United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2008/E01145.html
Cite as: [2008] UKVAT(Excise) E01145, [2008] UKVAT(Excise) E1145

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John Grenville-Jones v Revenue & Customs [2008] UKVAT(Excise) E01145 (07 November 2008)

E01145

Excise goods – Whether Appellant able to contest facts in Tribunal – Yes – Whether abuse of process – No – Restoration – Whether own use – No – Whether decision reasonable – Yes – Appeal dismissed

LONDON TRIBUNAL CENTRE

JOHN GRENVILLE-JONES Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: DR K KHAN (Chairman)

Sitting in public in London on 25 September 2008

The Appellant in person

Mr R Jones, Counsel, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

1. This is an appeal against a decision of the Respondents not to restore seized goods. The decision was communicated to the Appellant by letter dated 13 March 2008.

Background

2. The background to the appeal is that on 21 August 2007 the Appellant was stopped by a Customs Officer while travelling from Belgium as a coach passenger. The Appellant was questioned by the Officer and he declared that he had bought 16 sleeves of cigarettes and about 50 cigars. The Appellant said that the goods belonged to him and were for his consumption. He produced five receipts for the goods. The officer examined his luggage and found 10 x Superkings cigarettes (2000), 5 x Dorchester cigarettes (1,000), 3 x Davidoff (600), 2 x Camel (400), 1 x Wingfield (200), 5 x pouches of Old Holborn hand-rolling tobacco and 1 x café creme. The officer asked the Appellant what kind of tobacco he was currently smoking. He said Windsor Blue cigarettes. The Appellant signed the Officer's notebook.
3. On 22 November 2007 the Appellant returned to Dover to attend an interview which had been agreed at the initial seizure. The Officer read through the events from 21 August 2007 from his notebook and the Appellant agreed with what had been recorded.
4. The Appellant confirmed all seized goods were for his own use. He said he did not smoke a particular brand of cigarette but a variety of brands. He confirmed he smoked two packs of 20 cigarettes a day and a carton (200) would last him five days. He also confirmed that he sometimes smoked between five and ten roll-ups a day but preferred to smoke cigarettes. A 50 gram pouch of tobacco would last one month.
5. The Officer asked the Appellant how much a 50 gram pouch of tobacco would cost in the UK, he said approximately £5 to £6. He thought a 25 gram pouch would cost between £2 to £3 and a pack of 20 Superkings would cost £4.80 to £5. He confirmed he last purchased tobacco goods abroad in December 2006 and that had never been stopped by Customs.
6. The Appellant said he had paid about £500 for the seized goods by Debit Card and cash Euros. He said that they had been purchased from different shops which explains the five receipts. He had not used any sterling. He knew the guideline figure of 3,000 cigarettes was allowed on entry to the UK. The Officer noted that there was a one minute interval between the purchases on the receipts. The Officer had asked why the Appellant had purchased some goods in cash and others in Euros. The Appellant said that he had to get rid of some Euros from his previous holiday.
7. He could not remember where he had purchased the Davidoff cigarettes. The Officer asked about the purchase of the Superkings which he had in his possession when he was stopped and whether these could have been purchased abroad since there was French writing on the packet. The Appellant said they were purchased on his previous visit in December 2006. The Appellant said he had stored the cigarettes in his attic but had forgotten and had been buying his cigarettes from Tescos and locally since December 2006.
8. The Appellant is a self-employed tax consultant. He earns approximately £28,000 per year. He confirmed to the Officer during questioning that he had bought cheaper cigarettes on the black market on previous occasions.
9. The Officer was satisfied on the balance of probability that the goods seized were held for a commercial purpose and not for the Appellant's own use. The Officer seized the goods and issued the Appellant with a Custom form C156 – "Seizure Information Notice". In addition the Officer issued the Appellant with a copy of Customs Notice 12A. The goods were seized under Section 139 (1) of Customs and Excise Management Act 1979 ("CEMA") as being liable to forfeiture under both Regulation 16 of the REDS Regulations and Section 49(1)(a)(i) of CEMA.
10. The Appellant did not challenge the legality of the seizure and the excise goods were condemned as forfeit to the Crown by the passage of time under paragraph 5 of Schedule 3 of CEMA.
11. The Appellant wrote asking for the goods to be restored by letter dated 12 December 2007. On 9 January 2008 an officer replied to this letter refusing to restore the seized goods. On 8 February 2008 the Appellant wrote asking for a review of the decision of 9 January 2008 not to restore the goods. In that letter, the Appellant said he did not accept the decision and that the goods were for his own use and purchased with his own money. He requested an impartial review. On 13 February 2008 HM Revenue and Customs wrote to the Appellant advising that an independent Customs Review Officer would conduct a further review. In that letter the review process was explained and he was invited to provide any further information in support of his request for an independent review. There was no further correspondence from the Appellant following the issue of that letter. On 13 March 2008 a review of the decision not to restore the seized goods was issued to the Appellant.

The law

12. The relevant legal provisions are as follows:

(a) Section 2(1) of the Tobacco Products Duty Act 1979 provides that:

"There shall be charged on tobacco products imported into or manufactured in the United Kingdom a duty of excise at the rates shown … In the Table in Schedule 1 to this Act".

(b) Regulation 4 of The Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 ("The REDS Regulations"), Regulation 15 of The Beer Regulations 1993 and Regulation 12 of The Tobacco Products Regulations 2001, each as amended by the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 provide that:

"(1A) In the case of excise goods (beer, tobacco products) acquired by a person in another member state for his own use and transported by him to the United Kingdom, the excise duty point is the time when those goods are held or used for a commercial purpose by any person".

1(B) For the purposes of paragraph (1A) above:

(b) "own use" includes use as a personal gift,

(c) if the goods (beer, tobacco products) in question are (is) –

(i) transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or

(ii) the person holding them intends to make such a transfer,

those goods (that beer, those tobacco products) are (is) to be regarded as being held for commercial purpose.

(d) if the goods (beer, tobacco products) are (is) not duty and tax paid in the member State at the time of acquisition, or the duty and tax that was paid will be or has been reimbursed, refunded or otherwise dispend with, those goods (that beer, those products) are (is) to be regarded as being held for a commercial purpose.

(e) without prejudice to sub-paragraphs (c) and (d) above, in determining whether excise goods (beer, tobacco products) are (is) held or used for a commercial purpose by any person regard shall be taken of –

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

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

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

(iv) the location of those goods (that beer, those products),

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

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

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

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

10 litres of spirits

20 litres of intermediate products (as defined in Article 17(1) of Council Directive 92/83/EEC[4]),

90 litres of wine,

110 litres of beer,

3,200 cigarettes,

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

200 cigars,

3 kilogrammes of any other tobacco,

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

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

(c) Regulation 16 of the REDS Regulations provides that:

"Excise goods, in respect of which duty has not been paid, shall be liable to forfeiture where a breach of regulation 6 above (which states that "excise duty shall be paid before the excise duty point") or any other regulation contained in part IV, V or VI of these Regulations, or of any condition or restriction imposed by or under such a regulation, relates to those excise goods."

(d) Section 49(1) of the Customs and Excise Management Act 1979 ("CEMA") states:

"Where –

(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being chargeable on their importation with customs or excise duty, are, without payment of that duty –

(i) unshipped in any port.

Those goods shall … be liable to forfeiture."

(e) Section 139(1) of CEMA provides that:

"Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard."

(f) Section 141(1) of CEMA states that "where any thing has become liable to forfeiture under the customs and excise Acts" –

(a) any ship, aircraft, vehicle, animal, container (including any article of passengers' baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and

(b) any other thing mixed, packed or found with the things so liable shall also be liable to forfeiture."

(g) Section 152 of CEMA establishes that:

"The Commissioners may, as they see fit –

…(b) restore, subject to such conditions (if any) as they think proper, anything forfeited or seized under the

(h) Finally, Sections 14 to 16 of the Finance Act 1994 provide that:

Section 14(2):

(2) Any person who is –

(a) a person whose liability to pay any relevant duty or penalty is determined by, results from or is or will be affected by any decision to which this section applies,

(b) a person in relation to whom, or on whose application, such a decision has been made, or

(c) a person on or to whom the conditions, limitations, restrictions, prohibitions or other requirements to which such a decision relates are or are to be imposed or applied,

may by notice in writing to the Commissioners require them to review that decision.

Section 15(1):

"Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either –

(a) confirm the decision; or

(b) withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate."

Section 16(4) to (6):

(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person 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.

(5) In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.

(6) On an appeal under this section the burden of proof as to –

(a) the matters mentioned in subsection (1)(a) and (b) of section 8 above,

(b) the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and

(c) the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under section 22(1) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid),

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.

The Appellant's case

13. On 20 January 2008 the Appellant lodged an appeal at the Tribunal by way of a Notice of Appeal. The Appellant had attached a separate sheet of paper giving reasons why he believed the goods should be returned to him. He stated:

"The seized goods were for own use and had been purchased with his money. He is a heavy smoker and smokes about 50-60 cigarettes per day. He smokes a variety of brands and also smokes hand-rolled cigarettes again using a variety of tobacco. He also smokes small cigars. He strongly objects to "being accused by the British Customs as a smuggler"."

The Respondents' case

14. The Respondents contend that it would be an abuse of process for the Tribunal to make a finding that the goods were unlawfully seized or to entertain an argument as to own use.
15. If the Tribunal decides that it would not be an abuse of process to consider the Appellant's own use argument, the Respondents contend that their decision not to offer the seized goods for restoration was one that could have been reasonably arrived at for the following reasons.

(a) The Appellant was stopped with multiple brands of cigarettes, cigars and tobacco; most smokers are loyal to one brand of cigarette or one type of cigarette or tobacco. This indicated to the Officer that the goods were not for the Appellant's own use.

(b) The Officer considered that the Appellant was unsure of what goods he had actually purchased when the Officer initially questioned him. The Officer had asked the Appellant what tobacco goods he had in his possession. He replied with "No hand-rolling tobacco, I've got some 16 sleeves of fags (which equates to 3,200 cigarettes), this and that". The Appellant actually had 0.45 kilos of tobacco, 4,166 cigarettes, which is substantially more than the 16 sleeves.

(c) The Appellant has a number of different sales receipts for the goods, which suggested to the Officer that the goods were destined for other people and

(d) the Officer considered that the Appellant did not know the cost of hand-rolling tobacco in the UK, which suggested to the Officer that he did not smoke the particular tobacco he had in his possession.

Reasons for decision

16. The Tribunal must first decide whether it is an abuse of process for the Appellant to raise the circumstances surrounding the seizure at the Tribunal level. We do not consider that in the circumstances of this case it would be an abuse for the following reasons. The Appellant said that he chose the Tribunal because he considered it a fair and structured way of presenting his case and of receiving bundles of documents and evidence from HMRC. He further said that he did not understand the issues of legality which were raised in the Magistrate's Court and there were also issues relating to costs in that court. He also said he felt that a Magistrate's Court would not consider his questions and the fact that the goods were for his own use. In the cases of CCE v Weller [2006] EWHC (237 Ch), Gascoyne v Customs and Excise Commissioners 2005 Ch 215, Gora and Others v Customs and Excise Commissioners (2004) QB 93 and Commissioners of Customs and Excise v Albert Charles Smith (17 November 2005, unreported), the issue of abuse of process was considered. In Weller Mr Justice Evans-Lombe said that whether or not an importer, having suffered a deemed forfeiture (under paragraph 5 of Schedule 3 CEMA), is able to raise the validity of the forfeiture on a review by the Commissioners and on appeal from them to the Tribunal, depends on two questions. The first question is – Did the importer have a realistic opportunity to invoke the condemnation procedure and the second question is, if he did, are there nonetheless reasons, disclosed by the facts of the case, which should persuade the Commissioners or the Tribunal to permit him to re-open the question of the validity of the original seizure on an application for the return of the goods. The answer to the first question is invariably yes since the Appellant is normally issued with a Notice 12A at the time of the seizure, which is headed "What you can do if things are seized by Customs". Paragraph 2.18 of that Notice makes it clear that there is a right to lodge an appeal against the legality of the seizure. The Appellant therefore knew that he could have initiated condemnation proceedings in the Magistrate's Court. In the Weller case, the Tribunal gave an affirmative answer to the second question but gave no indication of the particular factors, in the material before it, which had led to that conclusion. The Appellant in this case was also aware of the costs involved in the Magistrate's Court and thought that he would be better able to conduct a case where all the evidence was presented, as at the Tribunal, in an orderly fashion with bundles of documents. The Appellant also explained that he was a diabetic and would have found the Magistrate's Court quite stressful. In the Weller case, Mr Justice Evans-Lombe said that one had to see whether there was evidence which would allow the Appellant to contest the validity of the forfeiture. This Tribunal has come to the conclusion that applying the principles of proportionality, there is good reason for this Tribunal to say that it would not be an abuse of process to consider the Appellant's own use arguments.
17. Let us now turn to the arguments raised by the Respondents.
18. The first point raised was that the Appellant had multiple brands of cigarettes, cigars and tobacco and most smokers are loyal to one brand. The fact that there were several brands owned by the Appellant was evidence that the tobacco was not for the Appellant's own use. The Appellant indicated in a letter written to HMRC on 30 August 2007 that he smoked between 50 and 60 cigarettes a day and he smoked different brands of cigarette and tobacco and he smoked cigars when drinking. He said that he smoked different types of cigarettes so he did not become addicted to any one brand. He said he had lived in America and bought various American brands which he developed a fondness for while living in that country. He said, however, that this was not evidence that the purchases were for commercial use. He also said that smoking different brands had reduced the dryness in his throat and coughing though no evidence was presented of these matter.
19. The Tribunal feels that there is prima facie evidence that buying different brands of tobacco would indicate buying for other people. It is very unusual for people to buy five different brands of cigarettes especially where the cigarettes are as different as Superkings and Café Crème small cigars. Most smokers are loyal to one brand and while they may smoke other brands while smoking that one brand it would be unusual to smoke five different brands of cigars and cigarettes given the varied tar content and strength. The probability is that the tobacco and cigarettes were in fact purchased for different people.
20. The second point raised is that the appellant was in possession of five different receipts for the goods. HMRC argue that the fact there were different receipts means that the goods were destined for different people. The Appellant said the receipts were in fact from different shops and that all shops were in close proximity to each other. He said it was not like the High Street where one has to walk up and down to shops since all the shops were in one compound. If one shop was out of a particular brand of cigarettes then he would buy that brand in another shop in the compound. This was the case with his purchases and it explains the different receipts. He said his approach to shopping was whimsical and that he had a "masters degree in electronics and did not deal in mathematical calculations of shopping in different shops". He said that the different receipts could be accounted for by the fact that he used a combination of cash and two different credit cards to pay for the goods and not because they were for different people. He had some Euros from a previous trip which he wanted to "use up" and as such paid for some of the cigarettes with the cash Euros. On a balance of probability having numerous receipts would normally indicate that the goods had been bought for different people and the separate receipts were a form of accounting for different sums of money. The receipts indicated that the appellant visited two different shops but had in fact five receipts. Having two different receipts would have been a more plausible explanation of the purchases if one visited two different shops. While the Appellant initially said at his interview that he had "a few Euros" to be used up, in fact he had approximately 450 Euros, a significant sum which may suggests that this money may have been given for the purposes of purchasing cigarettes. The fact that the purchases were made for five different brands, yielding five different receipts and the Appellant was in possession of a large amount of cash would collectively suggest that the Appellant was purchasing tobacco for other than his own use.
21. We should also look at the disclosures made at the time he was stopped. When the officer asked the Appellant how much tobacco he had bought, he replied, "no hand rolling – I 've got about 16 sleeves of fags; this and that". This statement proved to be untrue as had 450 grams (9 x 50 grams vouchers) of tobacco and significantly more than 16 sleeves (3,200) of cigarettes, which is the guideline figure. He had close to 4,100 cigarettes in his possession. The failure to accurately disclose the excise goods, would suggest that the Appellant may have been intending to misled the Officer and this raises questions of the credibility and honesty of the Appellant. The amount of cigarettes being imported clearly exceeded the guide levels and the failure to declare all excise goods in the Appellant's possession would suggest not only that he knew the guidelines but that he knew he was carrying tobacco in excess of those guidelines and answered the Officer's question in such a way as to suggest that he was within the guidelines. Further, a person who is a chain smoker, as the Appellant has admitted he is, who smokes over 50-60 cigarettes a day should have a fairly clear idea of the amount of cigarettes he had purchased for himself and the price of those cigarettes. The Appellant was asked about the UK price of tobacco. He said that a pouch of tobacco would be between "about £4 or £5, perhaps £6 or £5-£6 ball park." This was a curious reply given that he is a smoker and should know these prices. A pouch of tobacco is in the region of £11 for 50grams and a regular smoker of tobacco would know the UK prices. This is a curious answer and difficult to understand. When the Appellant had returned to Dover for his interview the Officer noted that the cigarettes he was smoking at that time had French writing on the packet. The Appellant told the officer that he had bought them on a previous shopping trip abroad in December 2006. He said that he had bought between 6 and 8 cartons of cigarettes at that time. Given the quantity of cigarettes which the Appellant consumes on a daily basis, it is fair to assume that cigarettes purchased in December 2006 would have lasted between 6 and 8 weeks only. The Appellant explained that because his house had been broken into he had put valuables in the attic and the cigarettes must have been stored there by mistake. He later found the cigarettes in the attic and started smoking them. He said that this would explain the time gap in the smoking of these cigarettes. It is difficult to draw a conclusion from this other than to say that the Appellant had foreign cigarettes in his possession at the time of his interview. It is possible he may have made another trip to the Continent to buy cigarettes after December 2006 and may have forgotten (the Appellant is diabetic) or he could have purchased these cigarettes on the "black market", as he indicated he had done previously.
22. The Appellant was a credible witness and an educated man. He worked in the field of taxation dealing with US taxation matters and earned a decent monthly income. However, on a balance of probability, it seems more likely that the cigarettes were purchased for commercial purposes. The five different brands and five different receipts together with the fact that he had previously used the black market to purchase cigarettes and so was not adverse to breaking the law and the fact that he was in possession of foreign cigarettes at the time of his interview would all together suggest that the probability is that he had purchased tobacco for other than his own use.
23. In the circumstances therefore the appeal would be dismissed. No issues of costs were raised in this case but the parties would be at liberty to apply to the Tribunal on those matters.

DR K KHAN

CHAIRMAN

RELEASED: 7 November 2008

LON 2008/8014