[2010] UKFTT 565 (TC)

TC00816

Appeal number: LON/2009/8023

EXCISE DUTY- Excise goods confiscated – appeal against review officer’s decision that the goods should not be restored to the Appellant

FIRST-TIER TRIBUNAL

TAX 

	SIMON WATSON	Appellant

	- and -

	DIRECTOR OF BORDER REVENUE 	Respondents

		TRIBUNAL: MRS.S.M.G.RADFORD (TRIBUNAL JUDGE)						MRS. H. MYERSCOUGH			

Sitting in public at 45 Bedford Square, London WC1 on 13 September 2010

The Appellant in person

Mr R. Jones, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	This is an appeal against the decision of the Customs review officer to refuse to restore goods seized from the Appellant on 27 September 2008.
2.	The Appellant and Mr Brenton, the review officer for the UK Border Agency, gave evidence. 
Background and facts
3.	On 27 September 2008 the Appellant arrived at Ramsgate port in his vehicle returning from a day trip. He was accompanied by his wife and three children. Customs officers spoke to the two adults. The Appellant told Officer Herbert that they had with them “four kilograms of Golden Virginia for my wife and four and a half kilograms of Drum for me.” They also had 25 cases of wine and 15 cases of beer.
4.	It was established that the Appellant had travelled abroad the week before with friends but claimed that on that trip he had not bought anything. He had also made a trip six weeks before and a few other trips between that day and the summer holidays.
5.	The Appellant confirmed that he had previously been stopped by customs and had received a Notice 1 explaining the guidelines regarding excise goods when he had been carrying a similar amount of goods as that day. He had brought back all the tobacco today because he was not sure when his next trip would be before Christmas and he had not brought back any goods on the previous trip because he knew that he was making this trip today.
6.	Officer Herbert asked the Appellant about his and his wife’s smoking habits. The Appellant confirmed that he had spent some £635 on the tobacco and a similar amount on the alcohol which he believed would last him until Christmas.
7.	The Appellant had bought six tickets for use as singles or day returns over a twelve month period which had cost £199. However this was the last trip he could take using the cheap fares as the time table was changing making day returns impossible. Generally fares had increased dramatically to £180 following the fire in the Channel tunnel so this was the last chance he would have before Christmas to make an affordable day return.
8.	He told the Customs officer that four packets of the tobacco were for his wife and four and a half packets were for him. The four and a half packets contained forty-five pouches of tobacco and there were forty pouches for his wife.
9.	The Appellant produced a copy of his Nationwide Building Society account to the Tribunal which showed his withdrawal of the cash to pay for the tobacco. Additionally he produced a statement which showed his receipt of tax credits which were paid into his Nationwide account noting a large receipt of £3,000 in August compared to the usual £200 credit. He also showed his Nationwide pass book to the interviewing officer.
10.	The Appellant told the Customs officer that he smoked some five pouches of tobacco a week and that included those roll ups which he gave to his father. He said that his wife smoked three to four pouches a week.
11.	During the interview the Appellant told the interviewing officer that he smoked thirty to forty roll ups per day but did not know how many roll ups he got from each pouch.
12.	The Appellant’s wife was interviewed separately and was asked about previous trips, smoking habits and finances. The officer who interviewed her did not think it feasible that she could consume three to four pouches of tobacco per week as she had stated that she smoked ten roll ups per day.
13.	On completion of the interview with the Appellant the customs officer Mr Herbert concluded that the tobacco was not for personal consumption and it was seized under the powers of the Customs and Excise Management Act 1979. The officer set out his reasons for doing so in his notebook. These were that the Appellant was a regular traveller; his stated consumption was of concern as it was so high; the time stated that the tobacco would last did not seem realistic; there were inconsistencies in the information the Appellant had given regarding the tobacco purchased that day; and consideration had also been given to the Appellant’s financial situation and his expenditure.
14.	In relation to the Appellant’s wife the customs officer Mr Dench also decided to seize her goods on the basis that it was not feasible for her to consume two to four pouches per week when her stated consumption was approximately 10 roll ups per day; there were inconsistencies in her statement with that of the Appellant’s regarding previous travel; and she was unaware of the amount of tobacco purchased for her stating that it was forty pouches of Golden Virginia when it was actually eighty pouches.
15.	On 28 September 2008 the Appellant wrote to HMRC regarding the seizure. He set out his recollection of events from the previous day. He gave further information regarding his smoking habits, previous trips he had made and his general travel habits. He asked that his tobacco be returned.
16.	Mr Dillon from the HMRC Post Seizure Unit wrote to the Appellant and outlined the appeal procedure. The letter stated that the Appellant’s letter would be treated as a notice of claim against the forfeiture. A further letter was sent to the Appellant on 10 November 2008 refusing restoration of the goods and on 12 November 2008 a letter was sent to him from HMRC dealing with the legality of the seizure and explaining that there would be a hearing concerning the seizure at the Magistrates Court.
17.	The Appellant wrote a further letter to HMRC, received on 12 November 2008, which reiterated that the tobacco was for his personal use and explaining that he had purchased an excessive amount because the cost of making the trips had become excessive.
18.	HMRC acknowledged receipt of the correspondence on 17 November 2008 and explained the process of review.
19.	On 16 December 2008 Mr Brenton, the reviewing officer, wrote to the Appellant with the results of his review of the previous decision. He upheld the decision and refused restoration of the goods on the following grounds:
•	The quantity of excise goods imported by the Appellant exceeded the guide levels specified in the REDS Regulations
•	Records available to him showed that the Appellant had made a minimum of 25 trips to Europe via Dover to Calais and return in the last thirteen months
•	The Appellant had told the interviewing officer that he had also travelled abroad about six weeks prior to an early September journey; that he had travelled on a few day trips between the summer holidays and the current trip; that he had been stopped by Customs about a year ago and been issued a Public Notice 1 and on that occasion had purchased about the same as on the current trip. Later he changed this account and stated that the Public Notice had been issued when he brought back a smaller amount of tobacco and that he had never brought back this much before.
•	The Appellant’s wife’s account differed from that of the Appellant. She had told her interviewing officer that they had both last travelled to Europe in May or June 2008; that the Appellant had travelled to Greece in August 2008 and once to France or Belgium maybe a week ago last Saturday; that the Appellant had not brought any tobacco goods on that trip or from Greece; that on the May/June trip she had purchased the same brand “but less than today” but could not remember the quantity. The Appellant told the interviewing officer that he had travelled a week prior to the current trip and had been on other trips since the summer but did not purchase tobacco on any of these trips other than twenty pouches bought in Luxembourg in June or July when he had travelled with his wife. From this Mr Brenton decided that one or both the Appellant and his wife were lying.
•	Mr Brenton stated in his letter that it was a common feature of people who travel frequently in order to import tobacco goods for commercial purpose to declare that on the occasions that they are not stopped that they had not purchased any tobacco goods on those particular trips.
•	Mr Brenton could not accept the consumption rates for the Appellant and his wife. During her interview the Appellant’s wife stated that the Appellant had purchased forty pouches of tobacco for her whilst the Appellant stated that four kilos of tobacco that is eighty pouches were for his wife. In interview the Appellant’s wife stated that she made ten rollups before she went to bed and then smoked the ten roll ups during the day. This conflicted with what the Appellant had told his interviewing officer.
•	It was generally accepted and was Customs experience that eighty to one hundred roll ups could be obtained from one five hundred gram pouch of tobacco. On the consumption stated by Appellant’s wife she would smoke less than one pouch a week and so the tobacco supposedly bought for the Appellant’s wife would have lasted almost two years although the shelf life of rolling tobacco is only twelve months from the date of manufacture.
•	The examination of the Appellant’s consumption was no more plausible. He had told his interviewing officer that he smoked about five pouches of tobacco per week. On the basis that eighty to one hundred roll ups can be obtained from a pouch of tobacco that would mean that the Appellant was smoking sixty to seventy roll ups per day but the Appellant had told the interviewing officer that he smoked thirty to forty roll ups per day and did not know how many roll ups he could get from a pouch. It was Mr Brenton’s experience that regular smokers of rolling tobacco were aware of how many roll ups they obtained from a pouch of tobacco.
•	Mr Brenton drew attention to the fact that the Appellant had paid for the goods in cash and stated that purchasers of goods for other people often use cash because they themselves have been paid cash in advance.
•	Mr Brenton concluded that from the evidence before him he was satisfied that the Appellant knew that what he was doing was wrong and that he had been importing quantities of excise goods. The records showed that he was a frequent and regular traveller and Mr Brenton believed that the Appellant took his family with him to disguise the commercial intent of the journey. Mr Brenton confirmed the original decision that the goods should not be restored to the Appellant.
20.	As part of his enquiries into the background of the matter Mr Brenton had checked the Appellant’s recorded travel history which showed a regular travel pattern of some twice monthly trips to Europe in the previous year. The travel history was produced to the Tribunal.
21.	On 15 January 2009 the Appellant issued a notice of appeal.
22.	On 17 July 2009 the Appellant’s appeal against the legality of the seizure of the goods was dismissed at Dover Magistrates Court and it was ordered that the tobacco goods were to be condemned as forfeit. The Appellant’s wife did not appear as the Appellant was not aware that she would be required to give evidence under oath regarding the seizure of her goods. He was under the mistaken belief that he could give evidence on her behalf. In her absence it was ordered that her tobacco goods be condemned as forfeit and both the Appellant and his wife had costs awarded against them in amount of £2,100 each.
23.	Prior to this decision the present appeal had been stood over until 17 November 2009. The Appellant had subsequently confirmed to HMRC that he wished to continue his appeal to the Tribunal.
24.	In evidence Mr Brenton referred to the fact that the magistrates had decided that the goods were lawfully seized. If it is decided by them that the goods should be condemned as forfeit it is because they had decided that the goods were purchased for a commercial purpose.
25.	The Appellant was carrying an excessive quantity of tobacco and no evidence had been produced to show that there were exceptional circumstances which might have caused him to order restoration of the tobacco.
26.	During the interview a receipt was found dated 5 September 2008 from Luxembourg for 20 pouches of tobacco. A far larger number of roll ups than the thirty a day that the Appellant claimed to smoke would be obtained from the four to five pouches a week that the Appellant said he needed.
27.	Although Mr Brenton had produced the Appellant’s travel record he wished to point out that these were not necessarily all the trips that the Appellant had made recently as if he had additionally travelled through the Channel tunnel his number plate might have been missed.
The Law
28.	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.”
29.	Regulation 4 of the REDS Regulations 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 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.

(1B) For the purposes of paragraph (1A) above- 
(b) “own use” includes use as a personal gift,
(c) if the goods  in question are –
(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 are to be regarded as being held for a commercial purpose.
(d) if the goods are 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 dispensed with, those goods are 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 are 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; 
(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 or any refusal to disclose his intended use of those goods;
(iv) the location of those goods;
(v) the mode of transport used to convey those goods;
(vi) any document or other information whatsoever relating to those goods ;
(vii) the nature of those goods including the nature and condition of any package or container,

(viii) the quantity of those goods , and in particular, whether the quantity exceeds any of the following quantities –
……….
3,200 cigarettes,
………
3 kilogrammes of any other tobacco products….

(ix) whether that person personally financed the purchase of those goods ; 
(x) any other circumstance that appears to be relevant.”
30.	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.”

31.	Section 49(1) of 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.” 

32.	Section 139(1) of CEMA provides:
“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.”

33.	Section 141(1) of CEMA states that:
	 “…where any thing has become liable to forfeiture under the customs and excise acts
 (b) any other thing mixed, packed or found with the things so liable,

shall also be liable to forfeiture”.

34.	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 Customs and Excise Acts.

35.	Sections 14 to 16 of the Finance Act 1994 provides: 

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.”

Sections 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 submissions
36.	The Appellant submitted that at the time he was stopped he believed that it was the last trip he would be able to make before Christmas as the price of the ferry trip was about to increase substantially.
37.	Although the interviewing officer had said that his disposable income did not support his cost of purchase he had withdrawn £1,000 from his Nationwide account and had brought a copy of the account with him to the hearing in order to demonstrate this.
38.	He and his wife were very tired when interviewed as they had left home very early that morning and were therefore not thinking straight when interviewed. His wife is Korean and does not speak perfect English. When she said that she made ten roll ups which were for the next day she actually meant the next morning as the Koreans would mean morning when they said day time. He pointed out that the interview record of his wife seemed very short. Only four hundred words were recorded although the interview apparently had lasted for forty-five minutes.
39.	He was unable to answer the question concerning how many roll ups he made from one pouch of tobacco – he thought that that was like asking him how many helpings of cereal were in each box.
40.	He submitted that the tobacco had been solely for the use of him and his wife and the occasional use by his father to whom he sometimes gave a roll up when they were together at the lake.

HMRC’s Submissions
41.  HMRC contended that the decision to refused restoration of the goods was reasonably reached. As a matter of proper procedure Mr Brenton had considered the background of the case including extracts from the Appellant and his wife’s interviews; the correspondence received from the Appellant; HMRC’s restoration policy; whether there were any exceptional circumstances; the matter of restoration but not the legality of the seizure which was a matter for the Magistrates Court; the regulations and the amount of tobacco the Appellant was carrying compared to the guidelines.
42. Mr Brenton had also summarised the relevant legislation in his letter and come to a clear conclusion at the same time inviting the Appellant to provide fresh information if such was available and informing him of the appeal procedure.
43. He had further noted a previous Tribunal decision in which Sir Stephen Oliver had stated that where a large quantity of goods is seized it was reasonable to conclude that the traveller had imported large quantities on other occasions.
44. HMRC submitted that it was apparent from the grounds of appeal and the Appellant’s pre-review correspondence that he was seeking to argue that the goods were for his own use rather than a ‘commercial purpose’ or at least that they were unlawfully seized. In the circumstances of this case, HMRC argued that it would be an abuse of process for the Appellant to argue before the Tribunal that the goods were for the Appellant’s personal use and/or that seizure was unlawful. This was because it was an issue which the Appellant had a chance to argue in the Magistrates Court and that court had the opportunity to make a decision on this issue. The decision from the Magistrates Court in condemnation proceedings on 17 July 2009 was that the goods were held for commercial purpose and therefore that the seizure was legal and it should not be revisited by this Tribunal.
45.  In Gora and Ors v Customs & Excise Commissioners [2004] QB 93, the Court of Appeal established that the Tribunal did not have the jurisdiction to reconsider the legality of the forfeiture and seizure of goods. However, in Dickinson v Customs and Excise Commissioners [2004] 1 WLR 1160 the High Court ruled that the Tribunal could still make a finding of fact that goods were imported for private use where there had been no contested condemnation proceedings and there was a deemed forfeiture under paragraph 5 of Schedule 3 to CEMA. 
46.  The more recent decision of the Court of Appeal in Gascoyne v Customs and Excise Commissioners [2005] Ch 215 has provided important guidance on this issue. The Court of Appeal stated that where there have been no condemnation proceedings and thus the goods have been deemed lawfully forfeited by virtue of the deeming provisions under paragraph 5 of Schedule 3 of CEMA, an importer should not be “completely shut out” from ventilating before the Tribunal the matters deemed to be decided against him (para 54). However, the Tribunal would have to be very conscious of issues of abuse of process when deciding whether such matters should in fact be ventilated before it (para 55). The Court of Appeal held that “the mere fact that the applicant has not applied to the Commissioners, and therefore there have been no condemnation proceedings” was not be enough to enable issues of ‘own use’ to be raised before the Tribunal (para 56).
47. HMRC contended that in particular Buxton LJ stated the following in his judgement in relation to the Appellant’s position where there had been contested condemnation proceedings and the goods condemned:
	“All that said I shall now turn to express my view on what is said by Pill LJ (in Gora). So far as domestic law is concerned I would respectfully say that the observations were clearly correct. I do not think that it can have been intended that the exporter before the tribunal would have a second bite at the cherry of lawfulness having failed in condemnation proceedings or let them go by default.”
48.  The High Court considered the implications of Gascoyne in Commissioners of Revenue and Customs v Albert Charles Smith (17th November 2005, unreported). Lewison J stated that:
“There must, therefore, be something more than a failure on the part of the applicant to invoke condemnation proceedings before the Tribunal is empowered to question the legality of the forfeiture” (para 20). 
Lewison J went on to say that:
“The Tribunal’s function, therefore, is analogous to a sentencing court once a defendant has been convicted. No matter that the defendant still protests his innocence of the charge against him, the function of a sentencing court is to accept mitigation but not to question the original conviction” (para 22; see also paras 30, 32 and 33).
49. In CCE v Weller [2006] EWHC 237 (Ch), Evans-Lombe J agreed with the approach of Lewison J in Smith,
“namely, that, whether or not an importer, having suffered a deemed forfeiture under paragraph 5 of schedule 3, 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, first, did the importer have a realistic opportunity to invoke the condemnation procedure and, secondly, 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 reopen the question of the validity of the original seizure on an application for return of the goods” (para 16). 
50. To the extent that the Appellant was arguing that the decision not to restore the goods was unreasonable and/or that the Appellant was allowed by the Tribunal to argue “own use”, HMRC contended that the review decision was one that could reasonably have been made. The goods were not intended for “own use”, as defined by the legislation rather they were held for a commercial purpose.  
51. It was submitted by HMRC that non-restoration was fair, reasonable and proportionate in the circumstances and that there were no other exceptional factors that militate towards disapplying HMRC’s policy of not restoring the seized goods.  The reviewing officer acted reasonably and was not fettered by policy but carefully considered the individual merits of the case and whether any exceptional circumstances applied.
52. The Tribunal were required to consider whether the review decision was reasonable under all the circumstances.
Findings
53. The Tribunal found that the reviewing officer had come to a reasonable decision under all the circumstances.
54. The Tribunal found the Appellant sincere in his belief that the goods should be restored and accept that some of the answers he and his wife gave in their interviews were somewhat muddled and confusing as a result of their long day. Nevertheless we have examined Mr Brenton’s reasons for refusing restoration and find his conclusions totally acceptable.
55. The Appellant had made very frequent trips abroad and even for a heavy smoker his stated consumption seemed improbable. He showed that he had withdrawn £1,000 for the tobacco on which he spent £635 and stated that he had returned with some £250 and although he had told the interviewing officer that he always had a few hundred pounds in cash with him this did not appear to fully explain how he had also managed to pay for the wine and beer which he said had cost a similar amount to the tobacco.
Decision
56.	The appeal is dismissed.
57. HMRC made an application for costs. Under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the New Rules”) which came into force on 1 April 2009, costs are governed by rule 10.  That rule provides: 
 	(1)     The Tribunal may only make an award in respect of costs (or, in Scotland, expenses –
(a)       under section 29(4) of the 2007 Act (wasted costs);
(b)       if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting of proceedings; or
(c)       if – (i)    the proceedings have been allocated as a Complex case under rule 23 …; and
	(ii)    the taxpayer … has not sent or delivered a written request to the Tribunal … that the proceedings be excluded from potential liability for costs or expenses under this sub-paragraph.

58. As stated above we found that the Appellant was sincere in his belief that he was within his rights to have the goods restored. We do not consider that he acted unreasonably in bringing the appeal. We have therefore decided not to award costs to HMRC.
59.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

    MRS.S.M.G.RADFORD
TRIBUNAL JUDGE

RELEASE DATE: 12 November 2010