Excise Duty: Appeal Against Refusal to Restore Goods Imported Duty Paid Within Statutory

E01033

Excise Duty: Appeal against refusal to restore goods imported duty paid within statutory guidelines; objection to seizure; HMRC purporting to review objection to seizure; Schedule 3 Para 6 CEMA 1979 not implemented; Failure of HMRC to fulfil statutory duty. Adjournment to allow consideration of condemnation proceedings.

EDINBURGH TRIBUNAL CENTRE

AUDREY BRYSONAppellants

PHYLLIS FRASER

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): Mrs G Pritchard, BL., MBA., WS

(Member): Mrs Helen M Dunn, LL.B.

Sitting in Edinburgh on Monday 5 March 2007

for the AppellantsA Bryson and P Fraser

for the RespondentsMr Andrew Scott, Shepherd & Wedderburn WS

© CROWN COPYRIGHT 2007.

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DECISION

The hearing was attended by Ms Bryson who represented herself. HMRC was represented by Mr Andrew Scott, Solicitor, Shepherd & Wedderburn. The bundle of papers accompanying the case is substantial but was only produced to Ms Bryson and the Tribunal two days before the hearing. Additional letters required to fulfil a direction of this Tribunal were only delivered on the morning of the hearing. These were vital to the Tribunal as will be seen later. It would have been helpful to have had these much earlier.

Mr Scott requested that Mrs Phyllis Fraser, Ms Bryson’s sister be present during the hearing as both women had travelled together and had brought in the same amount of excise duty paid goods. Both had these seized based on a decision they were held for a commercial purpose. Mrs Fraser had also objected to the seizure and had an appeal down to follow this one. The appeals are not conjoined but this decision relates to both cases in identical terms. It should be noted however that Mrs Phyllis Fraser’s letter from HMRC purporting to deal with the objection to seizure differs in some factual matters from Ms Bryson’s, but that is not in issue for this Tribunal. That will be for the Sheriff to determine should condemnation proceedings be initiated following the issue of this decision.

Background

Ms Bryson and Mrs Fraser had been stopped by HMRC on their return to Glasgow Airport from Spain on 21/03/06. The officers had requested each of them to state what excise goods she had in her baggage. Each declared that she had 3.200 cigarettes and 3kg of hand rolling tobacco (HRT) duty paid in Spain. These quantities of cigarettes and HRT are within the statutory guidelines contained in the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 SI2692 reflecting the arrangements for payment of duty under Council Directive 92/12/ER. This provided that where tobacco products are for own use the duty is payable in the Member State of Supply. Ms Bryson and Mrs Fraser believed they were entitled to bring these goods in duty paid from Spain. They were seized by HMRC on the ground they were for commercial use. The issue of own use/commercial use is not for this Tribunal.

Ms Bryson and Mrs Fraser consulted lawyers Messrs Lavery Smith Solicitors, Glasgow who wrote on 10/04/06 to Mr Sked, an officer of HMRC objecting to the seizure and giving reasons to show these goods were for personal use.

Mr Sked purported by letter dated 11/05/06 to review the objection to the seizure and refused to release the seized goods which were treated as forfeit. The terms of the letter will be commented on again later. Ms Bryson’s lawyers again objected by letter (dated 1 June 2006) and asked for a review of the decision and restoration of the goods.

Mr J Gilfeather an officer of HMRC made a decision that in terms of the Customs & Excise Management Act (CEMA) 1979 S152(2) he would not exercise his discretion to restore the goods to Ms Bryson and Mrs Fraser. A further review of that decision was requested.

Mr Sked, this time reviewing the refusal to restore, repeated the terms of his purported review of the seizure, and refused to restore the goods. Ms Bryson and Mrs Fraser appealed to the Tribunal stating in their appeals the goods were for their “own use”.

HMRC applied for the appeals not to be entertained as MsBryson and Mrs Fraser had not made appeals on grounds open to them. The Tribunal, having regard to the purported seizure review, allowed amendment of the Trib 1 so that Ms Bryson and Mrs Fraser could get their problem aired as they had been denied any opportunity of a hearing. This allowed Ms Bryson and Mrs Fraser access to the Tribunal on the grounds that HMRCs conduct was unreasonable.

The Direction of the Tribunal dated 23/11/06 after a hearing, having allowed the amendment, also set down a full hearing and requested copies of the correspondence between Mr Sked and MsBryson and Mrs Fraser’s solicitors prior to the review decision of 8/08/06 which was the subject of this appeal.

It would be helpful at this point to outline the law governing seizure of excise goods on import from a Member State of the EU.

This consists of:-

1. Tobacco Products Duty Act 1979 which provides for excise duty on importation of goods which are dutiable.
2. Council Directive 92/12/EC which provides for the general arrangements for monitoring and movement of excise duty goods within the European Union as follows:

(a)At Article 8 that as regards products acquired for own use that excise duty shall be charged in the Member State in which they are acquired.

(b)At Article 9.

(1)That excise duty shall become chargeable where products for consumption are held for a commercial purpose in another Member State.

(2)That for establishing a commercial purpose Member States must take account of (various provisions which are not relevant to this appeal) …….

the quantity of the products

For this purpose the Member State may lay down guidelines which may not be lower than:

Cigarettes 800 items

Smoking tobacco 1kg

1. The Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 provides amendments to the Tobacco Products Regulations 2001 which include matters in which HMRC must have regard including inter alia

(b) own use includes use as a personal gift

(e) (viii) the quantity of those products and in particular whether the quantity exceeds any of the following quantities:

3,200 cigarettes

3kg of any other tobacco products

(ix)whether that person financed the purchase of those products

(x)any other circumstances which appear to be relevant.

4.The Customs and Excise Management Act 1979

S139 of CEMA provides

(a)Any thing liable to forfeiture under the Customs & Excise Acts may be seized or detained by any officer ……

(b)At Sched 3 makes provisions with regard to seizure by an officer which include:

(i)at para 3 the right of the person from whom goods have been seized under the forfeiture provisions to object to the seizure.

(ii)At para 6 that if within one month of the seizure a notice of claim is made the Commissioners shall take proceedings for condemnation of the seized goods by the Court and if the Court finds that the seized goods were liable to forfeiture the Court shall condemn them as forfeited.

(c)Further provisions are made for conduct of the Court Proceedings.

(d)At Section 152(b) there is a provision that HMRC may as they see fit restore seized or forfeited goods subject to such conditions if any as they think proper.

1. Case Law

B S Gora v HMRC 2002 is referred to for its terms. Although it was a case of alcoholic excise duty and MrGora withdrew his objection to seizure Mr Stephen Oliver gives at p3 a very clear understanding that a person can question the liability to seizure as an underlying question of fact. The question can be whether the goods were properly seized in the first instance. Another fact is where the ‘owner’ has been innocent and diligent.

Gascoyne v HMRC 2004 EWCA Civ 1162 where Lord Buxton lays out the legislative scheme as he describes it as “yet another case in this court that addresses the activities of Her Majesty’s Customs & Excise is investigating and where necessary taking steps to recover duty in respect of, the importation by persons returning from other countries in the European Union with large amounts of dutiable goods”.

Lord Buxton clearly separates the issues of seizure and forfeiture.

At para 6 he states “The procedure therefore is that the importer gives a notice of claim and it is for the Commissioners, when receiving such notice, then to initiate legal proceedings for condemnation: that is to say for a decision as to whether the items are truly forfeit. Under S152(b) of CEMA the Commissioners have a discretionary power to restore, subject to such conditions (if any) as they think proper of any thing forfeited or seized under those Acts”.

HMRC v Smith CH 2005 APP/0117 unreported. In this case Mr Justice Lewison makes it clear the Tribunal must address the consequences of seizure before it can entertain an appeal against refusal to restore. In particular he directs the Tribunal to whom he referred back Mr Smith’s appeal to ask itself is “whether the Commissioner’s decision was one they could not reasonably have arrived at”. He also commented at para 25, “that the validity of the seizure does not become an issue merely because it is relevant to the question of whether the goods should be restored. The validity of the seizure will only become an issue if and only if the Tribunal is satisfied the Appellant had good reasons for not having raised the matter by way of condemnation proceedings”.

Anthony Johnstone v Chairman of VAT & Duties Tribunal (defenders) & HMRC (interested party) 2005 EWHC 115 (Admin) this clearly sets out at para 3 the procedure under para 6 which HMRC must adopt on receiving an objection to seizure. He also comments on the difficulty – both for Appellants and indeed lawyers, of fully grasping the distinct statutory procedures.

It should be noted that in none of these cases was the importation within the statutory guidelines.

This Tribunal is not the forum for a determination as to restoration whilst the matter of seizure is still not dealt with. Seized goods are only LIABLE TO FORFEITURE.

Procedure at Tribunal

The purpose of calling for the correspondence was to establish whether the objection to seizure had been dealt with properly by HMRC, prior to consideration of the request to restore.

As a preliminary matter the Tribunal pointed out to the HMRC representative Mr Andrew Scott that the Direction clearly indicated the Tribunal understood its own role which is to test the reasonableness of the reviewing officer’s refusal to restore the goods. It has no power to look at the seizure on its merits. However the Tribunal was troubled that the case law quoted by MrScott namely Gascoyne v CCE (2004) EWCA Civ 1162, CCE v Smith 2005 unreported and Johnstone v CCE (2005) EWHC 115 (Admin), all referred to above had all pointed out the necessity of the Tribunal addressing whether the Appellant had objected to the seizure on “own use” grounds and if not why not and whether condemnation proceedings had proceeded and produced a result.

The Tribunal noted that in this appeal the Appellant had objected to the seizure, in a letter from her then solicitors MessrsLavery Smith on 10 April 2006 in terms of the provisions of Schedule3 para 3 CEMA 1979.

However HMRC had not proceeded as they are statutorily required to do, as provided in Schedule 3 para 6 which states “where notice of claim in respect of any thing is duly given in accordance with paragraph 3 … above the Commissioners shall take proceedings for the condemnation of that thing by the court and if the court finds that the thing was at the time liable to forfeiture the court shall condemn it as forfeited”.

In our search for the grounds on which properly to direct ourselves the Tribunal did look at what had happened to that request and found as follows:-

1. Mr Sked in response to Lavery Smith’s letter of 10 April 2006 had not proceeded with condemnation proceedings. The Appellants cannot initiate these proceedings. They must, by statute, be initiated by HMRC on request. That did not happen.
2. Mr Sked had instead, in a different guise from his later reviewing role on the restoration request under CEMA S152(b), purported to review the seizure decision in his letter of 11 May 2006 to the Appellant’s then solicitors. He said “further to my letter of 15 April 2006 I have now completed my review of your appeal against seizure of your client’s goods on 21March 2006. I have upheld the seizure of these goods for the following reasons:- …………”
3. He was not empowered by statute to review the seizure objection on “own use” grounds. That is for another authority altogether, namely the Court as provided in Schedule 3 para 6 CEMA 1979. Only the Court can forfeit.
4. Later in the letter he purports to suggest that if the Appellant wishes to continue to proceed with “her appeal” against the seizure of her goods this will involve civil proceedings in the Sheriff Court which will decide whether they consider the goods were correctly seized. He further states “I must also inform you that should the Court find the things were legally seized, Customs normally ask for costs to be awarded in their favour”. The Tribunal considered this could be interpreted as off-putting and intimidatory. It is not within his power to review the seizure or to ask for confirmation or to suggest that either Appellant should be asked if she wished to continue with “her appeal”. He failed to fulfil his statutory duty to proceed with condemnation proceedings to establish if the seizure was legal and the goods forfeit. The Appellant has insisted throughout these goods were hers for own use and that she had not exceeded the guidelines. She has been denied her statutory right.

Having put these points to Mr Scott the Tribunal suggested an adjournment for Mr Scott to seek further information if available, or further instruction. The Tribunal was not prepared to go on to hear the Appellants restoration appeals which was suggested though not moved by Mr Scott, since it was clear that HMRCs behaviour had not been at all reasonable. They purported to review the seizure, and went on later to carry out a non-restoration decision and later still through what could only be described as the motions of a review of that decision since it was also conducted by Mr Sked whose views were already known.

Even a referral back for reconsideration by this Tribunal at this stage under S16(4) Finance Act 1979 could allow HMRC to instigate condemnation proceedings, as if what had intervened had never happened.

The Appellants were given an explanation of the difficulty faced by this Tribunal in attempting to proceed.

After the Tribunal’s adjournment Mr Scott asked for a further adjournment to allow HMRC to initiate proceedings for condemnation as they ought to have done.

It was suggested by the Tribunal that since the motion is the Commissioners, the procedure under Schedule 3 para 6 is mandatory, and remitting is appropriate. The Appellants were asked for their comments and appeared to have understood the difficulty and requested the Chairman to identify the Sheriff Court at which they would require to attend if their goods were not to be restored to them since the cigarettes and hand rolling tobacco, though seized, were what they now understood to be still liable to forfeiture, therefore were still theirs. The Tribunal was advised that the Court having jurisdiction for Glasgow Airport was Paisley Sheriff Court.

Decision

To adjourn this Tribunal to a date to be fixed. To request the Commissioners if so minded to proceed with condemnation and if so decided to remit the whole papers in this case up to and including this decision to Paisley Sheriff Court for the purpose of determining the outcome as provided by statute of the objection to the seizure of the Appellants’ excise duty paid goods imported at Glasgow Airport on 21.03.06.

The Tribunal is not making a direction so that we leave some discretion still with the Commissioners as to whether in this particular case the Appellants should be required to face further proceedings to which they were initially entitled in the first instance, but have so far been denied.

No motion was made with regard to costs and this matter is therefore reserved.

MRS G PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE: 23 MARCH 2007

EDN/06/8016

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