Revenue & Customs v Epson Telford Ltd

This is an application for permission to appeal in a customs tariff classification case, the question being whether the inkjet printer cartridges of second and third generation Epson printers are to be classified under the Combined Nomenclature as ink, in which case they are subject to customs duty at 6.5 per cent, or as parts suitable for use with printers, in which case no duty is payable. The VAT and Duties Tribunal said the latter. Henderson J, on appeal, said the former.

The first generation of such cartridges has been decided to be classifiable as ink in two successive cases in the European Court of Justice, called Turbon 1 (Turbon International GmbH v Oberfinanzdirektion Koblenz-Zoll-und Verbrauchsteuerabteilung [Case C-276/00]) and Turbon 2 (Turbon International GmbH v Oberfinanzdirektion Koblenz-Zoll-und Verbrauchsteuerabteilung [Case C-250/05]). We are told that there are different Binding Tariff Indications in relation to equivalent products in different member states, and in particular, that at any rate in some jurisdictions Hewlett Packard and Lexmark products are classified as parts suitable for use with printers, so that they are free of customs duty, resulting in a distortion of competition as between what Epson sees as precisely equivalent and directly competing products. That is, in principle, an unsatisfactory position, and one which might be capable of remedy if, given the advances and continuing advances in technology, the regular revision of the Combined Nomenclature were to include the addition of a more specific item dealing with this sort of product; but that is a question for a different forum, and the question for us is how to deal with Epson’s application for permission to appeal against Henderson J’s order.

The Commissioners of HM Revenue and Customs had notice of the application. They wrote to the court late in October, saying they did not propose to attend or make submissions, but they drew attention to some wise words of Advocate-General Jacobs in the case of Wiener v Hauptzollamt Emmerich [1997] ECR I-6495 (Case C-338/95), on the need for restraint when considering whether to seek a reference to the European Court of Justice in tariff classification cases.

Mr Anderson QC for Epson has pointed out to us that, when considering an application for permission to appeal, the Court of Appeal is a court of last instance, in terms of the third paragraph of Article 234 of the Treaty; whereas if permission is granted, then on the hearing of the substantive appeal the Court of Appeal is not a court of last instance, because it remains possible to challenge the decision in the House of Lords.

So, technically speaking, the position as regards a reference to the European Court of Justice could be different as between a permission application and a substantive appeal. Whether in practice that would make a difference on issues of this kind, in relation to a case which I can well believe has major commercial impact for the appellants, I have some doubt.

Mr Anderson puts his case perhaps at the most basic level by pointing out the disagreement between the tribunal and the judge, and the diversity of treatment of similar products within the European Union, and saying that it cannot be said that there is no scope for reasonable doubt, nor that the answer would be equally obvious to courts of other member states and the European Court of Justice. He seeks to distinguish the consistent decisions in Turbon 1 and Turbon 2 by the differences in technical and technological characteristics and attributes of the second and third generation products. He points out that in Turbon 1, the ECJ said that a test which could be referred to as the removal test had to be applied, but that it was not applied in Turbon 2. It seems to me there may be perfectly understandable reasons for that, given that Turbon 2 was a reassessment of Turbon 1, but on a limited basis.

It seems to me that there is a good deal of force in what Mr Anderson says, but that the court is handicapped by, on the one hand, the need to deal with the application in a very short timescale, and on the other hand, the absence of argument on behalf of the Commissioners. There is, of course, the possible perception that, if permission to appeal is granted on the basis that there is a reasonable prospect of success on the appeal, that might be said to answer the question whether the issue was the subject of acte claire, in which case a reference could not be regarded as necessary. As it seems to me, it would be unsatisfactory to do anything that prejudged that question. Formally speaking, it may be that the grant of permission would not technically compel the answer to the question of whether a reference was necessary, because one could grant permission on the basis that, whether or not there was a reasonable prospect, there was a compelling reason for the matter to be heard. But it seems to me that there is a more satisfactory way forward, which keeps the issue open and does not, as I see it, prejudge it in any way, which is to adjourn this application to come on before a full court of three members on notice to the Commissioners and with the appeal to follow immediately if permission is granted. That would enable a full court, with the benefit of full argument on both sides, to consider the matter both at the permission stage, and if it considers that permission should be granted, to transform itself into being not a court of last instance, to consider the appeal and to rule upon it accordingly. That will have the effect that the position of the parties would not be the same as if permission had already been granted, and in particular, the appellant would not be in a position of saying to the Customs, well, now that permission has been granted, let us consider whether the right thing is to invite the court to make a reference immediately without hearing argument on the appeal.

For myself, I think it is more satisfactory that the court should hear argument on the appeal, rather than go straight to considering whether to make a reference; but of course, if the Appellant wished to propose that to the Commissioners, there is nothing to stop them doing so, pending the full hearing of the application on the adjourned basis.

For those reasons, I would direct that the application be adjourned to the full court, to come on on notice, with the appeal to follow immediately thereafter if permission is granted by the full court.

I agree.