[2009] UKFTT 207 (TC)

TC00160

Appeal Number: MAN/2008/8091 			       
FIRST TIER TRIBUNAL TAX

EXCISE DUTY – Restoration of vehicle for a fee – Appellant pleading own use and disproportionate sanction  – Appellant did not pursue condemnation proceedings before magistrates – Tribunal not entitled to reopen issue of own use – Tribunal obliged to deal with the Appeal on the footing of a commercial importation – review decision reasonable – Appeal dismissed. 

DECISION NOTICE 
Rule 35(2) The Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 

	JOHN LIGHTFOOT	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      JON DENNY

Sitting in public at Manchester on 17 July 2009

Appellant appeared in person

Josh Shields counsel instructed by the Solicitor’s office of HM Revenue & Customs, for HMRC

© CROWN COPYRIGHT 2009

DECISION
The Appeal
1.	The Appellant was appealing against HMRC decision on review dated 17 June 2008 refusing to restore excise goods, namely hand rolling tobacco, cigarettes and cigars, and restoring a motor vehicle, a BMW 535 Sport registration number YDO7 OPS (hereinafter known as the vehicle) subject to the payment of a fee in the sum of £4,203.34.
2.	The Appellant’s Notice of Appeal dated 15 July 2008 related to that part of the review decision offering restoration of the vehicle on payment of the fee. In those circumstances the Tribunal confined its deliberations to the conditional restoration of the vehicle.
3.	The Tribunal heard evidence from the Appellant and his daughter Ms Michelle Lightfoot. Mrs Deborah Hodge, the review officer, gave evidence for HMRC. The parties supplied the Tribunal with bundles of documents which were admitted in evidence.
The Dispute
4.	The Appellant contended that he purchased the excise goods for his and Mrs Lightfoot’s use and for gifts to his daughter and partner. The Appellant considered that it was disproportionate for the vehicle to be offered for a fee because:
(1)	The goods had been purchased for own use, and part of the fee represented the duty payable on the excise goods brought in by the Appellant’s passengers.
(2)	The fee failed to take into account the financial loss suffered by the Appellant for the loss of the goods and the temporary loss of use of the vehicle.
5.	HMRC disagreed with the Appellant in that there was ample evidence to justify a finding that the Appellant purchased the entire excise goods for onward sale at a profit. In any event, the Appellant was prevented from relying on evidence of own use before the Tribunal because he failed to pursue his Appeal before the magistrates’ court against their seizure. Mrs Hodge, the review officer, took into account the relevant circumstances including the Appellant’s poor health in arriving at a decision which was more lenient than what would normally be imposed for a commercial importation. HMRC counsel submitted that Mrs Hodge’s decision was eminently reasonable.
6.	The issue in dispute was whether Mrs Hodge’s decision on review of   restoring   a vehicle for a fee was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable Mrs Hodge, the review officer, must have considered all relevant matters and must not have taken into consideration irrelevant matters.
Background
7.	On 5 March 2008 at the UK Control Zone, Coquelles, France, Customs Officers stopped the Appellant while driving the vehicle in which his wife, Anne Lightfoot, Francis and Pauline Crewe were passengers. They each declared four kilos of hand rolling tobacco, and 3,200 cigarettes. The Appellant also declared 200 cigars. 
8.	The Officers who stopped the vehicle found a further two kilos of hand rolling tobacco, which had been placed by mistake in the vehicle by the retailer of the excise goods in Belgium. Mrs Hodge accepted the Appellant’s explanation of mistake for the extra two kilos of tobacco, with the result that she disregarded the extra tobacco when  making her decision. 
9.	The Officers seized the excise goods and vehicle because they were satisfied that the goods had been purchased for commercial purposes. The Appellant’s application to restore the goods and the vehicle was refused. Mrs Hodge confirmed the decision not to restore the excise goods but offered restoration of the vehicle subject to payment of a fee. The Appellant paid the fee to recover his vehicle without prejudice to his right to challenge the decision before the Tribunal.
10.	The Appellant appealed to the magistrates’ court against the seizure but withdrew his Appeal on 5 August 2008. On the 18 September 2008 a magistrates’ court after being satisfied that the excise goods were held for a commercial purpose ordered them together with the vehicle to be condemned as forfeit. 
Appellant’s Case
11.	The Appellant asserted that he did not purchase the whole consignment of 18 kilos of hand rolling tobacco, 12,800 cigarettes, and 200 cigars found in his vehicle on 5 March 2008. The consignment was split equally between the Appellant and his wife, and Mr and Mrs Crewe except the two kilos of tobacco mistakenly placed in the vehicle boot by the shop-keeper and the 200 cigars which belonged to the Appellant. The Appellant and his wife intended to use their share of the excise goods for personal consumption and as gifts to their daughter and partner. The Appellant acknowledged that he did not know whether Mr Crewe smoked. The Appellant had subsequently discovered that Mr and Mrs Crewe’s tobacco purchase had been partly funded by contributions from their family. 
12.	The Appellant denied that he told the Customs Officer in interview that he owned the whole consignment of excise goods. His comment to the Officer about owning the goods was meant to be ironic as he believed that the Officer had already made up his mind. According to the Appellant, the Officer directed him to park his vehicle in an enclosed garage with a hidden kerb which had caused damage to the vehicle. The Appellant was extremely upset about the damage and when he complained, the Officer told him not to worry about repairs as he may not have a vehicle to repair when he left the UK Control Zone.  The Appellant found the Officer aggressive and intimidating.
13.	Until recently the Appellant was a hard worker who had held two jobs for the majority of his working life. The Appellant and his wife had paid off the mortgage on their property. He purchased the vehicle which was his life’s dream from the estate of his late mother. The Appellant and his wife were loving parents, giving considerable support to their daughter, who had been a heroine addict for 13 years, and her children. The Appellant had suffered two serious illnesses which severely restricted his mobility and as a result the Appellant was on long term incapacity benefit. The Appellant required his vehicle for visits to the hospital and taking his grandchildren to school.
14.	The Appellant was financially stable but he had incurred significant costs in recovering his vehicle, which amounted to £11,408. The Appellant used monies from an insurance payout for flood damage to his house in 2007 to pay for these costs. This meant that the Appellant and his wife had gone without furniture which had not been replaced since the flood.
15.	The Appellant asserted that he would never risk his dream vehicle which was worth £38,000 for the small profit from the sale of imported tobacco and cigarettes. Further if he wanted to, he could easily buy discounted tobacco on the streets of Stoke on Trent. The Appellant, however, decided to act honestly and buy tobacco legitimately in Belgium. The Appellant felt strongly that he was being punished for acting honestly.
Review Decision 17 June 2008
16.	Mrs Hodge completed her review before the condemnation proceedings were determined in the magistrates’ court. Although Mrs Hodge was not concerned with the legality of the seizure, she concluded from the facts before her that the Appellant had purchased the entire consignment of cigarettes and tobacco for the purpose of onward sale at a profit. She placed weight on his admission to the Officer in interview that the goods were his, and that he bought the goods in cash. Mrs Hodge also noted that the Appellant made four trips to the continent in 2007, which gave him the opportunity to purchase tobacco for commercial purposes. The Appellant did not allege that he bought the excise goods on a not for profit reimbursement basis.
17.	Mrs Hodge approached the issue of restoration of the vehicle on the basis that the Appellant was involved in a commercial importation of excise goods for profit. HMRC policy was that a private vehicle used for the improper importation of excise goods should not normally be restored. None of the published exceptions to the general policy applied to the Appellant’s circumstances. Mrs Hodge, however, decided to restore the vehicle subject to a fee after having regard to the Appellant’s medical condition and limited mobility together with the high value of the vehicle. Mrs Hodge considered that she had been unduly lenient with the Appellant.
Reasons for the Decision 
18.	 HMRC’s power regarding restoration of vehicles which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:
“confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it, to do one or more of the following, that is to say –
a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the Tribunal may direct;
b) to require the Commissioners to conduct, in accordance with the directions of the Tribunal, a further review of the original decision;
c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future”.
19.	The precondition to the Tribunal’s exercise of one or more of its three powers is that the person making the decision could not reasonably have arrived at it. The test for reasonableness is set out by Lord Lane in Customs and Excise v JH Corbitt (Numismatists) Ltd  [1980] STC 231 at page 239:
“…..if it were shown the Commissioners had acted in a way in which no reasonable panel of Commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight”.
20.	 In deciding the reasonableness of the Commissioners’ decision the Tribunal has a comprehensive fact finding jurisdiction to establish whether the primary facts upon which the Commissioners have based their decision were correct. The Tribunal, however, cannot consider the lawfulness of the seizure, or determine the underlying facts  about the proposed use of the seized goods when deciding the reasonableness of the Commissioners’ decision to refuse restoration. The reason for this is that matters relating to seizure are dealt with by the magistrates in condemnation proceedings. The importer does not have a choice  between the magistrates’ court or the Tribunal in bringing his dispute about the lawfulness of the seizure.  He must take it to the magistrates. Thus the importer is not entitled to have a second bite at the cherry of lawfulness before the Tribunal except when the Tribunal is satisfied that it would not be an abuse of process to take into account the facts of proposed use surrounding the seizure of the goods. Abuse of process is narrowly defined, and generally restricted to the situation where there has been a deemed confiscation rather than a positive decision by the magistrates.
21.	In this Appeal, the Appellant’s case was based on his proposition that the tobacco and cigarettes were purchased for his own use. The Tribunal cannot decide the correctness of his proposition unless it finds that the Appellant had grounds amounting to an abuse of process for not pursuing his case before the magistrates.
22.	The Appellant instituted condemnation proceedings before the magistrates but he decided to abandon them in his letter of 5 August 2008 when he said:
“We are writing to inform you that we no longer intend to pursue this matter in the magistrates’ court. Whilst we neither agree nor accept your decision or the reasoning behind it we are no longer in a financial position to pursue this matter. We were told by Customs Officers in Coquelles that we could appeal the seizure but because the Revenue used the best barristers in the country we have little to no chance of winning. I must say that on reflection that they were right, we were stopped on 5 March 2008, and now its 5 August, five months and still no chance for us to give our side of the case to an independent and impartial body. We believe matters like this are deliberately dragged out by people like you so that people like us give up, so why does it take an eternity to deal with a simple and mundane smuggling allegation”
At the time of writing his letter the Appellant was legally represented (see solicitor’s letter of 12 September 2008 to Mrs Hodge).
23.	The Appellant put two reasons for not pursuing the proceedings before the magistrates, which were his inability to afford the costs, and delay in fixing the hearing.  The High Court in Dawkin v HMRC [2008] EWHC 1972 (Ch) found that the cost of proceedings cannot generally provide grounds for an abuse of process. Mr Justice David Richards observing that
“Further, the costs and inconvenience of attending a magistrates’ court would be the same as attending the Tribunal. The only difference is the possible exposure to an adverse order for costs in the magistrates’ court ……. The fact that bringing or defending proceedings may, if unsuccessful, lead to an adverse order for costs cannot at least generally, provide a good reason for not bringing or defending them for the purposes of abuse of process” (see paragraphs 35 & 38)”
24.	The Appellant adduced no evidence of the reasons for the delay in fixing the hearing, and on the face of it a period of five months did not appear excessive. The Tribunal finds that the Appellant has not made out a case for an abuse of process, which would enable the Tribunal to reopen the question of the purported use for the excise goods. 
25.	The consequence of the Appellant’s withdrawal was that the magistrates condemned the excise goods as forfeited, and in doing so made a finding against the Appellant that the excise goods were held for a commercial purpose. The Tribunal was bound by the magistrates’ finding, and obliged to consider the Appellant’s Appeal from the standpoint that the excise goods were imported for a commercial purpose. Further the Appellant did not advance a case that the goods were destined for supply on a not for profit basis. Thus the Tribunal was obliged to treat the Appellant’s importation as  one for onward sale at a profit. The Appellant effectively made the wrong choice in not pursuing the matter before the magistrates. It would appear that his choice was made at the time he was represented by a solicitor 
26.	The Appellant put forward two further grounds for saying that a restoration fee of £4,203.34 was disproportionate for the Appellant’s contravention. The first ground was that the size of the fee equated to the duty owing on the whole consignment of tobacco, and cigarettes, half of which belonged to Mr and Mrs Crewe. Mrs Hodge  relying on a statement made by the  Appellant in interview, decided that he had in fact purchased the whole consignment.  After hearing the Appellant, the Tribunal accepted his evidence that  Mr and Mrs Crewe owned half the consignment. The Tribunal, however, finds that the Appellant did not make sufficient enquiry to satisfy him of the purposes for which Mr and Mrs Crewe held the tobacco and cigarettes. The Appellant fairly stated that he did not know whether Mr Crewe smoked. Further it transpired at the hearing that Mr and Mrs Crewe had been partly funded by members of their family which meant that their enterprise was a commercial one, albeit at a  not for profit basis. Thus the Appellant should have taken greater care in ensuring that his vehicle was not being used for transporting excise goods held for commercial purposes.
27.	The second ground related to the financial loss and hardship caused by the temporary loss of his vehicle. The Appellant calculated his financial loss at £11,408, which included £1,700 on the seized excise goods, £480 for the costs of travelling home after the vehicle was seized, £2,840 on legal advice, £1,200 on taxis and public transport whilst without a vehicle, £4,203 for the fee to recover his vehicle, £106 on travel costs to fetch his vehicle, and £879 expended on repairs to his vehicle. The majority of the costs except £1,200 on taxis and public transport and £879 on vehicle repairs were directly attributable to the seizure of his vehicle.  The relevance of those costs to the issue of exceptional hardship arsing from non-possession of a vehicle was questionable.  The Appellant did not go ahead with his challenge to the lawfulness of seizure in which case the costs associated with the seizure was a natural consequence of his deemed unlawful act. Thus this element of the costs did not constitute exceptional hardship for the purposes of restoration proceedings. The cost of vehicle repairs was a result of the Appellant colliding with a high kerb in the Customs’ garage. The Appellant considered the Customs Officer at fault in failing to warn him of the presence of the kerb. In those circumstances the remedies open to the Appellant were either the Civil Court or HMRC’s complaint procedures, not restoration proceedings.
28.	The Tribunal, however, is satisfied that the Appellant’s state of health which severely restricted his mobility, his responsibilities for his grandchildren and the travel costs arising from the temporary loss of his vehicle constituted exceptional hardship which were relevant to the issue of restoration.
29.	In summary the Tribunal finds that
(1)	There were no grounds to re-open the magistrates’ finding that the excise goods were held for a commercial purpose.
(2)	The Appellant did not assert that the tobacco and cigarettes were bought on a not for profit basis. Thus the Tribunal is obliged to consider the Appeal on the footing that the Appellant imported the goods for onward sale at a profit.
(3)	  The Appellant purchased one half of the consignment of tobacco and cigarettes seized on 5 March 2008. The remainder belonged to Mr and Mrs Crewe who funded their purchase with contributions from members of their family. Mr and Mrs Crewe’s purchase was a commercial one, albeit on a not for profit basis. 
(4)	The Appellant did not take sufficient care to ensure that his vehicle was not being used for transporting excise goods held for commercial purposes.
(5)	The majority of the financial loss incurred by the Appellant directly flowed from the seizure of the vehicle, the lawfulness of which was not challenged by the Appellant. These costs did not constitute exceptional hardship for the purposes of restoration proceedings.
(6)	The Appellant’s state of health and poor mobility, and his responsibilities to his grandchildren amounted to exceptional hardship. 
Was Mrs Hodge’s decision reasonable?
30.	At the time Mrs Hodge made her decision, the outcome of the condemnation proceedings before the magistrates was not known. Although Mrs Hodge’s conclusion that the Appellant was involved in a commercial importation for onward sale at profit was arrived at by a different route from the Tribunal, the difference in approach did not render her review unreasonable. The critical issue for the question of reasonableness was whether the importation was for commercial or own use, and in this respect the Tribunal’s finding corresponded with that of Mrs Hodge.  
31.	Under HMRC policy Mrs Hodge would have been justified in refusing restoration of a vehicle seized on the basis of transporting a commercial importation of excise goods. There was force to Mrs Hodge’s assertion that she took a more lenient course of action with the Appellant by offering restoration of the vehicle for a fee. Mrs Hodge adopted this course after having due regard to the individual circumstances of the Appellant, which in her view amounted to exceptional hardship sufficient to mitigate the usual sanction of non-restoration for commercial importations. The Tribunal reached the same conclusion as Mrs Hodge on the issue of exceptional hardship.
32.	The Tribunal did form a different view on the facts from Mrs Hodge about whether the Appellant had purchased the whole consignment of excise goods. The Tribunal decided that he did not, with one half of the consignment belonging to Mr and Mrs Crewe. The Tribunal, however, considers that this difference was not fundamental and did not undermine the reasonableness of Mrs Hodge’s decision. Essentially the importation remained a commercial one even though Mr and Mrs Crewe held an equal share of the tobacco and cigarettes. 
33.	The Appellant contended that if Mr and Mrs Crewe owned one half of the tobacco, the restoration fee should likewise be halved. The Appellant’s proposition belied a misunderstanding of the Tribunal’s powers. The Tribunal was not entitled to substitute its own decision for that of the review officer. The Tribunal’s sole concern was the reasonableness of Mrs Hodge’s decision. The Tribunal considers that Mrs Hodge’s decision of offering restoration of the vehicle for a fee equivalent to the excise duty on the whole consignment was not disproportionate for a commercial importation for onward sale at a profit.
Decision 
34.	The Tribunal is satisfied for the reasons set out above that HMRC decision on review dated 17 June 2008 restoring a motor vehicle, a BMW 535 Sport registration number YDO7 OPS subject to the payment of a fee in the sum of £4,203.34.was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. 
35.	We, therefore, dismiss the Appeal. We make no order for costs

                                 MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
  RELEASE DATE: 10 August 2009

MAN/

Notes
36.	The Tribunal directed that the costs regime which operated prior to 1 April 2009 applied to this Appeal. 
37.	A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making   an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.