United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E686, [2004] UKVAT(Excise) E00686

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Billingham v Customs and Excise [2004] UKVAT(Excise) E00686 (25 March 2004)

EXCISE DUTY — restoration of seized excise goods and conditional restoration of motor vehicle — whether the goods were for personal or commercial use — commercial use but selling at above cost price to family and cost price to friends — Appellant knew what he was doing wrong — the non-restoration and conditional restoration proportionate to the Appellant's contravention — yes — did the conditional restoration of the vehicle create exceptional hardship — no — was the decision not to restore the excise goods and offer conditional restoration of the vehicle reasonable — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

MR JOHN ROBERT BILLINGHAM Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Michael Tildesley (Chairman)

Mrs M Kostick FCA ATII

Sitting in public in Birmingham on 16 January 2004

The Appellant appeared in person

Mr Roger Thomas of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

DECISION

The Appeal

The Appellant is appealing against the decision on review of the Respondents dated 21 July 2003:

a. not to restore excise goods: 7200 cigarettes and one kilogram of hand rolling tobacco and

b. to restore the motor vehicle, Vauxhall Cavalier registration number K777 JAG on condition of payment of a fee to the value of £1,111.80 which represented the amount of duty on the imported excise goods.

The Grounds of the Appeal

The grounds of Appeal are set out in the Notice dated 11 August 2003 which states that "I was not selling goods for profit and there is misleading information in the review statements".

The Issue

The function of the Tribunal is to determine whether the Respondents' decision not to restore the excise goods and to restore conditionally the motor vehicle was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable the decision maker must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Evidence

The Tribunal heard evidence from Mr Billingham, the Appellant and from Ms Sim and Mr Crouch for the Respondents. A bundle of documents was considered by the Tribunal.

On 10 May 2003 at 8 am the Appellant, his wife and their daughter left their home in Halesowen, West Midlands to travel in their car to Folkestone to catch the 1.30pm Channel Tunnel train. Once across the Channel they did some shopping in Cite Europe, Calais and then went onto Hotel Iris at Depanne in Belgium where they stopped overnight. The Appellant and his wife had been crossing the Channel, once a month since January 2003. It had taken the Appellant 30 years to persuade his wife to obtain a passport so that they could travel together on the continent. His wife had fallen in love with Belgium and they looked forward together to their monthly trips.

At 11 am on the 11 May 2003 the Appellant and his family went to Adinkerke and purchased 7,200 Lambert and Butler cigarettes and one kilogram of Old Holborn hand rolling tobacco. They paid £951 in cash for the goods. They then travelled to Coquelles to catch the 1.30 pm train back to the UK. When they arrived there the Appellant intended to buy some food from the duty free building because his wife was diabetic and needed food at regular intervals. However, before he was able to do that he was stopped by Ms Sim, a Customs and Excise Officer who asked the Appellant about his trip and whether he had been stopped by Customs before, to which he replied: "Yes all the time". The Appellant was questioned about when he last travelled abroad. He said: "February to France but we didn't buy anything much cause it was Sunday and all the shops were closed". The Appellant was then asked about what goods he had purchased today. His response according to Ms Sim was "3,200 cigarettes and two packs of tobacco". Ms Sim then went to the boot of the car and found 7,200 Lambert and Butler cigarettes and two 500 gramme pack of Old Holborn hand rolling tobacco. She also put to the Appellant that he had journeyed abroad in January, February, March, April and May. He was asked why did he state February as his last trip abroad, to which he responded: " I got fed up with all the hassle". The Appellant was then read the commerciality statement. He indicated that he was prepared to go ahead with the interview.

During the interview the Appellant confirmed that he was on incapacity benefit. He received £125 a week in benefit plus £70 a week from his daughter, which was equivalent to a monthly income of about £888. His outgoings amounted to £540 a month. The Appellant and his wife had savings of a £1,000 in mini ISAs. The Appellant accepted that he paid for the cross Channel trip and for the petrol. He had saved the £951 which paid for the tobacco and cigarettes purchased in Adinkerke that day. The Appellant explained that the tobacco was for him and the cigarettes were for his wife, daughter, sons and daughter-in-law. He went onto state that they had all given him money for the excise goods, as well as his wife's friend who lived a couple doors away. Ms Sim pointed out to him that it was illegal to sell excise goods without first paying the duty to which he replied: "I'm not selling them really but I know I can't sell them to the public". The Appellant informed Ms Sim that they paid him £28 a sleeve because he needed the petrol money to come down. He honestly did not know that this amounted to selling the goods in the eyes of customs law. The Appellant told Ms Sim this was the third time this year that he had bought back cigarettes.

The Appellant's wife, Mrs Billingham, and his daughter Miss S Billingham were interviewed separately. Mrs Billingham originally stated that they had travelled abroad twice during the year but this was then corrected to four times when the Customs Officer posed the question about monthly travel. Mrs Billingham confirmed that they always buy the same quantity of goods when they travelled but she was unable to confirm the quantity bought because she always stayed in the car when her husband went to buy the goods. Mrs Billingham informed the Customs Officer that they sold the cigarettes to friends and their sons at £28 a sleeve. The cigarettes cost them £25 a sleeve. Mrs Billingham smoked between 20 to 30 cigarettes a day. Mrs Billingham fell ill as a result of her diabetes after about ten minutes of questions. Her interview was terminated because she was too poorly to continue.

Miss S Billingham confirmed that the tobacco was for her father and the cigarettes were for her and her mother. She had put no money towards the goods. She thought that the last time they had travelled across was in February. None of the excise goods were for other people. Miss Billingham had three elder brothers who never travelled and would not be receiving any of the excise goods. Miss Billingham smoked about 5 cigarettes a day.

Following the interviews the Respondents seized the Appellant's motor car, the 7,200 cigarettes and one kilogram of hand rolling tobacco. The reasons for the seizure were income versus expenditure, admitted commerciality and frequency of travel. The Appellant appealed to Ms Sim to have his car back so that he could get his diabetic wife home. Ms Sim's senior officer turned down the Appellant's request. They eventually got home via a taxi to Dover where their son picked them up and drove them home.

The Appellant wrote two letters on the 12 and 16 May 2003 requesting restoration of the motor car on the grounds that he was disabled and needed the car to take his wife to hospital. Miss S Billingham also sent a letter dated 16 May 2003 requesting return of the car. Their request was considered by Mr Matthews of the Respondents' Post Seizure Unit who decided to offer restoration of the motor car upon payment of a fee equivalent to the excise duty on the cigarettes and tobacco seized, namely £1,111.80. Mr Matthew reached his decision after taking into account all relevant factors including the medical condition of the Appellant and his wife.

On the 23 June 2003 the Appellant requested restoration of the cigarettes and tobacco which was refused by the Respondents' Post Seizure Unit on the 8 July 2003. The Appellant and his daughter requested a review of the Respondents' refusal to restore the excise goods in letters dated 9 and 14 July 2003 respectively.

Mr and Mrs Billingham's friend. Mrs Bicknell, sent a letter supporting the Appellant's case to the Respondents which read:

"… Mr and Mrs Billingham of whom I've known for over 18 years having heard of their dilemma, was shocked to hear that you thought these people would sell cigarettes for gain, we as friends have got together twice a week for coffee and a chat, and when they travelled over to Belgium for a trip, because they liked it so much and was a nice break for them, as their health isn't the best, I asked them if they'd mind bringing me some cigarettes back as I'd heard the quota had increased. I paid them £100 to bring me 800 cigarettes, myself couldn't see any wrong in this and neither could my friends, they would not in a million years break the law and I myself would not put my dearest friends in that situation. My father when he used to go abroad on holiday, always brought me cigarettes back, at 75 if I told him that he used to break the law, he'd probably have a heart attack.

These people are law abiding and the shock of all this has made them ill……………, so I think these decent people have been unfairly treated and have suffered greatly and to think they've got to pay that disgusting amount and have been treated so badly for such a small amount when there's bigger fish out there……".

On 21 July 2003 Mr Crouch conducted the review of the Respondent's decision to refuse restoration of the excise goods and the conditional restoration of the Appellant's motor car. Mr Crouch in carrying out the review placed particular importance on the Appellant's dishonesty during his interview with Ms Sim about his failure to declare all the excise goods and the previous trips abroad. He also considered that the Appellant's wife had attempted to mislead the Customs Officer about previous travel arrangements. Mr Crouch concluded that these were not the responses of two people who travel to purchase excise goods for their own use. They were in his view a deliberate attempt to detract the Customs Officer from the true purpose of their trips, namely the purchase of excise goods for commercial disposal. Mr Crouch had discovered from the Respondents' records that the Appellant had travelled abroad four times in 2002 as well as the five journeys in 2003. The dates of travel in 2002 were 29 March, 10 September, 12 September and 25 October. Mr Crouch also found that the Appellant was disposing of some of the cigarettes to friends and family at a profit. The Appellant and his wife confirmed in their interviews that they were selling sleeves of cigarettes for £28 each which was £3 more than the purchase price.

Mr Crouch applied the facts found to the Respondents' policies on the restoration of excise goods and private motor vehicles, which were:

Restoration Policy for Excise Goods

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

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

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

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

large quantities of goods which might damage legitimate trade;

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

Restoration Policy for Private Vehicles

"With effect from 14 July 2000 the Commissioner's normal policy regarding privately owned vehicles used for the improper importation of excise goods is that they will not be restored. However, as from the 18 April 2002, restoration of vehicles will be considered where the traveller can demonstrate that the goods were to be supplied at purchase price and not for profit and also, as from 29 October 2002, for first offence involving small quantities of excise goods. Every case is considered individually to determine whether the affected party has substantiated that restoration should exceptionally be allowed".

Mr Crouch concluded that the Appellant's failure to comply with legal requirements in that he was importing excise goods for a commercial purpose was sufficient enough reason for him in accordance with the policy not to offer restoration of the cigarettes and the hand rolling tobacco. In respect of the motor car he was satisfied that the offer of conditional restoration of the vehicle was consistent with the policy for first offences involving small quantities of excise goods.

On 30 July 2003 Mr Crouch corrected two factual inaccuracies in his review document in response to a letter from Miss S Billingham on 26 July 2003. The corrections were:

there was no Golden Virginia tobacco in the vehicle; it was all Old Holborn;

you had left home the previous night … Night should read day.

However, Mr Crouch did not consider that Miss S Billingham had provided him with any further information to change his decision not to restore the excise goods and to confirm conditional restoration of the motor vehicle.

When giving his evidence before the Tribunal the Appellant explained that after their first trip abroad when they bought cigarettes he and his wife decided to set up a "kitty" with respect to their use of the cigarettes. This arrangement involved them paying £28 into a "kitty" whenever they opened a new carton of cigarettes. The problem started when their sons wanted to buy cigarettes from them and they were told that they had to pay the same price as their Mom and Dad, namely £28, which was paid into the "kitty". The sons' contribution was not kept separate in the "kitty" from that put into by the Appellant and his wife. The money from the "kitty" was then used to purchase cigarettes on subsequent trips and the petrol for those journeys. The Appellant did not expect his friend, Mrs Bicknell, to pay £28 for the carton of cigarettes. They were to be supplied to her at cost price. The Appellant felt that the "kitty" was an informal arrangement and did not represent a commercial operation selling at profit. The Appellant had no intention of selling the cigarettes to the public.

The Appellant strongly resented the inference that he did not have the money to purchase cigarettes because he was in receipt of benefits. He produced bank statements to the Tribunal which showed that he was not in debt. The Appellant had been granted a mortgage to purchase his former council house and two bank loans to fund improvements to the house. He and his wife have credit cards with credits limits of £7,500 and £8,500 respectively. In his view these facts demonstrated that he had a high creditworthiness rating.

On the 23 June 2003 the Appellant paid the Respondents by credit card, £1,111.80 to recover his motor vehicle, which was worth about £1,500 without the number plate. The latter was valued more than the car at £1,600. The Appellant explained that he needed a car to take his wife to hospital for blood tests about every two months and to their doctor once a week. The Appellant, however, had bought another car within one week of his existing car being seized by Customs.

The Appellant accepted that he misled the Customs Officer about the last time he had been abroad. However, he did this before the formal interview and was done out of concern for his wife. He did not wish to subject her to a long delay in the Customs Hall and hoped by giving the answer he did, they would be ushered through quickly. With hindsight he accepted that it was wrong to get his friends, Mr and Mrs Bicknell, 800 cigarettes, however, at the time he honestly felt that he was doing nothing wrong. The Appellant denied that he originally said to Ms Sim that he had only bought in 3,200 cigarettes. He pointed out that this alleged statement was made before the formal interview and that Ms Sim did not make up her notes of the preliminary conversation until sometime after the event. The Appellant also queried why he would make this statement. The cigarettes and the tobacco were not hidden, they were in full view in the boot of the car. He was entitled with two other people in the car to bring in 9,600 cigarettes and in fact in February 2003 when he brought this amount back into the UK, nothing was said by Customs. He had no reason to lie to Ms Sim about the quantity of cigarettes.

The Appellant was of the view that the seizure of the excise goods and the conditional restoration of his motor car were out of all proportion to his technical infringement of the Regulations. He had now paid the full UK excise duty on the cigarettes and tobacco and either wished them to be returned or if they had been destroyed compensated for the cash paid for them. According to the Appellant he was not a smuggler selling the cigarettes and tobacco to the public. They were people who liked to travel and bought cigarettes for their own use which they shared with other members of their family.

The Appellant and Miss S Billingham submitted formal complaints to the Respondents about how the Appellant and his wife were treated by the Customs Officers and the arrangements for handing back the Appellant's motor car. The Respondents have accepted responsibility for certain aspects complained about and have made an ex gratia payment to the Appellant to compensate him for the losses suffered.

The Appellant did not challenge the forfeiture and seizure of the excise goods before the magistrates' court.

Authorities

The Appellant produced a copy of VAT Tribunal decision in Eric Darby v The Commissioners of Customs and Excise (LON, 2 December 2002) which is not binding upon the Tribunal. The facts of that case are different from the facts in this Appeal. In Darby the Respondents placed the burden of proving commerciality on the Appellant. Second there were material differences between Derby and this Appeal in respect of the evidence about frequency of travel, purchasing activity and payments for the excise goods.

Jurisdiction of the Tribunal

The Respondents' powers regarding restoration of goods which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:

"confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the 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;

(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 that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future.

The precondition to the Tribunal's exercise of one or more of its three powers, namely, that the person making a decision could not reasonably have arrived at it falls within the guidance given by Lord Lane in the decision in Customs and Excise v JH Corbitt (Numismatists) Ltd [1980] STC 231 at page 239:

"… if it were shown 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".

27. The Tribunal is entitled to make its own findings on the primary facts which are to be taken into account by the Commissioners when exercising their powers regarding restoration of goods. The finding of facts includes blameworthiness, the intended use for the excise goods: private or commercial, and the proportionality of the penalty imposed to the policy aims pursued having full regard to the individual circumstances of the case. The Tribunal, however, has no fact-finding jurisdiction for the purpose of challenging the legality of the seizure and forfeiture of the goods. The Tribunal will then apply its findings of fact to determine whether the Commissioners acted reasonably in refusing restoration.

The Tribunal's Findings of Fact

Was the Appellant's importation of tobacco/cigarettes for private/commercial use?

This question needs to be considered in the context of the legislative framework. Council Directive (EEC) No. 92/12 lays down a number of rules on the holding, movement and monitoring of products subject to excise duty, in particular so as to ensure that chargeability of excise duties is identical in all the Member States. The Directive draws a distinction between, on the one hand, goods held for commercial purposes, in respect of which accompanying documents are required for transportation purposes, and, on the other hand, goods held for personal use. Under Article 8 excise duty for goods held for private use is payable in the Member State in which they are purchased. No document is required when they are transported to another Member State. For Article 8 to apply, however, a number of conditions must be satisfied. The goods on which excise duty is chargeable must have been acquired by private individuals for their own use and transported by them. Article 9.2 sets out criteria for establishing whether goods transported by private individuals are intended for commercial purposes.

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 was replaced by the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 SI 2002 No. 2692. Regulation 12 gives guidance on whether the goods are held for own use or commercial purposes.

The relevant provisions of Regulation 12 are as follows:

"1B(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) if the products are not duty and tax paid in the member State at the time of acquisition, or the duty and tax that was paid will be or has been reimbursed, refunded or otherwise dispensed with, those products are to be regarded as being held for a commercial purpose,

(e) without prejudice to sub-paragraphs (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,

400 cigarillos (cigars weighing no more than 3 grammes each),

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."

Applying the criteria set out in Regulation 12(1B)(viii) the Tribunal finds that

(i) The cigarettes and tobacco were purchased for use by the Appellant and members of his family, except 800 cigarettes which were for a close family friend. The excise goods were not sold to the wider public. The members of the family would pay £28 for a sleeve of cigarettes, £3 more than the cost price. The close family friend paid the Appellant £100 for the 800 cigarettes which represented the cost price.

(ii) The Appellant was not a revenue trader.

(iii) The Appellant accepted that he lied initially to the Customs Officer about the timing of his last trip abroad. The Officer quickly exposed the lie by checking the Appellant's details against the Respondents' records of previous journeys. From that point onwards in the interview we are satisfied that the Appellant gave truthful answers to the Officer. The interview with the Appellant's wife followed a similar pattern. First she said that they had only previously travelled abroad twice that year but when the Officer asked if they travelled monthly Mrs Billingham amended her response. Apart from that slip we are satisfied of her veracity in respect of the interview. There are also inconsistencies between the account given by the Appellant and his wife and the account given by the daughter in particular about whether the Appellant's sons would receive any of the cigarettes. The Appellant and his wife were unequivocal about their sons paying for the cigarettes, whilst Miss Billingham denied that her brothers benefited from the excise goods. We accept that the Appellant did not try to mislead the Customs Officer about the quantity of cigarettes brought in, particularly as he knew that the quantity would be revealed when the boot was opened. We consider that the Officer made a mistake when she subsequently wrote her notes up.

(iv) The excise goods were in the boot of the car readily visible when opened.

(v) The Appellant conveyed the goods in the boot of his car.

(vi) The excise goods were purchased from Adinkerke, Belgium. The cost of these goods was not in dispute.

(vii) The goods purchased were one brand of cigarettes, Lambert and Butler, and one brand of hand rolling tobacco, Old Hoborn.

(viii) The quantity of hand rolling tobacco brought in was one kilogram which was well within the three kilograms specified by the Regulations. The Appellant also maintained that the 7,200 cigarettes were within the limit specified by the Regulations because his party of three were entitled each to bring in 3,200 cigarettes making a total of 9,600 for the trip. The Appellant, however, is confusing the quantities specified in the Regulations with the concept of quotas. In law there are no quotas on cigarettes purchased legitimately within the European Community by a community traveller between member states provided they are for personal use. The purpose of specifying the quantities of tobacco, cigarettes and alcohol in the Regulations is to give an indication to Customs Officers and to the Tribunal about the threshold between private and commercial use. The task of the Tribunal, however, is to consider the quantity of excise goods in the context of the evidence presented at the hearing. The Appellant informed the Tribunal that the cigarettes were principally for his wife and daughter, who smoked on average 35 cigarettes a day between them. The 7,200 cigarettes constituted 29 weeks supply for his wife and daughter. The Tribunal also received evidence in the form of Mrs Billingham's witness statement that the Appellant had purchased similar quantities of excise goods on their four previous trips abroad in 2003. The Appellant admitted in his testimony before the Tribunal that they imported 9,600 cigarettes in February 2003. Thus the Appellant purchased the equivalent of three years supply of cigarettes for his wife and daughter in the space of five months, which indicates to the Tribunal that a significant amount of the cigarettes purchased were reserved for use by his sons and other members of his family.

(ix) The Appellant accepted that the excise goods were purchased from the money in "the kitty" to which his sons and other members of the family contributed £28 per carton or sleeve of cigarettes, which was £3 more than the cost price. The Appellant also agreed that he received £100 from Mrs Bicknell to buy 800 cigarettes for her. The £100 represented the cost price for the cigarettes. We accepted the Appellant's evidence that he skilfully managed his finances well and rejected the implication that his expenditure exceeded his income.

(x) The Appellant travelled abroad four times in 2002 and five times in 2003 including the May visit.

After analysing the facts against each of the criteria in Regulation 12(1B)(e) we are satisfied that the excise goods purchased on the May trip were not for the exclusive personal use of the Appellant, his wife and his daughter. We are also satisfied that a significant amount of the cigarettes purchased were for other members of the family who paid above the cost price for them. The Appellant also received £800 from Mrs Bicknell to buy her cigarettes. These arrangements constitute a commercial purpose within the meaning of Regulation 12(1B)(c) of the 2002 Regulations. We, therefore, find that the Appellant purchased the excise goods for a commercial purpose, namely to supply cigarettes to members of his family at above cost price and to friends at cost price. We accept that the Appellant was not selling cigarettes and tobacco to the wider public.

What was the Degree of Blameworthiness of the Appellant?

The Appellant put forward the view that he made an honest mistake about what he was entitled to do and that he did not hide anything from the Customs Officer. His initial lie about when he last travelled was motivated out of concern for his wife's well-being. In contrast Mr Crouch described the Appellant's behaviour as dishonest and placed it at the other end of the spectrum of blameworthiness. We consider that the Appellant's degree of blameworthiness falls in between the two extremes. Our analysis of the conduct of the Appellant, his wife and his daughter in paragraph 30(iii) above suggests that there was some collusion between them to deflect the Customs Officers from their lines of enquiry. However, the collusion was not terribly sophisticated and in the case of the Appellant and his wife soon evaporated when challenged with the true facts. Further this element of collusion plus the knowledge of Customs regulation that the Appellant must have gained by his regular trips across the Channel suggests to us that they knew they were doing something wrong when bringing in the 7,200 cigarettes and the one kilogram of hand rolling tobacco on the 11 May 2003.

Was the Decision Not to Restore the Excise Goods and to Offer Conditional Restoration of the Motor Vehicle Proportionate to the Aims Pursued?

Article 1 of the First Protocol of the European Convention of Human Rights dealing with peaceful enjoyment of possessions was engaged when the Respondents deprived the Appellant of his excise goods. The aim pursued by the Respondents is to deter those people who are intent on regularly smuggling tobacco and alcohol in the UK which has caused a massive loss of revenue to the Government since the introduction of the Single Market. The revenue evaded for tobacco was estimated at £3.5 billion for 2000/01.

Lord Phillips MR in Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766 has ruled that the penalty imposed against persons caught bringing in goods contrary to the Regulations must be fair and proportionate to the contravention. Where persons are smuggling for a commercial purpose for profit they generally take themselves beyond the threshold whereby a lesser penalty than deprivation of property can be considered.

The Appellant sought to argue that payment of the duty owed was a sufficient penalty for his contravention of the Regulations. However, our findings of fact put his contravention higher than an innocent technical breach of the regulations. We have found that he knew he was doing something wrong and that he was selling cigarettes to members of his family at a price greater than cost. In those circumstances we consider that the non restoration of the excise goods and the conditional restoration of the motor vehicle were a proportionate response to his contravention and the aims pursued by the Respondents.

Did the Appellant suffer Exceptional Hardship from the Conditional Restoration of the Motor Vehicle?

The Appellant submitted that he would experience exceptional hardship from not having access to his car because of his disability and the need to take his wife at regular intervals to the doctors and the hospital. These were factors which the Respondents took into account when reversing their original decision not to offer restoration of the vehicle. The offer of conditional restoration of the motor vehicle did not appear to cause exceptional hardship to the Appellant because he had the means to pay the fee for restoring the vehicle to him. Also soon after the seizure of his car the Appellant purchased another motor vehicle to provide him with mobility. The Respondents have offered to compensate him for the depreciation in the value of the vehicle, N456 CNM, which was the difference between the declared purchase and sale price of the vehicle. We have assumed that the motor vehicle, N456 CNM, was the vehicle purchased by the Appellant when he was without his normal motor car.

Summary of our Findings of Fact

We find that

• The Appellant purchased the excise goods for a commercial purpose, namely to supply cigarettes to members of his family at above cost price and to friends at cost price.

• The Appellant knew he was doing something wrong when he brought in the tobacco and the cigarettes.

• The non-restoration of the excise goods and the conditional restoration of the motor vehicle were a proportionate response to his contravention and the aims pursued by the Respondents.

• The Appellant originally suffered exceptional hardship when he was denied use of his motor car. However, he was able to mitigate the exceptional hardship by purchasing another motor car and recovering his existing car on payment of a fee equivalent to the amount of duty owing on the tobacco and cigarettes brought in.

Was the Review decision of Mr Crouch unreasonable?

We are satisfied that Mr Crouch reviewed the available evidence including the letters of the Appellant and his daughter. He took into account the relevant legislation including the 2002 Regulations which provides guidance about private/commercial purpose. Our findings of fact are generally in line with his findings except that

• We did not find that the Appellant misled the Customs Officer about the quantity of excise goods brought in.

• We placed less weight on the Appellant's conduct when interviewed by the Customs Officer. Mr Crouch appeared to portray it as a sustained course of dishonest conduct intended to detract the Officer from the true purposes of the trips abroad. Our findings support a conclusion that the Appellant knew what he was doing was wrong, however, he was co-operative and honest in his dealings with the Officer except the initial lie about the last time he travelled.

However, we do not consider that these two differences between our findings and that of Mr Crouch's would materially affect the outcome of his Review decision. Overall we are, therefore, satisfied that Mr Crouch considered all the relevant facts at his disposal and disregarded irrelevant matters in reaching his decision not to restore the tobacco and cigarettes to the Appellant and to restore the motor car on condition of payment of a fee to the value of £1,111.80 which represented the amount of duty on the imported excise goods.

Our Decision

We have decided for the reasons set out above that the Respondents' decision of 21 July 2003 not to restore the excise goods to the Appellant and to restore conditionally the motor car was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. We, therefore, dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY
CHAIRMAN

Release date:

MAN/03/8134