Samsung: Galaxy S7 is not a ‘phone’

The Samsung Galaxy S7 is not a cellphone. This was according to Samsung Electronics SA, which lost its case in the Johannesburg High Court against the South African Revenue Service (Sars) on how to define the device.

Samsung’s fight with the tax authorities stems from how the Galaxy S7 is defined under the Customs and Excise Act.

On April 18, Sars withdrew a tariff determination which defined it as an ‘other’ device – along the lines of a PC or a laptop – rather than a ‘multi-functional device’ like a smartphone, which falls under a different tariff classification.

Refund fight

The dispute between Samsung and Sars over how to define the Galaxy S7 centred on the applications for refunds – the amount was not made known in the judgment – of customs duty on the devices.

Samsung argued that the Galaxy S7 was more than a phone, as the principal function of the product related to “the connection to the internet, social media, music and games and not the making of telephone calls”.

To support this assertion, the electronics group brought in Dr Jacques Van Wyk, an IT specialist, who said in an affidavit the device was not mainly used for telephony, as it also had fixed programmes, better known as ‘apps’ which were not available in a traditional cellphone.

This debate over what constitutes telephony was a big part of Samsung’s case.

Judge Nomonde Mngqibisa-Thusi defined Samsung’s argument like this: “The common denominator in the meanings ascribed to the word ‘telephone’ by these sources is the reference to the phrase ‘transmission of sound’.”

Looks like a …

For its part, Sars argued that the definition of what constitutes voice telephony is too narrow, as the transmission of sound could be performed by apps like WhatsApp and Skype.

Looked at this way, these types of services (along with all the other types of data-intensive apps) are all dependent on mobile telephone infrastructure to work.

Sars also brought in its own tech expert to effectively make the argument that if it looked like a phone and worked like a phone, it was a phone.

“The Samsung Galaxy S7, like other smartphones, is manufactured such that it can be held in one hand to the side of the user’s face such that the device will have a speaker next to the ear and a microphone that will pick up speech from the user’s mouth to enable a user to hold a telephone conversation,” Professor Ling Cheng said in an affidavit.

“The primary considerations of [the] Samsung Galaxy S7 design are for cellular telecommunication and convenience as a phone handset.”

He added: “As such the Samsung Galaxy S7 is manufactured as a cellular network handset, which is designed to maintain a two-way communication with the base station of a cellular mobile communication system.”

Not convinced

Mngqibisa-Thusi ruled in Sars’s favour.

She said just because the “product has functions found in laptops and desktops does not detract from its principal function of being a telephone for cellular networks”, and that it was “disingenuous” for Samsung to liken the Galaxy S7 to these machines.

She added that the product had all the features that conformed with the description of Sars’s tariff classifications, in that it was hand-held and that its principal function was telephony.

“I am not convinced that the product is a machine other than a smartphone.”

Samsung’s application was dismissed with costs.