HARARE
–
The
Supreme
Court
has
delivered
detailed
reasons
for
a
judgment
issued
in
March
which
upheld
a
landmark
High
Court
ruling
exonerating
ferrochrome
producer
ZIMASCO
from
paying
millions
in
disputed
mining
royalties,
dealing
a
blow
to
the
Zimbabwe
Revenue
Authority
(Zimra)
in
a
case
with
major
implications
for
the
mining
sector.
In
a
March
27
ruling,
the
apex
court
dismissed
Zimra’s
appeal
against
a
2023
decision
that
chrome
ore
concentrates
and
ferrochrome
were
not
subject
to
royalties
between
2019
and
2022.
The
judgement,
whose
reasons
were
released
this
week,
shields
ZIMASCO
from
liability
for
reassessed
royalties
amounting
to
ZWL$604
million
and
US$7
million,
while
clarifying
the
limits
of
the
taxman’s
reach
in
mining
taxation.
The
dispute
traces
back
to
a
2022
audit
in
which
Zimra
accused
ZIMASCO
of
underpaying
royalties
on
its
exports
of
chrome
products.
The
tax
authority
argued
that
royalties
should
have
been
calculated
on
the
gross
invoice
value,
including
logistics
costs,
rather
than
the
“ex-works”
price
declared
by
ZIMASCO.
More
critically,
Zimra
insisted
that
both
chrome
concentrates
and
ferrochrome—an
alloy
produced
by
smelting
chromite
ore—fell
within
the
scope
of
mineral
royalties
under
the
Mines
and
Minerals
Act.
It
issued
a
revised
assessment
covering
the
period
January
2019
to
September
2022,
triggering
the
legal
battle.
ZIMASCO,
represented
by
Advocate
Thabani
Mpofu,
pushed
back,
filing
for
a
declaratory
order
at
the
High
Court.
The
ferrochrome
producer
argued
that,
at
the
time,
royalties
were
only
chargeable
on
raw
minerals,
not
on
“mineral-bearing
products”
such
as
processed
alloys.
The
company
further
maintained
that
ferrochrome,
being
man-made,
could
not
be
classified
as
a
“mineral”
under
the
law.
The
High
Court
sided
with
ZIMASCO,
finding
that
no
royalty
rate
had
been
prescribed
for
mineral-bearing
products
before
January
1,
2022,
when
parliament
amended
the
Finance
Act
to
expressly
extend
royalties
to
such
products.
Zimra
escalated
the
matter
to
the
Supreme
Court,
arguing
that
royalties
should
always
have
applied
to
mineral-bearing
products.
Its
legal
team,
led
by
Simplicio
Bhebhe,
urged
the
court
to
adopt
a
“purposive”
reading
of
the
law,
warning
that
exempting
processed
products
like
ferrochrome
from
royalties
would
lead
to
an
“absurdity.”
But
the
three-judge
panel—Justices
Chinembiri
Bhunu,
George
Chiweshe
and
Joseph
Musakwa—was
unmoved.
In
its
newly
released
reasons,
the
court
reaffirmed
a
cardinal
principle
of
tax
law:
no
tax
or
royalty
can
be
imposed
without
clear
statutory
authority.
“Any
ambiguity
or
silence
in
the
legislation
must
be
resolved
in
favour
of
the
taxpayer
rather
than
the
taxing
authority,”
wrote
Justice
Musakwa.
The
judges
said
between
2019
and
2022,
the
Finance
Act’s
royalty
schedule
listed
rates
for
“minerals”
only.
Mineral-bearing
products
such
as
chrome
concentrates
and
ferrochrome
were
conspicuously
absent.
Without
a
prescribed
rate,
there
could
be
no
enforceable
obligation.
In
a
significant
finding
for
the
mining
industry,
the
court
also
ruled
on
the
status
of
ferrochrome
itself.
Evidence
before
the
court
showed
that
ferrochrome
is
produced
by
smelting
chromite
ore
in
furnaces
with
reductants
and
fluxes,
yielding
an
alloy
not
found
in
nature.
The
court
accepted
this,
holding
that
ferrochrome
does
not
fall
within
the
Mines
and
Minerals
Act’s
definition
of
a
“mineral,”
which
must
occur
naturally
and
result
from
geological
processes.
“Where
a
mineral
is
processed
to
the
extent
that
it
is
converted
into
an
alloy
not
found
in
the
earth’s
crust,
it
no
longer
retains
its
character
as
a
mineral,”
the
judgement
noted,
citing
earlier
case
law.
Adding
complexity
to
the
case
was
the
government’s
subsequent
attempt
to
close
the
gap.
In
2021,
parliament
enacted
Finance
Act
No.
7,
introducing
Section
37B
to
impose
royalties
on
mineral-bearing
products
effective
January
1,
2022.
In
2024,
a
further
amendment
retrospectively
broadened
the
definition
of
“mineral”
to
include
mineral-bearing
products,
backdated
to
2010.
Zimra
tried
to
lean
on
the
2024
amendment
to
argue
that
liability
should
apply
to
past
years.
But
the
Supreme
Court
dismissed
the
argument,
ruling
that
retrospective
definitions
could
not
substitute
for
the
absence
of
a
fixed
royalty
rate
in
the
law
during
the
relevant
period.
The
judgment
represents
a
major
victory
for
ZIMASCO—and
potentially
for
other
miners
who
exported
processed
mineral
products
before
2022.
By
affirming
that
royalties
must
rest
on
explicit
statutory
rates,
the
court
reinforced
taxpayer
protections
against
what
it
called
“arbitrary
or
expansive
interpretations”
by
revenue
authorities.
The
ruling
is
a
high-profile
setback
for
Zimra
that
not
only
wipes
out
a
multimillion-dollar
claim
but
may
embolden
other
mining
firms
to
challenge
royalty
assessments
for
past
periods.
With
royalties
on
mineral-bearing
products
now
firmly
entrenched
in
law
since
2022,
the
judgement
does
not
exempt
miners
from
current
obligations.