United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E840, [2004] UKVAT(Excise) E00840

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Bennett v Customs and Excise [2004] UKVAT(Excise) E00840 (29 December 2004)

E00840

EXCISE DUTY – tobacco etc and vehicle seized – deemed condemnation as no notice of claim - restoration refused – tribunal jurisdiction – Gora, Gascoyne and Dickinson considered – appeal allowed.

MANCHESTER TRIBUNAL CENTRE

KAREN BENNETT Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Richard Barlow (Chairman).

Brian Strangward.

Sitting in public in Manchester on 21 October 2004.

Mr Grierson of counsel instructed by Pannone & Co for the Appellant.

Miss Mayho of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2004

DECISION

Introduction.

This is an appeal against the respondents' review decision concerning a refusal to restore to her tobacco products, beer and a motor car seized at Dover on 5 December 2003. There is also reference to Baileys liqueur in the interview but it does not feature elsewhere. The appellant's main concern is the motor car which is an MG ZR valued at about £14,000 at the time of seizure. The goods that gave rise to the seizure were 24.95 kg of hand rolling tobacco because, although the appellant and her travelling companion also had cigarettes, beer and cigars with them they were in small quantities and were seized only because they were mixed, packed or found with the tobacco.

The appellant was represented by Mr Grierson of counsel, which was fortunate for her because the respondents, represented by Miss Mayho of counsel, put forward technical arguments about the tribunal's jurisdiction which had not been mentioned in the Statement of Case or elsewhere.

The jurisdiction issue.

The respondents argued that the tribunal is precluded from making any findings that contradict what they claim to be established facts, arising from the failure of the appellant to give a notice of claim to the Commissioners requiring them to commence condemnation proceedings.

Paragraph 8 of the Statement of Case alleges that the goods are liable to forfeiture by reason of section 49(1) of the Customs and Excise Management Act 1979 (CEMA) or regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (REDS). Paragraph 9 of the Statement of Case alleges that the vehicle is liable to forfeiture under section 141(1) of CEMA. The review letter, but not the Statement of Case, cites section 141 in respect of goods being mixed, packed or found with other goods that were liable to seizure. It is the respondents' case that the cigarettes, beer and cigars are liable on that ground.

Section 49(1) of CEMA covers a wide range of grounds upon which goods may be liable to forfeiture under the compendious title "goods improperly imported". It includes, in what may be the most relevant provision in cases of this sort, forfeiture of goods liable at their importation to excise duties, where the goods are unshipped without payment of duty. Regulation 16 of REDS is equally wide ranging and applies to goods in respect of which there is a breach of regulation 6 or Parts IV, V or VI of the regulations. From the Statement of Case it is impossible to identify with certainty a specific breach of a specific regulation which is alleged to have given rise to the forfeiture in this case.

The Statement of Case cites parts of regulation 12 of the Excise Goods, Beer and Tobacco Products Regulations 2001, as amended. That provides that the excise duty point is the time at which a person holding goods does so with the intention of transferring them to another person for money or money's worth; which the regulations provide shall be regarded as holding them for a commercial purpose. Regulation 6 of REDS requires that duty should be paid on or before the excise duty point and, if it is not, regulation 16 would give a ground for seizure and forfeiture of the goods. From the evidence it was possible to conclude that that was the Commissioners' case, though that could not be concluded with certainty from the Statement of Case.

Our purpose in summarising the Commissioners' Statement of Case in respect of the legislative provisions under which the goods were seized is to illustrate that the allegations made therein are wide ranging and unspecific.

Despite that; the Commissioners argue that because the appellant did not give notice of a requirement for condemnation proceedings it is to be deemed that the goods were held for a commercial purpose and that that issue cannot now be re-opened. Why, it might be asked, do the Commissioners allege that that issue is settled by the deeming that the goods were liable to condemnation when so many others may have arisen and when that issue may not? For example, as pleaded in the Statement of Case the goods may have been seized by reason of being concealed, giving rise to seizure under section 49(1)(e) of CEMA without reference to any allegation of commerciality.

Had the seizure required the issue of a seizure notice under paragraph 1(1) of Schedule 3 to CEMA, that notice would have stated the grounds for seizure but, as is commonly the case, the goods were apparently seized in the presence of a person whose presence made such a notice unnecessary (as to which see paragraph 1(2) of Schedule 3). An entirely non-specific form C156 giving no details of the grounds for seizure was issued.

We are not prepared to assume that the alleged commercial purpose was given as a reason for seizure at the time. There is a note about that in the officer's notebook of the officer who interviewed the appellant's travelling companion, apparently not in her presence, but there is nothing to indicate that it was part of the interview and it appears to be a note made for the officer's own purposes. It follows that although we are now able to determine how the Commissioners put their case for forfeiture that would not have been open to the appellant at the time of the seizure or for some time afterwards.

If due written notice of seizure is given under paragraph 1(1) and served under paragraph 2 of Schedule 3 of CEMA, or if none is required by reason of compliance with paragraph 1(2) (seizure in the presence of an offender or owner), then a person seeking to claim against the seizure must give the "notice of claim", under paragraph 3, within one month of the notice of seizure or the date of seizure if no notice is required. If no such notice of claim is given paragraph 5 provides that "the thing in question shall be deemed to have been duly condemned as forfeited". If a notice of claim is given, the Commissioners have an unspecified period of time in which to "take proceedings for the condemnation" (paragraph 6) in either a Magistrates' Court or the High Court (paragraph 8). Customs and Excise have argued that the time for giving notice of claim cannot be extended.

The notice of claim does not need to state the grounds for the claim, so that the appellant could have given notice without knowing what the Commissioners reasons for seizure were. As we have found there is no evidence that the appellant was informed about the grounds for seizure and the legal basis for it, until well after the time for claiming had expired.

Against the above background Customs and Excise have asserted that the appellant's failure to give notice of claim under paragraph 3 and the deeming that the goods are condemned as forfeit under paragraph 5 create res judicata against the appellant which preclude her from challenging the non-restoration on the grounds that the goods were for her own use; or that it would be an abuse of process for her to mount such a challenge.

These contentions are based on the judgment of Buxton LJ in Gascoyne v HM Customs and Excise (as yet unreported). In that case, following Gora v Customs and Excise Commissioners [2003] 3 WLR 160, Buxton LJ held that an importer cannot challenge the lawfulness of a seizure by way of an application for restoration of the goods under section 152(b) of CEMA if he has not given a notice of claim to the Commissioners (see paragraphs 46 and 47 of the judgment). That reference to the lawfulness of the seizure is a reference to its lawfulness as such, as is made clear later in the judgment and is clearly not the same thing as a request for restoration, which does not in itself challenge the lawfulness of the seizure; it is a request to exercise a discretion. Buxton LJ held that although section 152(b) itself does not preclude a challenge to the lawfulness of the seizure "the normal English law rules of res judicata or abuse of process" do preclude it.

It should be pointed out that in cases like the present one no question of res judicata can arise because no proceedings have been instituted and so there is no decision of a court. If any authority is required for that proposition it is to be found in paragraph 51 of the judgment in Gascoyne where Buxton LJ refers to there being no objection to holding that an actual finding in condemnation proceedings would bind the tribunal. In this case there has been no actual finding.

But where there have been no condemnation proceedings the question is whether an appellant who has failed to give notice to the Commissioners to institute condemnation proceedings is abusing the process of the tribunal by appealing on the grounds that the original seizure was invalid.

As to that, Buxton LJ said this at paragraphs 54 to 56:

"54 As it seems to me, for an importer to be completely shut out in the only tribunal before which he has in fact appeared from ventilating matters that are deemed to have been decided against him because of paragraph 5 of Schedule 3 does not adequately enable him to assert his Convention rights.

55 In my view, therefore, in a case where the deeming provisions under paragraph 5 are applied, the tribunal can reopen those issues: though the tribunal will always have well in mind, considerations of, or similar to, abuse of process in considering whether such issues should in fact be ventilated before it. (Emphasis added).

56 The mere fact that the applicant has not applied to the Commissioners, and therefore there have been no condemnation proceedings, would not, in my view be enough. But, in my judgment it goes too far to say that the deeming provisions have always, in every case, got to be paramount."

The reference, in paragraph 55, to "reopening those issues" clearly refer to issues of commerciality and own use in an appropriate case and unless it would be an abuse of process to raise them they can be raised even if the goods have been deemed to be forfeited.

The starting point for the consideration of whether the present appeal is an abuse of process must be to determine what the deeming provision has deemed to be the case. The deeming provision only ever deems that the thing in question is "duly condemned as forfeit" and so unless there is only one possible ground upon which the goods in question might have been liable to forfeiture the deeming does not specify the actual ground.

For purposes of considering whether the appeal is an abuse of process it should be possible to look at the matter in light of the actual circumstances, so that for example where the owner of the goods was in fact fully informed about the reasons for the seizure before the time for giving notice of claim expired, that would be a relevant factor in considering whether an appeal is an abuse of process.

In the absence of evidence that the precise reasons for seizure were explained to the appellant and in light of the Statement of Case, the deeming can only be taken at face value i.e. that the goods were duly seized as liable to forfeiture but that the precise grounds were not identified. In those circumstances we do not regard the appellant's case as an abuse of process in any sense and to disallow her from putting forward a case based on her contention that the goods were for her own use would prevent her from asserting her Convention rights in precisely the way that Buxton LJ mentioned at paragraph 54.

Additionally, there was correspondence between the appellant and Customs and Excise, not all of which was produced, and some consideration appears to have been given to what was termed an appeal which seems to have referred to condemnation proceedings. The appellant gained the impression that the rule was that restoration would not be considered while condemnation proceedings were under way and that the hearing in the Magistrates Court would not be for months and would take place in Dover. In the circumstances we are satisfied that the appellant's failure to give a notice of claim should not count against her in the tribunal appeal and comes no where near to making the tribunal proceedings an abuse of process.

Miss Mayho contended that if the tribunal considered that exceptional circumstances applied which would entitle the appellant to raise the own use issue then we should state what they are. No such exceptional circumstances are needed. All that is needed is that the proceedings should not be an abuse of process and we have given our reasons for concluding that they are not.

Tribunal's approach to finding facts.

In Gora, at page 175, the Commissioners' submissions about the role of the tribunal are set out in lettered paragraphs and they include statements at (c) to (d) that make it clear that the tribunal has a comprehensive fact finding role including deciding on "blameworthiness" (which we take to be an example rather than the only fact to be considered). The Court did not disagree with the submissions in that respect. In the case of Dickinson v Customs and Excise Commissioners [2004] 1 WLR 1160 at page 1174 Peter Smith J agreed with counsel for the appellant that "whilst the tribunal decision is limited to a review, it does have a fact finding status in view of the decision in Gora's case. Thus whilst it cannot impose its own order it can make findings of fact which, upon remission to the commissioners for further consideration, are binding on the commissioners". We therefore reject Miss Mayho's submission that we should judge the reasonableness of the review decision on the matters available to the review officer at the time of the review.

We agree that the decision should be viewed in light of the facts as they were at the time of the review and that subsequent events would not be relevant but, if she meant that the review can only be judged on the basis of the facts as known to the review officer, that is not the case.

Findings of fact.

The appellant travelled via Dover to Adinkerke in Belgium from her home in Greater Manchester with a Mr Grimes. She freely admitted that the purpose of the trip was to purchase tobacco.

The main dispute of fact in this case is whether those purchases were for Mrs Bennett and Mr Grimes' own use (and that of their daughters) or were for re-sale at a profit.

Customs and Excise relied principally on four issues which they said showed that the hand rolling tobacco was for re-sale.

First, they pointed out that the two travellers each had four times the quantity that is set as the guideline limit. This is factually correct but Mrs Bennett said that she and Mr Grimes had travelled two years before and had purchased a large quantity of tobacco products and had then decided to do the same again. Her account was that initially they had intended to buy cigarettes but found them to be dearer than expected and decided on hand rolling tobacco which she and her daughter smoked, as did Mr Grimes and his daughters.

In fact, receipts in their possession show they bought 300 pouches paid for in cash in pounds sterling and 200 more pouches paid for by Mrs Bennett's credit card paid for in euros. Mrs Bennett's evidence was that they had left the shop and returned to their car but then decided to buy the second lot of tobacco because they talked the matter over and decided to buy more because they would not be likely to return to Belgium in the near future.

The receipts produced raised an issue about this evidence, in that the till receipts appeared to be timed with the euro payment being the first in time and only two minutes before the sterling payment. Mrs Bennett was adamant that the sterling payment was first. Rather than raising any doubt about the veracity of her evidence, we found this to be convincing. Had she intended to deceive us, when we raised this issue, she might have simply said that she must have been mistaken about the order of purchases but her insistence on an irrelevant detail had very much the ring of truth. Our general impression of Mrs Bennett was that she was an honest witness. She gave her evidence in a sensible and forthright manner without prevarication or exaggeration and we find her evidence to be truthful.

The distance of travel is relevant to the issue of quantity and it is relevant that the appellant had travelled from Manchester. Customs and Excise have the means of checking whether a person is a regular traveller and no such allegation was made in this case. Mrs Bennett said in interview that she smoked 1.5 to 2 pouches a week and that half the goods were for her. On that basis the tobacco would have lasted about two years and nine months, not allowing for the fact that Mrs Bennett's daughter would have smoked some. It is true that she said the goods would last "all of next year" when she was interviewed but we do not regard that discrepancy as being particularly significant.

A customs officer put it to Mr Grimes that the shelf life of tobacco is six months. The review officer said in the review that he doubted if ordinary domestic premises would have the environment necessary to preserve tobacco for more than a year. However, Customs and Excise produced a letter from Gallaher Limited saying the shelf life of tobacco is 14-18 months in ideal conditions. The appellant produced a statement from the internet referring to a letter from Imperial Tobacco saying that their tobacco products would remain in very good condition for 12 to 18 months in normal storage conditions and would remain smokeable for longer though they might dry out and be harsher to smoke after that time.

The quantity was clearly large but in the circumstances we do not regard it as having dissuaded us from the basic finding that we believed the appellant's evidence that the goods were for her own use was truthful.

Secondly, Customs and Excise relied upon a contention that the expenditure was beyond the appellant's means. The appellant has a good job as a senior customer credit advisor with a utility company earning £1,362 a month after deductions. She produced evidence of various loan accounts that showed she had credit available and told us that she had savings in the form of insurance policies which were due to pay her lump sums. We are satisfied on the evidence that the appellant could afford the expenditure in question.

Thirdly, Customs and Excise said that it was unrealistic of Mrs Bennett to expect re-imbursement for his share of the tobacco from Mr Grimes, who is unemployed. However, the appellant told us and we accept this evidence, that Mr Grimes had an equitable interest in Mrs Bennett's home, stemming from an earlier period when they lived together and that she intended simply to deduct any debt from that when she paid him his share. In effect the loan to buy the tobacco was therefore secured. All of this was informal but as they remain friends it was not unrealistic.

Fourthly, Mr Grimes was untruthful in interview about the payment for the goods; in particular he said he had already paid Mrs Bennett. Mrs Bennett explained this on the basis that he was embarrassed to admit to the officer that he was relying on Mrs Bennett for the immediate funds to pay for the tobacco. That evidence is at least plausible and we do not regard the lies Mr Grimes told in interview as indicating that the goods were for a commercial purpose.

Conclusion.

Accordingly we hold that the goods were for Mrs Bennett and Mr Grimes' own use and not for a commercial purpose.

The appeal is allowed and pursuant to section 16(4) of the Finance Act 1994 we hold that the Commissioners' review decision is one that they could not reasonably have arrived at because it was based on an erroneous understanding of the facts. Pursuant to section 16(4)(b) of that Act we require the Commissioners to conduct a further review of the decision in accordance with our directions.

Directions for further review.

As envisaged in paragraph 71 of the judgment of Peter Smith J at page 1174 of the judgment in Dickinson (cited in paragraph 24 above) and in section 16(4) we direct that the further review should be based upon our findings of fact, in particular that the goods were for the personal use of the appellant and Mr Grimes.

We further direct that the review should take account of the fact that where goods are for an importer's own use there is no limit upon the quantity he or she can import.

We direct that the further review should be conducted by an officer other than the officer who carried out the review in question and that it should be completed within 45 days of the release of this decision.

Costs.

The appellant sought an award of costs and we direct that the respondents shall pay the appellant's costs of this appeal to be assessed by a chairman sitting alone, if not agreed between the parties and that either party shall have liberty to apply to the tribunal in respect of the assessment of costs.

RICHARD BARLOW

CHAIRMAN

RELEASED DATE: 29 December 2004

MAN/04/8041.