United Kingdom VAT & Duties Tribunals (Excise) Decisions

 


E00765

EXCISE DUTY – Personal import of tobacco brought into the UK in a private car – whether for own use of Appellant – whether for a commercial purpose – reasonableness of Commissioners' decision – commerciality as far as Appellant was concerned – proportionality considered – appeal dismissed.

Article 8 and 9 of EEC Directive 92/12, s 152(b) of the Customs and Excise Management Act 1979.

LONDON TRIBUNAL CENTRE

WILLIAM ERNEST WHITTERN	Appellant
and
THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

Tribunal Chairman: Rodney P Huggins (Chairman)

Sandi C O'Neill

Sitting in public in London on 24 May 2004

The Appellant in person.

Sarabjit Singh, Counsel, instructed by the Solicitor's Office for H M Customs and Excise for the Respondents.

... CROWN COPYRIGHT 2004

DECISION

The appeal

1. Mr William Ernest Whittern (the Appellant) appeals against a decision on review of Customs and Excise (Customs) contained in a letter dated 14 April 2003 not to restore quantities of tobacco, wine and spirits imported by him and seized by Customs.

Earlier proceedings relating to same seizure.

2. On 8 March 2002 another tribunal chaired by Dr Nuala Brice heard the substantive appeal against seizure of both the vehicle and the goods. By consent, the tribunal directed as follows :

"(1) that the appeal be allowed;

(2) that the respondents shall conduct a further review of the original

decision in accordance with the following directions :

(a) that the evidence of the Appellant in the appeal be accepted;

(b) that the decision on the further review be communicated to

the Appellant before Easter this year;

(c) that the decision on the further review be treated as a

decision on a statutory review against which the Appellant

may appeal …"

3. In accordance with the direction a further review was carried out by Senior Customs Officer Mrs Kathryn Philpott and she notified the decision to the Appellant by letter dated 5 June 2002. She offered the Appellant compensation equivalent to the tax inclusive value of the vehicle as shown in Glass' Guide current at that time.
4. The Appellant appealed by Notice dated 23 June 2002 and stated his grounds to be as follows :

"… the amount being offered to be my Customs and Excise (i.e. Glass' Guide) of the value of my car is unfair due to the amount of money I have lost due to replacing my vhicle, loss of wages, and other expenses including loss of all goods both personal and legitimately bought goods within the EU."

5. On 13 March 2003 a further tribunal (the second tribunal) also chaired by the Chairman of this tribunal (Mr Rodney Huggins) but having a different member heard the appeal relating to the compensation offered by Customs to the Appellant for the value of his Volvo Estate motor car, index number F474NBB (the vehicle) after the seizure of both the vehicle and the tobacco and alcohol being carried in it.
6. The second tribunal dismissed the appeal in respect of the compensation offered for the vehicle as it considered here was no jurisdiction for the tribunal to consider the appeal.
7. However, the second tribunal hearing heard the Appellant give evidence issued a direction that the original decision to restore the Appellant's goods was referred for a further review in accordance with the first tribunal's direction of 8 March 2002 to an officer who had not been previously concerned with the case. The Appellant was told that if he was dissatisfied with the result of that review he would have a further right of appeal to a tribunal. The current proceedings relate to that right.

The issue

8. The question is straightforward. Was the decision not to restore the excise goods reasonably arrived at by the Commissioners ?

The evidence

9. The Appellant gave evidence before the tribunal and similarly Mr Paul Arthur Devlin (Mr Devlin) the Review Officer whose decision was appealed and also Mr Leslie Smith (Mr Smith) an Officer of Customs with responsibility for excise duty policy.
10. A bundle of documents was produced by Mr Singh on behalf of Customs.

The facts

11. From the evidence before us, we find the following facts which, to a large extent, follow the same facts as found by the previous two tribunals.
12. The Appellant is a truck driver in regular employment who, in his spare time, frequently visits North-East France and the surrounding areas to shop. He travels by car using the Channel Tunnel motor-vehicle train accompanied usually by his wife and another couple. This occurs regularly on a monthly basis. Usually, groceries are bought but from time to time, the Appellant will purchase tobacco and alcohol for both his personal use and relatives and friends who reimburse him.
13. Towards the end of 2002 about October time, the Appellant, on one of his shopping trips, was stopped at the United Kingdom Tourist Control at Coquelles, near Calais in France. He was questioned by Customs Officers about the 4,000 or so cigarettes and tobacco he had bought. He replied that they were for himself and "close family members".
14. The tribunal finds on the balance of probabilities that although the Appellant denied it, he was handed a copy of the Customs pamphlet known as Notice 1 which sets out Customs and travellers rights for persons entering the UK on that occasion. He was allowed to proceed without any seizure although he had been given a warning at that time that he must not sell goods on a commercial basis.
15. On 7 April 2001 the Appellant, accompanied by his wife, went for one of their daily shopping trips and, on that occasion, visited Adinkerke, Belgium (just over the border between France and Belgium) to purchase various types of tobacco and then Carrefour, Cité Europe in Calais to acquire wine, beer and spirits plus groceries.
16. When the Appellant reached the UK Control at Coquelles, he was intercepted by Customs Officers.
17. In response to initial questions, the Appellant stated that he was returning from Belgium and Calais where he had been shopping. He had purchased 130 pouches [6.5Kg] of hand rolling tobacco together with some cigarettes and some beer. The vehicle belonged to him and he had owned it since the previous December.
18. The Appellant supplied the following further information in response to questioning :

(a) The Golden Virginia Tobacco belonged to him, as did some of the

cigarettes.

(b) The rest of the importation belonged to his family.

(c) He had paid for the goods and nobody had given him money towards

them. However, he also stated: "They will pay me when I get back"

(d) The exact quantities belonging to individuals would be sorted out

when he returned home. Because the goods were to be divided

between six people.

(e) The Benson and Hedges cigarettes belonged to his wife and the rest

would be distributed between his son, daughter, brother, daughter-

in-law, brother-in-law and son-in-law.

(f) He would receive cost payment for the goods, no profit would be

made and all the family would pay for the expenses incurred, such as

fuel.

19. Customs officer Katherine Hudson seized the excise goods, consisting of 7.75Kgs of hand rolling tobacco, 4,034 cigarettes, 150 cigarillos, 300 cigars, 106.56 litres of beer, 93 litres of still table wine and 1 litre of spirits, and the vehicle because she was not satisfied that the goods were for the Appellant's own use. The reasons for not being satisfied that the goods were for own use were recorded as follows:

"1. s.49 seizure

2. Excess MILs

3. Goods for non-travelling persons

4. Expecting to receive money."

20. Officer Hudson then issued the Appellant with Seizure Information form C156.
21. The day following the seizure, the Appellant wrote to the Customs stating that he wished to appeal against "the seizure of my car at Calais …"
22. By letter dated 19 April 2001, the Commissioners sought clarification of whether he sought a formal appeal under Schedule 3 of the Customs and Excise Management Act 1979 (the 1979 Act) or if he required invitation of condemnation proceedings. By a subsequent undated letter, the Appellant sought restoration of his vehicle. On 12 May 2001 the Appellant was notified of the Commissioners' decision not to restore the seized vehicle and excise goods. On 6 June 2001 the Appellant sought a review of the decision which was acknowledged. As the Commissioners did not review their decision within 45 days, it was statutorily deemed upheld.
23. The Appellant appealed and as referred to in paragraph 2 of this decision after his evidence had been accepted, his appeal was allowed. A direction was made by the tribunal which sat on 2 March 2002 that the Respondents should conduct a further review of the original decision to seize both the goods and vehicle before Easter 2002.
24. On 27 March 2002 the Solicitor's Office of Customs and Excise informed the Appellant they were unable to arrange for the original decision to be re-considered in time because it had similarities with Lindsay v Customs and Excise Commissioners [2002] STC 588 (Lindsay) where the Court of Appeal upheld the tribunal's decision in that case and the Commissioners were reviewing their policy in the light of the judgment (which had only been given on 20 February 2002) and were having to consider issuing new guidelines to staff.
25. About this time, the Commissioners sold the vehicle at auction and the appellant only found out when the DVLA office wrote to him for the registration documents.
26. Eventually, on 5 June 2002, Customs Officer Mrs Kathryn Philpott wrote to Mr Whittern and after setting out the facts as known to her concluded as follows :

"I am satisfied that the vehicle was used to improperly import alcohol and tobacco goods that were intended for sale at cost i.e. 'not for profit' In such circumstances the revised Customs policy regarding the restoration of private vehicles used to transport seized excise goods provides that when it is the first instances of such an irregularity, as indeed this case is, the vehicle should be restored for a fee equivalent to 100% of the duty that would have been due on all of the excise goods or the value of the vehicle whichever is the lesser …."

27. Officer Mrs Philpott overlooked reviewing that part of the original decision relating to the goods which remains outstanding.
28. On 13 March 2003, it was directed by the second tribunal that the Respondents carry out a re-review of the decision to refuse to offer restoration of the seized goods, on the basis that the goods were not purchased for commercial sale but for friends and family.
29. Senior Customs Officer Mr Devlin wrote to the Appellant on 14 April 2003 and told him that the letter was "the decision on re-review". He set out Customs restoration policy and then what he had to consider. He said as follows :

"When you were stopped by Customs in April 2001, it was established that you were importing a total of 7.75 kilos of tobacco, 4,034 cigarettes, 150 cigarillos, 300 cigars and quantities of beer, wines and spirits. Of the tobacco products, 20 pouches (one kilo) of hand rolling tobacco was for you. The rest of the tobacco goods were for family members who would repay their cost and contribute towards the expenses incurred in obtaining them.

All of the excise goods were subsequently seized as having been improperly imported. Customs refused to restore them in May 2001 and the matter has gone to appeal. It is now agreed before the tribunal that you were to be reimbursed the price of the goods and had not bought them for "commercial sale".

The Court of Appeal, in its decision on "Hoverspeed" decided, in essence, that excise goods are either for own use or for a commercial purpose. Those are opposites with no half-way-house. The term 'commercial' included, in the Court's view, goods bought for others even where no profit stood to be made.

What I have to decide is whether or not Customs should return your goods to you; or if they no longer exist, to make an equivalent payment to you.

The Commissioners' policy on restoration of excise goods has not been affected by the judgments mentioned above and it is that such goods will not be restored unless the affected party demonstrates an exceptional circumstance which merits a waiver of the norm.

As regards your case, the terms used by the Court of Appeal in December 2002 were that :

"The concepts of "products acquired by private individuals for their own use" in article 8 and "products held for commercial purposes" in article 9 of the Directive are antiethical, in the sense that if an individual acquires … products for a purpose other than his own use, such products are to be regarded as held for commercial purposes." Policy is that such goods are not restored and having read the papers in your case I do not consider that an exceptional circumstance has been established by you.

I therefore confirm the refusal to restore the seized goods …"

The Legislation

30. The relevant legal provisions are as follows :

(a) Article 8 of Council Directive 902/12/EEC states :

"As regards products acquired by private individuals for their own use

and transported by them, the principle governing the internal market

lays down that excise duty shall be charged in the Member State in

which they are acquired."

(b) Article 9(1) of Council Directive 92/12/EEC provides that :

"Without prejudice to articles 6, 7, and 8, excise duty shall become

chargeable where products for consumption in a member State are

held for commercial purpose in another member State. In this case,

the duty shall be due in the member State in whose territory the

products are and shall become chargeable to the holder of the

products."

(c) Article 9(2) of Council Directive 92/12/EEC states that :

"To establish that the products referred to in Article 8 are intended

for commercial purposes, member States must take into account, inter

alia, of the following :

- the commercial status of the holder of the products and his

reasons for holding them,

- the place where the products are located or, if appropriate, the

mode of transport used,

- any document relating to the products,

- the nature of the products,

- the quantity of the products.

For the purposes of applying the content of the fifth indent of the first subparagraph, member States may lay down guide levels, solely as a form

of evidence. These guide levels may not be lower than :

(a) Tobacco products

cigarettes 800 items

cigarillos 200 items

cigars 200 items

smoking tobacco 1.0kg;

(b) Alcoholic beverages

spirit drinks 10 L

intermediate products 20 L

wines (including a maximum of 60 L of sparkling wines) 90 L

beers 110 L "

(d) Article 3 of The Excise Duties (Personal Reliefs) Order 1992 as amended (the "PRO") provides that :

"Subject to the provisions of this order a Community traveller

entering a control zone or the United Kingdom shall be relieved

from payment of any duty of excise on excise goods which he has

obtained for his own use in the course of cross-border shopping and

which he has transported."

(e) Article 2(1) of the PRO defines "own use" as follows :

" "own use" includes use as a personal gift provided that if the

person making the gift receives in consequence any money or

money's worth (including any reimbursement of expenses incurred

in connection with obtaining the goods in question) his use shall not

be regarded as own use for the purpose of this Order."

[This provision was revoked with effect from 1 December 2002 after the time of the seizure.]

(f) Article 5(3) of the PRO establishes that :

"Paragraphs (3A) to (3C) below apply to a person who has in his

possession or control any excise goods afforded relief under this

Order in excess of any of the quantities shown in the Schedule to this

Order (this Schedule specifies the guide levels stated in EC Council

Directive 92/12/EEC, Article 9, above).

(3C) Paragraph (3B) above shall not apply where a Court or

Tribunal is satisfied that the condition imposed by paragraph (1)

above has been complied with."

(3A) The Commissioners may require a person to whom this

paragraph applies to satisfy them that the excise goods afforded relief

under this Order are not being held or used for a commercial

purpose.

(3B) Where a person fails to satisfy the Commissioners that the

excise goods in question are not being held or used for a commercial

purpose the condition imposed by paragraph (1) above shall, subject

to paragraph (3C) below, be treated as not being complied with.

(3C) Paragraph (3B) above shall not apply where a Court or

Tribunal is satisfied that the condition imposed by paragraph (1)

above has been complied with.

(g) Article 5(1) of the PRO states :

"The reliefs afforded under this Order are subject to the condition that

the excise goods in question are not …held or used for [a commercial

purpose] whether by the Community traveller who imported them or

by some other person who has possession or control of them; and if

that condition is not complied with in relation to any excise goods,

those goods shall, without prejudice to article 6 below, be liable to

forfeiture".

(h) Section 49(1) of the 1979 Act provides that :

"Where –

(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being goods chargeable on their importation with customs or excise duty, are without payment of that duty-

(i) unshipped in any port …

… those goods shall … be liable to forfeiture

(i) Section 139(1) of the 1979 Act provides that :

"Any thing liable to forfeiture under the Customs and Excise Acts

may be seized or detained by any officer or constable or any member

of Her Majesty's armed forces or coastguard."

(j) Section 141(1) of 1979 Act states that "where any thing has become liable to forfeiture under the Customs and Excise Acts" –

(a) any ship, aircraft, vehicle, animal, containers (including any

article of passengers' baggage) or other thing whatsoever which

has been used for the carriage, handling, deposit or concealment

of the thing so liable to forfeiture, either at a time when it was so

liable or for the purposes of the commission of the offence for

which it later became so liable; and

(b) any other thing mixed, packed or found with the things so liable,

shall also be liable to forfeiture".

(k) Section 152 of the 1979 Act establishes that :

"The Commissioners may, as they see fit –

… (b) restore, subject to such conditions (if any) as they think

proper, any thing forfeited or seized under the Customs and Excise

Acts."

The Tribunal's Jurisdiction

31. The Tribunal's jurisdiction in this appeal in statutory in nature and is set out in sections 14 to 16 of the Finance Act 1994 ("the 1994 Act"). Section 14 of the 1994 Act applies to any decision of the Commissioners of a description specified in Schedule 5 to that Act. Decisions made under section 152(b) of the 1979 Act fall within paragraph 2(1)(r) of Schedule 5. By virtue of section 14(2) of the 1994 Act decisions of a description falling within Schedule 5 to that Act are subject to review and appeal.
32. Section 15 of the Act requires that the Commissioners review the decision not to restore the excise goods if so requested.
33. Section 16(4) of the 1994 Act provides that the relevant power of the Tribunal:

"shall be 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;

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 future."

The Appellant's Argument

34. In his Notice of Appeal dated 10 may 2003, the Appellant contends :

"That after an illegal seizure by Customs and Excise, I have not been compensated for the replacement car I had to buy after my own was seized

and all goods seized at that time."

The Respondents' Argument

35. On behalf of the Respondents, Mr Singh argued that the decision to refuse to offer restoration of the Appellant's goods was a fair and reasonable decision in accordance with the applicable law, based upon the following :

(a) When the Appellant was intercepted, he was importing 7.75 Kg of

tobacco, 4,034 cigarettes, 150 cigarillos, 300 cigars, and quantities of

beer, wine and spirits. Of the tobacco products, 20 pouches (1Kg) of

hand rolling tobacco were for his own use, and the rest of the tobacco

goods were for family members who would repay their cost and

contribute towards the expenses incurred in obtaining them.

(b) As the seized goods were purchased on a friends and family basis,

with the Appellant being reimbursed by family members for the

goods, they were held for a "commercial purpose", both within the

meaning of Article 9(1) of Directive 92/12 and Article 5(1) of the

PRO (now revoked) and/or section 49(1)(a) of the 1979 Act, and were

appropriately seized pursuant to section 139(1) of the 1979 Act.

(c) He further contended that the Respondents' decision not to restore the

excise goods to the Appellant was reasonable and proportionate in the

circumstances. There were no exceptional circumstances to depart

from the general policy that seized goods are not restored.

(d) The value of the duty being avoided – (£1597.53) was more than the

cost of the goods

(e) Finally, the tribunal has no jurisdiction to consider the legality of the

seizure, so this matter could not be challenged by the Appellant in

these proceedings.

Reasons for decision

36. The tribunal finds that it has no jurisdiction to look at the validity of the seizure, even where no condemnation proceedings have taken place and the goods are deemed to be forfeited by the passage of time. In reaching that decision we apply the principles as laid down in paragraphs 54 to 58 of the judgment of Lord Justice Pill in Gora and others v Customs and Excise Commissioners (2004) QB93.
37. As the goods were deemed liable to forfeiture under section 49(1)(9) of the 1979 Act, they were seized pursuant to section 139(1) of that Act.
38. Therefore, the only issue for us to determine is the reasonableness of the Respondents' decision to refuse to offer the goods for restoration.

The reasonableness of the Respondents' decision to offer the goods for restoration

39. In Jason Thomas Bowd v Commissioners of Customs and Excise [1995]V & DR 212 the tribunal reviewed the decisions of higher courts when considering the word "reasonably" in a similar excise duty case involving the non-restoration of seized goods.

The tribunal in Bowd said, "In our view, 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 where he stated at page 229 :

" … A person instructed with a direction 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 these 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 a red-haired teacher, dismissed because she had red hair. This is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and, in fact, all those things run into one another."

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 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 disregarded something to which they should have given weight."

40. Before we consider the application of reasonableness to the circumstances of this appeal, it is necessary to consider whether the Commissioners are entitled to have a policy regarding the restoration of excise goods which have been improperly imported. We consider that the Commissioners are entitled to have such a policy. However, it must pursue a legitimate aim. Mr Smith, in giving evidence to the tribunal, considered that the aim is the deterring of the importation of goods for commercial purposes without payment of duty and the encouragement of compliance. That, in our view, must be legitimate. This was referred to in another tribunal decision of Mrs V Hopping v Customs and Excise Commissioners released on 9 October 2001 where, in paragraph 24 the tribunal said, "The critical question on this issue is whether the Commissioners have fettered their discretion by refusing to listen to an application that the policy be not applied in any particular case". We agree with the tribunal in Hopping that we do not think the Commissioners have allowed the existence of the policy to fetter absolutely the exercise of their discretion in this appeal.. There are circumstances in which the Commissioners will relax their policy but these are, by their very nature, limited.
41. It is quite evident to us that the Respondents accept (and so do we) that the excise goods were not purchased for commercial resale but on a 'friends and family' basis, with the Appellant to be reimbursed by family members for the goods. However, it is contended by the Respondents that the goods were still held for a commercial purpose. We agree with that view for the following reasons :

(a) In R v Commissioners of Customs and Excise, ex parte Hoverspeed and

Others (2003) QB 1041, it was held by the Court of Appeal that the

concepts of "products acquired by private individuals for their own

use" in Article 8 of Council Directive 92/12/EEC and "products held

for commercial purposes" in Article 9 were antithetical, so that if

goods were not for own use, they were to be regarded as being held for

a commercial purpose.

(b) This distinction was reflected in the law applicable at the same time of

the seizure. Article 2(1) of the PRO defines "own use" as follows :

" "own use" includes use as a personal gift provided that if the person

making the gift receives in consequence any money or money's worth

(including any reimbursement of expenses incurred in connection with

obtaining the goods in question) his use shall not be regarded as own

use for the purpose of this Order",.

(c) The antithetical nature of "own use" and "commercial use" as set out

in Hoverspeed is also reflected in the law after the PRO was revoked,

from 1 December 2002. [Mr Singh set out the change in the law after

. 1 December 2002 in his skeleton argument produced at the tribunal.]

Conclusions

42. In summary, we decide as follows :

(a) The Respondents' decision to refuse to offer restoration of the goods

was a fair and reasonable decision.

(b) The decision was proportionate in the circumstances.

(c) There can be no further consideration of the decision to restore the

vehicle as an offer has been made by the Respondents to the

Appellant in this connection. Any argument as to the value of the

vehicle at the time of seizure is outside the jurisdiction of this tribunal

and the Appellant will have to pursue his claim elsewhere.

(d) The tribunal has no jurisdiction to consider the legality of the seizure.

That is a matter for the Magistrates' Court.

43. The appeal is dismissed. There is no order as to costs.

Rodney P Huggins

Chairman

RELEASED 16/07/2004