[2009] UKFTT 248 (TC)

TC00197

Appeal number LON/2008/8119

EXCISE DUTY -  appellant brought in 6kg hand rolling tobacco - deemed forfeiture - whether arguments as to "own use" permissible before tribunal - no abuse of process – decision of HMRC in their review is reasonable  - case dismissed

FIRST-TIER TRIBUNAL

TAX 

	DR PETER ALLAN HOWSON	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Excise Duty)	Respondents

		            TRIBUNAL: 	Nicholas Aleksander (Tribunal Judge)
						P Davda

Sitting in public in London on 3 September 2009

The Appellant in person

R Jones of Counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	The Appellant, Dr Howson, appeals against the review by Mrs Deborah Hodge (an officer of HM Revenue and Customs) contained in a letter dated 12 June 2008, by which she confirmed an earlier decision dated 2 April 2008 refusing to return 6kg of hand rolling tobacco seized from him at Dover on 3 February 2008.  Dr Howson says that the goods were purchased for his own use, although some would have been given away as a gift to a close friend.  The Respondents ("HMRC") say that Dr Howson cannot now raise the issue whether the tobacco was for his own use as that would be an abuse of process in the light of the fact that that issue could have been litigated in the magistrates court.  Alternatively they say that Mrs Hodge's review is reasonable in all the circumstances and should be upheld.
2.	We heard evidence from Dr Howson, from his friend Ms E Lewis, Miss A Rogers (who is Ms Lewis's daughter), and from Mrs Hodge.  We also had a bundle of documents, which included copy pages from the notebook of the officer who interviewed Dr Howson at the time the tobacco was seized.
3.	Mr Jones submitted that a challenge to HMRC's view that the goods were not for "own use" was not a permissible ground of appeal in a case like this, essentially because that is an issue that can only be decided in condemnation proceedings.  In other words HMRC are prepared to succeed in this tribunal, indeed argue that they must succeed, even if that means that goods that should not have been seized are retained by them.
Background 
4.	Dr Howson is retired.  He used to be a lecturer in engineering at Brighton University.  He took early retirement in December 2007.  Prior to retiring, Dr Howson had an income from the University of approximately £38,000 per annum, plus investment income.  Since retiring, his income has significantly decreased.  Dr Howson estimated his pension to be approximately £8100 per annum before tax.  In addition he has investment income (but this has dropped with the recent reductions in interest rates).  Dr Howson lives on his yacht (which he owns outright) and which is moored in Brighton marina.  He pays a mooring charge of £6,100 per annum.  His net income (after tax and mooring expenses) is therefore very modest.
5.	Dr Howson went on a day trip to Belgium for his birthday on 3 February 2008.  His friend, Ms Lewis, was unable to accompany him. However he took Ms Lewis’s daughter, Miss Rogers as a treat – in order to mark Miss Rogers’ achievements at school.  The purpose of the trip was to buy tobacco (for Dr Howson) and chocolate (for Miss Rogers) – and to enjoy the journey.  Dr Howson purchased 6kg of hand rolling tobacco, and Miss Rogers purchased some chocolates.  On their return, they were stopped at Dover and were interviewed by a Customs officer.  Following the interview, the Customs officer was satisfied that the tobacco was held for a commercial purpose and seized it.  She also seized Dr Howson’s car on the basis that it was used for the carriage of goods liable to forfeiture – but the car was immediately restored on humanitarian grounds as it was used to transport Ms Lewis who is disabled.
6.	Dr Howson did not challenge the seizure of the tobacco in condemnation proceedings, and the tobacco was therefore deemed condemned under paragraph 5, Schedule 3, Customs and Excise Management Act 1979 (“CEMA”).  On 27 February 2008, Dr Howson wrote to HMRC requesting restoration of the tobacco on the basis that the tobacco was imported for his own use and for gifts, which request was refused by letter dated 2 April 2008.  On 30 April 2008, Dr Howson requested a review of that decision.  The review was conducted by Mrs Hodge and communicated to Dr Howson in her letter dated 12 June 2008, concluding that the tobacco should not be restored.  Dr Howson now appeals against that review to this tribunal.
Abuse of process 
7.	The relevant statutory provisions are complex. They relate to the payment of excise duty on the importation of goods; the liability of goods to forfeiture where duty is not paid; the rights of a Customs officer to seize goods liable to forfeiture; the process for goods to be condemned as forfeit by a magistrates' court or the High Court; the discretion which HMRC have to restore seized or forfeit goods; and the role of the tribunal and the extent of its powers in an appeal against a decision by HMRC not to restore goods.
8.	HMRC's case in this appeal is based on the principle of law that it is an abuse of process to raise in one tribunal or court a matter that has been (or could have been) raised in another tribunal or court which properly has the jurisdiction to decide that matter. They argue that Dr Howson is abusing the process of law and that therefore the tribunal must dismiss his appeal. This is so, they say, because Dr Howson's case before the tribunal is that the tobacco was held by him for personal use and for gifts (and not for commercial purposes) so that it was unlawfully seized by HMRC. If, as Dr Howson argues, the tobacco was unlawfully seized, then the decision of HMRC not to restore it is flawed and should be set aside or reviewed. However, in the submission of HMRC, the question as to the legality of the seizure of the tobacco is properly a question for determination exclusively by the magistrates court by means of condemnation proceedings. In these circumstances, HMRC argue, the courts have held in a series of recent decisions that it would be an abuse of the legal process for the tribunal to look into the question of the legality of the seizure when considering whether HMRC had acted reasonably in exercising their discretion by deciding not to restore the goods seized and condemned as forfeit.
9.	Mr Jones referred us to a number of well know cases which address the principles relating to the conflicting jurisdictions of the magistrates court in condemnation proceedings and of this tribunal. Most of those cases are concerned with the situation where there has been a deemed condemnation of the imported goods which have been seized (that is, where the importer has not challenged the legality of the seizure, and, under the relevant provisions, the goods are deemed to be condemned without the matter being taken before a magistrates' court). The Gascoyne case [2005] Ch 215 considered whether, in this situation, the importer had the right under domestic law or the European Convention on Human Rights to raise the issue of the legality of the seizure of the goods before the tribunal in restoration proceedings – the Gora case [2004] QB 93 had already decided that, under domestic law, if the importer let the condemnation proceedings go by default (so that the goods were condemned as forfeit) he was not entitled to raise before the tribunal the question of the legality of the seizure of the goods. The Court of Appeal held in Gascoyne that there could be circumstances where, having regard to the importer's rights under the Convention, it would be right for the tribunal to reopen the question of the legality of the seizure of the goods notwithstanding that there had been a deemed condemnation of the goods. However, the mere fact that the importer has failed to invoke the condemnation process (and thus the deemed condemnation has occurred) is in itself not sufficient grounds to permit the question of the legality of the seizure to be reopened by the tribunal (see the judgment of Buxton LJ at paragraphs 54 to 56).
10.	The decision in the Gascoyne case has been applied in the subsequent cases of Smith (17 November 2005, unreported) and Dawkin [2008] EWCH 1972. The Smith case was, like Gascoyne, a case where the importer had not challenged the legality of the seizure by making the necessary claim to the Commissioners, so that the goods (and the car in which they were packed) were deemed to be condemned. In such a case the approach which the tribunal must take, if the importer then wishes to raise before the tribunal in the restoration proceedings the question of whether the goods were lawfully seized, was described as follows, in the judgment of Lewison J (at paragraph 23):
 "Lord Justice Buxton's reference [in the Gascoyne case] to abuse of process or to considerations analogous to abuse of process are, in my view, references to the well-known principle that it may be an abuse of process to raise in one tribunal matters that could and should have been raised in another. So the relevant questions will always be, first, could the applicant have raised the question of lawfulness of forfeiture in other proceedings and, if the answer to that question is yes, why did he not do so? In the light of his reasons for not raising the matter in condemnation proceedings the Tribunal can then answer the question should he have done so and if they answer that question 'yes', then it will be, in most cases, an abuse of process for him to raise the question before the Tribunal."
11.	This approach was affirmed in the Dawkin case in the High Court. That case was not one of deemed condemnation since the importer began the process of challenging the legality of the seizure of the goods in the magistrates' court, but then, on taking legal advice, decided not to proceed with that challenge. It was held that it was an abuse of process for the importer to seek to raise the legality of the seizure when he appealed to the tribunal in restoration proceedings. The tribunal itself had considered that it was not an abuse of process for the importer to challenge the legality of the seizure in the restoration proceedings, giving a number of factors which it considered justified such an approach (including the fact that the importer was deterred from taking the matter to the magistrates' court by reason of the risks of a costs' order being made against him if he lost; the costs and inconvenience to the importer of attending the magistrates' court in the particular circumstances of the importer, who lived abroad; and the fact that the decision not to restore was taken on the assumption that the seizure was legal, without any regard to the importer's side of the story). In the High Court it was held that these factors were not such as "could take Mr Dawkin's case out of the usual run of cases where it is an abuse of process to raise the facts of seizure in the Tribunal."
12.	If we ask the first of what Lewison J described in Smith as the relevant questions for the tribunal, namely, could Dr Howson have raised the question of lawfulness of the seizure of the goods in other proceedings, then the answer has to be yes - the lawfulness of the seizure could have been challenged in condemnation proceedings before the magistrates court.
13.	This takes us to the second of the relevant questions as formulated by Lewison J: if Dr Howson could have raised the issue of the lawfulness of the seizure before the magistrates' court, why did he not do so? From the evidence we heard from Dr Howson, his reasons for not putting his case to the magistrates' court can be summarised as follows:
(1)	He considered that in order to put his case before the magistrates in a manner that had reasonable prospects of success, he would need to incur the expense of legal representation, and given his modest income, this was an expense he could not afford.  He considered that proceedings before the tribunal provided a more acceptable – perhaps user-friendly – forum than a magistrates' court for an unrepresented layman to make his case,
(2)	The condemnation proceedings would be heard before the Dover magistrates, and Dover was inconvenient, difficult and costly to reach from his home in Brighton, and
(3)	He was aware that if he failed in his case before the magistrates' court he would be ordered to pay HMRC’s costs (likely to be not less than £1500 according to HMRC’s Notice 12A) , whereas if he failed in his case before the tribunal, HMRC were likely to adhere to their normal policy not to ask for their costs – in this respect the tribunal was again a more acceptable forum, especially in a case where costs were likely to exceed the value of the goods seized.
14.	We now have to ask ourselves whether these reasons for not challenging the lawfulness of the seizure in the condemnation proceedings which he had begun justify Dr Howson’s decision not to put his case to the Dover magistrates. Taking in turn each of his reasons:
(1)	The magistrates' court has the jurisdiction to hear condemnation proceedings and is well used to hearing importers argue their own case without legal representation. There is no basis for any claim that Dr Howson would have had less of a fair or considerate hearing of his case before the magistrates' court than before this tribunal.
(2)	We do not consider that for Dr Howson to travel to Dover would put him to significantly greater inconvenience or expense that for him to travel to London (the venue at which this hearing took place).
(3)	There is a difference in the policy of HMRC with regard to costs in the magistrates' court and in the tribunal.  This issue was examined in the Dawkin case, mentioned above and to which we were specifically referred. In that case the costs factor was held not to be a matter which entitled the importer to withdraw from condemnation proceedings and instead argue the legality of the seizure of the goods before the tribunal. We do not think that David Richards J was laying down any comprehensive rule, and each case must be considered on its merits.  In this case the probable costs incurred by HMRC would far exceed the value of the goods – whereas in Dawkins the value of the goods was significantly more, and costs would not have been such an obvious deterrent.  In addition, Dawkins was a case where condemnation proceedings actually took place before the magistrates – although in the absence of the appellant.  There would therefore have been express findings of fact by the magistrates – which is not the case where there is a deemed condemnation. In this case there was a deemed condemnation without any hearing before the magistrates court.  Any finding of fact by this tribunal in this case could therefore not be in conflict with the determination of another tribunal relating to the same issues.
15.	Given the particular facts and circumstances of this case, we are of the view that it would not be an abuse for us to hear Dr Howson’s appeal against HMRC’s review.
HMRC Review
16.	Mrs Hodge undertook the review on behalf of HMRC, and her decision was communicated to Dr Howson in her letter dated 12 June 2008.  She decided not to restore the tobacco to Dr Howson on the grounds that the tobacco was purchased with a view to resale at a profit.
17.	Our jurisdiction in appeals of this nature is limited. Under section 16, Finance Act 1994 we cannot just allow the appeal.  We can only do one or more of the things mentioned in section 16(4), and then only if we are satisfied that the disputed decision is unreasonable.  The three things are: (a) to direct that the disputed decision ceases to have effect; (b) to require HMRC to conduct another review in accordance with any directions that we may give; and (c) to declare the decision to have been unreasonable.
18.	In reaching her decision, Mrs Hodge took into account the following principal factors:
(1)	When stopped at Dover, Dr Howson initially told the Customs officer that his last trip to the continent had been some time in the summer of 2007. This was a lie, as commercial records show (and Dr Howson subsequently admitted), that he had travelled to the continent in October 2007 and December 2007.
(2)	Dr Howson was a regular traveller to the continent, travelling in December 2006, March 2007, June 2007, July 2007 (motorbike), October 2007, December 2007 and April 2008 (motorbike).  At the interview at Dover, Dr Howson said that the last time he purchased tobacco on the continent was February 2007.  It appeared improbable to Mrs Hodge that  a medium to heavy smoker would travel to the continent and not take advantage of the cheap tobacco prices.
(3)	Dr Howson told the officer that he had not visited Belgium on his trip in December 2007 and had not brought back tobacco goods.  Yet the timing of that trip (12:15 to 17:35) was almost identical to the trip on 3 February (12:40 to 17:40) which indicated to Mrs Hodge that it was probable that Dr Howson had visited Belgium.
(4)	Dr Howson had purchased three different brands of tobacco.  He told the interviewing officer that he liked both Golden Virginia and Drum and to mix them about.  However in Mrs Hodge's experience, serious smokers exhibit brand preferences and it is rare that any smoker would mix three brands.  A more realistic explanation, in Mrs Hodge's view, was that the tobacco was intended for resale.
(5)	Dr Howson eventually admitted to the interviewing officer that he had travelled to Belgium three or four times during 2007, but had never bought tobacco – and yet on this trip he bought sufficient to last about a year.  Mrs Hodge considered that given the frequency of travel, there would have been no need to purchase sufficient tobacco to last a year, with the risk of it drying out and being unpalatable even before he had the chance to smoke it.
(6)	Dr Howson told the officer that he had last purchased tobacco on the continent in February 2007 and had run out some time ago.  He also claimed that he had last bought tobacco at a "gas station" in Brighton some two weeks previously – yet he produced two almost empty pouches of Belgian tobacco from his pocket and was unable to provide a credible explanation for this.
19.	In the course of giving evidence both Dr Howson and Miss Rogers (his travelling companion) mentioned that the interview at Dover took place late in the evening, that they were both tired and anxious to go home, as they had a long journey ahead of them back to Brighton.  They were not offered any refreshments and were stressed.  As a result of the experience Miss Rogers had to miss school the following day because she felt unwell.  We also note that Dr Howson was twice during the course of the interview invited to sign the officer's notebook to acknowledge that it represented an accurate record of the interview. When signing, Dr Howson's qualified his agreement ("approximately correct" and "about right"), but at no time in giving evidence before us did Dr Howson suggest that the officer's notes of the interview were incorrect in any material detail.
20.	We also note that there are material differences between the explanations given to the officer when interviewed at Dover, and to us in evidence.  For example,  when interviewed at Dover, Dr Howson stated that he smoked Drum and Golden Virginia and that he mixed them about.  However in evidence before us, Dr Howson stated that he smoked Drum and Amberleaf, and that he bought the Golden Virginia with a view – at some time or times in the future - to giving some (but not all) as a present to his friend Ms Lewis  (Ms Lewis confirmed in her evidence that she smoked Golden Virginia).  
21.	Dr Howson was also inconsistent as to his method of payment.  In the interview at Dover, Dr Howson stated that he had taken approximately £50 in cash with him on the journey, and  that he paid for the tobacco using his credit card (which he produced to the Customs officer).  However the receipts he produced to the Customs officer were cash receipts – and not credit card payment slips.  In evidence before us, Dr Howson stated that he usually paid in cash – because of the risk of credit cards being skimmed – although he then said that he might have paid some part with a credit card.  
22.	Dr Howson gave no explanation for these, and other, inconsistencies between what he said when interviewed at Dover and what he said in evidence at the hearing before us – other than the stressful nature of the interview.  We consider that even in a stressful situation it is improbable that a medium to heavy smoker, such as Dr Howson, would confuse the brands of tobacco that he smoked, whether he had taken approximately £400 or £50 in cash with him when he left Brighton, or whether he had paid for the tobacco in cash or with a credit card.  
23.	Dr Howson, when questioned in cross-examination, was also unable to give any estimate of the number of cigarettes that he could roll from a pouch of tobacco, or his consumption of cigarettes in a day or a week.  Again we find this improbable.  At the very least, Dr Howson must have an appreciation of the number of packets of cigarette paper he buys and uses – say in a day (or a week), and therefore of the number of cigarettes he smoked.
24.	Dr Howson in his evidence explained that he used to travel regularly to the continent as part of his job as a lecturer at Brighton University – as he was responsible for liaising and working with businesses on the continent as part of his university duties – in particular Champion Spark Plugs based in Belgium.  Since he took early retirement, his travels to the continent had reduced.  Dr Howson told us that some of these meetings were very brief (only an hour or so) and following the meeting, he would return back to Brighton – without purchasing any tobacco.  We find this explanation unconvincing.  We consider it highly improbable that a company such as Champion would require Dr Howson to spend an entire day travelling from Brighton to Belgium (and back) to attend a brief meeting – and even if he did attend such meetings, we consider it highly improbable that Dr Howson – as a medium to heavy smoker – would not have purchased tobacco in Belgium given the difference in price as compared to the UK.
25.	Overall, we do not consider that Dr Howson is a credible witness, and we do not place any material weight on the evidence that he gave before us. 
26.	Having considered all the evidence before us, we are satisfied that Mrs Hodges acted reasonably and proportionately in deciding not to return the tobacco to Dr Howson.  We therefore dismiss the appeal.
27.	As no request for costs was made on behalf of HMRC, none are awarded.
28.	The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (SI 2009 No 273 (L. 1)).   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Nicholas Aleksander

TRIBUNAL JUDGE
RELEASE DATE: 25 September 2009