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

Samcor (Manufacturing) (Pty) Ltd (the appellant) imported motor vehicle component parts from two Japanese companies, Mitsubishi Motor Corporation and Mazda Motor Corporation, pursuant to technical assistance and licence agreements. Under these agreements, the appellant paid royalties and licence fees to the Japanese companies calculated based on FOB prices of complete vehicle component sets, even though the imported kits did not contain all necessary parts. On 9 and 10 November 1983, the Commissioner for the South African Revenue Service (the respondent) made value determinations under section 65 of the Customs and Excise Act 91 of 1964, requiring a 1% uplift to be added to the transaction value of imported goods to account for these royalties and fees under section 67(1)(c) of the Act. Sigma (the appellant's predecessor) did not appeal these determinations. In June and July 1996, the appellant requested the respondent to amend or review the 1983 determinations, arguing that the royalties and fees were not dutiable as they did not relate to imported goods. On 9 September 1997, the respondent replied that the provisions of section 67(1)(c) were applicable to the royalties and fees. The appellant then brought an application in the Transvaal Provincial Division seeking declaratory orders that the fees and royalties were not dutiable and setting aside what it alleged was a determination made on 9 September 1997.

• Whether the respondent's letter of 9 September 1997 constituted a new value determination under section 65 of the Customs and Excise Act susceptible to appeal under section 65(6)
• Whether the proceedings before the court a quo were properly constituted as an appeal under section 65(6) or an application for a declaratory order
• Whether notice under section 96(1) of the Act was required for an application for a declaratory order
• Whether the value determination of 9 November 1983 applied to the appellant despite changes in corporate structure and successive agreements
• Whether the royalties and licence fees paid to the Japanese companies fell within section 67(1)(c) of the Act and were required to be added to the transaction value of imported goods

The appeal was dismissed with costs.

A value determination made by the Commissioner under section 65 of the Customs and Excise Act 91 of 1964 pertains to the importation carried on and the type of goods imported, not to the person of the importer. Where the same type of importation from the same foreign supplier continues after corporate restructuring or under successive substantially identical agreements, the original value determination remains binding on the successor importer. A communication from the Commissioner refusing to amend or withdraw an existing determination does not constitute a new determination susceptible to appeal under section 65(6) where it lacks the formality of an official determination and is clearly intended to convey refusal to change the existing determination. A party cannot recharacterize proceedings from an appeal to an application for declaratory relief for the first time on appeal where the proceedings were premised on and conducted as an appeal, as this would cause unfairness to the opposing party and deprive them of legitimate defenses available in appeal proceedings.

Mpati JA expressed the view, without deciding definitively, that it did not appear from a reading of the agreements that the fees and royalties were paid or payable "in respect of the goods" as required by section 67(1)(c) of the Customs and Excise Act, and indicated misgivings about the correctness of the trial judge's decision on the merits. The Court also confirmed, based on concessions by the respondent's counsel, that for royalties and fees to be "due by the buyer as a condition of sale" under section 67(1)(c), it must appear that the seller would not sell the imported goods unless the buyer undertook to pay such royalties and fees, and that this is a distinct and separate requirement from the royalties being paid "in respect of the goods". The Court drew an analogy with Road Accident Fund v Mothupi regarding amendments and changes of stance on appeal, noting that one cannot be confident that matters would not have been conducted differently at trial had a different basis been pleaded initially.

This case is significant in South African customs and excise law for establishing important principles regarding the nature and scope of value determinations made by the Commissioner under section 65 of the Customs and Excise Act. It clarifies that value determinations are tied to the nature of the importation and the goods rather than to the specific legal personality of the importer, thereby surviving corporate restructurings and successive substantially similar agreements. The judgment also clarifies what constitutes a new determination versus a restatement or refusal to amend an existing determination, and reinforces the distinction between appealable determinations and administrative correspondence. The case demonstrates the importance of exhausting appeal rights timeously and the limited circumstances in which parties can recharacterize the nature of proceedings on appeal. It also illustrates the application of procedural requirements such as section 96(1) notices and the consequences of raising new arguments for the first time on appeal.