United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E00392, [2003] UKVAT(Excise) E392

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Frazer v Customs and Excise [2003] UKVAT(Excise) E00392 (13 February 2003)

E00392

EXCISE DUTY — non-restoration of motor car — whether decision proportional where appellant admitted selling for profit tobacco goods on which UK excise duty not paid — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

MR K A FRAZER Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr J D Demack (Chairman)

Mr R Presho

Sitting in public in Newcastle upon Tyne on 14 January 2003

The Appellant appeared in person

Mr R Toone of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

DECISION

This is an appeal by Mr K A Frazer against a decision of the Commissioners of Customs and Excise on review by letter of 13 February 2002 refusing to restore to him a Renault Laguna car, registered number W544 OGR ("the Renault"), which they seized on 25 November 2001.

On the basis of correspondence between Mr Frazer and the Commissioners, his oral evidence, and the notes of an interview of him by Mr Gargrave, an officer of the Commissioners, we find the following facts to have been established.

At about 1.25p.m. on Sunday, the 25^th November 2001, Customs' officers stopped the Renault, which was being driven by Mr Frazer, outside the Excelsior Club, Catchgate, Co Durham. They then searched it, and found it to contain 4500 cigarettes, 6.4 kilograms of hand rolling tobacco, 39.6 litres of beer and 2.8 litres of spirits. The officers then went to Mr Frazer's home where they found 19,560 cigarettes, 3.25 kilograms of hand rolling tobacco, 606 litres of beer, 75.6 litres of spirits, 6 litres of wine and 2 litres of cider. They also searched his wife's Vauxhall Astra car ("the Vauxhall") and found it to contain 3060 cigarettes and 1.85 kilograms of hand rolling tobacco.

(We should perhaps add at this point that no evidence was adduced of the Commissioners holding a search warrant under s. 161A of the Customs and Excise Management Act 1979 ("CEMA") empowering them to enter Mr Frazer's home, so that whilst the seizure of goods from within his home may not have been lawful, it cannot axiomatically be regarded as invalid – see paras 47 and 48 of the judgment of Mance LJ in Regina (Hoverspeed Ltd) v Customs and Excise Commissioners) [2002] 3 WLR 1219.

Thus in total the officers found

27120 cigarettes

5 kilograms of hand rolling tobacco

645 litres of beer

78.4 litres of spirits

6 litres of wine

2 litres of cider

Mr Frazer was then cautioned by the officers and agreed to be interviewed. He gave the following information in interview: that all the excise goods were his and he had acquired all of them within the previous 4 to 6 weeks; that he had paid £25 per 200 cigarettes, between £3.25 and £3.65 per 50 gram pouch of hand rolling tobacco, £28 for each 6 bottle case of spirits and £10 per case for beer; that the beer was not duty free but had been bought because it had passed or was near to its "sell by" date; that he intended to sell the cigarettes, tobacco, spirits and beer at £26 per 200 cigarettes, £4 per pouch of tobacco, and £5 per bottle of spirits; he did not intend to sell the beer as he had a lot of family parties over the next few months; that the goods in the Renault were "just in the car" and had been there for a couple of days; that he had put 6 cases in the Renault from the garage that morning; that the Vauxhall was his wife's but the goods in it were his; that the goods found in the Vauxhall should not have been there having been left by mistake; that he intended to sell the goods in his possession at a profit; and that he did not know it was an offence to buy non-UK excise paid duty goods. Mr Frazer signed the interview notes as a true record.

The Customs' officers then seized all the excise goods listed in the penultimate paragraph, the Renault and the Vauxhall.

Through his solicitors, Mr Frazer, who accepted that the tobacco goods seized from him were liable to but had not had UK excise duty paid on them, sought restoration of the two cars. Initially the Commissioners refused restoration of both, but later restored the Vauxhall to the finance company which owned it, it being on hire purchase. Consequently, the appeal proceeded before us only against non-restoration of the Renault, and only on the ground that the Commissioners' decision was disproportionate.

In the decision on review against which Mr Frazer appeals, officer McFadden said that he or she had considered all the points raised and examined the case file. The officer took account of the fact that:

(a) Mr Frazer wished to appeal against the non-restoration of the two cars;

(b) Mr Frazer and his wife claimed to need reliable means of transport because of their varied working patterns;

(c) Mr Frazer realised that he would incur severe penalties; and

(d) the Vauxhall was Mrs Frazer's car, and she was "oblivious of what was happening."

The officer took account of the circumstances in which Mr Frazer was stopped and the quantities of excise goods found, and the replies he gave in interview. Finally, the officer took account of current government policy of not restoring seized goods, unless there were exceptional circumstances. The officer concluded that the cars should not be offered for restoration.

In interview, Mr Frazer did not explain how or from whom he had acquired the excise goods, but in oral evidence he said, and we accept, that he made 2 or 3 purchases a week of cigarettes and hand rolling tobacco over a short period from persons unknown to him who conducted their sales in lay-bys. He also claimed that he had bought the goods to order for persons who had financed his purchases. Whilst we can accept that that might have been the case in some instances, we are unable to accept that it always was. Our reason for so finding is that when Customs became involved in events, Mr Frazer had more than 27,000 cigarettes in his possession and we consider it doubtful, to say the least, to conclude that he would have been holding such a large stock had all his pre-paid orders not been satisfied. Mr Frazer admitted to making something out of his activities, but described it as "just gratitude" from his customers. When the nature of that "gratitude" was subjected to cross-examination, it emerged, and we find, that it consisted of profit.

Mr Toone, counsel for the Commissioners, submitted that if we were to find that Mr Frazer held the excise goods he possessed to sell at a profit, it was clear that he held them for a commercial purpose (even placing the burden of proof on the Commissioners in that regard). Consequently, he continued, they were correct to seize both excise goods and the two cars. He placed particular emphasis on para 71 the judgment of Judge LJ in Lindsay v CEC [2002] STC 588, which is set out later in our decision.

He further submitted that the test of holding for a commercial purpose was satisfied in the instant case because:

1) the quantity of excise goods found was extremely large;

2) Mr Frazer said that he intended to sell the goods at a profit;

3) he was stopped when in possession of a large quantity of excise goods; and

4) there could be no other explanation of the circumstances in which Mr Frazer was stopped.

Mr Toone further submitted that once the goods and cars had been seized, it was for Mr Frazer to establish that there were exceptional circumstances that warranted restoration.

Mr Frazer who had been advised by solicitors (as a letter from them he brought addressed to the tribunal clearly indicated) accepted that both goods and cars were liable to seizure and forfeiture, but submitted that the Commissioners' refusal to restore the Renault to him was disproportionate. That submission was based on the Renault being worth about £11,000 when seized, as opposed to the unpaid duty on the goods which Mr Toone estimated at £4,000.

Having found that Mr Frazer intended to sell the excise goods for profit, it follows that we hold that he held them for a commercial purpose. It is against that background that we turn to consider the law applicable.

Section 139(1) of CEMA provides that "any thing liable to forfeiture under the Customs and Excise Acts may be seized or detained".

By s. 141 of CEMA, any vehicle used for the carriage of a thing liable to forfeiture is also liable to forfeiture. (As Mr Frazer accepts that the excise goods, or at least those consisting of tobacco products, are liable to forfeiture, it is unnecessary for us to deal with the law in that regard).

By s. 152(b) of CEMA, the Commissioners may, as they see fit, restore, subject to conditions they think proper, anything forfeited or seized under the customs and excise Acts. And it is against the Commissioners' refusal to restore under that section that Mr Frazer brings his appeal.

We then turn to consider the Commissioners' policy of refusing to restore vehicles used for smuggling, as we hold to have been the case here, and to decided whether it results in the imposition of a penalty on Mr Frazer disproportionate having regard to the Commissioners' legitimate aim of preventing the evasion of excise duty imposed in accordance with European Union law.

In considering it, we bear in mind (a) the scale of the evil against which it is directed, and (b) that the free movement of persons within the internal market greatly facilitates the illicit importation of excise goods into the United Kingdom (see paras 60 and 61 of the judgment of Lord Phillips MR in Lindsay). Having regard to those considerations, in para 63 of his judgment Lord Phillips said:

"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 were 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 will 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 to 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."

And in paragraphs 71 and 72, Judge LJ added:

"71. I agree with the judgment of the Master of the Rolls on the issues of principle and their application to this appeal. My brief observations are by way of emphasis only. There is usually a marked distinction between those who smuggle amounts in excess of the permitted limits for their personal use and occasional distribution to family members and close friends. The vehicles used by those whose activity falls into either category are liable to be seized.

Given the extent of the damage caused to the public interest, it is, in my judgment, acceptable and proportionate that, subject to exceptional individual considerations, whatever they are worth, the vehicles of those who smuggle or profit, even for a small profit, should be seized as a matter of policy. However, the equal application of the same stringent policy to those who are not importing for profit fails adequately to recognise the distinction between them and those who are trading in smuggled goods. Accordingly the policy is flawed."

In his Notice of Appeal, given 25 March 2002, Mr Frazer gave his reason for appealing as:

"The vehicles in question are the only means of transport to and from employment. No public transport available whatsoever for both myself and spouse. Our employment involves both very early and late work patterns, and the only way to get to and from employment is our own transport."

We have carefully considered whether that reason constitutes exceptional hardship, and have concluded that it does not. In the instant case, we are satisfied that there was a reasonable relationship of proportionality between the means employed and the aim pursued (see para 52 of the judgment of Lord Phillips in the Lindsay case).

We dismiss the appeal.

David Demack

Chairman

Release Date:13 February 2003

MAN/02/8066