First-tier Tribunal (Tax)

[2011] UKFTT 270 (TC)

TC01132

Appeal number TC/2009/12348

Customs duty; repayment; limitation period; force majeure.

FIRST-TIER TRIBUNAL

TAX

Don Scott Commercials Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL:  Geraint Jones Q.C.

David E Williams CTA.

Sitting in public at 45 Bedford Square, London WC1 on 01 April 2011.

Mr. Nigel Gibbon for the Appellant

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

© CROWN COPYRIGHT 2011

DECISION

1.       In early 2004 the appellant, Don Scott Commercials, imported 21 American manufactured single cab and dual cab pickup vehicles. HMRC demanded import duty at the rate of 22%, contending that the vehicles fell to be classified as vehicles for the transport of goods rather than as vehicles principally designed for the transport of persons. The appellant contended that they fell into the duty classification that attracted duty at 10% only, being vehicles principally designed for the transport of persons. Thus a dispute arose which, in due time, found its way to the VAT & Duties Tribunal on the 10th May 2005. The Tribunal's decision, it suffices to say, came down in favour of HMRC.

2.       The duty was paid at the higher rate. No appeal was taken from the Tribunal's decision.

3.       The very point that had been decided against the appellant by the decision of the Tribunal, released on the 1 June 2005, was later litigated at the European Court of Justice in BVBA Van Landeghem (C-486/06) when the Court, having heard the Advocate General, proceeded to give judgement in favour of those who contended that vehicles of the type that the appellant had imported in 2004, fell to be classified as vehicles principally designed for the transport of persons; thus as vehicles attracting the lower level of import duty.

4.       European Council Regulation 2913/92, Article 236(2) provides that when a repayment of overpaid duty is sought, it must be repaid by the relevant tax authority, provided that the application for repayment has been made “within a period of three years from the date on which the amount of those duties was communicated to the debtor.” The same regulation then provides :“That period shall be extended if the person concerned provides evidence that he was prevented from submitting his application within the said period as a result of unforeseeable circumstances or force majeure.”

5.       The appellant's claim for repayment of duty was not made within the primary three year period. The appellant's case is that the European Court of Justice’s decision in Van Landeghem was not released until 6 December 2007, by which time the appellant's three year period for submitting its claim for repayment, had already expired. The appellant contends that correspondence thereafter took place between its representative and HMRC, with HMRC then being requested to make a repayment. HMRC refused; thus this appeal.

6.       This appeal has been argued with great care and skill on behalf of the appellant, by Mr Gibbon. He has provided a detailed Skeleton Argument with an extremely useful chronology attached. His argument proceeds on the basis that in 2005 the VAT and Duties Tribunal was misled by HMRC concerning the test to be applied when deciding into which duty classification the relevant vehicles should be placed.  By that he meant not that HMRC had??engaged in some kind of improper conduct; but that it had advanced incorrect arguments which were later roundly rejected by the  E.C.J. in subsequent litigation to which this appellant was not a party. Although he did not seek to argue that the appellant was prevented from submitting a timely application by “unforeseeable circumstances”, he argued that the effect of the incorrect arguments pursued by HMRC  has been compounded by what amounts to force majeure because  the VAT and Duties Tribunal wrongly rejected the appellant's appeal in 2005. Mr Gibbon says that the Tribunal was wrong as now demonstrated by the decision of the European Court of Justice. He also makes the point that HMRC did not make the appellant's trade organisation aware of the fact that the Van Landeghem case was proceeding before the E.C.J.

7.       Mr Gibbon’s main argument is that the appellant did not apply for a repayment at an earlier juncture because it was convinced that any such application would be doomed to fail and would be refused by HMRC. That is a proposition that we unhesitatingly accept. However, that is not to say that had the appellant made an application for repayment which, in turn, would have been refused by HMRC, it was not open to the appellant to pursue avenues of appeal beyond the VAT and Duties Tribunal just as it could have pursued such an appeal in 2005. The appellant chose not to adopt that route. We can well understand that the appellant may have taken a commercial decision not to expend funds on pursuing appeals. We can equally well understand that once the Van Landeghem decision came to the appellant's notice, the appellant would have wished to recover the overpaid duty.

8.       In our judgement the difficulty with the appellant's legal argument, notwithstanding that the appellant occupies the moral high ground, is that the appellant relies upon its own conduct as amounting to force majeure. In other words, the appellant relies upon its own decision not to pursue an application for repayment at an earlier juncture (within the permitted three year period) because it believed that any such application would certainly fail when presented to HMRC and would fail if appealed to the VAT and Duties Tribunal. If the appellant was to have any realistic prospect of success, it would have had to appeal beyond the first instance Tribunal.

9.       However widely one defines force majeure, it cannot include a conscious decision by one party not to pursue a given course of action (in this case making a claim for a refund of duty) in circumstances where the potential claimant desists from so doing because it believes that its claim will inevitably fail.

10.    On behalf of HMRC it has been argued that the appellant could have made a protective claim for repayment so as to protect itself against the three-year limitation period running against it, but that would only have been a realistic course of conduct if the appellant had known that the Van Landeghem case was proceeding before the E.C.J.  It did not know that. Indeed, the appellant criticises HMRC for not informing it of that fact, without it being established as a fact before us that HMRC itself knew of that case proceeding before the Court. We should make it plain that even if HMRC did have such knowledge, the mere fact that it failed to alert the appellant or its representative to the fact of the pending litigation before the E.C.J. would equally fail to come within the normally accepted meaning of force majeure.

11.    The result, at which we arrive, with little enthusiasm, is that this appeal must fail. This appeal raised issues closely analogous to the ample authority in the Courts to the effect that there must be finality in litigation. Thus, where a period for appealing one judgement has expired but an appellant later believes that an appeal would be successful in the light of later authority laid down by a higher court, it does not follow that leave to appeal out of time will be granted simply on that basis. This is an analogous situation.

12.    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.