First-tier Tribunal (Tax)

 

EXCISE DUTY AND CUSTOMS DUTY - civil evasion penalties - s25 Finance Act 2003 and s8 Finance Act 1994 - late appeal admitted - hearing in absence of appellant - whether seeking to evade duty - yes - whether dishonest conduct - yes - whether allowances given to reduce penalties correct - yes - whether proportionate - yes - appeal dismissed. "

FIRST-TIER TRIBUNAL TAX CHAMBER

Appeal number:  TC/2018/03822

 

BETWEEN

 

SAFIYO JIMCAALE

Appellant

 

 

-and-

 

 

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS

Respondents

 

 

 

TRIBUNAL:

JUDGE TRACEY BOWLER MR CHRISTOPHER JENKINS

 

 

Sitting in public at at Taylor House on 5 November 2019

 

The Appellant did not attend the hearing and no representative had been appointed.

 

Mr Carey, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

 

DECISION

Introduction

1.             Ms Jimcaale is appealing against a customs civil evasion penalty of £1645 and an excise civil evasion penalty of £5256 (“the Penalties”)  issued by HMRC on 11 September 2017 under provisions contained in section 25 Finance Act 2003 and section 8 Finance Act 1994.   HMRC have sought to impose the Penalties as a consequence of Ms Jimcaale proceeding through the Green Channel at London Heathrow airport on 4 September 2016 carrying 61kg of shisha tobacco in her luggage.  HMRC seized the shisha tobacco and Ms Jimcaale did not challenge the lawfulness of the seizure.  The Penalties were issued on the basis that Ms Jimcaale had engaged in conduct involving dishonesty for the purpose of evading duty.

2.             In summary, Ms Jimcaale has appealed on the basis that the shisha was for personal use, she did not know that duty was payable on it, she will not do this again, the Penalties are unfair and she cannot afford to pay them.

3.             Ms Jimcaale’s appeal is made pursuant to section 16 Finance Act 1994 and section 33 Finance Act 2003. We have jurisdiction to consider whether the penalty has been properly imposed and whether to reduce the penalty if we think there are grounds to do so, but we do not have jurisdiction to reduce or remove a penalty on the grounds of inability to pay.

4.             Ms Jimcaale was more than one month late making her appeal.  She applied to appeal late, but this was opposed by HMRC.

5.             Ms Jimcaale was sent a summary decision on 21 November 2019.  A decision setting out the full findings of fact and reasons was subsequently requested within the stipulated 28 days of its release. 

PROCEEDINGS IN THE ABSENCE OF MS JIMCAALE

6.             Ms Jimcaale did not attend the hearing and had not contacted the tribunal to say that she would be unable to attend. She had previously attended a hearing before Judge Brooks on 24 May 2019 which had been adjourned so that Ms Jimcaale could bring the relevant papers to the hearing. Directions issued by Judge Brooks required the bundle of evidence to be resent to Ms Jimcaale.

7.             When Ms Jimcaale did not attend this hearing the clerk tried to call the telephone number provided in the Notice of Appeal, but the number would not connect. We were satisfied that a Notice of Hearing had been sent to Ms Jimcaale on 25 June 2019 by email to the email address stated on the Notice of Appeal. In addition, Mr Carey explained that he had emailed Ms Jimcaale at the same email address in October and on 2 June 2019 a replacement bundle had been signed for when delivered to Ms Jimcaale’s address.

8.             As a result we were satisfied that Ms Jimcaale had been notified of the hearing. She had provided no basis for us to conclude that it was in the interests of justice and fairness to adjourn the hearing again. She had provided detailed grounds of appeal in her Notice of Appeal and there was ample evidence in the notes taken at the time of the seizure of the tobacco and subsequent correspondence to assess the key issues in the case: whether Ms Jimcaale had attempted to evade duty and had acted dishonestly.  In view of the evidence in the papers we therefore considered it to be in the interests of justice to proceed with the hearing in Ms Jimcaale’s absence under Rule 33 of The Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009.

ADMITTING THE LATE APPEAL

9.             In a letter received by HMRC on 27 February 2018 Ms Jimcaale requested an independent review of HMRC’s decision to impose the Penalties. HMRC upheld the decision in a letter which should have been dated 6 April 2018, but which was incorrectly dated 9 January 2018. She was required to appeal HMRC’s decision within 30 days of the date on the review letter. Ms Jimcaale telephoned HMRC on 29 May 2018 and was told that she needed to appeal to the tribunal and explain why her appeal was late. Ms Jimcaale then appealed to the tribunal on 16 June 2018, more than one month late.

10.         The case of William Martland v HMRC [2018] UKUT 178 (TCC) sets out the approach to be taken when determining whether to admit a late appeal. The Upper Tribunal said that in exercising judicial discretions generally, particular importance is to be given to the need for ‘litigation to be conducted efficiently and at proportionate cost’, and ‘to enforce compliance with rules, practice directions and orders’, although this should not detract from the general injunction to ‘consider all the circumstances of the case’.

11.         The Upper Tribunal provided the following guidance for the consideration of late appeals by the First-Tier Tribunal (“FTT”):

“44.When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton:

(1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being “neither serious nor significant”), then the FTT “is unlikely to need to spend much time on the second and third stages” - though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages.

(2) The reason (or reasons) why the default occurred should be established.

(3) The FTT can then move onto its evaluation of “all the circumstances of the case”. This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission.

45. That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. […] The FTT’s role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.

46. In doing so, the FTT can have regard to any obvious strength or weakness of the applicant’s case; this goes to the question of prejudice - there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal [...]

47. Shortage of funds (and consequent inability to instruct a professional adviser) should not, of itself, generally carry any weight in the FTT’s consideration of the reasonableness of the applicant’s explanation of the delay[…] Nor should the fact that the applicant is self-represented […] HMRC’s appealable decisions generally include a statement of the relevant appeal rights in reasonably plain English and it is not a complicated process to notify an appeal to the FTT, even for a litigant in person.”

 

12.         In this case the amount at stake for Ms Jimcaale is £6901 which is a significant amount of money for most people.  Ms Jimcaale says in her Notice of Appeal that she is a single mother of five children and therefore the amount is likely to be particularly significant for her.

13.         The length of delay was 41 days.  While statutory time limits should be respected, this length of delay is not in the range of the more serious and significant delays frequently seen in this tribunal. 

14.         Ms Jimcaale explained in her Notice of Appeal that she had been confused by the letter as it was wrongly dated 9 January 2018.  We took this error by HMRC into account.  Requiring action to be taken within 30 days of a letter dated 9 January was by defninition impossible when sent to Ms Jimcaale in April and may have confused her.  However, we did not accept Ms Jimcaale’s claim that there were manifest mistakes in the letter (unidentified by her) which would lead the reader to conclude that it was a fake.  Ms Jimcaale had been in correspondence with HMRC for some 9 months before the review conclusion letter sent to her in April 2018 and the information in the review letter set out consistent information, such as the precise amount of the Penalties, as well as a detailed history of the seizure and correspondence. 

15.         It took HMRC 10 months after the events at Heathrow to contact Ms Jimcaale for information in connection with the imposition of the Penalties.  That in itself may have incorrectly lulled Ms Jimcaale into the false sense that time was not of the essence.

16.         Ms Jimcaale also refers in her Notice of Appeal to family problems involving two family members being in a coma which she says contributed to the delay.  While we would normally expect to see some medical evidence to support such a statement, supporting evidence is not a requirement.   

17.         HMRC had already prepared their case for the appeal and were ready to proceed if permission for the late appeal was granted.  There would be little prejudice caused in terms in of case preparation for HMRC if permission for the late appeal was granted, although a grant of permission for late appeals may be seen as undermining the value of the statutory time limit unless done with careful regard to the balancing exercise described in Martland.

18.         In deciding whether to admit the late appeal we did not engage in a full analysis of the merits of the case.  However, considering the answers given to the Border Force Officer when stopped at Heathrow and the highly inconsistent explanations provided subsequently, Ms Jimcaale’s case did not appear strong.  

19.         Despite our view that her case was not strong, we concluded that given the amount at stake and its likely impact on Ms Jimcaale, the length of delay in appealing (particularly when set in the context of the wrongly dated HMRC letter), HMRC’s readiness to proceed and Ms Jimcaale’s reference to family problems, the balancing exercise weighed in favour of admitting the late appeal.

FINDINGS OF FACT

20.         The evidence consisted of the bundle prepared by HMRC, evidence from Ms Jimcaale in the Notice of Appeal and oral evidence from Officer Hundal.  Taking into account all of the evidence we made the following factual findings.

21.         Ms Jimcaale arrived at London Heathrow airport on 4 September 2016 on a flight from Kenya via Dubai. She walked through the Green “nothing to declare” Channel with luggage.

22.         Ms Jimcaale was stopped and questioned by a Border Force Officer. She said that her brother had given her two or three bags to bring into the UK and she did not know what was inside them. She said she had not packed those bags.  When asked if she had any tobacco, shisha or alcohol she said “no”.

23.         When Ms Jimcaale’s bags were searched 61kg of shisha tobacco were found. Ms Jimcaale then said that this was for a shop in Neasden.  She said that she did not know the name or location of the shop.

24.         The shisha tobacco was seized. Ms Jimcaale was given Public Notice 1, Public Notice 12A, a Seizure Information Notice and a warning letter about seized goods. She signed the information notice and the warning letter.  The warning letter stated that HMRC may take further action against Ms Jimcaale, such as issuing her with an assessment for any evaded tax or duty and a wrongdoing penalty.

25.         Public Notice 12A stated that Ms Jimcaale had one month to challenge the seizure of the shisha tobacco. She did not challenge the seizure.

26.         There are signs at Heathrow airport at the first point after a person lands, at immigration, at the luggage collection and at the exit.  Those signs show pictures of cigarettes as well as open tobacco and a shisha water pipe with the permitted allowances stated. 

27.         On 19 July 2017 Officer Halliday of HMRC wrote to Ms Jimcaale asking for information about the seizure, explaining that there was reason to believe that conduct involving dishonesty may have occurred in relation to her customs obligations. Ms Jimcaale was warned in that letter that civil evasion penalties of up to 100% of the amount of the duty evaded or attempted to be evaded were potentially payable if dishonest conduct was confirmed. 

28.         Public Notices 300 and 160 were enclosed with the letter of 19 July 2017.  Those notices explain that an investigation has been started under the civil evasion penalty system, how that would progress and what could be done to reduce penalties if they were imposed. 

29.         Ms Jimcaale was asked to reply to the letter within 30 days and sign and return the declaration that she understood the Public Notices, but she failed to do so within that time limit.

30.         On 1 August 2017 Officer Halliday wrote again to Ms Jimcaale asking for a response to the letter of 19 July 2017.

31.         Ms Jimcaale replied on 14 August 2017.   This letter shows that Ms Jimcaale frequently travelled to Kenya.  She has also travelled to Dubai on numerous occasions. She says that she  was told by a family friend before travel on 4 September 2016 that she could import shisha tobacco into the UK in order to fund her travel.

32.         Ms Jimcaale signed the declaration to confirm that she understood the Public Notices and returned it with her letter of 14 August 2017. 

33.         The Notice of Assessment for penalties of £8627, with a reduction of 10% for disclosure and 10% for co-operation producing a liability of £6901, was issued on 11 September 2017 in a letter sent to Ms Jimcaale’s home address.

34.         Ms Jimcaale telephoned Officer Halliday on 15 September 2017, in response to the Notice of Assessment, expressing concern at the issuance on the occasion of a first offence.  Officer Halliday also spoke to Ms Jimcaale’s son on that occasion and explained the appeal procedure.

35.         On 25 September 2017 Ms Jimcaale wrote to HMRC saying that she was not aware of the “amount of goods to be declared” on 4 September 2016 and it was her first time.  She had not travelled since and could not afford the Penalties.

36.         On 17 October 2017 Officer Halliday wrote to Ms Jimcaale to explain that the Penalties remained and explained how to proceed to seek to pay by instalments.

37.         On 20 November 2017 Ms Jimcaale wrote again to HMRC, repeating the points made previously about not having brought goods into the country before, and stating again that she could not pay the Penalties.

38.         On 18 December 2017 an officer from the post detection audit team wrote to explain how Ms Jimcaale could discuss payment or request a review.

39.         On 27 February 2018 Ms Jimcaale wrote to HMRC saying that she did not know that it was illegal to bring shisha into the UK; she had bought it all for personal use as it is very expensive in the UK; it was unfair to receive the fine more than a year after the event and she had understood that the warning she had received on 4 September 2016 was an end to the matter.

40.         In her Notice of Appeal Ms Jimcaale says that the shisha was brought to the UK for personal reasons and she had no intention of selling it or giving it to anyone other than family.  She says that she did not know it was like bringing in cigarettes.

The Law

41.         The legislation referred to in this decision is attached as an Appendix.

42.         Article 2 of the Travellers Allowance Order 1994 provides that people who travel from outside the European Union are not permitted to bring more than 250 grammes of shisha tobacco (which falls within the category of smoking tobacco) into the country without paying duty.

43.         Section 8 of the Finance Act 1994 and section 25 of the Finance Act 2003 state that where a person engages in any conduct for the purpose of evading any duty of excise or tax and their conduct involves dishonesty that person is liable to a penalty of an amount equal to the amount of duty or tax evaded, or sought to be evaded. The penalty can be reduced as either HMRC or the tribunal thinks proper, but in doing so no account can be taken of a person’s inability to pay the duty or the penalty. However, account can be taken of the person’s disclosure and/or co-operation.

44.         Section 8 of the Finance Act 1994 was partially repealed by provisions contained in the Finance Act 2007 and Finance Act 2008, but the repeal did not affect the provisions which enabled HMRC to impose the Penalties on Ms Jimcaale (Articles 4 and 6 Finance Act 2008 Schedule 41 (Appointed Day and Transitional Provisions) Order 2009 (SI 2009/511).

45.         In deciding whether a person has been dishonest the courts have set out the approach in the case of Ivey v Genting Casinos (UK) Ltd [2018] 2 All ER 406 which requires the actual state of mind of the person involved firstly to be identified and then for the objective standards of ordinary decent people to be applied to that state of mind. The person said to have been dishonest does not need to have appreciated or understood that what they were doing was dishonest.

46.         Under Section 31(2) Finance Act 2003 a demand notice in respect of penalties for customs duties evasion under Section 25 of that Act may not be given more than 2 years after HMRC has sufficient knowledge, in their opinion, of the facts sufficient to justify the giving of the demand notice. 

47.         Section 16(6) Finance Act 1994 (for excise duty) and Section 33(7)(a) Finance Act 2003 (for customs duty and import VAT) provide that the burden of proof is on HMRC to establish that Ms Jimcaale has engaged in conduct for the purpose of evading the duty or tax and that her conduct involved dishonesty.  Otherwise the burden of proof is on the Appellant.

48.          The standard of proof is the ordinary civil standard of a balance of probabilities.

Discussion

Grounds of Appeal

49.         Ms Jimcaale has appealed on the grounds that:

(1)          the shisha was for personal use;

(2)          she had no intention of selling it or giving it to anyone other than family;

(3)          she did not know it was like bringing in cigarettes;

(4)          it was the first time she had done this and she does not get into trouble with the police;

(5)          she would not have done it if she had known it was not allowed;

(6)          she regrets her actions and “will not repeat doing so again”; and

(7)          it is unfair to receive such a large penalty one year after the mistake was made, especially when she has not broken the law again in the meantime.

Compliance with statutory time limits

50.         We are satisfied that HMRC has discharged the burden of showing that the Notice of Assessment was issued to Ms Jimcaale’s address and within the statutory time limit.  The Notice of Assessment was issued on 11 September 2017 which was within two years of Ms Jimcaale’s travel on 4 September 2016 through Heathrow with the shisha.    

Treatment of the import of the shisha as being for commercial purposes

51.         In her notice of appeal Ms Jimcaale claims that she brought the shisha tobacco to the UK for personal use.  By virtue of the fact that she did not challenge the seizure of the tobacco, the result is that the goods are treated as having been brought into the UK for commercial purposes for both the assessment of duty and for penalty purposes.  That is made clear by the cases of HMRC v Jones & Jones [2011] EWCA Civ 824 and HMRC v Jacobson [2018] UKUT 18 TCC  It is not possible for us to find that the tobacco was for personal use and that the goods were therefore exempt from duty.  

52.         However, the deemed effect of the fact that Ms Jimcaale did not challenge the seizure of the tobacco is separate from the consideration of whether she engaged in conduct to evade the payment of duty and/or tax and whether her conduct involved dishonesty.

Ms Jimcaale’s conduct

53.         For the following reasons we are satisfied that HMRC have shown that Ms Jimcaale engaged in conduct to evade the payment of duty and/or tax and that her conduct involved dishonesty.

54.          Ms Jimcaale’s initial responses when questioned at Heathrow lack plausibility and credibility. At the airport she said that her brother had given her the bags and she did not know the contents. We find that this is not credible. Ms Jimcaale was carrying a very significant weight of shisha - 61kg.  It is not credible that a person would be given bags to carry weighing 61kg and not ask what was in them.  In addition, it is more likely than not that she would have needed to have confirmed at check-in that she had packed the bags and had not included any of the prescribed items.  If she could not confirm these matters she would have been required to open her bags for inspection and would clearly have noticed 61kg of shisha.

55.         When the shisha was found Ms Jimcaale’s responses changed.  She said that the shisha was for a shop in Neasden. If that was so, then her initial response was dishonest in saying that she did not know about the shisha. 

56.         Ms Jimcaale’s letter of 14 August 2017 says that she was told by a family friend in Dubai that she could import shisha into the UK and use that to fund her travel.  This implies that the shisha was brought to the UK in order to be sold at a profit and is consistent with the reference to the shop in Neasden.  However, the explanations which describe the commercial activity are not consistent with her claimed lack of knowledge of the shisha when first questioned at the airport. 

57.         We note for completeness that the letter of 14 August 2017 refers to travel on 19 July 2017.  We treat that as an error, as the travel was on 4 September 2016, mixing up the dates of travel and the date of Officer Halliday’s initial letter.  We therefore treat this as an oversight and attach little weight to the mistake.

58.         When Ms Jimcaale appealed the penalties she claimed that the shisha was for personal use and not for sale. The claimed personal use is not consistent with her initial claim that she had no knowledge of the shisha in her bags, or with the claim that it was for her to earn money through a shop in Neasden or otherwise.    The fact that Ms Jimcaale’s explanation has changed so frequently significantly undermines her credibility.

59.         Ms Jimcaale has not challenged the record of the interview at the airport or claimed that she did not send the letter found at page 24. Those pieces of evidence together show that Ms Jimcaale had knowingly brought the shisha into the UK in order to earn money.

60.         Ms Jimcaale is a frequent traveller according to her own description in her letter of 14 August 2017. The evidence does not show any reason why she would be unable to understand the prominent signs at the airport which show, not only by word, but also in pictures, what the allowance is.  Her Notice of Appeal shows that she is aware of restrictions on bringing cigarettes into the country and shisha is another form of tobacco.  The quantity of seized goods is approximately 244 times the allowance of 250 grammes. The excess is so significant that, even if Ms Jimcaale was not aware of the precise allowance, it is more likely than not that she would have known that she had exceeded it. She did not attempt to check whether she was carrying more than the allowance.

61.         In our view a reasonable and honest person importing such a heavy weight of shisha would have checked whether they could do so without paying duty.  That could have been by looking at the signs at the airport, or asking before entering the Green Channel.  Ms Jimcaale’s evidence shows that she brought the shisha to the UK in order to profit from buying it duty-free overseas and reselling it in the UK.  Yet she clearly attempted to deny any knowledge of the shisha when first asked about whether she was carrying any and, indeed, denied knowledge about the contents of very heavy bags weighing as much as a lighter- weight adult.  We therefore find it is likely that she knew there were restrictions on the amount of shisha she could bring into the UK without paying duty and that by going through the Green Channel she was attempting to evade the duty.  Her conduct clearly involved dishonesty by reference to the standards of ordinary decent people. 

62.         As a result HMRC were entitled to assess the Penalties.  Ms Jimcaale has complained that HMRC did not contact her until July 2017, some 10 months after the events at Heathrow.  She says that she thought that the warning letter given to her on 4 September 2016 was the end of the matter.  The warning letter which she signed and of which she was given a copy stated that HMRC may take further action against Ms Jimcaale such as issuing her with an assessment for any evaded tax or duty and a wrongdoing penalty.  She was therefore clearly warned of that possibility, but we can understand that she may have thought after 10 months that no further action would in fact be taken.  However, we are satisfied as explained above that HMRC acted within the statutory time limits to assess the Penalties.

Reduction of the penalties

63.         Ms Jimcaale has appealed the imposition of the Penalties but not the amount. The Penalties are based on the amount of duty sought to be evaded. HMRC has provided a breakdown of the Penalties in the Notice of Assessment and we find no basis to do other than accept those figures.

64.          The next question is whether the reduction to the penalty amount made by HMRC is appropriate. 

65.         HMRC has reduced the penalty by 10% for disclosure and 10% for co-operation. Reductions can be made up to the level of 40% in each case. However, in order to obtain a 40% reduction for disclosure the person is required to provide an early and truthful admission of the extent of the duty or tax not paid and why such amounts arose. Ms Jimcaale has provided inconsistent explanations. Her original explanation has subsequently been denied. She did not respond to the questions asked by Officer Halliday in the letter dated 19 July 2017 until she was chased for a response by Officer Halliday in another letter.

66.         She has stated in her Notice of Appeal that she has been having family problems, including two of her family members being in a coma. However, this was stated to explain why she responded late to the review by HMRC and not earlier delays and inconsistent explanations.   She has not provided any medical evidence to support her description of the family problems and we have reduced the weight given to her evidence because of our findings about her credibility.  We therefore find that Ms Jimcaale’s reference to family illness is insufficient by itself to show that such circumstances existed and limited her ability to engage with and respond to Officer Halliday.  As a result we find that Ms Jimcaale has not shown that she had any good reason for her failures to respond in a timely fashion or to make consistent disclosures.

67.         We therefore find that the 10% deduction for disclosure is properly considered and reasonable, recognising some element of response from Ms Jimcaale; although on one view, given her lack of consistent disclosure, it could be said to be surprisingly generous.

68.         The maximum reduction for co-operation is available where a person provides all information promptly, answers all questions truthfully, gives relevant information to establish the true liability and co-operate until the end of the investigation. Again we find that the 10% deduction for co-operation is properly considered and reasonable recognising some level of co-operation from Ms Jimcaale; although similarly, given the history of the investigations, it could be said to be surprisingly generous.

69.         The legislation does not permit a reduction in the penalty to be made because a person has insufficient money to pay the penalty, or because it is their first penalty.

Fairness

70.         Ms Jimcaale has said that it is unfair to receive such a large penalty a year after the events at Heathrow, especially as she is a law-abiding citizen, has not caused any trouble since and has learnt her lesson.  We do not have the power to reduce the Penalties on fairness grounds or because it is a person’s first offence.

71.         We have considered Ms Jimcaale’s statement about unfairness as an argument that the penalty is disproportionate in all the circumstances. She has had the shisha seized and has been assessed to the Penalties. 

72.         However, the European Court of Human Rights made clear in Gasus 25Dosier-und Fördertechnik GmbH v Netherlands (Application 15375/89) (1995) 20 EHRR 403, that in enacting laws for the purpose of securing the payment of taxes a state has a wide margin of appreciation, which is to be respected unless the measure adopted “is devoid of reasonable foundation.”

73.         The issue of proportionality has been addressed by Judge Brooks in the case of Staniszewski v HMRC [2016] UKFTT 128 (TC) in which he concluded that the penalty regime had been arrived at by the application of a rational scheme which was not devoid of reasonable foundation.   As a result it complied with the principle of proportionality.  We respectfully agree with Judge Brooks.

74.         The Penalties in this case may well be harsh with regard to Ms Jimcaale’s personal circumstances and income.  However, the Upper Tribunal in Denley v HMRC [2017] UKUT 340 (TCC) made clear that, in general, even where goods are seized, duties are imposed and penalties are assessed, the result cannot be viewed as disproportionate. 

75.         The seizure and forfeiture of the shisha was not challenged by Ms Jimcaale and she has suffered the Penalties because of her wrongdoing.  The courts in Denley and other cases have recognised that there is a serious problem with tobacco smuggling and that punitive deterrent measures are justified. In this case Ms Jimcaale had a very large quantity of the shisha in her possession exceeding the threshold by approximately 243 times.  She has been found to have evaded duty with the aim of profiting commercially from doing so and to have engaged in conduct which involves dishonesty.  We are therefore satisfied that the imposition of the Penalties is not “devoid of reasonable foundation”.

 

Conclusion

76.         For all these reasons we therefore find that the appeal of Ms Jimcaale is DISMISSED and the penalties of £6901 are confirmed. 

 

Right to apply for permission to appeal

77.         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.

 

 

TRACEY BOWLER

TRIBUNAL JUDGE

 

Release date: 03 February 2020

Appendix

Section 8 Finance Act 1994

 

(1) Subject to the following provisions of this section, in any case where –

(a) any person engages in any conduct for the purpose of evading any duty of excise, and

(b) his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded.

(4) Where a person is liable to a penalty under this section -

(a) the Commissioners or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and

(b) an appeal tribunal, on an appeal relating to a penalty reduced by the Commissioners under this subsection, may cancel the whole or any part of the reduction made by the Commissioners.

(5) Neither of the following matters shall be a matter which the Commissioners or any appeal tribunal shall be entitled to take into account in exercising their powers under subsection (4) above, that is to say-

(a) the insufficiency of the funds available to any person for paying any duty of excise or for paying the amount of the penalty;

(b) the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of duty.

 

 

Section 16 Finance Act 1994 Appeals to a tribunal

 

(1)     An appeal against a decision on a review under section 15 (not including a deemed confirmation under section 15(2)) may be made to an appeal tribunal within the period of 30 days beginning with the date of the document notifying the decision to which the appeal relates.

 

(2)     An appeal under this section with respect to a decision falling within subsection (1) or (1A) shall not be entertained unless the appellant is the person who required the review in question.

 

…

(5)     In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.

 

(6)     On an appeal under this section the burden of proof as to—

 

(a)     the matters mentioned in subsection (1)(a) and (b) of section 8 above,

 

(b)     the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and

 

(c)     the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under section 22(1), (1AA), (1AB) or (1AC) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid),

 

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.

 

(7)     An appeal tribunal shall not, by virtue of anything contained in this section, have any power, apart from their power in pursuance of section 8(4) above, to mitigate the amount of any penalty imposed under this Chapter.

 

Section 25 Finance Act 2003 Penalty for evasion

 

(1)     In any case where—

(a)     a person engages in any conduct for the purpose of evading any relevant tax or duty, and

(b)     his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person is liable to a penalty of an amount equal to the amount of the tax or duty evaded or, as the case may be, sought to be evaded.

(2)     Subsection (1) is subject to the following provisions of this Part.

(3)     Nothing in this section applies in relation to any customs duty of a preferential tariff country.

(4)     Any reference in this section to a person's “evading” any relevant tax or duty includes a reference to his obtaining or securing, without his being entitled to it,—

(a)     any repayment, rebate or drawback of any relevant tax or duty,

(b)     any relief or exemption from, or any allowance against, any relevant tax or duty, or

(c)     any deferral or other postponement of his liability to pay any relevant tax or duty or of the discharge by payment of any such liability,

and also includes a reference to his evading the cancellation of any entitlement to, or the withdrawal of, any such repayment, rebate, drawback, relief, exemption or allowance.

(5)     In relation to any such evasion of any relevant tax or duty as is mentioned in subsection (4), the reference in subsection (1) to the amount of the tax or duty evaded or sought to be evaded is a reference to the amount of—

(a)     the repayment, rebate or drawback,

(b)     the relief, exemption or allowance, or

(c)     the payment which, or the liability to make which, is deferred or otherwise postponed,

as the case may be.

(6)     Where, by reason of conduct falling within subsection (1) in the case of any relevant tax or duty, a person—

(a)     is convicted of an offence,

(b)     is given, and has not had withdrawn, a demand notice in respect of a penalty to which he is liable under section 26, or

(c)     is liable to a penalty imposed upon him under any other provision of the law relating to that relevant tax or duty,

that conduct does not also give rise to liability to a penalty under this section in respect of that relevant tax or duty.

 

 

 

 

 

 

 

Section 31 Finance Act 2003 Time limits for demands for penalties

(1)     A demand notice may not be given—

 

(a)     in the case of a penalty under section 25, more than 20 years after the conduct giving rise to the liability to the penalty ceased, or

 

(b)     in the case of a penalty under section 26, more than 3 years after the conduct giving rise to the liability to the penalty ceased.

 

(2)     A demand notice may not be given more than 2 years after there has come to the knowledge of the Commissioners evidence of facts sufficient in the opinion of the Commissioners to justify the giving of the demand notice.

 

 

Section 33 Finance Act 2003 Right to appeal against certain decisions

 

 

(2)     Where HMRC give a demand notice to a person or his representative, the person or his representative may make an appeal to an appeal tribunal in respect of—

 

(a)     their decision that the person is liable to a penalty under section 25 or 26, or

 

(b)     their decision as to the amount of the liability.

 

…

 

(7)     On an appeal under this section—

 

(a)     the burden of proof as to the matters mentioned in section 25(1) or 26(1) lies on HMRC; but

 

(b)     it is otherwise for the appellant to show that the grounds on which any such appeal is brought have been established.

 

Travellers Allowances Order 1994

 

2.—(1) Subject to the following provisions of this Order a person who has travelled from a third country shall on entering the United Kingdom be relieved from payment of value added tax and excise duty on goods of the descriptions and in the quantities shown in the Schedule to this Order obtained by him in a third country and contained in his personal luggage.

(2) For the purposes of this article—

(a) goods shall be treated as contained in a person s personal luggage where they are carried with or accompanied by the person or, if intended to accompany him, were at the time of his departure for the United Kingdom consigned by him as personal luggage to the transport operator with whom he travelled;

(b) a person shall not be treated as having travelled from a third country by reason only of his having arrived from its territorial waters or air space;

(c) “third country”, in relation to relief from excise duties, shall mean a place to which Council Directive 92/12/EEC of 25th February 1992(2)does not apply; and, in relation to relief from value added tax, shall have the meaning given by Article 3(1) of Council Directive 77/388/EEC of 17th May 1977(3)(as substituted by Article 1.1 of Council Directive 91/680/EEC of 16th December 1991(4)).

 

SCHEDULE

GOODS OBTAINED IN THIRD COUNTRIES

…

Smoking tobacco

250 grammes