On 01 December 2022, the South African Revenue Service (SARS) announced the Supreme Court of Appeal (SCA) judgement of 29 November 2022 in the case of Pacific Solar Technologies (Pty) Ltd (Pacific Solar) versus the Commissioner for SARS (the Commissioner) relating to whether a solar home system has the essential character of an energy source and power generation device or that of a lighting kit - product has a utility of its own – and would therefore constitute a fully functioning lamp, classifiable under tariff heading 9405.40.21 of Part 1 of Schedule No.1 to the Customs and Excise Act, 1964.
The media release states that the issue before the SCA was whether a solar home system had the essential character of an energy source and power generation device or that of a lighting kit.
The amount of customs duty payable upon importation depends on the tariff subheading, under which the product is to be classified. The appellant, Pacific Solar, imported five different types of solar home systems (the product), which was entered under tariff subheading 8501.31.
On 29 March 2018, the respondent, the Commissioner, made tariff determinations in respect of two of the models imported by Pacific Solar, namely the PVES 20W and PVES 100W models.
The two competing tariff subheadings in the case were 8501.31 (as contended by Pacific Solar) and 9405.40.21 (as contended by the Commissioner). They respectively provide:
- 8501 – electric motors and generators (excluding generating sets)
- 8501.31 – Of an output not exceeding 750W.
- 9405 – Lamps and lighting fittings including searchlights, spotlights, and part thereof, not elsewhere specified or included; illuminated signs, illuminated nameplates and the like, having a permanently fixed light source, and parts thereof not elsewhere specified or included.
- 9405.40 – Other electric lamps and lighting fittings.
- 9405.40.21 – Other light fittings, containing light-emitting diodes (LED) as a source of illumination.
The SCA relied on the principle set out in Commissioner for the South African Revenue Service versus LG Electronics SA (Pty) Ltd (LG Electronics) [2010] ZASCA 79, wherein it was held that the enquiry ‘does not turn on what the product was going to be or what it will be adapted to be. Rather, the court must consider what the product was at the time of importation’.
The SCA found that the product, as presented at the time of entry, constituted a fully functioning lamp, which was common cause. Accordingly, by application of the principle in the LG Electronics matter, the product fell to be classifiable under TH 9405.40.21.