lueven relied on the Explanatory Memorandum accompanying the VAT legislation.
The Court, however, cautioned against placing excessive reliance on explanatory memoranda when interpreting tax legislation.
The particular memorandum did not explain the detailed requirements of section 11(1)(f) or resolve the question of historical manufacturing.
It therefore did not materially advance Lueven’s case.
This part of the judgment reinforces an important hierarchy in tax interpretation:
The legislation remains the starting point.
Explanatory memoranda may provide context in appropriate circumstances, but they cannot substitute for the words enacted by Parliament.
12. SARS binding class rulings did not determine the meaning of the legislation
Another particularly significant aspect of the judgment concerns Lueven’s reliance on SARS binding class rulings.
Lueven argued that the rulings indicated that SARS had historically administered section 11(1)(f) consistently with Lueven’s interpretation.
The Court acknowledged that aspects of the rulings could appear to imply that Lueven and similar suppliers were permitted to make zero-rated supplies.
However, the rulings principally addressed documentary difficulties arising from the commingling of gold at Rand Refinery.
They did not determine the interpretative question before the Court: what constitutes a disqualifying historical manufacturing process?
The Court consequently held that the binding class rulings were not conclusive of the proper interpretation of section 11(1)(f).
This has implications beyond the gold industry.
A SARS ruling dealing with one aspect of a transaction should not automatically be treated as authority for a broader proposition that the ruling never actually determined.
13. SARS’ administrative practice does not determine what legislation means
The Court referred to the Constitutional Court’s earlier decision in Marshall NO v Commissioner, South African Revenue Service when considering the significance of SARS’ previous administrative treatment.
The principle is important.
The meaning of tax legislation is ultimately determined through an objective and independent interpretation of the legislation.
A unilateral administrative practice adopted by SARS does not itself determine the meaning of an Act.
This protects both sides of the tax relationship.
SARS cannot make legislation mean something merely because it has historically administered the provision in a particular manner.
Equally, taxpayers cannot necessarily rely on SARS’ historical treatment as establishing that their preferred interpretation of legislation is legally correct.
14. Other precious-metals legislation did not change the result
Lueven also referred to the Mining Rights Act and Precious Metals Act.
It argued that those statutes did not distinguish between newly mined and recycled gold and that reading such a distinction into section 11(1)(f) would therefore be inappropriate.
The Court disagreed.
Those statutes concern different subject matters and their definitions did not determine the VAT consequences created by section 11(1)(f).
The distinction between newly mined and recycled gold was not an impermissible addition to the VAT Act.
Rather, it arose as a consequence of applying the actual wording of section 11(1)(f).
15. The Court was cautious about inventing a policy rationale
One of the more interesting aspects of the judgment is the Court’s treatment of purpose.
Both parties proposed policy explanations for section 11(1)(f).
Lueven argued, among other things, that the provision supported the availability and sustainability of gold supplies to prescribed purchasers and that excluding recycled gold was inconsistent with sustainable use of a finite resource.
SARS argued that the provision was intended to provide favourable tax treatment to South Africa’s gold-mining industry.
The Court considered both explanations plausible.
But that was not enough.
Neither proposed policy objective could clearly be established from the legislation and admissible material.
The Court therefore declined to manufacture a legislative purpose that could not properly be demonstrated.
This is an important reminder in tax disputes:
Purposive interpretation does not give SARS or taxpayers a licence to substitute their preferred policy outcome for the words enacted by Parliament.
16. Text ultimately decided the case
After considering text, context and purpose, the Constitutional Court returned to the statutory wording.
The textual interpretation strongly favoured SARS.
The contextual material relied upon by Lueven did not displace that interpretation.
The purposive enquiry was ultimately inconclusive because neither party could establish its proposed policy rationale sufficiently clearly.
Lueven could therefore not use an uncertain purpose to escape the wording of section 11(1)(f).
The Court consequently confirmed that the provision excludes second-hand gold that has historically undergone a manufacturing process other than refining or manufacture or production into one of the prescribed forms.
17. Final order
The Constitutional Court dismissed Lueven’s appeal.
It also refused Lueven’s application to file supplementary written submissions after the hearing.
Lueven was ordered to pay SARS’ costs, including the costs of two counsel and the costs associated with its application to submit the supplementary written argument.
The High Court’s interpretation of section 11(1)(f) therefore ultimately prevailed.
18. Practical implications for gold and precious-metals businesses
The judgment means that businesses dealing in recycled or second-hand gold should not determine the VAT treatment solely by looking at the purity or physical form of the final refined product.
The history and source of the gold may be relevant to its VAT treatment.
Businesses operating in the gold supply chain should therefore consider whether their systems adequately identify:
- the source of gold acquired;
- whether the gold is newly mined or second-hand/recycled;
- the form in which it was acquired;
- whether it was previously manufactured;
- the nature of any historical manufacturing;
- the refining processes subsequently undertaken;
- the form in which the gold is ultimately supplied;
- the identity and status of the purchaser; and
- the documentary evidence supporting the VAT treatment adopted.
The judgment consequently converts what may previously have appeared to be primarily a product-classification question into a supply-chain provenance and documentation issue as well.
19. The danger of assuming that refining “resets” the VAT character of goods
One of the strongest practical lessons from the case is that processing goods into a new physical form does not necessarily erase facts arising earlier in their history.
Lueven’s gold eventually became highly refined gold bars.
Commercially and physically, the previous jewellery and scrap had ceased to exist in their former form.
For purposes of section 11(1)(f), however, the historical manufacturing remained legally relevant.
Tax practitioners should therefore be cautious about assuming that subsequent processing, refinement or transformation automatically resets the tax character of an asset.
Whether historical facts remain relevant will depend on the wording of the applicable tax provision.
20. Lessons for VAT zero-rating generally
Although the judgment concerns gold, several principles have wider application.
Zero-rating must be proved against the wording of the Act
Zero-rating is not established merely because a transaction appears to fall within the economic purpose of a provision.
Each statutory requirement must be satisfied.
Every part of the provision matters
An interpretation that makes statutory wording redundant is unlikely to succeed.
Taxpayers should therefore test their interpretation against every phrase in the relevant section rather than concentrating only on the requirements most favourable to their position.
Commercial reality does not replace statutory compliance
The practical difficulties created by commingling gold at a refinery did not alter the meaning of section 11(1)(f).
Operational complexity may affect how compliance is demonstrated, but it does not necessarily change what the legislation requires.
SARS rulings must be read within their scope
A ruling dealing primarily with documentation cannot automatically be treated as determining the substantive tax character of a transaction.
The precise question addressed by a ruling is critical.
Administrative practice is not legislation
Historical acceptance by SARS does not necessarily establish the correct legal interpretation of a provision.
Purpose cannot override clear statutory language
Purposive interpretation remains important, but an asserted policy objective must have a proper legal foundation.
Where purpose is uncertain and the text is clear, a taxpayer faces considerable difficulty in using general policy arguments to overcome the statutory wording.
21. A compliance lesson arising from the judgment
The decision creates an important practical question for vendors dealing with recycled commodities:
Can the vendor prove the history necessary to justify the VAT treatment adopted?
For businesses dealing in precious metals, documentation should therefore not begin only when the refined product is sold.
Relevant evidence may need to originate when the underlying material is acquired.
Procurement records, supplier declarations, product descriptions, refinery records and internal classifications may become important components of the VAT audit trail.
Where newly mined and recycled material enters the same processing environment, businesses should consider whether their accounting and inventory systems preserve sufficient information to support the VAT treatment of subsequent supplies.
The burden of correctly declaring taxable supplies remains with the vendor.
22. SA Tax Guide analysis
The significance of Lueven Metals extends beyond the relatively specialised question of gold.
The judgment demonstrates the Constitutional Court’s continuing insistence that tax legislation be interpreted holistically textually, contextually and purposively while recognising that purposive interpretation cannot be used to rewrite legislation.
The most significant proposition arising from the judgment can be stated simply:
The current physical characteristics of goods do not necessarily determine their VAT treatment where the legislation expressly makes their historical manufacturing process relevant.
For section 11(1)(f), it is therefore insufficient to establish merely that the gold supplied is refined gold in a prescribed form and that the purchaser is a prescribed purchaser.
The vendor must also satisfy the statutory requirement concerning the manufacturing history of that gold.
For taxpayers more generally, Lueven Metals provides another warning against constructing a tax position from broad principles, perceived legislative policy or previous SARS practice without first testing that position against the precise wording of the legislation.
23. Conclusion
The Constitutional Court confirmed that section 11(1)(f) of the VAT Act excludes second-hand or recycled gold from zero-rating where the gold has previously undergone a manufacturing process other than refining or manufacture or production into one of the prescribed forms.
Refining recycled gold does not erase its manufacturing history for purposes of the provision.
The decision therefore has immediate implications for refiners, precious-metal dealers, banks and other participants in the gold supply chain.
More broadly, the judgment reinforces three principles that should remain central to South African tax practice:
read the entire provision, establish every statutory requirement, and ensure that the evidence supports the tax treatment adopted.
Disclaimer: This article provides a general analysis of the judgment and does not constitute tax or legal advice. The VAT consequences of a particular transaction should be determined with reference to its specific facts, the applicable legislation and relevant supporting documentation.