Customs and Excise, Community Shopping, Seizure of Goods; Legality of Seizure; Deemed

Customs and Excise, Community Shopping, Seizure of Goods; Legality of Seizure; Deemed

E01124

Customs and Excise, Community Shopping, seizure of goods; legality of seizure; deemed forfeiture; restoration appeal; jurisdiction; abuse of process; whether legality of seizure can be raised in restoration appeal.

EDINBURGH TRIBUNAL CENTRE

MR DAVID FOSTERAppellant

- and -

THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): J Gordon Reid, QC., F.C.I.Arb.,

(Member): James D Crerar, WS., NP

Sitting in Edinburgh on Tuesday 10 June 2008

for the AppellantMr David Foster

for the RespondentsMr James Puzey, Barrister

© CROWN COPYRIGHT 2008.

1

DECISION

Introduction

  1. Smoking is an anti-social habit. It is an offence to smoke in certain categories of premises in Scotland (Smoking, Health and Care (Scotland) Act 2005 section 2). Similar legislation was subsequently introduced in England and in Wales. Almost everyone knows that smoking can be addictive and can cause lung cancer. The UK Government imposes significant taxes and duties on cigarettes, tobacco and other similar products. Other countries within the European Union do not do so to the same extent. This has led to the practice of UK residents travelling to mainland Europe for the principal purpose of buying cheap cigarettes and tobacco in large quantities and bringing them back to the UK. Many of these community shoppers do so for their own personal use to feed their anti-social habit. Some do so for the purposes of selling these cigarettes for commercial gain on the black market. HMRC have the invidious task of trying to identify and distinguish between the genuine community shopper purchasing such goods and bringing them into the United Kingdom for his own use, and those who do so for commercial purposes. If the goods, purchased within the European Union, duty paid, are for the community shopper’s personal use they are not liable to seizure no matter how large the quantity; if the goods are being brought in by the community shopper for commercial gain they are liable to seizure unless the appropriate duty has been paid.
  1. Sometimes Customs make mistakes and seize cigarettes and tobacco brought into the United Kingdom by a community shopper for personal use. Such mistakes are inevitable. The Community Shopper’s rights and remedies are contained in complex, sophisticated legislation, which includes Human Rights jurisprudence the correct application of all of which has become difficult in recent years and which makes it extremely difficult for the genuine community shopper to have the mistake rectified.
  1. This is one such case and we wish to make it clear at the outset of this Decision that having heard evidence and reviewed all the facts and circumstances, we are in no doubt whatsoever that the Appellant David Foster (who represented himself), and his wife, were genuine community shoppers bringing back a large quantity of cigarettes and a small quantity of rolling tobacco for their own personal use. Their goods should not have been seized. They were poorly treated by Customs at Glasgow Airport at the time of seizure. Customs have refused to restore the goods or compensate the Appellant. Customs now advance a number of sophisticated legal arguments to justify their position and to exclude from our consideration the one matter the Appellant wishes to raise before us (on which both he and his wife gave evidence without objection and were cross-examined), namely that the goods should not have been seized because they were for his and his wife’s own personal use.
  1. The real issue before this Tribunal is the scope of the appeal. We have been greatly assisted by the excellent and very fair presentation by James Puzey, Barrister who appeared on behalf of Customs. He produced a full written submission which he amplified at the Hearing, which took place at Edinburgh on 10th June 2008. He cross-examined the Appellant (who represented himself) and his wife, who both gave evidence on oath, with skill and restraint. Customs chose not to lead any oral evidence. One reason was the illness of Julie Wiggs, the review officer referred to below (see paragraph 58). The other reason was that she would not in any event be able to speak to the question of own use as she had not considered it.
  1. A bundle of documents was produced. There was no dispute as to the authenticity and where appropriate, the transmission and receipt of those documents.

Legislative Framework

  1. Section 49(1) of the Customs and Excise Management Act 1979 provides inter alia that imported goods, chargeable on importation with customs or excise duty, and unloaded from an aircraft in the UK without payment of that duty, are liable to forfeiture. Section 139(1) provides that any goods liable to forfeiture under the Customs and Excise Acts may be seized.
  1. Regulations 12(1)(1A) and (1B) of the Tobacco Products Regulations 2001, provide inter alia that:
  1. the excise duty point is the time when the tobacco products are charged with duty;
  2. where a community shopper acquires such goods in another member state for his own use and transports them to the UK, the excise duty point is the time when those products are held or used for a commercial purpose
  3. such goods are regarded as held for a commercial purpose if duty and tax has not been paid on acquisition in the member state; but regard is to be taken of-
  1. the community shopper’s reasons for having possession or control of the goods;
  2. whether the community shopper is a revenue trader;
  3. the community shopper’s conduct including his intended use of the goods or any refusal to disclose his intended use;
  4. the location of the goods
  5. the mode of transport used to convey the goods
  6. any document or other information relating to those goods
  7. the nature of the products including the nature and condition of any package or container
  8. the quantity of the goods and in particular whether the quantity exceeded 3200 cigarettes, 3 kilogrammes of rolling tobacco
  9. whether the community shopper personally financed the purchase;
  10. any other circumstances which appear to be relevant.
  1. Regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 provides that where duty has not been paid on excise goods they are liable to forfeiture where a breach Regulation 6 occurs in relation to those goods. Regulation 6 requires duty to be paid on or before the excise duty point.
  1. The overall effect of these provisions is that if the tobacco products held by the Appellant and/or his wife were held for a commercial purpose, these goods were liable to seizure and forfeiture.
  1. Where goods are seized as liable to forfeiture, the community shopper may within one month of the date of seizure, or a Notice thereof, himself give notice of claim to Customs (Schedule 3 paragraph 3). If he does so, then Customs must institute condemnation proceedings within six months in the Sheriff Court, or if they so wish in the Court of Session; there is no time limit for bringing proceedings in the Court of Session (Schedule 3 paragraph 3, 6, 8). If he does not do so, or withdraws his notice, then the goods are deemed to have been duly condemned as forfeited (Schedule 3 paragraph 5). The Schedule gives Customs power to dispose of the goods before they have been condemned if they are of a perishable nature (paragraph 16). If the Community Shopper succeeds in the condemnation proceedings, Customs are bound to compensate him, often, by reference to the market value of the goods (paragraph 17(1)(c) and 17(4) of Schedule 3).
  1. Section 152(b) of CEMA provides that Customs may

restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized (under the customs and excise Acts).

  1. That provision does not expressly exclude, (as a factor to be taken into account in the exercise of the statutory discretion) the circumstances relating to the seizure.
  1. The Tribunal’s jurisdiction is derived from section 16(1)(4)&(8) of and Schedule 5 paragraph 2(r) to the Finance Act 1994 as amended. It is confined in terms of section 16(4) to a power

where the tribunal are satisfied that the Commissioners or other persons 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.

  1. The nature of the Tribunal’s general jurisdiction is that where appropriate an Appellant (and the Respondents) may lead evidence of the facts and circumstances relating to the appeal. There are no pleadings as such although Customs produced in the usual way a Statement of Case. It narrates among other matters, Customs’ version of the circumstances of seizure (paragraph 1 and 12-14).

Grounds of Appeal

  1. The short ground of appeal states that

HMRC’s own codes of Practice and Procedures not adhered to.

  1. There is also a reference to a letter dated 25/1/08 from the Appellant to Customs. That letter refers to the assertion that at the time of seizure the Appellant wished to complain to a senior officer but was denied the opportunity of doing so.
  1. During the course of the appeal, it became apparent that the real ground of appeal was that the goods were purchased for personal use. Both Mr and Mrs Foster gave evidence about this in chief and in cross-examination. Much of the correspondence produced by Customs related to this topic.

Facts

  1. Mr Foster is a retired electrical engineer. He lives with his wife, Margaret, in Falkirk. They own a barber’s shop but he takes no part in its operation. There is no suggestion in the evidence or any documents produced that he has ever been a revenue trader. He has income from pensions. They have a few thousand pounds in savings. They are not wealthy but maintain a reasonable standard of living on their modest incomes. They have both been heavy smokers for many years. They have in the past made several trips to Spain to buy cigarettes thus taking advantage of the cheap prices there. Doing so makes a considerable saving even taking into account the cost of travel and accommodation. They do not normally buy cigarettes in the United Kingdom.
  1. In 2001 they wrote to Customs seeking clarification of their entitlement as community shoppers.
  1. They made such trips in 2002, 2003, 2004 and 2005. In 2004, they bought about 20,000 cigarettes, i.e. 100 cartons. A carton contains ten packets of twenty cigarettes i.e. 200 in total. They were interviewed by Customs at Glasgow Airport. Customs were satisfied that the cigarettes were being held for the Fosters’ own personal use. Mrs Foster made a trip in July or August 2005 to Mallorca with her son and grandson; she bought about 100 cartons of cigarettes (i.e. 20,000 cigarettes).
  1. On their return to Glasgow Airport on 20th January 2007, after a short trip to Spain to buy cigarettes, Mr Foster and his wife were interviewed by Customs Officers. They were initially spoken to together; they were subsequently separated. Mr Foster was interviewed in the Main Hall where travellers were milling around. Mrs Foster was taken to an interview room.
  1. Mr Foster was asked various questions about the cigarettes and tobacco contained in his suitcase. The cigarettes were not concealed in any way. There was nothing special about their packaging. He made no bones of the fact that the purpose of the trip was to purchase a large quantity of cigarettes thereby taking advantage of the lower prices in Spain. Mr and Mrs Foster personally financed the purchase of the cigarettes from their joint funds.
  1. Two officers made notes in their notebooks. This was not a transcript of everything that was said. At the end of the interview, Mr Foster was asked to sign the notebook and thereby confirm the accuracy of the notes. The notes are difficult to read. Nevertheless he signed.
  1. When initially interviewed together Mr Foster or Mrs Foster stated that they had about 68 cartons. Customs officers may have misheard the number as one of them wrote down 62. The correct number was 68 cartons of Silk Cut with one carton having been opened and two packets removed i.e. 68x200= 13,600 less 40=13,560). Mr Foster had receipts for his purchases and at some point passed them to a Customs officer. He also had in his possession 10, 50 gram pouches of Golden Virginia hand rolling tobacco. This is less than the guideline amount of 3kg referred to in paragraph 7 above. (The 13,560 cigarettes and the 0.5kg tobacco are collectively referred to as the “Goods”).
  1. In the course of his interview, Mr Foster said that he normally smoked Benson & Hedges, had stopped smoking for about a year but resumed smoking over Christmas 2006. He said he formerly smoked approximately 20-30 cigarettes a day but now smoked about 10-20. He said that he and his wife budgeted on about one carton of cigarettes each per week.
  1. He was asked about previous trips and stated that he had brought 100 cartons back from Spain in October 2004. He and his wife were stopped on that occasion, he said, but Customs accepted his explanation that they were for their personal use. He also said that his wife brought back cigarettes from Spain in July or August 2005. He was also asked about his financial circumstances.
  1. In the course of her interview, Mrs Foster said the cartons of Silk Cut and to hand rolling tobacco were for her and her husband. She said she and her husband each smoked about 25 cigarettes a day and that their purchases would last about one year. When asked when she was last abroad she stated that this occurred during the school holidays in August. The year was not mentioned although she had previously mentioned October. The Notebook refers to October 2006 but Mrs Foster explained in evidence that she meant to say 2005. We accept that explanation about the year which is consistent with Mr Foster’s evidence recorded by Customs on 20th January and in evidence before us. At the time of her interview Mrs Foster was extremely tired. She had had an early start to catch the flight home from Spain. She felt under pressure during the interview.
  1. Mrs Foster also referred to the trip in 2004 and stated that 50 cartons of Silk Cut and 50 cartons of B&H were brought back.
  1. One notebook referred to the Fosters being in the blue channel. Another notebook referred to the green channel.
  1. After Mr Foster’s signature in one notebook (Officer Burnside), the following appears:-

Spoke to officers N McAllister and J Gribbon. Agreed goods to be seized for the following reasons:-

1Inconsistent stories with co-travellers

2Time to last not as stated

3Unreasonable amount of purchase when giving up

  1. The inconsistencies are not specified in the notebooks. There is no amplification anywhere of the second and third reasons.
  1. Two days later, the Fosters wrote a lengthy letter (dated 22/1/07) to Ian Sked, a Customs official, described as a review officer. At the outset the letter states that the decision to seize is being appealed. The letter describes the interview from the Fosters’ point of view. It records that they were required to sign the notebooks, which his wife only glanced at and Mr Foster found difficult to read.
  1. The letter proceeds to explain that Mr Foster is a smoker who is trying to give up; that he preferred B&H to Silk Cut, but bought hand rolling tobacco (HRT); if he gave up the Silk Cut would last until about April 2008 when they proposed to return to Spain. The letter describes in detail how the purchases were funded.
  1. The letter refers to correspondence passing between Customs and the Fosters in 2001. In that earlier correspondence (which Mr Foster had with him at the Hearing) Mr Foster declared his travel plans and intentions to buy cigarettes abroad and requested guidance on quantities. Customs gave general guidance in response.
  1. The letter also records the Fosters’ foreign trips in 2002, 2003, 2004 and 2005. On each occasion they brought back quantities of cigarettes. The letter records that they were interviewed at Glasgow Airport in 2004 and were allowed to retain their purchases.
  1. In their letter the Fosters estimate their daily consumption at about 20-30 per day (i.e. in total 280-420 per week) which they describe as a carton a week each. Two cartons contain in total 400 cigarettes.
  1. Finally, the letter sets out various figures to demonstrate that even if they were to sell the Goods purchased, they would make a loss, having regard to the costs of the trip to Spain.
  1. This letter was treated by Customs, in a reply dated 25/1/07) as a formal appeal against seizure. The Fosters wrote a further letter dated 2/2/07 summarising their position. The letter pointed out that the real gain for heavy smokers was the difference between the purchase locally of a year’s supply (approximately £2,860) and the cost of the purchase in Spain (approximately £1500).
  1. In reply, by letter dated 15/2/07, Mr Sked stated that he had completed his review of the Fosters’ appeal. This is an extraordinary statement as Customs had already acknowledged in effect that condemnation proceedings would be required. The letter is extremely lengthy and narrates the contents of the officers’ notebooks, records the receipts for the purchase of the Goods, and refers to the relevant legislation.
  1. Mr Sked then explains at great length why he is satisfied that the Goods were held for a commercial purpose. Why he is doing this is unclear to say the least as his “review” has no statutory basis or effect whatsoever. He did not make the decision to seize so his reasons for justifying seizure are irrelevant. He did not make the subsequent artificial decision to refuse to restore the goods. We say artificial because (as appears from the history of events) the Goods had by the date of that decision, long since been destroyed.
  1. Mr Sked’s letter served to dishearten the Fosters and to discourage them from proceeding with the extant appeal against seizure. For what it may be worth we find the reasoning process in this letter to be wholly unreasonable, indeed perverse.
  1. The reasons may be summarised as follows:-
  1. The quantity
  2. The Fosters did not state the exact quantities during interview; this was because the Goods were not for their own use.
  3. Even if Mr Foster intended to give up smoking, it is not credible that he would not have imported a minimal quantity of his preferred brand.
  4. There were inconsistencies in the Fosters statements of their smoking habits.
  5. Mr Foster ought to have known exactly how long his supply of cigarettes would last. His statement that if he gave up, the supply would last until April 2008 but if he did not the supply would last until September/October 2008.
  6. Likewise Mrs Foster ought to have known exactly how long her supply would last. She said a year but Mr Sked’s calculations put the date at September 2008.
  7. Mr Sked calculates that on the basis of past purchases and consumption rates the Fosters ought to have had approximately 7900 cigarettes immediately prior to the Fosters’ January 2007 trip to Spain.
  8. Mr Foster did not know the cost of cigarettes in the UK.
  9. The Fosters’ financial circumstances were such that they could not finance the trip without being financially compensated.
  10. The Fosters were not open and honest at all times during the interviews.
  1. Towards the end of his letter Mr Sked states:-

The goods were therefore correctly seized under section 139(1) of CEMA and I uphold the seizure accordingly.