United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E1054, [2007] UKVAT(Excise) E01054

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Robert Archibald v Revenue & Customs [2007] UKVAT(Excise) E01054 (18 July 2007)

E01054

Excise Duties – Non restoration of seized goods – whether Appellant's letter was notice that he claimed the goods were not liable to seizure : para 3 sch 3 CEMA 1979 – held yes – whether question of own use open to the Tribunal – held yes – whether goods were for own use – held no – whether Customs' decision reasonable : section 16(4) FA 1994 held yes

LONDON TRIBUNAL CENTRE

ROBERT ARCHIBALD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: CHARLES HELLIER (Chairman)

R G GRICE

Sitting in public in Birmingham on 22 June 2007

The Appellant did not appear and was not represented

Sarabjit Singh, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Mr Archibald appeals against the Respondents' decision not to restore his car and certain other goods. The car and the goods were seized by the Respondents on 7 February 2004.

Mr Archibald did not appear in person for the hearing neither was he represented. Notice of the time and place for the hearing had been posted to him by the Tribunal Centre. The hearing was set for 10.00am at the venue Mr Archibald had indicated that he preferred. The Tribunal's clerk tried 5 times to contact Mr Archibald by phone after 10.00am without success. We decided to hear the appeal in the absence of the Appellant as permitted by rule 26(2) of the Tribunal's Rules. The hearing started at 10.45am.

The relevant law and the nature of the tribunal's jurisdiction

(1) The imposition of duty

Section 2 of the Tobacco Products Duty Act 1972 provides that excise duty is payable on the importation of cigarettes and hand rolling tobacco into the UK. The Tobacco Products Regulations 2001 are made in part under the provisions of that Act: Regulation 13 provides that the person liable to pay the duty is the person holding the goods at the excise point, and Regulation 14 that the duty is to be paid at the excise point. Regulation 12(1) provides that the excise point is the time when the goods are charged with duty. But this is subject to Regulation 12(1A) which provides that where tobacco products are acquired in a member state for a person's "own use … the excise duty point is the time where those products are held or used for a commercial purpose."

Thus if goods are acquired in France for a persons "own use" and are never held for a commercial purpose, there is never an excise duty point, and duty does not become payable. But if they are not acquired for a persons own use, or later become held for a commercial purpose duty will become payable.

The Regulations provide some further provisions on the question of "own use" and "commercial purpose". By Regulation 12(1B)(b) own use includes use as a personal gift. On the other hand, sub-paragraph (c) provides that if the goods are, or are intended to be, transferred to another person for money or money's worth (including for the reimbursement of their cost) then they are to be regarded as held for a commercial purpose.

Sub-paragraph (e) sets out factors to which regard must be had in determining whether goods are held for a commercial purpose. Those factors are:

"(i) that person's reasons for having possession or control of those products,

(ii) whether or not that person is a revenue trader (as defined in Section 1(1) of the Customs and Excise Management Act 1979),

(iii) that person's conduct, including his intended use of those products or any refusal to disclose his intended use of those products,

(iv) the location of those products,

(v) the mode of transport used to convey those products,

(vi) any document or other information whatsoever relating to those products,

(vii) the nature of those products including the nature and condition of any package or container,

(viii) the quantity of those products, and in particular, whether the quantity exceeds any of the following quantities –

32,000 cigarettes,

400 cigarillos (cigars weighing no more than 3 grammes each),

200 cigars,

3 kilogrammes of any other tobacco products,

(ix) whether that person personally financed the purchase of those products,

(x) any other circumstance that appears to be relevant."

We note that those factors need to be taken into account both when they suggest that the goods are held for a commercial purpose and when they suggest the contrary. Thus, for example, the unconcealed carriage of the products through Customs may suggest that the goods were not being held for a commercial purpose.

Because the requirement to consider these factors is mandatory, no decision as to whether the goods were held for a commercial purpose could be properly made unless any and all evidence relating to each heading is considered.

(2) The tribunal's jurisdiction

The tribunal's jurisdiction in this type of appeal is circumscribed. It is given by section 16(4) FA 1994 which provides:

"(4) In relation to any decision as to any ancillary matter [which is defined so as to encompass an appeal of this nature] … the powers of the tribunal on an appeal under this section shall be confined to a power, when 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 … is to cease to have effect …

(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; …"

Thus the tribunal is not empowered to substitute its own decision for that of the Respondents. Instead it has to consider whether the Respondents' decision could reasonably have been arrived at, and if it decides that it could not have been it may make one of the orders set out.

We approach the question of whether the decision could reasonably have been arrived at on the basis approved by the Court of Appeal in Lindsay v Customs and Excise Commissioners [2002] STC 588 and accordingly that we should ask ourselves the following questions in relation to the Commissioners' decision not to restore:-

(1) did the officer reach a decision which no reasonable officer could have reached?

(2) did the officer take into account all relevant considerations?

(3) did the officer leave out of account any relevant consideration?

(4) was the officer's decision disproportionately harsh?

In Golobiewska v Commissioners of Customs and Excise [2005] VATDT 267 the Court of Appeal indicated that the tribunal could not decide whether a decision was reasonable in the relevant sense unless it examined the asserted facts and substantiated their existence. Although it might at first sight appear that under section 16(4) the tribunal would be limited to the facts before the officer, the import of Lloyd LJ's judgment is that the tribunal should carry out a fact-finding exercise and in the light of its findings consider whether the decision on restoration was reasonable. Thus we are required to determine whether a decision made by the officer on the basis of evidence available to him or her was reasonable by reference to facts found by us.

There is one other potential restraint upon our jurisdiction. This arises because the legislation provides a person whose goods have been seized with two courses of action either or both of which he may pursue:-

(i) he may contest the legality of the forfeiture by acting so as to require HMRC to bring what are rather unfortunately called "condemnation proceedings" in the Magistrates Court or the High Court; and/or

(ii) he may apply to HMRC for the seized items to be restored, and, if HMRC refuse, seek a review of that decision, and if he is dissatisfied with that review, appeal to the tribunal under section 16 FA 1994.

In this case Mr Archibald has clearly adopted the second route. We return later in this decision to the question of whether or not he adopted the first route as well.

But the availability of the first route carries with it effects which may affect the course of action pursued by the person whose goods have been seized and the jurisdiction of this tribunal on an appeal under the restoration route:-

(i) if condemnation proceedings are brought and the appellant loses he may have to pay HMRC's costs;

(ii) if condemnation proceedings are brought and the appellant loses then the goods are to be treated as duly forfeit; and the issues determined by the Magistrates as necessary steps to the conclusion that the goods are forfeit bind this tribunal and cannot be re-opened by it; and

(iii) if condemnation proceedings are not brought because the appellant does not serve a notice in time requiring them to be brought then the goods are deemed to be duly forfeit.

The last two of those effects arise as a result of Schedule 3 Customs and Excise Management Act 1979 ("CEMA") which provides so far as relevant to this appeal:-

"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 …

4(1) Any notice under paragraph 3 shall specify the name and address of the claimant …

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 has 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, the thing in question shall be deemed to have been duly condemned as forfeited.

Where notice of claim in respect of any thing is duly given in accordance with paragraphs 3 and 4 above, the Commissioners shall take proceedings for the condemnation of that thing by the court, and if the court finds that the thing was at the time of seizure liable to forfeiture the court shall condemn it as forfeited …

10(1) In any proceedings for condemnation instigated in England, Wales or Northern Ireland, the claimant or his solicitor shall make oath that the thing seized was, or was to the best of his knowledge and belief, the property of the claimant at the time of the seizure.

(2) In any such proceedings instituted in the High Court, the claimant shall give such security for the costs of the proceedings as may be determined by the Court.

(3) If any requirement of this paragraph is not complied with, the court shall give judgment for the Commissioners."

Thus the taxpayer is given one month from the seizure to give notice of a claim. If he gives the notice, the Respondents are required to commence condemnation proceedings to test the liability of the goods to forfeiture. But if no notice is given the goods are deemed to have been liable to forfeiture.

If by virtue of failure to give the notice the goods are deemed to be forfeit, the question then arises as to the extent to which the issues relevant to that forfeiture may be considered by this Tribunal. This was how Buxton LJ answered that question in Gascoyne v Customs and Excise Commissioners 2004 EWCA Civ 1162:-

"51. …, in my view there is no Convention objection to holding that an actual finding in condemnation proceedings binds in a tribunal application, be it binding as to the decision as to lawfulness of seizure, or binding as to the underlying facts. In that respect, one can draw assistance, and the European Court of Human Rights has drawn assistance, from the parallel jurisprudence of article 6. If the importer has actually been in court, first of all he has had his day in court in front of a judicial body, and, secondly, as is well known, Convention jurisprudence permits a proportionate restriction on access to a court, provided the essential rights that are in contest from a Convention point of view are not thereby rendered nugatory. That was decided in Lithgow v United Kingdom (1986) 8 EHRR 329, incidentally a First Protocol case, at pp 393-394, para 194.

Secondly, however, that jurisprudence itself creates a great deal more difficulty in relation to the deeming provisions under paragraph 5 of Schedule 3. One's instincts, if no more, suggest that the extent to which it was held in Gora's case that those provisions necessarily prevent any further consideration of the legality of the seizure was an excessive limitation.

Miss Simler drew our attention in that connection to what was said by Lord Phillips MR in Lindsay's case, at p 1786, para 64, that the principle of proportionality requires that each case should be considered on its particular facts. Lord Phillips MR then went on to indicate the sort of facts that might be relevant.

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.

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.

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."

In Commissioners of Customs and Excise v David Weller 2006 EWHC 237 (Ch) Evans-Lombe J said in this context that whether an importer who has suffered a deemed forfeiture is able to raise the validity of a forfeiture on a review and subsequent appeal depended upon two questions:-

"first, did the importer have a realistic opportunity to invoke the condemnation procedure and,

secondly, if he did, are there nonetheless reasons, disclosed by the facts of the case which should persuade the … tribunal to permit him to re-open the question of the validity of the original seizure on an application for return of the goods."

Before we leave this topic there is one other matter to which we should refer. It is that goods may be liable to forfeiture for a number of different reasons and that therefore a deemed decision that the forfeiture was legal need not lead to this Tribunal being bound to consider that each of those reasons was satisfied. Goods may be liable to forfeiture under section 49 or 141 of CEMA:-

(i) section 49 provides that where goods on which duty is payable are imported without payment of duty they will be liable to forfeiture as will imported goods concealed or packed with intent to deceive an officer;

(ii) section 141 provides that a vehicle carrying goods liable to forfeiture or any other thing "mixed, packed or found with" the goods liable to forfeiture, may also be forfeited.

Thus if goods A and goods B were packed together, a deemed decision by virtue of paragraph 5 Schedule 3 that goods A were liable to forfeiture could mean that either goods A were dutiable but imported without payment of duty, or that goods B were dutiable and imported without payment of duty and were packed with goods A.

It seems to us therefore the Tribunal must investigate the facts of the seizure before it can determine whether it could be shut out of investigating the question as to whether goods A were dutiable goods imported without payment of duty.

In the remainder of this decision we therefore undertake the following tasks:-

(1) We determine the facts on the evidence before us;

(2) We ask whether Mr Archibald gave notice under paragraph 3 Schedule 3 CEMA;

(3) We ask, if he did not give such notice, first whether he had a realistic opportunity of so doing, and, if so, second, whether there are nonetheless reasons which should persuade us to re-open the question of the validity of forfeiture;

(4) Assuming that the validity of the forfeiture cannot be re-opened we ask whether it is inherent in the facts that the deeming provision of paragraph 5 mean that the goods seized were not for Mr Archibald's own use;

(5) On the assumption that the question of whether the goods were for Mr Archibald's own use is open to us, we consider that question on the basis of the facts as found by us;

(6) We consider the reasonableness of the Respondents' decision on review;

(7) We set out our conclusion; and

(8) Lastly we consider the question of costs.

(1) The Evidence and the Facts

We had before us a bundle of documents produced by the Respondents. This included correspondence with the Appellant and copies of the Respondents' officers' notebooks. It also included witness statements from two of the Respondents' officers. The Appellant had served a valid notice of objection to those witness statements; we therefore took no account of their contents. We heard no oral evidence.

We find the following background facts:-

(1) On 7 February 2004 the Appellant, accompanied by Craig Palmer, arrived at the Channel Tunnel, Coquelles in a Volvo car registration number K962 LNP.

(2) The Volvo contained:-

18kg Golden Virginia smoking tobacco

½ kg Old Holborn smoking tobacco

½ kg Dram smoking tobacco

400 Embassy cigarettes

240kg Mixed cigars

170kg Cigarillos

15 litres Beer

9 litres Wine

(3) The Appellant was stopped by the Respondents' officers. He declared that he had quite a lot of tobacco. The Appellant and Mr Palmer were then interviewed.

(4) Following the interview the Respondents' officers seized the goods described above and the Volvo.

The Respondents' review letter of June 2004 sets out, under the heading `background' details of the dealings with the Respondents' officers on the date of seizure which we accept as an unchallenged fair summary of the facts

On 22 February 2004, some three weeks after the seizure of his car and the goods, the Appellant wrote to the Respondents. In that letter he complained about the conduct of the interview and says that he made it "clear to the officer that the goods were for my own consumption I also offered to pay duty on the goods."

He says:

"I have enclosed letter B and will wait on your decision. If you decide not to return my goods and vehicle then I will send in letter A and challenge the seizure in court, as I feel I was dealt with unjustly and all I have to lose is the court costs."

`Letter B' was a standard form letter of request for restoration of the goods. Mr Singh told us, and we accept, that Letter A was a standard form letter designed as notice under paragraph 3 Schedule 3 requiring the Respondents to initiate condemnation proceedings. Both standard forms accompanied the Respondents' Notice 12A which we find was given to the Appellant. We did not see a copy of the Notice 12A which was in use at the time of the seizure.

On 7 April 2004 the Respondents wrote to the Appellant refusing restoration of the goods. The Appellant requested a review of that letter of 28 April 2004, and in their letter of 11 June 2004 the Respondents confirmed their decision not to restore. That letter is the subject of this appeal.

(2) Did Mr Archibald gave notice under paragraph 3 Schedule 3 in time?

Paragraph 3 Schedule 3 prescribes no form for the notice, merely requiring that notice be in writing and be given of his claim that the thing seized was not liable to forfeiture.

The notice must be given (in the circumstances of this appeal) within one month of the seizure. The only correspondence received by the Respondents within that time limit was Mr Archibald's letter of 22 February 2004. In the extract quoted above he says that he "will send in letter A and challenge the seizure". We asked ourselves whether the letter, including those quoted passages, could be treated as notice under paragraph 3.

We note that paragraph 3 does not require the importer to require proceedings to be brought, or to do anything other than to indicate in writing that he claims that the thing seized is not liable to forfeiture. If paragraph 3 had required the importer to give notice that he intended to challenge the seizure in court, or give notice requiring HMRC to begin condemnation proceedings then it does not seem to us that the words "I will send in letter A and challenge the seizure in court" should reasonably be taken to be such a notice.

But all paragraph 3 requires is that the importer claims that the items were not liable to seizure, and that he gives written notice of that claim. In his letter of 22 February 2004 Mr Archibald says "I broke no laws as you can bring any amount of goods into the UK as long as they are for your own consumption I made this clear to the officer that the goods were for my own consumption …". These words seem to us to suggest strongly that the Appellant was claiming that the goods were for his own use and thus that they were not liable to forfeiture. The thrust of this letter taken as a whole was not an appeal for mercy and assistance but an assertion of his position and an initial step in the process of getting his goods back.

Indeed it seems to us that in the case of a simple seizure of goods anything written by the importer in which it is clear that he is claiming that they were for his own use may well be a notice within paragraph 3.

Thus we conclude that the Appellant did give notice within paragraph 3.

(3) If Mr Archibald did not give a paragraph 3 notice are there circumstances which justify the reopening of the legality of the forfeiture?

First, did Mr Archibald have a realistic opportunity of doing so? We believe that he did. His letter of 22 February shows that he understood that he could send in Letter A. The possession of that standard form letter gave him a realistic opportunity of using it as notice under paragraph 3.

Second: are there nonetheless reasons which should persuade us to re-open the question? We think not. It does not seem to us that Mr Archibald, on the evidence of his letter, was confused or had been misled about the courses of action available to him. There was no evidence to suggest that he was anything other than a reasonably capable person who had read and understood the available material. And we accept that it is more likely than not that the Notice 12A in force at the relevant time described how to give notice to invoke condemnation proceedings. Neither do we think any apprehension as to costs if he lost preyed so heavily upon Mr Archibald's mind that the influence thereof could fairly be said to have deprived him of real choice in the matter. We saw on the evidence before us no circumstances which would have made it just to enable the matter to be re-opened.

(4) If the legality of forfeiture cannot be re-opened, does the deeming in paragraph 5 mean in the circumstances of this case that the goods were not for the Appellants own use?

The Respondents' conduct and correspondence evinces no argument in relation to the goods other than that they were imported for a commercial purpose. The Appellant's replies seem directed to the same issue only.

In these circumstances it seems to us that the goods could only be legally forfeit if they were not for the Appellant's own use. Accordingly if the question of forfeiture could not be re-opened the consequence in this appeal would be that the goods must be treated as having been held by another court to be not for own use, and that consequence would be binding on us.

Likewise in relation to the car, the only reason for its seizure appears to be that it was the vehicle in which the forfeitable goods were imported. If its forfeiture is deemed to be legal then the consequence must be that it must be treated as having conveyed the relevant goods (as to which in any event there appeared to have been no dispute).

(5) If the legality of forfeiture can be re-opened, were the goods for the Appellant's own use?

We find, on the evidence before us, that they were not. We note that we had no other evidence available to us of the circumstances of seizure other than the officers' notes of interview since the Appellant did not appear.

We were not convinced by the record of the Appellant's interview that he or his wife or son (assuming that he did intend to give some of the goods to his wife or son) smoked at a consumption rate sufficient to consume the imported tobacco within a reasonable time.

Although the goods were not hidden and were disclosed to the officers when the car was stopped – conduct which was unexceptionable – we were more suspicious about the Appellant's answers in the interview. We did not conclude that his was the conduct of someone with nothing to hide.

His recent trips and other imports suggested generally that he was importing more than he consumed or gave away.

The quantities imported exceeded, in relation to the tobacco, the baseline figure in Regulation 12(1B)(e).

We thought that the cost of the products as compared to the Appellant's available income suggested that he intended at the very least to pass some of them on at cost to other persons.

Overall, taking into account the factors in Regulation 12(1B)(e), we concluded that the goods were, when imported, held for a commercial purpose.

(6) Was the Respondents' decision on review reasonable?

The only attack on the Respondents' letter advanced by the Appellant in correspondence was that the goods were for his own use. We find that contention fails.

We have read the Respondents' letter. It is in our view a decision which could have been taken by a reasonable person on the basis of the facts set out. Those facts are all the relevant facts as found by us and no irrelevant fact was taken into consideration. The decision was not disproportionately harsh having regard to the circumstances of the importation, the duty at stake and the value of the goods and of the car.

There is one paragraph of the letter which as Mr Singh fairly pointed out contains an unreasonable conclusion. The writer says that he suspects that Mr Archibald may not be a smoker at all since he did not demonstrate any inclination to smoke throughout the lengthy interview despite the officer's invitation. Mr Singh accepts that this is not quite right: the Appellant answered the invitation by asking the officer for one of his cigarettes and the officer replied that he did not smoke. In our view in context the notes of interview do not disclose a clear desire to smoke. We do not think that the writer's statement evinces a material mistake of fact or a conclusion which on the basis of the transcript notes could not reasonably have been reached.

Conclusion

We conclude:-

(i) the Appellant did give notice under paragraph 3 Schedule 3;

(ii) the question of whether the goods were for his own use is open to us;

(iii) that the goods were not for his own use; and

(iv) that the decision not to restore was reasonable.

We therefore dismiss the appeal.

Costs

The Respondents sought £250 in respect of their costs. We have decided not to award costs. The Respondents' correspondence prior to the hearing relied heavily upon the contention that re-opening of the legality of forfeiture was not open to the Appellant. We have held differently.

CHARLES HELLIER

CHAIRMAN

RELEASED: 18 July 2007

LON 2004/8056