United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E464, [2003] UKVAT(Excise) E00464

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Eatock & Ors v Customs & Excise [2003] UKVAT(Excise) E00464 (04 August 2003)

EXCISE DUTY — Respondents refusal to restore cigarettes seized from first and third appellants — whether decision not to restore reasonable — no evidence adduced by respondents showing that appellants held goods for a commercial purpose — appeals allowed

EXCISE DUTY — Respondents refusal to restore car seized from second appellant as having been used to carry first appellants' cigarettes — finding that appellant innocent of any involvement of importation of excise goods by third appellant — appeal allowed

MANCHESTER TRIBUNAL CENTRE

PHILLIP EATOCK

LILIAN EATOCK

JOSEPH SPEAKMAN Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr J D Demack (Chairman)

Mrs G Pratt

Sitting in public in Manchester on the 12 and 13 May 2003

Mr Michael Talbot, solicitor of Messrs Pearson Hinchcliffe, Oldham, for the three appellants

Mr D Mohyuddin of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

DECISION

Mr Philip Eatock and Mr Joseph Speakman each appeal against a decision of the Commissioners of Customs and Excise not to restore excise goods seized from them. Mrs Eatock appeals against a decision not to restore her car. We dealt with the appeals together as the appellants were treated by Customs as having been involved in a joint smuggling operation.

When the appeals were called on, Mr Mohyuddin, counsel for the Commissioners, submitted that we had no jurisdiction to deal with them. He observed that for the tribunal to have jurisdiction there must be a decision "on review" of an original decision not to restore goods etc, seized. He accepted that each appellant had asked the Commissioners for an original decision, but observed that they had, incorrectly, responded by making a decision said to be on review and indicated that it was appealable. Not surprisingly the appellants did appeal (and the tribunal processed the appeals). Nevertheless, he maintained that we should direct that the appeals be struck out. We pointed out that it ill became the Commissioners to pursue such a point as late as the substantive hearing, particularly when the fault was entirely theirs. Having taken instructions at our insistence, Mr Mohyuddin indicated that the Commissioners were content for the hearing to proceed on the basis that each decision appealed was "on review". We proceed accordingly.

The decision letters in the cases of Mr and Mrs Eatock were addressed to their MEP and MP respectively, their parliamentary representatives having been asked to write to Customs by their constituents. We regard that as a most unsatisfactory state of affairs, and trust it will not occur in other cases. Decision letters should be addressed to the persons concerned where they are acting in person, or to their professional representatives.

We should also mention that the excise goods and car were the subject of condemnation proceedings. Notwithstanding that magistrates condemned both goods and car as forfeit, the Commissioners later applied for the proceedings to be re-opened to enable certain additional evidence to be adduced. It would appear, and we proceed on the basis, that the proceedings were not re-opened and that the Commissioners have agreed both that the appellants may pursue their appeals against non-restoration through this tribunal, and that we should take no account of the outcome of the original condemnation proceedings .

Before considering the decisions treated as having been made on review, it is convenient to set out the facts we find from the evidence presented to us.

Shortly after noon on 18 November 2000, Mrs Eatock went to Blackpool Airport in her Peugeot 406 car to collect Mr Eatock. (He was then her husband: they have since divorced). He had travelled to Spain a week earlier with about 15 friends for a week's holiday. She parked her car on the car park before going to the lounge to await his plane's arrival.

When his flight arrived Mrs Eatock went to the "Arrivals" area. There she saw Mr Speakman, whom she knew as a friend of her husband. She asked him where her husband was. He replied, "In Customs". She realised he had been drinking.

Mr Speakman is 59 years old. He is a very sick man. He was exposed to prolonged carbon monoxide poisoning 8 or 9 years ago. It has left him with some mental incapacity, an inability to walk more than a short distance, epilepsy, asthma and other problems. In dealing with him, we found that he "half-answered" questions, and gave answers that were not at all easy to understand.

Mr Speakman told Mrs Eatock that whilst in Spain he had arranged with her husband for her to take him home, his son's car having broken down so that he, his son, was unable to collect him.

As Mrs Eatock's parking ticket was by then about to expire, she took Mr Speakman's suitcase and hand luggage, left him and went to her car. She placed his luggage in the car boot and renewed her parking ticket. On returning to Mr Speakman, and whilst awaiting the emergence of Mr Eatock ,the two went to the café for a drink.

Meanwhile, Mr Eatock had been stopped by Miss Byrom, a Customs officer, as he came through Customs. She first asked him if he was aware of the prohibitions and restrictions on importing drugs, guns, etc. He said he was and had no such items. She then asked whether he had any cigarettes, tobacco or alcohol. He replied, as per her notes, "Yes I have 52 cartons of cigarettes plus 2 bottles of whisky". As that quantity of cigarettes exceeded the then minimum indicative level of 800 for personal use, she told him she would have to question him "as to commerciality". He was told he was free to leave, but without his cigarettes. He explained that he had been abroad on holiday – "a gang of us go [to the fiesta] every year". Next Miss Byrom asked if he had receipts for the cigarettes. On his producing them, she asked if he had further goods "as the receipts showed more goods purchased than in his suitcase." At that Mr Eatock said that the receipts be someone else's as the only goods he had were in his suitcase.

The next entry in Miss Byrom's notes reads thus: "I asked again, do any of the goods that the other passenger is carrying belong to you. He said no and that he must have picked up the receipts in the apartment [where he had stayed]". That entry must be incomplete: there is nothing in it to introduce "the other passenger", and Mr Speakman had not entered into the picture at that point.

In evidence, Miss Byrom admitted, and we find (from our own examination of Mr Eatock's copy receipts), that the receipts he had were for 53 packets of 200 Lambert and Butler cigarettes and one packet of Silk Cut. (Mr Eatock had only 52 full packets of Lambert and Butler with him as he had earlier opened one. We ignore the difference between his stated 52 cartons, and the 53 he did in fact have (including one carton of Silk Cut)). Miss Byrom further admitted that she had been mistaken in alleging that Mr Eatock's receipts related to more cigarettes than he possessed, and accepted she had proceeded to deal with matters on the basis that Mr Speakman was carrying goods belonging to Mr Eatock.

Mr Eatock told Miss Byrom that he received a disability pension of £800 per month, and that his wife had a pension of about £1200 per month. He added that he had paid for the cigarettes himself, and expected them to last about a year at a consumption rate of 50 a day. He also disclosed that he had previously travelled abroad in March 2000 but said he did not return with any cigarettes as he still had some from an earlier trip.

As further evidence that Mr Speakman was carrying cigarettes belonging to Mr Eatock, Miss Byrom claimed that Mr Eatock had failed to identify Mr Speakman as he passed through Customs, although asked to do so. She did, however, accept that the failure might have been due to his having been distracted by her questions. When all the other passengers had cleared Customs, Miss Byrom asked Mr Eatock to go into "Arrivals" and identify his companion. Mr Eatock did so.

Having confirmed Mr Speakman's identity herself by inspecting his passport, Miss Byrom asked him to show her his suitcases, i.e. his luggage. He replied, "It's gone: it's gone". (This is a good example of Mr Speakman half-answering a question).

At this point in events, we have to deal with a conflict of evidence. Miss Byrom claimed and noted, "He [Mr Speakman] said he didn't have any [suitcases]. I repeatedly asked Mr S to identify his suitcases. Both he and the female he was sat with, later identified to me as Mrs Eatock (wife of Philip) both agreed that suitcases had left. I explained that it was ridiculous to believe that the suitcases had gone on their own. Only after I was persistent did they eventually [after what in evidence she estimated at some 15 minutes] say that the suitcases were in the car R802 XBV." In contrast, Mr Speakman maintained that after saying his luggage had "gone", he added that he did not know where it was, and at that point, i.e. without delay, Mrs Eatock told Miss Byrom that it was in her car. It was common ground that she then asked if she should go for it, and that Miss Byrom and another Customs' officer, Mr Long, went with her to the car, which on Miss Byrom's instructions officer Long seized. On the points of disagreement Mrs Eatock's evidence confirmed that of Mr Speakman, as did that of Mr John Gary McMahon, an independent witness who happened to be at the Airport on business and overheard the relevant exchanges. The evidence given by Mr Speakman, Mrs Eatock and Mr McMahon bears all the hallmarks of truth, and we accept it as such. We reject that of Miss Byrom.

Mr Speakman freely admitted to Mrs Byrom having 10,000 Regal Cigarettes, 400 Silk Cut cigarettes, and 1000 grams of Golden Virginia hand rolling tobacco, claiming that they were all his. Miss Byrom then noted that she said to him, "You told me outside that all these were Christmas presents", he responded, "Oh yes, some are for Christmas presents". She then said, "How much?" and he replied, "I don't know". Mr Speakman was not required to produce receipts for his excise goods, nor was he questioned about the way in which he had financed his purchases.

Miss Byrom then seized the excise goods of both Mr Eatock and Mr Speakman. She noted the following reasons for seizure of both goods and car:

" 1) Inconsistent stories with co-travellers, i.e. receipts

2) Receipts held do not agree with goods and owner

3) Vague about travelling companions

4) Mr S unsure exactly what goods were for

5) Mr S lied about whereabouts of his suitcases

6) Knowledge of law

…

Both Mr S and Mrs E denied that goods were in vehicle … Mr E was argumentative although not aggressive in any way. I further explained to him that he had confirmed to me that the receipts he produced did not relate to his goods and his explanation had been that the receipts must relate to his co-traveller's goods (prior to me questioning co-traveller). The receipts did not relate to his or co-traveller's goods. He could not explain why he held receipts for so many goods or who is carrying them."

In view of Miss Byrom's acceptance that the receipts produced by Mr Eatock related to his goods, and to no others, we may ignore her first two reasons for seizure. We have to confess to being unable to understand her third reason – vague about travelling companions – but assume it relates to Mr Eatock and refers to his alleged failure to point out Mr Speakman in Customs. In our judgment, the point takes matters nowhere. Miss Byrom's fourth and fifth reasons relate only to Mr Speakman. The fourth we presume to have a bearing on commerciality, but without properly dealing with that matter: the fifth is her personal interpretation of events which we find unsubstantiated. In evidence, Miss Byrom said of her sixth reason - knowledge of law – that she simply assumed that everyone who travelled regularly, including annual travellers, knew about the restrictions on the importation of excise goods, but admitted that she had not raised the matter with Mr Eatock or Mr Speakman. We might usefully add at this point that Miss Byrom also said that she never asked Community travellers whether they were importing excise goods for their own use for she "knew what the answer to such a question would invariably be".

Miss Byrom directed the seizure of Mrs Eatock's car because "both Mr S and Mrs E denied that his goods were in the vehicle". We are unable to find any evidence whatsoever of such a denial either in Miss Byrom's notes or in her evidence; and neither Mr Speakman or Mrs Eatock made such an admission in evidence. Consequently, we find that Mr Speakman and Mrs Eatock did not deny that the former's goods were in the latter's car.

Whilst, for the reasons we have just given, we have doubts about the validity of the seizures, since, as the Court of Appeal observed at para 57 of its judgment in R (Hoverspeed Ltd & Others) v CEC [2003] 2 WLR 950, "courts should be reluctant to interfere on the facts with decisions by Customs whether to seize . . .", we proceed on the basis that they were valid.

We make the following further findings of fact:

1) Mr Eatock purchased the excise goods he declared for himself with his own money, and not on behalf of any other person;

2) He imported his cigarettes for his own use;

3) Mr Speakman purchased the excise goods he declared for himself with his own money, and not on behalf of any other person;

4) Mr Speakman imported his cigarettes for his own use;

5) Mrs Eatock did not know the contents of Mr Speakman's suitcase and handbag until after they were seized by Customs (In evidence, Miss Byron admitted she had no proof that Mrs Eatock knew those contents).

6) Mrs Eatock was completely blameless in events: she did not hinder Miss Byrom in any way, but rather assisted her;

7) Mrs Eatock bought the Peugeot car for £8,995 on 1 June 2000;

8) If the goods imported by Mr Speakman were held for a commercial purpose, they attracted UK excise duty of £1,527.45;

9) If the goods imported by Mr Eatock were held for a commercial purpose, they attracted UK excise duty of £1,430.41;

10) Mr Speakman's social life consists in his being taken to a local bingo club by his relatives when those attending take it in turn to pay for the whole evening's entertainment, i.e. not only for entrance fees etc, but also for drinks. A night's entertainment for the group usually costs Mr Speakman £15;

11) Mr Speakman's income consists of incapacity benefit, disability living allowance and mobility allowance. (Figures Mr Speakman gave in evidence of those three items were £87 per week, £270 per month and £40 per week respectively. We believe the figures to be those currently payable, but they are unlikely to be much different from those payable at the end of 2000). He made no claim to have any capital. He has no liability for rent of the flat in which he lives, his only regular expenses being those for gas, electricity and food.

12) Mr Speakman's excise goods cost approximately £700. He has a Barclaycard account. The statement for the account produced to us shows that he had an account balance of approximately £600 in mid November 2000, and a credit limit of £1,250. He thus had readily available credit facilities approaching the full cost of his goods. We therefore find that he had the ability to pay for them. (From the statement it would appear that the minimum payment on a balance of £1,250 would have been £36 per month – a figure we consider Mr Speakman could have afforded).

No evidence was adduced by the Commissioners to indicate that Mr Eatock had pre-financed Mr Speakman's purchases, or that arrangements were in place for Mr Eatock subsequently to finance those purchases. In its absence, and in view of denials of any such arrangements by Mr Eatock and Mr Speakman, we find that there were no such pre-financing or post-financing arrangements in place.

Miss Logan's review in each case is dated 29 December 2000. Although she wrote a letter in relation to each appellant, the core content of all three is the same, so that we are able to deal with them together.

We first comment on the following two sentences of Miss Logan's decision relating to Mr Eatock.

"He was asked whether he was aware of the prohibitions and restrictions to which he replied he was and held nothing. He then told the officer he was carrying 52 cartons of cigarettes plus 2 bottles of whisky".

Those sentences convey the impression that initially Mr Eatock was less than honest with Miss Byrom. But, as we earlier found, when Miss Byrom asked about his awareness of prohibitions and restrictions, it was in the context of drugs, guns, etc, and not tobacco and alcohol. We find that Mr Eatock correctly and honestly answered Miss Byrom's question about "prohibitions and restrictions".

Miss Logan then dealt with the other events of 20 November 2000 as noted by Miss Byron, so that she interpreted the events upon which we had conflicting evidence as Miss Byrom had done. Miss Logan upheld the seizure of the excise goods and indicated that they could not be restored to Mr Eatock and Mr Speakman, saying:

"They [the cigarettes held by Mr Eatock] were seized as liable to forfeiture under section 139 of the Customs and Excise Management Act 1979. There were inconsistent stories with the co-travellers regarding quantities of goods and receipts. The receipts did not agree with the owners or the goods with no explanation for this. Mr Speakman was unsure exactly what his goods were for and he lied about the whereabouts of his suitcases. It was unclear who had paid for the goods and who was carrying the additional goods shown on Mr Eatock's receipts. The officer was not satisfied that each traveller had paid for, and was able to pay for, his own goods and that they were to be used solely by that person for his own use or as the gift for another."

Thus, Miss Byrom's mistake about Mr Eatock's receipts was carried through to the decision treated as that on review. We are in no doubt, and repeat our earlier finding, that Mr Eatock paid for all the excise goods he declared, and that there were no "additional goods" on his receipts.

We are also in no doubt that Mr Eatock did not pay for the goods Mr Speakman declared. The Commissioners adduced no evidence even to indicate that some other third party might have paid for them and, in its absence, we confirm that Mr Speakman paid for his own excise goods. (We accept as we have already found, that Mr Speakman never produced receipts for his goods, but he was never asked to do so).

When Miss Logan said, "Mr Speakman was unsure exactly what his goods were for" she relied on Miss Byrom's note to the effect that Mr Speakman, having first said that all his excise goods were intended as Christmas presents, then said that only some were so intended, and was unable to indicate the quantity concerned. No evidence was adduced to satisfy us that Mr Speakman indicated an intention to make gifts of all his cigarettes and, in its absence, we are not prepared to find that he had such an intention. But even if we were prepared so to find, making such gifts would have constituted "own use" of the cigarettes. What Mr Speakman did not say was that he intended to deal with the excise goods he had otherwise than in a way permitted to an importer for his own use.

From Mr Speakman's evidence, we infer that smoking is an integral part of his and his relatives social lives, so that we have no doubt that gifts of cigarettes by him will be habitual.

Mr Speakman did not "lie about the whereabouts of his suitcases". When asked where his luggage was, he said, "It's gone". That was a perfectly truthful, if incomplete, answer to Miss Byrom's question.

It is quite plain that, once Miss Byrom had concluded that the receipts held by Mr Eatock were for more excise goods than he held, she proceeded on the assumption that he and Mr Speakman were smugglers, and construed every action on their part in that light. So too did Miss Logan. And when it became clear that Mrs Eatock was to transport the two home, her involvement in the smuggling operation was simply assumed by both officers.

Miss Logan gave the following reason for refusing to restore Mrs Eatock's car:

"Due to these circumstances I am not satisfied that the goods were not to be used for a commercial purpose and I uphold their seizure. The cigarettes and tobacco will not be returned to either Mr Eatock or Mr Speakman.

Both Mr Speakman and Mrs Eatock denied for a long period of time that the goods were in the vehicle, R802 XBV. I can only conclude that the reason for this was because they were aware that the goods would be liable to forfeiture. Indeed it was unclear, because of the receipts, where all the goods were and who exactly the purchaser was. The vehicle was therefore seized because Mr Speakman's suitcases containing cigarettes and hand rolling tobacco were in the car and were believed to before a commercial which is illegal. The car was also to be used for Mr Eatock's goods which are also liable to forfeiture. The car was being used for the carriage, handling, deposit and concealment of cigarettes and tobacco goods liable to forfeiture. I agree with the Officer's decision and uphold the seizure of the vehicle and it will not therefore, be restored to Mrs Eatock."

We earlier found that neither Mr Speakman nor Mrs Eatock "denied for a long period of time that the goods were in the vehicle". We have dealt with the purchase of all the excise goods, and need not repeat our findings in that behalf.

Following the decision of the Divisional Court in the case of R (Hoverspeed Ltd and others) v CEC [2002] 3 WLR 1219, which in this respect was not appealed, it is for the Commissioners to prove on the balance of probabilities that Community travellers importing excise goods for their own use which they have personally transported are held for a commercial purpose. None of the reasons given for seizure or for the refusal to restore the excise goods go anywhere near satisfying us that those goods were held for a commercial purpose by Mr Eatock or Mr Speakman.

And notwithstanding the large number of cigarettes each was importing, since the commissioners adduced no evidence to show that either held or intended to use his cigarettes for a commercial purpose, we are unwilling to hold that they were held for that purpose.

There are further points we must make about the non restoration of Mrs Eatock's car.

It will be recalled that in the relevant paragraph of the decision on review, Miss Logan said that one of her reasons for upholding the seizure of the car was that it "was also to be used for Mr Eatock's goods which are also liable to forfeiture". Section 141(1)(a) of the Customs and Excise Management Act 1979 provides for the forfeiture of a vehicle etc "which has been used" (our emphasis) for the carriage etc of a thing liable to forfeiture. In the instant case, the only goods the car "had been used" to carry were those of Mr Speakman, Consequently, Mr Eatock's goods may be ignored for present purposes.

In CEC v Ian Newbury [2003] EWHC 702 (Admin), the Divisional Court dealt with a case where Customs forfeited a car used to transport chargeable goods. The Court observed that there was a countervailing right under art 1 of protocol 1 to the European Convention on Human Rights:

"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 the 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."

Lord Phillips MR considered that article in his judgment in Lindsay v CEC [2002] 1 WLR 1766, saying this at para 52:

"The commissioners' policy involves the deprivation of people's possessions. Under art 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 and proportionality between the means employed and the aim pursued (Sporrong and Lönnroth v Sweden (1982) 5 EHRR 35, para 61; Air Canada v United Kingdom (1995) 20 EHRR 150, para 36). I would accept Mr Baker'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."

At para 64 of his judgment, Lord Phillips said that each case must be considered on its particular facts, including scale, whether it was a first offence, whether there was any attempt at concealment or dissimulation, the value of the vehicle, and the degree of hardship caused.

Even had we been satisfied that Mr Speakman was smuggling excise goods into the country, there is no evidence whatsoever to connect Mrs Eatock with his activities. She was blameless.

The scale of Mr Speakman's importation consequently plays no part in Mrs Eatock's appeal. Hers was a first "offence". There was no attempt at concealment or dissimulation.

It will also be recalled that we earlier found that Mrs Eatock bought the car for £8995 on 1 June 2000, and that excise duty which might have been due on Mr Speakman's goods was £1,527.45. Ignoring depreciation on the car, and working in round figures, the tax due would have been one-sixth of the value of the car – yet restoration of it was refused on any terms

No evidence was adduced of any exceptional hardship suffered by Mrs Eatock as the result of being deprived of her car.

We are in no doubt whatsoever that the Commissioners' action in seizing Mrs Eatock's car was Wednesbury unreasonable. Furthermore, bearing in mind the relative values of the car and the duty of Mr Speakman's cigarettes, it was disproportionate.

We allow all three appeals.

Our jurisdiction is restricted to directing the Commissioners to carry out a new review of their decisions not to restore Mr Eatock's and Mr Speakman's goods, and Mrs Eatock's car. We direct that at that review, the reviewing officer (who shall not be Miss Logan) take account of the findings of fact we have made, and our conclusion that the relevant excise goods were not imported for a commercial purpose. The reviews shall be conducted by 31 August 2003, and a copy of each shall be sent to the Manchester Tribunal centre.

We award the appellants their costs.

David Demack

Chairman

Release Date:

MAN/01/8018

MAN/01/8019

MAN/01/8020