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[2011] ZAGPPHC 116
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Nutec Southern Africa (Pty) Ltd v Commissioner for the South African Revenue Service (45921/2010) [2011] ZAGPPHC 116 (10 June 2011)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG, PRETORIA)
Case
No: 45921/2010
Date
heard: 02/06/2011
Date
of judgment: 10/06/2011
In
the matter between:
NUTEC
SOUTHERN AFRICA (PTY)
LTD
..............................................................
APPLICANT
and
THE
COMMISSIONER FOR THE SOUTH
AFRICAN
REVENUE
SERVICE
.........................................................................
RESPONDENT
JUDGMENT
DU
PLESSIS J
[1]
This is an appeal
1
against a tariff determination that the respondent made under the
provisions of section 47(9)(i)(a) of the Customs and Excise Act,
61
of 1964 ("the Act").
[2]
The applicant conducts business as an importer, manufacturer and
distributor of a variety of products utilised by the animal
feed
industry. It
imports a product called Acid Buf. In terms of
section 47(1) of the Act, import duty is payable on imported goods in
accordance
with the provisions of Schedule 1 to the Act. Purportedly
in accordance with the classification provided for in Table 1 of
Schedule
1, the respondent, for import duty purposes, classified Acid
Buf under tariff subheading 2309.90.92 as "preparations of a
kind used in animal feeding". The applicant contends that it
should be classified under subheading 1212.20.90 as "seaweed
and
other algae".
[3]
The applicant imports Acid Buf from Marigot Ltd t/a Celtic Sea
Minerals (CSM), a company based in Ireland. Acid Buf is made
from the
skeletal remains of red seaweed harvested from the ocean near
Ireland. The raw material is rich in minerals, primarily
calcium and
magnesium. After it has been harvested, the raw material is dried at
temperatures of 120 - 130°C. The raw material
is then ground to a
particle size of approximately .2mm. Because the
raw material is
soft magnesium is added when it is ground so as to prevent the
material from sticking to the grinder. From the perspective
of the
mineral wealth of the raw material, the percentage of magnesium added
in the grinding process is insignificant. Due to its
natural mineral
wealth Acid Buf is used to assist in the regulation of the acid
balance in the rumens of dairy cows. If the product
is administered
to the cows in the recommended quantities, it does not act as a
mineral supplement.
[4]
I now turn to the classification of Acid Buffer import duty purposes
[5]
in terms of section 47(8)(a) of the Act the interpretation of Table
1 of Schedule 1 is subject to the International Convention
on the
Harmonised case. I turn to the interpretation of the respective
headings that the parties contend for.
[10]
I have pointed out that the respondent contends that Acid Buf should
be classified under 2309.90.92.
3
Having regard to the relevant headings and subheadings, it is the
respondent's contention that Acid Buf must be classified as
"preparations of a kind used in animal feeding"
4
,
other than "dog or cat food"
5
,
not imported from Switzerland
6
and not falling under any of the other sub-subheadings of subheading
90. The real issue is whether Acid Buf is a preparation of
a kind
used in animal feeding.
[11]
According to the Shorter Oxford English Dictionary the word
preparation
means, in the present context, "a specially prepared or made up
substance, as a ... foodstuff'. The General Note
to Chapter 23 is
rather wide in its scope. It reads that the "Chapter covers the
various residues and wastes derived from
vegetable materials used by
food-preparing industries .... The main use of most of these products
is as animal feeding stuffs,
either alone or mixed with other
materials ..." (My underlining.) As to heading 9, Chapter Note
1, however, limits the seemingly
wide scope of the General Note: It
reads that heading 2309 "includes products of a kind used in
animal feeding, not elsewhere
specified or included, obtained by
processing vegetable ... materials to such an extent that they have
lost the essential characteristics
of the original material..."
(My underlining). I conclude that heading 2309 applies to
preparations of a kind used in animal
feeding, obtained by processing
vegetable materials. The processing must be such that the material
has lost its essential characteristics.
I shall now consider whether
Acid But fells within 2309.
[12]
I have earlier given some detail of the nature of Acid But. Dr
Taylor, an expert whose affidavit the applicant tendered in
evidence,
explains that Acid Sufis derived from red algae. When live, the algae
absorb minerals from the seawater and deposit them
as an exoskeleton.
The surface layer remains alive. Over time the skeleton breaks away
from the growth areas. This is then harvested.
The skeleton is
composed of minerals, primarily calcium and magnesium. It is a rich
mineral mix that has been derived naturally.
[13]
For the respondent Mr Puckrin submitted that, being an exoskeleton,
the skeletal material harvested does not form part of
the original
seaweed but is derived
7
from it. I cannot agree that, because it is an exoskeleton, the
material did not form an integral part of the seaweed. To hold
otherwise would be contrary to the express evidence of Dr Taylor.
[14]
Dr Taylor further explains that the skeletal remains of the seaweed
do not either through natural processes or through the
drying and
grinding process lose its essential characteristics. It follows
that, having regard to Chapter Note 1 to Chapter 23,
heading 2309
does not apply to Acid But.
[15]
Mr Puckrin, rightly in my view, did not argue, as was contended for
in the answering affidavit, that Acid But constitutes
a "premix"
or, in the words of 7 See the General Note to Chapter 23 quoted
earlier. heading 2309.90 "prepared animal
feedings stuffs
consisting of a mixture of several nutrients
[16]
MrVorsterforthe applicant pointed out that Chapter Note 1 to Chapter
23 also specifies that, to be included under 2309, a product
must not
be "elsewhere specified or included". He argued that, as
Acid Buf is included under heading 1212 as contended
for by the
applicant, it is for that reason too excluded from heading 2309. I
shall now consider whether Acid Buf is included under
heading 1212.
[17]
It is the applicant's contention that the product falls to be
classified under "seaweeds and other algae ... fresh, chilled...
or dried, whether or not ground'
8
.
Chapter Note 5 to Chapter 12 excludes from heading 1212 certain
specified goods. Dr Taylor states in his affidavit, and the
respondent
does not dispute, that Acid Buf can by no stretch of the
imagination fall under any of those exclusions. I leave it at that.
No
other Chapter Note is relevant. The essential question is whether
Acid But falls under "seaweeds and other algae". The
fact
that it consists of ground material is in terms of the express
wording of the heading irrelevant.
[18]
In my view the fact that Acid But is not made of the entire seaweed
but only of the skeletal remains does not disqualify it
from being
classified as seaweed for import duty purposes. It is an essentially
unchanged part of the original seaweed.
On
behalf of the applicant: Shepstone and Wylie Attorneys
…
.......................................
Per
Clarinda Kugel Attorneys
…
......................................
789
Park Street
…
......................................
Sunnyside
…
.......................................
Pretoria
Adv.
J.P. VorsterSC
On
behalf of the Respondent: LEHAE LA SARS
…
.............................................
Bronkhorst
Street
…
.............................................
Nieuw
Muckleneuk
…
.............................................
Pretoria
Adv.
C.E. Puckrin SC
Adv.
MPD Chabedi
1
The appeal is brought under section 47(9)(e) of the
Customs
and Excise Act, 91 of 1964.
3
The
eight digits denote a classification under chapter 23, heading 9,
subheading 90 and further subheading 92.
4
2309.
5
2309.90
read with 2309.10.
6
2309.90.92
read with 2309.90.09 read with 2309.90.91
7
See
the General Note to Chapter 23 quoted earlier.
8
1212
, 1212.20 and 1212.20.90..