Johnstone  v  Revenue & Customs [2006] UKVAT(Excise) E01007 (12 December 2006)

E01007 

EXCISE DUTY - cigarettes from Poland - duty payable on excess over 200? - yes - appeal dismissed. 

MANCHESTER TRIBUNAL CENTRE

DA VID JOHNSTONE
Appellant
- and -
HER MAJESTY'S REVENUE AND CUSTOMS
Respondents

Tribunal: 
Richard Barlow (Chairman) Marjorie Kostick 
Sitting in public in Manchester on 25 October 2006 
The Appellant Mr David Johnstone appeared in person and representing Barry and Anthony Johnstone 
Miss J Blewitt of counsel appeared for the Respondents instructed by the solicitor and general counsel to the commissioners of revenue and customs. 

© CROWN COPYRIGHT 2006

DECISION

1.   This is an appeal by David, Barry and Anthony Johnstone against a review decision of the commissioners by which they refused to refund to the appellants money paid by them by way of duty on imported cigarettes. 
2.	The amounts in question are £480.00 in respect of David Johnstone and £570.00 each in respect of Barry and Anthony Johnstone. Those amounts were paid to HMRC (Her Majesty's Revenue and Customs) at Dover on 11 March 2006 as excise duty on 3,200 cigarettes imported by David Johnstone and 3,800 cigarettes imported by both Barry and Anthony Johnstone. 
3.  The importations had occurred on 1 March 2006 and the cigarettes were detained on that date at Dover because HMRC considered that duty was payable on the cigarettes but the appellants did not then have with them the means to pay. 
4.   Evidence was given by David and Anthony Johnstone and by David Cawthraw, a customs officer who had reviewed the decision. We also took into account a bundle of documents presented to us. The relevant facts were not in dispute and we find them to be as follows. 
5.  The three appellants are brothers who live in the Manchester area and they had decided to make a short holiday journey to the Czech Republic travelling by car from Dover. During the visit to that country they decided to travel into Poland. The journey was disappointing because of the weather which prevented them visiting some of the places they wanted to visit but on the way back and having time to spare they noticed a Tesco store and visited the shopping complex where it was situated and by chance saw a shop selling cigarettes. We accept that their decision to buy cigarettes in Poland arose from those unplanned circumstances and that they had until then intended to buy cigarettes in Belgium on their return journey. 6. It is accepted by the respondents that the cigarettes were purchased for the appellants' own use. 
7.	Had they been purchased in Belgium the quantities involved would have slightly exceeded the 3,200 quantity which is one of the factors required to be taken into account under the Tobacco Products Regulations 2001 when a question arises as to whether cigarettes are being imported for a commercial purpose. In view of the fact that the respondents agree that the cigarettes were in fact for the appellants' own use we can safely assume that had they been bought in Belgium they would have qualified for importation without payment of duty. The duty point referred to in regulation 12 of the Tobacco Products Regulations 200 1 would not have occurred. 
8.	However this case is one to which the Commissioners contend that the Customs and Excise Duties (Travellers Allowances and Personal Reliefs) (New Member Sates) Order 2004 and the Excise Duty Points (Etc) (New Member States) Regulations 2004 apply. The commissioners therefore only allowed the appellants to import 200 cigarettes each without payment of duty. 
9.	The 2004 Orders provide that where a person who has travelled from Poland to the United Kingdom brings with him cigarettes acquired in Poland he shall be relieved from payment of duty on 200 cigarettes. That rule will apply until the end of 2008. Until then the excise duty point for cigarettes in excess of 200 brought from Poland by a traveller is the time of importation. 
10.	The Tobacco Products Regulations 2001 are not specifically referred to in the 2004 Orders so that there is an apparent conflict between them because Poland is a Member State and so the more generous allowance for own use goods in the Tobacco Products Regulations which refers to "Member States", without excluding Poland, might appear to apply to Poland. However, we hold that the 2004 Orders mean that the reference to Member States in the 2001 Regulation must, by necessary implication, temporarily exclude the New Member States, including Poland, referred to in the 2004 Orders. In other words the limit on duty free importations from Poland is 200 cigarettes even though Poland is now an EU Member. 
11. The appellants knew that Poland was a Member State by the time of their visit and were aware in general terms of the. fact that they could import the quantities of cigarettes they proposed to import from a Member State without payment of duty. Unfortunately they were not aware of the exception in the case of Poland and the other New Member States. 12. No criticism can be made of the appellants for their failure to know that rather arcane fact, nor did the respondents seek to make any such criticism. 
13.	It is true that had they wanted to the appellants could have discovered that fact from Customs publications or the internet but not having any reason to suspect there would be a different rule for Poland than for Belgium it never occurred to the appellants to make enquiries. 
14.	The appellants' case is not that the 2004 Orders do not apply but rather that it is unreasonable of the commissioners to charge duty in the circumstances of the case. 
15.	The commissioners appear to have dealt with the payments made by Messrs Johnstone as payments made under section 152(b) of thc Customs anu Excise Management Act 1979. The review carried out by the commissioners and their statement of case both proceed on that basis. However, restoration of goods under that section 152 and therefore payments to secure restoration only apply where goods which have been "forfeited or seized" are restored. In this case the goods were detained rather than seized and they were not forfeited and so the commissioners had no right to demand a restoration fee. 
16. The documents issued at Dover, both when the goods were detained and when they were returned to Mr Barry Johnstone (acting for himself and his brothers), are consistent only with the transaction that occurred at Dover on 11 March 2006 being the payment of duty and the return of detained goods. Those documents dated 1 March do not refer to seizure and do refer to detention. The document issued on 11 March does not refer to restoration and makes it clear that the payments made were payments of duty. 
17.	The appeal to the tribunal therefore lies under section 14(1)(b) of the Finance Act 1994 rather than being an appeal relating to an "ancillary matter" under section 14(1)(d). 
18.	Approaching the matter as a decision about whether the duty was payable leads to only one conclusion. The legislation is clear and the duty is payable. The appeal must therefore be dismissed. 19. It might be open to the appellants to argue that the tribunal has also jurisdiction to consider the reasonableness of the commissioners' decision to charge the duty and the power to direct a further review if the tribunal considers the decision unreasonable. That argument would depend upon the tribunal accepting that the use of the word "also" in section 16(4) of the Finance Act 1994 gives the tribunal the power to direct a further review on the grounds of unreasonableness in all cases, not just in those where the decision under appeal is one relating to an ancillary matter. 
20. The tribunal has previously held that that is not the correct interpretation of that provision (see the tribunal's decision in F Loendersloot lnternationale Decision E00948) but the issue has not yet been considered by a higher court. 
21.	In case we are wrong to conclude that the nature of the appeal is an appeal against a decision that the duty is payable purely as a matter of law or in case the tribunal ought to consider the reasonableness of the decision in the sense set out in section 16(4) we have considered whether the decision can be said to be reasonable. 
22. It is true that Messrs Johnstone were unfortunate to have acted as they did in understandable ignorance (and we would add in the absence of any fault on their part) of the special rule about goods from the New Member States. But given that that is the rule agreed amongst the Member States and provided for by UK legislation, HMRC cannot be criticised as unreasonable for enforcing it as otherwise no-one would be obliged to comply with the rule and it might as well not exist. 
23.	We were slightly concerned during the argument that HMRC should perhaps have made allowance for such duty as was paid in Poland. However the amount of duty charged was calculated by a ready reckoner method that slightly favoured the appellants compared with a more accurate calculation and the appellants' evidence was that by the time they had paid for the goods in Poland and had paid the UK duty the goods were still slightly cheaper than if they had been bought in the UK. In those circumstances and indeed in light of the fact that the appellants could not even say if they had paid any duty in Poland we do not consider the decision would be open to challenge on grounds of reasonableness on the facts even if the payment of duty in Poland had been made but was ignored. 
24. The appeal is dismissed and we make no award of costs. 

Richard Barlow
CHAIRMAN 
RELEASED: 12 December 2006
20 
MAN/06/8030