United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2003] UKVAT(Customs) C178, [2003] UKVAT(Customs) C00178

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Indus Food Ltd v Customs & Excise [2003] UKVAT(Customs) C00178 (12 June 2003)

IMPORT DUTY — preferential rate on importation of jaggery sugar from India — compliance with regulation 2782/76 Article 7 — post- clearance demand issued by the Commissioners — legitimate expectation — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

INDUS FOODS LIMITED Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Lady J C Mitting (Chairman)

Sitting in public in Birmingham on the 28th April 2003

The Appellant did not appear and was not represented

Mr D Timson-Hunt of the Solicitor's office of HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION

1. The matter under appeal was the decision of the Commissioners, taken on review, dated 23 October 2001 that a claim to preference on the importation of jaggery sugar had been incorrectly made at the time of import and a post-clearance demand dated 10 February 2000 had thus been correctly issued. The Appellant had advised the Tribunal Centre by letter dated 7 October 2002 that it did not intend to appear at the hearing and enclosed a written submission instead. I therefore decided it was appropriate to proceed with the hearing under Rule 26(2)Value Added Tax Tribunal Rules 1986.

The Law

2. Article 7 of Regulation (EEC) No. 2782/76 ("Article 7") provides as follows:-

"Article 7

For the purpose of this Regulation preferential sugar originating in India is sugar for which evidence of such origin has been given by the production of a certificate of origin fulfilling the conditions laid down in Article 9 of Regulation (EEC) No. 802/68.

The importer of preferential sugar originating in India shall, in addition, submit to the customs authorities of the Community a voucher duly endorsed by the competent authority of India.

This voucher shall:

bear one of the following endorsements:

"Regulation (EEC) No 2782/76 refers"

…

indicate the date of shipment of the goods and the relevant delivery period as defined for the purposes of undertakings given in respect of preferential sugar. The stated delivery period shall not, however, affect the validity, at the time of importation, of the certificate of origin referred to in paragraph 1

indicate the subheading in the Common Customs Tariff of the goods in question

…"

3. It has become accepted practice for administrative convenience that GSP (Generalised System of Preferences) form A is used as one single form to fulfil both the function of the certificate of origin and the voucher required under Article 7(1) and 7(2).
4. Counsel Regulation 2913/92/EEC ("The Code") Article 78(1) empowers the Commissioners to amend declarations after the release of goods and Article 78(3) provides:

"3. Where revision of the declaration or post-clearance examination indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall, in accordance with any provisions laid down, take the measures necessary to regularise the situation, taking account of the new information available to them."

5. Article 201(2) of The Code provides that a customs debt shall be incurred at the time of acceptance of the customs declaration.
6. Article 221(3) of The Code gives the Commissioners 3 years from the date on which the customs debt was incurred to communicate to the debtor the levying of duty.

Case Law

7. I was referred by Mr Timson-Hunt to the case of Commissioners of Customs and Excise v Invicta Poultry Limited and Fareway Trading Company Limited [1997] V&DR 56. The judgment of Lightman J. was upheld by the Court of Appeal but I was referred specifically to the following extract from Lightman J's judgment.

"The initial acceptance by the customs authorities of a trader's declaration and calculation of the duty payable cannot give rise of itself to any legitimate expectation that no further duty will become payable, for the role of the Commissioners in regard to the initial declaration in no way prevents subsequent checks being made: see Article 78.1 and R v Commissioners of Customs and Excise, ex p. Faroe Seafood Co. Ltd (Case C-153/94) [1996] ECR I-2465 at p. 2451 para. 93. For such a legitimate expectation to arise and to avoid liability for Additional Duty, there are three essential cumulative conditions to be satisfied specified in Article 220.2(b):

(a) the amount of duty legally owned must have failed to be entered in the accounts as a result of an error on the part of the customs authorities:

(b) the error must be one which could not reasonably have been detected by the person liable for payment; and

(c) the person liable for payment must have acted in good faith and complied with all the provisions laid down by the legislation in force as regards the customs declaration."

The Facts

8. The Appellant carries on business as a wholesale distributor of food from premises at 75 Sampson Road North in Sparkbrook, Birmingham.
9. In early 1997, the Appellant imported from India into the EC a consignment of jaggery sugar. A preferential rate of duty was claimed. GSP form A dated 27 January 1997 was prepared but found not to include the following information required by Article 7:

(a) the endorsement "Regulation (EEC) No. 2782/76 refers"

(b) the date of shipment of the goods

(c) the relevant delivery period

(d) the subheading in the Commons Customs Tariff of the goods

10. The form was not acceptable to the Commissioners but the transaction was however accepted by them on 13 February 1997 on the Appellant's undertaking to produce a GSP certificate within 14 days. By letter dated 27 February 1997 a further GSP certificate dated 15 February 1997 was submitted by Circle International, the Appellant's import agent.
11. Examination of this certificate shows it was still defective. The only additional information it included was the EEC regulation endorsement, although this was in fact wrongly stated to be 2781/76 instead of 2782/76. It specifically did not include the date of shipment, the relevant delivery period or the subheading in the Common Customs Tariff.
12. Unfortunately these deficiencies were apparently not picked up at the time, or if they were no action was taken and they were not communicated to the Appellant until a compliance audit at the Appellant's premises on 11 June 1999 when the visit report makes it clear that they were discussed. Without hearing evidence from the Appellant on this point, it was not at all clear how matters were left on the 11 June with regards to the deficiencies in the documentation. It appears that the matter of the importation was referred by the Commissioners to the Solicitor's Office but this may have been in relation to the nature of the importation generally. The next thing that happened was that by letter dated 10 February 2000, the Commissioners wrote to the Appellant, informing them that the Solicitor's Office had advised that the GSP certificate was not correctly indorsed and was deficient in the required information and therefore invalid and the full rate of duty was therefore payable. Consequently a C 18 post-clearance demand in the sum of £940.81 duty and £43.46 safe guard charge was levied on 10 February.
13. On 29 February the Appellant wrote to the Commissioners claiming that the GSP certificate had shown all the information required and had been accepted and that since no objection to it had been raised it should be treated as valid.
14. In response, the Commissioners, by letter dated 7 March, offered to cancel the charge if an amended GSP could be obtained within 1 month. The Appellant tried to obtain such a certificate but was informed by its suppliers that no additional endorsement was possible after so long. The suppliers' response stated that "the authorities concerned were firm in their reply that no rules are available to them to make the desired changes in the GSP and that too after 3 years from the date of export"
15. By letter dated 13 April 2000 the Commissioners re-imposed the post-clearance demand note issued on 10 February. The Appellant was advised of its right to request a review within 45 days but did not do so and their next communication to the Commissioners, dated 17 November, was treated by the Commissioners as a request for review and a timetable for dealing with it was laid down. In their letter, the Appellant argued that the GSP certificate had been accepted at the time and that amendments which could have been made then were not able to be made 3 years later and it was "grossly unjust for Customs, retrospectively, to demand amendments to documents 3 years after they had accepted them as being valid".
16. The reviewing officer, Mrs M C Steggals, upheld the imposition of the charge on the basis that the certificate had misquoted the Regulation and did not include the date of shipment, the expected date of delivery or the community code.

Submissions

17. The Appellant was not represented and did not appear but had asked that the tribunal consider its earlier submissions made in correspondence. Its case in essence was that the Commissioners had accepted the certification as valid and whereas it could have been corrected at the time, 3 years on it could not. The Appellant had been penalised by the Commissioners' delay in finding the error and were also being penalised for what was no more than a typing error in the reference to the Regulations. Further, it would not have been financially sensible for them to make the importation at the full rate. Finally Customs' delay in notifying the error was due to their own investigation about jaggery sugars.
18. Mr Timson-Hunt submitted that the requirements under Article 7 were mandatory; that the responsibility for ensuring the accuracy and completeness of the documentation rested with the Appellant; the Appellant had failed to comply with Article 7 and as such the Commissioners were empowered under Article 78(3) of The Code to regularise the situation by the raising of a post-clearance demand which they had done within the statutory time limit.

Conclusions

19. The Appellant did not seek to argue that the requirements of Article 7 were in any way optional and I accept that they are mandatory. As a Community Regulation it is binding and directly applicable and by nature of its wording it is also mandatory. "The importer…shall…" and "the voucher shall…"
20. As such, to have been entitled to make the importation at a preferential rate of duty, the requirements of Article 7 would have had to be complied with and they clearly were not. The mis-numbering of the Regulation was clearly a typing error and should not have been critical but the other deficiencies in my view were. The GSP certificate as submitted did not, under any view, meet the requirements laid down in Article 7 and the importation did not therefore meet the mandatory requirements for a preferential rate of duty.
21. The Commissioners were therefore entitled to refuse the application for preference. This would normally have been done at the time of importation when the deficiencies should have been spotted. However, there is provision for the Commissioners under Article 78 to carry out a post-clearance review and to regularise an otherwise incorrectly allowed application for preference by the raising of a post-clearance demand. This has to be done within 3 years from the date on which the Customs debt was incurred. Here, the Customs debt was incurred on 13 February 1997 and the demand communicated on 10 February 2000, just within the 3 year time limit.
22. On an interpretation of the Regulations alone therefore, the Commissioners were fully entitled to raise the demand. However, the nub of the Appellant's argument, although not put in such terms, appears to be based both on the principle of legitimate expectation and further that through the actions of the Commissioners, the Appellant had acted to its detriment and ended up in a situation where it could not comply with the Regulations.
23. I did not have the benefit of hearing any further representation or indeed any further evidence but on the basis of the documentation and correspondence before me, whilst having sympathy for the Appellant, I have to reject its arguments.
24. At the time of importation, the importation was dealt with on behalf of the Appellant by its import agent, Circle International. They should clearly have known the requirements of Article 7 and I assume they in fact did because they went someway to meeting them by the submission of the second GSP certificate.
25. In June 1999 the deficiencies in the paperwork were pointed out to the Appellant and discussed in some detail at the compliance audit. I would have liked to have known how matters were left at that meeting but it would appear from the paperwork before me and in particular the visit report that the Appellant was made fully aware of the problem and I assume could therefore at that stage have approached the supplier for amended documentation. Whether such an earlier application would have been anymore successful than the one eventually made, I know not. I do however note that the response from the suppliers to the Appellant, referred to above, specifically rules out, if I have understood it correctly, changes to the GSP after 3 years from the date of export. If my interpretation of this response is correct, the Appellant may well have been able to obtain an amended certificate acceptable to the Commissioners in June 1999.
26. Finally, I go back to the words of Lightman J, sighted above in Invicta Poultry. The sole fact of the Commissioners having incorrectly accepted a trader's declaration cannot, of itself, give rise to a legitimate expectation that no further duty will be payable. Other factors have to be present for such an expectation to arise and to avoid liability for the duty. In this case those factors are not present. First, the Appellant had not complied with the provisions laid down in the legislation so in fact the entitlement to a preferential rate had not arisen. Secondly, the agents, at the time of importation, should have known the document was deficient as the Regulations would have been within their sphere of expertise. They should therefore have realised that the conditions for entitlement to preference had not been met.
27. For these reasons I dismiss the appeal. I make no order as to costs

LADY MITTING

CHAIRMAN

RELEASE DATE: