United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2002] UKVAT(Excise) E00360, [2002] UKVAT(Excise) E360

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Downes v Customs and Excise [2002] UKVAT(Excise) E00360 (22 November 2002)

E00360

EXCISE DUTY – Seizure of vehicle and excise goods – Commissioners' refusal to restore – Large excess of excise goods – Reasonableness of policy – Right to property – Appeal dismissed

LONDON TRIBUNAL CENTRE

MRS ELSIE DOWNES Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MR PAUL HEIM CMG (Chairman)

MR A McLOUGHLIN

MRS C J DEBELL

Sitting in public in London on 19 October 2001

Mr K Rogers of counsel, for the Appellant

Mr C J Mellor of counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2002

DECISION

Mrs Elsie Downes appeals against the Commissioners' decision on review, dated 8 February 2001 upholding the decision not to restore to her a vehicle registration number P694 NHJ, seized by them on 3 October 2000.

At the hearing of this appeal Mrs Downes was represented by Mr K Rogers of counsel, and the Commissioners by Mr C J Mellor of counsel.

It is not in dispute that the Appellant and her sister Mrs Tucker were travelling in Mrs Downes' vehicle, registration number P694 NHJ when, on entry into the United Kingdom at the Hoverport in Dover they were stopped by an officer of HM Customs and Excise. They were asked some questions and gave answers. The officers then asked to be shown the boot of the vehicle and found two boxes of tobacco and a quantity of cigarettes, and later two holdalls behind the seats which also contained cigarettes. These goods were seized. They amounted to 17,800 cigarettes, 11 kilos of hand-rolling tobacco, 9 litres of wine, 4 litres of spirits, and 60.18 litres of beer. The goods and the vehicle were seized. Correspondence ensued, and on 9 November 2000 the Appellant wrote to the Commissioners asking to have the vehicle restored. On 21 November 2000 the Appellant was told that the goods were not offered for restoration because:

"(i) She had imported goods that exceed the guide levels set out in the Excise Duties (Personal Reliefs) Order 1992 (as amended);

(ii) She failed to satisfy the officer that there was no commercial element in the importation;

(iii) A false declaration was made to the officer;

(iv) No satisfactory explanation was given for making a false declaration about the amount of purchases;

(v) Excess and undeclared goods were concealed under other items;

(vi) An admission was made that the goods would be sold to others at a club and that sums would be added on to cover expenses."

This decision was reviewed and upheld by letter dated 8 February 2001.

The Appellant sets out in her grounds of appeal that no caution was given when she was interviewed, that the answers given were subsequent to the suggestions of the investigating officer, that there was no deliberate act of concealment that she did not set out to avoid duty or with any commercial motive, and alternatively, in mitigation that Mrs Downes and her sister were middle aged housewives on a shopping trip. The penalty of forfeiture of her car which was subject to a hire purchase agreement was excessive in all the circumstances.

The Appellant's case was presented as a shopping trip, on which she had been asked to bring things back for others. She was not a commercial smuggler. She accepts that she had stepped a little over the limit in allowances. She accepted that out of fear she did not tell the whole truth to the officer when first stopped, but that she responded once when interviewed. There was however an inducement expressed by the officer to make disclosure on the basis that she would otherwise lose her vehicle.

With regard to the goods, the beer was for her partner, and the spirits were for herself. The goods in the car were not consciously hidden. The car was not converted for smuggling.

Mrs Downes gave evidence to confirm these arguments, and said that her partner had asked her to get some things, for her family and for others. She made trips of this kind fairly often, and enjoyed them. She bought the cigarettes and tobacco in Belgium and for that reason they were loaded first. The boot was quite full there were also goods in the back. They were in duty free bags. When stopped and asked what she had got she simply said cigarettes. When the boot was opened she panicked. She did not know what to do. She knew that she was "over the top". For that reason "obviously I didn't tell them exactly what I had because I knew I was over the top". She said that the impression she had was that if they did not interview her they would take the car. She was not cautioned, that she could remember. She felt that she could either walk away and leave everything, or be interviewed, otherwise there was a risk of losing the car. She felt that if she was interviewed she could keep the car. The officers then said that as she was over the limit they would take the car, and so they let her clear the car and take the mineral water she had bought, the odd bottle of win and Vodka, and the sparkling wine. She said she travelled every five or six weeks, she bought beer for her partner because it was cheaper. Her partner had medical problems. She bought goods for people who asked her to do them a favour for some of these goods she "put something on top to cover expenses". This was meant to cover the cost of going over. There was no profit. It was not commercial. It was mainly for family and friends. Now she no longer had the car it was difficult to transport her partner. He now had to get somebody else to drive him or to take buses or taxis. The car was under hire purchase. She did not know that she was in breach of the contract in the hire purchase agreement. This would now restrict her ability to get another car on hire purchase.

In cross-examination Mrs Downes said she was aware of the prohibition on excess importation but so many people did it. She had not declared all the goods when the officer first asked her. She did sign the interview notes she could not remember because she was in such a state. She admitted the goods were of the amount alleged by the Commissioners, but they were between her sister and herself.

From the documents before the Tribunal it is clear that on 3 October 2000 the Appellant was given a document entitled "seizure information" relative to the tobacco, cigarettes, spirits, and the vehicle, which gave information on action she could take consequent on the seizure.

On 18 October 2000 she wrote stating that she wished to appeal against the seizure of her vehicle, stating that she had been misled, that she had been given no opportunity to seek legal advice, and had not been informed of her rights. She had not seen any notices informing her that she would risk having her car seized. Her rights had not been addressed. She wished to offer mitigation. The vehicle was still the subject of a hire purchase agreement. She was facing financial hardship. On 28 October she again wrote stating that she wished to appeal against the seizure of her car and saying it was the lifeline of her partner who had medical problems.

The Commissioners replied on 1 November 2000 accepting her letter as a notice of claim against the forfeiture of the goods and the vehicle and pointing out that under Schedule 3 to the Customs and Management Act 1979 the Commissioners were required to take proceedings for condemnation of the seized goods. If she did not wish to contest the seizure of the goods then she was to inform the Commissioners immediately so that proceedings were not started unnecessarily. She replied on 9 November that she did not wish proceedings to be taken in court but that she would like the restoration of her vehicle. The Commissioners replied on 12 November that condemnation proceedings had now been withdrawn at her request. Her request for restoration would be considered.

On 21 November 2000 Mr Thomas, team leader of the anti-smuggling team 8 at HM Customs and Excise Dover replied that while the Appellant had requested restoration of the seized vehicle, he had considered all the factors in the case and recommended that the goods should not be offered for restoration.

The Tribunal takes this decision to include the vehicle.

The reasons given for the decision were that the Appellant had imported goods that exceeded the guide levels, that there was a statutory presumption of commerciality that the person importing them was required to satisfy an officer that there was no commercial element in the importation. He took account of the fact that she had made a false declaration to the officer who dealt with her, that she subsequently gave a less than satisfactory answer as to why she had lied about the purchases, that undeclared goods were concealed under other items and that she admitted selling the goods to others at her club and to adding sums to cover her expenses.

The letter went on:

"The department's efforts are directed towards deterring and detecting fraud failure to pay excise duty that is due, irregularities and to encourage compliance with procedures established to control movements of excise goods. In this way protection will be given to both Revenue and the legitimate trade in the UK. It is appropriate that this objective should be applied consistently throughout the UK. The creation of the single market meant the removal of fiscal frontiers, this significantly increases opportunities for smuggling and irregular movement of goods with less risk of detection. Thus routine restoration, even on fairly stringent terms, would thoroughly undermine the Department's objective of reducing the incident of fraud, failure to pay excise duty that is due and irregularities.

To maximise deterrent and encourage compliance, the normal policy in these cases is to refuse to restore seized goods. There are no exceptional circumstances in this case which would justify departure in this policy".

Following the reply from the Appellant's advisers on 23 December 2000, Mrs D Florence, reviewing officer, confirm the refusal to restore the vehicle.

Mrs Florence said that when she undertook her review she had the documents in the Commissioners' bundle, including the notes taken by the officer and the correspondence. She confirmed that the Commissioners' policy was as stated and considered whether there was a case for disapplying the policy. She considered the arguments made by the Appellant's representative. She considered that she would not restore the vehicle to someone who was not the formal owner of it. The policy about hire purchase vehicles, she assumed, was to allow appellants to use their means of redress before a decision was taken to restore the car to the hire purchase company. However the car was condemned and the Crown could dispose of it. She would consider restitution to the hire purchase company after the Appellant had exhausted her remedies. She did not know if there had been any contact with the hire purchase company. It could be restored free of charge to the hire purchase company on condition that it was not given back to the hire purchaser. This was the object of preventing re-offending in that vehicle.

Mrs Florence said that she considered the argument of financial hardship but inferred from the notes of interview that the Appellant knew that what she did was wrong and she should have considered that earlier. Mrs Florence said that vehicles could be returned on humanitarian grounds for example if someone was ill and needed to get home, or indeed where the quantity of goods was very minor. An other reason might be that the vehicle was stolen and the owner was not aware of this.

She informed the court that she did not consider the relation of the value of the goods and duty to the value of the vehicle As to this question of proportion, the Commissioners said that their policy was proportional to the problem of bootlegging, not to the vehicle itself. Thus proportionality could be considered in exceptional cases. She said in cross-examination that she considered that the loss of the vehicle would cause anyone hardship. She did not know when the vehicle had been released to the finance company but was shown a document which indicated that it had been returned.

With the approval of the Appellant the Tribunal considered the witness statement of Mr Gerry Dolan, setting out the Commissioners' policy on seizure of vehicles and the new "get tough" policy that vehicle seized would not be restored. The statement contains the following passage:

"The current policy introduced on 13 July 2000 means that vehicles will be seized and not restored on the first attempt they are detected being used in smuggling. The message for fraudsters now using their vehicles to commit excise fraud is very simple, use it and you will lose it: and there will be no second chance. … Vehicle which belong to owners who are not present at the time of detection will also not have their vehicles restored, unless they can demonstrate that the decision not to offer the vehicle for restoration is unreasonable.

…

The current policy has been widely publicised in the national press and the Customs leaflet was sent out to every registered vehicle keeper with the reminder to pay their road fund licence (tax). This leaflet sets out the guidelines for amounts of tobacco and alcohol regarded as reasonable for personal use, the need to convince an officer of no commercial intent if these are exceeded and the penalties if caught smuggling. Where vehicles are seized and not restored, individual applications for restoration are considered on their merits and officers bear in mind the need for proportionality. …

It is not our intention to penalise the genuine honest traveller or to dissuade travellers from shopping in other EU countries when making purchases for their own use, but to deter those who are intent on regularly smuggling tobacco and alcohol into the UK".

It is argued for the Appellant that the way in which the Commissioners have exercised their powers under the policy had the effect of fettering the discretion which the legislation gave to the Commissioners. The Commissioners had altered the discretion which the legislation had given them, without reference to Parliament which had given them that discretion.

The Commissioners on the other hand say that their policy, and the aims which it pursues are entirely legitimate. In any event the Commissioners' decision not to restore the vehicle was made under the discretion given them by section 152(b) of the Customs and Management Act 1979 which provides that they "may, as they see fit … restore … any thing forfeited or seized", under the Customs and Excise Acts.

The Commissioners say that the Appellant's rights to import excise goods are limited by the Excise Goods (Personal Reliefs) Order 1992 (SI 1992/3155)

By Article 3 of that Order "A community traveller entering a control zone or the United Kingdom shall be relieved from payment of any duty of excise on excise goods which he has obtained for his own use in the course of cross border shopping and which he has transported".

"Own use" was defined in Article 2(1) of that Order as including "… use as a personal gift provided that if the person making the gift receives in consequence any money or moneys worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) its use shall not be regarded as own use for the purpose of this Order".

If a person has in his possession more excise goods than are specified in the Schedule to the Order, then, under article 5(3)A of the Order the Commissioners may require that person "… to satisfy them that the excise goods … are not being held or used for a commercial purpose." If the condition of not holding the goods for a commercial purpose is not complied with, then under Article 5(1) of the Order they are liable to forfeiture.

The limits given in the Schedule are among others 800 cigarettes, 1 kg of tobacco products, 10 litres of spirits, 90 litres of win and 110 litres of beer.

Article 5(3)B provides that if a person fails to satisfy the Commissioners that the excise goods are not being held or used for a commercial purpose the condition imposed by Article 5(1) shall "be treated as not complied with."

The Customs and Excise Management Act 1979 provides in section 139(1) that "any thing liable to forfeiture under the Customs and Excise Act may be seized or detained by any officer …". The Act goes on to state in section 141 that "where any thing has become liable to forfeiture under the Customs and Excise Acts, … any … vehicle … which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture … shall also be liable to forfeiture."

Schedule 3 of the same Act sets out the provisions relating to forfeiture and shows how the legality of the seizure can be challenged, by giving notice of claim, such claim obliging the Commissioners to institute proceedings for condemnation in the High Court or the Magistrates Court. Failure to give such a notice within the period of one month specified the thing in question shall be deemed to have been duly condemned as forfeited.

The Commissioners say that under those provisions the Appellant was rightly asked to satisfy the officers that the excise goods were not being held for a commercial purpose, and that she was unable to do so, and in fact admitted that she was bringing in goods in excess of the allowable limits. Accordingly the goods and the vehicle were rightly seized. The Appellant specifically said later that she did not wish to contest the seizure so that the vehicle was deemed to have been duly condemned as forfeited.

The Commissioners say that to the extent that the Appellant appeared to be challenging the legality of the seizure, the Commissioners' decision to seize both the goods and the vehicle was manifestly correct. The decision not to restore the vehicle is one made under section 152(b) of the Customs and Excise Management Act 1979, as falling within paragraph 2(1)(r) of Schedule 5 to the Finance Act 1994, leading to the review provided by section 14 of that latter Act. Section 15 of the Act required the Commissioners to review the decision not to restore the Appellant's vehicle, and the Tribunal's jurisdiction on appeal against that review was limited by the terms of section 16 of the 1994 Act in the following terms:

"16(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of the 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 a 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; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in the future".

The Commissioners say that the Tribunal's decision is therefore one of "reasonableness". This term has been defined in the appeal of Bowd v Commissioners of Customs and Excise [1995] V&DR 212, as "Wednesbury reasonableness" that is to say that the Commissioners' decision can only be found unreasonable if the Appellant can show that they have acted in a way in which no reasonable panel of commissioners could have acted, if they have taken into account some irrelevant matter or disregarded something to which they should have given weight or have made an error of law.

Thus the Commissioners say that the Tribunal's jurisdiction does not extend to the legality of the seizure of the goods and the vehicle, that being something which could have been contested by way of condemnation proceedings under Schedule 3 of the 1979 Act. They do however say that the seizure was reasonable and appropriate, as was the refusal to restore.

It does appear that the seizure is not the point in issue in this appeal. The Appellant said that she did not wish condemnation proceedings to take place. She has throughout accepted that she was carrying more goods than the limit stated in the legislation quoted earlier, that these were in fact largely for others, and that she would be repaid at least her expenses by these persons. The Tribunal does not therefore need to consider the legality of the seizure, expect insofar as it is incorporated within the review decision which is the subject of appeal. The Tribunal sees nothing to criticise in the seizure and forfeiture of the goods and the vehicle. What is clear in the present appeal is that the Appellant was given the opportunity of satisfying the officers that the goods were not held for a commercial purpose. In view of the very large quantities involved, she was not able to do so. The presumption would have been against her, even without her attempts to explain.

What is in issue now is the decision not to restore the vehicle. The reviewing officer applied the policy which has been brought to the Tribunal's attention. The Commissioners are clearly entitled to have such a policy. They have duties in regard to the revenue which they must fulfil. However, as far as the individual appellant is concerned, what affects him or her is the specific decision taken in his or her regard, and the effect of it is the same whether it is a decision taken as a result of a policy, or on particular grounds, save insofar as the reasons for the decision are in issue.

What is clear is that the Commissioners are obliged to carry out their statutory duties to review the specific decision not to restore, that being a discretion which Parliament has conferred upon them, and which they cannot avoid exercising when called upon to do so. The Tribunal has considered the terms of the policy in the light of the argument that the Commissioners have fettered their own discretion to such an extent that they cannot accomplish their statutory duties. The Tribunal does not think that this has been shown to be the case. The policy admits of exceptions. It is stated that individual applications for restoration are considered on their merits, and that the need for proportionality is borne in mind.

On the issue of proportionality Mrs Florence said that she did not specifically evaluate the value of the goods or the duty on them as compared to the value of the motor car, but she clearly considered all the circumstances of the case, including the amount of goods, the circumstances of seizure, and the fact that the vehicle was in any event not Mrs Downes' property. The Tribunal does not think that the Commissioners' decision in this case falls down on the issue of proportionality.

The Tribunal considers the arguments advanced on behalf of the Appellant. In regard to the matters alleged by way of mitigation, that this was a mere shopping trip, the Tribunal is obliged to say that it was not a shopping trip for goods for the Appellant's own use. There was clearly a commercial element in the purchase of these goods. Even though the Appellant does not see it as such, it prevents the goods from being considered for "own use", so that the decision not to restore is not invalidated by those circumstances.

The one exception arises from Mrs Downes' evidence. It is that that she was advised to answer questions unless she wished to have the vehicle seized. The Commissioners appear by implication to accept that some warning or statement was made, because they say that there is no requirement in the applicable legislation for the Commissioners to administer a caution and in any event these are not criminal proceedings where a caution would be applicable.

These proceedings are not in terms criminal. However, at the moment that questions were put to the Appellant and the passengers it was not clear what the result of the interviews would be. The importation of excise goods can lead to penal proceedings, for example under s.170A of the Act. Thus a wider view must be taken of the need for a caution. This seems the more so when presumptions against the individual are to be invoked. It is not clear exactly what was said. The Appellant says that she was perturbed, and does not remember everything about the interview. It would have been better to have had a record. The Tribunal does not reopen the facts of the seizure, but considers that a seizure improperly conducted could not be cured by a decision on review. The Appellant has set out the difficulties she suffers by reason of the loss of the car, and says that these render the Commissioners' decision unreasonable. The Commissioners did consider the point. Clearly loss of a vehicle must create difficulties. The Tribunal is unable to reach the conclusion that these difficulties invalidate the decision, It is not unreasonable for the Commissioners to take the view that those who, by intentional decisions, bring in excise goods largely in excess of the indicative limits, for avowed commercial purposes, must be taken to have accepted the difficulties which flow from the risk they have taken. The possible mitigation of these difficulties lies in the Commissioners' obligation to consider the individual case, and in the appeal to this Tribunal.

The Appellant also relies on the protection of the right to property guaranteed by Article 1 of Protocol 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. There has of course been an interference with her property, that is to say the vehicle, although it was subject to a hire purchase agreement which meant that it was technically not hers. However the Commissioners have shown that they balanced the general interest in the suppression of bootlegging against the interest of the Appellant. It is clear from the decision of the European Courts of Human Rights in Sporrong & Lonroth v Sweden [1992] 5 EHRR 35 that a requisite balance must be struck in a manner consonant with the Appellant's rights to peaceful enjoyment of her possessions in accordance with the criteria laid down in that case, but the Tribunal considers, as did the tribunal in the appeal of Dereczenik v Commissioners of Customs and Excise [2001] C00138, that the requisite balance was struck in this case. They considered the request to restore in the light of their discretion, of the policy they had adopted, and the circumstances of the case. The policy pursues a legitimate aim. The evidence is that it is applied stringently, but that individual applications to restore are considered on their merits, bearing in mind the need for proportionality, and that exceptions to the application of the policy can be made. The Tribunal does not consider that the Commissioners have fettered their discretion in a way which must lead to it being exercised improperly.

For these reasons the Tribunal considers that it has not been shown that the Commissioners have acted unreasonably in the circumstances of this appeal in refusing to restore the vehicle to Mrs Downes.

The appeal is dismissed.

PAULL HEIM CMG

CHAIRMAN

RELEASED: 22 October 2002

LON/01/8020-DOW.HEIM