United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2003/E00422.html
Cite as: [2003] UKVAT(Excise) E00422, [2003] UKVAT(Excise) E422

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David Budd v Customs and Excise [2003] UKVAT(Excise) E00422 (23 May 2003)

E00422

RESTORATION – Goods only – Refusal to restore – Tobacco in excess of indicative level – Admission by Appellant that tobacco for his father who would pay cost price – Proportionality – Whether principles in Lindsay applicable only to restoration of vehicles – No – Whether refusal to restore reasonable – Appeal allowed

HUMAN RIGHTS – Refusal to restore goods imported for "commercial purpose" of sale to Appellant's father at cost – Proportionality – Whether "fair balance between interests of status and rights of individual" – Whether principles in Lindsay applicable only to restoration of vehicle

LONDON TRIBUNAL CENTRE

DAVID BUDD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: ANGUS NICOL (Chairman)

MICHAEL SILBERT FRICS

PRAFUL DAVDA FCA

Sitting in public in London on 28 February 2003

The Appellant in person

Richard Smith, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION

1. This is an appeal against a decision on review by the Commissioners of their decision, also on review, not to restore certain excise goods to the Appellant, Mr David Budd. The Appellant, travelling as a foot passenger, was stopped at Dover on 6 January 2001, and found to be carrying, amongst other things, 6 kg of tobacco and 3,000 cigarettes. The goods were seized, and restoration was refused. The Appellant requested a review, and in a letter of 11 April 2001 the review officer, Mrs Diane Florence, stated that the decision had been reviewed and was confirmed. No reasons at all were given for this decision. The Appellant appealed against that review decision. On 2 April 2002 the Tribunal directed that a further review should be carried out in the light of the decision in Customs and Excise Commissioners v Lindsay [2002] STC 588. For some reason, that review was not carried out until 6 June 2002 (a copy was received by the Appellant on 8 June 2002), and that decision was also adverse to the Appellant. It is against that decision that he now appeals.

The facts

2. There appeared to be no dispute as to the facts, and we take them from the statement of case and officers' notebook. Having been stopped at Dover, the Appellant was interviewed, and gave the following information. He was travelling alone and had been to France and Belgium where he had bought tobacco, cigarettes, spirits, and wine. No-one had asked him to bring anything into the country for them. The goods that he had bought were for members of his family, none of whom had given him any money for them. He had paid about £500 for the goods. He said that he knew that it was illegal to sell excise goods. He could not remember whether he had seen Notice 1 before. He said that the tobacco was for his father who would give him the cost price for it. The goods were seized, on the grounds that they were in excess of the minimum indicative level, that he was aware of the law relating to the importation of excise goods, and was going to be given money for a part of the goods.
3. Also on 6 January 2001 the Appellant wrote to the Commissioners requesting the return of the goods and retraction of the warning letter. He said that he was not smuggling and had declared all that he had when approached by the officer. He therefore found the seizure notice offensive. He went on to say that when interviewed he had told the truth, including admitting that the tobacco was going to be given to his father for the cost price: telling the truth had been his downfall. In another letter dated 25 January 2001 the Appellant, at the request of the Commissioners, confirmed that he wished the return of the goods and was not making a claim against forfeiture. He further related that he travelled to France on a promotional day trip to Calais, and would not have gone to Belgium at all but for the fact that he had helped two disabled people in the ferry shop, and they took him on to Belgium. His original intention had been to buy the goods on board the ferry. He complained that Notice 1 was misleading in that it said that "you may be breaking the law if you sell the goods" rather than pointing out that to do so is breaking the law. He said again that he had at all times told the truth. The response was a letter dated 22 February 2001 from the Excise Support Team, stating that all the factors in the case had been considered, setting out the Customs policy on restoration, and refusing it. No reasons were given save that there were no exceptional circumstances.
4. The Appellant requested a review in a letter dated 27 February 2001, saying also that he could find nothing in Notice 1 that supported the Commissioners' decision not to restore the goods. This was acknowledged on 8 March 2001 in a letter which said that the request had been passed to the Review Team. On 13 March 2001 the Appellant wrote again, mentioning that his partner formerly smoked Benson and Hedges and had now changed to Superkings. He also referred specifically to Article 163 of Council Regulation 2913/92/EEC (Internal Transit) and the Human Rights Act 1998 as assisting his claim. The review letter, dated 11 April 2001 and signed by Diane Florence, gave no reasons for her decision, but merely stated that she had considered the evidence put before her (unspecified) and the correspondence as well as the legislation and Customs policy and confirmed the decision not to restore. The reasons were set out in Mrs Florence's witness statement made some six weeks later. In that statement she made it clear that she considered her function to be to consider whether the decision was one which a reasonable body of Commissioners could not have reached. (That is not a review officer's function. However, it is the further review decision against which this appeal is brought.) The Appellant duly lodged a notice of appeal.
5. In the aftermath of the Court of Appeal's decision in Lindsay (supra), on 2 April 2002 the Tribunal directed that a further review be carried out. No review decision having been sent to him, the Appellant telephoned Mrs Marshall, the review officer, on 6 June 2002, and was told that the case had not yet been reviewed, but that it would be done on the next day. It was received by the Appellant on 8 June 2002. He commented that that had left the review officer no more than a day and a half (after 67 days) to review the case and to digest the decision in Lindsay.

The further review

6. The review letter referred to the facts and to the correspondence. It also dealt with Article 163, explaining that that referred to commercial activities and duty suspension arrangements. Article 1 of the First Protocol of the Human Rights Convention was set out, as follows:

"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 for by law and by the general principles of international 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."

Mrs Marshall followed that by saying:

"The importation into the UK of excise goods for people who have not travelled, but who have, or will be paying for those goods, is not within the law."

The review letter then set out the relevant legislation, followed by a statement of the Customs policy on restoration of goods, including five factors the presence of any one of which would militate against restoration. The last of those factors was, "any evidence that the goods were for a commercial purpose".

7. Under the heading "Consideration", Mrs Marshall first examined whether the goods had been properly seized, and stated that the Appellant was, under the legislation, required when asked to do so to satisfy the officer that the goods were for his own use and to rebut the statutory presumption of commerciality. She continued:

"You will see from the legislation shown above, that relief from duty is afforded to goods for your own use only. However 'own use' includes gifts, provided no money or money's worth is received. Consequently, the tobacco purchased on behalf of your father who was going to pay you for it, did not qualify for relief from duty and I am satisfied that it was liable to seizure I am also satisfied that the other excise goods were liable to seizure under section 141(1)(b) of the Customs and Excise Management Act 1979 by virtue of the fact that they were found with the improperly imported tobacco.

I accept your contention that the tobacco was for your father and that he was to pay for it. I also accept that the remainder of the excise goods were either for you, or gifts for your family. However, the Commissioners' policy is that seized excise goods are only restored in exceptional circumstances and I regret that you have not demonstrated any exceptional circumstances that would lead me to depart from the Commissioners' policy.

I have considered your case in the light of the Court of Appeal case, Lindsay v Customs and Excise, but regret that case dealt only with restoration of seized vehicles and therefore does not have any bearing on the restoration of seized goods."

The decision not to restore the goods was accordingly upheld.

The law

8. Since the date of the seizure in January 2001 the law in this area has undergone considerable changes, in the wake of two Court of Appeal decisions, those in Customs and Excise Commissioners v Lindsay [2002] STC 588, [2002] 1 WLR 1766, and Customs and Excise Commissioners v The Queen (on the application of Hoverspeed Ltd and others) [2002] STC 000. In the Divisional Court in Hoverspeed ([2002] 3 WLR 1219) from which the case went to the Court of Appeal, it was held that the imposing upon an appellant, by the Excise Duties (Personal Reliefs) Order 1992 ("the 1992 Order") of the burden of proving that imported goods in excess of the indicative levels were not held for a commercial purpose was incompatible with the Excise Directive 92/12/EEC. Following that decision the 1992 Order was revoked. It was also held that it is for the Commissioners to prove that such goods are imported for a commercial purpose.
9. What is meant by "a commercial purpose" was discussed in both Lindsay and Hoverspeed. In Hoverspeed, at paragraph 65, the Court of Appeal held,

"that, if an individual acquires (or having acquired for his own use subsequently decides to hold) products for a purpose other than his own use, such products are to be regarded as held for commercial purposes."

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

(a) . . .

(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.

(d) . . .

(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 or 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."

11. 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 paragraph (1B)(e), set out above.
12. 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) . . ."

The restoration of goods or vehicles fall within the definition of "ancillary matter" as defined in Schedule 5 to the Act.

13. In order to determine whether the review decision not to restore is reasonable, the Tribunal looks at the evidence, for two reasons. First, if the evidence were to shew 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 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 against which the appeal is brought.
14. 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 Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1981] AC 22, by Lord Lane, who then said,

"[The Tribunal] could only properly [review the discretion] if it were shown that the Commissioners had acted in a way in 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."

The Commissioners' contentions

15. Mr Smith, who appeared for the Commissioners, contended that although the law was accurately set out in Lindsay, it was not relevant here as to the Commissioners' policy with respect to restoration of goods, since it dealt only with the matter of restoration of a vehicle. The minimum indicative levels had been increased since the seizure in this case, but that made little difference since the Appellant admitted that the tobacco was held for a commercial purpose.
16. The decision was not only reasonable but also fair and proportionate. Mrs Marshall considered Article 1 of the First Protocol. She found that the goods were properly seized; that being so the Commissioners had a discretion to restore them under section 152 of CEMA. It was an incorrect approach to consider that the goods which were within the indicative levels should be restored. Where goods are brought in to be passed on at cost, Mr Smith contended, to restore them would be giving hope to others that it was a worthwhile risk. There would be no adequate deterrent if all that happened was that the importer had to pay the duty, and in the end paid what he would have paid in the United Kingdom.
17. In Mitchell v Customs and Excise Commissioners (2003) (Decision No E384) the Tribunal found that the taxpayer, who had bought 2,600 cigarettes and 2 kg of tobacco for the purpose of supplying it to members of her family at cost price, had not known that what she was doing was wrong. She had admitted everything, and the Tribunal held that it was a first "offence" committed through inadvertence, the taxpayer's fault being failing to find out what the rules were beforehand. The Tribunal also held that it would have been a proportionate sanction in that case had the Commissioners required the payment of the duty owed, as was open to them to do. It was not accepted by the Tribunal that a policy of non-restoration of goods, regardless of the degree of fault and other circumstances, as a general deterrent, was proportionate. The appeal had been allowed, and a further review directed in the light of the Tribunal's findings. Mr Smith submitted that that case had been wrongly decided. In any event, he said, this Appellant had imported excise goods in excess of the indicative levels before, and had had them restored to him without condition; he did, therefore know what the rules were, and the case was distinguishable on those grounds.

The Appellant's contentions

18. The Appellant provided the Tribunal with a bundle of documents which included a statement from Mr Beal, the intercepting officer, and a news release relating to the Court of Appeal's decision in Hoverspeed. He stressed that he had told the officer the truth at all times, and that the officer, Mr Beal, had apologised for disbelieving him. The officer had said that he accepted that the Appellant had told the truth.
19. The Appellant said that Article 1 of the First Protocol of the Convention on Human Rights applied whether one was a foot passenger or travelling in a vehicle, so that it was not right to say that the decision in Lindsay referred only to cars. That case did not only refer to cars, but to the rights of individuals to their property.

Conclusions

20. We are obliged to start from the undeniable fact that the Appellant imported the tobacco for a commercial purpose. The authorities, in particular Hoverspeed, make it clear that there are only two possibilities: either excise goods are imported for the traveller's own use, or they are imported for a commercial purpose. If they are not for the traveller's own use, which includes use as a gift for which no money or money's worth is received in exchange, they are for commercial purposes. The Appellant, in this case, admitted from the start that the goods were for his father, and that his father would pay the cost price for them. The real issue in this case is, therefore, whether it was reasonable to refuse restoration notwithstanding the admitted commercial purpose.
21. The Commissioners contend that Lindsay is of no relevance here, because that case was concerned solely with restoration of vehicles and not goods. In Mitchell (supra), the Tribunal examined the decision in Lindsay, and came to the conclusion that the principles in respect of the striking of a fair balance between the interests of the state and those of the importer of the goods were stated as general principles and were not directed to the seizure of vehicles. It therefore followed that those principles were not confined to the restoration of vehicles. We therefore look to see what was held by the Master of the Rolls. His Lordship began, in paragraph 52:

"The commissioners' policy involves the deprivation of people's possessions. Under Article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is 'to secure the payment of taxes or other contributions or penalties'. The action taken must, however, strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued: Sporrong and Lönnroth v Sweden (1982) 5 EHRR 35, 50-51, para 61, and Air Canada v United Kingdom (1995) 20 EHRR 150, as cited above. I would accept [counsel's] submission that one must consider the individual case to ensure that the penalty imposed is fair. However strong the public interest, it cannot justify subjecting an individual to an interference with his fundamental rights that is unconscionable."

The Master of the Rolls referred also to the judgment of the Court of Justice in Louloudakis v Elliniko Dimosio [2001] ECR I-5547, 5596, paragraph 67:

"... it must be borne in mind that, in the absence of harmonisation of the Community legislation in the field of the penalties applicable where conditions laid down by arrangements under such legislation are not observed, the Member States are empowered to choose the penalties which seem appropriate to them. They must, however, exercise that power in accordance with Community law and its general principles, and consequently with the principle of proportionality....

. . .

The administrative measures or penalties must not go beyond what is strictly necessary for the objectives pursued and a penalty must not be so disproportionate to the gravity of the infringement that it becomes an obstacle to the freedoms enshrined in the Treaty...."

22. The Master of the Rolls continued with his conclusions:

"55 Broadly speaking, the aim of the Commissioners' policy is the prevention of the evasion of excise duty that is imposed in accordance with European Community law. That is a legitimate aim under Article 1 of the First protocol to the Convention. The issue is whether the policy is liable to result in the imposition of a penalty in the individual case that is disproportionate having regard to that legitimate aim. More specifically, did it have that effect in the case of Mr Lindsay?

. . .

57 ... The policy did not suggest that any regard should be paid to the value of the car. More significantly, in my view, it did not suggest that, save in the exceptional case referred to above, it was relevant to consider whether the goods were being imported to be distributed between family and friends or whether the importation was pursuant to a commercial venture under which the goods were to be sold at a profit."

The "exceptional case" referred to was "a first time 'technical offence' where a minimal amount of tobacco has been brought back for a relative's consumption with payment at cost". The judgment continued:

"58 In this context it is appropriate to refer to the comments of the Strasbourg court in Allgemeine Gold- und Silberscheideanstalt v United Kingdom (1986) 9 EHRR 1, 14, para 54:

'It is first to be observed that although there is a trend in the practice of the contracting states that the behaviour of the owner of the goods and in particular the use of due care on his part should be taken into account in deciding whether or not to restore smuggled goods - assuming that the goods are not dangerous - different standards are applied and no common practice can be said to exist. For forfeiture to be justified under the terms of the second paragraph of Article 1, it is enough that the explicit requirements of this paragraph are met and that the state has struck a fair balance between the interests of the state and those of the individual. The striking of a fair balance depends on many factors and the behaviour of the owner of the property, including the degree of fault or care which he has displayed, is one element of the entirety of circumstances which should be taken into account.'

59 In that case the court held that the forfeiture by the Customs of Krugerrands, which had been smuggled into the country in breach of import restrictions, did not violate Article 1 of the First Protocol."

In paragraph 64, the Master of the Rolls mentioned again the failure of the Commissioners policy to draw a distinction between the smuggler for a commercial profit and the driver importing goods for social distribution to family or friends with no attempt at making a profit. He said that even in such cases the scale of importation or other circumstances might justify seizure of the car, and continued:

"But where 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 the scale of importation, whether it is a 'first offence', whether there was an attempt at concealment or dissimulation, the value of the vehicle and the degree of hardship that will be caused by forfeiture. There is open to the Commissioners a wide range of lesser sanctions that will enable them to impose a sanction that is proportionate were forfeiture of the vehicle is not justified."

23. In Lindsay, the subject of the appeal was non-restoration of the vehicle. But it appears to us that the principles stated in that case are general principles, which were then applied to the particular case. We did not consider that those principles applied only in the case of restoration of a vehicle. The need for proportionality remains where only goods are concerned, and not a vehicle. It appears to us that the review officer has left the principles relating to proportionality and the striking of a fair balance as between the state and the individual enunciated in Lindsay out of her consideration. For that reason, we have come to the conclusion that she has left out of account a matter which she should have taken into consideration. We bear in mind that the amount imported was not large, and that the Appellant was open about the purpose for which he had imported it from the start. As to whether it was a "first offence", it was clear that the Appellant had been stopped before with a quantity of cigarettes which exceeded the then indicative level, but that his goods were restored. It would seem that the Commissioners did not regard it as an "offence", but were satisfied that the goods were for his own use.
24. For the above reasons, we allow the appeal. We direct that the Commissioners should carry out a further review in the light of this decision, and in particular paragraphs 20 to 23.

AND THIS TRIBUNAL DIRECTS

25. that the Commissioners shall carry out a further review of this case in the light of this decision
26. that the further review shall be carried out by an officer who has had no previous connexion with this case, and shall be completed within 42 days after the date of release of this decision
27. that in the event of the further review decision being adverse to the Appellant, the Appellant shall have the right to appeal against it
28. that there shall be no direction as to the costs of this appeal

ANGUS NICOL

CHAIRMAN

RELEASED: 23 May 2003

LON/2002/8169