United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2002] UKVAT(Excise) E00378, [2002] UKVAT(Excise) E378

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EXCISE DUTY - Restoration of goods - Reasonableness of refusal - Decision not to restore wrong in law and unsustainable on facts - Appeal allowed

LONDON TRIBUNAL CENTRE

ERIC DARBY - Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE - Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

LYNNETH SALISBURY

Sitting in public in London on 2 December 2002

The Appellant in person

Robert Kellar, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

DECISION

1. Eric Darby appeals against a decision given on 8 March 2002 not to restore excise goods to him.

2. This appeal was listed on 30 September 2002 for hearing today. Eric Darby appeared and Robert Kellar attended to represent the Commissioners. The review officer, who was to have given evidence, failed to attend. The Commissioners asked for an adjournment. Eric Darby objected. He had made long journey to be here and did not wish to be exposed to any further strain. He was ready and prepared to give evidence. We decided to proceed. This, as we saw it, would not unfairly prejudice the Commissioners because there were notes of interview to assist them in any cross-examination of Eric Darby and we had the benefit of a full, though late, review decision dated 20 May 2002. It seemed to us, as the issue was whether the Commissioners had acted reasonably in refusing to restore the goods, that we could fairly proceed on the available information without the need of having the review officer present for cross-examination.

3. We use the review officer’s account of the events in his letter of 20 May 2002 as the basis for our decision. This had the facts appearing to the review officer. Following each extract, we comment in the light of the evidence heard by us.

4. The first relevant part of the review officer’s letter reads as follows:

"On 16 October 2001 you were travelling in a Rover vehicle N112 PRG with a Mr William Riley; you were stopped by an Officer in the Customs Control area at Coquelles. The vehicle was examined and a quantity of tobacco, cigarettes and other excise goods in excess of the guidelines were identified."

5. Eric Darby accepts this. He gave us the background which we accept. He was 69 at the time. He and a colleague whom he had once worked with (William Riley), the owner of the car, decided to go on a shopping expedition in Mr Riley’s car. It had been Mr Riley’s idea. Eric Darby had been across the channel about six times in the last six years. They both knew that there were guidelines as to the quantities of alcohol and tobacco that Customs and Excise regarded as satisfying the "own use" test. They booked a cheap return ticket for 16 October on the Shuttle leaving Dover at about 5.00am and returning before noon the same day. Eric Darby left his house in Wellingborough about 1.00am. They crossed the channel and went to "Eastenders" in Adinkerke in Belgium. There they bought, between them, 6 kg of hand-rolling tobacco. They returned to Calais. Eric Darby bought 800 cigarettes (Benson & Hedges and Marlboroughs), 200 cigars, 9 litres of beer, 30 litres of wine and 7½ litres of spirits. Then they were stopped (at Coquelles). They told the Customs officer that they had more tobacco than the guideline limits.

6. We return to the next passage in the review letter:

"The officer read a formal statement to you which states in part that the person holding the excise goods is required to satisfy the Commissioners of Customs and Excise that he does not hold the goods for a commercial purpose. You were told that you were not under arrest and free to leave at any time. If you did decide to leave before the interview had finished then the goods and the vehicle would be seized."

7. We know nothing about the circumstances in which the car had been stopped and searched. We note that, following the unappealed part of the decision of the Administrative Court in Regina ( Hoverspeed Ltd) v Customs and Excise Commissioners [2002] 3 WLR 1219, the 1992 Personal Reliefs Order is incompatible with Directive 92/12 and article 26 of the EC Treaty insofar as articles 3 and 5 of the Order create a presumption that excise goods held in excess of the minimum indicative levels are held for a commercial purpose and therefore chargeable to additional excise duty in the UK and places the burden of proof that such goods were not held for a commercial purpose upon the individual in question. As the officer (without realizing it at the time) violated Eric Darby’s community law rights under the Directive, the seizure and subsequent proceedings would appear to be flawed.

8. Reverting to the review officer’s letter:

"The Officer asked a series of questions; you offered the following in response.

You said that more or less half of the goods in the vehicle belonged to you and you would be sharing them with your family. You said that you smoked cigars and mixed brands of rolling tobacco. You told the Officer that your family, sons, daughters and in-laws would have the rolling tobacco, except 30 or 40 pouches that you would keep for yourself. You said that they would pay you for the tobacco at the price you paid for it, £2.04 (per pouch) for the Golden Virgin but you may only charge £2.00."

9. In connection with the above Eric Darby asked us to bear in mind that he had never been so frightened in his life. We are prepared to believe this, but it does not affect our decision overall. We have examined the above passage in the light of the evidence available to the review officer. The source of the review officer’s finding is the interview note. So far as is relevant this reads:

"Q. Who will be having the rolling tobacco?

A. Family.

Q. What members?

A. Son plus daughters and in-laws.

Q. Were they given any money for the goods?

A. No.

Q. Will they be giving you money?

A. Yeah, probably, yeah they will.

Q. How much?

A. Whatever as I buy it £2.04 for the Virgin, I could run to £2.00.

Q. So you’ll be getting the cost price for the goods?

A. Yes its just like a day out; Christmas in mind.

We do not read that passage as meaning that the family had agreed to pay Eric Darby for the tobacco, or even that he expected to recover what he had spent on it. At most, the sons and daughters and in-laws would "probably" pay; he saw the trip as "like a day out, Christmas in mind". At all events Eric Darby was absolutely consistent in his answers that the tobacco was for his family.

10. Before proceeding to examine the review officer’s letter, we have two points arising from our observations of Eric Darby while he was giving evidence. Every question he is asked produces a lengthy and often far-ranging reply; sometimes what he says is vague and rambling. Unless something extraordinary has happened since the interview, it is inconceivable to us that the focussed and succinct answers recorded by the interviewing officer were the words actually used by Eric Darby. There must, we think, have been a drastic editorial exercise on the officer’s part at the time when he was noting down the questions and answers. Eric Darby signed the note agreeing "it is true and correct". Eric Darby said that he had not read it through. Here again, he attributed this to the fact that he was very frightened. We accept this. We accept Eric Darby’s evidence that the tobacco and cigarettes were for himself and his large family covering three generations. In evidence Eric Darby put a gloss on the interview note. He said that what he had wanted to convey was this:

"Knowing my family, they would give me the fair value for the tobacco."

That seems to us to be a more than probable explanation. Having said that, we do not think that the review officer’s simple and straightforward interpretation of the interview (i.e that he was not satisfied that the goods were not held for a commercial purpose) is justified.

11. The next relevant passage of the review officer’s letter reads as follows:

"You indicated to the Officer that you had paid for some of Mr Riley’s goods, you continued to tell the Officer that he had repaid you £100 while you were away and he would pay you more when you got back."

How does the interview note support that?

"Q. How much did you pay?

A. I’m not sure, you’ve got the receipts, about £300. I had more money, he is on Switch.

Q. Will Mr Riley be giving you any money when you get back?

A. He would do. He has paid me some.

Q. How much so far?

A. £100."

Eric Darby’s answers do not support the conclusion that he had paid for some of Mr Riley’s goods. Eric Darby says nothing about paying for Mr Riley’s goods. Nor do his answers contradict Mr Riley’s answer during his interview. In evidence Eric Darby explained what was meant by "he is on Switch". When they were at Dover on the way out they had bought gone to the holes in the wall to draw cash. There was no facility for a Switch card, so Mr Riley borrowed £100 in UK notes from Eric Darby. Mr Riley did not need it because he was able to pay for his purchases in France and Belgium using his card. Even without that explanation the interview passages concerning the £100 loan cannot we think be understood as supporting evidence of a joint bootlegging operating; they give no support to the conclusion that Eric Darby was buying or bringing the goods for Mr Riley who was to repay him.

12. The review letter then turned to Eric Darby’s and Mr Riley’s awareness of the guidelines:

"The officer asked you if you were aware of the guidelines in place for excise goods. You replied that you were aware of this but you said people have different views. You said that you thought what you had bought was reasonable and that you were not out to break the law.

Mr Riley told the officer that of the goods in the vehicle, 250 cigars, 30 pouches (1.5 kilos) of tobacco; wines beer and spirits were also his. He told the officer that the tobacco was for his son and daughter in-law but he would not be receiving any money for the goods. Mr Riley said that he wanted to treat them because they were not so well off and he (the son) looks after his car. He said that all the other tobacco in the car belonged to you. This would amount to 4.5 kilos.

The officer asked if Mr Riley was aware of the EU guidelines (for excise goods). He said that he was aware and he had a customs notice in his car."

13. Those passages are supported by the interview of Eric Darby which reads:

"Q. Are you aware of the guidelines in place for excise goods?

A. Yes I saw that but people have different views we thought that was reasonable.

We are certainly not out to break the law."

Mr Riley said:

"Q. Are you aware of the ED guidelines?

A. Yes.

Q. Have you ever seen a notice?

A. I’ve seen something similar. There is one in the glove compartment of the car."

We accept that they were both well aware of the guidelines. We think that they both reasonably believed that the amounts in excess of the 1 kilo guidelines could still be for non-commercial purposes. We note that Mr Riley simply said in interview that he had 30 pouches of hand-rolling tobacco. That is not the same thing as saying that he had 1½ kilos of and-rolling tobacco. We do not know how many pouches make a kilo. No doubt the officer did his own calculations on the basis of his own expert knowledge. Moreover, the officer had Mr Riley’s receipt.

14. The review letter went on to set out the reasons for seizure of the goods.

15. The first reason for seizure was that "You were going to receive money for some of the excise goods". That is correct but that does not mean that the goods were being bought here for a commercial purpose.

16. The second reason is that there was a discrepancy between the accounts as to the ownership of the goods. We have already noted that the interviewing officer had been given receipts by both Eric Darby and Mr Riley. From these it should have been clear as to how much hand-rolling tobacco was bought by each of them. In any event, as we have noted, Mr Riley never said that he had bought 1.5 kilos of hand-rolling tobacco.

17. The third reason is that there was a discrepancy between Eric Darby’s account that the exchange of money between him and Mr Riley and the account given by Mr Riley. That is so but it is no indication whatever that this was a joint bootlegging enterprise.

18. The fourth reason was - "Consumption rate you are evasive about the tobacco." The notes of interview read as follows:

"Q. Do you smoke yourself?

A. Cigars and rollings, I enjoy cigar.

Q. How many cigars have you bought today?

A. 3 of those little ones (pointing).

Q. The wooden boxes?

A. Yes.

Q. How many do you smoke per day?

A. Depends on stress.

Q. A rough idea?

A. It depends.

Q. Do you smoke roll-ups?

A. Yes.

Q. What brands?

A. Mixed, that’s why I got mixed, my sons use roll-ups.

Q. Who will be having the roll tobacco?

A. Family."

Those questions and answers indicate that Eric Darby was vague but not necessarily evasive. The fifth reason is that "Excise goods in excess of the guidelines". That is quite clear.

19. The sixth reason is "knowledge of the law". Recent cases such as Hoverspeed have questioned the Commissioners’ understanding of the law. It is unlikely that Eric Darby knew more about the law than the Commissioners themselves.

20. None of the reasons for seizure set out above go anywhere near satisfying us that the relevant excise goods were held for commercial purposes by Eric Darby.

21. The review officer expresses his conclusion in his letter of 20 May 2002 under the heading "Consideration". We quote:

"Before considering the matter of restoration I have firstly examined whether or not the excise goods were appropriately seized in the first instance. Because of the volume of excise goods you were importing you were required under the legislation when asked to do so, to satisfy the officer that the goods were for own use and rebut the statutory presumption of commerciality."

The Hoverspeed decision, as already noted, has shown that this is not a correct application of the law. The 1992 Personal Reliefs Order is, as noted, incompatible with Directive 92/12 insofar as a persuasive burden of proof is placed on an individual (such as Eric Darby) to prove that the goods are not held for a commercial purpose, where such goods are held in excess of the minimum indicative levels laid down in the Directive and in the Schedule to the Order.

21. The review letter goes on:

"You clearly told the officer that some of the goods, approximately 1, to 1½ kilo of tobacco was to be sold to your family at, or slightly below cost price. Acceptance of money for imported excise goods places them firmly beyond the relief for duty under the provisions of Article 5 of the Personal Reliefs Order 1992. By virtue of the breach of the Order then all excise goods and vehicle became liable to forfeiture"

We have already reviewed the evidence on the point. At most Eric Darby conceded that "probably they (the children and in-laws) would be reimbursing him with the cost of the hand-rolling tobacco". In the same paragraph the note of interview continues: "… its just like a day out. Christmas in mind". Acceptance of money for imported excise goods does not of itself "place them firmly beyond the relief from duty". The Court of Appeal in Hoverspeed declared that the Order is incompatible with the Directive and Article 28 of the Treaty insofar as excise goods imported from another Member State (where excise duty has been paid) are additionally chargeable to UK excise duty without it being established that the goods are imported into the United Kingdom for a commercial purpose. Merely accepting money in return for imported excise goods does not of itself constitute a commercial purpose for the importation.

22. The letter then refers to two specific considerations taken into account by the reviewing officer. First the officer notes the apparent confusion between the account of Eric Darby and that of Mr Riley as to what amounts of hand-rolling tobacco belonged to each. There being "some doubt", this contributed to the reasons why the seizing officer would not be satisfied the excise goods were for own use. We have already dealt with the evidence on this. In particular, as we have noted, we are not satisfied that Mr Riley was saying that had bought only 1½ kilo of hand-rolling tobacco. Then the review officer referred to the £100 passing between Eric Darby and Mr Riley. That also was an area where the seizing officer was dissatisfied with the accounts of Mr Riley and Eric Darby. However the review officer’s approach has now been shown to be wrong by the Hoverspeed decision. The burden of proof is not on Eric Darby to show that the goods are not held for commercial purposes.

23. The letter goes on:

"Having dealt with the seizure, it remains for me to address the issue of restoration of the goods. I have dealt with your letters to see whether you have presented the case for disapplying the Commissioners’ policy of non-restoration. You clearly admitted that some of the goods were for resale and that there were discrepancies between your respective interviews, casting some doubt in my opinion of ownership over the entire 6 kilos of tobacco that you and Mr Riley were holding. With this in mind I conclude that you have offered no reason for departing from the policy of non-restoration of the goods. I am of the opinion that the application of the Commissioners’ policy in this case treats you no more harshly or leniently than any one else in similar circumstances, and I can find no reason to vary the Commissioners’ policy of non-restoration in your case."

We have already noted that the words used in the interview do not establish that "the goods were for resale". Nor is there any real evidence throwing doubt as to the ownership of the 6 kilos of hand-rolling tobacco.

24. Our conclusions so far are that the reviewing officer applied the wrong legal test (i.e as regards the burden of proof being on Eric Darby) and, on the evidence, wrongly concluded that the excise goods had been brought here for resale. There was nothing commercial about the enterprise of those two elderly gentlemen on 16 October 2001. They were quite simply doing a one-off shopping expedition. There was no profit in it for either of them. If the children were going to reimburse the purchase prices of the hand-rolling tobacco that would not even cover the travelling costs. There was no system to their enterprise that might have characterized it as commercial. There were no characteristics of business or commerce about their activities that day. We are therefore satisfied that the excise goods were not imported into the United Kingdom for a commercial purpose.

25. That resolves the matter in Eric Darby’s favour and we allow the appeal without needing to reach any conclusion as to whether the seizure itself was legitimate. The only power available to the Customs officers to stop and search people (or their vehicles) at an internal frontier arises if there are reasonable grounds to suspect one or other of the matters set out in sections 163 and 163A of the Customs and Excise Management Act 1979. We refer to paragraph 39 of the Court of Appeal’s Hoverspeed decision. There was no evidence on this aspect of the case.

26. We allow the appeal and direct that a new review is to be carried out. At that review the review officer (who shall not be the same as the officer that conducted the review set out in the letter of 20 May 2002) shall take into account the findings that we have made and the conclusions that the relevant excise goods were not imported for a commercial purpose. The review shall be conducted by the end of February 2003.

27. We award Eric Darby £40 in respect of his costs of attending this hearing.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED:

LON/02/8160