Gill Nadel, Adv.
The recent decision of the Magistrate's Court of Tel Aviv includes a number of rulings regarding the interpretation of a customs' tariff writ, and to paragraph 6 of the Law of Indirect Taxes (תא 15119/03, decision given 1.7.07, names of advocates for each side not given)
That case discussed the classification of two appliances: One- A LNB appliance which is an electrical converter assembled on a satellite plate antenna, which the goal of strengthening the satellite signals received by the antenna and of converting them from a very high frequency to a lower one. The second- a frequency amplifier which is a device that serves to amplify the frequencies of satellite transmissions, after they have been received by the satellite antenna and converted by a sound converter of the LNB type, with the need for the amplifier arising when a number of users are connected to the same antenna (e.g, residents in a shared house) or when one user is interested in a number of exit points.
Regarding converters, the importer claimed that the converters discussed serve to receive television transmissions only, and that therefore their classification should be under item 85.43-8956 as electrical appliances with an independent function that serve as television appliances, which are exempt from customs. The Customs Authority countered that the converters also are used to receive radio, telephone, and Internet transmissions, and that their correct classification is under item 85.43-8959 as electrical appliances with independent function- other, which are required to pay customs.
Regarding the amplifiers, as well, there was a similar disagreement regarding the relevant customs item, but unlike with the converters, the importer admitted that the amplifiers are used to amplify both television transmissions and other transmissions, but claimed that item 85.43-8596 applies to appliances that serve both as televisions and not solely as televisions.
Beyond the ruling on the question of classification, the court was asked to instruct the Customs Authority to refund import taxes overpaid on the converters, of a sum of over a million shekel.
The court accepted the importer's stance on classification, but did not instruct that the tax be refunded since the importer did not succeed in proving that the tax was not transferred to the customers.
The court ruled that the customs' tariff writ distinguishes between a number of uses of goods. Sometimes it refers to an exclusive use of the goods for a specific purpose, and this is expressly said: thus, for example, in the customs item referring to cameras “whose exclusive use is in automatic machines for processing data”. Sometimes it refers to a less strict level of use, which is sufficed by a specific principal use, for example- a transformer of the type “that its exclusive or principal use is for soldering or welding.” Sometimes it refers to a level of use extremely loose, when the definition is satisfied by the goods serves a specific use, without requiring that it be the exclusive or only use, like in sewing machines of the type used in home economics, regarding which the court ruled that there is no need that it be the exclusive or principal use.
In our case, the court ruled that item 85.43-8596 does not require exclusive use as a television, or that the principal use be television, and it is satisfied by the appliance serving as a television. Therefore the court ruled that as soon as it became clear that the converters and amplifiers in the dispute served televisions as well, the classification is as appliances for television, and there is no place to classify them under a residual customs item, phrased as “other”. (Practically, the court ruled that the converters that were the subject of the case were used for television only, while the amplifiers were used for television among other things.)
However, despite the court's acceptance of the importer's stance on classification, it rejected the claim of the importer for refund of the tax overpaid on the converters, because the importer did not succeed in proving that the tax was not rolled over to the customers. The court ruled that the importer did not bring proof regarding the pricing of the sales price of the converters and that failure to bring these proofs worked to the detriment of the importer. Additionally, the court rejected the claim that the fact that the importer was caused operative loss during the years proves that the sales price did not include the tax, since it is possible that the loss was caused, for example, as a result of overly high general and administrative costs, or from desire to make due with a smaller profit in a competitive market.
We will note, as a sidepoint, that regarding the degree of proof necessary on questions of proving a failure to transfer the tax, there is no unified approach in the law. In ת"א 99086/00 Magistrate's Court of Tel Aviv- decision given 5.2.06, the court took a softer stance, and was satisfied by it having been proven that the prices of the goods fell after the importer was required to pay taxes according to the classification of the Customs Authority and they did not rise, and this that it was proven that, as a consequence of the conditions of the market and competition, it was impossible for the importer to raise the price of the goods. In תא 18518/03 Magistrate's Court of Tel Aviv- decision given 16.1.05, a more stringent stance was taken.
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