United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2008/E01147.html
Cite as: [2008] UKVAT(Excise) E1147, [2008] UKVAT(Excise) E01147

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Michael and Stephanie Ryan v Revenue & Customs [2008] UKVAT(Excise) E01147 (07 November 2008)

E01147

EXCISE GOODS - own use – new review on facts found –appeal allowed.

MANCHESTER TRIBUNAL CENTRE

MICHAEL AND STEPHANIE RYAN

Appellant

-and-

HER MAJESTY'S COMMISSIONERS OF REVENUE AND CUSTOMS

Respondents

Tribunal: Richard Barlow (Chairman)

Arthur Brown FCA CTA (Member)

Sitting in public in Leeds on 21 August 2008.

Mrs Stephanie Ryan in person. Mr Michael Ryan did not appear but was represented by Mrs Ryan.

Ms K Jones counsel, instructed by the Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION
1. The appellants appeal against a review decision by the commissioners, dated 17 December 2007, by which they confirmed an earlier decision, dated 25 September 2007, refusing to restore to each of the appellants 3,200 Regal Kingsize cigarettes seized from them at Manchester Airport on 1 August 2007.
2. The appellants were formerly married to each other and, following their divorce, they have been in partnership running a public house. Mrs Ryan has also been employed in a clerical capacity elsewhere. Mrs Ryan owns a property in Spain and both the appellants were returning from a short visit to it at the time the goods were seized.
3. The appellants' case is that the goods were for their own use though some would have been given away as gifts to family members.
4. The commissioners' case is principally that the appellants cannot now raise the issue whether the goods were for their own use as that would be an abuse of process in light of the fact that that issue could have been litigated in the Magistrates Court.
5. Ms Jones submitted that a challenge to the commissioners' view that the goods were not for own use was not a permissible ground of appeal in a case like this, essentially because that is an issue that can only be decided in condemnation proceedings. In other words the respondents are prepared to succeed in this tribunal, indeed argue that they must succeed, even if that means that goods that should not have been seized are retained by them.
6. Ms Jones also contended that the tribunal has limited fact finding powers so that the tribunal should not even consider as a matter of fact whether the grounds for seizing the goods ever existed.
7. Ms Jones cited the case of Gascoyne –v- Customs and Excise Commissioners [2005] Ch 215 as authority for the proposition that the tribunal has limited fact finding powers. In the case of Gora –v- Customs and Excise Commissioners [2004] QB 93 Mr Kenneth Parker QC, counsel for the commissioners, is recorded (at paragraph 38 of the judgement of Pill LJ) as having said:

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

Pill LJ endorsed that statement as correct in paragraph 39.




8. In Commissioners of Customs and Excise –v- David Weller [2006] EWHC 237 (Ch) Evans-Lombe J was hearing an appeal by the commissioners against a tribunal's interlocutory order that an appeal to the tribunal could proceed where there had not been condemnation proceedings. During the course of the judgement he said (at paragraph 23) that at the full hearing the tribunal would have to consider the facts including those relating to abuse of process more fully than had been the case in the interlocutory hearing and added:

"That tribunal may conclude, as a step in arriving at its decision that in all the circumstances Mr Weller should not be allowed to challenge the validity of the forfeiture. Though it is unlikely to do so if it was going to allow Mr Weller's appeal".

That last remark makes it clear that the tribunal can find the full facts, including those relating to the substantive merits of the appeal, even at the stage in its reasoning where it is considering whether the appeal can be allowed to proceed.

9. We accept that the tribunal might decline to make findings of fact about matters that are irrelevant to its decision, as might any first instance court or tribunal, but to say that it has limited fact finding powers goes too far.
10. In the Gora case the Court of Appeal had held that the only Court in which an importer could challenge a seizure of goods was a Court in which condemnation proceedings were instituted. It followed that the tribunal had no jurisdiction to consider a case where the Court had condemned the goods as forfeit and that a deemed condemnation, that is to say a case where the owner of the goods had not required the commissioners to begin condemnation proceedings within the permitted time, would be in the same position as one where there had been proceedings.
11. In Gascoyne the Court of Appeal pointed out that that Court need not have made that holding in Gora (in legal terms that it was obiter dicta) in order to reach its decision but more importantly that, although it was correct as a matter of UK law, it did not necessarily afford an importer all the rights available to him in light of the European Convention on Human Rights. We would add that those rights might also be available as a matter of European Union Law given the terms of Council Directive 92/12/EEC.
12. Accordingly the Court of Appeal held as follows in the Gascoyne case (see paragraphs 44 – 57 of the judgement of Buxton LJ):

The reason why UK law would not permit the issue of the correctness of the seizure to be considered by the tribunal, when it should have been considered by the courts, is not the literal interpretation of the legislation but the principles of procedural law known as res judicata and abuse of process, if their application precludes the tribunal from deciding that issue.

Because of the rights conferred by the European Convention on Human Rights, the owner of the goods can re-open the question of the seizure in the VAT and Duties Tribunal where the goods have been condemned by the deeming provision in paragraph 5 of Schedule 3 to the Customs and Excise Management Act 1979 (i.e. where the owner has not required the commissioners to begin condemnation proceedings within the month allowed) but that right will not apply where a Court has actually condemned the goods following a finding that they were not for own use.

13. The situation where the owner of the goods has required the commissioners to commence condemnation proceedings by giving a notice of claim under paragraph 4 of Schedule 3 to the Customs and Excise Management Act 1979 but withdraws that request either before the commissioners commence the condemnation proceedings or withdraws from those proceedings after they have been commenced but before the hearing is not specifically referred to in the judgement of Buxton LJ.
14. Condemnation proceedings are in rem and once the owner of goods has served a notice of claim and thus required the commissioners to begin condemnation proceedings it is arguable that an order of the Court is necessary even if the owner purports to withdraw from the proceedings, though no doubt in such cases the Court would decide the matter summarily without hearing evidence. Where the owner withdraws or purports to withdraw the notice of claim before the commissioners have actually instituted those proceedings it is less clear whether an order of the Court would still be needed. Paragraph 6 of Schedule 3 to the Customs and Excise Management Act 1979, which says that the commissioners "shall take proceedings" once a notice of claim has been given, suggests that an order would be needed even where the owner withdraws the notice of claim.
15. Although Buxton LJ did not refer to those circumstances directly and did refer specifically only to the case where there has been a deemed condemnation by reason of a failure to serve a notice of claim, we hold that in principle at least, the tribunal can deal with cases where the notice is withdrawn and the condemnation proceedings, if any, then go by default.
16. Mr Gascoyne had argued that a letter he had written to the commissioners should have been taken to be a notice of claim but the Court held against him on that issue so that the goods in that case had been condemned as forfeit under the deeming provision only and it was not strictly necessary for the Court to consider what the position might have been if he had given a notice of claim and withdrawn it before the proceedings had been commenced or had withdrawn from the proceedings after they were commenced but before they were heard.
17. In paragraph 54 of the judgement Buxton LJ said:

"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". (Emphasis added).

The reference to the only tribunal before which he has appeared would appear to encompass a case where there had been a notice of claim which has been abandoned.

18. In addition, in paragraph 46 of the judgement, Buxton LJ refers to cases where the owner has failed in condemnation proceedings or let them go by default as cases where UK domestic law would not allow a "second bite at the cherry" and then he goes on to consider the Convention rights before contrasting, in paragraph 51, a case where the Court has made an actual finding in condemnation proceedings with a case where they have gone by default. It is unclear whether the reference to "by default" was intended to apply only to the case where there has been a deemed condemnation because no notice of claim was given but that phrase seems apt to include a case where the owner did not contest those proceedings, at least if that led to the proceedings being withdrawn or decided summarily without consideration of the evidence.
19. The reference in paragraph 47 of the judgement to "normal English law rules of res judicata or abuse of process" as the basis for the conclusion that in UK domestic law the owner cannot challenge the seizure in the tribunal must encompass at least some cases where Court proceedings have been commenced because the statutory deeming provision is not an example of res judicata. The implication from that is that in Convention Law the situation may be different in cases where res judicata might apply in UK domestic law.
20. Clearly an appellant cannot challenge or contradict, in the tribunal, an actual finding of the Magistrates Court or the High Court but we conclude that, subject to any question of abuse of process or similar considerations, the appellants can raise the issue of own use in this case which has certainly not been the subject of substantive consideration by the Courts.
21. Ms Jones cited the case of Commissioners of Her Majesty's Revenue and Customs –v- David Dawkin [2008] EWHC 1972 (Ch) in which Mr Justice David Richards considered whether a differently constituted tribunal had misdirected itself on the issue of whether it would be an abuse of process for the appellant to raise the issue whether the seizure was valid. In that case the appellant had arrived at Birmingham Airport with a quantity of tobacco products well in excess of the guideline amounts. Two days later he had submitted a notice of claim under paragraph 3 of Schedule 3 to the Customs and Excise Management Act 1979 in the form provided in Notice 12A requiring the commissioners to commence condemnation proceedings on the ground the goods were not liable to forfeiture and that the seizure was therefore invalid. That notice of claim was invalid as Mr Dawkin lived abroad but he had not specified a solicitor who would accept service as required by paragraph 4 of the Schedule. One day before the expiry of the period for giving a valid notice the commissioners wrote to Mr Dawkin purporting to extend the period for notifying them of a solicitor willing to accept service by 14 days. The commissioners usually contend that the time limit for requiring the commencement of condemnation proceedings is incapable of being extended. That contention was not considered in any of the cases drawn to this Tribunal's attention but it appears that the commissioners accept that an invalid notice of claim can be validated outside the month allowed for making such a claim.
22. In this case Mr Ryan wrote to the commissioners on 2 August 2007 a letter in which he said, amongst other things, "I believe that [the cigarettes seized from him] should be returned for the following reasons … the Officer wrongly surmised that I would be retailing the cigarettes". That letter was received by HMRC not later than 7 August 2007; the date on which was date stamped at Liverpool.
23. Mrs Ryan wrote a letter dated 8 August, received not later than 15 August 2007 including the following, "I believe that [the cigarettes seized from her] should be returned for the following reasons … the amount of cigarettes purchased was not purely for my own use but for other family members too…".
24. In both cases the appellants also said that they did not wish to "pursue this matter down any other avenue"… "at present".
25. We regard the wording of both of those letters as being sufficiently clear to put the respondents on notice that the appellants were asserting that the goods were for their own use and therefore not for commercial purposes and so not liable to be seized as liable to forfeiture.
26. The Commissioners replied to both the appellants in identical terms saying:

"The tick below denotes the appeal option/s you have chosen, if this is not correct you must inform this office immediately.

Appealing legality of seizure

Requesting restoration v

What will happen now.

Request for the Return ("Restoration") of Seized Things

Your request for restoration will be considered and a decision will be sent to you in due course."

27. The letter to Mr Ryan referred to in the previous paragraph was dated 22 August and that to Mrs Ryan was dated 30 August. The time allowed in paragraph 3 of Schedule 3 of the Customs and Excise Management Act 1979 which, as already mentioned the respondents always insist is not capable of being extended, would have expired before Mrs Ryan could have replied. It seems that neither of the appellants replied to the commissioners' letters. Those letters end with an apparent promise to consider restoration but contain no statement that the right to contest the seizure will be lost if no reply is given to the letter.
28. We hold that the letters sent by Mr and Mrs Ryan are in terms that made it quite clear that they were asserting that the goods were for their own use and that therefore they were contending that the seizure was invalid. The commissioners should have begun condemnation proceedings which they did not do. The fact that the appellants had said that they wished the restoration to be considered first was not a sufficient reason for the commissioners simply to ignore the fact that the appellants were also contesting the liability to forfeiture and the seizure. Mrs Ryan did say in evidence that she had chosen to seek restoration rather than to go to the Magistrates Court but we do not assume from that that once restoration was refused she would necessarily have abandoned her claim that the goods were not liable to seizure and nor do we regard that as sufficient reason for the commissioners to ignore the letters contesting the liability.
29. In passing, we note that the respondents asserted at the hearing that the appellants' letters were sent to the wrong address because Notice 12A says that all notices of claim should be sent to an address on the back of the Seizure Information Notice or, if no address is given, to a Plymouth address. Paragraph 3 of Schedule 3 to the Customs and Excise Management Act 1979 specifically allows a Notice of Claim to be given at any Customs and Excise office.
30. The appellants had also been told in writing that if condemnation proceedings were commenced and the goods were condemned they would ask for up to £1,500 costs. Mr Justice David Richards pointed out in the Dawkin case that that should not generally be considered a good reason for not defending such proceedings or not bringing them (he meant not requiring the commissioners to bring them) when considering if it would be an abuse of process to allow the appellant to rely on the invalidity of the seizure as a ground for seeking restoration. We do not think that David Richards J was laying down any comprehensive rule and each case must be considered on its own facts. For example, in this case the costs sought would far exceed the value of the goods whereas in that case the value of the goods was more than in this one and the costs would not have been such an obvious deterrent. However, the reason we hold that it is not an abuse of process for the appellants to seek to open the issue of the validity of the seizure in this case is that the appellants had contested the validity of the seizure within the time allowed and the commissioners had not commenced proceedings as they should have done. There was an obligation on the commissioners to commence proceedings and the fact that the appellants said that they wished restoration to be considered first is not a good reason for the commissioners to fail to do so. It is now, we assume, too late for the commissioners to commence condemnation proceedings in the Magistrates' Court as it is more than six months since the matter of complaint arose.
31. Having decided that the appellants are entitled to raise the question of own use, we turn to the evidence.
32. Mrs Ryan attended the tribunal and gave evidence but Mr Ryan did not. We find that her evidence was truthful. She gave her evidence in a straightforward and sensible manner and was not shown to have contradicted herself or exaggerated her evidence. Her evidence was tested by cross examination and we have concluded that she told the truth. At one point in the hearing there was some suggestion that the respondents might ask for an adjournment to call the officers who had intercepted and interviewed the appellants and Mrs Ryan said that she did not think she could put herself through the ordeal of coming to the tribunal again (she did not use the word ordeal but she made it clear that she had found it difficult to contemplate appearing). She said that she had come because she was not a smuggler and she was not prepared to allow her integrity to be challenged without contesting it. That struck us as both a spontaneous and truthful assertion and we regard the fact that she felt genuinely and strongly that an injustice had been done as particularly corroborative of her evidence.
33. She also mentioned that Mr Ryan had not attended because he felt "you cannot beat the system".
34. Mrs Ryan said she smoked 20 cigarettes a day when she was interviewed and in evidence to us and Mr Ryan said he smoked 40 cigarettes a day. When interviewed Mr Ryan said Mrs Ryan smoked "only occasionally" and that was put to her as a contradiction in interview when she was asked "You don't smoke or just the odd one"? Mrs Ryan explained in evidence that she smoked mainly while she is at her clerical work not at the public house and we do not regard the contradiction, such as it is, as having much relevance. Whether someone who smokes 20 cigarettes a day is smoking only occasionally or just the odd one is really only a matter of opinion.
35. Both the appellants were consistent in their assertions in interview and, in the case of Mrs Ryan in evidence, that some of the cigarettes would be given away to family members and so the quantity imported is not suspiciously high. It also falls within the indicative limit that does not have to be automatically considered to be relevant in regulation 12 of the Tobacco Products Regulations 2001 (SI2001/1712), as amended, though we have it in mind that the fact that those quantities are not exceeded does not deem the importation to be for own use.
36. We considered whether the fact that Mr Ryan is a publican is relevant. Clearly it might give rise to suspicion that the goods could be sold in the public house but Mrs Ryan told us that cigarettes are sold in a machine at the public house and that the machine, as is usually the case, does not dispense packets of 20. In addition, had it been Mr Ryan's intention to sell the cigarettes in the public house, we would have expected the appellants to be carrying two different brands. We have of course also accepted Mrs Ryan's evidence that the cigarettes were not intended for sale and that there is no evidence at all to suggest that Mr Ryan did sell any.
37. The burden of proof is on both appellants and although Mr Ryan's failure to give evidence does make it more difficult for him to discharge that burden it does not make it impossible where a witness whose evidence is believed has given relevant evidence on his behalf.
38. Mrs Ryan's evidence on Mr Ryan's behalf as well as on her own behalf is based on her own knowledge of the facts.
39. We are satisfied to the requisite degree of certainty (the balance of probabilities being sufficient) that the goods in question were for the appellants' own use. The respondents did not take that fact into account when reviewing the decision not to restore the goods. Indeed, Mrs Wiggs who carried out the review and who gave evidence said she was not allowed to consider that question. She may have meant by that that she had been instructed by her superiors that she must not do so but if she meant that she was precluded by law from doing so then we hold that she was wrong to conclude that was the case. The commissioners' power to restore goods is not limited by any considerations about whether the person seeking restoration would or would not be able to appeal to the tribunal or is too late to require condemnation proceedings to be commenced and it is certainly open to the commissioners to restore goods which should not have been seized in the first place, as David Richards J pointed out in paragraph 40 of the Dawkins judgement.
40. The review decision is unreasonable in that it failed to take into account the fact that the goods were held by the appellants for a non-commercial purpose i.e. their own use. We therefore direct in accordance with section 16(4) of the Finance Act 1994 that the Commissioners should carry out a further review of the decision not to restore the goods, taking into account our findings and holdings in this appeal.
Richard Barlow CHAIRMAN Release date: 7 November 2008

MAN/08/8015