MBABANE – The Eswatini Revenue Service (ERS) has suffered a significant legal setback in its long-running tax battle with USA Distillers.
This is after the High Court refused to condone its late application to review a Revenue Appeals Tribunal ruling.
High Court Judge Justice Titus Mlangeni dismissed ERS’s application for condonation, finding that the revenue service had failed to provide sufficient grounds for its delay in approaching the court.
The judgment means that ERS’s attempt to challenge the Tribunal’s handling of evidence in the ongoing dispute cannot proceed on the basis of the late review application.
The matter, which dates back to around 2021, involves a disputed tax assessment said to be worth approximately E77 million.
Justice Mlangeni’s judgment does not, however, determine whether USA Distillers ultimately owes the disputed amount. Instead, the ruling centred on whether ERS should be allowed to pursue its review application after failing to meet the prescribed deadline.
The judgment was delivered on August 18, 2026, following arguments heard before the High Court on July 29. The legal battle stems from an ERS audit of USA Distillers covering the 2017 to 2020 financial years. The audit focused heavily on transactions between USA Distillers and its holding company, USA Holdings Ltd, including a loan arrangement and related sales agreements.
ERS had questioned a funding arrangement under which the loan allegedly had no fixed repayment terms and carried no interest, while USA Holdings retained exclusive rights to purchase USA Distillers’ production at predetermined prices.
The revenue service also raised concerns that prices remained unchanged over the four-year period despite rising operational costs, while USA Distillers reported minimal profits and recorded a loss in one of the years under review. ERS eventually classified USA Distillers as a ‘fully-fledged manufacturer’, arguing that the company performed key functions and assumed risks locally.
The revenue service also stated that it had not been provided with evidence demonstrating functional contribution by the parent company.
The audit involved several requests for information, extensions, meetings, site visits and interviews before ERS issued a Draft Letter of Findings in October 2022 proposing transfer-pricing adjustments.
The assessment subsequently became the subject of an appeal before the Revenue Appeals Tribunal. The dispute then moved beyond the substance of the tax assessment and into a procedural battle over evidence.
USA Distillers sought to introduce additional evidence during the Revenue Appeals Tribunal proceedings, including further documentation, calculations and expert material. ERS objected to the move, maintaining that the Tribunal should determine the appeal primarily on the original record before the commissioner general.
The Tribunal had previously indicated that appeals should primarily be determined on the existing record, while allowing additional evidence in limited circumstances where considerations including relevance, disclosure and fairness justified its admission.
ERS subsequently approached the High Court seeking to review the Tribunal’s decision concerning the additional material.
In its application, the revenue service argued that allowing the new calculations effectively reopened the audit process and prejudiced its ability to properly assess the information at the appeal stage. It also argued that the Tribunal’s decision amounted to a procedural irregularity and raised concerns relating to its right to a fair hearing.
Those arguments formed the basis of the review application that ultimately became the subject of Justice Mlangeni’s judgment.
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