United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E00413, [2003] UKVAT(Excise) E413

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Weston v Customs and Excise [2003] UKVAT(Excise) E00413 (15 May 2003)

RESTORATION—Goods only - Cigarettes said by Appellant to be for own use—Initial under- declaration, said by Appellant to be a mistake —Commissioners considered purchase for own use at a saving of £1,200 by Appellant with limited means "implausible"—Review decision apparently on basis of "reasonableness"—Officer included words "because others had"—Whether decision not to restore "reasonable"—No—Appeal allowed

LONDON TRIBUNAL CENTRE

MICHAEL PAUL WESTON Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: ANGUS NICOL (Chairman)

GEORGE MILES

Sitting in public in Cardiff on 14 February 2003

The Appellant in person

Miss Valentina Sloane, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

The Appellant, Michael Paul Weston, arrived by air from Spain, at Bristol Airport, on 15 January 2002. He had 10,000 cigarettes with him, and these were seized by Customs officers. Restoration was refused by the seizing officer, and the decision was upheld on review. It is against the review decision that the Appellant now appeals.

The facts

When stopped by a Customs officer, the Appellant was asked if he was aware of the guidelines as to importing tobacco and spirits, to which he replied, "Only that you can have what you want for your own use." He said that he had never seen Notice 1 before. Then he was asked what goods he had, and he said that he only had cigarettes. The officer's notes then record the following exchange:

"Q: How many cigarettes do you have?

A: 5,000.

Search of bag produced 10,000 cigs.

Q: There are more than 5,000 cigs here.

A: I meant 50 cartons.

Q. Have you the receipts for the goods?

A: Yes.

Produces 2 receipts for 3,500 ptas, 12 receipts for 14,000 ptas."

The Appellant said that he had paid for the cigarettes in cash. The "commerciality statement" was then read to him. He signed the officer's notes, and wrote, "I have read the above" under his signature.

A further interview ensued. The Appellant said that he knew it was an offence to sell tobacco goods on which duty had not been paid, but that he did not know that cigarettes imported from abroad were liable to excise duty. He said that he had been in Spain since June or July 1999 and had not been back to the United Kingdom since then. In Spain he had been working in hotels and restaurants, but was now unable to get work. He had come back to see a doctor and a dentist, and was registered sick. He said that he had paid 175,000 ptas (approximately £675) for the cigarettes and 22,000 ptas for his flight. He said that he had about £60 in the bank, but he also had friends and family, and would be able to go straight back on to sick benefit. He said that he had been earning about 250,000 ptas a month, and had paid for the cigarettes out of holiday pay due to him. He had been paid 450,000 ptas on leaving work. When asked whether £675 was not a lot to spend on cigarettes when he had only £60 in the bank, the Appellant's answer was recorded as,

"No, cos what I would spend in a year over here on cigarettes would be a lot more than that, wouldn't it? I don't drink, only smoke."

The Appellant went on to say that he did not intend to let anyone else have any of the cigarettes, nor had anyone asked him to bring the cigarettes into the country. He stated that he did not intend to sell them.

The Appellant said that he smoked between 40 and 50 cigarettes a day, depending upon what he was doing. He said that he had no financial commitments. When the officer asked him if he knew that there was excise duty on cigarettes, the Appellant said, "No, I thought it had all finished." He said that he had bought the cigarettes on the previous day, and nobody had assisted him with the trip or the purchase. Asked about his sick benefit, the Appellant said that he could not remember how much he had been getting. The officer then said, "You've been away for 18 months so you've not signed on or received any benefit recently have you?" The Appellant agreed, and said that he would just re-sign for it. He suffered from Seasonally Afflicted Disorder. The officer then said, "As it was only 18 months ago, how come you can't remember how much you got in benefits?" The Appellant replied that a bad memory was one of the symptoms.

We pause here to mention that although the Appellant had clearly said that he had been away in Spain for two years, and the officer was aware that he had been away since June or July 1999, she now, in January 2002, twice puts to him that has been out of the country for only 18 months. Why she did so was not clear, nor was the significance of her last question.

The interview ended with two passages to which the review officer drew particular attention. In the first, the Customs officer asked,

"Don't you think it was a bit risky to spend all your money on cigarettes when you don't know your entitlement to benefits on return to the UK?"

To which the Appellant replied,

"Well, of course it's stupid but in the long run it'll save. I've got plenty of family and friends."

He said that he would be staying with his ex-wife for a couple of days, and after that with his sister on her return from Australia. They both lived in the same village. Then the officer remarked that for someone who smoked 40 a day he had not much nicotine on his fingers. The Appellant said that he took the stains off with bleach.

The officer's reasons for seizure were:

"You are in excess of the guidelines by a large amount.

You told me that you had 5,000 cigarettes when you had 10,000, so I feel you lied.

Your expenditure is not commensurate with your income."

It is also to be noted that the officer's record of the interviews states that she stopped the Appellant at 1520 on 15 January 2002. However, the commerciality statement was read, so she recorded, at 1435. The goods were seized at 1549 according to the officer's notes. Her witness statement states that she stopped the Appellant at 1420, and that the goods were seized at 1549. In her statement she also said that after the first short interview her notes were read and signed by the Appellant, and again after the second interview. There is no record in the notes of the Appellant having signed the notes of the second interview.

In a letter of 29 January 2002 to the Post Seizure Unit in Plymouth, the Appellant said that he had returned to Britain indefinitely, and repeated that he had not intended to sell the cigarettes, which were for his own use. He said that he was prepared to let Customs officers visit his home address to ensure that the cigarettes had not been sold. He requested their return. That letter was answered by Miss Wheeler, the team leader, on 6 February 2002, who said:

"The Schedule to the [Excise Duties (Personal Reliefs) Order 1992] lays down the guidance levels for these goods. Importations in excess of the guide levels are deemed to be for commercial purpose unless, if required to do so, the importer satisfies Customs and Excise to the contrary. This means that if you fail to satisfy Customs and Excise that the goods in your possession are not solely for your own use, then there is a legal presumption that the goods are intended for a commercial purpose, and the goods become liable to forfeiture and can be seized.

In your case you were intercepted at Bristol International Airport on 15 January 2002. On initial questioning you stated you had in your possession 5,000 cigarettes. Following a full search of your baggage a total of 10,000 cigarettes were found.

You were then questioned regarding your intentions for the goods. The goods were seized for the following reasons:

1. You were carrying excise goods which were in excess of the guidelines as per article 5 of the Excise Duties (Personal Reliefs) Order 1992.

2. At the initial interception you failed to declare all the excise goods you were carrying.

3. The officer was not satisfied that your income supported the quantity of purchases made, nor was it reasonable to spend all your savings on excise goods when you had no planned employment within the UK.

I have considered the facts in this case and in conclusion I am unable to offer the goods for restoration, for any amount, as the seizure was properly made in accordance with Departmental policy as stated above. There are no exceptional circumstances in this case which would justify a departure from this policy.

It is noteworthy that that letter makes no mention at all of "Departmental policy" except in that last paragraph: it is not "stated above" at all. Nor is any mention made of anything said at the interviews which might have been in the Appellant's favour.

In a further letter, dated 25t February 2002, the Appellant said,

"Further to your letter of 6th February 2002, I would like a review of my case conducted.

The points you raised in your letter stating that I failed to declare all the excise goods I was carrying, I did in fact declare that I was carrying 50 cartons. With regard to my income not supporting the quantity of cigarettes purchased, I intend to stay in the country and would save a considerable amount of money buying the cigarettes from abroad rather than buying them in the UK.

As previously stated, the cigarettes are for my own personal use and are not intended for sale."

That letter was passed to the review team.

The review letter, signed by Mr Brian Rayden, was dated 22 April 2002. That was 56 days after the date of the Appellant's request for a review. However, neither party took any point on the review being late by eleven days. Section 15(2) of the Finance Act 1994 provides that where the Commissioners are obliged to review a decision and do not do so within 45 days beginning on the day on which the review was required, the Commissioners are assumed to have confirmed the decision reviewed. The section does not say that a review carried out or notified to the person concerned after 45 days have elapsed is of no effect. Accordingly, we have treated Mr Rayden's review decision as the decision against which this appeal is made. It is interesting to note that Mr Rayden said in that letter, "I have treated your letter as a valid requirement to conduct a review of the decision...." as though the Appellant's letter had in some way not been a strictly valid requirement. In our view, the Appellant's letter could hardly have been clearer, and was within the time allowed. It occurred to us that those words in the review letter may simply have been left in from another review letter, and had not been amended out.

Having set out some of the facts and the relevant legislation, Mr Rayden referred to the Commissioners' restoration policy for goods:

"It is this Department's general policy that seized excise goods are not restored. However, each case is examined on its merits to determine whether or not restoration may be exceptionally offered. In conducting this examination the presence of any one of the following factors will militate against restoration:

any evidence of previous smuggling or failure to comply with legal requirements;

any evidence that the person involved knew what they were doing was wrong;

any evidence that the person was paid to make the journey;

large quantities of goods which might damage legitimate trade;

any evidence that the goods were for a commercial purpose."

Under the heading "Consideration", Mr Rayden wrote:

"In reviewing the Commissioners' exercise of their discretion as to whether or not to restore, I have taken a fresh look at all information available to me and I have also considered the words of Lord Lane in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1981] AC 22:

'[The Tribunal] could only properly [review the discretion] if it were shown that the Commissioners had acted in a way which no reasonable panel of Commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.'

He then continued:

"Before considering the matter of restoration I have firstly examined whether or not the excise goods were appropriately seized in the first instance. Because of the volume of excise goods you were holding you were required under the legislation, when asked to do so, to satisfy the Officer that the goods are for own use and rebut the statutory presumption of commerciality.

You declared only 5,000 cigarettes when you had 10,000. You claim that you meant 50 cartons but I cannot accept that when you said '5,000' you meant 50 cartons. On those grounds alone the undeclared 5,000 cigarettes were liable to forfeiture as undeclared and the rest were also liable to forfeiture because they were packed with them.

It seems unreasonable to me that a person returning to the UK unsure of obtaining either a job or benefits, and with only £60 in the UK, would spend £648 in cigarettes for his own use.

Taking into account all of the above, I agree with the officer in not being satisfied that the goods were for own use. In my opinion, the seizure of the cigarettes was correct under article 5(1) of the PRO and section 139(1) of the CEMA."

On the issue of restoration, Mr Rayden wrote:

"Having dealt with the seizures, it remains for me to address the issue of restoration of the goods. In failing to declare all of the cigarettes you clearly knew that what you were doing was wrong. I have read your letters to see whether you have presented a case for disapplying the Commissioners' policy of non-restoration. I conclude that you have offered no reason for departing from the policy of non-restoration of the goods or the car. I am of the opinion that the application of the Commissioners' policy in this case treats you no more harshly or leniently than anyone else in similar circumstances and I can find no reason to vary the Commissioners' policy of non-restoration in your case.

Conclusion

For the reasons set out above I exercise my option to confirm the contested decision not to offer restoration of the goods."

In his witness statement Mr Rayden listed the documents upon which he relied in reaching his decision. In his evidence in chief, he started by saying that his function was to look at decisions not to restore and see if they were reasonable. In his witness statement, he concluded by saying that he was "satisfied that the decision to not offer restoration of the cigarettes was correct and reasonable". He conceded that he had not considered the case from the point of view of the onus of proof being upon the Commissioners (at that date, the 1992 Order had not been revoked, so there was no reason why he should have). He also said that the passage from Corbitt should not have been in the letter; he had put it in because other people had done so and he thought that he would follow what they did. He said that he did not feel that he should act upon it. Referring to the Appellant's statement in interview (see paragraph 6 above), that "Of course it's stupid but in the long run I'll save," Mr Rayden said that he considered that that confirmed that it was an unreasonable proposition to spend £648 on cigarettes in the Appellant's circumstances. Finally, Mr Rayden said that his reasons for his decision were largely to do with seizure, which also threw light upon whether restoration should be made. The Appellant must have known that he was doing something wrong in not declaring the full quantity of cigarettes; also his financial situation was not credible.

The law

Since January 2001 the law in this area has undergone dramatic change, in the wake of two Court of Appeal decisions, Lindsay v Customs and Excise Commissioners [2002] STC 588, and Customs and Excise Commissioners v The Queen (on the application of Hoverspeed Ltd and others) [2002] EWCA Civ 1804. In the Divisional Court in Hoverspeed ([2002] 3 WLR 1219) it was held that the laying upon an appellant, by the Excise Duties (Personal Reliefs) Order 1992 ("the 1992 Order"), of the burden of proving that goods in excess of the indicative levels were for his own use was incompatible with the Excise Directive 92/12/EEC. As a result, the 1992 Order was revoked, and the effect is as though that provision had never existed. It was also held that it is for the Commissioners to prove that such goods were imported for a commercial purpose.

The 1992 Order has effectively been replaced by the Tobacco Products Regulations 2001, as amended by the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002. So far as they bear upon this appeal, the provisions are as follows:

"12 Excise duty point

. . .

(1A) In the case of tobacco products acquired by a person in another Member State for his own use and transported by him to the United Kingdom, the excise duty point is the time when those products are held or used for a commercial purpose by any person.

(1B) For the purposes of paragraph (1A) above—

. . .

(b) 'own use' includes use as a personal gift;

(c) if the tobacco products in question are—

(i) transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or

(ii) the person holding them intends to make such a transfer,

those products are to be regarded as being held for a commercial purpose.

. . .

(e) without prejudice to subparagraphs (c) and (d) above, in determining whether tobacco products are held or used for a commercial purpose by any person regard shall be taken of—

(i) that person's reasons for having possession or control of those products,

(ii) whether of not that person is a revenue trader (as defined in section 1(1) of the Customs and Excise Management Act 1979),

(iii) that person's conduct, including his intended use of those products or any refusal to disclose his intended use of those products,

(iv) the location of those products,

(v) the mode of transport used to convey those products,

(vi) any document or other information whatsoever relating to those products,

(vii) the nature of those products including the nature and condition of any package or container,

(viii) the quantity of those products, and in particular, whether the quantity exceeds any of the following quantities—

3,200 cigarettes

4,000 cigarillos ...

200 cigars

3 kilogrammes of any other tobacco products

. . .

(ix) whether that person personally financed the purchase of those products,

(x) any other circumstance that appears to be relevant."

The effect is, therefore, that it is for the Commissioners to prove, on the balance of probabilities, that the goods were imported by this Appellant for a commercial purpose. In doing so, they must consider subparagraphs (i) to (x) of paragraph (1B)(e), set out above.

This Tribunal's jurisdiction is set out in section 16(4) of the Finance Act 1994:

"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 persons making that 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, and

(c) . . ."

This case falls within the definition of "ancillary matter" as defined in Schedule 5 to that Act.

In order to determine whether the review decision (or, if necessary, the original decision) not to restore is reasonable, the Tribunal should look at the evidence, for two reasons. First, if the evidence shewed that the seizure was not lawful, the Commissioners would have had no power to seize, and therefore the discretion to refuse restoration could not have arisen. Secondly, if the review decision, or the original decision (where it is the decision appealed against) is based upon evidence which has been erroneously reported to the officer conducting the review, or that evidence contains significant omissions, that will have a bearing upon the "reasonableness" of the decision appealed.

In this context, "reasonable" means reasonable in the sense in which that word was used in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. In that case, Lord Greene MR said, at page 229,

"A person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may be said, and often is said, to be acting 'unreasonably'."

That passage was cited in Corbitt shortly before the passage quoted in the review letter (see paragraph 13 above).

The Appellant's contentions

The Appellant relied upon the evidence as shewing that the cigarettes were imported for his own consumption and for no other purpose. He maintained that he had corrected the answer "5,000" to "50 cartons", the former having been a slip of the tongue. In that context, he pointed out that Miss Sloane had herself slipped up in giving one or two erroneous figures, and in including a reference to "the vehicle" in the statement of case (drafted by her), no vehicle being involved. He also pointed out that by buying that quantity of cigarettes, at the rate at which he smoked he would have saved about £1,250 in the course of a year and would have been able thereby to afford to go out to Spain for a holiday and buy a further supply of cigarettes. He might, he said, in future make two or more visits, restricting himself to buying 3,200 cigarettes each time.

The Commissioners' contentions

Miss Sloane, for the Commissioners, referred to Pitcher v Customs and Excise Commissioners (2000) (Decision No E376) on the point as to whether a seizure was lawful after a random interception. However, that was not an issue in this case. Miss Sloane pointed out that the Appellant's evidence, as to how many cigarettes he had imported, was inconsistent with the recorded interview, and there was nothing to suggest that that interview had been wrongly transcribed. It was therefore reasonable to consider that he had said "5,000" when in fact he had 10,000 cigarettes. It was not the Commissioners' case that merely exceeding the guidelines was enough by itself to warrant seizure and refusal to restore, but that was a factor to be considered. It was three times the guideline quantity, she said, and would have lasted the Appellant a year.

The Appellant's personal circumstances had been considered. The review officer took into account that the Appellant would make a long-term saving, and considered that it was unreasonable to take a long-term view on buying cigarettes when he had only limited funds. It would be very easy to make a profit on the cigarettes. It was also reasonable for Mr Rayden to disbelieve what the Appellant had said, and, further, to find that there were no exceptional circumstances which would justify restoration.

Miss Sloane stressed that Mr Rayden had not carried out his review on the basis of the reasonableness of the decision not to restore, notwithstanding that he had set out the passage (referred to above) from Corbitt.

Miss Sloane also referred to the Commissioners' policy as to restoration as set out in the witness statement of Gerry Dolan, and referred to the Court of Appeal decision in Lindsay (supra) at paragraphs 71 to 72.

The three principal points contended for by the Commissioners, and set out in Miss Sloane's skeleton argument were:

first, that the Appellant had lied about the number of cigarettes that he had imported;

secondly, that he was importing an extremely large quantity for personal use, more than three times the new and increased guidance level; it was proper for the review officer to take that into account under regulation 12(1B)(e)(viii) of the Tobacco Products Regulations 2001 as amended;

thirdly, that the Appellant had used all his pay from Spain in the purchase of his plane ticket and the cigarettes. It was implausible that he would spend £675, which, it was said, was all his available money after the purchase of his air ticket, on cigarettes for his own use rather than for resale, at a time when he had only £60 in the bank and no prospect of any income except the possibility of benefits.