United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2005] UKVAT(Excise) E888, [2005] UKVAT(Excise) E00888

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Butters v Revenue and Customs [2005] UKVAT(Excise) E00888 (06 June 2005)

E00888

EXCISE DUTIES — Seizure of excise goods at Hull ferry port — no condemnation proceedings and goods deemed to be forfeit — whether issue of importation of goods for own use can be raised by Appellant before tribunal — yes — whether decision on review to refuse restoration reasonable — no — case remitted by tribunal for further review — appeal allowed

MANCHESTER TRIBUNAL CENTRE

THOMAS ALFRED BUTTERS Appellant

- and -

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Johnson (Chairman)

Gilian Pratt

Sitting in public in York on 22 November 2004, 31 March and 14 April 2005

The Appellant appeared in person

Xanthia Craddock, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

DECISION

The issue in this appeal is whether, upon their review of a decision not to offer restoration to the Appellant of certain excise goods seized by them, namely cigarettes, hand-rolling tobacco, beer and wine ("the goods"), the Commissioners of Customs and Excise ("Customs") refused to offer restoration of the goods in such circumstances that they could not reasonably have arrived at their decision. The jurisdiction that we are exercising is that circumscribed by section 16(4) of the Finance Act 1994.

The goods consisted of the following:

7,500 g of Samson hand-rolling tobacco;

1,200 Benson and Hedges cigarettes;

3 boxes of 24 Nordik Pils beer of 25 cl;

2 boxes of 24 1664 beer of 25 cl;

2 half cases of 6 Egbenes wine of 1 l;

1 half case of 6 Cians wine of 75cl;

1 half case of 6 J P Chenet Cabernet wine of 75cl;

1 half case of 6 J P Chenet Rosé wine of 75 cl;

1 half case of 6 J P Chenet Merlot wine of 75 cl.

The background to the appeal is that on 18 December 2003 the Appellant Mr Butters, who was travelling with his son Paul, was stopped by an officer of Customs in Hull ferry terminal on returning to the UK from Zeebrugge, Belgium. The travellers were found to be in possession of the goods. Suspecting that the goods might be held for a commercial purpose, and so be subject to excise duty in the UK, Officers Gill and Elliott of Customs conducted interviews with the travellers.

Officer Gill, who interviewed the Appellant, was not satisfied with what he was told by the Appellant, reported the facts of the interview to his superior Officer Byrne of Customs, and the goods were seized. Officer Elliott, who interviewed Mr Paul Butters, found no grounds for seizure of certain other excise goods in the possession of the travellers, and those goods were not seized.

The appeal has been made on the grounds that the goods were brought into the UK for the personal consumption of the travellers and as Christmas presents for their family.

The Appellant informed us that following the seizure he initially telephoned a solicitor for advice on his position, but the solicitor was unhelpful, commenting that had he assaulted one of the Customs officers, matters might have been different. So the Appellant turned to his Member of Parliament, Ms Yvette Cooper. By letter dated 23 December 2003, she wrote to Customs on his behalf for background information as to the seizure. In that letter, Ms Cooper mentioned what we find to have been an important concern of the Appellant throughout, which is that, having been found guilty of a Customs offence a number of years previously, he was concerned that he might have been unfairly penalized in having his goods seized on this occasion.

Customs replied to Ms Cooper in a letter dated 11 February 2004 written by Mrs Mairi Russell, Customer Services Manager of Customs in Edinburgh. Mrs Russell enclosed a copy of a letter from Customs to Mr Butters, which we find also to have been dated 11 February 2004, and to be the letter a copy of which is at page 38 of the bundle of relevant documents provided to the tribunal by Customs. That letter was written by Officer Byrne and was also sent from the Edinburgh office of Customs. Copies of the letters from Ms Cooper and Mrs Russell referred to above are not in the bundle, but were handed to us separately.

The two letters dated 11 February 2004 appear to assume that the Appellant had requested restoration of the goods. We have not however been provided with a copy of any letter in which he did this.

The letter of 11 February 2004 from Officer Byrne to the Appellant begins by thanking the Appellant for "your letter dated 31 August 2003". If there was a letter of that date, it appears that it cannot have been relevant to the seizure or restoration of the goods, as the goods were not seized until 18 December 2003.

Officer Byrne's letter continues, "You have requested the return of the above excise goods". It is not clear to us on what basis precisely the Appellant may have done that. In particular, we are unclear whether the Appellant gave notice to Customs impliedly, if not expressly, requiring the issue of condemnation proceedings pursuant to Schedule 3 of the Customs and Excise Management Act 1979 ("schedule 3"). It appears that no such proceedings were ever instituted in this instance. That is relevant to our jurisdiction and is a matter to which we return below.

In his letter, Officer Byrne gave reasons, based on what the Appellant had told Officer Gill in interview, why the goods would not be offered for restoration. Officer Byrne stated that no exceptional circumstances were apparent justifying a departure from Customs' general policy that seized goods were not to be restored. He concluded his letter as follows:

"In addition to this letter you will also be hearing from the Appeals Unit direct in relation to any appeal against seizure you may have lodged. All further correspondence should be sent to them at the above address in Liverpool".

It therefore seems that Officer Byrne may have thought that the Appellant had indeed required proceedings to be issued under schedule 3.

On 19 March 2004 the Appellant replied to Customs at their Edinburgh office. The letter, which is copied at two places in the tribunal bundle, dealt in what we find to be quite a full way with the reasons for refusing restoration contained in Officer Byrne's letter. The Appellant ended his letter:

"Should my right to restoration be rejected by an independent review I would like further information off yourselves on further action that can be taken (ie self-funded civil courts action, European Court's action).

"I look forward to hearing from you in response to my request for my seized goods' restoration".

It seems to us that, in essence, the Appellant's letter of 19 March 2004 was written for two distinct purposes, viz

To join issue with the reasons relied upon by Officer Byrne for refusing restoration; and

To request information as to other avenues of appeal that the Appellant might pursue.

As we construe his letter, the Appellant would, as at 19 March 2004, have wished for proceedings to be pursued challenging the legitimacy of the seizure, had these been in time under schedule 3.

Customs treated the Appellant's letter as a request for a review of Officer Byrne's decision under section 14 of the Finance Act 1994. The review was conducted by Officer McNeight of Customs. The outcome of the review was contained in a letter dated 29 April 2004 sent to the Appellant by Mr McNeight.

The review resulted adversely to the Appellant. In the review letter Mr McNeight, after setting out the background to the seizure of the goods, summarizing the Appellant's interview with Officer Gill, and referring to the relevant legislation, said that it was his department's general policy that seized excise goods were not restored, but that each case was examined on its merits to determine whether or not restoration might be exceptionally offered.

Mr McNeight then indicated – we paraphrase slightly – that he would examine the case afresh, having regard to the Appellant's representations, and consider Officer Byrne's decision to see whether exceptional or mitigating circumstances existed that should be taken into account in varying or withdrawing the decision. He said that he would look " … to see if you have presented a case for not applying [Customs'] policy of non-restoration".

Mr McNeight continued:

"You have raised a number of points in your letters [sic] of appeal all of which refer to the grounds for seizure, this relates to the legality of the seizure. These points are not applicable to a review of a decision on restoration. You did not appeal the legality of the seizure [our emphasis in italics] and the goods are thus condemned as forfeit to the Crown by the passage of time".

He concluded that there were no exceptional circumstances in the Appellant's case warranting a deviation from the current policy of non-restoration. So Mr McNeight upheld the decision not to offer restoration. It is against that decision that the Appellant now appeals.

Officer Gill gave evidence to the tribunal. He told us that on 18 December 2003 he was acting under the direction of Officer Byrne as part of Customs' Regional Strike Force, which was operating in Hull at the time. From his interview with the Appellant, he had doubts as to the means whereby the Appellant had financed the goods.

The Appellant had, as we find, been retired for a number of years. However we for our part are satisfied that the Appellant had a current visa account with Yorkshire Bank enabling him to make the expenditure.

Officer Gill also thought it to be suspicious that the Appellant had a record of previous offending with Customs, declared himself to be a smoker but did not light a cigarette when asked, and was alert as to his rights.

In our view, the above matters came nowhere near to amounting to evidence that this importation might be for commercial purposes.

The reviewing officer Mr McNeight also gave evidence to the tribunal. He told the tribunal that he did not regard it as any part of his function to consider whether the goods might have been brought into the UK for the travellers' own use, because that matter went purely to the legitimacy of the seizure and was not germane to the separate matter of restoration of the goods. Mr McNeight said that, at the time he conducted his review, he would have been aware that Mr Paul Butters had not had any goods seized; however Mr McNeight regarded that as irrelevant and no more than part of the evidential background.

Appearing for H M Revenue and Customs, as they now are, Miss Craddock submitted that Mr McNeight had been correct not to regard the issue of whether the importation of the goods was for the travellers' own use as one for him to consider. She accepted that the case of Gascoyne v H M Customs and Excise [2004] EWCA Civ 1162 ("the Gascoyne case") contemplated circumstances in which an appellant to these tribunals might not be denied the opportunity of putting forward that argument, but she drew our attention to Buxton LJ's judgment at [56], where the learned Lord Justice stated: "The mere fact that the applicant has not applied to the Commissioners [under schedule 3], and therefore there have been no condemnation proceedings, would not, in my view, be enough".

Miss Craddock submitted that there was nothing in the present case to explain why the Appellant should not have proceeded under schedule 3, so that it must be assumed that the tribunal has no jurisdiction to allow the Appellant to take the "own use" point, which went solely to the question of the legitimacy of the seizure.

Miss Craddock further submitted that the approach of Mr McNeight to his task, under which he looked for exceptional circumstances to justify a departure from Customs' general policy of not offering restoration of seized goods, was correct. She submitted that it did not matter that it might be difficult or impossible to identify exceptional circumstances which might displace the operation of the policy in any case, that being merely a feature of the legislation as it had been drafted.

We think that it is a remarkable feature of this case that Mr Paul Butters was not found to be importing excise goods for commercial purposes but that the Appellant was so found. Quite how Customs satisfied themselves which traveller was importing which excise goods is not clear.

We also think that the goods in issue in this appeal were ones which should have been treated as having in all probability been imported in part for Christmas celebratory purposes and in part for personal consumption. There does not appear to have been a shred of evidence that payment would be received for any of the goods. On the contrary, there appears to have been a degree of wishful thinking based upon the previous record of the Appellant.

So far as the review letter is concerned, we find this to be unsatisfactory.

In the first place, no consideration at all was given to the circumstance that one traveller was allowed to pass whereas the other had his goods seized. That is relevant to the matter of restoration because the two travellers had presumably been abroad for a common purpose. It cannot be right for a reviewing officer to consider only the interview of the traveller who seeks restoration, when this falls to be cross-referenced with the interview given by his travelling companion. Moreover, we find that there was doubt as to which traveller was importing which goods, which is not a matter that Mr McNeight considered.

Secondly, the reviewing officer has approached his task on the basis that a challenge to the legitimacy of the seizure is beyond the scope of the review. But it is clear that that would not be so if the traveller were thereby denied his "day in court" – see the Gascoyne case at [54] – [56]. Miss Craddock argued strongly that the tribunal has no jurisdiction to decide the issue whether the goods were imported for the travellers' own use if the travellers might have required the issue of condemnation proceedings and failed to do so. But we think that the reviewing officer, had his decision been made after the Court of Appeal declared the law in the Gascoyne case, would have been bound to consider the basis on which no proceedings under schedule 3 had apparently come about.

From our examination of the correspondence that we refer to above, we think that Customs must have assumed that the Appellant had elected to proceed by way of seeking restoration of the goods. But, having listened to the Appellant in tribunal, we do not think that he appreciated that any choice on his part was involved. We find that he simply did not know – because no-one told him – that the option of requiring proceedings under schedule 3 was open.

Yet we find that the Appellant acted swiftly in asking Ms Cooper to investigate the background to his case on his behalf. This contrasts with the slowness of Customs, who took until 11 February 2004 to reply to Ms Cooper and write to the Appellant. The significance of this is that, between Ms Cooper's letter and Customs' reply, the one month period for requiring the institution of condemnation proceedings under schedule 3 had elapsed.

The final sentences of the Appellant's letter to Customs dated 19 March 2004 are, as we construe them, in effect asking for an opportunity to put forward, before a court or tribunal, the argument that the importation of the goods was for the travellers' own use. Mr McNeight however ignored that request in his review decision. His attitude was forthright. In effect it was – "You have not made the right moves for the issue of the legality of the seizure to be determined, so you are out of court as regards that argument. I need not consider it in my review".

Anything more unjust to the Appellant in the circumstances of this case it would be difficult to imagine. Having delayed in responding to Ms Cooper's enquiry until after the point at which it would be too late to require proceedings to be instituted under schedule 3, that is to say until February 2004, Customs then ignored the Appellant's request in March 2004 for information as to how he might put forward his case in other proceedings, whilst at the same time ruling in April 2004 that he could not do so upon the review. Fortunately, in July 2004, the Court of Appeal decided in the Gascoyne case that this tribunal does not have to deny him the benefit of his main argument that the importation was for own use.

The third and final respect in which we judge the review letter to be unsatisfactory is that it proceeds on the basis that unless Customs are persuaded that there are what are described as "exceptional circumstances" warranting a deviation from their general policy not to offer restoration of seized excise goods, restoration should be refused in every case. At the hearing before us, it emerged that, in cases of the non-restoration of excise goods, it can scarcely be conceived what those "exceptional circumstances" might be, and in practice, according to what Mr McNeight told us, no-one to his recollection has ever put forward a case in relation to goods brought into the UK from elsewhere within the EU in which such circumstances have been identified by him and have resulted in a decision to restore.

If this is correct – and for the purposes of this appeal we accept it to be correct – then the typical review letter of this kind appears to be largely a matter of form, being devoid of substance. The whole process of requiring a review of the original decision, and mounting an appeal to the tribunal when the review inevitably results adversely to the Appellant, is likewise devoid of substance. In short, we are purporting to exercise a jurisdiction which is pointless.

Naturally, we do not accept that our jurisdiction is pointless. It follows, we think, that a review letter that proceeds on the premise that there are in practical terms no circumstances in which the review might result favourably to the traveller is a fatally flawed review letter.

In summary we therefore decide that the review letter in this case contains a decision that could not reasonably have been arrived at for the following three reasons:

1) The decision failed to take into account all the relevant circumstances of the importation, in particular so far as they pertained to Mr Paul Butters as well as the Appellant, suggesting that the travellers were not holding the goods for a commercial purpose;

2) The decision failed to take into account that, in law, the Appellant should be allowed within the jurisdiction under the Finance Act 1994 to argue that the importation was for own use, in a case like this where the Appellant was seeking a forum to put that argument forward, and had evidently not elected that he would not pursue the issue of legality of seizure; and

3) The decision failed to allow that, save in exceptional circumstances which do not in practice exist, there should be any departure from Customs' policy not to offer non-restoration.

We therefore allow this appeal. Pursuant to section 16(4)(b) of the Finance Act 1994 we require Customs to conduct a further review of the original decision not to offer restoration of the goods, in accordance with the following directions:

The further review is to be conducted by a reviewing officer of Customs who has not hitherto been involved with the Appellant or his son Mr Paul Butters, either in relation to the facts of this case or those of any previous case in which either of them may have been involved with Customs, whether or not involving a Customs offence;

The further review is to be conducted within six weeks of the date of issue of this tribunal decision and a copy of the further review decision is thereupon to be lodged at the Manchester Tribunal Centre under the appeal reference shown at the foot of this tribunal decision, as well as being served on the Appellant;

The further review is to be conducted on the basis that this tribunal has found as a fact that the goods were in all probability being imported in part for Christmas celebratory purposes and in part for personal consumption and that there is no evidence that payment was to be received for any of the goods;

The further review is to be conducted on the basis that the Gascoyne case requires that the reviewing officer should have regard to the circumstances in which the traveller did not require proceedings under schedule 3 where, as the tribunal has found in this case, the traveller did not exercise a choice not to pursue the issue of the legality of the seizure of the goods, and further on the basis that such travellers are legally entitled to rely upon the "own use" argument in the exercise of the jurisdiction under the Finance Act 1994;

The further review is to be conducted on the basis that the premise of the review decision under appeal, namely that only in exceptional circumstances will a deviation from Customs' policy not to offer restoration of seized excise goods be warranted, is false;

If nevertheless the further review results adversely to the Appellant, then the Appellant may require the present proceedings to be relisted for consideration of the further review decision by the tribunal, without the need to issue further appeal proceedings, in which case the further hearing is to be reserved if possible to the present tribunal of Michael Johnson and Gilian Pratt.

MICHAEL JOHNSON

CHAIRMAN
Release Date: 6 June 2005

MAN/04/8069