Brady v Customs & Excise [2004] UKVAT(Excise) E00622 (27 January 2004)

EXCISE DUTY —cigarettes  seized at Newcastle ferry terminal and forfeited on return of appellant to UK from Netherlands as foot passenger  -  review decision confirming decision not to restore goods  -  burden of proof reversed  -  not shown on facts to be reasonable for Customs to have concluded that goods should not be restored as held for a commercial purpose  -  goods for personal use of appellant  -  appeal allowed     

MANCHESTER TRIBUNAL CENTRE

 
 	
	 SANDRA BRADY 	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

Tribunal:	Mr M S Johnson (Chairman)
		Mr R Presho FCMA

Sitting in Newcastle upon Tyne on the 6th November 2003

The Appellant appeared in person

Miss Emma Piasecki, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	This is an appeal under section 16 of the Finance Act 1994 against the outcome of a review conducted by the Commissioners of Customs and Excise (“Customs”) upholding an earlier decision of Customs refusing to restore to the appellant 8,000 cigarettes, of two different brands, seized from her at Newcastle Ferry Terminal on 20 April 2002.  The appellant was at the time carrying with her an additional 2,000 cigarettes which were not seized.

2.	The tribunal had the opportunity of listening to the appellant give evidence.  She was cross-examined by Miss Piasecki, who represented Customs.  No other witness was called to give evidence; however we had the benefit of a bundle of relevant documents provided to us by counsel, which included an unchallenged witness statement from the officer of Customs who reviewed the appellant’s case, namely Mr Christopher John McFadden.  We ascertained that the facts of the case were as follows.

3.	The appellant lives in Fenham, Newcastle.  She is a presentable young lady, aged in her thirties.  On 20 April 2002, she took a trip to Amsterdam on the ferry from Newcastle.  She travelled together with her daughter, aged 6 (who is one of her two children – she also has a teenage son).  The appellant made it quite clear that the trip was specifically for the purpose of purchasing cigarettes.  

4.	On the appellant’s return to Newcastle, she was questioned by an officer of Customs.  She made no secret of the fact that she was carrying cigarettes that she was bringing back with her from her trip.  She was asked where she had got the cigarettes, and she replied that she had purchased them on the ferry.  The cigarettes were purchased for herself and not for supplying to anyone else.  She told the officer that she had paid £992 in cash for the cigarettes.

5.	The appellant smokes 30 cigarettes a day, again as she told the officer.  She told the officer that she normally smoked Regals, but that if she got a sore throat, she smoked Superkings.  She said that she worked 12 to 16 hours per week in the delicatessen at the Cooperative store in Newburn Road, Throckley.   She earned about £150 per month, receiving income support in addition.  Social security paid her rent, but she had gas, electricity and water rates to pay, all @ £5.  She lived as a single mother.

6.	The appellant was asked by the officer about her savings.  She said that she had about £1,000 in the bank.  She had paid for the cigarettes by saving up.  She had travelled abroad 2 to 3 times in the previous 12 months, to Gran Canaria and Benidorm. She said that she had not brought back cigarettes before .  She did not know about the guidance levels specified for quantities of excise goods brought into the UK for personal use.  

7.	At the end of the interview, Customs seized 8,000 of the appellant’s cigarettes (5,000 Regals and 3,000 Superkings).  Customs did not seem to appreciate that she had in her possession another 2,000 cigarettes.  Unusually, Customs do not seem to have informed the traveller why the cigarettes were being seized.  Subsequently Customs completed a Form SEE 479C containing the comment, “Single female travelling with young child.  On income support, paid £932 for 8,000 cigarettes.  Goods seized”.        

8.	When she got home, the appellant wrote to Customs seeking to have her cigarettes restored to her.  We note that, in that letter, the appellant stated that she was carrying 50 cartons of cigarettes.   She wrote that she was one of many people who were taking advantage of the fact that, as was openly advertised on the ferry, travellers can in law bring back as many cigarettes as they want, provided that these are for personal use.  She stated that Customs had found the 40 cartons in one of her bags, but had not checked her other bag, in which she had another 10 cartons.   She protested that her earnings and her savings were such that she could afford to buy the cigarettes she purchased, and that it was not right that she should be treated as having attempted an illegal importation.

9.	The letter further records that, when the appellant got home, she telephoned the Customs officer, Mrs Pickles, and told her about the 10 cartons of cigarettes that had not been seized.  The letter states that, when told about this, Mrs Pickles said, “You got away with 10 then”, but that the appellant replied, “No, the officer didn’t check both bags, only one”.   

10.	It is significant that the appellant openly admitted in her letter that she was transporting more cigarettes than had been seized, and also that she telephoned Customs as described in the letter.  There was no reason for her to have telephoned or written accordingly.  Customs would have known nothing of the 10 other cartons if the appellant had kept silent.   This is in our view an important indicator of the appellant’s credibility.

11.	On 26 April 2002, an officer of Customs wrote to the appellant from Gravesend, Kent, refusing the restoration of the 8,000 cigarettes seized.  The only reasons given in the letter for deciding not to restore the goods were that she had breached the advertised guidelines, about which she was assumed to be aware , and that the appellant had not proved to the satisfaction of the officer who seized the cigarettes that they were not held for a commercial purpose .

12.	In our view, the letter of 26 April 2002 was particularly unsatisfactory because it made no mention of, and gave no consideration to, the admissions with regard to the 10 cartons made by the appellant as mentioned above.

13.	Following receipt of that letter, the appellant consulted solicitors, namely Tait Farrier Graham of Benwell, Newcastle.  They wrote a letter to Customs on her behalf dated 9 May 2002, indicating an intention to appeal against the seizure of the cigarettes.  The only fresh matter to emerge from that letter, which contains just three fairly brief paragraphs, was that it was stated that the appellant had intended to buy cigarettes to last her for the rest of the year.  The letter was incorrect in stating that 2,000 of the 10,000 cigarettes were returned to the appellant “then and there” by Customs – we are satisfied that Customs never appreciated that the appellant had with her another 2,000 cigarettes, and that the solicitors had in this regard simply misunderstood their client’s instructions.  

14.	Customs replied to that letter by a letter dated 15 May 2002, stating that condemnation proceedings would be commenced.   Then, by a letter dated 12 June 2002, Customs wrote to the solicitors asking whether the appellant wished to continue with the condemnation case .  The final paragraph of that letter was as follows:

“[The appellant] also indicated that she may wish to appeal against the non-restoration decision given in my colleague’s correspondence of 26 April 2002.  To appeal this decision [the appellant] was given 45 days from the date of that letter to write to the review officer in Customs House, Hull.  The deadline for a review decision request should have been received by the Review Officer by 9 June 2002, it is therefore too late for a review decision to be requested”.

15.	We are unimpressed by the somewhat Machiavellian nature of the two letters dated 15 May and 12 June 2002.  The earlier letter was unhelpful in that it had said nothing about seeking a review of the decision not to restore.  The later letter was unhelpful in that it was written three days after the expiry of the 45 day period for seeking such a review .  It was also intimidatory in stating that condemnation proceedings are costly and that Customs would pursue the award of costs against the individual initiating the proceedings, i.e. the appellant.  A less sympathetic attitude towards the appellant it is difficult to imagine.

16.	In fairness to Customs, this seems to have been appreciated, because Customs exercised their discretion to allow a review more than 45 days after the original decision.  Mr McFadden wrote to the appellant to that effect by letter dated 4 July 2002.  The result of his review was communicated to her by letter dated 12 August 2002.

17.	In his review letter, Mr McFadden began by setting out, in a series of “bullet points”, what had been stated by the appellant, what the Customs officers concerned would state, and what was said by the appellant in interview.  Mr McFadden then made reference to the contents of the Excise Duties (Personal Reliefs) Order 1992 SI 1992/3155 (“the PRO”) , and highlighted the following features of the appellant’s case:

•	The appellant had cigarettes in excess of the guidelines and failed to satisfy Customs that they were not held for a commercial purpose ;

•	The appellant had purchased two different brands of cigarettes;

•	The appellant’s luggage consisted of little apart from the cigarettes;

•	Despite having a relatively low income, the appellant spent £992 on cigarettes;

•	At a stated consumption rate of 30 cigarettes per day, a month’s cigarettes would cost the appellant £180, as against her stated earned income of £150 per month.  The cost of the trip and the purchase of the cigarettes were therefore excessive expenditure.

18.	Mr McFadden then referred briefly to government policy against tobacco smuggling, and concluded that, after taking account of all the above, he had decided that the cigarettes should not be offered for restoration.  Finally he notified the appellant of her right of appeal to this tribunal.

19.	At the tribunal hearing, the appellant impressed us with her sincerity.  Under cross-examination, she reminded us that, as a mother, she was entitled to family allowance as well as income support to supplement her earned income, and she had no difficulty in demonstrating that, with money put aside, she had £185 per week from which to finance inter alia her spending on cigarettes.  She was frank in admitting that, contrary to what she had told the Customs officer in interview, cigarettes had been brought back from her trips to Gran Canaria and Benidorm, but she stated that these had been paid for by other members of her family.

20.	Miss Piasecki, making her submissions on behalf of Customs, reminded us of our limited jurisdiction in this class of appeal.  Referring to section 16(4) of the Finance Act 1994, she said that, in order to allow the appeal, the tribunal needed to be satisfied that the review decision was not one that the reviewing officer could reasonably have arrived at.  She referred us to Mr McFadden’s review letter, and how it had, she said, comprehensively reviewed the evidence.  Mr McFadden was, she submitted, entitled to reach and was justified in reaching the conclusion that restoration was not appropriate.  She invited us to dismiss the appeal.

21.	The appellant submitted in conclusion that we should not hold it against her that she had limited funds.  She was a good manager of the money she received, and it had made sense for her to purchase her smoking requirements in bulk in order to save money.  She asked us to allow the appeal.

22.	Notwithstanding the forfeiture of excise goods, it is established that this tribunal has a fact-finding function as to the circumstances of the seizure .  We feel that there are in this case serious shortcomings in Customs’ approach to the facts.

23.	In the first place, this is not one of those cases where Customs have revisited the review in the light of the Hoverspeed decision.  Quite frankly, we think that Customs have reversed the burden of proof.  Both in the initial decision of 26 April 2002 and in the review, Customs have assumed that the onus was on the appellant to prove that the cigarettes were for her own personal use.  That is expressly stated in the letter of 26 April 2002, and in our view it is implied in the review letter of 12 August 2002, which does not expressly address the burden of proof.  The reason that it falls to be implied is that the review letter sets out article 5(3A) to (3C) of the PRO, and goes on to say:

“The Schedule [to the PRO] referred to above specifies … 800 cigarettes as quantities above which a traveller may be required to satisfy the Commissioners in this way.”   [italics added for emphasis].

24.	As we read the review letter, therefore, it is predicated upon the appellant’s failure to prove that the cigarettes were not held for a commercial purpose.  That is all wrong, in the light of the Hoverspeed case, and it suffices for a further review to be required in this instance.          

25.	But matters do not end there.  It appears secondly to us that Customs have disregarded clear evidence available to them of the traveller’s credibility.  Who telephones Customs on getting home and specifically informs Customs that more cigarettes have been imported than Customs found at the port, other than a person who is either sincere on the one hand or who wishes to gloat on the other?  We are satisfied that the appellant was not a gloater.  She was sincerely concerned about the fact that she had brought back 2,000 more cigarettes than had been found, and felt that she needed to inform Customs of that fact, first over the telephone and then by letter.

26.	That information was available both to the officer who made the original decision not to restore, and to the reviewing officer, neither of whom took the information into account.  It was in our judgment important information that it was unreasonable of them not to take into account.

27.	Thirdly, it has recently been held by the High Court that, notwithstanding forfeiture of excise goods, an appellant is entitled to raise before the tribunal the issue of private use for the purposes of seeking to invoke the discretionary procedure of restoration:  see  C & E Comrs v Dickinson [2003] EWHC 2358 (Ch) (15 October 2003), per Peter Smith J at paragraph 49.  We think that Customs have in the present case failed to take into account the evidence as to the income of the appellant and her ability to save small sums of money, week by week, to accumulate the savings necessary to finance a bulk purchase of cigarettes to last her for a year or so.  

28.	The review letter has regard to the appellant’s earned income, but disregards her social security income about which she spoke in her interview.  It is true that, in her interview, the appellant spoke only of income support.  But she presented with a 6 year old daughter, from which her entitlement to family allowance should have been apparent.  We think that the review letter did not bottom either the matter of the appellant’s income, or the fact of her ability to accumulate the money needed to purchase the cigarettes.

29.	We have found, and we direct Customs to assume in conducting the further review that we propose to order in this case, that the appellant had a weekly income of £185, from which sums of the order of £5 to £10 per week could be, and were habitually, saved into the appellant’s bank account ultimately to produce the figure of £1,000 that she had saved up.

30.	Finally, what therefore is the evidence in this instance of the appellant holding the cigarettes for a commercial purpose?  It is exiguous in the extreme.  It has not been shown that the appellant knew about the guidelines.  It has been explained why she bought two different brands of cigarette.  Naturally most of her luggage consisted of cigarettes, because the trip had been a short one specifically to buy the cigarettes.  She could well afford, as we had found, to buy the cigarettes.

31.	We conclude that Customs have seriously erred in this case.  We allow this appeal and we direct Customs to conduct, within six weeks of the release of this decision, a further review of the original decision not to restore the cigarettes to the appellant.  In so conducting the further review, we direct that Customs are to take on board the findings of fact we have made in this case, expressed in the preceding paragraphs.  Also Customs are to bear in mind, clearly and unequivocally, where the burden of proof lies.

32.	We are confident that, when the further review has been concluded, the inappropriateness of declining to return the cigarettes to the appellant will have been appreciated, and suitable compensation will be paid to her for the cigarettes not having been restored last year.

M S JOHNSON
CHAIRMAN
RELEASE DATE:
MAN/2002/8215