Cooneen Watts & Stone Ltd v HM Revenue and Customs

An end-use certificate under the Council Regulation (EC) No 150/2003 confirms military end use. It does not conclusively establish tariff classification. When used as a customs declaration, it remains subject to post-clearance verification. For classification, ordinary terms in the Combined Nomenclature govern. Function is relevant where the heading expressly or implicitly refers to function or use. A garment does not cease to be a jacket or trousers because it has specialist protective properties, and “other garments” is a residual category. The importer bears responsibility for the correct classification. Remission under Articles 220(2)(b) and 236 of the Council Regulation (EEC) No 2913/92 is unavailable where an error was reasonably detectable. Article 239 requires a special situation and absence of deception or obvious negligence. The appeal was dismissed.

The appellant imported specialised infrared-reflectance military clothing from China and claimed military end-use relief from customs duty. The First-tier Tribunal allowed the appellant’s case on classification, holding that the goods fell under CN heading 6211, but rejected its arguments on the effect of the Ministry of Defence certificate and on remission.

Nugee J in the Upper Tribunal allowed HMRC’s appeal on classification and dismissed the appellant’s cross-appeal. The issues before the Court of Appeal were whether the certificate conclusively determined classification, whether the clothing was properly classified under heading 6211, whether the proceedings were procedurally unfair, and whether duty could be remitted.

The appeal was dismissed unanimously. Laws LJ gave the judgment, with Elias LJ and Russell J agreeing.

1. Military end-use certificate. Under Articles 2 and 3(1) of the Council Regulation (EC) No 150/2003, the certificate established military end use, not the correct CN classification. The Regulation covered only goods listed in its Annex I and formed part of the general customs regime. If used as a customs declaration, the certificate had no special status: the CN code in Box 6 was no more than the trader’s assertion and remained subject to post-clearance verification. No reference to the Court of Justice was necessary.
2. Classification. The decisive criteria were the objective characteristics and properties defined in the wording of the relevant CN heading. Product function could be relevant where the heading expressly or implicitly referred to function or use. The words “jacket”, “trousers” and “other garments” had no special statutory definition. Heading 6211’s “other garments” category was residual and did not itself refer to protective function. Specialist infrared-reflectance properties therefore did not stop jacket-type items being jackets or justify classifying them as “other garments”. The caps and helmet covers fell within Chapter 65, although the precise heading was not decided.
3. Procedural fairness and importer responsibility. The importer was responsible for entering the correct classification under Article 199 of the Commission Regulation (EC) No 2454/93. HMRC had no duty to advance an alternative classification so that the appellant could formulate a different claim. Even a separate failure to raise Chapter 65 would not make the rejected heading 6211 claim correct or provide a remedy in these proceedings.
4. Articles 220(2)(b) and 236. The First-tier Tribunal was entitled to find that HMRC had not approved CN 6211, that any Ministry of Defence error did not cause the duty not to be entered in the accounts, and that the classification error was reasonably detectable. The appellant was an experienced importer and had been advised to consult HMRC’s tariff classification service. Its good faith did not overcome that finding, so remission was unavailable.
5. Article 239. Repayment or remission required the cumulative conditions of a special situation and the absence of deception or obvious negligence. A special situation required an exceptional position compared with other traders in the same business. The tribunals found no legitimate expectation, no special situation and, contingently, obvious negligence. Those findings were not open to challenge as errors of law. It was unnecessary to determine HMRC’s cross-appeal concerning the status of the Ministry of Defence as a customs authority.

• Court of Appeal (Civil Division) — Appeal dismissed. [2015] EWCA Civ 1261.
• Upper Tribunal (Tax and Chancery Chamber) — Nugee J allowed HMRC’s appeal on 24 January 2014 and dismissed the appellant’s cross-appeal.
• First-tier Tribunal — On 31 October 2012, allowed the appellant’s appeal on classification but rejected its arguments concerning the certificate and remission.