HM Revenue & Customs v GE ION Track Ltd

Harmonised System explanatory notes are aids to construction, not legally binding rules. An exclusion in such notes cannot operate as a rigid code which prevents application of the legally binding General Rules for Interpretation. Where goods are prima facie classifiable under two headings, the court must apply GIR 3, including the preference for the more specific description. A description based on the function of the goods as a whole may be more specific than one based on a component or mechanism. Instruments using beta radiation merely to ionise material for subsequent analysis were therefore more specifically described as instruments for physical or chemical analysis than as apparatus based on beta radiation.

GE Ion Track Limited imported three products used to detect explosives and narcotics. The products sampled air and analysed it using ion mobility spectrometry, with beta radiation forming part of the ionisation process.

The VAT and Duties Tribunal held that the products fell under combined nomenclature heading 9027, covering instruments and apparatus for physical or chemical analysis, rather than heading 9022, covering apparatus based on the use of beta radiation. HM Revenue and Customs appealed, contending that the explanatory-note exclusion for heading 9027 automatically displaced that heading and that heading 9022 was the more specific description.

1. Appeal dismissed. The Tribunal correctly held that the products were prima facie classifiable under both headings 9022 and 9027.
2. The explanatory notes to the Harmonised System were not legally binding. They were guides to the construction of the headings, section and chapter notes, and the General Rules for Interpretation. They could not alter the meaning of those binding provisions.
3. The exclusion of X-ray and similar apparatus in the explanatory note to heading 9027 was a pointer to another potentially appropriate heading, not an independent rule which automatically excluded heading 9027. GIR 3 remained applicable unless the heading itself, or a binding section or chapter note, required exclusion. The approach in VTech Electronics (UK) Ltd v Commissioners of Customs and Excise [2003] EWHC Ch 59 did not require a different conclusion.
4. Under GIR 3(a), the more specific description prevails over the more general description. Heading 9022 described the means by which part of the apparatus operated. Heading 9027 described the function of the apparatus as a whole. The products used beta radiation only to produce ions; they did not measure the beta radiation. Their function was chemical analysis. Heading 9027 was therefore the more specific description.
5. The explanatory note to heading 9027 did not limit that heading to optical spectrometers. The products were mass spectrometers and fell within the heading’s terms.
6. The court accepted the general approach stated in Holz Geenen v Oberfinanzdirektion München Case 309/98: classification depends principally on the objective characteristics and properties of the goods, with explanatory notes serving as non-binding interpretative aids. The decision in Develop Dr Eisbein v Hauptzollamt Stuttgart-West Case C35/94 supported the conclusion that explanatory notes must yield where they conflict with the binding classification rules.

1. VAT and Duties Tribunal: On 27 October 2005, allowed GE Ion Track Limited’s appeal against HMRC’s tariff classification and classified the products under heading 9027 rather than heading 9022.
2. High Court (Chancery Division): The appeal by HMRC was dismissed. The Tribunal’s classification was upheld.