Mac'Ants Abrasives Ltd v The Commissioners of Customs and Excise [2003] UKVAT(Customs) C00183  (12 November 2003)

C00183

CUSTOMS DUTY- preliminary issue - validity of sampling exercise - whether sampling exercise properly conducted - yes - whether validity of sampling exercise affects the classification of the goods - appeal on preliminary issue dismissed - Council Regulation (EEC) No. 2913/92 (Community Customs Code) Arts 68.69 and 70; Commission Regulation 2454/93/EC (Implementing Code) Art 242. 

LONDON TRIBUNAL CENTRE

MAC'ANTS ABRASIVES LIMITED	Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

Tribunal:	DR A N BRICE (Chairman)

Sitting in London on 9 July 2003 and 29 October 2003

Andrew Young of Counsel, instructed by Messrs Eversheds Solicitors, for the Appellant

Kieron Beal of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

PRELIMINARY DECISION

The appeal
1.	Mac'Ants Abrasives Limited (the Appellant) appeals against three deemed decisions on review confirming post-clearance demands for anti-dumping duty, additional customs duty and value added tax. The first demand was dated 4 January 2001; was for £21,567.00; and was in respect of a consignment entered on 12 January 2001. The second demand was dated 28 March 2001; was for £1,342,241.71; and was in respect of entries between 30 March 1998 and 19 January 2001. The third demand was dated 31 January 2002; was for £75,691.48; and was in respect of four further entries between 5 June 2000 and 4 September 2000. 

2.	The three demands were issued because Customs and Excise were of the view that the material imported by the Appellant was artificial corundum; that it should be classified in the combined nomenclature under heading 28 18 10 90; and accordingly that it was liable to a higher rate of customs duty, to anti-dumping duty and value added tax. The Appellant appealed because it was of the view that the imported material was aluminium oxide; that it should be classified under heading 28 18 20 00; and so should not be liable to additional customs duty, anti-dumping duty and value added tax.

3.	At a hearing for directions held on 5 September 2002 it was directed that the question of the validity of the sampling exercises should be dealt with as a preliminary issue and listed for one day's hearing before a chairman alone.  

The legislation relating to the preliminary issue 

4.	Articles 62 to 76 of Council Regulation (EEC) 2913/92 (the Community  Customs Code) contain the provisions about customs declarations in writing. Articles 68 to 70 refer to sampling and they provide:

"Article 68
For the verification of declarations which they have accepted, the customs authorities may-
(a) examine the documents covering the declaration and the documents accompanying it. The customs authorities may require the declarant to present other documents for the purpose of verifying the accuracy of the particulars contained in the declaration;
(b)	examine the goods and take samples for analysis or for detailed examination.

Article 69
1.	Transport of the goods to the places where they are to be examined and samples are to be taken, and all the handling necessitated by such examination or taking of samples, shall be carried out by or under the responsibility of the declarant. The costs incurred shall be borne by the declarant.

2.	The declarant shall be entitled to be present when the goods are examined and when samples are taken. Where they deem it appropriate, the customs authorities shall require the declarant to be present or represented when the goods are examined or samples are taken in order to provide them with the assistance necessary to facilitate such examination or taking of samples.

3.	Provided that samples are taken in accordance with the provisions in  force, the customs authorities shall not be liable for payment of any compensation in respect thereof but shall bear the costs of their analysis or examination.

Article 70
1.	Where only part of the goods covered by a declaration are examined, the results of the partial examination shall be taken to apply to all the goods covered by that declaration.
	However, the declarant may request a further examination of the goods, if he considers that the results of the partial examination are not valid as regards the remainder of the goods declared. 

2.	For the purposes of paragraph 1, where a declaration form covers two or more items, the particulars relating to each item shall be deemed to constitute a separate declaration."

5.	Thus, under the Community Customs Code, the customs authorities are entitled to take samples for analysis and are entitled to call upon the declarant for assistance. The declarant is entitled to be present when the samples are taken. Where only part of the goods covered by a declaration are examined the results are taken to apply to all the goods covered by that declaration but the declarant may request a further examination if he thinks that the results of the partial examination are not valid as regards the remainder of the goods.  

6.	Further provisions are found in Commission Regulation (EEC) No. 2454/93 (the Implementing Code). Articles 239 to 251 contain the provisions relating to the examination of goods and Articles 240, 241 and 242 contain provisions relating to sampling. Article 242 provides:

"Article 242
1.	Where the customs authorities decide to take samples, they shall so inform the declarant or his representative.
2.	Samples shall be taken by the customs authorities themselves. However, they may ask that this be done under their supervision by the declarant or a person designated by him.
Samples shall be taken in accordance with the methods laid down in the provisions in force.
3.	The quantities taken as samples should not exceed what is needed for analysis or more detailed examination, including possible check analysis." 

7.	Thus, under the Implementing Code, there is an obligation on the customs authorities to inform the declarant or his representative when they decide to take samples. 

The preliminary issue

8.	The Appellant argued that a sampling exercise conducted by Customs and Excise on 24 January 2000 was invalid because the Appellant had not been present when the goods were examined and samples taken within the meaning of Article 69.2 of the Community Customs Code from which it followed that any samples improperly obtained could not be used in evidence against the Appellant. Customs and Excise denied that the sampling exercise was invalid but argued that, even if it were, it would not affect the classification of the goods.

9.	Thus the preliminary issue for determination was whether the sampling exercise had been validly conducted under the Community Customs Code and the Implementing Code and, if not, what was the effect of that invalidity. 

The evidence

10.	A bundle of documents was produced by the Appellant on 9 July 2003 and another bundle was produced on 29 October 2003. Oral evidence was given on behalf of the Appellant by Mrs Elaine Lutkin, the Managing Director and Company Secretary of the Appellant, and by Mr Kent Martin the Sales Manager of the Appellant. Expert evidence of opinion was given on behalf of the Appellant by Mr Colin Chalmers BSc MSc a Lecturer in Statistics at the London School of Economics and Political Science. 

11.	A larger bundle of documents was produced by Customs and Excise and oral evidence was given on behalf of Customs and Excise by Mr John Creyke a Customs Manager at the Port of Felixstowe and by Mr Christopher Gerachty an investigation officer of HM Customs and Excise. Witness statements containing evidence on behalf of Customs and Excise and given by Mr Robert Gavin Burns of the Laboratory of the Government Chemist; Mrs Susan Lancashire, a Senior Analyst with the Laboratory of the Government Chemist; Dr Richard Neil White of Ceram Limited; Mr Andrew Holtby Darke a Senior Customs Officer; Mr Mark Robert McCormack an Officer of HM Customs and Excise; and Mr Gary Alan Heiss a Photographic Officer of HM Customs and Excise; were not challenged by the Appellant and were taken as read. Mr Heiss exhibited two books of photographs marked Heiss 101-506A and Heiss 101- 506B and two video tapes marked Heiss 101-375A and Heiss 101-375B. 

The legislation relating to the classification and anti-dumping duty

12.	In order to place the facts concerning the preliminary issue within the appropriate context it is first necessary to summarise the legislation relating to the classification in the combined nomenclature of the imported goods and relating to the anti-dumping duty. This legislation also provides useful definitions of artificial corundum and aluminium oxide which are necessary for a full appreciation of the facts. 

The legislation relating to the classification

13	Council Regulation (EEC) No. 2658/87 contains the provisions about the tariff classification of goods coming into the Community and the rates of duty. Article 1 establishes a combined nomenclature (CN) and Annex I sets out the combined nomenclature together with the rates of duty of the common customs tariff. Annex I is amended annually. Heading 28.18 reads:

"28.18
ARTIFICIAL CORUNDUM, WHETHER OR NOT CHEMICALLY DEFINED; ALUMINIUM OXIDE; ALUMINIUM HYDROXIDE

Artificial corundum, whether or not chemically defined
White, pink or ruby with an aluminium oxide content exceeding 97.5% by weight  281810 10

	Other									281810 90

	Aluminium oxide, other than artificial corundum				281820 00

	Aluminium hydroxide							281830 00" 

14.	The relevant parts of the Harmonised System Explanatory Notes for heading 28.18 describe the products in the following way:

(A)	ARTIFICAL CORUNDUM, WHETHER OR NOT CHEMICALLY DEFINED  
	
Artificial corundum is formed by fusing aluminium oxide in an electric furnace. The aluminium oxide may contain small proportions of other oxides (e.g., titanium oxide, chromium oxide) either deriving from the natural starting material (bauxites) or added to improve, for example, the hardness of the fused grain or to modify the colour. However, mechanical mixtures of artificial corundum and other substances, such as zirconium dioxide, are excluded (heading 38.24). 

Artificial corundum is put up in small pieces or masses, crushed or in grains; it is more resistant than ordinary aluminium oxide to the action of air and acids, and is very hard. It is used, e.g., as an abrasive, in the manufacture of refractory conglomerates (such as mullite and sillimanite, mixtures of corundum with pure refractory clay and with anhydrous aluminium silicates, respectively) or of laboratory utensils and in the electrical industry.  

(B)	ALUMINIUM OXIDE, OTHER THAN ARTIFICIAL CORUNDUM

Aluminium oxide (anhydrous or calcined alumina) (Al/2 O/3) is obtained by calcining the aluminium hydroxide  described below, or from ammonium alum. It is a light white powder, insoluble in water, specific gravity about 3.7. 

Uses include, e.g., in aluminium metallurgy, as a filler for paints, in the manufacture of abrasives and synthetic precious or semi-precious stones (rubies, sapphires, emeralds, amethysts, aquamarines, etc.), as a dehydrating agent (for drying gases), or as a catalyst (manufacture of acetone and acetic acid, cracking operations, etc.). …

This heading does not include:

(a)	Natural corundum (native aluminium oxide) … "

15.	Customs duty at the rate of 5.2% is charged on artificial corundum falling within codes 2818 10 10 and 2818 10 90 and at the rate of 4% is charged on aluminium oxide falling within code 2818 20 00. 

The legislation relating to the anti-dumping duty

16.	The legislation relating to the anti-dumping duty was introduced in October 1997 and is contained in Council Regulation (EC) No 1951/97. Article 1 of this Regulation imposed an anti-dumping duty on imports of artificial corundum falling within CN codes 2818 10 10 and 2818 10 90 and originating in the People's Republic of China. Article 2 stated that the rate of anti-dumping duty was ECU 204 per tonne. Recitals (17) and (18) described the product in the following way:

"(17)	The product concerned by this review is fused aluminium oxide, also known as artificial corundum falling from 1 January 1997 onwards within CN codes 2818 10 10 and 2818 10 90. It is principally produced in two basic varieties for which the chemical formula is identical (AI/2 0/3):
-	brown artificial corundum  consisting of 94 to 97% aluminium oxide,
-	white artificial corundum consisting of 97.5% to 99.5% aluminium oxide. 

Small quantities of pink artificial corundum which has a content of aluminium oxide similar to the white artificial corundum are also produced and sold in the Community. Hence the term "white artificial corundum" will be intended hereafter to include pink artificial corundum as well.   

(18)	The raw material for the production of brown artificial corundum is bauxite in natural or calcined form, while for the production of white artificial corundum, calcined alumina is used, which is a processed form of bauxite. Artificial corundum is manufactured by melting the raw material in electric-arc furnaces at temperatures higher than 2,000° C.

Artificial corundum, due to its specific characteristics, notably hardness, is mainly used in the production of abrasive materials such as grinding wheels, cutting wheels, sandpaper and in the production of refractory materials. 

The production process generates a certain amount of lower quality artificial corundum containing less than 94% of aluminium oxide. Its use is limited to the production of resin-bonded grinding wheels and to sand-blasting purposes."

17.	Thus it will be seen from the relevant legislation that aluminium oxide is a light white powder obtained by calcining aluminium hydroxide or from ammonium alum. Artificial corundum is of a granular appearance and is made by heating aluminium oxide in an electric arc furnace.  

18.	The parties agreed that the material imported by the Appellant was aluminium oxide which had been fused in an electric arc furnace. It was also agreed that the material imported by the Appellant originated in the People's Republic of China. However, the Appellant argued that the reference to a temperature of "higher than 2000 degrees centigrade" in recital (18) of the anti-dumping regulation was a crucial part of the description of artificial corundum and that there was no evidence that the material imported by the Appellant had been melted at that temperature. Customs and Excise, on the other hand, argued that recital (18) was descriptive only and that the law was as stated in the combined nomenclature and in Articles 1 and 2 of the anti-dumping duty regulation which did not mention the melt temperature. The Appellant also argued that the effect of recital (17) was that fused aluminium oxide, if it consisted of less than 94% of aluminium oxide, was not artificial corundum whereas Customs and Excise relied on the last paragraph of recital (18) and argued that fused aluminium oxide containing less than 94% of aluminium oxide was lower quality artificial corundum but was still artificial corundum. 

19.	Thus the issue which will be determined in the substantive appeal is whether (as argued by the Appellant) the material was aluminium oxide falling within CN code 2818 20 00 or whether (as argued by Customs and Excise) the material was artificial corundum falling within CN codes 2818 10 10 (white) or 2818 10 90 (brown or lower quality).
 
The facts concerning the preliminary issue 

20.	From the evidence before me I find the following facts for the purposes of the preliminary issue only. 

The Appellant and its imports

21.	The Appellant trades from premises in Dinnington, Sheffield and sells a range of abrasive cleaning materials. The Appellant also sells a complete range of fused alumina based products and has processing facilities in Europe and fusion plants in China.  

22.	At the relevant time the Appellant purchased and imported the material, which it calls aluminium oxide, from suppliers in The People's Republic of China. The Appellant used an import agent to make the import entries and to lodge these with Customs and Excise. There were 109 consignments between 30 March 1998 and 13 December 2000. The material was in granular form and the size of the granules ranged from 0mm (which is effectively dust) to 25mm. The material was packed into  bags each of which weighed one metric tonne (1,000 kgs) and each bag contained material of mixed size. The bags were packed into containers and each consignment could comprise anything from one to seven containers of the material. Throughout this period an average of 400 metric tonnes of material was imported each month.

23.	I saw two Certificates of Quality given by the Henan Import and Export Commodity Inspection Bureau of The People's Republic of China. The first was dated 24 September 1999 and related to eighty-eight metric tonnes of brown fused alumina with an aluminium content of between 95.62% and 95.81%. The second was dated 8 October 1999 and related to sixty-six metric tonnes of brown fused alumina with an aluminium content of between 95.62% and 95.48%. 

January 2000 - the first sample 

24.	In 1999 a trade source approached Customs and Excise with concerns that importers might be incorrectly classifying artificial corundum as aluminium oxide.

25.	On 11 October 1999 the Appellant ordered brown fused alumina oxide from Minmetals UK Limited of London (Minmetals). On 21 December 1999 Minmetals invoiced the Appellant and the Appellant paid Minmetals. This consignment came from Xingang in China and comprised 154 bags of one metric tonne each packed in seven containers. The packing list for this consignment showed various mesh sizes from 36 (0.335mm to 0.85mm) to 180 (0.053mm to 0.125mm). Thus there was a large variety of material size. 

26.	On 12 January 2000 the consignment was entered at Felixstowe prior to its arrival under entry number 071 011922W. It was entered by the import agent as aluminium oxide under CN code 2818 20 00 and the material was shown as originating in Xingang, China. On 15 January 2000 the consignment under entry number 071 011922W arrived and was accepted. On 16 January 2000 consignment under entry number 011922W was queried by Customs and Excise and the import agent was asked to provide a full technical specification of the material and to state whether it was accessible for sampling. On 17 January 2000, in a facsimile message referring to the consignment under entry number 071-011922W, Customs and Excise informed the agent that they were trying to establish if it were safe to examine and extract samples and, if it were safe to do so, then Customs would put out an official request that they required the goods for examination. On 17 January 2000 Mrs Lutkin of the Appellant sent a facsimile message to the agent saying that the technical specification was aluminium oxide and that the material was packed in one metric tonne polypropylene bulk bags each with a bottom discharge outlet which would allow access for sampling. On 18 January 2000 Customs and Excise issued an import examination advice quoting entry number 071 011922W, asking for one unit to be presented to the shed for partial examination and for one bag to be produced from the container if it were safe to do so. A copy of this request was sent to the Appellant. On 19 January 2000 Ms Sharon Kirk, of Customs and Excise, noted in a memorandum, quoting entry number 171 011922W, that the consignment was safe to examine and to take samples. The memorandum also noted advice that samples be taken from the top of a bag but that there was also a discharge outlet at the bottom of the bag. Finally, the memorandum noted that the Laboratory of the Government Chemist had asked for a sample of 500 gms and so the suggestion was that four plastic containers (two original, two duplicate) be taken.   

27.	On 24 January 2000 Mrs Josey of Customs and Excise examined the container in shed 70 at Felixstowe. Mrs Josey recorded on Ms Kirk's memorandum that at 9.45 am in shed 70 from a 100 kg bag she removed four samples and issued a C126. (A C126 is a date stamp and adhesive label affixed to a bag which has been opened for Customs' examination.) In a separate report dated 24 January 2000, and headed with entry number 011922W, Mrs Josey recorded that from a 100kg bag she had taken four samples amounting to approximately 4 kg and had transferred I kg into a plastic tub for analysis by the Government Chemist. This report was signed both by Mrs Josey and Ms Kirk. On the same day Mrs Josey sent a message, quoting entry number 071-011922W, to the import agent saying:

"Please advise importer that a sample has been taken from this load and will be forwarded to the Gov/Chem [Government Chemist] for analysis. The goods are to be cleared without prejudice."

28.	The Appellant was sent a copy of this message by the import agent. However, the Appellant was not provided with part of the sample. Further it was not clear whether the sample taken by Mrs Josey was taken from the top, middle or bottom of the bag.  Thereafter all the containers were transported to the Appellant's warehouse. 

29.	On 26 January 2000 Mrs Josey sent a Test Note under reference 00/0009, together with the sample, to the Laboratory of the Government Chemist. The Test Note referred to entry 071 011922W which had been declared as aluminium oxide and asked the Government Chemist: "Please verify if correct as entered or proper to ADD either 28181010 or 28181090."  The sample was received at the Laboratory of the Government Chemist on 27 January and given the unique laboratory number of A3000613.  

30.	On 27 January 2000 Mrs Lutkin wrote to Mrs Josey and stated that the material of which Mrs Josey had taken a sample was aluminium oxide. She said that the material was regularly tested by a local laboratory for lead and iron contents but not for full  composition because the materials were very consistent with only a minor fluctuation of trace compounds; the laboratory manager referred to the material as aluminium oxide or alumina which were interchangeable names. Mrs Lutkin went on to say that she was unable to find any reference to artificial corundum in any reference books and concluded by saying that, if Mrs Josey would send a sample of her sample to the Appellant's testing laboratory, they would analyse and define it for Customs and Excise and the Appellant would pay the cost. 

31.	On 7 March 2000 the Appellant's laboratory in Sheffield made a chemical analysis of a sample which it described as brown aluminium oxide of which 95.6% was aluminium oxide the remainder being: titanium dioxide (2.38%); silicon dioxide (1%); iron oxide (0.03%); calcium oxide (0.18%); magnesium oxide (0.40%); chromium oxide (0.01%); and alkali metals (0.16%). On 5 June 2000 the same laboratory gave a written report on a structural analysis of a sample of brown aluminium oxide which it referred to as aluminium oxide (corundum).

32.	Meanwhile, on 27 March 2000, the Laboratory of the Government Chemist wrote to Mrs Josey to say that aluminium oxide was a light white powder but the sample he had been sent was brownish grey in colour and with a granular appearance. It referred to the Harmonised System Explanatory Notes and asked for information about the method of manufacture of the material. On 30 March 2000 Mrs Josey sent a facsimile message to the Appellant, quoting entry number 071-011922W, saying that the Government Chemist wished to know the method of manufacture of the aluminium oxide with full details of processing especially if there had been fusion in an electric furnace. Mr Martin wrote to the Appellant's then representatives to say that the Appellant understood its product to be aluminium oxide and that it was "most certainly" electro-fused. On 25 September 2000 the Appellant's then representatives replied to Mrs Josey to say that there was no such product as artificial corundum but that the Appellant knew the product as fused aluminium oxide or alumina. 

33.	The Laboratory of the Government Chemist continued to ask for information about the production process and on 27 October 2000 Mrs Lutkin wrote to the Appellant's then advisers saying that the starting materials for the product were bauxite, iron and coke; that these materials were electro-fused at temperatures circa 2000°C; and that the materials were crushed and graded to the size range 0 - 25mm. On 21 November 2000, in a letter headed 00/0009 and A3000613, the Laboratory of the Government Chemist pointed out that this description matched that for brown aluminium oxide in Regulation 1951/97 (the anti-dumping regulation) and that the Appellant's own testing laboratory described the material as brown fused alumina. Based on this information, classification under commodity code 2818 10 90 (artificial corundum - other) was recommended. 

December 2000 - March 2001 - the first two demands 

34.	On 13 December 2000 the Appellant received a ruling from Customs and Excise on form C22 that they had re-classified the aluminium oxide imported under entry No. 071 011922W as artificial corundum which was liable to a higher rate of customs duty and to anti-dumping duty. On 4 January 2001 Customs and Excise sent the Appellant a post clearance demand note in the sum of £21,567.00 in respect of the consignment entered on 12 January 2000. The amount due was stated to be for under- declared anti-dumping duty, the 1.2% difference in customs duty and value added tax. (That is the first demand the subject of this appeal.) On 17 January 2001 the Appellant's then representatives asked for a formal review of the demand of 4 January 2001. Customs and Excise did not, within the period of forty-five days, give notice to the Appellant of their determination on the review and so, under section 15(2)(b) of the Finance Act 1994, they were assumed to have confirmed their original decision. 

35.	On 28 March 2001 Customs and Excise sent the Appellant a demand for £1,342,241.71 in respect of under-declared anti-dumping duty, customs duty and value added tax for entries submitted between 30 March 1998 to 19 January 2001. (That is the second demand the subject of this appeal). On 3 April 2001 the Appellant requested a review of this demand. Customs and Excise did not, within the period of forty-five days, give notice to the Appellant of their determination on the review and so, under section 15(2)(b) of the Finance Act 1994, they were assumed to have confirmed their original decision. 

March 2001 - the visit of Customs and Excise - another seven samples

36.	Meanwhile on 23 March 2001 Mr Gerachty and a colleague visited the premises of the Appellant. They had a search warrant and searched the premises removing all company documents and computers. In the presence of a manager employed by the Appellant they took samples and duplicate samples from the top, middle and bottom of seven bags. The samples were numbered B3003857 to B3003863 inclusive and were sent to the Laboratory of the Government Chemist for analysis. The Appellant accepts that this sampling exercise was validly conducted. 

37.	On 1 November 2001 the Laboratory of the Government Chemist produced a written report on the seven samples taken at the Appellant's premises on 23 March 2001 and also on the sample taken at Felixstowe on 24 January 2000. The relevant extracts from the report stated:

"Samples B3003857-B3003862 all confirmed to be alpha alumina, corundum, plus a small amount of silicon dioxide.  

Sample B3003863 identified as iron aluminium silicate, almandine. As this sample falls outside the scope of the Regulation, the alumina content was not measured. See ** below

			[percentage aluminium oxide]

B3003857				95.9			
B3003858				95.5
B3003859				95.0
B3003860				93.6
B3003861				95.5
B3003862				94.3
B3003863				**

Samples B3003857-B3003862, except B3003860, lie within the range 94 to 97% aluminium oxide content as specified for brown artificial corundum in Council Regulation (EC) No. 1951/97. 

The sample originally taken at Felixstowe, HMCE reference 00/0009 LGC reference A3000613 has also been confirmed to be corundum and has an aluminium oxide content of 95.4%." 

January 2002 - the third demand

38.	On 31 January 2002 Customs and Excise sent the Appellant a post clearance demand note in the sum of £75,691,48 in respect of four further entries between 5 June 2000 and 4 September 2000. On 14 February 2002 the Appellant requested a formal review of that decision. Customs and Excise did not, within the period of forty-five days, give notice to the Appellant of their determination on the review and so, under section 15(2)(b) of the Finance Act 1994, they were assumed to have confirmed their original decision. 

39.	Mrs Josey retired in March 2002 and now lives abroad. 

40.	On 27 August 2002 Customs and Excise purported to review the three demands of 4 January 2001, 28 March 2001 and 31 January 2002 even though the statutory time limits for such reviews had passed.  Paragraph 23 of the review letter stated that there was no evidence to confirm that the seven samples taken by Mr Gerachty on 21  March 2001 actually came from the importations subject to the post clearance demands and so the writer considered that the single original sample (taken on 24 January 2000) was of much more importance.  

41.	During the hearing the Appellant referred to a number of chemical analyses of samples of the material which it imported which showed levels of impurities varying from 97.1% of aluminium oxide and 2.9% of impurities to 79.2% of aluminium oxide and 20.8% of impurities. 

The evidence of opinion

42.	Mr Chalmers was of the view that a single sample was not enough. He referred to the description of artificial corundum in recitals (17) and 18) of Regulation (EC) 1951/97 (the anti-dumping regulation) which was by reference both to a purity level of 94% and 95% for brown and 97.5% and 99.5% for white artificial corundum and to a fusion process at a temperature above 2,000° C. Sampling therefore had to be sufficiently accurate to decide the required purity level and to infer the fusion temperature. A single non-random sample of 4kg from a total delivery of 13,000 tonnes was 0.00005% of the whole and was inadequate to estimate the range of impurities between 92% and 99%.  The data suggested that the material was very variable especially in particle size and, if that were a variable, then the material could be variable in other respects as well. The fusion temperature depended upon the level of impurities present during production (and would be lower if there were more impurities). However, this would not necessarily be the same as that after production because further processing may have taken place. Accordingly, no inference could be drawn about fusion temperature from measured impurity. In any event the definition of artificial corundum did not allow its identification without details of the exact production method.    

Reasons for decision

43	The issue for determination in the appeal raises two questions which are:

(1)	was the sampling exercise validly conducted under the Community Customs Code and the Implementing Code;  and, if not

(2)	what was the effect of that invalidity. 
	
44.	I have found it convenient to consider these two questions separately.

(1)	Was the sampling exercise validly conducted?

45.	For the Appellant Mr Young argued that the sampling procedure adopted by Customs and Excise on 24 January 2000 was not in accordance with Article 69.2 of the Community Customs Code because the Appellant had not been able to exercise its right to be present when the goods were examined and when the samples were taken. Mr Young also argued that the Appellant had not been given the right under Article 70.1 to request a further examination of the goods. A sample taken from one bag could not be representative of the whole consignment under Article 70.1 nor could it be representative of all the other consignments. In applying Community law the tribunal had to apply the principles of effectiveness, legal certainty, legitimate expectations and proportionality, (Marks and Spencer Plc v Customs and Excise Commissioners Case C-62/00) and the proper conduct of procedure (Jeroen van Schinjndel and Johannes Cornelis van Veen v Stichting Pensionenfonds voor Fysiotherapeuten Cases C-430/93 and C-431/93 p I-4738 para 19). The principle of legal certainty required that the provisions of the regulations would be followed by Customs and Excise. As they had not been, there had been no valid verification exercise. The principle of legal certainty also required that the Appellant should be able to rely upon its declarations. The Appellant had a legitimate expectation that duty would be collected in accordance with the Regulations.

46.	Mr Young did not admit that the sample taken by Mrs Josey was of the material imported by the Appellant. He remarked that Mrs Josey had not been called upon to give oral evidence and had not made a witness statement. Her reports indicated that the bag from which a sample was taken weighed 100 kg whereas all the bags imported by the Appellant weighed 1,000 kg. Also, Mrs Josey had recorded that she took four samples but only one was analysed. A number of samples should have been analysed and the procedure adopted by Mr Gerachty (who took samples from the top, middle and bottom of each bag) was a proper method and should have been followed. Mr Young suggested that it was possible that Mrs Josey had examined the goods of another trader who could have been a competitor. 

47.	For the Respondents Mr Beal argued that the sampling exercise on 24 January 2000 was properly carried out. The Appellant, through its import agent, was given notice of the examination of the goods and was asked to provide a full technical specification and to state whether it was accessible for sampling. Mrs Lutkin of the Appellant gave the information about how the material could be sampled. The Appellant or its import agent could have asked to attend the sampling and it was not claimed that they had been prevented from attending. There was no provision that the Appellant had to be informed that it could be present; the Appellant was an experienced importer and could be taken to know the rules. The Appellant had been informed after the sampling had taken place and had asked its own laboratory to carry out an analysis. The Appellant could have asked for a further examination of the goods under Article 70.1 if it considered that the results of the partial examination were not valid as regards the remainder of the goods but had not done so.  

48.	Mr Beal went on to argue that the burden of proof in the appeal was on the Appellant to show that the classification made by Customs and Excise was wrong but the Appellant had not adduced any evidence to prove that the product contained in the disputed consignments was aluminium oxide as it averred. He accepted that the primary composition of both artificial corundum and aluminium oxide was the same (Al/2 O/3) but the raw materials and the method of manufacture differed. The relevant question was whether the material was produced by fusion in an electric arc furnace or whether it was obtained by calcining aluminium hydroxide and the Appellant agreed that its material was produced by fusion in an electric arc furnace. Also, the evidence pointed to the conclusion that all the material imported by the Appellant was, at all relevant times, the same. Six out of seven of the samples taken on 23 March 2001, in the presence of the Appellant, were artificial corundum. The only reference to 2000 degrees centigrade appeared in recital (18) to the anti-dumping regulation but that was only a description of the product and not the classification definition. 

49.	In considering the arguments of the parties I start with the legislation relating to the preliminary issue. Article 68(b) of the Community Customs Code gives the customs authorities the power to examine goods and to take samples for analysis or for detailed examination. Thus Customs and Excise had the power to take the sample. Article 69.1 provides that the transport of the goods to the place where they are to be examined shall be carried out under the responsibility of the declarant. This was done as on 18 January 2000 Customs and Excise issued an import examination advice asking for one unit (container) to be presented to the shed for partial examination and for one bag to be produced from the container if it was safe to do so; the container was then placed in shed 70. Article 69.2 provides that the declarant shall be entitled to be present when the goods are examined and when samples are taken. The Appellant and its import agent were informed, by means of the import examination advice of 18 January 2000, of the intention to take samples. They could have been present when the goods were examined and they were not prevented from being present. 

50.	Article 70.1 provides that, if only part of the goods covered by a declaration are examined, the results apply to all the goods covered by the declaration but the declarant may request a further examination of the goods if he regards the results of the partial examination as not valid for the remainder. The Appellant did not request a further examination of the goods from which it follows that the results of the sample taken on 24 January 2000 apply to all the goods covered by that declaration. However, I accept the arguments of the Appellant that the results of that sample cannot apply to goods covered by any other declaration, in particular such results cannot apply to the entries covered by the second and third demand the subject of the appeal. .  

51.	Article 242 of the Implementing Regulations provides that, where the customs authorities decide to take samples, they shall so inform the declarant or his representative. That was done by means of the import examination advice of 18 January 2000.  

52.	Accordingly, I find that the sampling exercise was validly conducted under the Community Customs Code and the Implementing Code. In particular, the sampling procedure adopted by Customs and Excise was in accordance with Article 69.2 of the Community Customs Code because the Appellant could have exercised its right to be present when the goods were examined and when the samples were taken but did not do so. Also the sampling procedure was in accordance with Article 70.1 because the Appellant could have requested a further examination of the goods but did not do so. .

53.	I now turn to consider the other arguments put forward by the Appellant. As the provisions of the Community Customs Code and the Implementing Code were followed by Customs and Excise there was a valid verification exercise. Turning to the Appellant's arguments about Mrs Josey, the first was that Mrs Josey had not been called to give oral evidence and did not make a witness statement. However, Rule 28(1) of the Value Added Tax Tribunals Rules 1986 SI 1986 No. 590 provides that the Tribunal may direct or allow evidence of any fact to be given in any manner it may think fit. The evidence before the Tribunal relating to this preliminary issue consisted of full documentary evidence relating to the sampling. That evidence was consistent and very persuasive.  

54.	Secondly, the Appellant did not admit that the sample taken by Mrs Josey was of the material imported by the Appellant. It was suggested that it was possible that Mrs Josey had examined another trader's goods and such a trader might have been a competitor. In this connection I have given weight to the fact that all the documents relating to the sample bear the Appellant's entry number 011922W. When the sample was sent to the Laboratory of the Government Chemist it also had two additional references, namely a customs reference of 00/0009 and a unique laboratory reference of A3000613. All these appear consistently on the documents from which I find that it is most probable that the sample taken by Mrs Josey was of the material imported by the Appellant. It is also relevant that the analysis undertaken by the Appellant's laboratory on 7 March 2000 gave a very similar result. Mrs Josey's sample was analysed as consisting of 95.4% of aluminium oxide and the Appellant's analysis of 7 March 2000 showed results of 95.6% aluminium oxide.  

55.	Thirdly, the Appellant argued that Mrs Josey's reports indicated that the bag from which a sample was taken weighed 100 kg whereas all the Appellant's bags weighed 1,000 kgs. I regard this as an error made by Mrs Josey which, however, does not invalidate her sampling exercise.  

56.	Fourthly, the Appellant argued that Mrs Josey recorded that she took four samples but only one was analysed. This appears to have been the case but, in my view, does not affect the validity of the sampling exercise.

57.	Fifthly the Appellant argued that only one sample was taken when a number of samples should have been required and that the procedure adopted by Mr Gerachty was a proper method. Part of this argument was that a sample taken from one bag could not be representative of the whole consignment, relying upon the evidence of Mr Chalmers. In this connection Article 70.1 of the Community Customs Code is relevant. If the Appellant was of the view that the results of the partial examination were not valid as regards the whole consignment it should have asked for a further examination of the goods but did not do so.  

58.	My conclusion on the first question is, therefore, that the sampling exercise was validly conducted under the Community Customs Code and the Implementing Code.  

60.	That conclusion means that I do not have to consider the second question but, as arguments were put to me I record them and very briefly express my views. 

(2)	What would be the effect of an invalid sampling exercise?

61.	For the Appellant Mr Young accepted the principles established by the authorities cited by Mr Beal but argued that the sampling exercise was of importance because there was a wide variation of impurities and the greater the amount of impurities the lower the temperature of fusion. It was his case that a temperature lower than 2,000 degrees meant that the resulting material could not be artificial corundum. Thus a different sampling method might have produced a different outcome.  

62.	For Customs and Excise Mr Beal argued that, even if there had been a failure to comply with the sampling requirements, that would not invalidate the classification of the material imported by the Appellant. Failure to comply with procedural requirements did not nullify the subsequent entry which the customs authorities were obliged to enter in the accounts. He cited Covita AVE v Greece [1998] ECR I-7711 at paragraph 37 of the Opinion of the Advocate General and at paragraphs 35 and 36 of the judgment for the principle that procedural requirements of time limits were laid down for accounting purposes rather than to create rights for individual traders and that failure to comply with the time limits did not nullify the right to take action for post-clearance recovery. Mr Beal went on to argue that, if there had been prejudice caused by a failure to comply with a procedural requirement, then that could be a special situation calling for a remission of duty and he cited Hyper Srl v Commission [2002] ECR II-3141 at paragraph 98 and Viva Mexico (A firm) v The Commissioners of Customs and Excise [2001] V & DR 198 at 208 paragraphs 52 to 59 and at 211 paragraphs 11 to 13. He further argued that there was no legitimate interest in securing the annulment of a decision for a formal defect where the administration was bound to act as it did relying on Jean-Jacques Geist v Commission [1983] ECR 2191 at paragraph 7 and that the rights of the defence were not infringed, even if procedural requirements were not followed, so long as an applicant was in a position to make known his points of view, relying upon Champion Stationery Manufacturing Company Limited and others v Council of the European Union  Case T-147/97 1998] ECR II-4137 at paragraph 87. In this appeal the Appellant knew about the sampling and its position was not prejudiced. Mr Beal went on to cite Skatteministeriet v Sportsgoods A/S Case C-313/96 (judgment of 124 September 1998) at paragraphs 23 to 25 and 36 to 37 for the principle that, where there was an error in the tariff classification of goods on entry, the customs authorities had a duty to re-calculate the amount of duty due and take steps to recover any uncollected duties. He also cited Mehibas Dordtselaan BV v Commission Case T-290/97 (judgment of 18 January 2000) at paragraphs 46 and 47 for the principle that irregularities could not result in the annulment of a contested decision unless it was established that without them the procedure might have had a different outcome. 

63.	Mr Beal also referred in argument to the following authorities:

Friedrich Binder GmbH & Co. KG v Hauptzollamt Bad Reichenhall Case C-161/88 [1989] ECR 2415 at paragraph 19;

M & J Seafoods (Wholesale) Limited v The Commissioners of Customs and Excise [1999] V & DR 27 at paragraphs 49 to 53; 

SPKR 4 nr. 3482 ApS v Skattesministeriet Told-og Skattestyrelsen Case C-112/01 (judgment of 14 November 2002) at paragraphs 29 to 35. 

64.	It seems to me that the arguments of the parties on this question stray into the matters to be considered at the substantive hearing. There the Appellant will argue that the reference to a temperature of "higher than 2000 degrees centigrade" in recital (18) of the anti-dumping regulation is a crucial part of the description of artificial corundum. It will also argue that the higher the amount of impurities the lower the melt temperature. From that it will argue that at least some of the material imported by the Appellant had such a level of impurities that the melt temperature was less than 2,000 degrees centigrade and so was not artificial corundum. Customs and Excise, on the other hand, will argue that recital (18) is descriptive only and that the law is as stated in the combined nomenclature and in Articles 1 and 2 of the anti-dumping duty regulation which does not mention the melt temperature. I also understand that the Appellant will argue that the effect of recital (17) of the anti-dumping regulation is that fused aluminium oxide, if it consists of less than 94% of aluminium oxide, is not artificial corundum whereas Customs and Excise will argue that fused aluminium oxide containing less than 94% of aluminium oxide is lower quality artificial corundum but is still artificial corundum. 

65.	If the Appellant is right then it is possible that a different method of sampling might show a variety of levels of impurity and thus indicate a different product but if Customs and Excise are right then no amount of sampling would indicate a product other than artificial corundum. In this appeal the Appellant accepts that it imported fused aluminium oxide which had been melted in an arc furnace. The real dispute is whether that is artificial corundum or aluminium oxide within the meaning of the combined nomenclature and that will be determined at the hearing of the substantive appeal.    

Decision on preliminary issue

66	My decision on the preliminary issue is that the sampling exercise was validly conducted under the Community Customs Code and the Implementing Code. 

67.	The appeal on the preliminary issue is, therefore, dismissed.

68.	This Preliminary Decision does not determine the appeal. A further hearing will now be fixed for the hearing of the substantive issue which is whether the material imported by the Appellant is aluminium oxide and should properly be classified under heading 2818 20 00 (as argued by the Appellant) or whether it is artificial corundum and should properly be classified under heading 2818 10 10 or 2818 10 90 (as argued by Customs and Excise).  

Costs

69.	I DIRECT that the costs of the hearing of the preliminary issue be dealt with at the end of the substantive appeal. 

DR NUALA BRICE

CHAIRMAN

                                               RELEASE DATE: 12 November 2003

LON/2001/7050
11.11.03