Commissioner for the South African Revenue Service v Diageo SA (Pty) Ltd

The dispute concerned the correct tariff classification, for excise duty purposes under the Customs and Excise Act 91 of 1964, of Diageo’s liqueur product known as Cape Velvet Cream Original. SARS classified the product under Tariff Heading 2208.70.22 (Tariff Item 104.23.22), treating it as a liqueur with a wine spirit base to which alcoholic ingredients had been added. Diageo contended that the product should be classified under Tariff Heading 2208.70.21 (Tariff Item 104.23.21), applicable to liqueurs with a wine spirit base to which non‑alcoholic ingredients had been added. The dispute turned on whether the vanilla flavouring added to the wine spirit base constituted a “non‑alcoholic ingredient”, given that the vanilla extract had an alcohol by volume (ABV) of 0.6%, and the final flavouring mixture had an ABV of 0.002%. The High Court upheld SARS’s classification, but the Full Court reversed that decision in Diageo’s favour, relying inter alia on a purposive interpretation, the de minimis principle, and analogies to other statutes. SARS appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The order of the Full Court was set aside and replaced with an order dismissing Diageo’s appeal with costs, thereby confirming SARS’s original tariff classification.

The judgment reinforces strict textual and contextual interpretation in customs and excise tariff classification and cautions against importing concepts from other statutes or policy considerations without legislative support. It clarifies that the de minimis principle has no general application in tariff interpretation under the Customs and Excise Act and underscores the importance of maintaining the distinct stages of the classification inquiry. The case is significant for excise duty disputes involving alcoholic products and the interpretation of Schedule 1 to the Act.