United Kingdom VAT & Duties Tribunals (Customs) Decisions

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Cite as: [2008] UKVAT(Customs) C00265, [2008] UKVAT(Customs) C265

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LS Express Ltd v Revenue & Customs [2008] UKVAT(Customs) C00265 (11 November 2008)

C00265

CUSTOMS DUTY – post clearance demand – whether Appellant acted as agent for importer or on its own behalf – finding on facts that Appellant acted as agent 0 importer liable for customs duty and VAT – appeal allowed

MANCHESTER TRIBUNAL CENTRE

LS EXPRESS LTD Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Chairman)

Arthur Brown FCA CTA (Member)

Sitting in public in Manchester on 14 October 2008

John Powell, company secretary, for the Appellant

Vinesh Mandalia of counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008

DECISION

Introduction

On 15 February 2006, the Commissioners for Her Majesty's Revenue and Customs ("the Commissioners") raised a post clearance demand note for £4,135.45 customs duty and £26,592.86 VAT against the appellant company, LS Express Ltd ("LS"). They did so because goods, namely certain oil pipeline test equipment ("the equipment"), imported under inward processing relief ("IPR") had allegedly been re-exported from the UK without the Commissioners having been pre-notified of the re-export of the equipment, and without its having been "processed", both those elements being requirements of IPR

IPR provides relief from a variety of duties to promote exports from the EU and is intended to assist Community processors to compete on an equal footing with other traders on the world market. It relieves duty on imports of non-EU goods which are processed in the Community and re-exported, provided the trade does not harm the essential interests of Community producers of similar goods. "Processing" can be anything from repacking or sorting goods to complicated manufacturing. For present purposes, it is common ground that it includes repairs to goods.

The post clearance demand note was initially issued to Baker Petrolite Ltd ("Baker"), that company being the importer of the equipment on behalf of Pipeline Management Group, another division of Baker. The original note was withdrawn and re-issued to LS on Baker establishing to the satisfaction of the Commissioners that it had not authorised LS to act as its import agents, so that they considered LS liable for the duty due under the note.

LS required the Commissioners to carry out a review of their decision to impose the duties referred to in the post clearance demand note. That review was adverse to LS and was issued on 9 February 2007. It is against the decision on review that LS now appeals.

In its notice of appeal, given on 4 April 2007, LS claimed that the disputed sums would only have been due to the Commissioners at the time of importation, and then only on a temporary basis, since they would have been refunded on proven re-exportation within some 30 days: consequently, there would have been no loss of revenue. LS also claimed that it acted with the full knowledge and authority of Baker as its agent for both the import and re-export.

In its appeal, LS was represented by Mr John Powell, its company secretary, and the Commissioners by Mr Vinesa Mandalia, of counsel. The former called Mr Daniel Simpson, LS's import clerk, and the latter, Mr James Wright, Baker's customer service manager, to give oral evidence. In addition, we were provided with an agreed bundle of copy documents. From the whole of that evidence, we make the following findings of fact.

The facts

On 1 November 2004 LS, a forwarding and customs agent, received an airfreight import pre-advice from AM Express, its agents in Houston, Texas. The advice related to the export of the equipment from Baker US to Baker in Liverpool. LS had never acted for Baker previously, so that on LS being advised that the equipment had arrived at Manchester Airport, Mr Simpson telephoned Baker intending to seek instructions as to how LS should deal with the importation from either Paul Webley or Annette Walker (or Walton), they being named as LS's contacts in AM Express's instructions.

Mr Simpson was informed by an unidentified person at Baker that the person to whom he should speak was neither of those named, but rather was Mr Wright. He was given Mr Wright's direct dial telephone number, and asked to telephone him. Using that number, Mr Simpson then telephoned Mr Wright. He introduced himself and explained that LS had received the consignment of equipment from Houston. He advised Mr Wright that the goods had been sent under the incoterms of DDU, which meant that all charges including UK customs duties and other taxes were for the account of Baker US, but that clearance of the goods by the Commissioners was required before they could be delivered. Mr Simpson explained to Mr Wright the standard and customary practice used by all freight forwarders and customs agents in the UK receiving import consignments requiring UK customs clearance destined for new customers. He particularly asked whether Baker wished LS to arrange customs clearance on its behalf, or whether it wished to instruct its own customs agent to deal with the matter. He needed that that information because customs formalities of the importation could have been dealt with in one of three ways:

a) Baker itself could have dealt with them;

b) It could have instructed LS to deal with them; or

c) It could have instructed its own import agent to deal with them.

In evidence, Mr Simpson claimed that Mr Wright instructed him to arrange for LS to proceed with clearance of the consignment for Baker. Mr Wright, in contrast, maintained that he did not instruct LS to make the clearance arrangements; indeed, he claimed that he had no authority from Baker to do so.. The tribunal enquired of Mr Wright how it was that the equipment was cleared by customs and came to be delivered to Baker if LS did not act on its behalf, since there was no evidence whatsoever of Baker having indicated that it would itself deal with the importation or its having done so, or of its having instructed, or ever having intended instructing, its own import agent, one or other of (a) and (c) above being necessary had not LS acted for it on the import. Mr Wright was unable to offer any answer to the question. We find that Mr Wright did instruct LS to act for Baker, and that LS throughout acted, and in all documentation stated that it was acting, for Baker.

In the absence of any confirmatory evidence that Mr Wright had no authority to instruct LS to act on Baker's behalf and everything indicating both that it did so act and that at the relevant time Baker was perfectly satisfied with all that LS had done, we reject Mr Wright's evidence. We find that he did have authority to authorise LS to act for Baker. We do, however, accept that LS had no written authority to act for Baker, but since there is no legislative requirement in that behalf do not regard it as having any part to play in events with which we are concerned.

Mr Simpson was also provided with Baker's VAT registration number – a necessary requirement for duty and VAT clearance of the equipment. Mr Wright denied having given the number to him, but as Mr Simpson dealt with no other person within Baker who could have provided that information, and there was no other source of it available to Mr Simpson, we infer, and thus find, that it was indeed Mr Wright who supplied the number as part of the instructions he gave to Mr Simpson for LS to act for Baker.

Mr Simpson was aware from the content of the pre-advice email from AM Express that the equipment was to be reurned to the USA following its repair, and discussed the temporary nature of the importation with Mr Wright. In his evidence in chief, Mr Wright maintained that the equipment was imported into the UK for storage purposes only, but in cross-examination he admitted, and we find, that the importation was needed for the purposes of its repair. (The importance of that admission is that had the equipment not been "processed" in some way whilst in the UK, different procedural steps would have had to have been taken on its re-export from those actually taken). It follows that we also find that Baker was the importer of the equipment.

When instructing LS to collect and return the equipment to the USA, Baker used the same invoice for the re-export as it had used for its importation, but with the names and addresses of the shipper and "shipped to" reversed. The invoice contained no details of the status of the equipment or the fact that it was of foreign origin which might have required the use of a particular export procedure. Consequently, the re-export was not matched to the IRP declaration made on importation of the equipment with the result that the customs duties and taxes placed on suspension at the time of import were not cancelled. The equipment was re-exported on 12 November 2004.

The law

European Council Regulation 2913/92 establishes the Community Customs Code. Article 5 thereof provides for the appointment of agents in the following terms:

"1. Under the conditions set out in Article 64 (2) and subject to the provisions adopted within the framework of Article 243 (2) (b), any person may appoint a representative in his dealings with the customs authorities to perform the acts and formalities laid down by customs rules.

A representative must state that he is acting on behalf of the person represented, specify whether the representation is direct or indirect and be empowered to act as a representative. A person who fails to state that he is acting in the name of or on behalf of another person or who states that he is acting in the name of or on behalf of another person without being empowered to do so shall be deemed to be acting in his own name and on his own behalf."

As the Commissioners deemed LS to be acting on its own behalf, they rely on article 64(2a) to claim that LS failed to comply with the obligation under IPR to ensure that the goods were processed following entry into the UK. Article 64(2a) provides as follows:

"Where acceptance of a customs declaration imposes particular obligations on a specific person, the declaration must be made by that person or on his behalf."

And since they say that the obligation under IPR was not satisfied, the Commissioners maintain that a customs debt was incurred under article 204(1) which reads:

"A customs debt on importation shall be incurred through –

a) non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they are placed"

The relevant provisions of the Code relating to re-exportation are to be found in articles 182(3) and 203. They provide as follows:

"Article 182(3)

Save in cases determined in accordance with committee procedure, re-exportation or destruction shall be the subject of prior notification of the customs authorities. The customs authorities shall prohibit re-exportation should the formalities or measures referred to in the first subparagraph of paragraph 2 so provide. Where goods placed under an economic customs procedure when on Community customs territory are intended for re-exportation, a customs declaration within the meaning of Articles 59 to 78 shall be lodged. In such cases, Article 161 (4) and (5) shall apply.

Article 203

A customs debt on importation shall be incurred through:

- the unlawful removal from customs supervision of goods liable to import duties"

Conclusion

As clearly appears from our findings of fact, Mr. Wright's evidence was illogical, was inconsistent with the documents before us, and in part was untrue. He thus proved a most unreliable witness. Indeed, we reject all his evidence that conflicts with the oral evidence of Mr Simpson and the content of the documents before us. We are quite satisfied that throughout LS acted as agent for Baker, and did not act on its own behalf. The post clearance demand note initially issued to Baker should never have been re-issued to LS. It follows that we allow the appeal.

We enquired of Mr Powell whether LS sought its costs. He indicated that it did not. We therefore make no direction as to costs.

DAVID DEMACK

CHAIRMAN
Release Date: 7 November 2008

MAN/2007/7016