THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 528/09
In the matter between:
No precedential significance

COMMISSIONER FOR SOUTH AFRICAN
REVENUE SERVICES

Appellant

and

COLGATE-PALMOLIVE (PROPRIETARY) LIMITED
Respondent

Neutral citation:
CSARS v Colgate-Palmolive (Pty) Ltd (528/09) [2010]
ZASCA 98 (3 September 2010)

Coram:
Harms DP, Lewis, Cachalia and Shongwe JJA and K Pillay AJA

Heard:
26  August 2010

Delivered
3 September 2010

Summary:     Tariff determination under Customs and Excise Act 91 of 1964:
tetranyl, an ingredient of a fabric softener and conditioner,
imported from Spain, not dutiable under tariff heading 3402.12
of the Schedule to the Act: classifiable under heading 3809.91.

ORDER

On appeal from KwaZulu-Natal High Court (Pietermaritzburg) (Combrink J
sitting as the court of first instance).
The appeal is dismissed with costs including those of two counsel.

______________________________________________________________

JUDGMENT
______________________________________________________________

LEWIS JA (HARMS DP, CACHALIA AND SHONGWE JJA AND  K PILLAY
AJA concurring)

[1] The respondent, Colgate-Palmolive (Pty) Ltd (Colgate), imports a
product known as tetranyl L1-905 (tetranyl) from Spain. Tetranyl is used in
making a fabric softener and conditioner, StaSoft. It is imported in paste form
mixed with isoproponal, the sole purpose of which is to facilitate handling and
transport. The appellant, to whom I shall refer as the Commissioner, contends
that customs duty is payable on tetranyl in terms of the Customs and Excise
Act 91 of 1964. He has claimed payment of arrear duties and penalties in the
sum of R3 377 732. Colgate contends that no duty is payable.

[2] In an appeal to the KwaZulu-Natal High Court (Pietermaritzburg), in
terms of s 47(9)(e) of the Act against a tariff determination made by the
Commissioner (that tetranyl is dutiable under tariff heading 3402.12 of the
Schedule to the Act), Colgate contended that tetranyl falls under tariff heading
3809.91, and is not dutiable. The high court found for Colgate and set aside
the Commissioner’s determination. It ordered that tetranyl be classified under
tariff heading 3809.91. Thus no arrear duties were payable. The
Commissioner’s appeal to this court is with the leave of the high court.

[3] The high court dealt comprehensively with the principles of tariff
determination and considered expert evidence on the properties of tetranyl.

The principles are trite and I shall not repeat them here. In so far as the
evidence before the court is concerned, there was a perceived conflict in the
affidavits in Colgate’s appeal against the determination as to whether tetranyl
constitutes a preparation. For this – and other reasons – the judge who first
heard the appeal referred the matter to oral evidence and experts in chemistry
for each party produced expert reports and testified before Combrink J. It
became common cause that tetranyl is regarded as a preparation. Much of the
other evidence was also undisputed. It is necessary, however, to set out the
respective headings for which the parties contend and to consider briefly the
nature and functions of tetranyl.

The Commissioner’s determination: 3402.12
[4] Chapter 34 of the Schedule deals inter alia with soap, ‘organic surface-
active agents’ and washing preparations. Tariff heading 3402 reads:
‘Organic Surface-active Agents (Excluding Soap); Surface-active Preparations,
Washing Preparations (including Auxiliary Washing Preparations) and
Cleaning Preparations, whether or not Containing Soap . . . [my emphasis]
. . .
3402.12 = Cationic
. . .’.
The relevant explanatory note states that organic surface-active agents are
cationic in that they ‘ionise in aqueous solution to produce positively charged
organic ions responsible for the surface activity’.

Colgate’s contention: 3809.91
[5] Chapter 38 governs ‘miscellaneous chemical products’. Tariff heading
3809 covers ‘Finishing agents, Dye Carriers to Accelerate the Dyeing or Fixing
of Dyestuffs and Other Products and Preparations . . . of a Kind Used in the
Textile, Paper, Leather or Like Industries, Not Elsewhere Specified or
Included: [my emphasis].
. . .
3809.91 1= Of a kind used in the textile or like industries . . .’ .
The explanatory notes to the heading state that the items include ‘preparations
to modify the feel of products’ and refer to ‘softening agents’.

Approach to classification
[6] As stated by the high court (relying on Secretary for Customs and
Excise v Thomas Barlow and Sons Ltd 1970 (2) SA 660 (A) and IBM SA (Pty)
Ltd v Commissioner for Customs and Excise 1985 (4) SA 852 (A))
classification entails a three-stage process: ascertaining the meaning of the
words in the headings and section notes; considering the nature and
characteristics of the goods; and determining which heading is most
appropriate. I shall start with the nature and characteristics of tetranyl which
are not self-evident.

The nature and characteristics of tetranyl
[7] Both parties are agreed on the following: tetranyl is a finishing agent
used in the textile industry, but is confined to domestic use; it is not a separate
chemical compound but combines triethanolime (which is a separate
chemically defined compound) with ‘partially hydrogenated tallow acid’
obtained from animal fat. Tetranyl is a ‘quaternary ammonium compound’
mixed with isopropanalol to form a paste. Its main function is to improve the
softness of fabrics and to this end it is added to the rinse when fabrics have
been washed.

[8] The use of tetranyl conditions fabrics and softens them; it reduces the
build-up of static electricity in fabric and also reduces wrinkling. Tetranyl also
has water repellent properties which make drying times faster. There was an
apparent dispute between the experts as to whether it has surface-active
properties: one maintained that it accumulated next to the fabric and the other
that it adsorbs to it – it attaches to the fabric. They were agreed, however, that
tetranyl is cationic in that it has a positive molecular charge. The high court
concluded that surfactancy (having a surface-active function), while it may
occur together with adsorption, was not a prerequisite to adsorption. The court
in any event preferred the views of the expert for Colgate that surfactancy is
not the main function of tetranyl. The Commissioner was not able to show, in
this court, that this finding was wrong.

The correct classification
[9] Colgate argued – and the court below found – that tetranyl is covered
by tariff heading 3809: it is a finishing agent. The Commissioner contended,
however, that it falls also under 3402 as an organic surface-active agent. It will
be recalled that 3809 has an exclusionary proviso: even if the product fits the
description it cannot be classified under the heading if it is ‘elsewhere
specified’. The Commissioner argued, thus, that tetranyl, because it is an
organic surface-active agent, must be classified under 3402 and is therefore
excluded by 3809.

[10] But this argument fails to take into account the explanatory note to
3402, which itself excludes certain products. The note states that the heading
does not cover ‘Preparations, containing surface-active agents where the
surface-active function is either not required or is only subsidiary to the main
function of the preparation. . .’ (my emphasis).  This raises the question
whether tetranyl’s surface-active function is subsidiary to its main functions,
which have been described above – the softening and conditioning of fabric
after washing.

[11] There is no contention by the Commissioner that the main function of
tetranyl is its surfactancy – the reduction of surface tension, foaming,
emulsifying, or wetting (see the explanatory note to 3402). That being so,
tetranyl must be excluded from tariff heading 3402, surfactancy being only a
subsidiary function. This conclusion is borne out by the explanatory notes to
3809 which state that the heading covers preparations of the kind used during
finishing of fabrics, which include softening agents. In my view, therefore, the
order of the high court was correct.

[12] The appeal is dismissed with costs including those of two counsel.

_______________
C H Lewis
Judge of Appeal

APPEARANCES
APPELLANTS:

C J Pammenter SC

Instructed by the State Attorney,

Durban

The State  Attorney , Bloemfontein.

RESPONDENTS:

A Joubert SC (with him C McAslin)

Instructed by Bowman Gilfillan Attorneys,

Johannesburg

Honey Attorneys Inc,  Bloemfontein.
SUPREME COURT OF APPEAL OF SOUTH AFRICA

PRESS RELEASE
3 September 2010
STATUS: Immediate

De Beer v Minister of Safety and Security (356/09) [2010] ZASCA 98 (3
September 2010)

Please note that the media summary is intended for the benefit of the media
and does not form part of the judgment of the Supreme Court of Appeal

The Supreme Court of Appeal today dismissed an appeal against a refusal to
award damages in a claim brought against the police by the appellant, who
was arrested for cultivating cannabis (dagga). The appellant alleged that he
had a permit to cultivate the dagga for purposes of research but was arrested
when he failed to produce the permit.  He sued the police, alleging that his
prosecution was malicious.

Growing cannabis may be lawful – if done in terms of a research permit.  But
a policeman who was informed that the appellant was growing cannabis
(dagga) on his farm, allegedly under the authority of a permit, thought it was
unlikely that a permit for the cultivation of dagga existed. He made enquiries
and could find nothing to indicate that a permit for the cultivation of dagga
could be issued.

He obtained a search warrant and went with colleagues to the appellant’s
farm. The appellant showed him his dagga plants and explained that he had a
permit to do research. But he could not produce it. The policeman tried to
contact someone referred to him by the appellant at the Agricultural Research
Centre to find out about the existence of the permit. He was unsuccessful, as
was a police legal adviser.

The policeman searched a house on the farm and found dagga seeds and
leaves in various places in the house. He did not believe that research was
being conducted there. On the advice of the police legal adviser he arrested
the appellant and charged him with contravening the Drugs and Drug
Trafficking Act. The appellant was detained overnight, and released on bail
the following day.

Several months later a permit was found, issued to the Agricultural Research
Centre by the Department of Health. The charges were withdrawn.

The appellant sued the Minister for damages for malicious prosecution. The
North Gauteng High Court (Mavundla J) dismissed the action. It found that the
policeman had reasonably believed that the appellant was committing
offences having regard to the absence of evidence of any research at the
farm. And he had not acted maliciously: that is, he had no intention to injure
and had not acted recklessly. He had made attempts to establish whether
there was indeed a permit, and had not been overhasty in arresting and
charging the appellant.

The SCA dismissed an appeal against this finding, confirming that the
policeman had reasonably believed that the appellant was contravening the
Act, and that he had acted without malice.

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