Smartphone with fancy functions still a phone

WHILE the Samsung Galaxy S7, commonly referred to as a smartphone, has many advanced functions, it is still a phone and not a computer, the Supreme Court of Appeal has ruled.

The court was faced with an appeal by Samsung Electronics SA regarding the classification of this phone for import duty purposes.

The amount of customs duty payable upon importation depends on the tariff heading as classified by the commissioner for the SA Revenue Service (Sars).

The question which arose for determination in the appeal was whether the Samsung Galaxy S7 was a “telephone for cellular networks”, or “falls under the category of other apparatus for the transmission or reception of voice, images or other data”.

In September 2017, the Sars commissioner notified the importer of the product, Samsung Electronics SA, of a tariff determination that the product was classified as “machines for the reception, conversion and transmission or regeneration of voice, images or other data”.

The effect of this classification was that a lower import duty was applicable.

However, a few months later, Sars reclassified the product as “telephones for cellular networks or for other wireless networks, designed for use when carried in the hand or on the person”.

This meant the Galaxy S7 fell under a different category, for which more import tax was payable.

Samsung turned to the Gauteng

High Court, Pretoria, to fight the second classification, but the court ruled in favour of the taxman. Samsung subsequently approached the Supreme Court, where it also lost this round.

Samsung argued that although the product performed the function of a cellular telephone, it was a multifunctional machine.

It said that by reason of its multifunctional nature, the product’s principal function was not that of a telephone for cellular networks.

Samsung told the court it was necessary to first identify the meaning of a “telephone” from dictionaries, and then to marry that to the concept of “cellular network”.

Judge Nathan Ponnan said in this regard, that it was important to recognise that while recourse to authoritative dictionaries was a permissible and often helpful method available to courts to ascertain the ordinary meaning of words, judicial interpretation could not be undertaken, by “excessive peering at the language to be interpreted without sufficient attention to the contextual scene.”

He added that in attempting to identify a “principal function” the appellant overlooked the objective characteristics of the product, which identify that its principal function was that of a telephone for cellular networks.

Judge Ponnan concluded that although it shared many features of communication technology common to computers, the Samsung Galaxy S7 clearly identified as a telephone and not as some other apparatus.

Thus, he said, Sars categorisation of this product was correct.