[2011] UKFTT 56 (TC)

TC00934

Appeal number: TC/2009/16769

Appeal against the imposition of  C18 customs debt for the late submission of a C99 – whether the Appellant who claimed it had been lost by NIRU should have checked that it had safely arrived having previously been warned by them on a previous late submission that should it happen again the debt would not be cancelled

FIRST-TIER TRIBUNAL

TAX 

	EURO TRADING LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: S.M.G.RADFORD	 (TRIBUNAL JUDGE)						H.ADAMS							

Sitting in public at 45 Bedford Square, London WC1 on 16 November 2010

The Appellant did not appear but the Tribunal telephoned Mr Tahanzadeh of the Appellant and was informed by him that the hearing should go ahead in the Appellant’s absence

Mr D.Badenham, 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 HMRC’s decision not to cancel a C18 customs debt in relation to an import of engineering equipment (‘the goods’) which entered the country on 16 December 2008 under import number 071 029132W.  The debt consists of VAT and customs duties totalling £10,137.85, which is the sum of:
(1)	£2,494.87 ad valorem duty under tax type A00;
(2)	£7,620.71 import duty under tax type B00; and 
(3)	£22.27 compensatory interest under tax type D00. 
2.	The C18 was issued because the Appellant had failed, in relation to goods imported on 16 December 2008 on which the Appellant claimed Inward Processing Relief (IPR”), to comply with certain requirements in relation to the use of that procedure. 
3.	The Appellant requested a review of HMRC’s decision on 7 September 2009. On the 21 October 2009, the Appellant was notified that the original decision had been upheld and that the C18 debt remained in place.
4.	On 20 November 2009, the Appellant filed its Notice of Appeal. 
Background and facts
5.	The Appellant imported goods on 16 December 2008 under Customs Procedure Code 5100001. Use of this code indicated that the Appellant intended to use the IPR procedure.
6.	The IPR procedure suspends VAT and customs duties at the time of import.  It provides relief to promote exports from the European Community (EC) and assist Community processors to compete on an equal footing in the world market.  Duty is relieved on imports of non-EC goods which are processed in the Community and re-exported provided the trade does not harm the essential interests of Community producers of similar goods.  It can provide relief from customs duty, specific customs duty (previously CAP charges), anti-dumping duty and countervailing duty.
7.	IPR suspends duties payable on goods which have been imported from non-EC countries and are intended for re-export providing that certain conditions are met.
8.	The non-EC goods intended for re-export must be re-exported from the Community within a time limit agreed within HMRC.  This is known as the ‘period of discharge’ or ‘throughput period’.  In the present case, the throughput period was six months.  The goods were being imported into the UK for repair prior to the re-exportation. On the present facts, the goods imported by the Appellant were required to be re-exported within 6 months; meaning that the throughput period ended on 16 June 2009.
9.	The National Import Relief Unit (NIRU) is responsible for monitoring traders who use the IPR system.  There are two IPR systems: the fully authorised procedure and the simplified procedure.  To be able to use the fully authorised procedure, an application must be made to HMRC, who will decide if it is appropriate to issue a full authorisation.  The simplified procedure can be used by anyone who is not in possession of a full authorisation.  NIRU has responsibility for monitoring the simplified procedure.  At all material times, the Appellant was using the simplified procedure. 
10.	Certain requirements attach to the use of the IPR procedure in general.  If any such requirements are not fulfilled, then the duties in question may not be suspended.  On 16 June 2009, NIRU wrote to the Appellant explaining the requirements that must be met in order to retain entitlement to duty suspension.  These requirements were that CPC 3151000 (not CPC 5100001) must be declared on the re-export customs entry and a C99 document must be supplied to NIRU no later than 30 days following the throughput period.  NIRU further explained to the Appellant that failure to comply with these requirements would result in VAT and customs duty becoming payable.   
11.	 On the present facts, the C99 was due on 16 July 2009. The C99 was not provided to the Commissioners by 16 July 2009.
12.	NIRU wrote to the Appellant for a second time on 6 August 2009.  NIRU explained that a C18 had been issued for the VAT and customs duty suspended at import because the C99 had not been submitted to NIRU within 30 days of the expiry of the throughput period.  NIRU further confirmed that since a C99 had been submitted late on a previous occasion and the C18 had been cancelled on appeal and the Appellant had been warned on that occasion that future late submissions would not result in cancellations, the customs debt would remain (under Article 204 of Council Regulation 2913/92 (‘the Customs Code’).
13.	On 7 August 2009, the Appellant wrote to HMRC for a review of the decision not to cancel the debt.  A formal departmental review concluded that the original decision would be upheld.  The Appellant was informed of this by letter dated 21 October 2009.
14.	On 6 August 2009, HMRC wrote to the Appellant informing it of the reasons for the issuing of the C18. This was as a result of the failure of the Appellant to submit the C99 within thirty days of the expiry of the throughput period).
15.	The C99 was eventually provided by the Appellant on 12 August 2009 (although the C99 was date stamped by the Appellant as being completed in April 2009).
The Legislation 
16.	The Appellant’s circumstances were governed by a mixture of European Council Regulation 2913/92 (“the Customs Code”) and European Commission Regulation 2454/93 (“the Implementing Regulations”).
17.	Article 59 of the Customs Code provides that a declaration is required for goods placed under certain customs procedures and that customs supervision shall apply to goods under specified procedures. It states:
1. All goods intended to be placed under a customs procedure shall be covered by a declaration for that customs procedure. 
2. Community goods declared for an export, outward processing, transit or customs warehousing procedure shall be subject to customs supervision from the time of acceptance of the customs declaration until such time as they leave the customs territory of the Community or are destroyed or the customs declaration is invalidated.

18.	Article 118 states :
	1. The customs authorities shall specify the period within which the compensating products must have been exported or re-exported or assigned another customs-approved treatment or use. That period shall take account of the time required to carry out the processing operations and dispose of the compensating products. 
2. The period shall run from the date on which the non-Community goods are placed under the inward processing procedure. The customs authorities may grant an extension on submission of a duly substantiated request by the holder of the authorization. 
For reasons of simplification, it may be decided that a period which commences in the course of a calendar month or quarter shall end on the last day of a subsequent calendar month or quarter respectively. 

19.	Article 182(3) states:
Re-exportation or destruction shall be the subject of prior notification of the customs authorities. The customs authorities shall prohibit re-exportation should the formalities or measures referred to in the first subparagraph of paragraph 2 so provide. Where goods placed under an economic customs procedure when on Community customs territory are intended for re-exportation, a customs declaration within the meaning of Articles 59 to 78 shall be lodged. In such cases, Article 161 (4) and (5) shall apply.

20.	Article 204 states:
1. A customs debt on importation shall be incurred through: 
(a) non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they are placed, or
(b) non-compliance with a condition governing the placing of the goods under that procedure or the granting of a reduced or zero rate of import duty by virtue of the end-use of the goods, 
in cases other than those referred to in Article 203 unless it is established that those failures have no significant effect on the correct operation of the temporary storage or customs procedure in question. 
2. The customs debt shall be incurred either at the moment when the obligation whose non-fulfilment gives rise to the customs debt ceases to be met or at the moment when the goods are placed under the customs procedure concerned where it is established subsequently that a condition governing the placing of the goods under the said procedure or the granting of a reduced or zero rate of import duty by virtue of the end-use of the goods was not in fact fulfilled. 
3. The debtor shall be the person who is required, according to the circumstances, either to fulfil the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they have been placed, or to comply with the conditions governing the placing of the goods under that procedure. 

21.	Article 199 of the Implementing Regulations states:
Without prejudice to the possible application of penal provisions, the lodging with a customs office of a declaration signed by the declarant or his representative shall render him responsible under the provisions in force for:
- the accuracy of the information given in the declaration,
- the authenticity of the documents attached,
and
- compliance with all the obligations relating to the entry of the goods in question under the procedure concerned.

22.	Article 521 states in the relevant part:
	At least upon the expiry if the period of discharge, irrespective of whether aggregation in accordance with Article 118(2), second subparagraph, of the Code is used or not:
- in the case of inward processing (suspension system) or processing under customs control, the bill of discharge shall be supplied to the supervising office within 30 days;
…
Where special circumstances so warrant, the customs authorities may extend the period even if it has expired.  

23.	Article 859 states in the relevant part
The following failures shall be considered to have no significant effect on the correct operation of the temporary storage or customs procedure in question within the meaning of Article 204 (1) of the Code, provided:
- they do not constitute an attempt to remove the goods unlawfully from customs supervision,
- they do not imply obvious negligence on the part of the person concerned, and
- all the formalities necessary to regularize the situation of the goods are subsequently carried out:
9.  In the framework of inward processing and processing under customs control, exceeding the time-limit allowed for submission of the bill of discharge, provided the limit would have been extended had an extension been applied for in time.

24.	Article 860 states:
The customs authorities shall consider a customs debt to have been incurred under Article 204(1) of the Code unless the person who would be the debtor establishes that the conditions set out in Article 859 are fulfilled.

The Appellant’s Submissions
25.	In its grounds of appeal dated 20 November 2009, the Appellant stated that the first letter sent by NIRU which can be used to offer a C99 for extension was never received. The Appellant stated that it was probably lost in the post as a result of the postal strike and the Appellant provided proof of the postal strike dates.
26.	The Appellant stated further that the C18 form arrived a week late as it appeared to be stuck between NIRU’s departments and even the Reviews and Appeals team of HMRC sent their letter during another postal strike and so it too was late in arriving.
27.	The Appellant claimed to have sent the C99 in time although NIRU claimed that it had not been received. The Appellant produced a copy of the C99 it purported to have sent date stamped 17 April 2009.
28.	It was submitted on behalf of the Appellant that in 17 years of business as a small company it had never stepped once out of line and that it was wrong for it to be persecuted for some postal strike. It was submitted on behalf of the Appellant that whilst it seemed acceptable for NIRU correspondence to arrive late or get lost it was not so in respect of the Appellant’s correspondence.
29.	The Appellant claimed that a copy of its C99 had been sent and it was being blamed because NIRU had lost it.
30.	The Appellant contended that furthermore the goods in question were sold to Norwegian Piping of Norway, a non-European country on ex-works terms and were collected by the buyer from the Appellant’s warehouse in early January 2009. Thereafter they were shipped to Iran from Hamburg on 25 March 2009 so there was no question of the Appellant ever owing VAT or import duties on the goods.
31.	The Appellant produced its invoice to Nowegian Piping dated 23 December 2008 and the bill of lading issued in Hamburg on 25 March 2009.
HMRC’s Submissions

32.	HMRC contended that having considered the factors raised in the Appellant’s submissions nevertheless they maintained that the C18 debt was due.
33.	HMRC claimed that the Appellant was fully aware of the need to supply the C99 within 30 days of the end of the throughput period. On a previous occasion a C18 was issued to the Appellant for failing to send the C99 to NIRU within the requisite 30 days. That C18 was cancelled by letter dated 22 February 2008 but that letter made clear that the late submission of C99s in the future would result in a C18 debt that would not be cancelled.
34.	HMRC submitted that despite this warning the Appellant, in relation to the 16 December 2008 importation, did not provide NIRU with the C99 within the 30 days of the end of the throughput period nor did it request an extension of time. HMRC contended that in such circumstances the Appellant’s conduct amounted to obvious negligence for the purposes of Article 859. Article 859 is subject to an obvious negligence clause.  The clause was applied on this occasion because a previous C18, issued under similar circumstances, was cancelled under Article 860.  It was reasonable for NIRU not to cancel the debt for a second time. HMRC contended that the occurrence of the previous cancellation put the Appellant on notice as to what was required of them.
35.	Extensions to the period of 30 days following the throughput period in which to submit a C99 form may be extended by request.  There is no record of the Appellant making any such request, whether by letter, telephone, fax, email or otherwise. HMRC contended that having been previously warned about the late submission of a C99, it was incumbent on the Appellant to contact NIRU to check that its document had reached them.
36.	The Appellant raised the fact that due to postal strike it did not receive a letter from NIRU dated 16 June 2009. However, HMRC contended that without making any concession in relation to the postal strikes, this argument did not assist the Appellant because the letter of 16 June 2009 was a letter chasing the C99. Receipt of this letter was in no way a pre- requisite to the Appellant filing the C99. 
37.	HMRC submitted that it was necessary for the Appellant to ensure that the C99 reached the NIRU within good time.  The Appellant was aware that there was a postal strike, and should have taken measures to ensure that the C99 reached NIRU by an alternative method. Failing that the Appellant should have contacted NIRU to explain the situation. NIRU would then have given the Appellant another opportunity to submit the documents.
38.	The Appellant had also asserted that the C99 was provided and that NIRU had mislaid it. This was not accepted by HMRC and no proof of this occurrence had been provided by the Appellant. 

Findings
39.	We find that the legislation is clear and that the Appellant was well aware of the relevant regulations. Despite having been previously warned about the late submission of a C99 and therefore knowing of the potential penalties, it made no attempt to make absolutely sure that its C99 had been received by NIRU.
40.	We find that this conduct amounted to an obvious negligence for the purposes of Article 859.
Decision
41.	The appeal is dismissed and the C18 customs debt due in amount of £10,137.85 is hereby confirmed.
42.	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.

S.M.G. RADFORD

TRIBUNAL JUDGE

RELEASE DATE: 17 January 2011