United Kingdom VAT & Duties Tribunals (Customs) Decisions

 


Adeosun v Revenue & Customs [2007] UKVAT(Customs) C00233 (17 January 2007)

C00233

CUSTOMS DUTY – restoration of counterfeit goods refused – whether unreasonable – no – appeal dismissed

LONDON TRIBUNAL CENTRE

OLUFUNMILOLA ADEOSUN Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

ALEX MCLOUGHLIN

Sitting in public in London on 12 January 2007

The Appellant in person

Ben Lask, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1. Mrs Olufunmilola Adeosun appeals against the refusal by Customs to restore 212 items of counterfeit goods ("the Goods") seized on 24 April 2005. The Appellant appeared in person; Customs were represented by Mr Ben Lask.
2. The Appellant gave evidence. We find the following facts:

(1) The Appellant bought the Goods in a covered market in China for about £750 and had them sent from Hong Kong entered for customs purposes as personal effects. Because she was ill at the time the Appellant was not aware of this wrong customs entry.

(2) The Appellant had saved up for the holiday in China part of the cost of which was met by a gift. She declined to answer questions about her financial affairs. She stated that intended the Goods for gifts to family and friends. In view of the number of items we do not accept this and find that the Goods were purchased for commercial purposes (which includes the case of friends and family paying their cost).

(3) On their arrival Customs seized the Goods as not corresponding to the import entry.

(4) The 212 items of Goods were accessories such as 20 pairs of slippers, 29 pairs of shoes (by 5 different designers), 16 handbags (by 3 designers), 23 sunglasses (by 7 designers), 38 belts (by 12 designers), 19 key fobs (by 5 designers), and 24 tops (by 7 designers). The brands purported to be Gucci, Burberry, Christian Dior, Salvatore Ferrangamo, Hermes, Cartier, Louis Vuitton, Timberland, Tods, Fendi, Prada, Bulgari/Mont Blanc, Versace, Chanel, Dolce & Gabbana, Celine, and Boss.

(5) Customs suspected that the Goods were counterfeit and sent a number of samples to the trade mark owners comprising: Channel—sunglasses and case, handbag, and belt; Hugo Boss—belt; Dolce & Gabbana—belt and top; Prada—top and belt; Louis Vuitton—diary; Christian Dior—sunglasses and case and top. In all cases the trade mark owner confirmed that the samples were counterfeit. The market value of the equivalent genuine goods to the Goods in the sample was stated by the trade mark owners to be a total of £1,770 (which we accept). Using those prices, the total prices of the equivalent number of genuine Channel goods of three of the four types imported would have been £1,770, of the Dolce & Gabbana goods would have been £600, and of one item (out of eight) of the Louis Vuitton goods would have been £1,100, a total of £3,470 for 21 items out of the total of 212 items.

(6) On the balance of probabilities we find that all the Goods were counterfeit.

(7) Customs' letter of 9 May 2005 stated that they would not offer restoration of the goods as they were considered to infringe trademarks. By letter dated 17 May 2005 the Appellant requested a review of that decision. Written on the letter is "p mark 25/5 recd 27/5." We find that on the balance of probabilities the letter was received on 27 May 2005.

(8) On 7 July 2005 Mr Roger Duckworth reviewed the decision not to restore the goods and confirmed it while offering to consider any fresh evidence. He made this decision in accordance with Customs' policy having considered whether there were any grounds for exceptional departing from the policy and deciding that there were not.

3. Originally it was considered that this was an appeal against Mr Duckworth's review decision of 7 July 2005. Following a preliminary hearing the tribunal considered it was against a deemed refusal on 1 July 2005 and the statement of case was revised on that basis. Mr Lask pointed out to us the manuscript note on the letter of 17 May 2005 and submitted that if the letter had been received on 27 May 2005 (which we have found it was) the review was in time. He relied on the following provisions of the Finance Act 1994:

"14(2)     Any person who is—

…

(b)     a person in relation to whom, or on whose application, such a decision has been made, …

may by notice in writing to the Commissioners require them to review that decision."

"15(1)     Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either—

(a)     confirm the decision; or

(b)     withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate.

(2)     Where—

(a)     it is the duty of the Commissioners in pursuance of a requirement by any person under section 14 above to review any decision; and

(b)     they do not, within the period of forty-five days beginning with the day on which the review was required, give notice to that person of their determination on the review,

they shall be assumed for the purposes of this Chapter to have confirmed the decision."

He contended that Customs could not be under a statutory duty imposed by s 15(1) to review a decision before they had received the taxpayer's notice under s 14(2) and so the words in s 15(2) "beginning with the day on which the review was required" must be construed as referring to the time Customs receive the taxpayer's notice. We agree. It follows that this appeal is properly against Mr Duckworth's review letter of 7 July 2005 and in so far as the statement of case claims it to be against a deemed refusal we allow Customs to amend it. Although Mr Lask wanted a decision of this point it does not directly affect the Appellant since there is no real difference between the original refusal to restore and Mr Duckworth's review.

4. The Appellant contends that she bought the goods in good faith not knowing that they were counterfeit and they should be restored to her.
5. Mr Lask, for Customs, contends:

(1) Customs' policy of not restoring counterfeit goods is a reasonable one. It reflects the prohibition in art 16 of Council Regulation No 1383/2003 ("the Regulation") on such goods entering the customs territory of the Community. He also pointed to Communication from the Commission to the Council of 11 October 2005 drawing attention to the 1,000% increase in counterfeit seizures between 1998 and 2004 which now amounted to over 100m articles annually. The Council adopted a resolution on 13 March 2006 welcoming the Communication and the actions taken to improve customs controls over counterfeit goods. As an exception to this policy, Customs normally allow restoration if the goods were within the duty-free allowance (£145) or slightly over it in accordance with art 3(2) of the Regulation which provides:

"Where a traveller's personal baggage contains goods of a non-commercial nature within the limits of the duty-free allowance and there are no material indications to suggest the goods are part of commercial traffic, Member State shall consider such goods to be outside the scope of this Regulation."

(2) Customs applied the policy appropriately in the present case where the cost of the Goods was over five times the duty-free allowance.

(3) There is nothing to suggest that the decision was unreasonable or disproportionate, and no exceptional circumstances have been put forward to justify a departure from Customs' policy. Even if the Goods were intended as gifts for friends and family this is irrelevant in contrast to cases involving reliefs for tobacco and alcohol where it is the intended use that renders them liable to forfeiture. The quantity of the Goods and the amount spent compared to the apparent means of the Appellant makes it improbable that all the Goods were to be given away as gifts. The fact that the Appellant did not realise that the Goods were counterfeit is irrelevant. However their average price of £3.50 per item makes such a claim implausible.

(4) The Tribunal should adopt the same approach as in Foresythe v HMRC (2006) Customs Decision 00216.

6. Section 152 of the Customs and Excise Management Act 1979 provides that: "The Commissioners may, as they see fit…(b) restore, subject to such conditions (if any) as they think proper, anything forfeited or seized…."
7. The Tribunal's jurisdiction is contained in section 16 of the Finance Act 1994 which applies to matters contained in Schedule 5 including decisions on restoration. Section 16(4) provides that:

"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 the 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;…."

8. We find that the review decision was both reasonable and proportionate for the reasons put forward by Mr Lask. We have to weigh up the Appellant's loss of the Goods for which she paid £750, which is a significant loss to her, against the loss to the designers of the equivalent genuine goods and the public interest of preventing the import of counterfeit goods. We consider that non-restoration of counterfeit goods in accordance with Customs' policy when the Regulation makes it illegal to import counterfeit goods subject to complying with the procedure laid down in the Regulation (which may not have been fully complied with here) carries greater weight than the Appellant's right to her property before it was forfeit. We are satisfied that the review decision was one that Customs could reasonably have arrived at. Accordingly we dismiss the appeal. Mr Lask did not ask for costs.

JOHN F. AVERY JONES

CHAIRMAN

RELEASE DATE: 17 January 2007

LON/06/8021