October 14, 2026

QI Logistics v SARS

Written by Hansie Horn, MaxProf Audit Manager

What the SCA Decision Means for SARS Audits, Evidence and Taxpayer Disputes

Executive summary

The Supreme Court of Appeal (“SCA”) judgment in QI Logistics (Pty) Ltd v Commissioner for the South African Revenue Service (Case No. 180/2025) [2026] ZASCA 96 provides useful guidance on how SARS should exercise statutory powers and deal with evidence submitted by taxpayers and other persons involved in customs processes. Although the dispute arose in the customs and excise context, the reasoning has wider relevance for taxpayers involved in SARS audits, verifications, assessments and disputes.

The central lesson is not that SARS must accept taxpayer evidence. SARS remains entitled to test, reject and investigate evidence. The important requirement is that the decision-making process must be rational, lawful and properly connected to the information available to SARS when the decision is made.

For taxpayers, the judgment reinforces the importance of preserving a complete audit trail, responding substantively to SARS queries, identifying material evidence that has been rejected, and obtaining adequate reasons for an adverse decision where the basis is unclear.

1. Background to the dispute

QI Logistics (Pty) Ltd (“QI Logistics”) operated as a licensed customs clearing agent. The dispute concerned 67 consignments of fuel that moved through South Africa under customs procedures involving removal of goods in transit or removal in bond. The fuel originated in Mozambique and was destined for countries including Zimbabwe and Botswana.

SARS held QI Logistics liable for approximately R35.08 million in customs duties and levies, together with an amount demanded in lieu of forfeiture. SARS’s position was that QI Logistics had not provided sufficient evidence to establish that the fuel had been properly exported and that the relevant customs entries had therefore been duly acquitted.

QI Logistics disputed that conclusion. It maintained that documentary evidence had been supplied to demonstrate the movement and export of the goods and emphasised that its role was that of a clearing agent rather than the party controlling the physical transportation, sale or delivery of the fuel.

The High Court found against QI Logistics. The company appealed to the SCA.

2. What the SCA decided

The SCA upheld QI Logistics’s appeal and set aside the impugned SARS decisions. Importantly, the Court did not simply replace SARS’s decision with its own conclusion that no customs liability existed. Instead, it found that SARS’s decision-making process was defective and that the decisions were not rationally connected to the information available to the Commissioner. The matter was remitted to SARS for reconsideration.

This distinction is significant. The judgment does not establish a rule that SARS must accept every document or explanation put forward by a taxpayer. Rather, SARS must engage with the evidence, apply the relevant statutory framework and reach a conclusion that is rationally supported by the material before it.

3. The treatment of taxpayer evidence

A key feature of the judgment is the Court’s focus on the material that was actually available to SARS when the decisions were made. Where a taxpayer submits documentary evidence in support of its position, SARS must meaningfully consider that material.

It is therefore not enough to state, in general terms, that a taxpayer has failed to provide adequate proof. Where material evidence has been submitted and is rejected, the decision should demonstrate how that evidence was considered and why it did not satisfy the applicable statutory requirements.

In practical terms, a defensible SARS decision should be capable of being followed through a clear chain of reasoning:

What information and evidence was before SARS?
What statutory requirement or power was relevant?
How did SARS evaluate the evidence against that requirement?
Why was the evidence considered insufficient, unreliable, incomplete or otherwise incapable of establishing the taxpayer’s position?
How did that reasoning lead to the assessment, demand or other decision?

4. Reasons matter

The judgment also underscores the importance of adequate reasons for adverse SARS decisions. A taxpayer should be able to understand the factual and legal basis for the conclusion reached.

This becomes particularly important where SARS:

rejects documentary evidence;
disputes the validity or substance of transactions;
takes a different view of facts presented during an audit;
rejects explanations or representations supplied by the taxpayer;
questions proof of export or customs acquittal;
raises an assessment based on information that differs from the taxpayer’s records; or
reaches an adverse conclusion without adequately explaining the basis for it.

Where the basis for an adverse decision is unclear, requesting adequate reasons can help the taxpayer identify the actual dispute and determine the appropriate next step.

5. SARS can reject evidence — but the reasoning must be defensible

The QI Logistics judgment should not be read as preventing SARS from scrutinising or rejecting evidence. SARS remains responsible for determining whether the requirements of the relevant legislation have been met.

The issue is the quality of the decision-making process. If SARS concludes that evidence does not establish a taxpayer’s entitlement or compliance, the decision should identify the evidentiary and statutory basis for that conclusion.

A taxpayer therefore does not succeed merely because it has submitted a large volume of documentation. The significance of the judgment lies in the requirement that SARS properly evaluate material evidence and arrive at its conclusion through a rational decision-making process.

6. Relevance to VAT audits

Although QI Logistics arose from customs and excise legislation, its reasoning may be particularly useful in complex VAT audits. VAT audits frequently involve high transaction volumes, multiple accounting records and extensive supporting documentation.

Examples include situations where SARS rejects input tax deductions because it considers supporting documentation inadequate, transactions cannot be verified, or expenditure does not sufficiently relate to taxable supplies.

Where a taxpayer has supplied detailed reconciliations, tax invoices, contracts, proof of payment, export documentation, accounting records and written explanations, the judgment provides useful support for the proposition that SARS should properly engage with the material evidence before reaching an adverse conclusion.

The judgment does not remove the taxpayer’s burden of establishing its entitlement under the VAT Act. Instead, it reinforces the separate requirement that SARS’s own decision-making must be rational and lawful.

7. Practical steps for taxpayers

Maintain a complete audit trail: Keep copies of information, documents and representations submitted to SARS, together with records of when they were submitted. This helps establish what information was available to SARS at the relevant time.

Answer the issue raised — not just the request: Where SARS identifies a specific concern, provide both the supporting documentation and a concise explanation showing how the evidence addresses that concern.

Track disputed evidence: If SARS rejects a document, transaction or explanation, identify precisely what has been rejected and why it matters to the taxpayer’s position.

Obtain adequate reasons: Where an assessment or decision does not make the basis of SARS’s conclusion clear, consider requesting proper reasons rather than attempting to infer the reasoning.

Test the reasons against the record: Once reasons are provided, compare them with the evidence and representations that were actually submitted. Consider whether material evidence was addressed and whether the conclusion follows logically from the information available.

8. The broader administrative-law principle

At a broader level, QI Logistics reinforces the principle that the exercise of statutory power by SARS must remain within the legal framework governing that power. SARS has extensive powers to audit taxpayers, raise assessments and make determinations under tax and customs legislation, but the existence of statutory authority does not by itself make every exercise of that authority lawful.

The decision-making process and the decision itself must be capable of justification in light of the applicable law and the information before SARS at the time.

9. What the judgment does — and does not — mean

The judgment should not be interpreted as creating an automatic remedy for every taxpayer who disagrees with SARS. A taxpayer remains responsible for establishing its entitlement or compliance where the applicable legislation places that burden on the taxpayer.

Equally, a taxpayer should not assume that the submission of documents, without more, is sufficient. The strength of the taxpayer’s position will still depend on the quality, relevance and reliability of the evidence and its ability to satisfy the statutory requirements.

The judgment becomes particularly valuable where there is evidence that material information was not properly considered, the reasons for rejection are inadequate, or the ultimate conclusion does not logically follow from the information that was available to SARS.

10. Key takeaway for tax practitioners

QI Logistics shifts attention from the outcome of a SARS decision to the quality of the process by which that decision was reached. When reviewing an adverse SARS finding, practitioners should therefore consider both the substantive tax position and the decision-making record.

A useful review framework is:

What evidence did the taxpayer provide?
What evidence did SARS actually consider?
Which statutory requirement did SARS apply?
What was SARS’s reason for accepting or rejecting the evidence?
Do the reasons address the material representations made by the taxpayer?
Does the final conclusion logically follow from the information before SARS?

Conclusion

QI Logistics v SARS is important because it reinforces that effective tax administration requires more than the exercise of statutory power. SARS must consider the material before it, apply the relevant legal framework and reach decisions through a rational and defensible process.

For taxpayers and tax practitioners, the practical message is clear: build a complete evidentiary record during the audit, respond substantively to SARS’s concerns, preserve proof of what was submitted, and scrutinise the reasoning underlying any adverse decision.

In VAT and other complex tax disputes, the judgment may therefore provide useful support where SARS appears not to have engaged adequately with material evidence or where the reasoning given for an adverse outcome does not properly connect the evidence, the law and the conclusion.