“I consider that the essential character of the PlayStation®2 is given by its function of playing video games. Therefore using GIRs 1 and 3(b) the PlayStation®2 is correctly classified to heading 95.04 . . . I should point out that even if it was considered that the essential character of the PlayStation®2 could not be determined and that it functioned equally as a CD and DVD player and as a games console, then GIR 3(c) would come into play leading again to classification in Heading 95.04.” (4) On31 January 2001 Sony appealed to the tribunal from that review decision. That appeal was listed for hearing on30 May 2001 . For reasons which I shall explain the appeal was allowed by consent. (5) On5 June 2001 Sony requested new binding tariff information classifying the Playstation2 models under sub-heading 8471. The letter contained these paragraphs: “As you know we import the majority of the PlayStation 2 consoles into Holland and the Dutch VAT and Duty officers have used the original BTI in order to collect the duty payable. Please can you reissue a revised BTI with the effective date being that of the original (28th August 2000 ) so that we can use this document to recover the duty already paid in Holland and elsewhere.” (6) In response to that letter and to what Customs and Excise saw as a direction given by the tribunal on30 May 2001 – a direction which, if given, did not appear in the tribunal’s order of5 June 2001 – Customs and Excise issued the BTI of12 June 2001 . In a covering letter of that date they wrote: “Please find enclosed an amended Binding Tariff Information (BTI) reference GB 105614503, in respect of the Sony Playstation2. This has been amended in accordance with the tribunal Direction dated 5 June, following the hearing on 30 May. The start date of validity remains at19 October 2000 . . . .”
“As you are aware, the European Commission will shortly be publishing a Regulation which classifies the Playstation 2 to a different commodity code from that on the BTI. Once this Regulation has been published, BTI GB 105614503 will have to be revoked (Council Regulation (EEC) No 2913/92, Article 12.5(a)(i)). You will receive notification of revocation in due course”
“14. Commission Regulation (EC) No 1400/2001 dated10 July 2001 classifies the Playstation 2 system under CN code 95041000. There is no doubt that the regulation refers directly to your client's product. The measure has been adopted and duly published by the EC Commission and at this time is legally extant and valid. This means that BTI reference GB105614503 which classified the Playstation 2 under commodity code 8471499000, no longer conforms to the published EC view. The BTI was revoked in accordance with Articles 9(1) and 12(5)(i) (sic) to Council Regulation (EEC) 2913/92. The holder was notified in accordance with Article 9(3). The date of revocation was effected in accordance with Article 9(4) and Article 12(5). 15. In my opinion, the conditions set out in Council Regulation (EEC) No 2913/92 have been complied with. The revocation of BTI reference GB105614503 is legal and was correctly notified to the holder concerned. Therefore, I must uphold the decision to revoke your clients BTI as it clearly no longer conforms to the law laid down thereby. In my opinion, UK Customs have no margin of discretion in revoking of BTI reference GB105614503 and were acting in accordance with directly applicable Community rules.”
“ . . . does not provide for the possibility of classifying mixtures or composite goods according to the function which gives them their essential character.”
“14.1 InCase T-243/01 Sony v Commission, at paragraph 83 of its judgment, the CFI set out Sony’s contention that PS2 was a data-processing machine which fell under heading 8471 and not 9504. The CFI went on to consider (at paragraph 105) whether the Commission had committed an error of law by classifying the PS2 to heading 9504 in the contested regulation. This plea was rejected by the CFI. The contested Regulation was not annulled on this basis. Instead it clearly held at paragraphs 110 to 114 of its judgment that the PS2 was properly to be classified under heading 9504; 14.2 Customs cannot ignore the findings of the CFI in this case. In any event Customs respectfully agree with the CFI’s conclusions that the essential, objective characteristic of the PS2 is a video games console and as such it falls to be classified under heading 9504. This has been Customs view throughout; 14.3 Although it did not form part of the reasoning for the contested regulation, the classification to 9504 is also supported by Note 1(p) to Section XVI. Paragraph 132 of the CFI’s judgment indicates strongly that Note 1(p) could have been relied upon to support a classification to heading 9504; 14.4 In a letter dated8 January 2004 (copy enclosed), the Commission has expressed its view that the CFI agreed that the PS2 was and is still classifiable under heading 9504; 14.5 The classification has been judged to be correct by the Harmonised System Committee of the Customs Co-operation Council (‘HSC’). On28 November 2003 , the HSC reported on the 32nd session of the Committee. One of the items discussed at the meeting was the correct classification under the harmonised tariff of the PS2. The Japanese delegate advanced the same (or very similar) arguments to those raised by Sony to the effect that the PS2 should be classified under heading CN 8471. The EC Delegate advanced the reasoning adopted by the CFI in its judgment in Sony v Commission, including the contention that Note 1(p) to Section XVI precluded the classification to heading 8471. The EC Delegate contended that the proper classification was to heading 9504 on the basis that ‘the PS2 was intended essentially for playing video games’. The HSC decided by 28 votes to 9 that the proper classification was under heading 9504 by virtue of headings 1 and 6 of the GIRs and note 1(p) to Section XVI of the tariff. The Secretariat was instructed to prepare a classification opinion accordingly; 14.6 The Commission in Regulation (EC) No 1508/2000 of11 July 2000 concerning the classification of certain goods in the Combined Nomenclature classified one of PS2’s competitors, the SEGA Dreamcast video game console, under heading 9504. Customs acknowledge that the said Regulation notes that the SEGA Dreamcast does not permit the games programs to be modified by the user. Customs do not accept that for this reason alone their selected classification is incorrect.”
“15 I of course acknowledge that the contested Regulation has been annulled because it was vitiated by a defect in its reasoning. Nonetheless, as a matter of Community law (and in order to protect the Community's own resources) UK Customs as a national customs authority are obliged to ensure that the PS2 is entered to the correct commodity code. 16 It follows that I must continue to maintain that the revocation decision was correctly issued. It was correctly issued because the amended BTI dated12 June 2001 wrongly classified the PS2 under Heading 8471. The amended BTI was incorrectly issued. Indeed, Customs were correct to issue the BTI under Heading 95.04 which was issued in October 2000. Nonetheless, due to the passage of time, UK Customs do not seek to recover the sums they have paid out on repayment claims to Sony following the amendment of the BTI. 17 Customs do, however, intend to continue to defend the present appeal brought by you. . . . ”
“2. The issue in the appeal is essentially to determine the effect of the following steps: (a) the issue of binding tariff information 105614503 classifying the Product under heading 8471; (b) Commission Regulation 1400/2001 classifying it under heading 9504; (c) the Commissioners revoking the BTI; and (d) the Court of First Instance (CFI) annulling the Regulation. Does the BTI revive, as the Appellant contends, or does it remain revoked, as the Commissioners contend? ”
“8. . . . The Appellant asks the Tribunal to quash the revocation decision so that BTI revived on the Court annulling the Regulation, without making any decision on classification, which it says does not arise in the appeal; the Commissioners ask the Tribunal to start by classifying the Product. . . .”
“8. . . . If the revocation of the BTI was an automatic consequence of the Regulation, the BTI would remain in force now that the Regulation has been annulled retrospectively and the BTI would conclusively determine the classification. . . .”
“11. If step (3) [the letter of25 July 2001 ] had not been taken or if the Regulation had revoked the BTI, the Appellant would clearly be right. When the Regulation was issued the BTI automatically ceased to be valid. When the Regulation was annulled, the effect was as if there had been no Regulation and so the BTI remained in force. This is so whether or not the classification by the BTI was wrong and the Regulation was annulled because of a defect in the legal basis for the conclusion, rather than the conclusion itself being wrong (which the CFI did not address). The issue is whether the position is different because of the Commissioners’ letter revoking the BTI. ”
“Why should there be a right to ask [the Customs and Excise] to review the BTI automatically ceasing to be valid in consequence of the Regulation entering into force?”
“15. The letter [of25 July 2001 ] is odd in invoking both Articles 9(1) and 12(5)(a)(i). The former requires notification; the latter does not. The holder was in fact notified in accordance with Article 9(3). The dates on which they take effect are potentially different: the date of notification (with the possibility of postponement) in the former; the date of publication in the latter (we assume that this must mean the date it enters into force). The date of revocation was stated to be effected in accordance with both Article 9(4) (which implies that a decision to apply a postponement was made under article 9(4)) and Article 12(5). The reason for upholding the revocation decision, that the BTI "no longer conforms to the law laid down thereby" [i.e. by the Regulation] is a quotation from the latter. These suggest that at least at the time of the review decision, which is what is the subject of the appeal, the Commissioners saw the automatic effect of the Regulation and the revocation of the BTI as two separate things.”
“Now that the Regulation has been annulled retrospectively there is no reason why the revocation should not stand, unless this is prevented by [Customs and Excise] not giving the correct reason for the revocation at the time.”
“the Appellant has a right of appeal which requires them to know the reasons for the contested decision before lodging an appeal.”
“19 It seems to us that one must consider the context in which this dispute arises. One is required to treat the Regulation as valid until it was annulled. Although the Appellant stated from the beginning that it considered that the Regulation was invalid for the same reason as the CFI, until the CFI decided this the Regulation was valid. The Commissioners were consistent in their reason for revoking the BTI: that its classification was wrong in law. Clearly any detailed reasons which the Commissioners had at the time had to take into account the validity of the Regulation. Now that they know that the Regulation has been annulled it must be open to them to put forward new reasons supporting their conclusion in the light of the new circumstances. The only limit is that the Appellant must be in a position to challenge the reasons in an appeal. That is completely satisfied in this case. New reasons were given by the Commissioners in a letter of25 February 2004 and at the same time in their statement of case. The Tribunal has jurisdiction to decide the issue of law of whether the classification was correct; this is not a review jurisdiction where the stated reason for the decision is important to the determination of its reasonableness . . . . . . Unlike a Community body which, as demonstrated in the Sony case, must state the correct reasons for regulations, directives and decisions, here the issue is whether the Commissioners were right or wrong in law in revoking the BTI. It is not unusual for the Commissioners to adopt new legal arguments in the course of an appeal in this Tribunal. Accordingly, we do not consider that the revocation decision is invalid because the Commissioners put forward different reasons, in the light of the annulment of the Regulation for the classification being wrong, as they had always contended.”
“21. Because of the way in which Mr Clough argued the case, he did not address us on this issue. We assume that for tactical reasons he did not do so in reply either. Our decision is therefore made without the benefit of the Appellant's arguments but on the other hand, we now have a wealth of views from various bodies on the matter.”
“30. It follows that the BTI classification under 8471 is wrong in law and the Commissioners can use that ground as justification for having revoked the BTI. As we have already concluded the fact that the Commissioners did not rely on this reason at the time does not prevent them from relying on it now. It is not a case of the Appellant being deprived of the judgment in the Sony case; the CFI merely upset the Regulation's legal reasoning and left open that the result was unaltered. ”
“33. In summary, as a result of the Tribunal's Direction by consent on5 June 2001 the classification of the Product was under 8471, until the revocation of the BTI on31 July 2001 when it became 9504.”
“[115]. . . .
“[141]. . . . In its original skeleton on the appeal, Sony merely said that the Tribunal had wrongly relied on the judgment of the CFI, the World Customs Organisation opinion, and the European Commission letter. Its only positive argument was that the classification of the PS2 according to its objective characteristics (which would lead to classification under Heading 8471) should be preferred over a classification according to its intended use. The submission was supplemented in reply.”
“[142]. The issue was indirectly raised in the Notice of Appeal to this court, and I am satisfied that even if it were open for Sony to appeal from this aspect of the decision, there are no grounds for interfering with it. In my judgment, Sony should not be allowed to reopen what is essentially a question of fact, and appreciation of fact, on this appeal when it did not argue the question in the Tribunal. I am satisfied that whether I were to approach this question on the Edwards v Bairstow approach or whether I were to look at the material afresh, the decision of the Tribunal on this question must be affirmed. ”
“[119]. I do not consider that revocation of a BTI is a mutually exclusive alternative to its ceasing to be valid by reason of the adoption of a Regulation with which it is not in conformity, or that anything in the opinion of Advocate General Jacobs in C-463/98 Cabletron Systems Ltd v Revenue Commissioners[2001] ECR I-3495 paras 34 to 36, says so. All he is doing is paraphrasing Article 12(1), (2), (4), (5), and (6). In my judgment, there is no reason in principle why a Regulation could not determine the classification of a product and a separate revocation notification be made on the basis that the previous BTI applied an incorrect classification. The notification would then take effect under Article 9(1) and Article 12(5)(a)(iii) on the basis that the conditions which led to the BTI being issued had not been, or were no longer, fulfilled.”
“[124]. A separate revocation decision taken by a national customs authority is a measure taken in implementation of Article 9, and not one taken in implementation of the Regulation. It is true that the Regulation was directly applicable under Article 249 EC Treaty and left no discretion to Member States. There is also a general principle of European Community law that national measures may not interfere with the scope or effectiveness of Regulations: e.g. Case 34/73 Variola SpA v Amministrazione Italiana delle Finanze [1973] ECR 981;Case 94/77 Zerbone Snc v Amministrazione delle Finanze dello Stato [1978] ECR 99;Case C-223/98 Adidas AG[1999] ECR I-7081 ; Collins, European Community Law in the United Kingdom, 4th ed 1990, pp 74-76. [125]. But I do not consider that it is arguable that treatment of the decision as a separate revocation interferes with the direct applicability of the Regulation.”
“[121]. The Commissioners informed Sony on June 12, 2001 that the BTI would have to be revoked when the impending Regulation was published. [122]. The only measure which can be taken in relation to a BTI by a national customs authority is amendment or revocation under Article 9. The revocation decision was taken on July 25, 2001. Under Article 9(4) CCC revocation takes effect from the date of notification, although the customs authorities may defer the date when revocation takes place. By Article 6(3) decisions which are detrimental to persons addressed must refer to the right of appeal under Article 243, which gives a right of appeal initially to the customs authorities and then to the courts. By Article 12(5)(a)(iii) revocation under Article 9 must be notified. The July 25, 2001 decision letter is consistent with these provisions. The revocation decision was notified in accordance with Article 12(5)(a)(iii), and gave details of a right of appeal as required by Article 6(3) CCC, which is consistent with its legal basis under Article 9. The decision was expressed to take effect on July 31, 2001, when the Regulation was to enter into force. At the time that the decision was taken and notified, there was no automatic invalidity. The Regulation itself provided (Article 2) that BTIs which did not conform with the Regulation could be invoked under Article 12(6) CCC for a period of 3 months. ”
“[127]. I am satisfied that the reasoning was adequate. Article 6(3) CCC requires decisions which are detrimental to importers to set out the grounds on which they are based. The obligation under Article 6(3) is to set out the grounds for the decision, and not to set out a detailed statement. Sony was well aware of the grounds. The application for a formal departmental review of the decision of July 25, 2001 relied on the invalidity of the Regulation, but among the reasons for invalidity relied upon was the point that the Regulation had wrongly classified the PS2 to Heading 9504. [128]. The combined effect of the June 12, 2001, July 25, 2001, and October 18, 2001 letters is that the BTI was revoked on the ground that the Regulation had classified the PS2 under Heading 9504. But this reasoning is not dependent on the validity of the Regulation. The underlying reason, which was obvious to Sony, was that under the Common Customs Tariff system the PS2 was being classified as a video game of a kind used with a television receiver. I consider that the Tribunal was right to say that the Commissioners were at all times consistent in their reasoning, namely that classification to Heading 8471 was wrong, and that this is not a case of retrospective reasoning or a case where later reasons contradict earlier ones. ”
“[148]. . . . whether or not a revocation decision under Article 9(1) which was precluded by a classification Regulation from having any legal effects on the validity of the BTI when adopted may be transformed retroactively into a revocation decision under Article 9(1) which invalidates the BTI when the obstacle to its invalidation of the BTI is removed by the annulment of the Regulation for error of law by the CFI.”
“[152]. In my judgment the main issue raised by Sony is essentially one of fact, or appreciation of facts, namely whether there was a separate decision under Article 9(1). That question is not one susceptible of a reference. The main subsidiary issues are (a) whether that decision was based on the impending Regulation as such, [or] on the view that the Regulation represented a correct classification; and (b) whether that distinction makes a difference. I am satisfied that none of these questions raises a question of interpretation of Community law on which I ought to make a reference.”
“The main issue in the present appeal is whether the High Court (and the VAT and Duties Tribunal before it) is permitted by Community law to sidestep, albeit on shifting grounds, the elementary interpretation and application of Community law put forward by Sony, when to do so will require the Court of Appeal to overturn fundamental principles of the Community legal order.”
“Sony resists making comments on the classification issues discussed by [the] High Court since as it submitted before the Tribunal, and repeated before the High Court, the question of classification of the PlayStation®2 is precluded by Community law in the present appeal.”
“Any attempt by the Tribunal or the High Court to classify the PlayStation®2 retroactively is a serious infringement of the general principle of legal certainty in Community law (and the legitimate expectations of the BTI holders)”
“The Court’s finding that there could be an invalidation under Article 12(5)(a)(iii) in addition to an invalidation under Article 12(5)(a)(i) is contrary to the following fundamental principles of Community law . . . (i) legal certainty and legitimate expectations, (ii) proportionality (because it cannot be necessary to have two instruments invalidating a BTI), (iii) the principle of effectiveness of Article 12(5)(a)(i) and/or Article 12(5)(a)(iii), and the principle of direct applicability of regulations under Article 249 EC . . .”
“If you do not agree with the decision to revoke the BTI, you can ask for a formal Departmental review.”
“. . . The Revocation Decision was taken in application of Article 3 of Commission Regulation 1400/2001 whereby the Commission classified the PlayStation2 under CN Code 9504.10.00. . . . [Sony] regards the revocation decision as invalid considering that it was made in application of an illegal Community act, i.e. Commission Regulation 1400/2001. . . . ”
“On the basis of the foregoing [Sony] submits that the decision revoking the BTI GB 105614503 is invalid due to the invalidity of the Commission Regulation 1400/2001 which constitutes its legal basis. . . ”
“It is your contention that the revocation decision is invalid because it was made in application of an illegal Community act”
“Appellant respectfully submits that the VAT and Duties Tribunal can not rule in the present case on the assumption that the Commission Regulation is valid”
“It was correctly issued because the amended BTI dated12 June 2001 wrongly classified the PS2 under heading 8471. The amended BTI was incorrectly issued.”