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[2010] ZASCA 135
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Commissioner for South African Revenue Service v Plasmaview Technologies (Pty) Ltd (647/09) [2010] ZASCA 135; [2011] 2 All SA 235 (SCA); 73 SATC 338 (1 October 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 647/09
In the matter between:
THE COMMISSIONER FOR
THE SOUTH AFRICAN
REVENUE SERVICE
...................................................................................
Appellant
and
PLASMAVIEW
TECHNOLOGIES (PTY) LTD
............................................
Respondent
Neutral citation:
CSARS v Plasmaview Technologies (Pty) Ltd
(647/09)
[2010]
ZASCA 135
(1 October 2010)
Coram:
Mpati P,
Cloete, Lewis and Tshiqi JJA and Bertelsmann AJA
Heard:
2
SEPTEMBER 2010
Delivered: 1 OCTOBER
2010
Summary:
Customs
and excise – tariff determination – complete television
sets – whether importer may claim rebate.
______________________________________________________________________
ORDER
______________________________________________________________________
On appeal from: North
Gauteng High Court (Pretoria) (Prinsloo J sitting as court of first
instance).
1. The appeal is allowed
with costs, including the costs of two counsel.
2. The order of the court
below is set aside and replaced with the following:
'The appplication is
dismissed with costs, including the costs of two counsel.'
________________________________________________________________
JUDGMENT
________________________________________________________________
BERTELSMANN AJA (Mpati P,
Cloete, Lewis and Tshiqi JJA concurring)
[1] The appellant is the
Commissioner for the South African Revenue Service, appointed in
terms of the
South African Revenue Service Act 34 of 1997
. He is
responsible for inter alia the administration of the Customs and
Excise Act 91 of 1964. The respondent is Plasmaview Technologies
(Pty) Ltd (Plasmaview) a company.
[2] The Commissioner
appeals against a judgment and order of the court below (Prinsloo J
North Gauteng High Court Pretoria) which
reviewed and set aside what
was said to be a determination, dated 27 July 2006, allegedly made by
him in the exercise of the powers
conferred upon him by the Act.
[3] Plasmaview had
imported fully assembled televisions sets with plasma or liquid
crystal display (LCD) screens from Korea during
2006. These sets were
declared under tariff heading 8528.21.20 which allowed a full rebate
under rebate item 460.16.
[4] Plasmaview relied on
a tariff determination dated 20 December 2005 as justification for
declaring the television sets in the
above manner. The tariff
determination was made at a stage when it imported the screens and TV
tuners separately. This determination
was referred to as 'Plasma 1'
in the court below and this nomenclature will be retained in this
judgment. The fully assembled TV
sets were only imported once a copy
of 'Plasma 1' was made available to the respondent.
[5] On 27 July 2006, the
author of that tariff determination, Mr Pool, amended his reasons for
classifying the screens without tuners
under tariff heading
8528.21.20, but did not amend the determination that that tariff
heading applied to the screens in the condition
he had considered
them. He did not inform the respondent of this amendment, which is
referred to as 'Plasma 2'.
[6] When the Commissioner
investigated the importation of the assembled television sets through
his Post Clearance Inspection (PCI)
team from about May 2006, his
officials concluded that the fully assembled television sets had been
cleared incorrectly and assessed
the respondent by issuing two
schedules in the amounts of R 8 924 191, 69 and R
6 591 987, 90 respectively,
representing both underpaid
duty and VAT.
[7] Believing that
'Plasma 2' had formed the basis upon which these assessments were
made, Plasmaview lodged an appeal against them
and at the same time
launched a review application to have this supposed determination set
aside. In the same proceedings, Plasmaview
applied for a declaratory
order that the amounts assessed were not owing to the appellant.
[8] The court below
accepted that 'Plasma 2' represented a determination that, in the
absence of prior notice to Plasmaview, amounted
to administrative
action that was unfair to it and granted the relief sought. The
Commissioner was ordered to pay costs, including
those of senior
counsel.
[9] The Commissioner on
appeal disputes the finding that 'Plasma 2' is a determination;
argues that it therefore does not constitute
administrative action
and submits that the declaratory order should not have been granted.
The appeal is with the leave of the
high court.
The salient facts
[10] During 2005, the
respondent imported eight consignments of LCD screens from Korea into
South Africa. The port of entry was
East London. The screens were
described by the respondent as computer monitors with 81cm or 94 cm
screens. They were cleared as
'input display units for automatic data
processing' under tariff heading 8471.60, under which they would not
have attracted any
customs duty.
[11] One of the SARS
officials, Mr Putter, inspected the eight consignments. He found
screens that were not fitted with TV tuners
on importation, but were
equipped with the tuners very soon after they had been delivered to
the respondent’s agents in East
London.
[12] Putter was of the
view that the LCD screens were dutiable. He referred the question of
the tariff applicable to these items
to his head office, which
determined that the screens were incomplete reception apparatus for
television sets, attracting customs
and
ad valorem
duty. They
were classified under tariff heading 8528.21.30. This classification,
it was common cause, constituted a determination
in terms of s
47(9)(a)(i)(aa)of the Act ('the LCD determination'). Plasmaview duly
amended the tariff heading under which these
screens became subject
to duty by submitting correcting vouchers in respect of the eight
consignments.
[13] While importing LCD
screens, Plasmaview also imported 11 consignments of plasma screens.
Its agent requested Pool, a tariff
specialist employed at that time
at the Commissioner's head office, to determine the correct tariff
applicable to these screens.
Pool concluded on 20 December 2005 that
the plasma screens were 'reception apparatus for television' and
ought to be cleared under
tariff heading 8528.21.20.
[14] This tariff heading
reads:
Head-ing
Sub-Heading
CD
Article
Description
Statistical
Unit
Rates
of Duty
Reference
General
EU
SADC
85.28
8528.2
8528.21
.10
.20
2
5
Reception
Apparatus for Television, Whether or Not Incorporating
Radio-broadcast Receivers or Sound or Video Recording or
Reproducing Apparatus; Video Monitors and Video Projectors:
*
Refer to General Rebates of Customs Duties and Fuel Levy
460.16
Temporary Rebates of Customs Duties
*
Refer to Ad Valorem Excise Duties from Page 691
▬
Video
monitors:
=
Colour:
With
a screen size exceeding 3m x 4...........
-
With a screen size not exceeding 3 m x 4 m
u
u
free
25%
free
22%
free
free
A1/1/1273
w.e.f.
1/1/05
[15] Pool added that it
was the view of his office that 'television monitors are video
monitors' and that 'television receivers
incorporating screens . . .
qualify as video monitors’. He motivated his determination in
part as follows:
'CLASSIFICATION:
To qualify as a television set, a
video monitor must either incorporate a tv tuner or be otherwise
designed for completion into
a television set. No evidence of this
nature has been presented by your office. Classification within TH
8528.21.20 cannot be challenged
on the basis of the available
information.
It should be noted that it is in any
event the position of this office, in line with the Explanatory Note
to heading 85.28, that
television monitors are video monitors and
would qualify for entry under rebate item 460.16, providing that they
comply with all
the other requirements of the rebate item. EN 85.28
reads in pertinent part: "This heading covers television
receivers (including
video monitors and video projectors)" . . .
. The meaning of this syntax could hardly be plainer: included under
television
receivers are video monitors and video projectors.
. . . .
HOLDING
TH8528.21.20 applies to the goods at
issue. They are admissible under rebate item 460.16 insofar as they
comply with all the other
requirements of this rebate item.
Tariff Determination
Tariff Code 8528.21.20/460.16
Determination
Reception apparatus for television,
whether or not incorporating radio-broadcast receivers or sound or
video recording or reproducing
apparatus; video monitors and video
projectors: Video monitors: Colour: With a screen size not exceeding
3m x 4m Video monitors:
Provided that a certificate from the South
African Bureau of Standards is presented at the time of entry that
the video monitors
have more than 600 resolution lines.
Description
Plasma screens (42 inch) not
incorporating tv tuners: PV 4201 S and PV 4201
. . . .'
[16] By virtue of this
determination, these screens qualified for a full rebate of duty
under rebate item 460.16. Pool’s advice
was sent to the
respondent’s clearing agents by way of an e-mail on 3 January
2006. Plasmaview then applied to the Controller
at East London on 5
January 2006 for leave to substitute the bills of entry of the LCD
screens to reflect tariff heading 8528.21.20
rather than 8528.21.30,
in order to qualify for the full rebate. This request was granted on
13 March 2006 subject to the payment
of penalties.
[17] It must be
emphasised that the plasma screens to which Plasma 1 applied were
imported, as the LCD screens had been up to that
time, without TV
tuners. Upon receiving Pool’s determination, Plasmaview
arranged with the manufacturer in Korea to fit both
the LCD as well
as the plasma screens with TV tuners, so that they were imported as
fully assembled television sets. The assembled
sets were imported
from January 2006. The full rebate was claimed under rebate item
460.16 as before.
[18] Pool’s view
that television receivers were screens that without tuners qualified
as video monitors for a full rebate
was not uncontroversial and was
debated with him by his colleagues. On 27 July 2006, Pool amended the
'Law and Evidence' portion
of 'Plasma 1'. This document is 'Plasma
2'. In essence, Pool changed his stance that television receivers
could be classified under
tariff heading 8528.21. This change in his
approach was not communicated to Plasmaview until October 2006.
[19] The determination
made on 20 December 2005, identifying the applicable tariff heading
as 8528.21.20 for screens that had not
been equipped with TV tuners,
was not affected by Pool's amended comments.
[20] During May 2006,
unaware of Pool’s original determination and unaware of 'Plasma
2', Ms Spies of the SARS PCI in Johannesburg
began an inspection and
audit process into Plasmaview’s imports of television sets and
the possible underpayment of duty
and tax in respect thereof. These
imports came to Spies' notice as part of an ongoing investigation
into imports of television
sets generally, when the repayment claims
lodged by the respondent with the Controller in East London after
Pool’s determination
were inspected.
[21] Suspecting that duty
had been underpaid, Spies telephoned a Plasmaview representative to
inform her of the inspection and pending
audit and to request
relevant documentation from the company. This call was made on 23 May
2006. The discussion was confirmed by
e-mail the same day. The
respondent provided the documentation Spies had called for.
[22] Further literature
on the screens was requested in writing on 9 June 2006. Some of it
was delivered to Spies the next day.
The balance was to be supplied
at a personal meeting between Spies and Plasmaview's representatives.
This meeting was held on 5
July 2006. Spies informed the respondent
of her prima facie
view that duty had been
underpaid. Respondent handed a copy of 'Plasma 1' to Spies, placing
reliance upon this document for the
proposition that complete
television sets could be imported under full rebate of duty.
[23] On 29 September
2006, after having discussed the respondent’s importation of
television sets with her colleague Lester
Millar, and having been
provided with a copy of 'Plasma 2', Spies served a notice of
intention to demand outstanding duties on
Plasmaview, based upon the
prima facie
evidence in her possession. This
notice invited the company to make representations in respect of the
alleged liability for underpaid
duty. On 2 October 2006, Plasmaview
reacted to Spies' notice by letter, placing reliance on Pool's
original determination, Plasma
1, which was annexed to the letter
together with the LCD determination.
[24] On 5 October 2006,
the customs supervisor of East London gave notice to Plasmaview of
his intention to revoke the authorisation
to present substituted
bills of entry relating to the LCD screens because of the fact that
the Johannesburg PCI Office had discovered
that the imported screens
had been declared under the incorrect tariff and did not qualify for
a rebate. Plasmaview was invited
to make representations before 3
November 2006 why this step should not be taken.
[25] A meeting on 4
October 2006 followed at which the respondent was provided with a
copy of 'Plasma 2'. On 23 October 2006, Plasmaview,
through its
attorneys, gave formal notice in terms of s 47(9)(e), read with s
96(1)(a)(i) of the Act, of its intention to appeal
against 'the
determination' of 27 July 2006, which it had identified as the cause
of the demand for underpaid duties. At the same
time, representations
were made to the Commissioner's Pretoria office in an effort to
persuade the latter to abandon the claim.
[26] Spies was unaware of
the submissions made to the Pretoria office. She issued the schedules
reflecting the claim for underpaid
duties and tax on 9 November 2006
and had them delivered on 13 November 2006.
[27] Although the
respondent had delivered its notice of appeal and its representations
to SARS in October 2006, almost a year passed
before the review, the
appeal and the application for a declaratory order were launched in
one application. Negotiations between
the parties conducted prior to
litigation had come to naught.
[28] The court below
upheld the respondent's contention that 'Plasma 2' was a
determination, constituted unfair administrative action
and granted
the orders referred to above. The commissioner challenges these
findings and contends that 'Plasma 2' is no determination
at all, but
merely an amendment of the motivation that Pool provided in 'Plasma
1'. The Commissioner adopts the stance that the
claim for underpaid
duties is not based upon 'Plasma 2' but upon the schedules produced
by the PIC team.
Is 'plasma 2' a
determination?
[29] A determination for
purposes of Chapter V of the Act is the end result of the
classification of imported goods under the correct
tariff heading:
Colgate Palmolive (Pty) Ltd v Commissioner,
South African Revenue Service
2007 (1) SA 35
(N) para 1;
Commissioner, South African
Revenue Services v Komatsu Southern Africa (Pty) Ltd
2007
(2) 157 (SCA) para 8 and the authorities there cited.
[30] The provisions of
Chapter V of the Act were summarized by Cloete JA in
Commissioner,
South African Revenue Service v Trend Finance (Pty) Ltd & another
2007 (6) SA 117
(SCA) para 5:
‘
Chapter V
deals with clearance of goods and liability for payment of duties.
Every importer of goods is obliged in terms of s 38(1)
to make due
entry of those goods in terms of s 39. That latter section requires
the person entering any imported goods for any
purpose to deliver a
bill of entry to the controller in the prescribed form; to declare
that the particulars contained in the bill
of entry are correct; and
to pay all duties due on the goods. Section 40(1) provides that no
entry shall be valid unless the true
value of the goods on which duty
is leviable or which is required to be declared under the provisions
of the Act, has been declared;
a correct invoice has been produced to
the controller in the case of goods consigned to any person in the
Republic; and the correct
duty has been paid. Section 44(6)(c)
provides that in all cases except those specifically mentioned, the
liability for duty on
any imported goods is that of the importer or
owner of such goods (or any person who assumes such liability for any
purpose under
the provisions of the Act). Section 44(10) provides
that any duty for which any person is liable in terms of s 44 shall
be payable
upon demand by the Commissioner. Section 47 provides that
duty shall be paid on all imported goods in accordance with the
provisions
of Schedule 1.’
[31] 'Plasma 1'
identifies, through the accepted process of classification –
see
International Business Machines SA (Pty)
Ltd v Commissioner for Customs and Excise
1985
(4) SA 852
(A) at 863F–864C – the heading under which the
imported screens should be classified. 'Plasma 2' differs from
'Plasma
1' only in respect of the amended comment prepared by Pool
under the heading 'Law and Analysis', in which he suggests that a
plasma
screen or a LCD screen incorporating a TV tuner could '…
never be regarded as a video monitor', and could not qualify for
a
rebate under item 460.16. The tariff determination made in respect of
the screens (without tuners) in December 2005 was expressly
not
altered by the amended comment. The date of the original
determination was not affected and the document specifies that it
(still) applies to plasma screens not incorporating TV tuners.
[32] 'Plasma 2' is
therefore no tariff determination. Once this fact is established, it
is clear that the claim for underpaid duties
does not, and could not,
arise from the amended comment prepared by Mr Pool.
The review of 'Plasma
2'
[33] As 'Plasma 2' is not
a determination, it is not a decision capable of being reviewed, nor
can an appeal be lodged in terms
of s 47(9)(e) against its contents.
The court below
erred in this regard. Counsel for
the respondent was constrained to concede during argument that the
high court's findings could
not be supported.
The importation of
complete TV sets
[34] 'Plasma 1' was
prepared at a stage at which the respondent imported screens without
TV tuners, with specific reference to plasma
screens. Section
47(9)(a)(iii) of the Act reads:
'Any determination made under this
subsection shall operate –
(aa) only in respect of the goods
mentioned therein and the person in whose name it is issued…'
[35] It is common cause,
as I have said, that the respondent, once it received 'Plasma 1',
imported both LCD and plasma screens
with TV tuners already fitted by
the Korean manufacturer. It therefore began to import complete TV
sets.
[36] While screens
imported without tuners were at the time correctly classified under
tariff heading 8528.21.20, qualifying for
a full rebate under rebate
item 460.16 – see
CSARS v LG Electronics
(428/09)
[2010] ZASCA 79
(28 May 2010) –
the determination fell away once the nature of the imported item
changed. Not only did 'Plasma 2' therefore
not amend the earlier
determination, it simply did not apply any longer to the respondent’s
imports once the tuners were
fitted prior to shipment of the sets to
South Africa. This fact was overlooked in the judgment appealed
against.
The schedules prepared
by the PIC
[37] Ms Spies prepared
two schedules relating to bills of entry submitted by the respondent
in respect of the screens imported during
2005 and 2006. The
schedules were prepared in the exercise of the powers granted to the
appellant by section 47(9)(a) and 47(11):
'(9) (a) (i) The Commissioner may in
writing determine-
(aa) the tariff headings, tariff
subheadings or tariff items or other items of any Schedule under
which any imported goods, goods
manufactured in the Republic or goods
exported shall be classified; or ….
(11) (a) Notwithstanding the
provisions of subsection (10), any determination made under
subsection (9) (a) as a result of or during
the course of or
following upon an inspection of the books, accounts and other
documents of an importer, exporter, manufacturer
or user of goods,
shall, subject to the provisions of section 44(11)(c), be deemed to
have come into operation in respect of the
goods in question entered
for the purposes of this Act two years prior to the date on which the
inspection commenced.
(b) The expression "inspection of
any books, accounts and other documents", or any other reference
to an inspection in
this Act shall be taken to include any act done
by an officer in the exercise of any duty imposed or power conferred
by this Act
for the purposes of the physical examination of goods and
documents upon or after or in the absence of entry, the issue of stop
notes or other reports, the making of assessments and any pre- or
post-importation audit, investigation, inspection or verification
of
any such books, accounts and other documents required to be kept
under this Act.'
[38] The schedules
prepared by Spies are determinations as intended in the Act.
Alternative relief
[39] Once it was clear
that the appeal had to succeed, respondent’s counsel sought to
rely on alternative relief envisaged
during the hearing before the
court below when Plasmaview was granted an amendment of the notice of
motion. Prayer 5 was amended
to include the words 'Annexures FA 17
and FA 18 [Spies' schedules] are hereby set aside and'
before
the original prayer 'it is declared that the amounts demanded by the
respondent [the present appellant] from the applicant
[the present
respondent] in Annexures “FA 17” and “FA 18”
to the founding affidavit, being respectively
R8 924 191,69 (together
with interest thereon) and R 6 591 987,90 (together with interest
thereon), are not owing by the applicant
to the respondent.' Although
the amendment was granted
'provisionally',
the court below couched its declaratory order in the
form in which it was worded originally.
[40] The Commissioner’s
reliance on the schedules was introduced into the court below by an
additional affidavit filed without
opposition. Although Plasmaview
did file a further affidavit in reply to the additional affidavit,
the schedules were not dealt
with at all.
[41] Faced with these
difficulties, Plasmaview's counsel requested the indulgence of a
postponement in order to supplement the papers
to enable it to deal
with the schedules. The Commissioner objected. The schedules were not
disputed in the court below, either
in respect of the correctness of
the calculations of duty and tax, or in respect of the validity of
the decision to prepare them.
There is no explanation before this
court why, if these aspects were in issue, the dispute was not
ventilated before and why available
evidence was not placed on
record. There is consequently no basis upon which a postponement
could be granted.
[42] Finally, Plasmaview
argued that the commissioner does have a discretion whether or not to
apply the provisions of s 47(11)
once an underpayment of duty is
established. It sought a postponement for the purpose of making
representations to the appellant
to persuade him not to exercise the
powers given to him in terms of this section. Again, the Commissioner
opposed the request.
[43] From the wording of
the section quoted above it would appear prima facie that the
appellant has no discretion that would allow
him not to apply its
provisions. No postponement could alter this fact. But even if the
appellant could exercise a discretion not
to apply s 47(11), this
issue was not raised in the court below. There is no basis upon which
the appeal could be postponed to
accommodate a request to make
further representations at this stage. The remarks by Schutz JA in
McCarthy Retail Ltd v Short Distance Carriers
CC
2001 (3) SA 482
(SCA) paras 27 to 33 are
applicable in this case. The postponement was sought at the last
moment after the appeal had been conceded;
no satisfactory reasons
were advanced for the lateness of the hour at which it was sought;
and the Commissioner has a right to
have the appeal disposed of. The
principal reason for refusing the postponement is the fact that it
was sought in order to allow
the respondent to create a cause of
action where none existed when the appeal was heard. The request for
a postponement could therefore
not be entertained.
[44] 1. The appeal is
allowed with costs, including the costs of two counsel.
2. The order of the court
below is set aside and replaced with the following:
'The application is
dismissed with costs, including the costs of two counsel.'
___________________
E BERTELSMANN
ACTING JUDGE OF APPEAL
APPEARANCES:
For appellant: C Puckrin
SC
T Khatri
Instructed
by:
The State Attorney,
Pretoria
The State Attorney,
Bloemfontein
For
respondent: J P Vorster SC
Instructed
by:
Wolvaardt Inc, Pretoria
Matsepes Inc,
Bloemfontein