African Oxygen Ltd v Secretary for Customs and Excise

• Jurisdiction: South Africa
• Judge: Colman J
• Judgment Date: 14 May 1969
• Court: Transvaal Provincial Division
• Citation: 1969 (3) SA 391 (T)

F Colman, J.:

This application arises out of a dispute between the applicant and the respondent with regard to the tariff item in Part I of Schedule 1 of the Customs and Excise Act, 91 of 1964, which was properly applicable to certain equipment imported by the applicant from time to time during the years 1966, 1967 and 1968. The equipment consisted in G most instances of what are called Vacuum Insulated Evaporators. They are referred to commercially as 'V.I.E.s', and I shall in this judgment make use of that abbreviation. In each of a number of other instances what was imported was equipment which, although not in itself constituting a 'V.I.E.', was capable of being used, and was intended by H the applicant to be used, as part of a 'V.I.E.'. In argument these items were referred to as 'incomplete V.I.E.s' or 'incomplete items' and I shall for convenience adopt that language; it is necessary, however, to bear in mind that such a description can be a misleading one because as will later appear, it begs or tends to beg one of the questions which is in dispute between the parties.

The 'V.I.E.s' with which I am concerned are designed and used to serve the needs of industries and hospitals which use substantial quantities of oxygen, nitrogen and argon in gaseous form. When in this judgment

Colman J

I refer to oxygen alone it may be taken that what I say would be applicable also to the two other fluids which I have mentioned, and possibly to others as well.

It is possible for a hospital or factory which is in constant or A intermittent need of the gas oxygen to buy and store it as a gas in suitable containers under heavy pressure. There are, however, advantages in acquiring the oxygen in liquid form and keeping it in an apparatus which will convert it to a gas and deliver that gas, in suitable quantities and at suitable pressure and temperature, as it is required.

B A 'V.I.E.' is such an apparatus and its nature and operation may be briefly described in the following terms: There is a double-walled double-bottomed container for the liquid oxygen, made of stainless steel and capable of withstanding substantial pressure from within. This component holds the liquid oxygen and it is insulated so as to maintain C that liquid at a low temperature. Through a pipe leading from this container the liquid oxygen is led into a coil known as a vaporising coil in which, through the exposure of the coil to heat, the liquid oxygen is vaporised. Some of the gas so created is led back into the container in order that the pressure necessary for the efficient working of the apparatus may be maintained. The rest of the gas passes through D another coil (called the superheating coil) in which its temperature is raised further to approximately that of the atmosphere, which is the temperature at which the gas is normally required for use, and from there it is led off to an outlet from which it is drawn for use as required. There are a number of valves, including a self-acting valve which automatically maintains the desired pressure in the container component and elsewhere, and including also some safety valves. There E are, in addition, some gauges and filters. In some of the models with which I am concerned heat is transmitted to the vaporiser coil and superheating coil from an electrically heated immersion bath in which those coils are contained. In the other models the heat of the atmosphere to which the coils are exposed brings about the necessary F rise in temperature. What is achieved by the apparatus is that the liquid oxygen is stored with the minimum of unwanted vaporisation, and it is converted into gas at a pre-determined, automatically maintained, pressure for distribution to a pipe line from which it may be drawn off as required in the desired quantities and at a temperature appropriate for the use to which it is to be put.

G The liability of the importer for customs duty on the 'V.I.E.s' is determined, in pursuance of sec. 47 (1) of the Act, in accordance with the provisions of the First Schedule thereto. Part I of that Schedule is the relevant part, and it is the contention of the applicant that the appropriate heading is heading 84.17 which reads as follows:

'84.17

Machinery, plant and similar laboratory equipment, whether or not electrically heated, for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilising, pasteurising, steaming, drying, evaporating, vaporising, condensing or cooling, not being machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectrical.'

The duty payable is not determinable from the tariff heading. For that one must go to appropriate sub-heading which falls under it. But no difficulty arises in that regard as it is common cause that if the heading

Colman J

84.17 is the correct one the 'V.I.E.s' fall under sub-heading 84.17.90, with the consequence that they are duty-free items.

The respondent on the other hand contends that the appropriate tariff heading is heading 73.22, which reads:

'73.22

Reservoirs, tanks, vats and similar containers, for any A material, of iron or steel, of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment.'

Here, again, the choice of a sub-heading presents no problem. It is clear and undisputed that, if heading 73.22 is the correct one to apply, the 'V.I.E.s' fall under sub-heading 73.22.90 and are subject to customs duty.

B Lengthy affidavits have been filed on behalf of each of the litigants and I heard argument in support of each of their contentions. The essential difference between the parties, it seems to me, arises out of their respective approaches to the nature and function of a 'V.I.E.'. The respondent claims, correctly, that the commercial name of the apparatus is to be ignored when one is seeking to categorise it for C customs duty purposes. And he goes on to contend that essentially the apparatus is one for storing oxygen for use as required. The fact that most of it is stored as a liquid which is converted to a gas in the equipment is (so the argument goes) a feature subsidiary to the storage function, and heading 73.22 is, therefore, the appropriate one. The D applicant on the other hand argues that, although the apparatus is indeed one in which oxygen is stored for use, it is its conversion from a liquid to a gas which is the decisive feature and that heading 84.17 is, therefore, the appropriate one.

Unfortunately it is not permissible for me to resolve the dispute relating to the complete V.I.E.s (and still less the dispute about the E incomplete ones) by making a simple choice between these two approaches. I must have regard, in the first place, to the rules of interpretation which appear in Note VIII of the General Notes to Schedule 1 of Act 91 of 1964. I must have regard also to sec. 47 (8) (a) of the Act which provides:

F 'The interpretation of Part I of Schedule 1 shall be subject to the Explanatory Notes to the Brussels Nomenclature issued by the Customs Co-operation Council, Brussels, from time to time.'

There is a proviso to that sub-section which I need not quote because it is common cause that it has no application to the dispute before me.

G The Notes referred to in sec. 47 (8) (a) (which I shall refer to as the 'Brussels Notes') constitute a formidable body of interpretative rules and illustrations, and I was referred in argument to a number of passages therein. I shall make reference in due course to some of those. But I shall cite, firstly, some of the interpretative rules which appear in Note VIII of the Schedule to the statute. Rule (1) reads:

'The titles of sections, chapters and sub-chapters are provided for ease H of reference only; 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, provided such headings or notes do not otherwise indicate, according to paras. (2) to (5) below.'

And the material portion of Rule (3) reads as follows:

'When for any reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a)

The heading which provides the most specific description shall be preferred to headings providing a more general description (sub-headings being disregarded).

Colman J

(b)

Mixtures and composite goods which consist of different materials or are made up of different...