Commissioner of Customs and Excise v Randles Brothers & Hudson Ltd

• Jurisdiction: South Africa
• Judge: De Wet CJ, Watermeyer JA, Tindall JA, Centlivres JA and Feetham JA
• Judgment Date: 20 May 1941
• Citation: 1941 AD 369
• Court: Appellate Division

De Wet, C.J.:

Sec. 1 of the Customs Tariff and. Excise Amendment Act, 36 of 1925, provided for the levying of customs duties on goods imported into the Union at the rates set forth the in Schedule to the Act. Sec. 2, as amended b Act 44 off 1936, provided that the goods described in Class XV of the Schedule would, subject to such conditions and regulations as the Minister might prescribe be admitted into the Union under rebate of customs duties to the extent specified in the respective items of the said class I provided such goods were imported for use only in the manufacturing industry mentioned in each instance. Amongst the items mentioned: in Class XV was item 359, with which the present case is concerned, and which, as amended by subsequent Acts, read as follows in 1935: -

"359. Shirt, collar and pyjama, suit manufacturing industries -

Piece goods of cotton or wool or mixtures thereof, buttons, separable metal slide fasteners, woven labels and tabs, and pyjama girdles.

Duty rebated..... The whole duty."

Regulations were prescribed by the Minister laying down the conditions under which registered importers or registered manufacturers could import these goods under rebate, the conditions under which the registered importer could transfer the goods to a registered manufacturer to be made up into shirts or pyjamas, etc., and the conditions to be observed in order to secure that the goods were so used. The regulations in force in 1935 were those published under, Government Notice No. 992 of the 20th July, 1934. Under these regulations the defendant company was registered as importers. Its practice was to import goods and then transfer them to a registered manufacturer to be made up into shirts or pyjamas for the benefit of the defendant. The goods were transferred under a form prescribed by the Regulations which was as follows: -

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"To the: Collector of Customs, ........................................... I/We certify that the undermentioned goods entered per Bill of Entry No. ...... date ...... under Class XV/ex Bond have been duly transferred to Messrs ............ Address ............................
	.............................................; Signature of Importer
Date ....................... Received in full the above-described goods which I hereby declare are to be used solely for the purpose specified in items ....... of the Customs Tariff.
	Signature of Manufacturer .......... Address .............. Date ................."

The registered manufacturer furthermore had to enter into a bond securing that all goods imported or received by him would be used solely for the purpose specified in the relative tariff item. The orders given by the defendant were on what is called the C.M.T. (Cut, make and trim) principle. They were on a printed form headed "C.M.T. Order No ......." contained the number of the bale imported and directed the manufacture to C.M.T such and such a number of shirts or pyjamas as the case may be at a price of so much per dozen. The evidence in this case showed that the C.M.T price charged by the manufacturers was a well recognised one, depending bit the nature of the material and the trade of the garments to be manufactured so that it was not necessary for the defendant and the manufacturers to settle the price in each particular case.

Act 25 of 1936 substituted a new sec. 2 for sec, 2 of the Act of 1925 which I need not set out in full as for the purposes of this case it is to the same effect as the amended sec. 2 to which I have already referred. The same Act also effected minor alterations in item 359 which, however, are not material in the present case. By Government Notice No. 940 of the 20th June, 1936, a new set of regulations was introduced. Under these regulations importers registered under the previous regulations were given to the 31st December,19363 to deal with goods falling under item 359 which had been shipped to them before the date of the publication

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of the new regulations or which were purchased or ordered for use in fulfilment of contracts entered into before that date. Such goods could be imported under rebate in order to be made into shirts or pyjamas by a registered manufacturer for the importer. After the 31st December, 1936, the position was governed by Regulations [*] 7, 8, and 9 which were as follows: (The Regulations were set out).

The form appended was in similar terms to the one under the former regulations, which I have already set out in full, save and except that in the receipt by the manufacturer the words "my own property" were inserted between the words "are" and "to be used".

The effect of these regulations was that a registered manufacturer could either import the materials required by him direct or obtain them from another registered manufacturer or from an importer. If he obtained them from the bonded warehouse of an importer a declaration in the appended form had to be completed. The declaration of transfer by the importer remained the same as under the previous regulations but the manufacturer had, in addition to the former declaration that the goods were to be used solely for the purpose specified in the relevant item of the Customs Tariff, to declare further that the goods were his own property. It would seem to follow that, when the declaration had been properly and truly completed i.e when the importer had transferred the ownership of the goods to the manufacturer, the importer would be released from liability to pay the duty.

After the publication of the new regulations the defendant wrote to the Collector of Customs at Durban on the 23rd July, 1936,

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asking whether they would be recognised as registered importers under rebate after the end of the year and if not whether they would be permitted to sell and transfer materials in bond to registered manufacturers for making into shirts, etc., and whether it would be in order for them to purchase the articles made from such materials. To this the following reply dated the 6th August, 1936, was received: -

"With reference to your letter, Shipping Department, of the 23rd ultimo, I have been instructed by the Commissioner of Customs and Excise as follows: -

You will not be recognised as registered importers under rebate after the 31st December, 1936. You will therefore not be permitted to transfer piece goods in bond to registered manufacturers for the purpose of making articles of clothing on your account.

You may sell and transfer materials in bond to registered manufacturers provided the sale is a genuine one and not a bogus sale intended to circumvent the regulations. In this connection. I have to draw your attention to the nature of the declaration the purchaser is required to make, that is that the goods received by him are his own property, Thereafter you may purchase shirts, etc., from the manufacturers."

In addition to this correspondence several interviews took place between officials of the defendant and of the Customs Department, the object of these interviews being found by the learned Judge in the trial Court to be the desire on the part of the defendant to obtain the view of the Department upon the full scope and intention of the regulations so that the defendant would be able to carry them out properly.

After the new regulations came into force the practice, adopted by the defendant was briefly as follows. It made arrangements with five registered manufacturers that any material required by the defendant to be made into shirts or pyjamas should be sold to the manufacturers at cost price. The manufacturers on their part to sell the shirts or pyjamas made from this material to the defendant. The price of the finished article to be the original cost of the material plus the cutting, making and trimming charge of the manufacturer. There was no obligation on the part of the manufacturer to pay for the material

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purchased by him until such time as the finished articles were delivered to the defendant. In pursuance of this arrangement the defendant from time to time transferred materials to one or other of the manufacturers, the declaration with the receipt as required by the regulations was completed by the defendant and the manufacturer and the material was accompanied by an invoice from the defendant debiting the manufacturer with the cost of the material. As a general rule prior to, but in some cages subsequent to, the date of the invoice an order was given by the defendants to the manufacturer specifying the nature of the articles which defendant wished to be made out of the material. From the 2nd February, 1937, until the 9th December, 1937, these orders were issued on the ordinary printed C. M.T forms specifying the charge per dozen for the cutting, making and trimming. From 9th December, 1937, until 8th March, 1938, the printed C.M.T forms were used but instead of the order reading "Please C. M. T." so many garments, the manufacturer was instructed to supply an approximate stated number of garments at a stated price per dozen for the cutting, making and trimming. From the 8th March, 1938, onwards indent forms were used in which the manufacturer was instructed to supply an approximate number of garments at a stated price per dozen. There were minor variations, for instance on the 8th and 9th March, 1938, indent forms were issued in respect of certain orders for which C.M.T forms had been issued months before and even in respect of orders which had been already partly fulfilled.

In respect of these transactions the plaintiff instituted action against the defendant for the sum of £638 7s. 1d customs duty and a further sum of £300 by way of penalty in terms of sec. 116 of the Customs...