HM Revenue & Customs v Epson Telford Ltd

For tariff classification under GRI 3(b), the essential character of composite goods is identified by an objective assessment of their purpose and the relative importance of their components. The dispensable-constituent inquiry is a possible method, not a mandatory or paramount test. The relevant factor may vary with the goods.

For printer cartridges containing ink, technical delivery controls, electronic chips and safety functions remain ancillary where the cartridge’s basic function is to supply ink to the print head. A second appeal may proceed where there is a compelling reason, but European Union law does not disapply CPR 52.13. No further reference is required where the applicable Court of Justice reasoning is clear and unambiguous.

The Commissioners appealed from a decision of the VAT and Duties Tribunal, which had allowed Epson Telford Ltd’s appeal against customs classifications of its second and third generation printer cartridges. The Tribunal classified the cartridges as parts of printers under heading 8473, rather than as ink under heading 3215.

Mr Justice Henderson allowed the Commissioners’ appeal and restored the customs classifications, holding that the cartridges were ink. His decision is reported at [2007] EWHC 1045 (Ch). Epson sought permission for a second appeal and an order referring questions of European Union law to the Court of Justice. The central issue was whether the ink, the cartridge components, or both gave the cartridges their essential character under GRI 3(b).

Sir John Chadwick gave the judgment of the court. Lord Justice Toulson and Lord Justice Carnwath agreed.

1. Permission and second appeal. CPR 52.13 applied because the proposed appeal was a second appeal from a High Court decision made on an appeal from the Tribunal. The fact that the outcome turned on European Union law did not remove that requirement. Although the appeal raised no general point of principle, permission was granted because the issue was of great commercial importance and there was a compelling reason for the Court of Appeal to hear it.
2. Tariff classification. The parties accepted that the cartridges were prima facie classifiable under two headings, that GRI 3 applied, and that GRI 3(a) was not determinative. Under GRI 3(b), the court had to identify the component giving the composite goods their essential character.
3. Essential character. The court applied the reasoning in Turbon II, Case C-250/05. The appropriate assessment was purpose-based. The cartridges were inserted into the printers to supply them with ink. The ink was therefore the most important component for the purpose of using the goods. The dispensable-constituent test identified in VauDe Sport, [2001] ECR I-3683, was not exclusive or mandatory. The factors determining essential character vary with the type of goods.
4. Application. The technical features distinguishing the G2 and G3 cartridges from the G1 cartridges regulated delivery, recorded ink levels and protected the print head from dry firing. Those features were ancillary to the basic function of supplying ink. The cartridges were therefore classified under heading 3215 as ink, and GRI 3(c) did not arise.
5. Reference and disposition. Turbon II was clear and unambiguous. The Court of Appeal was not persuaded that its reasoning conflicted with the wider European Union case law or that further guidance was needed. The application for a preliminary reference was refused and Epson’s appeal was dismissed.

1. Court of Appeal (Civil Division): Permission to appeal granted; application for a preliminary reference refused; Epson’s appeal dismissed.
2. High Court, Chancery Division: On 4 May 2007, Mr Justice Henderson allowed the Commissioners’ appeal from the Tribunal and restored the classifications of the cartridges as ink: [2007] EWHC 1045 (Ch).
3. VAT and Duties Tribunal: On 19 May 2006, the Tribunal allowed Epson’s appeal and classified the cartridges as parts of printers: [2006] UKVAT (Customs) C00217.