United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2005] UKVAT(Excise) E00847, [2005] UKVAT(Excise) E847

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Brookes v Customs and Excise [2005] UKVAT(Excise) E00847 (22 February 2005)

E00847

EXCISE DUTY — Restoration of a motor vehicle and excise goods — father importing cigarettes and beer — son importing tobacco and beer — father's importation was for personal use — son's importation commercial use for profit — material difference from the Review Officers' finding that both were involved in commercial importation — whether this difference may have a bearing upon the decision not to restore — yes — was the decision not to restore the vehicle reasonable — no — Appeal allowed.

MANCHESTER TRIBUNAL CENTRE

ROBERT BROOKES Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Michael Tildesley (Chairman)

J David Kippest

Sitting in public in Birmingham on 6 January 2005

The Appellant appeared in person

Zaheer Afzal, instructed by the Solicitor's office for HM Customs and Excise, for the Respondents

DECISION

The Appeal

The Appellant was appealing against the decision of the Respondents on review dated the 5 August 2004 to refuse restoration of excise goods and a motor vehicle (Rover 420, registration V434 DJM). The excise goods consisted of 12 kilograms of hand rolling tobacco, 800 cigarettes, 250 cigars and 234 litres of beer.
The Appellant's grounds of appeal were:

"I was only verbally accused of evading tax. They could not offer a review they had in no time disposed of my £12,000 car without my knowledge. I am innocent until proved guilty. I can prove from credit card statements my average spend per trip was £228 as agreed through my solicitor. I am seeking £18,000 compensation. Customs work on assumptions and probabilities".
The Appellant disputed the Respondents' assertion that he was selling the excise goods for profit. He challenged the inferences drawn by the Respondents about the Appellant's trips to France and Belgium. The Appellant also considered that the Respondents were not justified in their refusal to restore his motor vehicle.
The function of the Tribunal is to determine whether the Respondents' decision not to restore the excise goods and the motor vehicle 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.
We received evidence from the following persons:

(1) Robert Brookes, the Appellant

(2) Richard Graham Brookes, the Appellant's son

(3) Gareth Morgan, the Customs and Excise Officer who carried out the Review.

An agreed bundle of documents was presented to the Tribunal.

The Evidence

Background
The Appellant and his son, Richard Graham Brookes, left Marston Green, West Midlands at 8am on 21 May 2001 in the Appellant's motor vehicle and caught the 12 midday Channel Tunnel train to Calais where they purchased the excise goods. On their return to the UK they were stopped at 3.40pm by Customs Officers at the UK Control zone in Coquelles and interviewed. The Officers were not satisfied that the excise goods had been purchased by the Appellant and his son for personal use whereupon the Officers seized the goods and the Appellant's motor vehicle. The Appellant and his son made their own way back to Marston Green.
On 22 May 2001 the Appellant wrote to the Respondents requesting restoration of the motor vehicle, which was refused on 14 June 2001. On 11 July 2001, Allsop and Co, the Appellant's solicitors, requested a review of the decision not to restore. The Respondents acknowledged receipt of the solicitors' letter on 24 July 2001 in which they stated that if the solicitors had not heard from the Review Team within 45 days of 12 July 2001, they should assume that the original decision not to restore was upheld. In late October 2001 the Appellant contacted the Respondents and was informed that his motor vehicle had been sold by auction on 18 October 2001.
The Appellant's Member of Parliament wrote on behalf of the Appellant to Treasury Ministers and the Parliamentary Ombudsman to challenge the Respondents' decision regarding seizure and sale of his motor vehicle. Mr Boateng, Treasury Minister, and Ms Moffit, Senior Investigation Officer of the Parliamentary Ombudsman both advised the Appellant to appeal to the VAT and Duties Tribunal, which he did on 17 August 2003.
The Respondents were unaware of the Appeal until a pre-hearing review was listed on 24 May 2004 when the Tribunal directed the Respondents to carry out a review of their decision refusing restoration. Mr Morgan carried out the review which was communicated by letter to the Appellant on 5 August 2004.

The Review Decision
Mr Morgan found no exceptional circumstances in the Appellants' case to depart from the Respondents' policies that seized excise goods and private vehicles used for the improper importation or transportation of excise goods should not normally be restored. In reaching his decision he relied upon the following findings:

(1) The quantity of excise goods imported by the Appellant exceeded the guide levels specified in the Excise Goods, Beer and Tobacco Products Amendment Regulations 2002 and the Channel Tunnel (Alcoholic Liquor and Tobacco Products) (Amendment) Order 2002 (hereinafter referred to as "The Regulations). The 12 kilograms of hand rolling tobacco imported by the Appellant's son exceeded the guide level of one kilogram 12 times. The 234 litres of beer imported was more than twice the guideline of 110 litres.

(2) The Appellant and his son when first stopped did not mention they had seen Customs Notice 1 and only said they travelled five times in order to give the Customs Officer the impression that they travelled far less than they actually did.

(3) The financial viability of making so many visits in a short space of time to buy small quantities of excise goods, particularly as it appeared that the Appellant was claiming Disability Living Allowance from May 2000 to February 2001.

(4) The Appellant's son had not taken the opportunity to bring hand rolling tobacco back for his partner on previous trips. He had only just started to smoke tobacco himself and yet his consumption rate was five pouches a week. Also the 12 kilograms of tobacco would have cost him £488.80 (1.5 times his weekly income).

(5) Most of the excise goods brought back were to be sold for a profit which took the case beyond the threshold where the value of the motor vehicle was taken into account.
Mr Morgan gave evidence that the value of the motor vehicle as at June 2001 was £7,011 retail and £5,836 trading in value. This information was obtained from "Glass's Motoring Guide for Used Car Prices". He was not aware that the motor vehicle had been converted to run on gas. Mr Morgan was unable to produce documentary evidence to support his assertion that the Appellant was in receipt of Disability Living Allowance. This information had been supplied to him during a telephone conversation with an official from the Department of Work and Pensions.

The Appellant's Evidence
On 21 May 2001 the Appellant purchased 800 cigarettes and cigars on his credit card. The cigarettes were for himself and his wife, whilst the cigars were for his brother who would reimburse him at cost. His son using his credit card bought the Golden Virginia hand rolling tobacco and the beer which was to be split between him and his father.
The Appellant accepted that he regularly travelled to the Continent. Between 11 June 2000 to 20 May 2001 he made 18 trips, of which 15 were day trips and three were holidays. The total amount of money spent on alcohol and tobacco on these 18 visits was £4,286, an average of £238.11 per trip. The Appellant extracted this information from his credit card statements. His solicitor shared the information with the Respondents on 11 July 2001. The Appellant accepted that he bought beer on all the day trips and usually one thousand cigarettes each visit. In October and December 2001, he made three separate trips in each of those months mainly to buy beer.
The Appellant denied that he lied to the Customs Officer about the number of previous trips made. He believed that the Officer was asking him about the number of previous trips he made in 2001, in which case he gave an accurate response of five trips.
The Appellant together with his two sons were heavy beer drinkers averaging between them about ten pints a day. He also entertained a lot, particularly at Christmas. The beer purchased on 21 May 2001 would last him between two and four weeks. The Appellant smoked between 15 and 25 cigarettes a day.
The Appellant thought nothing of driving to Calais and back to the West Midlands in one day. The Appellant was used to driving. He had been previously employed as an HGV driver. In any event he usually shared the driving with his passenger. His car was converted to run on gas which considerably reduced the fuel costs. The Appellant estimated that a return journey to Calais would cost him about £35 - £40 for the fuel and the Channel Tunnel ticket. In the Appellant's view this cost was insignificant when compared with the £250 on average he saved by purchasing the beer and cigarettes in France and Belgium.
The Appellant strongly denied that he had been in receipt of disability benefits. He had always been in employment. His earnings as at 21 May 2001 were in the region of £15,000 to £16,000 per annum. His wife earned about £26,000 per annum.
The Appellant estimated the value of his motor vehicle when seized to be in the region of £12,000. He, however, was prepared to accept the valuation provided by Mr Morgan subject to the added value provided by the gas conversion. The Appellant required a loan of £8,760 to purchase a replacement vehicle.
Mr Richard Brookes, the Appellant's son explained that the 12 kilograms of hand rolling tobacco was for himself and his partner. He told the Officer, however, that he might give away some of the tobacco pouches as presents. He knew that the 12 kilograms was well above the guidelines in the Regulations. Mr Richard Brookes bought the large quantity of tobacco because it was on offer with a third off the normal price. He accepted that he only started smoking roll-ups from March 2001in contrast to his partner who had started much earlier. Mr Richard Brookes and his partner smoked daily each about 30 roll-ups. He confirmed that he was a heavy drinker and over the Christmas period would drink 17 pints of beer a day.
Mr Richard Brookes made about 5 or 6 trips in his car to France and Belgium in the previous year. On 18 March 2001 he accompanied a friend to Calais. They purchased 5,000 cigarettes and one half of kilogram of hand rolling tobacco between them. On that day Customs Notice 1 had been given to his friend. In interview with the Customs Officer he referred to another journey with a friend where they each brought back six cartons of 200 cigarettes.
Mr Richard Brookes was employed as a postman earning about £300 to £350 per week with monthly outgoings of £559. His partner was employed as a Prisoner Escort Officer at the local magistrates' court earning a reasonable wage, which was not mentioned by Richard Brookes in interview with the Customs Officer. She also had an interest in a shop in Chelmsley Wood, Birmingham.

Jurisdiction of the Tribunal
The Respondents' power 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, not for profit or commercial, the proportionality of the penalty imposed to the policy aims pursued having full regard to the individual circumstances of the case and exceptional hardship. 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 recent Court of Appeal decision in Gascoyne v Customs and Excise Commissioners [2005] 2 WLR 222 has ruled that the Tribunal in restoration proceedings should not revisit the facts necessary to establish the legality of the seizure or forfeiture, such as, whether the excise goods were acquired for personal use. The effect of this ruling is relaxed when there has been no condemnation proceedings before the magistrates' court, in which case it may be open to the Tribunal to revisit the facts pertinent to the legality of the forfeiture and seizure provided the Tribunal is satisfied that it will not be an abuse of process. The Respondents did not raise "the abuse of process argument" at the hearing. The Appellant did not pursue the route of condemnation proceedings before the magistrates. Thus there had been no previous finding about whether the excise goods had been bought for private or commercial use. Also the Appellant was advised by the Treasury Ministers and the Parliamentary Ombudsman to pursue an Appeal before the VAT and Duties Tribunal.

The Facts found by the Tribunal
The Respondents accepted that the Appellant purchased the cigarettes and the cigars, whilst his son bought the hand rolling tobacco. The beer was shared between them. The quantity of cigarettes and cigars imported were within the guidelines indicative of own use. The amount of beer imported at 234 litres was slightly over the 110 litres multiplied by two for the Appellant and his son, not as Mr Morgan suggested exceeding the guideline by two times. The quantity of hand rolling tobacco was twelve times the guideline as at 21 May 2001 but four times the amended guideline of three kilograms introduced from 1 December 2002.
We were satisfied on the evidence that the Appellant had not sought to deceive the Customs Officer about the frequency of his previous trips to the Continent. We accepted his explanation that he interpreted the Officer's question as asking about the number of previous trips in 2001, in which case he gave a truthful answer. We placed no weight on his initial denial about seeing Notice 1 before. He readily accepted that he had seen the Notice when interviewed. We considered that the overall tenor of his interview with the Customs Officer was cooperative and open with his responses. The Appellant took the trouble through his solicitor to provide the Respondents with a detailed breakdown of his journeys abroad in the previous 12 months and the amounts spent on excise goods. This information was supported by documentary evidence in the form of credit card statements, which was made available to the Respondents on request.
We were satisfied from the Appellant's evidence, in particular the amount spent on each trip, that he travelled about every four weeks to France and Belgium for the principal purpose of buying beer for consumption by himself and his immediate family. In addition he would buy about one thousand cigarettes for himself, his wife and his brother who would reimburse him at cost. These purchases were within the indicative guidelines set out in "the Regulations" for determining own use. We considered that the Appellant had the means to afford the expenditure and that he secured significant savings from his purchases abroad. We disregarded Mr Morgan's assertion that the Appellant had applied for Disability Living Allowance because it was strongly disputed by the Appellant and not supported by documentary evidence. The amounts purchased were consistent with the Appellant's stated rates of consumption.
We, therefore, concluded that the Appellant's purchases on 21 May 2001 followed his existing pattern of purchasing beer and cigarettes for use by himself and his family with his brother recompensing the Appellant at cost.
We found the evidence of the Appellant's son, Mr Richard Brookes unconvincing. He was unclear about the details of recent purchases of excise goods. During the interview with the Customs Officer he stated that his last purchase abroad was six packets of 200 cigarettes each. Mr Morgan believed that this purchase took place at the beginning of March 2001 and preceded a more significant purchase with a friend on 18 March 2001 of 5,000 cigarettes and a half kilogram of hand rolling tobacco. Mr Richard Brookes did not challenge Mr Morgan's statement; instead he suggested that he had simply gone along with his friend to increase the amount of excise goods that his friend could import within the guidelines. We did not accept his explanation particularly as Mr Richard Brookes was the driver on the 18 March.
His purchase of 12 kilograms of hand rolling tobacco did not fit in with his previous purchasing pattern. Previously he had not imported significant quantities of hand rolling tobacco even though his partner apparently smoked tobacco. Mr Richard Brooke's justification for bringing in such a large quantity was that he recently started to smoke hand rolling tobacco and that the said quantity had been significantly discounted. Mr Richard Brookes, however, knew that the quantity of 12 kilograms was obviously too much and that he and his partner would not smoke that quantity. The price paid for the tobacco of £488 was a substantial outlay against his weekly wage. He told the Tribunal that it was affordable because his partner was working as a Prison Escort Officer at the local Magistrates' Court, however, he failed to mention this fact to the Customs Officer and when pressed in cross examination he stated that she only started work there in April or May 2001. We are satisfied from the evidence that Mr Richard Brookes imported the hand rolling tobacco for the purpose of selling on at a profit.

Was the Non Restoration Proportionate?
Mr Morgan concluded that the Appellant and his son were both involved with the importation of excise goods for the purposes of selling them at a profit, in which case it was unnecessary for Mr Morgan to carry out a detailed analysis of whether the non-restoration of the motor vehicle was a proportionate response. We have a reached a different conclusion from Mr Morgan in that the Appellant was importing excise goods for his own use or to be given to his brother at cost, whilst his son was importing the tobacco to make a profit. In those circumstances we consider that it is necessary to re-examine the proportionality of the non restoration of the motor vehicle against the facts found by the Tribunal. We accept that this analysis is not required for the forfeiture and the seizure of a motor vehicle because of the wording of section 141 Customs and Excise Management Act 1979. This Tribunal, however, is not concerned with forfeiture but with the Respondents' discretionary powers of restoration under section 152(b) of the 1979 Act. The exercise of those powers demands a deeper analysis of the precise extent of the Appellant's culpability, if indeed he is culpable from our findings, and the relationship of that analysis to the full range of the Respondents' powers under section 152 of the Customs and Excise Management Act 1979.

Was the Respondents' Review decision Reasonable?
We have found that the Appellant was importing excise goods for his own use; however, his son who was travelling with him was importing tobacco for a commercial purpose. This finding is materially different from Mr Morgan's findings which may have an impact on the Respondents' decision not to offer restoration of goods and in particular the motor vehicle. We, therefore, conclude that the Review Officer's decision of 5 August 2004 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994.

Our Decision
In view of our finding that the Respondents' decision of 5 August 2004 was unreasonably arrived at, we allow the Appeal. No order for costs is made because the Appellant submitted no application despite being invited to do so.

Orders
We make the following orders pursuant to our decision to allow the Appeal and in accordance with section 16(4) of the Finance Act 1994:

a. The decision not to restore the Appellant's excise goods and motor vehicle shall cease to have effect from the date of release of this decision.

b. The Commissioners shall conduct a further review of the decision not to restore the excise goods and motor vehicle and serve the same on both the Appellant and the Tribunal within 30 days of release of this Decision.

c. An Officer not previously involved with the case shall conduct the further review.

d. The further review shall be on the basis of the Tribunal's findings of fact as set out in paragraphs 26 to 32 of this decision and shall consider whether restoration should be made in the form of compensation and if so shall specify the amount of compensation and the basis of the calculation.

e. The Review Officer shall take account of any further material or representations made by the Appellant within 14 days from release of this decision. The representations shall be made to HM Customs and Excise, Review Team, Detection South Region, Crownhill Court, Tailyour Road, Crownhill, Plymouth, PL6 5 BZ.

The Appellant will have a further right of appeal to the Tribunal if dissatisfied with the outcome of the further review.

MICHAEL TILDESLEY

CHAIRMAN
Release Date: 22 February 2005

MAN/04/8098