EXCISE DUTY – whether requirement to provide a guarantee under art 13 of Council Directive 92/12/EEC means that the person's liability is limited to the amount of the guarantee – no – appeal dismissed
LONDON TRIBUNAL CENTRE
GARRETT TRADING LIMITED (No. 2) Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS Respondents
Tribunal: DR JOHN F AVERY JONES CBE (Chairman)
PRAFUL D DAVDA FCA
Sitting in public in London on 9 July 2008
Andrew Young, counsel, instructed by Mills & Reeve LLP, for the Appellant
Rebecca Stubbs, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2008
An authorized warehousekeeper shall be required to:
(a) provide…a compulsory guarantee to cover movement subject to article 15(3), the conditions for which shall be set by the competent authorities of the Member State in which the tax warehouse is authorized….
Article 15 provides:
- The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorized warehousekeeper of dispatch, as provided for in Article 13, or if need be, by a guarantee jointly and severally binding both the consignor and the transporter. The competent authorities in the Member States may permit the transporter or the owner of the products to provide a guarantee in place of that provided by the authorized warehousekeeper of dispatch. If appropriate, Member States may require the consignee to provide a guarantee.
The detailed rules for the guarantee shall be laid down by the Member States. The guarantee shall be valid throughout the Community"
Article 20 provides:
"1. Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the Member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15 (3), without prejudice to the bringing of criminal proceedings. …"
(1) The Tribunal's subsequent decision in Anglo Overseas limited v HMRC (2008) Excise Decision 01090 was correct in the following reasoning:
(2) Lord Hoffmann in Greenalls Management Limited v Customs and Excise Commissioners  1 WLR 1752 at  recognised the dual role of providing a guarantee and being personally liable under the former Regulations: "The fact that someone can be required to give a bond is not inconsistent with his being personally liable. Usually it is his own liability which the bond is intended to secure."
(3) In van de Water, Case C-325/99, the European Court of Justice said: "…it follows from the scheme of the Directive, and from the ninth recital in the preamble, that the national authorities must in any event ensure that the tax debt is in fact collected." This was confirmed in Cipriani, Case C-395/00 at . These are inconsistent with any limitation of the liability.
- It is, I think, the use of the phrase "provide a guarantee" which has led to confusion. It does not appear to be a mistaken translation: the corresponding French text is "fournir une garantie", which has the same meaning. But what is intended, in my judgment, is that the warehousekeeper is expected to guarantee the duty. It may be that the draftsman had in mind that the warehousekeeper would execute some document to the effect that he assumed that obligation; what the Directive does not do, in my judgment, is allow for the warehousekeeper (or other person assuming liability) to provide a third party "guarantee", given (as in this case) by an institution such as an insurance company, to replace and, as is suggested in this case, limit his own liability. There is nothing in the Directive or in DSMEG which, in my judgment, allows a guarantor to limit his liability, or which permits the fiscal authority to accept a guarantee for anything less than the full amount of the duty.
We understand that this decision is under appeal but the parties did not want us to hold up our decision until after the appeal.
A guarantee is an accessory contract by which the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person, whose primary liability to the promisee must exist or be contemplated. (Halsbury's Laws vol 49 para 1013.)
There must therefore be a primary obligor whose liability is guaranteed by a secondary obligor. The question is whether the term is used in a different sense in the Directive, such as of a person's being liable to pay a contingent liability. We do not consider that it is. Article 15(3) requires various people to "provide a guarantee" that is valid throughout the Community, the detailed rules for which must be laid down by the Member States. If the Directive had merely wanted to specify who is the primary obligor of payment of the contingent liability to duty art 20 would have been sufficient without the need for arts 13 and 15 requiring detailed rules for something, for the validity of something throughout the Community, or for something to be provided. Alt this seems to imply that the guarantee referred to is a true guarantee from a secondary obligor.
"1. The amount of the guarantee should reflect the risk inherent in the activities of the warehousekeeper or the registered trader.
Reference to the amount of the guarantee shows that it cannot be a reference to a primary obligation to pay the whole of the contingent duty. We were also shown evidence that the Commission was taking infringement proceedings against Portugal for requiring a guarantee of 2 per cent of the average monthly amount of excise duty paid in the previous year, with a minimum and maximum. This is also consistent with our reading of the Directive as requiring a true guarantee, with the dispute turning on the amount.
"1. Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due… from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15 (3),…
The problem with this wording is that art 15(3) does not identify a person who guaranteed payment; it merely says that various people must "provide a guarantee," and so the cross-reference must be to the person providing the guarantee.
- - (1) Subject to paragraph (2) below, where there is an excise duty point as prescribed by regulation 3 or 4 above, the person liable to pay the excise duty on the occurrence of that excise duty point shall be the person shown as the consignor on the accompanying administrative document or, if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person.
(2) Any other person who causes or has caused the occurrence of an excise duty point as prescribed by regulation 3 or 4 above, shall be jointly and severally liable to pay the duty with the person specified in paragraph (1)."
This puts the primary obligation to pay the excise duty on the person shown in box 10 "as having arranged for the guarantee" thus demonstrating such dual role.
JOHN F AVERY JONES
RELEASE DATE: 18 July 2008
LON/06/8024 and 8003