United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2003/E00382.html
Cite as: [2003] UKVAT(Excise) E382, [2003] UKVAT(Excise) E00382

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Ellington v Customs and Excise [2003] UKVAT(Excise) E00382 (31 January 2003)

E00382

EXCISE DUTIES - Goods seized from house - Whether appellant selling them - Whether commercial or not for profit - Incorrect test by reviewing officer - Appeal dismissed

LONDON TRIBUNAL CENTRE

KENNETH ELLINGTON Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MISS J C GORT (Chairman)

MR M FAROOQ

MR R G GRICE

Sitting in public in Birmingham on 25 October 2002

The Appellant in person

Mr C Mellor, Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2002


 


DECISION

1. This is an appeal against a decision on review dated 22 August 2001 not to restore a Peugeot motor vehicle seized from the Appellant on 6 July 2001.

The facts

2. As a result of anonymous information that the Appellant was involved in selling excise goods Customs and Excise officers visited Mr and Mrs Ellington at their home on 6 July 2001.
3. There was a dispute between the parties as to the behaviour of the officers at the time. The principal officer concerned, a Mr Richard Spotwood, claimed that he always conducted himself in a quiet and courteous manner. Mrs Ellington, the Appellant's wife, was the only person at the house at the time. She did not give evidence to the Tribunal, but there was a statement submitted on behalf of the Appellant in which it was stated that Mrs Ellington was ill at the time suffering from high blood pressure and that she was upstairs in her bedroom at the time of the visit. There was a medical statement before us dated 12 September 2001 stating that Mrs Ellington was still under investigation for hypertension which had been diagnosed in March 2001.
4. For the purposes of this decision it is not necessary for us to decide what did take place during that visit, but we accept that there was a great deal of commotion caused not least by the Ellington's dog which was barking, and that both Mr and Mrs Ellington were distressed by the visit.
5. When questioned Mrs Ellington told the officers that there was a quantity of tobacco on the premises, and she also told them that the previous Saturday she had travelled to Belgium in the Peugeot car with her husband and had brought back enough beer, wine, tobacco and cigars to last them for six months. They had also travelled abroad about six weeks prior to that. She did not remember whether they had bought any tobacco or cigars on the previous occasion.
6. She agreed that she had on one occasion sold tobacco to a friend at work and she thought her husband had sold tobacco at work, she agreed that some tobacco had been sold to neighbours up the street. There were over 100 pouches left, but she did not know how much had been sold. The pouches had been sold by her for £4.00. She produced to the officers 5½ kilos of Old Holborn hand-rolling tobacco, 6.95 kilos of Golden Virginia hand-rolling tobacco and 11 boxes containing 50 Hollandia cigars. The house was then searched and Mrs Ellington contacted her husband who returned home.
7. On his arrival the Appellant was informed of the reason for the visit and for the seizure of the tobacco. A further search of the premises, the vehicles and the outbuildings took place. The Appellant was interviewed and he said that all the tobacco had been purchased on the previous trip and it had cost about £2.00 per pouch. Three hundred pouches had been purchased at a cost of about £600. In interview he said: "I bring it back for friends". He was then asked if he sold it and he said: "They pay me for it plus a certain amount for fetching it." When I asked if he knew that was wrong he said: "No I didn't know that. I know its wrong for profit." In further questioning he said that he had sold it to about ten friends. He further said he had not sold tobacco at work nor to neighbours. Both Mr and Mrs Ellington signed the officers' notebooks and agreed that the written record was accurate.
8. By a letter of the same date, 6 July 2001, the Appellant wrote to the Commissioners stating that the quantity of tobacco and cigars found in the house had been purchased on behalf of elderly friends and family. He continued that it was not done to make a profit but to make it possible for them to afford to smoke and that all they had done was to give him the money to get their goods and help pay for some of the travel expenses. He requested the return of his car and concluded that without his car he was unable to get to work. He worked as a lorry driver, and had to start early in the morning and buses did not run at that time. He did not refer to any misconduct or intimidating behaviour on vehalf of the officers who searched the house.
9. The Appellant set out lengthy grounds of appeal stating in sum that he and his wife were not aware that what they were doing was wrong and they had not been selling the tobacco for profit. Both were in ill health and he himself had had a four-way heart coronary by-pass. (A doctor's letter was produced to the Tribunal which confirmed that he had had a coronary by-pass performed in January 2000 and remained on medication and under review.) Mr Ellington referred to his wife's ill health and continued that he had wrongly told the officers that they had fetched 300 pouches. They had made three journeys and had in total brought back 300 pouches. They had taken three trips because they were setting up a double celebration, his wife's parents have been married for 50 years and they had been married for 27 years. The first journey had been made to check out the prices of wine and beer and the second was to collect as much as they could carry with a trailer. A further trip was then made to "top up". They had been stopped on their return from their second journey and nothing had been found to be wrong.
10. A second notice of appeal was served dated 18 September 2001 in which it was said: "Statements were inadmissible and misleading. Punishment outweighs the "crime". Inconsistent application of EEC guidelines."
11. In the formal departmental review letter Mr D R Ketley, the reviewing officer, had taken into account the goods found at the Appellant's home and his and his wife's answers in interview. He referred to the Commissioners' general policy that seized excise goods were not restored and with effect from 14 July 2000 it was also their policy that privately owned vehicles which had been used for the carriage of seized goods would not be restored.
12. Under the heading "consideration" Mr Ketley said as follows:

"It is for me to determine whether or not the contested decision is one that a reasonable body of commissioners could not have reached. Before considering the matter I have firstly examined whether or not the goods and vehicle were appropriately seized.

From the answers that the officer was given, he concluded that the goods were not for own use and I concur with this conclusion. You admitted during interview that you sold tobacco on which excise duty had not been paid in the UK. I am also satisfied that vehicle registration number P934 SDU was used in the carriage of these goods … the basis of seizure was that you sold a quantity of tobacco."

13. At the hearing of the appeal Mr Ketley gave evidence to the effect that his approach was to look at all the evidence to see if the decision not to restore the vehicle was reasonable. In the present case he had concluded that the goods were purchased for resale because the evidence said that the pouches were purchased for £2.00 and sold for £4.00 and there was therefore an element of profit.
14. He did not consider that the circumstances of the ill health of the Appellant and his wife were sufficient to incline him to restore the vehicle, particularly as there was another vehicle present at the house. He had not seen the medical statements until after he had reviewed the case but he did not consider that they constituted sufficient evidence to warrant the return of the vehicle on medical grounds. He gave commerciality as being the basis for the decision.
15. In cross-examination he had said that he had not considered either the value of the car or the goods, he had not considered that the number of trips made and he had not considered the fact that the excise goods were clearly visible. He also said he had given no consideration to the hardship which was caused. His considerations had been based on the legality of the seizure and the reasonableness of the decision. He had taken the view that all the hand-rolling tobacco was for sale.
16. The Appellant gave oral evidence to the Tribunal. He also produced a written statement. In his evidence the Appellant said that he had not been telling the truth in the letter of 6 July when he had said that he had purchased the tobacco and cigars on behalf of elderly friends. He had stated that to obtain sympathy.
17. He repeated the matters which was set out in the notice of the appeal to the effect that the items were for a golden wedding celebration for his in-laws. Three tips had been made to the Continent in all, and tobacco products had been purchased on each occasion. On the second trip about £450 had been spent on drink and about £200 on tobacco. On the third trip he had purchased 14 cases of wine, 7 of lager and had spent about £200 on tobacco. He had again been stopped on that occasion and had produced the receipts and been allowed to carry on. The second trip had been made because more and more people had learned of the celebrations and wanted to come and the guest lists had grown so they had needed to purchase more. He informed us that as about 120 pouches had been purchased on the last trip there should have been about 120 pouches in the house. (His wife had told the officers there would be about 100 pouches.)
18. Mr Ellington stated that he had personally only sold ten pouches of tobacco which he had sold to two pensioners at cost price. When he had said in interview that he had sold to ten friends he had given a wrong answer. He was in a state of considerable trauma and worried that his wife could have had a heart attack. He should have said that he had allowed friends to have ten pouches. He said he was bringing the tobacco back for his wife and family. However, in his written statement Mr Ellington writes: "Not realizing that we were committing an offence, we explained to elderly friends and neighbours of the price we were paying for these tobacco products … and they promptly asked could they have some … As these people were mostly old age pensioners, we allowed them to give us the price that we paid for the goods …"
19. It was his understanding that his wife had received £4.00 for two pouches i.e. she had sold the pouches at £2.00 each. No profit had been made. When he arrived home his wife was in tears and very upset.
20. After the search Mr Spotwood had told him that if he offered to pay the tax on the goods, which a colleague worked out at £1,018, with an additional £1,000, if he rang a particular telephone number and offer to pay that sum it was possible the car would be returned. He had not signed the officer's notes until after this conversation, nor had his wife.
21. Mr Ellington accepted he did not explain at the time about the hardship over the seizure nor about his and his wife's medical condition. He claimed that Mr Spotwood told him that if he were caught again selling tobacco he would come back and seize the house.
22. In cross-examination Mr Ellington said that he had claimed that all the goods had been bought on one trip because he did not wish to appear a frequent traveller.
23. Mr Ketley was recalled and was asked what he had meant by "commercial". He replied that it covered any selling for profit whatsoever. He would still consider it to be a commercial venture if only 12 pouches of tobacco had been sold, 10 at £2.00 each and 2 for £4.00 each. He was unable to answer a question as to whether he accepted the Appellant's contention that only 12 pouches had been sold.

The Appellant's case

24. It was part of the Appellant's case that both the Appellant and his wife had been frightened by the number of Customs officers and at the manner of their treatment by them. They had felt intimidated and this caused them to say things which were not accurate.
25. There was an application on behalf of the Appellant that the officer's note should not be permitted in evidence because the answers were obtained as a consequence of that intimidation. The Tribunal was referred to article 8 of the European Union Directive 92/12 EEC, to the Excise Duties (Personal Reliefs) Order 1992 and to the Human Rights Act 1998 Article 1 Protocol 1, Article 6 Protocol 1 and Article 8 Protocol 8. It was submitted that it was a basic principle that Member States must not impose controls that interfere with the free movement of goods within the internal market and no further excise duty should be levied on excise goods where goods were for non-commercial use by private individuals and transported by them.
26. It was further submitted that every natural or legal person is entitled to the peaceful enjoyment of his possessions and interference with that right should be both reasonable and proportionate. Further the search and seizure of the Appellant's home had infringed his rights to respect for his private life and health.
27. It was further submitted that in the course of the review there had been no consideration of the detrimental effect seizure of the vehicle was having on the Appellant and his wife. The review officer had not considered all the facts known to him.
28. It was submitted that the importation was not commercial and that it should be for the Respondents to prove that it was with hard evidence. Mr Ellington had admitted accepting £24 for 12 pouches of tobacco, the Respondents had ample opportunity to obtain hard evidence of commerciality.
29. The European Union gave the UK citizens the right to purchase goods from another Member State and to bring them to the UK without paying further duty if the goods were for personal use or to be gifted. It was only where there was a commercial use that further duty should be paid in the UK.
30. The Tribunal was referred to the case of Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766. In that case and in the case of Hoverspeed Ltd v Commissioners of Customs and Excise [2002] 3 CMLR 17 a distinction was drawn between smugglers for profit and those involved in not for profit smuggling. The Appellant here had made no attempt to hide the goods. No commercial profit had been made. The fact that he had 12 kilos of tobacco was not evidence of his intention to commit a commercial transaction.
31. The Appellant's case was that he had made no profit and he had no intention to profit from the importation.
32. It was further submitted that the remedy where somebody has contravened the Customs and Excise Management Act must be proportionate and reasonable to conform with the principles of the European Union and the Human Rights Act. In this case the Appellant accepted that he had received £24 for 12 pouches. The duty involved could not be proportionate to the seizure of a vehicle worth £5,000. On the calculations carried out by Customs and Excise the duty said to be evaded was £1,018, this was disproportionate to the £5,000 value of the vehicle. In addition the Appellant had lost all the imported goods, not just the tobacco but also the alcohol.
33. The review was not reasonable because the reviewing officer did not consider the hardship to the Appellant of living in a rural setting and being deprived of his vehicle, nor the poor health of both the Appellant and his wife.

The Respondents' case

34. Both the Appellant and his wife had admitted selling tobacco, both the husband and wife had travelled in the car which was used in the importation and therefore Customs and Excise were entitled to seize the vehicle.
35. It was accepted that the Tribunal had the power to make findings of primary fact, the main question here was whether the goods were sold at a profit.
36. The burden of proof was on the Appellant to show that the decision was one which no reasonable reviewing officer could have arrived at, the burden was not on the Respondents as had been suggested by the Appellant.
37. The Tribunal was referred to the case of Dannatt v Commissioners of Customs and Excise (2002) LON/00/8030 for the proposition that the reviewing decision must be judged in the light of the facts which were reasonably apparent at the time of the decision. There was a duty on the Customs and Excise to make reasonable enquiries if it were necessary on the facts. The matter of the Appellant and his wife's health was for the Appellant to raise. The Appellant accepted that he had not disclosed the full extent of their problems to the reviewing officer until after the review.
38. The Tribunal was referred to paragraph 27 of Dannatt (supra) where the President of the Tribunal said:

"The underlying facts which constituted the "relevant matters" will all be subjected to the fact-finding procedures before the Tribunal. Unless they have already been determined by another tribunal … they will all be open to challenge. Once the fact-finding exercise is complete, the question arises whether on those facts "the commissioners or other persons making the decision could not reasonably have arrived at it" … At that stage the tribunal may be required to direct its attention to matters such as (i) whether the commissioners' decision is bad because they have tied themselves to a policy and refused to listen properly to applications to be excluded from it or (ii) whether the restoration policy itself amounts to a disproportionate evasion of the right to possession given by article 1 of the 1^st protocol."

39. The explanations given before the Tribunal today were new, the Appellant had not previous raised the issue of only 12 pouches being sold, nor that the wife had sold 2 pouches for a total of £4.00. The Tribunal was invited not to accept that evidence.
40. The reviewing officer had properly looked at the policy, and the policy was reasonable and in pursuit of a legitimate aim. The policy was proportionate and achieved a fair balance between the individual rights and the need to deter smuggling.
41. The reviewing officer had considered everything that was before him, he had not fettered his discretion. In the case of Lindsay a distinction was made between goods brought back for friends and family at cost price and commercial smuggling. In the present case the smuggling was commercial. The reviewing officer was not required to consider paragraph 64 of Lindsay where the Commissioners' policy was criticised for not drawing a distinction between the commercial smuggler and the driver importing goods for social distribution to family or friends in circumstances where there was no attempt to make a profit, because in the present case there was clear evidence that the importation was for profit.
42. The Tribunal was further referred to the case of Houlton Meats Ltd v Commissioners of Customs and Excise (2002) where the tribunal held that since the commissioners had treated the case as one of commercial smuggling, and the tribunal concluded that they were not unreasonable in doing so, the value of the car in relation to the duty could be ignored. In the present case it was reasonable to conclude that it was a commercial venture, Mrs Ellington had admitted she had been selling goods at work and to neighbours and Mr Ellington also admitted selling. They were clearly selling for a profit. The notebooks had been read and signed, although Mr Ellington now sought to say they were incorrect and that only 12 packets had been sold and not for profit. His credibility was in question in particular since he had admitted that he had lied in correspondence.
43. The correspondence itself showed inconsistencies and his evidence now was that he did not go abroad with the intention of buying tobacco to sell, he only sold when he was approached to do so. He had referred to travel expenses and in interview said he was reimbursed for fetching it. He now says the true cost was less than £2.00 whereas previously he said the cost was £2.00 per pouch. His evidence that there had been a threat to seize the house was not credible; the Commissioners had no power to do that. There was discrepancy between when Mr Ellington says the notebook was signed, and the officer's evidence. Mrs Ellington had made an amendment which showed that she had properly read the notes. There was no evidence to support the claim of intimidation. It was not accepted that any inducement was offered to the Ellingtons to sign the notes.
44. It was not accepted that article 8 was violated, as Mrs Ellington had freely consented to the search of the house, as indeed had Mr Ellington when he arrived. Mrs Ellington had produced the tobacco before the search had taken place so there could be no question of a breach.
45. There had been no fetter of their discretion by the officers. Lindsay was to be distinguished as stated above and the decision on hardship was reasonable, given that there were two cars on the premises.

Reasons for decision

46. By his own admission Mr Ellington had not been telling the truth to the officers either at interview or in his later correspondence. There were anomalies in his evidence before us which cause us to doubt the truth of his evidence before us. In particular, in his written statement he described how "elderly friends and neighbours" who were "mostly old age pensioners" were allowed to purchase tobacco products for the price that the Ellingtons had paid. In the light of this statement it is hard to accept that he in fact only sold 10 pouches to two elderly people.
47. In addition Mr Ellington had made three recent trips to the continent on each of which he had purchased tobacco. There had been a trip some seven weeks prior to the search of the premises, when Mr Ellington had bought approximately 120 pouches of tobacco. He had also purchased 120 pouches of tobacco approximately one week before the search. Both Mrs Ellington and Mr Ellington were of the opinion that they were about 100-120 pouches of tobacco in the house at the time of the search. This therefore raises the question, which was not asked of Mr Ellington, as to what happened to the other 100-120 pouches which had been bought only some seven weeks previously? This is particularly pertinent since Mrs Ellington told the officers that on the last trip they had brought back enough tobacco to last them for six months.
48. We do, however, accept Mr Ellington's evidence that he had not been selling the pouches for more than a nominal profit. There was a discrepancy in his evidence as to how much the pouches had cost, he initially having said they cost £2.00 each and later saying that they cost "probably £1.80 or £1.95p a pouch". He maintained throughout that he had sold them for £2.00 a pouch. We regard this "profit" as di minimis. Unfortunately Mrs Ellington did not give evidence before us. We are not able to accept Mr Ellington's explanation that his wife had sold two pouches at £2.00 each, rather than selling two pouches at £4.00. However we do accept that the pouches he sold were sold at £2.00 each.
49. Mr Ketley had an incorrect view as to what is the appropriate test for "commercial" selling. In our view, although we find that Mr Ellington sold more than he admitted to us, we do not find that he can properly regard it as a commercial smuggler. We accept the Appellant's evidence that his car had been stopped on two previous occasions and he had been allowed to continue on his way. This signifies that the goods were not hidden in any way. In the case of Lindsay (supra) Lord Phillips MR stated at paragraph 63 and 64 as follows:

"Having regard to these considerations, I would not have been prepared to condemn the Commissioners' policy had it been one that was applied to those who are using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at a profit. Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars would be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles. Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration. Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance. Cases of exceptional hardship must always, of course, be given due consideration.

The Commissioners' policy does not, however, draw a distinction between the commercial smuggler and the driver importing goods for social distribution to family or friends in circumstances where there is no attempt to make a profit. Of course even in such a case the scale of importation, or other circumstances may be such as to justify forfeiture of the car. But where the importation is not for the purpose of making a profit, I consider that the principle of proportionality requires that each should be considered on its particular facts, which will include the scale of importation, whether it is a `first offence', whether there was an attempt at concealment or dissimulation, the value of the vehicle and the degree of hardship that will be caused by forfeiture. There is open to the commissioners a wide range of lesser sanctions that will enable them to impose a sanction that is proportionate where forfeiture of the vehicle is not justified."

50. We note that in his interview the Appellant had said that all the tobacco had been purchased on the previous trip, 300 pouches in total had been purchased at a cost of about £600. This is different from his evidence before us to the effect that the tobacco had been purchased over three different trips, 120 pouches having been purchased on the last trip and 120 on the one before that and his not knowing how much had been bought on the first trip. He failed to produce to the Tribunal or to the Respondents the receipt which he claimed to have shown to the officers of Customs and Excise who had stopped him on his last return. In interview he had also said that he brought the tobacco back for friends and that he was paid for it plus a certain amount for fetching it. We find that these answers to the officer were correct and we do not accept the Appellant's evidence that he was caused to say untruths by the attitude of the officers. We do however accept that his wife was extremely upset, as was he on that occasion.
51. Although we find that Mr Ketley has both incorrectly stated the job of a reviewing officer, in that it is not the reviewing officer's job to see if the decision not to restore the vehicle was a reasonable one, and has incorrectly defined 'commercial', nonetheless he also said that he had looked to see if the seizure of the vehicle was correct in the first place which was a proper statement of his duty, and, as we prefer the evidence that the Appellant gave to the officer at the time of the seizure that he was paid a certain amount for fetching the tobacco, rather than his later evidence to us, we cannot say that the decision Mr Ketley reached that the decision to seize the vehicle should be upheld was one which no reasonable reviewing officer could reach, this appeal is dismissed.
52. No order for costs.

MISS J C GORT

CHAIRMAN

RELEASED: 31 January 2003

LON/01/8153