Durban North Turf (Pty) Ltd v Commissioner, South African Revenue Service

• Jurisdiction: South Africa
• Judge: Madondo J
• Judgment Date: 31 August 2010
• Citation: 2011 (2) SA 347 (KZP)
• Docket Number: 4355/2008
• Hearing Date: 10 May 2010
• Counsel: PJ Olsen SC for the applicant. CJ Pammenter SC (with ZP Pungula) for the respondent.
• Court: KwaZulu-Natal High Court, Pietermaritzburg

Madondo J:

Introduction I

[1] This is an appeal in terms of s 47(9)(e) of the Customs and Excise Act 91 of 1964 (the Act) against the determination of the respondent, dated 21 December 2005, that the Poligras 2000 imported by the applicant for use as a synthetic hockey pitch falls to be classified under J the tariff heading 57.03, particularly under tariff subheading 5703.30.

Madondo J

The applicant contends that the said goods ought to have been classified A under tariff heading 95.06 and subheading 9506.99.

Parties

[2] The applicant is Durban North Turf (Pty) Ltd, a duly registered company, which has its principal place of business at 12 Radar Drive, B Durban North, KwaZulu-Natal. Mr Olsen SC appears on behalf of the applicant.

[3] The respondent is the Commissioner for the South African Revenue Service who is cited care of the office of the State Attorney, 3rd Floor, C Sangro House, 417 Smith Street, Durban. Mr Pammenter SC, assisted by Ms Pungula, appears on behalf of the respondent.

The background

[4] The applicant concluded a contract for the installation of a synthetic D surface outdoor hockey pitch at the premises of Glenwood Old Boys' Sports Club, Durban North. Following the conclusion of the said contract, the applicant, on 31 May 2005, imported the product known as Poligras 2000 for use as a hockey pitch.

[5] Section 47(1) of the Act provides, inter alia, that customs duty shall E be paid on all imported goods in accordance with the provisions of Schedule 1 to the Act (the schedule). The schedule classifies goods under various tariff headings and subheadings. The duty payable is determined by the tariff subheading under which the goods are classified.

[6] The respondent classified the product under Ch 57.03, subheading F 5703.30 of the schedule, and determined that 30 % rate of duty was applicable to the importation of the product. However, the applicant contested the determination made by the respondent. On 28 June 2005 the applicant resubmitted the product for determination. But, on 28 July 2005, the respondent's earlier classification of the product was G confirmed. The respondent then called for an underpayment in customs duty and VAT as a result thereof.

[7] The applicant still was not content with the determination and on 15 November 2005 it submitted further representations for consideration. H Having applied his mind to the representations submitted by the applicant, the respondent found no reason for deviating from the previous determination and it once again confirmed the determination.

[8] On 21 December 2005 the respondent, in terms of s 47(9)(a)(i)(aa) of the Act, classified the synthetic turf (Poligras 2000), imported by the I applicant, as carpet or any other textile floor coverings falling under tariff heading 57.03, particularly under subheading 5703.30. On importation the applicant had declared the goods in issue on the relevant bill of entry as falling under tariff subheading 9506.99. The rationale for such declaration was that synthetic turf, as equipment of sport, should be classified under the tariff heading 95.06. J

Madondo J

Issue to be decided A

[9] The issue raised in this matter is whether the synthetic turf (Poligras 2000) is classifiable as a carpet or textile floor covering under tariff heading 57.03, or as sporting equipment under tariff heading 95.06.

Interpretation of the schedule B

[10] The importance of the dispute which has arisen lies in the fact that goods falling under tariff heading 95.06 are imported free of charge, while goods falling under tariff heading 57.03 are subject to a duty of 30 %. Presumably, the rationale for making sporting equipment not C dutiable is to promote sports and to make it possible for all the citizens, the scholars in particular, to participate therein.

[11] Section 47(9)(a)(i)(aa) of the Act provides:

'The Commissioner may in writing determine —

(aa)

the tariff headings, tariff subheadings or tariff items or other items D of any Schedule under which any imported goods, goods manufactured in the Republic or goods exported shall be classified . . . .'

[12] Section 47(8)(a) of the Act provides that the interpretation of any tariff heading or tariff subheading in Part 1 of the schedule and every section note and chapter note in Part 1 of the schedule shall be subjected E to the International Convention on the Harmonized Commodity Description and Coding System done in Brussels on 14 June 1983, and to the explanatory notes to the Harmonized System issued by the Customs Co-operation Council from time to time.

[13] This provision does not mean that the notes are to be regarded as F peremptory injunctions (International Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise 1985 (4) SA 852 (A) at 864), for, as Trollip JA pointed out in Secretary for Customs and Excise v Thomas Barlow & Sons Ltd 1970 (2) SA 660 (A) at 676C – D,

'they are not worded with the linguistic precision usually characteristic of statutory precepts; on the contrary they consist mainly of discursive G comment and illustrations'.

[14] All that s 47(8)(a) requires is that the interpretation of the relative headings and section and chapter notes shall be in conformity with, and not contrary to the Brussels Notes. African Oxygen Ltd v Secretary for Customs and Excise 1969 (3) SA 391 (T) at 394C – E; Autoware (Pty) Ltd v Secretary for Customs and Excise H 1975 (4) SA 318 (W) at 321E – F.

[15] The Harmonized System means the nomenclature comprising the headings and subheadings and their related numerical codes, section, chapter and subheading notes, and the general rules for the interpretation I of the Harmonized System.

[16] The Harmonized System determines the classification of goods. However, it does not determine what customs duty is payable on the importation of such goods into a contracting party. Such customs duty is fixed by the individual contracting parties concerned. The Harmonized System has only been devised to bring about uniformity in the J classification of goods by contracting parties.

Madondo J

[17] Part 1 of the schedule is based on the Harmonized System and A provides for the rules of interpretation, the headings, subheadings, section, chapter and subheading notes. International Business Machines SA (Pty) Ltd, supra, at 862A – 863A.

[18] Note VIII to the schedule sets out the rules for the interpretation of the schedule. Paragraph 1 says: B

'The titles of Sections, Chapters and sub-Chapters are provided for ease 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 require. . . .'

This is intended to make it quite clear that the terms of the headings and C any relative section or chapter notes are paramount, ie they are the first consideration in determining classification.

[19] Part 1 of the schedule, including the notes thereto and the tariff headings and subheadings, should be interpreted according to the D natural and ordinary sense of the language used therein, unless the context or the subject clearly shows that they were used in a different sense: Steyn Die Uitleg van Wette 5 ed at 2 para 2; National Screenprint (Pty) Ltd v Minister of Finance 1978 (3) SA 501 (C) at 506H, and effect must be given to every word. Words which are not technical or specialised bear their ordinary meaning. E SA Historical Mint (Pty) Ltd v Minister of Finance and Another 1997 (2) SA 862 (C).

[20] For the above purpose, recourse may be had to well-known and authoritative dictionaries, and for technical words technical dictionaries of authority may be used. International Business Machines SA (Pty) Ltd v Commissioner for Customs and Excise, supra at 859; F National Screenprint case, supra at 507A – H; Department of Customs and Excise v Maybaker SA (Pty) Ltd 1982 (3) SA 809 (A) at 816D – H.

[21] Opinion evidence on the meanings of ordinary words is inadmissible, except in regard to words which have a special or technical G meaning. International Business Machines SA (Pty) Ltd, supra at 874B. The schedule contains general-notes sections and chapter notes to aid in its interpretation.

Classification of goods

[22] It is of...