[2010] UKFTT 207 (TC)

	TC00509

					      Appeal Number: TC/2009/11057

EXCISE DUTY – NON-RESTORATION OF VEHICLE – Evidence of Own Use of Excise Goods – Not Admitted – Abuse of Process – Was the Non-Restoration Proportionate – Yes – Did the Appellants suffer Exceptional hardship – No – Was the decision reasonable – Yes -  Appeal Dismissed 

FIRST TIER TRIBUNAL
TAX

	DJILAL BENAHMED & LAIMA MISKINYTE	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

Tribunal: 	Michael Tildesley OBE (Judge)
John Davison (Member)	  

Sitting in public at Leeds on 13 April 2010

The Appellants appeared in person

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

© CROWN COPYRIGHT 2010

DECISION
The Appeal

1.	The Appellants appealed against the HMRC’s decision on review dated 6 May 2009 refusing restoration of a BMW 530i SE registration number VK05 CTX (hereinafter known as “the vehicle”).
2.	On 10 February 2009 Customs Officers at Coquelles in France intercepted the vehicle driven by Mr Benahmed accompanied by Miss Miskinyte and her brother, Donatos Miskinis. The vehicle was found to be carrying 12 kilogrammes of Samson hand rolling tobacco.
3.	The Customs Officers seized the vehicle and the tobacco because they were satisfied that the excise goods were being held for a commercial purpose and UK excise duty had not been paid on them.
4.	On 12 February 2009 the Appellants wrote to HMRC requesting it to look at their case and return their goods. On 18 February HMRC treated the letter of 12 February 2009 as an Appeal against the legality of the seizure. In those circumstances HMRC advised the Appellants that it would be instituting condemnation proceedings before the magistrates’ court.
5.	On 23 February 2009 the Appellants withdrew their Appeal against seizure, and requested HMRC to restore the vehicle. 
6.	On 20 March 2009 HMRC refused restoration of the vehicle. 
7.	On 6 May 2009 Mr Cawthraw, Review Officer, confirmed the decision not to restore the vehicle.
The Appellant’s Case
8.	The Appellants contended that they imported the tobacco for personal use. There was no evidence that they were smugglers. The Appellants frequently travelled to the continent to visit friends and relatives. Their visit on 10 February 2009 was the first time that they had travelled to the continent for the purpose of purchasing tobacco. They decided to do this to beat the recession by making considerable savings on their tobacco purchases. The Appellants considered they suffered exceptional hardship from the loss of the vehicle. They considered that they received a life sentence for an innocent act. The car was subject to a finance leasing arrangement under which Miss Miskinyte was required to meet the monthly instalments of ₤234 until the expiry of the lease. The Appellants estimated that the potential cost to them was over ₤18,000 which was totally disproportionate to the amount of duty at stake which was ₤1,464.12. 
The Issues
9.	The two issues in this Appeal are
(1)	Was the Tribunal entitled to take account of the Appellants’ evidence about personal use?
(2)	Whether Mr Cawthraw’s refusal to restore the vehicle was a decision which no reasonable body of Commissioners could have arrived at. The jurisdiction of the Tribunal was to find the primary facts and to decide whether in the light of those findings Mr Cawthraw’s decision was reasonable. In order for the decision to be reasonable Mr Cawthraw must have considered all relevant matters and disregarded irrelevant matters.
Jurisdiction of the Tribunal
10.	HMRC’s power regarding restoration of goods 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”.
11.	The precondition to the Tribunal’s exercise of one or more of its three powers is that the person making a 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”.
12.	 In Gora and others v Customs and Excise Commissioners [2003] EWCA Civ 525, the Court of Appeal decided that the Tribunal had a comprehensive fact finding jurisdiction in restoration Appeals: 
“[The Tribunal] satisfies itself that the primary facts upon which the      Commissioners have based their decision are correct. The rules of the tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals.'
Strictly speaking, it appears that under s 16(4) of the 1994 Act, the Tribunal would be limited to considering whether there was sufficient evidence to support the Commissioners' finding of blameworthiness. However, in practice, given the power of the Tribunal to carry out a fact-finding exercise, the Tribunal could decide for itself this primary fact. The Tribunal should then go on to decide whether, in the light of its findings of fact, the decision on restoration was reasonable. The Commissioners would not challenge such an approach and would conduct a further review in accordance with the findings of the Tribunal" (paragraph 39).
13.	The Court of Appeal, however, considered that the Tribunal’s comprehensive fact finding jurisdiction did not extend to finding of facts about the legality of the seizure of the goods, which was a matter for the magistrates in condemnation proceedings. Thus Lord Justice Pill  in Gora at paragraphs 56 – 58 stated that
“56. The Tribunal accepted that where liability to forfeiture has been determined by a court in condemnation proceedings, there is no further room for fact finding by the Tribunal and it has no jurisdiction. However, the Tribunal went on to hold that Mr Gora did not give a notice under paragraph 3 and as a result the law took its course and the goods were treated as property seized and so liable to forfeiture. No finding of fact resulted. A deemed fact is not a real fact. It cannot consequently rank as a consideration relevant to the subsequent decision on restoration until determined by the Tribunal or conceded to exist. It was held to be open to the Tribunal to determine the question of fact whether the goods were seized.

57. I do not agree with that conclusion. Jurisdiction to decide whether any thing forfeited is to be restored under section 152(b) is with the Tribunal. The jurisdiction in condemnation proceedings is, by virtue of Schedule 3, with the courts. If the deeming provision in paragraph 5 of the Schedule operates, the thing in question shall be deemed to have been duly condemned as forfeited. The effect of this deeming provision is to provide that the thing is to be treated as forfeited. The purpose of the provision is to treat the deemed fact as a fact and I cannot accept that it can be treated as "not a real fact".

58. While the division of jurisdiction between the courts and the Tribunal may arguably be curious, and is probably retained because of the long standing jurisdiction of the courts in proceedings for condemnation, the division is clear and it is not intended that the Tribunal should have jurisdiction to reconsider the condemnation of goods as forfeited. Mr Cordara's submission that the Tribunal should have jurisdiction to consider whether duty has been paid is no more than another way of claiming that the court's findings should be re-opened. The Tribunal's view would produce the surprising result that the person whose goods had been seized could make a choice of fact-finding tribunal. If he wanted the court to determine the issue he would serve a notice under paragraphs 3 and 4; if he wanted the Tribunal he would do nothing. In my judgment, the statutory scheme does not produce that result. The application to the Tribunal is for restoration under section 152. There is no breach of Article 6 because the owner has recourse to the courts in the condemnation proceedings”.
14.	In Gascoyne v Customs and Excise Commissioners [2004] EWCA Civ 1162 the Court of Appeal elaborated upon Lord Justice Pill’s observations regarding the Tribunal’s jurisdiction to reconsider the condemnation of goods as forfeited. Lord Justice Buxton concluded that where there has been a deemed forfeiture of goods, the Tribunal could reopen the issues relating to the seizure of the goods provided it would not amount to an abuse of process.  
15.	Lewison J in the Commissioners of Customs and Excise v Albert Charles Smith ChD (2005) unreported, stated on abuse of process:
“ Buxton's LJ reference to abuse of process or to considerations analogous to abuse of process are, in my view, references to the well-known principle that it may be an abuse of process to raise in one tribunal matters that could and should have been raised in another. So the relevant questions will always be, first, could the Applicant have raised the question of lawfulness of forfeiture in other proceedings and, if the answer to that question is yes, why did he not do so? In the light of his reasons for not raising the matter in condemnation proceedings the tribunal can then answer the question should he have done so and if they answer that question 'yes', then it will be, in most cases, an abuse of process for him to raise the question before the tribunal."
16.	 Evans-Lombe J in Commissioners of Customs and Excise v Weller [2006] EWHC 237 (Ch) concluded that whether a Tribunal should permit an Appellant to mount a challenge to the legality of the seizure in restoration proceedings would depend on the application of the principle of proportionality to the particular facts of the case in question.  
Summary of Tribunal Jurisdiction
17.	 The review of the  authorities on the Tribunal’s jurisdiction in restoration proceedings establishes the following principles:
(1)	The Tribunal’s jurisdiction is limited to determining whether the Commissioners’ decision to refuse restoration or to offer restoration on terms was reasonable. 
(2)	The Tribunal is not entitled to substitute its own view about whether the goods should be restored.
(3)	 The test for reasonableness is whether 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.
(4)	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.
(5)	The Tribunal is not entitled to consider the lawfulness of the seizure, or determine the underlying facts relating to seizure when deciding the reasonableness of the Commissioners’ decision to refuse restoration except when the Tribunal is satisfied that it would not be an abuse of process to take into account the facts surrounding the seizure of the goods.
(6)	Where the goods have been condemned as forfeited by the magistrates, there is no further room for fact finding by the Tribunal on the circumstances surrounding the seizure.
(7)	Where there has been a deemed forfeiture of the goods, the Tribunal should apply the principle of proportionality to the particular facts of the case having in mind considerations of abuse of process when deciding whether to reopen the issue about the lawfulness of the original seizure. 
(8)	The Appellant’s failure to institute condemnation proceedings will, in most cases, preclude subsequent challenge to the lawfulness of the seizure in restoration proceedings. In such circumstances the Tribunal should consider the Appellant’s response to two questions when deciding whether to re-open the facts of the original seizure. The first question is: could the Appellant have raised the question of lawfulness of forfeiture in other proceedings and if yes, why did he not do so?
First Dispute: Are the Appellants entitled to adduce evidence of own use?
18.	The above review of the Authorities establish that where the goods have been condemned as forfeited the Tribunal is not entitled as a matter of law to decide on the legality of the seizure or the facts underlying the seizure. The one exception is that where there has been deemed forfeiture the Tribunal should apply the principle of proportionality to the particular facts of the case having in mind considerations of abuse of process when deciding whether to reopen the issue about the lawfulness of the original seizure. In deciding the question of abuse of process the Tribunal should have regard to two questions: could the Appellants have raised the issue of own use in other proceedings and if yes, why did they not do so?
19.	In this Appeal the Appellants had the opportunity to raise the matter of own use in condemnation proceedings before the magistrates’ court. They decided not to proceed with condemnation proceedings and withdrew their Appeal to the magistrates’ court against seizure. In  Commissioners for Revenue & Customs v Mills [2007]  EWHC 241 (Ch) Mr Justice Mann held that a forfeiture following a withdrawal of condemnation  proceedings fell within the category of a deemed forfeiture. In which case the Tribunal had to be satisfied that the Appellants had good reasons why they withdrew their Appeal to the magistrates before the Tribunal could entertain their evidence on own use. 
20.	The reasons put forward by the Appellants were that they did not understand the legalities connected with seizure, and that the costs involved in the magistrates’ court’s proceedings were beyond their means. They had taken advice of solicitors before they withdrew their Appeal before the magistrates’ court.
21.	HMRC’s letter dated 18 February 2010 advised the Appellants of the consequences of withdrawing proceedings before the magistrates’ court:
“ If you withdraw from condemnation proceedings  in the magistrates’ court then the Commissioners will consider the goods are confirmed as held for a commercial purpose – being not for own use – when making any decision about restoration of the goods and in any review of such decision. Furthermore, the Commissioners will ask for any challenge to the legality of the seizure, including claims own use, in any subsequent VAT & Duties Tribunal appeal to be struck out on the grounds that you had ample opportunity to make your claim in the proper place – the Magistrates’ Court – but failed to do therefore the legality of the seizure has already been confirmed and the goods are held for a commercial purpose”.
22.	In Her Majesty’s Revenue & Customs v Dawkin [2008] EWHC 1972 Mr Justice David Richards allowed HMRC’s appeal against the ruling of a Tribunal which permitted Mr Dawkin to advance arguments of own use on the grounds of costs and inability to understand the legal complexities . Mr Justice David Richards decided that the Tribunal was wrong, stating  at paragraph 38: 
“….the Tribunal stated .that the delay coupled with the mention that HMRC would seek costs in the magistrates’ court would deter all but those who fully understood the consequence of not challenging the seizure in the magistrates court. The first point to note is that Notice 12A clearly states the consequence. One of the grounds on which the Tribunal in Smith permitted the importer to raise the issue of seizure was inadequacies in this respect in the Notice. Lewison J described it as an "unsustainable conclusion" and said that statements in the Notice were "unequivocal in telling the person whose vehicle had been seized that if he does not invoke the challenge to the seizure within one month he will thereafter lose the right to challenge it." Secondly, Mr Dawkin took legal advice and decided against proceedings in the magistrates’ court. Thirdly, the position as to costs is common to litigants in most proceedings. 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. Finally, there can be no criticism of HMRC in mentioning the costs position. It would be a failure to mention it which might be open to criticism”
23.	The Appellant’s reasons corresponded almost exactly with those put forward by Mr Dawkin. The High Court decided that reasons of costs and not understanding the legal complexities were not sufficient for the Tribunal to admit evidence of own use.
24.	The Tribunal finds that the reasons put forward by the Appellants for not proceeding with their Appeal before the magistrates’ court were not sufficient to take this Appeal out of the normal run of the mill case. HMRC advised the Appellants in clear terms of the consequences of withdrawing the proceedings before the magistrates’ court.  It would, therefore, be an abuse of process to allow the Appellants’ evidence of own use. Essentially the Appellants made the wrong choice of the judicial forum for hearing their dispute. They should have continued with their Appeal before the magistrates’ court. In those circumstances, Mr Cawthraw, the Review Officer, was entitled to treat the Appellants’ importation of tobacco as a commercial importation.
Second Dispute: Was Mr Cawthraw’s Decision Reasonable?
25.	Mr Cawthraw decided that non-restoration of the vehicle was fair reasonable and proportionate. In reaching his decision  Mr Cawthraw had regard to the following matters:
(1)	The Appellants had not claimed that the tobacco was to be passed onto others on a not for profit basis. The tobacco was, therefore, held for profit.
(2)	Lord Justice Judge’s dictum in Lindsay v Customs and Excise Commissioners [2002] EWCA Civ 267 at paragraph 71:
“Given the extent of the damage caused to the public interest, it is, in my judgment, acceptable and proportionate that, subject to exceptional individual considerations, whatever they are worth, the vehicles of those who smuggle for profit, even for a small profit, should be seized as a matter of policy”
(3)	The amount imported of 12 kilogrammes of tobacco was not a small quantity, which constituted an aggravating circumstance within HMRC policy against restoration.
(4)	No exceptional hardship: Mr Cawthraw considered the inconvenience and expense suffered by the Appellants did not amount hardship over and above the natural consequence arising from loss of the vehicle. 
(5)	Miss Miskinyte had two other vehicles registered in her name, a Mazda MX3 and a Mercedes CLK 2000
26.	The Appellants in response stated that
(1)	They were law-abiding and hard working citizens who had not been in trouble with HMRC before.
(2)	The vehicle was registered in the name of Mr Benahmed but was purchased by Miss Miskinyte under a conditional sale agreement with a finance company. Under this agreement Miss Miskinyte was required to make monthly instalments of ₤234 for a period of five years. The total amount payable under the agreement was ₤15,000. Under the terms of the agreement   Miss Miskinyte was required to insure and tax vehicle. The finance company retained ownership of the vehicle until the loan was paid out. The loan could be discharged early on payment of a prescribed amount at certain intervals.
(3)	Miss Miskinyte had maintained the payments under the finance agreement whilst the vehicle was in HMRC’s custody. She was obliged to discharge the loan even though she no longer had possession of the vehicle. 
(4)	The financial cost to them associated with the non-restoration of the vehicle was in the region of ₤18,000 which was out of all proportion to the duty owed on the tobacco of ₤1,464.12. 
(5)	The Appellants had acquired the vehicle in September 2008. Their use of it was limited to five months before the vehicle was seized.
(6)	Miss Miskinyte relied on public transport to travel to her place of employment. The public transport links were unreliable.
(7)	Mr Benahmed worked as a part-time taxi driver earning around ₤100 a week. Miss Miskinyte held down a good job with an annual salary of  29,000. She owned her home on a mortgage.
(8)	Miss Miskinyte accepted that the Mazda MX3 and a Mercedes CLK 2000 were registered in her name. The Mazda MX3 was an old banger which had subsequently been sold. The Mercedes CLK 2000 belonged to her brother. Miss Miskinyte accepted that the insurance for the Mercedes was in her name, and that she drove the vehicle.
27.	The Tribunal found the Appellants to be truthful witnesses who gave their evidence in a straightforward manner. The Tribunal accepts their evidence apart from their formulation of proportionality. Equally Mr Cawthraw’s decision was based on sound principles. He, as with the Tribunal, was bound by the legal consequence of the deemed forfeiture that the tobacco was lawfully seized. In those circumstances Mr Cawthraw was obliged to conduct his review on the basis that it was a commercial importation by the Appellants. In that respect he took into the relevant considerations regarding the issue of proportionality which was summed up by the extract from Lord Justice Judge’s decision in Lindsay. Although the Tribunal may be critical of his approach to exceptional hardship in that he did not give sufficient attention to the individual circumstances of the Appellants, our findings on hardship were such that they did not amount to exceptional hardship. The Tribunal finds that the Appellants have the means to meet the financial requirements of the conditional sale agreement. Further Miss Miskinyte had access to another vehicle in case of difficulties in attending her employment. Finally their employment was not affected by the loss of the vehicle.  In those circumstances the Tribunal is satisfied that Mr Cawthraw took account of relevant considerations and disregarded irrelevant considerations in reaching his decision to confirm the non-restoration of the vehicle
28.	The problem in this case was that the Appellants made the wrong choice over the legal forum to air their dispute. Their defence was that they purchased the tobacco for their own use. This was a matter for the magistrates’ court not the Tribunal. The jurisdiction of the Tribunal is limited. The Tribunal is not entitled to admit evidence of own use unless it would not be an abuse of process following a deemed forfeiture. The Tribunal is unable to substitute its own decision for that of the Review Officer. The Tribunal’s powers are restricted to considering whether the Review Officer’s decision is reasonable. 
Decision
29.	The Tribunal is satisfied that HMRC decision on review dated 6 May 2009 refusing restoration of the vehicle was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994.  The Tribunal, therefore, dismisses the Appeal.
30.	The Appellants raised the possibility of return of the vehicle to the finance company. The Tribunal is not in a position to give legal advice on this matter. The Appellants may wish to consider taking advice before approaching the finance company about the possibility of it making an application for restoration of the vehicle on the grounds that they own it. The Tribunal requests HMRC to give the Appellants 28 days to make this approach if they decide to do so before the vehicle is disposed. The Tribunal, however, fully acknowledges that whether HMRC grants the 28 day reprieve is a matter for its discretion.

MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE   
RELEASE DATE: 6 May 2010
Notes
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.