United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E01077, [2007] UKVAT(Excise) E1077

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James Hughes v Revenue & Customs [2007] UKVAT(Excise) E01077 (06/12/2007)

E01077

EXCISE DUTY – Restoration of seized excise goods, 12 kilograms of hand rolling tobacco – Appellant imported tobacco on a not for profit basis – previous importation of a large quantity of tobacco for own use – Respondents refused restoration because the importation did not meet the legal requirements of own use together with the aggravating features of large quantity and previous importation – Respondents' decision reasonable – Appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

JAMES HUGHES Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

MOHAMMED FAROOQ (Member)

Sitting in public in Birmingham on 24 October 2007

The Appellant appeared in person

James Puzey, counsel instructed by the Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 14 June 2006 refusing restoration of excise goods comprising 12 kilograms of hand rolling tobacco.

Issue in Dispute

On 27 January 2006 a Customs Officer at the UK Control Zone at Coquelles, France stopped the Appellant who was driving a Peugeot 406 car. Mr Pickering and Mr A Hughes were passengers in the vehicle. They explained to the Officer that they had been to Adinkerke for the purpose of buying tobacco. The Appellant had purchased 12 kilograms of hand rolling tobacco whilst each of his passengers bought six kilograms of hand rolling tobacco. After interviewing the Appellant, the Officer seized the hand rolling tobacco and the car because she was satisfied that the tobacco was held for a commercial purpose. The Officer used her discretion and restored the car without charge on humanitarian grounds. On 14 June 2006 Mr Harris confirmed the non-restoration of the tobacco.

On 5 October 2006 condemnation proceedings were heard before Dover magistrates' court. The Respondents failed to attend the hearing with the result that the tobacco was not condemned as forfeited. The Respondents appealed to the Crown Court which over-turned the magistrates' decision on 14 February 2007 and condemned the tobacco. The Appellant observed the Crown Court hearing from the public gallery but did not participate in the hearing.

We are concerned in this Appeal solely with the non-restoration of the hand rolling tobacco purchased by the Appellant. His vehicle has been restored to him without conditions, which means that he has no right of Appeal against that decision.

The Appellant contended that he purchased the tobacco for his own use. He also complained about the time taken by the Respondents to bring this matter to hearing and their advice about what constituted own use. The Respondents countered that the issue for the Tribunal was the reasonableness of Mr Harris' refusal to restore tobacco. The Respondents disputed that they had given misleading advice. In their view they had been conscientious in dealing with the Appellant's enquiries, sending ten letters in response.

The issue for the Tribunal was whether Mr Harris refusal of restoration of the tobacco was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable Mr Harris must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Evidence

We heard evidence from:

(1) James Hughes, the Appellant;

(2) David Harris, Officer of HM Revenue and Customs, who conducted the review decision on 14 June 2006.

The Tribunal received a bundle of documents which included the Appellant's correspondence with the Respondents. Mr Alan Pickering assisted the Appellant at the hearing.

The Respondents' Review Decision of 14 June 2006

Mr Harris considered the decision of non-restoration afresh by looking at the circumstances surrounding the seizure except the correctness or legality of the seizure itself. Mr Harris was guided by the Commissioners' policy on restoration of seized excise goods but not fettered by it.

The Commissioners' policy for restoration of seized excise goods was revised as from 28 March 2006 for goods purchased on a not for profit basis. The policy was:

"From 28 March 2006 the Commissioners policy for seized excise goods which are not for own use, but are to be passed on to others on a not for profit basis, has changed for non-aggravated cases only: the excise goods will normally be restored for an amount equal to the total of the duty evaded, plus the VAT on the duty, plus a penalty of 15 per cent of the duty and VAT".

Mr Harris took account of the following facts in reaching his decision refusing non restoration of the tobacco:

(1) The quantity of tobacco purchased which was 12 kilograms, four times the indicative guideline of three kilograms for own use as set out in The Tobacco Products Regulations 2001 as amended.

(2) The Appellant's admission in interview that his two sons were purchasing one box of tobacco (six kilograms) from him at cost price. His two daughters were also buying from him at cost price, three packs of tobacco each (three kilograms in total). His children would reimburse the Appellant on his return to the United Kingdom. Three of his children did not travel with him to Adinkerke to purchase the tobacco.

(3) The Appellant previously imported two and half boxes of hand rolling tobacco (15 kilograms) on 10 March 2005 from the continent for his own use. He told the Customs Officer that the tobacco would last him two years.

Mr Harris concluded that the Appellant had not provided him with exceptional circumstances that would justify restoration of the tobacco. Further there were aggravating circumstances which supported his decision not to restore the tobacco, which Mr Harris explained as follows:

"By your own admission during the interview the majority of the goods you were bringing in were intended for others who had not travelled and were going to pay you the cost price for the goods. Such a movement of goods is clearly outside the scope of "own use" definition as set out in the legislation. In addition, this was not the first time such a transaction had taken place".

The amount of excise duty on the importation of 12 kilograms of hand rolling tobacco on 27 January 2006 was £1,286.16.

The Appellant's evidence

The Appellant accepted that his children would reimburse him at cost price for nine kilograms of the hand rolling tobacco brought in on 27 January 2006. The remaining three kilograms of tobacco were for the use of himself and his partner. The Appellant pointed out that one of his sons accompanied him on the trip on 27 January 2006. His partner was due to travel with him but she was taken ill at the last moment.

The Appellant disagreed that he admitted to the Customs Officer on the previous trip on 10 March 2005 that the tobacco imported on this occasion would last him two years. It was the Officer who suggested the period of two years. The Appellant disputed with the Officer about the shelf life of tobacco. The Appellant told the Officer that he was still smoking tobacco which was nearly four years old.

The Appellant asserted that he was purchasing the tobacco for his own use. He was not selling it on for profit. He was simply giving it to his children at cost price which in his view did not amount to a commercial sale.

The Appellant considered that the Respondents were acting inconsistently. The Customs Officer on 10 March 2005 allowed him to bring in 15 kilograms of tobacco, which questioned the validity of the Respondents seizure of 12 kilograms of tobacco on 27 January 2006. However, the Appellant told the Customs Officer on 10 March 2005 that the tobacco was just for the use of himself and his partner.

The Appellant complained about the Respondents' conduct in deferring this hearing until after the condemnation proceedings had been dealt with. The Appellant waited 19 months for this hearing. The Appellant stated that he had not instigated the condemnation proceedings and was pushed down this route by the Respondents. The Appellant considered that the Respondents had not answered satisfactorily his enquiries about the meaning of commercial and under what circumstances he could legitimately bring back hand rolling tobacco from the continent.

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".

In deciding the reasonableness of the Commissioners' decision the Tribunal has a comprehensive fact finding jurisdiction to establish whether the primary facts upon which the Commissioners have based their decision are correct. The Tribunal, however, is not entitled to consider the lawfulness of the seizure, or determine the underlying facts relating to seizure when deciding the reasonableness of the Commissioners' decision to refuse restoration except when the Tribunal is satisfied that it would not be an abuse of process to take into account the facts surrounding the seizure of the goods. Where the goods have been condemned as forfeited by the magistrates or the Crown Court, there is no further room for fact finding by the Tribunal on the circumstances surrounding the seizure.

Was the Decision of Mr Harris Reasonable?

The Appellant submitted that he was entitled to restoration of the hand rolling tobacco because he had no intention of selling on the tobacco at profit. He purchased the tobacco for his own use and to give to his children at cost price. Mr Harris accepted that the Appellant did not import the tobacco for onward sale at profit but nevertheless refused restoration because the Appellant's importation was outside the legal definition of own use and of the existence of specific features which aggravated the importation.

As explained above we were not entitled to consider the facts surrounding the seizure of goods unless we find that there has been an abuse of process. In this Appeal the Appellant put forward no grounds to support a finding of an abuse of process. The Crown Court on 14 February 2007 decided the legality of the seizure by ordering the tobacco to be condemned as forfeited. As part of its decision the Crown Court determined that the tobacco was imported for a commercial purpose. The Appellant's perception that the Respondents had pushed him down the condemnation route was not strictly relevant to the issue of whether there had been an abuse of process. The Respondents, however, challenged the Appellant's perception by referring to their letter of 28 February 2006 where they advised the Appellant of his right to stop the condemnation proceedings by giving notice in writing. We are satisfied that the Respondents fully explained the various options open to the Appellant to challenge the seizure of the tobacco.

Although we have no jurisdiction to determine whether the importation was for own use or for a commercial purpose, we consider it necessary to examine the legal definition of own use and commercial as applied to the importation of excise goods, so as to deal with the Appellant's submissions and to assess the reasonableness of Mr Harris' decision.

Regulations 4(3)(1B)(b) and (c) of The Tobacco Products Regulations 2001 as amended regard goods transferred to another person for money or money's worth or the person holding the goods intends to make such a transfer as goods held for a commercial purpose. Where excise goods are imported into the United Kingdom for a commercial purpose, the importer is required to pay UK excise duty on those goods. The legal definition of commercial purpose makes no distinction between goods transferred at cost and those sold on for profit. In the case of the Appellant's importation of 27 January 2006, on his own admission, he was bringing in tobacco for his children who would reimburse him with the cost price of the tobacco. Thus he intended to make a transfer of tobacco to his children for money, albeit at cost, which fell within the definition of commercial purpose and made him liable for UK excise duty.

The Respondents' restoration policy for seized excise goods distinguishes between importations at cost and for profit. Essentially where a private individual brings in excise goods which are not for own use, but are to be passed on to others on a not for profit basis, the Respondents would consider restoration subject to the payment of the outstanding duty and VAT, and a small penalty provided there are no aggravating circumstances. The Respondents are unlikely to consider restoration where the importation is for onward sale at profit.

The Appellant was able to retain the tobacco imported in March 2005 because the Customs Officer accepted his explanation that the tobacco was for him and his partner despite the large quantity. The circumstances of the 27 January 2006 importation were different from those in March 2005 because they involved a transfer of goods for money, albeit at cost. Thus the Respondents did not act inconsistently towards the Appellant in respect of his importations of tobacco. They had regard to the individual circumstances of each importation which merited different outcomes.

Mr Harris in refusing restoration of the excise goods, took account of the Appellant's admission that he was intending to transfer some of the tobacco to his children in exchange for money, albeit at cost. Mr Harris, however, considered that the importation of 27 January 2006 was aggravated by the large quantity of tobacco brought in (four times the indicative guideline of three kilograms) and the Appellant's previous importation of 15 kilograms of tobacco, some nine months previous. Mr Harris formed the view that these aggravating features justified non-restoration rather than restoring the goods on condition of payment of duty in full, VAT, and a small penalty.

We are satisfied that the Respondents' policy for restoration of excise goods was proportionate in that it distinguished between different types of importations and degrees of blameworthiness. The policy required importers of not for profit goods to pay the duty properly due on the importation as a condition of restoration. If, however, there were aggravating features attached to the importation of not for profit goods restoration might be denied.

Mr Harris' grounds for refusing restoration were factually based. The Appellant accepted that he was intending to transfer some of the tobacco to his children for money at cost. The Appellant's importation of 12 kilograms was a large quantity of tobacco, four times the indicative level. The previous importation in March 2005 took place nine months previous and involved 15 kilograms of tobacco.

We are satisfied that the facts which Mr Harris had regard to when making his decision were relevant to the issue of restoration. The facts were: not for profit, quantity of tobacco and previous importation. Further we consider that Mr Harris was correct in treating quantity of tobacco and previous importation as aggravating features. We find no evidence that Mr Harris took into account some irrelevant matter or disregarded something to which he should have given weight in coming to his decision on the 14 June 2006.

Our Decision

We are satisfied for the reasons set out above that the Respondents' decision on review dated 14 June 2006 refusing restoration of excise goods comprising 12 kilograms of hand rolling tobacco was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994.

We, therefore, dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 6 December 2007

MAN/06/8032