Tina Cosmetics (Pty) Ltd v the Commissioner for Customs and Excise

• Jurisdiction: South Africa
• Judge: Wunsh J
• Judgment Date: 19 January 1998
• Citation: 1998 JDR 0181 (W)
• Docket Number: 96/14817
• Court: Witwatersrand Local Division

Wunsh J:

These proceedings started as an application to review a determination by the respondent classifying thirteen what are described as "locally manufactured products" as falling under tariff sub-headings 33.03, 33.04 and 33.07 of Schedule 1, Part 1 of

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Wunsh J

the Customs and Excise Act 91 of 1964 ("the Act"). Later it became common cause that the applicant is appealing in terms of sec 47(9)(f) of the Act against the tariff classifications. "Locally manufactured" is within quotation marks because, although all the products (which I shall call the "disputed products") are marketed and sold by the applicant, under the brand name Tinkerbell, three of the four products handed to me during the hearing are stated on the packaging to be "made in USA". Apart from the appeal, there is an application, if the appeal fails, against the retrospective effect of the respondent's determination. I shall, use the expressions appeal and appellant to embrace also the application and the appellant in its role of applicant.

Despite the volume of the papers, the dispute seems to fall within a narrow ambit. The disputed products are in one form or another, perfume, lipstick, nail polish and bubble bath. Their get up, in which the colour pink is predominant, indicates that they are intended for use by children. It was not seriously disputed by the respondent that an adult would not, for example, buy Tinkerbell lipstick for her own use. An affidavit by Doreen Matilda Storm, a chief standards officer of the General Chemistry Division of the South African Bureau of Standards, tells us that the Kirk-Olhmer Encyclopedia of Chemical Technology, consisting of 25 volumes of approximately 900-1000 pages and of technical information of processes and substances which are of interest to a chemist, is the standard work of chemical technology in the world. The ingredients of lipstick were identified by Ms Storm by means of infra-red spectrometry. The spectra of the oil and wax components that were separated agreed with the reference spectra of castor oil and an ester type wax like beeswax. Its backing card which is part of the record says that the Tinkerbell lipstick's ingredients are castor oil, candelilla wax,

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Wunsh J

beeswax, ozokerite, carnauba, butyl myristate, mineral oil, paraffin, fragrance, aluminium hydroxide, propylene glycol, Bha, propyl gallati, citric acid, titanium dioxide, d & c red #17 Zirconium lake, d & c yellow #5 aluminium lake and d & c red #9 barium lake.

According to Storm Kirk-Olhmer says:

"lipstick is a solid fatty-base product containing dissolved and suspended colorant materials. The colorants used in lipsticks are either insoluble lakes or oil-soluble dyes of the Eosin group, or both. ... Highly refined castor oil is one of the most common ingredients in lipstick ... Lanolin and various derivatives are used for the emollient properties and for a degree of tackiness and drag. ... various waxes are used to impart different characteristics such as hardness, thixotropy, melting paint and ease of application ... Carnauba wax is responsible for stiffening the stick ... Candelilla wax is used for the same reason, but to a lesser extent."

The book also mentions ozokerite and beeswax as ingredients of lipstick.

Substantiated by detailed references, Storm says that her analysis of various Tinkerbell lipstick products and the claims on the packaging conform with what Kirk-Olhmer identifies as the characteristics of lipstick.

It is true that evidence is not normally admissible to establish the ordinary meaning of words in the Act. But a court may, in order to determine the ordinary meaning, have recourse to dictionaries and Kirk-Olhmer is in this context a dictionary.

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Wunsh J

The children for whom Tinkerbell lipstick is bought are given an opportunity to imitate their mothers and other grown ups. Their use of the make-up may not be as disciplined as that of their mothers and they may also apply it on parts of their bodies other than their lips and even on objects other than their bodies. The reverse side of the backing card contains the following:

"soothing and gentle for young lips".

"Dear Friend,

... (Each product) has been thoroughly tested in our laboratories to be certain it is gentle enough for your use. Although they are specially formulated to be mild, play items, these products do contain real fragrances and cosmetic ingredients. So please take the proper precautions to keep them away from fabrics and carpeting where they may cause staining.

Please give my regards to all your friends, and write back soon.

Love Tinkerbell"

This marketing statement crystallise the issue. The product is indeed lipstick, but intended to be a "play item".

I have dealt with the lipstick. Similar observations and considerations apply to the other disputed products.

1998 JDR 0181 p5

Wunsh J

The respondent's classification was for the purpose of a determination that the products constitute excisable goods as defined in the Act which attract an ad valorem duty of 15% of their value.

Schedule 1 to the Act sets out the goods on which duty is payable and the rates. It is subdivided into tariff headings and subheadings. Its structure was explained by Trollip JA in Secretary, Customs & Excise v Thomas Barlow & Sons Ltd 1970 2 SA 59 (A) at 74D-G and the approach to its interpretation at 74H-75F. Section VI of Schedule 1 is headed "products of the chemical or allied industries" and chapter 33 thereof "essential oils and resinoids; perfumes, cosmetic or toilet preparations".

The tariff items which the respondent has determined to be applicable are:

"33.03

Perfumes and Toilet Waters

33.04

Beauty or Make-Up Preparations and Preparations for the Care of the Skin (excluding medicaments), including sun tan preparations; manicure or pedicure preparations

33.07

Pre-Shave, shaving or after-shave preparations, personal deodrants, bath preparation depilatories and other perfumes, cosmetic or toilet preparations not elsewhere specified or included; prepared room deodorisers, whether or not perfumed or having disinfectant properties."

The words I have underlined were held to apply to the disputed products.

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Wunsh J

Leaving aside a consideration of the primary function of the disputed products, as marketed, they obviously fall within these descriptions. The lipstick is, for example, a beauty or make-up preparation.

The appellant contends that the disputed products fall under section XX of Schedule 1, headed "Miscellaneous Manufactured Articles", Chapter 95 of which bears the title "Toys, games and sport requisites; parts and accessories thereof". Chapter 95 specifies a number of toys. A sub-heading, 95.03, reads:

"Other toys; reduced-size ('scale') models and similar recreational models, working or not; puzzles of all kinds"

and a sub-sub-heading, 95.03.90 is

"Other",

which is where the appellant says its merchandise falls because there is no specific reference to the items which are the disputed products.

The appellant's case is that the disputed products

"are designed for and used by children for their amusement and pleasure", are

"not used as proper consumer items in the convectional sense",

are aimed at the market of children up to age of 12, are packaged for children as "play cosmetics for use by children for amusement and pleasure" and "are not primarily used nor suitable for primary use to adorn or beautify the face or body or as personal grooming aids".

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Wunsh J

The respondent originally did not dispute this view. On 20 November 1985 he classified the appellant's products as "other toys" under tariff heading 95.03. Shortly thereafter he informed the appellant that, as it was no longer manufacturing goods subject to ad valorem excise duty, the licence previously granted in respect of a special manufacturing warehouse had been cancelled. A dispute followed after an adverse determination on 23 November 1993 when the Controller of Customs, Germiston "stopped" a consignment of goods imported by the appellant rejecting the claim that they were "other toys". The appellant objected to the Controller, stating that it wished to appeal against his action. The Controller was asked to submit the matter to the respondent who referred the matter back to the Controller. The appellant instituted proceedings to set aside what was described as the respondent's decision of 11 September 1995; it was a letter from the Controller of Custom and Excise which, because of the second leg of the dispute raised in these proceedings, I quote in full:

"During the course of a recent inspection and correspondence between Brussels and the Office of the Commissioner for Customs and Excise it was found that your products with the trade name 'Tinkerbell' were deemed to be cosmetics and not toys resulting in underpayments of duty amount to R572 955,75.

A copy of the inspector's schedule reflecting the details and the total underpayment, which must please be brought to account, is attached for your information.

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Wunsh J

In view of the circumstances here prevailing it is furthermore considered that you have contravened sections 38(4), 47(1) and 47A(1) and committed an offence specified in section 83(a) of the Customs and Excise Act, No. 91 of 1964.

Any person who in the opinion of the Commissioner has contravened any provision of the Act may avail himself of the procedure prescribed in section 91 provided he complies with all the relevant provisions of the section, i.e. elects to be dealt with by the Commissioner, agrees to abide by his decision and deposits such sum as he may require.

The Commissioner may thereafter, in terms of the section and after such enquiry he deems necessary, determine the matter summarily and may without legal proceedings, order forfeiture by way of a penalty of the whole or any part of the...