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	United Kingdom VAT & Duties Tribunals (Customs) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Dynamic CCTV Ltd v Revenue & Customs [2006] UKVAT(Customs) C00226 (13 October 2006) URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2006/C00226.html Cite as: [2006] UKVAT(Customs) C226, [2006] UKVAT(Customs) C00226

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C00226

CUSTOMS DUTY – digital video recorder without hard disc drive – whether video recording apparatus or incomplete apparatus having the essential character of such apparatus (85 21), or whether parts suitable for use solely or principally with video recording apparatus (85 22) – the former – appeal dismissed

LONDON TRIBUNAL CENTRE

DYNAMIC CCTV LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

PRAFUL DAVDA FCA

Sitting in public in London on 10 October 2006

Stephen Gaikwad, Vantis Custom House, for the Appellant

Owain Thomas, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. Dynamic CCTV appeals against the decision on review on 26 January 2006 to uphold a binding tariff information classifying their product under Heading 8521. The product is a multiplexed digital video recorder not containing any hard disc drive at the time of import. The Appellant was represented by Mr Stephen Gaikwad, and Customs by Mr Owain Thomas.
2. We had documentary evidence about the product and heard evidence from Mr Bevan Clues, Chartered Electrical Engineer and a Member of the Institution of Electrical Engineers, and find the following facts:

(1) The product is a digital video recorder for use with closed circuit television. It is a combination of a time lapse video recorder, video server and possibly (this was disputed by Mr Clues, and is unnecessary for us to decide) a multiplexer. It can collect information from up to 16 cameras, it compresses the data and stores it on a hard disc drive. It is fitted with a caddy for a removable hard disc drive but no disc drive is present at the time of import. There is also a CD drive but this will not record directly from the input cameras, but is used for copying sections from the hard disc drive.

(2) The operating system is embedded in the processor and is not on the hard disc drive, which accordingly serves a storage function only.

3. The General Rules for Interpretation of the Nomenclature provide:

"1. The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.

2(a). Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the finished or complete article…".

4. Heading 8521 covers:

"Video recording or reproducing apparatus, whether or not incorporating a video tuner:

Magnetic tape-type….

Other 85219000

-- video-reproducing apparatus, for certain types of aircraft

-- Other 90."

Heading 8522 covers:

"Parts and accessories suitable for use solely or principally with apparatus of headings 8519 to 8521."

5. Mr Gaikwad, for the Appellant, contends:

(1) The product lacks an essential component without which it will not function and cannot therefore fall within heading 8521. It is only a part of a complete video recorder, falling within Heading 8522.

(2) The hard disc drive is not a consumable in the sense of a material that is used up and needs constant replenishment.

(3) It is irrelevant that the software for the operation of the product is not contained on the hard disc drive.

(4) In Case C-401/93 the Court dealt with the classification of the mechanical components of a tape video recorder and concluded:

"It must be observed that although the mechanical components which make up a mecadeck are essential as regards the specific manner in which a video recorder functions, the electronic components are also indispensable. The essential character of a video recorder is to be found in the combination of the mechanical and electronic components."

Here the product lacks the electronic components contained in the hard disc drive and therefore lacks the essential character of a video recorder.

6. Mr Thomas, for Customs, contends:

(1) The product is complete except for the storage device. By analogy, a domestic video cassette recorder without a tape would be a video recorder, although it will not work without the tape. A hard disc drive is more complicated, containing the electronic circuitry enabling it to function but its function is purely as a storage device.

(2) Alternatively, by Rule GIR 2a the product has the essential character of a video recorder. It is not part of a video recorder on the ordinary meaning of part. The heading requires that the part must be suitable for use solely or principally with apparatus of headings 8519 to 8521, that is video recording apparatus, and it is certainly not the case that the hard disc drive is video recording apparatus. As the European Court said in Case C-39/98 the expression parts [within heading 8473] "implies a whole for the operation of which the part is essential." It cannot be said that the product is part of a whole video recorder.

(3) Nothing requires that the recording medium be present at import.

(4) The Appellant's argument confuses the functioning of the product with its essential character. It will normally be the case that something missing an essential part will not function but this does not mean that it cannot have the essential character of a functioning whole.

7. Mr Gaikwad clearly demonstrated the distinction that the Appellant is making when he held a CD on one hand and a hard disc drive in the other. He said that they were not equivalent; the hard disc drive is the equivalent of the CD plus the CD drive. Here, the product was not just missing the equivalent of a CD but the CD drive as well. However, we consider that Mr Thomas is right to look at the function of the missing part. The hard disc drive, taken as a whole, functions in exactly the same way as the CD or the tape in the home cassette video recorder; it merely holds data, but in order to do so it requires electronic circuitry to make it function. The product, without a hard disc drive, is a complete whole, just like a home video cassette recorder without a tape. The product merely needs a hard disc to be inserted into the caddy for it to work. Accordingly we consider that it is a video recording apparatus falling within Heading 8521.
8. If we are wrong about this we also consider that Rule 2(a) applies. We consider that while the product is incomplete it has the essential character of a complete video recorder. We agree with Mr Thomas that there is a difference between whether the product can function without a hard disc drive, and whether, as presented, the incomplete article has the essential character of the complete article. Its use is capable of being an objective characteristic; as the Court said in Case C-459/93:

"13. In this connection it should be noted that the intended use of a product may constitute an objective criterion for classification if it is inherent to the product, and that inherent character must be capable of being assessed on the basis of the product's objective characteristics and properties."

We consider that the inherent character of the product is a video recorder, and nothing else, and that this is its essential character.

9. Heading 8522 can be expanded to read:

"Parts and accessories suitable for use solely or principally with [video recording apparatus]."

The issue is whether the product is within these words. On the Appellant's case the video recording apparatus is the product plus the hard disc drive, and the part is the product. We consider that it is not within the ordinary use of language to describe the product as a part suitable for use solely or principally with video recording apparatus. It is much closer to being the whole than the part. It is video recording apparatus minus a component that is essential to its functioning as such. We do not consider that this Heading applies.

10. Accordingly we confirm the classification as 8521900090 and dismiss the appeal.
11. We failed to ask Mr Thomas if Customs would ask for costs if they won and accordingly should they wish to claim costs in principle (leaving aside the figures) an application should be made to the Tribunal within 30 days of the date of release of this decision.

JOHN F. AVERY JONES

CHAIRMAN

RELEASE DATE: 13 October 2006

LON/06/7012