First-tier Tribunal (Tax)

[2017] UKFTT 593 (TC)

TC06035

Appeal number: TC/2014/03246

EXCISE DUTY – assessment and penalty – preliminary issue –assumed earlier but unidentified release for consumption - Tribunal bound by B&M Retail [2016] UKUT 429 (TC) – preliminary issue decided in favour of HMRC

FIRST-TIER TRIBUNAL

TAX CHAMBER

Decided on the papers with the consent of both parties

Mr A Johal, solicitor, of Rainer Hughes Solicitors, for the Appellant

Mr I McGoverin, solicitor, HMRC’s solicitors office, for the Respondents

© CROWN COPYRIGHT 2017

PRELIMINARY DECISION

1.              On 9 June 2014 the appellant appealed an excise duty assessment of £400,068 issued to it on 18 July 2013.  On 18 July 2014 it appealed a penalty assessment of £80,013.60 issued on 31 January 2014 to it in respect of the circumstances which gave rise to the duty assessment.

2.              The parties agreed that the Tribunal should determine a preliminary issue on assumed facts.  The Tribunal consented to this on the basis that it was in the interests of justice to do so.

3.              The preliminary issue is whether only one excise duty point can arise in respect of specific goods, and, if the facts were found to be as assumed below, such a duty point must have arisen before the appellant purchased the goods and therefore the appellant could not be, as it was, assessed on the basis of a later duty point arising when the goods were held in its nominated warehouse.

Assumed facts

4.              The appellant purchased alcoholic goods (a mixture of red, white and rosé wine of the brands and in the quantities as specified in the annex to this decision) from C&C Brands Ltd on dates between July 2011 and April 2012. The goods were delivered on the appellant’s instructions on each occasion to a warehouse at Unit 5, Springhill Road, Grimethorpe, Barnsley (‘the warehouse’) owned and operated by Wormall Developments Ltd, who held them to the appellant’s order.

5.              Wormall Developments Ltd were not registered to, and did not hold, the goods in question in excise duty suspension.  It is not known whether the goods were ever held in a duty suspension arrangement.

6.              The appellant had no evidence, and did not seek to prove, that the goods in question had had the applicable UK excise duty paid, relieved, remitted or deferred under a duty deferment arrangement in respect of them at any point.

7.              The appellant had no evidence of, and did not seek to prove, who delivered the goods to the warehouse nor of where the goods were held before being held in the warehouse. 

8.              HMRC have identified the chain of suppliers who supplied the goods in question to C&C Brands Ltd.  The chain traced back to a trader who has not been located or contacted by HMRC.  The appellant had no evidence, and did not seek to prove, that any of the identified suppliers had paid excise duty in respect of the goods in question.  The appellant had no evidence, and did not seek to prove, that any of the identified suppliers held or stored the excise goods in question.

9.              On 18 July 2013, the appellant was assessed under Regulation 10(2) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (‘the Regulations’) for £400,068 on the basis that it was jointly and severally liable for the excise duty assessed on Wormall Developments Ltd, on the same date, under Regulation 10(1) of the Regulations.

10.           An excise wrongdoing penalty in relation to the above assessment was imposed on the appellant under s 41 Finance Act 2008.

The appellant’s contentions

11.           The appellant appealed the excise duty and penalty on the basis that in respect of identified goods only one excise duty point can arise, and on the basis of the assumed facts set out above, such duty point must have arisen before the goods were purchased by the appellant and delivered to Wormall Developments Ltd.  This was because under Regulation 5 an excise duty point arose when goods are released for consumption in the UK, and, in order for the appellant to purchase the goods and for them to be delivered to its nominated warehouse, the goods must already have been released for consumption within the UK (within the meaning of Regulation 6(1) of the Regulations).  As the appellant and Wormall Developments Ltd were not the persons owning or holding the goods at the time of the original release for consumption within the UK, the appellant contends it was not liable to pay the duty and the assessment and penalty imposed on it should be discharged. 

12.           The appellant contends that the above analysis is unaffected by its inability to identify any of the following:

(a)          the place the goods were first released for consumption in the UK;

(b)          the date the goods were first released for consumption in the UK;

(c)          the persons involved in the first release for consumption in the UK.

Binding authority

13.           The Upper Tribunal considered these issues in the case of B&M Retail Ltd [2016] UKUT 429 (TCC).  Its conclusion was:

[155] Our analysis of the wording of the 2008 Directive, and of the policy considerations which are evident from its recitals and the observations in the authorities about the need to ensure that unpaid excise duty is collected when goods have been released for consumption within the EU, leads us to conclude that the correct interpretation of the 2008 Directive, and consequently the Regulations, is that once any one of the four events mentioned in Article 7 of the 2008 Directive has occurred then it is incumbent on the Member State in question to ensure that the duty is paid.  Therefore, in circumstances where it is unable to assess any person who caused a prior release for consumption to occur, it is open to the member State to asses, in accordance with its own procedures, any person who is found to be holding the goods within the meaning of Art 7(2)(b) of the 2008 Directive.

[156]  We agree with HMRC that, if B&M’s contentions were correct, then, in particular in relation to imported excise goods, if HMRC were unable to establish how or when the goods concerned were imported, the products would have to go untaxed, even though the person holding them were unable to show duty had been paid.  Such a result would be clearly contrary to the objection of the 2008 Directive to ensure that duties properly chargeable are collected.

[157] As a consequence, we have concluded that the preliminary issue should be resolved in favour of HMRC.  In particular, we consider that the recognition by HMRC that one or more other excise duty points must, in principle, have been triggered before B&M received the relevant goods did not preclude HMRC from assessing B&M for excise duty in respect of the goods pursuant to Regulation 6(1)(b).  This conclusion is subject to HMRC’s power to reimburse B&M the amount of the assessment, in accordance with their stated policy, should it later be established through evidence that an assessment can be made in respect of an excise duty point which arose prior to B&M holding the goods.

14.           The Tribunal is bound by the Upper Tribunal’s ruling.  The effect of the ruling appears to be that it is open to HMRC to assess any person who is found to be holding the goods which cannot be shown to be duty paid unless an earlier duty point can be identified and assessed.  On the assumed facts in this case, an earlier duty point cannot be identified and assessed.  Wormall Developments Ltd can therefore be assessed to the duty on the goods as the person holding the goods the first time a release for consumption under Regulation 6(1) in respect of those goods can be identified; the appellant’s joint and several liability to that assessment flows from Regulation 10(2).

Decision

15.           The preliminary issue is therefore decided against the appellant.

16.           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.

BARBARA MOSEDALE

TRIBUNAL JUDGE

RELEASE DATE: 31 JULY 2017

Total Excise Duty  £400,068.20