First-tier Tribunal (Tax)

[2011] UKFTT 127 (TC)

TC001001

Appeal number: TC/2010/01249

CUSTOMS DUTY – quota exhausted during the import – whether entitled to repayment under art 239 of the Customs Code – no – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

S & B HERBA FOODS LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: JOHN F AVERY JONES CBE (TRIBUNAL JUDGE) JOHN G ROBINSON

Sitting in public at 45 Bedford Square, London WC1 on 1 February 2011

Martin Carr, Logistics Manager of the Appellant, for the Appellant

David Bedenham, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.       S&B Herba Foods Limited appeals against a decision on review dated 3 December 2009 not to repay customs duty of £35,053.44.  The Appellant was represented by its Logistics Manager Mr Martin Carr, and the Respondents (“HMRC”) were represented by Mr David Bedenham.

2.       The issue in this appeal is whether the Appellant is entitled to repayment of customs duty under art 239 of the Customs Code (Council Regulation 2913/92/EEC) which provides:

“(1) Import duties or export duties may be repaid or remitted in situations other than those referred to in Articles 236, 237 and 238:

-        to be determined in accordance with the procedure of the committee;

-        resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned.  The situations in which this provision may be applied and the procedures to be followed to that end shall be defined in accordance with the committed procedure.  Repayment or remission may be made subject to special conditions….”

3.       The facts, which are not in dispute are as follows:

(1)        The Appellant imported 1,768,952 metric tonnes of broken rice from Egypt on 11 September 2009 intending to benefit from the tariff quota.  The quota was “critical” at the time of import and the Appellant had initially to pay duty at the full rate.

(2)        The full amount of the import did not qualify for the reduced rate as the quota became exhausted.  The result was that the Appellant was awarded the reduced rate under the quota for 1,156,408 m/t but was required to pay the full rate on the remaining 612,544 m/t, the difference being £35,053.44.

(3)        On 21 September 2009 the Appellant applied for repayment of this sum under art 239.  This was refused on 25 September 2009 and the Appellant requested a review on 20 October 2009 but the review decision of 3 December 2009 upheld the decision to refuse repayment.

(4)        The way quota was allocated was that the goods were declared on 11 September 2009 electronically on CHIEF [Customs Handling of Import and Export Freight].  All quota claims within a 24 hour period starting immediately after midnight (here from the beginning Friday 11 September 2009) are picked up electronically on the next working day (here Monday 14 September 2009) by the HMRC Tariff Quota Team and then transferred to the Commission in Brussels.  On the next day (15 September 2009) the Tariff Quota Team received a response from the Commission of the Appellant’s allocation of quota.  Available quota on a particular day is divided equally between importers in all Member States.

(5)        The Appellant checked the Commission’s website before import and ascertained that the available quota was in excess of 2,200 m/t in 9 September 2009.  It was 1,678 m/t on 10 September 2009.  The website makes it clear that there is no guarantee that the amount shown as available will be awarded.

4.       Mr Carr contends that the Appellant made all enquiries to establish that quota was available and relies on the following passage from Notice 266 (Rejected Imports: Repayment or Remission of Duty and VAT):

“3.1 What are the special situations?

You can claim repayment or remission of import duty and VAT on the goods imported when they are:

…

(l) entered to a system of duty relief which is refused through no fault of the consignee:

- eg where relief under a tariff quota is claimed but refused because the quota has been exhausted.”

5.       Mr Bedenham contends that:

(1)        Quotas are allocated on a daily basis by the Commission (art 308A Commission Regulation 2454/93/EEC).  When the quota was allocated on 15 September 2009 the quota was insufficient to cover the entire import and the full amount of duty was properly payable on the balance.

(2)        For the Appellant to claim under art 239 the Court of First Instance has said that there must be a special (or exceptional) situation compared to other operators engaged in the same business, see Kaufring, Case T-186/97 and joined cases at [218] following earlier case law.  This does not include exhaustion of the quota, see Commission Decision of 22 December 2006 (REM 02/2006):

“(18) …The fact that both that the quota was exhausted following the charging to it of declarations accepted on 13 July and that the firm could not therefore draw on the tariff quota cannot in itself constitute a special situation within the meaning of Article 239 of Regulation (EEC) No 2913/92, since no economic operator can be certain before the Commission carries out the drawing operation that it will benefit from a reduction or exemption from customs duties in connection with the quota concerned.”

(3)        Even if there were exceptional circumstances there was obvious negligence on the part of the Appellant in going ahead with the import when the quota was known to be nearly exhausted.

(4)        The quoted passage in Notice 266 deals with the situation that, for example, HMRC fail to pass on information on a day’s imports to the Commission as a result of which the quota is exhausted by the time it is allocated to the importer but would not have been if the information had been passed on in time.

(5)        There are no provisions allowing the Appellant following a rejected claim for quota relief to put the part not qualifying for quota into a bonded warehouse.

6.       We consider that Mr Bedenham is right in contending that there is no special situation that could bring art 239 into play.  The Appellant is in the same position as other importers of not knowing until the Commission allocates the quota whether there is any quota left, which cannot constitute a special situation.  On that basis there is no need for us to consider whether there is obvious negligence by the Appellant.

7.       Accordingly we find that the duty was properly charged and the Appellant is not entitled to repayment under art 239.

8.       We must, however, express our concern about the passage in Notice 266 which can certainly be read in the way that the Appellant did.  If the reference to “through no fault of the consignee” (which one might think has nothing to do with whether there is a special situation as it is dealt with by the no-obvious-negligence requirement) really means “through HMRC’s fault” then we consider that it should say so.  We hope that HMRC will look at this wording.

9.       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: 16 February 2011