United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2006] UKVAT(Excise) E00952, [2006] UKVAT(Excise) E952

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Cheryll Scott v Revenue & Customs [2006] UKVAT(Excise) E00952 (02 May 2006)

EO00952

EXCISE DUTY – Restoration of a vehicle subject to payment of restoration fee –Review Officer found the Appellant innocent of unlawful importation but blameworthy in placing no restrictions on the activities of her passengers – found that the Appellant placed restrictions on her passengers – the Review Officer concentrated on the actions of the passengers rather than the Appellant's actions – the review did not consider the grounds for exceptional hardship in sufficient detail – was the decision to restore the vehicle subject to payment of fee reasonable – no – appeal allowed and further review directed.

MANCHESTER TRIBUNAL CENTRE

CHERYLL SCOTT Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

ALBAN HOLDEN (Member)

Sitting in public in Birmingham on 27 February 2006

The Appellant appeared in person

Claire Chapman, Counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 7 September 2005 offering restoration of a Vauxhall Vectra motor vehicle registration number R552 TRB subject to a payment of a fee in the sum of £1,025.

The Appellant set out the grounds of her Appeal in a letter dated 23 September 2005. Essentially she considered that the Review Officer's decision was inconsistent in that he found her to be "innocent but blameworthy". Further the Review Officer did not have sufficient regard to the hardship caused to the Appellant by the loss of her vehicle.

Issue in Dispute

On 16 June 2005 Customs Officers at the UK Control Zone at Coquelles, France, stopped the Appellant, who was driving the vehicle which had three passengers in it, Mrs Gunn, Mrs Johnson and Mr Marriott. The Officers inspected the vehicle and found 24 kilograms of hand rolling tobacco and 1,000 cigarettes. The hand rolling tobacco was split equally between the Appellant and her three passengers. The cigarettes were for the Appellant, Mrs Johnson and Mrs Gunn. The Customs Officers were satisfied that the Appellant's excise goods were for personal use. They, however, seized the excise goods belonging to the passengers because the Officers believed that the goods had been purchased for a commercial purpose. The Officers also seized the Appellant's vehicle as it had been used in the carrying of seized excise goods. On review the vehicle was restored on payment of a fee in the sum of £1,025 to the Appellant. The passengers have not appealed against the seizure of the excise goods or sought restoration of them.

The Appellant contested the conditional restoration of her motor vehicle. The Customs Officers decided that she was innocent of smuggling. The Appellant was convinced that her passengers were only making purchases for themselves. In these circumstances it was not fair that she had lost her vehicle which was her most prized possession. The loss of her vehicle had caused her great hardship. The Appellant required the vehicle to care for her disabled husband and to attend her employment where she did shift work.

The issue for the Tribunal was whether the Respondents' decision dated 7 September 2005 to restore the vehicle subject to a payment of a fee in the sum of £1,025 was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to be reasonable the decision maker must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Evidence

The Appellant gave evidence upon oath and also submitted a typed statement of case.

The witness statement of David Harris, the Review Officer, was received in evidence as the Appellant raised no objection within 14 days of notification of the statement. The Respondents produced a bundle of documents.

The Respondents' Review Decision of 7 September 2005

Mr Harris took account of the following matters in reaching his decision offering conditional restoration of Vauxhall Vectra motor vehicle registration number R552 TRB:

(1) The quantity of excise goods imported which exceeded the guide levels specified in the Regulations.

(2) The passengers paid for their goods in cash which in Mr Harris' view was a common feature of buying excise goods for commercial sale.

(3) The Appellant had a responsibility to know the purpose for which her passengers were using her vehicle. She did not place any restrictions on the activities of her passengers, in particular did not prevent them from importing excise goods for a commercial purpose.

(4) The Appellant did not suffer exceptional hardship by the loss of her vehicle. She had been registered on 22 June 2005 as a keeper of another vehicle, a Ford Escort registration number K567 KCH.

Mr Harris found the Appellant innocent of any direct concern in the illicit importations but she was blameworthy because she did not put any restrictions on the activities of her passengers.

Mr Harris considered the Respondents' policy for the restoration of private vehicles which was:

"The Commissioners' general policy is that private vehicles used for the improper importation or transportation of excise goods should not normally be restored. The policy is intended to be robust so as to protect legitimate UK trade and revenue and prevent illicit trade in excise goods. However vehicles may be restored at the discretion of the Commissioners subject to such conditions (if any ) as they think proper (e.g. for a fee) in the following circumstances:

If the excise goods were destined for supply on a "not for profit" basis for example for reimbursement.

If the excise goods were destined for supply of profit, the quantity of excise goods is small, and it is a first occurrence.

If the vehicle was owned by a third party who was not present at the time of the seizure and was either blameless or had taken reasonable steps to prevent smuggling in the vehicle".

Mr Harris took the view that the amount of excise goods involved (18 kilograms of hand rolling tobacco) was not small and, therefore, did not apply that part of the policy regarding small commercial importations. Mr Harris decided that the Appellant was blameworthy. In the circumstances he considered that the most appropriate action was conditional restoration of the vehicle on the payment of a fee equivalent to the trade value of the vehicle which was lower than the revenue evaded by the passengers' commercial importation of excise goods.

Our Findings of Fact

We make the following findings of fact:

(1) The Appellant travelled across the Channel about four times a year to visit her brother who lived in Germany. They normally met in Belgium which was roughly equidistant between their respective homes.

(2) She arranged to met her brother in Belgium on 16 June 2005 when she also intended to purchase tobacco, cigarettes, wine and washing powder. Unfortunately her brother let her down. However, she still decided to make the trip since she had booked the day off work.

(3) Mrs Gunn, Mrs Johnson and Mr Marriott were longstanding friends of the Appellant. They made separate approaches to the Appellant during the two weeks prior to the trip about accompanying her across the Channel. The Appellant was content for them to be passengers on the trip. Mrs Gunn and Mr Marriott had previously travelled with the Appellant. In the case of Mrs Johnson it was her first trip abroad. Mrs Gunn and Mrs Johnson were pensioners.

(4) The Appellant told her passengers that they could only bring one box of tobacco back with them. Her passengers told the Appellant in the car on the way down to Dover that they were only purchasing tobacco for themselves and immediate members of family.

(5) The Appellant knew that her passengers were heavy smokers and rolled their own tobacco.

(6) The Appellant did not enquire with her passengers about their financial resources. She considered it was none of her business. She knew that Mrs Gunn was relatively well off in receipt of three pensions. Mrs Johnson was less well off, whilst Mr Marriott had been unemployed for at least two years and under the witness protection scheme. However, the Appellant considered that her passengers were in a similar financial position to herself. The Appellant was able to purchase the tobacco from her own resources. She saw no reason why her passengers could not do the same. The passengers informed the Appellant that they were not being reimbursed from someone else for their purchases of tobacco. Mrs Johnson's son gave the Appellant his mother's money in an envelope before they left for the continent.

(7) Mrs Gunn only possessed a credit card, which she did not use abroad. The Appellant and her other two passengers did not have credit cards. The Appellant was unable to obtain a credit card because she had no fixed address.

(8) The Appellant was aware of the guidelines in the Regulations regarding the quantity of excise goods that provided an indication about private use or commercial purposes. However, the Appellant regarded the guidelines as guidelines. She was aware that she could import higher quantities of excise goods than the guidelines provided the goods were used solely for personal use.

(9) The Appellant and her passengers purchased the tobacco and cigarettes from Union Jacks, Adinkerke, Belgium. The Appellant paid on behalf of the group which ensured that no more than one box of hand rolling tobacco was bought by each of her passengers. One box consisted of six kilograms of hand rolling tobacco and cost £330.

(10) The Customs Officers accepted that the Appellant's importation of six kilograms of hand rolling tobacco and cigarettes was for personal use. The Officers, however, decided that each passenger's importation of the same quantity of hand rolling tobacco as the Appellant, six kilograms, was for commercial purposes.

(11) The Respondents conceded that the Appellant had no direct involvement in the illicit importation of excise goods. They also accepted at the hearing that the Appellant was not engaged in a joint enterprise with her passengers to evade excise duty on the tobacco importations.

(12) The Appellant purchased the Vauxhall Vectra vehicle in November 2004 for £930. The Ford Escort was bought immediately after the seizure of the Vauhall Vectra because the Appellant needed a car to get to work. The Appellant borrowed £200 from her brother to pay for the Escort. The £200 loan was still outstanding. The Escort was scrapped in October 2005 because the Appellant could not afford to pay for the repairs on the vehicle.

(13) The Appellant was employed as a stock handler in a clothes warehouse. She was required to start work at 5.45 am when there was no public transport. Her place of work was about three miles from where she normally stayed.

(14) The Appellant had been off work for the last three months through depression. She was receiving medication for her condition. The Appellant considered that the dispute regarding her vehicle had contributed to her depression.

(15) Although the Appellant was separated from her husband, she still cared for him on a regular basis which included cooking meals, transporting him for frequent hospital appointments and driving him to the local pub. Her husband was registered as disabled. The taxation class for the Appellants' motor vehicle, the Vauxhall Vectra, was disabled. Their children lived with the father to whom the Appellant paid maintenance.

(16) The Appellant also required her car to visit her elderly father who was poorly and needed assistance with medical appointments.

The Jurisdiction of the Tribunal

The Respondents' power regarding restoration of goods and vehicles 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 findings of fact include blameworthiness and the proportionality of the penalty imposed to the policy aims pursued having full regard to the individual circumstances of the case. 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.

Was the Review Decision dated 7 September 2005 Reasonable?

Mr Harris, the Review Officer, found the Appellant innocent but blameworthy. Our findings of fact undermine Mr Harris' basis for his finding of blameworthiness in that she failed to place any restrictions on her passengers purchasing excise goods for commercial purposes. We found that the Appellant restricted them to one box of hand rolling tobacco which was the same quantity of tobacco purchased by herself. Further the Appellant ensured that they only bought one box because she organised the purchase on behalf of them all from Union Jacks in Adinkerke. The passengers informed the Appellant that they were buying for themselves and close family members. The Appellant had no reason to disbelieve them. They were longstanding friends of the Appellant and were heavy smokers. Their financial position was no different from the Appellant. Mrs Gunn and Mr Marriott had travelled to the continent before with the Appellant. As far as the Appellant was concerned her passengers were not engaged in a commercial importation of tobacco.

We had the advantage over Mr Harris of hearing the Appellant on oath. Counsel for Respondents subjected her to rigorous cross-examination, however, we found the Appellant to be a convincing witness. Although Mr Harris did not have the benefit of hearing the Appellant's evidence, we consider that his approach to the facts known at the time of his decision was flawed.

Mr Harris was dealing with the Appellant not her passengers. The conditional restoration of the vehicle only affected the Appellant. In our view Mr Harris approached his review decision from the passengers' situation rather than that of the Appellant. Mr Harris was obliged to accept that the passengers were involved in commercial importations because they did not challenge the seizure of their goods. This fact, however, dominated his decision with the result that he placed undue weight on the actions of the passengers which deflected his attention away from the Appellant's actions. Had Mr Harris approached his decision from the Appellant's perspective, he may have arrived at a different conclusion. The Appellant was innocent of any direct involvement with commercial importations of tobacco. She was not engaged in a joint enterprise with her passengers. Her passengers purchased the exact same quantity of tobacco as herself. The Appellant had no reason to suspect that her passengers were importing tobacco for commercial purposes. The Customs Officers did not ask the Appellant about restrictions placed on her passengers to minimise the risk of commercial importations. Mr Harris' inference that the Appellant placed no restrictions was without factual foundation.

Our findings of fact supported the Appellant's contention that she suffered exceptional hardship by the loss of her car. The Appellant's lifestyle was out of the ordinary. She had no fixed address and cared for her disabled husband despite being separated from him. She required the car to go to work, and to tend for her husband and poorly father. Her car was taxed at the disabled rate. Mr Harris dismissed these circumstances because the Appellant was a registered keeper of another vehicle. However, we heard at the Appeal hearing that this vehicle was bought with a loan from her brother which has not been repaid. The vehicle has since been scrapped. We are satisfied that Mr Harris did not examine in sufficient detail the facts regarding exceptional hardship.

We, therefore, conclude that Mr Harris' decision of 7 February 2005 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994.

We have reached this conclusion because:

(1) We found that the Appellant placed restrictions on the activities of her passengers on the trip to Belgium on 16 June 2005.

(2) Mr Harris gave too much weight to the activities of the passengers and disregarded those facts which supported the Appellant's case.

(3) Mr Harris did not examine in sufficient detail the facts regarding the Appellant's claim for exceptional hardship.

Our Decision

In view of our finding that the Respondents' decision of 7 September 2005 was unreasonably arrived at, we allow the Appeal.

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 to restore the Appellant's vehicle on payment of a restoration fee shall cease to have effect from the date of release of this decision.

b. The Commissioners shall conduct a further review of the decision to restore the vehicle on payment of the restoration fee 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 summarised in paragraphs 12 and 21 of this decision.

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 Revenue and Customs Review Team, Detection South Region, Crownhill Court, Tailyour Road, Crownhill, Plymouth, PL6 5 BZ.

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

The Appellant made no application for costs. We make no order for costs.

MICHAEL TILDESLEY

CHAIRMAN

RELEASE DATE: 2 May 2006

MAN/05/8052