EXCISE DUTIES – appellants seeking restoration of cigarettes seized at Liverpool John Lennon Airport on their return from Spain – goods on balance of probabilities found to have been held for a commercial purpose – review decisions of Customs held to be reasonable – appeals dismissed
MANCHESTER TRIBUNAL CENTRE
(1) STEPHEN NATTRASS
(2) MARGARET MORTON Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: Mr M S Johnson (Chairman)
Mrs R Dean
Sitting in public in Manchester on the 23rd July 2003
Miss L Elliott, of John Budd & Co, Solicitors, for the Appellants
Mr A Vinson, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents
© CROWN COPYRIGHT 2003
DECISION
The basis of the two appeals and the issue before the tribunal
- These two appeals, by Mr Stephen Nattrass and Mrs Margaret Morton respectively, were heard together, so as to avoid duplication of evidence in relation to common facts.
- The relationship between the appellants is that they have been close friends, but not partners, for some years. Mrs Morton was Mr Nattrass's carer during a period when he was chronically ill.
- The appeals have been made under section 16 of the Finance Act 1994, the appellants each inviting the tribunal to exercise its powers under section 16(4) of that Act.
- The disputed review decisions of the Commissioners of Customs and Excise ("Customs") relate to the upholding of decisions not to restore quantities of cigarettes, which the appellants sought to bring into the UK on 12 July 2002. The port of entry was, in each case, Liverpool John Lennon Airport, where the appellants landed on the same "Easyjet" flight from Málaga, Spain. When their belongings were examined by Customs, the appellants were each found to be transporting 21,800 Lambert & Butler cigarettes (that is, a total of 43,600 cigarettes).
- The issue in the appeals is as to whether the cigarettes were being transported for the appellants' own use, or alternatively were held for a commercial purpose. The notices of appeal contain identical grounds of appeal, viz "I had no intention of selling any of them [i.e. the cigarettes], for profit or otherwise".
- In other words, Customs are put to proof by the appellants that the cigarettes imported were not entirely for the appellants' own consumption. Customs perceived that the goods were a commercial importation; having interviewed the appellants, they seized the cigarettes, for the following stated reasons:
• The quantities of goods were greater than the indicative quantities specified in the Schedule to the Excise Duties (Personal Reliefs) Order 1992 SI 1992/3155 ("the Order"), which was in force at the time;
• The travellers had not disclosed previous trips abroad via Liverpool Airport;
• They had not disclosed that such previous travel had been with the cut-price airline "Easyjet";
• Their two stories were inconsistent with each other as to who had paid for the flight on this occasion;
• Their declared income was inconsistent with the expenditure involved.
- For the above reasons, Customs were of the view that the importations were for a commercial purpose and not for the appellants' own use.
Evidence before the tribunal
- The bundle of documents prepared for the use of the tribunal, helpfully handed to the tribunal by counsel for Customs, shows that the appellants sought prompt restoration of the seized goods. They employed the firm of John Budd & Co, solicitors of Blackpool, to correspond with Customs in an effort to get their cigarettes back. With that in mind, Mrs Anne Hind of John Budd & Co wrote to Customs on 17 July 2002. The letter shows, and we find, that the appellants were stopped by Customs on this occasion because Customs had been notified by telephone by the Spanish authorities that the appellants were carrying large quantities of cigarettes on that particular flight.
- Customs replied to Mrs Hind's letter on 18 September 2002, in the case of Mr Nattrass, and on 8 October 2002, in the case of Mrs Morton. Customs' letters referred to their policy of deterring and detecting fraud. In Mr Nattrass's case, restoration of the cigarettes was declined, for the reasons set out above, plus the fact that the appellants had been stopped by Customs previously, and that there were inconsistencies between the appellants' stated daily consumption rate of cigarettes and the length of time they would take to smoke the cigarettes. In Mrs Morton's case, the goods were not offered for restoration because of her long period of unemployment, her low income, her lack of savings, her unbelievable explanation for having travelled twice to Spain within the two previous months without purchasing cigarettes, and the quantity of cigarettes purchased and their cost.
- Mrs Hind wrote further to Customs on 20 September 2002 indicating an intention to appeal against the decision in relation to Mr Nattrass. Customs treated that as a request to review the decision, because under the Finance Act 1994 a right of appeal to the tribunal only arises against such a review. In October 2002, Mrs Hind further sought an independent review of the decision in respect of Mrs Morton. Separate formal departmental review letters were issued in respect of each of the appellants, both dated 8 November 2002. In each case the reviewing officer of Customs was Miss Julie Logan.
- Miss Logan's reviews were adverse to the appellants. In each case, she analysed the replies given by the appellants in interview. She took a fresh look at the facts of the cases, pointing out the evidence on the basis of which Customs' officers had hitherto been of the view that the goods were not for own use. She stated that she agreed with the views of those officers. She then addressed the credibility of the appellants in the light of the account of themselves they had each given. She concluded: " ... you have offered no reason for departing from [Customs'] policy of non-restoration of the goods. ... For the reasons [set out in the review letters] I exercise my option to confirm the contested decision not to offer restoration of the goods".
- The appellants now appeal to this tribunal against those adverse reviews.
- The evidence received by the tribunal, in addition to the contents of the appeal bundle, consisted of oral evidence from Mr Nattrass and Mrs Morton, giving evidence on their own behalf, and from Miss Logan, on behalf of Customs.
- In presenting the appeals, Miss Elliott examined particular reasons advanced by Customs for declining to restore the goods. We look at these in turn, having regard to the facts we find proved from the evidence of the appellants respectively, and from the documentation.
• Previous trips abroad made by the appellants
- The appellants accepted in interview that they had travelled abroad before for cigarettes, Mr Nattrass two years previously via Blackpool Airport, and Mrs Morton one year previously via Manchester Airport. They accepted that they each brought back 110 cartons of cigarettes on those occasions. They each alleged that Customs had allowed them to retain these cigarettes at the time.
- Within the last year, Mr Nattrass had visited Australia, South Africa, Magaluf and Torremolinos. He had brought back 400 cigarettes from the trip to South Africa, and 1,200 from the trip to Magaluf.
- The appellants' most recent trip had been to Spain some 3 weeks previously, between 19 and 21 June 2002, but they did not accept that any cigarettes had been bought on that occasion. They said that they could not have done so, as "every shop was shut". We discuss this under the next heading.
- Mr Nattrass explained that he had a friend who was able to obtain free airline tickets for him, enabling his trips to Australia and South Africa. We had sight of a copy of a letter dated 23 January 2003 from a Mr Angus Brian Cuthbertson, confirming this. The most recent trip to Spain had been paid for by Mr Nattrass's credit card, with Mrs Morton reimbursing him.
- The appellants' case is that they are accustomed to purchase cigarettes in bulk for their own consumption, acquiring approximately one year's supply at a time. However we note that that would involve their accumulating substantial amounts of money, which the exiguous stated means of the appellants would appear to make impossible. We return to this below.
• The trip to Spain 3 weeks previously
- Customs did not believe that no cigarette purchases had been made by the appellants on their most recent previous trip to Spain. The appellants countered this by saying that there was a general strike in progress in Spain when they had last been there, making it impossible to purchase cigarettes.
- Miss Elliott put before the tribunal internet print-outs which indicated that a "very successful general strike" took place in Spain on 20 June 2002. This began with a general strike in the Basque country on 19 June, and the effects then became nationwide on the following day. The consequences of the strike seem to have lasted into 21 June.
- We are prepared to accept that it will have been difficult to purchase cigarettes when the appellants were last in Spain, their visit coinciding, as it did, with the strike.
• Level of expenditure on the goods having regard to the stated resources of the appellants respectively
- The appellants each brought back 110 cartons of cigarettes, costing them about £1,600 each.
- The evidence shows that Mr Nattrass had been awarded the sum of £4,700 in April 2002 by the Criminal Injuries Compensation Authority in relation to personal injuries he had suffered. Mrs Hind acted for him in and about that matter. She remitted the net sum of £4,136 to him on 13 May 2002. He credited this to his NatWest Advantage Gold Account on 14 May, to add to a credit balance of £1,881.85 which he already possessed.
- On 29 May 2002 he credited £2,000 to his account with the Marsden Building Society, withdrawn from the NatWest account. He withdrew £3,000 from that account between then and 10 July 2002, leaving him with a credit balance of £104.26.
- He also had a NatWest Gold Card. During the month 23 June - 22 July 2002, he paid off a debit balance of £1,010.79 by direct debit from his bank account, leaving a total new "spend" of £664.74 outstanding. This appears not to have been atypical, in that the previous direct debit from his bank account in respect of his Gold Card, dated 17 May 2002, was for £654.80.
- We note that, whilst Mr Nattrass was several thousand pounds to the good as a result of his Compensation Authority payment, his monthly expenditure was high, quite apart from that fact. It does not correspond with what he told the Customs officer in interview, which was that his monthly income was £500 in benefits, with expenditure of £100 per month, and that he had spent his savings on "doing up" his house and buying the cigarettes in issue.
- We find that Mr Nattrass must have had an income from another source, and that it would be reasonable to conclude that that may well have come from a species of economic activity on his part.
- Turning to Mrs Morton, she claimed an income of £72 per week, with no specified expenditure. She was paid £1,212.81 by Mark Gilbert Morse, solicitors of Newcastle upon Tyne, on 15 May 2002, as an interim award of damages in a claim against British Coal made by her brother, her sisters and herself, by reason of the illness and disability of their late father.
- On 20 October 2002, Mrs Hind wrote to Miss Logan, indicating her surprise at the reasons for the decision given on 8 October 2002, and drawing attention to the contents of her letter dated 17 July 2002. In that letter, Mrs Morton was said to have kept a money-box into which she placed £2 every time she smoked a packet of cigarettes. She had adverted to that in interview, only there she had mentioned putting aside £1 to £1.50 for every packet smoked. Mention was made, in the interview and the letter, of the £1,212.81 received in May, but no other source of income for Mrs Morton was disclosed.
- During the course of Mrs Morton's oral evidence it became clear, just before and just after the lunchtime adjournment, that the full truth had not been told to Customs about the source of the money used by Mrs Morton to finance her cigarettes. We find that members of her family were financing her in that regard. She could not herself have afforded to collect £1 to £2 per packet of cigarettes smoked, against the cost of further purchases, having regard to her low stated income.
- Accordingly we find that Mrs Morton too had an income from another source, namely her family, and that it would be reasonable to conclude that she was not buying cigarettes exclusively for herself, but that on a balance of probabilities members of her family were providing the wherewithal for her purchases, in whole or in part.
- We find that there was a lack of genuineness on the part of both Mr Nattrass and Mrs Morton in explaining their financial arrangements to Customs, which has not helped their cases in these appeals.
• The appellants' rate of consumption of cigarettes
- In interview, the appellants each claimed to smoke about 80 cigarettes per day, and they both indicated that their cigarettes would last them about a year.
- Listening to Mr Nattrass and Mrs Morton giving oral evidence, we have formed the view that neither of them would have smoked all the cigarettes they brought back. We have formed the view that their probable consumption of cigarettes was, in the case of each of them, of the order of 40 to 50 per day. At that rate of consumption, the cigarettes imported would have lasted them considerably over a year.
- Having regard to the state of their finances, it would not make sense to invest so much money in cigarettes at one go, when smaller quantities might readily have been bought on short trips as required, in an affordable way. A different ulterior motive must have underlain the purchase of 220 cartons of cigarettes at one time.
- The probability, as we see it, is that an indeterminate amount of the cigarettes brought back would be smoked by others, about whom we know nothing.
• Testimonials
- We take account of a letter dated 22 January 2003 from a former police officer, a Ms Chadwick, confirming that the appellants are both heavy smokers, testifying to the honesty, decency and reliability of Mr Nattrass, and stating Mrs Morton to be hardworking, honest and of good character.
- We also note that Mr Cuthbertson, in his letter mentioned above, describes Mr Nattrass as having impeccable moral standards and states that his character is without question or fault.
Miss Logan's evidence
- Miss Logan highlighted the following matters as factors taken into account by her in reaching her decisions on the review of these cases, and we find that the outcome of her reviews was based on them.
o In the case of Mr Nattrass:
? The paucity of Mr Nattrass's stated income;
- Her doubt over his stated consumption rate of 80 cigarettes per day;
- The unclear attribution of the lump sums of money withdrawn by Mr Nattrass;
- The unclear fate of the previous large quantity of cigarettes imported;
- Uncertainty as to the alleged Spanish strike;
o In the case of Mrs Morton:
- The unclear attribution of the money received by her as interim damages;
- Her lack of funds to pay for her smoking habit;
- Doubt over her rate of consumption of cigarettes;
- Her trips abroad, each affording opportunities to purchase cigarettes.
- Miss Logan stated, and we find, that she had in mind when she conducted her reviews the decision of the Divisional Court of the Queen's Bench Division in R (on the application of Hoverspeed Ltd and others) v C & E Comrs [2002] 4 All ER 912 ("the Hoverspeed case"). The decision of the Court of Appeal in the Hoverspeed case, reported at [2003] 2 All ER 553, heard by the court on 5 and 6 November 2002, had not yet appeared at the time of her reviews.
Submissions of the parties' representatives
- Appearing on behalf of Customs, Mr Vinson submitted that the appellants' credibility was thrown into serious doubt. It was improbable that such a large quantity of cigarettes would have been acquired at one time for the appellants' personal use. What was stated in the correspondence from the appellants' solicitor did not fit with what the tribunal had been told.
- The manner of funding the cigarettes did not make sense, in the light of the means of the appellants. Mr Nattrass's expenditure was out of all proportion to his stated income. Mrs Morton had told lies to Customs about the source of her funds. Mr Vinson invited the tribunal to find that neither appellant was consuming as many as 80 cigarettes a day.
- He invited us to dismiss the appeals.
- For the appellants, Miss Elliott submitted that she had provided material to refute each of the substantial reasons of Customs for refusing restoration. The other matters relied upon by Customs were of no substance.
- The burden of proof was upon Customs to show commerciality. The discrepancies between the statements of the appellants and the evidence before the tribunal were explicable by the stress and agitation they felt at the time. They were in funds to make the purchases, and these were entirely understandable in the respective circumstances of the appellants.
- There was no commercial intention and no reliable evidence of commerciality.
- Miss Elliott invited us to allow the appeals.
Decision of the tribunal with reasons
- Council Directive (EEC) 92/12 of 25 February 1992 ("the Excise Directive") establishes, by article 9(2), the criteria of which account is inter alia to be taken in establishing that excise goods brought from one member state to another are intended for commercial purposes. These are:
- The commercial status of the holder of the products and his reasons for holding them;
- The place where the products are located or, if appropriate, the mode of transport used;
- Any document relating to the products;
- The nature of the products;
- The quantity of the products.
- Customs were, of course, applying article 5 of the Order, as they understood its terms, at the time of the seizure of the cigarettes in these cases. In the Hoverspeed case, the Divisional Court castigated the Order as inconsistent with the Excise Directive, and the Order has since been revoked.
- However, even accepting, as Customs do, that it is for Customs to prove that goods being brought into the UK are held or used for a commercial purpose, we are of the view that there are powerful indicators to that effect in both the cases now under appeal, when we revisit the cases de novo, as the Hoverspeed case invites us to do. We say this for the following reasons:
- The quantities of cigarettes transported on this occasion were out of all proportion to the means of the appellants respectively unless commerciality is presumed;
- What we now know about the level and source of the funds enjoyed by Mr Nattrass and Mrs Morton respectively is indicative that importations by them were not exclusively for their own use;
- Neither appellant told Customs the truth about their financial circumstances when interviewed;
- The rate of consumption of cigarettes by the appellants respectively makes it inherently improbable that all the cigarettes imported can have been for their own use.
- We consider that the above factors rather than those identified by Customs are decisive in these cases. Equally, however, the above factors were amongst those identified by Miss Logan when she conducted her reviews. Disregarding all the other factors identified by Customs, we are of the view that the outcome of the reviews was reasonable. So far as article 9(2) of the Excise Directive is concerned, we are of the view that the reviews that she conducted did hold the criteria mentioned in that sub-article properly in balance with the other matters correctly taken into account.
- We see no reason, therefore, to interfere. We decline to exercise our powers contained in section 16(4) of the Finance Act 1994 and we dismiss each of these appeals.
M S Johnson
Chairman
Release Date:
MAN/03/8004
MAN/03/8005
