IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LONDON TRIBUNAL CENTRE
(MR RODNEY HIGGINS)
London WC2A 2LL
B e f o r e :
LORD JUSTICE JUDGE
MR JUSTICE CARNWATH
|JOHN RICHARD LINDSAY|
|- v -|
|COMMISSIONERS OF CUSTOMS AND EXCISE|
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 020 7421 4040 Fax: 020 7831 8838
Official Shorthand Writers to the Court)
MR PHILIP BAKER and MS CLAIRE SIMPSON (Instructed by Edward Woodcraft, Essex, IGI 4NF) appeared on behalf of the Respondent.
Crown Copyright ©
LORD PHILLIPS, MR:
The statutory framework
(1)In this Order-
'Community traveller' means a person who makes a journey between a member State and the United Kingdom .... or a person who is about to embark or has embarked on a shuttle train in France for a journey to the United Kingdom;
'cross-border shopping' means the obtaining of excise goods duty and tax paid in the Economic Community provided that payment has not been, and will not be, reimbursed, refunded or otherwise dispensed with;
'own use' includes use as a personal gift provided that if the person making the gift receives in consequence any money or money's worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order.
3. Relief from duty of excise - cross-border shopping
Subject to the provisions of this Order a Community traveller entering [a control zone or] the United Kingdom shall be relieved from payment of any duty of excise on excise goods which he has obtained for his own use in the course of cross-border shopping and which he has transported.
[3A Relief from duty of excise - conditions - shuttle train goods
(1) In relation to shuttle train goods, this article shall have effect for the purpose of determining whether relief has been treated as having been afforded under article 3 above.
(2) No relief shall be treated as having been afforded if the goods are held for a commercial purpose.
(3) Where the shuttle train goods exceed any of the quantities shown in the Schedule to this Order the Commissioners may require the person holding the goods to satisfy them that the goods are not held for a commercial purpose.
(4) In determining whether or not any person holds shuttle train goods for a commercial purpose regard shall be taken of the factors listed in sub-paragraphs (a) to (j) of article 5(2) below.
(5) If the person holding the goods is required so to do but fails to satisfy the Commissioners that he does not hold them for a commercial purpose, it shall be presumed that the goods are held for a commercial purpose.
(6) Where the person holding the goods so fails to satisfy the Commissioners that he does not hold them for a commercial purpose, for the purpose of any proceedings instituted in accordance with paragraph 8 of Schedule 3 to the Customs and Excise Management Act 1979 or any appeal under section 16 of the Finance Act 1994, his failure shall cause the goods to be treated as 'goods held for a commercial purpose'.
The factors listed in Article 5(2) are the following:
(a) his reasons for having possession or control of those goods;
(b)whether or not he is a revenue trader;
(c)his conduct in relation to those goods and, for the purposes of this sub-paragraph, conduct includes his intentions at any time in relation to those goods;
(d)the location of those goods;
(e)the mode of transport used to convey those goods;
(f)any document or other information whatsoever relating to those goods;
(g)the nature of those goods including the nature and condition of any package or container;
(h)the quantity of those goods;
(i)whether he has personally financed the purchase of those goods; and
(j)any other circumstance which appears to be relevant."
(b)400 cigarillos (that is to say cigars weighing not more than 3 grammes each);
(d)1 kilogramme of tobacco products other than in a form mentioned in paragraph (a), (b) or (c) above;
(e)10 litres of spirits;
(f)20 litres of intermediate products (that is to say products defined as intermediate products in Article 17(1) of the Council Directive 92/83/EEC);
(g)90 litres of wines (but only 60 litres may be sparking wines);
(h)110 litres of beer."
"(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say-
(a)to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c)in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."
'Goods held for a commercial purpose'
"As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired."
"1. Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purpose in another Member State.
In this case, the duty shall be due in the Member State in whose territory the products are and shall become chargeable to the holder of the products.
2. To establish that the products referred to in Article 8 are intended for commercial purposes, Member States must take account, inter alia, of the following:
- the commercial status of the holder of the products and his reasons for holding them,
- the place where the products are located or, if appropriate, the mode of transport used,
- any document relating to the products,
- the nature of the products,
- the quantity of the products.
For the purposes of applying the content of the fifth indent of the first subparagraph, Member States may lay down guide levels, solely as a form of evidence. These guide levels may not be lower than:
(a) Tobacco products
cigarettes 800 items
cigarillos (cigars weighing not more than 3g each) 400 items
cigars 200 items
smoking tobacco l,0kg;
(b) Alcoholic beverages
spirit drinks 10 l
intermediate products 20 l
wines (including a maximum of 60 l of sparkling wines) 90 l
beers 110 l."
The Commissioners' Policy
"4. 55. .... The [Commissioner's] policies are designed to penalise those who make a living from selling alcohol and tobacco without payment of duty, not the honest Community travellers. In 1993 when the Single Market was introduced the revenue eroded on smuggled excise goods brought into the UK was in the region of £30 to £40 million. By the year 2000 this had escalated to £3.8 billion from tobacco smuggling alone. To try and keep abreast of this increasing problem more robust methods of dealing with the seizure and reclamation of vehicles used to smuggle excise goods into the UK were initially brought into force in 1998. Then the general practice was that, if an individual had excise goods seized for the first time, the vehicle could only be restored after the payment of a sum of £250 or a sum equivalent to 50% of the duty due on the goods seized as liable to forfeiture whichever was the greater.
56. Despite this tougher policy being applied, the use of vehicles in excise smuggling continued in an upward trend and to outline this, in 1998, a total of 3,163 vehicles were seized containing excise goods with a revenue value of £142 million and in 1999 there were 5,200 vehicles seized containing excise goods to the value of £348 million.
57. The UK Government introduced its current policy on 13 July 2000 after the Paymaster General had, on 22 March 2000, reaffirmed the Government's commitment to ensure that smugglers face the toughest possible sanctions and penalties available. Now vehicles are seized and not restored on the first attempt they are detected being used in smuggling. This policy applies to all types of motor cars and light commercial vehicles except those which are genuinely rented. Only exceptional circumstances can justify a departure from the policy. An example was a motor car adapted for and used by a disabled driver."
"1. The Government's intention to tackle tobacco smuggling announced on 22 March by the Paymaster General included not only a £209 million investment in Customs but also a commitment to ensure that those caught would face the most severe penalties and sanctions available.
2. One of the most direct ways to strike at the smugglers' activities is by seizing the vehicles they use to smuggle in their contraband. As the Paymaster General has said, we are determined to ensure that this sanction is as tough as it can be. The more effective this sanction is, the more we will hit the smugglers in the pocket and reduce the profitability of their illegal trade.
3. We are now in the process of applying the toughest possible sanctions in terms of our vehicle seizure policy. We are tackling the different components involved - eg privately owned cars and light goods vehicles, hire or lease vehicles and commercial tractors & trailers - in separate, but coherent, bite-size chunks.
6. This revised policy sends out a strong message about vehicles to all those involved in smuggling: there are no second chances - if you use it, you will lose it. This policy is aimed at those who are profiting from smuggling or who are deliberately flouting the law. We would expect discretion to be applied where it is a case of the infrequent honest traveller who is genuinely unaware of the conditions of the Personal Reliefs Order and has made modest purchases on behalf of family who have not travelled.
Revised Policy - 'No Second Chances'
8. With immediate effect, our headline policy will be that any car or light goods vehicle (other than rented) used for smuggling or for transporting smuggled or diverted excise goods within the UK will be seized and not restored. Restoration will be very much the exception, not the rule, irrespective of whether it is the first time the smuggler has been caught. This policy is to be applied vigorously both at the ports and at all inland locations where it can be proved that a vehicle was used to transport goods which are liable to seizure.
11. Occasions which merit on the spot restoration will be very rare and by their nature unpredictable. Therefore, this DCL does not attempt to explore every possible scenario when restoration on the spot might be applicable. It leaves that decision to officers on the ground, with the advice of their senior officers where appropriate, who have the necessary expertise and experience. However, in general, the decision to restore should be because:
*it would be entirely disproportionate to refuse to restore the vehicle (one example could be on a first time 'technical' offence where a minimal amount of tobacco has been bought back for a relatives consumption with payment at cost)
*it would be seen as inhumane not to restore.
12. It is important for seizing officers to bear in mind the issues of proportionality and human rights (ECHR) when considering whether restoration is appropriate. It is not intended that restoration will be an option in any other circumstances."
The primary facts
"Mr Lindsay is a night lorry driver who works at nights on weekdays solely in Great Britain. He lives at his parents' home in Dagenham, Essex and has a girlfriend who lives elsewhere. They have two children aged 6 and 3 and his girlfriend is pregnant. He supports his young family. He has four sisters and one brother. The four sisters are all married and live in their own homes.
In the year 2000 on 13 May, 27 May, 11 June and 9 July, Mr Lindsay made journeys in his vehicle from Cheriton to Coquelles and thence into France and Belgium to purchase cigarettes, tobacco and alcohol.
The last two occasions were Sunday trips and Mr Lindsay used the early bird service of the Channel Tunnel shuttle train leaving Cheriton at approximately 5.30am and arriving back at Coquelles between 9.15am and 9.30am. The summer time in France and Belgium is one hour ahead of the UK.
On Sunday 23 July 2000 Mr Lindsay, accompanied by his father, drove his vehicle from Dagenham to catch the same early bird service as before from Cheriton at about 5.30am. As on the previous occasions, the sole purpose of the visit was to buy excise goods whose retail price in Belgium and France is considerably less than in the UK because of the UK excise duties. They drove to a town in Belgium called Adinkerke, just across the border with France where they purchased the cigarettes and tobacco. The cost was £2,107 and they paid in cash. The cost of the cigarettes and tobacco included Belgian excise duty.
They then returned to France and stopped at a store near Calais to purchase the alcohol.
Mr Lindsay and his father went through French Customs and were stopped at 8.55am by British Customs Officers at the juxtaposed immigration control at Coquelles.
Mr Lindsay and his father were interviewed by Customs officer, Laura Bloomfield. She was told that they had been to France that morning to a cash and carry supermarket off junction 19 on the Motorway system. They were returning to Dagenham where they lived when they were stopped. Mr Lindsay was asked what he had bought and he replied 'booze, cigarettes and tobacco'. The back of the car and the unlocked boot were examined and found to contain goods which consisted of:
(i) two boxes of Benson & Hedges cigarettes (totalling 15,300 with a revenue value of £2,026.62).
(ii) one box of Superkings cigarettes (totalling 3,200 with a revenue value of £418.56).
(iii) one box of Golden Virginia hand-rolling tobacco; and
(iv)one box of Old Holborn hand-rolling tobacco (weighing together 10 kilos with a revenue value of £951)
(v)there were also loose cartons of Silk Cut cigarettes and a few cases of beer and bottles of spirits.
Mr Lindsay and his father were asked who were the owners of the goods. Mr Lindsay replied that the goods belonged to both of them. When asked whether all of them were intended for the two of them, Mr Lindsay replied that some of them were for other family members who had already paid some money for cigarettes."
"You have in your possession excise goods in excess of the guidance levels, which for tobacco is one kilogram, cigarettes is 800. Relief from payment of UK excise duty is afforded subject to the condition that these goods are not imported or held or used for a commercial purpose. I require you to satisfy me that these goods have not been imported for a commercial use. If you fail to do so, then these goods will be seized as being liable to forfeiture. However, at this point you are not under arrest and you are both free to leave these controls."
The first reconsideration
(i)the appellant had tobacco and cigarettes many times in excess of the Guidance levels;
(ii)he had received payment for the goods imported on behalf of persons not travelling;
(iii) he had declined to stay and answer questions
and therefore failed to satisfy theofficers as to his entitlement.
tc \l 1 ""The review
"The Officer explained to you that due to the quantity of excise goods you were importing you were required to satisfy her that the excise goods were for your own use and not some other (commercial) purpose. She told you that if you failed to so the goods would be liable to forfeiture."
"Relief from the payment of any excise duty afforded under the 1992 Order is only if the goods are for own use and that the individual has transported them. This is not the case here. You had entered into a commercial transaction with your family to purchase excise goods on their behalf. They are deemed not to be for 'own use' under the legal definition quoted earlier, therefore there is no relief from the payment of excise duty on these goods and this rendered them liable to forfeiture."
With effect from 14 July 2000 the Commissioners' policy regarding privately owned vehicles used for the improper importation of excise goods is that they will not be restored, even on the first occasion they are so used. That policy applied at the time of the seizure of the vehicle. A car may however, be restored to a third party where it has been stolen and the matter was reported at the time.
Relief from the payment of any excise duty afforded under the 1992 Order is only if the goods are for own use and that the individual has transported them. This is not the case here. You had entered into a commercial transaction with your family to purchase excise goods on their behalf. They are deemed not to be for 'own use' under the legal definition quoted earlier, therefore there is no relief from the payment of excise duty on these goods and this rendered them liable to forfeiture."
The Tribunal's decision
"7. The seizure of Mr Lindsay's car was a penalty out of all proportion to the question or amount of tobacco involved. The car was new and worth approximately £15,000. Mr Lindsay having purchased the car with a finance agreement with Ford Credit in the sum of approximately £12,000.
8. The amount of tobacco in question amounted to £2,107. Even if the duty on that was the same amount again, since the tobacco has been seized by Customs and Excise and its restoration is not being sought by Mr Lindsay, Mr Lindsay has already effectively incurred a substantial penalty equal to the duty which would have been paid. For the car to be seized on top of that is oppressive and disproportionate to the matter concerned. Seizing a car of this value exceeds even the amount of the fine which would ordinarily be payable in a criminal matter."
"Except for the Appellant's mother, the others had given the Appellant some £900 for their cigarettes. The total cost of the cigarettes and tobacco acquired in Adinkerke, Belgium was £2,107 and therefore approximately 43.8% of the total goods were bought with money provided by others and this quantity was not for 'own use' of the Appellant and his father. We consider these words 'own use' do not include other members of the family who pay in advance for tobacco brought back for their use. The Appellant's mother does not come within this category because her cigarettes were a gift from the Appellant and his father. We also find that this arrangement with other members of the family made the transaction 'commercial' since they were benefiting financially from the transaction in that the excise goods were cheaper than in the UK. The Appellant and his father were effectively agents for other members of the family in this enterprise."
"Every natural legal person is entitled to the peaceful enjoyment of his possessions. On-one should be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provision shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
"According to the Court's well-established case law, the second paragraph of Article 1 must be construed in the light of the principle laid down in the Article's first sentence. Consequently, an interference must achieve a 'fair balance' between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as whole, including the second paragraph: there must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued."
"We accept the evidence of Customs Officer Florence that the policy was hardened considerably and no consideration is given to the value of the motor vehicle seized in relation to the value of the duty sought to be avoided. The tribunal accepts that the Respondents have the right to exercise a policy with regard to such seizure, but it must achieve the 'fair balance' referred to in the Air Canada case. In our judgment the current policy does not achieve the fair balance since it excludes the reviewing officer from giving any real consideration to proportionality which, as has been demonstrated in this decision, is a fundamental concept of European law.
In this appeal, under the present policy, the reviewing officer considering restoration of a vehicle is excluded by the Commissioners' policy from giving full consideration to all relevant matters when deciding whether or not to restore the vehicle to its owner subject to conditions or otherwise. The evidence of Mrs Florence on this point is quite clear. Her discretion under s 152 of CEMA is fettered by the policy.
The Commissioners are entitled to formulate a policy, but where that policy restrains a discretion conferred by statute, that policy is at first sight unreasonable.
The tribunal finds that the value of the vehicle at time of seizure was at least £10,500. The reasons for that are that the new cost was just under £12,000 and Glass's guide for a year old Ford Focus was £8,500. This car was four months old and only had 5,000 miles on the clock. The excise duty assessed on the forfeited goods was approximately £3,500. These values are disproportionate and this factor should have been taken into account by the reviewing officer. She should not have ignored it.
The appellant is a lorry driver with a partner and small family of two children to support. He also has to pay hire purchase instalments on his motor car with most of the loan of £6,000 outstanding at the date of seizure. We find that by being deprived of his vehicle he suffers undue hardship."
"Exercising its power under s 16(4) of the Finance Act 1994 the tribunal directs that the seized vehicle is to be restored to the Appellant.
In the event of the vehicle having been disposed of, or having deteriorated whilst in the custody of Customs, then the tribunal has given guidance in paragraph 86 of this decision as to the value pertaining at the date of the seizure which the Commissioners shall take into account when compensating the Appellant. If the parties are unable to agree the amount of compensation then either party is at liberty to apply to the tribunal for a direction in this respect."
The issues before us
The Commissioners' Contentions
"So is application of the 'use it and lose it' policy proportionate? In the words of the Air Canada decision the question is whether the policy and the decision as to its application in the present circumstances represents a reasonable relationship for the proportionality between the means employed and the aim pursued.
We start with the aim pursued. We see this as a legitimate aim for the reasons already given. The aim is found in the summary of Gerry Dolan's evidence. The policy is designed to check the increase in smuggling and the loss of revenues and the damage to the business of local traders.
On the other side of the balance is the means employed. Seizure and the refusal to restore the vehicle are, on first impression, direct violations of the owner's fundamental right of peaceful enjoyment of this vehicle. The result is capable of being arbitrary to the point of extravagant. The financial loss resulting from the refusal to restore an expensive car could many times exceed the loss of revenue sought from the smuggling operation. A less invasive way of dealing with the seized car might be to offer to release it on payment of a prescribed amount. Those are negative features which on their face tell against the Commissioners' policy being a proportionate reaction. But there are other factors which tend to balance up the 'means employed' by the Commissioners with the aim pursued. The first of these is that the actual means employed, ie seizure and refusal to restore, is a suitable way of preventing smuggling. Take away the vehicle and it can no longer be used for bootlegging. When a vehicle has been used every ten days to make short round trips to Calais and back it is realistic that that vehicle should be removed from circulation as a means of bootlegging. Second, to refuse to restore is even-handed. It is a course of action that is blind to the value of the vehicle and to the financial means of the owner. In other words it treats all bootleggers alike. This tends to outweigh the other, less invasive, course open to the Commissioners of offering to return the vehicle on payment of a monetary amount. Third, the owner who makes a bootlegging trip to France and whose vehicle is taken will know the score before he embarks on his smuggling operations. In a real sense he ventures his vehicle as one of the stakes of his dishonest enterprise. He foregoes his claim to any unqualified fundamental right of peaceful enjoyment of the vehicle before he sets off on his trip. Fourthly, so long as the seizure and refusal to restore the vehicle does not cause physical suffering or result in excessive inconvenience to defenceless third parties, its impact will be directed at the owner.
Every case will have to be dealt with on its own facts. But in principle we do not see a lack of balance when the factors set out above are brought into the reckoning. Where the owner is the driver he will know that he risks losing the vehicle when he sets out to bootleg. He takes the risk and loses when he is caught."
Mr Lindsay's contentions
The applicable principles
European Community law
"Subject to those observations, it must be borne in mind that, in the absence of harmonisation of the Community legislation in the field of the penalties applicable where conditions laid down by arrangements under such legislation are not observed, the Member States are empowered to choose the penalties which seem appropriate to them. They must, however exercise that power in accordance with Community law and its general principles, and consequently with the principle of proportionality."
"The administrative measures or penalties must not go beyond what is strictly necessary for the objectives pursued and a penalty must not be so disproportionate to the gravity of the infringement that it becomes an obstacle to the freedoms enshrined in the Treaty."
"It is to be observed that although there is a trend in the practice of the Contracting States that the behaviour of the owner of the goods and in particular the use of due care on his part should be taken into account in deciding whether or not to restore smuggled goods - assuming that the goods are not dangerous - different standards are applied and no common practice can be said to exist. For forfeiture to be justified under the terms of the second paragraph of Article 1, it is enough that the explicit requirements of this paragraph are met and that the State has struck a fair balance between the interests of the State and those of the individual. The striking of a fair balance depends on many factors and the behaviour of the owner of the property, including the degree of fault or care which he has displayed, is one element of the entirety of circumstances which should be taken into account."
"In relation to other decisions, the powers of an appeal tribunal on appeal under this section shall also include the power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal."