First-tier Tribunal (Tax)

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Cite as: [2009] UKFTT 133 (TC)

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[2009] UKFTT 133 (TC)

TC00101

Appeal number MAN/08/8101

EXCISE GOODS RESTORATION – VEHICLE RESTORATION – own use? – yes – appeal allowed.

FIRST-TIER TRIBUNAL

TAX

LAWRENCE AND JOAN JONES Appellants

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: Judge Richard Barlow

Member Warren Snowdon

Sitting in public in North Shields on 27 March 2009.

The Appellants in person.

Mr James Puzey of counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

Mr and Mrs Jones appeal against the commissioners' refusal to restore to them 228 litres of wine, 187.5 litres of beer, 6Kg of tobacco and a Ford Galaxy motor vehicle all seized at Hull on 15 April 2008. Mr and Mrs Jones requested restoration but it was refused by a letter dated 22 May 2008 and, following a review which upheld that decision, the appeal came before us sitting in North Shields on 27 March 2009.

The Tribunal's powers in a case like this are limited, by section 16(4) of the Finance Act 1994, to deciding whether we are satisfied the decision was one the commissioners could not reasonably have arrived at. If we are so satisfied we can direct that the decision shall cease to have effect and order a new review to be conducted in accordance with our directions.

Mr Puzey asserted that we should make a ruling first about whether it would be an abuse of process for the appellants to be allowed to proceed with their appeal, in so far as it raises questions about the legality of the seizure of the goods, on the ground that the appellants had required the respondents to commence condemnation proceedings but had withdrawn that request before a Magistrates' Court or the High Court had adjudicated on it and before the respondents had commenced the proceedings in a Magistrates Court or the High Court, so that the goods in question were condemned as forfeit under paragraphs 5 to 7 of Schedule 3 to the Customs and Excise Management Act 1979.

It would be inconvenient if the Tribunal had to adopt that two stage approach to the questions potentially before it and to try to separate out the evidence that is relevant to the question of abuse of process, particularly where, as is often the case, the appellant is unrepresented and can hardly be expected to understand the fine distinctions involved. Such a procedure might well require the Tribunal to withdraw and decide on the abuse issue and then give its decision on that and then resume later, possibly on a different day and hear the rest of the evidence; if it rules that it would not be an abuse of process for the appellant to raise the legality of the seizure.

In Gora –v- Customs and Excise Commissioners [2004] QB 93 the Court of Appeal had held that the only Court in which an importer could challenge a seizure of goods was a Court in which condemnation proceedings were instituted. It followed that the Tribunal had no jurisdiction to consider a case where the Court had condemned the goods as forfeit and that a deemed condemnation, that is to say a case where the owner of the goods had not required the commissioners to begin condemnation proceedings within the permitted time, would be in the same position as one where there had been proceedings.

In Gascoyne –v- Customs and Excise Commissioners [2005] 2 WLR 222 the Court of Appeal pointed out that that Court need not have made that holding in Gora (in legal terms that it was obiter dicta) in order to reach its decision but more importantly that, although it was correct as a matter of UK law, it did not necessarily afford an importer all the rights available to him in light of the European Convention on Human Rights. We would add that those rights might also be available as a matter of European Union Law given the terms of Council Directive 92/12/EEC which allows private persons to acquire (ie to import) excise goods in unlimited quantities if duty has been paid in the country of purchase and the goods are not for a commercial purpose.

Accordingly the Court of Appeal held as follows in the Gascoyne case (see paragraphs 44 – 57 of the judgment of Buxton LJ):

(1) Because of the rights conferred by the European Convention on Human Rights, the owner of the goods can re-open the question of the seizure in the VAT and Duties Tribunal where the goods have been condemned by the deeming provision in paragraph 5 of Schedule 3 to the Customs and Excise Management Act 1979 (i.e. where the owner has not required the commissioners to begin condemnation proceedings within the month allowed) but that right will not apply where a Court has actually condemned the goods following a finding that they were not for own use.

(2) The reason why UK law might not permit the issue of the correctness of the seizure to be considered by the Tribunal, when it should have been considered by the Courts, is not the literal interpretation of the legislation but the principles of procedural law known as res judicata and abuse of process, if their application precludes the Tribunal from deciding that issue.

We would add (see below for our reasons):

(3) Whether those rules do preclude the Tribunal from deciding that issue is therefore an issue relating to the Tribunal's jurisdiction to decide the substantive issues but that in itself does not preclude it from being decided in the same proceedings as the substantive matter if the Tribunal decides the abuse issue in the Appellant's favour.

The situation where the owner of the goods has required the commissioners to commence condemnation proceedings by giving a notice of claim under paragraph 4 of Schedule 3 to the Customs and Excise Management Act 1979 but withdraws that request either before the commissioners commence the condemnation proceedings or withdraws from those proceedings after they have been commenced but before the hearing, is not specifically referred to in the judgment of Buxton LJ.

It was long believed to be the case that paragraph 6 of that Schedule, which appears by use of the phrase "the Commissioners shall take proceedings" to be in mandatory terms, meant that condemnation proceedings once required had to proceed to a hearing in the Magistrates or High Court but Mann J held in the High Court in Commissioners for Her Majesty's Revenue and Customs –v- Mills [2007] EWHC 2241 (Ch) that, if the owner of the goods withdraws his claim, that has the effect that the goods are condemned as forfeit without a hearing (paragraphs 28 and 29 of the judgment) which is a species of deemed condemnation (paragraph 33). However, there is no res judicata where, as in this case, the notice is withdrawn before the condemnation proceedings are commenced and so the issue here is one of a potential abuse of process.

In Commissioners of Customs and Excise –v- David Weller [2006] EWHC 237 (Ch) Evans-Lombe J, gave judgment in an appeal by the commissioners against a Tribunal's interlocutory order that an appeal to the Tribunal could proceed where there had not been condemnation proceedings. During the course of the judgment he said (at paragraph 23) that at the full hearing the Tribunal would have to consider the facts including those relating to abuse of process more fully than had been the case in the interlocutory hearing and added:

"That tribunal may conclude, as a step in arriving at its decision that in all the circumstances Mr Weller should not be allowed to challenge the validity of the forfeiture. Though it is unlikely to do so if it was going to allow Mr Weller's appeal".

That last remark makes it clear that the Tribunal can find the full facts, including those relating to the substantive merits of the appeal, even at the stage in its reasoning where it is considering whether the appeal can be allowed to proceed. In our view that is a most cogent reason for hearing both the abuse and the substantive issues in the same proceedings.

Mr Puzey cited the case of Gascoyne –v- Customs and Excise Commissioners [2005] Ch 215 as authority for the proposition that the Tribunal has limited fact finding powers. In the case of Gora –v- Customs and Excise Commissioners [2004] QB 93 Mr Kenneth Parker QC, counsel for the commissioners, is recorded (at paragraph 38 of the judgment of Pill LJ) as having said:

"[The tribunal] satisfies itself that the primary facts upon which the commissioners have based their decisions are correct. The rules of the tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals".

Pill LJ endorsed that statement as correct in paragraph 39.

It follows that our ruling, given during the hearing, was that the abuse issue could be decided as part of a single hearing in which we would hear all the evidence and that is the procedure we adopted. It also follows from the remarks of Mr Parker QC in Gora, endorsed by the Court of Appeal, and the decision of Evans-Lombe J in Weller, which has not been overruled by the Court of Appeal, that we can also have regard to the merits of the appeal when deciding the abuse issue, though we do not go so far as to say those merits alone would answer the question whether it would be an abuse to allow the case to proceed.

We heard evidence from Mr Jones and read a statement from Julie Wiggs, the reviewing officer, and read documents, including officers' notebook entries, relating to the interviews of Mr and Mrs Jones.

We will deal first with the question of abuse of process.

It is common ground between the parties that the goods in question were jointly owned by Mr and Mrs Jones. They were seized in their presence so no notice of seizure was required. A seizure information notice addressed to Mr Jones shows that Notice 12A was issued. That notice sets out the rights of the owner in respect of requiring condemnation proceedings and the alternative of seeking restoration and attempts to explain that, if no claim against seizure is submitted in time, the person concerned will not be able to challenge the legality of the seizure when seeking restoration. We say that it attempts to make that distinction because experience has shown that lay people do not understand the distinction even though it is set out reasonably accurately in the Notice. We also add that the current state of the law with its division of jurisdiction between the Courts and the Tribunal has been repeatedly criticised both in the Tribunal and in the Higher Courts. The Notice makes no mention of the traveller's Human Rights Convention or Community Law rights.

On 22 April 2008 a firm of solicitors wrote to the commissioners requiring them to commence condemnation proceedings. The actual wording of the letter included the following:

" We are acting on behalf of Mr. Lawrence Jones and Mrs. Joan Jones and write to confirm that our client wishes to appeal to court against the legality of the seizure of the following items:" …

"Please accept this letter as notice that our clients wish to appeal against the customs legal right to seize the items listed above".

There is no reference at all in that letter to any request for restoration and it could only be taken as a notice of claim.

Despite that, on 28 April 2008, the respondents wrote to the solicitor a standard form letter saying that the appellants had chosen "the appeal options" consisting of appealing against legality of seizure and requesting restoration and saying if that was not correct they must inform the commissioners immediately.

That letter also said:

"If you decide to withdraw from condemnation proceedings you must accept that the goods are legally seized e.g. in the case of intra EU excise goods that they were imported for a commercial purpose. This is a matter of law. You will no longer be able to contend otherwise".

The letter makes no reference to any Human Rights Convention or Community Law rights that might affect the correctness of the assertion about the law contained in it.

Following that letter a different firm of solicitors wrote a letter dated 14 May 2008 to the commissioners which included the following:

"Our clients do not wish to proceed with the appeal against the legality of seizure and we shall be obliged therefore if that aspect of their application can be withdrawn".

"Although our clients have accepted our advice that given the background to this matter there is no legal merit in an application challenging the legality of seizure they maintain that the goods which they attempted to import were not for commercial disposal".

Those two passages are, of course, inconsistent with each other to anyone properly familiar with the law in this respect.

In evidence Mr Jones said the first solicitor he consulted had said he should appeal the legality of the seizure and "something else". The second solicitor had said that he should not appeal the legality of the seizure because in his experience Mr and Mrs Jones would not have won. He had said Customs and Excise were a law unto themselves and once they had seized the goods the only way to get them back would be to appeal for leniency and rely on the severity of the seizure. We consider that the phrase "no legal merit" in the letter of 14 May 2008 should be read in light of that advice rather than as a reference to any factual issue conceded by the appellants.

Mr Jones added the, in our view very pertinent, comment that Mrs Jones would not contemplate going to the Magistrates Court to give evidence because of her condition. She was ill at the time and although he was not sure if she would have needed to take part in the proceedings she would have had to appeal. Later Mr Jones told us that Mrs Jones was "bad with her nerves" and that for a time after the seizure of the goods she was unable to leave the house or to sleep properly. Mr Jones told us that he had only told his wife the day before the hearing before us that it had been fixed for hearing, so as to lessen the length of time in which she would worry about coming to the Tribunal.

Mrs Jones did not give evidence (Mr Puzey had indicated he had no more questions for her than those he had asked Mr Jones) but she did state to us, when asked if she wanted to add anything to her husband's submissions, that she would not have "put myself through this" if she had intended to sell any of the goods. She implied that she felt strongly about the case but that it had been an ordeal coming to the Tribunal and we concluded that it would have been more of an ordeal for her to have gone to the Magistrates Court.

We are satisfied that what the appellants said about why they did not pursue the condemnation proceedings is true.

There may well be cases where it would be an abuse of process for an appellant to be allowed to pursue an appeal to the Tribunal because they have taken legal advice and withdrawn their notice of claim in light of it but we do not regard that as being necessarily a conclusive factor. We hold that this appeal can proceed without there being an abuse of process because Mr and Mrs Jones were incorrectly advised by their solicitor and it is understandable that lay people cannot understand the fine distinctions about the legal processes involved in a case like this one. In particular we also take into account Mrs Jones's condition. Given the nature of the decision we have reached on the substantive issue this is also a case where Evans-Lombe J's judgment in Weller, quoted in paragraph 10 above, is highly relevant.

We now turn to our findings of fact about the substantive issue.

Mr and Mrs Jones travelled to Zeebrugge from Hull and back by overnight ferry and spent the intervening day in Belgium and France where they bought the goods in question. They spent a total of £774 and €376 on the excise goods. Their financial situation as explained in undisputed evidence by Mr Jones is the following. They are both retired. Their joint annual income from pensions and state benefits is approximately £23,250 and they have savings of about £100,000 mostly from money received by Mr Jones on retirement. They own their home and have paid off their mortgage. We find that although the amount they spent was substantial it is not an amount that was beyond their means and so the amount does not in itself suggest that the goods were for commercial use.

Mr and Mrs Jones were regular travellers to the Continent for short stays in Belgium or France and Mr Jones agreed when cross examined that, according to Customs records, they had travelled 8 times in the last nine months of 2007 so that the total for twelve months may have been more than 8 times. When he was first intercepted at Hull an officer had a short conversation with Mr Jones which was recorded in a notebook. Mr Jones readily stated that he had previously travelled five weeks before and said that he had travelled 6 to 8 times in the last twelve months. He made these statements before he had any reason to think that Customs knew exactly how many times he had travelled. We do not regard the statement about 6 to 8 times as being so far removed from the truth as to be anything other than a truthful estimate. Indeed given that Mr Jones admitted up to eight visits before he knew Customs had a record showing eight visits in less than a year we regard his answer as supportive of his case. A dishonest person might well have given a lower than truthful estimate when challenged in those circumstances.

There were some minor discrepancies between what Mr Jones and Mrs Jones said about each others' tobacco consumption but we do not regard them as significant.

Mrs Jones was alleged, in the reasons for the seizure as stated in the officer's notebook, to have said she smoked a pouch of tobacco a day which is a huge amount but in the notes of the interview she said "one packet". In the Statement of Case and the review this is referred to as if it were still a point against Mrs Jones though the reference to a pouch has been recorded correctly as being to a packet. Mrs Jones made it clear in our view that she smokes mainly manufactured cigarettes and that the tobacco was for her family and that she only smoked HRT when she was out of manufactured cigarettes. There is therefore no inconsistency, contrary to an allegation made by the respondents, between her evidence about a packet and that of Mr Jones who had said she mainly smoked manufactured cigarettes.

Mr Jones said that the quantity of drinks purchased was because they were planning a surprise fortieth birthday party for Mrs Jones's daughter. It was alleged that he had then elaborated untruthfully by adding references to other parties, having realised that the amount of goods was too great to be credible for one party for forty people (as indeed it probably was). In fact he mentioned all the parties in the same reply. He did not add references to other parties only after realising that his first answer was incredible. His step daughter was indeed approaching forty as a copy of her passport proved.

Both appellants were alleged to have understated the amounts of excise goods imported on previous trips but there is no evidence that they had imported large quantities on all the earlier trips and they both independently mentioned that they had imported a large amount on this occasion because they were going to change the car for a smaller one.

Our conclusion about the factual issue concerning whether the goods were for the appellants' own use, being partly for their own consumption and partly as gifts to family without reimbursement, is of course based to an extent on our view of Mr Jones as a witness. He gave his evidence without prevarication or exaggeration and we found him to be a truthful witness. That impression was also supported by the unprompted remarks of Mrs Jones when we asked her if she wanted to add anything to his submissions to us. We have mentioned some of this in paragraph 22 above but it bears repeating here. Mrs Jones put herself through an ordeal to come to the Tribunal. Her actual words were "It took a lot for me to come here today. If I had known it was going to be an ordeal like this I would not have come". She also said "We have come here today because it is so unjust that we have lost our car". Bearing in mind that Mrs Jones had found the Tribunal hearing an ordeal, even without her having had to give evidence, we regard it as significant that she felt the injustice of the situation demanded her presence. That sense of injustice was not a pretence in our view.

We find that the goods in question were imported for the appellants' own use in the relevant sense.

We hold that the appeal is allowed and the respondents are directed to carry out a new review of their decision not to restore the seized excise goods and the vehicle. In carrying out that review we direct the Commissioners to take into account our findings of fact including the fact that the goods were not for a commercial purpose and accordingly were not liable to seizure and to consider whether it would be unreasonable for them to refuse to restore the goods in those circumstances.

RICHARD BARLOW

TRIBUNAL JUDGE

RELEASE DATE: 18 June 2009