Commissioner, South African Revenue Services v Komatsu Southern Africa (Pty) Ltd

• Jurisdiction: South Africa
• Judgment Date: 26 September 2006
• Citation: 2007 (2) SA 157 (SCA)

Commissioner, South African Revenue Services v Komatsu Southern Africa (Pty) Ltd
2007 (2) SA 157 (SCA)

2007 (2) SA p157

Citation	2007 (2) SA 157 (SCA)
Case No	448/05
Court	Supreme Court of Appeal
Judge	Harms JA, Brand JA, Cloete JA, Theron AJA and Cachalia AJA
Heard	September 4, 2006
Judgment	September 26, 2006
Counsel	C E Puckrin SC (with T Khatri) for the appellant.; E W Dunn SC (with J M Barnard) for the respondent.

Flynote : Sleutelwoorde B

Revenue — Customs and excise — Classification of articles for customs duty — Decisive criterion objective characteristics and properties of goods at time of presentation for customs clearance — Machine to be classified as complete machine if having essential character of complete C machine — Essential character determined by having regard to purpose for which machine designed, to which ascertainment of principal function of machine linked — Customs and Excise Act 91 of 1964, Schedule 1.

Headnote : Kopnota

The respondent appealed to the High Court against the appellant's tariff determination in respect of a machine imported by D the respondent. The appellant determined that the machine fell to be classified as a front-end shovel loader under Schedule 1 to the Customs and Excise Act 91 of 1964, with the consequence that the importation of the machine attracted customs duty. It was common cause that on importation the machine was incomplete since it came without an attachment such as a shovel or bucket. The evidence of the appellant's E expert was that the principal function of the machine was that of a wheel-loader fitted with a shovel because it had been designed for use with a shovel or bucket. Respondent's experts testified that absent such an attachment it was impossible to determine the principal function of the machine. The High Court set aside the appellant's determination, finding that on importation the machine lacked an essential characteristic of a front-end shovel loader, namely, a shovel F or a bucket. On appeal against the decision of the High Court, the appellant contended that although the machine was incomplete on importation it qualified by virtue of its inherent nature and characteristics as a front-end shovel loader. The respondent's response was that because the machine had not been fitted with a bucket, it lacked a key characteristic of a front-end shovel loader, G and could accordingly not be classified as such.

Held, that the decisive criterion for the customs classification of goods was the objective characteristics and properties of the goods as determined at the time of their presentation for customs clearance. While the subjective intention of the designer and importer were generally irrelevant, in certain circumstances, they might be relevant in determining the nature, characteristics and H properties of the goods. (Paragraph [8] at 160F - 161A.)

Held, further, that under General Interpretative Rule 2(a) the machine had to be classified as the complete machine if it had the essential character of the complete machine. The essential character of the machine was in turn determined by having regard to the purpose for which the machine was designed, to which was linked the ascertainment of the principal function of the machine. I (Paragraph [13] at 162D.)

Held, further, that the evidence of the respondent's experts was not convincing since they down-played the importance of the principal design parameters of the machine and failed to recognise that the attachments were ancillary to the machine in that they had been designed to fit the machine. The Court a quo had erred in not accepting the evidence of the appellant's expert and J

2007 (2) SA p158

in concluding that the machine did not have the essential characteristics of a A front-end shovel loader. (Paragraph [14] at 162F - G.) Appeal upheld.

Cases Considered

Annotations

Reported cases

African Oxygen Ltd v Secretary for Customs & Excise 1969 (3) SA 391 (T): referred to B

Autoware (Pty) Ltd v Secretary for Customs and Excise 1975 (4) SA 318 (W): distinguished

Commissioner for Customs and Excise v Capital C Meats CC (in Liquidation) and Another 1999 (1) SA 570 (SCA): referred to

International Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise 1985 (4) SA 852 (A): dictum at 863G - H applied

National Screenprint (Pty) Ltd v Minister of Finance 1978 (3) SA 501 (C): referred to

Secretary for Customs and Excise v Thomas Barlow & Sons Ltd 1970 (2) SA 660 (A): referred to

The Heritage Collection (Pty) Ltd v D Commissioner, South African Revenue Service 2002 (6) SA 15 (SCA): referred to.

Statutes Considered

Statutes

The Customs and Excise Act 91 of 1964, Schedule 1, General Interpretative Rule 2(a): obtainable from the Office of the Commissioner for Customs and Excise. E

Case Information

Appeal from a decision in the Durban and Coast Local Division (Jappie J). The facts appear from the reasons for judgment.

C E Puckrin SC (with T Khatri) for the appellant.

E W Dunn SC (with J M Barnard) for the respondent.

In addition to the authorities referred to by the Court, F counsel for the parties referred to the following:

Falkiner v Whitton 1917 AC 106 (PC)

Kommissaris van Doeane en Aksyns v Mincer Motors Bpk 1959 (1) SA 114 (A) at 121D - F

Proto International (Edms) Bpk v Kommissaris van die Suid-Afrikaanse Inkomstediens (CPD, case No 7376/98) at G 7 - 9, 12

RC Drilling (Pty) Ltd v Commissioner of the South African Revenue Service (WLD, case No 18184/2000) at 6 - 12, 15 - 16.

Cur adv vult. H

Postea (September 26).

Judgment

Theron AJA:

[1] This appeal concerns the classification of goods in terms of Schedule 1 to the Customs and Excise Act 91 of 1964 for purposes of I customs duty.

[2] The respondent, Komatsu Southern Africa (Pty) Ltd, is a manufacturer of heavy equipment and the importer of the machine at the centre of this dispute, namely, a Komatsu W120 - 3A wheel loader. The appellant J

2007 (2) SA p159

Theron AJA

is the Commissioner for the South African Revenue...