MSA Britain Ltd v Revenue & Customs (CUSTOMS DUTY : Classification - nomenclature) [2019] UKFTT 0693 (TC)

FTT-Tax
MSA Britain Ltd v Revenue & Customs (CUSTOMS DUTY : Classification - nomenclature)
[2019] UKFTT 0693 (TC) · 2019-09-25
[19]“[19] The FTT first noted (at para. [15]) that in its request for a review of HMRC's BTI decision Honeywell described the Device as follows:
"The product is a gas monitoring device which is carried on the person (portable) and used by people who work in confined spaces and may have reason to come into contact with high levels of potentially dangerous toxic gases. The product (as described in the technical specification) detects the following gases and provides a 'parts per million' (PPM) LCD readout of each of these gases in real time (i.e. on a continuing basis): H2S, CO2, SO2, PH3, NH3, HCN, CL2, ClO2, O3 and combustibles. The units contain[s] both audible, visible and a vibration alert mechanism."
[20][20] The FTT went on to consider (in para. [17]) the technical literature available online in relation to the Device, which stated under the heading "Protect yourself" that the Device could simultaneously monitor and display up to five atmospheric hazards.[21][20] Based on the factual evidence provided by Mr Christopher Townsend of Honeywell which was accepted by the FTT, the FTT found (in para. [24]) that the Device detected whether there were gases at all in the relevant space entered into by the person wearing the Device and that, if there were, the level detected may or may not be dangerous. The alarm indications could be disabled at the discretion of the user, although Mr Townsend agreed that it was not best practice to disable the detection sensors in a gaseous environment. [21] The FTT also found (in paras. [35]-[36]) that levels of gas building up on the filters on the Device caused electrical currents to be generated which were proportionate to the level of the gas. Those currents were measured and displayed on the LCD screen on the Device. Optionally the user could lock the readings and the Device could store several months of continuous data on a removable memory card. When a calibrated level of gases was reached the Device showed the word "ALARM" on the LCD screen which became backlit and displayed the ambient gas readings. It flashed, made a sound and vibrated. 52. These findings as to the physical features of the devices (thus postponing for the moment the description of their use in the second sentence of [19]) are consistent with the description of the devices in the BTI and the brochure before me. I take them as objective properties and characteristics of the Altair devices (subject to variations in the number of gases with which the devices worked).[53]The brochure before me describing the "Altair Family Gas Detectors" contained pictures of the detectors. It showed them being held in the hands of workers some of whom were wearing respiration hoods or other protective clothing. The pictures of the devices showed that they were about the size of a large and very thick mobile phone. Each had a number of robust buttons on its face. The centre of most devices was occupied by an LCD display screen which prominently displayed one or more numbers which I took to be the concentration(s) of the gas(es) being monitored. There were other symbols on the screens, not all of which I could make out from the copies before me, but one of which appeared to be an indication of the period of the use of the device and others may have been indicators of the safety of the environment in view of the (displayed) concentration of gases. 54. The FTT made the following finding (in para. [37]) as to the contents of the Alert device and how it worked:
"From the facts that we have found as to the contents of the device and the way it works, and from the appellant's written and Mr Townsend's oral description of it, we find that the Gas Alert Micro 5 has the characteristics and properties of an alerting device. Those characteristics and properties include the ability of the device to detect pre-calibrated levels of dangerous gases and the three different alarms together with the LCD screen display when a predetermined level of gas is reached. The ability to disable one or more alarms does not alter that." 55. I accept that the Altair devices will have the characteristic of an alerting device, but because of the physical features of the devices I have described in the penultimate paragraph, I do not consider that that is their only characteristic. They have, in my view, the important characteristic that they analyse, and display their analysis of, the ambient atmosphere (I address the meaning of ‘analyse’ in the headings later).. (ii) the intended uses of the product which are inherent in the product and capable of being assessed on the basis of those objective characteristics and properties 56. The FTT made the following finding in relation to the use of the Alert device: "38. We also find that the intended use, and actual use, of the device is the alerting of its wearer to the presence of noxious levels of gas in a confined space and it does that by at least one and usually two or three different types of alarm signal, visual, audible and vibrating. Put another way, in answer to the question: "
What is the device for?" we find that it is to do that alerting. And we find that alerting is the only thing the device is intended to be used for.[39]We also find that one of the things the device does in order to be able to give its alerts is measuring (and as we have said HMRC do not dispute that measuring is one of the device's "functions"). It measures the quantity of gas (in ppm) and it also measures by reference to time, so that it can, depending on how it is calibrated, give alerts when a selected gas is present at a given level or range of levels over a given period. But we find that the measurement is a means to an end, not an end in itself: measurement is not its intended use." 57. The FTT concluded (in para. [77]) that:
"… the essential characteristics and properties and the only intended use (and in fact the only conceivable actual use) of the device is as an instrument for alerting its operator by visual, audible and vibrating signals to the presence of a dangerous build up or absolute level of particular hazardous gases and other noxious substances". 58. In the light of the pictures in the brochures and the FTT’s description of the properties of the Alert device I do not come, on the evidence before me, to the same conclusion in relation to the Altair devices as the FTT came in relation to the Alert device as regards to the intended use of the devices. It seems to me that the LCD screen showing a figure for the percentage of particular gases shows that inherent in those characteristics and properties is the use of the device to show the numerical result of the analysis of the ambient atmosphere, and that this is an important and intended use of the device. 59. In relation to the use described by the FTT in the second paragraph of the quotation from [19] of the Master of the Rolls’ judgement, I note that the brochures showed workers holding the devices rather than wearing them, and that save for the fact that the size of the devices permitted them to be held in one (gloved) hand, I saw no feature which indicated that their use was confined to those who worked in confined spaces. (iii) the competing headings 60. Under this heading I consider first the words and HSEN for 8531 and whether the products fall within it. I then compare the words of 9027 with 9026 and consider the effect of the Regulation. I then consider with reference to the HSENs whether the characteristics and properties of the devices fall within 9026 and 9027. (A) 8531. 61. Electric sound or visual signalling apparatus (for example, bells, sirens, indicator panels, burglar or fire alarms), other than those of heading 8512 or 8530 . . 62. The section heading in which 8531 lies specifies “machinery and mechanical appliances; electrical equipment…” whereas that for Section XVII, in which 9026 and 9027 lie provides a more specific description in the current context: “…measuring, checking…instruments and apparatus.”. That suggests that an instrument which signalled something but which also measured (or analysed in order to present a measurement) would not fall within 8531. 63. The HSEN for 8531 says (with certain irrelevant exceptions) that this heading covers: "…all electrical apparatus used for signalling purposes, whether using sound for the transmission of the signal ... or visual indication ... and whether operated by hand (e.g. doorbells) or automatically (e.g. burglar alarms).” It then gives a list of other items covered by the heading: (i) electric bells, ... door chimes etc ... (ii) electric sound signalling, horns, sirens (iii) other signalling apparatus (winking or intermittent lights etc) (iv) indicator panels (room indicators, lift indicators, station indicator panels) (v) burglar alarms - with a detecting part and a signalling part (vi) fire alarms with a detecting part and a signalling part. (vii) “Electric vapour or gas alarms consisting of a detector and a sound or visual alarm to warn of the presence of hazardous gaseous mixtures (eg natural gas, methane) …” 64. The first five examples point to products which give an alarm as the result of some action or event. The last two involve the giving of an indication when a gas or vapour is present. But none, even including fire alarms, encompass a device with a prior analytical function let alone one which displays, rather than signals, the numerical results of that analysis. They are systems which have a binary operation - the alarm is on or off - and do not provide quantitative information. 65. To my mind the Altair product is different from the examples given in the HSEN. 66. Nevertheless the FTT said that in its view the heading 8531: "[78] ... describes accurately and clearly the essential characteristics and properties and the use (the only intended use) of the Gas AlertMicro-5 ..." and Sales and Davis LJJ held that this was a conclusion which it was entitled to reach [124] 67. I conclude that 8531 is a potential classification for the Altair product. (B) 9026 and 9027: A Comparison 68. I found it helpful first to compare the words of 9026 and 9027 9026. Instrument and apparatus for 9027. Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases physical or chemical analysis (for example, flow meters, level gauges, minorities, heat meters) (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); Instruments and apparatus for measuring or checking viscosity ... quantities of heat, sound or light ... 9026.10 for measuring or checking the flow of liquids ... 9027. 10 gas or smoke analysis apparatus ... 9026. 20 for measuring or checking pressure ... 9027. 20 chromatographs and electrophoresis instruments 9026. 80 other instruments or apparatus 9026 8020 electronic 9027. 30 spectrometers 69. I draw two points from this comparison. The first is that each uses the word "for" in the same way. I can see nothing in the context of 9027 which indicates a different understanding of that word from that which is relevant to 9026. 70. In Honeywell Sales LJ said, as I have noted above, that "the force of the word "for"” in the opening of 9026 was that the specified use had to be the main or principal purpose of the device. Whilst later he said that the precise language and content of 9026 was different from that of 9027 it seems to me that, reading the heading together with the HSENs, the word "for" is used in the same way in both headings, and that whilst the other parts of the heading clearly differ, the meaning Sales LJ attached to "for" must be the same in both. However, it is less clear to me that the requirement in relation to 9027 is that the specified “use” has to be the principal use rather than the principal function of the device. I return to this later. 71. The second is the distinction drawn between analysis and measurement. “Analysis” to my mind carries with it the concept of taking something apart or examining its components, and is apt to encompass the process of determining the proportion of the components of particular gases in a mixture, whereas "level" in the context of "flow, level, pressure" indicates a physical measurement of an amount or quantity of gas or liquid without regard to its dissection into component parts. On would not ordinarily, I think, speak of the “level” of Chlorine in tap water although one might speak of the percentage concentration of Chlorine in such water. 72. That distinction is reinforced by the examples. Flow meters (9026) measure the passing volume of liquid, but spectrometers (9027) display the relative components of a source of light. Level gauges show the height of the liquid, but gas or smoke analysis apparatus indicates the composition of the gas. 73. Mr Cock says that the Altair products do not conduct any analysis on the results of the gas concentrations. That seems to me to postpone the concept of analysis to a second analysis of the results of an earlier analysis, because determining the relative presence of the components of something is, in my view, properly described as analysis. 74. In support of this submission Mr Cock relies on the CJEU judgement in Fluke and Raytech C-134/13. That case concerned inter alia the classification by regulation of an infrared thermal imager which, by collecting infrared radiation through a lens displayed an image coloured by reference to the temperatures of its constituent parts and which could also display the temperatures of different points in the image. The question before the national court had been whether such an instrument should have been classified under 9025 as a thermometer, or under 9027 as a device for physical analysis or carrying out a calorimetric measurement. 75. The CJEU held that 9025 applied. It held that 9027 did not apply because the devices in question “display the results of temperature measurement without conducting another physical analysis beyond a mere temperature measurement, a more specific property covered by 9025…” 76. Mr Cock says that this establishes that a product which carries out and displays a measurement without conducting another analysis does not fall within 9027. 77. I do not agree. Measurement of temperature does not consist of determining the component parts of something – it is not on its own ‘analysis’. But a device which determines the percentage of one thing within another is analysing that other even where it displays the result of that analysis as a measurement. .(C) The Regulation 78. In Krings GmbH C-130/02 the CJEU said, at [33], that in order to determine the scope of a clarification Regulation, account must be taken of the reasons given in the Regulation, and that the application by analogy of the Regulation to a product not identical with that in a regulation, facilitated coherent interpretation of the CN. Then at [36], having regard to the reasons in the Regulation in that case and the fact that they also applied to the product at issue, it classified that product under the number given in the regulation. 79. In Anagram the Court again applied the classification in the regulation to a non-identical product holding that the differences between the product at issue and the regulation product did not affect the principal characteristics. Although not made explicit in this judgement it seems to me that by "principal characteristics" the Court had in mind those characteristics which were relevant to the stated reasons for the classification of the Regulation product. 80. The Annex to Regulation 2018/1208 describes the regulation product and the reasons for its classification under 9027 thus: Description of the goods Classification (CN-code) Reasons (1) (2) (3) A sensor based electrical analogue apparatus (so-called "oxygen analyser") measuring approximately 240 x 220 x 200mm and weighing approximately 4.3 kg. The apparatus uses coulometric technology in order to detect and measure trace oxygen and paramagnetic technology in order to accurately measure the percentage of oxygen in pure gas streams and multigas backgrounds. It includes an LCD monitor to display the results of the measurements. It also includes an audio and visual alarm and analogue and digital outputs and two-way serial communication. The apparatus is used in industrial gas process and quality control. Classification is determined by general rules 1, 3(b) and 6 for the interpretation of the Combined Nomenclature and by the wording of CN codes 9027, 9027 10 and 9027 10 10. The apparatus has characteristics and functions of an apparatus for physical or chemical analysis (gas or smoke analysis apparatus) of heading 9027. See also the Harmonised System explanatory (HSEN) to heading 9027, first paragraph, point (8), which covers electrical gas or smoke analysis apparatus for determining and measuring the content of gases, used to analyse combustible or burnt gases in coke ovens, gas producers, blast furnaces, etc. Classification under heading 9026 as instruments or apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases is excluded as instruments and apparatus for physical or chemical analysis are more specifically covered by heading 9027 (see also the HSEN to heading 9026, first paragraph, exclusion (d)). The apparatus is a composite product within the meaning of GIR 3 (b) and is to be classified according to the component that gives the product its essential character. Detecting and measuring the oxygen within the gas is considered to be the function that gives the essential character to the apparatus. The apparatus is therefore to be classified under CN code 9027. 10. 10, as an electronic gas or smoke analysis apparatus. 81. In summary the reasons for the classification are: (a) that the product has the characteristics and functions of an apparatus for physical or chemical analysis; (b) that classification is supported by the HSENs to 9026 and 9027; (c) 9027 is more specific than 9026; and (d) the product was a composite and its essential characteristic for the purposes of GIR 3 (b) was to detect and measure oxygen within a gas. 82. It is plain that, although the regulation product’s description contains many of the objective features of the Altair products, the Regulation does not apply directly to the Altair products which are much smaller and are not limited to oxygen analysis. The issue is whether it may be applied by analogy. 83. Mr Cock says that, although there are similarities, the Altair product differs from the regulation product in the following particulars. 84. First, The regulation product is larger and heavier (20 times heavier). 85. It seems to me that this characteristic is not relevant to the reasons given for the classification. 86. Second, the regulation product, he says, is an analyser whereas the Altair product is not. 87. I agree that the regulation product is an analyser. It is described as using coulometric (the measurement of electrical charge and discharge flow) and paramagnetic technology to measure percentage oxygen. That is analysis of the gas. But the FTT's description of the way in which the Alert Micro Gas 5 worked showed that that device used such technology to analyse gas (that is to say the ambient atmospheric gas) composition: “[35] Levels of gases building up on the filters cause electrical currents to be generated which are proportionate to the level of the gas. These currents are measured and displayed on the LCD screen." ... [39] ... it measures the quantity of gas (in ppm) ..." 88. Measuring in parts per million in this way is to my mind clearly coulometric analysis. 89. Third, he says that, in contrast to the Altair products, the alarms in the regulation product are insignificant compared to its main function of gas level measurement analysis and process control. 90. I see no basis in the description in the regulation for concluding that the alarm function of the regulation product was comparatively insignificant. It is true that the use of the product - "in industrial gas process and quality control" - is different from the use found by the FTT for the Gas Alert Micro 5 (being "as an instrument for alerting the operator ... to the presence of ... hazardous gases ...), but not only do I not find the Altair product to have such a circumscribed use, but the use of the product does not form an explicit reason for the classification in the regulation. 91. Thus those differences do not persuade me that the principal characteristics of the Altair devices as determined by reference to the reasons given for the classification differ from those of the regulation the device such that the regulation may not be applied by analogy. 92. I note that, whereas the heading of 9027 speaks of a product “for physical or chemical analysis” the reasons in the Regulation say that the apparatus has the “characteristics and function of an apparatus for…analysis”. This points to structure and function, rather than use, as being the object of the word “for” in this heading. 93. Although Sales LJ used “function” and “use” interchangeably, it seems to me in the context of 9017 that they mean slightly different things. It seems to me that “function” relates more to the inherent working of the device, and intended use is concerned with how its features show it might be used. The words of 9027 and the Regulation point to my mind to analysis as being a requisite function. 94. I therefore consider that the Regulation taken together with Sales LJ’s analysis of the word “for” indicates that the words of the heading are satisfied where the (or, perhaps, a) main characteristic or function of the product is analysis. 95. The fourth reason in the regulation was that detecting and measuring oxygen was the function which gave the regulation device its essential character for the purposes of GIR 3(b). GIR 3 (b) applies where goods are prima facie classifiable under two headings (and where the product is a composite - which both regulation product and the Altair product are). This aspect of the reasoning in the regulation is relevant to the classification by analogy of the Altair product only if it is prima facie classifiable under two headings after the application of the relevant section and chapter notes: for only then is it necessary to rely upon GIR 3 (b). (B) 9026 96. No argument was made to me that 9026 was the correct classification. Whilst the Upper Tribunal (erroneously) held that it was correct for the Alert device in the case of a binary choice between 9026 and 8531, that was not the choice before me. 97. Without the constriction of a binary choice, it seems to me that the "level" of a gas or liquid is an ill fitting description for the concentration of one gas in a mixture of gases; and that, even if the effect of Dalton's law of partial pressures [1] is that measurement of the concentration of a gas in a mixture of gases leads to the calculation of its partial pressure in a mixture of gases, that was not what the product did. 98. The dissection of ambient atmospheric gas into some of its components is properly understood as ‘analysis’ rather than measurement of a level. Thus (as the Regulation reasons also explain) 9027, in its reference to analysis, is more specific than 9026: a conclusion reflected also in para (d) of the HSEN for 9026 which provides that instruments for physical or chemical analysis do not fall within that heading but fall within 9027. 99. I conclude that the Altair products are not properly classifiable under 9026. (D) 9027. 9027- Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity… 100. The HSEN for 9027 lists a number of analytical instruments for determining the composition of light and materials. It then says: "... (8) gas or smoke analysis apparatus. These are used to analyse combustible gases or combustion by products (burnt gases) in coke ovens, gas producers, blast furnaces etc ... "
It should be noted that the heading includes gas or smoke analysis apparatus for use in industrial processes (i.e. directly connected to furnaces, gas generators etc). But apparatus consisting mainly of laboratory glassware falls into heading 70.17. "(9) ... electronic smoke detectors equipped solely with an alarm fall in heading 85.31. 101. Mr Cock emphasises the reference to industrial process usage which he says refers to a product quite different from the handheld portable Altair product. 102. I accept that distinction, but it does not seem to me to be relevant to the meaning of the heading which does not distinguish in any way between large potentially fixed industrial devices and smaller portable ones. The fact that large devices are expressly said to be included within the heading does not mean that small ones are not. The heading concentrates on the function of a device not its size or portability. 103. Note (9) reinforces the view that 8531 is concerned with binary alarms, and 9027 with products which provide quantitative information as the result of some form of analysis. 104. When discussing 9026 the FTT said that the ambit of 9026 was limited to items "whose only function and use is to measure the level of gas etc". I have explained above that Sales LJ considered that this was too narrow a reading "for", and that its meaning would be satisfied if the "main function" of the device was the measuring the level of the gas [138] (and that Davis LJ indicated that possibly a main use would suffice). 105. Applying that understanding of “for” in 9027, and my conclusion that the Regulation reasoning indicates that the question of what the product is for must be addressed in relation to its objective functions, it seems to me that since the objective features of the Altair products include the prominent display (and in some cases recording) of their analysis of the ambient atmosphere, they can be said to have a main function of conducting that analysis 106. That approach is consistent with the reasons given in the Regulation where the regulation product, which also had an LCD display and an alarm, was said to have the "characteristics and functions of an apparatus for physical and chemical analysis". 107. Thus, having regard to the objective characteristics and properties and therefore its functions I find that the product is capable of falling within 9027. 108. In so saying I acknowledge that I have come to a different conclusion in relation to function from that of the FTT at [80]. 109. The FTT found at [37] that "from the facts we have found as to the contents of the device and the way it works, and from the appellant’s written and Mr Townsend’s oral description of it ... that the Gas Alert Micro 5 has the characteristics and properties of an alerting device ...", and at [38] that: "the intended use, and actual use of the device is the alerting its wearer to the presence of noxious levels of gas…" 110. So, it said "alerting was the only thing the device is intended to be used for". 111. The Court of Appeal held that on the evidence before it the FTT was entitled to come to the evaluative conclusion that the device did not fall within 9026 as a device for measuring the level of gas. That finding, however, was not that such was the only possible conclusion; it was simply that it was not a perverse conclusion [105] or one to which it was not "entitled to make on the evidence before it". 112. I did not have the same evidence before me. I had the FTT's description of the device and how it works, the description of the Altair devices in the BTI application and a brochure, but I did not have the oral evidence of Mr Townsend or the other documentary material before the FTT. 113. I am not able to come to the same conclusion on this evidence. The prominent display on the face of the product of the results of the analysis of the ambient atmosphere indicates to me that at least one use of the product is for the analysis it conducts. Such a display permits the user to ascertain whether the concentration of the relevant gases is much less than, close to or greatly exceeds safe levels, and to monitor their change and rate of change. These uses are inherent in the device and must be uses for which the device is intended and are dependent on the main function of doing analysis. The ability of the devices to memorise and record gas concentrations, although not obvious from the brochure pictures of the devices, are clearly intended uses to which gas analysis is essential. 114. The prominence of the display on the face of the device indicates to me that this was a main function and also a main intended use. I accept that alerting and alarming were also important uses of the device but it does not seem to me that they were the sole intended use. 115. I conclude that the devices fall within the words of 9027, being devices for the analysis of gases since that is its main function and one of its main uses. (iv)The effect of Notes 1(m) and 3 on the competing Headings. 116. I have concluded that the devices fall within the words of both 8531 and those of 9027. 117. The Notes to Section XVI (into which 8531 falls) say: "1. This section does not cover ... (m) articles of chapter 90 ... “3. Unless the context otherwise requires, ... machines designed for the purpose of performing two or more complementary or alternative functions are to be classified ... as being of that machine which performs the principal function.” 118. Note 3 to Chapter 90 (into which 9027 falls) provides that the provisions of Note 3 to Section XVI also apply to that Chapter. Note 3. 119. It seems to me that Note 3, because it relates to the nature of classification - and so bears on the meaning of a particular heading - must be considered before Note1(m). 120. The FTT at [99] considered that the measuring function and the alerting function of the device were not "complementary or alternative functions since the measuring function was subservient to the alerting function. To my mind, however, not only was analysis not subservient to alerting, but the display of the analysis of the gas and the alarm function were complementary in the sense that the ability to see gas composition levels and changes as a safety measure was completed in the provision of an alarm, and conversely the binary alarm function was enhanced or complemented by the availability of quantitative information. 121. I find that the principal function of the devices is the analysis which feeds the displaying, recording and alerting functions. On this basis I find that 9027 prevails Note 1(m) 122. If I am wrong in the preceding conclusion the devices would potentially fall within 9027 and 8531. In that case Note 1(m) means that they are to be classified under 9027. Conclusion 123. I find on the evidence before me that the Altair devices are properly classified under 9027 and I dismiss the appeal. Rights of Appeal 124. 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. CHARLES HELLIER TRIBUNAL JUDGE RELEASE DATE: 13 November 2019 [1] In a mixture of gases which exert no physical or chemical action on one another, each gas exerts the same pressure as if it alone occupied the entire vessel, and the total pressure is the sum of the partial pressures due to each gas.

Cited in 4 later judgments