Commissioner for the South African Revenue Services v Fascination Wigs (Pty) Ltd (204/09) [2010] ZASCA 6; [2010] 3 All SA 129 (SCA) (4 March 2010)

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Commissioner for the South African Revenue Services v Fascination Wigs (Pty) Ltd (204/09) [2010] ZASCA 6; [2010] 3 All SA 129 (SCA); 72 SATC 112 (4 March 2010)

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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
204/09
In the
matter between:
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE Appellant
and
FASCINATION WIGS (PTY) LTD Respondent
Neutral citation:
CSARS v Fascination Wigs
(204/09)
[2010] ZASCA 06
(4 March 2010)
Coram:
HARMS
DP, LEWIS and LEACH JJA, and THERON and SERITI AJJA
Heard: 16
February 2010
Delivered
4 March 2010
Summary:
Tariff classification under Customs and Excise Act
91 of 1964: wefts imported for attachment to hair are not prepared
for making of
a wig or the like and thus fall under tariff heading
67.04 which covers finished items of false hair.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from :
North
Gauteng High Court (Pretoria) (Prinsloo J sitting as court of first
instance):
1 The appeal is upheld with costs including those of two counsel.
2 The order of the high court is replaced with the following:
‘
The applicant’s appeal in terms of s 47(9)(e)
of the Customs and Excise Act 91 of 1964 is dismissed with costs,
including the employment
of two counsel’.
JUDGMENT
LEWIS JA (
Harms DP, Leach JA and Theron and Seriti AJJA concurring)
[1]
At issue in this
appeal is whether synthetic hair products imported by the respondent,
Fascination Wigs (Pty) Ltd (Fascination Wigs),
are to be classified
as completed products for the purpose of levying customs duty on
them, or whether they fall under a tariff heading
that attracts no
customs duty. Wigs, for example, are dutiable. Are wefts or weaves or
braids?
[2]
On 6 December 2005
the appellant, the Commissioner for the South African Revenue Service
(the Commissioner), acting in terms of s
47(9)(a)(i)(aa) of the
Customs and Excise Act 91 of 1964, determined that certain synthetic
hair products imported by Fascination
Wigs should be classified under
tariff heading 6704.19 of Part 1 of Schedule 1 to the Act.
Fascination Wigs appealed against that
determination in terms of s
47(9)(e) of the Act. The high court upheld the appeal, and the
Commissioner appeals to this court with
the leave of the high court.
[3]
Fascination Wigs
imports a number of natural hair products and synthetic or animal
hair. Although initially the parties disputed the
classification of
human hair imports as well as animal and synthetic hair, the question
of the human hair products was not pursued
in the high court and we
are not concerned with it on appeal. The products in issue fall into
two classes: ‘weaves’ for integration
into a person’s hair or
for gluing on to a scalp, and ‘braiding fibres’ for integration
into hair by braiding (plaiting) it.
Weaves are also referred to as
wefts. Indeed, the term weave is but the American word for a weft. A
weft, in general terms, comprises
fibres woven or stitched together.
In the world of hairdressing, a weft comprises a number of fibres
(natural or acrylic) stitched
together to form tufts. They are used
in making wigs or are attached to a person’s own hair by different
processes.
[4]
The essence of the
dispute is whether the wefts in question, which are attachable by
braiding or weaving into a person’s natural
hair, or gluing them to
the scalp, are to be classified, in broad terms, as items used for
making up a wig, or as completed or finished
products. If they fall
into the first category they are not dutiable. In the second category
they would attract duty. Naturally,
Fascination Wigs contends that
they are items used in making up wigs, or the like, and the
Commissioner contends that they are completed
products that are not
themselves changed in any way after importation, even though a
complex and time-consuming process may be required
to attach them to
hair or to a head.
[5]
The specific tariff
categories in issue are in chapter 67 of Schedule 1 of the Act.
Fascination Wigs contends that the wefts are to
be classified under
tariff heading 67.03, while the Commissioner has determined that they
fall under 67.04.
[6]
The headings and
relevant explanatory notes are as follows:
‘
67.03 -
Human hair, dressed, thinned, bleached or otherwise worked; wool or
other animal hair or other textile materials,
prepared
for use in making wigs or the like
’
(my emphasis).
The explanatory notes
include
the following (excluding references to human hair):
‘
This
heading also includes wool, other animal hair (eg, the hair of the
yak, angora or Tibetan goat) and other textile materials (eg,
man-made fibres), prepared for use in making wigs and the like, or
dolls’ hair. Products prepared for the above purposes include,
in
particular:
Articles
consisting of a sliver, generally of wool or other animal hair,
interlaced on two parallel strings and having the appearance
of a
plait. These articles (known as “crape”) are normally presented
in long lengths and weigh about 1 kg.
Waved (curled) slivers of
textile fibres put up in small bundles each containing a length of
14 to 15 m and weighing about 500g.
“
Wefts”
consisting of man-made fibres dyed in the mass, folded in two to
form tufts which are bound together, at the folded ends,
by a
machine-made plait of textile yarns approximately 2 mm wide. These
“wefts” have the appearance of a fringe in the length.’
67.04 –
‘Wigs, false beards, eyebrows and eyelashes, switches and the like,
of human or animal hair or of textile materials; articles
of human
hair not elsewhere specified or included.
-Of synthetic textile materials:
6704.11 –
Complete wigs
6704.19 – Other
6704.20 – Of human hair
6704.90 –
Of other materials
’
The explanatory notes state:
‘
This
heading covers:
Made up
articles of po
stiche
of all kinds manufactured of human or animal hair or of textile
materials. These articles include wigs, beards, eyebrows
and
eyelashes, switches, curls, chignons, moustaches and the like. They
are usually of high-class workmanship intended for use
either as
aids to personal toilet or for professional work (eg, theatrical
wigs).
. . . .’
[7]
The principles
applicable in determining whether articles fall under a particular
classification are well-settled. I shall not rehearse
them, save to
refer to the basic principles briefly. In
International
Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise
1
Nicholas AJA said:
'
The
process of classification
Classification
as between headings is a three-stage process: first, interpretation –
the ascertainment of the meaning of the words
used in the headings
(and relevant section and chapter notes) which may be relevant to the
classification of the goods concerned;
second, consideration of the
nature and characteristics of those goods; and third, the selection
of the heading which is most appropriate
to such goods.'
[8]
A court must also
have regard to the General Rules for the Interpretation of the
Harmonized System (the Brussels Notes),
2
Rule 1 of which states that 'for legal purposes, classification shall
be determined according to the terms of the headings and any
relative
section or chapter notes and, provided such headings or notes do not
otherwise require, according to the following provisions'.
[9]
The explanatory
notes are guides to classification and interpretation. In
Secretary
for Customs and Excise v Thomas Barlow & Sons Ltd
3
Trollip JA said that 'they are not worded with the linguistic
precision usually characteristic of statutory precepts; on the
contrary
they consist mainly of discursive comment and
illustrations'. On the general principles of classification see too
Commissioner for Customs and Excise v
Capital Meats CC (in liquidation)
;
4
Lewis Stores (Pty) Ltd v Minister of
Finance & another
;
5
CSARS v Komatsu Southern Africa (Pty)
Ltd
6
and
CSARS v The Baking Tin (Pty) Ltd
.
7
These cases all affirm that when classifying imported goods one must
have regard to their objective characteristics at the time of
importation.
[10]
The parties accept
that the essential difference between tariff headings 67.03 and 67.04
is that the former covers ‘products prepared
for use’ in making
wigs or the like – that is,
components
of articles such as wigs, hairpieces, switches, false eyebrows,
beards and moustaches, whereas the latter covers the
complete
articles. The components that are non-dutiable have been processed or
worked upon to a point where they can be used in the making
of
articles of postiche, as referred to in the explanatory notes to
67.04. ‘Postiche’ means false hair. In the Shorter Oxford
English
Dictionary it is defined, inter alia, as ‘an imitation substituted
for the real thing’.
8
[11]
The Commissioner
contends that the wefts or braids imported by Fascination Wigs are
complete articles. Nothing further need be done
to them for use.
Fascination Wigs, on the other hand, maintains that the articles need
further working in order to constitute postiche.
The fibres cannot
simply be attached to the head. They must be woven or braided onto a
person’s hair, or glued onto the scalp,
with skill and expertise.
The final appearance of the false hair is like a wig – very
different from the product as imported. And
counsel for Fascination
Wigs argues that the conclusive words in the heading of 67.03 are
‘prepared for use in making wigs
or
the like
’ (my emphasis). The
contention is thus that when a skilled hairdresser attaches the
fibres to a person’s head he or she is preparing
something like a
wig and that the final appearance is postiche.
[12]
The argument is
based on the evidence of hairdressers and wigmakers that the process
of attachment may be complex and time-consuming,
and that the
finished work is like a wig. It is indeed so that the attached
components – the finished appearance – may look very
different
from the products as imported. But the question remains whether the
fibres in issue are ‘prepared for use in making wigs
or the like’.
The Commissioner contends that they are not: they are complete
products which undergo no process themselves. They
are not used for
making a wig or the like. The method of attachment, and the skill and
time required to weave or glue the fibres
onto the person’s hair or
head, are irrelevant. A new product does not come into being.
[13]
The Commissioner
contends further that although the process of attachment of the
fibres (the braids and wefts) may be complex, the
products are
similar in effect to the false curls, switches, chignons, eyebrows,
eyelashes, beards and moustaches referred to in
67.04. They are not
components of something else, and are not prepared for use in making
something like a wig.
[14]
The high court
found that the evidence of the manufacturer of the fibres (Mr Chan
Kwok Keung of Evergreen Products Factory Ltd (Evergreen)
in China)
supported Fascination Wigs’ contention that the articles should
fall under 67.03: they were materials prepared for use
in making wigs
or the like.
[15]
However, the
evidence of Kueng, as argued by counsel for the Commissioner, does
not support that finding. He said (in a replying affidavit
to that of
Ms Reinette Cremore for the Commissioner) that Fascination Wigs
imports single wefts, with a single line of stitching,
comprising a
plait. Evergreen also manufactures, he stated, ‘wigs from both
single and double wefts’. The double wefts used to
make wigs ‘are
not similar to the double wefts imported by the Applicant
[Fascination Wigs]’.
[16] Keung
continued:
‘
Th
e
double wefts imported by the Applicant are stitched differently in
that the weft when doubled is not stitched directly on top of
each
other, it is stepped one on up and one down. However, if Evergreen
should ever use the double wefts imported by the Applicant
to make
wigs, we would stitch the wefts directly on top of each other, which
in my opinion would give additional volume to the design
of the wig.
The double
wefts made by Evergreen for the Applicant are specifically made
according to the Applicant’s preference, in that a single
weft is
folded over and the weft is then sewed so that one weft is sewn above
the other. Notwithstanding the latter, I maintain that
the product
remains a weft and confirm that it is as simple as picking the stitch
to turn the double weft into a single weft.’
[17]
Fascination Wigs
relied heavily on the fact that explanatory note 3 to heading 67.03
refers to and defines wefts, arguing that certain
of the products it
imports fall within that definition. This begs the question. The
wefts referred to in the definition must still
comply with the
heading which requires that they are prepared for use in making wigs
and the like – which is not the case here.
In any event, the term
weft on its own has no significance. Wefts are used to make wigs, and
are expressly referred to for such purpose
in the explanatory notes
to 67.03, set out earlier.
[18] There is no reference to wefts in 67.04. But,
as I have said, a weft is no more than a collection of fibres woven
or stitched
together and may be folded to form tufts. And it is not
disputed that braids are also wefts. The question is not whether
wefts are
referred to in the explanatory notes to tariff heading
64.04. It is whether, objectively, the wefts in issue – and not
wefts in
general – are themselves complete and can be used without
being changed or processed in any way.
[19
] Keung’s evidence
was that if Fascination Wigs wished to use Evergreen wefts for making
up wigs, it would make a product that is
different from that which
they actually do supply. The wefts that Evergreen supplied to
Fascination Wigs, and that are in question,
are not, he said,
suitable for making wigs.
[20
] Nor are these wefts
actually used for making wigs. They are used as attachments to a
person’s hair or head, in the same way as
are switches or chignons.
The complexity of the manner of attachment and the ultimate
appearance when the attachment is completed,
does not change their
essential nature. That seems to me to be conclusive of the dispute.
The articles were correctly classified
by the Commissioner as falling
under tariff heading 67.04.
[21
]
1
The appeal is upheld
with costs including those of two counsel.
2 The order of the high court is replaced with the
following:
‘
The applicant’s appeal in terms of s 47(9)(e)
of the Customs and Excise Act 91 of 1964 is dismissed with costs,
including the employment
of two counsel’.
_______________
C H Lewis
Judge of Appeal
APPEARANCES
APPELLANTS: A Meyer SC (with him I Enslin)
Instructed by State
Attorney, Pretoria;
State Attorney, Bloemfontein.
RESPONDENTS: C E Puckrin SC
(with him I Ellis)
Instructed by Marlon Shevelew &
Associates, Cape Town;
Webbers, Bloemfontein.
1
1985 (4) SA 852
(A) at 863F-H.
2
Section 47(8)(a) of the Act.
3
1970 (2) SA 660
(A) at 676C-D.
4
[1998] ZASCA 80
;
1999 (1) SA 570
(SCA) 573A-E.
5
65 (2003) SATC 172
para 8.
6
2007 (2) SA 157
(SCA) para 8.
7
2007 (6) SA 545
(SCA) paras 5 and 6.
8
Third ed 1988. The word does
not appear in the 10
th
ed of the Concise Oxford English Dictionary (2002).