Distell ‘owes SARS R28m’ in Amarula tax spat
Is it a spirit or is it a wine? Drinks producer Distell’s nine-year court fight to have its iconic "liqueur" Amarula Cream classified under the latter category has left it with a multimillion-rand hangover after the South African Revenue Service (SARS) emerged victorious, again, in the latest round of a long-running tax spat.
The company approached the High Court in Pretoria to lodge an appeal against an estimated R28m tax liability dating back to 2006, when a SARS excise duty reclassification affected 14 of the company’s liqueurs — including evocatively named drinks such as Angels Share Cream, Delgado Supremo, Zorba and Barbosa.
But the court ruled this month that the company’s case "has no prospects of success".
Distell also missed the boat by leaving it too late to lodge an appeal — four years after the fact, instead of the stipulated 12 months for this type of case.
The drinks company’s spirits do not seem to have been damped by this blow, however, as it is likely to mount another court fight.
Company legal adviser Wessel de Wet said "Our view, at this point, is to appeal the ruling, but a final decision still needs to be made."
SARS said in an e-mailed response that it had "noted the judgment and will continue with ... (its) processes".
But the tax authority declined to reveal how much money it was seeking from Distell, citing its confidentiality policy.
One estimate is that Distell owes SARS about R28m, but someone close to the case said the company’s bill was "substantially more than that".
When the 2011 budget unified the excise duty for both spirit-based and fortified wine-based drinks, the change of duty on Amarula from R4.33 per litre of absolute alcohol to R93.03 created a liability dating back to 2006.
Bizarrely, although marketed as a top-selling liqueur, Distell says Amarula does not fall under this category of tipple and is, in fact, a wine-based product. The irony is not lost on the company, which had tried to keep Amarula out of the court case, fearing damage to the global brand.
Initially, SARS had offered to secure legal papers and allow the company to refer to Amarula by another name for the matter to be heard in camera. However, Distell failed to make an application for Amarula in its appeal against the excise duty reclassification, choosing instead to see how it fared in the challenge against classification of its other brands.
SARS had little sympathy for this strategy, saying Distell’s delays and applications for extensions were not about trying to protect its brand, "but the lie about the true nature of the product (Amarula)".