Revenue And Customs v Honeywell Analytics Ltd

For customs tariff classification, the decisive criterion is the goods’ objective characteristics and properties. Intended use may be considered where it is inherent in the product and objectively verifiable; manuals, marketing literature and the way goods are presented to users may therefore be relevant. There is no general principal-purpose tie-break rule for goods capable of falling under more than one heading. The applicable Notes or General Interpretative Rules must be used. In the artificial binary choice between headings 8531 and 9026, a gas device whose main intended use was alerting, with measurement subordinate and separate measurement use merely theoretical, fell under heading 8531.

HMRC issued a Binding Tariff Information decision classifying Honeywell’s Gas Alert Micro 5 under heading 8531 of the Combined Nomenclature. The First-tier Tribunal dismissed Honeywell’s appeal on 20 November 2015. The Upper Tribunal allowed Honeywell’s appeal, set aside the First-tier Tribunal’s decision and classified the device under heading 9026: [2017] UKUT 61 (TCC).

HMRC appealed. It also sought to introduce, at a late stage, a case for classification under heading 9027, but that application was refused. The appeal therefore concerned the artificial binary choice between headings 8531 and 9026, including the relevance of intended use and marketing materials, the interpretation of heading 9026, and the operation of Note 1(m) of Section XVI.

Majority: Davis LJ and Sales LJ. The appeal was allowed. The Upper Tribunal’s order was set aside and the First-tier Tribunal’s decision classifying the device under heading 8531 was restored.

1. Late amendment. The refusal to permit HMRC to introduce classification under heading 9027 was a case-management decision. The Upper Tribunal had made no error of principle and had acted within the limits of its discretion. The point was raised too late and its admission would have caused procedural unfairness because Honeywell had not had the opportunity to adduce evidence, including expert evidence, on heading 9027.
2. Classification principles. Tariff classification is an objective exercise based on the goods’ characteristics and properties. Intended use may be an objective criterion where it is inherent in the product. Manuals, marketing literature and the objective manner in which goods are presented to consumers or users are relevant materials: excluding them was an error of law. The majority also accepted that there is no general principal-function tie-break rule applicable whenever goods appear to fall under more than one heading. The relevant Notes and General Interpretative Rules must instead be applied.
3. Application to heading 9026. In the artificial binary choice before the court, the wording of heading 9026 required the device’s main or principal intended use to be measuring or checking the level of gases. It was insufficient that measurement was necessary to operate the alarm or was a subordinate function. Uses that were merely theoretical or highly improbable could be disregarded. The First-tier Tribunal was entitled to find that the device was intended to alert workers, that measurement was subordinate to alerting, and that separate use as a measuring instrument was not a real possibility.
4. Note 1(m). Note 1(m) of Section XVI would have required priority for Chapter 90 if the device fell within both headings 8531 and 9026. Since the First-tier Tribunal was entitled to find that heading 9026 did not apply, the Note was not engaged and no issue arose under the GIRs.

Dissent. The Master of the Rolls would have dismissed the appeal. He agreed that marketing materials and targeted use were relevant, but considered those errors immaterial because the device’s objective characteristics showed a measuring function beyond a merely theoretical possibility.

• Court of Appeal (Civil Division): The appeal was allowed by Davis LJ and Sales LJ. The Upper Tribunal’s order was set aside and the First-tier Tribunal’s order was restored: [2018] EWCA Civ 579.
• Upper Tribunal, Tax and Chancery Chamber: Honeywell’s appeal was allowed. The First-tier Tribunal’s decision was set aside and the device was classified under heading 9026: [2017] UKUT 61 (TCC).
• First-tier Tribunal, Tax Chamber: Honeywell’s appeal against HMRC’s classification under heading 8531 was dismissed on 20 November 2015.