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[2019] ZAGPPHC 61
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Ellies Electronics (Pty) Ltd v South Africa Revenue Services (47899/2017) [2019] ZAGPPHC 61; 85 SATC 457 (7 March 2019)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
CASE NO.:
47899/2017
7/3/2019
In the matter between:
ELLIES ELECTRONICS (PTY) LTD
Applicant
and
THE SOUTH AFRICAN REVENUE SERVICE
Respondent
JUDGMENT
VAN DER WESTHUIZEN, J
[1] This
is an appeal in terms of the provisions of section 47(9)(e) of the
Customs and
Excise Act, 91 of 1964 relating to a determination by the
respondent of the applicable tariff in respect of goods imported by
the
applicant. Although it is termed an appeal, in essence it
is a determination of the applicable tariff
de
novo
by the court.
[1]
[2] The respondent seeks an
order that the late filing of an opposing affidavit together
with an
affidavit by an expert be condoned. The applicant does not
oppose that application. In my view cogent reasons
have been
provided for the delay and the late filing is condoned.
[3] The
principles of determination of tariff classification are common cause
between
the parties, well settled and are trite.
[2]
The rules for the interpretation of the Harmonised System (2012
version) apply. It need not be restated.
[4] The
process encompasses a three stage process: first, interpretation,
i.e. ascertainment
of the meaning of words used in the headings and
relevant section and chapter notes on the goods concerned; second,
consideration
of the nature and characteristics of those goods; and,
third, the selection of the most appropriate heading in Schedule 1 in
respect
of those goods.
[3]
[5] In
determining the nature and characteristics of the goods in question,
it is trite
that the classification must be based upon the product as
presented at the time of importation.
[4]
The product presented as a whole must be classified.
[5]
The goods are characterised by their objective characteristics.
[6]
Further in this regard, it was held in
L
G Electronics, supra,
that the primary
design and use carries the most persuasion.
[6] The applicant imported
two products, both are referred to as “Solar Panel Light
Kit”.
The only difference being that the one includes 4 lights whilst the
other only 2. Nothing turns on this
difference.
[7] The products were
imported during 2015 and the tariff determination occurred in 2015.
As recorded earlier, the 2012 version of the Harmonised System
applies.
[8] The main dispute
between the parties relates to the nature and characteristics of
the
product, and hence, which heading should apply in determining the
appropriate tariff.
[9] The applicant contends
that the product, in its most rudimentary form and in essence,
and
for that matter the essential characteristic thereof, is a power unit
for generating electricity to be utilised in a 12 volt
or 5 volt
charge. On the other hand, the respondent contends that the
product in essence is a composite product, the primary
design and use
amounting to a solar light kit.
[10] It is common cause that, as
presented, the product featured as follows:
(a)
The
product was contained in a packaging which bore,
inter
alia
the wording, “Solar Panel
Light Kit”. Furthermore, there are depictions on the
packaging that indicate LED Lights,
240 Lumens, 5-6 hours of light,
USB port, solar power, DIY Intermediate and Emergency Saving;
(b)
Also
depicted are light bulbs, a unit, a solar panel and a tent that
appears to be illuminated on the inside;
(c)
Further
wording appears that indicate “Ideal for camping, emergency
lighting, cellphone charging, reading, etc.”;
(d)
Inside
there were three main components, i.e. a solar panel, a power unit
and a set of lights;
(e)
Connecting
cables were included;
(f)
A
technical data sheet was included.
[11] The three main components are
interdependent on one another. None could operate on its
own.
To an extent the power unit, once charged, could be utilised on its
own until the charge is depleted. Thereafter,
the power unit
has to be re-connected to the solar panel to be recharged. The
power unit had no charge as presented.
It required connecting
to the solar panel to be charged.
[12] It is further common cause between
the parties that the product is mobile.
[13] The applicant contends that
although the product consists of three main parts, the power unit,
which is the middle part once connected, is designed and functions as
a generator. As a generator, it converts the energy
received
from the solar panel to Direct Current, either 12 Volt or 5 Volt.
The contention of the applicant is further that
as such, the power
unit is the essential part of the product.
[14] It is further submitted by the
applicant that attachments such as the lights, the cellular phone,
DVD players and the like are just that. It is for the end user
to decide whether to use any of the possible attachments should
he or
she so wish. It is further contended by the applicant that the
attachments are not part of the design or functionality of
the power
unit. It is conceded by Mr Barnard, who appeared on behalf of
the applicant, that the power unit is dependent upon
the connecting
thereof to the solar panel to be charged initially and after
depletion of the charge, to be recharged. Mr
Barnard further
submitted that after the power unit is charged, the power unit acts
as a generator. The design and functionality
of the product, so
it is contended by the applicant, is that of a solar power generator
used to generate, from solar energy to
DC, and store this energy
source.
[15] The applicant submits that the
design and functionality of the product being that of a generator,
and applying the general rules of interpretation of the Harmonised
System, the product tariff should be determined with reference
to
Tariff Heading 85.01 – Electric motors and generators
(excluding generating sets) of Part 1 of Schedule No 1 to the Customs
and Excise Act.
[16] However, the respondent determined
the tariff heading with reference to Heading 9405.40.21 of
Schedule
1, as “Lamps and lighting fittings, including searchlights and
spotlights and parts thereof not elsewhere specified
or included:
Other electric lamps and lighting fittings: Other, containing light
emitting diodes (LED) as source of illumination”.
[17] The point of dispute is a narrow
one. The issue is whether the product is merely a generator,
or, a source of illumination as described in Tariff Heading
9405.40.21, as contended for by the respondent.
[18] In considering this dispute, what
has to be determined is whether the product can be described
having
an essential part, or whether the product has no essential part but
is made up of different components, all having no essential
characteristics.
[19] It is to be noted that the product
manual or data sheet, supplied by the manufacturer and included
in
the packaging, describes the design and use or purpose as:
“
It (s)erves as a multi-function mini
solar home lighting system. On a fully charged battery, the
unit is mainly used to provide
lighting during power failures,
camping, travelling and many outdoor activities where light may be
needed, ideal for emergencies.
Other uses are a backup power charger for mobile phones, cameras,
MP3 players, PSPs, iPods etc.”
[20] In view of the foregoing, the
respondent submits that the primary design and use of the product
is
that of a light source. On a purposive reading of the foregoing
quote, the primary design and use is that of a solar lighting
system. The use as a backup power charger is clearly a
secondary use.
[21] The product as presented, and as
described in the product manual or data sheet supplied therewith,
is
in my view clearly aimed at supplying an alternative light source.
It is irrelevant for what the end user may use the
product.
[22] Further in my view, had the
product as presented not contained the lights, the approach adopted
by the applicant and as contended for on its behalf, may have been
persuasive. However, the inclusion of the lights, as part
of
the product, cannot be ignored as submitted by Mr Barnard. The
inclusion of the lights have a purpose. That purpose
is clearly
defined by the combination of the three main components in the
package and as defined in the product manual or data
sheet. The
primary design and use of the product is a solar panel light kit.
[23] The primary design and use of the
product being a solar power panel light kit, the product as
presented
cannot fall under Tariff Heading” 85.01 “
-
Electric motors and generators (excluding generating sets)”
of Part 1 of Schedule No 1 to the Customs and Excise Act.
[24] The more appropriate Tariff
Heading, in my view, is that of “9405.40.21” of Schedule
1, “
Lamps and lighting fittings, including searchlights and
spotlights and parts thereof not elsewhere specified or included:
Other
electric lamps and lighting fittings: Other, containing light
emitting diodes (LED) as source of illumination”.
[25] The experts called on behalf of
the parties appear to agree in general as to the characteristics
of
the product. However, Mr Reyneke, on behalf of the applicant,
makes a sharp right turn after agreeing in principle with
Mr Wozniak,
called on behalf of the respondent, without clearly explaining his
diversion. Mr Reyneke’s evidence, in
so far as it
disagrees with that of Mr Wozniak, cannot be accepted. Mr
Wozniak convincingly argues that the product is primarily
a solar
panel light source. I accept his evidence.
[26] It follows, in my view, that the
appropriate and correct determination, applying the general
rules of
interpretation of the Harmonised System, of the Tariff Heading is
that of “9405.40.21” of Schedule 1, “
Lamps and
lighting fittings, including searchlights and spotlights and parts
thereof not elsewhere specified or included: Other
electric lamps and
lighting fittings: Other, containing light emitting diodes (LED) as
source of illumination”
.
[27] On the issue of costs, the
respondent employed senior and junior counsel, whilst the applicant
employed a senior junior counsel. Without denigrating Mr
Barnard’s abilities, in my view the employ of two counsel
was
necessary.
I grant the following order:
1.
The
application is dismissed with costs, such costs to include the costs
consequent on the employ of two counsel;
2.
The
costs of the expert, Mr Wozniak, to be included in the costs of the
respondent to be paid by the applicant.
C J VAN DER WESTHUIZEN
JUDGE OF THE HIGH COURT
On behalf of
Applicant: JM BARNARD
Instructed
by:
KAMPEL KAUFMANN ATTORNEYS
On behalf of
Respondent: JA MEYER SC
WN MOTHIBE
Instructed by:
THE STATE ATTORNEY
[1]
Metmark (Pty) Ltd v Commissioner of Customs and Excise
1984(3) SA 892 (T) at 896C – 897B
[2]
Commissioner, South African Revenue Service v The Baking Tin
(Pty) Ltd
2007(6) SA 545 (SCA) at [5]
[3]
International Business Machines SA (Pty) Ltd v Commissioner for
Customs and Excise
1985(4) SA 852 (A) at 863- H
[4]
Commissioner, South African Revenue Service v L G Electronics SA
(Pty) Ltd
2012(5) SA 439 (SCA)
[5]
The Heritage Collection (Pty) Ltd v Commissioner, South African
Revenue Service
2002(6) SA 15 (SCA) at 21C-D
[6]
[6]
The Baking Tin, supra
at 548G-H