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[2010] ZASCA 103
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Distell Ltd and Another v Commissioner of South African Revenue Service (416/09) [2010] ZASCA 103; [2011] 1 All SA 225 (SCA); 73 SATC 148 (13 September 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No:
416/09
In
the matter between:
DISTELL
LIMITED First Appellant
STELLENBOSCH
FARMERS’
WINERY
LIMITED Second Appellant
and
THE COMMISSIONER FOR
THE
SOUTH AFRICAN REVENUE
SERVICE
Respondent
Neutral citation
:
Distell v CSARS
(416/09)
[2010] ZASCA 103
(13 September 2010)
Coram:
HARMS DP,
HEHER, MHLANTLA JJA, EBRAHIM AND K PILLAY AJJA
Heard:
18 August
2010
Delivered:
13
September 2010
Updated:
Summary:
Customs
and Excise – Act no 91 of 1964 – tariff classification –
‘wine coolers’ – whether ‘other
fermented
beverages’ or ‘mixtures of fermented beverages and
non-alcoholic beverages’ – whether water is
a
‘non-alcoholic beverage’.
____________________________________________________________________________________
ORDER
On appeal from:
North
Gauteng High Court (Pretoria) (Ebersohn AJ, Webster and Molopa JJ
sitting as court of appeal):
1. The
appeal succeeds with costs including the costs of two counsel.
2. The
order of the court a quo is set aside and replaced by the following:
‘
1. The
appeal succeeds with costs including the costs of two counsel.
2. Save
for the costs order granted in favour of the second appellant the
order of the High Court is set aside and in its place
the following
order is made:
“
(a) The
determination made by the Commissioner for the South African Revenue
Service (“the Commissioner”) on 13 October
2004 that the
products listed in Annexure “A” (the “final wine
cooler products”) fall to be classified
in tariff item
104.15.50 before the amendment of Part 2A of Schedule 1 to the
Customs and Excise Act, 91 of 1964 (“the Act”),
dated 18
February 2004, is hereby corrected by substituting therefor a
determination that prior to the said amendment only the
wine portion
used in the manufacture of the final wine cooler products is liable
to excise duty under item 104.15.10 of Part 2A
of Schedule 1 to the
Act.
(b) The
determination made by the Commissioner on 13 October 2004 that the
final wine cooler products fall to be classified in tariff
item
104.17.15 after the amendment of Part 2A of Schedule 1 to the Act
(dated 18 February 2004) is hereby corrected by substituting
therefor
a determination that after the said amendment the whole of the final
wine cooler products is classifiable in tariff item
104.17.22 of Part
2A of Schedule 1 to the Act.
(c) The
determinations made by the Commissioner on 13 October 2004 that
Bernini Sparkling Grape Beverage and Crown Premium fall
to be
classified in tariff item 104.17.15 after the amendment of Part 2A of
Schedule 1 to the Act (dated 18 February 2004) are
hereby corrected
by substituting therefor a determination that the whole of the said
products is classifiable in tariff item 104.17.22
of Part 2A of
Schedule 1 to the Act.”
_______________
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER
JA (HARMS DP, MHLANTLA JJA, EBRAHIM and K PILLAY AJJA concurring):
[1] This
case concerns the correct classification of ten wine coolers
1
for the purposes of excise duty payable in terms of the Customs and
Excise Act 91 of 1964 (‘the Act’) and the consequential
relief to which the appellants are entitled if they succeed on the
classification issue.
[2] The
first appellant (‘Distell’) has manufactured alcoholic
beverages for many years. It acquired the business of
the second
appellant (‘SFW’)
2
with effect from 1 January 2001. SFW also manufactured such
beverages.
[3] Prior
to 1 January 2001 SFW manufactured Crown. Distell continued to do so
after the acquisition. Before and after, it manufactured
the other
nine wine coolers.
[4] The
classification of the wine coolers was, for the most part, the
subject of determinations made by the respondent (‘the
Commissioner’) on various dates in terms of s 47(9)(a) of the
Act. The appellants contest the latest determination in respect
of
each cooler. The relief claimed by the appellants in the courts below
took the form of appeals in terms of s 47(9)(e), or, as
an
alternative, applications to compel the Commissioner to correct
determinations ‘made in error’, as contemplated
in s
47(9)(d)(i), and, in respect of Crown (during a limited period when
it was not the subject of any determination), declaratory
relief.
[5] In
terms of s 47(1) of the Act duty is payable on, inter alia, all
‘excisable goods’ in accordance with the provisions
of
Schedule 1 to the Act. The term ‘excisable goods’ is
defined as meaning goods specified in Part 2 of Schedule 1.
Part 1 of
Schedule 1 contains descriptive headings and sub-headings
3
for the purposes of classifying goods in relation to duties payable
under Part 1 (customs duty) and other parts of Schedule 1.
Section A
of Part 2 to the Schedule uses these tariff headings for the purpose
of identifying, by way of item numbers, the goods
which constitute
‘excisable goods’ and the excise duty payable on them.
The excise headings in Part 2A mirror the tariff
headings in Part 1
(sometimes with minor differences which may limit the goods within
the excise headings but can never broaden
the class). Part 2A of
Schedule 1 was amended with effect from 18 February 2004. The
classification issue will require a consideration
of the position
both before and after the amendment.
The facts and history
of the dispute
[6] As
will appear, each product is a composite and the descriptive tariff
headings which must be considered are by no means sharply
defined,
and it is, therefore, hardly surprising that neither the appellants
nor the Commissioner has been consistent in its views
concerning the
correct classification of the coolers. Each side treats the
vacillations of the other as opportunism. It is in my
view
unnecessary to attach epithets to the conduct of either.
[7] On
17 July 1995 the Commissioner issued a written tariff determination
to SFW in terms whereof Crown was determined to be (i)
classified
under tariff heading 22.06.00.90 of Part 1 of Schedule 1
4
,
and hence (ii) liable to excise duty in terms of item 104.15.80 of
Part 2A of Schedule 1.
[8] On
1 December 1995 the Part 2A determination was amended by the
Commissioner
from item 104.15.80 to item 104.15.50.
[9] On
21 June 1996 the Commissioner issued a determination that classified
Bernini under TH 22.06.00.90 and item 104.15.80. In
September of that
year it amended the latter classification to item 104.15.50.
[10]
For reasons not germane to the appeal Distell paid duty on Bernini at
the rate specified in item 104.15.10 (a lower rate than
104.15.50)
until August 2002. The appellants’ view in the current
litigation is that no duty at all was payable on Bernini
as a cooler,
but only on the wine used in making it. On that basis, any
overpayment was mainly attributable to duty having been
paid on the
full volume of Bernini and not just on the wine content.
[11] On
14 August 2002 the Commissioner issued a determination to Distell in
respect of the other eight coolers. This was the first
determination
in respect of these. The determination was in line with those made
for Crown and Bernini, ie TH 22.06.00.90 and item
104.15.50. Shortly
before issuing this determination, at a meeting on 22 July 2002 the
SARS officials had explained their view
as being that the coolers
were a mixture of wine and a non-alcoholic beverage in the form of
water.
5
Thus, at that stage, SARS’s approach on the classification
question was what the appellants contend in this appeal.
[12] Distell,
whose opinion had until then been that excise duty was payable on the
coolers, but at the rate contained in item 104.15.10,
investigated
the matter further. Its conclusion was that the mixtures falling
under the second part of TH 22.06 were not excisable
as such and that
Distell should be paying excise duty only on the wine component and
at the 104.15.10 rate. This was explained
and motivated in a letter
from its consultant, KPMG, to SARS of 7 October 2002.
[13] In
regard to the eight coolers that had been the subject of the August
2002 determination, SARS conceded the position in a
letter of 12
March 2003: the determination was amended in accordance with
Distell’s representations. At the same time SARS
confirmed that
duty (at the 104.15.10 rate) was payable only on the wine content of
the coolers. However, in another letter of
the same date the
Commissioner refused to amend the 1995/1996 determinations for Crown
and Bernini, holding that any appeal in
that regard was time-barred
in terms of s 47(9)(f), this despite its implicit acknowledgement
that those determinations were wrong
in law.
[14] Distell
remonstrated without effect against what it regarded as inconsistent
and unjust treatment. On 15 December 2003 it gave
notice in terms of
s 96 of the Act of its intention to institute legal proceedings
against the Commissioner and launched the application
which gave rise
to this appeal on 6 May 2004. At that stage SARS’s attitude was
still that the coolers were mixtures falling
under the second part of
TH 22.06.
[15] In
the meantime, with effect from 18 February 2004, Part 2A of Schedule
1 had been amended. The effect of the amendment was
to make clear
that all beverages classifiable under TH 22.06 would be liable for
the same excise duty.
[16] Appellants’
counsel submitted before us that, when the application was launched,
SARS began to look for arguments to
support the very large amounts of
duty which Distell and SFW had overpaid. Be that as it may, in three
letters to Distell and SFW
dated 13 October 2004 SARS certainly
adopted a new position, namely that the coolers were not mixtures
falling under the second
part of TH22.06, but, instead, fermented
beverages, falling within the first part of that heading.
[17] In
consequence of those letters, the Commissioner:
(i) determined
the Part 1 classification of Crown to be amended from TH22.06.00.90
to TH22.06.00.80 from that date (ie 13 October
2004) and subject to
excise duty in terms of item 104.17.15;
(ii) confirmed
the Part 2A classification of Crown (made in 1995) in terms of item
104.15.50 prior to the statutory amendment of
18 February 2004;
(iii) determined
Bernini to be classified under TH22.06.00.80 with effect from the
date of determination and subject to excise duty
in terms of item
104.17.15;
(iv) withdrew
the determination of 12 March 2003 relating to the eight wine coolers
(ie other than Crown and Bernini);
(v) determined
those coolers to be classified under TH22.06.00.80 of Schedule 1 with
effect from 14 August 2002 and subject to excise
duty under item
104.15.50 before the statutory amendment of 18 February 2004 and
under item 104.17.15 after that amendment.
[18]
On or about 12 October 2005 Distell applied successfully to join SFW
as a second applicant.
[19]
The classification application was argued before Seriti J in
September 2006. On 1 November 2006 the learned judge dismissed
the
application with costs but subsequently granted the appellants leave
to appeal to the Full Court.
[20]
The appeal was argued on 13 August 2008. The appellants refined the
relief claimed by them without objection from the respondent.
The
relief that they then sought (and the order which they now seek on
appeal) was as follows:
‘
1. The
appeal is upheld with costs, including those attendant on the
employment of two counsel.
2. Save
for the costs order granted in favour of the second appellant, the
order of the Court
a
quo
is set aside and
replaced with the following orders:
2.1 The
determination made by the Commissioner for the South African Revenue
Service (“the Commissioner”) on 13 October
2004 that the
products listed in Annexure “A” (the “final wine
cooler products”) fall to be classified
in tariff item
104.15.50 before the amendment of Part 2A of Schedule No 1 to the
Customs and Excise Act, No 91 of 1964 (“the
Act”), dated
18 February 2004, is hereby corrected by substituting therefor a
determination that prior to the said amendment
only the wine portion
used in the manufacture of the final wine cooler products is liable
to excise duty under item 104.15.10 of
Part 2A of Schedule No 1 to
the Act.
2.2 The
determination made by the Commissioner on 13 October 2004 that the
final wine cooler products fall to be classified in tariff
item
104.17.15 after the amendment of Part 2A of Schedule No 1 to the Act
(dated 18 February 2004) is hereby corrected by substituting
therefor
a determination that after the said amendment the whole of the final
wine cooler products is classifiable in tariff item
104.17.22 of Part
2A of Schedule No 1 to the Act.
2.3 In
respect of the period prior to 18 February 2004, the determination
made by the Commissioner on 10 September 1996 in respect
of Bernini
Sparkling Grape Beverage (such determination having been confirmed on
13 October 2004) is set aside and substituted
with the following
determination:
“
Only
the wine portion used in the manufacture of Bernini Sparkling Grape
Beverage is subject to excise duty under tariff item 104.15.10
of
Part 2.4 of Schedule No 1, as it read prior to 18 February 2004.”
2.4 In
respect of the period prior to 1 January 2001, the determination made
by the Commission on 30 November 1995 in respect of
Crown Premium
(such determination having been confirmed on 13 October 2004) is set
aside and substituted with the following determination:
“
Only
the wine portion used in the manufacture of Crown Premium is subject
to excise duty under tariff item 104.15.10 of Part 2.4
of Schedule No
1, as it read prior to 18 February 2004.”
2.5 In
respect of the period 1 January 2001 to 18 February 2004 it is
declared that only the wine portion used in the manufacture
of Crown
Premium was subject to excise duty under tariff item 104.15.10 of
Part 2A of Schedule No 1, as it read prior to 18 February
2004.
2.6 The
determinations made by the Commissioner on 13 October 2004 that
Bernini Sparkling Grape Beverage and Crown Premium fall
to be
classified in tariff item 104.17.15 after the amendment of Part 2A of
Schedule No 1 to the Act (dated 18 February 2004) are
hereby
corrected by substituting therefor a determination that the whole of
the said products are classifiable in tariff item 104.17.22
of Part
2A of Schedule No 1 to the Act.
2.7 The
first respondent shall pay the applicants’ costs including
those attendant on the employment of two counsel.’
[21] On
3 April 2009 the Full Court (per Ebersohn AJ, Webster and Molopa JJ
concurring) dismissed the appeal with costs. This Court
thereafter
granted special leave to appeal.
Sources
of law
[22] The
legal sources applicable to tariff classification are-
(a) Schedule
1 to the Act, Part 1 of which deals with customs duties, and Part 2
with excise duties. Part 1 contains the wording
of the tariff
headings, section notes and chapter notes. The tariff headings in
Part 1 are used in Part 2 for purposes of imposing
excise duty.
Schedule 1 also contains, in section A of the General Notes, the
General Rules for the Interpretation of the Harmonized
System. In the
present matter Interpretative Rules 1, 3 and 6 may have relevance.
(b) The
Explanatory Notes to the Harmonized System (sometimes called
‘Brussels Notes’) issued from time to time by the
World
Customs Organization. In terms of s 47(8)(a) of the Act, the
interpretation of any tariff heading or sub-heading in Part
1 of
Schedule 1, the general rules for the interpretation of Schedule 1,
and every section note and chapter note in that Part,
is ‘subject
to’ the Explanatory Notes.
(c) The Case Law
In
Secretary
for Customs and Excise v Thomas Barlow and Sons Ltd
6
Trollip JA referred to Rule 1 of the Interpretative Rules which
states that the titles of sections, chapters and sub-chapters are
provided for ease of reference only and that, for legal purposes,
classification as between headings shall be determined according
to
the terms of the headings and any relative section or chapter notes
and (unless such headings or notes otherwise indicate) according
to
paragraphs 2 to 5 of the Interpretative Rules. He pointed out that
this rendered the relevant headings and section and chapter
notes not
only the first but also the paramount consideration in determining
which classification should apply in any particular
case. The
Explanatory Notes, he said, merely explain or perhaps supplement the
headings and section and chapter notes and do not
override or
contradict them. In
International
Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise
7
Nicholas
AJA identified three stages in the tariff classification process:
‘
first,
interpretation – the ascertainment of the meaning of the words
used in the headings (and relative 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.’
There
is no reason to regard the order of the first two stages as
immutable.
[23] As
to the Interpretative Rules, reference has been made above to the
content of
Rule 1. Rule 3 provides
that when goods are prima facie classifiable under two or more
headings, the heading which provides the
most specific description
shall be preferred to headings providing a more general description.
Rule 6 applies the same principle
mutatis mutandis
as between
sub-headings.
The
nature and characteristics of the wine coolers
[24] In
applying the three stages of tariff classification in this case it is
convenient to consider first the nature and characteristics
of the
wine coolers, as without such an understanding the importance of the
words used in the headings may be lost or undervalued.
[25] The
manufacturing process of the coolers was described in an affidavit by
a Distell employee, Duncan Green. He stated that
the coolers consist
of ‘a wine base to which water, sweetening agents and
flavouring agents are added’. He annexed
to his affidavit
detailed recipes for each product. The differences in the processes
are only material in relation to an alternative
argument raised by
counsel for the Commissioner. For present purposes the Bernini recipe
may be cited as an example of the similarities.
[26] The
first part of the Bernini recipe describes the manufacturing of the
‘concentrate’, a blending of sweetening
agents, fining
agents and a small amount of water with base wine, an ordinary wine
with an alcohol content of between 12% and 13%.
The next part of the
recipe requires the blending of the concentrate with additional water
(described as ‘de-aerated, carbonated
process water’) to
achieve a 50:50 blend with the concentrate. The wine in the
‘concentrate’ is ordinary wine
without the removal of
volume ie the concentrate is not reduced to a syrup. The intermediate
phase of the product is a ‘concentrate’
because it has a
higher alcohol content than the intended end-product, the cooler.
[27] The
recipes for Crown and the eight other coolers are essentially the
same as that of Bernini, save that in the case of some
of the coolers
there is no intermediate concentrate: instead the full amount of
water (not yet carbonated) is added to the wine
together with the
flavourants and fining agents and the full-volume product then goes
to the bottling plant where it is carbonated
and bottled.
Words
used in the Headings, Chapter Notes and Tariff Items
[28] It
is common cause that the relevant chapter of Part 1 is chapter 22,
headed ‘BEVERAGES, SPIRITS AND VINEGAR’.
[29] Tariff
Headings 22.01 and 22.02 deal with (in summary) unsweetened and
sweetened water respectively. (Neither such is excisable
under Part
2A.) TH 22.03 deals with beer made from malt, and is not relevant.
[30] THs
22.04, 22.05 and 22.06 read as follows:
‘
22.04 - WINE
OF FRESH GRAPES, INCLUDING FORTIFIED WINES; GRAPE MUST OTHER THAN
THAT OF HEADING 20.09
22.05 - VERMOUTH
AND OTHER WINE OF FRESH GRAPES FLAVOURED WITH PLANTS OR AROMATIC
SUBSTANCES
22.06 - OTHER
FERMENTED BEVERAGES (FOR EXAMPLE, CIDER, PERRY, MEAD); MIXTURES OF
FERMENTED BEVERAGES AND MIXTURES OF FERMENTED BEVERAGES
AND
NON-ALCOHOLIC BEVERAGES, NOT ELSEWHERE SPECIFIED OR INCLUDED.’
(The
later headings in chapter 22 are of no significance.)
[31] TH22.06
thus falls into two parts, namely
(a) the
part before the semi-colon (ie other fermented beverages such as
cider, perry and mead) and
(b) the
part thereafter (which covers two types of mixtures, namely
(i) mixtures
of fermented beverages, and
(ii) mixtures
of fermented beverages and non-alcoholic beverages).
[32] As
regards excise duty, the relevant item prior to 18 February 2004 was
item
104.15.
8
The relevant items from 18 February 2004 are items 104.15 and
104.17.15 and 104.17.22.
9
The relevant excise items in Part 2A use the THs 22.04, 22.05 and
22.06. The dispute between the parties concerns the interpretation
of
these headings and their application to the wine coolers.
[33] The
debate focuses mainly on TH22.06. The Commissioner’s case is
that the coolers are ‘other fermented beverages’
under
the first part of 22.06. His argument in support of that
classification is the following:
(a) The
coolers are not like, for example, wine and lemonade, the result of a
fermented beverage and a proper non-alcoholic beverage
simply mixed
together; they are designer products made in a single process that,
for purely practical reasons, is subdivided into
two stages. The
outcome of the process is, in each case, a fermented beverage.
(b) Shorn
of adornment, the processes are no different from that employed to
make a cup of coffee (using coffee, milk and sugar):
although a
mixture of two or more ingredients may result in an end product that
may be consumed as such (eg sweetened milk or sugar
water), and
although some people may have a preference as to the order in which
the ingredients are to be added, nothing turns
on these matters.
Irrespective of how one goes about it, the final product will not be
a mixture of the ingredients, but a new
designer product: coffee.
[34] By
contrast the appellants’ case is that the coolers fall under
the second part of TH22.06 (‘mixtures’),
being a mixture
of a fermented beverage (wine) and a non-alcoholic beverage (water).
An
explanation of the relief claimed by the appellants and why they
regard it as important
[35] To
explain the significance of the two competing positions for purposes
of excise duty in Part 2A, one must distinguish between
the period
before and after 18 February 2004.
[36] Before
18 February 2004-
(a) Item
104.15 in Part 2A included only the first part of TH22.06.
Accordingly, it is
common
cause that if, as the appellants contend, the wine coolers are
mixtures that fall under the second part of TH22.06, no excise
duty
was payable on the coolers up to that date.
(b) Excise
duty was, however, payable on the manufacture of the wine used in
creating the wine coolers. This duty was payable in
terms of item
104.15.10 (‘unfortified still wine’) read with TH22.04
(‘wine of fresh grapes . . .’).
(c) However,
the Commissioner’s case is that the coolers are ‘other
fermented beverages’ and that the first part
of TH22.06 was
certainly covered by excise item 104.15. In that case the coolers
would fall under excise sub-item 104.15.50 (‘Other
still
fermented beverages, unfortified’).
(d) The
result would be, on the Commissioner’s case, that the
appellants had to pay duty not only on the wine alone, but also
on
the coolers containing the same wine (which, because of the addition
of water, would have a larger volume). Moreover, the rate
imposed by
item 104.15.50 was higher than the rate imposed by item 104.15.10.
(e) The
different contentions of the parties are also relevant to the
question of rebates on the excise duty payable in respect
of the wine
used in making the coolers. This will be dealt with below.
[37] From 18 February
2004:
(a) Item
104 in part 2A was amended by removing TH22.06 from item 104.15 and
creating a new excise item, 104.17, to deal with TH22.06
which it now
covers in its entirety (and not merely the first part as previously).
(b) It
is common cause that excise duty is, in terms of item 104.17, payable
on the coolers. However, the appellants contend that,
because the
coolers fall under the second part of TH22.06, they should be
classified under excise sub-item 104.17.22, whereas the
Commissioner
(consistent with his contention that they fall under the first part
of TH22.06) argues that the coolers are to be
classified under excise
sub-item 104.17.15.
(c) The
difference is not relevant to the rate of excise duty payable on the
coolers, since the rates in items 104.17.15 and 104.17.22
have been
the same. However, the classification is of importance when it comes
to
rebates
on the excise duty payable on the wine used in
making the coolers.
[38] In
the debate between the parties rebates are relevant in respect of the
period before and after 18 February 2004 for the reasons
which
follow:
(a) As
noted, excise duty is payable on the
wine
manufactured for use
in making the coolers. Up to 18 February 2004 this duty was payable
in terms of item 104.15.10 read with TH22.04.
As from that date the
duty on the wine has been payable in terms of item 104.15.04 read
with TH22.04. (The change in the numbering
of the sub-items is not
material – both deal with ‘unfortified wine’.)
(b) If
excise duty is also payable on the
coolers
such duty (whether
under the old item 104.15.50 or the new item 104.17.15 or 104.17.22)
would be payable at a higher rate and on
a larger volume. The larger
volume would include the wine on which duty (albeit at a lower rate)
had already been paid.
(c) To
prevent this double taxation, s 75(1)(d) read with Schedule 6 allows
a manufacturer of excisable goods in certain circumstances
to claim a
rebate in respect of duty paid on excisable goods used in the
manufacture of other excisable goods.
(d) Prior
to 1 April 2006 the relevant rebate item in Schedule 6 was item
606.22.10. This item did not deal specifically with wine
used in the
manufacture of mixtures falling under TH22.06, but provided for a
full rebate of duty for excisable goods in a customs
and excise
warehouse ‘entered for use in the manufacture, by reprocessing,
of excisable goods of the same or another class
or kind’. This
was the rebate item Distell initially applied for the wine used in
making the coolers.
(e) But
Schedule 6 was amended with effect from 1 April 2006. An item 620 was
introduced dealing specifically with wine and fermented
beverages.
Item 620.05.03 allows a full rebate of duty for unfortified wine
‘entered for use in the manufacture of . . .
mixtures of
fermented beverages and mixtures of fermented beverages and
non-alcoholic beverages of item 104.17.22’ (i.e.)
mixtures as
contemplated in the second part of TH 22.06). There is, however, no
rebate item for wine entered for use in the manufacture
of ‘other
fermented beverages’ (ie beverages contemplated in the first
part of TH 22.06).
(f) In
regard to the rebate regime up to 1 April 2006, the Commissioner
responded to the application brought by the appellants in
this matter
by notifying Distell, in para 22.7 of an opposing affidavit filed on
6 May 2005, of his decision that as from the date
of delivery of that
affidavit Distell would no longer be allowed to enter the wine under
rebate item 606.22.10. In other words,
the Commissioner specifically
sought to exact double tax from Distell.
(g) In
regard to the rebate regime from 1 April 2006, the Commissioner’s
excise determination in respect of the coolers has
become directly
relevant because the new rebate item 620.05.03 permits a full rebate
for unfortified wine used in making ‘mixtures’
(ie
beverages falling under the second part of TH22.06) but contains no
rebate for wine used in making ‘other fermented beverages’
(ie beverages falling under the first part of TH22.06).
(h) Accordingly,
if the appellants are right that the coolers are ‘mixtures’
falling under the second part of TH22.06,
the position as from 1
April 2006 is that, because Distell has been paying excise duty (at a
higher rate) on the wine coolers (inclusive
of the wine forming part
thereof), Distell would be entitled to a rebate on the excise duty
paid on the earlier manufacture of
the wine. Effectively, Distell
would pay excise duty once on the finished product, a result that, so
the appellants submit, would
be both just and intended by the
legislature.
(i) However,
the Commissioner’s excise determination is that the coolers are
not mixtures but fall under the first part of
TH22.06. Rebate item
620 does not accommodate this situation and the appellants thus have
to pay duty on the original wine and,
again (at a higher rate and on
a larger volume) on the coolers.
(j) The
appellants therefore submit that the Commissioner’s excise
determination gives rise to an oppressive and unjust result.
Moreover, they contend, the very formulation of rebate item 620.05
(read with note 3 thereto) shows that the Commissioner’s
excise
classification of the coolers is wrong. Rebate item 620.05 allows a
full rebate on wine entered for use in making sparkling
wine,
fortified wine, mixtures and spirits of item 104.20. The thinking of
the legislature is, according to appellants’ counsel,
quite
clear: if wine is used in making another excisable beverage it should
enjoy a full rebate; the reason why rebate item 620.05
does not
mention wine used in making ‘other fermented beverages’
(ie beverages falling under the first part of TH22.06)
is that the
legislature knew that the first part of TH22.06 did not apply to
wine-based beverages (for reasons which will be considered
below).
The Commissioner’s contested excise determinations in the
present case fly in the face of this statutory scheme.
[39] Clearly,
the financial consequences of the classification issue are
substantial and ongoing. If Distell’s submissions
are valid the
payment of double duty is understandably regarded by it as a serious
injustice.
[40] As
noted earlier, the Commissioner contends that the coolers are
classifiable under the first part of TH22.06 as ‘other
fermented beverages’, whereas the appellants submit that they
are classifiable under the second part as mixtures. By the
time of
the hearing in the court a quo the Commissioner disputed that water
was a ‘non-alcoholic beverage’ for tariff
purposes. On
the Commissioner’s argument, this rendered irrelevant the fact
that, prior to 18 February 2004, item 104.15
did not include the
second portion of TH22.06 dealing with mixtures. According to the
Commissioner, the relevant tariff item in
Part 2A was item 104.15.50,
‘Other still fermented beverages, unfortified’.
[41] Although
Chapter 22 is titled ‘BEVERAGES, SPIRITS AND VINEGAR,
Interpretative Rule 1 states that such titles are for
ease of
reference only and that, for legal purposes, classification must be
determined according to the terms of the headings and
relevant
section and chapter notes. Accordingly, the appellants’ counsel
rightly placed no reliance on such force as the
title might lend to
their argument.
[42] The
wine component of the coolers ie the wine before it is mixed with the
water, is ordinary wine falling under TH 22.04, ‘wine
of fresh
grapes’. The explanatory notes to TH 22.04 state that this
tariff heading includes ordinary wine.
[43] The
water component of the coolers, ie the water which is, prior to
mixing, added to the wine, is unsweetened water falling
under TH
22.01. That item itself states that ‘waters’ for the
purpose of the heading include natural waters. The Explanatory
Notes
on TH22.01 provide that the item includes natural waters of all
kinds. (Chapter Notes 1(b) and (c) and the corresponding
Explanatory
Note A state that seawater and distilled or conductivity water –
do not fall under chapter 22.)
[44] As
regards the end product (the wine coolers manufactured through a
process of mixing), the parties were
ad idem
that TH22.06
applied, the dispute being confined to whether it fell into the first
or second part of the item.
Can
the wine coolers be accommodated in the first part of TH 22.06 under
the rubric ‘Other fermented beverages’, as
the
Commissioner has classified them?
[45] The
rationale for so placing the coolers, according to counsel, was that
they are ‘designer products’ in which
the wine component,
the product of a fermentation process, imbues the mixture of wine,
water, sweeteners and flavourant with the
element of fermentation and
renders the finished product a fermented beverage. When the court put
to counsel that, properly interpreted,
a ‘fermented beverage’
was one where the beverage was the end product of a fermentation
process, he maintained his
initial stance but conceded that if such
should be the correct interpretation, ‘the Commissioner has no
argument’.
[46] A
moment’s reflection will demonstrate that the proposition put
to counsel must be correct. The wine component is, of
course,
separately manufactured, anterior to use for any other purpose such
as its adoption as a base for a wine cooler. The wine
is, of itself,
classifiable under TH22.04. By reason of a note to TH22.06 it is
excluded from the scope of TH22.06 and is, therefore,
not a
‘fermented beverage’ for the purpose of the heading. The
recipe for each cooler shows that fermentation does
not occur in the
process and plays no role in bringing about the product. Thus,
production of the coolers is devoid of any fermentation
process and
they are not ‘fermented beverages’ in the normal sense of
the term. That this is so is borne out by reference
to the extensive
examples in the notes to TH22.06 of the fermented beverages which are
among those included.
10
In every case the beverage named is one which is the final product of
a fermentation process, albeit enhanced by additives, as
in the case
of
hydromel
vineux
.
As appellants’ counsel submitted (see para 38(j) above) the
absence of wine used in making ‘other fermented beverages’
from rebate item 620.05 is consistent with its exclusion from
TH22.06.
[47] On
this ground alone the determinations made by the Commissioner in
respect of each of the coolers was wrong in substance and
must be set
aside.
[48] Counsel
for the appellants was not satisfied with the extent of such a
victory. He pointed out that the relief which his clients
had sought
in the court below also provided for the substitution of the
Commissioner’s determinations by orders as to the
correct
headings which should be applied.
[49] Although
counsel for the Commissioner resisted such relief on the ground that
the further determinations should be left to
his client, the parties
have long been ad idem that if the coolers are to find a home in the
tariff schedule, the only suitable
heading is TH22.06. The matter has
been fully argued and it is desirable that we resolve the dispute
which remains over the second
half of that heading. In this regard
the decisive issue is the meaning and scope of the expression
‘non-alcoholic beverage’.
Is
water a ‘non-alcoholic beverage’ within the context of
TH22.06?
[50]
Although there are dissenting voices, the balance of dictionary
definitions favours the view that the meaning of ‘beverage’
is wide enough to include ordinary water. That feasible breadth of
interpretation has been recognized in reported cases.
11
Whether it bears the wider or a narrower meaning (which excludes
water) depends upon the context in which the word is used, in
the
present case TH22, and, particularly, in sub-heading 06 .
[51] There
are strong linguistic indications of an intention that water was
regarded by the legislator as a non-alcoholic beverage.
The
Explanatory Notes to TH22 state, under ‘General’, that
the products covered in the chapter fall into four main
groups, the
first of which is ‘Water and other non-alcoholic beverages and
ice’, thereby conveying that water is part
of the
genus
of
non-alcoholic beverages. To like effect is the formulation of TH22.02
which states that the heading covers sweetened waters ‘and
other non-alcoholic beverages’ (excluding fruit and vegetable
juices falling under TH20.09). The Explanatory Notes to the
same
heading state that it covers ‘non-alcoholic beverages . . . not
classified under other headings, particularly heading
20.09
or 22.01
’
(my emphasis). As TH22.01 relates only to unsweetened water, the
express exclusion is, in context, consistent only with
the
understanding that such water is regarded a ‘non-alcoholic
beverage’.
[52] In
the specific context of TH22.06, the second half of the heading is
directed at combinations of fermented beverages and non-alcoholic
beverages which together result in a product which possesses a
commercial or trade potential (as with all products in the tariff
schedules). The wine coolers are designer products in that sense
which have a drawing power over and above that of the wine
constituent
alone (which, as earlier noted has already been brought
within the excise regime, upon its creation, within TH22.04). The
water
component is not simply incidental but plays an important role
in providing the character of the finished product. The parties are
agreed that if the coolers cannot be brought within TH22.06 there is
no apparent place for them in the existing tariff headings.
Since,
for the reasons set out above, the first part of the heading is
inapposite, only the second can accommodate the coolers.
In the
circumstances, given the ‘added value’ contributed by the
water element, the recognition of water as a non-alcoholic
beverage
for the purposes of TH22.06 seems entirely consistent with the
commercial rationale of the tariff. Moreover, it is clear,
that were
the cooler to utilize lemonade instead of water, the second part of
the heading would apply: the explanatory note says
so explicitly. I
can find no reason in principle to distinguish between two
non-alcoholic liquids, both potable, that perform the
same function
as a mixing component, such that one should be excluded from the
operation of the heading and the other be included.
[53] Counsel
for the Commissioner have referred to contra-indications in the
structure of TH22. These are, however, at best, equivocal.
They are
not strong enough to outweigh the persuasive considerations to which
I have drawn attention. I conclude, therefore, that
the appellants’
contention that water is to be understood as a non-alcoholic beverage
within the framework of TH22.06 must
be upheld.
[54] In
their heads of argument counsel for the Commissioner submitted that
by reason of the formulation of the recipes, certain
of the coolers
were a textbook example of an “alcoholic preparation” as
contemplated by TH21.06.90:
12
According to Explanatory Note (7) to TH21.06.90 the heading includes
the following (if not covered by any other heading):
‘
(7)
Non-alcoholic
or alcoholic preparations (not based on odoriferous substances) of a
kind used in the manufacture of various non-alcoholic
or alcoholic
beverages. These preparations can be obtained by compounding
vegetable extracts of heading 13.02 with lactic acid,
tartaric acid,
citric acid, phosphoric acid, preserving agents, foaming agents,
fruit juices, etc. The preparations contain (in
whole or in part) the
flavouring ingredients which characterize a particular beverage. As a
result, the beverage in question can
usually be obtained simply by
diluting
the
preparation with water, wine or alcohol, with or without the
addition, for example, of sugar or carbon dioxide gas. Some of
these
products are specially prepared for domestic use: they are also
widely used in industry in order to avoid the unnecessary
transport
of large quantities of water, alcohol, etc. As presented, these
preparations are not intended for consumption as beverages
and thus
can be distinguished from the beverages of Chapter 22.’
[55] Counsel
further submitted that, even if water were, on a proper
interpretation, to be regarded as a ‘non-alcoholic beverage’,
the coolers were, in their perfected state, a mixture of an
‘alcoholic preparation’ and a ‘non-alcoholic
beverage’
and not a mixture of a ‘fermented beverage’
and a ‘non-alcoholic beverage’. Whether the coolers were
‘alcoholic
preparations’ within the ambit of TH21.06.90
was, however, in the first instance, a question of fact. The
appellants were
not confronted with either the facts or the legal
conclusions to be drawn from them until they received counsel’s
heads of
argument in this appeal. Quite apart from the composition of
the alcoholic compound, the note requires that ‘as presented’
the alcoholic preparations concerned are not intended for consumption
as beverages. No evidence was adduced as to when, if at all,
and in
what state, presentation occurred. In these circumstances no case was
made out by the Commissioner for the relevance of
TH21.06.90 in the
classification of the coolers. It is in the circumstances not an
answer that counsel can rely on.
[56] In
the result the appeal must succeed in relation to all the coolers
concerned.
The
terms of the relief to which the appellants are entitled
[57] Counsel
for the Commissioner, relying on
3
M South Africa (Pty) Ltd v The Commissioner for the South African
Revenue Service and Another
13
,
submitted that any claim for refunds will be limited to the two years
immediately before the amendment of the tariffs in question.
Because
the same rate of excise duty has, since 18 February 2004, been
payable on all products classifiable under TH22.06, the
appellants
would not, in their submission, be entitled to any refund
irrespective of by whom the amendment is made or its effective
date.
Appellants’ counsel dispute the interpretation that their
opponents have placed on the judgment. They submit that the
judgment
is irrelevant to the present case and that the practical effects of
the amendment must be adduced from the terms of the
statute. For the
reasons which follow I think their submission is correct.
[58] In
the
3
M
case an incorrect and adverse determination made by the Commissioner
on 9 April 1991 was eventually corrected by him in the taxpayer’s
favour on 21 November 2006. In terms of s 47(9)(d)(i)(bb) of the Act
the amended determination was made effective from 9 April
1991. The
question arose as to the extent of the refunds to which the taxpayer
was entitled in consequence of the amended determination.
This
involved an interpretation of s 76B(1)(a)(i), which limits refunds to
goods entered for home consumption ‘during a period
of two
years immediately preceding the date of such determination, new
determination or amendment, whichever date occurs last .
. .’.
The taxpayer argued that the date of the amendment was its effective
date (9 April 1991) so that it could claim refunds
on goods entered
on or after 9 April 1989. The Commissioner argued that the date of
amendment was when it was issued (21 November
2006) so that the
taxpayer could only claim refunds on goods entered on or after 21
November 2004. The Court upheld the Commissioner’s
contention.
[59] In
3
M
the
adverse determination of 1991 had not been the subject of an appeal
under s 47(9)(e). The determination was simply amended by
an exercise
of the Commissioner’s power of amendment under s 47(9)(d)(i).
When there is an appeal under
s
47(9)(e), the two year period is reckoned backwards from the date of
the appeal, even though the court’s order amending
the
determination might only be made some time later (see the proviso to
s 76B(1)(a)(i) and the
3
M
judgment
at paras 22 and 24).
[60] In
the present matter, unlike
3
M
,
the Commissioner has not as yet corrected the determinations which
the appellants say are (and which I have found to be) wrong.
The
relief which the appellants seek in respect of the disputed
determinations is based on appeals under s 47(9)(e), alternatively,
are orders compelling the Commissioner to correct the determinations
under s 47(9)(d)(i). In respect of
Crown
,
where no determination existed for the period 1 January 2001 to 18
February 2004, Distell seeks declaratory relief.
The
period prior to 18 February 2004
[61] In
respect of this period one must distinguish between the eight wine
coolers,
Bernini
and
Crown
.
[62] As
regards the eight coolers, in his adverse determination of 13 October
2004 the Commissioner amended his earlier favourable
determination of
12 March 2003 retrospectively to 14 August 2002, purporting to act in
terms of s 47(9)(d)(i). Distell appealed
timeously against the
determination in its amended notice of motion dated 15 December 2004.
Because of the success of its appeal,
Distell would, in terms of the
proviso to s 76B(1)(a)(i) be entitled to refunds in respect of
Bernini entered for home consumption
on or after 15 December 2002.
The effect of the
3
M
judgment
is that the two-year period would not take Distell back to the
effective date of the amended determination made on 13 October
2004
namely to 14 August 2002.
[63] The
practical importance of the appeal in respect of the eight wine
coolers prior to 18 February 2004 is also to prevent the
Commissioner
from asserting an entitlement to underpaid duty. An order in terms of
para 2.1 is therefore justified.
14
[64] As
regards Bernini (prior to 18 February 2004), the adverse
determination was made in September 1996. Distell brought a belated
appeal against this determination, relying on s 47(9)(e), and,
alternatively, on enforcing the Commissioner’s duty to correct
his erroneous determination, relying on s 47(9)(d)(i).
[65] The
s 47(9)(e) appeal is dependent on condonation. As regards the period
prior to 18 February 2004, the appellants accept that
the
Commissioner’s letter of 13 October 2004 was not a fresh
determination in respect of the classification of Bernini under
Part
2A but merely confirmation that the Commissioner was adhering to the
determination of 10 September 1996. Unless there was
a timeous appeal
against the determination (s 49(7)(f)) or a discretionary extension
of time (in terms of s 96(1)(c)), the determination
of 10 September
1996 could not be challenged by way of appeal nor could a declaratory
order be obtained inconsistent with the terms
of such determination:
Samcor
Manufacturing (Pty) Ltd v Commissioner SARS.
15
[66] The
period of delay was about 8 years. The courts below refused
condonation. Distell’s case was that the 1996 determination
did
not come to the attention of its officials who had been querying the
Bernini classification. The evidence to establish this
alleged
failure was, however, hearsay in nature. It also lacked credibility
to the extent that, when an opportunity arose in August
2002 to draw
the attention of SARS to the non-receipt of the determination, and in
circumstances which called for such a response,
no protest was
forthcoming. I do not therefore find reason to override the decisions
of the lower courts.
[67] The
appellants argued in the alternative for a duty on the Commissioner
under s 47(9)(i) to amend determinations made in error
even in cases
where an appeal was no longer available. However, as counsel concede,
should there be an enforced correction under
s 47(9)(d)(i), the
two-year period would be reckoned backwards from the date on which
the enforced amendment were to be made. Since
that date lies in the
future, the effect of the
3
M
judgment
is that there would be no right to a refund in respect of any part
of the period up to 18
February 2004. The relief claimed in para 2.3 is, for these reasons,
refused.
[68] The
position in respect of
Crown
prior to 18 February 2004 (where
the adverse determination was made in December 1995) would be the
same as for
Bernini
, but for the fact that, in the case of
Crown
, there was no determination at all in respect of the
period from 1 January 2001 (when Distell took over the manufacture of
Crown
from SFW) until 18 February 2004 (when the 1995
determination was rendered redundant because of the statutory
amendment). The belated
s 47(9)(e) appeal could obviously have no
bearing on the position between 1 January 2001 and 18 February 2004.
Because the purported
s 47(9)(e) appeal was only filed in May 2004
(without furnishing grounds for the exercise of condonation) neither
a s 47(9)(e)
appeal nor an enforced correction under s 47(9)(d)(i)
would enable the appellants to claim refunds in respect of the period
prior
to 1 January 2001. The relief in para 2.4 is therefore refused.
[69] There
was no determination for
Crown
in force during the period 1
January 2001 to 18 February 2004. In terms of s 76B(1)(e), in respect
of this period, Distell would
have had to apply for refunds within
two years from the date of entry of the goods for home consumption.
As counsel readily conceded,
there was no proof that it had done so.
The relief claimed in para 2.5 therefore serves no apparent purpose.
[70] It
may further be recorded that the Commissioner has (through his
counsel) tendered consent to an order that he amend the 1995
and 1996
determinations given to SFW and Distell in respect of Crown and
Bernini respectively, should this Court find (as it has)
that the
coolers are mixtures of fermented beverages and non-alcoholic
beverages. Such an order would have no practical effect.
The
period from 18 February 2004
[71] The
determinations made by the Commissioner in his letters of 13 October
2004 classified
Bernini
,
Crown
and the other eight wine
coolers in a particular way as from 18 February 2004 (the date on
which Schedule 1 to the Act was amended).
In respect of those
determinations there were timeous s 47(9)(e) appeals by way of the
appellants’ amended notice of motion
of 15 December 2004 or the
further amended notice of motion dated 2 June 2005.
[72] Accordingly,
and irrespective of the date of this judgment, the two-year period
contemplated in the proviso to s 76B(1)(a)(i)
would permit the
appellants to claim refunds on all goods entered for home consumption
on or after 18 February 2004: a period of
two years reckoned
backwards from the date of the s 47(9)(e) appeals would pre-date 18
February 2004. The orders sought in paras
2.2 and 2.6 accordingly
serve a legitimate purpose and must be granted.
[73] In
the result the following order is made:
1. The
appeal succeeds with costs including the costs of two counsel.
2. The
order of the court a quo is set aside and replaced by the following:
‘
1. The
appeal succeeds with costs including the costs of two counsel.
2. Save
for the costs order granted in favour of the second appellant the
order of the High Court is set aside and in its place
the following
order is made:
“
(a) The
determination made by the Commissioner for the South African Revenue
Service (“the Commissioner”) on 13 October
2004 that the
products listed in Annexure “A” (the “final wine
cooler products”) fall to be classified
in tariff item
104.15.50 before the amendment of Part 2A of Schedule 1 to the
Customs and Excise Act, 91 of 1964 (“the Act”),
dated 18
February 2004, is hereby corrected by substituting therefor a
determination that prior to the said amendment only the
wine portion
used in the manufacture of the final wine cooler products is liable
to excise duty under item 104.15.10 of Part 2A
of Schedule 1 to the
Act.
(b) The
determination made by the Commissioner on 13 October 2004 that the
final wine cooler products fall to be classified in tariff
item
104.17.15 after the amendment of Part 2A of Schedule 1 to the Act
(dated 18 February 2004) is hereby corrected by substituting
therefor
a determination that after the said amendment the whole of the final
wine cooler products is classifiable in tariff item
104.17.22 of Part
2A of Schedule 1 to the Act.
(c) The
determinations made by the Commissioner on 13 October 2004 that
Bernini Sparkling Grape Beverage and Crown Premium fall
to be
classified in tariff item 104.17.15 after the amendment of Part 2A of
Schedule 1 to the Act (dated 18 February 2004) are
hereby corrected
by substituting therefor a determination that the whole of the said
products is classifiable in tariff item 104.17.22
of Part 2A of
Schedule 1 to the Act.”
____________________
J
A Heher
Judge
of Appeal
HARMS
DP (concurring)
[74] I have read the
judgment of my colleague Heher JA and agree with the order proposed
by him. His judgment deals comprehensively
with the arguments raised
before us based on the multifarious issues defined in the papers.
They were the consequence of inconsistent
approaches and frequent
changes of mind by all the parties. The Full Court added a discussion
of matter not raised by either party,
namely, the application of the
Promotion of Administrative Justice Act 3 of 2000
to the case. In the
course of this the issue, which ought to be a straightforward
interpretation issue, became blurred.
[75] The case is about
excise duty. Duty is payable on all excisable goods in accordance
with the provisions of schedule 1 at the
time of entry for home
consumption of such goods (s 47 (1) of the Customs and Excise Act 91
0f 1964). The goods on which the commissioner
wished to levy a duty
are, generically speaking, wine coolers. The entry of the ingredients
of the wine coolers (such as the wine
component) for home consumption
and excise payable thereon is not for present purposes relevant.
[76] A wine cooler, as
appears from the main judgment, is in general terms made by first
preparing a concentrate consisting of wine
and flavouring and
sweetening agents. The concentrate is then mixed or blended with
water to produce a 50:50 blend. This, once
carbonated, is the wine
cooler which, depending on its classification in schedule 1, may be
subject to excise duty.
[77] The commissioner
sought to impose a duty on wine coolers for the period preceding 18
February 2004 under a tariff heading ‘other
still fermented
beverages, unfortified’. It was common cause that there was no
other applicable tariff heading which had
to be considered. The
commissioner was wrong. Wine coolers are not ‘still’
beverages – they are carbonated. In
addition, wine coolers are
not ‘fermented’ beverages – they may contain a
fermented product, namely wine, but
that does not mean that they are
on entry for home consumption fermented products.
[78] The 2004 amendment
created the source of the second dispute. The commissioner argued
that wine coolers are fermented beverages
falling under the heading
‘other fermented beverages (for example, cider, perry and
mead)’. Cider is obtained by fermenting
the juice of apples,
perry is similar but obtained from pears, and mead is prepared by
fermenting honey in water. Apart from the
fact that wine coolers are
clearly not of the same genus as the examples, they are, as
mentioned, not ‘fermented’ beverages.
This puts an end to
the commissioner’s attempted classification.
[79] What is left for
consideration is whether, as submitted by the appellants, wine
coolers are ‘mixtures of fermented beverages
and non-alcoholic
beverages’. Since wine is a fermented beverage the question
depends on whether water is, in context, a
‘beverage’.
The irony of the case is that if we accept the commissioner’s
argument that water is not a beverage
it means that wine coolers
cannot be classified under this tariff heading and in the absence of
an alternative argument for the
one rejected in the previous
paragraph it would mean that, as before, wine coolers
per se
were since the amendment not subject to excise duty.
[80] The main judgment
deals at some length with the meaning of ‘beverage’ in
the present context and comes to the conclusion
that it includes
water. This means that the appellants’ submission about the
correct tariff heading is accepted as correct.
The matter is not
without its difficulties but since the appellants insist that water
is a beverage and the commissioner is not
prejudiced if we find
accordingly I accept the conclusion.
__________________
L T C Harms
Deputy
President
APPEARANCES
APPELLANTS: A
P Joubert SC with him O L Rogers SC
Instructed
by Cliffe Dekker Hofmeyr Inc, Johannesburg;
Webbers,
Bloemfontein
RESPONDENT: C
E Puckrin SC with him J A Meyer SC and I A Enslin
Instructed by State
Attorney, Pretoria;
State
Attorney, Bloemfontein
1
According to the evidence the wine coolers consist of variations of
an unfortified wine base to which flavouring and water are
added and
the mixture is carbonated to produce the end product. The ten wine
coolers are Bernini Sparkling Grape Beverage (‘
Bernini
’);
Crown Premium (‘
Crown
’);Bernini Dry Grape Liquor;
Tiffany’s Bucks Fizz Cooler; Tiffany’s Blackcurrant
Cooler; River Dew Peach Chenin
Blanc Cooler; River Dew Raspberry
Pinotage Cooler; River Dew Tropical Sauvignon Blanc Cooler; River
Dew Blackcurrant Cabernet
Cooler; and Castell Ginger Fizz Cooler.
2
The
locus standi
of SFW, a subject of dispute in the court a
quo, is now moot.
3
Based on the international Harmonized System for the Classification
of Goods.
4
The precise terms of this and other headings are set out below. In
this judgment the abbreviation ‘TH’ will be used
to
designate a heading in Part 1.
5
‘By virtue of the General Notes to Chapter 22 and the terms of
headings 22.01 and 22.02’.
6
1970 (2) SA 660(A)
at 675H-676F.
7
1985 (4) SA 852
(A) at 863G-H.
8
Tariff
Item
Tariff
Heading
Description
104.15
.05
.10
.40
.50
.60
.70
.80
22.04
22.05
22.06
Wine
of fresh grapes, including fortified wines: grape must other than
that of heading 20.09
Vermouths
and other wine of fresh grapes flavoured with plants or aromatic
substances
Other
fermented beverages (for example, cider, perry and mead):
Sorghum
beer (excluding beer made from preparations based on sorghum flour)
Unfortified
still wine
Fortified
still wine
Other
still fermented beverages, unfortified
Other
still fermented beverages, fortified
Sparkling
wine
Other
fermented beverages (excluding sorghum beer)’
9
Tariff
Item
Tariff
heading
Description
104.15
22.04
Wine
of fresh grapes, including fortified wines; grape must, other than
that of heading no 20.09
22.05
Vermouths
and other wine of fresh grapes flavoured with plants or aromatic
substances.
.02
Sparkling
wine
.04
Unfortified
wine
.06
Fortified
wine
104.17
22.06
Other
fermented beverages, (for example, cider, perry and mead); mixtures
of fermented beverages and mixtures of fermented beverages
and
non-alcoholic beverages, not elsewhere specified or included:
.05
Traditional
African beer as defined in Additional Note 1 to Chapter 22
.15
Other
fermented beverages, unfortified
.17
Other
fermented beverages, fortified
.22
Mixtures
of fermented beverages and mixtures of fermented beverages and
non-alcoholic beverages
.90
Other’
10
‘(1)
Cider
, an alcoholic beverage obtained by
fermenting the juice of apples.
Perry
,
a fermented beverage somewhat similar to cider made with the juice
of pears.
Mead,
a beverage prepared by fermenting a solution of honey in water.
(The heading includes
hydromel vineux
– mead
containing added white wine, aromatics and other substances.)
Raisin
wine
Wines
obtained by the fermentation of fruit juices
, other than juice
of fresh grapes (fig, date or berry wines), or of vegetable juices,
with an alcoholic strength by volume
exceeding 0.5% vol.
“
Malton”
,
a fermented beverage prepared from malt extract and wine lees.
Spruce
,
a beverage made from leaves or small branches of the spruce fir or
from spruce essence.
Saké
or rice wine
.
Palm
wine
, prepared from the sap of certain palm trees.
Ginger
beer and herb beer
, prepared from sugar and water and ginger or
herbs, fermented with yeast.
All these beverages may
be either naturally sparkling or artificially charged with carbon
dioxide. They remain classified in the
heading when fortified with
added alcohol or when the alcohol content has been increased by
further fermentation, provided that
they retain the character of
products falling in the heading.’
11
See for example Re
Bristol-Myers Company (Pty) Ltd v Commissioner
of Taxation
[1990] FCA 200
;
Perrier Group of Canada Inc v
Canada
[1996] 1 FC 586.
12
‘Food preparations not elsewhere specified or included:
Other’.
13
(272/09)
[2010] ZASCA 20
(23 March 2010) at paras 21 to 27.
14
See para 20 above. All subsequent references to
the relief claimed refer to the terms of the proposed order set out
there.
15
2002 (4) SA 823
(SCA) at paras 22 to 31.