Commissioner for the South African Revenue Service v Delta Motor Corporation (Pty) Ltd

Delta Motor Corporation (Pty) Ltd, a motor vehicle manufacturer and distributor, imported completely knocked down (CKD) kits from Adam Opel Aktiengesellschaft (Opel) since 1987. Customs duty was paid on the full invoiced price of the kits. In 1997 Delta was advised that the invoiced price included charges for engineering, styling and tooling (EST), which it contended were royalties payable for licensed rights under separate agreements, and not part of the price of the imported goods. Delta sought a refund of customs duty on the basis that EST charges were not dutiable. SARS refused, but the High Court granted a declaratory order that the EST charges did not form part of the value of the goods for customs duty purposes. SARS appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. The High Court’s declaratory order stood.

The case clarifies the treatment of royalties and licence fees for customs valuation purposes in South African law. It confirms that payments are only dutiable if they directly relate to imported goods and are payable as a condition of sale, and that SARS must look to the true contractual and factual position rather than the form of invoicing.