Judgment summary
This is an opposed tariff appeal heard on 25 November 2025, with judgment handed down on 10 February 2026. The applicant, WCF Hardware Distributors (Pty) Ltd, appealed against a tariff determination made by the Commissioner for the South African Revenue Service (CSARS) on 13 February 2023 under section 47(9)(a) of the Customs and Excise Act, 91 of 1964.
The Commissioner determined that the applicant's imported products did not qualify for rebate item 315.06/83.02/01.04/40 of Schedule 3 to the Act, and demanded payment of R3 640 842.30, comprising underpayment of duty, underpayment of VAT, interest on VAT, and a VAT penalty of 10% [17].
The court dismissed the appeal and ordered the applicant to pay costs on Scale C and Scale B consequent upon the employment of two counsel [49].
Background
The applicant is registered with the Commissioner as a manufacturer under rebate of duty in respect of item 315.06 of Schedule 3 to the Customs Act [11]. Its application for a rebate store was approved by SARS on 11 April 2009, at which time the Commissioner was informed of the products the applicant imports and the manufacturing it performs [12].
On 13 May 2022 the Commissioner issued the applicant with a notification to conduct a desk audit for the periods 2018/05/01 to 2022/04/01, described as a Post Clearance Inspection. An onsite visit was conducted on 6 September 2022 for a physical rebate store assessment [13].
Following the audit, the Commissioner issued a Letter of Findings dated 13 September 2022 for the audit period 2020/05/01 to 2022/04/01, concluding that the imported product had the characteristics of a finished product and that the applicant did not manufacture but assembled a finished product [14].
The applicant responded on 21 September 2022, submitting that it creates 11 new products through its manufacturing process [15]. The Commissioner then issued a Notice of Intent dated 13 October 2022, holding that the applicant did not qualify to import goods using rebate item 315.06 and that the goods should be brought to account under tariff heading 8302.10(3) as hinges under "general", attracting a duty rate of 20% [15].
The Commissioner's Branch Office subsequently submitted a departmental application to Tariff Head Office, which issued tariff determination JHB 43/2022 dated 13 February 2023, confirming that tariff heading 8302.10 does not qualify under rebate item 315.06 [16].
Following the tariff determination, the Commissioner issued a demand for R3 640 842.30 [17]. The applicant lodged an internal administrative appeal on or about 29 May 2023. The National Appeals Committee upheld the determination and demand by letter dated 28 June 2023 [18]. On 3 July 2023 the applicant delivered its notice under section 96 of the Customs Act of its intention to proceed with litigation [19].
Core dispute
The parties agreed that the imported products are classified under tariff heading 8302.10 [4]. The sole issue was whether tariff heading 8302.10 is subject to rebate item 315.06/83.02/01.04/40 of Schedule 3 [4].
The dispute turned on the proper interpretation of the word "manufacture" as used in rebate item 315.06 [20]. The applicant contended that assembling different parts amounts to manufacturing, and therefore its assembly process constituted the manufacture of concealed self-closing furniture hinges with circular hinge bosses as required by the rebate item [21, 33]. The Commissioner contended that assembly is not manufacturing and that the applicant accordingly did not qualify for the rebate [21].
The applicant's process involved importing hinge parts into its rebate warehouse, removing them to a manufacturing area, assembling 11 different formats of hinges by attaching screws, plates and dowels, and then distributing the finished hinges through a sales company [22].
The applicant also raised an alternative ground, namely that rebate item 320.01/8302.10/01.06 applied, but did not persist with this alternative relief in its replying affidavit [8, 10].
Court findings
The court noted that a tariff appeal under section 47(9)(e) of the Act is an appeal in the wide sense, being a complete re-hearing with or without additional evidence, in which the court steps into the shoes of the Commissioner and makes a new tariff determination [3].
The court held that the onus rested on the applicant to prove that the goods were manufactured in the Republic in compliance with the Act, the rules, schedules and notes thereto, by virtue of sections 10(4) and 102(5) of the Act [29].
On the facts, the court found that the imported goods were not the different component parts of a hinge. Annexure FA17.1, the applicant's own upgrading value added schedule, showed that completed hinges already consisting of a complete hinge and plate were imported in most instances, and that none of the imported products' characteristics were changed or upgraded by the applicant [39].
The court held that the imported goods did not meet the qualifications of Note 4 to Schedule 3, which requires goods to be "the same or similar basic raw materials", because the imported goods were not raw materials used in manufacturing parts of hinges. Raw materials must undergo a substantial transformation, that is a change of characteristic, to become part of the finished product, whereas the imported items were already finished components requiring no further transformative processing [40, 41].
Applying General Interpretive Rule 2(a) and its explanatory notes, the court found that the hinges, as presented, had the essential character of complete hinges and were accordingly classifiable as complete or finished hinges [45]. The court characterised the applicant's process as simply repackaging completed hinges by adding screws, with the essential character of the imported goods remaining the same after the so-called value upgrading [46].
The court applied the test endorsed by the SCA in Enviroserv Waste Management, namely whether that which is made is different from that out of which it is made, and found that the applicant did not satisfy this test [47].
The court agreed with the National Appeals Committee's conclusion that upon importation all the parts were already assembled and therefore not covered under the industry specified in the rebate item, and that section 75(2) of the Act read with Note 1 to Schedule 3 required goods to be entered for use in the production or manufacture of goods in the specified industry [48].
Outcome
The application and appeal were dismissed. The applicant was ordered to pay the costs of the application, consequent upon the employment of two counsel, on Scale C and Scale B [49].
Major issues / areas of contention
- Whether the applicant's process of assembling imported hinge components by attaching screws, plates and dowels constituted 'manufacture' within the meaning of rebate item 315.06/83.02/01.04/40 of Schedule 3 to the Customs and Excise Act, 91 of 1964.
- Whether the imported products were 'parts of hinges' or already finished components, for the purposes of qualifying for the rebate.
- Whether the imported goods met the raw materials requirement in Note 4 to Schedule 3, which requires goods to be the same or similar basic raw materials as those specified in the industry name.
- Application of General Interpretive Rule 2(a) and its explanatory notes to determine whether the imported goods had the essential character of complete or finished hinges upon importation.
- The incidence of the onus of proof under sections 10(4) and 102(5) of the Customs and Excise Act, 91 of 1964, requiring the applicant to prove that goods were manufactured in the Republic.
- Whether rebate item 320.01/8302.10/01.06 applied as an alternative basis for the full rebate of duty (not persisted with by the applicant in its replying affidavit).
- The demand for R3 640 842.30 comprising underpayment of duty, underpayment of VAT, interest on VAT, and a VAT penalty of 10%.