Page 781 - SAIT Compendium 2016 Volume1

CASE DIGEST 2013–2014
PLC, Derby, United Kingdom. The purpose of the tiles is to create a hard oor on a at surface, such as on the pitch of a stadium, in order to protect the pitch while activities can safely take place on the arti cial surface.
In November 2010, Terraplas entered two consignments of tiles for home consumption which caused import duties to become payable thereon. The tiles were, in terms of the bill of entry entered under tariff heading 3918.90.20, on which the Controller of Customs, Cape Town, passed vouchers of correction to read 3918.90.40. Terraplas lodged an internal appeal in terms of s 77B of the Customs and Excise Act 91 of 1964 (hereinafter referred to as ‘the Act’) to the Commissioner with the ultimate result that the Commissioner classi ed the tiles under tariff heading 3926.90.90. This led to Terraplas making use of the alternative dispute-resolution procedure provided for in s 77I of the Act. The National Appeal Committee of the South African Revenue Service con rmed that the tiles had to be classi ed under tariff heading 3926.90.90. Terraplas appealed against this decision to the North Gauteng High Court in terms of s 47 (9) (e) of the Act.
On the appeal, Terraplas contended that the tiles had to be classi ed under tariff heading 3918.90.40, which reads as follows:
‘ oor coverings of plastics, whether or not self-adhesive, in rolls or in the form of tiles; wall or ceiling coverings of plastics, as de ned in note 9 to this chapter’.
This would cause the tiles to be subject to an import duty of 1,3 per cent. The Commissioner contended that the tiles had to be classi ed under tariff heading 3926.90.90, which reads as follows: ‘other articles of plastics and articles of other materials of headings 39.01 to 39.14’. This would cause the tiles to be subject to a 10 per cent import duty. The High Court had to determine whether the tiles were ‘ oor coverings’ as contemplated by tariff heading 39.18 and held that the Commissioner’s interpretation was too restrictive and that the appropriate tariff heading was in fact 3918.90.40.
In determining the correct tariff classi cation of the tiles, Navsa JA referred to Secretary for Customs and Excise v Thomas Barlow & Sons Ltd 1970 (2) SA 660 (A), where it was held that the relevant headings and section and chapter notes are not only the rst, ‘but the paramount consideration in determining which classi cation, as between heading should apply in any particular case’. The SCA also referred to Rule 1 of the General Rules for the Interpretation of the Harmonised System, which states the following:
‘The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classi cation shall be determined according to the terms of the headings and any relative Section or Chapter Notes . . . .’ (own emphasis).
The SCA also held that the explanatory notes to the Schedule may be used for guidance but reiterated that they are merely intended to ‘explain or perhaps supplement those headings and notes and not to override or contradict them’.
As to determining the correct tariff classi cation, the SCA provided the following guidance at para 16:
‘An interpretation of Schedule 1, for the purposes of classi cation, is therefore effected rst, with reference to the headings and their subheadings falling under the chapters and subchapters. The headings give brief descriptions of the goods. A second source of interpretation are the notes to each section or chapter which operate as a guide. The Schedule also includes general rules and notes for the purposes of classi cation. Once a meaning has been given to the potentially relevant words, the nature and characteristics of the goods must be considered and the heading most appropriate to such goods be selected.’
The SCA, after referring to the dictionary meaning of ‘ oor’ held that in legal interpretation, any number of dictionary meanings of a word is not conclusive – the meaning of the word must be determined contextually. Navsa JA held that tariff heading 39.18 encompasses ‘plastic articles which are in some way enhancements of existing oor surfaces’ which would conceal an existing oor and that the ‘... envisaged oor coverings are not in themselves regarded as a oor’. The SCA held that tariff heading 39.18 encompasses enhancements which the use of extends beyond an immediate purpose such as the covering of a stadium’s oors for a single event. It was further held that a stadium’s pitch is not regarded as a oor and that it is already covered by grass and that the purposes of Terraplas’ tiles were to preserve the grass growth and to protect the turf. It was ultimately held by the SCA that the contention by Terraplas that its tiles constitute a oor of a temporary nature does not mean that they qualify as a oor covering for purposes of tariff heading 39.18.
As a last attempt to persuade the SCA not to accept the Commissioner’s tariff classi cation, Terraplas contended that the Schedule would not have made provision for novelty articles if it weren’t the contemplation of its compilers and that the SCA should therefore be careful in considering the classi cation of the tiles under the Commissioner’s general heading of 39.26. Navsa JA responded as follows to this contention at para [22]:
‘The tiles are constructed of high-density polyethylene, which is a plastic. Plastics and articles thereof are catered for as extensively as one would have thought possible under s VII of the Schedule and Chapter 39, where under the tariff headings in question reside. Simply put, there is no question of novelty. Questions of novelty of design are more appropriately addressed in patent infringement cases. The short answer to the proposition on behalf of Terraplas is that there are mechanisms to update lists and that catch-all categories such as the one proposed by the Commissioner, provided they are applicable, were resorted to, to deal with articles not speci cally catered for. There is no authority, nor would one expect there to be, indicating directly or even tangentially, that the novelty of an article renders a different interpretive process.’ (own emphasis).
Held
It was held that in the absence of any other speci c tariff heading, the tiles must be classi ed under tariff heading 3926.90.90. The following order was consequently made:
1. The appeal is upheld with costs including the costs of two counsel.
2. The order of the court a quo is set aside and substituted with the following:
‘The appeal in terms of s 47 (9) (e) of the Customs and Excise Act 91 of 1964 is dismissed with costs, such to include the costs consequent upon the employment of two counsel.’
SAIT CompendIum oF TAx LegISLATIon VoLume 1 773
CASE DIGEST 2013-2014