[2009] UKFTT 219 (TC)

TC00169

Appeal Number: LON/2008/7125
                     LON 2008/7129
                     LON 2008/7130 

FIRST TIER TRIBUNAL TAX

CUSTOMS DUTIES – Whether duties were due on postal packages – Appellant argued imported from Germany rather than United States – Not proved on balance of probabilities – Appellant contended that HMRC not entitled to treat original decision as upheld – Tribunal had jurisdiction to hear Appeals against deemed decisions – Duties properly levied – Appeal dismissed

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

	PETER TERENCE O’NEILL	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      SHAHWAR SADEQUE

Sitting in public at London on 24 July 2009

Appellant appeared in person

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

© CROWN COPYRIGHT 2009

DECISION
The Appeal
1.	The Appeals related to the Appellant’s purchases of compact discs and DVDs from Amazon.com on three separate occasions. The Appellant contended that the goods were despatched from Germany in which case no duty and VAT were payable on the transactions. HMRC argued otherwise saying that the goods had been imported from the United States of America, in which case they were subject to duty and VAT (the factual dispute). 
2.	The Appellant also submitted that HMRC was in breach of its statutory duty in failing to conduct a review of its initial decision. Thus HMRC was not entitled to benefit from its breach, and by default HMRC had admitted the Appellant’s claim. HMRC disagreed with the Appellant’s analysis.  The legislation provided that the original decision was deemed to be upheld where a review was not carried out. The Tribunal had jurisdiction to deal with deemed decisions in the same way as decisions arising from the review procedure (the review dispute). 
3.	The disputed transactions are set out in the table below:
Date of Order	The Order	Value of Order	Disputed Charges	
25.11.07	Giuseppe Tartini The Violin Concertos Vols 3, 7, 8, 10, 11 (Music CDs)	$184.86 (including $13.96 shipping & handling)	£16.33 VAT 
£8 Royal Mail Clearance Fee
	
26.11.07	Giuseppe Tartini The Violin Concertos Vol 7 (Music CDs)	$47.55 (including $5.59 shipping & handling)	£4.20 VAT 
£8 Royal Mail Clearance Fee
	
20.04.08	Heroes – Season One; No Country for Old Men; Enchanted; I am Legend (Film DVDs).	$79.91 (including $13.95 shipping & handling)	£7.04 VAT 
£8 Royal Mail Clearance Fee

The Factual Dispute
4.	The  facts agreed between the parties were as follows:
(1)	The Appellant purchased the CDs and DVDs on the internet from Amazon.com which was based at 1 Centrepoint Boulevard, New Castle, United States of America. The purchase price was in dollars. The UK branch of Amazon traded from the website of Amazon.co.uk.
(2)	The terms and conditions of sale applied by Amazon.com made the Appellant liable to pay the customs charges or local taxes deemed due in the country of arrival.
(3)	The label on the package containing the goods stated the name and address of Amazon.com, the name and address of the Appellant prefixed by Ship to and a Customs declaration – CN 22. This label was headed DPGM Standard Row – DHL Global Mail.
(4)	Article 237 of EC Regulation 2454/93/EEC required a CN22 declaration on postal packages for the purposes of calculating the duty payable on the goods when presented to Customs. The CN22 on the packages to the Appellant described the goods which were classified as merchandise. The CN22 stated the charges including a separate charge for freight and insurance and the weight of the goods. The CN22 was signed with a certificate that the item did not contain any dangerous article prohibited by postal regulations. 
(5)	A smaller peel off label entitled Deutsche Post was also attached to each package, at the top of the larger label. The smaller label under the heading Deutsche Post stated that post paid, 60544 Frankfurt, Allemagne (Germany). The left part of the label stated that in the case of non delivery please return to 36243 Niederhoufs, Germany (translated from French).
(6)	HMRC placed a charge on each package which was affixed at Mount Pleasant Postal Depot, Farringdon Road, London, EC1A 1BB. The charge set out the VAT due and the Royal Mail international handling fee. The charge explained that goods purchased and imported into the European Union with a value of over £18 were subject to Customs charges. The charge gave details of the address for dealing with any queries on Customs charges.
(7)	The musical CDs bore a stamp of being manufactured in Austria. The film DVDs were programmed for play in  North America. The Appellant accepted that some DVD machines for sale in the United Kingdom had the capability to play DVDs destined for the North American market.
5.	The Appellant relied on the Deutsche Post stamp for his assertion that the goods were posted from Germany. The Appellant pointed out that HMRC did not dispute the authenticity of the stamp. Further the stamp directed that the goods be returned to Germany in the event of non-delivery. Finally it defied common sense for the musical CDs to be transported to the United States of America, and then back to Germany for despatch when the CDs were manufactured in Austria. 
6.	The Appellant challenged HMRC’s assertion that Deutsche Post despatched all Amazon.com mail from the United States of America. He contended that HMRC had adduced no documentary evidence proving the truth of its statement that Amazon.com had given its delivery contract work to Deutsche Post Global which collated and delivered the packages of Amazon.com from three mail handling units in New York, Chicago and Los Angeles. The Appellant also submitted that even if HMRC’s statement was true, there was no evidence of how the goods were brought into Germany, and no evidence that they were not taxed in Germany.
7.	HMRC contended that the onus was on the Appellant to prove that the goods held the status of Community goods, having been released for free circulation before they entered the United Kingdom. The Appellant had failed to provide evidence of the status of the goods; of a Customs’ declaration made and of import duties paid in Germany.  Further, the evidence did not show that the goods were shipped from Germany According to HMRC the strong inference to be drawn from the evidence was that the goods were shipped from the United States of America, and transported within the Community to the United Kingdom where they were released for free circulation by payment of the duty. 
8.	The issue for the Tribunal was whether the Appellant had discharged the burden of proving on the balance of probabilities that the goods had been imported from Germany rather than the United States of America.  The Appellant’s case essentially comprised the information on the Deutsche Post label. This had to be weighed against the evidence of the larger label showing that the goods had been sent from the United States of America together with the fact that the Appellant ordered the goods from Amazon.com which was based in the United States. The larger label also incorporated a Customs declaration which indicated that the goods had not been released for free circulation.
9.	The Appellant’s approach when faced with contrary evidence was to place responsibility upon HMRC to prove that the goods were not sent from Germany. His approach was summed up by his comment that the case was to be determined by the evidence not by the burden of proof.  The problem with his proposition was that there was competing evidence in this Appeal.  
10.	The Deutsche Post label was evidence of postage being paid in Germany not unequivocal proof that the goods had been imported from Germany. If HMRC had not adduced evidence of shipping from United States, the Appellant’s reliance on the Deutsche Post label may have been sufficient to prove his case. HMRC, however, provided persuasive evidence of the goods being shipped from the United States together with a plausible explanation for the presence of the Deutsche Post label. HMRC’s explanation was that the goods were shipped from the United States to a central clearance centre in Germany for onward posting using the external transit procedure to Member states. The external transit procedure enabled the goods to escape the payment of import duty at the point of entry whilst they were transported through the Community to the United Kingdom. HMRC made the Appellant aware of its explanation for the Deutsche Post label in the informal reconsideration of Mr Payne dated 3 September 2008 and the Statements of Case dated 6 November 2008.
11.	The Appellant contended that HMRC adduced no evidence of the German clearance centre and that no import duty was paid on the goods when they entered Germany. The Tribunal considers the Appellant’s contentions misconceived. In order to dispute the Appeal, HMRC had to cast sufficient doubt on the Appellant’s case which it did by adducing  persuasive evidence that the goods were imported from the United States, and provide an explanation for the Deutsche Post label.  There was no obligation upon HMRC to prove that the goods entered the European Union via Germany. The onus was on the Appellant to prove on the balance of probabilities that the goods were imported from Germany.  Apart from the Deutsche Post label, the Appellant relied on the evidence of the place of manufacture for the CDs, which was Austria. The Appellant argued that it made more sense for Amazon.com to send  them  direct from Germany rather than transport the CDs to the United States and back out again to the United Kingdom. The Appellant’s argument was eminently reasonable but not supported with evidence except the manufacturer’s stamp on the CD label. Further the Appellant’s reliance on the place of manufacture was undermined by the fact that the DVDs purchased by the Appellant were made for the North American market. 
12.	The Tribunal finds that the evidence of the goods being shipped from the United States more convincing than the Appellant’s evidence of the goods imported from Germany.  The Appellant purchased the goods from a firm established in the United States. The purchase price was in American dollars. The larger label showed that the goods were shipped from the United States to the Appellant. The label incorporated a Customs declaration which indicated that Amazon.com expected the Appellant to pay import duties. The terms and conditions of sale applied by Amazon.com made the Appellant liable to pay  customs charges or local taxes The smaller label, Deutsche Post,  was affixed to the top of the larger label and capable of being peeled off, which gave the impression that the larger notice was the principal document.
13.	The Tribunal holds that the Appellant has failed to prove on the balance of probabilities that the goods were imported from Germany rather than the United States of America. 
14.	The Tribunal expressed the view that had the parties contacted Amazon.com prior to the hearing it may have resolved the dispute regarding the facts. The Tribunal offered the parties an adjournment to ascertain the position from Amazon.com., which the parties declined.
The Review Dispute
15.	On various dates in May 2008 the Appellant requested a refund of the Custom’s charges on the packages comprising the CDs and DVDs.  Mr Cook of HMRC issued written decisions with brief reasons stating that the charges were properly levied and no refund would be made. Mr Cook advised the Appellant of his right to request a review of the decisions which would be conducted by an impartial review officer.  On 21 June 2008 the Appellant requested formal departmental reviews. On 25 June 2008 HMRC advised the Appellant that his case had been allocated to an Adrian Woolley who had a maximum of 45 days from the date of receipt of the Appellant’s letter to conduct the formal review and notify him of the outcome. HMRC further advised that if Mr Woolley did not inform the Appellant of the outcome of the review by the expiry of the 45 day period, the Appellant was to assume that the original decision was upheld, in which case he could appeal to the Tribunal. On 15 August 2008 HMRC told the Appellant that Mr Woolley was unable to complete the Review within the 45 days, and that the original decisions of Mr Cook would be deemed upheld.
16.	The Appellant contended that under section 15 of the Finance Act 1994 HMRC was under a statutory duty to complete a review within 45 days. In his case HMRC did not carry out the review, and was, therefore, in breach of its statutory duty. In those circumstances HMRC should not benefit from its non-compliance by being able to rely on the fiction of a deemed decision to resist the Appellant’s Appeal. Thus the Tribunal should regard HMRC’s failure as if the purported review allowed the Appellant’s claim for a refund. The Appellant considered that the wording of section 15(2) of the Finance Act 1994 supported his view. He argued that the deemed decision only came into play if HMRC had actually carried out the review within the required time limit but failed to notify the outcome within 45 days. Section 15(2) did not apply when HMRC had done nothing to progress the review.
17.	HMRC submitted that the Appellant  misunderstood the legislation. Section 16 of the 1994 Act gave the Tribunal jurisdiction to hear Appeals against deemed decisions. The Tribunal was a creature of statute, and did not have the power to rule on supposed breaches of statutory duty. The Tribunal did not have the authority to treat HMRC’s failure as if the purported review allowed the Appellant’s claim.
18.	Section 15 of Finance Act 1994 provides
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
2) Where
a) it is the duty of the Commissioners in pursuance of a requirement by any person under section 14 above to review any decision; and
b) they do not within the period of forty five days beginning with the day on which the review was required, give notice of their determination on the review,
they shall be assumed for the Purposes of this Chapter to have confirmed the decision. 
19.	 Section 16(1) of Finance Act 1994 provides so far as is relevant:
 ….. An appeal shall lie to an appeal Tribunal with respect to any of the following decisions, that is to say –
 a) any decision by the Commissioners on a review under section 15 above (including a deemed confirmation under subsection 2 of the section)
20.	Section 16(5) of the 1994 Act provides:
In relation to any 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 of any decision quashed on appeal. 
21.	The Tribunal considers the Appellant’s construction of section 15(2) of the 1994 Act flawed. He argued that the deeming provision only applied when HMRC had conducted a review but failed to notify the outcome. The Appellant was importing additional words into the legislation. The wording of section 15(2) was unambiguous. Section 15(2) applied to every situation where HMRC had failed to notify the outcome of the review within 45 days.  There was nothing in section 15(2) that required a review to be completed in order for the deeming provision to bite.
22.	The Tribunal disagrees with the Appellant’s assertion that the deeming provision enabled HMRC to escape the consequences of its breach of statutory duty. Section 15(2) provides a remedy for HMRC’s breach of duty. If section 15(2) was not enacted the aggrieved person would have to await the review decision, and in the meantime  be deprived of an effective means of challenging HMRC other than resorting to judicial review. Section 15(2) specifies that where HMRC does not notify a review within 45 days the original decision is deemed upheld.  Section 16 of the 1994 Act gives an aggrieved person a right of appeal against a deemed decision.
23.	Finally the Tribunal does not have authority to make the order as requested by the Appellant which was to regard HMRC’s failure as if the purported review allowed his claim for a refund. Section 16 of the 1994 Act defines the extent of the Tribunal’s jurisdiction which is to determine appeals against decisions on review under section 15 including deemed decisions. The Tribunal’s powers on Appeal  are defined by section 16(5) which effectively are to uphold, quash or vary the review decision on the merits of the Appeal in which the burden of proof rests upon the Appellant (section 16(6) of the 1994 Act).  The Tribunal has no jurisdiction to offer relief for proven breaches of statutory duty.
24.	The Tribunal, therefore, decides against the Appellant in the review dispute. HMRC was entitled to deem the original decision of Mr Cook upheld, despite no review being conducted. The Tribunal had jurisdiction to deal with the Appeal against the deemed decision on its merits.
The Handling Charge
25.	The Appellant submitted that if his Appeal was successful the Tribunal could order HMRC to refund the £8 Royal Mail clearance fee charged on the packages. The Appellant argued that HMRC demanded the fee not the Post Office, and, therefore, the fee formed part of Custom’s charges. HMRC pointed out that the clearance fee was outside its remit, and that if the Appellant disagreed with the charge he should take it up with the Post Office.
26.	The Tribunal is satisfied that the clearance fee was imposed by the Post Office. The Tribunal’s jurisdiction was limited to determining disputes about duties levied by HMRC. The Tribunal has no standing in respect of the clearance fee, which was a matter that the Appellant should take up with the Post Office.
Decision
27.	 The Tribunal finds that the Appellant has failed to prove on the balance of probabilities that the goods were imported from Germany rather than the United States of America. The Tribunal preferred HMRC’s evidence that the goods were imported from the United States. Any goods of value in excess of £18 imported into the  United Kingdom from the United States were subject to the payment of Customs’ duties which include VAT. The Appellant was, therefore, liable to pay the duties on the packages of CDs and DVDs. There was no dispute about the quantum of the charges.  The Tribunal dismisses the Appeals.   

                                

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 25 August 2009

LON/

28.	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.