United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E00838, [2004] UKVAT(Excise) E838

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Drennan v Customs and Excise [2004] UKVAT(Excise) E00838 (09 December 2004)

E00838

EXCISE DUTY — excise goods and car transporting goods seized at Dover on return to UK and forfeited — review decision confirming decision not to restore vehicle — held on facts to be unreasonable for Customs to conclude that vehicle should not be restored — travellers not smugglers as that term commonly understood — held that value of the vehicle and the need of the appellant to have use of the vehicle should have been taken into account — appeal allowed and further review directed — subsequent appeal against further review — no fresh ground of appeal advanced — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

HENRY DRENNAN Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Michael S Johnson (Chairman)

Kathleen Ramm FCA (Member)

Sitting in public in North Shields, Tyne and Wear on 17 November 2004

The Appellant appeared in person

Mrs X Craddock, counsel, instructed by the Solicitor's Office for HM Customs and Excise for the Respondents

DECISION

On 17 March 2004 a tribunal consisting of Michael Johnson (Chairman) and Roland Presho FCMA ("the earlier tribunal") heard the appellant's appeal against a decision of the Commissioners of Customs and Excise ("Customs") upholding a previous decision of Customs declining to restore to the appellant certain excise goods ("the goods") and a VW Polo motorcar ("the car"). The goods and the car had been seized from the appellant by Customs on 8 August 2001 on the occasion of his return to the UK from the continent. That appeal was allowed by the earlier tribunal, which directed Customs to conduct a further review of the appellant's case ("the fresh review").

For ease of reference, a copy of the decision of the earlier tribunal ("the earlier decision") is scheduled to the present decision. There was no appeal from the earlier decision.

The fresh review was carried out, as directed by the earlier tribunal, by a reviewing officer of Customs not previously involved in the appellant's case, namely Mrs Hilda Marshall. She performed the fresh review, again as directed by the earlier tribunal, within six weeks of the release of the earlier decision. The earlier decision was released on 23 April 2004; the fresh review was contained in a letter sent to the appellant dated 1 June 2004.

As appears from the earlier decision, the earlier tribunal was of the view that the fresh review should take into account the principle of proportionality when considering the restoration of the car. The earlier tribunal decided that, on the findings of fact that it had made, restoration of the car might properly have been offered on condition of payment of the amount of excise duty which, as the earlier tribunal found, had been evaded by the appellant. However the earlier tribunal indicated that it would be for the officer conducting the fresh review – Mrs Marshall, as it turned out – to decide whether a somewhat more severe condition for restoration might be imposed, in line with Customs' policy and to reflect the need to discourage travellers in the category of the appellant from breaking the law ^[1].

The outcome of the fresh review was that Mrs Marshall decided to offer restoration of the car on payment of the amount of duty evaded (£1,512.12) plus an additional 20% of that amount (£302.42). She said in her review letter that in circumstances where a more severe condition than that decided upon by the tribunal was appropriate, Customs' policy was to impose a penalty of 200% of the amount of the duty evaded. But she took account of what the earlier tribunal had decided in the appellant's case ^[2], and the fact that the appellant had been deprived of the use of the car for some considerable time, and she therefore reduced the penalty that might have been imposed.

Consequently the position following the fresh review is that the appellant can have the car restored to him on payment of £1,814.54.

The appellant has appealed against that result. His grounds of appeal are contained in a letter accompanying the Notice of Appeal. However on reading that document, we formed the impression that the appellant was in large measure seeking to reopen the hearing before the earlier tribunal and to modify the findings of fact made by the earlier tribunal. The expressed grounds of appeal were, in other words, not directed to the outcome of the fresh review and the contents of the review letter.

Accordingly we asked the appellant whether anything that had happened since the release of the earlier decision was relied upon by him in the current appeal. The response of the appellant was to say that he could not understand the earlier decision, nor why he should have to pay any sum to have his car back, when he had done nothing wrong. He made it clear that he considered himself hard done by.

We explained to the appellant that we could not reopen the earlier decision, against which there had been no appeal, and that the purpose of the current appeal was to examine the fresh review. We asked him whether he had any criticism of it. We said that it appeared that Mrs Marshall had sought to give effect in the fresh review to the decision of the earlier tribunal. We asked if the appellant was challenging that.

The appellant reiterated his criticisms of the earlier decision, and made it clear that it was that decision, and all that flowed from it, that he wished to attack. He did not put forward a ground of challenge to the fresh review as such.

We formed the view that there was no basis on which we could entertain the current appeal, since the only grounds of appeal advanced were against the earlier decision and not the fresh review.

We are not surprised that no ground of appeal against the fresh review was relied upon, as the fresh review appears to us to be precisely in accordance with what the earlier tribunal intended and directed, and we could not find any fault with Mrs Marshall's approach to her task or with her decision.

We accordingly indicated at the conclusion of the hearing that the appeal was dismissed. We are aware that Ms Craddock of counsel, representing Customs, came fully prepared to make submissions, but in the event we found it unnecessary to call upon her.

We therefore record that this appeal has been dismissed for lack of a valid ground of appeal.

MICHAEL S JOHNSON

CHAIRMAN
Release Date: 9 December 2004

MAN/2004/8080

SCHEDULE

DECISION

In this appeal, brought under section 16 of the Finance Act 1994, the appellant is seeking to have restored to him a VW Polo motorcar, Registration No T390 ACU ("the car"), in which he and his companion were transporting to the U.K. from the continent certain excise goods ("the goods"). The goods consisted of the following:

5 Kg of hand-rolling tobacco;

1 litre of spirits;

60 litres of beer;

1,000 Superking cigarettes;

1,000 Regal cigarettes; and

100 cigarillos.

The car and the goods were seized by H M Customs and Excise ("Customs") at Dover docks on 8 August 2001 and were forfeited. The appellant and his companion, Ms Janette Willis ("Ms Willis") were at the time returning to the U.K. from France. They had used the car to go and purchase the bulk of the goods from a retail outlet in Belgium. Some cigarettes were also purchased on the ferry.

The seizure resulted because Customs concluded that the goods were being held or used for a commercial purpose. Customs applied article 5(3A) of the Excise Duties (Personal Reliefs) Order 1992 SI 1992/3155 ("the PRO"), which was then still in force, and called upon the appellant to satisfy them that such was not the case. The appellant failed to do that, so the car and the goods were seized. The car was seized pursuant to section 141 of the Customs and Excise Management Act 1979, as the vehicle used to transport the goods.

Following the seizure, the appellant sought restoration of the car by a letter to Customs dated 15 August 2001. Restoration was declined, on policy grounds, by a letter from Customs to the appellant dated 22 August 2001. The appellant sought a review of that decision by letter dated 18 September 2001. That letter was acknowledged by Customs on 24 September 2001. In that letter, Customs indicated that the appellant's case was being passed to their review team. That resulted in the issue of a review letter ("the first review") dated 5 November 2001. The reviewing officer was Mr R P Truscott of Customs.

The first review resulted adversely to the appellant. Mr Truscott confirmed the contested decision not to restore the car. On 29 November 2001, the appellant appealed to the tribunal against the result of the first review, on the following grounds:

"The [goods] were for my own personal use. The car confiscated is subject to hire purchase and [so] I do not own it. The HP company are currently in contact with [Customs] reclaiming this. The car value is about £7,000. The HP is about £8,000".

The appeal came on for hearing on 26 November 2002, on which occasion it was agreed, without the tribunal being required to reach a decision, that a further review of the appellant's case should be conducted by Customs. That is not surprising, because the first review had not taken account of a development in the law between the issue of the appeal and the hearing. Mr Truscott cannot of course be criticized for this – he could not possibly have taken the development into account.

The development was that the circumstances of this case and the first review both pre-dated the decision of the Divisional Court of the Queen's Bench Division in R (on the application of Hoverspeed Ltd and Ors) v C & E Comrs [2002] 4 All E R 912 ^[3] ("the Hoverspeed case"), in which the court held that the PRO wrongly placed the burden of proof on travellers to satisfy Customs that they were not holding or using excise goods for a commercial purpose, instead of on Customs. In consequence, the PRO was eventually revoked and replaced. The tribunal due to hear this case in November 2002 wished Customs to have the opportunity of reconsidering the issue of restoration in the light of the burden of proof to which the judgments in the Hoverspeed case referred.

A further review was therefore conducted, and the result of the further review, contained in a decision letter dated 25 February 2003, emerged as adverse to the appellant. The appeal was listed for directions before the Chairman on 6 November 2003, on which occasion he directed that the reviewing officer of Customs who conducted the further review, Mr R Brenton, should attend the further hearing of this appeal. The Chairman so directed because he felt that the further review did not adequately express in what way account had been taken of the Hoverspeed case, which is what the earlier tribunal must have intended.

Ms Xanthe Craddock, counsel appearing for Customs, has explained that Mr Brenton has not attended tribunal because he is giving evidence in another, more important, case. However we see no reason to adjourn the present hearing to cater for that fact, seeing that the appellant does not wish that there should be an adjournment, and it is now so long since the car was seized. We record, however, that in reaching our decision we have been disadvantaged by the non-attendance of Mr Brenton, which we do not understand, seeing that Customs were given the usual opportunity to indicate unsuitable dates for this hearing. As we understand it, the hearing has been listed for today's date on the assumption that compliance with the Chairman's direction would not cause difficulty to Customs.

The tribunal has heard evidence from the appellant, who was cross-examined by Ms Craddock. We have had the benefit of reading the contents of the appeal bundle lodged for the earlier hearing in November 2002, and an amplified appeal bundle, helpfully produced by Ms Craddock. Additionally, the appellant has produced copies of the following documents:

A letter to the appellant from Dawson & Sanderson Ltd, travel agents, dealing with the cancellation of an intended holiday in Benidorm due to be taken in the first fortnight in July 2001;

Booking documentation in relation to that holiday;

Notices produced by P & O Stena Line, encouraging the purchase of excise goods for personal consumption;

A newspaper article, recording a case in which a High Court judge, on appeal from the Crown Court, ordered a reconsideration of a forfeiture decision in respect of 19,780 cigarettes, stating that the sheer volume of cigarettes involved was not necessarily decisive, and that there were persons who, for their own use, bought cigarettes and alcohol in very considerable quantities. A rehearing was ordered by the judge.

We find the following facts.

The appellant and Ms Willis, who live in County Durham, decided to make a quick trip to the continent in the car to buy the goods. They travelled through the night of 7 August 2001, crossed to Calais from Dover by ferry, drove across the border into Belgium to buy the bulk of the goods, and returned by ferry to Dover from Calais, arriving back in the U.K. in the early afternoon of 8 August 2001, having also purchased a small amount of cigarettes on the ferry.

They were separately interviewed by Customs when they landed. The appellant said that the purpose of the journey was just to have a look and do some shopping and get some cigarettes. Ms Willis said likewise.

The appellant said that he had 5 cartons of Regal cigarettes and 5 cartons of Superking cigarettes. He did not immediately mention having any tobacco. However he was then asked if he had any tobacco and he replied, "Yes, it's in the boot".

The appellant told the tribunal that he had not intended to disguise the fact that he was carrying hand-rolling tobacco in the car. However, we note that he did not immediately declare the tobacco, only the cigarettes.

The appellant said that both he and Ms Willis would be smoking the cigarettes and the tobacco. His consumption was 20 – 25 a day. He did not know how long the cigarettes and tobacco would last. He thought that they would last "a good few months". He and Ms Willis would be splitting them.

It is clear from the interview conducted with the appellant that his position was that he had paid for the goods, and was hoping that Ms Willis would pay him something towards their cost. He said that he had paid for the ferry ticket. He told Customs that the money had come from the reimbursement in respect of a cancelled holiday in Benidorm that he was due to take with his previous girlfriend. That trip had fallen through. The appellant produced relevant documentation to the tribunal, referred to in paragraph 10 above.

Ms Willis, by contrast, said that the money for the goods had come from her. She had, she said, savings from which she took £1,000 on the trip, spending just over £700 on the goods. She said that the £700 was her money. She said that she smoked at least 20 cigarettes a day. She did not expect the cigarettes to last long; she said that the idea was to use the tobacco in the house and the cigarettes when socializing. She expected them to last six months or more. She said that the only person to contribute towards the cost of the goods was her brother, who had given her £50 to bring back tobacco to that value for him to smoke.

Ms Willis said that she knew what "the limit was", which we take to be a reference to the guidelines for excise goods being brought into the U.K. from the E.U., but then said that, so long as goods were for personal use, "we thought whatever", which we take to mean that she and the appellant believed that there was in that case no restriction.

We find that both Ms Willis and the appellant proceeded abroad to buy the goods on the basis that they could bring back any quantity of excise goods for their own use. However each of them was read a "commerciality statement" – i.e. they were issued with a requirement for the purpose of article 5(3A) of the PRO – with the result that Customs proceeded to seize the goods and the car when Customs were not satisfied as provided by that article.

The appellant told Customs that he was a shop manager, on a salary of £19,000 before tax. He had outgoings of £516 per month. Ms Willis told Customs that she was a shop supervisor, taking home an average of £130 per week. She received working family tax credit of £135.94 a week in addition. She was not asked about her outgoings.

Both travellers stated, and we accept, that their trip to France and Belgium was their first trip of its kind. The appellant told us that they had made the "long journey" from the north-east of England in the expectation that they would bring back a large quantity of excise goods, as they believed to be their right.

The appellant told us, and we have no reason to disbelieve, that the car cost some £10,000. It was purchased as a new vehicle by the appellant in March 1999, entirely on finance and without a cash deposit, but trading in a Ford Mondeo in part exchange. The appellant thought that it might have been worth of the order of £8,000 in August 2001. That may be optimistic, but we nevertheless find that the car was worth many times the value of the goods.

We find that the appellant has not been without a vehicle since the seizure of the car. His brother lent him £2,000 so that he could purchase an old VW Passat with a substantial mileage. As his letters make clear, and as he told the tribunal, the appellant has a journey to work that makes public transport difficult. Three times a week, his shift starts at 5.30 a.m. He lives in Peterlee and works in Bishop Auckland. The appellant continues to owe the finance company £6,800 for the car, and has not been in a position to repay his brother the money borrowed to buy the Passat.

We therefore accept that, for the sake of his continued employment, the appellant does have a greater than average need for the regular use of a private vehicle.

The goods were seized for the following stated reasons:

The quantity was in excess of the guidelines specified in the Schedule to the PRO;

Money was being received for some of the goods;

Some of the goods were for a non-entitled person;

Inconsistency regarding payment for the goods;

Knowledge of the guidance levels for excise goods;

Income and expenditure.

No useful purpose would in our view be served by undertaking a close analysis of the first review, which it is common ground has been overtaken by the further review. Rather we need to have regard to the decision in the further review in determining, as provided by section 16(4) of the Finance Act 1994, whether it is the case that Mr Brenton, as reviewing officer, could reasonably have arrived at his decision.

Mr Brenton's decision letter begins by incorporating by reference the background to the case expressed in the first review. He then sets out the applicable legislation and shortly refers to Customs' policy as to the restoration of private vehicles. Under the heading "consideration", Mr Brenton then analyses the position, over approximately three A4 pages.

Mr Brenton refers to the Hoverspeed case, and what was held in that case with regard to the burden of proof, continuing:

"However you and Ms Willis were importing between you 12.5 kg of hand-rolling tobacco and 2,000 cigarettes. Of which 12.5 kg of tobacco, were found in the boot of your car. I do not view it as unreasonable for Customs Officers to take account of that in establishing whether or not the excise goods were held for commercial purposes".

We agree entirely with Mr Brenton, but we do not think that his comment really addresses the issue of burden of proof, which is what the Hoverspeed case was about.

Mr Brenton then quotes from the decision in a tribunal case, Boyd v C & E Comrs, decided by a Scottish tribunal chaired by Mr Gordon Coutts QC. In that case, the learned Chairman took a characteristically robust view about the conclusion to be drawn from the importation of a large amount of hand-rolling tobacco. Without for a moment doubting the correctness of that decision on its facts, we are aware that the Boyd case is only one of many tribunal decisions handed down in equivalent circumstances, and we are of opinion that Mr Brenton's review would have been more balanced if he had mentioned the decisions in other cases as well, and sought to reconcile them one with another.

We feel that we should discourage reviewing officers from relying upon the opinion of a particular tribunal Chairman ^[4], expressed in a particular case, as distinct from forming their own opinion on the basis of a reconciliation of the results of the numerous tribunal decisions, many of them decided since the Boyd case, which together contain the jurisprudence in this jurisdiction.

Mr Brenton states that he does not think that the goods imported were a "plausible" quantity to import for own use. Unfortunately, he does not say why. However, he then proceeds to identify a number of matters which have properly concerned him.

Firstly, Mr Brenton quotes from the record of interview of the appellant. He says that he thinks that the appellant was seeking to deceive the Customs officer about the real reason for the trip and to make a "creeping declaration" about the tobacco in the boot. We agree about the "creeping declaration", although we find it to be slight. We doubt, however, if attempted deception is properly to be read into the stated purpose for the trip – after all, one can "shop" for tobacco as much as for any other goods.

Mr Brenton next makes what we regard as a very cogent point. He contrasts the real and substantial difference between what the appellant said about payment for the goods and what Ms Willis said about that same subject. We agree that it is not possible to reconcile the two accounts. The appellant was adamant that his version – namely that he paid for the goods – was correct, and could not explain to the tribunal why Ms Willis had said what she said. We asked the appellant if he had suggested to her that she might attend tribunal as a witness; he replied that she was no longer his girlfriend – they had fallen out – and that there had been no question of her attending. Consequently the tribunal is left with an apparent unresolved conflict of evidence casting a justifiable doubt on the credibility of the travellers.

Mr Brenton then comments on the cost of the goods, compared with the respective means of the travellers, and at their stated consumptions of cigarettes. He raises what we agree is a reasonable doubt about whether they could possibly have meant to smoke all the tobacco themselves. He refers also to the fact that Ms Willis was, according to her account, bringing back tobacco for her brother for which he had paid her.

So far as the goods are concerned, Mr Brenton concludes:

"I am of the opinion that your initial replies to the Officer and the lack of credibility in both your subsequent accounts during interview are nothing short of a façade of deceit to camouflage this commercial venture".

That being so, Mr Brenton proceeds to apply the decision of the Court of Appeal in the case of Lindsay v C & E Comrs [2002] 3 All E R page 137, letter g ("the Lindsay case"), where Lord Phillips MR said this:

"Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles".

Lord Phillips went on to say that considerations of proportionality are normally irrelevant in such a case, but that cases of exceptional hardship must always, of course, be given due consideration.

Judge LJ delivered a judgment to the like effect.

On behalf of Customs, Ms Craddock submitted that the appellant had failed to demonstrate that the decision of Customs not to restore the car was unreasonable. Having regard to the information available to him, Mr Brenton was entitled to conclude as he did. The quantities of tobacco imported were very large; the travellers' behaviour was evasive; there were discrepancies in the interviews, particularly as to who paid for the goods. Ms Willis had said that part of the goods had been procured for her brother and paid for by him. There was no suggestion otherwise that the goods were not entirely for the travellers. The information given as to how long the goods might last was exiguous.

Ms Cradock submitted that the Lindsay case was in point and could apply. She submitted that the value of the car was irrelevant, but that even if principles of proportionality might apply, it would not be disproportionate to have refused to restore the car. She submitted that there was no evidence of exceptional hardship in this case.

The appellant submitted to the tribunal that he was legally entitled to bring back the goods. There had been no evasion of duty. He asked that, whatever view the tribunal might take of the goods, we should find that the decision not to restore the car was unreasonable, having regard to the isolated nature of the incident and his need for the car, which he had explained to Customs in his letters.

In our view, Customs have proved that it was reasonable to have concluded that the importation of the goods was not for own use. We think that the difference in the accounts of the two travellers as to who had paid for the goods is significant. We think that it shows that the travellers appreciated that it was important to satisfy Customs that they could readily afford to have bought goods costing £700. In attempting to deal with that matter, they told inconsistent stories. Customs were, in our view, entirely justified in being sceptical, bearing in mind the financial circumstances of the travellers.

We therefore accept Ms Craddock's submissions to that extent. On the other hand, the facts of this case do not seem to us to be of the kind addressed by Lord Phillips in the passage quoted from the Lindsay case. We do not think that it has been proved that the appellant deliberately risked the seizure and forfeiture of the car. We have been told, and we accept, that this was the appellant's first trip of its kind. The distinction that the Court of Appeal appeared to draw was between committed smugglers on the one hand and on the other hand innocent travellers bringing back goods which they would sell at cost price. In between these two categories there appears to lie a third, namely travellers whose object is to sell the imported goods at a profit, but for whom this represents an isolated fall from grace.

We do not find it to have been proved that the appellant and his companion were what are commonly regarded as smugglers. We have held that it was reasonable for Customs to have concluded that the importation was not for own use, but that does not in our opinion suffice to categorise these travellers, as Mr Brenton did in the further review, along with those individuals (sometimes driving white vans, sometimes making repeated trips to the continent in groups of 3 or 4, deliberately using old, low value vehicles) who are obviously engaged in a nefarious course of conduct, namely the evasion of excise duty.

We have come to the conclusion, therefore, that the further review unreasonably ignores this distinction. We cannot see that Customs have proved, on the facts of this case as found by the tribunal, that the appellant and his companion are properly regarded as akin to smugglers of the kind identified by Lord Phillips in the Lindsay case. We find that the further review does not deal with this aspect; rather, it simply cites the Lindsay case and concludes that that case must apply so that restoration should be refused.

The reason for this seems to be the conclusion reached by Mr Brenton which we quote in paragraph 37 of this decision. Mr Brenton has concluded that the facts of this case indicate "a façade of deceit to camouflage this commercial venture". In our view, that is to put it too strongly. Customs have proved that it was reasonable to conclude that the importation was not for own use. They have not proved the alleged deceit, as to which we are unable to make a finding, on the limited evidence placed before the tribunal.

We are therefore of opinion that there should be a further review of the question whether the car should be restored. That further review should bear in mind that the car was worth much more than the duty evaded. If it is right to bear in mind proportionality in the case of so-called innocent, non profit-making importations of excise goods, which the Court of Appeal has held that it is, then in this sort of case, the disparity between the duty evaded and the value of the car should not be ignored, and we so direct.

On the findings that we have made, we think that restoration of the car might properly have been offered on payment of the amount of duty evaded. However it is for the officer conducting the further review – who should of course be an officer other than Mr Truscott and Mr Brenton – to decide whether a somewhat more severe condition might be imposed, in line with policy and to reflect the need to discourage travellers in the category of the appellant from breaking the law, even on a first trip.

This appeal is therefore allowed. We additionally direct that the further review shall be conducted within six weeks of the release of this decision, and that a copy of the further review shall be sent to the Manchester Tribunal Centre, under reference MAN/2001/8354, for placing on file.

Note 1    (see paragraph 49 of the earlier decision).     [Back]

Note 2    (namely that the appellant and his companion were not commercial smugglers, as commonly regarded, and that deceit on the part of the appellant had not been proved – see paragraphs 45 and 47 of the earlier decision)    [Back]

Note 3    (which went on appeal, see [2003] 2 All E R 553, but not in respect of this point).    [Back]

Note 4   (albeit a Chairman so eminent as Mr Coutts)    [Back]