Neutral Citation Number: [2009] EWHC 2046 (Ch)
Case No: CH/2008/APP/0667
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE VAT
 & DUTIES TRIBUNAL

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 05/08/2009

Before:

MR JUSTICE CHRISTOPHER CLARKE
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Between:

	MATALAN RETAIL LTD	Appellant	
	- and -		
	THE COMMISSIONERS OF HM REVENUE AND CUSTOMS	Respondents	

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Philippa Whipple (instructed by McGrigors LLP) for the Appellant
Andrew O’Connor (instructed by Solicitors Office HM Revenue & Customs) for the Respondents

Hearing dates: 10th & 11th June 2009
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Judgment

MR JUSTICE CHRISTOPHER CLARKE: 
1.	This is an appeal from a decision of the VAT & Duties Tribunal (“the Tribunal”) given on 8th August 2008. Superficially the case concerns the classification for customs tariff purposes of swimwear imported by the Appellant, Matalan Retail Limited (“Matalan”). In fact, as will become apparent, what now divides the parties is the extent to which the Commissioners are, in the events which have happened, precluded from contending that a particular classification applies, even though that is in fact the correct classification. 

2.	The Tribunal had before it two appeals. The first appeal was against the refusal by the Commissioners to meet three repayment claims totalling            £ 522,537.43. The second, which was withdrawn during the hearing, was against the revocation of a binding tariff information (“BTI”). Matalan had also lodged a further notice of appeal against the issue by the Commissioners of two post-clearance demands amounting to £ 113,464.78 which it had applied to have consolidated with the other two appeals and heard at the same time. The Chairman declined to make that order, to which the Commissioners had objected. 

3.	The Chairman described the swimwear concerned as including:

“..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. Matalan says that, although the proportions differ from one garment to another, the rubber content of each garment, considered as a whole, exceeds 5%, and it produced some analysis reports prepared by an independent laboratory supporting that claim.”
.
4.	It is common ground that all the garments are properly classified within heading 6112 of the European Union’s customs tariff, the Combined Nomenclature, which is the annually revised Annex 1 to Council Regulation 2658/87/EEC. The text of that, so far as presently relevant, is:

“Men’s or boy’s 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”	

5.	The text of the tariff for “Women’s or girl’s swimwear” is identical save that the subheadings are numbered 6112 41 and 6112 49 respectively. It is accepted that all the garments in issue are of synthetic fibres. The critical distinction between the classifications is that goods within 6112 31 10 and 6112 41 10 (the “10” classification) attracted duty at 8 per cent, while those within 6112 31 90 or 61112 41 90 (the “90” classification), attracted duty at (for the relevant period) either 12.2 or 12 per cent. 

The legislation

6.	Council Regulation 2913/92 establishes the Community Customs Code. That provides as follows:

Article 12

 1	 The customs authorities shall issue binding tariff information… on written request, acting in accordance with the committee procedure.

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

Binding tariff information …. shall be binding on the customs authorities only in respect of goods on which customs formalities are completed after the date on which the information was supplied by them.

….

 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,
…

 4	 Binding information shall be valid for a period of six years in the case of tariffs…. By way of derogation from Article 8, it shall be annulled where it is based on inaccurate or incomplete information from the applicant.

 5	 Binding information shall cease to be valid:

(a)	in the case of tariff information:

(i)	where a regulation is adopted and the information no longer conforms to the law laid down thereby;
…..

(iii)      where it is revoked or amended in accordance with 
Article 9, provided that the revocation or amendment is notified to the holder.
		
The date on which binding information ceases to be valid for the cases cited in (i) and (ii) shall be the date of publication of the said measures …
... …..

 6	 The holder of binding information which ceases to be valid pursuant to paragraph 5 (a) (ii) or (iii) … may still use that information for a period of six months from the date of publication or notification, provided that he concluded binding contracts for the purchase or sale of the goods in question, on the basis of the binding information, before that measure was adopted…..”

In the case of paragraph 5 (a) (i) ……, the Regulation …may lay down a period within which the first subparagraph shall apply.”

7.	Article 236 of the Code provides as follows:

            Article 236

 1	 Import duties or export duties shall be repaid in so far as it is established that when they were paid the amount of such duties was not legally owed …… 

... …..

 2	 Import duties or export duties shall be repaid or remitted upon submission of an application to the appropriate customs office within a period of three years from the date on which the amount of those duties was communicated to the debtor….

8.	Commission Regulation 2454/93 (the “Implementation Regulation”) lays down general provisions for the implementation of the Code. The “committee procedure” specified in Article 12 of the Code is that set out in Articles 5 ff of the Implementation Regulation.  It includes the following:

“	            Article 6

 2	 An application for binding tariff information shall relate to only one type of goods.

 3	 Applications shall include the following particulars:

... ...

(c) the customs nomenclature in which the goods are to be classified …

(d)	a detailed description of the goods permitting their identification and the determination of their classification in the customs nomenclature

... ...

(f) any samples ... which may assist the customs authorities in determining the correct classification of the goods in the customs nomenclature, to be attached as annexes;

(g) the classification envisaged; 

... ….

(i) any particulars to be treated as confidential;

  	           Article 7

 1	 Binding tariff information supplied by the customs authorities of a Member State shall be notified to the applicant in writing as soon as possible…

           Article 8

 1	 A copy of the binding tariff information notified…. and the facts… shall be transmitted to the Commission without delay by the customs authorities of the Member State concerned. Such transmission shall be effected by electronic means as soon as possible.

 2	 Where a Member State so requests the Commission shall send it without delay the particulars contained in the copy of the form and the other relevant information. Such transmission shall be effected by electronic means as soon as possible.

                       Article 10

1	 Without prejudice to Articles 5 and 64 of the Code, binding tariff  information may be invoked only by the holder.

 3	 The holder of binding tariff information may use it in respect of particular goods only where it is established to the satisfaction of the customs authorities that the goods in question conform in all respectsto those described in the information presented.

                       Article 878

 2	 Without prejudice to Article 882, application for repayment or remission shall be made, in one original and one copy, on a form conforming to the specimen and provisions in Annex 111.

However, application for repayment or remission may also be made ... on plain paper, provided it contains the information appearing in the said Annex.

                             Article 881

 1       The customs office referred to in Article 879 may accept an application not containing all the information provided for on the form referred to in Article 878 (2). However, the application must contain at least the information to be entered in boxes 1 to 3 and 7.

 2	 Where paragraph 1 is applied, the said customs office shall set a time limit for the supply of any missing particulars and/or documents.

 3      Where the time limit set by the customs office pursuant to paragraph 2 is not observed, the application shall be considered to have been  withdrawn.”

9.	If a dispute arises between the Commissioners and a trader as to the tariff applicable to any given product or products that dispute may be resolved by a claim for repayment the validity of which will, if necessary, in the end be determined by the Tribunal. A binding tariff information provides a means by which the importer may be assured in advance that any given product will be treated as falling within a particular classification.

10.	Certain features of this procedure must be noted.  Firstly, the customs authorities are bound to issue BTIs on written request. Secondly, a BTI operates only in favour of the person to whom it is given: Article 12.2. of the Code; Article 10.1. of the Implementation Regulation. Thirdly, it operates only prospectively in respect of goods imported after it has been issued: Article 12.2. (second para). Fourthly, in order to take advantage of it the holder must show to the satisfaction of the customs authorities that the goods in question correspond in every respect to those described in the information: Article 12.3 of the Code and Article 10.3 of the Regulation. Fifthly, a binding information operates in favour of the holder as against all customs authorities within the Union: Article 12.2 of the Code. Sixthly, the classification of imports for tariff purposes is usually identified when the importation takes place. The BTI system provides, by way of exception, a route to secure in advance that a particular classification is applied. 

11.	An application for a BTI must be distinguished from a claim for repayment of duty. The holder of a BTI will be able to use it in respect of the goods to which it relates so as to secure that a particular tariff is applied to them throughout the Community. But a BTI has no effect in relation to goods which are not covered by it. A trader may make a repayment claim whether he is the holder of a BTI or not. 

The history

12.	Matalan imports large quantities of different types of garment having the characteristics described in paragraph 3. Not surprisingly they come in different sizes, colours and designs (one piece, bikini, trunks etc). Matalan ascribes to different types of garment a different product (line) code according to design, size, and colour. There are thus a large number of different line codes. 

The claim for overpaid duty

13.	On 23rd August 2004 Ms Caroline Forster (now Mrs Barraclough), Matalan’s Customs Duty Manager, wrote to HMCE submitting a claim for repayment of overpaid duty on form C 285 – the applicable form. Attached to the form was a schedule containing details of customs entries in respect of which duty had been paid on men’s and women’s swimwear from November 2001 onwards at the rate for the “90” classification. The letter explained that Matalan:

“would like to protect .. our position in the event that we have overpaid duty on imports of swimwear. I have enclosed supporting evidence as to the basis of our protective claim”.

That was, no doubt, a reference to the 3 year limit specified in Article 236.2 of the Code. On 7th September 2004 an officer of HMCE stated that HMCE was willing to accept the claim on the basis of the information supplied provided that the full information was submitted by 30th November 2004. 

The application for a BTI

14.	On 17th September 2004 Ms Forster filled in an application form for a BTI. The form, which is a Community form, states at the top “A separate application must be made for each product”. The form specified “TARIC” as the relevant Customs Nomenclature (TARIC is a 10 digit code) and indicated Matalan’s view that the goods should be classified as “6112 41 1000” i.e. the “10” classification which attracts a lower rate of duty. The goods were described as:

“LADIES SWIMMING COSTUME – SHELL 80% POLYAMIDE AND 20% ELASTANE . LINING – 1005 POLYAMIDE. 29% BY WEIGHT OF RUBBER THREAD”

Matalan gave a reference on the form of F 119374/F 116437. F 119374 was a black costume with a pink trim. It appears (see para 6 of Ms Forster’s statement) that one sample was sent, which was of that costume. 

The first BTI

15.	On 22nd September 2004 HMCE sent to Matalan a BTI dated 20th September 2004. The accompanying letter explained that the one piece swimming costume to which it related was excluded from classification at 6112 41 1000 because the body of the garment did not contain any rubber. 

16.	The BTI itself, which was contained in another community form, contains 10 boxes. Box 4 specified 22nd September 2004 as the date of the start of its validity. Box 6 specified the classification of the goods as 6112 41 9000. Box 7 , headed “Description of goods” read as follows:

“ KNITTED ONE PIECE SWIMMING COSTUME FOR WOMEN, INTENDED TO COVER THE BODY REACHING DOWN TO THE CROTCH. WITH BRA STYLE SHAPED CUPS WITH UNDERWIRING. WITH LINED CROTCH WITH ADJUSTABLE SHOULDER STRAPS IN CONTRASTING COLOUR. WITH HIGH CUT OPENINGS FOR THE LEGS, WITH ELASTIC AT THE CONTRASTING NECKLINE AND THE ARMHOLES. ALSO ELASTICATED AT  LEG OPENINGS. OF 80% POLYAMIDE AND 20% ELASTANE.”

17.	Box 8 was headed “Commercial denomination and additional information”. The entry in that was “F 119374”. F 119374 was the code for a black costume with a pink trim. It is HMRC which, at any rate in the first instance, determines what is placed in Boxes 7 and 8. Its decision may well reflect its view of what needs to be stated in order to identify which goods are to receive the benefit of the BTI.  

18.	On 13th October Matalan obtained a report from a testing house on the quantity of rubber present in various samples of bikini, swim shorts, and swim briefs, and on the percentage rubber in the trim of garment F 119374 (100%) and in the garment as a whole (16.9%).  On 2nd November 2004 Matalan applied for a review of the decision in respect of the BTI, asserting that the correct classification was as 6112 41 1000.  The letter enclosed another sample - F 119371, which was blue with a white trim – and was stated to be exactly the same save as to colour, and the test report on F 119374.  

19.	On 17th November Ms Forster wrote to HMCE saying that it would not be possible for Matalan to submit its claim by 30th November 2004 and suggesting a revised date of 21st January 2005. 

The review decision

20.	On 2nd December 2004 HMCE produced its review decision which upheld the original decision of 22nd September 2004. In essence the decision was that the textile material from which the garments were made (i.e. the garment without the trim) could not be considered to contain rubber thread. The garment to which the letter related was expressed to be one coded F 119371, which had been sent with Matalan’s letter of 2nd November.

21.	The basis for HMCE’s view (originally and on review) was that the requirement that there should be a 5% or more weight content of rubber thread applied to the “synthetic fibres” referred to in the subheading 6112 41, and not to the heading “Women’s and girls swimwear”. It was insufficient that the rubber was more than 5% of the whole costume including trim. It had to be 5% of the body of the garment made from synthetic fibres, and the body of the garment contained no rubber at all. 

The time-bar point

22.	On 2nd December 2004 HMCE wrote to Matalan stating that since the  evidence in support of the claim had not been produced by 30th November HMCE had rejected the original claim dated 23rd August 2004. A further claim could be submitted with the appropriate supportive evidence subject to the normal three year time limit. In the event this time point was not pursued. 

The first appeal

23.	On 23rd December 2004 Matalan appealed to the Tribunal against the review decision (“the first appeal”). 

24.	In February and March 2005 there was an important exchange of e-mail and letter correspondence between HMCE and Matalan. On 24th February 2005 Ms Forster of Matalan e-mailed to Mr Robinson, who had been dealing with the matter for HMCE:

“ You may remember some time ago we discussed a swimwear reclaim for which I had sent some details in an attempt to protect the claim.

This claim has not been submitted as the classification of the swimwear is currently in dispute and I am awaiting details of whether a re-review of the original BTI would be granted. Therefore it was not possible for me to submit a claim during the time period which you set.

As this is the case, and has been since the BTI was submitted, I would like to protect the entries for the period that this has been considered by Customs.

….

Therefore, can you confirm that the entries from the time that the intent of the reclaim was lodged last year will be protected as I have been unable to submit this claim due to a dispute with Customs”

	        The false dawn

25.	On 4th March 2005 Mrs Watts of HMCE, who had been the Reviewing Officer,  wrote to Mr John Pitt of Price Waterhouse Coopers (“PWC”), who were acting for Matalan, a letter in which she referred to the fact that HMCE had commissioned its own analysis of the rubber thread and found it to be 15% by weight and ended:

“ Based on all of the information above we now consider that the swimsuit classified on Binding Tariff Information(BTI) GB 1134585192 is classified to commodity code 6112411000. I shall now arrange for the BTI to be cancelled and a new one issued to that effect. Your client should now write to the Tribunal to withdraw the appeal.”

26.	On 8th March 2005 Mr Robinson e-mailed Ms Forster :

“ Further to our conversation I now understand that you were not been (sic) able to submit a complete C285 claim because of a review of the Binding Tariff Information (BTI) dated 20 September 2004 …. A final BTI decision has now been issued to Matalan dated 4 March 2005.

In this instance Customs are willing to accept the original claim date of 23 August 2004 relating to the products subject to the above BTI provided that the full information is submitted within 3 months of the date of the revised BTI decision.

No further extension to the time for submitting the full claim will be given since you now have all the relevant information to submit a complete claim.”

No BTI decision dated 4th March appears to have been given, as opposed to intimated.

	       The change of heart

27.	Meanwhile in another department of HMCE a different approach was being mooted. On 18th March 2005 Jan Pond of the Business Education & Support Team, Tariff Classification, had written to Mrs Watts, a letter which included the following:

“ I have spoken to Alan about this case and want to question the Solicitor’s advice not to carry on to Tribunal.

[She then referred to various provisions of the Tariff]

If we concede we effectively take up the position of agreeing that the product conforms to the subheading text, when we do not. We would therefore be liable to being called upon to satisfy EC Own Resources by the European Court of Auditors.

We would prefer to take the matter to Tribunal and only if we were to lose, to submit the matter to the Committee.”

28.	On 23rd March 2005 (by a letter dated 4th April 2005)  Mrs Watts wrote to Mr Pitt informing him that HMCE now maintained that the correct classification was the “90” classification. She now relied on a contention that because of a particular Legal Note rubber in strips of 0.8 cm (which was the relevant measurement for the garment in question) was to be classified as strip and not thread. 

29.	On 6th April 2005 Ms Forster e-mailed to Mr Robinson:  

“In reference to our recent discussions relating to the swimwear reclaim which you gave 3 months from the date of the Customs decision to submit. This worked out at 3rd June. You also agreed that the reclaim would be accepted going back three years from the date of the original BTI decision from Customs (September 2004).

As I explained in our last conversation, we received a letter on 4 March which stated:

“ Based on all of the information above we now consider that the swimsuit classified on BTI GB113485192 is classified to commodity code 6112411000”

Despite this, we then received a letter on 23 March which then stated ‘based on all of the above information I must now maintain that the correct classification for the swimsuit is to Commodity code 6112419000’.

We do not agree with this and believe the swimsuit is correctly classified to the code 6112411000. Therefore, we will be replying  to the Customs & International Trade National Reviews & Appeals Team with the reason why we believe this is the correct code.

My concern is that we may not have a decision by the 3 June therefore, the date for the submission of the reclaim will have to be set again depending on when we get a final decision from Customs. It may be that the case goes to Tribunal.

Can you therefore confirm that the date of 3 June no longer stands and the date of submission of the reclaim will be 3 months from the date that the FINAL decision is reached. Can you please confirm this by e-mail.”

30.	On April 14th Mr Robinson replied:

“ As discussed, further to my e-mail of 8 March 05 and your appeal against the BTI decision, I can confirm that the time limit for submitting the final claim (i.e. by duty value) will be extended to one month from the date of receipt of the Customs appeal decision

Due to the volume of supporting documentation it is not necessary to supply this to Customs when the full claim is submitted but it must be retained so that the claim can be verified by Customs before repayment is authorised.

As suggested, I would appreciate if you can let me know when the Customs appeal decision is received.”

31.	On 26th May 2005 HMRC lodged their statement of case with the tribunal. In it HMRC relied on two reasons for the “90” classification: 

(a) 	the rubber was not contained in the fibres of the garment; 

(b)	 the rubber strip was not “thread” for the purposes of 6112 41 1000 of the Code. 

 I refer to these hereafter as “the two points”. 

32.	Reliance was placed on Note 7 of the Harmonised System Explanatory Notes (HSEN) which provides:

“Thread wholly of localised rubber, of which any cross-sectional dimension exceeds 5mm, is to be classified as strip, rods or profile shapes, of heading 40. 08.”

and on the HSEN to heading 40.07 which provides that the heading includes:

“ thread wholly of vulcanised rubber (single strand) provided that no cross-sectional dimension exceeds 5mm.”

33.	HSENs are issued by the World Customs Organisation which administers the nomenclature established by the Convention on the Harmonised Commodity Description and Coding System and have been held by the ECJ to be of persuasive value. 

HMRC concedes

34.	The appeal hearing was due to take place on 26th April 2006. But on 20th April 2006 HMRC wrote to Matalan in relation to the appeal as follows:

“ The Commissioners hereby withdraw the disputed decision. The Appellant is hereby invited to withdraw its appeal and is reminded in that regard that such withdrawal would not prevent its making application to the Tribunal in respect of costs (rule 16 of the Tribunal Rules).”

35.	There is some ambiguity in the expression “the disputed decision”, which either means (as I think it does) the review decision of 2nd December 2004 or the decision of 22nd September 2004 that was reviewed. The distinction is immaterial. If the Commissioners were withdrawing the review decision they were necessarily conceding the inaccuracy of both the review decision and the original decision which it had upheld. 

36.	On 21st April 2006 PWC gave notice on behalf of Matalan that it withdrew its appeal.

37.	 HMRC later paid Matalan £ 37,500 in respect of its costs of the appeal. 

38.	On 17th May 2006 Ms Loftus of Matalan, who had taken over from Ms Forster, wrote to HMRC submitting three C 285 claims for repayment of overpayment of duty in the following amounts and covering the following products imported between 2001 and 2006 :

(i)	Women’s swimwear which should have been classified as 6112 41 1000: 	                   £460,326.88

(ii)	Men’s swimwear which should have been classified as 6112 31 1000:			£ 47,096.04

(iii)	Tankini tops formerly classified as vest tops but now as swimwear. 		                   £ 28,168.02

The second BTI

39.	On 25th May HMCE wrote a letter in which they thanked Matalan for its request of 20th September 2004 and included a new BTI, expressed to have a start date of 25th May 2005. This was in the same form as the previous BTI with the same entries in Boxes 7 (Description of the goods) and 8 (Commercial denomination and additional information - F 119374) save that in Box 6 it classified the goods as 6112 41 1000. 

40.	On 14th June 2006 Mr Stewart Rayton of HMCE visited Matalan’s premises with a view to verifying the claim. As the Tribunal records, he is not a tariff classification officer and did not direct his attention to the characteristics of the garments. He looked at a number of samples and queried some aspects of the claim, including in particular some duplicate invoices. He reduced the claims (and notated the relevant C 285) so that they became £ 460,326.88 (as before), £46,753.75, and £ 25,456.80.  Matalan agreed with these reductions. Mr Rayton signed the three C 285s by way of authorisation, having secured the agreement of a Mr Hall to repayment of the claims submitted, and they were countersigned on 6th July 2006 by a Mr Mitchinson. 

41.	By a letter dated 5th July 2006 Mr Rayton sent the three “authorised C 285 repayment claims” totalling £ 522,537.43 to the National Duty Repayment Centre (“NDRC”) in Dover. In early August Ms Loftus was asked by Mr Hunt for Matalan’s bank details which she gave. 

Another change of heart

42.	By mid-August Matalan were beginning to get wind of the possibility that they would not be paid. On 14th August Mr Pitt of PWC, who had learnt from the local officer that the repayment was being held over until the Nomenclature Committee meeting in October, e-mailed Ms Aileen Andrews, the Policy Manager of HMRC Tariff Classification asking whether:

“ regardless of the position with any other claim, Matalan’s claim can be processed now, given that the local officer has verified the claim?”

43.	Ms Andrews replied:

“ I can confirm that all duty re-payment claims for swimwear including Matalan are being treated as protected claims but will not be processed until after the next meeting of the Textile Sector of the Nomenclature Committee in October. The classification of these items is complex therefore until further clarification is received from Brussels we are unable to progress any application for repayment.” 

44.	On 21st August 2006 Mr Mortimer, a Senior Indirect Tax Specialist  of HMRC and the local officer in charge of Matalan’s affairs, informed Ms Loftus that Ms Andrews would be attending the October meeting, which would discuss the UK interpretation of the Explanatory Notes of Chapter 61 regarding the 5 % rubber thread content in swimwear, and that it was intended to “progress with the re-consideration of Binding Tariff  Informations (BTIs) held by traders who believe the classification on their BTI is incorrect and are claiming a re-payment of duty”.  He asked that relevant samples relating to “your entries for each BTI you wish to claim against should now be sent” together with an analyst’s report. The Commissioners later indicated that they did not wish to inspect all the samples. 

45.	On 31st August 2006 Mr Mortimer advised Ms Loftus by e-mail that HMRC was willing to repay duty for the swimwear classified on the BTI of 25th May 2006 under costume reference number F 119374. In other words repayment would be made only in respect of that product line. He asked for amended  C 285s to be resubmitted identifying :

“which relates to [that] swimwear and which should be treated as ‘protected claims’ pending the outcome of the next meeting of the textiles committee in Brussels, together with schedules of the entries appropriate to each claim.”.

46.	On 7th September 2006 Mr Pitt of PWC e-mailed the local officer saying that Matalan had believed:

“ that all protected reclaims held and accepted by Customs prior to [20 April 2006] should be covered by the decision. If they were not covered by the appeal, the reclaims should have been rejected by Customs at the point of submission.

Given this, I have recommended that Matalan do not submit further samples to Customs, as requested by your letter dated 21 August 2006. We believe the protected reclaims already launched should instead be settled….”

	        The decision the subject of the appeal to the Tribunal   

47.	On 8th September 2006 Mr Mortimer replied to state, inter alia, that HMRC was willing to repay all swimwear classified on the 2006 BTI costume reference number  F 119374 (an offer which was not limited to importations after the date of the second BTI and which was not taken up) and intended to treat the remainder of the claims, other than those in respect of F 119374, as protected claims pending the outcome of the next textiles committee meeting in Brussels; samples were still required as per his letter of 21st August.

48.	On 3rd October 2006 PWC on behalf of Matalan requested a review of that decision. On 12th October 2006 a representative of HMRC wrote to Mr Pitt telling him that the local officer’s comments in the e-mail of 8th September were not an appealable matter. Although there was originally a dispute as to the jurisdiction of the Tribunal that has fallen away. It is this review decision, which, if correct, would involve HMRC paying only a small fraction of the claims, which was the subject of the appeal to the Tribunal.  

49.	Documentation obtained by Matalan pursuant to applications under the Freedom of Information Act has revealed something of what was going on at HMRC.  In April 2006 Mr Hunt of  NDRC e-mailed a Mr Attridge referring to the 3 Matalan C285 claims NDRC had received and saying that Aileen (Ms Andrews) has 

“ advised that in the Matalan Tribunal case a decision was taken which related to one garment, not all items of swimwear imported into the UK and until the meeting in October and the clarification of the interpretation of heading 61124110 is confirmed, repayment should not be made.

 Are you able to clarify if, considering the above, repayments may be made to Matalan or whether they are in the same situation as other importers of swimwear?”

50.	On 26th May 2006, the day after the replacement BTI was issued a Mr Bennet said in an e-mail to a Mr Priestley:

“ I was thinking along the lines of what the issue is, what happened about the withdrawal from Tribunal, what claims are in the offing, what to look out for at other traders, and the extent to which claims must be on all fours with ……/Matalan to be paid.”

51.	It is apparent from the documents that there was internal discussion about how to deal with other claims said to raise similar questions to those raised by Matalan and about the significance of the withdrawal of the HMRC decision in relation to Matalan. 

52.	On 13th June Mr Priestley said in an e-mail to, inter alios, Mr Mortimer, who was responsible for Matalan’s affairs:

“ In view of the fact that we have withdrawn our decision on Matalan, I think we are on a losing wicket if we try to block claims for what seem to be essentially the same goods (in classification terms) from other traders..

Idris and I agreed to hang fire until Aileeen got back from Brussels; if they decide that the garment in question is, in fact, subject to a far higher rate after all, we will reject our claims (although where this leaves Matalan I don't know) ..”

53.	On 14th June , after his visit to Matalan, Mr Rayton reported to Mr Mortimer that the claim was not being repaid just yet due to a number of anomalies listed in the report. On 29th June a lady at NDRC e-mailed others there and reported:

“I have spoken to two LBS [Local Business Service] managers… and they have informed me that although HMRC withdrew from the tribunal, T&SO still don't agree with the change of commodity code for these goods and have referred the case to Brussels, who next meet either in July or October.”

54.	On 3rd July 2006 a Mr Malpas in an e-mail to Mr Priestley said:

“ I understand that the Matalan ruling was withdrawn on solicitor’s advice because they felt that the General Interpretation Rules used as a basis for the disputed ruling had not been correctly applied and that this would weaken our case at tribunal and lead to further litigation. PWC are presumably using this for all of their other claimants in that they will argue that the assumptions behind the 6112419000 classification are flawed and the goods should be classified as 6112411000.”

55.	At some date after June 2006 Ms Andrews e-mailed a lady at the European Commission expressing the opinion of the UK that, in order for there to be a “10” classification, the rubber should be contained within the main body of the fabric and saying:

“As one of our large companies has challenged this opinion it is imperative that discussion takes place between all Member States (MS) at our next Textile Sector meeting. If all MS are in agreement with the UK we believe clarification should be established by a Regulation. If you are in agreement I will prepare a draft Regulation in advance of the meeting which can be amended if necessary.”

56.	On 11th July 2006 Ms Andrews sent a long e-mail to a large number of addressees in which she confirmed a number of matters: including (i) that  HMRC would not be revoking BTIs for traders who intend to make a repayment claim; (ii) that it would not be issuing BTIs for the “10” code until the interpretation of the heading had been clarified by the Commission; (iii) that a very high percentage of Member States were classifying these items in the same way as the UK as “90”;  (iv) that some traders were using the “10” code inappropriately and were likely to be subject to claims for payment; and (v) that :

•	The UK interpretation of Heading 6112411000 is that the 5% rubber should be contained in the body of the swimsuit. In essence that the rubber is part of the fabric that the garment is made from not merely sewn into the garment e.g. around the legs etc. as a tightening element; and 

•	For classification purposes a rubber strip that is 8mm wide is not considered to be rubber thread, however finding a definitive answer to what constitutes rubber thread has posed a problem.

57.	On 8th August Mr Attridge e-mailed Ms Andrews asking for advice. In it he said:

“The [Matalan] case was withdrawn because Counsel considered that our case was weak. However, the classification of swimwear and the definition of rubber ‘thread’ has consequently been submitted, by yourself, for consideration to the NC [Nomenclature Committee] (Textiles). In my opinion, the NDRC can accept protected (i.e. provisional) repayment claims, because of future discussions. However, I do not consider that any refunds can be made for these goods, until the NC has fully considered the issue and maybe approved a classification regulation, especially if it transpires that the UK's line is accepted.”

58.	On 9th August 2006 Ms Hunt of NDRC  had a telephone conversation with Ms Loftus of Matalan in which Ms Loftus said that the three C 285s submitted could be repaid as they were a result of the tribunal which HMRC withdrew from. Ms Hunt e-mailed Mr Mortimer asking whether the C 285s could be repaid.  

59.	Ms Loftus also e-mailed Mr Mortimer:

“  ... The swimwear claim has still not been repaid. Everything is finalised between us, Stewart Rayton and yourself and the claim forwarded to Dover for processing, this was at the end of June. I had heard nothing by the end of July so phoned Dover requesting an update to why there was a delay in repaying. They advised they had lost the claim. Stewart Rayton’s colleague then re-sent everything to them. Two weeks later I still haven't heard anything so decided to phone them. I have just been told that they are waiting for confirmation off Stewart or yourself that they are allowed to repay us in light of this issue being taken to the commission. I did try and explain that we are different to anyone else because Customs conceded just before we were due to go to Tribunal and that Stewart had already asked this question of you and agreed it was to be paid but they want confirmation. The ladies [sic] name at Dover is Jan Hunt ….There appears to be a severe lack of communication between the repayment unit and local officers. Do they not have some sort of activity boundaries statement in place?.”

60.	On 11th August Mr Mortimer e-mailed to Ms Hunt that the position of Matalan was different to other companies making claims “because their reclaim was the subject of an Appeal… that Solicitors Office chose not to defend. We are therefore obliged to repay asap as further delay has now occurred”. He asked to be rung with confirmation that repayment was being made if he had not spoken to her before 1000 am. 2 ½ hours later he e-mailed Ms Hunt saying that he was awaiting further information from Ms Andrews and asking her to hold action until he got back in touch. On the same day someone noted on Ms Loftus’ e-mail to Mr Mortimer: “Aileen Andrews does not want repayment.” 

61.	Mr Attridge forwarded to  Ms Hunt  the e-mail to Ms Andrews from Mr Pitt of 14th August (see para 42 above). On 15th August Mr Mortimer e-mailed Mr Attridge, with copies to Ms Andrews and Ms Hunt, and others. In that e-mail he said:

“The company has been visited & my staff have verified the claim in detail. In view of the information above [which was as to the percentage weight of rubber in the relevant garments], it is still our recommendation that the claim is repaid. I accept the wider implications involved but would highlight the delays from the trader’s perspective.”

	        Regulation 651/2007

62.	The meeting of the Textiles Committee presumably took place in October 2006.

63.	On 8th June 2007 the Commission adopted Regulation 651/2007. This provided that:

“Article 1

The goods described in column 1 of the table set out in the Annex shall be classified within the Combined Nomenclature under the CN-code indicated in column 2 of that table.”

64.	Item 1 in column 1 of the Annex gave a description of a women’s swimsuit in terms very similar to those contained in the two BTIs. Column 2 specified code 6112 41 90. Column 3, headed “Reasons”, provided that:

“Since the rubber is added to the garment but not contained in the fabric this garment cannot be classified in subheading 6112 41 10.”

65.	The effect of this regulation was threefold. Firstly, it took effect prospectively for garments falling within column 1. Secondly, in circumstances where there had been no relevant intervening material change to the wording of the nomenclature, it constituted a  persuasive indication as to the proper interpretation of the provisions in the Combined Nomenclature dealing with 5% or more weight of rubber: see Advocate General Jacobs in Deutsche Nichimen GmbH v Hauptzollant Dusseldorf [2001] ECR 1-2701.  In effect it established the validity of the first of HMRC’s two points. Thirdly, it invalidated the second BTI since the information contained in that BTI no longer conformed to the law laid down  by a Regulation: Article 12.5 (a) (i) of the Code. That was subject to Article 2 of Regulation 651/2007, which provided that BTIs not in accordance with the Regulation could be invoked for a period of 60 days under Article 12 (6) of Regulation 2913/92. 

66.	Regulation 651/2007 came into force on the 20th day following its publication (which was on 14th June 2007) in the Official Journal i.e. on 4th July 2007. 

67.	On 22nd March 2007 HMRC had revoked the second BTI. There was originally before the Tribunal an appeal against that revocation. But Matalan did not pursue that appeal since the effective date of that revocation, if valid, post-dated the coming into force of Regulation 651/2007 so that the amount due to or from Matalan was unaffected whatever the outcome of that appeal might have been.

What was the correct tariff classification in respect of the swimwear?
. 
68.	The Tribunal decided that all of the swimwear (on the assumption that it had the composition stated by Matalan) came within the “90” and not the “10” classification. The Chairman decided that the reasoning set out in Regulation 651/2007 was unconvincing because it begged the question. (With respect it seems to me that it answered it; by giving the view of the community legislator, as AG Jacobs put it, that the classification enacted follows from the legislation already in force).  Nevertheless he concluded that the Regulation properly reflected the proper classification of the garments because chapter 61 of the Combined Nomenclature proceeded by progressively refining the description of the goods to which it referred by qualifying the description at any given level by the descriptions which follow at the next level below, and that the following descriptions were to be applied successively in the order in which they appeared, so that the words “containing by weight 5% or more of rubber thread” qualified the preceding words “of synthetic fibres.” 

69.	The Tribunal rejected the second of the two points. It was not suggested to me that it was wrong to do so. 

70.	Matalan no longer seeks to suggest that the proper classification is “10” and not “90”.  The first of the two points has for practical purposes been determined by Regulation 651/2007 and is applicable in respect of all the swimwear. What Matalan does suggest is that, in the light of the withdrawal by HMRC of the impugned decision and the consequent withdrawal of the appeal, it is not open to HMRC to contend, in respect of any of the relevant swimwear, that they cannot be classified as “10” because of the first of the two points (or the second).  

Matalan’s submissions

71.	Matalan contends that it and HMRC agreed how to manage the claims for repayment, all of which involved the same two points. They agreed (“the first agreement” ) that the resolution of the appeal against the review of the first BTI  would determine how those two points were to be resolved in respect of all the swimwear the subject of the claims for repayment. The first agreement was followed by another agreement (“the second agreement”) that, on HMRC withdrawing the impugned decision, Matalan would withdraw the appeal. The withdrawal of the appeal in those circumstances necessarily meant that the “10” classification would extend to all women’s swimwear coming within the description in Box 7 of the BTIs. 

72.	The effect of the first agreement, even if there was no second agreement, was, so it is submitted, that it was not open to HMRC to resist the repayment claims on the basis of either of the two points in relation to which it had conceded Matalan’s appeal. Whatever might be the position in other cases, where there might be a permutation of different possible classifications, the present case was very simple. Either the two points were right or wrong. If right, the appeal would fail and the “90” classification would apply. If wrong, the appeal would succeed and the “10” classification would apply. The withdrawal of the decision appealed against necessarily involved the Commissioners conceding that both points were bad. The second BTI could not have been given if either of them were good.  The withdrawal of the appeal, in those circumstances, either gave rise to an issue estoppel or, in any event, meant that it was an abuse of the process of the court for the Commissioners to put forward either of the two points. Even if there was no agreement, but only an understanding that the first appeal would determine the classification issue, the same consequences would follow. 

The Tribunal’s decision

73.	The Tribunal decided that the first appeal was an appeal against the decision in respect of the first BTI of 22nd September 2004 and nothing more. It was not some form of test or lead case. The correct interpretation of the tariff as it applied to the one item described in the first BTI would have been indicative of its correct interpretation in relation to similar items; but there was nothing in the documents or the contemporaneous correspondence which supported the contention that the parties had formally or informally agreed, that the appeal would be determinative of the classification of all of Matalan’s imported swimwear.  There was no agreement whether under section 85 of the Value Added Tax Act 1994 or otherwise in relation to settling the first appeal. There was no meeting of the minds. The Commissioners withdrew the decision (unconditionally) and Matalan withdrew the appeal.  On that “narrow and not very attractive basis” the Chairman felt obliged to decide the issue about agreement in the Commissioners’ favour. 

74.	The Chairman then dealt with the effect of the second BTI of 22nd May 2006. He recorded that the Commissioners did not argue that it had no retrospective consequence at all although they went no further than conceding that the goods described in the replacement BTI were to be classified as “10”. He regarded that concession as the inevitable minimum consequence of the withdrawal of the original BTI. He said:

“In my view it is necessary to approach the case on the footing that there was, or is deemed to have been, a valid BTI in heading 6112 41 10 from 22nd September 2004, when the original, rescinded, BTI was issued, to 3 July 2007, when the regulation came into force.” 
 
75.	There are several difficulties with this passage. Firstly, there was in fact no BTI with heading 6112 41 10 prior to the second BTI of 25th May 2006. Secondly, the second BTI could not have been retrospective. Mr O’Connor told me (and I accept) that no concession of retrospectivity was made by him at the hearing; and the Code makes plain that BTIs operate prospectively. Article 12.2 provides that a BTI shall be binding on the customs authorities only in respect of the goods on which customs formalities are completed after the date of supply of the BTI. The Tribunal must have been referring to the course of events set out in the correspondence. 

76.	Thirdly, the footing on which the tribunal thought that there was deemed to be a valid BTI in heading 6112 41 10 from 22nd September 2004 is unclear. I assume that it was because the Tribunal regarded this as a necessary consequence of the first appeal.  

77.	An appeal to a Tribunal in respect of decisions made by the Commissioners relating to BTIs lies pursuant to sections 14 to 16 of the Finance Act 1994 read together with the Customs Review and Appeals (Tariff and Origin) Regulations 1997. Under section 14 of the 1994 Act a person in relation to whom such a decision has been made may, within a specified period, require the Commissioners to review the decision.  If he does so, the Commissioners are under section 15 required to review the decision and may either confirm it, withdraw it, or vary it and, in the latter two cases, they may take such further steps, if any, in consequence of the withdrawal or variation as they may consider appropriate. 

78.	Under section 16 of the Act an appeal lies to the Tribunal with respect to a review decision, which may, inter alia, either (a) direct that the decision is to cease to have effect; (b) require the Commissioners to conduct a further review of the original decision; or (c) quash or vary any decision and substitute its own decision for any decision quashed on appeal. 

79.	The Commissioners accept that the Tribunal could, by way of remedy,  have quashed or varied the review decision and substituted for it a decision that the first BTI should classify the goods which were its subject matter under the “10” classification. Matalan could have asked the Tribunal to do that or made an agreement with HMRC to the like effect. But the appeal was withdrawn and the Tribunal made no substantive order.  I do not accept that a withdrawal by HMRC of the disputed BTI coupled with a withdrawal by Matalan of its appeal either purported to amend or had the effect of amending the first BTI  so as to provide for a 6112 41 10 classification. 

The upshot of the second appeal

80.	The Tribunal decided that Matalan could claim the protection of the deemed BTI “(incorrect though it was)” from 22nd September 2004 but could not do so in respect of the period before it applied for a BTI. The tribunal said that that conclusion disposed of Matalan’s repayment claim because that claim was wholly related to the period before it applied for a BTI.

81.	It is true that a BTI affords no protection in respect of the period before the application for a BTI.  But the Tribunal was, as is common ground between the parties, in error in thinking that Matalan’s repayment claim related wholly to the period before it applied for a BTI i.e. down to 2004. It applied to a period from 2001 down to 17th May 2006. On the Tribunal’s finding Matalan was entitled to rely on a deemed BTI with a “10” classification of its imports of women’s swimwear imported after 22nd September 2004 until May 2006. The value attributable to such imports on the relevant schedules is said to be £ 156,214.73.   

82.	The fact that a BTI is not retrospective would be without significance if the swimwear in question was properly classified as “10”. In that case Matalan would have a valid claim in respect of repayment for imports going back to three years before August 2004. But, as the Tribunal held, Matalan’s swimwear is not so classifiable. 

83.	The Tribunal also decided [para 45] that:

“the correspondence to which article 12 (3) of [the Code] alludes is … to be limited to details of the description which might have a bearing on classification.” 

It accepted 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” [para 46]. 

84.	In this respect the Tribunal was, in my judgment, also in error. The legislation requires the goods declared to correspond “in every respect” and “in all respects” to the goods described in the information. The tribunal’s formulation is a departure from the words of the legislation. 

85.	Matalan submits that the Tribunal’s broad construction is (partially) correct, although the Tribunal should have gone further and applied its conclusion to men's swimwear as well (and also to the period prior to 2004). A BTI should not be construed as limited in application only to goods with the same line code as that specified in the information. The Implementation Regulation contemplates that a BTI shall relate to only one type of goods. But that is well capable of extending beyond a single item. The requirement to enclose samples shows that there will be a range of goods, of which the items submitted will be samples. The requirement of compliance in all respects with the goods described cannot be applied literally so as to require identity with every aspect of the goods which are described in the BTI. If that were so details such as colour and size would inevitably become material , although having no bearing on the proper tariff category, and the concept of the “type of goods” identified, in some cases, by reference to “samples" would be lost. 

86.	Whilst I can see the attractiveness of a submission that the BTI should be applied to goods which are no different in any respect which would or could lead to a different classification, there is, in my view,  a need for a degree of strictness and the words of the legislation prescribe it. A BTI provides an importer with the means to secure that his goods attract a particular classification throughout the Community, whether the goods are imported into Felixstowe, Barcelona, Genoa or the Piraeus, and whatever the view of the customs authorities concerned.  It is necessary to be clear as to exactly what a BTI covers. The way in which the Code achieves this is to fix on the contents of the information. If the goods imported correspond in every respect with those described in face of the information, the importer may require them to be treated as having the classification specified in the BTI. If not, not.  No question of the materiality of any departure arises. The legislature cannot, in my view,  have contemplated that BTIs should be used to cover items which were not in all respects as described in the information but which were said to be indistinguishable for tariff purposes from those that were – a criterion likely to give rise to much dispute particularly in cases less simple than the present. The aim must have been to afford to the importer an assurance (in relation to the goods the subject of the BTI) as to how he could require the goods to be classified – “to enable the trader to proceed with certainty where there are doubts as to the classification of goods in the existing customs nomenclature”, as the ECJ put it in Lopex Export at para 28 - and to give minimal scope for different custom authorities to take different views as to what was covered by the BTI. 

87.	It is said that this conclusion produces such manifest inconvenience that it cannot be justified, since it will require separate applications for every single line code and, therefore, every permutation of size, shape and colour. There are, in my view, two answers to this. The first is that Matalan chose to make application for a BTI in respect of a garment under reference F 119374, in response to which HMRC issued a BTI which specified F 119374 as the commercial denomination. In those circumstances, as it seems to me, goods with a different commercial denomination cannot be regarded as conforming in all respects to those described in the information presented. One of the characteristics of the good described in the information was that they were coded F 119374. Goods with a different commercial denomination are not identical in all respects with goods of a different denomination. The second is that it does not seem to me incumbent on someone in the position of Matalan to employ a coding system all of whose numbers differ according to (a) model, (b) colour and (c) size. I do not see why there could not be a code which covered garments of the same composition, with, if need be, a further sub-reference for colour and size. HMRC would need to be persuaded to use the former code in a BTI (the alternative being a series of BTIs for every combination of model, colour and size) but there does not seem to me to be any insuperable legal or practical obstacle to this approach. 

88.	The Tribunal stated that the  Commissioners’ argument to the contrary was inconsistent with :

“the 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.”

I do not regard this as a valid point. The significance of Regulation 651/2007 is that it indicates the proper interpretation of the Combined Nomenclature. It serves to classify the goods specified in the Regulation and may apply by analogy to other goods which are sufficiently similar: see paras 18-25 of V-tech Electronics (UK) Plc v CCE [2003] EWHC 59 (Ch); paras 34-35 of Krings Gmbh v Oberfinanzdirektion Nurnberg [2001] ECR 1-3495. A Regulation is legislative in character and of general application. A BTI is specific to an individual and can only be relied upon by the holder in respect of goods corresponding in every respect with those described in it.  Regulation 651/2007 does not contain the limiting provisions as to its application specified by the Code in respect of BTIs.  

89.	The Tribunal went on to decide that, whilst articles of a like kind to the item of women’s swimwear which was the subject of the original BTI must be classified as falling within 6112 41 10, neither the original nor the replacement BTI covered men’s and boys’ swimwear. Such swimwear could not be classified as within 6112 41 10 but had a distinct code and they were not indistinguishable from women’s and girls’ swimwear in terms of the tariff. Matalan had or was deemed to have had a BTI relating only to women’s swimwear from September 2004 to July 2007. The Chairman said, however, that he would be disappointed if the Commissioners were to insist on treating Matalan’s imports of men’s swimwear during the period September 2004 to July 2007 in a different fashion. 
 
90.	Accordingly Matalan’s repayment claims failed. Had the Tribunal appreciated that Matalan’s claims were not limited to claims which pre-date 22nd September 2004 it would, I infer, have held that Matalan was entitled to repayment in respect of women’s and girl swimwear imported between 22nd September 2004 and July 2007. 

The first alleged agreement

91.	The Tribunal found that Mrs Barraclough of Matalan took the view that the BTI which she sought could safely be used as an authoritative guide for the correct classification of all the garments, and that her understanding was that the officer with whom she was dealing would take the same view because it would be extremely laborious to ask for a BTI for each different style. But the Tribunal did not, in my judgment, err in law in deciding that there was no agreement between the parties that the appeal would be determinative of the classification of all of Matalan’s imported swimwear (by which I take the Tribunal to mean all its swimwear with 5% or more of rubber in the whole garment but less than 5% in the synthetic fibre without the trim). An appeal only lies to this court on a point of law.

92.	I have set out in the preceding paragraphs of this judgment the communications between the parties that are said to establish such an agreement and they are, in my judgment, insufficient for the purpose. In essence there was an application in the letter of 23rd August 2004 in respect of overpaid duty made by way of a protective claim. Correspondence with the Revenue eventually led to Matalan’s position being protected as from 23rd August 2004 provided that the necessary details were provided within a month of the decision on the appeal against the review decision of 23rd December 2004. Matalan filed its application for a BTI on 17th September 2004 describing a woman’s swimming costume and enclosing a sample of F 119374. On 22nd September 2004 it received a BTI for that costume with a “90” classification. It produced further analysts’ reports on various other samples. HMCE made a review decision upholding the original decision of 22nd September. In its 24th February 2005 e-mail Matalan made clear that the full claim had not been submitted because the classification of the swimwear was currently in dispute. That displayed an intention to make a full claim if the result of the dispute about classification was as Matalan hoped. Then, after the false dawn and HMRC’s change of heart, HMRC lodged its case taking the two points. Finally, in April 2006 it withdrew the disputed decision.  Matalan then put in its full claim.

93.	It was entirely sensible for Matalan to make an application for a BTI in respect of a single costume of which one sample was supplied, rather than to make a series of applications for every product line, a task which could have imposed a serious burden on HMRC in dealing with them. It was reasonable for Matalan to expect that its claims in respect of all its swimwear would in practice be determined by the result of the first appeal. But nothing was said or done which amounted to an agreement that the outcome of that appeal would determine the treatment of swimwear which was not the subject of the appeal. There was no meeting of the minds in the sense of offer and acceptance: see R (DFS Furniture) v C & E Comrs [2002] EWCA Civ 1708. At the lowest I can find no error of law in the Tribunal’s conclusion to that effect. 

The second alleged agreement

94.	I am also of the view that the tribunal did not err in law in deciding that the withdrawal of the appeal was not the result of an agreement between the parties. The Commissioners unilaterally withdrew their decision and invited Matalan to withdraw its appeal in consequence. The withdrawal of the decision by the Commissioners was not conditional on the withdrawal of the appeal by Matalan and had occurred before Matalan did so. The withdrawal of the appeal followed the withdrawal of the decision but was not made as the price of that withdrawal.  

95.	Section 85 of the 1994 Act provides:

“85 Settling appeals by agreement
(1)     Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, the Commissioners and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated—
(a)     as upheld without variation, or
(b)     as varied in a particular manner, or
(c)     as discharged or cancelled,
the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, a tribunal had determined the appeal in accordance with the terms of the agreement (including any terms as to costs).
…
(4)     Where—
(a)     a person who has given a notice of appeal notifies the Commissioners, whether orally or in writing, that he desires not to proceed with the appeal; and
(b)     30 days have elapsed since the giving of the notification without the Commissioners giving to the appellant notice in writing indicating that they are unwilling that the appeal should be treated as withdrawn,
the preceding provisions of this section shall have effect as if, at the date of the appellant's notification, the appellant and the Commissioners had come to an agreement, orally or in writing, as the case may be, that the decision under appeal should be upheld without variation.”
 
96.	For the reasons set out above I do not regard the Commissioners and Matalan as having come to an agreement that the decision under appeal should be treated as discharged or cancelled (or varied in a particular manner). Even if, contrary to my view,  they are to be taken as having reached an agreement that the review decision would be withdrawn, under section 85 the effect of such an agreement would be the same as if the Tribunal had ordered the review decision to be cancelled. That leaves unresolved what is to happen in respect of the BTI which was the subject of the (cancelled) review decision.

Estoppel and abuse of process

97.	Matalan contends that , in the light of the withdrawal by HMRC of the review decision it is estopped from disputing that all of Matalan’s imported swimwear throughout the period 2001 – 2007 should attract the “10” classification; or, alternatively that  it would be an abuse of process for it to be allowed to do so. 

98.	In Specialist Group International v Deakin [2001] EWCA Civ 777, May, LJ, said this:

“22	As Aldous LJ said during the hearing, the authorities taken as a whole tends to encourage elaborate technical submissions which many percipient non-lawyers would scarcely understand. Cause of action estoppel and issue estoppel are not readily understandable phrases to a non-lawyer. It should not be necessary to have to pick for hours over the precise text of a dozen or so Law Reports to find out what in the end is reasonably straightforward and understandable law capable of being simply expressed. I would try to express it simply as follows.

23.	If a claim has been explicitly determined in previous concluded proceedings between the same parties, that claim cannot be raised again, other than on an appeal, unless there is a fraud or collusion. If a necessary element of a claim has been explicitly determined in previous concluded proceedings between the same parties, that issue cannot be raised again, if, as is likely but not inevitable, it would be an abuse to raise that issue again. This may also extend to an implicitly necessary element of the previous determination. The previous determination may include a settlement. If a claim or issue has not been determined in previous concluded proceedings between the same parties, there may nevertheless be circumstances in which, as a matter of public and private interest on a broad merits-based procedural judgment, it would be an abuse for a party to raise that claim or issue. Such circumstances may, depending on the facts, exist where the litigant could and should have raised the matter in question in earlier concluded proceedings. There may in particular cases be other elements of abuse, including oppression of another party; but abuse of process is a concept which defies precise definition in the abstract. The court will only stop a claim as an abuse after most careful consideration.”

99.	May LJ described the main sources of this summary as Arnold v NatWest Bank plc [1991] 2 AC 104-7 and Johnson v Gore Wood & Co [2001] 2 AC  1.In the latter case Lord Bingham said:

“It may very well be, as has been convincingly argued ... that what is now taken to be the rule in Henderson v Henderson has diverged from the ruling which Wigram V-C made which was addressed to res judicata. But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be fired, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present later proceedings will be much more obviously abusive, and there will rarely be a finding of an abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because the matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgement which takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

100.	The withdrawal of the first appeal did not constitute a determination (explicit or implicit) of any issue between Matalan and HMRC. The Tribunal made no order and the parties made no compromise.  At the same time the only basis upon which HMRC can have withdrawn its decision, Matalan withdrawn its appeal and HMRC issued the second BTI was that swimwear with no rubber in the synthetic fibre content but with rubber amounting to 5% or more of the garment as a whole (“the qualifying swimwear”) was properly to be given a “10” and not a “90” classification. Unless that proposition (“the essential proposition”) was correct there could be no basis for withdrawing either the review decision (or the original decision) or for issuing the second BTI with a “10” classification. 

101.	If the essential proposition was correct it would follow that Matalan was entitled to have the duty on all its qualifying swimwear treated as having a “10” classification for tariff purposes. This would not be because of any BTI but because that result would be a necessary consequence of the essential proposition. Matalan could then recover the duty that it had overpaid subject to the relevant time limits. Matalan would only be out of time in relation to imports which were made prior to three years before 23rd August 2004. 

Abuse of process - discussion

102.	Is it an abuse of process for HMRC to resist repayment of the difference between the duty payable under the higher tariff and that payable under the lower? The Tribunal, to whom Deakin was cited, does not seem to have dealt with the argument based on estoppel in terms, although they refer to it in para 37 as follows:

“Furthermore the common understanding of the parties that the BTI as originally issued covered not only the items 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 the specific item: they were required to meet it all.”

103.	Mr O’Connor, for HMRC points out that, if the first appeal had been heard, and it had succeeded, any amended BTI would only have affected the goods which were the subject of the first BTI. These would either be, as he submits, the goods with the specified line code or, at the highest, as the tribunal thought, Matalan’s women’s and girls’ swimwear. It would be curious, he said, if concepts of res judicata and abuse of process gave Matalan an ampler right of recovery. 

104.	I would not regard this as particularly surprising. The effect of a BTI is limited to the goods to which it relates. But in deciding on the correct classification for tariff purposes of certain goods, in order to  determine an appeal in respect of a BTI, the Tribunal may need to decide  a broader issue such as the validity or otherwise of the essential proposition. If it does so, that determination might give rise to an estoppel between the parties, even though the scope of the BTI itself is more limited.  He also submits that, even if there was, contrary to his submission, a determination of an issue in the BTI proceedings, it would not have been the same issue as that which was determined in the repayment claim proceedings. The issue in the former was the correct classification of a single article; in the latter it was the correct classification of a wide range of articles. That is so; but it does not, in my view prevent an estoppel arising in relation to an issue which is common to both proceedings. 
 
105.	More fundamentally he submits that taxation and rating cases are recognised exceptions to the general rules as to res judicata. Thus para 297 of Spencer Bower on Res Judicata reads as follows:

“ Decisions on income tax, land tax and rating assessments constitute an established exception to the general as to res judicata. Decisions on one year's tax or rate, or one rating valuation or assessment list, do not create estoppels in respect of another year's tax or rate, or a later valuation or assessment list. Such decisions often involve changing facts, and where this is the case it is impossible in any event to hold the parties estopped from one year to another. “This assessment seems inherently to be of a passing nature”. While such decisions (subject to appeal)  will generally be conclusive for the particular assessment,  they will not estop either party when the same question arises on another year's assessment, evaluation or list.”

106.	Spencer Bower charts the history of the decisions in this area. In Broken Hill Pty Co. Ltd v Broken Hill Municipal Council [1926] AC 94 the Privy Council held that a decision of the High Court of Australia on the construction of a section of a statute dealing with rating value did not  estop the parties from relitigating  the issue on a subsequent year’s assessment.  Some 5-6 weeks later in Hoysted v Federal Taxation Comr [1926] AC 155, the Privy Council held that an implied decision of the High Court on the true construction of a will estopped the parties from contending for a different construction relating to a later year’s assessment. 

107.	In Society of Medical Officers of Health v Hope [1960] AC 553 a local valuation court decided in 1951 that land owned by the Society was exempt from rates under section 1 of the Scientific Societies Act 1843, an exemption that depended on the existence of a number of facts relating to the Society and its purpose in occupying the building. In 1956 the land was shown as a rateable in the new valuation list. The Lands Tribunal rejected a submission that a res judicata estoppel arose from the 1951 decision even though it was admitted that there had been no change of circumstances. Lord Radcliffe, with whom Viscount Simons and Lords Cohen and Jenkins agreed, referred to there being:

“ high and frequent authority for the proposition that it is not in the nature of a decision  on one rate or tax that it should settle anything more than the bare issue of that one liability, and that, consequently, it cannot constitute an estoppel when a new issue of liability to a succeeding year’ s rate or tax comes up for adjudication. The question of this liability is a “new question.”

108.	The reasoning of Lord Radcliffe was twofold: 

(i) the limited jurisdiction of the local valuation court, which might have to form opinions on questions of general law, but only incidentally to its direct function of fixing the assessment: 

(ii) the special position of the valuation officer or equivalent official.

109.	As to the latter Lord Keith said:

“The valuation officer has a public duty to perform by making periodically every five years a valuation list of all hereditaments, with certain exceptions, in his rating area. He must necessarily reconsider and revise the previous valuation list. He has no personal interest in any appeals taken against his valuations, and has a duty to hold the scales as fairly as he can among the ratepayers affected, the occupiers of the various hereditaments. The general body of ratepayers is constantly changing. With each quinquennium the revaluation will affect a new body of ratepayers. I doubt if the valuation officer owing such a duty to an ever-changing body of ratepayers can be regarded as always the same party in the sense in which that expression is used for the application of the rule of res judicata. What if the appellant society changes its habitat, and moves into another rating area with a different valuation officer?

I emphasise these aspects of the functions of a valuation officer under the statute, for they lead to what I regard as the true answer to the submission for the appellants, which is that a public officer in the position of the respondent cannot be estopped from carrying out his duties under the statute.”

110.	In Caffoor v Columbo Income Tax Comr [1961] AC 584 the Privy Council had to choose between its two former decisions and held that taxation and rating decisions were sui generis. Lord Radcliffe said:

“The critical thing is that the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of the assessable income for the year in which the assessment is challenged. It is only the amount of that assessable income that is concluded by an agreement or by a decision on an appeal against it (see section 75). Although, of course, the process of arriving at the necessary decision is likely to involve consideration of questions of law, turning upon the construction of the Ordinance or of other statutes or upon the general law, and the tribunal will have to form its view on those questions, all these questions have to be treated as collateral or incidental to what is the only issue that is truly submitted to determination (cf Reg v Hutchings).”

	        And later

“It may be that the principles applied in these cases form a somewhat anomalous branch of the general law of estoppel per rem judicatam, and are not easily derived from or transferred to other branches of litigation in which such estoppels have to be considered; but in their Lordships opinion they are well established in their own field, and it is not by any means to be assumed that the result is one that should be regretted in the public interest.”

111.	Matalan submits that Caffoor is of no relevance being concerned with income tax or rating assessments in specific years. In any event Johnson v Gore Wood shows that there is now a fundamentally different approach to estoppel/ abuse arguments requiring a” broad merits-based judgement”. Further the Caffoor rule does not operate across all taxes. In Vandervell Trustees Ltd v White [1971] 1 AC 912 Lord Radcliffe stated that :

“… the commissioners [by which he meant the judicial body of commissioners and not HMRC] are bound to treat as res judicata any decision of a competent court to which the revenue were parties on any issue which may come before them.”

112.	In Vandervell the critical issue was whether certain income had belonged to V (Mr Vandervell, deceased) or T (the trustee of his family settlement). The Revenue claimed that it belonged to V and was taxable to surtax. The question was whether the Revenue could be joined (as V’s executors had sought) in an action between V’s executors and T as to the ownership of the income. A further question was whether the special commissioners, who alone had jurisdiction to decide whether V had been overcharged by any assessment, would be bound by any decision of a competent court in proceedings to which the Revenue was a party. The relevant statutory provisions – section 52 (5) of the Income Tax 1952 as amended - provided for the commissioners to reduce an assessment if it appeared to a majority of the commissioners “by examination of the appellant on oath or affirmation, or by other lawful evidence” that the taxpayer had been overcharged. 

113.	With some reluctance Lord Reid agreed with the other Law Lords, that the existing rules were not wide enough to add the Revenue as party against the objection of V’s executors.

114.	Lord Morris and Lord Wilberforce did not deal with the res judicata question. Viscount Dilhorne observed that, if it was held in the action that V had no beneficial interest in the shares, the  Revenue, if a party to the action, would not be able to contend that he was entitled  (932 B-D), but that the special and general commissioners would not be so constrained (934H – 935A).

115.	Lord Diplock held that, if the Revenue was a  party to the action, the effect of any determination by the court would be that the Revenue was precluded from producing to the special commissioners any evidence which conflicted with the court's determination of fact or advancing any reasons to the special commissioners  which conflicted with what the court had decided on that issue as a matter of fact or law:

“But it would do no more. The taxpayer would still have to satisfy the special commissioners that the assessment was wrong and, so far as it is depended upon facts, to do so by lawful evidence of them. The judgment of the court would not be lawful evidence of the facts find therein. Those facts would have to be approved afresh by the taxpayer if the grounds on which he sought reduction of the assessment depended on those facts.”

116.	The upshot of these decisions would appear to be as follows:

(a)	a decision by a tribunal charged with determining the correct rate or tax to be paid in respect of one year is not to be treated as determining the rate or tax to be paid in a succeeding year even if there is no change in circumstances, whether of fact or law. By parity of reasoning a decision by a tribunal as to the duty to be paid on a particular importation of goods is not determinative of the duty to be paid on a different importation of goods even if there is no change of circumstances as between the two importations. The tribunal and the parties concerned (tax authority and taxpayer) are not bound by any estoppel created by the previous decision either as to law or fact.

(b)       if the tax authorities and the taxpayer are parties to a court case 
in which the court has determined a question of fact, the parties are estopped from putting forward evidence or making submissions which are inconsistent with the determination of that question by the court. But a tribunal whose task it is to determine the tax, rate or duty payable is not so bound. 

117.	I doubt whether proposition (a) can continue to be justified by any notion    	that the Tribunal is not the sort of judicial body whose decisions could 	constitute res judicata, as opposed to the principle set out in Hope (see 	para     	107 above). Proposition (b) would appear to follow from Vandervell and 	ordinary principles. However, the observations of the House on the issue 	of res judicata are probably obiter. It is noticeable that two members of the 	House did not deal with the question at all. Of the three who did so Viscount 	Dilhorne and Lord Diplock regarded a finding of fact by the court as binding 	on the Revenue, but not the special commissioners and Lord Reid regarded 	such a finding as binding on both.

118.	In the United States the US Supreme Court has held that res judicata principles are of restricted application to judicial decision on customs duty. Such decisions are only res judicata in respect of the subject importation and both importer and customs can relitigate the questions in relation to later importations. In US v Stone & Downer & Co 274 US 225 (1927).

119.	The Court said:

“ … circumstances justify limiting the finality of the conclusion in Customs controversies to the identical importation. The business of importing is carried on by large houses between whom and the Government there are innumerable transactions ... and there are constant differences as to proper classification or similar importations. The evidence which may be presented in one case may be much varied in the next. The importance of a classification and its far-reaching effect may not have been clearly understood ... when the first litigation was carried through. One large importing house may secure a judgement in its favour ... If that house can rely upon a conclusion in early litigation as one which is to remain final as to it  ... while a similar importations made by another ... may be tried and heard and a different conclusion reached, a most embarrassing situation is presented. The importing house which has ... obtained the favourable position permanently binding on the Government will be able to import the goods at a much better rate than that enjoyed by ... its competitors. Such a result would lead to inequality in the administration of the customs law, to discrimination and to great injustice and confusion. In the same way if the first decision were against a large importing house, and its competitors ... succeeded in securing a different conclusion, the first litigant, bound by the judgement against it ... must permanently do business ... at great and inequitable disadvantage with its competitors.”

120.	Matalan submits that this case is of no assistance. It is an old authority coming from a different jurisdiction and addresses, otherwise than in a Community context, the risk of discrepancies between different rulings. Within the EU the risk of discrepancies between different rulings is a matter which the Commission can resolve by regulation and see Article 9 of the Implementing Regulations which provides:

Article 9

Where the Commission finds that different binding information exists in respect of the same goods shall necessary adopt a measure to ensure the uniform application of the customs nomenclature.

121.	I am not persuaded that, applying a broad-based merits test, it was an abuse of the process of the Tribunal for the Commissioners to decline to repay the amount by which the duty paid by Matalan exceeded what would have been due if the qualifying swimwear received a “10” classification (“the excess duty”). I say that for the following reasons:

(a)	there had been no judicial determination of the validity or otherwise of the essential proposition, which is a question of interpretation of the Code in relation to to facts which are not in dispute;  

(b)	whatever Matalan’s expectations were, there was no agreement that the outcome of the first appeal would determine the classification for tariff purposes of Matalan’s qualifying swimwear;

(c)	the principle set out in paragraph 116 (a) derived from the decisions in Broken Hill, Hope, and Cafoor means that, even if the Tribunal had decided the essential proposition in Matalan’s favour, neither it nor HMRC would be bound by that determination, as a matter of res judicata, in relation to future transactions or BTIs (although any BTIs put in place as a result of the Tribunal's decision would take effect, subject to the Code, in accordance with their terms);  

(d)	 that result may be said to be inconsistent with the approach of the law in other contexts, but the “result is not to be regretted in the public interest”;

(e)	specifically it is in the public interest that traders should pay the correct amount of tax or duty – no more and no less; 

(f) 	it is also in the public interest that taxpayers should receive fair treatment but I am not persuaded that in the present case Matalan has been unfairly treated to an extent that the latter should outweigh the former interest; 

(g)	if the doctrine of issue estoppel would not preclude HMRC from refusing to repay for the reasons stated above it is not easy  to see how, in present circumstances,  the doctrine of abuse of process could do so; 

(h)	the effect of holding that HMRC must repay the excess duty will be that Matalan receives a competitive advantage compared with other importers who have had to pay the correct amount. It is true that some traders within the Community may have had their goods in this category receive the “10” classification as a result of decision made in the Member States concerned (on the evidence there was considerable uniformity in applying the “90” classification); but that does not negate the desirability of ensuring as far as possible that duty is paid at the correct rate; 

(i) 	Matalan has been put to trouble and expense in appealing the initial review decision. But that expense is not very considerable and Matalan have received £ 37,500 from HMRC in respect of it. 

(j)	        Whilst the right-thinking man would be distinctly unimpressed by the way in which HMRC (taken as a whole) had handled this case, he would not, in my judgment, regard it as unjust that HMRC should not have to pay Matalan the excess duty. 

            Costs

122.	The Tribunal refused to award HMRC its costs. The Chairman expressed the view that the Commissioners’ conduct of the matter fell below the standard to be expected. He observed that the Commissioners regretted their concession of the first appeal; prevaricated and used devices to avoid paying. They refused to pay even after Mr Rayton had agreed the details of the claim and he and his superior officers had passed it for payment. They argued that the claim was out of time when, as their own officers could have told them, it was not. Matalan had to resort to a freedom of information request in order to discover what had happened.

123.	The Chairman took the view that the appeal could easily have been avoided if the Commissioners had allowed the earlier appeal to proceed to a hearing and had respected its outcome or had accepted fully the consequence of the withdrawal of the original BTI. Matalan had been left with little choice but to seek a resolution of the dispute before the Tribunal. Accordingly he declined to make a direction against it in respect of costs. 

124.	The Commissioners contend that the Tribunal should have made an order for costs in its favour. As to that Matalan draws attention to the endorsement by the Finance Secretary to the Treasury on 10 March 2009 in respect of the First-tier Tax Chamber that it would continue to operate the existing costs rules in the Tribunal in accordance with the practice set out by Lord Sheldon of Ashton-under-Lyne (as he now is) on 13 November 1976, re-stated by Lord Brooke of Sutton Mandeville (as he now is) on 24 July 1986 that HMRC would not seek costs from appellants in most cases. The Brooke statement had recorded that the Customs and Excise would continue to ask for the costs of those “exceptional Tribunal hearings of substantial and complex cases where large sums are involved and which are comparable with High Court cases”.

125.	The Tribunal, Matalan submits, was not only right not to award the Commissioners any costs, but should also have marked its disapproval of the Commissioners’ conduct by awarding Matalan some or all of its costs in any event. This was particularly so given the fact that, but for a misunderstanding by the Tribunal of the extent of the claim, Matalan would have in substantial measure succeeded. Mr O'Connor submitted that this was a case which, on account of the sums involved and its complexity, meant that it was out of the usual and that the Commissioners, as the successful party, should recover their costs. 

126.	Whilst some of the Chairman's observations appear to proceed on the basis that the appeal could have been avoided if the Commissioners had acted in such a way as would have produced a final result (Matalan paying duty in accordance with the “10” classification) which was the opposite of what the Commissioners finally secured, there was, in my judgment, no error of law in the Tribunal's decision on costs, which seems to me well within the bounds of discretion entrusted to it. 

127.	In those circumstances I propose to dismiss the appeal. The second BTI must, however, take effect in accordance with its terms. Its effect is that, in respect of garments which correspond in every respect to those described in it, including the F 119374 code, and on which customs formalities were completed after 25th May 2006 and before 14th June 2007 HMRC is bound by the tariff classification specified in it. Matalan is also entitled to the benefit of Article 12 (2) of the Code taken with Article 2 of Regulation 651/2007. 

128.	I am grateful to both counsel for the quality and lucidity of their submissions.