United Kingdom VAT & Duties Tribunals (Customs) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2006/C00222.html
Cite as: [2006] UKVAT(Customs) C222, [2006] UKVAT(Customs) C00222

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Solitaire (Liverpool) Ltd v Revenue & Customs [2006] UKSPC (24 August 2006)

C00222

CUSTOMS DUTY - preferential treatment - subsequent entry in accounts - remission - special situation - cumulation - agreement between Community and Romania - imports of fabric from Turkey to Romania for manufacture into garments - cumulation agreement between Romania and Turkey not yet in force - cumulation agreement held not to be retrospective - exports of finished goods to Community accorded preferential treatment in error - exporter in continual touch with Romanian customs authorities at request of importer - reliance upon authorities and absence of fault on part of exporter or importer - Council Regulation 2913/92/EEC art 220(2)(b) held to be applicable - remission held to be appropriate under ditto art 239 and Commission Regulation 2454/93/EEC establishing the Community Customs Code - appeal allowed

MANCHESTER TRIBUNAL CENTRE

SOLITAIRE (LIVERPOOL) LTD Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Johnson (Chairman)

Mary Ainsworth

Sitting in public in Manchester on 8 August 2006

James Henderson, counsel instructed by Bermans, solicitors for the Appellant

James Puzey, counsel instructed by the Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006


 


SUPPLEMENTAL DECISION

Background to this supplemental decision

1. This decision should be read with, and is supplemental to, the decision of the tribunal released on 9 March 2006 ("the principal decision").
2. The appeal has been restored before us for further hearing for the purposes of working out the consequences of the principal decision, and also for argument as to costs, as envisaged by paragraphs 70 and 71 respectively of the principal decision. This supplemental decision relates to the outcome of that further hearing.
3. In paragraph 68 of the principal decision, we indicated that our decision was that the duty in issue should be remitted so far as attributable to the period during which the special situation mentioned in paragraph 64 of the principal decision endured.
4. In paragraph 64, we stated that we found that the special situation extended until the time at which the Romanian customs authorities accepted that preferential treatment was dependent upon originality of the imported fabric being demonstrated in compliance with the Cross-agreement, at which time the Appellant and the Romanian factory could themselves reasonably be expected to have toed the line. We did not state when that time might be.
5. Understandably, the parties have requested a ruling from us as to that time, seeing that we have not, in the principal decision, specifically dealt with the question as to which of the disputed exports might or might not be affected by the special situation that we have held to exist.

Reasons why the tribunal has felt unable to comply with the above request

6. We lack the evidence from which we consider that we can or ought to attempt to make a finding of fact as to when that time might be. We are strongly of the view that, in the absence of further evidence, it would be undesirable for us to purport to decide the time at which the Romanian customs authorities accepted that preferential treatment was dependent upon originality being demonstrated pursuant to the Cross-agreement.
7. There are two reasons for this.
8. Firstly, as we pointed out at the hearing, we have had no evidence from Romania, enabling us to go beyond the picture presented by the matters to which we refer in paragraph 41 of the principal decision. The evidence that this tribunal has had as to the knowledge and appreciation of the Romanian authorities has been limited to what this tribunal has been able to gather circumstantially. We have not heard from those authorities themselves.
9. Secondly, we are wary of making a judgment which might indirectly impact upon Romania as a sovereign state. As the European Court has emphasised, whereas a customs union is a single entity, a free trade area is based on an agreement between sovereign states. The Romanian customs authorities are an organ of that state. Preferential customs treatment is a matter that affects the rights and interests of that state. This tribunal should respect the comity of nations.
10. Although we feel unable, for the reasons expressed, to decide the time at which the Romanian authorities accepted preferential treatment as being dependent upon the demonstration of originality, we have drawn attention to the confusion on the part of those authorities that is apparent from the evidence in this appeal. That confusion appears to have continued until as recently as 2003.
11. Thus, in paragraph 27 of the principal decision we drew attention to the apparent confusion existing in Romania as to the implementation date of the Agreement, which confusion seemingly existed at the time of the letter dated 7 November 2002 from which we quoted in paragraph 26.
12. Again, in paragraphs 28 – 31, we discussed the letter received by Customs from the Romanian authorities dated 16 April 2003, and the annex included with it. In paragraph 31, we stated that the result of Customs' enquiries of the Romanian authorities was that the Romanian authorities had justified some, but not all, of the EUR 1s issued by them.
13. In paragraph 33, we stated that the shortcomings of the annex included with the letter dated 16 April 2003 were manifest, and we there pointed out that the result of the review in this appeal did seem to countenance that the present case might be one of "exceptional circumstances", as contemplated by article 32(6) – on which article Customs might otherwise have been expected to rely, as mentioned in paragraph 30.
14. When, as mentioned in paragraph 41, we took into account the picture presented by the correspondence between Customs and the Romanian authorities, that picture was one of confusion, as we stated in paragraph 51. Accordingly, whatever the state of knowledge or appreciation on the part of the Romanian authorities from time to time, as to which we make no finding, the Appellant was not alerted by them as to the preferential tariff treatment (or lack of it) of the manufactured garments made from the fabric imported from Turkey, as we stated in paragraph 40.
15. We have made no distinction in that regard between the period pre- and post-1 October 1999. We have indicated, in paragraph 64, that we are satisfied that the Romanian authorities did not accept the need to demonstrate originality in accordance with the Cross-agreement prior to 1 October 1999 – being the date on which the Cross-agreement came into effect – but we have not indicated, and do not intend to indicate, how long it may have been after that date that they may have so accepted.
16. We have not so indicated for the reasons expressed in paragraphs 8 and 9 of this supplemental decision.

Confirmation of the outcome of the appeal

17. It is, or should be, clear from the principal decision that the Appellant's lack of awareness that preferential tariff treatment might not be available extended throughout: that is to say, it embraced all the exports in respect of which preferential status is contested in this appeal. We have accepted Mr Rowley's evidence in that regard, as mentioned in paragraph 40 of the principal decision.
18. We are concerned in this supplemental decision to confirm that we make no judgment that is to be construed as adverse to the Romanian authorities. We do no more than conclude that, having regard to matters which include inter alia the correspondence of which we have seen copies, and the ignorance of the Romanian business as to the true preferential tariff position despite having liaised with those authorities, the right thing to do is to decide to allow the appeal and quash the decision arrived at on review by Customs, as indicated in paragraph 69 of the principal decision.
19. Our decision recognises the indefinite continuation of the special situation, bearing in mind the confusion that apparently still existed as late as 2003.

Costs

20. In paragraph 71 of the principal decision, we stated that, without having heard argument, we were minded to award the Appellant all its reasonable costs, without making a deduction by reason of the Appellant having lost in respect of the first issue. Having been addressed by counsel as to costs on 8 August 2006, we have changed our mind.
21. Mr Puzey has pointed out, in our view with justification, that the first issue took up some time before the tribunal, at the hearing in February 2006. It may be, as Mr Henderson has submitted, that it was necessary to "set the scene" by analysing the construction of the Agreement in order to ascertain its application. Nevertheless, the first issue was advanced as a discrete issue, and in order to address that issue, HMRC, and in due course the tribunal in preparing the principal decision, necessarily had to take quite some time.
22. It is the practice in the English civil courts, applying Part 44.3(4)(b) of the Civil Procedure Rules 1998, to have regard to whether a party has succeeded in respect of part of its case, as distinct from the whole. This tribunal too needs to take an overview of the case as a whole and reach a conclusion as to costs based on the questions: (i) who has succeeded in the appeal; and (ii) what order for costs does justice require? Where a party has succeeded in part of its case, but not the whole of its case, it will quite often be appropriate for that party to be awarded a percentage of its costs only.
23. Secondly, Mr Puzey has submitted that the result of this appeal has turned on the acceptance by the tribunal of evidence from Mr Rowley – see paragraphs 40 and 41 of the principal decision – whose significance does not appear to have been properly appreciated by the Appellant prior to the hearing, otherwise it would have been put forward in terms requiring an answer from HMRC. Mr Henderson has submitted that that was the evidence that he intended to call, and did call, in support of the issues on which the Appellant has succeeded in this appeal, and that it has quite rightly won him the day.
24. We think, however, that Mr Puzey does have a point. Mr Rowley's witness statement is at tab 47 of the main hearing bundle. That document is silent as to the key piece of evidence, put forward by Mr Rowley in oral evidence and accepted by us as fact, that the lawyer in charge of the Romanian business was in continuous contact with the Romanian authorities and hence au fait with their requirements.
25. Had that piece of evidence been in Mr Rowley's typewritten statement, HMRC might possibly have taken a different view of this case. They might have taken steps to attempt to verify his assertion in Bucharest. They might, for instance, have been able to show that the lawyer was not in regular contact with the Romanian authorities there, or that those authorities had alerted the Romanian business to the non-availability of preferential tariff treatment in certain instances. They might, indeed, have settled the appeal, bearing in mind the reductions in the sum demanded to a fraction of its original amount.
26. The way the hearing proceeded in February, HMRC did not have the opportunity to explore fresh avenues. We do not hold it against HMRC that no application was made for a long adjournment, as we think it very unlikely that such would have been granted, having regard to the age of the appeal and the desire for finality. Mr Henderson has pointed out how much anguish has been caused to the Appellant by the length of time it has taken to have the demands in this case quashed, and how anxious the Appellant has been to put an end to the dispute.
27. Mr Puzey has submitted that there should be no order as to the costs of this appeal. We disagree. We think that the Appellant has been substantially successful in the appeal and that we should follow the general rule that the unsuccessful party should be ordered to pay the costs of the successful party. However, for the reasons we have outlined above, we do not think that it would be right for the successful Appellant to receive all its costs.
28. We therefore decide that HMRC should pay to the Appellant half its costs of and concerning this appeal, including the hearing on 8 August 2006, to be assessed on the standard basis, if not agreed.
29. If issues arise as to quantum, as to which amounts are costs of and concerning the appeal and which are not, or with regard to particular items, the Chairman is content to hold a hearing for the summary assessment of costs if requested by both parties. In that case, the Chairman would first wish to give directions – if possible by correspondence. Alternatively, if either party objects to a summary assessment, and costs cannot be agreed, the costs of and concerning the appeal must go for detailed assessment in the usual way.

MICHAEL JOHNSON

CHAIRMAN
Release Date: 24 August 2006

MAN/04/7011