[2009] UKFTT 316 (TC)

			
TC00260

					           Appeal number LON/2008/7168

VAT – Goods imported into the UK – Postal packages – Whether packages coming from Germany to be treated as imported into the UK from outside the EU – Section 15(1) VATA : yes if customs duty would be payable on their removal to the UK

Customs Duty – Postal packages arriving in the UK from Germany – Whether community goods on arrival in the UK – Held on the facts the goods had been imported into the EU in Germany under customs control and removed to the UK where they had been released: Customs duty would thus be payable on their arrival in the UK

FIRST-TIER TRIBUNAL
TAX 

	MRS SUSAN SHEFTZ	Appellant

	- and -

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

			TRIBUNAL: 	CHARLES HELLIER (JUDGE)
					NIGEL COLLARD (MEMBER)

Sitting in public in London on 3 November 2009

Mario Angiolini, counsel for HMRC

The Appellant did not appear and was not represented

© CROWN COPYRIGHT 2009

DECISION

1.	The Tribunal first considered whether it should proceed with the hearing in the absence of the Appellant. Rule 33 of the Tribunal’s Rules provides that the Tribunal may proceed in a party’s absence if
(a)	it is satisfied that the party has been notified of the hearing; and
(b)	it considers it in the interests of justice to proceed with the hearing.

It was clear to us that the first of these conditions was satisfied. Mrs Sheftz had been sent notice of the hearing. When the clerk telephoned before the hearing she was told by Mrs Sheftz’ husband that Mrs Sheftz was aware of the hearing and would not be attending.
2.	The second condition gave us some concern. The Tribunal’s file contained correspondence between the Tribunal and Mrs Sheftz in which Mrs Sheftz had expressed an interest in a hearing at a venue nearer to her home in Hove than London, in which the Tribunal had written to Mrs Sheftz indicating that such a venue might be possible and inviting an application, and in which Mrs Sheftz had then indicated that she would prefer a hearing nearer Hove. In response the Tribunal had written offering venues in London, Cardiff, Norwich or Birmingham. Mrs Sheftz had not replied and the hearing was fixed for London.  It was clear from the correspondence that, had a hearing been fixed for a venue nearer Hove, Mrs Sheftz would have attended.
3.	Nevertheless Mrs Sheftz had indicated to HMRC, in correspondence with the Tribunal and via her husband, that she was content for the hearing to proceed in her absence, and the Respondents were keen that we should proceed. Bearing in mind the effect of Rule 38 of the Tribunal’s rules (see below) we considered on balance that it was in the interests of justice to proceed.
4.	Under Rule 38 of the Tribunal’s Rules the Tribunal may set aside a decision if (a) it considers it in the interests of justice to do so and (b) a party was not present at the hearing. If Mrs Sheftz wishes to apply for this decision to be set aside she must make a written application to the Tribunal which is received no later than 28 days after the Tribunal sends this Decision Notice to her.
Background
5.	Mrs Sheftz received a number of postal packages on which Customs Duty and VAT had been charged. She paid the amount demanded and was given the packages by the Royal Mail. In relation to two of the packages she made a claim to HMRC for reimbursement of the charges. This claim was refused on 5 August 2008 and the refusal was upheld on a review by Theresa Hill of HMRC’s Review and Appeals Team which was communicated to Mrs Sheftz in a letter of 1 October 2008. Mrs Sheftz appeals against that decision.
6.	In outline HMRC’s case is that the goods were imported from the USA and that therefore customs duty and VAT is eligible; Mrs Sheftz’ case is that they were imported from Germany within the EU and that therefore no such tax or duty is payable.
The Relevant legislation
(a)  Customs Duty 
7.	The procedure for the charging of customs duty is set out in EU Regulations which apply uniformly across the EU. There are two principal regulations, the ‘Code’ : Council Regulation 2913/92, and the Commission Regulations 2454/93. Duty is charged by reference to the EU Customs Tariff which sets rates of charge by reference to the customs value of goods imported into the EU. Articles 29-33 of the code provide, broadly, that the customs value is the price paid for the goods when sold for export plus costs of packing and transport.
8.	The EC Treaty provides that customs duties may not be charged on goods which are in free circulation in a Member state and that goods imported into the EU are to be considered to be in free circulation in a state once duties have been paid and import formalities completed within that state. The Code requires imported goods to be presented to Customs (Articles 38-40). They are then subject to customs control until, among other possibilities (such as re-export) they are ‘released for free circulation’. At that point the goods become free of customs control. But, by Article 79, such release	
“shall entail application of commercial policy measures, completion of other formalities laid down in respect of the importation and the charging of any duties legally due”.
9.	Article 43 of the Code requires goods which are presented to customs to be covered by a “summary declaration”. Article 237 contains provisions relating to the making of such a declaration where goods are brought into the EU by post. It provides that goods sent by letter or packet are to be treated as declared when they are accompanied by a “CN22” declaration. This declaration indicates the value of the goods.
10.	Article 91 provides for a system (or “procedure”) under which goods which have been imported into the EU and have not been released into free circulation may be moved around the EU from one customs office to another. Article 462a of the Commission Regulations provides that where under such a procedure goods are carried by post
“the customs authorities of the Member states of despatch shall be required to affix on the packaging and accompanying documents a label of the type shown in Annex 42.”

11.	Annex 42 shows a Yellow label 23 mm x 49mm  with the words “Goods not fulfilling the conditions laid down in Article 9 and 10 of the Treaty establishing the European Economic Community” in the middle of it. This Yellow label is referred to in the evidence of Mr Beaver which we shall come to later.
12.	Council Regulation 918/83 provides a limited form of relief for small value imports. Goods of intrinsic value which does not exceed ECU 22 are to be admitted free of import duties.
(b) VAT
13.	Section 2(1) (c) of the VAT Act 1994 charges VAT on the importation of goods from member states. Section 1(4) requires such VAT to be collected as a customs duty.
The Evidence
14.	We had before us a bundle of copy correspondence which included Mrs Sheftz’ correspondence with HMRC and included photocopies of the packaging of the parcels on which duties had been levied. We also had a witness statement from Tony Beaver, an officer of the UK Border Agency designated as a customs official. Mr Beaver’s evidence related to the general procedure adopted at the International Post department at Mount Pleasant. Mr Beaver’s evidence was supplemented by a report from those instructing Mr Angiolini of his reply to a question raised by the Tribunal.
Unfortunately, and importantly, we did not have before us the original packaging of the parcels on which the duties were charges.
Procedure adopted for mail from Germany
15.	From Mr Beaver’s witness statement we find that the normal procedure is that: 
i.	 post (and postal packages) arrives at the UK sorting office                       from Germany in sealed bags
ii.	some of these bags bear a Yellow label
iii.	the letter and parcels in bags bearing a Yellow label are          presented to customs officials for the determination of customs duties.
16.	In response to our enquiry we were told that Mr Beaver had said that it was only those letters and parcels which were in the bags which have a Yellow sticker which were presented to customs for charging. We accept that that is normally the case.
The packaging of Mrs Sheftz’ two parcels
17.	The First package we identify by the bar code number ZA016949036GB.

This package:-
(i)	bore the logo “Play.com MOVIES MUSIC GAMES”             above Mr Sheftz’ address;
(ii)	had affixed to it a CN22 sticker describing the contents as Optical Media of value £22.99;
(iii)	had a “Deutche Post” sticker affixed so as partially to obscure the CN22
(iv)	bore a charge label detailing a VAT charge of £4.02, no customs duty charge and a Royal Mail handling fee of £8.00
18.	The second package we identify by the bar code number ZA008455419GB. 
This package:-
(i)	had affixed a label incorporating a CN22 describing the contents as a ‘Digital Video Disc’ of value US $39.99 and the cost of Freight and Insurance as US $6.48
(ii)	showed in the upper part of that label Mrs Sheftz’ address and below that address characters including:
		“/std-Intl-us-eur/”;
(iii)	had a Deutche Post sticker affixed at the top of the label and obscuring the very top of the label;
(iv)	bore a charge label detailing a VAT charge of £4.15, no customs duty charge, and a Royal Mail handling fee of £8.00.
Mrs Sheftz’ contentions
19.	Mrs Sheftz says that the packages were posted in Germany. That she says is clear from the ‘Deutche Post’ sticker. There should be no customs duty (or VAT) on goods dispatched from EU countries.
20.	She seeks a refund of the total amounts charged and complains about the delay occasioned in the receipt of the parcels. She expresses a concern that she is being unfairly targeted by HMRC in relation to goods ordered on the internet for her daughter’s birthday.
21.	In response to a suggestion from HMRC that underneath the “Deutche Post” labels on the packages the address of a US based original consigner would be shown, Mrs Sheftz says in a letter to HMRC dated 6 October 2008
“I have systematically taken off the labels posted from Germany and there is no USA postage marks under any of these labels…”
Mr Angiolini’s contentions
22.	Mr Angiolini says:-
(i)	on the basis of Mr Beaver’s evidence it is likely that each package came from Germany in a bag with a Yellow sticker on it
(ii)	Yellow stickers are affixed to goods moving under customs control procedures. Therefore it is likely that the goods in each case had been imported into the EU and not released into free circulation. The Deutche Post sticker indicates that it is likely that they were first imported into Germany.
(iii)	each package bears a CN22 label. Such labels are only relevant to persons dispatching goods into (or out of) the EU. Given that the addressee was Mrs Sheftz in England, it was therefore likely that the person sending the goods was outside the EU.
(iv)	In the case of the second package the US $ value and the “std-intl-us-eur” characters suggest a US origin.
(v)	in HMRC’s letters to Mrs Sheftz they suggest that the first package came from Amazon.com (rather than Amazon.co.uk). He says that Mrs Sheftz does not dispute this in her correspondence.
Our conclusions on the place of despatch
23.	In relation to the first package the first three of Mr Angioloni’s propositions seem correct to us and point to non EU despatch. However set against that is the sterling value (£22.99) of the goods. That however does not suggest a German dispatcher more than a US dispatcher. The CN22 label weighs in favour of a non EU despatch.
  24.	In relation to the second package we find it probable, for the first four reasons Mr Angiolini gives, that it was despatched from the US to Germany and there taken into customs control before onward despatch (with a Yellow Label on the bag) to the UK.
25.	The only evidence before us which called this into question was Mrs Sheftz’ statement that she had peeled back the Deutche Post sticker and found no USA postmark.  But (a) she does not say whether she found a USA address, and (b) we did not have the original packing before us to test what actually lay beneath the sticker.
26.	Thus we conclude that it is likely that both packages were despatched by post to Mr Sheftz from outside the EU and first arrived in the EU in Germany when they were taken into Customs control and whence they were sent to the UK.
Customs Duty
27.	No customs duty was charged on either package. There is therefore nothing for us to decide in relation to such duty.
VAT
28.	Section 1(1)(c) VATA provides, as we have noted, for VAT on the importation of goods from places outside the member states. We have found it likely that the goods were sent from outside the EU to Germany and then came to the UK. Is that movement to be considered an importation from a place outside the EU for this purpose?
29.	Section 15(1) VATA provides that goods are to be treated as imported from outside the member states where
(a)	having been removed from a place outside the member states, they enter the territory of the Community;
(b)	they enter that territory by being removed to the United Kingdom or are removed to the United Kingdom after entering that territory; and
(c)	the circumstances are such that it is on their removal to the United Kingdom or subsequently while they are in the United Kingdom that any Community Customs debt in respect of duty on their entry into the territory of the Community would be incurred.
30.	It is clear, on our findings of fact, that (a) and (b) above are satisfied. In relation to (c) however it appears that no customs duty was charged on the goods: does that mean that (c) is not satisfied? It seems to us that it is satisfied.  Paragraph (c) refers to “any” debt which “would” be incurred: it refers therefore to the circumstances which would give rise to a customs change if there was one, and does not require that there be a charge. On our findings of fact, any customs debt would be incurred on the goods in the packages when released into free circulation in the UK. Accordingly the goods are to be treated as imported for the purposes of section 1(1)(1).
31.	We therefore find that VAT was correctly charged.
32.	Our jurisdiction does not extend to the charge made by the Royal Mail.  We make no finding in relation to it.

Result
33.	We dismiss the appeal.
Appeal from this Decision.
34.	Any party wishing to appeal this decision to the Upper Tribunal must seek permission by making a written application to the Tribunal within 56 days of being provided with a copy of this decision. Other details are provided in the notice form the Tribunal which accompanies this decision.

         CHARLES HELLIER
TRIBUNAL JUDGE
RELEASE DATE: 20 November 2009-11-23