[2010] UKFTT 437 (TC)

TC00702

Appeal number TC/2009/09815

CUSTOMS DUTIES – TARIFF CLASSIFICATION - The Goods analysed the gases in a patient’s respiration during surgical operations and  modules of a parent patient monitoring systems – HMRC conceded that the correct classification was TC 901820 00 00 – Appeal allowed

FIRST-TIER TRIBUNAL

TAX

GE MEDICAL SYSTEMS INFORMATION TECHNOLOGY Gmbh Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: MICHAEL TILDESLEY OBE

HELEN FOLORUNSO

Sitting in public in London on 10 June 2010

Philip Challen, Customs Duties Consultant for the Appellant

Mark Fell instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

The Hearing on 10 June 2010

1.     At the hearing on 10 June 2010 HMRC advised the Tribunal that it had conceded the Appeal but the parties had been unable to agree the terms of a consent order.[1] The Appellant considered that a consent order would not explain the details of the dispute and required a written decision of the Tribunal which would be available on the website.

2.     In those circumstances the Tribunal directed that the Appeal be allowed and that HMRC prepare and lodge a draft decision with the Appellant having a right of reply. The Tribunal indicated that it retained the right to determine the contents of the published decision. The Tribunal apologises for not publishing the decision by the due date (19 August 2010). The reason for the delay was due to the Judge being ill.

3.     HMRC supplied a draft decision by 28 June 2010. The Appellant responded promptly on 29 June 2010 suggesting various amendments to the draft which concerned the chronology and whether the draft captured the disputed issue with absolute clarity. HMRC objected to the amendments which it considered to be unnecessary and inappropriate. HMRC reminded the Tribunal of what it said at the hearing on 10 June 2010. The Tribunal indicated  that the purpose of including  the chronology in the decision was  to set out the background  not to apportion blame, and that its decision was concerned only with the facts of this Appeal not with establishing general principles for use in other cases. Critically the parties agreed on the facts found, which comprised a series of concessions on the part of HMRC. The Tribunal has taken onboard some of the Appellant’s amendments which it considers uncontroversial.

The Appeal

4.     This is an appeal relating to the tariff classification of goods under the Combined Nomenclature contained in Annex 1 of EC Council Regulation 2658/8 7 (as amended from time to time). The appeal concerns the categorisation of two machines imported into the UK by the Appellant (“the Goods”). The Goods analyse the gases in a patient’s respiration during surgical operations and are modules of a parent patient monitoring systems used by anaesthetists to ensure delivery of the correct dosage of anaesthetic agent. In Binding Tariff Information (“BTI”) GB 500544885 and BTI GB 500544983 the Goods were both classified to 901819 10 00 under rules 1 and 6 of the General Interpretation Rules (“the GIRs”) and Note 2(b) to Chapter 90. These two BTIs were upheld by a review decision of HMRC dated 6 April 2009 with reference number NRA/225/09 (“the Review Decision”). The Review Decision was appealed by the Appellant which contends that the Goods should be classified to 901820 0000 under Rules 1, 3 and 6 of the GIRs.

5.     On 2 June 2010 HMRC conceded the appeal. The Appellant declined to agree to a consent order disposing of the proceedings under Rule 34 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

Chronology

6.     The chronology is set out below

Description of the Goods

7.     The Goods are known as: “Smart Anesthesia Multi-Gas (SAM) Module (“SAM”); and “Capnostat CO2 Module” (“the C02 Module”). The Goods are mass spectrometers working in the infra-red spectrum to analyse the breath of a patient on the operating table, determining the amount of anaesthetic gases  inspired and expired, thereby assisting the anaesthetist to administer the correct dosage of anaesthetic. The Goods lack an independent power supply or a display unit and must interface with a parent monitoring system which provides them with power and displays their output to the relevant clinician.

8.     The witness statement of Steve Morvack dated 17 December 2008 states at paragraph 4 that SAM operates solely with the Solar ® 8000i patient monitor via a TRAM RAC 4A docking station or solely with the Appellant’s DASH family of monitors via the TRAM RAC 2A docking station. In the original application for a BTI in respect of SAM, SAM was described as follows.

“Real time monitoring of a patient’s respiratory and anaesthetic gases by analysis of the Infra Red spectrum. The module provides the capability to automatically identify and quantify the presence of halogenated anesthetic agents (Halothane, Enflurane, Isoflurane, Desflurane and Sevoflurane) along with C02 and N20, using spectroscopy in the optical radiation spectrum (infra-red) to do so.

9.     The witness statement of Brian L. Jenson dated 17 December 2008 states at paragraph 4 that the C02 Module operates solely with the Solar ® 8000i patient monitor via a TRAM RAC 4A docking station. In the original application for a BTI in respect of the C02 Module, the C02 Module was described as follows.

Capnostat C02 module — a medical device for the real-time monitoring of a patient’s respiratory gases. Sensor: Mainstream non-dispersive infrared (NDIR) absorption with dual wavelength ratiometric-true single beam optics.

The Dispute

10.  In its Statement of Case dated 6 June 2009 HMRC maintained that the Goods should be classified to 901819 10 00 under rules 1 and 6 of the GIRs and Note 2(b) to Chapter 90, as per the Review Decision. HMRC’s stance is summarised in the following extracts from paragraphs 32(c), 32(f), 32(g) and 32(h) of its Statement of Case.

“c. Note 2(a) to Chapter 90 of the Combined Nomenclature requires that parts and accessories which are goods included in any of the headings of this Chapter be classified in their respective headings.. Note 2(b) which requires that other parts and accessories be classified with the machines, instruments or apparatus of which they form part or to which they are an accessory.

f Note 2(a) to Chapter 90 requires that SAM and the C02 Module be classified as free standing items, rather than as part of the apparatus of which they form part if they are goods included in any of the headings to Chapters 90, 84, 85 or 91 (with certain immaterial exceptions).

g. HMRC submit that the Modules do not fall within any of the headings within these Chapters.

h. Consequently, it is submitted that Note 2(b) to Chapter 90 applies, read in conjunction with the explanatory notes to the Harmonised System, and the Modules fall to be classified with the machines, instruments or apparatus of which they are “parts and accessories.. In the premises the Modules accordingly each fall to be classified under the classification applicable to the patient monitoring system to which they are an accessory”.

11.   The Appellant maintains that the Goods should be classified to 901820 00 00 under rules 1, 3 and 6 of the GIRs. The Appellant’s stance is summarised in the following extracts from paragraphs 3.3, 3.4, 5.3.1, 5.3.2 and 5.3.3 of its Skeleton Argument dated 27 May 2010.

“3.3 The Appellant invites the Tribunal to rule that the products do indeed fall within the descriptions of Headings 90.18 and 90.27. It is self evident that: a) they are instruments and appliances/apparatus; b) they are “for” gas analysis; and c) they are used in medical and surgical science. Such a determination would bring into play Note 2(a) of Chapter 90, which requires the adoption of GIR 3 to decide between those two headings.

3.4 The secondary issue is how, assuming that Headings 90.18 and 90.27 are potentially applicable, GIR 3(a) decides between them. The Appellants contend that in determining whether the physical attribute or the usage attribute provides the more specific description, the intent of the designers of the Nomenclature can be inferred from the format of the nomenclature.... The fact that the designers of the Nomenclature elected to break out medical usage as one of the very, very few usage-based Headings suggests that they wanted to isolate medical usage as the over­riding attribute of a product, and have such products assigned into Heading 90.18.

5.3.1 Both products are infra-red ray apparatus (9018.20) and are also electro-­diagnostic apparatus (9018.11 to 9018.19).

5.3.2 The terms of GIR 6 require that only subheadings at the same level can be compared...”

12.  The Appellant originally suggested that as Subheadings 9018.11 to 9018.9 were not at the same level as Subheading 9018.20, only the latter could apply. The Appellant now accepts that the comparable subheading at the same level as 9018.20 is 9018.1x – electro-diagnostic apparatus. Accordingly, rule 3 of the GIRs decides between the competing subheadings and as each provides an equally specific description of the Goods, rule 3(c) of the GIRs applied under the auspices of rule 6 decides in favour of 9018.20 being last in numeric order.

Agreed Facts

13.   The agreed facts take the form of a series of concessions made by HMRC following the indication in its letter of 2 June 2010 that it was conceding the appeal. HMRC set out the concessions it was making for the purposes of the appeal in paragraph 3 of its Skeleton Argument dated 8 June 2010.  The Appellant suggested no changes to the series of concessions in its response dated 29 June. The concessions were as follows.

(1)    The Goods are parts of a wider patient monitoring system.

(2)    On the evidence available to it at this time, HMRC concedes that the Goods (as parts) are themselves capable, in their own right, of classification in both headings 90.18 and 90.27.

(3)    Accordingly, Chapter 90 Note 2(a) applies, rather than Note 2(b).

(4)    GIR 3 applies to decide the correct heading because two headings are possible.

(5)    GIR 3 also applies (under the auspices of GIR 6) to decide between subheadings 9018.lx and 9018.20.

(6)  The goods are accordingly correctly categorised to 901820 00 00.

Decision

14.  In the light of the Respondent’s concessions, the Tribunal makes findings in the terms set out at paragraphs 13.1 to 13.6 above. By reason of those findings, the appeal is allowed.

15.  Accordingly, the Tribunal orders as follows:

The review decision dated 6 April 2009, reference number NRA1225/09, be quashed and substituted with a decision that the correct classification in the customs nomenclature for the goods referred to in Binding Tariff Information GB 500544885 and Binding Tariff Information GB500544983 is TC 901820 00 00, with the justification for the classification of the said goods being that Classification is determined by the interpretation of General Rules 1, 3 and 6 of the Combined Nomenclature and the terms of heading 9018 and subheading 9018.20”.

16.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

MICHAEL TILDESLEY OBE

TRIBUNAL JUDGE

RELEASE DATE:15 September 2010