Amber Services Europe Ltd & Anor v The Director of Border Revenue [2015] EWHC 3665 (Admin)

“THE AGREED FACTS 15. It was not in dispute that: (a) Amber Services Europe Limited were the owners of 5740.80 kilograms of unprocessed tobacco leaf; (b) On the 18th November 2013 Amber Services caused the tobacco to be imported into the United Kingdom. The haulier was F.H.U. Makar and the vehicle LLU5P29. The delivery documentation described the goods as “96 karton Hand Strips Burley”. (c) The unprocessed tobacco leaf was not liable to duty at the point of importation into the UK as it was not at that time a ‘tobacco product’ as defined by the Tobacco Product Duty Act 1979. If the unprocessed leaf was later processed into a tobacco product it would become liable for duty; (d) The vehicle was stopped by Border Force and enquiries made. Border Force is part of the Home Office and carries out immigration and customs controls for people and goods entering the UK. Border Force exercises general functions concurrently with Her Majesty’s Commissioners for Customs and Excise in accordance with the Borders, Citizenship and Immigration Act 2009; (e) As a result of those enquiries a decision was made to seize the vehicle and tobacco; (f) The tobacco and vehicle were seized under section 139 of the Act; (g) The reason for the seizure of the tobacco was that Border Force believed it was liable to forfeiture under section 170B of the Act on the grounds that had the vehicle been allowed to proceed the unprocessed tobacco would have been used in the production of illicit tobacco products upon which duty would have been evaded; (h) The vehicle was seized as liable for forfeiture under section 141(1)(a) of the Act in that it was used in the carriage, handling, deposit or concealment of a thing liable to forfeiture; (i) The hauliers had their vehicle returned after payment of a penalty and did not pursue a claim under schedule 3 of the Act; (j) On the 4th December 2013 in accordance with paragraph 3 of Schedule 3 of Act, Amber Services, gave notice that the tobacco was not liable to forfeiture; (k) On the 6th May 2014, in accordance with paragraph 6 of Schedule 3 of the Act, the Director of Border Revenue (Secretary of State for the Home Department) started proceedings in the magistrates’ court by way of complaint for condemnation and forfeiture of the vehicle and tobacco; (l) As at the date of the hearing no one had been charged with or convicted of an offence under section 170B of the Act in relation to the seized goods. MY FINDINGS OF FACT 16. At the hearing on 12th May 2015 I found the following facts which I set out only to the extent that they are necessary for the specific purpose of the appeal. 17. I note that Amber Services did not give evidence during the condemnation proceedings of present any positive case at trial other than to advance legal arguments. (a) Amber Services had recently imported another load of unprocessed tobacco into the UK. That load had not been seized; (b) In small quantities raw/unprocessed tobacco can be easily processed into “other smoking tobacco” or “hand rolling tobacco” (as defined in the Tobacco Products (Descriptions of Products) Order 2003) using domestic equipment. Dried uncut tobacco leaves can be quickly hydrated by simply spraying with water or coming into contract with steam, and cut with equipment such as a knife or paper shredder. Once tobacco has been processed so that it in a smokeable state it becomes liable to excise duty at the appropriate rate; (c) Anyone using raw/unprocessed tobacco for the purpose of making a tobacco product is required to register their premises as a factory. The registration must take place before any duty can be paid. The process is tightly controlled and regulated to prevent the evasion of duty. HMRC public notice 476 sets out the strict requirements for registration. These requirements make it highly unlikely that a domestic premises would satisfy the criteria for registration; (d) As at the 23rd July 2014 (date of the statement of the witness Neil Pederson a HMRC Senior Tobacco Excise Policy Adviser) there were less than 25 registered manufacturing/importing premises in the UK and all premises registered were in respect of Limited Companies. I was satisfied that at the time of seizure on the 18th November 2013 the position had been no different; (e) Whilst there may be other uses of tobacco leaf in products such as pesticides, wood staining and animal bedding there was no evidence that that was the intended use for the goods imported by Amber Services; (f) Amber Services was not registered in respect of a manufacturing/importing premises for tobacco products; (g) Amber Services had sold a significant quantity of the earlier load of unprocessed tobacco to members of the public through Internet sales in weights of approximately 60 Kg per box at a price of £5.13 per kilogram. 46 “Cash sales” receipts were produced in evidence issued by Amber Services for the period from the 7th November 2013 until the 14th November 2013. (h) These sales receipts did not include excise duty and contained a disclaimer ‘The product within this packaging, in the original form which it is sold, is not a dutiable product. Once the leaves within this packaging are transformed into a smokeable state, duty is liable to be paid to Her Majesties Revenue and Customs using a TP7A form. If you intend to manufacture a smokeable product from the leaves within this packaging, you will be bound by legislation set by HMRC and should take advice from notice 476 before commencing production. Advice, if required should be sough from HMRC representatives or a reputable law firm.’ (i) Amber Services would have sold the seized load in a similar manner; (j) This was a scheme of importation and sale deliberately created by Amber Services to avoid and eventually evade the payment of excise duty. Amber Services imported the unprocessed tobacco, with the primary intention of selling the tobacco on to mainly individual purchasers who would then process the tobacco and smoke it; (k) Amber Services and its directors were aware of the legal requirements in relation to the payment of duty. They referred to them on each sales receipt. I concluded that they also must have been aware of the requirements to register premises at which tobacco was processed and the difficulties of doing so for domestic purchasers; (l) Amber Services and its directors knew that its purchasers would not register their premises and pay the excise duty but would process the tobacco into a dutiable product and evade the duty; (m) No duty had been paid by the purchasers of unprocessed tobacco from Amber Services as no one had registered their premises by July 2014 in respect of the purchases they had made. I am satisfied that these purchasers had no intention of paying the duty at the time of purchase and then processed the tobacco into a smokeable form and the duty was evaded; (n) I concluded that Amber Services and its directors operated their business and sales on the basis that duty would not be paid on the tobacco. They found a ready market for their tobacco product precisely because the price was extremely competitive as it did not include duty and could thus undercut legitimate tobacco sales and still provide a significant profit for the company. There had never been any real prospect that their purchasers would register their premises and pay the duty thus ensuring the market and sales continued. In the absence of that duty free competitive edge the business would have evaporated; (o) Once dried and shredded into hand rolling tobacco the duty payable on the seized load would have been in excess of £991,000 and the VAT payable would have been £244,000”