United Kingdom VAT & Duties Tribunals (Excise) Decisions

Smith v Revenue & Customs [2005] UKVAT(Excise) E00896 (12 July 2005)

E00896

EXCISE – Restoration – Application by Customs to dismiss appeal as abuse of process – Deemed forfeiture of 5000 cigarettes – Appellant claiming cigarettes for own use – Notice 12A (October 2002) – Appellant sent Letters A and B both appealing against seizure and requesting restoration – Customs' letter stating restoration could not be considered until condemnation determined – Appeal against seizure withdrawn – Application under Rule 6 that restoration appeal asserting own use could not be entertained – Whether Tribunal has power to dismiss appeal on such application – Held that no power – Finding that not abuse of process because Appellant misled – Finance Act 1994 s.16 – Trib Rules 1986 r.6(1), 18(1) – Customs application dismissed

LONDON TRIBUNAL CENTRE

DEBORAH SMITH Appellant

and –

HM REVENUE AND CUSTOMS Respondents Tribunal: THEODORE WALLACE (Chairman)

Sitting in public in London on 1 July 2005

Malcolm Guy for the Appellant

Daren Timson-Hunt, of the Solicitor's Office, for the Respondents

© CROWN COPYRIGHT 2005
DECISION
1. This was an application by Customs for the appeal against a decision confirming the refusal to restore 5,000 cigarettes seized from the Appellant at Plymouth Ferryport to be dismissed as an abuse of process.
2. The application is made under Rule 6 of the VAT Tribunals Rules 1986 on the grounds that "the Appellant is challenging the legality of the seizure which the Tribunal has no jurisdiction to hear where the challenge was proper to condemnation proceedings, and such proceedings were issued."
3. The application raises two main issues: whether the Tribunal has power to dismiss an appeal as an abuse of process without a hearing on the merits and whether it has been shown that this particular appeal constitutes an abuse of process.

The relevant facts

4. The Appellant was stopped on 21 September 2004 after disembarking from a ferry from Spain. She was interviewed and told Customs that 3,000 Royals were for herself and that 1,200 Lambert and Butler Menthol and 800 Gold Coast were a birthday present for her grandmother. Customs did not accept her explanation and seized the cigarettes under section 139 of the Customs and Excise Management Act 1979 ("CEMA") as liable to forfeiture.
5. The Appellant was issued with a copy of Notice 12A (October 2002).
6. Paragraph 1.2 stated that the Appellant could challenge the seizure or ask for restoration and included the following:

"Your case will be dealt with faster if it is clear what you are asking us to do. To ensure that we are clear about what you want you may wish to use the letters at the back of this Notice. Use LETTER A if you are appealing against the seizure. Use LETTER B if you are asking for the return (restoration) of the vehicle/goods. If you want to appeal the seizure and ask for the return of the vehicle/goods then use both LETTERS A and B."

Paragraph 2.13 stated that the whole condemnation process could take a number of months. Paragraph 2.16 stated that if the court found in favour of Customs it would order forfeiture of the goods and may order costs "likely to be at least a couple of hundred pounds." Paragraph 2.18 read as follows:

"2.18 What if I want the vehicle/goods back quickly, I don't want to wait until the condemnation proceedings are finished?

While the condemnation process is on-going you can in the meantime ask us to consider returning the seized items – see Section 3."

7. The Appellant sent both Letters A and B with a covering letter dated 28 September repeating that the goods were for her own use and a gift for her grandmother.
8. On 1 October a member of Customs' Post Seizure replied as follows:

"Thank you for your recent letter, which the Commissioners of Customs and Excise accept as notice of claim against forfeiture of the items specified in your letter.

Under Schedule 3 to the Customs and Excise Management Act 1979, the Commissioners are required to institute proceedings for the condemnation of the seized goods. These proceedings will be instituted in the Magistrates' Court having jurisdiction for the area in which the seizure took place, who will decide whether the goods were liable to be seized and also decide on the awarding of costs.

If you wish to contest the seizure as being unlawful, then you need take no further action. We will institute condemnation proceedings in the appropriate Court, and you will be sent a summons telling you where and when the first hearing will take place in due course.

If you do not wish to contest the seizure of goods, then you must notify us in writing immediately, so that proceedings are not started unnecessarily.

Please note that restoration cannot be considered until the condemnation proceedings have been heard in court or withdrawn.

If you require any further details, please contact this office."

The Appellant replied on 3 October 2004,

"I am writing to let you know that I wish to withdraw my appeal, so you can consider returning my goods. If my request for the goods to be returned fails, I will then put in an appeal. I don't think your Leaflet Notice 12A is clear, if you look at page 4 it tells you to send letters A and B if you wish to appeal and ask for your goods back, it doesn't say you can do one or the other."

9. Customs replied on 6 October saying that all the facts would now be obtained from the detecting team and that they aimed to provide a decision by 1 November. The letter made no reference to Notice 12A.
10. On 22 October 2004 Customs wrote refusing restoration of the goods. By this date a fresh notice of claim was not possible because the time limit of one month under CEMA Sch 3, para 3 had expired. The letter stated that she was carrying mixed brands "which did not satisfy the officer that the goods were for personal use." I observe that this applied the burden of proof held to be incompatible with Community Law in R (Hoverspeed Ltd) v Customs and Excise Commissioners [2003] QB 1041. The letter stated that the Appellant could ask for a review. This she did. The Review dated 2 December confirmed the decision refusing restoration and informed the Appellant that she could appeal to the Tribunal.
11. The Appellant appealed in a notice served on 15 December against the review decision, giving as her grounds,

"Because of the outrageous allegation Customs are making. It's my understanding that it's for Customs to prove the outrageous allegation under the Human Rights Act."

12. A representative of the Solicitor's Office wrote to the Appellant on 21 January 2005 asking for particulars of the grounds of appeal including the following,

"3. Do you accept that you initially asked the Commissioners of Customs and Excise to commence condemnation proceedings by letter dated 28 September 2004, attached, but that by letter dated 3 October 2004, attached, you withdrew this request?

13. Given that you had an opportunity to seek condemnation proceedings, requested those proceedings and then withdrew, please state:

(a) is it your contention that you were prevented from pursuing condemnation proceedings?

(b) if so, how you were prevented from pursuing condemnation proceedings?

14. If your answer to 4(a) is 'No' then please state how you say you have grounds in law to challenge the seizure noting the Court of Appeal judgment in Gascoyne."

Earlier the writer had drawn attention to paragraphs 46 and 54-56 of Gascoyne v Customs and Excise Commissioners [2005] 2 WLR 222 which was enclosed.

15. The Appellant responded with a lengthy letter. She stated that her letter of 3 October 2004 was "not withdrawing my request for condemnation proceedings but postponing them." She wrote that Customs took so long to consider returning her goods that she did not have time to put an appeal in.
16. In the Statement of Case dated 9 March 2005 Customs contended at paragraph 23 "that it is an abuse of process for the Tribunal to entertain this appeal." At paragraph 26(b) it was pleaded that "Notice 12A is and was at all relevant times correct and that the Appellant had plenty of time within which to challenge the seizure."
17. On 29 March 2005 Mr Timson-Hunt who had settled the Statement of Case made the application now under consideration for the appeal to be dismissed as an abuse of process.

The legal provisions

18. Under section 16(1) of the Finance Act 1994 an appeal lies to the Tribunal with respect to any decision by the Commissioners on a review under section 15. Section 14 entitles a person affected by specified decisions to require a review in writing; the decisions include any decision under section 152(b) of the Customs and Excise Management Act ("CEMA") 1979 as to whether anything forfeited or seized is to be restored. Section 15 provides for a review.
19. Section 16(2) provides,

"An appeal under this section shall not be entertained unless the appellant is the person who required the review in question."

Under section 16(3) an appeal as to various duties shall not be entertained unless the relevant duty is paid or security is accepted or hardship is shown. That subsection has no application to a restoration appeal.

20. Rule 6(1) of the VAT Tribunals Rules 1986 provides,

"(1) Where the Commissioners contend that an appeal does not lie to, or cannot be entertained by, a tribunal they shall serve a notice to that effect at the appropriate tribunal centre containing the grounds for such contention and applying for the appeal to be struck out or dismissed, as the case may be, as soon as practicable by them after the receipt by them of the notice of appeal."

Rule 18(1) provides,

"(1) A tribunal shall –

(a) strike out an appeal where no appeal lies against the disputed decision; and

(b) dismiss an appeal where the appeal cannot be entertained by a tribunal.

(2) …

(3) Except in accordance with rule 17, no appeal shall be struck out or dismissed under this rule without a hearing."

Submissions

21. At the hearing Mr Timson-Hunt provided a skeleton argument of 13 pages which was provided to the Appellant on the afternoon of the hearing.
22. He contended that the appeal should be dismissed as an abuse of process on the basis that the Appellant requested the issue of condemnation proceedings in the Magistrates' Court and then "of her own volition" requested withdrawal from those proceedings. Since she had withdrawn them, it would be an abuse of process for the Tribunal to reopen the issue of legality of seizure following Gascoyne [2005] 2 WLR 222 at [55] and Johnstone v VAT Tribunal [2005] EWHC 115 (Admin).
23. Mr Timson-Hunt said that if the Appellant had not withdrawn the claim against forfeiture the matter would have been dealt with by the magistrates. He accepted that paragraph 5 of Customs' letter of 1 October (see paragraph 8 above) may have been inappropriate. He said that "cannot be considered" should have been "will not be considered." He said that Customs were entitled to defer giving a decision on restoration until after condemnation proceedings so as to save public resources.
24. He said that until goods are condemned title to goods does not change. At the time of seizure Customs treated restoration and seizure as separate; today they consider both at once. He said that currently there is a delay of 4-5 months in condemnation hearings, previously it had been greater.
25. Mr Timson-Hunt said that in spite of the wording of the letter of 1 October the Appellant should not be allowed to contend that the goods were for her own use and gifts. He said that she had not been deprived of the chance of condemnation proceedings and had not been induced to withdraw them. Paragraphs 3 and 4 of the letter of 1 October had made the position quite clear.
26. He said that under paragraph 55 of Gascoyne it is for the Tribunal to look at whether it is an abuse. If an Appellant was deprived of the chance to apply through illness that would be a ground to reopen the legality of the seizure. The question is whether the person has had an opportunity to pursue condemnation. If an appellant was told that he could not take condemnation proceedings or that he could do so later, that would almost be misfeasance. He submitted that the only issue is whether the Appellant was effectively deprived of a right.
27. Mr Timson-Hunt said that if the Tribunal reopens the question of legality of the seizure it is effectively extending the period under Schedule 3, paragraph 3 of CEMA 1979 for making a claim. In Gascoyne Buxton LJ had said that as a matter of domestic law the observations in Gora v Customs and Excise Commissioners [2004] QB 93 as to the effect of deemed forfeiture were correct; the reservations arose from the rights under Article 1 of the First Protocol to the European Convention on Human Rights.
28. He said that Human Rights case law does not allow for an extension of the time limit. This aspect had not been raised before the Court of Appeal in Gascoyne. He said that the test under the Convention is very strict, citing Welter v Sweden (1985) (11122/84)(unreported) and Carvenillos v Spain (1998) (116/1997/900/1112) (unreported), both of which were considered by Collins J in J and P M Dockeray v Secretary of State for the Environment, Food and Rural Affairs [2002] EWHC 420 (Admin). He said that Dockeray at paragraphs 17 and 18 confirms that even time limits which are relatively short (three days in Carvenillos and 14 days in Welter) can be properly imposed to prevent access to a court or tribunal.
29. Mr Timson-Hunt said that the words "cannot be entertained" in Rule 6(1) and Rule 18(1) have a broad meaning and cover an appeal which is an abuse of process because of the reasons put forward for the appeal notwithstanding that the appeal is against a decision as to restoration falling under section 16(1). He said that the purpose of such an application is to ensure the speedy and efficient conduct of appeals by the early dismissal of appeals with little merit, while ensuring that appeals with merit in the view of the Tribunal go forward to a full hearing.
30. Mr Guy said that Notice 12A had said that both Letter A and B could be sent and paragraph 2.18 covered the person wanting goods back quickly. The Appellant returned the letters in time once the address which had not been provided with the Seizure Information Notice (C 156) had been obtained. The Appellant had not intended by her letter of 3 October to withdraw fully. Customs letter of 6 October had not said that it would not be possible to appeal against forfeiture after the restoration decision.

Conclusions

31. This application raises issues of importance since it is one of a number of such applications which clearly reflect a policy decision by Customs following Gascoyne.
32. I consider first whether the Tribunal has power to grant the application for which Customs ask.
33. The Tribunal unlike the High Court is a statutory body with no inherent powers. It is established under section 82 of the VAT Act 1994 and Schedule 12; paragraph 9 of Schedule 12 provides for rules with regard to procedure. Under section 7(3) of the Finance Act 1994 references to an appeal tribunal in sections 9 to 19 are to a VAT and duties tribunal and section 7(5) refers to rules made under Schedule 12 of the VAT Act 1994.
34. The Tribunals Rules 1986, as amended from time to time, contain the rules of procedure made under Schedule 12, paragraph 9 and its predecessors.
35. The VAT Act 1994 s.84(2)(3) and (3A) provide that an appeal cannot be entertained in specified circumstances. Section 16(3) of the Finance Act 1994 contains similar but not identical provisions to those in section 84(3) and (3A) of the VAT Act. Section 16(2) of the Finance Act 1994 provides that an appeal shall not be entertained unless the appellant required the review. Sections 16(2) and (3) have the effect that if either subsection applies the Tribunal cannot entertain an appeal which would otherwise lie under section 16(1).
36. The word "entertained" is not defined in either Act. It is clear beyond argument that Rule 6(1) and 18(1) cover circumstances where by reason of section 16(2) or (3) of the Finance Act 1994 an appeal cannot be entertained.
37. The issue here is whether the words "cannot be entertained" in the Rules go beyond section 16(2) and (3) of the Finance Act 1994 and cover an application for an appeal to be dismissed as an abuse of process thus introducing a power or rather a requirement which is not in the enabling Act.
38. In my judgment this involves considering not only the words "cannot be entertained" but also the enabling provisions in paragraph 9 of Schedule 12.
39. Not one of the specific enabling provisions in paragraph 9 approaches a provision for free-standing dismissal of an appeal an abuse of process. I have no difficulty in interpreting the power in paragraph 9 to make rules as including by implication the incidental powers necessary for operation of the powers granted, see Attorney General v Great Eastern Railway Co (1880) 5 App Cas 473. The rules thus include power under Rule 19(4) to allow or dismiss an appeal by reason of failure to comply with a direction.
40. Paragraph 9(a) provides for provisions limiting the time within which appeals may be brought. It does not cover provisions for ensuring that a notice of appeal must contain reasons which are valid in law.
41. There are sound reasons for this. Difficult jurisdictional points arise not infrequently in tax appeals which may involve issues of fact as well as law. An example is when an Appellant says that he was misdirected : depending on the circumstances a statement by an officer may be a misdirection or an oral decision "allowing" or "permitting" a taxpayer to do or not to do something or the statement may turn out to have been correct. Often the facts are confused and disputed. A dispute as to whether the reasons for an appeal are valid is often in practice a preliminary point of law. Preliminary points of law are not to be encouraged since there is a real danger of adding to the time and cost of litigation.
42. The other reason is that Tribunals are intended to be less formal forums in which an unrepresented Appellant can get a fair hearing. In many cases the grounds of appeal are poorly expressed and when an appeal is heard a genuine issue arises. In the present case if the Appellant had expressed herself differently, Customs would have had no basis for the application.
43. The question here comes down to whether the introductory words of paragraph 9 providing for "rules with respect to the procedure to be followed" are wide enough to encompass an obligation to dismiss an appeal on the ground that it cannot be entertained because it is an abuse of process.
44. In Customs and Excise Commissioners v Hubbard Foundation Scotland [1981] STC 593 Lord Cameron said that the word "entertain" is not a term of art but should receive a construction as to the particular context and that it is a flexible word, I do not consider that the words "cannot be entertained" in Rule 6(1) and 18(1) can legitimately be interpreted as extending beyond the situations covered by the enabling Acts, those being the clear context.
45. I note also that, although Buxton LJ considered at paragraph 56 whether it would be an abuse of process for the Tribunal to reopen the issue of seizure, he made no suggestion that in such a case an appeal should be dismissed at the outset nor did he make any reference to the powers to the Tribunal.
46. It is important to remember that a deemed forfeiture will often not determine the reason for forfeiture. The reasons for seizure may or may not be given at the time and the factual basis of forfeiture is often unclear apart from the fact that dutiable goods were imported without payment of duty. Peter Smith J pointed out in Dickinson v Customs and Excise Commissioners [2003] V&DR 390 at [45] that "it would be very odd if every non-profit commercial case was capable of being received on the restoration proceedings except the one based entirely on his own use".
47. I conclude that the Tribunal has no power to grant the Application sought.
48. Whether or not I am correct in this conclusion the issue still arises as to whether reopening the issue would be an abuse of process so that the Appellant should be debarred from giving evidence on this issue. The powers under Rule 19(3) are clearly wide enough to enable a Tribunal to exclude irrelevant or inadmissible evidence, although the power to refuse evidence is subject to Rule 28(1).
49. In my judgment the question of whether reopening the deemed forfeiture would constitute an abuse necessarily involves consideration of the circumstances of the particular case and what passed between the parties.
50. The unsatisfactory mismatch between the statutory procedures for condemnation and restoration were expressly commented on by Carnwath and Brooke LLJ in Gascoyne. In Johnstone Moses J commented at paragraph 5 on the difficulty even for a lawyer fully to grasp the distinct statutory procedures. In Dickinson Peter Smith J said at [94] that the nature of the distinction between restoration and condemnation escaped the attention of Customs and the Tribunals for many years, see also Gascoyne at [77].
51. It is important to note that the power in section 152(b) of CEMA is to restore anything "forfeited or seized", the underlining is mine. Under section 14(4) of the Finance Act 1994 it is the duty of Customs to give written notification to any person in relation to whom such a decision is made who requests a decision.
52. In my judgment paragraph 5 of Customs letter of 1 October 2004 was wrong in law. At one stage Mr Timson-Hunt appeared to suggest that until title passed on condemnation Customs had no title to enable them to restore the goods. It seems to me that such a position would be absurd. It would mean that whatever facts come to light Customs would have to pursue condemnation to a hearing before considering restoration. Such a position would clearly be incompatible with the Convention and with Community Law. Furthermore it would render the words "or seizure" in section 152(b) otiose. Delivery up under Schedule 3, paragraph 16 is a different concept normally involving a payment on the footing that the goods are liable to forfeiture.
53. Nor do I accept that Customs are entitled to defer giving a decision as to restoration until condemnation proceedings which will take 4-5 months even now and sometimes much longer.
54. The position here therefore is that the Appellant withdrew the claim against forfeiture on the basis of a letter from Customs which misstated the law.
55. I do not accept Mr Timson-Hunt's submission that the previous paragraphs made the position clear. The fact is that the position adopted by Customs is clearly contrary to that in Notice 12A which they gave to the Appellant on 21 September. When the Appellant referred in her letter of 3 October to Notice 12A, her observations were ignored. If Customs had replied on 6 October that the Appellant would not be able to revive her claim against forfeiture if restoration was refused and that restoration would only be considered on the basis that the goods were being imported for a commercial purpose, it is highly likely that the Appellant would have renewed her claim against forfeiture. By the time of the Review decision however it was too late for her to do this.
56. I do not accept the submission that reopening the legality of forfeiture is effectively to extend time for a claim under Schedule 3, paragraph 3 of CEMA. Nor do I consider that the time limit cases cited have any relevance to this case.
57. Mr Timson-Hunt provided no authority for the proposition that the Appellant should not be allowed to reopen the issue before the Tribunal unless she was deprived of the chance to claim against forfeiture.
58. In my judgment when she withdrew her claim against forfeiture the Appellant was misled by Customs on a matter which is confusing at the best of times. On the facts of this case I conclude that it is not an abuse of process for the Appellant to reopen the issue of legality.
59. If I had concluded that the Tribunal does have power to dismiss an appeal at the outset as an abuse of process, and I had not concluded that the Appellant was misled by the letter of 1 October 2004 and Notice 12A, it would still have been necessary to consider exactly on what facts the deemed forfeiture was based. This might well have required oral evidence. Given my earlier conclusions, this is not necessary.
60. On the footing that the Tribunal does not have power to dismiss an appeal as an abuse of process, the correct time to consider whether evidence should be excluded on grounds of irrelevance, because the issue to which it is directed is concluded by a deemed forfeiture, is at the hearing of the appeal itself. Sometimes it is immediately clear that evidence is inadmissible. More often, particularly with an unrepresented Appellant, it will be appropriate to hear what he wishes to say before deciding whether it is admissible or relevant.
61. The application is dismissed.
THEODORE WALLACE CHAIRMAN RELEASED:12 July 2005

LON/04/8102