United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2008] UKVAT(Excise) E1120, [2008] UKVAT(Excise) E01120

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Michael Dodge v Revenue & Customs [2008] UKVAT(Excise) E01120 (20 June 2008)

E01120

EXCISE DUTY – Non-restoration of cigarettes and hand-rolling tobacco –Tribunal admitted evidence of personal use – no abuse of process – Review Officer refused restoration because the excise goods were intended for onward sale at profit – Review Officer's decision reasonable – Appeal dismissed

LONDON TRIBUNAL CENTRE

MICHAEL DODGE Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

RUTH WATTS DAVIES MHCIMA FCIPD (Member)

Sitting in public in London on 28 May 2008

The Appellant appeared in person

Rupert Jones counsel instructed by Solicitor of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 16 April 2007 refusing restoration of excise goods comprising three kilograms of hand rolling tobacco and 1,580 cigarettes.

The grounds of Appeal as set out in the Notice dated 12 June 2007 were:

"I was told nine times by Officer 162 you do not have to go through this interview - just leave everything here nothing on your file no receipt will be give. Nothing tangible or empirical no officer's name or number to be seen. I see this as an attempted bribe. See enclosures. This is a standard practice by Customs at Dover. They appear to deny it. Sorry about handwriting this is due to bad eyesight".

The Dispute

On 7 January 2007 the Appellant was intercepted by a Customs Officer at Dover Eastern Docks having alighted as a foot passenger from a ferry from France. The Appellant told the Officer that he had been to Belgium to buy some cigarettes and tobacco. He had travelled to France a few weeks ago and made two previous trips in the previous three months. The Appellant spent about £300 on the excise goods, stating that the tobacco was for his brother-in-law. The Officer seized the cigarettes and tobacco because he believed that they had been purchased for a commercial purpose.

On 13 January 2007 the Appellant appealed against the seizure of the excise goods and requested restoration of the goods. The Appellant stated in support of his applications:

(1) The excise goods were within the guide levels which indicated that the goods were not for commercial purposes.

(2) He had travelled to France about one month ago, and to Belgium about two months ago when he purchased no tobacco.

(3) This was the first time in 18 months since he bought tobacco in Belgium.

(4) He had been laid up over Christmas which prevented him from buying the cigarettes and tobacco as presents before Christmas.

(5) He had a large extended family and would not be seeing them again.

(6) His recent trips to the France were undertaken for personal and business reasons.

(7) He considered he had been treated unfairly by the Customs Officer.

On 13 February 2007 the Respondents refused to restore the excise goods.

On 28 February 2007 the Appellant withdrew his appeal against seizure to the Magistrates' Courts but requested a review of the decision not to restore. On 16 April 2007 Mrs Hodge (formerly known as Mrs Gillespie) refused restoration of the cigarettes and tobacco.

The two issues in this Appeal:

(1) Was the Tribunal entitled to take account of the Appellant's evidence about personal use?

(2) Whether Mrs Hodge's refusal to restore the excise goods was a decision which no reasonable body of Commissioners could have arrived at. The jurisdiction of the Tribunal was to find the primary facts and to decide whether in the light of those findings Mrs Hodge's decision was reasonable. In order for the decision to be reasonable Mrs Hodge must have considered all relevant matters and disregarded irrelevant matters.

The Evidence

We heard evidence from the Appellant and Mrs Deborah Hodge. The parties supplied bundles of documents which were received in evidence.

Jurisdiction of the Tribunal

The Respondents' power regarding restoration of goods 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 is that the person making a decision could not reasonably have arrived at it. The test for reasonableness is set out by Lord Lane 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 Gora and others v Customs and Excise Commissioners [2003] EWCA Civ 525, the Court of Appeal decided that the Tribunal had a comprehensive fact finding jurisdiction in restoration Appeals:

"[The Tribunal] satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules of the tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals.'

Strictly speaking, it appears that under s 16(4) of the 1994 Act, the Tribunal would be limited to considering whether there was sufficient evidence to support the Commissioners' finding of blameworthiness. However, in practice, given the power of the Tribunal to carry out a fact-finding exercise, the Tribunal could decide for itself this primary fact. The Tribunal should then go on to decide whether, in the light of its findings of fact, the decision on restoration was reasonable. The Commissioners would not challenge such an approach and would conduct a further review in accordance with the findings of the Tribunal" (paragraph 39).

The Court of Appeal, however, considered that the Tribunal's comprehensive fact finding jurisdiction did not extend to finding of facts about the legality of the seizure of the goods, which was a matter for the magistrates in condemnation proceedings. Thus Lord Justice Pill in Gora at paragraphs 56 – 58stated that

"56. The Tribunal accepted that where liability to forfeiture has been determined by a court in condemnation proceedings, there is no further room for fact finding by the Tribunal and it has no jurisdiction. However, the Tribunal went on to hold that Mr Gora did not give a notice under paragraph 3 and as a result the law took its course and the goods were treated as property seized and so liable to forfeiture. No finding of fact resulted. A deemed fact is not a real fact. It cannot consequently rank as a consideration relevant to the subsequent decision on restoration until determined by the Tribunal or conceded to exist. It was held to be open to the Tribunal to determine the question of fact whether the goods were seized.

I do not agree with that conclusion. Jurisdiction to decide whether any thing forfeited is to be restored under section 152(b) is with the Tribunal. The jurisdiction in condemnation proceedings is, by virtue of Schedule 3, with the courts. If the deeming provision in paragraph 5 of the Schedule operates, the thing in question shall be deemed to have been duly condemned as forfeited. The effect of this deeming provision is to provide that the thing is to be treated as forfeited. The purpose of the provision is to treat the deemed fact as a fact and I cannot accept that it can be treated as "not a real fact".

While the division of jurisdiction between the courts and the Tribunal may arguably be curious, and is probably retained because of the long standing jurisdiction of the courts in proceedings for condemnation, the division is clear and it is not intended that the Tribunal should have jurisdiction to reconsider the condemnation of goods as forfeited. Mr Cordara's submission that the Tribunal should have jurisdiction to consider whether duty has been paid is no more than another way of claiming that the court's findings should be re-opened. The Tribunal's view would produce the surprising result that the person whose goods had been seized could make a choice of fact-finding tribunal. If he wanted the court to determine the issue he would serve a notice under paragraphs 3 and 4; if he wanted the Tribunal he would do nothing. In my judgment, the statutory scheme does not produce that result. The application to the Tribunal is for restoration under section 152. There is no breach of Article 6 because the owner has recourse to the courts in the condemnation proceedings".

In Gascoyne v Customs and Excise Commissioners [2004] EWCA Civ 1162 the Court of Appeal elaborated upon Lord Justice Pill's observations regarding the Tribunal's jurisdiction to reconsider the condemnation of goods as forfeited. Lord Justice Buxton concluded that where there has been a deemed forfeiture of goods, the tribunal could reopen the issues relating to the seizure of the goods provided it would not amount to an abuse of process.

Lewison J in the Commissioners of Customs and Excise v Albert Charles Smith ChD (2005) unreported, stated on abuse of process:

" Buxton's LJ reference to abuse of process or to considerations analogous to abuse of process are, in my view, references to the well-known principle that it may be an abuse of process to raise in one tribunal matters that could and should have been raised in another. So the relevant questions will always be, first, could the Applicant have raised the question of lawfulness of forfeiture in other proceedings and, if the answer to that question is yes, why did he not do so? In the light of his reasons for not raising the matter in condemnation proceedings the tribunal can then answer the question should he have done so and if they answer that question 'yes', then it will be, in most cases, an abuse of process for him to raise the question before the tribunal."

Evans-Lombe J in Commissioners of Customs and Excise v Weller [2006] EWHC 237 (Ch) concluded that whether a Tribunal should permit an Appellant to mount a challenge to the legality of the seizure in restoration proceedings would depend on the application of the principle of proportionality to the particular facts of the case in question.

Summary of Tribunal Jurisdiction

The review of the authorities on the Tribunal's jurisdiction in restoration proceedings establishes the following principles:

(1) The Tribunal's jurisdiction is limited to determining whether the Commissioners' decision to refuse restoration or to offer restoration on terms was reasonable.

(2) The Tribunal is not entitled to substitute its own view about whether the goods should be restored.

(3) The test for reasonableness is whether 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.

(4) 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 were correct.

(5) The Tribunal 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.

(6) Where the goods have been condemned as forfeited by the magistrates, there is no further room for fact finding by the Tribunal on the circumstances surrounding the seizure.

(7) Where there has been a deemed forfeiture of the goods, the Tribunal should apply the principle of proportionality to the particular facts of the case having in mind considerations of abuse of process when deciding whether to reopen the issue about the lawfulness of the original seizure.

(8) The Appellant's failure to institute condemnation proceedings will, in most cases, preclude subsequent challenge to the lawfulness of the seizure in restoration proceedings. In such circumstances the Tribunal should consider the Appellant's response to two questions when deciding whether to re-open the facts of the original seizure. The first question is: why did the Appellant not institute condemnation proceedings. The second question is: should he have done so.

Is the Appellant entitled to rely on the underlying facts relating to the seizure?

The Appellant's principal ground for requesting restoration of the goods was that he purchased the cigarettes and tobacco for his own use. Respondents' counsel pointed out that the Appellant was a regular traveller who was aware of the legal restrictions on importing excise goods for commercial purposes and the processes for challenging seizures of excise goods by Customs Officers. The Appellant had previously appealed unsuccessfully to a magistrates' court in respect of another importation. In this instance the Appellant consciously withdrew his Appeal before the magistrates' court. In the circumstances the Respondent contended that it would be an abuse of process for the Tribunal to entertain an argument of "own use".

We decided to admit evidence of own use because:

(1) The goods had been forfeited under the deeming provisions which did not involve an actual finding on own use by a magistrates' court.

(2) The Appellant followed advice given to him by a firm of solicitors to submit an appeal to a magistrates' court and then withdraw it.

(3) The likely order for costs by a magistrates' court if he failed with his proceedings to overturn the seizure. The costs order would be in the region of £1,000 which contrasted with the modest amount spent by the Appellant on the confiscated goods.

(4) The factual circumstances of this Appeal, in particular, the quantities of cigarettes and tobacco purchased were not above the guideline amounts indicative of commercial use.

(5) The Appellant would be precluded from testing Mrs Hodge's conclusion that the goods were purchased in order to be sold on for a profit which formed her principal reason for refusing restoration.

Findings of Fact on the Appellant's Importation on 7 January 2007

We find the following facts:

(1) The quantities of hand rolling tobacco and cigarettes brought in by the Appellant on 7 January 2007 corresponded exactly with the guideline quantity of three kilograms of tobacco, and below the guideline of 3,200 cigarettes in Regulation 12 (1B)(e)(viii) of the Tobacco Products Regulations 2001 (SI 2001/1712) as amended by SI 2002/2692.

(2) The Appellant was ill during the Christmas period of 2006.

(3) The Appellant was a retired seaman. His principal reason for his frequent ferry trips to France was his love of the sea and the companionship of like-minded travellers.

(4) The Appellant made a total of 18 trips to France in the 16 months preceding his visit on 7 January 2007.

(5) The Appellant had been stopped by Customs Officers on nine separate occasions since June 2001. On each occasion the Appellant was found to be in possession of cigarettes and hand rolling tobacco. On seven of those occasions the Appellant brought in a quantity of hand rolling tobacco which corresponded exactly with the guideline quantity. On five occasions Customs Officers seized the excise goods. The Respondents paid compensation to the Appellant for the goods seized on 4 June 2005 because he had not been issued with the correct seizure notice.

(6) The Appellant carried the goods purchased on 7 January 2007 in a P&O ferry carrier bag which gave the impression that they were purchased on the ship rather than in Adinkerke, Belgium.

(7) The Appellant was retired and received a weekly income of about £120. At the time he was stopped he had about £3,000 in his current account. The Appellant had no major outgoings. He received council tax and housing benefit in respect of his rented accommodation. He paid £369 for the excise goods, of which £216 was for the cigarettes and the remaining £153 for the hand rolling tobacco.

(8) The Appellant smoked cigarettes, on average a pack of 20 a day. There was a doubt in the Appellant's mind whether he had quit smoking on the 7 January 2007.

(9) The Appellant had the opportunity to purchase Christmas presents when he travelled on 10 December 2006.

Although we accepted the Appellant's principal reason for travelling was his love of the sea and companionship, we placed weight on the facts that he was a frequent traveller and on each occasion of being stopped by a Customs Officer he was found to be in possession of cigarettes and tobacco. Further the quantity of tobacco brought in invariably coincided with the guideline amount. We conclude from those facts that it was highly probable that he brought in a similar quantity of tobacco on each of the 18 trips undertaken in the previous 16 months before being stopped on 7 January 2007.

We were not convinced with the Appellant's explanation for his purchase of the hand rolling tobacco which he said was a present for his brother-in-law. The Appellant admitted that he had not seen or spoken with his brother-in-law for a while. Further the Appellant did not appear to have a current address for his brother-in-law. Finally we consider it implausible that the Appellant would spend £153 on a present on the off-chance that he might meet up with his brother-in-law, particularly as his weekly income was a £120. The Appellant accepted that he did not smoke roll-ups.

We are satisfied from our findings of fact that the Respondents have discharged their burden of establishing that the excise goods were purchased for commercial purposes. Further we hold that the Appellant intended to sell on the imported tobacco at a profit.

The Appellant suggested that the loss of £369 spent on the purchase of the excise goods constituted exceptional hardship. We find that it did not amount to exceptional hardship because the word exceptional implied something beyond an inevitable consequence of the seizure of the excise goods.

Was Mrs Hodge's Decision Reasonable?

Mrs Hodge decided that his 7 January 2007 importation was for commercial purposes when viewed in the context of his frequent trips abroad and the fact that the quantity of tobacco imported corresponded with the guideline quantity which followed the pattern of his previous importations following an interception by a Customs Officer.

Our findings of fact broadly corresponded with those facts relied upon by Mrs Hodge. We, however, placed weight on his implausible explanation for the destination of the tobacco which he said was a Christmas present for his brother-in-law. Mrs Hodge fairly stated that she was unable to take this matter into account as the full nature of the Appellant's relationship with his brother-in-law only became apparent at the hearing. We consider Mrs Hodge's projected calculation of the amount and costs of tobacco potentially imported on the 18 trips in the previous 16 months of little value, which was the other point of difference between our findings and those of Mrs Hodge's. However, we find that these differences were not material, and that we agreed with Mrs Hodge's conclusion that the Appellant intended to sell on the imported excise goods for a profit.

We decided that the Appellant had no grounds to substantiate a claim of exceptional hardship. We consider that non-restoration of the goods was proportionate for an importation involving onward sale at a profit.

Decision

We are satisfied for the reasons set out above that the Respondents' decision on review dated 16 April 2007 refusing restoration of three kilograms of hand rolling tobacco and 1,580 cigarettes 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: 20 June 2008

LON/