First-tier Tribunal (Tax)

[2010] UKFTT 226 (TC)

TC00527

Appeal reference: MAN/2008/7053

CUSTOMS DUTY – post-clearance demand – incorrect declaration – whether incorrect information given to the Appellant by the Commissioners – no

ANTI-DUMPING DUTY – country of origin – no lead-in time – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

                                                       RECOVERYPAK LTD                                      Appellant

- and -

THE COMMISSIONERS FOR

                                      HER MAJESTY’S REVENUE AND CUSTOMS         Respondents

Tribunal:        Lady Mitting (Judge)

Sitting in public in Birmingham on 25 March 2010

Mr. S D Kempin, accountancy consultant, for the Appellant

Owain Thomas, counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.           The Appellant appeals against a decision of the Commissioners dated 20 May 2008 which had the effect of deeming an earlier post-clearance demand to be upheld with effect from 10 May 2008.

Background

2.           In January 2008, the Commissioners carried out verification checks on importers of plastic bags made in China and Thailand to ensure that they had been allotted the correct classification code on import.  As such an importer, the Appellant was included in the checks and by letter dated 15 January 2008, the Appellant was referred to 21 consignments imported from Nanhai Native Product Import and Export Co. Ltd under invoices dating from 11 September 2006 to 3 November 2006, the consignments had been declared variously under two codes, namely 39232100 99 and 39231000 00 but the invoices gave insufficient information for the codes to be verified.  The Appellant therefore obtained a certificate from Nanhai advising that all bags in each consignment were of low-density polyethylene (“LDP”) and that the sheet thicknesses varied between, and indeed within, consignments from 20 to 200 microns.  The correct classification code for all consignments should have been CN39232100 20, as accepted by the Appellant.  Had the correct code been declared, Anti-Dumping Duty (“ADD”) and related VAT would have been charged before the goods cleared Customs at the port of entry.  A post-clearance demand was consequently issued in the sum of £65,511.54 against which the Appellant now appeals.

3.           The Appellant’s case in summary is that:

1.     Insufficient notice of the imposition of ADD was given and the company was not aware of it;

2.     The goods did not “originate” in China and the duty was not therefore in any event payable; and

3.     The Appellant sought telephone assistance from the Commissioners on the correct classification code and was given the wrong one

These arguments are expanded upon later in this decision.

The evidence

4.           Oral evidence was given by Mr. Sukhraj Singh Dhillon, Chief Executive Officer of the Appellant company (“Recoverypak”).  Recoverypak is part of a larger, family-run business Eurokey Recycling Limited, currently run by Mr. Dhillon’s son.  The procedure insofar as it is related to all these consignments was as follows.  Eurokey collected from its customer for recycling LDP waste products.  The waste was exported as scrap to China, to Nanhai in particular, where it was shredded, heated, melted down, has a colour replacement added, fed into an extruder from which it emerges in sheet form and is then reformed by cutting and sealing into black plastic bags, which were packaged and shipped back to the UK to the order of Recoverypak for onward sale to Recoverypak’s own customers.  It was Mr. Dhillon’s evidence that only LDP originating from Eurokey was used in the production process and apart from the colouring, no other raw materials went into the production of the bags.  In effect therefore, Mr. Dhillon was saying, Recoverypak imports from China black plastic bags made up exclusively from waste materials exported by an associated company Eurokey.  Transportation of the bags from Nanhai to Recoverypak was arranged by Recoverypak’s forwarding agents FCL.  It was the responsibility of FCL to see the consignment through Customs, a part of this process being the allocation of the correct tariff classification code to the goods.  On the basis of this declaration, Customs advised FCL of such VAT and duty as was due.  FCL invoiced Recoverypak who pay the duty, usually electronically, within 24 hours and, on receipt of payment, the goods were cleared by Customs and released for onward transit to Recoverypak.

5.           Mr. Dhillon told us that it was he who advised FCL of the classification to be allotted to the consignments as there was insufficient information given on the paperwork (eg no mention of the sheet thickness of the materials) for FCL to be able to identify the correct code themselves.  To ascertain the correct code, Mr. Dhillon’s evidence was that he rang the Tariff Classification Office which gave him the code which he needed.  We go into some detail about this purported call which is central to Mr. Dhillon’s case but the evidence relating to which was far from satisfactory.

6.           Mr. Dhillon’s evidence was that he rang the number of the Tariff Classification Advice Line (“TCAL”) on the number given out by the Commissioners on one of their information sheets.  He told me the call was made on 3 May 2006 and he evidenced it by production of his diary, the entry for that day containing a four-line note listing, inter alia, a tariff code 3923210000.  The first difficulty over this call is that the Commissioners have searched their record of calls to the TCAL and while there is a record of several calls from Mr. Dhillon to the helpline, there is none between 11 April 2005 and 27 November 2006.  Further in an email passed to the Commissioners by Mr. Kempin in readiness for the tribunal hearing, Mr. Dhillon gives the number which he called as that not of the TCAL but of the General Eqnuiries helpline.  Mr. Dhillon explained this by saying that he in fact rang the general helpline, who then gave him the number of the TCAL.  The second difficulty relates to how a tariff code could have been given to Mr. Dhillon given the limited amount of information which he gave to the advisors.  His evidence was that, having identified himself by reference to the company’s VAT number, he was asked only what he was importing, to which he replied, “plastic refuse sacks of LDP material”.  As Mr. Thomas pointed out, critical to the classification is the thickness of the sheeting.  Without this information a code cannot be allocated.  The third difficulty is that as well as the code which Mr. Dhillon had jotted down in his diary not being the correct code, neither is it one of the two codes which were in fact declared in relation to these consignments.

7.           Mr. Dhillon had been asked in correspondence by the Commissioners (letter 24 February 2010) whether just the one call was made in respect of all consignments or whether he made a call prior to each.  His e-mail answer was that he had called prior to each consignment.  His oral evidence was that it had been just the once.  The same letter asked for full details of the information which he gave to the advisor and the answer given by the advisor.  Mr. Dhillon’s email answer was detailed but he accepted in cross-examination that in fact the information which he gave was not in any part relevant to the consignments in question.

8.           Mr. Dhillon had never applied for a BTI.

Legislation

9.           The action taken by the Commissioners to recover the under-paid duty and tax falls within Article 220 (1) of the Community Customs Code (Council Regulation EEC 2913/92):

“1. Where the amount of duty resulting from a customs debt has not been entered in the accounts in accordance with Articles 218 and 219 or has been entered in the accounts at a level lower than the amount legally owed, the amount of duty to be recovered or which remains to be recovered shall be entered in the accounts within two days of the date on which the customs authorities become aware of the situation and are in a position to calculate the amount legally owed and to determine the debtor (subsequent entry in the accounts).  That time limit may be extended in accordance with Article 219.”

10.        Although not specifically referred to by Mr. Kempin, his argument that Mr. Dhillon was mislead appears to be based on Article 220 (2)(b) which reads as follows:

“2. Except in the cases referred to in the second and third subparagraphs of Articles 217 (1), subsequent entry in the accounts shall not occur where:

a)     …

b)     the amount of duty legally owed was not entered in the accounts as a result of an error on the part of the customs authorities which could not reasonably have been detected by the person liable for payment, the latter for his part having acted in good faith and complied with all the provisions laid down by the legislation in force as regards the customs declaration.”

11.        Definitive Anti-Dumping Duty was imposed under Council Regulation 1425 (2006), published in the Official Journal (OJ L270/4) on 29 September 2006 with effect from 30 September 2006.  Article 1 reads as follows:

            “Council Regulation (EC) No 384/96

            Article 1 – Principles

1.     An anti-dumping duty may be applied to any dumped product whose release for free circulation in the Community causes injury.

Council Regulation 1425/2006

Article 1

1. Definitive anti-dumping duties are hereby imposed on imports of plastic sacks and bags, containing at least 20% by weight of polyethylene and of a thickness not exceeding 100 micrometers; originating in the People’s Republic of China and Thailand; and falling within CN codes ex 3293 21 00, ex 3923 29 10 and ex 3923 29 90 (TARIC codes 3923 21 00 20, 3923 29 10 20 and 3923 29 90 20).”

The rate of duty is set by reference to the status of the exporting producer, in this case being 28.8%, a figure not disputed by the Appellant.

12.        Articles 23 and 24 of the Customs Code provide, in relation to country of origin as follows.  Article 23 provides that goods originating in a country shall be those wholly obtained or produced in that country.  Article 24 provides that:

“Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture.”

Submissions and conclusions

13.        I deal firstly with Mr. Kempin’s argument that the Appellant was given incorrect information by the helpline.  The evidence in relation to the phonecall is unsatisfactory and contradictory and falls a long way short of persuading me, on the balance of probability, that the phonecall was made and the advice alleged was given.  Not only is there no corroborative evidence of the call which there should have been from the Commissioners’ own records but as Mr. Thomas pointed out, without the thickness of the sheeting it would not be possible to identify the correct code.  I am therefore unable to accept that Mr. Dhillon was misled by the Commissioners.  However, even if I had found otherwise and had been able to find that the call was made and that Mr. Dhillon was given the incorrect classification, it would still not avail him for two reasons.  First, as the code which he alleges he was given was never declared in relation to the goods he cannot be said to have relied upon it, and his failure to declare the correct code cannot be said to have arisen from misleading advice given by the Commissioners.  He did not use the advice which he said he had been given.  Secondly, to fall within Article 220 (2)(b), Mr. Dhillon would have to have been able to show that the error made by the Commissioners “could not reasonably have been detected” by him.  The Court of Appeal in CCE v Invicta Poultry Ltd, Buxton LJ concluded:

“Where, as in the present case, the question cannot be shown to be one of complexity, and can therefore be answered simply from the Journal.  It seems clear to me, as it seemed to the Judge, that the issue of whether the error could reasonably have been detected is determined by that very fact: that the error is revealed by the Journal.  The trader therefore in every case ignores the journal at his peril.”

A simple reading of the tariff code would have lead Mr. Dhillon to the correct classification.  There is nothing complex in the composition of the goods which could lead to any difficulty of interpretation and it would have been very straightforward for Mr. Dhillon to check the code and identify the error.

14.        In respect of the mis-classification therefore, there was no excuse and the Appellant is liable to the additional duty arising therefrom.

15.        Mr. Kempin’s argument in relation to the ADD is twofold.  First, he argues that there was insufficient notice of the imposition of the duty.  The Appellant already had goods in transit which had been ordered and a price negotiated for prior to the imposition of the tax.  The terms of purchased might well have been significantly different had Mr. Dhillon been aware of his liability for the duty.  This is an argument for which I have some sympathy but about which I can do nothing.  The Regulation is clear and no period of grace or transition is allowed.

16.        The Appellant’s second argument is that the goods did not in any event originate in China but in the UK, the Appellant’s reasoning being that the only raw material which went into the goods imported was the LDP exported by the associated company.  The country of origin had therefore to be the UK.  At its very best the Appellant’s argument can only be that the goods were produced in China and the UK.  It is quite impossible to argue successfully that only the UK had any part in the production.  Taking the argument therefore that there were two competing countries of origin, Article 24 comes into play and it is a question of where the goods underwent their “last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture”.  The manufacturing process here was that all that originated from the UK was the waste LDP that was shipped out to China.  In China, the scrap waste underwent a totally transforming process, described earlier in this Decision.   Mr. Kempin argued that that process was “minor”.  I reject that argument.  The process undertaken in China resulted in scrap waste LDP being converted into pristine plastic bags ready for immediate resale without anything further having to be done to them.  I accept that it was LDP that went into the process and the bags that emerged were also of LDP but the process which the scrap waste underwent was in fact the entire manufacturing process.  I therefore find that the goods originated in China and ADD was therefore due upon their importation.

17.        Mr. Kempin raised one further argument, namely that at paragraph 4.5 of the Commissioners’ Public notice 376 (Anti-Dumping and Countervailing Duties), the Commissioners had stated that because of printing deadlines information pages in the Tariff Code may not be completely up to date.  He did not expand upon his argument but I think he was saying that even had Mr. Dhillon checked the Tariff Code on 30 September, he may not have found the imposition of ADD listed.  That argument would not avail Mr. Dhillon for two reasons.  First, it is the Official Journal which is the source document and that would quite clearly be up to date, and it is the information given in the Official Journal which the Appellant is deemed to be aware of.  Secondly, as Mr. Thomas pointed out, the imposition of ADD is predicated upon the correct classification code.  If the correct classification code had been allotted to these goods, as they went through Customs, the liability to ADD would have been immediately triggered and would have been demanded before the goods could be released.

18.        For all these reasons the Appellant’s appeal fails and is dismissed.

19.        The Commissioners made no application for costs and I make no order.

The Appellant has a right to apply for permission to appeal against this decision in accordance with rule 39 of the Rules.  The parties are referred to “Guidance to accompany a decision from the First-Tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

LADY MITTING

JUDGE
Release Date: 19 May 2010