Sony Computer Entertainment Europe Ltd. v Customs and Excise, Court of Appeal - Chancery Division, July 27, 2005, [2005] EWHC 1644 (Ch)
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Sony Computer Entertainment Europe Ltd. v Customs and Excise, Court of Appeal - Chancery Division, July 27, 2005, [2005] EWHC 1644 (Ch)
Neutral Citation No: [2005] EWHC 1644 (Ch)
CH/2004/APP/0812 IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONON APPEAL FROM THE VAT AND DUTIES TRIBUNALRoyal Courts of JusticeStrandLondon WC2A 2LLWednesday, July 27, 2005BeforeMR JUSTICE LAWRENCE COLLINS- - - - - - - - - - - - - - - - - - - - -Between- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -Mr Mark Clough QC and Mr Philippe de Baere (instructed by Ashurst) for the AppellantMr Kieron Beal (instructed by the Solicitor for HM Revenue and Customs) for the Respondents- - - - - - - - - - - - - - - - - - - - -JUDGMENTMr Justice Lawrence Collins:I Introduction1. This is an appeal by Sony Computer Entertainment Europe Ltd ("Sony") from a decision of the VAT and Duties Tribunal ("the Tribunal") in favour of the Commissioners of Customs and Excise ("the Commissioners") dated October 15, 2004. 2. This appeal concerns the customs classification of the Sony Playstation2 ("the PS2"). It has been most elaborately argued, with more than 150 pages of written arguments and the citation of more than 60 decisions of the European Court or the Court of First Instance. 3. The practical point is that until the end of 2003 the duty on goods imported into the EC under customs classification Heading 8471 (automatic data processing machines) was zero, whereas the duty on goods under subheading 9504 10 00 (video games of a kind used with a television receiver) was 1.7%. Sony is attempting to recover as overpaid duty some 50 million euros which it says it has paid as a result of the many PS2s imported and wrongly classified to Heading 9504. Since January 1, 2004, the duty under both headings has been zero. 4. In October 2000 the Commissioners classified the PS2 under Heading 9504, because it was not freely programmable for the purposes of Heading 8471. This was challenged by Sony but the decision was upheld by the reviewing officer. Sony appealed to the Tribunal. The EC Nomenclature Committee in February 2001 resolved that the European Commission should draw up a Regulation classifying the PS2 under Heading 9504, and approved a draft Regulation to that effect in May 2001, notwithstanding that it was freely programmable. Because the original basis of the Commissioners' decision was that the PS2 was not freely programmable, Sony's appeal to the Tribunal was allowed by consent. 5. Pending the publication of a Regulation classifying the PS2 to Heading 9504, the Commissioners issued a Binding Tariff Information classifying the PS2 to Heading 8471 as from October 2000, but making it clear that its classification would have to be revoked when the Regulation classifying it to Heading 9504 was published. 6. The Regulation was published in July 2001. On July 25, 2001, the Commissioners wrote to Sony revoking the Binding Tariff Information. In September 2003, the Court of First Instance annulled the Regulation because of a defect in its reasoning, whilst recognising that the PS2 was intended to be used mainly for playing video games, and that it could have been classified under Heading 9504. Subsequently the European Commission expressed the view that the PS2 should be classified to Heading 9504, and in May 2004 the World Customs Organisation adopted a Classification Opinion which classified the PS2 under Heading 9504. 7. In briefest summary, Sony's position is that the effect of the annulment of the Regulation by the Court of First Instance is to revive the Commissioners' classification to Heading 8471, notwithstanding that (a) the Commissioners' classification was expressly stated to be only valid until the adoption of the Regulation classifying the PS2 to Heading 9504; and (b) at all material times the Community and the international bodies dealing with classification have acted on the view that the PS2 is to be classified to Heading 9504. II Legal background8. The Common Customs Tariff came into existence in 1968. By Article 26 of the revised EC Treaty Common Customs Tariff duties are fixed by the Council acting on a qualified majority on a proposal from the Commission. 9. The level of customs duties on goods imported from outside the EC is determined at Community level on the basis of the Combined Nomenclature ("CN") established by Article 1 of Council Regulation 2658/1987. The CN is established on the basis of the World Customs Organisation's Harmonised System laid down in the International Convention on the Harmonised Commodity Description and Coding System 1983 to which the Community is a party. 10. Article 3(1)(a)(ii) of the International Convention provides that, subject to certain exceptions, each contracting party undertakes "to apply the General Rules for the Interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes and shall not modify the scope of the Section, Chapters, headings or subheadings of the Harmonised System". The International Convention is kept up to date by the Harmonized S...See the full content of this document
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