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United Kingdom VAT & Duties Tribunals (Customs) Decisions

You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Invicta Foods Ltd v Revenue & Customs [2008] UKVAT(Customs) C00258 (25 June 2008)
URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2008/C00258.html
Cite as: [2008] UKVAT(Customs) C00258, [2008] UKVAT(Customs) C258
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Invicta Foods Ltd v Revenue & Customs [2008] UKSPC (25 June 2008)
    C00258
    CUSTOMS DUTY – relief under art 220(2)(b) of the Code – whether error could reasonably have been detected – no, Appellant pointed out what it considered to be an error to Customs who still would not accept the documents required by a Regulation – art 220(2)(b) satisfied

    LONDON TRIBUNAL CENTRE

    INVICTA FOODS LIMITED Appellant

    - and -

    THE COMMISSIONERS FOR HER MAJESTY'S

    REVENUE AND CUSTOMS Respondents

    Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

    RAY BATTERSBY

    Sitting in public in London on 27 May 2008

    Nicola Shaw, counsel, instructed by Clyde & Co LLP, for the Appellant

    Owain Thomas, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

    © CROWN COPYRIGHT 2008

     
    DECISION
  1. This is a supplementary decision following our interim decision released on 13 August 2007, which needs to be read together with the interim decision. As before the Appellant was represented by Miss Nicola Shaw and Customs by Mr Owain Thomas.

  2. The issues left outstanding in our interim decision were first whether art 220(2)(b) of the Code applies and in particular whether art 272 of the Code is relevant, and secondly, whether art 239 applies. Article 220 provides:

    3. "1. Where the amount of duty resulting from a customs debt has not been entered in the accounts in accordance with Articles 218 and 219 or has been entered in the accounts at a level lower than the amount legally owed, the amount of duty to be recovered or which remains to be recovered shall be entered in the accounts within two days of the date on which the customs authorities become aware of the situation and are in a position to calculate the amount legally owed and to determine the debtor (subsequent entry in the accounts). That time limit may be extended in accordance with Article 219.
  3. Except in the cases referred to in the second and third subparagraphs of Article 217(1), subsequent entry in the accounts shall not occur where:

    4. (a) the original decision not to enter duty in the accounts or to enter it in the accounts at a figure less than the amount of duty legally owed was taken on the basis of general provisions invalidated at a later date by a court decision.
    (b) the amount of duty legally owed was not entered in the accounts as a result of an error on the part of the customs authorities which could not reasonably have been detected by the person liable for payment, the latter for his part having acted in good faith and complied with all the provisions laid down by the legislation in force as regards the customs declaration."
  4. Miss Nicola Shaw, for the Appellant, contends in outline:

    5. (1) Article 217 is applicable because Customs adopted a procedure for collecting super levies on the basis of the declared cif price, rather than asking for documents to prove the cif price when it was higher than the representative price and security for the excess of the cif price over the representative price. This would be authorised by art 217 if Customs are satisfied that the correct amount of duty would be paid, which they would be if they accepted the cif price.
    (2) Art 239 should apply but is relevant only to the duty that has been paid (£57,637.45 actually paid, and £60,022 secured), a hardship application having been accepted for the remainder.
  5. Mr Owain Thomas, for Customs, contends in outline:

    6. (1) For art 220(2)(b) not only was the error reasonably detectable by the Appellant, it was actually known to the Appellant. The Appellant has no legitimate expectation that the entry particulars should stand when the conditions in para (b) are not satisfied. The oral representations by Customs are insufficient to create legitimate expectations. The Appellant cannot come within art 220(2)(b). The failure to keep documents required for three years in accordance with art 16 of the Customs Code means that the Appellant did not comply with the provisions relating to the customs declaration.
    (2) Art 217 relates only to practical procedures. It cannot take away the requirement in art 217(1) to enter the duty in the accounts. It cannot give Customs power to waive the mandatory requirements of the Regulation.
    (3) On art 239 no application has been made and Customs cannot prejudge whether there would be exceptional circumstances. It is not accepted that there is no obvious negligence by the Appellant.
  6. For the Appellant to succeed under art 220(2)(b) it needs to show (1) the correct amount of duty was not entered in the accounts and that the error was attributable to Customs (which is conceded), (2) the error could not reasonably have been detected by the Appellant, (3) the Appellant acted in good faith and complied with all the provisions laid down for the customs declaration.

  7. On point (2) Customs did not require production of documents required by Commission Regulation No.1484/95 as amended by Regulation 393/99 with effect from 6 March 1999 ("the Regulation"), except for the invoice and the veterinary certificate, and nor did they require security when the Regulation required it. No explanation was given for this failure, although we were told that it was not due to a computer processing restriction. We found as a fact that Mr Stokes, logistics manager of the Appellant:

    8. "was aware that Customs were not applying the Regulation properly and spoke to two named Customs officers on the telephone about it. He was told to continue as before and that Customs would not accept an Entry with additional documents attached to it or if the Appellant tried to provide security. Mrs Pauline Brown [Customs' Common Agricultural Policy Unit of Expertise] told us that she had spoken to the officers who either did not remember or denied saying this, but she accepted Mr Stokes' evidence.
    If the error by Customs was simply not requiring the documents then clearly the Appellant actually knew of the error and it cannot be argued that the error 'could not reasonably have been detected.'"
  8. In view of our finding of fact that Customs would not have accepted an entry with the correct documents or accepted security when this was required by the Regulation we consider that this is a different situation from the normal case where art 220 is in issue of a customs authority giving wrong advice over, for example, tariff classification when by reading the Official Journal the taxpayer would have known it was wrong and could have entered the goods under the correct heading. An example of a variation of this type of case is Covita, Case C-370/96 in which the taxpayer knew of the possibility of a countervailing charge being imposed on the goods imported by the taxpayer and had been in touch with the local Greek customs authority on a daily basis to check that had not been imposed. In fact a Commission Regulation of 22 June 1992 had imposed such a charge, the Commission had informed the Greek Ministry of Agriculture on 23 June 1992 of the adoption of the regulation and on 29 June 1992 of the regulation itself, which the ministry forwarded to the local customs office on 2 July 1992. Subsequently the customs authority imposed the charge in relation to imports between 24 June and 1 July 1992. The ECJ stated:

    9. "26. Next, the error made by the competent authorities must be such that it could not reasonably be detected by the person liable acting in good faith, despite his professional experience and the diligence shown by him. In this regard, it should be observed that it is mandatory for Community provisions introducing a countervailing charge to be published in the Official Journal of the European Communities. From the date of that publication no person is deemed to be unaware of that charge (see, to that effect, Case 161/88 Binder v Hauptzollamt Bad Reichenhall [1989] ECR 2415, paragraph 19). That is the case where a professional trader importing goods is aware of the imminent possibility that a countervailing charge might be introduced for those goods. Such a trader cannot expect each customs office to be immediately informed that the charge has been introduced, but must ascertain, by consulting the relevant issues of the Official Journal, the provisions of Community law applicable to the transactions he is carrying out. To impose such an obligation on traders to inform themselves does not constitute a requirement that is disproportionate to the objective pursued by the introduction of a countervailing charge, which is to obviate disturbances on the Community market, bearing in mind, moreover, the need to apply Community law uniformly.
  9. None the less, it should be observed that, as the Advocate General states at point 31 of his Opinion, it cannot be accepted that a trader such as Covita was aware that Regulation No 1591/92 had been adopted if it proves that the Official Journal of 23 June 1992 was not available on that date in its Greek language version at the Office for Official Publications of the European Communities, situated in Luxembourg. If evidence is produced that actual publication of the Official Journal was delayed, regard must be had to the date on which the issue was actually available (Case 98/78 Racke v Hauptzollamt Mainz [1979] ECR 69, paragraph 15)."

    10. This demonstrates how strict a test this is. A taxpayer cannot expect a local customs office to be informed of the regulation and it should consult the Official Journal itself. The only let-out is if the Official Journal was not issued in the Greek language and so the taxpayer could not have read it.

  10. Similarly, in Peter Biegi Nahrungsmittel Cases T-309/01 and 239/02 the German Minister of Finance amended the working tariff of the German customs authorities by inserting a quota without specifying that an import licence was required for products within the quota. The ECJ said:

  11. On that point, it is clearly established in the case-law that the applicable Community tariff provisions constitute the sole relevant positive law as from the date of their publication in the Official Journal of the European Communities, and everyone is deemed to know that law. A customs tariff manual like the German one, drawn up by the national authorities, is therefore merely a guide for customs operations, with purely indicative value. It follows that a trader whose business essentially comprises import and export transactions and who has accumulated some experience in that area must, by reading the relevant issues of the Official Journal, acquaint himself with the Community law applicable to the transactions which he undertakes. Such a trader may not, therefore, rely solely on the statement of rates contained in a national customs tariff manual in order to determine the applicable rate of duty (Binder, paragraph 19; Behn Verpackungsbedarf, paragraphs 13 and 14; William Hinton and Sons, paragraph 71).

    12. Again, this shows how strict a test this is. Nothing but the Official Journal will suffice, not the German version published by the German customs authorities.

  12. While the test is an extremely strict one, it does not require the taxpayer to do the impossible, such as reading the Official Journal when it has not been published in the taxpayer's own language, or at all (Covita at [27]). Another example is that the issue may be complex and so reading the Official Journal may not answer the question. As Lightman J said in Invicta Poultry Ltd v Customs and Excise Commissioners [1997] EWHC Admin 614 (2 July 1997) at [24]:

    13. "If however the relevant provisions of the Code or rules are complex or the facts are complex, the error may not be readily detectable. Examples of cases where such complexity has been found to exist are where there are differences of opinion between Member States on the proper classification of goods and there has been recognised by the EC a need to amend the tariff nomenclature to clarify the law (see Hewlett Packard Case C-250/91 p.1-1819 at 1846-7, para 23); where the error of the customs authorities has been repeated on more than one occasion (Deutsche Fernsprecher Case C-64/89 p.1.2535 at 1.2557 para 20); and where merely studying the text of the Code leads to no clear application to the facts and has led the customs authority for a period to an erroneous view (see Faroe Seafood C-153/94 1-2465 at paras 103-5). To answer the question whether in these circumstances the error is reasonably detectable, reference must be made to the three factors above mentioned, namely the nature of the error, the professional experience of the trader and the degree of care he had exercised."
  13. We said above that we regarded this case as different from these examples. Where Customs give advice as to classification of goods they are trying to apply the law but may make a mistake; in Covita the Greek customs authority was answering the taxpayer's questions about the existence of a countervailing charge, but their information was out of date; in Peter Biegi the German customs authority were reading the German version of the tariff which contained an error. The taxpayer is not entitled to assume that Customs are right when reading the Official Journal will show that they are wrong. But we consider that he is entitled to assume that they are trying to apply the law. Here Customs are either ignoring directly applicable community legislation, or they believe that there is some basis in law for their failure apparently to apply the Regulation. We suggested in the interim decision that art 217(2) might form such a basis. Article 217 provides:

    14. "(1) Each and every amount of import duty or export duty resulting from a customs debt, hereinafter called 'amount of duty', shall be calculated by the customs authorities as soon as they have the necessary particulars, and entered by those authorities in the accounting records or on any other equivalent medium (entry in the accounts)…
    (2) The Member States shall determine the practical procedures for the entry in the accounts of the amounts of duty. Those procedures may differ according to whether or not, in view of the circumstances in which the customs debt was incurred, the customs authorities are satisfied that the said amounts will be paid."
  14. Miss Shaw unsurprisingly contended that art 217 applied. Mr Thomas disclaims any reliance on it, contending that Article 217(1) requires entry of the (correct) amount of duty in the accounts; paragraph (2) cannot detract from that requirement as its scope is restricted to practical procedures. It cannot justify waiving the mandatory requirements of the Regulation. Having heard the arguments of the parties we agree with Mr Thomas, and therefore we have to conclude that Customs were ignoring the Regulation. We consider that ignoring the Regulation is different in nature from trying to apply the law and making an error in the course of doing so.

  15. This appeal raises the question of what follows in such circumstances after (unusually) the taxpayer has read the Official Journal. Normally the taxpayer can make the entry under the correct classification, or presumably in Covita could have proffered the countervailing charge, or in Biegi the import licence, and it will be accepted. But here we have found as a fact that the Appellant had been told twice that the additional documents would not have been accepted and, what is more, that an entry with what it considered to be the correct documents would not have been accepted, so that the Appellant's perishable goods, Brazilian chicken meat, would not have been cleared, rendering the Appellant in breach of contract with its purchaser.

  16. Point (2) for the application of art 220(2)(b) (see paragraph 5 above) requires the taxpayer to have read the Official Journal and understood it so far as is reasonable having regard to the nature of the error, his experience and the degree of care exercised. Mr Stokes of the Appellant did read the Official Journal and pointed out what he saw as the error to Customs, so in that sense it cannot be said that the error could not reasonably have been detected by him, because he actually detected it. However, we consider that we must look at the whole process and not stop at that point. Having, as we have found, been told by two officers that they would not accept an Entry accompanied by what he considered to be the correct documents he wrote to the Ministry of Agriculture, Fisheries and Food to try to obtain independent confirmation of his reading, but did not receive any satisfactory reply. We consider that we should apply point (2) at this stage. Having been told twice by Customs officers that his reading of the Official Journal was wrong and having failed to obtain confirmation of his view from the Ministry of Agriculture, Fisheries and Food, we consider that he was reasonably entitled to doubt the correctness of his reading and accordingly to doubt whether there was any error by Customs. If he was led to believe by Customs that there was no error by Customs, we consider that it can be said that the (actual) error could not reasonably have been detected by the Appellant. We consider that this is distinguishable from the normal case, illustrated for example by Covita, where the customs authority tells the taxpayer something that is in fact an error and the taxpayer merely accepts it without reading the Official Journal. Here the Appellant has acted reasonably in detecting what it thought was an error but has been reasonably led to believe that it was not an error, and we consider that it was reasonable for the Appellant to believe in the circumstances that Customs were complying with the law. One cannot reasonably detect an error that one reasonably does not believe exists. The situation is analogous to the taxpayer not being expected to do the impossible, such as such as reading the Official Journal when it has not been published in the taxpayer's own language, or has not been published at all (Covita at [27]), or understanding the Official Journal when the issue is complex. Accordingly we find that point (2) is satisfied.

  17. On point (3) of the requirements for the application of art 220(2)(b) (the Appellant acted in good faith and complied with all the provisions laid down for the customs declaration), we found in the interim decision that this is satisfied. However, Mr Thomas raised a new argument that by not keeping the documents required by art 14 of the Customs Code for three calendar years in accordance with art 16 the Appellant has not complied with all the provisions laid down for the customs declaration. We consider it rather rich of Customs to refuse to accept documents and then complain that they were not retained. Articles 14 and 16 are in section 4 (other provisions) of Chapter 2 (sundry general provisions relating in particular to the rights and obligations of persons with regard to customs rules) of Title 1; the provisions about declarations are in Chapter 2 (customs procedures) of Title IV (Customs-approved treatment or use). The requirement to retain documents is therefore not a provision laid down for the customs declaration. Accordingly we confirm our decision that point (3) is satisfied, which means that the whole of art 220(2)(b) is satisfied.

  18. In our interim decision we said that art 239 of the Code might potentially be relevant but this would arises only if we find that art 220(2)(b) is inapplicable, which we have not. In any case although Miss Shaw attempted to argue that this provision had been claimed it is clear that it has not been. We therefore have no jurisdiction to deal with it.

  19. In the light of our decision above on art 220(2)(b) we can update the conclusions in our interim decision. In two cases we said that the Appellant was not liable for the post-clearance demands because the liability was on a different person. However, we wee asked by Mr Thomas to sate the liability on the transaction, which we do, although doubting whether we should do so on an appeal against a post-clearance demand on the Appellant.

  20. Our conclusions in principle on the liability to post-clearance demands of the test entries using the same numbering as in our interim decision are accordingly as follows:

    21. (1) Liable because no proof of subsequent sale produced.
    (2) Not liable.
    (3) Transaction not liable because the selling invoice by the Appellant to a third party at $2.20 indirectly substantiates the cif price of $2.30 in spite of the absence of any invoice from Euromeat (the importer, which is not related to the Appellant) to the Appellant, the difference being accounted for by the carriage and freight costs.
    (4) Not liable.
    (5) Not liable.
    (6) Not liable in principle; the cif price is below the representative price so no additional documents are required; but we understand that the duty was incorrectly calculated and the Appellant concedes that the correctly calculated duty should be paid.
    (7) Not liable by art 220(2)(b).
    (8) Not liable by art 220(2)(b).
    (9) Liable as invoice presented out of time.
    (10) Liable as invoice presented out of time.
  21. As before so far as costs are concerned the Appellant should have their costs in relation to the Entries that we have decided are not liable to the post-clearance demand, and Customs did not ask for costs. We invite the Appellant and Customs to try to agree a suitable apportionment of costs to give effect to this and if the matter cannot be agreed the Appellant may apply to the Tribunal for a direction about costs.

    22. JOHN F AVERY JONES
    CHAIRMAN
    RELEASE DATE: 25 June 2008

    LON/00/7061

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