[2012] UKFTT 340 (TC)
TC02026
Appeal number:
TC/2011/02665
EXCISE DUTIES – Seizure of
vehicle – Refusal of Restoration – Whether refusal reasonable and proportionate
in the circumstances – Yes – Appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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MANMOHAN SINGH
ARORA
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE NICHOLAS ALEKSANDER
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CAROLINE DE ALBUQUERQUE
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Sitting in public at Bedford Square , London on 26 March 2012
Amit Sareen of ie Law
Solicitors for the Appellant
David Bedenham of counsel,
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
The appellant, Mr Arora, appeals against a review by John Harris (an
officer of HM Revenue and Customs) contained in a letter dated 10 March 2011,
by which he confirmed an earlier decision refusing to restore Mr Arora's car
(black VW Touareg registration EJ05 DZD).
2.
We heard evidence on oath from Mr Arora (with the aid of an interpreter)
and from Mr Ben Cooper (an officer of HM Revenue and Customs). In addition
there was presented to us a witness statement from Mr Harris, which was not
challenged. A bundle of documents was also produced in evidence.
Background Facts
3.
The background facts are not in dispute and we find them to be as
follows.
4.
Mr Arora is the owner of three convenience shops, including one on the Goldhawk Road near Shepherds Bush in London.
5.
On 10 November 2010, HMRC officers visited the shop and found bottles of
spirits on the shelves which had counterfeit "duty paid" labels. As
Mr Arora was not present in the shop, they told the shop assistant that HMRC
officers would return the following day. On 11 November 2010 Mr Cooper visited
the shop with his colleague Mr Eve. Mr Arora was present. They identified
themselves as officers of HMRC and explained that they were there to check UK duty paid stickers and stamps on both alcohol and tobacco products. They carried out a
search under section 122, Customs and Excise Management Act 1979
("CEMA"). Found on the shelves were 22 bottles (16.5 litres) of
wines and 61 bottles (46.2 litres) of mixed spirits. The duty paid labels on
the spirits were tested with an ultra violet torch and none of the duty labels
fluoresced, indicating that the tax labels and the spirits were counterfeit.
Mr Arora was asked to produce documentary evidence (such as invoices or
receipts) for the wine and spirits, but did not produce any. Mr Cooper
therefore seized the wine and spirits under section 139, CEMA, and form C156
(notice of seizure) was issued to Mr Arora and countersigned by him.
6.
Mr Arora was then asked by Mr Cooper about his vehicle, and was told
that it was parked at home in Northolt, and that he had taken the bus to work.
Mr Arora was asked to empty his trouser pockets, and he produced keys to a
Volkswagen vehicle. Mr Arora then took the HMRC officer to the vehicle (the VW
Touareg) which was parked in a nearby car park. The car was searched under
section 163, CEMA. Found in the car were 218 bottles (106.1 litres) of mixed
spirits. The duty paid labels on these bottles were tested with the ultra
violet torch. None of the labels fluoresced, again indicating that the tax
labels and the spirits were counterfeit. The spirits and the car were seized
under sections 49(1), 139(1) and 141, CEMA. Form C156 was issued to and
countersigned by Mr Arora.
7.
The total amount of duty evaded for the bottles of wine is £37.11
(excluding any VAT) and the duty evaded on the spirits is £1359.28 (excluding
any VAT).
8.
On 20 November 2010 Mr Arora wrote to HMRC contesting the seizure of the
car and the 218 bottles of spirits found in it on the basis that the spirits
were for personal use or had been purchased from legitimate sources. HMRC
responded on 7 December 2010 stating that they would commence condemnation
proceedings in the Magistrates Court. We note that Mr Arora did not contest
the condemnation proceedings, and on 15 June 2011, the West London Magistrates
Court ordered that the alcohol and the car be condemned as forfeit.
9.
On 30 December 2010 wrote to HMRC requesting release of the car. This
was treated by HMRC as a request for restoration and on 5 January 2011, HMRC
wrote to Mr Arora stating that restoration of the car would not be offered. Mr
Arora applied for a review of that decision by an e-mail dated 2 February
2011.
10.
The review was undertaken by Mr Harris and his decision not to restore
the vehicle was confirmed by letter dated 10 March 2011.
11.
The reason Mr Harris gave for his decision was because HMRC's general
policy is to seize smuggled goods and any vehicle used to smuggle or transport
them. HMRC's policy is not to restore vehicles unless (a) the quantity of
goods involved is small (the guide level for spirits is 10 litres) and it is a
first offence; (b) the vehicle is adapted for a disabled person; (c) although
not adapted, the vehicle is essential for the transport of an elderly person or
disabled children to a special school; or (d) the vehicle is used to transport
seriously ill people for regular treatment (eg dialysis) and there is no viable
alternative transport available. Mr Harris stated in his letter that although
he was guided by HMRC policy, he considered every case on its individual merits,
and took into account whether there were any mitigating or exceptional
circumstances. Mr Harris considered the reasons given by Mr Arora in his
letter of 20 November 2010 and did not consider that the explanations given
were plausible. Mr Harris took into account that the seizure of the car would
cause Mr Arora difficulties, but those were to be expected and were a natural
consequence of the car being seized. Mr Harris did not consider that Mr Arora
would suffer exceptional hardship from the seizure. For these reasons he
decided that the car should not be restored.
12.
On 5 April 2011 and 12 May 2011 Mr Arora's solicitors wrote to Mr
Harris, contending that HMRC's decision was disproportionate and offering
additional explanations for Mr Arora's conduct, and appealing against the
review decision. Enclosed with the letter of 12 May were a series of receipts
for various purchases of alcohol.
13.
The explanation given in those letters to HMRC was repeated to us at the
hearing by Mr Arora in his evidence. Mr Arora stated that a man (he did not
know his name and he had never met him before – his name was something like
"Ali") had visited him in his shop. "Ali" said that he was
also a shopkeeper, but he had to close his business and was selling his stock.
Mr Arora offered to buy wine and spirits from "Ali". "Ali"
subsequently delivered the wine and spirits to Mr Arora's shop. The price for
the wine and spirits was between £2200 and £2300 (compared with a cost of
approximately £3000 if it were purchased from a cash and carry). Mr Arora paid
a small deposit on delivery, and the balance later. The price was paid in
cash, and "Ali" did not provide an invoice or any other form of
receipt.
14.
On 10 November 2010, when Mr Arora learned of the first visit by HMRC
officers, he told us that he was concerned about the fact that he had been
duped by "Ali", and took steps to remove the contraband alcohol from
the shop, and placed it in his car with a view to disposing of the bottles
later – but he was not able to remove all of the alcohol from his shop. When
HMRC officers interviewed him on 11 November 2010, he was extremely nervous,
which is why he lied about where he lived and the location of the car.
15.
Mr Arora also told us that he needed his car to be able to take his
children to school and to transport his wife (who was ill) to hospital.
Included in the bundles was a letter from Mrs Arora's GP confirming that she is
ill – although the letter referred to hospital appointments in the past, it was
unclear whether Mrs Arora was still visiting the hospital. However, Mr Arora
confirmed in evidence that he had another vehicle (a van) which had two
passenger seats and that it was possible to use the van to take his children to
school or (in an emergency) take his wife to hospital.
The Law
16.
Section 49 CEMA provides that goods which are imported without payment
of duty are liable to forfeiture. Section 141(1) provides that, where a thing
has become liable to forfeiture, then (a) any vehicle used for the carriage,
handling, deposit or concealment of that thing, and (b) any other thing mixed,
packed or found with that thing is also liable to forfeiture. Section 139(1)
provides that anything liable to forfeiture may be seized by an HMRC officer.
Section 152(b) provides:
"The Commissioners may, as they see fit- …
(b) restore, subject to such conditions (if
any) as they think proper, any thing forfeited or seized under [the customs and
excise] Acts … ."
17.
Section 16, Finance Act 1994 ("FA94") provides that an appeal
shall lie to the Tribunal against a decision on review under section 15 FA94.
Section 15 provides for the review of decisions which come within section 14
FA94. Section 14(1)(d) includes any decision specified in Schedule 5 FA94.
Paragraph 2(1)(r) of Schedule 5 specifies any decision under section 152(b)
CEMA "as to whether or not anything forfeited or seized under the customs
and excise Acts is to be restored to any person or as to the conditions subject
to which any such thing is so restored."
18.
Thus, although section 152(b) gives HMRC a discretion as to whether or
not to restore seized vehicles or goods, sections 14 to 16 FA94 give a right of
appeal to the Tribunal against a refusal to restore or the conditions of
restoration. However, section 16 FA94 limits the jurisdiction of the Tribunal
in respect of ancillary matters. Section 16(8) defines ancillary matters as
those specified in Schedule 5. As a refusal to restore and the conditions of
restoration are specified in Schedule 5 they are, therefore, ancillary matters.
The relevant parts of section 16(4) provide:
"16(4) 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 that 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, and
(c) in the case of a decision which has
already been acted on or taken effect and cannot be remedied by a further
review to declare the decision to have been unreasonable and to give directions
to the Commissioners as to the steps to be taken for securing that repetitions
of the unreasonableness do not occur when comparable circumstances arise in the
future."
19.
The precondition to the Tribunal’s exercise of one or more of its three
powers, namely, that the person making a decision could not reasonably have
arrived at it, falls within the guidance given by Lord Lane in the decision in Customs
and Excise v JH Corbitt (Numismatists) Ltd [1980] STC 231 (not cited to us)
at page 239:
“…..if it were shown the Commissioners had acted in
a way in which no reasonable panel of commissioners could have acted; if they
had taken into account some irrelevant matter or had disregarded something to
which they should have given weight”.
20.
The Tribunal is entitled to make its own findings on the primary facts
which are to be taken into account by HMRC when exercising their powers
regarding restoration of goods. The findings of fact include blameworthiness
and the proportionality of the penalty imposed to the policy aims pursued
having full regard to the individual circumstances of the case. The Tribunal,
however, has no fact finding jurisdiction for the purpose of challenging the
legality of the seizure and forfeiture of the goods. The Tribunal will then
apply its findings of fact to determine whether the Respondents acted
reasonably in refusing restoration.
21.
The Court of Appeal in Revenue and Customs Commissioners v Jones and
another [2011] EWCA Civ 824 confirmed the scope of the Tribunal’s
jurisdiction when a person does not contest the seizure before the magistrates’
court. Mummery LJ at paragraphs 71(4) & (5) stated:
“The stipulated statutory effect of the [importers']
withdrawal of their notice of claim under para 3 of Sch 3 was that the goods
were deemed by the express language of para 5 to have been condemned and to
have been 'duly' condemned as forfeited as illegally imported goods. The tribunal
must give effect to the clear deeming provisions in the 1979 Act: it is
impossible to read them in any other way than as requiring the goods to be
taken as 'duly condemned' if the owner does not challenge the legality of the
seizure in the allocated court by invoking and pursuing the appropriate
procedure. The deeming process limited the scope of the issues that the
[importers] were entitled to ventilate in the FTT on their restoration appeal.
The FTT had to take it that the goods had been 'duly' condemned as illegal
imports. It was not open to it to conclude that the goods were legal imports
illegally seized by HMRC by finding as a fact that they were being imported for
own use. The role of the tribunal, as defined in the 1979 Act, does not extend
to deciding as a fact that the goods were, as the [importers] argued in the
tribunal, being imported legally for personal use. That issue could only be
decided by the court. The FTT's jurisdiction is limited to hearing an appeal
against a discretionary decision by HMRC not to restore the seized goods to the
respondents. In brief, the deemed effect of the [importers'] failure to contest
condemnation of the goods by the court was that the goods were being illegally
imported by the [importers] for commercial use”.
Issues before the Tribunal
22.
Mr Arora's main argument is that the loss of the vehicle is a
disproportionate penalty, having regard to (a) the fact that he was an innocent
purchaser of the goods and was unaware that duty had not been paid on them, (b)
that as soon as he became aware that the goods were contraband, he withdrew
then from sale and placed them in his car for subsequent disposal, (c) that the
loss of his car will cause him exceptional hardship, (d) that this is a first
offence, and (e) that the vehicle (at a value of £10,000) is worth over seven
times the excise duty sought to be evaded,
23.
We reject this argument. We find Mr Arora's explanations implausible.
Mr Arora has been in business for many years, and has been retailing alcohol
through three shops for more than five years. Individuals do not just turn up
off the street offering to sell wine and spirits at a substantial discount to
wholesale prices. Indeed Mr Arora stated in his evidence that nothing like
this had ever happened to him before. Mr Arora is a successful small
businessman with three shops, and he is clearly no fool. These circumstances
would have placed Mr Arora on notice that there was something suspicious about
the proposal. The fact that no invoice or other receipt was sought or offered
confirms that the sale was illegitimate; a legitimate trader would need to
issue a VAT invoice for a sale of this quantity, and Mr Arora would need such
an invoice in order to be able to claim his input VAT credit, and provide
accounting evidence for the purposes of preparing his own accounts and his
income tax return.
24.
Mr Arora's actions after HMRC's visits reinforces our view. If Mr Arora
had been an innocent purchaser, and had removed the contraband bottles to his
car with a view to disposing of them later, then why did he not tell this to
HMRC when they arrived. Instead he lied, saying that his home was in Northolt
and that his car was parked there. Whilst we understand that Mr Arora may have
been nervous, this does not explain his lies.
25.
Mr Sareen also sought to argue that some of the bottles found in the
vehicle had been purchased legitimately, and duty had been paid on them. If
this were the case, then this is an issue that should have been ventilated in
the condemnation proceedings before the Magistrates Court. As all the bottles
of alcohol seized by HMRC had been condemned as forfeit in condemnation
proceedings, this Tribunal is bound by the decision of the Magistrates Court
that all the alcohol seized was contraband.
26.
We cannot regard the seizure of or the refusal to restore his vehicle as
disproportionate, because the point is explicitly dealt with in an authority,
binding on us, namely the decision of the Court of Appeal in Lindsay v
Commissioners of Customs and Excise [2002] EWCA Civ 607.
27.
In that case (at [63] and [64]) Lord Phillips MR (as he then was) said
this:
63. Having regard to these considerations, 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.
64. The Commissioners’ policy does not, however, draw
a distinction between the commercial smuggler and the driver importing goods
for social distribution to family or friends in circumstances where there is no
attempt to make a profit. Of course even in such a case the scale of
importation, or other circumstances, may be such as to justify forfeiture of
the car. But where the importation is not for the purpose of making a profit,
I consider that the principle of proportionality requires that each case should
be considered on its particular facts, which will include the scale of
importation, whether it is a ‘first offence’, whether there was an attempt at
concealment or dissimulation, the value of the vehicle and the degree of
hardship that will be caused by forfeiture. There is open to the Commissioners
a wide range of lesser sanctions that will enable them to impose a sanction
that is proportionate where forfeiture of the vehicle is not justified.
28.
Lord Justice Judge (as he then was), agreeing with Lord Phillips said
this (at [71] and [72]):
71. I agree with the judgment of the Master of the
Rolls on the issues of principle and their application to this appeal. My brief
observations are by way of emphasis only. There is usually a marked distinction
between those who smuggle alcohol, cigarettes and tobacco for profit and those
who, without profit, smuggle amounts in excess of the permitted limits for
their personal use and occasional distribution to family members and close
friends. The vehicles used by those whose activity falls into either category
are liable to be seized.
72. Given the extent of the damage caused to the
public interest, it is, in my judgment, acceptable and proportionate that,
subject to exceptional individual considerations, whatever they are worth, the
vehicles of those who smuggle for profit, even for a small profit, should be
seized as a matter of policy. However, the equal application of the same
stringent policy to those who are not importing for profit fails adequately to
recognise the distinction between them and those who are trading in smuggled
goods. Accordingly the policy is flawed.
29.
It appears from these passages (to which we have added the emphases)
that the real question of proportionality arising in cases such as this, where
illicit alcohol is being sold commercially, is not whether the value of a
seized vehicle is disproportionate to the offence, or the amount of duty sought
to be evaded, but whether the seizure of a valuable vehicle intentionally used
to further a fraudulent commercial venture is disproportionate to the damage caused
to the public interest by such ventures. The Court of Appeal has made it clear
that in the absence of exceptional circumstances it is not.
30.
We consider that there are no exceptional circumstances in this case
which would justify restoration. Mr Arora lives in an area which has good
public transport and also has a van which can be used to transport his
children to school, or take his wife to hospital in an emergency. Although the
van may not be as comfortable and convenient as a VW Touareg (for example
because it has only two passenger seats, and therefore cannot accommodate his
wife and his children at the same time), it is sufficient to do the job if
required.
Conclusion
31.
We find that HMRC's decision that there were no relevant exceptional
circumstances in this case was reasonable and also that HMRC's decision to
refuse restoration of the vehicle was not disproportionate or otherwise
unreasonable.
32.
The appeal is therefore dismissed
33.
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.
NICHOLAS ALEKSANDER
TRIBUNAL JUDGE
RELEASE DATE: 16 May 2012
Authorities mentioned in skeleton
arguments but not referred to in this decision:
Aykut Ates v CCE (2002)
(E00188)
CCE v Newbury [2003] EWHC 702 (Admin)
Louloudiakis v Dimosio
[2001] EUECJ C-262/99
R (oao Hoverspeed and others)
v CCE [2002] EWHC 1630 (Admin)
