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Distell must pay Sars R131.4m over Amarula

| Wine and liquor

Liquor giant Distell Ltd has until Friday to pay more than R131.4 million to the South African Revenue Service (Sars) after it lost its latest legal bid for an order suspending any payment to the tax collector for Amarula Cream, which was classified as a spirit-based drink.

Distell has been embroiled in ongoing litigation, as it felt that Amarula Cream was a wine-based and not a spirit-based drink.

Classified as a spirit-based drink meant paying many millions more in excise duty.

In its fight for this reclassification, Distell has suffered several legal setbacks, but has not given up.

The company turned to the Supreme Court of Appeal (SCA), where it asked for suspension of payment to Sars, as well as interest on the amount, pending the final outcome of its ongoing legal battle.

But two judges of the SCA last week dismissed the application.

Sars then launched an urgent application against the liquor giant this week, saying it is now pay-back time. Sars said the principle of “argue now, pay later” is no longer applicable.

Judge Johan Louw ordered that Distell pay R131.4m, which is part of R213m it allegedly owes to Sars.

Sars demanded the tax from Distell in a letter sent to the company in February, but no payment was made. Distell asked Sars to suspend the payment for now. It also stated that it should be absolved from paying interest on the amount.

Sars refused to suspend the payment until the finalisation of the ongoing litigation, which is now before the SCA.

The tax body argued before the high court this week that if Distell was successful in its future litigation, the excise duty would be repaid, plus interest.

Amarula was earlier classified as a spirit-based drink, which means Distell has to pay much higher excise duty on the product.

Distell, on the other hand, maintained that Amarula is more of a wine-based aperitif and should thus fall under a different Sars classification, meaning less excise duty.

In October, the high court cut short Distell’s intended appeal against the classification.

Distell at the time asked the court for permission to go ahead with their application, although they were 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 none of these reasons were valid.

The liquor giant subsequently took its fight to the SCA.

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Pretoria News

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