United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E788, [2004] UKVAT(Excise) E00788

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Earl v Customs and Excise [2004] UKVAT(Excise) E00788 (03 September 2004)

E00788

EXCISE DUTY – Restoration of seized excise -- whether the goods were for personal or commercial use – commercial use for profit- was the decision not to restore the excise goods reasonable – yes – Appeal dismissed.

LONDON TRIBUNAL CENTRE

COLIN EARL Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Michael Tildesley (Chairman)

Roberta Johnson (Member)

Sitting in public in London on 16 July 2004

The Appellant appeared in person with his daughter Miss Yvonne Earl

Fiona Darroch Counsel for the Respondents

© CROWN COPYRIGHT 2004

DECISION

The Appeal

The Appellant is appealing against the decision on review of the Respondents dated 14 October 2003 not to restore excise goods, namely four kilograms of Golden Virginia hand rolling tobacco, 2,800 Lambert & Butler cigarettes and 70 cigars.

The Grounds of the Appeal

The grounds of Appeal were set out in the Notice of Appeal dated 4 November 2003:

a) I was not doing anything illegal.

b) Suffering from anxiety, stress (off work since 18 December 2002).

c) Trips were a confidence booster.

d) Was trying to ease our financial situation.

e) Non-profitable venture, except by what I was saving on English equivalent.

The Issue

The function of the Tribunal is to determine whether the Respondents' decision not to restore the excise goods was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable the decision maker must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Evidence

The Tribunal heard evidence from the Appellant and from Mr Harris for the Respondents. A bundle of documents was presented to the Tribunal. Miss Yvonne Earl attended the hearing in support of her father.

On 31 July 2003 at the UK Control Zone (Tourist), Coquelles, France at approximately 1400 hours Mr David Turner, Customs and Excise Officer, stopped the Appellant who was travelling on a coach owned by SM Coaches. The Appellant had been on a day trip to Belgium and was returning to the UK. The Appellant had with him 80 pouches (4kg) of Golden Virginia hand rolling tobacco, 14 cartons of Lambert and Butler cigarettes (2,800) and 70 cigars. The Appellant had been stopped before by Customs and Excise. Their records revealed that he last travelled by coach on the 26 June 2003 when the Appellant declared 5kg of hand rolling tobacco and 3,200 cigarettes in his possession. After questioning the Appellant Mr Turner was not satisfied that the excise goods were for personal use with the result that the cigarettes and tobacco were seized.

On 24 September 2003 Mr Mee of the Respondents' Post Seizure Unit turned down the Appellant's request for restoration of the excise goods.

The Respondents' Decision on Review dated 14 October 2003.

Mr David Harris of Customs and Excise conducted the review of the Respondents' decision to refuse restoration of the excise goods. He took a fresh look at all information available to him including the correspondence from the Appellant. Mr Harris considered the facts against the Respondents' Restoration Policy for Excise Goods which was:

"It is this Department's general policy that seized excise goods are not restored. However, each case is examined on its merits to determine whether or not restoration may be exceptionally offered. In conducting this examination the presence of any one of the following factors will militate against restoration:

• any evidence of previous smuggling or failure to comply with legal requirements;

• any evidence that the person involved knew what they were doing was wrong;

• any evidence that the person was paid to make the journey;

• large quantities of goods which might damage legitimate trade;

• any evidence that the goods were for a commercial purpose".

After careful consideration Mr Harris decided that there were no exceptional circumstances to warrant departure from the policy and upheld the decision not to restore the excise goods to the Appellant. Mr Harris told the Tribunal that the evidence supported findings that the goods were purchased for a commercial purpose and that the quantities bought would damage legitimate trade.

In reaching his conclusion Mr Harris placed weight on the implausibility of the Appellant's explanation that the hand rolling tobacco was for his personal use. Mr Harris estimated that the Appellant would have consumed 5,400 roll up cigarettes (154 a day) in the period between his previous trip on the 26 June and the 31 July 2003 when he was stopped. Mr Harris based his estimate on the Appellants' statement to Mr Turner that he had 2kg of hand rolling tobacco left from his previous trip and that a 50 gramme pouch of tobacco would yield 80-100 roll-up cigarettes. Mr Harris doubted the Appellant's claimed weekly consumption rate of nine to ten pouches of hand rolling tobacco. Mr Harris considered that the Appellant could not fund from within his own resources the level of expenditure incurred on the tobacco and cigarettes bought on the two cross Channel trips. Mr Harris estimated that the Appellant would have spent about £540 per trip.

Mr Harris was confused by the Appellant's correspondence where he stated that he smoked Old Holborn not Golden Virginia. Mr Harris was unable to reconcile the Appellant's assertion that he consumed the hand rolling tobacco with his purchases of Golden Virginia hand rolling tobacco which he did not smoke. Mr Harris followed up the Appellant's request to contact Dr Andrews about his illness. Dr Andrews informed Mr Harris that the Appellant was in all likelihood fit for interview and able to give answers to questions put to him.

The Appellant's Evidence

The Appellant had been in work all his working life until he was made redundant from his supervisory position in a warehouse in 1998/99. He then was in and out of work but managed to get a job as a bus driver in 2001 which suited his skills as a professional HGV driver. Unfortunately he had a couple of minor accidents on the buses which seriously affected his confidence to such an extent that he could not stop shaking. The Appellant has been unemployed since 18 December 2002.

The Appellant was referred by his local GP for his symptoms to Dr Henry Andrews, Consultant Psychiatrist, at Enfield Mental Health Unit. Dr Andrews first saw the Appellant in February 2003 and prescribed him with anti-depressants. According to the Appellant Dr Andrews found that there were no major problems with the Appellant's mental health, although he could not diagnose precisely the cause of the Appellant's anxiety. Dr Andrews stated in a letter dated 26 January 2003 that "Mr Earl finds dealing with officialdom very anxiety provoking. When anxious he is prone to becoming confused, at which times he may be unable to talk coherently about matters such as the workings of his benefits".

The Appellant caught the coach at 5am on the 31 July 2003 for a day trip to France and Belgium. He purchased the tobacco and cigarettes at Adinkerke, Belgium. He did not realise at the time of purchase that he chose Golden Virginia hand rolling tobacco rather than Old Holborn or Drum which was what he normally smoked. The Appellant did not check what he bought because the people in the tobacco shop asked him what he wanted and then passed it to him in black plastic bags through a hole in the counter. He was given cigars as a promotional gift. After Adinkerke the coach travelled back to Coquelles via Calais where it stopped at a supermarket which the Appellant walked round without buying anything.

At Coquelles the Appellant was the first off the coach carrying the tobacco and cigarettes in two small black plastic bags. The excise goods were not concealed. He felt that he was not doing anything wrong. The UK was part of the European Union and he was entitled to bring back as much tobacco and cigarettes as he wanted.

The Appellant agreed with the notes of interview recorded by Officer Turner where he said that he was unemployed receiving £60 a week. The Appellant had no other income and used his mother's money to purchase the excise goods. He told the Officer that he still had packets of tobacco and quite a lot of cigarettes left from his last trip. The Appellant explained that he purchased more tobacco because he did not know when he was going back to work and that his family took a lot. The excise goods were for him and his family. He did not charge his family for their use of the goods. The Appellant found Officer Turner courteous and "as good as gold". However, the Appellant did feel that he was starting to become confused and losing it during the interview.

The Appellant was a heavy smoker averaging sometimes 80 a day particularly when he was stressed out and not sleeping at night. He estimated that he consumed seven 50 gramme pouches of tobacco a week. He was also a proud Northerner and thought nothing of sharing cigarettes with friends at his local pub. He also gave a lot away to his family who were all heavy smokers. His wife smoked Lambert and Butler cigarettes. The Appellant disputed Mr Harris' assertion that 80-100 roll-ups could be obtained from a 50 gramme pouch of hand rolling tobacco. He produced to the Tribunal a tobacco tin containing about 50 roll-ups whose weight without the tin approximated to 50 grammes.

The Appellant estimated that he spent about £80/£90 a week on tobacco at home. The cost of buying the tobacco across the Channel was considerably cheaper and helped him with his debts, particularly if he got back to work. He bought in bulk in Belgium to offset the travel costs. The Appellant accepted that he was in a difficult financial situation receiving then about £60 a week in benefit. He had to sell off some of his possessions including his best watch to make ends meet. The Appellant also received financial support from his family particularly his wife and some very good friends. The Appellant borrowed the money from his mother to purchase the tobacco and cigarettes. His mother had about £990 in savings.

The Appellant found the cross-Channel trips therapeutic. He managed everything himself which boosted his self confidence. On the July trip he felt fine in the shop and knew what he was doing when he purchased the tobacco and cigarettes. After the July trip he went over to Belgium again and brought back a similar quantity of tobacco and cigarettes. The Appellant had also travelled across the Channel with his wife and daughter.

The Appellant stated that he bought back Golden Virginia on the first trip as a favour for a friend. The Appellant was not specific when questioned about who the cigarettes were for other than his family smoked a lot and he would give cartons to them when they visited from Grantham.

The Appellant produced a letter from Mr R Mather dated 2 February 2004. Mr Mather had known the Appellant for some years and found him to be a honest and of a trustworthy disposition.

Jurisdiction of the Tribunal

The Respondents' powers regarding restoration of goods which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:

"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;

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 that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future.

The precondition to the Tribunal's exercise of one or more of its three powers, namely, that the person making a decision could not reasonably have arrived at it falls within the guidance given by Lord Lane in the decision in Customs and Excise v JH Corbitt (Numismatists) Ltd [1980] STC 231 at page 239:

"…..if it were shown 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".

The Tribunal is entitled to make its own findings on the primary facts which are to be taken into account by the Commissioners when exercising their powers regarding restoration of goods. The finding of facts includes blameworthiness, the intended use for the excise goods: private or commercial, and the proportionality of the penalty imposed to the policy aims pursued having full regard to the individual circumstances of the case. The Tribunal, however, has no fact finding jurisdiction for the purpose of challenging the legality of the seizure and forfeiture of the goods. The Tribunal will then apply its findings of fact to determine whether the Commissioners acted reasonably in refusing restoration.

The Tribunal's Findings of Fact

Was the Appellant's importation of tobacco/cigarettes for private/commercial use?

This question needs to be considered in the context of the legislative framework. Council Directive (EEC) No. 92/12 lays down a number of rules on the holding, movement and monitoring of products subject to excise duty, in particular so as to ensure that chargeability of excise duties is identical in all the Member States. The Directive draws a distinction between, on the one hand, goods held for commercial purposes, in respect of which accompanying documents are required for transportation purposes, and, on the other hand, goods held for personal use. Under Article 8 excise duty for goods held for private use is payable in the Member State in which they are purchased. No document is required when they are transported to another Member State. For Article 8 to apply, however, a number of conditions must be satisfied. The goods on which excise duty is chargeable must have been acquired by private individuals for their own use and transported by them. Article 9.2 sets out criteria for establishing whether goods transported by private individuals are intended for commercial purposes.

The provisions of the Directive were originally implemented in the United Kingdom by The Excise Duties (Personal Reliefs) Order 1992 SI 1992 No.3155. The 1992 Order was replaced by the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 SI 2002 No. 2692. Regulation 12 gives guidance on whether the goods are held for own use or commercial purposes.

The relevant provisions of Regulation 12 are as follows:

1B(b) "own use" includes use as a personal gift,

(c) if the tobacco products in question are -

(i) transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or

(ii) the person holding them intends to make such a transfer,

those products are to be regarded as being held for a commercial purpose,

(d) if the products are not duty and tax paid in the member State at the time of acquisition, or the duty and tax that was paid will be or has been reimbursed, refunded or otherwise dispensed with, those products are to be regarded as being held for a commercial purpose,

(e) without prejudice to sub-paragraphs (c) and (d) above, in determining whether tobacco products are held or used for a commercial purpose by any person regard shall be taken of -

(i) that person's reasons for having possession or control of those products,

(ii) whether or not that person is a revenue trader (as defined in section 1(1) of the Customs and Excise Management Act 1979),

(iii) that person's conduct, including his intended use of those products or any refusal to disclose his intended use of those products,

(iv) the location of those products,

(v) the mode of transport used to convey those products,

(vi) any document or other information whatsoever relating to those products,

(vii) the nature of those products including the nature and condition of any package or container,

(viii) the quantity of those products, and in particular, whether the quantity exceeds any of the following quantities -

3,200 cigarettes,

400 cigarillos (cigars weighing no more than 3 grammes each),

200 cigars,

3 kilogrammes of any other tobacco products,

(ix) whether that person personally financed the purchase of those products,

(x) any other circumstance that appears to be relevant."

Applying the criteria set out in Regulation 12(1B)(viii) the Tribunal finds that

i. The Appellant travelled across the Channel on 31 July 2003 with the principal purpose of buying tobacco and cigarettes. He told the Customs Officer that the excise goods were for himself and his family. The trips abroad also boosted his self confidence.

ii. The Appellant was not a revenue trader.

iii. The Appellant was co-operative with the Customs Officer and answered the questions put to him. He later informed the Respondents by letter that he smoked Old Holborn or Drum hand rolling tobacco. The Appellant suggested that the purchase of the Golden Virginia tobacco on 31 July was a mistake. However, it transpired at the Tribunal that he bought Golden Virginia on his previous trip in June as a favour to a good friend. The Appellant in answers to questions posed by Counsel for Respondents was not specific about the intended recipients for the cartons of cigarettes. He produced no independent evidence to support his assertion that he gave the cigarettes to family members.

iv. The Appellant carried the excise goods in black plastic bags. The goods were not concealed in any way.

v. The Appellant had travelled alone by coach to Belgium.

vi. The excise goods were purchased from Adinkerke, Belgium. The parties were agreed about the approximate cost of the tobacco and cigarettes, although no receipts were produced.

vii. The Appellant bought one brand of cigarettes, Lambert and Butler and one brand of hand rolling tobacco, Golden Virginia.

viii. The Appellant was travelling alone. The quantity of hand rolling tobacco brought in by the Appellant was four kilogrammes which exceeded the guideline of three kilogrammes by 33%. The quantity of 2,800 cigarettes was within the guideline of 3,200 recommended by the Regulations. The Appellant imported a larger quantity of tobacco and cigarettes, five kilogrames and 3,200 respectively, just five weeks prior to the 31 July trip. The quantity of hand rolling tobacco imported over a period of five weeks would have kept the Appellant in tobacco for 26 weeks even with his stated high consumption rate of seven pouches per week.

ix. The Appellant did not have the funds from his own resources to purchase the tobacco and cigarettes. He borrowed money from his mother to pay for them. At the time he was in dire financial circumstances having to sell off some of his valued possessions to raise money.

x. The Appellant had travelled five weeks previous and purchased a large quantity of cigarettes and tobacco. He also crossed the Channel on at least two occasions in the recent past. He had quite alot of cigarettes left from the June trip.

The Appellant purchased substantial quantities of tobacco and cigarettes in the space of five weeks. The quantity of tobacco bought, nine kilogrammes, was 50% higher than the guideline of six kilogrammes for two journeys. Even if we accept that the Appellant consumed seven 50 gramme packets of tobacco a week, it would have taken him six months to have smoked the tobacco. However, the Appellant's assertion that he purchased the tobacco for his own use was undermined by his admission that he smoked Old Holborn and Drum hand rolling tobacco not Golden Virginia which was the tobacco brand bought on both occasions. The Appellant also bought 6,000 cigarettes which was just below the guideline of 6,400 but still a significant amount. The Appellant stated that the cigarettes were for his family, however, he produced no letters from family members to substantiate his gifts. Also he accepted that he had a quite alot of cigarettes left from the June trip which raises questions why he needed to buy more particularly in view of his dire financial circumstances. Finally the Appellant did not have the resources to purchase these large quantities of cigarettes and tobacco. His explanation that he was saving considerable amounts of money by buying in bulk would have made sense if he had bought his preferred brand of hand rolling tobacco. The explanation, however, makes no sense in respect of the cigarettes because he smoked roll-ups.

We find that the Appellant purchased substantial quantities of tobacco and cigarettes on a very limited budget in a short time period. He bought tobacco which was not the brand he smoked. The Appellant did not need to buy more cigarettes on the July trip because he had quite a lot left from his previous trip. We have, therefore, concluded from these findings when taken together that he purchased the tobacco and cigarettes for a commercial purpose, namely to sell them on for a profit.

The Appellant's state of health

The Appellant informed the Tribunal that he was suffering from depression and anxiety following his inability to hold down a job after he had worked so hard all his life. Dr Andrews confirmed that the Appellant was on a course of anti-depressants. There was, however, no evidence from either the Appellant or his doctors that his illness was impairing his state of mind. The Appellant accepted that he felt fine when shopping for the excise goods. He was justifiably proud that he managed to do the shopping and the trips by himself which boosted his self confidence. The Tribunal was conscious of his difficulties at the hearing. We ensured that he was given ample opportunity to present his case and protected him from too rigorous cross-examination without undue prejudice to the Respondents' case. We encouraged his daughter to speak on his behalf. We are, however, satisfied that his illness did not impair his judgement and that he knew what he was doing when purchasing the cigarettes and tobacco. We, therefore, conclude that his illness was not a material issue for determining the facts of the Appeal.

Was the Review decision of 14 October 2003 unreasonable?

Our findings of fact support the conclusions of Mr Harris' review, namely, that the excise goods purchased on the 31 July 2003 were for a commercial purpose and that the large quantity bought might damage legitimate trade. Mr Harris also examined the implications of the Appellant's illness by contacting Dr Andrews. We placed less weight on the calculation performed by Mr Harris in respect of the number of roll-ups smoked by the Appellant. We consider that his assumption of 80-100 roll ups from a 50 gramme pouch of tobacco was problematical because of the variable amount of tobacco used by smokers in their roll-ups. However, our difference of view with Mr Harris about the number of roll ups is a relatively minor matter and does not affect the reasonableness of his review. We are, therefore, satisfied that Mr Harris considered all the relevant facts at his disposal and disregarded irrelevant matters in reaching his decision not to restore the tobacco and cigarettes to the Appellant. .

Our Decision

We have decided for the reasons set out above that the Respondents' decision of 14 October 2003 not to restore the excise goods to the Appellant was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. We, therefore, dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY

CHAIRMAN

Release Date: 3 September 2004

LON/03/8209