Distell Limited v The Commissioner for the South African Revenue Services

• Jurisdiction: South Africa
• Judge: Webster J, Molopa J, Ebersohn AJ
• Judgment Date: 03 April 2009
• Docket Number: A.1274/06
• Court: North Gauteng High Court, Pretoria
• Hearing Date: 13 August 2008
• Citation: 2009 JDR 0337 (GNP)

Ebersohn AJ:

[1] In this matter the appellants appeal with leave of the court a quo against the whole of the judgment in terms whereof the appellants' application in the court a quo was dismissed with costs. In this judgment the first appellant will be referred to as

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"Distell", the second appellant as "SFW" and the first respondent as the "Commissioner".

[2] The court a quo made the following order:

"1.

The application is dismissed.

2.

Applicants are ordered to pay jointly and severally the costs of both first and second respondents on a party and party scale which costs are to include costs occasioned by the employment of two counsel."

[3] The appellants rely on various grounds in their notice of appeal and these grounds, summarised, read as follows:

a)

The court a quo erred in finding that the first appellant does not have locus standi in respect of Crown Premium ("Crown").

b)

The court a quo erred in finding that there was no justification for the joinder of the second applicant in order to obtain relief in the alternative in respect of Crown, because any such relief has become time barred.

c)

The court a quo erred in finding that the relief claimed in respect of Bernini Sparkling Grape, relating to a determination which was made in 1996, was time barred.

d)

The court a quo erred in finding that the 1996 determination relating to Bernini Sparkling Grape was not made in respect of the first applicant.

e)

The court a quo erred in holding that the wine coolers were classifiable under tariff item 104.15.50 prior to 18 February 2004.

f)

The court a quo erred in finding the applicable tariff heading to be TH22.06 "other fermented beverages" for the product could not fall under "other"; the reason being that the "fermented beverage" of the product is "wine of fresh grapes", which is covered by TH22.04.

g)

The court a quo erred in holding, on the authority of AM Moosa Group Ltd. v

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Commissioner SA Revenue Service 2003 (6) SA 244 (SCA), that the estoppel raised by Distell could not succeed.

h)

The court a quo erred in holding that the constitutional issue raised was premature, because, as the claim of Distell and SFW for refunds will only arise on the setting aside of the determinations of 13 October 2004, the unconstitutional deprivation by section 76B of the Act of such refunds could only arise in such event.

i)

Due to the findings of the court a quo the court a quo did not consider certain aspects which should have been considered and decided in the favour of Distell and SFW.

[4] The court a quo dealt with the facts in its judgment obviating the necessity of repeating everything again in this judgment and only the facts relating to the appeal will be dealt with.

[5] The only issue which falls to be decided in this appeal is the merits of the classification issue and if the appellants succeed on the merits, the orders which should be made to amend the Commissioner's (allegedly) incorrect determination. The following issues will therefore have to be considered by this Court:

a)

Distell's locus standi to challenge the 1995 determination given to SFW in respect of Crown.

b)

Whether, having regard to:

i)

Section 47(9) of the Act, as it read during 1995/1996, alternatively as it reads presently;

ii)

the common law, alternatively section 7(1) read with section 9 of the Promotion of Administrative Justice Act, 3 of 2000 ("PAJA");

the tariff determinations made by the Commissioner in 1995 and 1996 in respect of Crown and Bernini may now be impugned.

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c)

Whether the wine coolers, prior to the amendment of Schedule 1 Part 2A on 18 February 2004, attracted payment of specific excise duty in terms of Tariff Item 104.17.15.

[6] In order to determine the aforesaid, a finding on the true nature and characteristics of the wine coolers and, in particular, a finding on whether water is, for classification purposes, to be regarded as a "non-alcoholic beverage", is to be made. With regard to the belated attack on the constitutionality of section 76B of the Act, resulting in the second respondent being joined, the appellants conceded that the constitutionality questions should not be adjudicated in this application and if the appellants succeed on the classification issue, they will raise these matters (to the extent necessary) in any subsequent proceedings that may be instituted. (Appellants' heads of argument paras. 94-99).

[7] Based on averments made by the deponent (Vermaak AA (Vol. 2, para. 7.1, record p. 149) it appears that Distell and SFW launched the application in an attempt to reclaim at least R150 million from the fiscus.

[8] During 1995 SFW manufactured, among others, a drink known as a "wine cooler" under the mark "Crown Premium" ("Crown").

[9] On 17 July 1995 a written tariff determination was given to SFW by the Commissioner in terms whereof Crown was determined to be:

a)

classifiable under Tariff Heading 2206.00.90 of Part 1 of Schedule 1 of the Customs and Excise Act, 91 of 1964 ("the Act"); and hence

b)

liable to excise duty in terms of Tariff Item 104.15.80 of Part 2A of Schedule 1 of the Act. (All references hereafter to Tariff Headings and Tariff Items will be references to the relevant headings and items in Part 1 and Part 2A of Schedule 1 to the Act). Part 1 deals with what might be termed "ordinary" customs duty on imported goods, whilst Part 2A deals with excise duty payable (for present purposes) on goods manufactured in South Africa. The items mentioned in Part 2A invariably mirror Tariff Headings in Part 1 with or without minor amendments.

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[10] On 1 December 1995 the Part 2A determination given to SFW was amended by the Commissioner from Tariff Item 104.15.80 to Tariff Item 104.15.50.

[11] During 1996 a company known as Distillers Corporation Limited ("Distillers") manufactured, among others, a wine cooler known as Bernini Sparkling Grape Beverage ("Bernini").

[12] On 21 June 1996 a written tariff determination was given to Distillers in terms whereof Bernini was determined to be:

a)

classifiable under Tariff Heading 2206.00.90; and hence

b)

liable to excise duty in terms of Tariff Item 104.15.80;

[13] On 10 September 1996 the Part 2A determination given to Distillers was amended by the Commissioner from Tariff Item 104.15.80 to Tariff Item 104.15.50.

[14] Neither SFW nor Distillers NO appealed against the Commissioner's determinations.

[15] During January 2001 Distillers bought the business of SFW and eventually became Distell.

[16] In early 2002 the Commissioner apparently realized that there could be a problem with the classification of the wine coolers, in particular the excise duties paid thereon, as and as a result thereof an in-depth investigation was undertaken.

[17] In terms of a (new) written tariff determination made by the Commissioner on 14 August 2002, eight other wine coolers ("the eight wine coolers") manufactured by the newly formed Distell were determined to be:

a)

classifiable under Tariff Heading 2206.00.90; and

b)

liable to the levy of excise duty in terms of Tariff Item 104.15.50.

[18] A firm known as KPMG (acting on behalf of Distell) made certain submissions

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to the Commissioner, and the Commissioner in reaction thereto, in terms of a written determination dated 12 March 2003:

a)

withdrew the determinations of 14 August 2002 (in respect of the eight wine coolers) insofar as they pertained to the Part 2A classification; and

b)

determined the eight wine coolers to be classifiable under Tariff Item 104.15.10, with effect from 14 August 2002.

[19] As regards Crown and Bernini the Commissioner, in a further evenly dated letter, advised Distell that, as the classifications in respect thereof had been made as long ago as 1995 and 1996 respectively, the right to appeal the same had lapsed by virtue of the provisions of section 47(9) read with section 96 of the Act.

[20] In terms of a letter dated 15 December 2003 Distell gave notice in terms of Section 96 of the Act of its intention to institute legal proceedings against the Commissioner.

[21] On 18 February 2004 (as part of the budget speech of the Minister of Finance), and with effect from that date, Part 2A of Schedule 1 was amended. The effect of the amendment was to make it clear that from that date all the beverages classifiable under Tariff Heading 22.06 would be liable to the same excise duty.

[22] The proceedings before the court a quo were instituted on 6 May 2004.

[23] In terms of a written determination dated 13 October 2004 the Commissioner issued the following new determinations to Distell in respect of Crown:

a)

It was determined to be classifiable under Tariff Heading 2206.00.80 with effect from the date of the determination, i.e. 13 October 2004;

b)

it was determined to be subject to specific excise duty in terms of Tariff Item 104.17.15.

[24] In terms of a written determination dated 13 October 2004 the Commissioner issued the following determinations in respect of Crown:

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a)

The Part 1 classification was amended from Tariff Heading 2206.00.90 to Tariff Heading 2206.00.80 with effect from 13 October 2004; and

b)

the Part 2A classification, as it was prior to the amendment of the Act on 18 February 2004, was confirmed.

[25] In terms of a written determination dated 13 October 2004 the Commissioner issued the following new determinations to Distell in respect of Bernini:

a)

it was determined to be classifiable under Tariff Heading 2206.00.80; and

b)

it was determined to be subject to specific excise duty in terms of Tariff Item 104.17.15.

[26] In terms of a written determination dated 13 October 2004 the Commissioner issued the...