Westland Geoprojects Holdings) Ltd v Revenue & Customs [2011] UKFTT 408 (TC) (23 June 2011)
[2011] UKFTT 408 (TC)
TC01263
Appeal number
LON/2008/7115
Appeal
against the imposition of a C18 customs debt for the late submission of a C99 –
whether the Appellant who claimed it had been sent to NIRU should have checked
that it had safely arrived having previously been warned by them on a previous
late submission that should it happen again the debt would not be cancelled -
despite Appellant receiving a reminder C99 still not sent - appeal dismissed on
basis that the Appellant’s conduct amounted to obvious negligence under Article
859 of the Customs Code
FIRST-TIER TRIBUNAL
TAX
WESTLAND GEOPROJECTS (HOLDINGS) LTD Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL: S.M.G.RADFORD (TRIBUNAL JUDGE)
C.S
DE ALBUQUERQUE
Sitting in public at 45 Bedford Square, London WC1 on 9 June 2011
Mr Black of PBS International
Freight Limited shipping agent for the Appellant
Miss Hui Ling McCarthy,
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. This
is an appeal against HMRC’s decision not to cancel a C18 customs debt which
arose in relation to an import of ship spares (“the goods”) which entered the
country on 22 June 2007.
2. The
debt consists of VAT and customs duties totalling £1,707.02, which is the sum
of £220.21 ad valorem duty and £1,486.81 import duty.
3. The
C18 was issued because the Appellant had failed, in relation to the goods
imported on 22 June 2007 on which the Appellant claimed Inward Processing
Relief (IPR”), to comply with certain requirements in relation to the use of
that procedure.
4. On
31 March 2008, the Appellant appealed the issue of the C18 and requested a
review of HMRC’s decision.
5. On
13 May 2008, the Appellant was notified that the original decision had been
upheld and that the C18 debt remained in place
6. On
17 June 2008, the Appellant filed its notice of appeal with the Tribunal. HMRC
did not object to the Appellant’s application for an extension of time.
Background and facts
7. The
Appellant has been represented throughout by its shipping agents, PBS
International Freight Limited (“PBS”).
8. The
Appellant imported the goods on 22 June 2007 under Customs Procedure Code
5100001. Use of this code indicated that the Appellant intended to use the IPR
procedure.
9. The
IPR procedure suspends VAT and customs duties at the time of import. It
provides relief to promote exports from the European Community (EC) and assist
Community processors to compete on an equal footing in the world market. Duty
is relieved on imports of non-EC goods which are processed in the Community and
re-exported provided the trade does not harm the essential interests of
Community producers of similar goods. It can provide relief from customs duty,
specific customs duty (previously CAP charges), anti-dumping duty and
countervailing duty.
10. The duties
payable on goods which have been imported from non-EC countries and are
intended for re-export are only suspended providing that certain conditions are
met.
11. The non-EC goods
intended for re-export must be re-exported from the Community within a time
limit agreed within HMRC. This is known as the ‘period of discharge’ or
‘throughput period’. In the present case, the throughput period was six months.
12. Records must be
kept for all operations carried out. Users of the suspension method are also
required to submit the bill of discharge, a completed form C99, detailing
receipts and disposals. If any of the requirements are not met then depending
on the circumstances, the duties in question may not be suspended.
13. The amounts
which fall payable in the case of non-compliance with the suspension method
requirements are not penalties as such. These sums are simply the suspended
duties that would otherwise be due and payable, had the IPR procedure not been
used.
14. The National
Import Relief Unit (NIRU) is responsible for monitoring traders who use the IPR
system. There are two IPR systems which are the fully authorised procedure and
the simplified procedure.
15. To be able to
use the fully authorised procedure, an application must be made to HMRC, who
will decide if it is appropriate to issue a full authorisation. However, if a
trader only intends to use the relief occasionally and the processing of the
goods imported into the EC only takes place in the UK, traders may choose to
use the simplified procedure. The simplified procedure can be used by anyone
who is not in possession of a full authorisation. NIRU has responsibility for
monitoring the simplified procedure. At all material times, the Appellant was
using the simplified procedure.
16. Although PBS was
a frequent user of IPR, comparatively speaking the Appellant was not.
Suitability is measured by reference to the Appellant’s circumstances.
Accordingly, it was suitable for the Appellant to use simplified authorisation.
17. The Appellant
used the simplified authorisation procedure for IPR for the first time on or
around 3 May 2007.
18. On 9 May 2007 NIRU sent an introductory letter to the Appellant, explaining the requirements
that needed to be met in order for duties to be suspended under IPR and
pointing the Appellant to Customs Notice 221A for further information.
19. In particular NIRU
drew attention to two requirements. Firstly that form CPC 31 51 00 must be used
when the goods were re-exported from the EC and secondly that a bill of
discharge, a C99, must be sent to the NIRU within 30 days of the end of the
throughput period.
20. NIRU also
pointed out that the throughput period was normally six months unless a written
request for extension was forwarded to NIRU. The Appellant was informed that if
this action was not completed it would automatically be charged the duties and
taxes suspended.
21. The Appellant
imported the goods from the US (Houston, Texas) on 21 June 2007. The goods arrived at London Gatwick on 22 June 2007. The goods were imported under Customs
Procedure Code 5100001. Use of this code indicated that the Appellant intended
to use the IPR procedure.
22. The throughput
period expired within 6 months from the date of import on 22 December 2007. The C99 was due within 30 days from the expiry of the throughput period that is by
no later than 22 January 2008.
23. On 22 December 2007, NIRU wrote to the Appellant warning that no C99 had been received in
respect of the goods imported by the Appellant on 22 June 2007, the throughput period had now expired and that if no C99 was received within 30 days the customs
duty and taxes suspended on import would be demanded.
24. Notwithstanding
NIRU’s warning letter, no C99 had been received by NIRU by 22 January 2008. Accordingly, on 10 March 2008, HMRC issued the C18 Post Clearance Demand Notice
presently under appeal.
25. On 14 March 2008 NIRU received a letter from Miss Claire Tubb of PBS which enclosed
supporting evidence showing that the goods in question had been re-exported to Azerbaijan from London Heathrow on 23 June 2007 under Customs Procedure Code 315100.
26. This was not the
first time that the Appellant had failed to submit a C99 within the requisite
time limit. Late C99 Bills of Discharge had been submitted on three previous
and one subsequent occasion. On appeal HMRC had previously cancelled two C18
Post Clearance Demand Notices.
The Legislation
27. The Appellant’s
circumstances were governed by a mixture of European Council Regulation 2913/92
(“the Customs Code”) and European Commission Regulation 2454/93 (“the
Implementing Regulations”).
28. Article 59 of
the Customs Code provides that a declaration is required for goods placed under
certain customs procedures and that customs supervision shall apply to goods
under specified procedures. It states:
1. All goods intended to be placed under a
customs procedure shall be covered by a declaration for that customs procedure.
2. Community goods declared for an export, outward processing, transit
or customs warehousing procedure shall be subject to customs supervision from
the time of acceptance of the customs declaration until such time as they leave
the customs territory of the Community or are destroyed or the customs
declaration is invalidated.
29. Article 118
states :
1.
The customs authorities shall specify the period within which the compensating
products must have been exported or re-exported or assigned another
customs-approved treatment or use. That period shall take account of the time
required to carry out the processing operations and dispose of the compensating
products.
2. The period
shall run from the date on which the non-Community goods are placed under the
inward processing procedure. The customs authorities may grant an extension on
submission of a duly substantiated request by the holder of the authorization.
For reasons of simplification, it may be decided that a period which
commences in the course of a calendar month or quarter shall end on the last
day of a subsequent calendar month or quarter respectively.
30. Article 182(3)
states:
Re-exportation or destruction shall be the subject of prior
notification of the customs authorities. The customs authorities shall prohibit
re-exportation should the formalities or measures referred to in the first
subparagraph of paragraph 2 so provide. Where goods placed under an economic
customs procedure when on Community customs territory are intended for
re-exportation, a customs declaration within the meaning of Articles 59 to 78
shall be lodged. In such cases, Article 161 (4) and (5) shall apply.
31. Article 204
states:
1. A customs
debt on importation shall be incurred through:
(a)
non-fulfilment of one of the obligations arising, in respect of goods liable to
import duties, from their temporary storage or from the use of the customs
procedure under which they are placed, or
(b)
non-compliance with a condition governing the placing of the goods under that
procedure or the granting of a reduced or zero rate of import duty by virtue of
the end-use of the goods,
in cases
other than those referred to in Article 203 unless it is established that those
failures have no significant effect on the correct operation of the temporary
storage or customs procedure in question.
2. The
customs debt shall be incurred either at the moment when the obligation whose
non-fulfilment gives rise to the customs debt ceases to be met or at the moment
when the goods are placed under the customs procedure concerned where it is
established subsequently that a condition governing the placing of the goods
under the said procedure or the granting of a reduced or zero rate of import
duty by virtue of the end-use of the goods was not in fact fulfilled.
3. The debtor shall be the person who is required, according to the
circumstances, either to fulfil the obligations arising, in respect of goods
liable to import duties, from their temporary storage or from the use of the
customs procedure under which they have been placed, or to comply with the
conditions governing the placing of the goods under that procedure.
32. Article 199 of
the Implementing Regulations states:
Without
prejudice to the possible application of penal provisions, the lodging with a
customs office of a declaration signed by the declarant or his representative
shall render him responsible under the provisions in force for:
- the
accuracy of the information given in the declaration,
- the
authenticity of the documents attached,
and
compliance with all the obligations relating to the entry of the goods
in question under the procedure concerned.
-
33. Article 521
states in the relevant part:
At least upon the expiry if the period of discharge,
irrespective of whether aggregation in accordance with Article 118(2), second
subparagraph, of the Code is used or not:
- in the case of inward processing (suspension system) or processing
under customs control, the bill of discharge shall be supplied to the
supervising office within 30 days;
…
Where special circumstances so warrant, the customs authorities may
extend the period even if it has expired.
34. Article 859
states in the relevant part
The following
failures shall be considered to have no significant effect on the correct
operation of the temporary storage or customs procedure in question within the
meaning of Article 204 (1) of the Code, provided:
they do not
constitute an attempt to remove the goods unlawfully from customs supervision,
they do not
imply obvious negligence on the part of the person concerned, and
- all the
formalities necessary to regularize the situation of the goods are subsequently
carried out:
35. Article 859(9)
states:
In the framework of inward processing and processing
under customs control, exceeding the time-limit allowed for submission of the
bill of discharge, provided the limit would have been extended had an extension
been applied for in time.
36. Article 860
states:
The customs authorities shall consider a customs debt to have been
incurred under Article 204(1) of the Code unless the person who would be the
debtor establishes that the conditions set out in Article 859 are fulfilled.
Appellant’s Submissions
37. Mr Black
contended on behalf of the Appellant that the correct procedures were followed.
The goods were hand carried from the UK to Azerbaijan leaving from London
Heathrow Terminal 3 on 23 June 2007 and a representative from PBS accompanied
the Appellant to make sure that the export paperwork was stamped at the time of
exportation.
38. Mr Black
contended that the C99 was sent to NIRU at the usual address once the goods had
left the country.
39. Mr Black
submitted that at no time was there any attempt to defraud HMRC of any taxes
due. The documentation submitted showed that every effort was made to ensure
that the correct import and export procedures were adhered to by the Appellant.
40. Mr Black
submitted that the review decision had not noted that the C99 was posted right
away to the usual address and because it had not been received by NIRU and on
previous occasions the Appellant had failed to send the C99s, both the
Appellant and PBS were being punished by HMRC.
41. On cross-examination
Mr Black confirmed that the reminder letter had been received by the Appellant
and passed to PBS. At PBS it was dealt with by Miss Claire Tubb. Mr Black said
however that she did not know what to do and only took action when NIRU issued
the C18 demand notice.
HMRC’s Submissions
42. Miss McCarthy
submitted on behalf of HMRC that although Mr Black had contended that a C99 had
been submitted to NIRU on time, NIRU had not received it and even now had still
not received a copy of it although included in the Appellant’s list of
documents was “copy C99 dated 27/06/07.
43. Miss McCarthy
submitted that HMRC contended that the C18 debt was due for a number of
reasons.
44. The Appellant
and its agent PBS were fully aware of the need to send the C99 within 30 days
of the expiry of the throughput period. This had been made clear to the
Appellant in NIRU’s introductory letter dated 9 May 2007.
45. Moreover NIRU
had sent a specific reminder to the Appellant on 22 December 2007 in relation to the shipment under appeal. Despite the warning contained in this letter, the
Appellant did not provide NIRU with the C99 within the 30 days of the end of
the throughput period, nor did the Appellant contact NIRU to request an
extension of time, whether by letter, telephone, fax, email or otherwise.
46. By letter dated
4 March 2008 the Appellant was warned that “any future belated returns will not
result in cancellation of the debt as you have been made fully aware of your
responsibilities and any further breaches will be classed as negligence”.
47. Miss McCarthy
submitted that in such circumstances the Appellant’s conduct amounted to
“obvious negligence” within the meaning of art.859. She submitted that it was
reasonable for NIRU not to cancel the debt for a third time. She also noted
that the Appellant had subsequently failed to submit a C99 for a fourth time in
relation to import entry 099142H on 24 September 2007.
48. She submitted
that the assertion made by PBS in its letter of 31 March 2008 that the C99 had in fact been delivered appeared to be contradicted by PBS’s earlier reply on
behalf of the Appellant in correspondence. In the undated letter from Ms.
Claire Tubb to NIRU responding to the C18 Demand Notice issued on 10 March 2008 and which was received by NIRU on 14 March 2008, PBS enclosed “copies of the original import entry, import awb and export entry stamped by customs”.
However no reference at all was made to a C99 previously submitted, nor was a
copy enclosed.
49. Neither the
Appellant nor its representatives at any stage provided proof of postage and neither
the Appellant nor its representatives contacted NIRU when the Appellant
received NIRU’s reminder letter of 22 December 2007 which notified it that the C99 for the entry in dispute had not been received.
50. In the
circumstances, HMRC asked the Tribunal to find that on the balance of
probabilities the Appellant had failed to prove that the C99 was sent.
51. Miss Mc Carthy
submitted that as the Tribunal had recently held in Euro Trading Limited v
HMRC [2011] UKFTT 56 (TC) at [39], the legislation in respect of the IPR was
clear. In this case, the Appellant was well aware of its obligations, having
been reminded of them on previous occasions. Despite NIRU’s warnings about the
consequences of late submission of the C99, the Appellant and its
representatives failed to make absolutely certain that its C99 had been
received by the NIRU.
52. Miss McCarthy
referred to the case of Firma Sohl & Sohike Case C-48/98 in which
the ECJ stated that :
“The repayment or
remission of import and export duties which may be made only under certain
conditions and in cases specifically provided for constitutes an exception to
the normal import and export procedure and consequently the provisions which
provide for such repayment are to be interpreted strictly. Since a lack of
‘obvious negligence’ is an essential condition of being able to claim repayment
or remission of import or export duties, it follows that that term must be
interpreted in such a way that the number of cases of repayment or remission
remains limited.”
53. Miss McCarthy
submitted that in this case the Appellant’s conduct amounted to obvious
negligence for the purposes of Article 859 and the appeal should be dismissed.
Findings
54. We find that
neither the Appellant nor its agent was able to produce any evidence that the
C99 had been sent. Despite having been previously warned about the late
submission of a C99 and therefore knowing of the potential liability which
could arise, they made no attempt to make absolutely sure that its C99 had been
received by NIRU.
55. We find that
even after the reminder sent by NIRU nothing was immediately done by the
Appellant or its agent to correct the apparent omission.
56. We find that the
Appellant’s conduct amounted to an obvious negligence for the purposes of
Article 859.
Decision
57. The appeal is
dismissed and the C18 customs debt of £1,707.02 is hereby confirmed.
58. 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.
TRIBUNAL JUDGE
RELEASE DATE: 23 June 2011
