[2012] UKFTT 481 (TC)
TC02158
Appeal number:
TC/2010/03330
EXCISE
DUTY – “Spirit gels” with significant alcohol content imported into UK from Sweden – Whether chargeable to excise duty – Yes – Whether exempt from excise duty under
Article 27 of Directive 92/83/EEC – No – Appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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GFT RETAIL UK
LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE JOHN BROOKS
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ELIZABETH BRIDGE
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Sitting in public at 45 Bedford Square, London WC1 on 20 April 2012
Stephen Pezzack, director of
GFT Retail UK Limited, for the Appellant
David Bedenham, counsel,
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
This is an appeal, by GFT Retail UK Limited (“GFT”), against an
assessment to excise duty in the sum of £25,240 was issued by HM Revenue and
Customs (“HMRC”) on 29 January 2010.
2.
The background and circumstances that gave rise to the assessment are
not disputed.
3.
GFT is sales and marketing agent which has worked for Liquids Limited
(“Liquids”) for many years building up sales of cooking wine supplied to
Liquids by Juvinum AB (“Juvinum”), a Swedish company. The cooking wine was
imported into the United Kingdom and controlled by Liquids with finance being
provided by Juvinum.
4.
Having identified potential problems with the use of spirits in a
professional kitchen, such as health and safety issues of glass in the kitchen,
consumption by chefs during preparation and theft of un-opened bottles, Juvinum
developed and manufactured “liquid spirit gels” (the “Gel”) of various types
including rum, whisky, brandy, triple sec and calvados. Each Gel consists of a
cooking spirit made from a traditional spirit (eg brandy) that has turned
viscous using a natural stabiliser (E466 Carboxymethylcellulose) whilst
retaining its alcoholic content.
5.
The Gels are described in promotional literature as the “safest, most
economical and tastiest way to add alcoholic ingredients in the professional
kitchen”. Instructions for its use contained on the label of the plastic
bottles in which it is sold explain that it:
… is to be used in the exact same way as your normal
liquid spirit, as it is made with REAL spirit
The label also explains that the Gel:
.. is made from traditionally distilled spirits and
made into a flavoured gel with NO other ingredients added. This process allows
it to retain the original ABV, flavours and characteristics of the spirits.
However, due to the presence of the natural stabiliser, the
Gel, which when poured does not disperse, is neither suitable to drink on its
own nor can it be mixed with normal liquids.
6.
Due to the development costs of the Gels GFT was asked to purchase and
hold stocks from Juvinum. It was intended that once the financial position of
Juvinum improved it would finance the liquid sprit gels in the same way as it
did the cooking wine. Therefore, between December 2007 and October 2008 GFT
imported significant quantities of the Gels from Juvinum. Although these Gels
had a significant alcohol content (between 15% and 40% ABV depending on the type)
no excise duty was paid by GFT.
7.
GFT had intended to sell the Gel to wholesalers supplying the catering
trade. However, sales did not reach the levels anticipated and a quantity of
the Gel remained at the warehouse.
8.
Following a visit by Andrew Cousins, an assurance officer on HMRC’s
Excise team, the Gel remaining at the warehouse was detained by HMRC and subsequently
seized. On 29 January 2010 the assessment to excise duty, with which this
appeal is concerned, was issued. It was calculated on the quantity of the Gel
imported from Sweden less that held at the warehouse together with and any sold
outside the UK (some had been sold to Dublin wholesalers).
9.
On 26 February 2010 GFT appealed to the Tribunal on the grounds that the
Gel is not liable to UK excise duty contending that it falls within Article 27
of EC Directive 92/93/EEC.
10.
EC Directive 92/93/EEC (the “Directive”), which under Article 19
requires Member States to apply “an excise duty to ethyl alcohol”, was
implemented into domestic legislation by the Alcoholic Liquor Duties Act 1979
(“ALDA”) and the Customs and Excise Management Act 1979 (“CEMA”).
11.
Section 5 ALDA provides that excise duty shall be charged on spirits
imported into the United Kingdom and s 126(1) CEMA provides that excise duty
shall be charged on imported goods if they contain “as a part of ingredient
thereof any good chargeable with excise duty”. Excise duty is payable on such
goods on their importation by their importer under Regulations 4 and 5 of the
Excise Good (Holding, Movement, Warehousing and REDS) Regulations 1992 (which
are no longer in force but were at the time of the assessment).
12.
Member States are required to exempt the products covered by the
Directive under Article 27(1)(e):
when used for the production of flavours for the
preparation of foodstuffs and non-alcoholic beverages with an alcoholic
strength not exceeding 1.2% vol.
and under Article 27(1)(f):
when used directly or as a constituent of semi-finished
products for the production of foodstuffs, filled or otherwise, provided that
in each case the alcoholic content does exceed 8.5 litres of pure alcohol per
100 kg of the product for chocolates, and 5 litres of pure alcohol per 100 kg
of the product for other products.
13.
These exemptions have been implemented into domestic law by s 5A ALDA
which provides that excise duty shall not be payable on any spirits contained
in flavourings imported into the United Kingdom or used in the production of
flavourings if used for the preparation of food for human consumption or the
preparation of any beverage of an alcoholic strength not exceeding 1.2%.
14.
Guidance on the application of the exemptions is given in HMRC’s Notice
41 “Alcoholic Ingredients Relief”. We were referred to Part 5 of this Notice, which
is headed “Sprit-based essences and flavourings”, by Mr Pezzack.
15.
Paragraph 5.1 of the Notice states that Sprit-based essences and
flavourings are “exempt from duty”.
16.
In answer to the question posed by paragraph 5.2 “is duty payable on
spirit-based flavours and essences received from other EU Member States?”, the
Notice states:
No. any product classified under CN Code 3302
(flavourings and essences for soft drinks, etc.) should be exempt from spirits
duty under the provisions of [the Directive]
Any product classified under CN Code 3302 will be
treated as duty exempt, irrespective of the sprits content.
17.
Mr Pezzack explained that the Gel was classified in Sweden under CN Code 3302. He also referred to a Binding Tariff Information (“BTI”) that
had been provided on 27 March 2009 by HMRC to Liquids which had classified
cooking wine imported by Liquids to 2103 9090 80 (which was not subject to excise
duty as it had an ABV of 5% or less) and contended that as the same
classification (2103 9090 80) had been given to various versions of the Gel
imported by Liquid in BTIs issued by HMRC’s Customs & International Tariff
Classification Service the same treatment should be applied to the Gel which
fell within the exemptions contained in the Directive.
18.
However, Mr Bedenham, for HMRC, referred us to the notes attached to the
BTI which clearly state that excise duty may apply to goods within the same
classification “if they contain alcohol”. He contended that the Gels, whose
alcoholic content varied between 15% and 40% ABV, were spirits not flavourings
or essences and, in the absence of any evidence that it was used in the
circumstances prescribed by Article 27 of the Directive, were properly chargeable
to excise duty.
19.
Given the alcohol content of the Gels together with the information on
the label that it “is made from traditionally distilled spirits” with “NO other
ingredients added” and the process “allows it to retain the original ABV,
flavours and characteristics of the spirits” we agree with Mr Bedenham that the
Gels are “spirits”. Therefore, unless they come within the exemptions contained
in Article 27(1) of the Directive they are subject to excise duty.
20.
Mr Pezzack contends that the exemptions do apply as the Gels are used
for the production of foodstuffs. He emphasised that all marketing efforts were
aimed at the professional chef and that as the Gels cannot be used in drinks
and, as with any spirit used in the kitchen to enhance the flavour of the final
dish, all alcohol is burned off. Mr Pezzack also argued that the Gels should
not be treated differently from other household products, such as vanilla
essence, which contained alcohol but were not subject to excise duty.
21.
However, it is the only Gels with which this appeal is concerned and although
we accept that these are used in the production of foodstuffs they are not
“used directly” for this purpose by GFT as required by Article 27(1)(f) of the
Directive but used directly by a chef in a professional kitchen in the same
manner as any other traditionally distilled spirits.
22.
Also, having concluded that the Gels are “spirits” and not “flavours”, we
find that the exemption in Article 27(1)(e) cannot apply as the Gels are not
“used for the production of flavours” but used as a cooking ingredient in the
same way as any other spirit.
23.
Therefore, although we do understand and accept that as a result of its
involvement with the importation of the Gels GFT faces genuine financial
concerns, as the Gels do not fall within the exemption contained in the
Directive we have no alternative but to uphold the assessment and dismiss the
appeal.
24.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. 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.
JOHN BROOKS
TRIBUNAL JUDGE
RELEASE DATE: 1 August 2012
