United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E771, [2004] UKVAT(Excise) E00771

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Harris 7 Anor v Customs and Excise [2004] UKVAT(Excise) E00771 (23 July 2004)

E00771

EXCISE DUTY – Restoration of Goods – Appeal dismissed on the facts

Jurisdiction – Goods sold before review – "Restored" includes compensation – FA 1994 Sch 5 para 2(1)(r)

LONDON TRIBUNAL CENTRE

WYNFORD STUART HARRIS AND LORRAINE HARRIS Appellants

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: THEODORE WALLACE (Chairman)

MRS SHAHWAR SADEQUE, M Phil MSc

Sitting in public in London on 28 June 2004

Mrs Lorraine Harris represented the Appellants

Miss Fiona Darrock, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004


 


DECISION

1. This is an appeal against a review decision on 8 January 2003 refusing restoration of excise goods seized at Coquelles on 26 July 2001 and offering compensation for Mrs Harris's car, which had been auctioned, subject to the condition of paying the excise duty on the goods.
2. At the outset of the hearing it emerged that in April 2003 Customs had paid £4,200 compensation for the car after deducting approximately £900 for excise duty on the goods. Neither the Tribunal nor counsel representing Customs had been informed of this. The appeal hearing was thus solely concerned with excise goods.
3. The Appellants assert that the excise goods were not for profit being for their own use.
4. Customs contend that the goods were imported for profit and that the refusal of restoration or compensation was reasonable.
5. The Appellants were not legally represented as is usually the case with appeals of this type. On 7 August 2003 the Tribunal directed a skeleton argument from the Commissioners as to the jurisdiction of the Tribunal where the goods and vehicle have been disposed of. A skeleton argument was submitted by another counsel and failed to address the issue of the interpretation of "restored" in Schedule 5, paragraph 2(1)(r) of the Finance Act 1994 when restoration of the actual goods is not possible.
6. Miss Darrock was unaware of the Tribunal direction and had not been provided with a copy of the earlier skeleton argument. The Tribunal proceeded to consider the appeal on the basis that "restored" must be interpreted as encompassing financial compensation when restoration in kind is not possible. Unless "restored" is so construed widely the Tribunal has no jurisdiction in such circumstances. However that would not be compatible with the Human Rights Convention and with Community Law.

The history of the proceedings

7. On 26 July 2001 the Appellants were stopped at the Channel Tunnel terminal at Coquelles. Mr Harris was driving a Vauxhall Omega P384 VGB which his wife had bought a week before. They had in the car 210 litres of beer, 5 kilogrammes of tobacco, 1600 cigarettes and 100 cigarillos. They were interviewed. Customs did not accept their assertions that the goods were for their own use and seized the goods and the car.
8. On 10 August the Appellants wrote asking for the goods and vehicle to be returned asserting that the goods were for themselves. On 20 August Customs wrote that they were treating the letter as a claim against forfeiture and would take condemnation proceedings in the Magistrates Court. On 2 September the tobacco was destroyed in accordance with Customs' policy. The Appellants were not informed of this.
9. On 16 October the Appellants wrote "to confirm, that in order to proceed with our request for restoration of our vehicle, that we wish to withdraw court proceedings." That letter appears to have followed a telephone conversation with Customs. We assume that the Appellants had been told that restoration would not be considered until the conclusion of condemnation proceedings, as happened in Alzitrans SL v Customs and Excise Commissioners [2003] V&DR 369. In Alzitrans it was accepted by Customs that such a view was mistaken, see paragraph 19 of the judgment of Blackburne J.
10. On 16 November Customs wrote that the condemnation proceedings were being withdrawn and that the request for restoration would be dealt with. The letter stated, "No court hearing will take place". For reasons which have not been explained, the condemnation proceedings were not withdrawn and the goods and vehicle were condemned by the Channel Magistrates Court on 7 January 2002 in the Appellants absence. We observe that, quite apart from the magistrates clearly not being informed of the withdrawal, the condemnation order was obtained on the basis of the burden of proof in the Excise Duties (Personal Reliefs) Order 1992 article 5(3A) and (3B) which was declared by the Divisional Court to be incompatible with Community Law in R (Hoverspeed Ltd) v Customs and Excise Commissioners [2003] 3 WLR 1219.
11. The beer had in fact been destroyed on 1 December 2001. The car was authorised for sale on 7 January 2002 and was auctioned on 24 January 2002. The Appellants were not informed of this either. In letters dated 11 January and 5 February 2002 Customs refused to restore the goods and vehicle. The Appellants required a review by letter dated 21 February. On 4 April 2002 Mr Devlin in the first review wrote, "The excise goods and the vehicle will not be restored to you." The Appellants appealed against the Review Decision.
12. On 26 July 2002 in response to a letter to the Tribunal regarding hearing dates the Appellants wrote that Customs "have held our vehicle and goods for almost exactly a year" and complained of the delay. They were clearly still unaware of the disposal of the goods and vehicle.
13. In an application dated 17 October 2002 Customs applied for a direction for a further review in the light of the Hoverspeed decision. The Appellants did not object and the Tribunal being satisfied that the review was defective made a direction on 25 October 2002 for a further review under section 16(4)(b) of the Finance Act 1994 of the decision to refuse restoration of the vehicle and goods and directed that it be conducted within 6 weeks of the judgment of the Court of Appeal in Hoverspeed by an officer not previously involved. Judgment in Hoverspeed was given on 10 December 2002.
14. On 8 January 2003 Carl Penford completed the Review which is the subject of the present appeal.
15. He concluded that the goods were intended for re-sale at a profit and confirmed the decision not to offer restoration of the goods.
16. With respect to the car he said this,

"The restoration policy applicable is therefore that which was introduced on 29 October 2002. That policy allows for restoration where certain criteria apply. Restoration will be considered under that policy on a first occasion and where the volume of seized goods does not exceed 3 times the new guide level of 3 kilos, i.e. 9 kilos in the case of hand rolling tobacco. You have not had excise goods seized from you previously and the quantity of goods involved was less than 3 times the new guide levels.

I have therefore concluded that under the Commissioners' revised policy it would have been appropriate conditionally to restore the vehicle, the condition being the payment of a sum of money equivalent to the excise duty involved. As the vehicle has been disposed of, Customs will make a compensatory payment to you based on the value of the vehicle. A deduction based on the excise duty due on the seized goods may be made when calculating the amount Customs propose to offer."

17. As stated at paragraph 2 above compensation was in fact accepted by Mrs Harris subject to a deduction for the duty although neither the Solicitor's Office of Customs nor the Tribunal were informed of this. The dispute is therefore confined to the goods.
18. We heard four witnesses: the two Appellants, Derryck Peter Howland, the officer who intercepted the car, interviewed Mr Harris and seized the goods and car, and Carl Penford, the Review Officer. We find the following facts.
19. The interception was at 11.15pm. Mr Howland spoke first to Mr Harris just behind the immigration booth. Mr Harris was standing outside the car, Mrs Harris remained in the car. Mr Harris told the officer that they had been to France and Belgium that day and bought tobacco, cigarettes and some beer. Asked how much he said, "50 pouches of tobacco and 800 cigarettes each". Mr Howland recorded that he asked Mr Harris whether "each" referred to the pouches and that Mr Harris said, "No."
20. Mr Harris told the officer that he had been stopped 8 weeks earlier with the same goods and that that was the last time he had travelled. At Mr Howland's request, Mr Harris opened the boot and showed him the beer and 1600 cigarettes and showed him a bag with one hundred 50 gr pouches of tobacco.
21. Mr Howland left the car for a short time to make enquiries and on return asked Mr Harris again when he last travelled. Mr Harris said he was over two days ago but only had enough money for 5 beers and did not buy any tobacco. Mr Howland did not follow this up but asked what he bought in June. Mr Harris said that he and his wife had bought 60 pouches and 600 cigarettes between them. He said that smoked 5 pouches a week and she smoked more.
22. At that point Mr Howland wrote up his notebook and Mr Harris after reading the notes wrote, "This is a true account" and signed the note.
23. Mr Howland asked Mr Harris to drive the car into the Customs shed and asked Mr and Mrs Harris to satisfy him that the excise goods were for their own use and not for a commercial purpose. They both chose to stay and answer questions and Mr Howland interviewed. Mr Harris while Alastair Williams interviewed Mrs Harris in another room. By this time it was 11.55 pm.
24. Mr Harris told Mr Howland that he left home (in Wales) at 2.15pm and caught the 7.06pm boat. He went to Belgium then to Pidous in Calais and Cité of Europe which was closed. They paid £395 for tobacco and £101 for beer. No one else had given them money. He said that he smoked 70 or 80 a day, 5 to 6 pouches a week. He used a machine with tubes getting 50 cigarettes from a 50 gr pouch. He had five boxes of 250 tubes on 16 June.
25. He told Mr Howland that he was a coach driver for a firm in Pontypridd and earned £180 to £200 net per week. His wife was a retired nurse and had a pension of £600 a month. He said that he had £2,000 in the bank. He financed the purchase from savings. They did not have a mortgage. They had recently married and had two houses which they sold to buy their present house.
26. Mr Harris said that he thought that he had been given Notice 1 at Dover in June and he knew the guidance levels. On 16 June he had travelled as a coach passenger; his wife was with him and they bought 60 pouches and 600 cigarettes which they had since smoked. He had made 6 or 7 trips in the last 12 months. His last trip was on 16 June; he did not count 24 July as he did not have any money on him. Mr Howland asked to see Mr Harris's wallet.
27. The wallet contained a piece of A5 lined paper about 4½ inches by 8. It contained a series of figures in green biro and in black biro telephone numbers with the names "Beryl" and "Graham Blake". The figures were as follows:

"90 @ 2.04 = 183.60

8 @ 19.00 = 152.00

20 @ 3.00 = 60.00

2 @ 10.50 = 21.00

Cost 416.60

90 @ 3.30 = 297.00

8 @ 25.00 = 200.00

20 @ 6.00 = 120.00

2 @ 18.00 = 36.00

Return Profit 653.00"

Lower down appeared:

"653.00

416.60

Profit 236.40

71.00

165.40"

Other sums also in green biro were at the bottom on the left, but had no obvious relationship to the others.

28. At this point Mr Howland spoke to Mr Williams showing him the piece of paper and learned that Mrs Harris had told Mr Williams that the Golden Virginia cost £2.04 a pouch and the Regal cigarettes £19 per pack.
29. Mr Howland asked Mr Harris what the figures were. Mr Harris said that he did not know, it was not his writing; it was in his wallet for the two phone numbers; Graham Blaken used to be his boss and was a friend. Mr Howland asked whether Mr Harris was selling excise goods and Mr Harris said that he was not.
30. Mr Howland asked Mr Harris to read through his notes, which Mr Harris did. He wrote, "This is a true account" and signed the note.
31. Meanwhile Mr Williams was interviewing Mrs Harris. She told him that she got 50 Golden Virginia at £2.04 a pouch and 800 Regal at £19 per pack. They shared the cost. Her husband went to the counter. She did not know what they spent because her husband paid for it. She thought £102 and £76. She gave him £200. She said that she smoked heavily, getting through at least five pouches a week as well as cigarettes when she went out. She rolled her cigarettes on the tubes in a machine getting about 50 out of a pouch.
32. Mrs Harris told him that she had a nurse's pension of about £540 a month and £420 for incapacity. She had just moved and had £17,500 from sale of her house. She and her husband shared the household bills.
33. She told him that they had travelled to France two days earlier but forgot their money. She had also been abroad with Mr Harris in February or March and on a coach trip in June importing 400 cigarettes and 20 to 40 pouches of tobacco. She expected the goods she had just bought to last two months depending on how much stress she was under.
34. Mr Williams then showed her the piece of paper in her husband's wallet and asked if she could explain it. She replied, "I've no idea". She said that she did not recognise the writing. She said that she could not explain why the prices on the top two lines, £2.04 and £19, corresponded with the prices she had given earlier. She said that she did not know why her husband had the list.
35. At 0.41 am she wrote that the notes in Mr Williams' notebook were a true and accurate account.
36. At this point Mr Howland having consulted Mr Williams told the Appellants that the goods and car were being seized for the following reasons:

"1. Excess guidelines

2. Sheet of financial calcs.

3. Consumption rates questionable

4. Previous Notice 1 for 60 pouches. Organised coach trip for tobacco

5. Failed to satisfy."

Mr Harris asked to see a senior officer who confirmed the seizure. The Appellants were taken back to England by Chubb Security. In addition to the tobacco pouches and cigarettes, 35 cases of Blonde de Lys beer in 25 cl bottles and 2 boxes of Eastender cigarettes were seized.

The Oral evidence

37. Mrs Harris said that she was interviewed by one male who took notes which she read and signed as correct. She said that she had owned the car a week. It was seized at around 3.00am. She said that she smoked Golden Virginia and her husband smoked Old Holborn; both smoked Regal when out socially or when he was working. She said the cigarillos were free. The beer was for a house-warming party in their new home. She said that the names and telephone numbers on the piece of paper were in her husband's writing, but not the part in green biro. She did not know whose writing the part in green biro was.
38. She told Miss Darrock in cross-examination that she had never seen the piece of paper until shown it by Customs. She agreed that £183.60 is the cost of 90 pouches at £2.04 and that cartons of 200 cigarettes cost £19 in Adinkerke. She said that they were at her husband's mother's house when he was given the number of Beryl an elderly lady who they hoped would look after their dog while away. She said that they were in a public house when someone gave Mr Blake's telephone number to Mr Harris. She denied that she was well aware of the computations on the paper and said that the tobacco and cigarettes were not for resale.
39. She said that they had not bought as much in June. A pouch lasted her about a day depending on how many cigarettes she smoked. On average she probably smoked 60 a day. It was on her medical records as an asthmatic. Her asthma had developed as a child. She said that she used cigarettes instead of a tranquilliser.
40. Mrs Harris told Miss Darrock that she had a Barclaycard but did not know that she could use the pin number abroad. On the trip two days before she had given her husband money before going and he had forgotten his wallet. She carried the passport and tickets. She had booked the tickets on-line. They never bought petrol abroad. They had not bought petrol on the way to Dover. If they stopped for petrol she used her debit card.
41. She said that they married in February 2001 having met 4½ months before. Having sold their houses they bought a cottage in Tonypandy. They had just put in central hearing so that the funds in her bank account were low. The debit card did not operate for the savings account. They put cash into a Nationwide account to pay council tax and household bills. She collected her incapacity benefit in cash from the Post Office. She could not remember where the £200 for the trip when they were stopped came from.
42. She said that on the June coach trip she believed that some people abandoned what they bought but she did not know why.
43. Mrs Harris said that she knew that she had more than the guidelines but said that she knew also that they were only guidelines.
44. Mr Harris confirmed his wife's evidence and was cross-examined. He said that his contribution to the purchases came from his wages which were paid in cash. He paid in sterling.
45. He said that he had obviously misunderstood the question about whether "each" referred to the pouches (see paragraph 19 above). He had already given the correct answer.
46. He agreed that he had said "Yes" when asked whether the June trip was the last trip, but said that on the trip 2 days before he had left his wallet behind and only had enough money for 5 cases of beer.
47. Mr Harris said that he went to France and Belgium about every two months when he ran out of tobacco and had a day off work. For him the journey was nothing, he was a long distance lorry driver. The trip cost between £50 and £80 for petrol and fares depending on offers.
48. Asked about the piece of paper, he said that 3 or 4 weeks earlier he was having a pint at the White Hart in Tonypandy when he met a chap who he only knew as Norman. He asked how Graham Blaken his former employer was doing and Norman gave him the piece of paper on which he wrote Blaken's name. He did not know where Norman got it from; he had not been asked about Norman before and did not think about it at the time of the interview. He said that anyone going to Adinkerke would expect to pay £2.04 a pouch for tobacco and £19 for cigarettes.
49. Re-examined, he said that he was interviewed separately from his wife and asked, "When were we supposed to have concocted a story?" He said that the White Hart was not his normal pub. He said that his past experiences of Customs as a coach driver were that you never volunteer anything you are not asked. He had done many coach trips in past years and spent many hours in Customs' shed at Dover. He said that he used to do continental coach trips twice a week.
50. Mr Howland told the Tribunal that he wrote the first part of his notes immediately before the interview. After the initial questions he had checked when Mr Harris had last travelled and knew from records that it was two days before. He said that he did not pursue questions about the piece of paper but was not convinced from the answers that the purchases were not commercial.
51. In cross-examination he said that he had never been to Adinkerke and did not know whether the prices were all the same for different brands. He agreed that Mr Harris did not try to hide the tobacco and cigarettes. He said that although he himself was clear as to what questions he was asking, it was possible that Mr Harris misunderstood. Mr Howland said that he was collecting information to satisfy himself that the goods were for the Appellants' own use.
52. Mr Howland told the Tribunal that he did not follow up Mr Harris's answers. It was not clear to him that Mr Harris was trying to mislead him, therefore those were not included among of the reasons for seizure. He found the 5-6 pouches a week consumption by Mr Harris, with his wife smoking more, strange. He agreed that it was possible that 50 cigarettes a day was true.
53. Re-examined, Mr Howland said that guidelines given by Customs to officers were that 90-100 cigarettes could be obtained from a pouch by hand-rolling. He had not seen a machine and did not know whether tubes could take twice as much tobacco. He said that the calculations on the piece of paper pointed to commerciality and this was the main factor in his decision to seize the goods and car.
54. Carl Penford said that he had conducted the Review of 8 January 2003. He had made an offer of conditional restoration of the car (see paragraph 16 above).
55. In their letter dated 21 February 2002 requesting the first review the Appellants wrote that Notice 1 was issued to Mr Harris on 16 June when he had been the organiser of the coach trip and some tobacco was abandoned : this had nothing to do with Mr Harris in spite of insinuations in July. They also wrote that since the seizure their house had been thoroughly searched and Customs had found nothing other than cigarettes for their own use.

Submissions

56. Miss Darrock, for Customs, said that the tobacco seized was five times the guidelines at the time. She said that the officer's view that the Appellants' consumption was questionable was justified on the evidence. The approach by Mr Harris at paragraph 48 above was reflected in the interview. He was experienced enough to know what checks were made. She submitted that when Mr Howland returned to the car after initial inquiries, Mr Harris realised this and admitted the trip two days before.
57. She said that the piece of paper with calculations strongly indicated purchases for resale at a profit. The top two prices coincided with what Mrs Harris had said in interview. Mr Harris had not given the explanation about Norman giving it in a pub at the interview. She said that she made no point on the other figures "20 @ 3.00" and "2 @ 10.50" but she did rely on the £71 deduction which was in line with the evidence by Mr Harris of the cost of a trip. She said that it was common ground that no goods were seized from Mr Harris on 16 June. She said that it was not suggested that he was importing for sale on that occasion. Earlier, she said during cross-examination of Mrs Harris that it was not the case for Customs that there had been any earlier resale of excise goods.
58. Mrs Harris said that the interviews were very intimidating. Some questions were rather vague. The notes did not contain all that was said. She said that the prices were of the most common brand. She said that as the piece of paper came from Wales, it was likely that anyone coming from there would have a similar travel cost. She said that since Hoverspeed the guidelines had been significantly increased.

Conclusions

59. We have not found this an easy case to decide.
60. We have to decide whether the decision of Mr Penford was made on correct facts and whether he applied the correct legal principles. If he based his decision on incorrect facts, then his decision cannot stand.
61. The central issue in this case was one of fact, namely the use intended by the Appellants. The tribunal is obliged to consider a detailed analyses of this use, see Dickinson v Customs and excise Commissioners [2004] 3 WLR 1160 at paragraph 83.
62. We note that the interviews were conducted on the basis of the burden of proof on the traveller which was declared incompatible by the Divisional Court in Hoverspeed. As a result Mr Howland did not follow up certain answers. This made the task of Miss Darrock more difficult.
63. Given that the Review decision was on the basis that there had been no previous seizure from the Appellants and that Miss Darrock accepted that it was not part of Customs' case that there had been any earlier resale of goods, the relevance of the earlier trips is limited to the Appellants' knowledge of the guidelines and the credibility of their assertion that the tobacco goods bought on this occasion were for their own use given the opportunity for earlier purchases. It was never suggested that the beer was for resale.
64. Since Mr and Mrs Harris were allowed to keep 60 pouches (3 kg) on 16 June although Notice 1 was served, it is clear that on that occasion the officers were satisfied that it was for their own use.
65. While we accept Mr Howland's evidence that 90 or 100 cigarettes can be obtained from a pouch by hand-rolling, hand-rolled cigarettes are less lightly packed than ordinary cigarettes and are normally thinner. Machine filled tubes would clearly use much more tobacco for each cigarette and we find the evidence of Mrs Harris that she got 50 cigarettes from a pouch using tubes to be credible. We accept her statement in her interview that she gets through at least five pouches a week, in addition to cigarettes on social occasions. It follows that her June purchases were running out by late July.
66. The strongest evidence for Customs is of course the piece of paper. We accept the evidence of the Appellants, which was not challenged on this, that the figures in green biro were not written by Mr Harris and that the names and telephone numbers which were in black biro were in his writing. The writing and figures do appear to us to be different from that in green biro.
67. That does not mean that they were not a shopping list for the trip. The top two figures coincided with the prices which Mrs Harris had said she paid before the piece of paper was found. The totals and the other figures conflict with Mr Harris's answers at paragraph 24 again before the piece of paper was found even if the cost of 10 more pouches is added. The figure of £71 is in line with the total expenses on a trip.
68. The explanation given by Mr Harris as to when and why the piece of paper came to be in his wallet was unconvincing to say the least. It is clear that the calculations on the paper relate to tobacco and cigarettes, which someone was selling cheap. The return on the tobacco was less than the duty which was then £95.12 per kg. It was not a convenient scrap of paper to write unrelated telephone numbers and if it was to be used it is difficult to see why he did not use the other side. Nor it is easy to see why Mr Harris should have kept it for 3 to 4 weeks. It is very odd that Mr Harris did not think of its origin at the interview. We do accept however that Mrs Harris had not seen it before.
69. Miss Darrock relied on the fact that initially Mr Harris said that his last trip was on 16 June and also that he said "No" when asked whether they had 50 pouches each. We note however that Mr Howland did not pursue those matters at the time and told us that it was not clear to him that Mr Harris was trying to mislead him (paragraph 53 above). Mr Howland's note was not a verbatim contemporary note but was written up shortly after.
70. After much thought we have concluded that the explanation by Mr Harris for the piece of paper is not credible and that on the balance of probabilities most of the tobacco and cigarettes was for resale at a profit. Given the low prices it appears that Mr Harris must have been a middle man.
71. It follows that the review decision was not based on incorrect facts. No other ground of attack was put forward. The appeal is dismissed.
72. In closing we observe that there were a number of unsatisfactory features of this case. The Appellants were not told until January 2003 that the car had been sold. They appear to have been induced to withdraw the claim against forfeiture on a wrong basis. Condemnation proceedings were pursued in their absence although they had been told that they were withdrawn. Counsel was not informed of the Tribunal's direction or of the skeleton argument. Nonetheless, however unsatisfactory these matters are, they cannot affect our decision.

THEODORE WALLACE

CHAIRMAN

RELEASED:23/07/2004

LON/2003/8099