British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
United Kingdom VAT & Duties Tribunals (Excise) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Excise) Decisions >> Acton & Anor (t/a Tor Imports) v Customs and Excise [2004] UKVAT(Excise) E00736 (24 May 2004)
URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2004/E00736.html
Cite as: [2004] UKVAT(Excise) E00736, [2004] UKVAT(Excise) E736
[New search] [Printable RTF version] [Help]
SECURITY Commissioners' requirements for premises and movement guarantees relating to a bonded warehouse used for storage of tobacco products whether review of decision being within policy guidelines was unreasonable no appeal dismissed.
CEMA 1979 s157(1); Article 11 of 9/.12/EEC; FA 1994 s15 and 16(4); SI 1999/1278 reg 16.
LONDON TRIBUNAL CENTRE
| MARK ACTON AND SANDRA ACTON TRADING AS TOR IMPORTS |
Appellants |
and |
|
| THE COMMISSIONERS OF CUSTOMS AND EXCISE | Respondents |
Tribunal Chairman: Rodney P Huggins (Chairman)
Michael James
Sitting in public in Plymouth on 28 April 2004
The Appellants in person.
Jeremy Hyam of Counsel instructed by the Solicitor's Office of H M Customs and Excise for the Respondents.
... CROWN COPYRIGHT 2004
5 10 15 20 25 30 35 40 45 50 |
DECISION The appeal 1. Mr Mark Acton and Mrs Sandra Acton trading as Tor Imports (together called "the Appellants") appeal against a decision on review of Customs and Excise (Customs) dated 9 May 2003. This review confirmed an original decision dated 6 June 2002 amended subsequently on 10 February 2003 that the Appellants should provide premises and movement guarantees as authorised warehousekeepers in respect of dutiable goods. The legislation 2. Section 157(1) of the Customs and Excise Management Act 1979 (CEMA 1979) provides "Without prejudice to any express requirement as to security contained in the Customs and Excise Acts, the Commissioners may, if they see fit, require any person to give security [(or further security) by bond, guarantee] or otherwise for the observance of any condition in connection with customs and excise.". 3. Article 13 of Council Directive 92/12/EEC provides that "An authorised warehousekeeper shall be required to (a) provide a guarantee, if necessary, to cover production, processing and holding and a compulsory guarantee to cover movement the conditions for which shall be set by the competent authorities of the Member State in which the tax warehouse is authorised." 4. The Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR 1999) gives the Commissioners power to approve occupiers of excise warehouses and register them as registered excise dealers and shippers in accordance with section 100G(21) of CEMA 1979. 5. Regulation 16 of WOWGR 1999 provides "The Commissioners may require any relevant revenue trader to provide such security, as they may think appropriate for the payment of excise duty that is or may become due from him." 6. Section 16 of the Finance Act 1994 (the 1994 Act) provides that an appeal shall lie to a tribunal against a decision on review under Section 15. This Section provides for the review of decisions specified in Schedule 5 of the 1994 Act. Paragraph 2(1)(s) of Schedule 5 specifies "any decision under section 157 (of CEMA 1979) as to whether or not any person is to be required to give any security for the observance of any condition as to the form or amount of, or the conditions of, any such security or as to the cancellation of any bond". 7. Section 16 of the 1994 Act limits the jurisdiction of the tribunal in respect of "ancillary" matters and section 16(8) defines these as those specified in Schedule 5. As a requirement to give security is a decision |
|
5 10 15 20 25 30 35 40 45 50 |
specified in Schedule 5 it is, therefore, an ancillary matter. The relevant parts of section 16(4) provide as follows :- 8. "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." Customs and Excise Notice 197 9. In 2001 Customs and Excise introduced a Notice 197 setting out their requirements for financial securities within excise warehousing. In principle, section 11.3 of Notice 197 provides a minimum level of £250,000 for premises security for a new general storage and distribution warehouse. In terms of section 16.2 of the Notice, the security can be reduced by 50% where a principal has provided security for the previous 2 consecutive years and a reduction to 0% when security has been provided for 4 consecutive years. In either case, no claim must have been made against the security and no significant irregularities must have been identified. Initially, the movements security (in addition to premises security) was a minimum level of £20,000. 10. Subsequently, although Customs retained the right to demand these minimum levels of security, subject to meeting certain criteria, warehousekeepers could apply for reductions in the size of their guarantees but it was indicated in an Excise News publication, Edition 1/01 issued on 16 October 2001, internally in Customs, that when considering the level of premises security for established warehouses, working on a basis of average month-end stockholding for the previous 12 months a potential duty of between £100,000 and £400,000 would require a level of security of £100,000. 11. Another Excise News publication, Edition 2/01 issued on 27 November 2001, internally, stated that although the minimum guarantees would |
|
5 10 15 20 25 30 35 40 45 50 |
normally be £20,000, a guarantee could be allowed for a lesser figure "
where there are exceptional circumstances." The issues 12. The original substituted decision required a premises guarantee of £100,000 and a movement guarantee of £2,000 in relation to the approval of the warehouse under the provision of WOWGR 1999. The issues therefore before the tribunal were : (1) Was the review decision contained in the letter dated 9 May 2003 reasonably reached by the Commissioners on the facts as presented to and by Mr Stephen Preston (Mr Preston), the Reviewing Officer ? (2) If not, what action should the tribunal take under section 16(4) of the 1994 Act ? The evidence 13. A bundle of documents was produced by the parties. Oral evidence was given by both the Appellants, mainly Mr Acton. Oral evidence was also given by Mr Preston, a Senior Officer of Customs and Excise. A witness statement by Mrs Sue Williamson, another Customs Officer, was not objected to by the Appellants and admitted in evidence at the hearing as evidence of the facts stated in it. The facts 14. The facts were not in dispute and we accordingly find as follows . 15. In or about 1993, the Appellants started trading as importers of fine hand-made cigars and similar tobacco products of top quality following Mr Acton's redundancy from leading cigar importers. 16. Initially, they worked from their home in Dawlish, Devon and on recommendation used Cargo Bonding Company Limited's excise warehouse at Burton-on-Trent for storage facilities. 17. In October 2000 the Appellants became aware through Customs and Excise Officers that Cargo Bonding Company Limited (Cargo Bonding) were operating irregularly and defrauding various customers including the Appellants. Mr and Mrs Acton and their staff co-operated fully with Customs and Excise Officers from the Derby Office and provided duplicate paperwork to substantiate documentation which had disappeared from Cargo Bonding's premises. This occurred until February 2001 when Cargo Bonding ceased as an excise warehousing facility because Customs withdrew their approval. 18. For a few months, the Appellants used Medway Bonds Warehouse at |
|
5 10 15 20 25 30 35 40 45 50 |
Rochester in Kent as an interim storage facility although this was not really suitable for the storage of fine cigars. During the period, the Appellants traded as a loss and had to make two-thirds of their sales force redundant. 19. It was suggested to the Appellants by Customs Officers that it would be advantageous is they obtained suitable premises in Dawlish and applied for bonded warehouse approval themselves. The Appellants applied for a licence to the Customs Office in Plymouth but after a four weeks delay were told that the paperwork had been lost and a fresh application had to be made to Bristol. Approval was granted by Customs on 11 June 2001 for Unit 4, Imperial House, Shutterton Industrial Estate, Exeter Road, Dawlish, Devon to be an Excise Storage and Distribution Warehouse under the provisions of Section 92 of CEMA 1979. This approval, which was subject to the Commissioners; powers of revocation or variation, allowed the receipt, warehousing and dispatch of cigars and cigarillos, cigarettes and pipe tobacco for a period ending 31 March 2002. 20. In October 2001 WOWG Regulations were introduced requiring warehousekeepers authorised for excise storage and distribution to possess financial security for premises and movements. This was to be effective immediately for new warehousekeepers and from 1 January 2002 for existing ones. 21. The Appellant's warehouse approval was renewed with effect from 1 April 2002 for a further twelve months and the Appellants were notified by official letter dated 8 April 2002. Annexe 3 to the Approval Number 2729946 set out the conditions under which the warehouse approval was granted, Condition (f) stated as follows : "The warehousekeeper will ensure that an adequate holding and movement guarantee is in place which will cover potential revenue on any losses which may occur within the warehouse, and the potential revenue on all duty suspended movements in or out of the warehouses, of excise goods." 22. Mr and Mrs Acton were unaware of the extent of the financial security required by Customs until they received a letter from the Financial Securities centre at Salford dated 6 June 2002. This letter enclosed a movement and premises guarantee for a total of £102,000 made up as to £100,000 for the premises part and £2,000 for the movement portion. These amounts had been assessed by Customs Officer Peter Morgan stationed at Bristol on 31 January 2002. He had visited the Appellants at their premises in Dawlish toward the end of 2001 but had not been able to discuss with the Appellants the implications of the newly acquired security because the officer accompanying him had been taken ill during the meeting necessitating emergency transport to Torbay Hospital. 23. Officer Morgan recommended a minimum guarantee size of £100,000 for the premises and £2,000 for movements as the duty on average amount of |
|
5 10 15 20 25 30 35 40 45 50 |
duty suspended in one week was on £721. The duty on average month end stockholding was £210,000. 24. Upon receipt of the letter of 6 June 2002 from the Salford Centre the Appellants contacted Customs by telephone since they were very concerned about the amount of security required as their warehouse business was only small. 25. Customs Officer Sue Williamson then became involved and entered into correspondence with the Appellants. She visited the Appellants on 9 July 2003 in company with Officer David Hayes, also from Customs Bristol Office. She carried out an examination of the excise warehouse and found that the Appellants complied with all necessary requirements. Officer Williamson informed Mr and Mrs Acton that normally under policy guidelines the level of premises security required was £250,000 and movements security was £20,000 for a new general storage and distribution warehouse. Discounts could only be allowed after two years trading and provision of a recognized guarantee during that period. She also told them that Officer Peter Morgan had given incorrect information. 26. Mr and Mrs Acton told the Officers at their meeting that the imposition of such a large guarantee would effectively close them down as their bank would only guarantee £42,000. They asked for more time to resolve the matter. 27. After further time, eventually on 10 February 2003, Officer Williamson wrote to the Appellants confirming that the premises security requirement had been reduced from the normal level of £250,000 to £100,000 and the movement security requirement from £20,000 to £2,000. 28. By letter dated 26 March 2003, Mr and Mrs Acton requested a departmental review of the decision contained in Officer Williamson's letter of 10 February 2003. The Appellants stated that they had a good compliance history and requested a 100% reduction in the level of security. 29. Review Officer Stephen Preston conducted a review of Officer Williamson's decision and concluded that the level of security notified was not excessive. He outlined the background, relevant legislation and the Appellants' arguments in reaching his decision. 30. By notice of appeal dated 6 June 2003, the Appellants contended that (1) They were not informed that they would need guarantees when the licences were issued (2) As a result of the Commissioners' actions, their original bonding facilities at Cargo Bonding Company Limited were closed |
|
5 10 15 20 25 30 35 40 45 50 |
(3) They have a good compliance history and had been importing and selling cigars in the UK for the last 10 years and running a bonded warehouse for the last 2 years. (4) Their facility is unique and there is no other warehouse with the same facilities. (5) The Appellants' firm is a small, family run business and cannot afford the guarantee. Reasons for decision The Commissioners' Policy 31. Mr Hyam for the Commissioners referred to the Respondents' departmental policy relevant at the time when the decision relating to the guarantee was given. 32. He specifically drew the attention of the tribunal to the conditions outlined in Notice 197 which include the level of security required. Section 11.1 requires the premises security to be provided by an authorised warehousekeeper (or an associated or parent company). 33. Section 11.3 of the Notice then designates a minimum level of £250,000 as the premises security for a new general storage and distribution warehouse. This figure can be reduced by the 'established traders discounts' referred to in Section 16.2. These allow for a 50% reduction when the principal has provided security for the 2 previous consecutive years and a reduction to 0% when the security has been provided for 4 consecutive years. In either case no claim must have been made against the security and no significant irregularities must have been identified. 34. Similarly, the minimum level of security required for movement guarantees was set normally at £20,000. Customs Officers were authorised by a financial security policy published in November 2001 to assess the likely risk to the revenue in each case. A guarantee that is less than £20,000 can be allowed where there are exceptional circumstances. 35. As from 1 January 2002, the requirement for warehousekeepers to provide financial security was extended to all warehousekeepers. 36. These new provisions relating to guarantees for premises and movements have significantly revised the previous guarantee system : this is because of tightening up the previous bonded warehousing practices as a result of defaults such as occurred with Cargo Bonding. 37. The tribunal finds that these new provisions were necessary and the Commissioners were entitled to bring them into force. |
|
5 10 15 20 25 30 35 40 45 50 |
38. It is necessary then to consider whether the decision was reasonable. Was the decision reasonable ? 39. The Appellants in order to succeed in their appeal have to satisfy the tribunal that the Commissioners could not reasonably have arrived at the decision made by Officer Preston in his letter of 9 May 2003 within sections 16(4) of the 1994 Act 40. It is necessary as has occurred in other tribunals to review the decisions of higher courts when considering the word "reasonably". We agree with the view that the word "reasonably" is to be construed in the wider sense used by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 when he stated at page 229 : " A person instructed with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matter which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules he may truly be said, and often is said, to be acting 'unreasonably'. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington L J in Short v Poole Corporation [1926] Ch 66 gave the example of the red-haired teacher dismissed because she had red hair. That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is no unreasonable that it might almost be described as being done in bad faith; and, in fact, all those things run into one another." 41. The approach to be adopted by a tribunal in reviewing the exercise of a discretion conferred on the Commissioners (albeit a different discretion) was put in this way by Lord Lane in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1980] 2 WLR 653 at p.663 : "It could only properly [review the discretion] if it were shown that 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 discharged something to which they should have given weight." This does not allow the tribunal to look at the decision and simply disagree with it and substitute its own decision. 42. We therefore return to the review decision and to what Officer Preston said about it in evidence. 43. He told us that Officer Williamson had supplied him with all relevant documents including the two policy documents produced to the tribunal. The policy was, in accordance with Customs' published approach. |
|
5 10 15 20 25 30 35 40 45 50 |
44. In his review letter of 9 May 2003 he said in conclusion : "Having considered the legislation and the guidance in the Notice, I consulted the HMCE policy section responsible for this area and verified that the minimum level of security required for a premises guarantee for an existing warehousekeeper (i.e. one approved before 01/10/10) would still theoretically be £250,000 unless entitled to the established trader discount. The discounts would apply to warehousekeepers meeting the no claim' conditions if they had traded as warehousekeepers for the necessary 2 or 4 year periods even if no security had been actually legally required at that time. Unfortunately, although TOR's previous history as a revenue trader was exemplary, the company had no prior record as a warehousekeeper before June 2001. A similar situation exists in relation to movement guarantees and here the normal minimum figure is £20,000. In the normal course of events I would therefore have expected the required financial security to be at least £250,000 and £20,000 amounts referred to above. However the HMCE representatives at the Bristol office took the decision that as TOR had been officially advised that the levels of security required would be £100,000 and £2,000 and that since they viewed that those levels would satisfactorily safeguard the revenue, they would accept those latter levels. I therefore find that the level of security notified in Mrs Williamson's letter of 10/02/03 is not excessive and I have therefore upheld that decision." 45. In our view, this was entirely reasonable bearing in mind the principles we have set out in paragraphs 40 and 41 of this decision. Decision 46. Appeal dismissed, the decision dated 6 June 1002 amended subsequently on 10 February 2003 that the Appellants should provide a premises guarantee in the sum of £100,000 and a movement guarantee in the sum of £2,000 is upheld. 47. The Appellants will be at liberty to make another application now for discounts from the above sums and no doubt Customs will take into account the facts that no guarantees were required until June 2002; there was considerable delay in dealing with the Appellants original application; the subsequent correspondence was protracted through no fault of the Appellants; there are no irregularities in their conduct as warehousekeepers and, as Officer Williamson mentioned in her witness statement the Appellants have a "good compliance history". Regretfully, the tribunal cannot take these matters into account in reaching its decision. |
|
5 10 15 20 |
48. There is no order as to costs. Rodney P Huggins Chairman Release Date : LON/03/8135 |