Revenue and Customs v Epson Telford Ltd

For classification of composite goods under GRI 3(b), the essential character must be identified objectively. The constituent-removal method is not an exclusive or mandatory test. The relevant factor may instead be the constituent's role in the use of the goods, since the factor determining essential character varies with the goods concerned.

Where a printer cartridge's basic purpose is to supply ink, technical features which regulate delivery, communicate ink levels and prevent dry firing may remain ancillary to that purpose. Those features do not necessarily displace ink as the component giving the cartridge its essential character.

HM Revenue and Customs classified second and third generation Epson printer cartridges as ink under heading 3215 of the Combined Nomenclature. Epson contended that they were printer parts under heading 8473 and therefore duty-free.

The VAT and Duties Tribunal allowed Epson's appeal. Henderson J allowed the Commissioners' appeal, restoring the classification as ink: [2007] EWHC 1045 (Ch). Epson sought permission for a second appeal and a preliminary reference to the Court of Justice under article 234 of the EC Treaty.

The central issue was whether, for GRI 3(b), ink alone or a combination of ink and the cartridge's technical components gave the G2 and G3 cartridges their essential character.

Sir John Chadwick, with whom Toulson and Carnwath LJJ agreed, granted permission to appeal but dismissed the appeal. The application for a preliminary reference to the Court of Justice was refused.

1. The parties accepted that the cartridges were prima facie classifiable under two headings, that GRI 3 applied, and that GRI 3(a) did not determine their classification. The issue was therefore the component giving the goods their essential character under GRI 3(b).

2. The court applied the reasoning of the Court of Justice in Turbon II, Case C-250/05. GRI 3(b) did not impose a mandatory constituent-removal test. The factors relevant to essential character vary according to the goods. It was permissible to identify essential character by the objective purpose for which a cartridge is inserted into a printer.

3. That purpose was to supply ink. The printed circuit board, chip, controlled flow systems and dry-firing safeguards made the supply of ink more effective and protected the printhead. They did not alter the basic function of the cartridge or make those technical components equally decisive with the ink. The cartridges were therefore properly classified as ink under heading 3215.

4. The court explained that observations in Turbon I, Case C-276/00, concerning GRI 3(b) did not form the logical basis of that decision, because that court had rejected the alternative classification under heading 8473. Turbon II gave the applicable guidance.

5. CPR 52.13 remained applicable notwithstanding that Community law was involved. Although no general point of principle arose, Epson's commercial interest gave a compelling reason to grant permission. No further reference was required because the reasoning in Turbon II was sufficiently clear and was not shown to conflict with the earlier authorities.

• Court of Appeal (Civil Division): granted permission for a second appeal, refused a preliminary reference, and dismissed Epson's appeal: [2008] EWCA Civ 567.
• High Court (Chancery Division): Henderson J allowed the Commissioners' appeal and restored the classification of the G2 and G3 cartridges as ink: [2007] EWHC 1045 (Ch).
• VAT and Duties Tribunal: allowed Epson's appeal and classified the cartridges as printer parts: [2006] UKVAT (Customs) C00217.