“Since it remains necessary for the proper functioning of the internal market that the concept, and conditions for chargeability, of excise duty be the same in all Member States, it is necessary to make clear at Community level when excise goods are released for consumption and who the person liable to pay the excise duty is.”
“(1) Excise duty shall become chargeable at the time, and in the Member State, of release for consumption (2) For the purposes of this Directive, ‘release for consumption’ shall mean any of the following: (a) the departure of excise goods, including irregular departure, from a duty suspension arrangement; (b) the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of Community law and national legislation; (c) the production of excise goods, including irregular production, outside a duty suspension arrangement; (d) the importation of excise goods, including irregular importation, unless the excise goods are placed, immediately upon importation, under a duty suspension arrangement.”
“(1) The person liable to pay the excise duty that has become chargeable shall be: … (b) in relation to the holding of excise goods as referred to in Article 7(2)(b), the person holding the excise goods and any other person involved in the holding of the excise goods …. (2) Where several persons are liable for payment of one excise duty debt, they shall be jointly and severally liable for such debt.”
“(1) … where excise goods which have already been released for consumption in one Member State are held for commercial purposes in another Member State in order to be delivered or used there, they shall be subject to excise duty and excise duty shall become chargeable in that other Member State. For the purposes of this Article, ‘holding for commercial purposes’ shall mean the holding of excise goods by a person other than a private individual or by a private individual for reasons other than his own use and transported by him in accordance with Article 32. (2) The chargeability conditions and rate of excise duty to be applied shall be those in force on the date on which duty becomes chargeable in that other Member State. (3) The person liable to pay the excise duty which has become chargeable shall be, depending on the cases referred to in paragraph 1, the person making the delivery or holding the goods intended for delivery, or to whom the goods are delivered in the other Member State.”
“1. Where an irregularity has occurred during a movement of excise goods under Article 33(1) … in a Member State other than the Member State in which they were released for consumption, they shall be subject to excise duty and excise duty shall be chargeable in the Member State where the irregularity occurred. 2. Where an irregularity has been detected during a movement of excise goods under Article 33(1) … in a Member State other than the Member State in which they were released for consumption, and it is not possible to determine where the irregularity occurred, the irregularity shall be deemed to have occurred and the excise duty shall be chargeable in the Member State where the irregularity was detected. However, if before the expiry of a period of three years from the date on which the excise goods were acquired, it is ascertained in which Member State the irregularity actually occurred, the provisions of paragraph 1 shall apply. 3. The excise duty shall be due from … any person who participated in the irregularity.”
“(1) Subject to the following provisions of this section, the Commissioners may by regulations make provision, in relation to any duties of excise on goods, for fixing the time when the requirement to pay any duty with which goods become chargeable is to take effect (“the excise duty point”). … (4) Where regulations under this section prescribe an excise duty point for any goods, such regulations may also make provision (a) specifying the person or persons on whom the liability to pay duty on the goods is to fall at the excise duty point (being the person or persons having the prescribed connection with the goods at that point or at such other time, falling no earlier than when the goods become chargeable with the duty, as may be prescribed); and (b) where more than one person is to be liable to pay the duty, specifying whether the liability is to be both joint and several.”
“A penalty is payable by a person (P) where (a) after the excise duty point for any goods which are chargeable with the duty of excise, P acquires possession of the goods or is concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods, and (b) at the time when P acquires possession of the goods or is so concerned, a payment of duty on the goods is outstanding and has not been deferred.”
“ … it should be noted that, whilst Article 6 of the Directive does not specify the person liable to pay the duty chargeable, it follows from the scheme of the Directive … that the national authorities must in any event ensure that the tax debt is in fact collected.”
“the aim of Directive 92/12 is to lay down a number of rules on the holding, movement and monitoring of products subject to excise duty, in particular so as to ensure that chargeability of excise duties is identical in all the Member States. That harmonisation makes it possible, in principle, to avoid double taxation in relations between Member States…”
“25. In particular, in expressly providing that the person ‘receiving the products’ at issue may be liable to excise duty on products subject to that duty released for consumption in a Member State and held for commercial purposes in another Member State, Article 7(3) of Directive 92/12 must be interpreted as meaning that any holder of the products at issue is liable to excise duty. 26. A more restrictive interpretation, to the effect that only the first holder of the products at issue is liable to excise duty, would defeat the purpose of Directive 92/12. Under that directive, the movement of products from the territory of one Member State to that of another may not give rise to systematic checks by national authorities, which are liable to impede the free movement of goods in the internal market of the European Union. Consequently, such an interpretation would render more uncertain the collection of excise duty due upon the crossing of an EU border.”
“The Directive was adopted as part of the creation of a single market without fiscal frontiers. The main purpose of the Directive was to have a single set of rules for determining the moment at which duty became payable, so as to avoid a situation in which duty could be levied on the same goods in different countries.”
“29. ‘Holding’ is not defined in the Finance Act or in the Regulations, there appears to be no authority on its meaning. It is plain that it denotes some concept of possession of the goods. Possession is incapable of precise definition; its meaning varies according to the nature of the issue in which the question of possession is raised …. But it can broadly be described as control, directly or through another, of the asset, with the intention of asserting such control against others, whether temporarily or permanently: see, for example, Goode on Commercial Law, Fourth Edition, p46. In the case of bailment, the bailee has actual, or physical, possession and the bailor constructive possession. In other words, if the bailee holds possession not for any interest of his own exclusively as bailee at will, legal possession will be shared by bailor and bailee. 30. In this case Heijboer had physical possession of the cigarettes at the excise duty point, but Heijboer was acting as no more than the agent of the primary carrier, Yeardley. Yeardley was, therefore, in law the bailee of the cigarettes at the excise duty point and, not apparently having any interest of its own in the goods, shared legal possession with the person having the right to exercise control over the goods …. If Yeardley had known, or perhaps even ought to have known, that it had physical possession of the cigarettes at the excise duty point, its possession might have been sufficient to constitute a ‘holding’ of the cigarettes at that point. However, Yeardley had no such knowledge, actual or constructive, and was entirely an innocent agent. That important fact then turns the focus on the person or persons who were exercising control over the cigarettes at the excise duty point …. 31. There is nothing, furthermore, in this interpretation and application of [the regulation] to the facts of this case that would be inimical to the purposes of the Finance Act. To seek to impose liability to pay duty on either Heijboer or Yeardley, who, as bailees, had actual possession of the cigarettes at the excise 36. duty point but who were no more than innocent agents, would raise serious questions of compatibility with the objectives of the legislation. Imposing liability on the appellants raises no such questions, because they were the persons who, at the excise duty point, were exercising de facto and legal control over the cigarettes. In short, responsibility for the goods carries responsibility for paying the duty.”
“ … both the language and purpose of Article 7 (3) [of the 1992 Directive] strongly support the conclusion that a person who has de facto and legal control of the goods at the excise duty point should be liable to pay the duty. That conclusion is all the more compelling where the person in actual physical possession does not know, and has no reason to know, the (hidden) nature of the goods being transported as part of a fraudulent enterprise to which he is not a party. To seek to impose liability on entirely innocent agents such as Heijboer or Yeardley, rather than upon the appellants, would no more promote the objectives of the Directive than those of the Regulations.”
“There is no need for the person to have any beneficial ownership in the goods in order to be a ‘holder’ …. A courier or person in physical possession who lacks both actual and constructive knowledge of the goods, or the duty which is payable upon them, cannot be the ‘holder’ within [the regulation] – Taylor and Wood.”
“ … in seeking to ensure the payment of excise duty while permitting movement of goods under duty suspension arrangements, it is neither unreasonable nor disproportionate to stipulate that, except in the case where goods are lost due to some force majeure event (in which case no liability attaches), a person involved in the movement of goods should be liable for the duty which is unpaid as a result of the goods being stolen in transit or otherwise removed from the duty suspension arrangements as a result of an irregularity. Such a measure is in my view necessary to achieve that purpose. The alternative of fault-based liability would be difficult to enforce and would, in all likelihood, result in the nonrecoverability of significant amount of duty. That, at any rate, appears to be the thinking behind the approach taken in the Directive and I can see no basis for saying that this is an unreasonable approach.”
“ … in our view Gross provides clear authority that once excise goods in respect of which duty has not been paid are circulating within the Member State of the destination then the authorities of that Member State have the ability to choose which of sequential holders of the goods to assess provided that there has not been a prior assessment. This is consistent with the underlying policy of the 2008 Directive … that it is the duty of the Member State concerned to ensure that duty is paid on goods that are found to have been released for consumption. The decision in the case is therefore consistent with the principle that it should be possible to assess a person found to be holding goods in respect of which duty has not been paid even though there may have been a prior release for consumption of those goods within the same Member State, so long as there has been no prior assessment of the outstanding duty.” 43. The Upper Tribunal returned to this interpretation of the underlying policy at paragraphs 148-9: “148. … we do not consider that assessing a person found to be holding goods in respect of which excise duty has not been ‘levied’, in circumstances where it necessarily follows that in principle a prior release for consumption has occurred, is inconsistent with the purpose of the 2008 Directive and its predecessor. 149. As a number of the ECJ cases we have referred to above demonstrate, it is clearly the intention of the EU legislature that Member States shall take all necessary steps to ensure that goods in respect of which excise duty should have been paid cannot circulate freely within the EU alongside goods where duty has been paid. That would be a clear distortion of the internal market. If B & M’s contentions were correct, then … HMRC would be powerless to prevent that happening if they were unable to detect where, when, how and by whose agency the prior event which B & M contends will necessarily have triggered an excise duty point has occurred. That cannot have been the intention behind the 2008 Directive and its predecessor ….” 44. This led the Upper Tribunal to conclude, at paragraph 155-6, that “ 155 … once any one of the four events mentioned in article 7 of the 2008 Directive has occurred then it is incumbent on the Member State in question to ensure that the duty is paid. Therefore, in circumstances where it is unable to assess any person who caused a prior release for consumption to occur, it is open to the Member State to assess, in accordance with its own procedures, any person who is found to be holding the goods within the meaning of article 7(2)(b) of the 2008 Directive. 156. We agree with HMRC that, if B & M’s contentions were correct, then, in particular in relation to imported goods, if HMRC were unable to establish how or when the goods concerned were imported, the products would have to go untaxed, even though the person holding them was unable to show duty had been paid. Such a result would be clearly contrary to the objective of the 2008 Directive to ensure that duties properly chargeable are collected.”
“ … the need to ensure that unpaid excise duty is collected when goods have been released for consumption requires HMRC, as the UT found in B & M, to make an assessment once it has established that an excise duty point has occurred, Clearly, HMRC cannot make an assessment until it has the necessary information on which to establish when, how, where and by whose acts the excise duty point occurred. Therefore, in the absence of any relevant information in relation to any prior release for consumption, HMRC must assess the person who it finds to be holding the goods in question, since that is the only excise duty point which HMRC is able to establish.”
“65. There is no question that the appellants had physical possession of the goods but that is neither necessary nor, by itself, enough to constitute ‘holding’ for the purposes of regulation 13. In order to be ‘holding the goods’, a person must be capable of exercising de jure and/or de facto control over the goods, whether temporarily or permanently, either directly or by acting through an agent. In this case, as the tribunals found, the drivers had control over the goods. That was, in our view, obviously correct. The appellants, as drivers, had custody of the goods and were responsible for them during their transportation. The fact that the drivers had obligations to others, who had engaged them to transport the goods, and those others had control over the drivers does not mean that the drivers did not also have de jure and de facto control, albeit subject to obligations owed to and directions by the others. 66. A person who has de jure and de facto control of goods but who lacks both actual and constructive knowledge of them and the fact that duty is payable on them, cannot be said to be ‘holding’ the goods for the purposes of regulation 13. In these cases, however, it was not disputed that the appellants knew the nature of the goods they were carrying and that they were subject to excise duty ….”
“(1) A person owning or having legal control of smuggled goods with the intention of asserting control against others, whether temporarily or permanently, is to be regarded as ‘holding’ those goods for the purpose of regulation 13 of the 2010 Regulations; (2) Depending on the circumstances, a person having physical possession of smuggled goods, and sharing legal possession of those goods with the person mentioned in (1) above may be regarded as holding them for the purposes of regulation 13; (3) An innocent agent of a person mentioned in (1) or (2) above having physical possession of smuggled goods is not to be regarded as holding those goods for the purposes of regulation 13, and (4) Actual or constructive knowledge of his physical possession of smuggled goods might be sufficient to constitute ‘holding’ for the purposes of regulation 13 and take such a person outside the status of ‘innocent agent’.”
“61. In our view, insofar as the question of knowledge is concerned, assuming it is relevant to the question of ‘holding’, the relevant knowledge is not only as to the physical nature of the goods [which] are being carried but also as to whether or not a liability to excise duty has arisen in respect of them … This is consistent with the limited reasoning on this point in Taylor and Wood. The only information that Mr Perfect had was to be found in the documentation he collected when he picked up the goods and on the face of it this documentation was consistent with the movement of goods subject to a valid duty-suspended arrangement. As we have found, he had no means of checking whether the ARC on the CMR had been used or not. 62. As far as the question of constructive knowledge is concerned, again assuming that it is relevant to the question of ‘holding’, as we have indicated above there was nothing on the face of the documents to put him on enquiry. It is also difficult to know what enquiries someone in his position could have made. He could not have access to the EMCS system …. 63. This leaves the question as to whether he should have been put on enquiry by virtue of what HMRC represented were the unusual circumstances in which he came to be engaged by ‘Des’. In the world in which Mr Perfect operated these informal arrangements were not to be regarded as unusual …. These sort of arrangements proliferate regardless as to whether they involve the smuggling of alcohol. Consequently in our view the circumstances should not in themselves without any stronger evidence have put Mr Perfect on enquiry as to whether he was going to be involved in the smuggling of alcohol. 64. We therefore conclude that Mr Perfect should be regarded as an innocent agent in the same way that the hauliers were so characterised in Taylor andWood. That being so, our analysis is equally applicable to the question as to whether Mr Perfect was ‘making delivery of the goods’ within the meaning of regulation 13(2)(a). As the Court of Appeal observed at [31] of Taylor and Wood, to impose liability on Mr Perfect in the circumstances that we have found would raise serious questions of compatibility with the objectives of the legislation.”
“51. The Court of Appeal has considered what those words mean on several occasions. The Court of Appeal recognises that the person can ‘hold’ the goods for the purposes of the regulations even though he or she has no beneficial interest in them, and even though he or she may not be in physical possession of them, so long as he or she is capable of exercising de jure and/or de facto control over them, whether temporary or permanently, either directly or through an agent. This is to construe the word ‘holding’ (and by necessary extension, the word ‘delivery’) broadly. However, the Court of Appeal has confirmed that the person who lacks actual or constructive knowledge will not ‘hold’ the goods for the purposes of the regulations. This is to recognise that the broad words are subject to an exception for those who are ‘innocent agents’. 52. Ms Simor [for HMRC] accepts that there is an exception, in line with the domestic authorities. That is, in one sense, to accept that the words of the 2008 Directive do not impose strict liability at all. 53. The appeal turns on what innocence means in this context. Ms Simor argues that, properly understood, the innocent agent exception only extends to those cases where the agent has no knowledge (actual or constructive) of the nature of the goods as excise goods; so, she says, if the agent knows the nature of the goods, and specifically that he or she is carrying goods of a kind which is subject to excise duty, then the agent ‘knows the risks’ and will be fixed with liability, if it turns out that the duty on those goods has gone unpaid. The logical consequence of Ms Simor’s argument is that a driver who knows that he or she is carrying excise goods can never be immune from liability for any excise duty which goes unpaid on those goods, albeit jointly and severally liable alongside others who may also be within the scope of the regulations…. 54. Mr Bedenham [for Mr Perfect] challenges that submission. He says that the concept of the innocent agent extends to anyone who lacks actual constructive knowledge of the criminal enterprise in relation to the goods (i.e. the attempt to evade tax on the goods), regardless of whether that person knows that the goods he or she is carrying are of a kind which is subject to excise duty in the first place.”
“ … such an interpretation is consistent with the scheme and purpose of the 2008 Directive. We accept, of course, that the 2008 Directive must be interpreted in a manner which complies with EU law principles, including the principles of fairness and proportionality. That is a point echoed bys.1(4) of the Finance (No.2) Act 1992 , which permits regulations which specify the person to be liable where the ‘prescribed connection’ is established, in relation to which this Tribunal is required to have regard to the scope of what the legislature contemplated as a ‘fair and reasonable justification’ for imposing the liability (see Taylor and Wood at paragraph 20). We do not accept that it is fair, proportionate or reasonable to impose liability for evading excise duty on HGV drivers who are found in possession of the goods at the point that the evasion is discovered, but who lack any involvement in or knowledge of the criminal enterprise; they are not aware that tax has been evaded on the goods they are carrying, and nor can it be said that they should have been aware. To impose liability on those drivers simply because they are in possession of the goods at the time the fraud is discovered, but without knowledge of what has occurred or is intended, is neither fair nor proportionate. The suggestion by Ms Simor that any unfairness or lack of proportionality in the application of the regime could be mitigated by HMRC, as the taxing authority, exercising discretion in individual cases, does not meet the point: the exercise of discretion in individual cases is not to be confused with the need for a system to be fair and proportionate in its application to all. In any event, HMRC do not intend to exercise discretion in Mr Perfect’s favour, so the fact that HMRC has discretion in individual cases does not avail him.”