United Kingdom VAT & Duties Tribunals (Excise) Decisions

 


Bailey v Customs and Excise [2003] UKVAT(Excise) E00592 (08 December 2003)

E00592

EXCISE DUTY — seizure of cigarettes and tobacco — whether for own use — no — whether refusal to restore vehicle reasonable — no — appeal allowed in part

MANCHESTER TRIBUNAL CENTRE

KAREN BAILEY Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Lady Mitting (Chairman)

Mr R Grice (Member)

Sitting in public in Birmingham on 22 October 2003

Mrs Karen Bailey appeared in person

Mr W Baker of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1. The decision under appeal is that of the Commissioners to refuse restoration of a vehicle L107 NHP and excise goods consisting of 18 kilograms of hand rolling tobacco, 3,200 cigarettes, 2 litres of spirits and 24 litres of beer. The goods were seized at Eastern Dover Docks on 21 July 2001. Mrs Bailey's original appeal had been allowed, at the request of the Commissioners, by the tribunal on 1 November 2002 in the light of R (Hoverspeed and others) v Customs and Excise Commissioners [2002] EWCA 1804 and a further review was directed. That review, dated 7 January 2003 upheld the refusal to restore and is the decision under appeal before us.
2. Witness statements had been served by the Commissioners and as no objection had been raised no evidence was called on behalf of the Commissioners. Mrs Bailey gave evidence under oath. It was accepted by the Commissioners that the seized vehicle belonged not to Mrs Bailey but to her mother Mrs Nicklin and it was further accepted by the Commissioners that Mrs Bailey was entitled to claim restoration of the vehicle within her own appeal, Mrs Nicklin having recently died.
3. Mrs Bailey told us that she and two friends had travelled on the morning of the 21 July from their home in Kidderminster, catching the 6:30 a.m. ferry. Mrs Bailey was 7 and a half months pregnant at the time and the purpose of her journey when it had been booked had been to buy baby clothes. The booking had been a special offer costing £20 for the vehicle and three travellers. By the time they went, however, Mrs Bailey's family had bought for her everything she could possibly need for the baby rendering the original purpose of the trip unnecessary. This is not as strange as it might seem as Mrs Bailey's family was an exceedingly large one, her mother being one of eight and her father one of eleven. Having already made the booking however, Mrs Bailey decided to keep it and instead of buying baby clothes, the three ladies made the trip to buy cigarettes, tobacco and alcohol. From Calais they travelled to Adinkerke in Belgium where they all went their separate ways buying what they each wanted. The tobacco and the alcohol were bought in Belgium, the cigarettes being bought on the ferry on the way home. Mrs Bailey told us that the lock on the boot of her car was defective and the boot could not be opened. All the goods were therefore piled into the back of the car on the seat and the floor. When they returned to Calais, immigration officials were checking each vehicle and they insisted that the boot was opened. Mrs Bailey had to break the lock with a screwdriver but having thus got the boot open, they transferred all (or so, we were told, they thought) the goods into the boot.
4. At Dover, the vehicle was intercepted and the travellers questioned. Questioning was exceedingly brief and none of them appear to have been questioned individually. The officer ascertained where they had been and asked Mrs Bailey "How much have you got?", to which Mrs Bailey's recorded reply was "20 packs … between us". A few questions later he asked again and was told 25 packs. The officer then counted 36 packs of which "one pack and 400 cigarettes" were found under the front passenger seat. Mrs Bailey was adamant that this mis-records what was under the seat. She told us it was one item containing two packs, sealed together, of 400 cigarettes in total. The only other question asked by the officer was whether the car was Mrs Bailey's to which she replied it was her brother's. The officer then seized the car and goods, his recorded reasons being excess mils, goods concealed, under declaration and multi-brands.
5. In her oral evidence Mrs Bailey told us that she had given conflicting and incorrect answers to the amount of goods because first she was confused as to the units of quantity to which the officer was referring. She didn't know whether he meant how many kilograms or how many packs. She also told us that she did not know the precise quantities because they had each bought their own goods separately, piled them into the back of the car and then at Calais "thrown" them into the boot. The package found under the front seat must have been left behind unnoticed in the transfer. Mrs Bailey told us that she had told the officer the car was her brother's because her brother lived at home with their parents and he used the vehicle a lot. However immediately after the seizure, Mrs Bailey rang her mother from the terminal and told her what had happened. Mrs Nicklin told her that the vehicle was in fact hers. Mrs Bailey went back to speak to a senior officer and explained to him that the vehicle was her mother's, her mother being disabled, and in fact the vehicle did have a special disabled drivers tax disc. Mrs Bailey found the officer to be totally disinterested. That she spoke to a senior officer is recorded in the seizing officer's notebook but what was said is not recorded. Mrs Bailey and her friends then left the terminal.
6. Mrs Bailey told us that about 10 kilograms of the tobacco were for her. She did not smoke it herself as she was a cigarette smoker but a great number of her extended family did. She intended to give all of the tobacco away both as a thank you to those family members who had bought baby equipment for her and also because a number of her relatives travelled abroad on shopping trips and it was accepted practice within the family that they would all buy for each other. Her purchases were therefore to be, at least in part, in exchange for excise goods she had been given in the past and would be in the future. Hence the number of different brands purchased. Mrs Bailey told us that she knew there were no limits on the amounts which could be brought into the UK for one's own use and she believed that both her reasons for purchase would count as "own use". We heard no evidence as to what the other two travellers intended doing with their goods.
7. Mrs Bailey told us that her mother had had cancer and was by the time of these events too ill to drive herself. During the week, Mrs Bailey acted as her mother's carer and, in this role, she took her mother to Wolverhampton to her regular chemotherapy and radiotherapy treatments. Mrs Bailey did not herself have a car at the time and they would almost always use Mrs Nicklin's vehicle. We were told that Mr Nicklin had a company car which he used for work and we understand there was one other vehicle in the Nicklin household used by Mrs Nicklin's son.
8. Immediately after the seizure Mrs Bailey wrote an undated letter requesting the immediate return of the vehicle. She explained in her letter that the vehicle belonged to her mother who was reliant upon it as she was disabled with breast and bone cancer and had to be taken for regular hospital and medical appointments. She explained about the transfer of goods from the body of the car to the boot and that there had been no attempt to hide any of them. She explained that her family had purchased all she needed for her baby and she was "returning the favour". Mrs Nicklin also wrote advising of her illness and her reliance on the car. Restoration was refused by letter dated 13 August 2001. A review was requested by letter dated 24 September 2001 in which Mrs Bailey forcefully denied any concealment of the goods or any wilful underdeclaration. She went on to say her mother was, as a result of the seizure, housebound. Restoration was again refused.
9. The review letter which forms the basis of this decision was written by Mr R Brenton. In the letter he set out legislation and departmental policy on restoration. He cited the differing answers given my Mrs Bailey in interview as to the quantity of goods and the package found under the front seat. He stated the opinion that Mrs Bailey had "deliberately lied to the officer to deceive him" and had "exacerbated the deceit by informing the officer that the vehicle belonged to your brother". The vehicle and goods had thus been rightly seized because of her "actions of false declaration and concealment". He believed she had provided no exceptional circumstances to dis-apply the Commissioners' policy.
10. In considering any hardship to Mrs Nicklin caused by the seizure, Mr Brenton had ascertained that four vehicles were "available for your and your mothers use". He then listed a Vauxhall which was registered to Mrs Bailey's husband at the Baileys' home address; a Ford Fiesta registered in Mrs Bailey's name acquired in October 2001; a Motability Hyundi registered to Mrs Nicklin and a Peugeot acquired in December 1998 registered in the name of David Nicklin. Mr Brenton concluded from this that the claim of hardship was "invalid".

Legislation

11. At the time of seizure and the review decision, the Excise Duty (Personal Reliefs) Order 1992 provided that a traveller bringing excise goods into the UK in quantities in excess of a minimum indicative level had to satisfy the Commissioners that the goods were for own use, "own use" being defined as:

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

12. If the traveller failed to so satisfy the Commissioners, the goods were treated as being held for a commercial purpose and UK duty became payable on them. At the time of the seizure the level for cigarettes was 800 and for hand rolling tobacco, 1 kilogram.
13. This definition of "own use" has been upheld. It has also been held that if family and friends are reimbursing on a not for profit basis then this is nevertheless commercial and duty is payable (Lindsay v Customs and Excise Commissioners 2002 1WLR 1766). Following the decision in Hoverspeed, the Commissioners have accepted that the burden of proof should not be upon the traveller to satisfy the Commissioners that the goods were not for commercial purpose but rather upon themselves to show that the goods were held for such purpose.
14. The Commissioners are empowered by the Customs and Excise Management Act 1979 ("CEMA") section 49 to forfeit dutiable goods which have been imported or held without payment of duty. Section 141(1) empowers the Commissioners to seize any goods, mixed, packed or found with the dutiable goods and also any vehicle in which the goods are being carried. Section 152(b) CEMA allows the Commissioners as they think fit to restore any goods which have been seized. A review and appeal procedure from decisions of the Commissioners is set out in sections 15 and 16 of the Finance Act 1994. A holder of goods may appeal against a review decision of the Commissioners taken under section 15 to the tribunal. The tribunal's jurisdiction is set out in section 16(4) in the following terms:

"In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at, 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 direction of the tribunal, a further review of the original decision; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.

15. In exercising its jurisdiction, the test of reasonableness requires the tribunal to ask whether the decision was one which no reasonable panel of Commissioners could have come to; whether some irrelevant matter had been taken into account; whether some matter which should have been taken into account had been ignored or there had been some error of law.

Submissions

16. Mr Baker submitted that only bona fide gifts were allowed into the UK free of duty. If the "gift" was to be passed on in recompense for a provided service or in payment for goods then that was not a bona fide gift within the definition of "own use". He stressed the levels of the importation, the differing brands, the different declarations as to quantity and submitted that the importation was for commercial use. In the light of Lindsay he also submitted that refusal to restore was reasonable. The vehicle was worth between £1,500 and £1,800 whereas the duty evaded was in the region of £2,000.
17. Mrs Bailey's case was that the goods were purchased for her own use and that in giving the goods away to her family for the reasons described, this fell within own use.

Conclusions

18. Pursuant to the case of Gora and others v Commissioners of Customs and Excise [2003] EWCA Civ 525, the tribunal is not concerned with whether the goods and vehicle were properly seized and forfeited. They are deemed to have been so, in this case by virtue of Mrs Bailey not having sought condemnation proceedings. Our jurisdiction is limited to considering restoration. However, we feel it is important that we make findings of fact with regard to the events surrounding the seizure as these are relevant to the reasonableness of the Commissioners' refusal to allow restoration.
19. We found Mrs Bailey to be a truthful and straightforward witness. It is unfortunate she gave differing answers to the seizing officer as to the amount of goods carried but we accept that she genuinely did not know the quantities involved because she had not known how much her friends had brought in. We also reject the Commissioners' assumption that one pack had been deliberately hidden under the passenger seat. We can easily understand how in the transfer of the goods one pack could have been overlooked. We do not believe Mrs Bailey deliberately lied to the officer or deliberately attempted to conceal anything. Certainly Mrs Bailey told the officer, incorrectly, that the vehicle belonged to her brother. We were given no satisfactory explanation as to why she did so but, unlike Mr Brenton, we do not see this as further evidence of deceit. No useful purpose was served by the inaccuracy and we also accept that Mrs Bailey rectified the error by telling the senior officer, after she had phoned her mother. This was her evidence. That she spoke to a senior officer is recorded in the seizing officer's notebook. Mrs Bailey also referred to it in her correspondence to the Commissioners and it is worth noting that neither of the reviewing officers sought to contradict the assertion.
20. However, even having accepted Mrs Bailey's evidence as to the nature and purpose of the importation, we cannot accept her submission that the purpose fell within own use. What we have is involvement in an, albeit within the family, arrangement whereby family members who take regular trips abroad supply themselves and each other with duty free goods. This in our mind is tainted with commerciality. We accept the goods are not sold at a profit and probably not even at cost. The chances are that no money ever changes hands but there is undoubtedly a commercial element because Mrs Bailey is in effect paying for similar favours which she has received in the past and will receive in the future. That is just the way the arrangement worked. We find therefore that the tobacco purchased by Mrs Bailey was not purchased by her for her own use within the definition contained in the Personal Reliefs Order. It was thus liable to UK duty and consequently to forfeiture. Pursuant to section 141 CEMA the remainder of the goods and the vehicle were also rightly forfeit.
21. The goods must remain forfeit and there can be no justification for their restoration. In respect of the goods we believe the reviewing officer was perfectly reasonable in refusing restoration. However, in respect of the vehicle, different considerations apply. We have to consider what the level of commerciality was and we refer ourselves to paragraphs 63 and 64 of Lindsay:

"[63] Having regard to these considerations, I would not have been prepared to condemn the commissioners' policy had it been one that was applied to those who were using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at profit. Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles. Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration. Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance. Cases of exceptional hardship must always, of course, be given due consideration.

[64] The commissioners' policy does not, however, draw a distinction between the commercial smuggler and the driver importing goods for social distribution to family and friends in circumstances where there is no attempt to make a profit. Of course even in such a case, the scale of importation, or other circumstances, may be such as to justify forfeiture of the car. But where the importation is not for the purpose of making profit, I consider that the principle of proportionality requires that each case should be considered on its particular facts, which 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 cased 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 where forfeiture of the vehicle is not justified."

22. The importation in this case brought no monetary profit to Mrs Bailey. The goods were not passed on outside the family and this was not, however it is looked at a smuggling venture. In our findings of fact we have rejected the suggestion that there was a concealment or deceit by Mrs Bailey. Mr Brenton did not in his letter say whether he considered proportionality although he does refer to being drawn by the words of Lord Phillips and Lord Justice Judge in the case of Lindsay so by implication he did. In this event he must clearly have taken the view that the refusal to restore was proportionate. We think that given our findings of fact, this was not a reasonable view to take.
23. We also consider that Mr Brenton's view that the hardship claim was invalid was not a reasonable view to take. He justifies his claim by citing the four vehicles which at the time of his review were held by the family. It is unfortunate that he did not put the question of these vehicles to Mrs Bailey or Mrs Nicklin before incorporating it into his review. Had he done so he would have realised that it is a distortion of the position as it was at the time of the seizure. Mrs Bailey's Fiesta was not purchased until several months later – as indeed was apparent to him from the records. The Motability vehicle was acquired by Mrs Nicklin almost a year later. Again it would have been apparent from its registration number that it could not have been purchased before April 2002. The Peugeot in David Nicklin's name could have belonged to either Mrs Bailey's father or brother both of whom were called David but it would not have necessarily been available to Mrs Nicklin upon the daily basis for which she needed a vehicle. Mr Paul Bailey's car was kept by him at his home and is quite irrelevant to the needs of Mrs Nicklin. It is our view that Mr Brenton did not pay nearly enough regard to the hardship caused to Mrs Nicklin by the seizure and he ought to have given the hardship very much greater weight in considering whether the vehicle should be restored.
24. There is one further point which has never been addressed and that concerns Mrs Nicklin's knowledge of the trip. Mrs Bailey said her mother, as she could no longer driver the vehicle herself, allowed Mrs Bailey and her brother free use of the car. This was especially so for Mrs Bailey who cared for her mother all week and who had no vehicle of her own. In answer to a question from the tribunal, Mrs Bailey said her mother would have known she had the car on the day in question but did not know that she was using it to go abroad. Mr Baker did not challenge this statement by Mrs Bailey and we see no reason to doubt its truth. It is unfortunate that neither Mrs Bailey nor Mrs Nicklin mention ed it in correspondence – perhaps they hadn't realised its relevance – but equally it is unfortunate that neither of the reviewing officers took it up with them. Mr Baker did not address the point in his submission but we believe it to be relevant and it only adds to our view that the refusal to restore the vehicle was disproportionate.
25. In summary therefore, we believe that in so far as the vehicle was concerned, Mr Brenton's refusal to restore it was an unreasonable decision as he failed to have sufficient regard to proportionality.
26. The appeal is therefore allowed in respect of the vehicle and in accordance with our jurisdiction, we direct that within 6 weeks of the release of this decision, a further review should be carried out by an officer who has had no previous involvement with the case, such review taking note of the findings and views expressed in this decision.
27. We make no order as to costs.

LADY MITTING

CHIARMAN

Release Date: 8 December 2003

MAN/03/8085