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Cite as: [2008] UKVAT(Customs) C00262, [2008] UKVAT(Customs) C262

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Matalan Retail Ltd v Revenue & Customs [2008] UKVAT(Customs) C00262 (08 August 2008)

C00262

CUSTOMS DUTIES ... swimwear — correct classification within CN — Commissioners' refusal to meet repayment claims — relevance of withdrawal and reversal of earlier decision relating to similar goods — whether amounting to agreement within VAT Act 1994 s 85 — relevance of Commission Regulation settling classification for future to past classification — classification claimed by Appellant found to be incorrect but BTI in that code to be treated as in force and effective to classify some of goods — absence of BTI in period covered by repayment claim fatal to claim — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

MATALAN RETAIL LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Sitting in public in Manchester on 12 to 14 May 2008

Philippa Whipple, counsel, instructed by PricewaterhouseCoopers, for the Appellant

Andrew O'Connor, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

Introduction

The issue between the parties in this appeal relates, primarily, to the correct classification for customs tariff purposes of swimwear imported by the Appellant, Matalan Retail Limited ("Matalan"). There is, however, rather more to it than that. Formally, I was required to determine two appeals: one against the Commissioners' refusal to meet three repayment claims amounting in all to £522,537.43 in respect of customs duty which, Matalan contends, it overpaid between 2001 and 2004; and the second against their revocation of a binding tariff information ("BTI"). The second of those appeals was withdrawn during the hearing, as I shall explain. Matalan has lodged a further notice of appeal against the issue by the Commissioners of two post-clearance demands amounting to £113,464.78 and it applied that that third appeal be consolidated with the other two and heard at the same time. The Commissioners opposed the adoption of that course, arguing that the third appeal had been so recently brought that they had not had sufficient time to consider it properly. I declined to make the direction Matalan sought, for the reasons advanced by the Commissioners, though I suspect the conclusions I have reached about the appeals which are before me will enable the parties to resolve that latest appeal.

Matalan was represented before me by Philippa Whipple and the Commissioners by Andrew O'Connor, both of counsel. I heard the oral evidence of Veronica Bennett, Matalan's customs duty manager; Caroline Barraclough, her predecessor in that position; Stewart Rayton, a customs officer (since retired) who played a part in the events I shall describe; John Pitt, formerly a customs officer but at the material time a senior manager at PricewaterhouseCoopers ("PwC") who acted as Matalan's customs duties adviser and who conducted much of the correspondence with HMRC about the matters in issue; and Stephen Robinson, a serving customs officer who was also involved in the matter for part of the relevant period. Both Mr Rayton and Mr Robinson were called by Matalan, and I had no evidence from the HMRC officers responsible for making the original decisions or from the officers who conducted the reviews against the outcome of which the appeals have been brought, though I did have the letters written by the reviewing officers, as well as other correspondence.

The goods and the tariff

The swimwear with which I am concerned includes quite a large range of garments intended for women, girls, men and boys, of different designs, sizes and colours, but all made of the same materials. The body of each garment consists of a synthetic fabric of mixed polyamide and elastane; the fabric contains no rubber. Each garment has strips of material around the openings provided for legs and, depending on the nature of the garment, the arms and neck, and I understand the same material forms the shoulder straps of some garments. That material, which I shall refer to as "trim", contains rubber. Matalan says that, although the proportions differ from one garment to another, the rubber content of each garment, considered as a whole, exceeds five per cent, and it produced some analysis reports prepared by an independent laboratory supporting that claim. The Commissioners do not advance a positive case to the contrary, but have not yet conceded the validity of Matalan's contentions.

It was common ground that all the garments are properly classified within heading 6112 of the European Union's customs tariff, the Combined Nomenclature ("CN"), which is the annually revised Annex 1 to Council Regulation 2658/87/EEC. The text of the CN, so far as presently relevant, is:

"Men's or boys' swimwear:

6112 31 — Of synthetic fibres

6112 31 10 — containing by weight 5% or more of rubber thread

6112 31 90 — other

6112 39 — Of other textile materials

6112 39 10 — containing by weight 5% or more of rubber thread

6112 39 90 — other."

The text of the tariff relating to "women's and girls' swimwear" is identical, save that the subheadings are numbered 6112 41 and 6112 49 respectively.

It was also common ground that at the internationally agreed Harmonised System six-digit level, all the garments with which I am concerned, being of synthetic fibres, are classified in subheading 6112 31 (men's and boys') or 6112 41 (women's and girls'). It is only for the Community's tariff purposes that each of those subheadings is divided. The significance for present purposes of the division is that goods within 6112 31 10 and 6112 41 10 (for brevity I shall refer to the classifications as "10") are subject to duty at 8 per cent, while those within the second, "other", categories (for brevity, "90") are charged at 12.2 per cent (for some of the relevant period duty was charged at 12 per cent).

The primary dispute between the parties arises from the ambiguity of the tariff. Matalan argues that it should be read "Men's or boy's swimwear (of synthetic fibres) containing by weight 5% or more of rubber thread"; the Commissioners that it should be read "Men's or boy's swimwear (of synthetic fibres containing by weight 5% or more of rubber thread)". That is, Matalan contends that the rubber content is to be assessed by reference to the garment as a whole, with the result that duty is due at the lower rate; while if the Commissioners are right, that assessment is to be made by reference only to the fabric forming the body of the garment. Since that fabric contains no rubber, the garments must fall within 90, with the consequence that duty is due at the higher rate. I was told, incidentally, that the reason for the division was that the Community wished to provide an incentive to rubber producers.

It is necessary to deal with the chronology of the case before coming to the detail of the competing arguments about the correct tariff classification. When the hearing began there was one matter of significant factual contention, that is whether the repayment claims were in time, but after Mr Robinson's evidence had been concluded Mr O'Connor indicated that the Commissioners no longer wished to pursue the argument that they were not. The remaining facts were largely uncontroversial and I can deal with them fairly briefly. I shall identify the source of the facts as I set them out below only when it is necessary to do so.

The relevant events

In the summer of 2004 Mrs Barraclough was Matalan's customs duty manager. One of her responsibilities was to keep the classification for tariff purposes of the numerous articles imported by Matalan under review. When she came to deal with Matalan's swimwear range she realised that it had been declared within 90 rather than, as she thought appropriate, 10, and that in consequence Matalan had paid more duty than was due. On 23 August 2004 she submitted to the Commissioners a claim for repayment of the duty which, she believed, Matalan had overpaid during the preceding three years.

The procedure for making repayment claims is laid down by article 236 of Council Regulation 2913/92/EEC (the Community Customs Code) and (so far as material here) articles 877 to 881 of Commission Regulation 2454/93/EEC (the Implementing Regulation). As the application of these provisions was not contentious I do not need to set them out: it is sufficient to mention that article 236 provides for the repayment of duty mistakenly paid within the three years preceding the making of an application for repayment, while articles 877 to 881 set out the detailed procedure. The application is to be made, usually on a prescribed form commonly known in the UK as form C285, by providing various items of information. It is accepted by the Commissioners that Matalan complied with the relevant formal requirements. Mrs Barraclough was familiar with the procedure as she had made repayment claims on Matalan's behalf on several previous occasions.

Mrs Barraclough did not send full details of the reclaim immediately, because she had not had enough time to extract all of the necessary information from Matalan's records. Instead, she asked that the claim be protected, that is treated as having been made (so that it extended for the full three years into the past) but should be left in abeyance until she had been able to secure the necessary supporting detail. The Commissioners accepted the claim on that basis, but on the condition that full particulars were provided by 30 November 2004. The imposition of a time limit of that kind is a requirement of article 881(2) of the Implementing Regulation.

On 17 September Mrs Barraclough sent one garment, a women's one-piece swimming costume, to the Commissioners' classification office with an application for a BTI. Her view, she told me, was that the resulting BTI (which she expected to be within 10) could safely be used as an authoritative guide to the correct classification of all the garments since, although they differed in design, size and colour, they were of materially the same composition, that is they were of synthetic fibres and, if the trim were taken into account, contained at least 5 per cent rubber thread. Her understanding, she said, was that the officer with whom she was dealing at the classification office would take the same view, since it would have been extremely laborious and expensive for both Matalan and the Commissioners had she asked for a BTI for each different style (let alone size and colour) of garment. She told me she would have sent further items had they been requested, but none were requested. Instead, a BTI classifying the goods to 90 was issued on 22 September. On 2 November Mrs Barraclough asked for a review of the decision, and sent with her request a copy of a laboratory analysis she had obtained in the meantime, showing that the rubber content of the garment exceeded five per cent.

There was then what seems to me to have been a misunderstanding, as a result of which HMRC rejected the repayment claims since the supporting information was not supplied by 30 November, the deadline they had imposed. The Commissioners' position at the beginning of the hearing was that the complete claim (which, because of the continuing differences between the parties, was not submitted until May 2006) was a new claim, replacing the rejected original claim, and that so far as it related to duty paid more than three years before that claim was submitted, was out of time. Matalan's case was that the Commissioners had agreed to revive the original claim when the principal reason for the delay—the dispute about the BTI, to which I am about to come—was pointed out, and Mr Robinson's evidence supported that version of events. It was for that reason that the Commissioners withdrew their argument that the claim for repayment was partly out of time.

The BTI was upheld on review and on 23 December 2004 Matalan lodged an appeal against the review decision with this tribunal. In May 2005 the Commissioners served the statement of case in that appeal, which revealed (or, perhaps more accurately, confirmed) that they relied on two factors: that the rubber within the trim was to be disregarded when determining the tariff classification; and that the rubber was in any event not thread, as classification within 10 required, but strip. These two contentions were in issue before me and I shall return to them.

That appeal was listed to be heard on 24 April 2006. On 20 April, the Commissioners wrote to Matalan's representatives stating that they "withdraw the disputed decision. The Appellant is hereby invited to withdraw its appeal …". Matalan did withdraw its appeal, and the Commissioners paid its costs. On 25 May they issued a replacement BTI for the item of swimwear which had been submitted with the original application, classifying it within 10. In the meantime, on 17 May, Mrs Bennett, who had by then replaced Mrs Barraclough, submitted complete repayment claims.

Mr Rayton visited Matalan on 14 June 2006, to check the information which Mrs Bennett had provided. He is not a tariff classification officer, and did not direct his attention to the characteristics of the garments. His task was to check the claim against the supporting invoices. In doing so he detected a number of mistakes—Mrs Bennett accepted that she had erroneously included the duty paid on some other goods which had been invoiced with the swimwear—and those errors were corrected. On 5 July Mr Rayton submitted the claims, approved by him as amended and countersigned by his superior officer, to the Commissioners' repayment office at Dover. The repayment was not, however, made. Matalan was at first told that the claims had been mislaid, but it later became clear that a more senior officer had countermanded Mr Rayton's authorisation.

It emerged that senior officers at the Commissioners' main customs duty office were of the opinion that the BTI which was the subject of the first appeal had been withdrawn too hastily (I was told it had been withdrawn because the Commissioners had received advice from counsel—evidently not Mr O'Connor—that it would be very difficult to defend at a hearing before the tribunal), that the goods should, despite the withdrawal of the original BTI and its replacement by another classifying the goods to 10, be classified within 90, and that, as the BTI covered only one type of garment but the claims related to many types, it was still open to the Commissioners to argue that those other garments should be classified within 90. They were also not satisfied that all the garments contained at least 5 per cent rubber, even assuming Matalan's preferred interpretation of the tariff was correct.

On 21 August 2006 Matalan was asked to supply a sample of every garment included within the repayment claims although, before the samples were actually provided, the Commissioners indicated that they did not in fact want to inspect them after all. An offer was made to meet the claim so far as it related to the garments expressly referred to in the replacement BTI, and to treat the remainder of the claim as protected until the Commissioners had attended the next meeting of the textiles committee (of the European Union's customs policy section). PwC requested a formal review of the partial refusal and on 12 October 2006 the Commissioners issued a letter setting out the outcome of the review: in essence, Matalan was required to establish its claim, garment by garment, by reference to the replacement BTI and had not yet done so to the Commissioners' satisfaction. On 10 November Matalan lodged an appeal against the review decision that the repayment should not be made in full. That is the first of the appeals now before me.

On 22 March 2007 the Commissioners revoked, or purported to revoke, the replacement BTI, contending that it was no longer valid since it was incorrect: a regulation making it clear that the correct tariff classification of garments of the kind imported by Matalan was in 90 was to be published later in the year. A review of that decision was requested by PwC, and the second of Matalan's appeals before me was against the review decision upholding the revocation. The expected regulation to which the Commissioners had alluded when revoking the BTI was published, as Commission Regulation (EC) No 651/2007, on 8 June, and it classified the swimwear which is the subject of this appeal (or some of it) to 90. Matalan accepts that, from the coming into force of the regulation on 3 July 2007, the swimwear must be treated as falling within that classification; it has not sought to challenge the validity of the regulation.

In the meantime, the post clearance demands (commonly known as C18s) the subject of the third appeal were issued on 18 June 2007. The Commissioners seek by them to recover duty which, they say, Matalan underpaid on garments similar, but not identical, to those described in the BTI. Again, a review was requested. It led to the reduction of the demands, since some elements were found to be out of time, but the demands were otherwise upheld.

Four issues arise from those facts: what, before the coming into effect of the regulation, was the correct tariff classification of Matalan's garments; what was the effect of the Commissioners' decision to withdraw the original BTI, abandon their resistance to Matalan's first appeal and issue the replacement BTI; whether, and if so to what extent, Matalan's repayment claims are valid; and whether the revocation of the replacement BTI in March 2007 was effective. As Miss Whipple conceded during the course of argument that the validity of the revocation of the replacement BTI was of no more than academic interest, and withdrew the appeal against the revocation, I do not propose to deal with that issue. Her reason for withdrawing the appeal was that the effective date of the revocation, if it was valid, post-dated the coming into force of the regulation, and the amount due to or from Matalan is unaffected whatever the outcome of the appeal might have been. I shall deal with the other issues in the order in which I have set them out since, although Miss Whipple pursued the second argument before the first (and, indeed, advanced the first only as an alternative to the second), it seems to me that it is both more convenient and more logical to deal with them in that way.

The correct tariff classification of the swimwear

For the purpose of determining this issue I have proceeded on the footing that Matalan is right in what it says about the composition of all the garments; that is, that they are of knitted or crocheted synthetic fibres (which I understand is not disputed) and have a rubber content, taking the garment as a whole, of not less than five per cent. Although Matalan produced several analysis reports, all showing rubber content in excess of 5 per cent, I am not in a position to determine whether every garment has that amount of rubber, though I have no reason to suppose Matalan's contentions in that respect are incorrect.

I have already made the point that the wording of the tariff, taken alone, is ambiguous: it can be read with either of the meanings the parties sought to ascribe to it, without any straining of language, and there is nothing in the immediate context which suggests that one interpretation should be favoured over the other. An intention to aid rubber producers would support Matalan's preferred reading since it is difficult to understand why incorporating rubber in the body fabric acts as an incentive while incorporating it in the trim does not, but the information that this was the aim behind the differential treatment of the garments was no more than anecdotal and I attach no weight to it.

Ordinarily, ambiguities and obscurities in the tariff can be resolved by resort to various aids. First are the General Interpretative Rules, or GIRs, which form part of the tariff and are binding. There are six such rules, of which three are, or may be, relevant here. Rule 1 provides that

"The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions."

The heading in this case, 6112, is "Track suits, ski suits and swimwear, knitted or crocheted", which throws no light on the matter, and there are no section or chapter notes which might have any application. Rules 2, 4 and 5 are of no possible relevance in this case. Miss Whipple sought to rely on rule 3, which Mr O'Connor argued was irrelevant, and it is convenient to resolve that issue after dealing briefly with rule 6. It adopts a similar approach to that of rule 1, but at sub-heading level:

"For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section and chapter notes also apply, unless the context requires otherwise."

The subheadings—that is, the descriptions at six-digit level—read "of synthetic fibres" and "of other textile materials" and accordingly offer no assistance, since, as I have said, there is no dispute that the former is apt, and the latter is not. There are no subheading notes. I add, before dealing with rule 3, that there are no (authoritative but non-binding) Harmonised System Explanatory Notes (which is to be expected since the Harmonised System classifies goods only to the six-digit level) or Combined Nomenclature Explanatory Notes which bear on the classification of these goods.

So far as it might be relevant, rule 3 reads:

"When … goods are prima facie classifiable under two or more headings, classification shall be effected as follows:

(a) the heading which provides the most specific description shall be preferred to headings providing a more general description …

(b) [immaterial]

(c) when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration."

Miss Whipple's argument, in essence, was that the words of classification 10, "containing by weight 5% or more of rubber thread", provide a more specific description than the single word "other" of classification 90. That is, self-evidently, true; but I agree with Mr O'Connor that the development of the argument—that, in consequence, 10 is to be preferred over 90—must fail because rule 3(a) applies only where there are competing possible classifications, any of which could be chosen but for the application of the rule, whereas in this case 10 and 90, the only available choices, are plainly mutually exclusive. I should perhaps add for completeness that although rule 3 refers only to headings (extended, by operation of rule 6, to subheadings) it is often applied, whether or not strictly correctly, at lower levels. There is an obvious trap for Matalan in rule 3(c) but Mr O'Connor, consistently with his argument that rule 3 was not relevant, did not suggest that it should be applied and in my view he was right not to do so.

The Commissioners do not merely argue that their preferred interpretation of the tariff is the more natural reading, but rely on two more substantial arguments. The first, to which I have already briefly referred, is that the rubber used in the trim is not thread, as classification 10 requires, but strip. The second is that the June 2007 regulation, although not of formal retrospective effect, should be taken to have clarified what the correct interpretation of the tariff had always been, and that it was, if not determinative, a compelling indication of the correct classification of the garments both before and after its coming into effect.

Chapter 40 of the Combined Nomenclature classifies "Rubber and articles thereof". Chapter note 7 which, by operation of GIR rule 1, is binding, provides that "Thread wholly of vulcanised rubber, of which any cross-sectional dimension exceeds 5mm, is to be classified as strip, rods or profile shapes, of heading 4008". Matalan accepts that the rubber used in its garments is vulcanised and has, in one cross-section, a dimension of 8mm and that, were the classification of the rubber as a discrete item in question, it would have to be placed, as strip, within heading 4008. The Commissioners argued, in the correspondence between the parties and in the statement of case in the appeal against the original BTI, that the requirement that the rubber used be classified as strip necessarily implied that it was not thread. In my view that is not the effect of a chapter note which states that "Thread … is to be classified as strip"; the wording used suggests to me that, despite the classification, the material remains thread. Indeed, chapter 40 contains nothing defining thread, by reference to maximum dimensions or otherwise. Accordingly I reject this argument.

The Commission Regulation made in June 2007 described the first item to which it related (like many regulations of its kind it dealt with several articles; the others are of no relevance here) as

"A lightweight garment for women intended to cover the body reaching down to the crotch, made of a knitted self-coloured fabric of synthetic fibres (80% polyamide and 20% elastane), the fabric does not contain any rubber thread.

"The garment is fitted with 8mm wide strips of vulcanised rubber (heading 4008), which are added by stitching them into the neckline, armholes and leg openings.

"The garment has under wired bra style shaped cups, a lined gusset, adjustable straps and high cut openings for the legs."

The parties are agreed that that is an accurate description of a women's one-piece swimming costume typical of those imported by Matalan. It is also similar to the descriptions used in the original and the replacement BTIs. The regulation classified the garment to 90 (in full, 6112 41 90), and gave as the reasons for so doing:

"Classification is determined by General Rules 1 and 6 for the interpretation of the Combined Nomenclature and the wording of CN codes 6112, 6112 41 and 6112 41 90.

"Since the rubber is added to the garment but not contained in the fabric of the garment, this garment cannot be classified in subheading 6112 41 10 (women's or girls' swimwear of synthetic fibres containing 5% or more of rubber thread).

"Taking into account its general appearance, the cut and the nature of the fabric, the garment meets the criteria for classification of women's or girls' swimwear of synthetic fibres (CN code 6112 41 90 — other)."

Mr O'Connor pointed out that the regulation was not made in consequence of a recent amendment of the tariff, or because goods of a novel kind had been introduced. It was for that reason that it should be taken as a legislative declaration of the correct interpretation of the tariff. He relied for that proposition on what was said by Advocate General Jacobs in Deutsche Nichimen GmbH v Hauptzollamt Düsseldorf (Case C-201/99) [2001] ECR I-2701, in which the court was required to consider the correct classification of satellite television receivers. Having concluded that they should come within heading 8528, he added that

"42 Further support may be derived from the subsequent classification under that heading by the Commission in Regulation 884/94. Whilst a regulation classifying goods under a particular tariff heading or subheading, being of a legislative nature, cannot have retroactive effect … the form of such regulations, which generally state (as is the case with Regulation 884/94) that classification is determined by the provisions of the general rules for the interpretation of the nomenclature and by the wording of the relevant headings and subheadings, suggests that the legislature takes the view that the classification enacted in fact follows from the legislation already in force.

"43 The support provided by such a subsequent regulation—in so far as it confirms a conclusion already reached as to the proper classification—is of course confined to cases where, as here, there has been no intervening material change to the wording of the nomenclature and the validity of the regulation itself has not been called into question …"

That is highly persuasive authority. However, as the Advocate General said, a subsequent regulation is supportive of a conclusion as to the proper classification which has already been reached; it is not the starting point for determining that classification. In addition, I find the reasoning set out in the regulation unconvincing, since it begs the question. Nevertheless, I have come to the conclusion that the regulation does correctly reflect the proper classification of the garments.

Perusal of chapter 61 shows that (like other chapters of the Combined Nomenclature) it proceeds by progressively refining the description of the goods to which it refers, that it does so by qualifying the description at any given level by the descriptions which follow at the next level below, and that the following descriptions are to be applied successively, in the order in which they appear, until the correct description is found, or one arrives at "other". That being so, it seems to me clear that the words "containing by weight 5% or more of rubber thread" qualify the preceding words "of synthetic fibres" rather than the antecedent words "men's or boys' swimwear", and that classification within 10 is possible, as the Commissioners argue, and as the elided quotation of the tariff in the regulation suggests, only if the fabric, rather than the garment as a whole, satisfies the rubber content test. Accordingly I conclude that, regardless of the regulation, the garments were and are properly classified within 90. I observe that the regulation, though it mentions the 8mm wide rubber in the description of the garment, does not refer to its use as an additional material factor.

The first appeal

I come, next, to Miss Whipple's argument based on the Commissioners' withdrawal of the original BTI, their concession of Matalan's appeal, and their issuing of the replacement BTI. Her contention was that the original BTI, though it described only one garment, nevertheless covered all garments of a like composition, that the Commissioners understood that to be the case, that the first appeal was a test case (as the Commissioners also understood) and that the Commissioners' concession of the first appeal and their issue of a replacement BTI precluded them from arguing that the garments were classified in 90 before the regulation came into effect.

The letter of 20 April 2006 by which the Commissioners informed Matalan that the original BTI was rescinded and invited it to withdraw the appeal (and seek its costs), Matalan's acceptance of that proposal and the Commissioners' making good of the rescission of the original BTI by the issue of a replacement amounted, she said, to an agreement within section 85 of the Value Added Tax Act 1994, which relates to appeals to this tribunal, and which provides that such agreements have the same consequences as a determination of the tribunal. It was not open to the Commissioners to litigate the same issue again in these appeals since there was a deemed decision by the tribunal that classification within 10 was correct, and the matter was res judicata: see, by analogy, R v Special Commissioners ex p Fina Exploration Ltd [1992] STC 1, in which an approximately equivalent provision relating to proceedings before the Special Commissioners was in issue. Furthermore, the common understanding of the parties that the BTI as originally issued covered not only the item specifically described in it but all others of a like kind meant that, on its revocation, the replacement BTI similarly covered all the garments of a like kind. The Commissioners were accordingly precluded from arguing that they were obliged to meet Matalan's repayment claim only so far as it related to that specific item: they were required to meet it all.

Mr O'Connor's argument was that the manner in which the first appeal was disposed of could not be regarded as an agreement within section 85 of the 1994 Act, and that even if it could be so construed, it did not have the effect for which Miss Whipple had argued. There could be no agreement without offer, acceptance and consideration. The Commissioners' letter to the effect that the original BTI was to be withdrawn was not an offer, which carried with it the possibility of acceptance or rejection and was thus provisional, but an unequivocal statement of intention. There was nothing for Matalan to accept or reject. There was no consideration in the sense that Matalan gave something up, for example a claim for costs, in exchange for the decision, nor did it act to its detriment by withdrawing its appeal—it had achieved all it could have achieved by pursuing the appeal to a successful conclusion. There was, he said, nothing from which it could be found that the Commissioners had accepted that the first appeal was a test case, a concept which, he said, was novel, if not unknown, in this tribunal's jurisdiction; it was nothing more than an appeal against a particular BTI.

On this issue I have concluded that Mr O'Connor was right to contend that the first appeal was not a test case, and that there was no section 85 agreement, though I do not accept his reasoning for the latter proposition, and do not altogether accept his reasons for the former. It is true that the term "test case" is not to be found in the tribunal's rules, although a very similar practice, of identifying a lead case and allowing others to be stood over, by agreement, behind it, has been in common use for some years, and I do not agree with Mr O'Connor that the concept is unknown within this tribunal. However, nothing of the kind occurred here; as Mr O'Connor said, it was an appeal against a BTI and nothing more. It is true that a decision by the tribunal about the correct interpretation of the tariff as it applied to the one item described in the disputed BTI would have been indicative of its correct interpretation in relation to similar items, but there is nothing in the documents served in the course of the appeal, or in the contemporaneous correspondence, which supports the contention that the parties had formally, or even impiedly, agreed that the appeal would be determinative of the classification of all Matalan's imported swimwear. For those reasons I cannot accept that the first appeal can properly be regarded as a test case, though the manner in which it was conducted does, in my view, have a significance to which I will return.

Section 85 requires no more than that an agreement resolving an appeal by the upholding of a decision without variation, as varied in a particular manner, or as discharged or cancelled be recorded in writing. Miss Whipple is right in the sense that the cancellation of the original BTI led to the disposal of the appeal. I disagree with Mr O'Connor about the need for consideration: while variation usually, though not necessarily, implies concession on both sides, the upholding of a decision without variation, or its cancellation, carry no implication that the successful party has made any concession or, to use Mr O'Connor's words, given anything up in return. Section 85 provides for the making of a statutory agreement, and I see no need to import into it a requirement of consideration in the common law sense. However, section 85 proceeds upon the footing that, consideration or not, the parties have come to terms. What happened here was not the result of a meeting of minds; the Commissioners withdrew the decision and Matalan withdrew its appeal. It clearly would not have done so if the Commissioners had not withdrawn the original BTI, but I agree with Mr O'Connor that the withdrawal of the BTI was unconditional. On that narrow, and not very attractive, basis I feel obliged to decide this issue in the Commissioners' favour.

The effect of the replacement BTI

The replacement BTI was issued on 25 May 2006, and was expressed to be valid from that date. The Commissioners do not, however, argue that it has no retrospective consequence at all, though they go no further than conceding that the goods described in the replacement BTI are to be classified in 10; all others, they say, fall within 90. That concession, it seems to me, is the inevitable minimum consequence of the withdrawal of the original BTI: as there were only two possible classifications, abandonment of one by the customs authority necessarily implies that the other must be adopted. In my view it is necessary to approach this case on the footing that there was, or is deemed to have been, a valid BTI in heading 6112 41 10 from 22 September 2004, when the original, rescinded, BTI was issued, to 3 July 2007, when the regulation came into force (since, as I have said, that date preceded the effective date of revocation of the replacement BTI, should that revocation have been valid).

Miss Whipple argued for a much wider application of the BTI: as Mrs Barraclough had said, the common practice was to obtain a BTI for a sample article and apply it to all other articles of a like kind. The Commissioners' approach in this appeal was too narrow and formal, and did not reflect what they themselves did in practice.

The legislation relating to BTIs is to be found in articles 11 and 12 of the Community Customs Code. The only provisions relevant to this question are in article 12(2) and (3), which, so far as material, read:

"2 Binding tariff information … shall be binding on the customs authorities as against the holder of the information only in respect of the tariff classification … of goods …

3 The holder of such information must be able to prove that—

— for tariff purposes: the goods declared correspond in every respect to those described in the information …"

A further provision, to the same effect, appears at article 10(3) of the Implementing Regulation.

There are, in my view, two obstacles in Miss Whipple's way. First, while those provisions enable Matalan to claim the protection of the deemed BTI (incorrect though it was) from 22 September 2004, it does not seem to me that it can claim similar protection in respect of the period before it applied for a BTI. It must pay duty—as in fact it did—at the correct, higher, rate. That conclusion, alone, seems to me to dispose of Matalan's repayment claim (which wholly relates to the period before it applied for a BTI), but I shall nevertheless deal with the second obstacle.

There is a practical attraction to Miss Whipple's argument that a BTI can be taken to apply to every article which, in tariff terms, is indistinguishable from the item described in the BTI. By contrast, if one takes the Commissioners' argument to its logical conclusion, the inclusion within the description of an element of no consequence, so far as application of the tariff is concerned, would mean that the importer needs, for its own protection, to obtain a BTI for every variant of that garment which lacks that irrelevant element. There are parts of the Combined Nomenclature which descend to minute detail and in some cases there may be little alternative to obtaining a BTI for each item; here, however, the tariff is fairly simple. Taking it as undisputed that the correct heading is 6112, the characteristics which are significant for tariff purposes are: whether the garment is swimwear designed for men and boys, or swimwear designed for women and girls; whether it is of synthetic fibres or other textile materials; and whether (as I have found) the fabric does, or does not, contain not less than 5 per cent of rubber thread. Details of design such as variations of shape (save to the extent that such variations dictate the suitability of the garment for males or females) are of no relevance. The correspondence to which article 12(3) of the Community Customs Code alludes is, in my view, to be limited to details of the description which might have a bearing on classification.

I accept therefore Miss Whipple's argument that a BTI can be applied not only to the item described in it but to others which, in terms of the tariff, are indistinguishable from it. The Commissioners' argument to the contrary is inconsistent with their further argument that the regulation, which equally describes only one garment, is nevertheless to be applied to all garments which, as far as the tariff is concerned, are indistinguishable from it. That was the basis on which they argued that the regulation should be taken as a guide to the correct interpretation of the tariff in respect of all Matalan's swimwear importations, it was the basis for the making of the post clearance demands in issue in the most recent appeal and it is the basis on which they have required Matalan to account for duty at the higher rate on all its imported swimwear since the regulation came into effect. In principle, therefore, I reject the narrow interpretation which the Commissioners advance.

However, one can take the argument only so far. The original BTI, its replacement and the regulation all refer to a single item of women's swimwear. For the period between September 2004 and July 2007, for the reasons I have given, it is appropriate to treat the correct classification of that item as one within 10—in full, 6112 41 10. While articles of a like kind must, in my judgment, also be classified within that code, I do not see how it can be said, consistently with article 12(3) of the Community Customs Code as I have interpreted it, that either the original or the replacement BTI covered men's and boys' swimwear, which cannot be classified within 6112 41 10; garments answering to that description have a distinct code of their own and they are not indistinguishable from women's and girls' swimwear in terms of the tariff.

Miss Whipple recognised the difficulty and sought to meet it by reference to the issues in the first, compromised, appeal: whether the rubber content of the whole garment or only that within the body was to be taken into account, and whether the rubber was thread or strip. Those arguments were relevant in exactly the same way to both men's and women's swimwear, and if the tribunal had determined the matter against the Commissioners in relation to women's swimwear it would not have been open to them to argue subsequently that the tariff, despite its identical wording, should be interpreted differently in relation to men's swimwear. There is obvious force in that argument, and it is in my view significant that the Commissioners conducted themselves in a manner consistent with Miss Whipple's arguments: it was only after they had had second thoughts about the revocation of the original BTI that they suggested that its replacement should be applied narrowly, they had sent Mr Rayton to verify all of Matalan's claim, and not merely so much of it as related to women's swimwear, they had approved the claim as corrected for clerical errors only, and the approval had been countermanded not because the claim included men's swimwear, but because the Commissioners regretted having made any concession at all. I bear in mind too that the Commissioners consider the 2007 regulation to be determinative of the correct classification of men's as well as women's swimwear.

However, I have come to the conclusion that all those points are indicative of the manner in which the tariff may be applied in practice, particularly in cases such as this where it would indeed be absurd to treat men's and women's swimwear differently, but that the correct legal approach is unaffected. The tariff must necessarily be interpreted strictly, as the GIRs indicate, in order to respect the cardinal requirement that each commodity has one, and only one, place within it. That requirement dictates, generally, a pedantic approach; that in some cases, of which this is an example, a pedantic and a more relaxed approach arrive at the same result does not undermine the principle. The conclusion I have reached is that, as a matter of law, Matalan had (or is to be deemed to have had) a BTI relating only to women's swimwear from September 2004 to July 2007. I should nevertheless be disappointed if, in the circumstances of this case, the Commissioners were to insist on treating Matalan's imports of men's swimwear during that period in a different fashion, a course which I consider would be most unfair.

Conclusions

For the reasons I have given I conclude that Matalan's repayment claims must fail. I make no determination of the second of its appeals.

Both parties asked for directions in their favour in respect of costs should they succeed. Those applications bring me to a topic at which I have so far only hinted. Mr O'Connor accepted that, in some respects, the Commissioners had not handled the dispute well, to the extent that Matalan's treatment might be thought unfair. In my view there can be no room for doubt that the Commissioners' conduct of the matter falls below the standard to be expected.

It became clear that at a senior level they regretted the concession of the first appeal, and that everything was done to minimise the effects of their having done so. The Commissioners should have recognised that they had conceded that appeal, that it was their own decision to do so, that they must bear the consequences of their decision, whatever second thoughts they had had, and that they should have dealt with Matalan's claim promptly. Instead they prevaricated, and used what I can describe only as devices to avoid paying. Although Mr Rayton was asked to, and did, agree the detail of Matalan's claim, and although he and his superior officer passed the adjusted claim for payment, the Commissioners refused to pay. They argued that the claim was out of time even though, as they eventually conceded (and as their own officers could have told them if they had been asked), it was not. Matalan was compelled to resort to freedom of information requests in order to discover what had happened, and it was Matalan which was required to arrange for Mr Rayton and Mr Robinson to give evidence.

Matalan has failed in one appeal and has abandoned the other. In those circumstances I do not think I can go so far as to direct the Commissioners to pay its costs. But I do not consider it appropriate to direct that Matalan pay the Commissioners' costs, despite their success. In my view this appeal could easily have been avoided had the Commissioners conducted themselves differently, by allowing the earlier appeal to proceed to a hearing and respecting its outcome, whatever it might have been, or by accepting fully the consequences of the withdrawal of the original BTI. Matalan was left with little choice but to seek a resolution of the dispute before this tribunal, and I shall not make a direction against it in respect of costs.

COLIN BISHOPP

CHAIRMAN
Release Date: 8 August 2008

MAN/06/7028 & MAN/07/7035

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