United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E727, [2004] UKVAT(Excise) E00727

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Paul Alan Harvie v Customs and Excise [2004] UKVAT(Excise) E00727 (27 May 2004)

DRAFT 10/05/04 MAN/03/8171

EXCISE DUTY — excise goods and car transporting goods seized at Dover on return to UK and forfeited - restoration of vehicle sought - review decision that restoration should be offered on payment of amount of duty and tax due in respect of the goods - restoration accepted by appellant on that basis - held on facts to be reasonable for Customs to offer conditional restoration of vehicle because it was properly assumed that goods held for commercial purposes on a non-profit basis - principle of proportionality correctly taken into account by reviewing officer - appeal dismissed

MANCHESTER TRIBUNAL CENTRE

PAUL ALAN HARVIE Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr M S Johnson (Chairman)

Mrs G Pratt (Member)

Sitting in public in York on 21st April 2004

The Appellant appeared in person

Mr R Spragg, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents

DECISION

This appeal, brought under section 16 of the Finance Act 1994 ("the Act"), concerns certain excise goods ("the goods") and a vehicle in which the goods were being transported, namely a Vauxhall Vectra Registration No W436 LOD ("the vehicle"). The goods and the vehicle were seized by H M Customs and Excise ("Customs") at Eastern Docks, Dover, on 29 December 2001 and were subsequently forfeited.

At the time of seizure, the appellant had just returned to the UK from the continent, having been to Belgium to purchase the goods. The goods consisted of the following:

95 Kg of hand-rolling tobacco;

800 cigarettes;

50 cigarillos;

7 litres of spirits; and

1 litre of wine.

The appellant was interviewed by an officer of Customs on his arrival in Dover. Copies of the officer's interview notes ("the notes") are contained in a bundle of documents ("the bundle") helpfully presented to the tribunal by Mr Spragg, counsel representing Customs. The appellant gave oral evidence to the tribunal, and was cross-examined by Mr Spragg. He was the only witness from whom the tribunal heard oral evidence; however we also had the benefit of considering a witness statement from an officer of Customs, Ms Gillian Martha Hurrell, a copy of which was included in the bundle. Ms Hurrell did not attend tribunal.

The bundle also contained copies of correspondence exchanged between Customs and the appellant, of the relevant seizure documentation, and of two review decisions. The first review decision was by Mr David Leavesley, another officer of Customs, and was dated 15 April 2002. The second review decision, a re-review, was by Ms Hurrell and was dated 23 September 2003. It is the latter decision against which this appeal has been brought.

The appellant's case was re-reviewed following an application from Customs dated 7 July 2003 that this should happen, in the light of the decision of the Divisional Court of the Queen's Bench Division in R (on the application of Hoverspeed Ltd and Ors) v C & E Comrs [2002] 4 All E R 912 ("the Hoverspeed case"). In the decision in the Hoverspeed case ^[1], ensuing since the date of the original review decision, the court held that the Excise Duties (Personal Reliefs) Order 1992 SI/3155 ("the PRO") wrongly placed the burden of proof on travellers to satisfy Customs that they were not holding or using excise goods for a commercial purpose, instead of on Customs. In view of this, Customs' application was granted and the re-review now under appeal was directed to take place.

The only other evidence before the tribunal in this appeal consisted of publicity material from the "Eastenders" Beer & Wine Cash & Carry outlet, near Adinkerke, Belgium, downloaded from the internet by the appellant.

The facts as we find them to be are as follows.

At the time of his trip to the continent resulting in the seizure, the appellant, who lives in Hull, worked for a small company involved in the computer software industry. One of his recreations was paramotoring, i.e. the motor-powered activity otherwise similar to paragliding. Some two months prior to Christmas 2001 he had broken his motor, and needed to purchase some parts. He also wanted to buy a new trike. These items were available in France at about half the UK price. The appellant ordered the items on 10 December 2001 and travelled to France to fetch them.

It struck the appellant at that time that he could save money by purchasing his smoking requirements on the continent. He decided to make a second trip to the continent to buy tobacco and cigarettes. His first trip was made purely to purchase his paramotoring requirements; his second trip, on 29 December 2001, was in order to purchase the goods. His idea was to make a saving on the £300 per month or more he spent in the UK on tobacco.

The appellant smoked the contents of about seven pouches of hand-rolling tobacco a week, obtaining some 50 cigarettes from a pouch. He decided to purchase enough tobacco on the continent to satisfy the smoking needs of himself and his wife, with some allowance made for his Brazilian mother-in-law as well.

The vehicle had a value of about £10,000. Initially it had been obtained on hire purchase, but the appellant subsequently bought the vehicle outright, financing it via a loan. The vehicle was some 18 months old when it was seized, and had travelled some 27,000 miles.

The appellant agreed in tribunal that the notes were accurate. The notes record an interview that commenced at 10.35 a.m. on 29 December 2001. The appellant accepts that, when asked on landing in the UK how much tobacco he had with him exactly, he replied "450 pouches and 4 sleeves of cigarettes". He said that he had them to last him 18 months. He produced his receipts for his purchases. He said that he was "stocking up for a year".

We find that the appellant actually had with him not just 450 pouches, as stated, but another 149 pouches of hand-rolling tobacco as well ^[2].

The Customs officer then read to the appellant a "commerciality statement", i.e. the appellant was required to satisfy Customs that the goods were not being held or used for a commercial purpose (this reversal of the burden of proof, contained in article 5(3A) of the PRO, was in the Hoverspeed case found to be in contradiction of Council Directive 92/12/EEC, and the PRO was later revoked).

The appellant told the interviewing officer that the tobacco he had purchased would be consumed by him at the rate of a packet every day or two days. He and his wife would be smoking it. It would last about a year. He had received no money for purchasing any of it and he would not be selling it. Nor would he be giving any of it away. He had last travelled abroad 2 weeks previously, and had brought back 1 Kg of tobacco on that occasion, of which he had one pouch left.

The appellant told Customs that he had paid for the tobacco in cash. His earnings were such that he took home £2,450 per month. He produced smoking materials. He said that he had bought cigarettes as well as tobacco because it was easier to smoke cigarettes if he went out drinking.

In the UK, the appellant said, he was accustomed to obtain his tobacco requirements from shops, "from people in pubs" and from a Sunday market where tobacco could be had @ £2.50 a pouch. He stated that a pouch cost over £8 in the shops.

The appellant said that his neighbour had told him where to go to buy the tobacco on the continent. The appellant believed that he could get as much as he wanted. He appeared to be ignorant of the guidelines for quantities of excise goods contained in the Schedule to the PRO. He said that he had bought such a large quantity on the present occasion because he could afford to stock up, and had not realised until his previous trip how cheap it was. He would not be travelling again to buy tobacco for about 18 months.

The Customs officer who conducted the interview recorded at the end of the notes that the goods and vehicle were being seized because of the appellant's consumption rate, the fact that the goods were in excess of the guidelines, that it was unreasonable to have bought only 1 Kg of tobacco on the previous trip, and that he had stated in interview that he regularly purchased tobacco from an illegitimate source.

The appellant wrote to Customs on 30 December 2001 seeking the restoration of the vehicle. He fortified that request with information contained in a letter dated 4 January 2002. However Customs refused the request for restoration by letter dated 29 January 2002, because the goods were greatly in excess of the specified guidelines and would be likely to damage legitimate trade, Customs did not believe that the appellant consumed as much as a pouch of tobacco every one to two days, and could not reconcile the large quantity of tobacco purchased at the end of December with his having brought back only 1 Kg when he went abroad earlier in December.

The appellant then wrote a long letter to Customs dated 28 February 2002 seeking a review of the decision not to restore. In the course of that letter, he attempted to explain how he initially came to purchase 450 pouches of tobacco and ended up purchasing a further 150. He wrote that he thought that the 450 pouches would last him a year, and drove away from the outlet after buying those, but on realising that he had enough money with him to buy more tobacco, he turned round and drove back and bought the extra 150 pouches. Later, he stopped at a cash & carry near Calais and bought some wine and spirits.

Also in that letter, the appellant explained how he was able to fund the purchase of a replacement for the seized vehicle, namely a Vauxhall Omega. He wrote that he withdrew from the business in which he was employed the sum of £25,000, thereby enabling the discharge of a bank loan of that amount. He borrowed £2,500 to purchase the Omega. That debt would be cleared in 2002, but the loan for the seized vehicle could continue to be repayable until 2004.

The appellant provided still further information in a letter to Customs dated 6 March 2002. He described circumstances in which he had just broken his arm, which would take 10 to 12 weeks to heal. He also referred to his unblemished record, and that he had been made to feel like a criminal by Customs, "guilty until proven innocent".

The appellant wrote further to Customs on 12 April 2002. We find that there is a large measure of duplication between this letter and the appellant's letters to Customs dated 28 February 2002 and 6 March 2002 ^[3].

In his letters, the appellant addressed the reasons given in Customs' letter of 29 January 2002 for not restoring the goods. He argued that he had attempted to declare the goods. He pointed out that he had no need to sell excise goods in this country to generate extra income, as he had a £40,000 per annum salary and his wife earned £10,000. He analysed the cost of their smoking, conservatively estimating this at £300 per month. The trip to the continent to purchase tobacco was, he wrote, part of a detailed consideration of how he and his wife could improve their financial situation. The appellant stated that he smoked one pouch of tobacco a day, and his wife two pouches per week. They also smoked 3 to 4 packets of cigarettes during evening or weekend socialising.

In the initial review decision, that dated 15 April 2002, Mr Leavesley mentioned that the appellant had not declared the extra 150 pouches at all when interviewed. He found it incredible that, having bought the extra tobacco only a few hours before, the appellant could have forgotten to mention these pouches. He pointed out, as indeed appears to us to be the case, that the circumstances of the further purchase had only been raised by the appellant for the first time in his letter to Customs dated 28 February 2002. Mr Leavesley also drew attention to the inconsistency between what the appellant had said in interview about his own consumption rate of tobacco and what was being stated in the correspondence about the consumption rates of himself and his wife. Mr Leavesley said that the stated amounts struck him as excessive.

Ms Hurrell's review decision dated 23 September 2003, the one now under appeal, is quite different from that of Mr Leavesley. It is apparent that she has conducted a fresh reconsideration of all the material. She identified a discrepancy between what the appellant had suggested about learning the cheapness of tobacco on the continent on his first trip to France in early December, and what he had also stated in interview, when he said that his neighbour had told him about this. She explained that it was hard to reconcile his stated tobacco consumption with purchasing 1 Kg during the earlier trip, which would involve consuming 19 pouches in 14 days, if, as he had said, he had just one pouch left. She pointed out that the pouches purchased on the later trip would allegedly last 66 weeks, yet the cigarettes also purchased would last just 10 weeks.

Ms Hurrell said that, if the appellant had taken £1,100 with him to spend on tobacco, it would make no sense to spend £837.76 on 450 pouches, and only as an afterthought a further £280.50 on another 150 pouches. She queried the appellant's apparent familiarity with the kinds of question asked by interviewing Customs officers, pre-empting the information sought by Customs in much of what he had said, and his calculation of his monthly expenditure on tobacco.

She then referred to the decision of the Court of Appeal in Lindsay v C & E Comrs [2002] 3 All E R 118 ("the Lindsay case"), in which the court held that a decision by Customs not to restore a seized vehicle, even where excise goods were seized as not being for the traveller's own use, could be disproportionate, in a case where excise goods are being sold, but for no profit. She said:

"There have not been any representations from you that the goods were being sold, but for no profit. Restoration would therefore not normally be applicable on those grounds. However, in using my discretion, and allowing the benefit of the doubt regarding your financial circumstances, I consider it a possibility that the commercial aspects of your case may involve selling goods to friends and/or family for no profit, i.e. at cost price".

She accordingly decided that restoration of the vehicle should be offered on payment of 100% of the duty and tax which would be due on the goods, on the assumption that they were for commercial use, i.e. £3,816.95 including VAT. The goods themselves, having been seized and forfeited, and appearing to be held for commercial purposes, should not be restored, seeing that the revenue due in respect of them exceeded their purchase price.

The appellant informed the tribunal that he paid the £3,816.95 requested and received the vehicle back in October 2003. It then cost him about another £2,000 to have it serviced and recommissioned for use. By then its value was such that he had made an overall loss on it.

For Customs, Mr Spragg submitted that the quantity of hand-rolling tobacco being imported was such that Customs had acted reasonably in declining to restore the goods. There was no explanation as to the inconsistencies in the appellant's story. The appellant's wife had not given evidence. His mother-in-law had not been mentioned in the interview. The appellant was questioned mid-morning, so that it did not appear that he could have been tired, thus affecting the answers he gave. The seizure and forfeiture of the goods had not been challenged. In short, Mr Spragg submitted that the re-review had resulted correctly, so that the appeal should be dismissed.

In conclusion, the appellant said that he relied upon five matters, namely his previous good character, his lack of a financial incentive to bring the goods into the UK for commercial purposes, that he had never dreamt that the goods might be seized and forfeited, that he was tired and frightened by the officer interviewing him, and that his purchase in the UK of tobacco products from illegitimate sources was neither here nor there. He had not sought to disguise the quantities brought back – indeed he had produced his purchase receipts at the time. He submitted that he had done nothing wrong. He asked us to allow the appeal.

In considering our decision, we need to bear in mind that, in this area of our jurisdiction, it is only if we are satisfied that Ms Hurrell could not reasonably have arrived at the decision contained in her review letter of 23 September 2003 that we are empowered to allow this appeal – see section 16(4) of the Act. We have registered the points made by the appellant in his evidence and submissions. Nevertheless we note the following matters, which appear from the facts we have found:

That, for whatever reason, the appellant did not make a declaration as to 149 ^[4] of the pouches of tobacco he had with him – we discount the production of the receipts, seeing that the appellant had been specifically requested to state exactly how much he was actually transporting;

That there are inconsistencies between what the appellant stated in interview to be his consumption of tobacco and what his subsequent correspondence alleges to be the consumption of himself and his wife respectively;

That the appellant is articulate, intelligent and alert, and so appears well able to have appreciated the procedures for bringing tobacco goods into the UK from other EU countries, so that ignorance does not, we think, afford him an excuse;

That the appellant did not suffer hardship in consequence of the forfeiture of the vehicle; and

That he accepted restoration of the vehicle in consideration of paying the amount of duty due in respect of the goods, on the basis that they were held for commercial use.

The quantity of hand-rolling tobacco being imported in this case was such that it seems to us reasonable for Customs to have concluded that the goods were, on the balance of probabilities, held for a commercial purpose, pace a convincing explanation to the contrary. Yet the explanations put forward are contradictory as to the important details of who would be smoking the tobacco, at what rate, and over what period. Significantly, the appellant has neither challenged the seizure and forfeiture of the goods, nor has he sought a review of the decision not to restore them – all his correspondence, from the outset, has been directed to the restoration of the vehicle alone.

Ms Hurrell has drawn an analogy in this case with the Lindsay case. She has applied the principle of proportionality applicable, according to the Lindsay case, in cases of non-profit importations for commercial purposes. We think that, in doing so, Ms Hurrell has acted fairly towards the appellant, because there is no evidence in this case that what has properly been assumed to be a commercial importation was not in fact for profit. It may well have been for a profit. But Ms Hurrell, in the exercise of her discretion, has given the benefit of the doubt on that matter to the appellant.

In our opinion, the conclusion arrived at in the review decision under appeal is proportionate. On the basis of a commercial importation of the goods, duty and tax amounting to £3,816.95 would have been payable, assuming that the goods had been correctly declared. As mentioned, restoration of the goods themselves has not been sought. It seems to us to be correct that the vehicle, having regard to its value, should be restored on payment of that amount.

Moreover, the clinching matter is that the appellant accepted restoration on condition of payment of that sum, which he duly paid to obtain back the vehicle. He must in so doing have accepted that it was in his interests to do so. It seems to us that justice has been done by a restoration on that basis. We accordingly agree with the review decision of Ms Hurrell and see no reason to interfere.

We therefore dismiss this appeal. No application was made for costs, and none are awarded.

MR M S JOHNSON

CHAIRMAN

Release date:

Note 1    (which went on appeal, see [2003] 2 All E R 553, but not in respect of the burden of proof point)     [Back]

Note 2    plus a partly-consumed 150th pouch.    [Back]

Note 3    (appearing to involve “cutting and pasting”)    [Back]

Note 4    a 150th pouch had been partly consumed at the time of interview    [Back]