[2011] UKFTT 307 (TC)

TC01168

Appeal number: TC/2010/01301

Excise duty – tobacco and cigarettes – whether open to importer to raise legality of seizure after condemnation proceedings determined against him – no – whether decision to refuse restoration of goods reasonable – yes – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	ALAN JONES	Appellant

	- and -

	DIRECTOR OF UK BORDER REVENUE	Respondent

				TRIBUNAL: JOHN CLARK (TRIBUNAL JUDGE)
						CAROLINE DE ALBUQUERQUE

Sitting in public at 45 Bedford Square, London WC1 on 10 March 2011

The Appellant did not appear and was not represented

Rupert Jones of Counsel, instructed by the UK Border Agency Cash & Forfeiture Legal Team, for the Respondent

© CROWN COPYRIGHT 2011

DECISION

1.	The appeal is against a disputed decision of the Respondent in a letter dated 29 December 2009 in which the Respondent notified the Appellant that after conducting a review, certain excise goods seized on 11 October 2009 would not be restored to him.
2.	As the Appellant had not appeared by the time the hearing was due to start, and had made no contact with the Tribunals Service to indicate whether he would be attending, the clerk telephoned him. The Appellant answered the telephone, but as soon as the clerk explained that the call was from the Tribunals Service relating to the hearing, the Appellant terminated the call. In accordance with Rule 33 of the Tribunal Rules, we determined that it was appropriate for the hearing to proceed.
3.	The Appellant and Counsel have the same surname. In order to avoid confusion, we continue to refer to the Appellant as “the Appellant”, and we refer to Mr Rupert Jones as “Counsel”.
The facts
4.	The evidence consisted of a bundle of documents and a witness statement given by Higher Officer Brian Anthony Rayden; there was no oral evidence [check notes]. From the evidence we find the following background facts; where appropriate, we make further findings later in this decision. 
5.	On Sunday 11 October 2009 at 02.55 the Appellant was stopped in the Blue Channel by an officer of the UK Border Agency at Luton airport, on arrival from Malaga, Spain. The Appellant was travelling alone, and was carrying one suitcase and one bag.
6.	The officer asked the Appellant how long he had been away; he replied that he had been away for one day. He had been away for a day to play golf. He did not have any golf clubs with him.
7.	The officer asked the Appellant whether he was carrying anything like drugs, firearms or obscene material; he confirmed that he was not. The officer then asked whether the Appellant had brought any cigarettes back with him. The Appellant replied that he had brought back about 15 cartons and some tobacco. The officer then opened the Appellant’s bags and found quantities of cigarettes and tobacco which he recorded in his notebook as 4,200 Mayfair cigarettes and 3.5 kg of hand rolling tobacco. (The quantity of tobacco was later disputed by the Appellant; see below.) When asked whose goods these were, the Appellant replied that the tobacco was for his father and the cigarettes were for the Appellant and his wife.
8.	When asked how often he travelled to Spain, the Appellant responded that he did so quite often, to play golf on Sundays. The officer then explained to the Appellant that he was not under arrest, and read the “commerciality statement” to the Appellant, who signed the officer’s notes at that point. (The officer’s notes record the time of reading the commerciality statement as “15.00”; we find that this was an error, and should have been recorded as “03.00”.) When signing the notes, the Appellant explained that he had not replied “no” to the officer’s question about golf clubs; they were left “over there” (ie in Spain). The Appellant confirmed that he was willing to stay for interview.
9.	In response to questions, he explained that the goods belonged to him and that they were for family. They had been purchased in a cigarette shop, and had cost about £900. The officer made a note to record that he had seen the receipts. The Appellant confirmed that he had paid for them, and said that he was not a “revenue trader”. No-one had assisted him with the purchase. He intended to smoke the goods; he confirmed that he was a smoker. He smoked Mayfair cigarettes.
10.	The officer asked what financial commitments the Appellant had. He replied that he had a bit of a mortgage, not a lot now. He did not really have any savings. He had Tesco money from early retirement. He had financed the purchase with his money; he indicated that he did work.
11.	The Appellant confirmed that he was aware of Notice 1, and knew that it was an offence to sell imported excise goods without first paying duty.
12.	He had last travelled abroad the previous Sunday, and had made about 20 trips in the last 12 months. He had imported tobacco goods about a month to six weeks before, and had smoked them.
13.	When he signed the notes at 03.20, the Appellant asked the officer to add that shops in Spain were not open on Sundays for the purchase of tobacco goods.
14.	Following the interview, the officer was satisfied that the excise goods, ie the tobacco and the cigarettes, were held for a commercial purpose, which rendered them liable to forfeiture. (We consider the relevant statutory provisions below.) All the excise goods were seized. The Appellant was issued with a “Seizure Information Notice” and Customs Notice 12A (“Goods and/or vehicles seized by Customs”). The notice recorded the date and time as “11.10.09 03.25 hours”. At the foot of the notice, the Appellant signed to acknowledge receipt, following these words on the form:
“I acknowledge receipt of Form C 156 (Original) and agree that the above description of the things seized is correct.”
The date shown opposite his signature was amended to show “11th /10/09”.
15.	The notice explained that the owner could challenge the legality of the seizure in a Magistrates’ Court by sending Customs [now the UK Border Agency] a notice of claim within one month of the date of seizure.
16.	On 14 October 2009 the Appellant wrote to Customs enclosing the two forms “Letter A” and “Letter B” from Notice 12A. By Letter A he confirmed that he wished to appeal to a court against the legality of the seizure. By Letter B he asked for the excise goods to be restored to him. In these forms he claimed that 7 kg of hand rolling tobacco had been seized, and not the 3.5 kg as stated on the Seizure Information Notice. Despite sending both letters, he ticked the box against the statement: “I do not wish to contest the legality of the seizure.” He made various complaints, including indications that he had been called a liar by the officer, that the officer had kept his tobacco receipt, and that half the original total of 7 kg of tobacco had “gone in someone’s back pocket”.
17.	On 11 November 2009, the UK Border Agency wrote to the Appellant to inform him that the goods would not be restored. On 20 November 2009 the Appellant wrote to request a review of the decision not to restore the goods. He raised various matters which he contended had not been properly considered. On 8 December 2009 an officer wrote to the Appellant explaining the review process and indicating that if the Appellant had any further evidence or information that he would like to provide in support of his request, he should send it to the Review Officers; this was his last opportunity to provide them with such information. If it was not provided now, it could not be taken into account.
18.	On 23 December 2009 the Appellant wrote in response. He stated that he still had his receipt referring to “21 Mayfair and 70 Golden Virginia”, and had had no reply about the missing 3.5 kg.  He also referred to tobacco shops in Spain being shut after 13.30 on Saturdays and closed all day on Sundays; he said that he still had two photographs taken on 25 October 2009, which was a Sunday, to show that they were closed.
19.	On 14 December 2009 a Senior Detection Manager in the UK Border Agency’s Border Force Complaints Team wrote to respond to the various complaints which the Appellant had made. The letter indicated that the officers concerned had acted professionally and properly in applying departmental procedures. The Senior Detection Manager was satisfied that the treatment which the Appellant had received was neither harsh nor inappropriate and was fully in line with current departmental seizure policy. In relation to the suggestion that tobacco products had been taken, there was no question of this having happened; any suggestion of such an occurrence was strongly refuted. (The matters dealt with in this letter are outside the scope of the present appeal, and we therefore make no further comment on them.)
20.	On 29 December 2009, Mr Rayden, the Review Officer, wrote to the Appellant setting out the results of the review. We consider the terms of this letter in detail below.
21.	By a Notice of Appeal dated 18 January 2010 the Appellant appealed to the Tribunal. He questioned why the form related to tax, whereas his appeal concerned being stopped at the airport; we explain this below.
22.	On 11 March 2010 the Respondent wrote to the Tribunal asking that the appeal be stood over until 45 days after the resolution of the condemnation proceedings, which were currently at the first hearing stage and due to be heard on 19 April 2010, following which a contested condemnation hearing would be arranged. As the Respondent’s application was unopposed, it was allowed.
23.	On 19 April 2010, the date set for the first hearing stage of the condemnation proceedings, the Luton Magistrates’ Court ordered that the excise goods, 3.5 kg of hand rolling tobacco and 4,200 cigarettes, were to be condemned as forfeit. In the documents put in evidence to us, there was no specific indication that the Appellant had not appeared at that hearing. However, as the goods were condemned at what was originally intended to be the first hearing stage, we find that the Appellant did not take any steps in relation to those proceedings beyond the sending of his Letter A on 14 October 2009. No account appears to have been taken of the fact that the Appellant had ticked the box in Letter B indicating that he did not wish to contest the legality of the seizure.
24.	Following the condemnation proceedings, the UK Border Agency wrote on 26 May 2010 to the Appellant to ask whether he would still be pursuing his appeal to the Tribunal on the question of the decision not to restore the goods. In his undated reply, he indicated that he wished to carry on, and raised various questions including the “missing” 3.5 kg of Golden Virginia hand rolling tobacco. The UK Border Agency responded on 17 June 2010, explaining that the Appellant would need to address the matter raised in his letter with the Post Seizure Unit in Plymouth, as the writer’s office was only instructed in relation to the restoration appeal.
25.	There is no record in the evidence before us of any further action by the Appellant in relation to this appeal.
Arguments for the Appellant
26.	In the letter attached to his notice of appeal, the Appellant referred to the amounts and the cost of the cigarettes and tobacco. He set out totals showing what he considered to be the truth, namely 4,200 Mayfair cigarettes costing 619.50 Euros and 7 kg of Golden Virginia tobacco costing 339.50 Euros. These differed from the officers’ figures of 4,200 cigarettes costing £728.07 and 3.5 kg of tobacco costing £435.58.
27.	He contended that officers had lied about the amount of tobacco seized; he  stated:
“I signed for 3.5 kg of tobacco. I had 7 kg of tobacco so who has the other 3.5 kg or is this a cover up. My receipt also confirms this. So once again your officer is lying. So who has got the other 3.5 kg of Golden Virginia.”
28.	He also raised the issue of shops being closed on Sundays. He explained that he had travelled out on Saturday 10 October and not on Sunday 11 October, the day when he had been stopped in the early morning at Luton Airport. He referred to previous travel and occasions when he had been stopped, and to the quantities of goods which he had been carrying.
29.	He requested that the goods should be stored until the case was closed.
Arguments for the Respondent
30.	Counsel emphasised the narrowness of the Appellant’s grounds of appeal. This was important. The Appellant was challenging the grounds for the seizure; he was not seeking to challenge the review decision on the reasonableness issue. Counsel contended that it was an abuse of process, or seeking to re-open a matter already decided by another court (“res judicata”) to argue before the Tribunal matters concerning the seizure. The Appellant had had his opportunity in the condemnation proceedings, and had not succeeded in persuading the Magistrates’ Court that the goods were unlawfully seized.
31.	Counsel referred to a number of cases, without citing them in detail. These were Gora v Commissioners of Customs and Excise [2003] EWCA Civ 525, Gascoyne v Customs & Excise Commissioners (2005) Ch 215 (CA), Albert Charles Smith (2004) Excise Decision E00841, David Dawkin v Revenue and Customs Commissioners (2007) Excise Decision E01036, Weller v Revenue and Customs Commissioners (2006) Excise Decision E00987. Counsel emphasised the decision in John Morgan [2009] UK FTT 134, in which the Tribunal held that there was an abuse of process where the appeal had been withdrawn. He also referred to a 2011 Court of Appeal case, Jones and Jones.
32.	Counsel then referred to the main issue of the reasonableness of the Review Officer’s decision. We consider this in detail below.
Discussion and conclusions
33.	For the benefit of the Appellant, we wish to emphasise that this Tribunal is a independent body, within Her Majesty’s Courts and Tribunals Service, and ultimately part of the Ministry of Justice. The reason for the appeal coming before this Tribunal is that it relates to excise duty, which is a form of tax. The excise duty on tobacco (including cigarettes) is charged under s 2(1) of the Tobacco Products Duty Act 1979, and applies to “tobacco products imported . . . into the United Kingdom”. Unless the importer (ie the person stopped at the port or airport) can show that the goods have not been brought into the UK for a “commercial purpose”, they do not qualify for treatment as “duty free”.
34.	Where goods are seized from the importer, that person has two possible ways of challenging the action taken. One is to argue that the seizure was not lawful. As shown by Letter A attached to Notice 12A, this involves taking proceedings before the Magistrates’ Court, described as “condemnation proceedings”. Normally, once the Magistrates’ Court has decided that the seizure was lawful, the importer cannot make any further challenge against the legality of the seizure. (We have deliberately over-simplified the position, in order to make clear to the Appellant the importance and effect of condemnation proceedings.) The position was also confirmed in the review decision letter dated 29 December 2009, which stated:
“Having had an opportunity of raising the lawfulness of the seizure in the magistrates’ court one does not have a second chance of doing so at tribunal or statutory review.”
35.	The other way of challenging the action is to contest the decision not to restore the goods. The process is started by Letter B attached to Notice 12A. If the UK Border Agency confirms the decision on review, as has happened here, the importer can choose to raise the question before this Tribunal. Broadly speaking, the only matters which the importer can raise on appeal to this Tribunal are those relating to the reasonableness of the decision. Where an importer can show that the officer or the UK Border Agency could not reasonably have arrived at the decision not to restore the goods, this Tribunal has certain limited powers relating to that decision. However, we emphasise that this Tribunal does not have power to order the restoration of the goods. If this Tribunal does not accept that the decision is unreasonable, the decision stands and the goods cannot be restored.
36.	In the Appellant’s case, he used Letter A to start condemnation proceedings in the Magistrates’ Court. However, he did not do anything further in relation to those proceedings, and therefore the Luton Magistrates’ Court ordered the goods to be condemned. In making that order, the Magistrates’ Court was also confirming that the seizure of the Appellant’s tobacco and cigarettes was lawful.
37.	Counsel argued before us that it was not open to the Appellant to raise the question of the legality of the seizure in proceedings before this Tribunal. He contended that the position in the present case was clearer than in John Morgan, where the importer had not taken his opportunity to appear at the condemnation proceedings and argue his case before the Magistrates’ Court because he thought that it was open to him to do so before the tribunal. It was held that it was an abuse of process for the importer to seek to challenge the legality of the seizure in tribunal proceedings when it had been open to him to do so in the condemnation proceedings.
38.	We accept Counsel’s argument, and respectfully adopt the comments of the tribunal in John Morgan, including the analysis of the various cases considered by that tribunal. By taking no action in relation to the condemnation proceedings, the Appellant in the present case has given up any opportunity that he might have had to argue that the seizure was not lawful. We assume that his non-appearance at the condemnation hearing was the result of a deliberate decision on his part.
39.	We also consider that he has given up any opportunity to raise other matters relating to the seizure, in particular as to the amount of goods actually seized. As Counsel argued, if the amount of tobacco had in fact been 7 kg rather than the 3.5 kg set out in the paperwork (and acknowledged by the Appellant in adding his signature to the Seizure Information Notice), the argument against the Appellant that the goods were held for a commercial purpose would have been all the stronger.
40.	Thus the only matter open to us to consider is the Appellant’s appeal to this Tribunal challenging the Respondent’s decision not to restore the goods.
41.	It was not clear from any of the Appellant’s letters whether he was arguing that the decision not to restore the goods was unreasonable. As was done in the Respondent’s Statement of Case, we consider the position to the extent to which the Appellant is so arguing.
42.	In his review decision letter dated 29 December 2009, Mr Rayden, the Review Officer, considered the position on the assumption that the magistrates’ court would find that the seizure was lawful and would condemn the [tobacco and cigarettes] as forfeit to the Crown; he also mentioned that if the Appellant’s claim was successful, the goods (or their value) would be returned to the Appellant.
43.	Mr Rayden considered whether the goods were held for profit, in which case they would not normally be restored, or were to be passed on to others on a “not for profit” reimbursement basis. He also considered whether, if the latter basis applied, there were “aggravating circumstances”, because if there were none, the normal policy was to restore the goods for a fee equal to the total of the duty evaded, plus VAT on that duty, plus a penalty of 15 per cent of the duty and VAT.
44.	“Aggravating circumstances” included any previous offence by the individual, the importation of large quantities, and any other circumstances that would render restoration inappropriate. If there were aggravating circumstances, it was necessary to consider whether the degree of that aggravation should result in the refusal to restore the goods.
45.	In all cases, it was appropriate to determine whether there were exceptional circumstances that should result in the restoration of the goods.
46.	In all cases, it should be determined whether the result was fair, reasonable and proportionate in all the circumstances.
47.	In considering these matters, Mr Rayden had taken account of the following circumstances:
(1)	The quantity of excise goods exceeded the guide levels specified in the relevant Regulations. The Appellant was importing more than the guide level of 3,200 cigarettes;
(2)	The Appellant had appeared to place great emphasis on the cigarette shops in Spain being closed on Sundays. The Appellant had imported cigarettes on Sunday 11 October 2009 and had been intercepted. Further, it appeared from information in the internet that the tobacco shop at Malaga airport was open on Sundays;
(3)	The Appellant had been stopped on 19 April 2006 [we note that this was a Wednesday] at Stansted airport, when 3,200 cigarettes and 3.5 kg of hand rolling tobacco had been seized from him. Mr Rayden considered, in the light of the case of Lakhbir Khatkar, that it was reasonable to assume that the Appellant had been importing large quantities of goods on those other occasions when he had not been stopped;
(4)	The Appellant had not claimed that the goods were to be passed on to others on a “not for profit” reimbursement basis. Mr Rayden concluded that they were held for profit and should therefore not normally be restored. He considered that non-restoration was fair, reasonable and proportionate in these circumstances;
(5)	Even if he were to accept that the excise goods were to be passed on to others on a “not for profit” reimbursement (which he emphasised that he did not accept), the goods should not be restored because of “aggravated circumstances”, namely that the Appellant had been involved in a previous offence (see (3) above);
(6)	Mr Rayden had read the Appellant’s letters carefully to see whether a case had been presented for disapplying the UK Border Agency’s policy and whether there were any exceptional circumstances justifying doing so. He indicated that he had found no reason for disapplying the policy and no exceptional circumstances;
(7)	In his opinion, the application of the policy in the present case treated the Appellant no more harshly or leniently than anyone else in similar circumstances, and Mr Rayden could find no reason to vary the policy in this case. He had decided to uphold the original decision that the excise goods should not be restored to the Appellant.
48.	We have considered Mr Rayden’s review decision in the light of the UK Border Agency’s policy and Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766. We accept the Respondent’s argument that non-restoration of the goods was reasonable and proportionate in the light of Lindsay; the inconvenience and expense caused to the Appellant was not exceptional hardship over what should be expected in the circumstances.
49.	We also accept that there were no other exceptional factors, and that the Review Officer was guided but not fettered by the policy, and considered the Appellant’s case on its individual merits to decide whether there were any mitigating or exceptional circumstances.
50.	We are satisfied that Mr Rayden’s decision was reasonably arrived at, in the light of all relevant matters and disregarding any irrelevant matters, and therefore hold that the Appellant has no grounds for challenging it. His appeal is therefore dismissed.
51.	Counsel applied for the Respondent’s costs. As this case was allocated to the Standard category, under Rule 23 of the Tribunal Rules (SI 2009/273 (L.1)), costs cannot normally be awarded; see Rule 10. It is possible to award costs under Rule 10(1)(b) “if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings”. Given the lack of action taken by the Appellant after his undated letter confirming that he wished to continue, as well as his termination of the clerk’s telephone call on the morning of the hearing, we have some sympathy with the Respondent’s position. However, we do not feel that it would be appropriate to make an award against the Appellant under Rule 10(1)(b) without his having been warned that such an application might be made.
Further comment
52.	Despite the efforts of the UK Border Agency, it appears that lay appellants such as the present Appellant need clearer information to make them aware of the respective appeal routes in these cases and the consequences of pursuing either or both of them or of deciding to pursue only one. In addition, we consider it advisable in such cases to arrange a pre-trial hearing to establish whether the appellant is proposing to attend the substantive hearing and whether the nature and purpose of the appeal to the tribunal are properly understood. We would hope that the waste of time and resources in cases of this type could be reduced by taking this course, rather than leaving matters until the hearing day, with the appellant not in attendance. In addition, we suggest that some form of notification that a costs application might be made should appear prominently in the pre-hearing correspondence.
Right to apply for permission to appeal
53.	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.

JOHN CLARK

TRIBUNAL JUDGE
RELEASE DATE: 10 May 2011