United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E412, [2003] UKVAT(Excise) E00412

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Liam Julian Delany v Customs and Excise [2003] UKVAT(Excise) E00412 (12 May 2003)

E00412

Excise Duty – Restoration of goods – Seized HRT not offered for restoration – Wrong burden of proof of commerciality considered by reviewing officer – Whether goods for own use `found with' goods for sale at cost price to relative – Whether s.141(1) of CEMA 1979 applicable – Appeal dismissed

LONDON TRIBUNAL CENTRE

LIAM JULIAN DELANY Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MISS J C GORT (Chairman)

MISS A WEST FCA

MR G MILES

Sitting in public in Bristol on 11 March 2003

Mrs A J Salter, the Appellant's mother, appeared on his behalf

Mr Matthew Barnes of counsel, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

This is an appeal against a decision of the Commissioners on review to refuse to restore excise goods consisting of 12 kgs of hand-rolling tobacco ("HRT") to the Appellant, the decision being set out in a letter dated 14 November 2001.

The evidence

A bundle of documents was produced by the Respondents containing correspondence, the statement of case, the Notice of Appeal and four witness statements from Mr Graham Crouch, senior officer with Customs and Excise; Mr Matthew Suart an officer of Customs and Excise; Timothy John Little, Customs officer and Miss Sarah Elizabeth New, Customs officer. Mr Crouch and Mr Suart both gave evidence before the Tribunal.

The Appellant gave evidence on his own behalf, and Mr Lee Ryall, Miss Claire Gormley and Mrs Anne Salter also gave evidence on his behalf.

The facts

On 9 August 2001 the Appellant was travelling in a Renault Clio motor vehicle, registration number L240 NYC which was being driven by Mr Ryall, when they were stopped by officers of Customs and Excise entering the UK at Eastern Docks, Dover. Miss Mandy McConnell, who was the Appellant's girlfriend, was also in the car at the time.

They told the Customs officers that they had been to Calais for a day trip in order to get some shopping and some tobacco, and that they had two large boxes of HRT each, being 6 boxes in total. Mr Little, who was the Customs officer who first spoke to the group, asked to look in the boot of the vehicle, and there he found 6 x 6 kgs boxes of Golden Virginia HRT and 1 x 5 kgs box of Old Holborn HRT. Having been told that they were carrying excise goods in excess of the recommended guidelines, the occupants were each interviewed separately.

There was no evidence before the Tribunal as to the reason why the car had been stopped in the first place. The goods were in the boot of the car and there had been no attempt to hide them.

In the course of the interview the Appellant told Mr Suart that he worked as a sales team leader for Argos and also as a refuse loader. Two of the boxes of Golden Virginia HRT were for his own use, and he knew that it would last for a long time. As he smoked two pouches a week, he thought the HRT would last approximately a year, may be less. When it was put to him that it would last longer, he accepted that that might be the case.

The Appellant also told Mr Suart that he and his friends had gone over to look for alloy wheels and car accessories. They had been over the previous week and on that occasion had brought a box of Old Holborn for Miss McConnell's father, but they had bought the wrong tobacco and, as they had found out that it could be exchanged, they had done that on this visit. They had been provided with money to purchase tobacco. The reason that he personally had bought so much tobacco was because he smoked it and "the Mrs" smoked also. He had bought it to last and because it was cheaper than in the UK.

Mr Suart again asked the Appellant why he had bought so much tobacco at one time and the Appellant replied "Only holiday I have is in October so I can't afford to go away that often." In his evidence to the Tribunal the Appellant explained that he could not afford to take more than one holiday a year because if he did so he would not be paid. He had a holiday planned for the following September which in the event had cost him £2,000.

The car they were travelling in belonged to the Appellant's parents. They had travelled twice previously to France but had only bought tobacco or cigarettes on the previous time and on the present occasion. They had not bought any tobacco goods on the first occasion. The Appellant had personally spent just over £400 on tobacco which represented a week and a half's wages. His take home pay was about £800 a month and in addition he could earn between £30 and £40 a day on his other job which he usually did about one day a week. He expected to have over £150 spending money at the end of each week. His normal expenditure on cigarettes or tobacco in a week in the United Kingdom was £20-£30.

At the time of the interview the Appellant was smoking cigarettes from a packet of 20 duty free which he had bought on the ferry on the crossing. He was normally able to get between 50 and 75 cigarettes from one pouch of hand-rolling tobacco. He had never previously had any dealing with Customs and Excise.

Mr Ryall was interviewed by Mr Little. He also had spent about £400 purchasing two boxes of Golden Virginia HRT. He smoked about five pouches each week. He worked as a dustman earning £15,000-£16,000 per annum. He lived with his parents.

Mr Ryall expected the tobacco to last about three months. At the time of the interview he was smoking from a pack of Embassy which he had bought on the ferry on the return journey. He had no HRT on him. He had also travelled the previous week, on that occasion in the Appellant's car, when they were looking for car parts and realised that they could buy tobacco much cheaper over on the continent. He had not been aware of the guidelines. He had believed that he could bring back unlimited quantities of tobacco for personal use. He considered he could get 50 or more cigarettes out of one pouch of HRT. They had travelled on this occasion in the Appellant's mother's car because it was a diesel car which made it more economical to travel and the Appellant's own car had a rattling exhaust.

The tobacco had been purchased at Adinkerke. It was the opinion of the Commissioners that Adinkerke was some 40 minutes journey from the Port.

Miss McConnell was interviewed by Miss New. Neither Miss New nor Miss McConnell gave evidence before us but the record of interview shows that with regard to the circumstances and events of the trip, her evidence agrees with that of the Appellant. She however reckoned that she would only get 30-40 cigarettes out of a pouch of tobacco. This was explained by the Appellant as being because she used a machine to roll her cigarettes which made larger cigarettes than he was able to by hand. She had been with the Appellant and Mr Ryall on the previous occasion when they had been over and purchased the tobacco for her father. She had no hand-rolling equipment on her at the time.

Following the interviews, the car and all the HRT in the car was seized by Customs and Excise.

By a letter dated 13 August 2001 Mrs Salter wrote to the Commissioners requesting the restoration of her vehicle and the excise goods seized. She was informed that the persons claiming ownership of the goods must request restoration of them in person, hence this appeal is not concerned with restoration of the vehicle which was dealt with independently by the Commissioners and has not as yet been determined by a court or tribunal.

At the time of the importation the Appellant was only 21 years of age and Miss McConnell was 20 years of age. None of the three people in the car were aware of the guidelines, nor that it was not lawful to bring in HRT for someone else to use, when that person was only paying the cost price of the HRT.

On the return journey all three had spent a lot of time in the bar and Mr Ryall in particular was playing the fruit machines. In those circumstances they preferred to smoke pre-rolled cigarettes, not HRT.

The Appellant had been given a leaflet by the ferry company which said that he would be entitled to bring in as much tobacco product as he liked for own use.

A previous journey had been made to look for car parts in respect of Miss Gormley's car which was a modified Fiat Uno Turbo with a rare body. The company which made it had gone bankrupt and it was one of only 50 in the country. They had been looking for alloy wheels, seats, steering wheel and other matters. They had bought these things at Adinkerke.

The Tribunal was told that the reason that they had not bought tobacco on the previous two occasions was that they had not budgeted for such a purchase. They had been able to make the crossing for less than £5, and they had stayed at Mr Ryall's father's house which was in Eastbourne, not too far from the port. On the occasion when they were stopped they had just been paid and had the money available to purchase tobacco. Insofar as the overall cost was concerned, because the car was a diesel engine, and because they had filled up with petrol on the continent which was considerably cheaper than in the United Kingdom, the total cost of the petrol was between £30 and £50. The Appellant had taken time off work to make the various trips and would not be able to afford to go until the following tax year.

It was Miss Gormley's evidence that she had been on a previous trip to France to look for the car parts for her car with the Appellant, Miss McConnell and Mr Ryall. Her car was unique, and car parts were very expensive in this country and hard to obtain. She had tried to obtain the parts in the United Kingdom but they were significantly cheaper abroad.

The car parts had not been bought on that journey, but Miss Gormley had ordered the parts from France. The Appellant and his friends had been happy to go over to check the prices out with her because it gave them a day out and was enjoyable. Miss Gormley was Mr Ryall's girlfriend.

It was Mrs Salter's evidence that the car belonged to her husband, who would never have lent it if he had thought that there was any intention of using it to do anything illegal. The Appellant lived at home with them and did not pay rent. She confirmed that the Appellant and Miss McConnell smoked a considerable amount. Insofar as the amount of money that was spent, it was her opinion that young people had a very different sense of the value of money, and they were perfectly prepared to spend amounts such as £200 on trainers and £400 on a pair of glasses, which might seem excessive.

Mr Ryall gave evidence that they had not been allowed to stay in the car on board the ferry, that they had gone upstairs to the bar where he had been playing the fruit machines and they did not have time to roll any cigarettes. He smoked HRT because it lasted longer and was cheaper.

Mr Crouch was the officer who had carried out the review. He commenced his consideration with the following sentence:

"It is for me to determine whether or not the decision you contest is one that a reasonable body of commissioners could not have reached."

In carrying out his review Mr Crouch stated that he had considered all the evidence and information before him and reached the following conclusions inter alia. He took account of the fact that when initially stopped the occupants of the car failed to declare the full amount of tobacco that was being carried in the vehicle. He then continued:

"Though I do accept the ownership of the 7^th box was satisfactorily explained during the separate interviews conducted with the three of you, the fact that a false declaration was made can hardly be considered to be the bona fide actions of persons who maintain they have purchased solely for their own use."

In considering the quantity of excise goods which the Appellant had with him Mr Crouch said that he was "of necessity" guided by the Tribunal decision in the case of Gordon Boyd v Commissioners of Customs and Excise in which the chairman had said that where 9.6 kilos of hand-rolling tobacco were imported it strained credulity beyond acceptable levels that this could be for one man's own use.

Mr Crouch concluded that the occupants had made up the story about going over to price up car accessories and alloy wheels to distract the officers from the true purpose of their trip. He was unable to accept that anybody would want to travel all the way from Yeovil to Calais and Adinkerke with the expense that would entail to price up car parts. He considered that a telephone call would have enabled them to obtain the price for the parts they were looking for.

He also stated:

"From the admission given in interview that money had been received prior to travel for some of the tobacco and considering the quantity of tobacco being imported, in the Officer's view the three of you had failed to rebut the statutory presumption of commerciality. The officer had no alternative other than to seize the excise goods."

In evidence Mr Crouch initially said that it was his job to look at all the facts and information available at the time, and come to a conclusion about the seizure. It became clear from his subsequent evidence that he had in fact been looking at whether the officer's decision was reasonable or not. He said: "If the decision was not reasonable my consideration would have been different." He accepted that he had considered at the time that the burden of proof was on the Appellant to satisfy the Commissioners as to commerciality. With regard to the evidence concerning whether the goods were for a commercial purpose, he said that he had no specific evidence of this other than the quantities which had been imported and the declared consumption rate.

The law

Article 3 of the Excise Duties (Personal Reliefs) Order 1992 ("the 1992 Order"), provides that:

"Subject to the provisions of this Order a Community traveller entering a control zone or the United Kingdom shall be relieved from payment of any duty of excise on excise goods which he has obtained for his own use in the course of cross-border shopping and which he has transported".

Article 2(1) of the 1992 Order defines "own use" as follows:

" "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".

Article 5(3) of the 1992 Order provides that;

"(3) Paragraphs (3A) to (3C) below apply to a person who has in his possession or control any excise goods afforded relief under this Order in excess of any of the quantities shown in the Schedule to this Order.

(3A) The Commissioners may require a person to whom this paragraph applies to satisfy them that the excise goods afforded relief under this Order are not being held or used for a commercial purpose.

(3B) Where a person fails to satisfy the Commissioners that the excise goods in question are not being held or used for a commercial purpose the condition imposed by paragraph (1) above, shall, subject to paragraph (3C) below, be treated as not being complied with.

(3C) Paragraph (3B) above shall not apply where a court or tribunal is satisfied that the condition imposed by paragraph (1) has been complied with."

The Schedule to the 1992 Order, referred to above, specifies, inter alia, 1 kilogramme of tobacco products, as the quantity above which a traveller may be required to satisfy the Commissioners in this way.

Article 5(1) of the 1992 Order then provides that if the condition, that the excise goods are not held or used for a commercial purpose, is not complied with "… those goods shall, without prejudice to article 6 below, be liable to forfeiture".

Section 139(1) of the Customs and Excise Management Act 1979 ("the 1979 Act") provides that, "Any thing liable for forfeiture under the Customs and Excise Acts may be seized or detained by any officer …".

Section 141(1) of the 1979 Act then provides that:

"(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the Customs and Excise Acts –

(a) any ship, aircraft, vehicle, animal, container (including any article of passengers' baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and

(b) any other thing mixed, packed or found with the thing so liable, shall also be liable to forfeiture".

Section 152 of the 1979 Act states that:

"The Commissioners may, as they see fit:

(a) …

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts; …".

The Appellant's case

It was submitted on behalf of the Appellant that the Appellant and his friends were only young, they had been bombarded with questions but were never given any proper chance to explain themselves. Mrs Salter had herself written to explain to the Commissioners that diesel was cheaper to run and that they were not aware that they were not allowed to bring in tobacco for Miss McConnell's father in circumstances in which they were taking money for it. The cost to each of the occupants for smoking was nearly £30 a week in the United Kingdom and therefore they wished to take advantage of the potential saving.

It was never made clear that "no limits" for personal use did not mean just that, nor that they had to abide by guidelines, of which they were unaware.

The Appellant had a responsible job and was a responsible person.

There had never been any attempt to deny that they extra box of tobacco was there, it had not been realised that it was wrong to have it.

It was a fundamental right under EC law that they should be able to buy goods in the community and not be regarded as evading tax.

The Respondents' case

On behalf of the Respondents it was submitted that it was quite reasonable for the officer to conclude that the goods were being brought in to sell. 36 kgs of hand-rolling tobacco had been brought in but no cigarettes. £12,000 was a significant amount of money to spend. None of the people had any accurate idea of how long the HRT would last. It was unlikely that such a large amount of money would be spent without it having first been calculated how long the tobacco would last, and that tobacco was perishable.

It was submitted that it was unlikely that habitual HRT smokers would not have any loose tobacco on them when they were stopped, but would buy cigarettes on the ferry. The only direct evidence in this case was that the Appellant smoked manufactured cigarettes.

Furthermore the Appellant and his fellow travellers had been abroad twice before, and it was reasonable for the review officer to conclude that the purpose was to sell the tobacco. It was a long journey from Yeovil and was reasonably expensive.

With regard to the law, even if there was no lawful basis for having stopped the car in the first place, that did not prevent the seizure from being lawful. The law was quite clear that a traveller was only entitled to bring back goods for his own use and here there was clear evidence that 5 kgs was for another party who was not travelling.

The Tribunal was referred to the case of John Elton Rainbow, a decision of the tribunal sitting in Plymouth on 16 January 2003. In that case half of the goods were held for the appellant's own use and the other half were not. Nonetheless the tribunal upheld the decision to seize all the excise goods.

The Tribunal was also referred to the case of Hoverspeed & Others [2002] EWCA Civ 1804.

In the present case the reviewing officer reasonably concluded that the items were for a commercial purpose, and therefore it was reasonable to conclude that they should not be restored.

By section 139(1) of the 1979 Act, any thing liable to forfeiture under the Customs and Excise Acts may be seized or be detained by any officer, and therefore the officers were entitled to seize the 5kgs purchased for Miss McConnell's father.

If it were not accepted that the 12 kgs of Golden Virginia HRT were held for a commercial purpose, it was contended that they were liable to forfeiture pursuant to section 141(1) of the 1979 Act, which sets out that any goods that are mixed, packed or found with goods liable to forfeiture shall also be liable to forfeiture. The Tribunal was referred to the case of Degerdon released on 26 September 2002 in which Mr Barlow had stated that:

"The three words `mixed', `packed' and `found' take some refinement of meaning from each other and it is possible to conclude that to some degree the intention is that there should be an element of difficulty of separation of item from another before one that is not otherwise liable to forfeiture becomes so liable by its association with one at ease."

It was submitted that that analysis was incorrect, and the words should be given their plain ordinary meaning. The Tribunal was referred to the rule expressed by Reid LJ in the case of Pinner v Everett [1969] 3 All ER 257 as follows:

"In determining the meaning of any word or phrase in a statute the first question to ask always is what is the natural or ordinary meaning of that word or phrase in its context in the statute? It is only when that meaning leads to some result which cannot reasonably be supposed to have been the intention of the legislature that it is proper to look for some other possible meaning of the word or phrase."

It was accepted that the Excise Duty (Personal Reliefs) Order 1992 failed to implement the 1992 directive, which has direct effect, in that:

(a) it makes excise goods imported from another Member State chargeable to UK excise duty without it being established that the goods are imported into UK for a commercial purpose; and

(b) it places a persuasive burden of proof on the individual to prove that the goods are not held for commercial purposes where the goods are in excess of the MILs.

However, the seizure of the goods was not invalidated by the fact that the Customs officer had not understood the correct legal position with regard to who had to show that the goods were held for a commercial purpose, as this had not played any relevant part at all in the decision to seize.

With regard to restoration, under section 152(b) of the 1979 Act, the Respondents may, if they see fit, "restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized" under the Customs and Excise Acts. The decision not to restore was reasonable and proportionate in that the Appellant had imported excise goods for a commercial purpose, the excise goods were therefore dutiable. The Appellant had attempted to evade paying the duty, and doing so the Appellant was damaging legitimate trade, a failure to penalise those were in breach of statutory requirements would render the said requirements meaningless and inoperable.

It was submitted that the refusal to restore the HRT was a proportionate and reasonable response.

Reasons for decision

The Tribunal accepted that the Appellant was telling the truth with regard to the purpose of the trip and his circumstances. We accept that there was no intention to sell any of the hand-rolling tobacco, and that the extra 5 kgs box had been paid for at cost price by Miss McConnell's father. We accept that there was no commercial purpose or intent in the purchases.

We do not accept that there was any deliberate evasion by the Appellant or his fellow travellers with regard to the spare box. We find it reasonable for the Appellant to have believed that they could bring in excise goods for members of the family in circumstances where they were not to be paid anything other than the cost price of those goods, given the leaflet which is handed out.

We accept that there had been a previous trip when the prices of the spare parts needed for Miss Gormley's car were checked out and that those parts had subsequently been purchased. We were persuaded of this in part by the fact that the Appellant had undertaken a 40-minute extra journey to get to Adinkerke where the spare parts were located, rather than simply buying the tobacco products at a nearer point.

We find that the quantity of HRT which the Appellant had brought in for his own use was reasonable, given his mother's evidence as to the quantity he smoked, and his particular circumstances. He was in a position to afford the purchase at the time.

With regard to the review letter, we do not accept Mr Crouch's conclusion that the Appellant and fellow travellers made a false declaration with regard to the existence of the 7^th box. We consider that Mr Crouch when considering commerciality did not properly take account of the extent of the Appellant's smoking habit or the ambiguity of the advice, which he must have been aware was given to all travellers, that they were entitled to bring in goods for own use and for family and friends. His conclusion that he was "of necessity" guided by the words of the chairman in the case of Gordon Boyd was wrong, although of course he was entitled to be guided by that case. In other cases larger amounts have been accepted as being for own use. Each case must be looked at in the light of its own particular facts, and whilst each individual in the present case had imported considerably more than the 9.6kgs to be shared between two people in that case, Mr Crouch did not consider the correct quantity in this case, which was 36 kgs between the three, but referred to 41 kgs between the three of them. It had been stated from the outset by all the people concerned that 5 kgs were for Miss McConnell's father's own use, and we accept that that was the case.

We can see no justification for Mr Crouch concluding that the story about the alloy wheels was made up; he should have retained an open mind about that fact and taken account of the extra journey involved in going to Adinkerke.

We accept the Respondents' argument that the fact that there is no evidence as to why the car was stopped does not invalidate the seizure.

The officer wrongly stated that there was a statutory presumption of commerciality which the Appellant had failed to rebut. Whilst it is right that it is only since the case of Hoverspeed that the law has been clarified with this regard, nonetheless this was a wrong approach adopted by the officer. Mr Crouch in his evidence had stated that he had no specific evidence that the goods were for a commercial purpose other than the quantities which had been imported and the declared consumption rate. On the basis of the evidence before us we are not satisfied that the Appellant had any commercial purpose in mind with regard to the 12kgs of hand-rolling tobacco which he brought in himself. However, since Hoverspeed, and following the case of John Elton Rainbow, the whole importation is deemed commercial given that the Appellant had received money from Miss McConnell's father for the 5kgs of hand-rolling tobacco for his use.

We accept the Respondent's argument that in the present case the Appellant is caught by section 141 of CEMA, and it cannot be disputed that the goods were "found with" goods which are deemed to be commercial. As with the chairman in the case of John Elton Rainbow, we are satisfied that the scale of the importation was not large and that the "commercial" element of the imported goods was small in proportion and in any event was not to be sold at a profit. We also note that there was no attempt to conceal the extra 5kgs of HRT. These factors are not of any help to the Appellant in the present case, and we consider that, although there were flaws in the decision letter, we do not consider that there would be any purpose in referring this matter back to the Respondents for a further review, given the inevitable conclusion as a matter of law that the goods were for a "commercial" purpose. However, we are aware that there is an outstanding appeal against the seizure of the vehicle, and we hope that our findings will be taken into account when that matter is considered by the Commissioners.

This appeal is dismissed. No order as to costs.

MISS J C GORT

CHAIRMAN

RELEASED:

LON/02/8046