The Commissioner for the South African Revenue Service v The South African Breweries (Pty) Ltd

The South African Breweries (Pty) Ltd (SAB) manufactures flavoured alcoholic beverages (FABs). In October 2013 the Commissioner for the South African Revenue Service (SARS) issued a tariff determination under s 47(9)(a) of the Customs and Excise Act 91 of 1964 classifying SAB’s FABs under tariff heading 22.08 (spirits and other spirituous beverages), attracting a higher excise duty. SAB appealed the determination, contending that the FABs were fermented beverages, not distilled spirits, and should be classified under tariff heading 22.06 (other fermented beverages and mixtures of fermented and non-alcoholic beverages). The Gauteng Division of the High Court upheld SAB’s appeal and set aside SARS’s determination. SARS appealed to the Supreme Court of Appeal, arguing that the products fell under heading 22.08, relying primarily on explanatory notes referring to ‘alcoholic lemonade’.

The appeal was dismissed with costs, including the costs of two counsel. Paragraph 3 of the High Court’s order was set aside and replaced with an order substituting SARS’s tariff determinations with determinations classifying the products under tariff heading 2206.00.90 in Part 1 of Schedule 1 and tariff item 104.17.90 in Part 2A, with effect from the date of SAB’s determination.

The case reaffirms fundamental principles of tariff classification in South African customs and excise law, particularly that classification is determined primarily by the wording of tariff headings and not by explanatory notes. It clarifies the distinction between fermented beverages and spirituous (distilled) beverages for excise purposes and limits SARS’s ability to rely on Harmonised System Explanatory Notes to justify higher excise duties where the statutory headings do not support that classification.