Air International Pty Ltd v Chief Executive Officer of Customs

[2002] FCA 355
(2002) 35 AAR 205
(2002) 49 ATR 630
(2002) 121 FCR 149

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(Judgment by: Hill J)

Between: Air International Pty Ltd (ACN 004 684 628) - Appellant
And: Chief Executive Officer of Customs - Respondent

Court:

Judges: Hill J
O'Loughlin J
Tamberlin J

Subject References:
CUSTOMS LAW
principles of classification for tariffs
essential character test
whether air conditioning parts designed and adapted for use in air conditioning units should properly be classified as replacement parts where some ultimately sold to dealers and resold as spare parts
whether goods of a kind used as replacement parts
essential character
goods of a kind used as

Legislative References:
Customs Tariff Act 1995 (Cth) - s 7(1); Sch 2 Rule 2(a); Sch 3 Rule 6
International Convention on the Harmonized Commodity Description and Coding System 1983 -

Case References:
Re Pirelli Tyres Australia Pty Ltd and Others and Chief Executive Officer of Customs cited - (1999) 58 ALD 517
Hygienic Lily Ltd v Deputy Commissioner of Taxation referred to - (1987) 13 FCR 396
Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd discussed - [1979] 1 WLR 305
Diethelm Manufacturing Pty Ltd v Commissioner of Taxation referred to - (1993) 44 FCR 450
Clean Investments v Commissioner of Taxation applied - (2001) 105 FCR 248
Applicant A v Minister for Immigration and Ethnic Affairs referred to - (1997) 190 CLR 225
Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd applied - [1979] 1 WLR 305

Hearing date: 11 February 2002
Judgment date: 17 April 2002

Sydney (heard in Melbourne)

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Judgment by:
Hill J

1 The Appellant, Air International Pty Ltd ("Air International") appeals from the decision of a Judge of the Court dismissing its appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") which had affirmed the decision of the Respondent Chief Executive Officer of Customs ("Customs") to demand payment of customs duty. The duty was said to be payable in respect of certain goods being fan assemblies, condensers and evaporators for use in certain automotive air conditioning systems ("the subject goods"). Air International had paid the duty demanded in respect of the subject goods under protest, with the consequence that the affirmation of the decision means that the duty paid should not be refunded.

2 The appeal to this Court, heard by the learned primary Judge, is an application in the original jurisdiction of the Court and is an appeal on, that is to say, limited to, a question of law. Unless the Tribunal made an error of law in its fact finding, the facts as found must thus be accepted. The application to the Court, as filed, outlined a number of questions of law upon which it was said the Tribunal had erred. It was, however, also claimed that the Tribunal had reached its conclusion "without proper regard to the evidence as to the characteristics of the goods in question". No doubt a Tribunal which reaches its decision contrary to the evidence may be said to err in law. So, a question of law is involved if there is no evidence upon which the Tribunal could reach its conclusion. If the ground was intended to go to the weight which the Tribunal gave to the evidence before it, then it is difficult to see a question of law involved at all. At least, generally speaking, the weight to be given to evidence is a matter for the Tribunal, not for this Court. However, in my view, and contrary to the view of their Honours O'Loughlin and Tamberlin JJ there is a question of law in the present case and in respect of which in my view the Tribunal erred. That question concerns the proper construction of the relevant items in Schedule 3 of the Customs Tariff Act 1995 (Cth) ("the Tariff Act").

THE ISSUE FOR DECISION

3 Between December 1998 and June 1999 Air International paid customs duty under protest in relation to several entries of the subject goods which the Tribunal described as being "major components of automotive air conditioning systems". Air International claimed to be entitled to a refund of the money paid. That entitlement depended upon whether the goods which, so far as they comprised condensers and evaporators had been classified under tariff subheading 8419.50.10 of Schedule 3 of the Tariff Act and so far as they comprised fan assemblies had been classified under tariff subheading 8414.59.10 of that Schedule were correctly so classified by Customs.

4 The sub-heading 8419.50.10 refers, inter alia, to pumps and gas compressors, being "of a kind used as replacement components in passenger vehicles." The sub-heading 8414.59.10 refers, inter alia, to air or vacuum pumps and certain kinds of compressors being "of a kind used as replacement components in passenger motor vehicles". If the goods were properly classified under these sub-headings then the customs duty was correctly paid. If they were not, then Air International was entitled to a refund. It was common ground that if the goods were of a kind used merely as components in passenger motor vehicles, for example as parts of air conditioning units to be built into passenger motor vehicles they would attract a lower tariff of 5% instead of a tariff of either 10% or 11%. It may be noted, although nothing turns upon it, that the Customs Tariff Amendment (ACIS Implementation) Act 1999, Sch1 Item 9 amended the relevant subheadings and many others, so as to omit the word "replacement".

THE DECISION OF THE TRIBUNAL

5 The Tribunal made a number of findings of fact which it is necessary to summarise. Briefly, these were:

1

The goods were imported by Air International, Australia's largest supplier of automotive air conditioning systems and components for inclusion in air conditioning kits which it supplied, to motor vehicle manufacturers or importers. The completed kits were made up of other parts, such as compressors, filters, pipes, hoses and screws which did not form part of the imports. Particular kits were designed for particular models of motor vehicles to ensure that they fitted the cavity available in the particular model, met manufacturer's standards and functioned optimally in Australia's climatic conditions. Air conditioning units are not necessarily interchangeable even between models or sub-models made by the same car manufacturer.

2

Air International's business was divided into three divisions which the Tribunal described as "original equipment", "accessory kits" and "spare parts". The original equipment division provided air conditioning for installation into Australian manufactured motor vehicles during their assembly on the production line either as original equipment or to meet the demand for optional air conditioning. Air conditioning fitted as original equipment is not subject to duty. Air International also in its accessory kits division supplied its kits for particular models of imported passenger motor vehicles which were imported without air conditioning. Finally as part of its contracts with motor vehicle manufacturers it provided replacement air conditioner parts for air conditioning or kits which it had supplied as part of its original equipment or accessory kits business. It also, the Tribunal found "provides air conditioner parts to non-manufacturers in minimal quantities". The Tribunal made no finding as to whether these latter spare parts were for use in its own air conditioning or air conditioning kits or as spare parts for use in other air conditioning units. The spare parts business was a small part of Air International's overall business. The claim for refund did not relate to the particular components sold in this division.

3

Other suppliers designed and supplied air conditioners for installation in motor vehicles and parts for air conditioners suitable for use in particular vehicles. These parts were equivalent to parts that might be used by the manufacturer or importer/distributor.

6 It is not necessary to set out the particular rates of duty payable on each of the parts with which the present appeal is concerned. It ranged, if Customs were correct on the matter of classification, from 10% to 11%. If on the other hand Customs was not correct on the matter of classification it appears to be common ground that the rate of duty was 5%. The quantum of the duty is not a matter of dispute assuming the classification made by Customs was correct.

7 The Tribunal noted that Schedule 2 of the Tariff Act set out the General Rules for the Interpretation of the Harmonized System provided for by the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June 1983 ("the Convention"). Those rules must be used in working out the tariff classification under which goods are classified for the purposes of Schedule 3 to the Act: s 7(1). Rule 2(a) provides that:

"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 complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled."

This rule applies also to subheadings: Rule 6.

8 The Tribunal then proceeded to consider and reject an argument that the goods were not components of a passenger motor vehicle, but accessories. It had been submitted that there was a dichotomy between the two terms, so that they were mutually exclusive. The Tribunal was of the view that there was no true dichotomy such that the terms components and accessories were mutually exclusive and held that the subject goods were properly to be classified as components of a passenger motor vehicle. It took the view that the word "component" was interchangeable in the present context with "part" and that it was not essential for an item to be a component of a passenger motor vehicle for that item to be something essential to the functioning of a passenger motor vehicle. So, a cigarette lighter could, the Tribunal said be a part of a motor vehicle, although inessential to the functioning of that vehicle. The Tribunal noted that matters of fact and degree could be involved in determining whether the whole made up of a sum of parts was or was not a passenger motor vehicle. It affirmed what had been said by another Tribunal (Deputy President Forgie, Senior Member Muller and Mr Horrigan, Member) in Re Pirelli Tyres Australia Pty Ltd and Others and Chief Executive Officer of Customs (1999) 58 ALD 517 at 523, namely that in order to be a component of a passenger motor vehicle an item must be a part:

"... which, when combined with other parts, give[s] an object its essential characteristic as a passenger motor vehicle."

9 The Tribunal then turned to consider whether the goods were of the relevant kind. It referred to cases on sales tax exemptions where it had been held that the phrase "goods of a kind" was directed not to the use for which particular goods were designed, nor the purpose for which the goods were to be put but rather to the "nature, quality and adaptation of goods in the class or genus in question" (per Gummow J in Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 at 399).

10 Hence, in the Tribunal's view it was unnecessary to look at whether the subject goods were designed or manufactured for particular passenger motor vehicles or what the subject goods were used for. The question for decision, according to the Tribunal was whether the goods belonged to a class or genus of goods used as components of passenger motor vehicles. It noted that similar goods of other manufacturers (or goods imported by other importers) were parts commonly used as components in passenger motor vehicles and were, therefore, goods of a kind for use as components in passenger motor vehicles and that the subject goods were likewise to be so classified, notwithstanding that they were intended to be used for a particular purpose by Air International and particularly adapted for such use. Further, they were goods of a kind used as replacement components. The Tribunal said at [39]:

"Bearing in mind that the subject goods need only be of a genus or class that are used as replacement components in passenger motor vehicles in order to come within the relevant tariff classifications, it does not matter whether the subject goods are themselves used to replace another. It is enough that they be of a genus or class that does so.... On the facts of this case, we are satisfied that a certain proportion of the subject goods are actually used to take the place of (ie replace) condensers and evaporators that are involved in cooling the temperature in passenger of motor vehicles, that are components of passenger motor vehicles and that need to be changed. Even if they were not, we are satisfied that the subject goods are of a genus or class that are used to replace condensers and evaporators that are involved in cooling the temperature in passenger motor vehicles and are used as components in passenger motor vehicles."

11 The Tribunal reached, and for the same reasons, the same decision concerning the fan assemblies.

12 In the result the Tribunal determined that the goods had been correctly classified and that no duty should be refunded to Air International.

13 From this decision Air International appealed to this Court.

THE JUDGMENT BELOW

14 The learned primary Judge was of the same view as the Tribunal and dismissed the appeal from the Tribunal's decision. His Honour found and essentially for the same reason as the Tribunal, that the words "components" and "accessories" were not mutually exclusive. It may be noted that the classification does not, in fact, use the word "accessory" or derivatives from that word, but only the word "components". With respect I agree with this part of his Honour's decision and for the reasons given both by the Tribunal and by his Honour.

15 The learned primary Judge rejected, also, a submission that the Tribunal had erred in equating air conditioning with the tyres considered in the Pirelli case. Again, with respect, I agree with his Honour and for the reasons given both by the Tribunal and his Honour.

16 Finally the learned primary Judge turned to consider a submission that Air International was entitled to succeed on the basis that such a small percentage of the subject goods had been imported for use as replacement components that the subject goods could not be properly classified as replacement components. It was submitted, on the basis of what was said by Megaw LJ in Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305 at 317 (the passage is set out later in full at para 28) that if the goods were made "primarily for some other use" then even though they might incidentally be used suitably as replacement components, they could not be said to be goods "of the kind used as replacement components."

17 After a consideration of a number of cases his Honour expressed the view that the question for decision was whether the subject goods were members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) are used as replacement components in passenger motor vehicles. In his Honour's view that conclusion was open to the Tribunal as a question of fact, even if the subject goods were themselves not intended to be used as replacement components.

18 It is from this decision that Air International appeals.

DISCUSSION

19 It is useful, before considering the factual matters relied upon by counsel for Air International to consider the principles of classification to be applied in the present case.

20 Although there has been some disagreement as to the significance of an essential character test in the area of sales tax classification, (see the later discussion at para 23 of these reasons) it must be noted that the notion of essential character receives legislative support in the Interpretation Rule 2(a) set out earlier in paragraph 7 of these reasons. No doubt there are cases where the phrase "essential character" may be thought to have little meaning, at least where the item of goods has, as will often be the case, only one character. But one thing is clear. The expression "essential character" emphasises the point that particular goods may have more than one character so that, at least in such a case, it will be necessary, when embarking on the task of characterisation to look at that character which is "essential" and disregard any other inessential character.

21 This will be particularly the case where the classification test requires the goods to be "goods of a kind used as". The phrase "goods of a kind" in conjunction with "use", as here, draws attention not to the use to which the particular goods are put, but to whether the goods are of a particular genus. As I said in Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450 the wider the genus, the narrower the task of classification. This was a matter taken up by Lindgren J, with whose judgment Lee and Cooper JJ agreed, in Clean Investments v Commissioner of Taxation (2001) 105 FCR 248, one of a number of cases which have had reason to consider whether particular goods fell within the exemption from sales tax contained in Item 1 (f) of Schedule 3 to the Sales Tax (Exemptions and Classifications) Act 1935 by reasons that they were goods "of a kind ordinarily used for household purposes". The judgment considers in some detail, the relevant previous case law, including Hygienic Lily to which reference was earlier made and accordingly I need not refer to that previous case law here. Clean Investments concerned, inter alia, coin operated washing machines and it was held that it was open to the Tribunal on the facts before it to find that the machines were within the terms of the exemption and thus not liable to sales tax.

22 In Clean Investments Lindgren J set out certain general propositions relevant to the interpretation of a sales tax item where the words "goods of a kind" are used. Those relevant here, adopting the system of numbering used by his Honour (quotations appear in italics, comments in normal font) are:

2.

"The goods to which Item 1 must be applied are the particular goods of the taxpayer, that is, in the present case, the relevant machines..." Here the goods to be classified are the subject goods imported by Air International and upon which it paid customs duty. Particularly the classification of other goods, either imported by Air International or others is not under consideration.

3.

"The statutory question is not whether those goods of the taxpayer will in fact be used for household purposes but whether they are goods 'of a kind ordinarily used for household purposes'." Here the question is not whether the subject goods of the taxpayer imported by it will in fact be used for replacement components for motor vehicles, but whether they are goods "of a kind used as replacement components for motor vehicles".

4.

"... it is preferable to pose the statutory question as a single composite question." His Honour noted that answering the genus question separately as a threshold question will assume, without making explicit, an answer to the question. Hence to define the genus in that case as "machines designed to wash fabrics" would have the result that industrial washing machines would qualify as goods ordinarily used for household purposes.

23 To some extent, as Counsel for Air International argued, the Tribunal and the learned primary Judge separated the composite question to be asked into two separate questions, namely whether the subject goods were components, and only then, whether they were of a kind used as replacement parts. This separation resulted from the argument of Air International that the subject goods were not components, but rather accessories to a motor vehicle, an argument which was rejected, and in my view correctly. However, I do not think in the present case that any relevant error of law was thereby committed.

5.

"The "essential character" test lacks sufficient precision to assist, at least in the present case [references omitted]. In my view, there is a danger that that test may serve simply to give an undeserved legitimacy to first impressions." As already noted there is, at least, some relevance given in the present legislation to a test of essential character. Further the test may have importance in a case where a particular item can be said to have more than one character in directing attention away from any inessential character. To regard the subject goods as just condensers or fan assemblies, being "parts" or "components" for air conditioning units generally will obviously lead automatically (and in my view, incorrectly on the facts of the present case) to a conclusion favourable to the respondent.

24 In the circumstances of that case his Honour was of the view that the particular machines qualified for the exemption.

CLASSIFICATION IN CUSTOMS

25 Two general comments may be made concerning classification in the customs tariff context. First, it may be noted, that the customs classification regime and particularly the interpretative rules have their current origin in international Treaty, namely the Convention. As such they should receive an interpretation consistent with the purpose of the treaty and in accordance with the general rules of treaty interpretation, that is to say, in good faith and in accordance with the ordinary meaning of the words, but in the light of its object and purpose cf Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 251-253. The second, which is more important, is that the classification Rules in the Act recognise that a particular item of goods may inherently fall under more than one classification. The rules are designed, however, to ensure, so far as possible, that goods fall within only one category. Conflicts between possible multiple classifications are resolved in many cases by special rules. So there are rules to be found in notes to the particular classifications which operate to allocate a particular item capable of falling within more than one classification to a particular classification or exclude items from falling within particular classifications. The notes are not relevant here. Although also not directly relevant to the present case the Rules in s 8 of the Act reinforce the principle that only one classification is to be adopted. It is this fact which more than any other, makes it essential, particularly where more than one heading may be applicable to a particular item of goods, to apply that heading or classification (subject to any statutory direction, such as in s 8 of the Act) that is most particularly appropriate to the particular goods requiring classification. The requirement to adopt the most appropriate classification, as well as the statutory reference to essential character, makes it important, at least where goods may fall within more than one category, that the category is chosen which most fits the essential character of the goods in question.

26 Classification arises in many contexts as well as customs duty. One, to which reference already has been made, was Australian sales tax, now effectively repealed and replaced by the GST. Value added tax in the United Kingdom, where in effect there exist multiple rates provides another example where classification will be relevant to determine which particular effective rate will be payable. The Australian GST has minimised (although not completely eliminated) the need for classification by adopting what is, generally speaking, a single rate tax but for a relatively small number of supplies which are GST free, and a small number of supplies which are input taxed or where reduced input tax credits are available for certain acquisitions.

27 The decision of the Court of Appeal in Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305 was a case which required classification for the purposes of determining whether VAT was payable on couplings and winches used in pulling caravans. The question in issue was whether the particular goods fell to be classified as "Goods of a kind suitable for use as parts of goods within item 1 or item 5". The particular goods were standard fittings for caravans and there was nothing intrinsic in their design or construction which particularly fitted them for the purpose of being used to pull a boat trailer, recreational boats falling within item 1, although it would have been possible to so use them. The Court of Appeal held in the circumstances that the goods did not fall within the classification appropriate to couplings or winches for use as parts of boat trailers.

28 Brown LJ held that the words "goods of a kind" referred to some class or category or genus of goods which had characteristics in common. That holding is generally consistent with the Australian sales tax cases referred to in Clean Investments. Indeed his Lordship's use of the test that to fall within the genus the goods had to be "designed" or "adapted" for the relevant use finds echo in the judgment of Gummow J in Hygienic Lily among other cases. In his Lordship's view the statutory classification applied only to couplings or winches which were designed or intended by their manufacturer or in fact predominantly used as parts of pleasure boats. Megaw LJ said at 316:

"Presumably the three words "of a kind" have not been introduced merely for elegance of prosody or to provide meaningless padding. They have been introduced in order to affect the meaning. They do affect the meaning. It is not "the goods" - the particular articles, here the couplings and the winch - which have to be suitable for use as parts. It is the kind of goods to which those particular articles belong, their genus, which has to be thus suitable. The addition of "of a kind" would be meaningless if goods which are themselves suitable are necessarily also goods of a kind which is suitable. The question is, first, what is the relevant "kind of goods" of which they are members; and, secondly, is that kind of goods generically, suitable for use as parts of the goods comprised in items 1 and 5 of Group 3.

...To identify the "kind" to which a particular article belongs, you must ascertain first what is the common characteristic which turns a collection of individual articles into a "kind". In the context of item 6 (and the other provisions of the schedule where the words 'goods of a kind' are used), the characteristic must relate to suitability for use for some purpose. Next, ... a particular article cannot, for the purposes of these statutory provisions, be treated as belonging to more than one kind.... The only way in which the relevant kind can be ascertained is by ascertaining what is the exclusive or primary purpose for which the specific article is made, or, perhaps, if this should be different, for which it is used."

29 Hence in the particular case where the goods had a "secondary or adventitious" suitability for use as part of boats or trailers that secondary use was held not to govern the classification.

30 Although the context may be said to be different, the principle evident in Megaw LJ's reasons has application to customs classification. So, where goods are capable of more than one use (and that is the present case) the determination of the genus to which they belong should not be made by reference to a secondary or adventitious use, but rather to the particular use for which they are designed and, perhaps more significantly having regard to the context of customs duty, for which they are imported.

31 Customs duty is a tax on the importation of goods. It contemplates that the duty which is paid on entry of the goods will be incorporated into those goods as they pass into commerce thereafter. It has significance beyond the raising of revenue and is often a tool of government policy. The rate imposed on particular goods may take into account factors such as the protection of Australian industry as well as the economic (and political) effects which the end price of imported products or products which incorporate imported parts may have. The rate may, as well, be affected by international trade treaties.

32 It is clear from the passage extracted earlier which sets out the Tribunal's reasons in the present case that the Tribunal was of the opinion that the classification of the subject goods was to be made simply by reason of the fact that goods of the same kind as the present goods were used as replacement parts in passenger motor cars, irrespective of what commercial use Air International made of them. The fact that Air International had also used "a certain proportion" of those parts as replacement components appears to have been thought to have relevance only because that fact demonstrated that the goods were of a kind used as replacement parts.

33 However, with respect to the Tribunal and those who think otherwise, I think that in the present context that is an erroneous approach to the classification required to be made. It is obvious that every part used in the assembly of motor vehicles or components for motor vehicles is capable of being used as a replacement part. Every condenser, every fan, every evaporator is capable of wearing out and will need to be replaced at some time. Every condenser, every fan, every evaporator may potentially at some time in its useful life require repair. Many repairs will involve the use of replacement parts. Every condenser, every fan, every evaporator used to assemble an automobile air conditioning unit may potentially be damaged in the course of the assembly process. If the Tribunal's approach to classification is correct every such component will be classified as a replacement part and attract the rate of customs duty applicable to goods of a kind used as replacement components. No component could ever fall outside the classification applicable to replacement parts. The approach to classification adopted by the Tribunal leads to a result which is, with respect, bizarre.

34 With respect, also, the difficulty can not be avoided by saying, as the learned primary Judge did, that it was open as a matter of fact to the Tribunal to reach the classification conclusion it did. In other words, if the task of classification is properly to be engaged in the mere fact that parts of the present kind are used by others as replacement components or even that the importer itself uses some parts as replacement components will not, without more, provide an answer.

35 In my view the proper approach to the question of classification here, where it is obvious that the imported parts are capable of being used either as original parts for the assembly of motor vehicle air conditioning units or to replace parts that had previously been imported and used in the assembly of such motor vehicle air conditioning units is to consider what the essential character of the particular imported goods is. It can be accepted both from the language of the particular sub-heading and from the fact that customs duty will be payable on entry and before actual use, that the question how the particular parts are in fact used, will, subject to the comments below, be irrelevant to the question. That does not mean, however, that the purpose for which the goods are imported will be irrelevant.

36 Relevant to the determination of the essential character of the goods will be matters such as whether the goods are specifically adapted for use as spare parts or whether they are specifically adapted for use in the assembly of air conditioning kits, the quantity imported (which, if relatively small, may suggest that the goods are really for use as replacement parts), any packaging which may illustrate the real nature of the items in question but also whether the goods are imported for use in the assembly of motor vehicle air conditioning units or for use, by sale or otherwise as spare parts. One is familiar in some areas, this may or may not be the case here) with goods being marketed as "genuine spare parts". Such goods, if packaged before import could easily be recognised as goods of a kind used as replacement parts.

37 Like Megaw LJ in Mechanical Services I am of the view that goods cannot, for customs classification, be treated as belonging to more than one "kind". Further, where no distinction exists between articles which are of the kind used as replacement components, and those which are not, (and the present is such a case) the only way in which the relevant kind can be ascertained will be by ascertaining what the exclusive or primary purpose is for which the goods are imported. Subsequent use, may be the best evidence of that purpose. In my view it will generally be the case with goods of the present kind, that they will take their character from the purpose of the importing, rather than anything which is an inherent quality of the goods themselves.

38 In the present case the evidence before the Tribunal was that the total spare parts business of Air International was budgeted to account for 4.1% of the Air International's motor vehicle air conditioning business and that sales of spare parts to non vehicle manufacturers and non-importer/distributors represented 0.266% of Air International's motor vehicle air conditioning business. There were sales of parts to the motor vehicle manufacturers who installed the kits in their motor cars, no doubt to use as replacement parts for the original parts supplied which for some reason were defective. The evidence was silent as to what was done by non manufacturers who, so the evidence said, purchased spare parts in "minimal quantities", supplies of which were said in the 2000/2001 financial year to have had a value of less than $350,000.

39 These figures compared with a turnover for Air International of some $119 million in the financial year 2000-2001.

40 What conclusions one should draw from these figures is a matter for the Tribunal, not for the Court.

41 As is, by now, obvious, I am of the view that the Tribunal erred in law by applying the wrong test in characterising the goods imported by Air International as goods of a kind used as replacement components. The test it applied, namely, of enquiring whether similar goods (or even the particular goods) were used from time to time as replacement parts, was erroneous. It follows, in my view, that the appeal should be allowed and the matter remitted to the Tribunal to determine the question of classification by applying the correct test, with or without the taking of further evidence in the discretion of the Tribunal. Customs should pay the costs of the appeal and of the hearing below.

42 I should add, that in my view Air International has not established that there was any finding of the Tribunal not open to it. I have read all the material which was before the Tribunal, including witness statements with annexures and a transcript of the cross examination of some of the witnesses. Apart from the monetary figures which I have set out earlier in this judgment there is nothing in this material which casts any real doubt on the Tribunal's factual findings.