United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2008] UKVAT(Excise) E1124, [2008] UKVAT(Excise) E01124

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Mr David Foster v Revenue & Customs [2008] UKVAT(Excise) E01124 (09 July 2008)

E01124

Customs and Excise, Community Shopping, seizure of goods; legality of seizure; deemed forfeiture; restoration appeal; jurisdiction; abuse of process; whether legality of seizure can be raised in restoration appeal.

EDINBURGH TRIBUNAL CENTRE

MR DAVID FOSTER Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): J Gordon Reid, QC., F.C.I.Arb.,

(Member): James D Crerar, WS., NP

Sitting in Edinburgh on Tuesday 10 June 2008

for the Appellant Mr David Foster

for the Respondents Mr James Puzey, Barrister

© CROWN COPYRIGHT 2008.

DECISION

Introduction

Smoking is an anti-social habit. It is an offence to smoke in certain categories of premises in Scotland (Smoking, Health and Care (Scotland) Act 2005 section 2). Similar legislation was subsequently introduced in England and in Wales. Almost everyone knows that smoking can be addictive and can cause lung cancer. The UK Government imposes significant taxes and duties on cigarettes, tobacco and other similar products. Other countries within the European Union do not do so to the same extent. This has led to the practice of UK residents travelling to mainland Europe for the principal purpose of buying cheap cigarettes and tobacco in large quantities and bringing them back to the UK. Many of these community shoppers do so for their own personal use to feed their anti-social habit. Some do so for the purposes of selling these cigarettes for commercial gain on the black market. HMRC have the invidious task of trying to identify and distinguish between the genuine community shopper purchasing such goods and bringing them into the United Kingdom for his own use, and those who do so for commercial purposes. If the goods, purchased within the European Union, duty paid, are for the community shopper's personal use they are not liable to seizure no matter how large the quantity; if the goods are being brought in by the community shopper for commercial gain they are liable to seizure unless the appropriate duty has been paid.

Sometimes Customs make mistakes and seize cigarettes and tobacco brought into the United Kingdom by a community shopper for personal use. Such mistakes are inevitable. The Community Shopper's rights and remedies are contained in complex, sophisticated legislation, which includes Human Rights jurisprudence the correct application of all of which has become difficult in recent years and which makes it extremely difficult for the genuine community shopper to have the mistake rectified.

This is one such case and we wish to make it clear at the outset of this Decision that having heard evidence and reviewed all the facts and circumstances, we are in no doubt whatsoever that the Appellant David Foster (who represented himself), and his wife, were genuine community shoppers bringing back a large quantity of cigarettes and a small quantity of rolling tobacco for their own personal use. Their goods should not have been seized. They were poorly treated by Customs at Glasgow Airport at the time of seizure. Customs have refused to restore the goods or compensate the Appellant. Customs now advance a number of sophisticated legal arguments to justify their position and to exclude from our consideration the one matter the Appellant wishes to raise before us (on which both he and his wife gave evidence without objection and were cross-examined), namely that the goods should not have been seized because they were for his and his wife's own personal use.

The real issue before this Tribunal is the scope of the appeal. We have been greatly assisted by the excellent and very fair presentation by James Puzey, Barrister who appeared on behalf of Customs. He produced a full written submission which he amplified at the Hearing, which took place at Edinburgh on 10^th June 2008. He cross-examined the Appellant (who represented himself) and his wife, who both gave evidence on oath, with skill and restraint. Customs chose not to lead any oral evidence. One reason was the illness of Julie Wiggs, the review officer referred to below (see paragraph 58). The other reason was that she would not in any event be able to speak to the question of own use as she had not considered it.

A bundle of documents was produced. There was no dispute as to the authenticity and where appropriate, the transmission and receipt of those documents.

Legislative Framework

Section 49(1) of the Customs and Excise Management Act 1979 provides inter alia that imported goods, chargeable on importation with customs or excise duty, and unloaded from an aircraft in the UK without payment of that duty, are liable to forfeiture. Section 139(1) provides that any goods liable to forfeiture under the Customs and Excise Acts may be seized.

Regulations 12(1)(1A) and (1B) of the Tobacco Products Regulations 2001, provide inter alia that:

i. the excise duty point is the time when the tobacco products are charged with duty;

ii. where a community shopper acquires such goods in another member state for his own use and transports them to the UK, the excise duty point is the time when those products are held or used for a commercial purpose

iii. such goods are regarded as held for a commercial purpose if duty and tax has not been paid on acquisition in the member state; but regard is to be taken of-

a. the community shopper's reasons for having possession or control of the goods;

b. whether the community shopper is a revenue trader;

c. the community shopper's conduct including his intended use of the goods or any refusal to disclose his intended use;

d. the location of the goods

e. the mode of transport used to convey the goods

f. any document or other information relating to those goods

g. the nature of the products including the nature and condition of any package or container

h. the quantity of the goods and in particular whether the quantity exceeded 3200 cigarettes, 3 kilogrammes of rolling tobacco

i. whether the community shopper personally financed the purchase;

j. any other circumstances which appear to be relevant.

Regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 provides that where duty has not been paid on excise goods they are liable to forfeiture where a breach Regulation 6 occurs in relation to those goods. Regulation 6 requires duty to be paid on or before the excise duty point.

The overall effect of these provisions is that if the tobacco products held by the Appellant and/or his wife were held for a commercial purpose, these goods were liable to seizure and forfeiture.

Where goods are seized as liable to forfeiture, the community shopper may within one month of the date of seizure, or a Notice thereof, himself give notice of claim to Customs (Schedule 3 paragraph 3). If he does so, then Customs must institute condemnation proceedings within six months in the Sheriff Court, or if they so wish in the Court of Session; there is no time limit for bringing proceedings in the Court of Session (Schedule 3 paragraph 3, 6, 8). If he does not do so, or withdraws his notice, then the goods are deemed to have been duly condemned as forfeited (Schedule 3 paragraph 5). The Schedule gives Customs power to dispose of the goods before they have been condemned if they are of a perishable nature (paragraph 16). If the Community Shopper succeeds in the condemnation proceedings, Customs are bound to compensate him, often, by reference to the market value of the goods (paragraph 17(1)(c) and 17(4) of Schedule 3).

Section 152(b) of CEMA provides that Customs may

restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized (under the customs and excise Acts).

That provision does not expressly exclude, (as a factor to be taken into account in the exercise of the statutory discretion) the circumstances relating to the seizure.

The Tribunal's jurisdiction is derived from section 16(1)(4)&(8) of and Schedule 5 paragraph 2(r) to the Finance Act 1994 as amended. It is confined in terms of section 16(4) to a power

where the tribunal are satisfied that the Commissioners or other persons making that 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; and

(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 the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.

The nature of the Tribunal's general jurisdiction is that where appropriate an Appellant (and the Respondents) may lead evidence of the facts and circumstances relating to the appeal. There are no pleadings as such although Customs produced in the usual way a Statement of Case. It narrates among other matters, Customs' version of the circumstances of seizure (paragraph 1 and 12-14).

Grounds of Appeal

The short ground of appeal states that

HMRC's own codes of Practice and Procedures not adhered to.

There is also a reference to a letter dated 25/1/08 from the Appellant to Customs. That letter refers to the assertion that at the time of seizure the Appellant wished to complain to a senior officer but was denied the opportunity of doing so.

During the course of the appeal, it became apparent that the real ground of appeal was that the goods were purchased for personal use. Both Mr and Mrs Foster gave evidence about this in chief and in cross-examination. Much of the correspondence produced by Customs related to this topic.

Facts

Mr Foster is a retired electrical engineer. He lives with his wife, Margaret, in Falkirk. They own a barber's shop but he takes no part in its operation. There is no suggestion in the evidence or any documents produced that he has ever been a revenue trader. He has income from pensions. They have a few thousand pounds in savings. They are not wealthy but maintain a reasonable standard of living on their modest incomes. They have both been heavy smokers for many years. They have in the past made several trips to Spain to buy cigarettes thus taking advantage of the cheap prices there. Doing so makes a considerable saving even taking into account the cost of travel and accommodation. They do not normally buy cigarettes in the United Kingdom.

In 2001 they wrote to Customs seeking clarification of their entitlement as community shoppers.

They made such trips in 2002, 2003, 2004 and 2005. In 2004, they bought about 20,000 cigarettes, i.e. 100 cartons. A carton contains ten packets of twenty cigarettes i.e. 200 in total. They were interviewed by Customs at Glasgow Airport. Customs were satisfied that the cigarettes were being held for the Fosters' own personal use. Mrs Foster made a trip in July or August 2005 to Mallorca with her son and grandson; she bought about 100 cartons of cigarettes (i.e. 20,000 cigarettes).

On their return to Glasgow Airport on 20^th January 2007, after a short trip to Spain to buy cigarettes, Mr Foster and his wife were interviewed by Customs Officers. They were initially spoken to together; they were subsequently separated. Mr Foster was interviewed in the Main Hall where travellers were milling around. Mrs Foster was taken to an interview room.

Mr Foster was asked various questions about the cigarettes and tobacco contained in his suitcase. The cigarettes were not concealed in any way. There was nothing special about their packaging. He made no bones of the fact that the purpose of the trip was to purchase a large quantity of cigarettes thereby taking advantage of the lower prices in Spain. Mr and Mrs Foster personally financed the purchase of the cigarettes from their joint funds.

Two officers made notes in their notebooks. This was not a transcript of everything that was said. At the end of the interview, Mr Foster was asked to sign the notebook and thereby confirm the accuracy of the notes. The notes are difficult to read. Nevertheless he signed.

When initially interviewed together Mr Foster or Mrs Foster stated that they had about 68 cartons. Customs officers may have misheard the number as one of them wrote down 62. The correct number was 68 cartons of Silk Cut with one carton having been opened and two packets removed i.e. 68x200= 13,600 less 40=13,560). Mr Foster had receipts for his purchases and at some point passed them to a Customs officer. He also had in his possession 10, 50 gram pouches of Golden Virginia hand rolling tobacco. This is less than the guideline amount of 3kg referred to in paragraph 7 above. (The 13,560 cigarettes and the 0.5kg tobacco are collectively referred to as the "Goods").

In the course of his interview, Mr Foster said that he normally smoked Benson & Hedges, had stopped smoking for about a year but resumed smoking over Christmas 2006. He said he formerly smoked approximately 20-30 cigarettes a day but now smoked about 10-20. He said that he and his wife budgeted on about one carton of cigarettes each per week.

He was asked about previous trips and stated that he had brought 100 cartons back from Spain in October 2004. He and his wife were stopped on that occasion, he said, but Customs accepted his explanation that they were for their personal use. He also said that his wife brought back cigarettes from Spain in July or August 2005. He was also asked about his financial circumstances.

In the course of her interview, Mrs Foster said the cartons of Silk Cut and to hand rolling tobacco were for her and her husband. She said she and her husband each smoked about 25 cigarettes a day and that their purchases would last about one year. When asked when she was last abroad she stated that this occurred during the school holidays in August. The year was not mentioned although she had previously mentioned October. The Notebook refers to October 2006 but Mrs Foster explained in evidence that she meant to say 2005. We accept that explanation about the year which is consistent with Mr Foster's evidence recorded by Customs on 20^th January and in evidence before us. At the time of her interview Mrs Foster was extremely tired. She had had an early start to catch the flight home from Spain. She felt under pressure during the interview.

Mrs Foster also referred to the trip in 2004 and stated that 50 cartons of Silk Cut and 50 cartons of B&H were brought back.

One notebook referred to the Fosters being in the blue channel. Another notebook referred to the green channel.

After Mr Foster's signature in one notebook (Officer Burnside), the following appears:-

Spoke to officers N McAllister and J Gribbon. Agreed goods to be seized for the following reasons:-

1 Inconsistent stories with co-travellers

2 Time to last not as stated

3 Unreasonable amount of purchase when giving up

The inconsistencies are not specified in the notebooks. There is no amplification anywhere of the second and third reasons.

Two days later, the Fosters wrote a lengthy letter (dated 22/1/07) to Ian Sked, a Customs official, described as a review officer. At the outset the letter states that the decision to seize is being appealed. The letter describes the interview from the Fosters' point of view. It records that they were required to sign the notebooks, which his wife only glanced at and Mr Foster found difficult to read.

The letter proceeds to explain that Mr Foster is a smoker who is trying to give up; that he preferred B&H to Silk Cut, but bought hand rolling tobacco (HRT); if he gave up the Silk Cut would last until about April 2008 when they proposed to return to Spain. The letter describes in detail how the purchases were funded.

The letter refers to correspondence passing between Customs and the Fosters in 2001. In that earlier correspondence (which Mr Foster had with him at the Hearing) Mr Foster declared his travel plans and intentions to buy cigarettes abroad and requested guidance on quantities. Customs gave general guidance in response.

The letter also records the Fosters' foreign trips in 2002, 2003, 2004 and 2005. On each occasion they brought back quantities of cigarettes. The letter records that they were interviewed at Glasgow Airport in 2004 and were allowed to retain their purchases.

In their letter the Fosters estimate their daily consumption at about 20-30 per day (i.e. in total 280-420 per week) which they describe as a carton a week each. Two cartons contain in total 400 cigarettes.

Finally, the letter sets out various figures to demonstrate that even if they were to sell the Goods purchased, they would make a loss, having regard to the costs of the trip to Spain.

This letter was treated by Customs, in a reply dated 25/1/07) as a formal appeal against seizure. The Fosters wrote a further letter dated 2/2/07 summarising their position. The letter pointed out that the real gain for heavy smokers was the difference between the purchase locally of a year's supply (approximately £2,860) and the cost of the purchase in Spain (approximately £1500).

In reply, by letter dated 15/2/07, Mr Sked stated that he had completed his review of the Fosters' appeal. This is an extraordinary statement as Customs had already acknowledged in effect that condemnation proceedings would be required. The letter is extremely lengthy and narrates the contents of the officers' notebooks, records the receipts for the purchase of the Goods, and refers to the relevant legislation.

Mr Sked then explains at great length why he is satisfied that the Goods were held for a commercial purpose. Why he is doing this is unclear to say the least as his "review" has no statutory basis or effect whatsoever. He did not make the decision to seize so his reasons for justifying seizure are irrelevant. He did not make the subsequent artificial decision to refuse to restore the goods. We say artificial because (as appears from the history of events) the Goods had by the date of that decision, long since been destroyed.

Mr Sked's letter served to dishearten the Fosters and to discourage them from proceeding with the extant appeal against seizure. For what it may be worth we find the reasoning process in this letter to be wholly unreasonable, indeed perverse.

The reasons may be summarised as follows:-

i. The quantity

ii. The Fosters did not state the exact quantities during interview; this was because the Goods were not for their own use.

iii. Even if Mr Foster intended to give up smoking, it is not credible that he would not have imported a minimal quantity of his preferred brand.

iv. There were inconsistencies in the Fosters statements of their smoking habits.

v. Mr Foster ought to have known exactly how long his supply of cigarettes would last. His statement that if he gave up, the supply would last until April 2008 but if he did not the supply would last until September/October 2008.

vi. Likewise Mrs Foster ought to have known exactly how long her supply would last. She said a year but Mr Sked's calculations put the date at September 2008.

vii. Mr Sked calculates that on the basis of past purchases and consumption rates the Fosters ought to have had approximately 7900 cigarettes immediately prior to the Fosters' January 2007 trip to Spain.

viii. Mr Foster did not know the cost of cigarettes in the UK.

ix. The Fosters' financial circumstances were such that they could not finance the trip without being financially compensated.

x. The Fosters were not open and honest at all times during the interviews.

Towards the end of his letter Mr Sked states:-

The goods were therefore correctly seized under section 139(1) of CEMA and I uphold the seizure accordingly.

Mrs Foster sent a detailed reply by letter dated 19/2/07. In that letter she denied that her husband had referred to 60 cartons and maintained that he had stated that there were 68 cartoons. She said that she had underestimated her consumption stating that it was 30 a day. She explained more fully her financial circumstances.

Further correspondence ensued. By letter to the Fosters dated 8/3/07 Mr Sked referred to a telephone conversation with Mr Foster that day and confirmed that the case had been passed to HMRC solicitors to institute condemnation proceedings. The letter pointed out that if they withdrew from these proceedings after a writ had been served customs would seek costs of a minimum of £280. The letter also pointed out that should Customs be successful at the hearing or should the appeal be withdrawn at a later date the recoverable costs would be substantially more.

This letter must have crossed with Mr Foster's letter to Mr Sked of the same date. In it, Mr Foster expressed dissatisfaction with Mr Sked's conduct and intimated that he had spoken to the Regional Complaints Unit. He stated that he would await the outcome of the court proceedings.

By letter to Mr Sked dated 9/3/07, Mr Foster drew his attention to the London Tribunal's decision in Mills (see paragraph 74 below).

By letter dated 16/3/07 to Mr Foster, Mr Sked stated with reference to condemnation proceedings that

Rather than proceeding with your case directly to the Sheriff Court I carried out a local review of this case. I was not involved in the original decision and my review was carried out independently............As condemnation proceedings can be expensive I wanted to ensure you could make as informed a decision as possible in deciding whether to proceed with your appeal to the Sheriff Court.

The letter again summarises what he regards as the grounds for concluding that the goods were held by Mr Foster and his wife for a commercial purpose, namely (i) the quantities, (ii) vagueness as to consumption rates, (iii) misdeclaration of quantities. The penultimate paragraph of the letter states

It is not suggested that the purpose of importing these goods was to make a profit which would cover the cost of the goods and your trip. However, I believe the goods have not been imported for your own use as you have alleged, and I must conclude that the goods have been imported for others for a commercial purpose

By letter dated 21/3/07 to Mr Sked, Mr Foster pointed out that Mr Sked's calculations were not based on the average of one carton per person per week, which had always been the Fosters' position. At this stage, Mr Foster was still insisting in his appeal against seizure.

By letter dated 26/3/07 in reply Mr Sked informed Mr Foster that the goods seized had been selected for disposal on 5 March 2007. He also pointed out that

Should your appeal be successful HM Revenue and Customs operate a policy of compensatory payments based on the purchase value of the goods at the point of sale (as per Schedule 3, paragraph 17(c) of the Customs and Excise Management Act 1979.

By letter dated 29^th March 2007 to Mr Sked, Mr Foster stated inter alia

We confirm we are not proceeding with our appeal.

We note in your letter that you destroyed our property almost a month ago. Had we been aware of this fact on 8^th March we would probably have withdrawn our appeal then.

Mr Sked responded by letter dated 29/3/07 stating that the case was now closed.

In March 2007, Mr Foster complained about the conduct of the Customs officers who interviewed him and his wife. He also complained about Mr Sked. He received a reply from a Customs official (Mrs M Russell). She replied by letter dated 11/4/07. The letter did not address Mr Foster's specific complaints in any detail. She rejected them. Mr Foster persisted in his complaints.

He received a very long reply (dated 17/9/07) to a further letter of complaint from Mrs C L Gowing, Complaints Manager, based at HMRC Detection Complaints, Northern and Central, Ipswich. She seems to have received and relied on reports from the officers involved. She seems to have accepted everything they said and rejected all Mr Foster's contentions. Mr Foster has taken matters further by appealing to the Ombudsman and/or the Adjudicator. (We heard no evidence of the details of such procedures or what stage they have now reached). In the meantime Mrs Gowing, in a letter dated 15/10/07 to Mr Foster acknowledged that some aspect of the correspondence had not been dealt with within a reasonable time and authorised compensation of £50 to be paid to Mr Foster.

By letter dated 23/9/07, Mr Foster replied to Mrs Gowing's letter dated 17/9/07. His letter considers events in considerable detail and is consistent with what he has maintained all along, namely that Customs officials were aggressive, he stated the correct quantity of cigarettes imported, his wife made a genuine mistake about the year of her visit to Spain with her son, and Mr Sked made significant errors in his mathematical calculations. He also repeated a number of other points which need not be specified.

Mr Foster's letter dated 23/9/07 was treated by Customs as a formal request for restoration of the Goods (even although they had long since been destroyed). By letter dated 12/10/07, Colin Fraser, HMRC Senior Detection Manager, Edinburgh rejected the deemed request. The letter contains only general statements about policy and says nothing about the particular circumstances relating to Mr Foster's experience. It gives no reasons whatsoever, which are specific to Mr Foster's case.

By letter dated 27^th December 2007, Customs, per Julie Wiggs, a Review officer, carried out a statutory review of Customs' decision dated 12^th October 2007 not to restore the Goods. That letter purports to set out the background and narrates inter alia that (i) the Appellant and his wife were interviewed, (ii) following these interviews an unidentified Customs officer was satisfied that the goods were for a commercial purpose, and (iii) the Goods were seized under section 139 of CEMA as being liable to forfeiture under Regulation 16 of the REDS Regulations and section 49)1)(a)(ii) of CEMA. The letter proceeds to note that matters directly relating to the legality of the seizure are not relevant to restoration and could not be considered. However the letter then notes that a notice of claim was submitted but subsequently withdrawn. The letter records that the goods were deemed to have been duly condemned as forfeited to the Crown and that the goods

are now owned by Customs for the reasons that they were seized in the first place; that is because they were held for a commercial purpose and not for own use and you can no longer contend otherwise

In the light of the authorities discussed below, the underlined part of the letter quoted above is wrong in law and therefore misleading. Moreover, the statement that the goods are now owned by Customs is also wrong because, as noted above, the Goods, by this stage, had long since been destroyed.

The letter continues

Despite being aware that you cold (sic) not raise matters of "own use" in a restoration appeal of this (sic) you chose to withdraw your appeal against seizure. You now claim this was because the goods had been disposed of yet that reason is at odds with your continuing with a restoration appeal.

The reasoning in this paragraph is fallacious. The Appellant withdrew the notice of claim after he was informed that the goods had been destroyed. It is entirely understandable that a community shopper (not well versed in the law) will decide not to pursue condemnation proceedings further when told that the object of the contemplated litigation no longer exists. In these circumstances the community shopper is left so far as he is concerned with the only remedy left to him namely the fiction of restoration under section 152(b) of CEMA which might lead to compensation.

The letter continues

Having had an opportunity of raising and challenging the seizure – which includes any claim that the goods were for "own use" including gifts – in the Magistrates Court, one does not have a second chance of doing so in a statutory review (such as this letter) or at a VAT and Duties Tribunal

For further information about this please see Appendix A attached.

Appendix A purports to set out the law. Reference is made to a passage in the judgment of Lewison J in Albert Smith v HMRC where the Judge observes that it will be, in most cases, an abuse of process for (the community shopper) to raise the question (sc the lawfulness of forfeiture) before the Tribunal.

Customs must therefore be taken to accept that in most but not all cases it will be an abuse of process (at least in England) to raise the question before the Tribunal. Customs must also be taken to at least accept that there will be some cases where it will not be an abuse of process to do so. However contrary to the judgment from which Customs' letter quotes the Appendix concludes

This means that having had an opportunity of raising and challenging the seizure – which includes any claim that the goods were for "own use" including gifts – in the Magistrates Court, one does not have a second chance of doing so in a statutory review (such as this letter) or at a VAT & Duties Tribunal

Without qualification, the underlined passage is also wrong on Customs' own analysis of the law and therefore misleading.

The main body of the letter then proceeds to record Customs' policy for the restoration of excise goods. It notes that the

general policy is that seized excise goods should not normally be restored each case is examined on its merits to determine whether or not restoration may be exceptionally offered.

The letter then identifies an exception where goods will be restored on certain conditions (payment of duty, VAT and a penalty). The identified exception is not relevant for present purposes. It relates to goods passed on to others on a "not for profit" reimbursement basis. In the present, appeal there is no evidence whatsoever that the Goods were to be passed on to third parties at all. There is also no direct or indirect evidence that they were to be used for a commercial purpose.

The letter then purports to address the issue of restoration. The writer states that she considers

the decision afresh; including the circumstances of the events on the date of seizure and related evidence to identify if any exceptional or mitigating circumstances exist that should be taken into account.

The words underlined indicate that the evidence of what transpired on the date of seizure falls to be taken into account. There is no review of the facts in the letter and no indication that the circumstances have been reviewed at all. All that is noted is that it is not claimed that the Goods were for reimbursement on a not for profit basis. The writer concludes that

The goods were held for profit and should therefore not normally be restored..................

Having considered all the relevant evidence in this case I have decided to confirm (uphold) the original decision, the seized goods will not be restored.

Customs could not restore the Goods as they had long since been destroyed. The impression given by the letter is that the Goods still exist and if the decision had been in favour of the Appellants the Goods would have been restored. The letter is again misleading in that respect.

What is also noteworthy about this review letter is that nowhere does it attempt to summarise the reasons for or even justify the seizure of the Goods. Customs' statutory Statement of Case lodged in this appeal does not do so either. Nor does it challenge the jurisdiction of this Tribunal to review, as the review officer purported to have done,

the circumstances of the events on the date of seizure

In summary, we find as fact that the Goods were not purchased for a commercial purpose. They were not to be sold for profit. They were purchased for personal use.

Submissions

In essence, the argument advanced on behalf of Customs by Mr Puzey was that the present appeal could not open up the legality of the forfeiture as to do so would amount to an abuse of process. He referred to Mills 2007 EWHC 2241 (Ch), Gora v CC&E 2003 3 WLR 160, Gascoyne v CC&E 2005 1 WLR 222, HMRC v Smith 2005 unreported, CC&E v Weller 2006 EWHC 237. The Appellant's withdrawal from condemnation proceedings was prompted by the destruction of the seized goods.

In his closing submission, Mr Foster did not add significantly to what he said in evidence or in the course of the correspondence referred to above.

Discussion

Evidence

We found Mr Foster to be wholly reliable and credible. He is an intelligent and articulate individual who presented his case with moderation and restraint. He impressed as a determined individual who felt aggrieved by the treatment he and his wife had received from Customs and would not let matters rest until he had received what he perceived to be justice. This is borne out by the stamina which he exhibited in correspondence with Custom and by the fact that he is maintaining his right to pursue his complaints with the Ombudsman and/or the Adjudicator. We found Mrs Foster to be credible and generally reliable. She was or at least appeared to be very nervous when giving evidence. It must be quite daunting to give formal evidence in a judicial setting, to questions put by one's spouse. We should say that there was not the slightest hint of the Fosters preparing questions and answers in advance or in any way deliberately shaping their evidence to give it consistency. The substance of the evidence of each of them was consistent, which is not surprising as we accept that both were giving truthful answers to all the questions put to them particularly those put by the Tribunal and in cross-examination.

In particular, a variety of questions were asked in the cross examination of both Mr and Mrs Foster which raised the issue of whether the Goods were acquired for their own personal use. Mrs Foster was cross examined on her statement that she was in Spain in 2006. She explained that she had made a simple mistake. At the interview she referred to last year meaning the year 2005, forgetting in the heat of the moment that current year was 2007. Many people make similar mistakes in the month of January; writing a cheque with the date of the previous year is a classic example. We accept Mrs Foster's evidence. The mistake was pointed out shortly after in correspondence. She also maintained that when she and her husband were interviewed they stated that they had 68 cartons of cigarettes and not 60 or 62. We accept that evidence too. The Fosters had no reason to lie about this matter. They had been stopped; their baggage was being examined; the cigarettes would be counted; they had and handed over receipts for 68 cartons. There was no advantage to be gained by deliberately stating the wrong quantity. Even if they stated about 60 or 62 cartons, we do not see anything sinister in that either.

Our short conclusion on the evidence is that the Goods were purchased for the Fosters' own personal use. They were not purchased for any form of commercial purpose. The reasons for seizure are obscure, have never been explained by those making the decision and in all the circumstances are unjustified insofar as they are capable of being understood. The so-called review procedure conducted by Mr Sked was irregular, had no statutory basis and was liable to confuse and did confuse Mr Foster as to his rights and remedies. Further correspondence from Customs contained several misleading statements, and compounded the pre-existing confusion and the state of uncertainty in this branch of the law.

Mr Foster withdrew his notice of claim because the Goods had been destroyed and because of the risk of a substantial liability in expenses in pursuing in court proceedings. He was not, apparently eligible, for Legal Aid. He also had difficulty in obtaining adequate legal advice on this complex area of the law. These seem to us to be good reasons for not pursuing own use arguments in condemnation proceedings. There was nothing reprehensible in such a decision which was plainly made in good faith.

As for Mr Sked's reasons in his letter dated 15/2/07 we have, insofar as his letter may be relevant to the decision we have to make, the following comments:-

i. Given the Fosters' smoking habits, the quantity is not surprising;

ii. The absurdity of this reason is demonstrated by simply stating it;

iii. B&H were his preferred brand. It is nowhere stated at interview that he would not smoke Silk Cut. It is understandable that not having his preferred brand at his home and readily accessible would encourage Mr Foster to refrain from smoking or at least cut down. No adverse inference can reasonably be drawn from this evidence;

iv. What the notebook records is not 10-20, but 10, 20 or more. Mr Sked has misinterpreted the information provided to Customs by the Fosters;

v. It is absurd to suggest that Mr Foster should have known exactly how long his cigarettes would last;

vi. We do not consider that the information given was ever intended to be mathematically precise. Rather, the estimate was given under pressure in the heat of the moment;

vii. As previously indicated Mr Sked is giving these estimates a mathematical precision and accuracy which are not justified;

viii. This is hardly surprising as most if not all of his purchases were made abroad. If he were proposing to sell the cigarettes at profit the one piece of essential information would be the UK price otherwise how would he know that third party purchasers would be interested in buying. No adverse inference can reasonably be drawn;

ix. No basis is given for this speculative statement;

x. This is a general comment which we do not consider can be reasonably supported on the information available to Mr Sked.

The concluding statement is extraordinary. Mr Sked had no power to uphold the seizure. There was no statutory basis whatsoever for this conduct which we regard as misleading and which was bound to discourage the Fosters from persisting in the requirement for condemnation proceedings to be instituted.

Law

We now attempt to identify the law as it currently stands on the issue whether the Tribunal may consider questions of own use in restoration appeals under section 152(b) of CEMA, and apply it to the facts as we have found them to be.

Gora, a restoration appeal, raised preliminary issues as to the application of Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. It endorsed the Tribunal's fact finding role in the exercise of its jurisdiction under section 16(4) of the 1994 Act (paragraphs 38 and 39). Dicta in the case indicate that the Tribunal may not consider the question of the legality of seizure (see paragraphs 57, 58 and 62).

However, in Gascoyne, another restoration appeal the Court of Appeal noted that Gora caused a difficulty (paragraph 28). Paragraphs 57 and 58 in Gora were regarded as obiter (paragraph 38, and 42). The difficulty related to the fact that the forfeiture process interfered with the importer's rights to his property which are potentially protected by Article 1 of the First Protocol to the Convention. In that context Lord Justice Buxton said this-

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 provision has always, in every case, got to be paramount.................

76 .............failure to give a paragraph 3 notice will, in most cases, preclude a subsequent challenge to the lawfulness of seizure.

Carnwath LJ (with whom Brooke LJ agreed) had rather greater doubts than Buxton LJ about the correctness of the dicta in Gora discussed above.

In Smith unreported 17/11/05 (Lewison J), a restoration case, the Judge observed, after reviewing Gora and Gascoyne, that the validity of the seizure will only become an issue if the Tribunal (hearing a section 152(b) appeal) is satisfied that the applicant had good reasons for not having raised the matter of condemnation proceedings (paragraphs 25 and 32 and page 15). He held that the Tribunal misdirected itself (paragraphs 25 and 28) and remitted back to the Tribunal giving Mr Smith, who represented himself before the court, a further opportunity to persuade the Tribunal that he had good reasons for not making a claim to challenge the legality of the seizure (page 16). There is a revealing exchange between the Judge and Mr Smith (at pages 17 and 18) which highlights the difficulty community shoppers have in understanding (a) the complexities of the law and (b) why there should be a restraint on arguing own use before the Tribunal.

In Weller 2006 EWHC 237 (Ch) Evans-Lombe J followed the approach in Smith (paragraph 16). The Tribunal had made an interlocutory order that the appeal should proceed on the basis that

The Tribunal has jurisdiction to consider whether the seized goods were for the Appellant's personal use even though there have been no condemnation proceedings and condemnation has not been challenged.

The Judge noted on the material before the Tribunal that Mr Weller or his advisers were suffering from confusion (in relation to the procedure for appealing against seizure and appealing to a Tribunal) at the time he was assumed to have decided not to ask the Commissioners to initiate condemnation proceedings (paragraph 18). The Judge's view was that (paragraph 21)

The Tribunal plainly had jurisdiction, on appeal from the Commissioners' refusal to review, to admit an argument in support of the appeal amounting to a challenge to the validity of the forfeiture.

The only remaining question was whether the Tribunal was entitled on the particular facts to conclude that Mr Weller should be allowed to contest the validity of the deemed forfeiture. The Judge held that he was (paragraph 22). Finally, the Judge echoed the

call by each of the Judges of the Court of Appeal which heard the Gascoyne case that a statutory rationalisation of the procedure governing the forfeiture of goods by the Commissioners is urgently required. It seems to me that the present system is confusing to the public and pregnant with the possibility of substantial injustice.

(paragraph 24)

We agree and adopt these sentiments. They also echo the exchange between community shopper and Judge in Smith referred to above. Putting it more broadly, it is difficult to see how such a confusing system could ever be described as proportionate and necessary. A system which is confusing and thus justifiably criticised can hardly be said to strike a fair balance between the interests of the individual and the general public interest. The test of legal certainty may not be met. The view that deemed forfeiture automatically shuts out the one argument that most community shoppers wish to raise before the Tribunal can hardly be said to achieve a reasonable degree of proportionality. A statutory scheme which is confusing and leads to uncertainty is neither reasonable nor necessary. We therefore agree with the approach in Gascoyne and Weller. We consider that we have jurisdiction to determine, at the very least, whether the circumstances justify the community shopper arguing in the context of a section 152(b) application to Customs (see Mills at paragraph 25) and a subsequent appeal to this Tribunal, that the goods should be restored (or more accurately compensation paid for their wrongful destruction) because they were for the applicant's own use.

In Weller, Customs eventually concluded that the goods should be restored to him free of charge and offered an ex gratia payment. That offer was the subject of yet a further appeal to the London Tribunal which was dismissed (LON/2004/8093 30/4/08, Chairman Nicholas Aleksander).

In Mills, another restoration appeal (the decision of the Tribunal was referred to in the course of correspondence between Mr Foster and Customs; see paragraph 47 above), the court held (reversing the Tribunal on this point) that a notice requiring condemnation proceedings be commenced can be withdrawn before such proceedings are begun (paragraph 28). The juridical basis of that view, notwithstanding the peremptory wording of paragraph 6 of Schedule 3 to CEMA, may be that the notice is treated as pro non scripto, or the intimation of its withdrawal amounts to a waiver (in the sense of abandonment) of the statutory right to insist in condemnation proceedings.

In Mills, Customs argued that deemed forfeiture excluded any own use argument before the Tribunal (paragraph 33). That argument was rejected by the court (paragraph 34) and Customs' appeal was dismissed (paragraph 43 and 47). The court considered the question from the standpoint of abuse of process and held, on the particular facts (paragraphs 35-36) that the Tribunal, albeit for different reasons than those given by the Tribunal, was entitled to consider the own use argument (paragraph 38). As Customs had expressly excluded the legality and correctness of the seizure itself, the Tribunal was justified in allowing the appeal and remitting to HMRC to reconsider on the express basis that the Mr Mills' goods were for his own use (paragraphs 39, 43 and 46).

It is interesting to note that in Mills, one of the reasons for refusing to restore given by the reviewing officer was that there was a discrepancy between what was declared and what was found. The reviewing officer said this gave good reason to doubt the Appellant's credibility; the Tribunal concluded that this finding was one which could not reasonably have been drawn from the evidence; receipts were produced for the true amount; the Tribunal found that the Appellant could scarcely be said to be trying to convince the officer that the importation was materially smaller than it really was (see paragraphs 17 and 18). The Judge agreed with that reasoning (paragraph 40). He pointed out that the under-declaration was not significant since it did not bring the Appellant close to any particular guideline that might have helped him and he was carrying receipts which showed the true quantities. It was therefore impossible to infer a sensible motive or reason for Mr Mills lying about this. That same general point and reasoning applies in the present case.

As in Mills no objection was taken before us to the leading of evidence either oral or documentary. No objection can therefore be taken to this tribunal making primary findings of fact based on that evidence (see Mills paragraphs 45 and 46).

A number of recent Tribunal decisions, not cited to us, have considered the question of abuse of process in the context of restoration appeals. They do not affect our decision. Rather, they reassure us that the approach we take in this case is the correct one. Thus, in Morgan LON/2007/8056, 15/4/08, Chairman-Adrian Shipwright, the Tribunal considered that it would not be an abuse of process to make a finding of fact (which it made) that the goods were imported for own use (paragraph 16) on the basis that such a finding did not go to the legality of the seizure but to the reasonableness of the decision to refuse restoration (paragraph 17). The decision not to restore was one that the Commissioners could not reasonably have arrived at. The decision proceeded on irrelevant considerations, namely (inter alia) that the goods were for commercial and not personal use (paragraph 21). The Tribunal directed that a further review be carried out taking account that the Tribunal had found that the goods were for personal use and not for commerce (paragraph 23).

In Peet MAN/2007/8057, 14/5/08, Chairman-Ian Vellins, a restoration appeal, condemnation proceedings were not instituted. The Appellant did not insist in such proceedings for reasons of cost. A differently constituted Tribunal had previously held that it would be contrary to the Appellant's human rights for him not to be able to rely before the Tribunal on the case he would have advanced before the court (paragraph 5). Following that decision, which Customs appeared to accept, they carried out a further review and concluded that a portion of the goods were for the Appellant's own use and offered an ex gratia payment. The Appellant again appealed. The Tribunal (chaired by Mr Vellins) made findings relating to the facts underlying the original seizure of the goods (paragraph 36, 38-53). The Tribunal heard evidence from the Appellant and from Customs officers (paragraphs 26-32). The Tribunal expressly found that the seizure was lawful (paragraph 48) and dismissed the appeal.

In Roebuck MAN/07/8032, 28/3/08, Chairman Richard Barlow, Customs again argued that the argument that the goods were for the Appellant's own use was not a permissible ground of appeal because that was an issue that could only be decided in condemnation proceedings (paragraph 9). After reviewing Gora and Gascoyne, the Tribunal concluded that subject to any question of abuse of process or similar considerations, the Appellants could raise the issue of own use where that issue has not been the subject of substantive consideration by the courts (paragraph 24). The Tribunal noted that the distinction between condemnation proceedings and a restoration appeal was not an easy one for a lay person to understand; these were subtle distinctions which were needed to understand the complicated system the law has devised for resolving issues in this area (paragraph 28). The Tribunal therefore held that an abuse of process or similar concept did not arise and that the appellant was not precluded from raising the question of own use in the Tribunal (paragraph 29). The Tribunal considered itself entitled to make full findings of fact and held that the Appellant's Convention rights entitled him to challenge the correctness of the seizure and that he was not precluded by procedural issues such as abuse of process and the like (paragraph 43). It is of some interest to note that in considering the evidence the Tribunal recorded that the Appellant was said to have given inconsistent replies about how long the tobacco in question would last compared with his rate of consumption as described to the officer. The Tribunal accepted the Appellant's evidence that he only stated a rate of consumption because he was repeatedly asked and that he could not give an accurate figure (paragraph 37). Having regard to its general fact finding powers and the terms of section 16(4)(b) of the 1994 Act, the Tribunal also rejected a Customs submission that the question of the reasonableness of the decision fell to be judged on the Customs view of the facts (paragraph 44). The Tribunal allowed the appeal and directed that a further review be conducted in light of the Tribunal's findings of fact, and in particular the fact that the goods were for the Appellant's own use (paragraph 46).

A general discussion of the powers of the Tribunal under section 16(4) of the 1994 Act is to be found in Boxton Ltd LON 2007/8130 7/3/08, Chairman Theodore Wallace. That discussion lends support for the terms of the Directions set out below.

In Scots law, the developing doctrine of abuse of process generally involves some form of reprehensible conduct by the party whose behaviour is called into question. The conduct is wilful and may involve bad faith (see the discussion in Tonner v Reiach and Hall 2008 SC 1 at paragraphs 74-81). In our view, Mr Foster's conduct cannot, on any conceivable basis, be described as an abuse of process. He withdrew his notice of claim for reasons of costs, some legal advice he had received and lack of knowledge of the subtleties of this area of law as explained above. Which process could he be abusing? It cannot be the Sheriff Court as no proceedings were begun there. It cannot be the processes of this Tribunal as numerous decisions have considered the question of own use in restoration appeals. Moreover the conduct which might be said to constitute abuse occurred before an appeal to this Tribunal was ever taken. These decisions recognise and accommodate an Appellant's Convention rights. Assuming jurisdiction to consider own use where an Appellant has either not required condemnation proceedings to be taken or withdrawn that requirement before any findings have been made by the court is entirely compatible with an appellant's Convention rights. No question of inconsistent findings of fact by different decision makers arise. No question of prejudice arises. Mr Foster, too, could hardly be accused of forum shopping.

Moreover, no question of res judicata arises. A deemed condemnation is in our view, at best for Customs, the equivalent of the dismissal of a party's claim. In Scots law res judicata may be pleaded where there has been a proper judicial determination of the subject matter in dispute. It does not normally arise where a claim is dismissed (as opposed to the granting of decree of absolvitor). We refer to the statement of principle in Waydale Ltd v DHL Holdings (UK) Ltd 2000 SC 172 at 177.

In our view, therefore, the question of own use is a matter which, in this case, could properly be raised before this Tribunal. It was so raised and we are bound to consider it. Customs ought to have considered it in the context of the application for restoration and in the review of the decision not to restore. They did not do so or did not do so adequately. Had they done so and properly investigated matters the only reasonably conclusion they could have arrived at would have been that the Goods were held for own use. Customs therefore failed to take into account a relevant matter. Moreover, the original decision to refuse to restore gives neither adequate nor intelligible reasons for the decision. The decision on review is barely any better. In these circumstances, we are satisfied that the decision not restore and its confirmation on review are decisions which Customs could not reasonably have arrived at.

Summary

This Tribunal has jurisdiction in this restoration appeal to consider arguments that the Goods were held for Mr Foster's own use. No question of abuse of process, res judicata or similar considerations arises.

We have found as fact that the Goods were held for own use.

We are satisfied that the Customs' decision to refuse to restore the Goods (or more accurately since the Goods have long since been destroyed, to offer compensation), confirmed on review, was not one which they could reasonably have arrived at, particularly as they excluded from their consideration the argument that the Goods were for own use.

Disposal

We allow the appeal and direct that the decision complained of is to cease to have effect. We require Customs to conduct, in accordance with the aftermentioned Directions, a further review of the original decision to refuse to restore the Goods.

The Directions mentioned are

i. The review is to be carried out in the light of this Tribunal's Decision.

ii. The review is to be carried out taking account of this Tribunal's Findings. In particular, the review is to be carried out on the basis that the Goods were, at the material time, held by Mr and Mrs Foster for their own use.

iii. The review is to be carried out within 28 days of the date of release of this Decision by an officer not previously involved in the case at any stage.

iv. Should the review conclude that compensation should be paid, any compensation awarded should reflect the current average UK price at which the Goods might be sold at leading supermarkets at the date which is as close to the date of any payment of compensation as is reasonably practicable. (This would fully compensate but not over-compensate the Appellant as he would be able to go into the market and replace the Goods wrongfully seized and destroyed; he would be restored to the position he would have been in had the Goods not been wrongfully seized and destroyed).

Finally, should either party have any application relating to the expenses of the Hearing, they should be made in writing within 21 days of the date of release of this decision. It should be possible to resolve the question of expenses without the need for a further hearing. However, should either party wish a hearing on expenses they should make that clear in any submissions they make to the Tribunal.

J GORDON REID, QC., F.C.I.ARB.,

CHAIRMAN

RELEASE: 9 JULY 2008

EDN/08/8003