Judgement of the European Court of Justice – 14 April 2011.
Pace Plc –v– The Commissioners for Her Majesty’s Revenue & Customs
The case concerned the classification of Set Top Boxes (STB) with HDD recording functionality. HMRC had classified these products as directed by a CN Explanatory Note issued in May 2008. Pace’s case was that as the CNEN merely provided guidance but conflicted with the provisions of the CN which is fully binding in law, HMRC should have disregarded the CNEN.
HMRC’s interpretation required Pace to pay 13.9% duty on imports of STBC-HDD whereas prior to the adoption of the CNEN these products had been given free of duty access to the EU as required under the WTO Information Technology Agreement.
The Court’s judgement in favour of Pace contains a number of important elements:
- a CNEN cannot be binding as it merely provides guidance as to interpretation
- classification must follow from the application of the GIRs - and GIR 1 in this instance provided the answer
- even though provisions of WTO law are not directly applicable in EU law, where EU legislation has been adopted in the area this must be interpreted "so far as is possible" in line with the WTO provisions. The Court thereby ensured that the outcome of its judgement did not conflict with the outcome of WTO DS/375/376 and 377 EC-IT Products which had concluded that STB-HDD had to be accorded free of duty access by the EU.
- in a final twist, the Court confirmed that even though of non-binding status, as the Implementing Regulation to the Community Customs Code requires that BTIs are to be issued in conformity with a CNEN, a national customs administration cannot disregard a CNEN when considering an application for a BTI.
Grayston & Company acted for Pace plc in the EU proceedings. John Grayston represented Pace plc before the European Court with barrister Jeremy White of Pump Court Tax Chambers London.