Commissioner, South African Revenue Services v Motion Vehicle Wholesalers (Pty) Ltd

Supreme Court of Appeal -509/05 Hearing date: 05 September 2006
  Judgment date: 26 September 2006

Revenue – Customs and Excise Act 91 of 1964 – Classification of goods for purposes of customs duty ─ whether vehicles imported by the respondent, with temporary modifications to increase their seating capacity, should be classified as vehicles for the transport of either less than ten persons or of ten or more persons.

Media Summary of Judgment

In a judgment today the Supreme Court of Appeal has upheld an appeal by the Commissioner relating to tariff classification for customs duty purposes.

Motion (the respondent) is an importer of Toyota Land Cruiser 100 Series vehicles. The vehicles are manufactured by the Toyota Motor Corporation (TMC) in Japan as eight-seater vehicles.

After being manufactured in Japan, the vehicles are modified in Australia. Two additional seats are added in the luggage compartment at the rear of the vehicle, each facing the other. The vehicles are presented, on importation, with these two additional seats. It is common cause that the two additional seats are removed after customs clearance, returned to Australia for re-use in the same manner and the vehicles are sold as suitable for the transport of eight persons.

In 1998 the Commissioner issued a determination that the vehicles were classifiable under tariff heading 87.02. Since that date the respondent has imported more than 580 vehicles all of which have been classified under heading 87.02. On 28 November 2003, the Commissioner revoked the determination and issued a new determination to the effect that the vehicles were classifiable under heading 87.03. It is common cause that for each vehicle classified under heading 87.02 instead of under heading 87.03, the respondent saved an amount of R135 000 in customs duties and VAT. The respondent successfully appealed to the High Court against the new determination.

The SCA, in a judgment by Theron AJA in which Harms JA, Brand JA, Cloete JA and Cachalia AJA concurred, it was held, that the respondent, together with the modifier, has attempted, in a superficial and unsophisticated manner, to conceal the true nature of the vehicles by giving them a temporary different form. In other words, they have attempted to disguise vehicles designed for the transport of eight persons as vehicles designed for the transport of ten or more persons, solely for the purpose of evading higher customs duty. It was further held that the vehicles were modified with the intention of circumventing the Act and that such modification was a sham.