United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2004/E00722.html
Cite as: [2004] UKVAT(Excise) E00722, [2004] UKVAT(Excise) E722

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Robert Hardie v Customs and Excise [2004] UKVAT(Excise) E00722 (17 May 2004)

Excise Duty — importation of 36 kilos of HRT claimed to be for own use — on evidence held not to be for own use — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

ROBERT HARDIE Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr J D Demack (Chairman)

Mrs G Pratt

Sitting in public in Manchester on 25 March 2004

The Appellant in person

Miss Samantha Holland of counsel instructed by the Solicitor for the customs and Excise for the Respondents

© CROWN COPYRIGHT 2004


 


DECISION

1. In June 2001 Mr and Mrs Callaghan, friends of the appellant, Mr Robert Hardie, were considering going to France by car. They had not been before. Mr Callaghan mentioned the idea to Mr Hardie. Mr Hardie suggested that he and Mr Callaghan make an exploratory visit taking advantage of a special day return fare of £12 being offered by the Daily Mirror. Initially they were going to go in Mr Hardie's car, but later changed their plans and in fact travelled in Mrs Callaghan's car. The travellers made their trip on 23 June 2001. They went to both France and Belgium. Mr Callaghan returned with 6 kilos of hand rolling tobacco and 10,000 cigarettes, and Mr Hardie with 36 kilos of tobacco. They were stopped by Customs officers at the Eastern Car Terminal, Dover. They freely disclosed their excise goods and, under the domestic legislation as it then stood, were required to satisfy Customs that the goods were not held or to be used for a commercial purpose. They claimed to have bought the goods with their own money, and said that they did not intend to sell them, knowing that it was illegal to do so.
2. The travellers' claims to own use having been rejected, their goods and the car were seized as liable to forfeiture. Mr Hardie asked for his goods to be returned, but his request was refused, both initially and on review. It is against the decision on review, given on 26 June 2003 that he now appeals.
3. In the review letter, Mr G A Murray, the review officer, set out the facts as we have summarised them above, and noted the information that had been obtained by Customs in interviews of the travellers. He added that UK excise duty on their goods amounted to £5449.42 made up as to £4066.02 on 42 kilos of tobacco and £1383.40 on 10,000 cigarettes. (It follows that the duty on Mr Hardie's tobacco was £3485).
4. Then Mr Murray set out the 'several items of legislation' that applied. We do not propose to rehearse it again: it also appears in the Statement of Case. There are, however, some parts of it we think worthy of summary.
5. Under European Community legislation, travellers from one member State in the European Union to another may import excise goods into the latter duty paid in the former, which are for the traveller's own use, and which he has personally transported. 'Own use' in this context includes gifts. Other excise goods imported into the UK are liable to UK duty.
6. When the legislation was implemented in the UK, by the Excise Goods (Personal Reliefs) Order 1992, the burden of proving that goods imported were for the traveller's own use and were not held or to be used for a commercial purpose was put on the traveller. In the unappealed part of the judgment of the Divisional Court in R (Hoverspeed and others) v Customs & Excise Commissioners [2001] 3WLR 1218, it was held that the burden of proof was wrongly imposed by the 1992 Order: it was for Customs to prove that the goods were held or to be used for a commercial purpose. Consequently, the procedure adopted in relation to Mr Hardie would appear to have been flawed.
7. In the review letter Mr Murray observed that under Community legislation the quantity of goods being imported by a traveller was one of a number of factors which Customs were required to take into account in determining they were held or to be used for a commercial purpose, other factors for consideration including the traveller's reasons for having the goods, their location, whether the person concerned was a revenue trader, and any other relevant circumstances. He added that the quantitative 'guide level' for tobacco was then 3 kilos, having been but 1 kilo in June 2001.
8. Mr Murray also drew attention to s. 152 (b) of the Customs and Excise Management Act 1979 as giving Customs a discretion whether to restore items seized and, if so, on what terms. Finally, he explained that the Finance Act 1994 (the 1994 Act) created a system of review and appeals, and that his role was to confirm, vary or withdraw the decision not to restore Mr Hardie's tobacco to him.
9. For Mr Hardie's benefit, we should perhaps add that by the 1994 Act the jurisdiction of these tribunals is confined to a power, where the tribunal is satisfied that Customs could not reasonably have arrived at a decision not to restore goods to require them, to conduct, in accordance with the directions of the tribunal, a further review of the original decision. 'Unreasonably' in this context means that Customs must not have taken into account something which they ought properly to have ignored, must not have ignored something which they ought to have considered, or that their conclusion is one at which no reasonable body of Commissioners could have arrived.
10. Next in the review letter, Mr Murray observed that Customs general policy was not to restore seized goods, but that each case was considered on its merits to see whether, exceptionally, restoration might be offered.
11. He then considered in great detail Mr Hardie's case for restoration as revealed in interview and subsequent correspondence. We propose to follow the pattern of his decision and adopt his paragraph numbering.

(i) Mr Murray first noted that in his Notice of Appeal, Mr Hardie claimed that his tobacco was 'for the sole use of myself and family and was not intended for resale or profit and that the seizure was unfair and illegal under European law'

At that point, Mr Murray made no comment on Mr Hardie's claims; nor do we.

(ii) As the guide levels for own use imported excise goods had been increased after Mr Hardie's tobacco had been seized, Mr Murray explained the legislative changes that had brought that about and their effect on Mr Hardie's case. He observed that even under the new guide lines, Mr Hardie had 12 times the guide level, which applying Customs average of 90 cigarettes obtainable from each 500 gram pouch of tobacco, meant that he had the equivalent of 64,800 cigarettes.

Having noted that quantity was one of the range of factors he had to take into account in determining whether the tobacco was held or to be used for a commercial purpose, Mr Murray observed that the quantity of tobacco Mr Hardie had was "of sufficient size as to raise justifiable doubts that it was genuinely for 'own use' within the definition of that term'.

On the basis of the information available to Mr Murray and, bearing in mind that he was applying Customs own guidance as to how many cigarettes could be obtained from a pouch of tobacco, that would appear to have been a perfectly fair conclusion taken in isolation.

But matters did not rest there. Before us Mr Hardie produced a pair of scales and 29 king sized cigarettes he had rolled. He proceeded to demonstrate to our satisfaction that they contained the contents of one 500 gram pouch of tobacco. In evidence, Mr Murray explained that Customs estimate of how many cigarettes could be obtained from a pouch was based on cigarettes of ordinary size containing very loosely rolled tobacco. He said, and we accept, that it was the first time that he had come across anyone who rolled king sized cigarettes, so that he appeared to accept that Mr Hardie's rolling practice was very unusual and outside his personal experience. But, he added, in interview Mr Hardie had claimed to consume over 4 pouches of tobacco a week – equivalent to about 120 of his king sized cigarettes – so that even on his own figures and taking account of his claim that half the tobacco was destined for his wife and son, his own portion would last him 90 weeks (360÷4) – a period considerably in excess of the shelf life of tobacco as advised to Customs by tobacco manufacturers

(iii) We can dispose of this point very quickly as we have already largely dealt with it. Mr Murray explained the effect of the judgment in the Hoverspeed case (see para 6 above), and said that he had taken it into account in reviewing Mr Hardie's case: he stated that he had regarded the quantity of tobacco simply as an item of evidence to be considered.

We do not consider the point in need of further comment.

(iv) In initial questions put to the travellers by the Customs officers who stopped them they were asked about previous travel to the continent. Mr Hardie is noted as replying, "We haven't. This is the first". Later, when interviewed more formally, Mr Hardie responded to the same or a very similar question saying that he had made a day trip two months earlier – in March 2001.

Mr Murray considered Mr Hardie's change in resply not to be "the actions we would expect from a bona fide traveller genuinely bringing in excise goods for own use".

In evidence to us, Mr Hardie claimed that in the first of his replies he had been responding on the basis that he and Mr Callaghan had not travelled to the continent together before.

We have to say that we regard that explanation as more than a little disingenuous, so that we entirely agree with Mr Murray's observation set out in the penultimate paragraph.

(v) Mr Hardie also claimed in interview that at the time of the visit to the continent in March 2001 he had no money with him with which to buy excise goods, but that he and his wife had bought 10 pouches of tobacco (presumably with her money or credit card). Mr Murray found it "simply not credible" that he would undertake a journey from his home in Manchester to Dover without ensuring that he had the funds to buy excise goods; that travellers undertook day trips primarily for shopping. He concluded that shopping was the most likely purpose of the trip.

In evidence, Mr Hardie claimed, and we accept, that the trip had not been made in the way assumed by Customs: he and his wife had been spending the weekend with his brother in Crawley, Sussex, and it was from there that the trip had been made. Mr Hardie also claimed that he always made purchases in cash; his wife made all their credit card purchases.

Accepting that the trip was made from Sussex, we observe that if Mr and Mrs Hardie were visiting his brother it is inconceivable that Mrs Hardie would not have had her credit card with her and, in the absence of cash, would not have used it to purchase supplies in excess of the 10 pouches admitted for a family of three people (Mr and Mrs Hardie and their resident 30 year old son) so heavily dependent on tobacco. In those circumstances, we are unable to disagree with Mr Murray's conclusion that shopping, including for excise goods, was the most likely purpose of the trip.

(vi) To a great extent the points made by Mr Murray under this head repeat these of point (ii), except that he also dealt with the tobacco consumption of Mrs Hardie and the son. Mr Murray said that he had "considerable difficulty" in accepting that Mr Hardie would buy "such a quantity for consumption so far ahead into the future, especially since tobacco is a perishable commodity with a shelf life of approximately 14-18 months if stored in optimum conditions". That is a perfectly reasonable observation. No evidence was adduced by Mr Hardie of his wife's and son's tobacco consumption beyond the oral claims he made for them.

(vii) Next, Mr Murray dealt with the claimed consumption of Mrs Hardie and the son (3 pouches per week each). He questioned why Mr Hardie would buy so much for them "for use so far ahead in time". He also doubted that, since all the tobacco was the same brand, it was for consumption by the family.

As Mr Murray merely "doubted" that the tobacco was for family consumption, and did not so conclude, his view was not unreasonable. In any event, the point takes matters little further.

(viii) In interview, repeated in correspondence, Mr Hardie claimed intending to store the tobacco in his home freezer, the dimensions whereof were 4 feet high and 2 ½ feet square. Mr Murray was "disinclined" to accept his submissions, "they seem impractical and uneconomic".

He added that the volume of tobacco would have been such as to necessitate Mr Hardie buying another freezer, "which would negate the savings made on the purchase of the tobacco".

Mr Hardie's response in evidence to those observations was that a new freezer would have cost him in the region of £250 whereas his purchase had saved him £3485 UK duty, so that it was nonsense for Mr Murray to say that the purchase of another freezer would negate the savings on the tobacco purchase.

Mr Hardie's point is a perfectly valid one, but, in our judgment cannot be viewed in isolation from the other facts before us, particularly that of the quantity of tobacco involved. In our judgment, the point is insufficient to invalidate Mr Murray's decision.

(ix) Mr Hardie failed to appeal against the legality of the seizure of the tobacco so that it was deemed to be forfeit to the Crown. That is fact, and needs no comment.

(x) On the basis of the nine points he had previously made, Mr Murray remained "entirely unconvinced" that the tobacco was for Mr Hardie's own use. He did not accept that the tobacco was for consumption by the Hardie family.

We are unable to conclude that Mr Murray's decision in that behalf was unreasonable.

(xi) Next Mr Murray, having observed that duty on the 36 kilos of tobacco was £3485, merely said that he considered Mr Hardie liable to that duty.

(xii) Mr Murray the concluded by saying that, having reviewed the question of restoration in the light of Customs policy on restoration he did not consider there were any exceptional circumstances justifying departure from their general policy. He made 4 specific points:

He considered the tobacco was held for a commercial purpose, which in itself militated against restoration;

He also considered importation on the scale concerned potentially damaged legitimate UK trade, again militating against restoration;

Having observed that Mr Hardie appeared to have a reasonable knowledge of Customs regulations and brought into the UK a substantial quantity of tobacco, Mr Murray considered "on balance" that he had been aware of doing something that was not lawful – yet again militating against restoration; and

He considered the decision not to restore "a reasonable and proportionate exercise of discretion bearing in mind the general public interest in protecting the amount of revenue generated by excise duty."

For all those reasons, Mr Murray confirmed that Mr Hardie's tobacco would not be returned to him.

12. In evidence, Mr Hardie sought to persuade us that he was something of an innocent abroad in buying such a large amount of tobacco and importing it into the UK. We are unable to accept that that was the case. Over the years a great deal of publicity has been given to the Community right to import duty free excise goods from other EU Member States for personal use; none more so than to smokers. We find it impossible to believe that a family of 3 all said to be heavily dependent on tobacco, had never prior to June 2001 sought to take advantage of the substantially lower rates of duty on tobacco products bought on the continent. And even if Mr and Mrs Hardie were not as worldly wise in this area as others, their 30 year old son, who was said by Mr Hardie in interview to have worked in London for a time, must surely have been aware of the substantial duty advantages of continental purchases.
13. Mr Hardie presented a most attractive and interesting case, and is to be congratulated on the preparatory work he did. He relied heavily on the decision of Nevin v Customs & Excise Commissioners (2002) Decision E00272 where the tribunal found that 30 kilos of tobacco and other items imported by the appellant were for his own use. In that case Mr Nevin's only income consisted of benefits of £1290 per month, out of which he claimed to spend £400 on tobacco and pay interest on a £10,000 bank loan of £214. His stated expenses made no provision for repayment of the capital on the bank loan, or for the credit card payments for his excise goods purchases, nor did he apparently have money to cover expenditure on clothes or other household expenses for himself, his wife and at least one infant child. Against that factual background, and with the greatest respect to the tribunal, we find it difficult to understand how it was able to conclude that expenditure of £1600 on excise goods could have been considered as being other than commercial by any reasonable body of Commissioners.
14. We accept that Mr Hardie was in employment and had savings sufficient to cover the cost of the tobacco he bought, so that his circumstances differed substantially from those of Mr Nevin. Nevertheless, we are not prepared to follow the Nevin case.
15. There comes a point in every decision where the tribunal has to consider the quantity of excise goods being imported. It is but one factor to be taken into account in determining whether an importation is commercial, and must be viewed in the light of all the other evidence, not in isolation. Nevertheless, on any view, 36 kilos is a commercial quantity of tobacco.
16. The Commissioners have satisfied us on the evidence that the tobacco being imported by Mr Hardie was not for his own use, including genuine gifts within that expression.
17. We have most carefully considered all the points made by Mr Murray in the review letter, and are unable to hold that his decision not to restore Mr Hardie's tobacco was unreasonable: he considered everything he ought to have considered, and ignored everything he ought to have ignored; and his decision was not one which a reasonable body of Commissioners could not have reached. It follows that we dismiss Mr Hardie's appeal.
18. The flaw in procedure we identified at para 6 of our decision avails Mr Hardie nothing. We are quite satisfied, even taking it into account, that Customs decision as to restoration would have remained the same (see John Dee Ltd v Customs & Excise Commissioners [1995] STC 949).

DAVID DEMACK

CHAIRMAN

Release Date:

MAN/03/8116