United Kingdom VAT & Duties Tribunals (Excise) Decisions

Franklin & Anor v Customs and Excise [2004] UKVAT(Excise) E00616 (22 February 2004)

E00616

EXCISE DUTY - refusal to restore vehicle and excise goods - whether excise goods for personal use of Appellants - no -whether held for commercial purposes - yes - whether Tribunal satisfied that the person making the decision not to restore the vehicle and goods could not reasonably have arrived at it - no - appeal dismissed - Council Directive (EEC) No. 92/12; The Excise Duties (Personal Reliefs) Order 1992 SI 1992 No. 3155; The Excise Goods, Beer and Tobacco Products (Amendment) Regulations) 2002 SI 2002 No. 2692; CEMA 1979 s152(b); FA 1994 S16(4)

LONDON TRIBUNAL CENTRE

IAN LAWSON FRANKLIN AND GERARD COAKLEY

Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: DR NUALA BRICE (Chairman)

MRS E M MACLEOD CIPM

MR R S SURI

Sitting in public in London on 28 November 2003

The Appellants in person

Robert Keller of Counsel, instructed by the Solicitor for Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

The appeal

1. Mr Ian Lawson Franklin and Mr Gerard Coakley (the Appellants) appeal against a decision on review dated 7 June 2001. The review decision confirmed an original decision dated 14 March 2001 which was to refuse to restore seized excise goods and a vehicle. The excise goods were seized because Customs and Excise were of the view that they were held by the Appellants for commercial purposes. The Appellants appealed because they argued that the excise goods were for their personal use.

The legislation

2. Council Directive (EEC) No. 92/12 provides that, where excise goods are acquired by private individuals for their own use and transported by them, excise duty is charged in the member state in which they are acquired. However, if any excise goods are held for commercial purposes in another member state then duty is due in that state from the holder of the goods. Thus where excise goods are purchased in another member state and imported into the United Kingdom no excise duty is due if the goods are for personal use but duty is due if the goods are held for commercial purposes.
3. The provisions of the directive were originally implemented in the United Kingdom by The Excise Duties (Personal Reliefs) Order 1992 SI 1992 No. 3155 (the 1992 Order). The 1992 Order was in force both at the date of the seizure and at the date of the decision on review. Article 3 provided that a Community traveller entering the United Kingdom was relieved from payment of excise duty on excise goods which he had obtained for his own use. Article 5 provided that there would be no relief if the excise goods were held or used for a commercial purpose. In determining whether or not excise goods were held for a commercial purpose regard had to be had to a number of factors including the quantity of the goods. If the quantities were in excess of the amounts mentioned in the Schedule then Customs and Excise could require the traveller to satisfy them that the goods were not being held or used for a commercial purpose. The quantities of tobacco products mentioned in the 1992 Order were 800 cigarettes, 400 cigarillos, 200 cigars and 1 kilogram of smoking tobacco.
4. Since 1 December 2002 the provisions of the directive have been implemented by The Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 (the 2002 Regulations). Article 4 applies to tobacco products and provides that, 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. In determining whether tobacco products are held or used for a commercial purpose, regard shall be taken of a number of factors including the quantity of the products and, in particular, whether the quantity exceeds 3,200 cigarettes; 400 cigarillos; 200 cigars; and three kilograms of any other tobacco products.
5. Section 49 of the Customs and Excise Management Act 1979 provides that goods which are imported without payment of duty are liable to forfeiture. Section 141(1)(a) provides that, where a thing has become liable to forfeiture, then any vehicle used for the carriage of that thing is also liable to forfeiture. Section 139(1) provides that anything liable to forfeiture may be seized by a Customs Officer. Section 152(b) provides:

"The Commissioners may, as they see fit- …

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under [the customs and excise] Acts … ."

6. Section 16 of the Finance Act 1994 (the 1994 Act) provides that an appeal shall lie to the Tribunal against a decision on review under section 15. Section 15 provides for the review of decisions which come within section 14. Section 14(1)(d) includes any decision specified in Schedule 5. Paragraph 2(1)(r) of Schedule 5 specifies any decision under section 152(b) "as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions subject to which any such thing is so restored."
7. Thus, although section 152(b) gives Customs and Excise a discretion as to whether or not to restore seized vehicles or goods, sections 14 to 16 of the Finance Act 1994 give a right of appeal to the Tribunal against a refusal to restore or the conditions of restoration. However, section 16 limits the jurisdiction of the Tribunal in respect of ancillary matters. Section 16(8) defines ancillary matters as those specified in Schedule 5. As a refusal to restore and the conditions of restoration are specified in Schedule 5 they are, therefore, ancillary matters. The relevant parts of section 16(4) provide:

"16(4) 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 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) 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 the future."

The issues

8. The issues for determination in the appeal were:

(1) whether the excise goods were held for the personal use of the Appellants (as argued by the Appellants) or for commercial purposes (as argued by Customs and Excise) within the meaning of the directive, the 1992 Order and the 2002 Regulations;

(2) whether, in the light of its findings on issue (1), the Tribunal was satisfied that the person making the decision not to restore the vehicle and the excise goods could not reasonably have arrived at that decision within the meaning of section 16(4) of the 1994 Act; and, if so,

(3) what action the Tribunal should take under section 16(4) of the 1994 Act.

The evidence

9. Oral evidence was given on behalf of the Appellants by Mr Franklin and Mr Coakley. Mr Franklin produced at the hearing written statements made by his mother Mrs Mabel Franklin, his wife Mrs Elena Franklin and his son Mr Robbie Franklin. Each statement stated that over a period of years Mr Franklin had purchased tobacco and cigarettes for the writer of the statement who paid no money for the goods. In deciding what weight to give to this evidence we bore in mind that these witnesses did not attend the hearing and so were not available to be questioned.
10. Oral evidence was given on behalf of Customs and Excise by Mr Gary Nicholls, an Officer of Customs and Excise, who interviewed Mr Coakley on the day of the seizure; by Ms Rebecca Todd, an Officer of Customs and Excise, who interviewed Mr Franklin on the day of the seizure and who made the decision to seize the vehicle and goods; and Ms Gloria Elizabeth Hepburn, an Officer of Customs and Excise who made the review decision the subject of the appeal. A bundle of documents was produced by Customs and Excise.

The facts

11. From the evidence before us we find the following facts.
12. On 20 January 2001 Mr Franklin was at Dover Hoverport. He was driving vehicle registration number P507 GMC and Mr Coakley was his passenger. They were stopped by Officers of Customs and Excise and were asked some questions.
13. Both Mr Franklin and Mr Coakley confirmed that they travelled together "now and again". They had been friends for a few years. They met up to travel and shop but not otherwise. Mr Coakley had telephoned Mr Franklin to arrange the trip.
14. Mr Franklin said that 30 packets (1.5 kilograms) of Old Holborn hand rolling tobacco and 120 packets (6 kilograms) of Golden Virginia hand rolling tobacco belonged to him. He also said that he had 4 cartons (800) of Superkings cigarettes for his mother who had not paid him. Mr Franklin said that he smoked Golden Virginia and that the 1.5 kilograms of Old Holborn was for his son. He also had some wine and some chocolate. He had spent in the region of £400. Mr Franklin said that he smoked about 20 cigarettes each day from the Golden Virginia tobacco and that a pouch of tobacco would last him a week and a half. The excise goods he had imported would last him "past summer". He said that he had last travelled to France one month previously and that he had travelled four to five times in the previous year. He had purchased "a box and a bit" on the previous occasion and most of this tobacco was still in his possession. He confirmed that he was employed as a stock taker and earned about £1,200 each month of which £180 was disposable income each month. He had paid for the excise goods in cash from his wages. He knew about the guidelines but said that he had no intention of receiving any money for the excise goods.
15. Mr Coakley said that 4,000 cigarettes (3,000 Silk Cut and 1,000 Superkings) were his but none of the hand rolling tobacco. He also had two bottles of whiskey (70 cl each). He said that he had travelled on the ferry two years previously and that this was his first trip on the Hovercraft. He had last travelled through the tunnel before Christmas (when he had bought 3,000 cigarettes) and before that in July 2000 (when he had bought 2,000 cigarettes). .He knew about the guidelines.
16. The Customs Officers established that the total importation amounted to 5,800 cigarettes and 11.5 kilograms of hand rolling tobacco. There were also 18 litres of wine and one bottle each of gin, brandy and whisky. The duty on the hand rolling tobacco was £1,093.88 and on the cigarettes was £789.88. The decision was made to seize the car and the excise goods. The reasons for the seizure were: that both Appellants had knowledge of the guidelines; that the quantity of excise goods exceeded the guidelines; that the stories of the Appellants were inconsistent and did not explain the ownership of all the goods; that the amount spent by Mr Franklin was large compared with his disposable income; and that some of the goods were not claimed by either Appellant.
17. Mr Franklin wrote on 22 February 2001 requesting restoration of his car. This was refused. Mr Coakley also requested the restoration of his goods and this was refused by letter dated 14 March 2001. On 25 April 2001 Mr Franklin's representatives requested a review of the decision relating to him and the review decision was given on 7 June 2001 by Ms Hepburn. That is the decision the subject of the appeal.
18. In conducting her review Ms Hepburn took into account that Mr Franklin claimed to own 7.5 kilograms of the hand rolling tobacco and Mr Coakley claimed none. However, 11.5 kilograms had been imported and that was 11.5 times the guide level of 1 kilogram at the time. She did not accept that all this was for the personal use of the Appellants, even if 1.5 kilograms was for the son of Mr Franklin. Next, Ms Hepburn took into account that Mr Franklin had said that he had travelled about a month previously and purchased "a box and a bit". A box of tobacco was usually 5 or 6 kilograms in weight or 100 or 120 pouches. If a pouch lasted Mr Franklin about a week and a half, 5 kilograms would last him 150 weeks. If he still had most of that at home he would not need any more. If the whole of the 11.5 kilograms imported on 20 January 2001 belonged to Mr Franklin then that and the tobacco imported a month previously would be enough to last him for 450 weeks. Thirdly, Ms Hepburn also bore in mind that the value of the purchase of the tobacco would represent a full two months' worth of Mr Franklin's disposable income. Finally, Ms Hepburn remarked that it was an unusual friendship when Mr Franklin and Mr Coakley only met to purchase excise goods. She concluded that the Appellants had not discharged the burden of proving that the goods were for their personal use; it followed that, as there was an element of commerciality, the vehicle and the goods would not be restored.
19. Mr Coakley appealed separately and Customs and Excise applied on 12 June 2002 for his appeal to be struck out because he had not requested a review of the decision to seize his goods. That application was heard by the Tribunal (Chairman Miss Jane Plumptre) on 3 September 2002 when the Tribunal directed that the review letter of 7 June 2001 be treated as a review in the appeal of Mr Coakley, as well as in the appeal of Mr Franklin, and that the two appeals be heard together.

The arguments for the Appellants

20. Mr Franklin argued that he and Mr Coakley travelled about once every six months to buy excise goods for their personal use because the rates of duty were lower outside the United Kingdom. Before the seizure they had been stopped a couple of times but then let through. They had never sold the excise goods. He wanted damages for the seizure of his car. Mr Coakley argued that he had bought a quantity of goods because he was going to the United States for a while and would not be able to go again for about another year; also he had a large family.

The arguments for Customs and Excise

21. For Customs and Excise Mr Keller argued that the decision not to restore the vehicle and goods was reasonable. Although at the time of the review it had been assumed that the burden of proving personal use was on the traveller, and that had been altered by R v Customs and Excise Commissioners v Hoverspeed Limited [2002] EWHC 1630 (Admin), the decision not to restore would have been the same if the principle in Hoverspeed had applied. Finally, as the excise goods had been held for commercial purposes it was proportionate to refuse to restore the vehicle, relying upon John Richard Lindsay v The Commissioners of Customs and Excise [2002] EWCA Civ 267..

Reasons for decision

22. The first issue we have to decide is whether the excise goods were held for the personal use of the Appellants (as argued by the Appellants) or for commercial purposes (as argued by Customs and Excise).
23. As our decision on this issue will depend on the weight we give to the evidence of the Appellants we first express our views on them as witnesses. We found both Appellants to be evasive and inconsistent and did not find them to be reliable witnesses..
24. On the evidence before us we find that the excise goods were imported for commercial purposes for the following reasons. First, Mr Franklin imported 11.5 kilograms of hand rolling tobacco. Initially he only claimed to have imported 7.5 kilograms but later admitted to 11.5 kilograms. The inconsistency of his claims renders his evidence unreliable. Also, 11.5 kilograms is highly unlikely to be for his personal use even if 1.5 kilograms was given to his son as he claimed. Secondly, Mr Franklin had imported hand rolling tobacco one month previously which would have been enough to last him for 150 weeks. This renders it even more improbable that the amount imported on 20 January 2001 was for his own use. Thirdly, at his interview Mr Franklin mentioned that his mother smoked cigarettes and that 1.5 kilograms of the tobacco was for his son but the statements he produced at the hearing mentioned his wife for the first time and, for the first time, mentioned that his wife and mother smoked tobacco. Again, the inconsistencies render the evidence unreliable. Fourthly, Mr Franklin declared at his interview that he was importing 800 cigarettes and Mr Coakley declared 4,000 but the total importation was 5,800; the remaining 1,000 cigarettes were not claimed. In our experience when people buy goods for their own use they know exactly what they have bought. Finally, to spend £400 on tobacco out of a disposable income of £180 per month would be most unusual if it were all for personal use. The inference we draw is that Mr Franklin was going to be paid for the tobacco and cigarettes.
25. As for Mr Coakley his 4,000 cigarettes was five times the minimum indicative levels at the time. He had travelled a month previously when he had bought 3,000 cigarettes. If he smoked 50 a day that would last for 140 days. We were not convinced by Mr Coakley's argument that he made the journey on 21 January 2001 (about a month after his previous journey) because he was going to the United States for a year and would not be able to go to France again during that time. If he were going to the United States then he could purchase his cigarettes there. The inconsistencies about the amounts of tobacco and cigarettes also concern Mr Coakley. Although Mr Coakley imported fewer excise goods we formed the view that both Appellants were acting together, especially as they usually met when going shopping for excise goods.
26. We conclude that the excise goods were held for commercial purposes.
27. The second issue we have to decide is whether, in the light of our findings on issue (1), we are satisfied that the person making the decision not to restore the vehicle and the excise goods could not reasonably have arrived at that decision within the meaning of section 16(4).
28. It will be clear from our conclusion that the excise goods were held for commercial purposes that we are of the view that the decision not to restore the car or the goods was reasonable.
29. We note that both at the time of the seizure and at the date of the review decision the relevant legislation was contained in the 1992 Order which provided that if a person had in his possession excise goods in excess of the minimum indicative levels then Customs and Excise could require him to satisfy them that the goods were not being held or used for a commercial purpose. In R v Customs and Excise Commissioners v Hoverspeed Limited [2002] EWHC 1630 (Admin) the Divisional Court held that the requirement under the 1992 Order that the traveller had to prove that excise goods over the stated limits were not held for commercial purposes was incompatible with the directive and that it was for Customs and Excise to show that the importation was for commercial purposes. At the hearing Ms Hepburn was asked whether her decision would have been changed if she had applied the principle established in Hoverspeed and she replied that it would have made no difference. We accept the evidence of Ms Hepburn and are also of the view that, if the principle established in Hoverspeed were applied to the facts of this appeal, Customs and Excise have shown that the importation was for commercial purposes.
30. The third issue we have to decide is what action the Tribunal should take under section 16(4). We dismiss the appeal.

Decision

31. Our decisions on the issues for determination in the appeal are:

(1) that the excise goods were held for commercial purposes;

(2) that, in the light of our findings on issue (1), we are satisfied that the person making the decision not to restore the vehicle and the excise goods could reasonably have arrived at that decision within the meaning of section 16(4); and

(3) we dismiss the appeal.

32. The appeal is, therefore, dismissed.

DR NUALA BRICE

CHAIRMAN

22 January 2004

LON/2001/8225

LON/2002/8142

13.01.04