United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2005] UKVAT(Excise) E00943, [2005] UKVAT(Excise) E943

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Cummins & Anor v Revenue and Customs [2005] UKVAT(Excise) E00943 (19 December 2005)

EO00943

EXCISE DUTY – Restoration – Excise goods and vehicle – Two Appellants (father and son) and one other person imported 24 Kg of hand-rolling tobacco, 3,200 cigarettes and other excise goods – Seizure of excise goods and vehicle on grounds of quantity of goods and disbelief by Customs Officers of the travellers' "own use" explanations – Restoration of goods refused – Restoration of vehicle offered by way of a compensatory payment following disposal of the vehicle, subject to a restoration fee equal to the duty on all the excise goods imported – Whether "own use" issue could be ventilated at the Tribunal at the appeal against the refusal to restore – Gascoyne v CCE [2004] EWCA Civ 1162 considered – held in the circumstances ventilation of the "own use" issue would involve an abuse of process – found on the facts that the refusals to restore the excise goods and the decision to offer restoration of the vehicle subject to the restoration fee stipulated were proportionate and reasonable – John Elton Rainbow v CCE LON/2002/8151 considered – appeals dismissed

LONDON TRIBUNAL CENTRE

LEON PATRICK CUMMINS Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

STEFAN CUMMINS Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: JOHN WALTERS QC (Chairman)

MRS SHAHWAR SADEQUE

Sitting in public in London on 21 November 2005

The Appellants did not appear and were not represented

Kieron Beal, instructed by the Solicitor for H.M. Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

The appeals

The two appeals of Leon Patrick Cummins and his son Stefan Cummins (respectively LON/2003/8071 and LON/2003/8070) were heard together. They relate to the same circumstances in which the Respondent Commissioners (hereinafter "Customs") refused restoration of excise goods and a vehicle seized at Dover on 23 June 2001. Leon Cummins and Stefan Cummins apparently both live at the same address in Lincoln.

Neither appellant was present or represented at the hearing and the Tribunal proceeded to consider both appeals in the absence of the respective appellants, under rule 26(2) of the VAT Tribunals Rules 1986.

Leon Cummins appeals against a decision on review of Customs' original decision not to restore a quantity of excise goods and a car, registration number L638 BNX, which were seized at Dover on 23 June 2001. The review decision, which is the subject of the appeal, is contained in a letter dated 3 January 2003 sent to Leon Cummins by Review Officer I. F. McEntee, who gave evidence to the Tribunal.

Officer McEntee's decision was to allow restoration of the car on payment of a fee. As the vehicle had already been disposed of, Officer McEntee said that Customs would make a compensatory payment to Leon Cummins "based on the value of your vehicle. A deduction based on the excise duty due on the seized goods may be made when calculating the amount Customs propose to offer."

(We interpolate at this point that it is now established (see this Tribunal's decision in William Leonard Powell v HM Revenue and Customs Chairman: Theodore Wallace, E00900, release date: 18 August 2005, which is accepted as correct by Customs) that Customs have power to make a compensatory payment when restoration in specie is physically impossible, and that this Tribunal's jurisdiction extends to entertaining an appeal against a decision to offer restoration in the form of a compensatory payment and to considering the reasonableness of the decision to offer a compensatory payment and the reasonableness of the payment offered.)

Officer McEntee's decision was a second review of Customs' original decision not to restore the excise goods and the car. The first review was conducted by Review Officer K. Philpott, and was contained in a letter dated 26 October 2001 sent to Wilkin Chapman Epton Blades, Solicitors, then acting for Leon Cummins. Officer Philpott's decision had been to confirm Customs' original decision not to restore the vehicle and excise goods.

The second review was undertaken by Officer McEntee following a direction from this Tribunal that a further review should be carried out by Customs in the light of the decision of the Court of Appeal in R (Hoverspeed Ltd) v Customs and Excise Commissioners [2002] EWCA Civ 1804.

Stefan Cummins, who was a passenger in the car, registration number L638 BNX, when it was seized at Dover on 23 June 2001, appeals against a decision of Officer McEntee contained in a letter addressed to him, dated 3 January 2003, not to restore his excise goods. Officer McEntee's review in Stefan Cummins's case was also a second review of Customs' original decision (taken by Officer Clark and communicated to Stefan Cummins by him in a letter dated 18 July 2001) not to offer the goods for restoration. The first review in Stefan Cummins's case was also by Officer Philpott (her letter to Wilkin Chapman Epton Blades, Solicitors, then acting also for Stefan Cummins, dated 26 October 2001). Officer Philpott had confirmed Officer Clark's decision not to offer restoration of the excise goods. Again, Officer McEntee's re-review had taken place following a direction from the Tribunal for a re-review in the light of the Hoverspeed decision.

The facts

We find from the evidence before us the following relevant facts. (We also make certain further findings of fact in the paragraphs below under the heading "The issues and the Tribunal's decision".)

Leon Cummins, Stefan Cummins and a Mr. David O'Neill (a cousin of Leon Cummins) went to Calais on a very early morning sailing from Dover on 23 June 2001. They travelled from Lincoln in Leon Cummins's vehicle, a Rover 218, registration number L638 BNX.

They returned from Calais to Dover on a sailing at around midday and they were stopped by Customs officers on arrival at Eastern Docks, Dover. Excise goods as follows were discovered in the car: 24 Kilograms of hand-rolling tobacco, 3,200 cigarettes, 114.42 litres of beer, 1.2 litres of spirits and 50 cigarillos.

The three passengers agreed to be interviewed and were interviewed separately by Customs officers. The excise goods and the car were seized. The reasons given for the seizure were:

(1) that the excise goods carried were in excess of the minimum indicative levels;

(2) that Leon Cummins had given an inconsistent account of his previous trips abroad, both internally with his own version of events and also when contrasted with the account given by Mr. O'Neill, who had given details of a trip to France the previous Saturday;

(3) that Leon Cummins had undertaken three trips to France in the course of the previous month; and

(4) that, in relation to Stefan Cummins's goods, the level of expenditure claimed to have been incurred by him contrasted strongly with his income.

On 4 July 2001 Langleys, Solicitors, of Lincoln, wrote to Customs' Post Seizure Unit at Dover, on behalf of Leon Cummins, asking for his seized excise goods to be restored to him. They stated that the amounts purchased (referring to 160 pouches of tobacco, 1,200 cigarettes and 11 cases of lager) were not excessive and were for Leon Cummins' own personal use. (160 pouches of tobacco represents 8 kilograms.) In a separate letter of the same date Langleys on behalf of Leon Cummins asked for the restoration of the vehicle stating that he "does not seek to appeal against the seizure, however should his application for restoration be unsuccessful we [Langleys] reserve our right to appeal at that stage".

By an undated letter sent at about the same time (early July 2001), Stefan Cummins wrote to Customs' Post Seizure Unit asking for the return of the excise goods which he stated belonged to him: 160 pouches of tobacco and 1,000 cigarettes. He stated that these goods were not excessive and were for his own personal use.

Customs' Officer C. Clark wrote on 12 July 2001 stating that he "recommend[ed] that the vehicle, on this occasion, is not offered for restoration". Officer Clark wrote on 18 July 2001 to Stefan Cummins to the same effect regarding his seized excise goods, and on 25 July 2001 Officer Clark wrote to Langleys to the same effect regarding Leon Cummins's seized excise goods. He decided that there were no exceptional circumstances to justify departure from Customs' policy of deterring fraud and excise duty evasion through non-restoration of vehicles and excise goods.

On 20 July 2001, Leon Cummins wrote to Customs appealing against the decision to refuse restoration of his vehicle and his excise goods. On the same day Stefan Cummins wrote to Customs appealing against the decision not to return his goods.

These requests, followed up by a letter from Wilkin Chapman Epton Blades, Solicitors, then representing Leon Cummins and Stefan Cummins (and David O'Neill), were treated by Customs as a requirement to conduct a statutory review of the decisions not to restore the goods and the vehicle, under section 14 and schedule 5, Finance Act 1994. These reviews were conducted by Officer K. Philpott, who concluded (as stated above) in letters dated 26 October 2001, that the excise goods and the vehicle should not be restored, confirming Officer Clark's decisions.

It appears that Leon Cummins and Stefan Cummins appealed against Officer K. Philpott's decisions to this Tribunal and that on the application of Customs a re-review was directed in both cases following the Court of Appeal's decision in Hoverspeed.

The re-review was conducted by Officer McEntee, who concluded that the decision not to restore the seized excise goods should be confirmed, specifically because he was satisfied from the answers given by Leon Cummins, Stefan Cummins and David O'Neill at interview that it was extremely unlikely that the tobacco purchased was intended for the travellers' own use.

Officer McEntee also concluded, giving Leon Cummins in terms "the benefit of the doubt", that the goods were intended to be disposed of to others on a "not for profit" basis. This conclusion led him to apply Customs' policy on "not for profit" importations of offering restoration of the car on the payment of a fee. He noted that the car had in fact already been disposed of. In these circumstances he advised Leon Cummins that Customs would make a compensatory payment to him based on the value of the vehicle and that "a deduction based on the excise duty due on the seized goods may be made when calculating the amount Customs propose to offer". He invited Leon Cummins to forward any documentary evidence he might have as to the vehicle's value to the Post Seizure Unit.

The issues and the Tribunal's decision

Both Leon Cummins and Stefan Cummins assert that the excise goods imported by each of them respectively was for his own use. In Stefan Cummins's case, this is the only issue. Mr. Beal, who appeared for Customs, in argument submitted that the first issue for the Tribunal's decision was whether or not we should consider the issue of "own use" and make findings. He submitted that we should not, on the basis that to do so would be an abuse of process. He relied on the Court of Appeal's decision in Gascoyne v Customs and Excise Commissioners [2004] EWCA Civ 1162.

The excise goods in this case were forfeited pursuant to section 49(1) Customs and Excise Management Act 1979 ("CEMA"), and the car was forfeited pursuant to section 141 CEMA, Customs taking the view that the excise goods were chargeable on their importation with excise duty (that is that they were not for the passengers' "own use"). The provisions for forfeiture are supplemented by Schedule 3 CEMA which provides relevantly as follows:

"1(1) The commissioners shall … give notice of the seizure of any thing as liable to forfeiture and of the grounds therefore to any person who to their knowledge was at the time of the seizure the owner or one of the owners thereof."

"3. Any person claiming that any thing seized as liable to forfeiture is not so liable shall, within one month of the date of the notice of seizure or, where no such notice has been served on him, within one month of the date of the seizure, give notice of his claim in writing to the commissioners at any office of customs and excise."

"5. If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of any thing no such notice having been given to the commissioners, or if, in the case of any such notice given, any requirement of paragraph 4 above is not complied with, [that lays down certain limited requirements for the content of a notice of claim] the thing in question shall be deemed to have been duly condemned as forfeited."

"8. Proceedings for condemnation shall be civil proceedings and may be instituted – (a) in England or Wales either in the High Court or in a magistrates' court … [that relates back to paragraph 6 which provides that such proceedings shall be taken by the commissioners when a notice of claim is duly given to them]"

At [54] to [56] inclusive of Gascoyne, Buxton LJ (in a passage with which Carnwath and Brooke LJJ agreed) said:

"[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 the 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 very well in mind considerations of, or similar to, abuse of process in considering whether such issues should in fact be ventilated before it.

[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."

Mr. Beal placed reliance on the (second) letter written by Langleys on behalf of Leon Cummins, dated 4 July 2001, to which we have made reference above at [13] in which, in relation to the seizure of the vehicle, Customs were informed that Leon Cummins did not seek to appeal against the seizure but reserved the right to appeal at the stage of any rejection of his application for restoration. He submitted that this showed that Leon Cummins (or Langleys on his behalf) had voluntarily rejected the procedure of challenging the legality of the seizure in condemnation proceedings by deployment of the argument that the excise goods had been imported for his "own use" (thus effectively inviting the deemed forfeiture of the vehicle under paragraph 5 of Schedule 3 to CEMA), with the result that it would be an abuse of the Tribunal's procedure to allow the issue of "own use" to be ventilated in this appeal.

As we read the relevant paragraphs of Gascoyne, a failure to apply to Customs to institute condemnation proceedings, thus bringing about a deemed forfeiture under paragraph 5 of Schedule 3 to CEMA, will render an attempt to reopen the issue of "own use" in appeal proceedings before this Tribunal an abuse of our process, unless, exceptionally, there is a factor present in the case which nevertheless renders an appellant's inability to ventilate the issue before this Tribunal a denial of his rights to his property that are potentially protected by article 1 of the First Protocol to the European Convention on Human Rights.

In relation to Leon Cummins's appeal against the conditional restoration of his vehicle, we find, in agreement with Mr. Beal's submission, that Langleys' second letter of 4 July 2001 showed that Leon Cummins (or Langleys on his behalf) by advisedly not giving notice requiring condemnation proceedings to be instituted, was, in effect, opting to deploy his "own use" case in appeal proceedings before this Tribunal rather than in condemnation proceedings. We hold that in these circumstances Leon Cummins's attempt to raise the "own use" issue in his appeal before this Tribunal in relation to the conditional restoration of the vehicle is an abuse of this Tribunal's procedure. We also hold that by the attempt to opt to deploy the "own use" case in the appeal before this Tribunal rather than in condemnation proceedings, Leon Cummins (through Langleys) was intending to achieve what he (and/or Langleys) must have considered was a procedural advantage, and that this negates any reasonable contention to the effect that our refusal to hear and decide the "own use" issue would be a denial of Leon Cummins's Convention rights. We therefore decide, in relation to Leon Cummins's appeal in relation to the conditional restoration of the vehicle that we will not hear and determine the "own use" issue.

The correspondence concerning Leon Cummins's and Stefan Cummins's respective requests for restoration of seized excise goods show that both of them, on 20 July 2001, decided in terms (this time, without the involvement of Langleys) to appeal against Customs' decisions not to return the goods. This decision was made within the period of one month allowed by paragraph 3 of Schedule 3 to CEMA for the giving of a claim in writing to Customs that the goods seized as liable to forfeiture were not so liable. Having regard to the interconnection of Leon Cummins's and Stefan Cummins's respective appeals against the decisions not to restore the excise goods with Leon Cummins's appeal against the decision to make conditional restoration of the vehicle, and our decision not to hear and determine the "own use" issue on that appeal, it seems to us that we should refuse to hear and determine the "own use" issue on the appeals in relation to the excise goods, also, on the grounds of abuse of the process of this Tribunal. In particular we record that we have considered whether our refusal to hear and decide the "own use" issue on the appeals in relation to the excise goods would be a denial of Leon Cummins's and Stefan Cummins's respective Convention rights, and have concluded that it would not. The evidence as a whole persuades us that both Leon Cummins and Stefan Cummins must be taken to have opted not to initiate condemnation proceedings, and in these circumstances it would be an abuse of our procedure to permit them to deploy the "own use" argument in these appeal proceedings when it ought to have been deployed (if at all) in condemnation proceedings.

The second issue put to us by Mr. Beal for decision was predicated on the basis that we decided (as we have not) that we should hear and determine the "own use" issues in relation to both appeals. That issue is whether, on this basis, the excise goods were brought in for Leon Cummins's and Stefan Cummins's respective "own use". Although in the light of our decision on the first issue we do not have to decide this issue, we will say that, on the evidence before us, we are convinced by the reasoning of the different Customs officers who have considered the issue, Officer Clark, Officer Philpott and Officer McEntee, and endorse their conclusion that the excise goods were not imported for Leon Cummins's and Stefan Cummins's respective "own use".

Specifically, we find that, at the time of the seizure, Leon Cummins was on his third trip to the Continent within an eight-day time span and that he had also travelled just a few weeks before that as well. Having made these earlier trips we accept the inference the officers drew that Leon Cummins did not purchase such large quantities of tobacco on the trip on 23 June 2001 (at least 160 pouches (8 kilograms) of tobacco and 1,200 cigarettes) for his own use. On his evidence, this quantity of tobacco would have lasted him a full year, at the end of which time it would have deteriorated. We endorse the officers' scepticism with the travellers' explanations that they had purchased the excise goods in approximately equal shares, considering it unlikely that they would purchase approximately the same quantity of the same tobacco products if they had genuinely been intended for their respective "own use", in particular when regard is had to Stefan Cummins's and Mr. O'Neill's relative lack of means. We find that this was a joint enterprise financed by Leon Cummins and that all the importations were intended to be used by him, but not for his "own use".

The third issue – which we have to decide – is whether or not Customs' decisions were reasonable.

In relation to the decision to refuse restoration of the excise goods, Customs' policy was and remains not to restore seized goods, save in exceptional circumstances. When restoration is exceptionally allowed it is normally conditional on a restoration fee based on 100% of the related duty being paid. We consider that the application of the policy, resulting in the decision not to offer restoration of the excise goods, was not disproportionate on the facts of these cases, and therefore was reasonable.

In relation to Officer McEntee's decision to offer restoration of the vehicle conditional on the payment of a restoration fee "based on" (or, we assume, equal to) the excise duty on the seized goods (approximately £2,800), Mr. Beal referred us to the decision of this Tribunal (Chairman: Stephen Oliver QC) in John Elton Rainbow v Commissioners of Customs and Excise (LON/2002/8151) where the Tribunal held that in principle Customs' policy of demanding a restoration fee in a case where a decision to make restoration of a vehicle had been made, was appropriate to protect legitimate trade and to avoid rendering the statutory requirements meaningless and inoperable (ibid. at [39]). The Tribunal however held in that case that a restoration fee equal to the duty on the whole amount of goods imported was disproportionate, given that Customs accepted that half of those goods were indeed imported for "own use". The Tribunal expressed the view that an appropriate amount to demand would be the duty on the goods imported for sale – ie. half the amount in Customs' decision.

In this case, Customs do not accept that any of the goods imported were for "own use", and all the goods were deemed to be forfeited pursuant to paragraph 5 of Schedule 3 to CEMA, so that we must take it that none of them were imported for "own use", a factual issue which we have decided that we should not revisit (see: [26] and [27] above). We have also, at [28] and [29] above, expressed the view that, on the evidence we have seen, this is the correct conclusion, and have found that this was a joint enterprise financed by Leon Cummins and that all the importations were intended to be used by him, and not for his "own use".

Thus, it would be consistent with the reasoning in the Rainbow decision if we were to decide in Leon Cummins's case that the decision to restore the vehicle subject to the payment of a restoration fee equal to the duty on the excise goods imported was reasonable and proportionate.

We were not told the relevant value of the vehicle (which had been disposed of at auction for £911 before Officer McEntee reached his decision). The figure of auction proceeds would not be taken as the relevant value, because Customs recognise that that figure was likely to be less than the market value of the vehicle in its condition at the time of seizure. It may however be that Officer McEntee's decision to offer restoration of the vehicle will turn out to be totally nugatory, because the value of the vehicle may well be taken to be less than the fee demanded (approximately £2,800). We do not consider that this raises an issue of principle in relation to the proportionality of Officer McEntee's decision. A sanction, in the form of a restoration fee, is clearly justified in the context of the restoration of a seized vehicle, even in the case of a "not for profit" importation. Lord Phillips MR recognised in Lindsay v Customs and Excise Commissioners [2002] 1WLR 1766 at [64] that this was so. He said that "even in such a case the scale of importation, or other circumstances, may be such as to justify forfeiture of the car". In Leon Cummins's case, the implication of Officer McEntee's decision is that because this was a "not for profit" importation then in principle Leon Cummins should suffer a lesser sanction than forfeiture of the car. However he applied Customs' policy of requiring a fee equal to the excise duty sought to be evaded. This means that, having regard to the value of the car, it may not, effectively, be offered for restoration at all. Nevertheless, in our view the decision is reasonable and proportionate. This is because the result, effective non-restoration, does not flow from the undue severity of the sanction imposed by Customs, but from the (assumed) relatively low value of the vehicle. It would, in our view, be irrational for Customs to depart from their policy in order to be more lenient to the "not for profit" smuggler who carries out his smuggling in a lower value car, merely because the car was of lower value. We therefore hold Officer McEntee's decision to offer restoration of the car conditionally on payment of a fee equal to the duty on the excise goods imported to be reasonable and proportionate.

In the result we dismiss both appeals.

JOHN WALTERS QC

CHAIRMAN

RELEASED: 19 December 2005

LON/03/8070-1