United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E404, [2003] UKVAT(Excise) E00404

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Peter John Dumphy v Customs and Excise [2003] UKVAT(Excise) E00404 (22 April 2003)

E00404

EXCISE DUTY – whether cigarettes and tobacco held for a commercial purpose – yes

LONDON TRIBUNAL CENTRE

PETER JOHN DUMPHY Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

SUNIL K DAS ACIS

ROSALIND RUDD

Sitting in public in London on 10 April 2003

The Appellant in person

Christopher Mellor instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003

DECISION

This is an appeal by Mr Peter J Dumphy against the decision on review dated 20 September 2002 refusing to restore excise goods and a car. The Appellant appeared in person, and the Commissioners were represented by Mr Christopher Mellor.

This case has had a long history and dates back to a seizure on 2 July 2001. This is an appeal against a second review. We heard evidence from the Appellant, and the following officers: Miss K A Hudson, who asked the initial questions and interviewed the Appellant's wife, Mr J A Clark, who interviewed the Appellant, and Mr G A Murray, the reviewing officer. The second review was carried out by Mr Murray who concluded in his letter of 20 September 2002 that the excise goods were held for a commercial purpose, that he considered that the Appellant misled the officers when interviewed in relation to the amount of excise goods, their location and the frequency of travel, and that accordingly the goods and the car should not be offered for restoration.

A problem arises about the car, registration M8 TLC. The Appellant has always maintained that it belonged to his sister in law, Mrs Collingbourne, but he has not given evidence which satisfied the Commissioners that this was the case. Having heard the Appellant's evidence we find as a fact that the car did belong to Mrs Collingbourne. As Mrs Collingbourne has previously asked for its restoration Mr Murray agreed to make a fast-track review of the decision not to restore the car in the light of our finding of fact and was willing to travel to Bristol to interview her. We direct that such interview be carried out within 28 days of the hearing and that Mr Murray make his review within 14 days after the interview, and that a copy of the review be served on the Tribunal. The Tribunal is grateful to Mr Murray for agreeing this short timetable which we feel is right having regard to the long time that this appeal has been pending. Accordingly we dismiss the appeal by the Appellant so far as it relates to the car as he had no standing to appeal.

The excise goods consisted of 11 kgs of hand rolling tobacco, 11,760 cigarettes, 150 cigarillos, 21 litres of still wine and 84 litres of beer. These cost about £1,600, the duty would be £2,765 and the sale value in the UK about £4,100.

There is no evidence about why the Appellant was stopped. Miss Hudson thought it was because of the profile as being the time for cheap day returns but she did not originally stop the vehicle. However, the Court of Appeal decided in Customs and Excise Corms v The Queen on the application of Hoverspeed Limited [2002] EWCA Civ 1804 (paragraph 49) that the seizure did not thereby become axiomatically invalid.

There is a relief from excise duty under article 3 of the Excise Duties (Personal Reliefs) Order 1992 for goods which a Community traveller has obtained for his own use in the course of cross-border shopping which he has transported. Own use is defined in article 2:

"'own use' includes use as a personal gift provided that if the person making the gift receives in consequence any money or money's worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order."

Under article 5(1) of the Order the relief is subject to the condition that the excise goods are not held or used for a commercial purpose. It is not disputed that the Order is invalid in so far as it places the burden of proof that the goods are not held for a commercial purpose on the Appellant. The Commissioners, not being satisfied that the excise goods were not held for a commercial purpose, seized the excise goods as liable to forfeiture under sections 49(1) and 141(1) of the Customs and Excise Management Act 1979. The stated reasons for seizing the goods included that they considered that the expenditure on the goods was inconsistent with the Appellant's income, and that not all the goods had been declared. Accordingly any misapprehension about the burden of proof played no part in the decision to seize the goods.

Section 152 of the Customs and Excise Management Act 1979 provides that: "The Commissioners may, as they see fit…(b) restore, subject to such conditions (if any) as they think proper, anything forfeited or seized…." By section 14(2) of the Finance Act 1994 a person affected by a decision of the Commissioners, which includes a decision under section 152(b), may require it to be reviewed, which has been done.

The Tribunal's jurisdiction is contained in section 16 of the Finance Act 1994 which applies to matters contained in Schedule 5, including decisions on restoration. Section 16(4) provides that

"In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an 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 the 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;…."

The issue in this appeal is whether the excise goods were held for the Appellant's own use, as the Appellant claims, or whether for commercial use for the purpose of profit, as the Commissioners contend. Our finding of fact in relation to this question is based on the following points.

The Appellant did not declare all the goods. He declared one box of tobacco when there were two; he gave the officers one receipt for excise goods and further receipts were found in his wife's handbag; he declared 5 boxes of cigarettes whereas 6 boxes were found. He gave the amount paid as £1,200 whereas it was about £1,600.

There was some concealment of the goods. Some of the cigarettes were found under cases of beer on the back seat of the car, whereas one would expect to find that the beer being heavier would be on the bottom. We do not accept the Appellant's explanation that this was to deter theft, bearing in mind that he also failed to declare all the cigarettes.

Incorrect answers were given about previous trips. Mr and Mrs Dumphy had both travelled to the Continent in the same car on 5 and 19 May and 18 June 2001 before they were stopped on 2 July 2001. Mrs Dumphy said that she had never used the vehicle to travel abroad, and that the last time she travelled abroad was to Spain a few years before. The Appellant said that this was the first time he had bought tobacco from abroad except for Spain 5 years before. The next question was "have you travelled to France or Belgium" to which he answered "no," and "so this is your first trip over" to which he answered "yes." The Appellant claims that he thought that these subsequent questions related to trips to buy tobacco. While there is some possibility of misunderstanding we consider that the questions were clear, and even if he misunderstood the questions there is no possibility of Mrs Dumphy not understanding the question she was asked.

The expenditure was disproportionate to the Appellant's means. The Appellant stated that his disposable income was around £150 per month but he spent £1,600 (declared as £1,200) on the excise goods.

The quantities are not in line with the stated levels of consumption. The Appellant's stated consumption was 2 to 3 pouches of tobacco, Mrs Dumphy's 1 to 1½ pouches per week and each of the two sons made a pouch last 1 to 3 days, total 7¾ pouches per week or 7 months worth (the review is in error in stating 5¾ pouches per week and 9 months); this quantity of tobacco equates to about 19,800 cigarettes at 90 cigarettes per pouch. In addition the Appellant smoked 60 to 80 tailor-made cigarettes per day, Mrs Dumphy 40 to 60 per day and the children 20 per day between them; he had purchased 11,769 cigarettes so that including the tobacco he had effectively purchased the equivalent of 31,500 cigarettes. Since they had travelled to the Continent on three previous occasions in the previous two months it is difficult to see why this quantity of cigarettes was purchased for their own use.

Having heard the evidence, in coming to our conclusions we have had regard to the Appellant's inability to write and his difficulty in reading, and his consequential difficulty in conducting the appeal. In the circumstances it is more likely that he may have misunderstood questions that were put to him or that he failed to notice that the recorded answers were incorrect. Mr Clark recorded that the Appellant stated that he could not write but understood that he could read; if he had thought that the Appellant could not read he would have asked another officer to read it to him. It is possible that he may have been disadvantaged because of this. But taking the Appellant's difficulties fully into account we do not think that this can possibly account for all of the above discrepancies. In particular there is no suggestion that Mrs Dumphy misunderstood the question about previous trips abroad in the car and she clearly gave an incorrect answer. The Appellant having been caught out on this easily verifiable point the Commissioners understandably did not believe the rest of the answers. We find that on the balance of probabilities the tobacco and cigarettes were for held commercial use in the sense of being acquired for sale at a profit.

We do not find that the cigarillos, the wine or the beer was held for a commercial purpose. However, Mr Mellor contended that these were liable to forfeiture under section 141(1)(b) of the 1979 Act as being "mixed, packed or found" with goods liable to forfeiture. We agree that they were so mixed, packed or found and so they fall to be treated in the same way as the tobacco and cigarettes.

Article 1 of Protocol 1 of the Human Rights Convention provides:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law…

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

The principle behind this provision is summarised in the decision of the European Court of Human rights in Air Canada v UK 20 EHRR 150 as follows:

"According to the Court's well-established case law, the second paragraph of Article 1 must be construed in the light of the principle laid down in the Article's first sentence. Consequently, an interference must achieve a 'fair balance' between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph: there must therefore be a reasonable relationship for the proportionality between the means employed and the aim pursued."

The Court of Appeal in Lindsay v Customs and Excise Comrs. [2002] 1 WLR 1766 considered this aspect at para.63:

"…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….Cases of exceptional hardship must always, of course, be given due consideration."

64….But where the importation is not for the purpose of making a profit, I consider that the principle of proportionality requires that each case should be considered on its particular facts, which will include [various factors are set out].

Although these statements relate to forfeiture of cars, since we have concluded that this is a case of commercial smuggling these factors do not need to be considered. Mr Murray did consider whether there were any exceptional circumstances to justify departing from the general policy that excise goods are not restored, and concluded that there were not. He had not fettered his discretion in applying a policy.

On the basis of our finding of fact, this is not a case where we are satisfied that Mr Murray could not reasonably have arrived at the decision he reached. Indeed we consider that his decision was the only reasonable conclusion that could have been arrived at. We also consider that the decision not to restore the goods was proportionate. Accordingly we dismiss the appeal in relation to the excise goods.

J F AVERY JONES

CHAIRMAN 22 May 2003

LON/02/8282