United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E400, [2003] UKVAT(Excise) E00400

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Mrs S Taylor v The Commisioners of Customs and Excise [2003] UKVAT(Excise) E00400 (04 April 2003)

E00400

EXCISE DUTY – restoration of car – refusal to restore – whether satisfied tobacco imported for commercial purposes and not for own use – yes – whether satisfied any exceptional circumstance making refusal to restore out of proportion – no – review decision prior to Hoverspeed – whether could have been reached reasonably – yes - appeal dismissed

LONDON TRIBUNAL CENTRE

MRS S TAYLOR Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MALCOLM J F PALMER (Chairman)

ELIZABETH M MACLEOD

Sitting in public in London on 28 January 2003

Mr Glen Taylor, her husband, for the Appellant

Katrine Sawyer, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

The Appeal

This is an appeal by Mrs S Taylor of Cheshunt, Hertfordshire. It is an appeal against the decision of Mr Graham Crouch, a Senior Officer of Customs and Excise, ("Mr Crouch") given in a letter dated 27 May 2002 confirming on his review a decision under section 152 (b) Customs and Excise Management Act 1979 ("CEMA") to refuse to restore a Vauxhall Astra with registration number T372MMS the property of Mrs Taylor.

The Issues

The principal issue for us is whether Mr Crouch's decision not to restore the car could not reasonably have been arrived at. Subsidiary issues are, firstly, whether we are satisfied that Mr Taylor did not bring in the relevant excise goods for his own use; secondly, whether we are satisfied that Mrs Taylor was knowingly involved in the purpose of the importation; and thirdly, we need to consider whether Mr Crouch's decision, which deprives Mrs Taylor of her property, is disproportionate and fails to strike a fair balance between Mrs Taylor's rights and the public interest.

The Evidence

At the hearing we were given by Customs and Excise a 113 page bundle of documents ("the Bundle"). The Bundle included 4 witness statements from four officers of Customs and Excise. The first is from Mr Crouch who confirmed it in his evidence at the hearing. Its accuracy was not disputed by Mr Taylor. The Bundle included (pages 103 and 104) a witness statement from Mr Raymond Arnott who was not present at the hearing. Mr Arnott's statement was not relied upon by Miss Sawyer and was not read by us. The Bundle also included witness statements from two other officers, Jennifer A Wood and Fiona M Ross, who were present at the hearing, whose witness statements largely reproduce the accounts in their note books of their respective interviews of Mr and Mrs Taylor. These accounts were signed at the time as correct and at the hearing Mr Taylor confirmed that he did not dispute them as accurate records of the interviews. Mr Taylor confirmed that he did not wish to question either of these two officers and accordingly they did not give any oral evidence. Mr Taylor produced some photos of the approach in England to the car ferry he used. Oral evidence was given by Mr Taylor and to a lesser extent by Mrs Taylor, both of whom were invited by the tribunal to say what they wished to us.

The Basic Undisputed Facts

In the afternoon of 18 March 2002 Mr and Mrs Taylor returned to Dover from a day trip to France in Mrs Taylor's Vauxhall Astra registration number T372 MMS. They were stopped by a Customs and Excise Officer. After some initial questions by Jennifer Wood, Mrs Taylor was interviewed by her and Mr Taylor was separately interviewed by Mr Arnott. The officers' notebooks (pages 45 to 59 of the Bundle) were signed by Mr Taylor or Mrs Taylor at the end of the notes of the interviews. At the hearing Mr Taylor confirmed that these notebooks were an accurate record of the interviews. At the end of the interviews Mr Taylor was told that he had failed to satisfy Customs and Excise that the tobacco products were for his own personal use. Customs and Excise then seized the Astra and the following items that had been purchased during the trip before arrival at Dover:

(i) 18.5 kg of hand rolling tobacco, made up of 370 separate 50g pouches of tobacco;

(ii) 8,780 cigarettes;

(iii) 10 cigarellos; and

(iv) 1 litre of vodka and 1.5 litres of wine.

Mr Taylor smokes 40 to 50 cigarettes a day. He is in full time employment as a car-hire company driver driving many miles each day, for example, driving returned cars back to base. Mrs Taylor is employed as an assistant manager of Soletrader in Cambridge. She also smokes at least 25 cigarettes a day. They live in a village some 12 miles outside Cambridge and need a car to get to work and to Mr Taylor's medical appointments as a diabetic. Their regular joint income received after deductions is around £1,700 each month with outgoings of £1,400 to £1,500 each month leaving spending income of around £200 to £300 each month. The cigarettes and tobacco purchased on 18 March cost around £1,600 and were paid for by Mr Taylor by credit card. Following the seizure of her Astra on that day, Mrs Taylor first hired a car then purchased another car which was registered in her name on 18 April.

About five weeks before this March trip, Mr and Mrs Taylor had made an earlier trip across the Channel when they had not been stopped and when it was accepted by Customs and Excise before us that no cigarettes or tobacco had been purchased by them.

On 20 March Mrs Taylor wrote to Customs and Excise (page 67 of the Bundle) withdrawing any appeal to restore the tobacco and stating

"Upon being shown the contents of Notice 1. we now realise that the volume of tobacco we brought into the Country was somewhat excessive. Had the said Notice been observed by us on public display we would have adhered to the limitations/restrictions in compliance with the same. In retrospect, given the fact that our word is our only defence in relation to the above, we would relinquish any claim to the tobacco due to the absence of proof/evidence contrary to the suggestion that the same was not intended for personal use only."

On 20 or 28 March (pages 67 to 68 of the Bundle) and again on 4 April 2002 (page 75) Mrs Taylor wrote to Customs and Excise asking for restoration of the vehicle. On 9 April Mr C Dunne, an officer with the Post Seizure Unit in Dover wrote to Mrs Taylor (pages 76 to 78) confirming to her "that the vehicle, on this occasion, is not offered for restoration, …" and giving 6 reasons for that decision. On 10 April (page 80) Mrs Taylor wrote requesting a review of the decision.

The review was carried out by Mr Crouch. Mr Crouch wrote on 27 May (pages 85 to 94) confirming the earlier decision not to offer restoration of the Astra. On 17 June Mrs Taylor appealed to this tribunal against that review decision of Mr Crouch.

The reasons for purchasing the tobacco

Miss Sawyer in her skeleton arguments clearly submitted that our jurisdiction was only supervisory and limited to deciding whether Mr Crouch in his review acted reasonably. She submitted that the original decision to seize the vehicle was not challenged. We told her that we noted those submissions, but that we intended to consider whether or not facts existed that would justify seizure. We consider that, in the light of Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766, C.A. and R (Hoverspeed Ltd) v Customs and Excise Commissioners v The Queen [2002] 3 WLR 1219, D.C., we are entitled to find facts that might relate to the validity of the seizure and, in particular, as to whether the importation was for commercial purposes or solely for the use of Mr and Mrs Taylor. In Lindsay Lord Phillips, the Master of the Rolls, giving the decision followed by Judge LJ and Carnworth LJ, stated in paragraph 45

"I have expressed some reservation about Mr Lindsay's evidence that the goods in his car were destined only for himself and his close family. That evidence has, however, been accepted and it is not for this court to review the tribunal's findings of fact."

It is implicit in this that Lord Phillips accepted that the tribunal has jurisdiction to find such facts. Furthermore, in Hoverspeed the Divisional Court, on page 1260 at paragraph 130(10) point D of the judgment of the court given by Brook LJ, clearly states that the burden of proof as to commerciality is on Customs and Excise "both in condemnatory proceedings and before the VAT and Duties Tribunal". But, the burden of proof on commerciality would be irrelevant before the tribunal if we cannot make findings of fact on the issue of commerciality. We therefore take both these decisions as authority for the proposition that we are entitled to consider evidence on the basic facts relevant to whether or not commerciality existed and accordingly whether the seizure was lawful.

Mr Taylor in his evidence to us stated that he could now see that he had brought in too much. He showed us photos showing at the entrance on the United Kingdom side of the tunnel no sign warning people against coming back with too much tobacco. He stated that he had never sold any tobacco or cigarettes. Miss Sawyer in her cross examination of Mr Taylor made it clear that she did not accept that he purchased the cigarettes and tobacco for Mr and Mrs Taylor's own use.

It may be true that Mr Taylor has never actually sold any tobacco. But the question is not whether he has actually sold any tobacco. It is whether we are satisfied that it is more likely than not that he purchased for his and Mrs Taylor's own use this particular quantity of seized tobacco. Once it was seized he had no opportunity to sell it.

We are satisfied that it is much more likely than not that he intended to sell this tobacco. We find that this was a commercial purchase in the sense that Mr Taylor intended to make a profit in some way from this tobacco. In coming to that conclusion we take into account what he said in evidence, the quantity of tobacco purchased, his inconsistencies in his evidence - both to us and in his statements to Customs and Excise when the car was stopped - in particular on the number of cigarettes he expected to be able to roll with the hand rolling tobacco, and the unlikelihood that any one with so little available spending money would spend so much on so much tobacco. His first statement to Customs and Excise was that he expected to be able to roll 200 cigarettes from each 50g pack. At the hearing he first told us that he would be able to roll 160 out of a pouch. Later in the hearing in answer to a question from the tribunal he gave the figure of 120. He tried to explain the cost of this purchase by stating that the minimum amounts he would have to pay on his credit card accounts would be less than what he would have otherwise have to pay for his cigarettes if they were bought here. We note that no credible other reason for the purchase has been given by Mr or Mrs Taylor: there is no suggestion, for example, that anyone had agreed to share the cost in return for a share of the cigarettes. Mr Taylor, like all of us, may do foolish things from time to time, but we do not believe that he would do anything so foolish as to buy for his own use this quantity of tobacco out of his limited available money.

The involvement of Mrs Taylor

Mrs Taylor chose to have her husband represent her at the hearing. He did not choose to call her as a witness. We nevertheless asked Mrs Taylor to say anything to us that she wished. She made it clear to us that she was not present when Mr Taylor purchased the tobacco and cigarettes on shore. She was buying something else at another store. We understood her to accept the evidence of Mr Crouch that she had at first, after the seizing of her Astra, hired another car and then replaced the hiring with the purchase of another car. She made it clear to us, if she needed to, that the seizure of her car was a very serious loss to her both financially and as the loss of a necessary way to get to work and live where they did.

We were shown a copy of the note book of Jennifer Wood (page 51 of the Bundle) recording her interview of Mrs Taylor on 18 March 2002 before the car was seized. Mr Taylor accepted that this and the other notebooks were a fair record of the interviews that evening. This notebook shows (page 51) that, in answer to a question about the trip she made with Mr Taylor and a friend some five weeks earlier, she stated that on that trip "… we didn't come over specifically for cigarettes. Whereas today we did."

Mr Taylor in his evidence and their statements in interview made it clear that Mrs Taylor kept, at the least, a close watch on the family's finances. As the assistant manager of a retail business we have no doubt that she knew the true long term cost of purchases by credit card, however small the first required payment might be. In her statements she denied knowing the exact amount and cost of the purchases made by her husband. But she did admit to expecting that the amount he had bought would last for 18 months.

From this evidence it is clear to us that Mrs Taylor knew that the purpose of the trip was to purchase a large amount of tobacco and cigarettes. We have no difficulty in coming to the conclusion that, at least by the time they returned to Dover she had a very good idea of the large commitment her husband had made. For these reasons we are satisfied that it is far more likely than not that she also knew that much of the tobacco and cigarettes would have to be, and was probably always intended to be, sold.

The proportionality of the seizure

In paragraph 34 of her skeleton argument Miss Sawyer accepted that under Article 1 of the First Protocol to the European Convention of Human Rights the decision not to restore the Astra to Mrs Taylor needed to strike a fair balance between her rights and the public interest. She cited, amongst other passages, Lord Phillips MR in Lindsay at paragraph 63 of his decision where he stated

"(63) 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 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."

Here Parliament has decided that cigarettes and tobacco are to be subject to rates of taxation – excise duty – that inevitably make it very attractive to purchase them across the Channel and to sell them under the counter back in this country. The Commissioners have not surprisingly concluded that any policy adopted by them to prevent such purchases and sales must be harsh. The seizing and refusal to allow restoration of a vehicle is clearly a very harsh penalty, particularly for a first recorded offence. But we take the above passage in Lord Phillips' decision in Lindsay as clear authority for us to find that where, as we have concluded here, the owner of the seized car knowingly participated in a trip for the purchase of tobacco and cigarettes to be sold at a profit, the seizure does strike a fair balance between the interests of the owner, Mrs Taylor, and the public interest, unless there are exceptional circumstances of hardship.

Are there exceptional circumstances here? The circumstances here that we take into account include:

(a) Although we have little evidence of the true value of the Astra, we assume that that value very substantially exceeded both the cost of the cigarettes and tobacco and the duty that would have been payable if Mr and Mrs Taylor had openly declared them and their intention to sell them at a profit;

(b) Mrs Taylor needed the car for her day to day life and, in particular, to get to her work, and presumably any other work she might reasonably find;

(c) Replacing the car would put a very substantial financial burden on Mrs Taylor that she could not sensibly and willingly afford;

(d) Mr Taylor needs transport by car to get him to necessary medical treatment for his diabetes.

We do not consider that these, either individually or taken together, are exceptional circumstances of the kind that would make the seizure out of proportion. These seem to us to be circumstances similar to those that most car owners under the harsh penalty of seizure would be likely to suffer. Most people living out of a city centre are nowadays dependent in many and important ways on access to a car.

Was the review decision reasonable?

Our jurisdiction in this appeal is under section 16 of the Finance Act 1994. That section allows an appeal to the tribunal against a decision, such as that by Mr Crouch, which was itself made on the review of an earlier decision on review. Here that earlier decision was Mr Dunne's initial decision not to allow restoration. We explained to Mr and Mrs Taylor, both at the beginning of the hearing and again at its end, that we do not have power ourselves to order the restoration to Mrs Taylor of her Astra. The essential question for us is whether we are satisfied that Mr Crouch could not have arrived at his decision reasonably. If we do not consider that his decision was arrived at reasonably our principal power is the power to require Customs and Excise to review again their decision with, for example, directions that they must take into account any findings we may make.

We accept that Mr Crouch's ten page letter of 27 May 2002 (pages to 94 of the Bundle) fairly sets out the steps he took in his review and the reasons for his decision to uphold Mr Dunne's earlier decision. It is clear from this that Mr Crouch came to his own conclusions as to whether the initial seizure was appropriate: he did not simply consider whether Mr Dunne's review was reasonable. He considered whether in his view there were exceptional circumstances that would make the refusal to restore the vehicle inappropriate as failing to strike a proper balance.

Mr Crouch carried out his review after the decision in Lindsay, but before the decision in Hoverspeed. Mr Crouch, therefore, as he admitted in his evidence to us and as he stated in his decision letter, considered that it was for the appellant to satisfy Customs and Excise that the quantity of tobacco and cigarettes that she and her Mr Taylor had imported was for their own use. The Divisional Court in Hoverspeed held that the burden of proof under the Excise Duty (Personal Reliefs) Order 1992 which Customs and Excise had, therefore, put on an appellant whose car has been seized to prove that goods over the indicated limit are not held for commercial purpose was incompatible with Excise Directive 92/12/EEC. Neither that conclusion of the Divisional Court, nor its ruling that Customs have to show that importation in those circumstances is for commercial purposes, were challenged on the appeal to the Court of Appeal. It follows that Hoverspeed is authority to show that Mr Crouch in his review applied the wrong test. The burden to show that the excessive goods were for their own use was not on Mr or Mrs Taylor. He should have considered that the burden was on Customs and Excise to show that the importation was for commercial purposes.

To the extent that Mr Crouch applied that wrong test in his review, the procedure he adopted in his review was, therefore, unreasonable. Nevertheless, the issue for us is whether he could reasonably have reached the conclusion that he did. As we have sought to make clear in paragraphs 11 to 17 we consider that there is sufficient evidence to conclude that the tobacco and cigarettes were knowingly imported by Mr and Mrs Taylor to be sold at a profit. That is for these purposes a commercial purpose. The evidence given to us on which we have reached that conclusion is essentially the same as the evidence before Mr Crouch. We, therefore conclude that Mr Crouch could reasonably come to the decision that he did come to, if correctly he should have come to that conclusion by a different route.

For these reasons we conclude that we should not make any direction for a further review by Customs and Excise.

For these reasons the appeal is dismissed.

MALCOLM J F PALMER

CHAIRMAN

RELEASED: 4 April 2003

LON/2001/8164