First-tier Tribunal (Tax)

[2010] UKFTT 639 (TC)

TC00878

Appeal number: TC/2010/02306

EXCISE DUTY – restoration of car – 25 kilos of hand-rolling tobacco between two people – whether reasonable not to restore – yes – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

                                        JAMES VAN DER VELDE                       Appellant

                                                                      - and -

                                          DIRECTOR OF BORDER REVENUE         Respondent

                        TRIBUNAL: JOHN F AVERY JONES CBE (TRIBUNAL JUDGE)                                                      RUTH WATTS DAVIES MHCIMA FCIPD                                              

Sitting in public at 45 Bedford Square, London WC1 on 3 December 2010

The Appellant in person

Caroline Stone, counsel, instructed by the UK Border Agency Legal Team, for the Respondent

© CROWN COPYRIGHT 2010

DECISION

1.     Mr James van der Velde appeals against a decision on review dated 4 February 2010 not to restore a car, a BMW 325 registration J88 MRV (“the car”), that had been seized on 29 December 2009 at Dover when carrying 25 kilos of hand-rolling tobacco.  The Appellant appeared in person and the Respondent was represented by Miss Caroline Stone.

2.     We did not hear evidence from the review officer, Mr D C Hodge, because of the bad weather but the Appellant was content that we should continue without him.  We heard evidence from the Appellant and his passenger Mr Lee Broughen and find the following facts:

(1)  The car was stopped at Dover on the Appellant’s and Mr Broghen’s return from Belgium.  When asked how much tobacco he had purchased the Appellant replied “Quite a lot.”  When asked what quantity he said “I don’t know” and when pressed either Mr Broghen (as the officer’s notes, which they both signed, record) or the Appellant (as both of them stated in evidence) said “I don’t know.  Maybe 6 or 9 kilos.”  We do not think it necessary to resolve who said it.  The car contained 25 kilos of hand-rolling tobacco.

(2)  The receipt for the tobacco shows 51 boxes of 10 (50 gram) pouches of Golden Virginia tobacco, 510 pouches in total, and in addition two loose pouches were in the car.  The price was £2,014.50 before a cash discount of £20.15 was given.

(3)  During his interview the Appellant stated that he had paid £2,000 in cash for our family and ourselves, of which he and Mr Broghen had contributed £500 each and Mr Broghen had been given £1,000 by a family member.  The Appellant’s sister and father had contributed to the cost for their share of the tobacco.  He stated that he smoked about one pouch a week and also shared it with his friends.  A pouch would cost £10.70 in the UK and he purchased it for £3.91 in Belgium.  He worked full time at Tesco earning £1,100 per month.  He lived at home and his outgoings were just under £500 per month.  He had no savings and credit card debts of £430.  He thought that he had purchased 200 pouches of 50 grams in total.

(4)  By letter the Appellant explained that the car was bought with a loan on which he was paying £216.66 per month until April 2013.

(5)  In evidence the Appellant stated that he obtained 40 cigarettes from a 50 gram pouch, which we do not accept in view of the figures given by Miss Stone in paragraph 3(1)(a) below, which we accept.  He said he smoked 10 to 15 cigarettes a day amounting to a pouch or 1.5 pouches a week.  He said that his £500 worth of tobacco would last a year (on a previous trip he had spent £250 which had lasted 6 to 8 months).  We do not accept this.  If he in fact obtained 90 cigarettes per pouch and smoked 15 cigarettes per day 1.5 pouches would last 9 days.  His £500 bought 127 pouches which would last 85 weeks (or 127 weeks if he smoked 1 pouch per week).  He knew the cost of a pouch in the UK from working in Tesco; the cashier at Adinkerke where he purchased the tobacco told him that the price per pouch was £3.95 reduced to £3.91 by the cash discount.  He would go to a pub with friends and contribute a pouch of tobacco and expect the friends to pay for drinks accordingly.  He said he had not smoked on the way back from Belgium but they had smoked during stops in the way out.  He had paid for the petrol, total about £120 for the trip, and Mr Brougen had paid for the ferry tickets.  The loss of the car made it difficult to get to work as he lived in a country district.  Initially a neighbour gave him a lift, then he paid £400 to £500 for another car which broke down, he then borrowed his sister’s car for a month, then bought another car for £600 by paying in instalments, which he still has.

(6)  Mr Broghen stated in his interview that half the tobacco was for himself and his family, including a friend who paid £500, another friend who paid £20, and his father and Aaron paying £480.  The remainder of “not exactly but about £500” had been provided by the Appellant and him jointly.  He usually obtained 40 to 60 cigarettes from a 25 gram pouch and expected that 6 kilos would last a year.

(7)   The officer considered that the tobacco was held for a commercial purpose and seized the tobacco and the car.  An appeal against seizure was started and then withdrawn.  The decision not to restore the car was upheld on review.

(8)  The duty in question was £3,111.25.  The shop value of the tobacco in the UK was over £5,500.  The car had cost £4,495 on 5 September 2009 and the value in Glass’ Guide in January 2010 was £4,225, which the Appellant said was too low.

3.     Miss Stone contends:

(1)  The officer was reasonable in concluding that the tobacco was for commercial use. 

(a)   The quantity of tobacco was large, over 8 times the guideline amount (for one person).  A typical pre-rolled cigarette contains 0.55 grams of tobacco so that a 50 gram pouch would produce 90 hand-rolled cigarettes containing the same amount of tobacco.  The total 25 kilos would produce 45,400 cigarettes, a 6.2 year supply for a 20-a-day smoker.  This was indicative of commercial import, as was the tobacco all being Golden Virginia.  Payment in cash involved the danger of carrying large sums and meant that there was no record of the purchase.

(b)  The tobacco was on one receipt and the Appellant said that he had bought £2,000 of tobacco.  Even if the Appellant’s share were £500 this equates to his disposable monthly income.

(c)   The absence of smoking paraphernalia on the Appellant and Mr Broghen is significant even accepting that the Appellant did not want smoking in the car.

(d)  One or other of the Appellant and Mr Broghen had lied to the officer about 6-9 kilos and the other had said nothing to contradict the statement.

(e)   The Appellant and Mr Broghen gave inconsistent accounts at interview of who the tobacco was for.  Mr Broughen said that his and the Appellant’s share was not exactly £500 each.

(2)  Non-restoration of the car was reasonable and proportionate.  The value of the car did not have to be taken into account for a commercial import, see Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766.  In any event it was proportionate taking the Glass’ Guide value of the car of £4,225 (or even the cost of £4,495) compared to the duty evaded of £3,111 and the misdeclaration of the quantity to the officers.

(3)  The decision took into account the Appellant’s rights under Article 1 Protocol 1 of the Human Rights Convention, which were subject to the state’s right to secure payment of taxes.

4.     The Appellant contends:

(1)  The seizure was contrary to article 1 of Protocol 1 to the Human Rights Convention.

(2)  The value of the car was disproportionate to the duty.  Proportionality should take into account that they had lost the tobacco as well.

(3)  The officer should not have concluded that the tobacco would be supplied for profit.

5.     Section 152 of the Customs and Excise Management Act 1979 provides that: “The Commissioners may, as they see fit…(b) restore, subject to such conditions (if any) as they think proper, anything forfeited or seized….”  By section 14(2) of the Finance Act 1994 a person affected by a decision of the Commissioners, which includes a decision under section 152(b), may require it to be reviewed.  The Commissioners’ powers are now vested in the Director of Border Revenue.

6.     The Tribunal’s jurisdiction is contained in section 16 of the Finance Act 1994 which applies to matters contained in Schedule 5 including decisions on restoration.  Section 16(4) provides that

“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 the 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;….”

7.     Regulation 4(1B)(c) of the Excise Goods )Holding, Movement, Warehousing and REDS) Regulations 1992 as amended by the Tobacco Products Regulations 2001 and the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 provides:

“(c) if the tobacco products in question are—

(i) transferred to another person for money or money’s worth (including any reimbursement of expenses incurred in connection with obtaining them), or

(ii) the person holding them intends to make such a transfer,

those tobacco products are to be regarded as being held for a commercial purpose.”

8.     The Tribunal’s jurisdiction is therefore limited to considering the reasonableness of the decision not to restore the car.  The Director’s policy is to restore vehicles involved in smuggling on a not-for-profit basis for 100% of the duty for a first offence in aggravated cases (which this is, as more than 6 kilos of hand-rolling tobacco are involved), and not to restore vehicles involved on a profit basis involving this quantity of tobacco.  These quantities are exceeded even if the Appellant and Mr Broghen are treated as importing half the total each.  The review officer stated in the review letter that he was not bound by the policy and had considered the case on its merits.  His conclusion was “In my opinion the most likely explanation for the purchase of 25 kilos of handrolling tobacco is that you intended to sell it to make a profit.”  Having heard the evidence of the Appellant and Mr Broghen we do not consider that this is a case where someone paid for the trip and asked them to bring the tobacco back.  We do consider it unlikely, given the means of the Appellant and the amount of money involved, that he did not intend to transfer tobacco to another person for a profit, either by selling to friends at more than cost, or in the way he described of putting a pouch towards an evening at a pub with friends who would match it by paying for drinks on the basis of the Appellant receiving value greater than the cost of the tobacco.  We regard the latter as a transfer for money’s worth even though the arrangement falls short of a contract.  We do not find the officer’s conclusion to be one that he could not reasonably have arrived at, and would have come to the same conclusion ourselves. 

9.     The Appellant also relies on the Human Rights Act 1998.  Article 1 of Protocol 1 of the Human Rights Convention provides:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law…

The preceding provisions 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.”

The principle behind this provision is summarised in the decision of the European Court of Human rights in Air Canada v UK 20 EHRR 150 as follows:

“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 a whole, including the second paragraph: there must therefore be a reasonable relationship for the proportionality between the means employed and the aim pursued.”

The Court of Appeal in Lindsay v Customs and Excise Comrs. [2002] EWCA Civ 267 considered this aspect at para.63:

“…I would not have been prepared to condemn the Commissioners’ policy had it been one that was applied to those who were using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at a profit.  Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles.  Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration.  Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance.  Cases of exceptional hardship must always, of course, be given due consideration.”

In relation to proportionality this is not an issue since the import is commercial, as we have found.  Even if this is wrong we do not consider the amount of duty disproportionate to the value of the car in failing to achieve the fair balance between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights.  Even at the cost price the duty is 69% of the value of the car.

10.  This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

JOHN F AVERY JONES

TRIBUNAL JUDGE

RELEASE DATE: 10 December 2010