Uzoaru (t/a Couzsons UK) v Revenue & Customs [2009] UKFTT 153 (TC)

FTT-Tax

Uzoaru (t/a Couzsons UK) v Revenue & Customs

[2009] UKFTT 153 (TC) · 2009-07-08

[1]

[2009] UKFTT 153 (TC)

TC00119 Appeal number LON/2008/7026 Excise Duty – Restoration – Deemed condemnation – Review – Whether reasonable and proportionate – Yes – Appeal dismissed FIRST-TIER TRIBUNAL TAX OLIVER UZOARU T/A COUZSONS UK Appellant - and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS (VAT) Respondents TRIBUNAL: DR K KHAN (Judge) MISS D M WILSON Sitting in public in London on 7 April 2009 Dr David Southern, Counsel, for the Appellant Kelly Musgrave, Counsel, for the Respondents © CROWN COPYRIGHT 2009 DECISION Introduction The disputed decision of the Respondents is contained in a letter, dated 23 January 2008, which notified the Appellant that after conducting a review the Commissioners would not restore 8218.8 litres of beer (5.086.8 litres of Guinness and 3132 litres of Star and Guilder beer which attract total excise duty of £7,420.43) and 368 cases of non-alcoholic drinks which were seized on 1 October 2007. Background facts

[2]On 7 September 2007, container MSKU4028779 arrived on the M/V Maersk Kolkata container ship at the Felixtowe docks from Nigeria via Spain. The container was placed on hold pending scanning. Following the scan decision was taken for a full examination of the goods on 17 September 2007. At the point of examination, there were found to be cockroaches and a spider in the container. The examination was halted and the container sent for fumigation.

[3]Following the fumigation, it was not deemed safe to examine until after 27 September 2007. On examination of the container on 30 September 2007, it was found there were a total of 368 cases of non-alcoholic drinks and 8218.8 litres of beers of various alcoholic strengths. The declaration to Customs was of 3960 litres of alcoholic drinks and 3960 litres of non-alcoholic drinks. There was therefore an underdeclaration of 4258.8 litres of alcoholic drinks which is more than a 100% of what was legitimately declared. The goods were seized under section 139(1) of the Customs and Excise Management Act 1979 ("CEMA") as the officers took the view that a large proportion of the goods were not declared.

[4]The Respondents were satisfied that the mis-declared excise goods (the beer) was held for a commercial purpose and therefore was chargeable with duty on importation. Since duty was not paid and the goods did not correspond to the customs declarations which was made, they were liable to forfeiture under section 49(1)(a) and (e) CEMA. The remaining goods (the non-alcoholic drinks) were seized under section 141(1)(b) CEMA because they were mixed/packed/found with goods liable to forfeiture. The relevant sequence of events which followed are outlined below.

[5]The Respondents sent Couzsons UK Ltd a notice of seizure dated 1 October 2007.

[6]On 26 October 2007, the Appellant sent a facsimile (dated 15 October 2007) appealing against the seizure of the goods and requesting restoration of the goods to the company.

[7]The Respondents acknowledged this request in a letter dated 7 November 2007.

[8]On 12 November 2007 an officer of the Respondents in the Post Seizure Unit, Plymouth, replied refusing restoration of the goods.

[9]In a letter dated 13 December 2007, the Respondents received a request to review the decision not to restore the goods. The letter enclosed documentation in support of the Appellant and an assertion that Couzsons UK no longer wish to challenge the legality of the seizure in condemnation proceedings.

[10]On 14 January 2008, the Respondents wrote explaining the review process and inviting the Appellant to provide any further information in support of the request for a review.

[11]On 4 February 2008 the Respondents wrote to the Appellant replying to a complaint he had made.

[12]On 23 January 2008 the Respondents wrote to confirm that after conducting a review they would confirm the original decision not to restore. (The review officer Raymond Benton, appeared as a witness for the Respondents at this hearing.)

[13]On 20 February 2008 the Appellant wrote to the Respondents regarding a complaint he was pursuing and made further submissions in support of an appeal against the review decision. On 3 April 2008 the Appellant provided his list of documents. On 7 April 2008 the Tribunal directed that the Respondents have an extension of time to 19 May 2008 in order to serve their Statement of Case and list of documents pursuant to their application of 26 March 2008. The law

[14]The relevant legal provisions are as follows: 1. The seizure was made under CEMA section 139(1), on the basis that the goods in question were liable to forfeiture under section 49(1)(a)(e). 2. The power to restore seized goods is conferred by section 152(b) CEMA. 3. The right to require a review of a decision not to restore seized goods is conferred by Finance Act 1994, section 14(1)(d), and Schedule 5, para 2(1)(r). 4. The right to appeal against a review decision is conferred by FA 1994, section 16(1)(a). 5. Apart from restoration proceedings there are condemnation proceedings and the law relating to seizure and condemnation is contained in CEMA, Schedule 3.

[15]Both procedures arise from the same facts but are assigned to different court. Condemnation proceedings are assigned to the Magistrates' Court and the High Court. The issues relate to the legality of the seizure and forfeiture. Restoration proceedings are assigned to the First-Tier Tribunal (Tax Chamber). The Tribunal is concerned with the reasonableness of the Revenue's decision not to restore.

[16]Briefly the law under CEMA ss 139, 145 and Schedule 3 are as follows:(a) When goods are seized the Revenue must issue a notice of seizure (Schedule 3, para 1).

(b) The owner of the goods can issue his notice of claim within one month of the notice of seizure claiming that the seized goods were not liable to forfeiture (Schedule 3, para 3, 4). Where such notice of claim is given within the time limit, the Revenue must start condemnation proceedings in the Magistrates Court (within six months) or in the High Court (without time limit) (Section 145, Schedule 3 para 6, 8). Such proceedings are civil proceedings (para 8).

(d) If the seizure is found to be lawful, the Court issues a certificate of condemnation which allows forfeit to the Crown (para 14).

(e) There is a right of appeal (para 11).

(f) If no notice of claim is given within one month of the date of the notice of seizure, there is a deemed condemnation (para 5).

(g) If the seizure is found to be unlawful the Revenue must return the goods or pay compensation (para 17).

[17]The main cases referred to were:(a) Wilberforce v C&E Commissioners MAN/03/8036

(b) Gora v C&E Commissioners (2003) ECWA Civ 525

[2005] 2 WLR 222

(d) Lindsay v C&E Commissioners

[2002] STC 588

The Appellant's submissions

[18]The Appellant identified the following issues: 1. Was the letter of 15 October 2007 a notice of claim or a request for restoration? 2. Is retrospective deemed condemnation possible as a matter of law? 3. Can restoration proceedings be commenced(a) in absence of condemnation or

(b) if the goods had been destroyed before 23 January 2008? 4. In all the circumstances was a decision not restore reasonable?

[19]With regard to the first issue the Appellant says that the letter of 15 October 2007 can only be interpreted as a notice of claim within CEMA Schedule 3, paragraph 3, 4. Since the letter constituted a notice of claim and disputes the seizure, the Commissioners are obliged to start condemnation proceedings. If no notice of claim is given, then there is a deemed condemnation. Given that by 1 November (within one month of the seizure) there was a valid letter of claim in place there was therefore no scope for a deemed condemnation.

[20]The Appellant says that condemnation proceedings gives the Crown legal title to the goods and can dispose of them. However if the goods are not condemned, the Commissioners' title remains only possessory. Therefore the goods cannot be destroyed unless perishable. During the month following seizure, and given that a valid notice disputing the seizure was given, the goods should have been stored in a warehouse pending the outcome of the condemnation proceedings, as required by law (CEMA section 139(5)).

[21]Regarding the second issue, the Appellant says that there was agreement by the Appellant and the Commissioners to treat the notice of claim as withdrawn. However, the legal effect of such a decision is not to effect a deemed condemnation under Schedule 3, paragraph 5. The Revenue assumed erroneously that this was the case but a deemed retrospective condemnation is legally impossible.

[22]Regarding issue three, the Appellant says that the legislation draws a distinction between returning possession of the goods to the owner ("deliver up") and transferring both possession and legal title law to the owner ("restore"). However, s.152(b) CEMA appears to cover both restoration of ownership and restoration of possession. Where there has been no condemnation, the Tribunal has wider powers to find facts and review the decision than where condemnation precedes restoration proceedings.

[23]They assert that restoration presupposes that the goods are still held by the Commissioners. It is therefore difficult to see how the Commissioners could decide on 12 December 2007 and 23 January 2008 not to restore the goods when in fact they are had already been destroyed.

[24]With regard to issue four, the Appellant says that a decision not to restore would be unreasonable for the following reasons: 1. The review letter proceeds on the basis that there had been a significant misdeclaration of the quantities of alcohol and non-alcoholic drinks imported. This has never been established. An innocent explanation is that the Revenue Officer mistook the non-alcoholic drinks for alcoholic drinks. 2. The letter wrongly assumes that there had been a deemed condemnation under Schedule 3, para 5. This is an error of law on the face of the record. 3. The importation was made by Couzsons Ltd, which had no title to the goods. 4. The goods were destroyed by the Revenue prior to any decision in relation to condemnation or restoration proceedings, so prejudging the outcome of such proceedings, and making it impossible for such proceedings to be conducted. 5. The confusion about condemnation/restoration proceedings has arisen because the Commissioners appeared to have encouraged the Appellant to follow a particular course. 6. The Commissioners cannot combine the exercise of their public duties with advice to the owner as to what legal remedies follow. 7. There is no evidence that the Appellant's conduct was blameworthy. He had made numerous previous importation without breach of regulations. 8. To safeguard the Appellant's rights, the law should be interpreted to require the public authority to either establish the legality of their actions or offer compensation.

[25]The Appellant submits that if there was a deemed condemnation, reasons 3-8 above remain valid.

[26]The Appellant asserts that the Revenue have erred in law and exercised their power in an unreasonable manner. The decision was one which "the Commissioners could not reasonably have arrived at" within the meaning of FA 1994, 16(4). The question, whether there had been a notice of claim was fudged. If the goods had been destroyed, the restoration procedure was a charade. The Commissioners have produced no evidence to justify the decision to seize.

[27]The Appellant seeks the following remedies: That the Tribunal makes a standover direction to enable the Revenue to issue condemnation proceeding. Since the Revenue had not commenced proceedings in the Magistrates Court within six months of the seizure, they are now out of time for bringing condemnation proceedings but there is no time limit for bringing condemnation proceedings in the High Court. Alternatively, the Tribunal may make a direction under FA 1994, section 16(4)(b) requiring the Commissioners to conduct a further review of the original decision or pursuant to 16(4)(c) declare the decision to have been unreasonable.

[28]The Respondents' arguments are as follows: 1. The goods were lawfully seized and liable to forfeiture under section 49(1)(a) and (e) of CEMA. 2. The Respondents applied their policy that seized excise goods should not normally be restored. 3. It was reasonable for the Respondents to conclude that they had not been provided with details of exceptional circumstances which would result in a restoration of the goods to the Appellant. Further the financial difficulties suffered by the Appellant arose before the seizure of the goods and therefore was not an exceptional circumstance. 4. The Appellant was importing goods liable to UK excise duty and VAT. It was his responsibility to comply with all UK import regulations. It is clear that the container contained excise goods that had not been declared under appropriate documentation. This mis-declaration is a clear breach of the regulations in force. The Appellant was a regular importer of goods into the UK and should be well aware of the legal requirements of Customs entries. There is no evidence to suggest he made reasonable checks of the consignor to ensure that they were complying with the requirements for disclosure. He also had a personal responsibility to check the goods. There was a significant misdeclaration of the quantities of alcoholic and non-alcoholic drinks imported. 5. The Respondents submit that the goods should not be restored and this decision was reasonable on the evidence. Further, at the time that the review decision was made the Appellant company was not a legitimate trading company and did not hold title to the goods. The goods could not be restored to the company for the following reasons:(1) records available to the Respondents showed that Couzsons UK Ltd was dissolved by the Registrar of Companies on 9 January 2007;

(2) that Couzsons UK was not registered for VAT;

(3) 55 Grounds Road, London (the delivery address) was not a commercial premises but a residential address and that Oliver Uzoaru was not recorded as living there;

(4) Couzsons UK Ltd was related to another dissolved company – Levacham Products (UK) Ltd, which was the name the supplier of the imported goods was using. 6. The Respondents contended that non-restoration of the goods was reasonable and proportionate ( Lindsay v C&E Commissioners (2002)). The inconvenience and expense caused to the Appellant was not exceptional hardship over and above what one should expect in the circumstances. The Appellant had not demonstrated any exceptional hardship suffered by non-restoration. 7. Lastly, the Appellant in his letter of 13 December 2007 made a decision after being fully informed and advised on his position not to pursue condemnation proceedings. He said in the letter:

"I have consulted legal opinions on this matter and found that condemnation trial could take onwards of six months or more; therefore such long drawn out trial cannot serve us any purpose as we cannot afford the cost and time of the trial"

. The 26 October 2007 facsimile (dated 15 October 2007) constituted a withdrawal of his appeal against seizure.

[29]Let us start by looking at the jurisdiction of the Tribunal. The central issue for the Tribunal is the reasonableness of the Commissioners' decision not to restore the excise goods or to offer restoration on terms. The Tribunal has no jurisdiction to determine the legality of the seizure and forfeiture. This is established from the case of Gora v C&E Commissioners

[2003] 3 WLR 160

(at para 55-58).

[30]In the event that the Tribunal finds that the Commissioners' decision is unreasonable it cannot order restoration of the goods but can order a review of the decision or declare that a decision is unreasonable. The Tribunal can decide on the primary facts and look at the facts upon which the Commissioners based their decision not to restore and may make findings on fact on blameworthiness, personal use, social distribution (to friends and family) and proportionality of the action taken by the Commissioners. The Tribunal should decide in the light of those facts whether the decision of the Commissioners not to restore is reasonable.

[31]Let us look firstly at the arguments presented by Mr Southern for the Appellant.

[32]He says that the Appellant's letter of 15 October (received by the Commissioners on 26 October 2007 as a facsimile) is accepted by both parties as an appeal against seizure and a request for restoration. The letter itself states: "This representation is to solicit the review of the seizure decision and of adequate compensation in the name of justice and of fair play".

[33]The Commissioners acknowledged that this would give rise to proceedings being issued in the Magistrates Court as stated in their letter of 27 October 2007:

"You have decided to challenge the legality of the seizure … if you wish to continue with your appeal against the legality of the decision, no further action is required by you …"

. If within one month of the seizure, the owner gives notice that the seizure is disputed, as in this case, the Commissioners are obliged to start condemnation proceedings. Schedule 3 paragraph 6 states: "Where notice of claim in respect of anything is duly given in accordance with paragraph 3 and 4 above, the Commissioners shall take proceedings for the condemnation of that thing by the Court".

[34]If no notice of claim is given, then there is a deemed condemnation under Schedule 3 paragraph 5 which state: "If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of any thing no such notice has been given to the Commissioners … the thing in question shall be deemed to have been duly condemned as forfeited".

[35]Therefore on 1 November a valid notice of claim was in place.

[36]In a letter dated 13 December 2007, the Appellant stated that they no longer wish to challenge the legality of seizure in condemnation proceedings. The Appellant and the Commissioners agreed to treat the notice of claim as withdrawn as a result of this letter.

[37]Mr Southern raises a question as to the legal effect of such a decision and states that this cannot be a deemed condemnation under Schedule 3 paragraph 5. The legislation does not allow for a deemed retrospective condemnation. The review letter is written on the basis that the goods had been condemned and this amount to an error of law which vitiates the whole process. Further, since there was no deemed condemnation, the owner would retain legal title to the goods since the Commissioners' title would only be possessory and they cannot destroy the goods (unless perishable). The goods should therefore be returned or appropriate compensation paid.

[38]Let us look at this submission. The first point concerns the deeming effect of CEMA and whether a deemed condemnation can only take effect within the time limit for requesting condemnation proceedings ie within one month of the seizure. The short answer to this is no. While the relevant provisions of Schedule 3 do not deal with the withdrawal of a notice of claim or state any time limits for so doing, such a notice can be withdrawn at any time before the proceedings are commenced. The legislation has to be read in this way and this must have been intended when the legislation was drafted. If we say that a notice cannot be withdrawn and in the event that a taxpayer no longer wishes to pursue a challenge to the seizure, then the Commissioners would have to start proceedings and then procure their termination. This will not be sensible. It is more expedient to allow the withdrawal of the notice if both parties agree. This would save costs and simplify the procedure and there appears to be no legal principle which should prevent such an approach. The rules relating to statutory interpretation requires an interpretation which is just and sensible land which prevents an absurd result. It cannot be said that the legislation implicitly prohibits or prevents a withdrawal of notice but rather the withdrawal is simply not prescribed by the legislation. However if we say that the notice cannot be withdrawn before proceedings have started, then that would produce an absurd result

[39]It must be remembered that the Notice 12A is a standard form document which would have given the Appellant all the relevant information relating to the rights of the Commissioners and the individual where there has been a seizure. Further, the Appellant had taken legal advice before writing to the Commissioners stating that they wished to withdraw the notice of claim. The parties would then agreed the withdrawal. The decision to withdraw would have been made from an informed position.

[40]In the circumstances therefore, the Tribunal believes that there was a deemed forfeiture of the goods and the point raised by the Appellant that the review letter and the review was wrong in law is not a view with which the Tribunal agrees.

[41]The second issue is whether the decision of the review officer is proportionate and reasonable.

[42]The Tribunal proceeded on the basis that they are considering the non restoration of a consignment of beer and soft drinks which was seized on 30 September 2007 and which was the subject of a decision not to restore by the Commissioners on 23 January 2008.

[43]The Tribunal formed the view that Mr Raymond Benton, Customs Review Officer, was a reliable and honest witness who had considerable experience of these cases. Mr Oliver Uzoaru was an honest businessman making a living for himself and his family. Given his financial difficulties and the complexity of the restoration and condemnation proceeding he sought legal advice and pursued the advice given.

[44]It was found that the Customs declaration form referred to 3,960 litres of non-alcoholic drinks and 3,960 of alcoholic drinks. HMRC Officers discovered 2,904.5 litres of non alcoholic drink and 8,218.8 litres of alcoholic drink. When compared with the Customs declaration, it showed an underdeclaration of alcoholic drinks by some 4,258.8 litres and an overdeclaration of non alcoholic drinks by 1,055.5 litres. In monetary terms, excise duty was paid by the Appellant through their agents for £3,578.31. The excise duty payable on the total amount of alcoholic drinks should have been £7,420.43.

[45]There is no evidence that the Appellant's conduct was blameworthy. However, he has been in the business of importing goods liable to UK excise duty and VAT for some considerable period. It was his responsibility to comply with all UK import regulations. It is accepted that there was a misdeclaration which is a breach of the regulations in force. There should have been a proper checking of the consignment to ensure that there was compliance with the appropriate regulations. If the misdeclaration was the fault of the agents then an action would lie against the agents for negligence for his loss.

[46]The Tribunal finds that the goods were lawfully seized and liable to forfeiture under section 49(1)(a) and (e) of CEMA. The Tribunal is not making a determination of the legality of seizure or forfeiture.

[47]It is the policy of the Respondents that goods are not restored in these cases. However, each case is examined on its merits to determine whether or not restoration may be exceptionally offered. In making a decision the hardship of the decision on the Appellant is considered. It is a subjective matter. It is apparent that the Appellant's financial difficulties arose sometime before September 2007. This is evident from a summons for non/late payment of Council tax which was issued in August 2007. The Appellant's information on his financial position was considered but it was not considered an exceptional hardship by the Commissioners after considering the evidence on the Appellant's present position and financial history.

[48]In looking at the issue of proportionality, each case must be considered on its own facts and a fair balance must be struck between the rights of the Appellant and the public interest and consequent loss of revenues. If goods are incorrectly declared then a misdeclaration is a threat to the Revenue and it is not disproportionate in these circumstances not to restore the goods given the price of the goods (£10,000 approx) and the duty which was not paid (£4,000).

[49]In looking at the manner of the review undertaken by the Review Officer, it is correct to say that he followed the proper procedure and took adequate and accurate notes as evidence. The Appellant clearly withdrew his notice of claim after seeking advice from lawyers. The documentation drew a distinction between alcoholic and non alcoholic beverages and we cannot accept the Appellant's argument that the Revenue Officer mistook non alcoholic drinks for alcoholic drinks. We also find no evidence that the Commissioners encouraged the Appellant to follow a particular procedural course with regard to the condemnation/restoration proceedings. Furthermore, the Appellant company Couzsons UK Ltd which is registered at the address 22A Callis Road, Walthamstow, London E17 8EL was dissolved by the Registrar of Companies on 9 January 2007 and is not registered for VAT. The address on the sales invoice for the same company is 55 Browns Road, London which is not a commercial premises but a residential address not that of Mr Uzoaru. This raises questions as to whether Couzsons UK Ltd is a legitimate trading business.

[50]We have therefore decided that for the reasons set out above the review decision contained in a letter dated 23 January 2008 was not unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. Further, we can find no grounds for upholding the Appellant's argument that there was no deemed condemnation within Schedule 3 paragraph 5 and legal title to the goods did belong to the Crown and the destruction of the goods and the review undertaken by the Commissioners was with lawful authority.

[51]The appeal is therefore dismissed. DR K KHAN TRIBUNAL JUDGE RELEASE DATE: 8 July 2009