Pretoria - There are no celebratory drinks at Distell Ltd as the liquor giant lost its legal bid to avoid paying higher excise duty on Amarula Cream.
The high court in Pretoria on Thursday refused to entertain its appeal against the South African Revenue Service (Sars) tariff classification of this truly South African product.
Sars classified Amarula as a spirit-based drink, which means that Distell had to pay higher excise duty on the product.
But Distell maintained that Amarula is more of a wine-based aperitif and that it should thus fall under a different Sars classification.
Distell stood to pay millions more in excise duty if Amarula remained under a spirit-based classification.
Judge Sulet Potterill cut Distell’s intended appeal short, as she refused the liquor giant permission to go ahead with its legal battle on a technicality.
Distell asked the court for permission to go ahead with their application, although they are four years late in lodging the appeal. According to Distell it had good reasons for taking so long before it turned to court, but the judge found that none of these reasons were valid.
The practical effect of the higher classification is that Distell would be taxed more than R6 a litre on the final product.
Distell earlier said it had developed a new formula for Amarula and asked Sars to reclassify it to another tariff category.
The battle between Sars and Distell has been raging for several years, but mainly concerned the tariff classification for its other aperitifs, such as Angels’ Share Cream, Delgado Supremo and Nachtmusik.
The high court in 2011 agreed with Sars that these products were classified as spirit-based drinks and should thus fall under this classification, which meant more taxes had to be paid by Distell.
The Supreme Court of Appeal in Bloemfontein confirmed this position.The company at the time never mentioned Amarula in its legal battles, as it feared the publicity would negatively influence the selling of this successful product.
In turning to the appeal court in Bloemfontein to complain about the classification of its other aperitifs, the company asked that although Amarula was not mentioned by name, it should be included in the application.
They were even prepared to include Amarula in those proceedings, but only to refer to it as “product X”.
The reason given was that Amarula was a globally branded product and that consumers would view any litigation negatively.
Counsel for Distell told the court that it was four years late in launching this application as it tried all avenues possible to avoid mentioning Amarula by name.
For the first two and a half years it tried to negotiate with Sars regarding the applicable tariff for Amarula. Distell said it was, in relation to aperitifs, the victim of unfair legislative policies.
According to Distell this is because the Liquor Products Act compelled the manufacturers of aperitifs to use a wine-based component, to remove the taste and aroma of the wine in it and to add spirits to achieve an alcohol content of between 15 percent and 23 percent.
It further said that in spite of the prescribed features of the removal of the taste and aroma of the wine, the act still classifies aperitifs as spirits.
This in turn subjected the manufacturer to much higher excise tariffs.
Judge Potterill declined giving Distell the go-ahead to proceed with their appeal, as the time lapse in launching the proceedings was too long and she said no proper reasons were given for this. She also found that even if she did give the go-ahead, Distell did not have a good case.
Pretoria News