E01018

EXCISE DUTY – Restoration of seized excise goods and private vehicle –– Appellants contending non-restoration disproportionate –  goods bought for own use and for reimbursement at cost – Review Officer’s decision goods purchased for onward distribution at profit – large quantity of tobacco imported – contradictory accounts in  the Appellants’ statements – frequency of travel – implausible funding arrangements  – Respondents correct in giving weight to these facts – tribunal’s findings of fact support the Respondents’ conclusion that tobacco imported for sale at profit -  was the non-restoration of vehicle  proportionate to the Appellant’s contravention – yes - did the non-restoration create exceptional hardship – no - was the decision not to restore the excise goods and vehicle  reasonable – yes – Appeal dismissed – no order for Respondents’ costs

LONDON TRIBUNAL CENTRE

	LORRAINE LEBAN  	Appellants
HENRY SMITH

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      KEN GODDARD MBE		  (Member)

Sitting in public in Lowestoft on 20 December 2006

Philip Woolfe, counsel for the Appellants

Fiona Darroch, counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	Miss Leban was appealing against the Respondents’ decision on review dated 26 January and 17 March 2006 refusing restoration of excise goods and a motor vehicle, a Ford Focus C-Max registration AO54 NXE.
2.	Mr Smith was appealing against the Respondents’ decision on review dated 26 January and 17 March 2006 refusing restoration of excise goods.
The Background
3.	On 15 October 2005 at the UK Control zone at Coquelles, France, Miss Leban, Mr Smith, Mr Napthine and Mrs Napthine were stopped by Customs Officers travelling in a Ford Focus motor vehicle driven by Miss Leban.
4.	The Customs Officers seized the motor vehicle and the following quantities of excise goods:
25 kilograms of hand rolling tobacco
1.5   kilograms of pipe tobacco
600  cigarillos
32    litres of beer
72    litres of wine
13.75 litres of spirits.
5.	The value of the excise duty  on the above goods was £3,090.03.
6.	On 21 October 2005 Miss Leban and Mr Smith requested restoration of the excise goods and motor vehicle. On 11 November 2005 the Respondents refused restoration. On 5 December 2005 Miss Leban and Mr Smith requested a review of the non-restoration decision. On 26 January 2006 Mrs Perkins confirmed the non-restoration decision on review. On 17 February 2006 Miss Leban and Mr Smith appealed to the Tribunal against the Respondents’ decision to refuse restoration. On 17 March Mrs Perkins carried out a supplementary review following the receipt of additional information from the Appellants. Mrs Perkins confirmed the decision not to restore the vehicle and excise goods.
7.	Miss Leban and Mr Smith did not appeal to the magistrates’ courts against the legality or correctness of the seizure. Mr and Mrs Napthine did not apply for restoration of the excise goods. They made no appeal to the magistrates’ courts.
The Issue in Dispute
8.	The issue in dispute was whether Mrs Perkins’ refusal to restore the vehicle and the excise goods was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable Mrs Perkins must have considered all relevant matters and must not have taken into consideration irrelevant matters.   
9.	The Appellants contended that Mrs Perkins’ decision was not reasonable because
(1)	The decision not to restore the excise goods and the vehicle was based on an inference drawn from the evidence that the goods were intended for commercial resale. In fact, the evidence did not support that inference adequately or at all. The decision accordingly was made on a false factual basis.
(2)	In fact the goods were not intended for commercial resale. In those circumstances the Respondents’ refusal to restore the vehicle and the excise goods was a disproportionate interference with the Appellants’ rights under Article 1 of Protocol 1 to the European Convention on Human Rights and Article 8 of the Excise Directive.
The Evidence
10.	We heard evidence from the Appellants. The witness statement of David Cathraw adopting the review decision of Mrs Perkins who was unable to attend the hearing was received in evidence. A bundle of documents was prepared for the Tribunal.
The Review Decision
11.	In reaching her decision refusing restoration, Mrs Perkins examined all the circumstances surrounding the seizure of the vehicle and excise goods except the legality or correctness of the seizure. She formed the view that the Appellants had not provided her with details of exceptional circumstances that would justify restoration of the excise goods under the terms of the Respondents’ restoration policy. Further she found positive additional reasons for concluding that non-restoration of excise goods was appropriate which were:
(1)	The quantity of tobacco goods that were being imported exceeded the guide levels specified in the REDS Regulations. Miss Leban claimed 11 kilograms of tobacco which was almost four times the guide level of three kilograms.
(2)	Miss Leban, Mr Smith and their co-travellers deceived the Customs Officers when stopped about the quantity of hand-rolling tobacco in the vehicle. They initially told the Officers that they each had three kilograms of tobacco when the correct total was more than twice the declared quantity. The Appellants must have known the correct quantity of tobacco held as they were carrying receipts for the full quantity.
(3)	In interview Mr Napthine accepted that he lied in his statement about the amount of tobacco that belonged him. He initially stated that 13 kilograms of Old Holborn hand rolling tobacco belonged to him but then changed it to three kilograms.  Mr Napthine   offered  no explanation for his lie.
(4)	Miss Leban and Mr Smith also gave contradictory accounts about their ownership of the tobacco. Miss Leban told the Customs Officer that 12 kilograms belonged to her but changed it to 11 kilograms when making her claim for restoration. Mr Smith stated that three kilograms of tobacco was his but this was increased to six kilograms in his restoration request. 
(5)	Mrs Perkins was not impressed with Mr Smith’s explanation that he forgot to tell the Customs Officer about asking Miss Leban to buy tobacco for his partner.  Mrs Perkins considered that Mr Smith had ample opportunity during his interview to advise the Officer that he was importing goods destined for others.
(6)	The Appellants did not explain the discrepancy between the quantity of tobacco found in the car, 25 kilograms of tobacco, and the amount claimed by the Appellants and Mr and Mrs Napthine which totalled 23 kilograms.
(7)	Miss Leban’s admission that she was purchasing excise goods on behalf of others who had not travelled and from whom she was expecting payment.
(8)	The inconsistency between the accounts of Miss Leban and Mr Smith about whether Mr Smith brought back tobacco on his last trip with Miss Leban. Mr Smith stated that on each of his previous six trips he returned  on average with three kilograms of tobacco, whereas Miss Leban asserted that Mr Smith was the one person who did not bring tobacco back. 
(9)	Miss Leban paid a substantial sum in cash for the tobacco. Mr Smith and Mr Napthine claimed that they would repay Miss Leban on their return but they could not supply the Officer with any figures about the amounts  due. This caused Mrs Perkins to have serious doubts about whether the excise goods were for Mr Smith and Mr Napthine. She concluded that the payment arrangements supported the view that the excise goods were destined for onward distribution.
(10)	Miss Leban did not demonstrate satisfactorily how the excise goods were purchased. Mrs Perkins found it not credible that Miss Leban  accumulated over £1,800 from a “pot” in which she saved her tobacco money, particularly as she had recently travelled to France when she purchased excise goods.
(11)	The excise goods were paid for in cash by Miss Leban. Mrs Perkins considered cash purchases to be a feature of  excise goods bought for resale at profit because there was no audit trail.
(12)	Mrs Perkins considered that the large quantity of excise goods purchased, almost worth £5,000 in the UK shops, would damage legitimate UK trade.
12.	Mrs Perkins concluded that the hand rolling tobacco, or most of it, would be sold for profit. She arrived at her conclusion from her findings on the travellers’ dishonesty in failing to declare all the tobacco goods, the quantity of goods, the inconsistencies within the Appellants’ statements and those of Mr and Mrs Napthine, their frequency of travel and the lack of supporting documentation regarding payment of the goods. In view of her conclusion Mrs Perkins decided that Miss Leban’s application for restoration of her vehicle did not meet the circumstances outlined in the Respondents’ policy allowing restoration of a vehicle used for unlawful importation of excise goods. Miss Leban failed to satisfy Mrs Perkins that the excise goods were to be supplied at purchase price and not for profit. The importation did not come within the category of first offences involving small quantities of excise goods.
13.	Mrs Perkins found no evidence that the non-restoration of the vehicle caused Miss Leban exceptional hardship. Mrs Perkins noted that Miss Leban was also the registered keeper of a Rover Metro. Mrs Perkins in her supplementary review of 17 March 2006 examined the medical evidence supplied on Miss Leban’s behalf, which included three statutory sick pay notes dated 31 January 2006, 8 February 2006 and 19 February 2006. Each of those notes recorded the reason for Miss Leban’s absence from work as anxiety/depression.  Miss Leban’s general practitioner wrote in a letter dated 7 February 2006 that
“ Miss Leban attended recently with depression and anxiety. She says that she had poor sleeping for some time, in fact dating back to October 2005 when her car was seized by Customs and Excise for carrying excess tobacco which she claims was for personal consumption. There were other factors which have aggravated this and caused her anxiety more recently”. 
14.	Mrs Perkins concluded from the medical evidence supplied that Miss Leban’s health issues were not solely attributed to the seizure of her vehicle. Mrs Perkins saw no documentary evidence that the loss of the vehicle seriously affected Miss Leban’s continuing employment or led to any bankruptcy proceedings.
15.	Mrs Perkins decided that the non-restoration of  the excise goods was equitable reasonable and proportionate. Further Mrs Perkins saw no reason to disapply the Respondents’ policy of not restoring the vehicle in all the circumstances.
Respondents’ Restoration Policies
16.	Mrs Perkins conducted her reviews of 26 January and 17 March 2006 against the Respondents’ policies which were then in force.
17.	The policy for excise goods was that seized goods should not normally be restored. However, each case is examined on its merits to determine whether or not restoration may be offered exceptionally.
18.	The policy for private vehicles was that
“The Commissioners’ general policy is that private vehicles used for the improper importation or transportation of excise goods should not normally be restored. The policy is intended to be robust so as to protect legitimate UK trade and revenue and prevent illicit trade in excise goods. However vehicles may be restored at the discretion of the Commissioners subject to such conditions (if any) as they think proper (e.g. for a fee) in the following circumstances:
•	If the excise goods were destined for supply on a “not for profit” basis for example for reimbursement.
•	If the excise goods were destined for supply of profit, the quantity of excise goods is small, and it is a first occurrence.
•	If the vehicle was owned by a third party who was not present at the time of the seizure and was either blameless or had taken reasonable steps to prevent smuggling in the vehicle”.
19.	In June 2006 the United Kingdom reached agreement with the European Commission regarding its policies for seizures of tobacco and cars. The Commission considered that the United Kingdom’s sanction policies – those relating to the purchase of excise goods on behalf of a third party, and the importation of excise goods by post remained disproportionate where there were no aggravating circumstances. Thus the Respondents have modified their restoration policies  to answer the Commission’s concerns, namely:
“Under the new policies, in such irregular movement cases, the UK will no longer systematically seize as liable to forfeiture the goods and cars of persons holding excise goods for purposes other than their own use.
Instead in first time irregular movements without aggravating circumstances, the holder will be offered the option of holding onto his goods against the payment of the duty plus a penalty. Where a car is used to carry the goods in such cases it will not be seized but the owner will normally be warned that it could be seized in any further cases”.
20.	The changes apply specifically to persons bringing goods back for others for reimbursement at or below cost price where it is the first time that goods have been seized and the amount of goods involved was small.
21.	The Commission also noted that
“Where a person brings back goods for a commercial purpose ie a purpose other than his own use, and fails to comply with the formalities that apply to such situations under EC rules, the Member States are entitled to apply sanctions, provided these are reasonable and proportionate in accordance with general principles of EU law”.
The Appellants’ Evidence
22.	Miss Leban made regular trips to France and Belgium to purchase tobacco and alcohol. She made six trips in the 12 months before being stopped by Customs Officers on 15 October 2005. Miss Leban acknowledged that she told the Officer in interview that she had travelled nine or ten times in the same period. However, Miss Leban stated that this was a guess, and after the interview when she had time to reflect on the number of journeys the correct number of trips was six.
23.	 Miss Leban explained she planned the trip for the 15 October at the beginning of October 2005 which was intended to cover purchases for Christmas. Miss Leban made the arrangements with Mr and Mrs Napthine about one week prior to the trip. Mr Smith agreed to accompany Miss Leban several days before 15 October 2005.
24.	They set off for France around 12.30am on 15 October 2005. The first place they visited was a tobacco shop in Belgium where Miss Leban paid for five kilograms of drum hand rolling tobacco, five kilograms of Old Holborn hand rolling tobacco, 15 kilograms of Golden Virginia hand rolling tobacco, six packs of five tins of 20 Café Crème cigarillos and one and half kilograms of Erinmoor and Clan pipe tobacco. She also purchased one bottle of Johnny Walker Black Label and six bottles of Smirnoff Red vodka. 
25.	Miss Leban intended to gift three bottles of vodka to her hairdresser and friends from the pub, the remaining three bottles of vodka were for her own consumption. The one bottle of Johnny Walker was to be a gift to Mr Smith. The Drum hand rolling tobacco was for her boyfriend, 50 pouches were a Christmas present, 20 pouches would be given to him straightaway, whilst he would reimburse her for the 30 pouches. The pipe tobacco was Christmas gifts for a couple of “old boys” at the local pub. The Golden Virginia was to be divided with three kilograms going each to Mr Smith, Ms Blenkinsopp and Mrs Napthine with six kilograms for Miss Leban’s personal use and Christmas gifts. Three kilograms of Old Holborn hand rolling tobacco was for Mr Napthine with the remainder split between Miss Leban and Mr Smith. The cigarillos were purchased as gifts.
26.	On the way back to the tunnel they called at Eastenders in Calais where Miss Leban purchased cases of lager and wine. The six bottles of Dogs Bollocks red wine were bought for Mr Smith who used it in cooking. Mr and Mrs Napthine went round Eastenders by themselves and purchased wine and spirits.
27.	 Miss Leban paid around £1,670 in cash for the excise goods. She used sterling because the price was cheaper than by paying either in Euros or by card. Miss Leban received £200 beforehand from Mrs Napthine to pay for her excise goods. Miss Leban accepted that she had not mentioned the specific sum of £200 to the Customs Officer. Miss Leban arranged with Mr Smith and Mr Napthine to reimburse her for their share of the tobacco on their return to Lowestoft. Mr Smith was unable to pay her because he did not have the time to go to the bank beforehand. Miss Leban originally stated in interview that Mr Smith would repay her on return because he did not have much money.  
28.	Miss Leban forgot to mention to the Customs Officer that the Drum hand rolling tobacco was for her boyfriend. Likewise in interview Mr Smith forgot about the Golden Virginia tobacco purchased for his partner, Ms Blenkinsopp. Although Mr Smith failed to advise Ms Blenkinsopp that he was buying her tobacco, he expected Ms Blenkinsopp to repay Miss Leban for the purchase. Miss Leban acknowledged that they made a mistake in buying five kilograms of Old Holborn hand rolling tobacco. They only intended to purchase three kilograms.
29.	When they arrived at UK Control zone at Coquelles they were pulled over by a man who they assumed to be security. They did not realise he was a Customs Officer. He asked Miss Leban how much tobacco was in the vehicle. Miss Leban thought he was referring just to her, so she replied 240 pouches (12 kilograms) which included Mr Smith’s share but unfortunately did not include the Drum tobacco for her boyfriend. 
30.	In cross-examination Respondents’ counsel pointed out to Miss Leban that the question asked of her by the Officer was: “How many pouches of tobacco are in the car, not who owns them”?  to which Miss Leban replied “60 each, 240”. Miss Leban stuck to her evidence contending that the Officer had not made an accurate account of the conversation.
31.	The Appellants and Mr and Mrs Napthine were then interviewed separately. Miss Leban accepted that she signed the interview statement as a correct record. However, she felt that she was under pressure to sign the statement and to give short answers. Miss Leban considered the interview to be stressful particularly as this was the first time that she had been in trouble with Customs. Miss Leban now considered that parts of the interview were inaccurate. Mr Smith also considered that there were inaccuracies in the interview particularly about the various references to Ms Blenkinsopp and the impression given that he was man of no resources. Mr Smith was tired during the interview which explained why he forgot about the purchase for Ms Blenkinsopp. 
32.	Mr Smith saw no inconsistency between his reply to the Officer that he honestly did not know what the tobacco would cost him with his earlier reply about the tobacco costing about £2.70 a pouch. Mr Smith did not know how many roll-ups he obtained from a tobacco pouch. Mr Smith had been smoking for 50 years or more. A tobacco pouch would generally last him between one to two days. During interview Mr Smith accepted that they imported the maximum amount of tobacco, three kilograms each. Although Mr Smith knew about the three kilograms guideline for importation of tobacco, his reference to the maximum in  interview was that each person brought back at the most three kilograms rather than the maximum under the guidelines.
33.	Mr and Mrs Napthine did not ask for restoration because they did not want any hassle. Miss Leban did not ask them to attend the hearing in support of her and Mr Smith’s appeal. Mr Smith believed that they did not know of the Appeal. Mr and Mrs Napthine were good friends of Miss Leban. No evidence was called on behalf of the Appellants from Miss Leban’s boyfriend, Ms Blenkinsopp or any beneficiary of the gifts.
34.	Miss Leban was employed as fork lift/lorry driver when they were stopped by Customs. She earned £250 to £430 a week with outgoings of £120 a week. Her  savings were about £1,000. In August 2006 Miss Leban was made redundant. She was now retraining as a plumber. In September 2004 Miss Leban purchased the Ford Focus C-Max for £13,245, paid for partly in cash with the remainder from a bank loan, which she was still paying. 
35.	Mr Smith was in receipt of state pension of £110 per week. He owned a substantial house with a value in excess of £500,000. Mr Smith also owned antiques from which he would sell individual pieces to raise income.
36.	At the time her vehicle was seized Miss Leban required a reliable car to get to work. She would leave for work at 4.10am  travelling 50 miles. Miss Leban owned another vehicle, a Mini Metro, which was unreliable and uncomfortable since Miss Leban suffered from a bad back. The Mini Metro was subsequently stolen which meant that Miss Leban had to purchase another vehicle, a Peugeot 306 “S” registered  for £400. 
37.	Following the seizure of her vehicle, Miss Leban began to suffer from anxiety and depression which resulted in days off work. From the end of January 2006 Miss Leban was permanently off work until she was made in redundant in August 2006. Miss Leban developed Crohns disease. Miss Leban was not off work with illness from May 2004 to October 2005.
The Jurisdiction of the Tribunal 
38.	The Respondents’ power regarding restoration of goods and vehicles which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:
“confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it, to do one or more of the following, that is to say –
a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the Tribunal may direct;
b) to require the Commissioners to conduct, in accordance with the directions of the Tribunal, a further review of the original decision;
c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future”.
39.	The precondition to the Tribunal’s exercise of one or more of its three powers is that the person making a decision could not reasonably have arrived at it. The test for reasonableness is set out by Lord Lane in Customs and Excise v JH Corbitt (Numismatists) Ltd  [1980] STC 231 at page 239:
“…..if it were shown the Commissioners had acted in a way in which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight”.
40.	 In Gora and others v Customs and Excise Commissioners [2003] EWCA Civ 525, the Court of Appeal decided that the Tribunal had a comprehensive fact finding jurisdiction in restoration Appeals except  findings  of fact about the legality of the seizure of the goods, which is a matter for the magistrates in condemnation proceedings.
Reasons for Our Decision
41.	We are concerned with the reasonableness of Mrs Perkins’ decision to refuse restoration of excise goods and the vehicle. We assess reasonableness against the standard of how a reasonable panel of Commissioners would have acted, in the sense of whether Mrs Perkins had full regard to relevant matters and disregarded irrelevant matters in reaching her decision.  We are not permitted under section 16(4) of the Finance Act 1994 to substitute our own decision about restoration. In reaching our decision about reasonableness, we are not, however, restricted to the facts known to Mrs Perkins at the time she made her decision. In restoration proceedings we have a comprehensive fact finding jurisdiction, so as to satisfy ourselves that the primary facts upon which the Commissioners have based their decision are correct. 
42.	At the heart of the dispute is Mrs Perkins’ finding that the importation of the tobacco was for a commercial purpose selling at a profit. Her conclusion was derived from her findings on the travellers’ dishonesty in failing to declare all the tobacco goods, the quantity of goods, the inconsistencies within their statements, their frequency of travel and lack of supporting documentation regarding payment of goods.
43.	Miss Leban’s explanation at the hearing for failing to declare the correct amount of tobacco when they were stopped was that she thought the question was directed at her ownership of the tobacco, to which she replied 12 kilograms. Her explanation was inherently flawed by her admission that the 12 kilograms not only included her own tobacco but also Mr Smith’s tobacco. Miss Leban also accepted that she forgot to include the five kilograms of Drum tobacco purportedly purchased for her boyfriend, and presumably the Old Holborn tobacco which she intended to share with Mr Smith. The truthfulness of Miss Leban’s explanation was further undermined by the actual question asked by the Customs Officer as recorded in the interview statement. The Officer’s question was unambiguous and explicit, “How many pouches of tobacco are in the car, not who owns them”? We are satisfied from her frequent travels to France and Belgium that Miss Leban understood the significance of 12 kilograms in that it represented the guideline quantity of tobacco importation for four people, above which an inference of commercial importation might be drawn. We find that Miss Leban deceived the Customs Officer with her reply of 12 kilograms with the intention of concealing the true quantity of tobacco imported.
44.	The quantity of tobacco imported of 25 kilograms was over twice the guideline quantity of 12 kilograms for four people. Miss Leban’s evidence was that 11 of the 25 kilograms belonged to her. In her witness statement of 12 December 2006 Miss Leban acknowledged that she failed to take account of the outstanding two kilograms of Old Holborn which was to be shared between her and Mr Smith. The addition of the Old Holborn would take her share of the tobacco to 12 kilograms,  four times the guideline of three kilograms for an individual importation. According to Miss Leban the six kilograms of Golden Virginia (120 pouches) was for her own use or gifts to unspecified individuals. If for own use the 120 pouches would last her 40 weeks based on her admitted consumption rate of three pouches per week, which assumes she had no tobacco left from her previous visit at the end of August. According to Miss Leban the five kilograms of Drum tobacco was for her boyfriend, the majority of which would be gifted with the remainder reimbursed at cost. Miss Leban forgot to mention the five kilograms to the Customs Officer.  Miss Leban did not produce a letter or call evidence from her boyfriend to corroborate her account. Mr Smith claimed six kilograms of the hand rolling tobacco, which did not include his share of the Old Holborn tobacco. Three kilograms was destined for his partner, Ms Blenkinsopp.  Mr Smith forgot to tell the Customs Officer and Ms Blenkinsopp about his proposed purchase for her, although he fully expected Ms Blenkinsopp to reimburse Miss Leban for the costs of the three kilograms of tobacco. Mr Smith was vague about his consumption rate, one pouch might last one or two days. He did not know the number of roll-ups he obtained from a pouch.  
45.	Throughout the dispute the Appellants have given conflicting accounts about the quantity of tobacco which belonged to them. Their explanation for the discrepancies was that they forgot to mention them to the Customs Officer. Mr Smith even forgot to tell Ms Blenkinsopp about the purchase. The Appellants  supplied no corroboration of their accounts from the intended beneficiaries of their  gifts.  Miss Leban’s stated consumption rate undermined her claim for personal use. Thus their explanations about purchasing the goods for own use and gifts were not credible and riddled with inconsistencies.
46.	  The interview statements of Miss Leban and Mr Smith were inconsistent in several respects. Their statements on the quantities of tobacco which belonged to them were contradicted by their subsequent explanations. Miss Leban gave evidence of a lower number of trips to France and Belgium in the previous 12 months than that declared to the Customs Officer. Miss Leban disagreed with Mr Smith about whether he imported tobacco on their trip prior to 15 October 2005. Their explanation for the inconsistencies was that the interview records were inaccurate despite them signing the records as a true account. Miss Leban and Mr Smith were unable at the hearing to rebut Mr Napthine’s admission in interview that he initially lied to the Customs Officer about the amount of tobacco which belonged to him. Mr and Mrs Napthine declined to challenge the Respondents’ refusal to restore the excise goods.   The number of inconsistencies, particularly on matters central to the disputed issue of restoration, and Mr Napthine’s admission of lying add weight to Mrs Perkins’ conclusion that the Appellants were concealing their true intentions for their importation of excise goods.
47.	  Miss Leban and Mr Smith accepted that they were frequent travellers to France and Belgium for the sole purpose of purchasing excise goods.  They were familiar with the procedures and the guidelines for importation. They were not naïve first time travellers. Although Miss Leban stated in interview that she did not always bring back tobacco, her answer must be treated with circumspection considering the short nature of her visits to France and Belgium. In contrast Mr Smith accepted that he brought back three kilograms of tobacco on each of his previous six trips. The pattern of regular trips every six to eight weeks to purchase excise goods was consistent with the Appellants having a commercial purpose for the excise goods of onward distribution at profit. The fact that 15 October trip was some six weeks after the last trip at the end of August 2005 suggests that it was part of the usual pattern of visits rather than a special trip to buy Christmas presents. 
48.	Mrs Perkins considered that cash payments were a common feature of buying excise goods for commercial purposes. Miss Leban explained that she would get a cheaper price if paid  in sterling. Miss Leban, however, failed to give a persuasive account of how she accumulated the cash to fund her frequent trips. According to Miss Leban, when she finished a pouch of tobacco or a bottle of wine  she would put aside  a sum of money equivalent to the English price of that item which would go towards the costs of her next visit.  The amount set aside would be supplemented by savings of £100 from her wages her week.  On the 15 October Miss Leban took with her £1,800 in cash, which would have required her to put aside about £300 each week from her last visit at the end of August.  During this period her weekly wages ranged from £250 to £430 with weekly outgoings of  £120. 
49.	Mr Smith received £110 per week in pension and had savings of £200. He told the Customs Officer that with his partner they spent what they received each week. Mr Smith revealed in his witness statement that he periodically sold off individual antiques for cash to raise income. During 2006 he made one such sale raising between £1,000 to £2,000 in cash. We found Mr Smith’s ability to pay for the tobacco inconclusive. He did not appear to have the day-to-day income to pay for his tobacco. Miss Leban said in interview that he did not have much money. His sales of antiques were in cash and not evidenced by documentary proof. 
50.	Mrs Perkins was not convinced about the Appellant’s arrangements for funding the transactions. She pointed out in her supplementary review of 17 March 2006  that despite having had the opportunity to provide her with any information or bank statements as to how the funds were accumulated or from where they originated, nothing to date had been provided. No documents were provided to the Tribunal. Miss Leban stated that she kept no written record of the cash put aside, although she did have a bank account.  
51.	The other aspect of the funding arrangements which caused Mrs Perkins concern was that Miss Leban paid for  the tobacco. Miss Leban explained that if one person paid for the tobacco they would get a bigger discount. Also it was necessary for one person to remain in the car so as to deter potential thieves. Miss Leban would be reimbursed by Mr Smith and Mr Napthine for their share of the tobacco, and in Mr Smith’s case the wine also when they returned to Lowestoft.  In interview Miss Leban stated that this was the normal arrangement with Mr Smith because he did not have a lot of money. In her witness statement Miss Leban  gave a different account, namely that, she helped Mr Smith out since he did not manage to get to the bank. Mr Smith and Mr Napthine in interview were unable to provide the Customs Officers with figures of how much they owed to Miss Leban. Mrs Napthine apparently paid Miss Leban £200 beforehand to pay for her tobacco.  Mrs Napthine, however, gave contradictory accounts in interview. First saying that she gave her money to Miss Leban for the tobacco, and then stating the she paid for the wine, her husband the spirits and would square up afterwards with Miss Leban for the tobacco. At the hearing it emerged that Miss Leban and her friends organised the trip to France and Belgium on 15 October 2005 a week beforehand. , Therefore prior to the departure  Mr Smith and Mr Napthine had adequate time to  give Miss Leban the money for their share of the tobacco. Mr Smith should have known the cost of his goods since he was regular traveller and always bought the same amount.
52.	We consider that the Appellants’ explanations of the funding arrangements for their purchases were implausible. In Miss Leban’s case we doubt from the figures provided that she was able to accumulate by her proposed method the monies necessary for the purchases on 15 October 2005.  The evidence of Mr Smith’s ability to pay was contradictory. Mr Smith insisted that he was a man of means, in contrast Miss Leban told the Customs Officer that Mr Smith did not have a lot of money. Equally we are sceptical about the claims of Mr Smith and Mr Napthine that they intended to reimburse Miss Leban on their return for their share of the tobacco. As the trip was planned Mr Napthine and Mr Smith had adequate time and sufficient knowledge about the cost of tobacco to give Miss Leban the required monies before they left.  Also the arrangements for paying for the tobacco were different from those for the alcohol purchases.  Mr and Mrs Napthine paid separately from Miss Leban for their alcohol. We conclude from our findings on funding, reimbursement, and the separate arrangements for alcohol and tobacco purchases that the most likely explanation for Miss Leban paying for the tobacco goods was that they belonged to her with the majority destined for onward distribution for sale at profit. 
53.	In summary we make the following findings of fact:
(1)	When initially stopped Miss Leban  deceived the Customs Officer with her reply of 12 kilograms with the intention of  concealing the true quantity of tobacco imported.
(2)	The quantity of tobacco imported was significantly above the guidelines in the regulations.
(3)	The Appellants’ explanations about purchasing the goods for own use and gifts were not credible and riddled with inconsistencies.
(4)	The number of inconsistencies in the witness statements, particularly on matters central to the disputed issue of restoration, and Mr Napthine’s admission of lying add weight to the conclusion that the Appellants were concealing their true intentions for their importation of excise goods.
(5)	The pattern of regular trips every six to eight weeks to purchase excise goods was consistent with the Appellants having a commercial purpose  for the excise goods of onward distribution at profit. The fact that 15 October trip was some six weeks after the last trip at the end of August 2005 suggests that it was part of the usual pattern of visits rather than a special trip to buy Christmas presents. 
(6)	 The Appellants’ evidence on the funding and reimbursement arrangements was implausible which together with the separate arrangements for the alcohol and tobacco purchases suggest that the tobacco was purchased for onward distribution by Miss Leban for sale at profit. 
54.	Our findings on the primary facts of the Appeal support Mrs Perkins’ conclusion that the purpose of Miss Leban’s purchase of tobacco goods, or most of it, was for onward distribution for sale at a profit. In view of our findings Mrs Perkins correctly applied  the principles of proportionality as expounded by  Lord Phillips MR in Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766 where Lord Phillips stated that persons who are smuggling for a commercial purpose for profit  generally take themselves beyond the threshold whereby a lesser penalty than deprivation of property can be considered subject to the issue of exceptional hardship.
55.	We agree with Appellants’ counsel that we should re-consider the reasonableness of Mrs Perkins’ decision in the light of the changes to the Respondents’ restoration policy announced in June 2006. However, those changes affected only those persons bringing goods back for others for reimbursement at or below cost price where it is the first time that goods have been seized and the amount of goods involved is small.  Our findings of fact did not support the Appellants’ assertions that the goods were purchased as gifts for third parties or for reimbursement at cost or below cost.  We are satisfied that Mrs Perkins’ conclusion about commercial purpose for sale at profit was reasonably arrived at on the facts of the Appeal. In those circumstances the changes to the Respondents’ restoration policies have no relevance to the facts of this Appeal, and would not have a material bearing on the reasonableness of Mrs Perkins’ decision. 
56.	The remaining matter is whether Mrs Perkins properly addressed the issue of exceptional hardship by taking into account relevant matters and disregarding irrelevant matters. Miss Leban gave evidence of her deteriorating health since the seizure of her vehicle and the hardships suffered by the loss of her vehicle. Her evidence essentially conformed with the information provided to Mrs Perkins prior to the hearing. Mrs Perkins considered Miss Leban’s representations on her health taking into account the letter from her general practitioner. Mrs Perkins concluded from the medical evidence that Miss Leban’s health issues were not solely attributed to the seizure of her vehicle. Mrs Perkins saw no documentary evidence that the loss of the vehicle seriously affected Miss Leban’s continuing employment or led to any bankruptcy proceedings. Mrs Perkins also took into account that Miss Leban was the registered owner of another vehicle which enabled her to travel to work. Our findings of fact on hardship are essentially the same as Mrs Perkins, namely Miss Leban’s deteriorating health was not solely caused by the seizure of her vehicle and that she suffered financial loss from the loss of her car but this did not prevent Miss Leban from attending work or push her into bankruptcy.
57.	  We are not entitled to substitute our own decision about whether the facts constituted exceptional hardship. We are confined to considering whether Mrs Perkins properly addressed her mind to the information on exceptional hardship placed before her in the light of our findings on the primary facts. Mrs Perkins considered that hardship was a natural consequence of having a car seized but the test was whether the hardship was exceptional.  We find that Mrs Perkins gave proper consideration and weight to the relevant facts on hardship. Her conclusion of no exceptional hardship was reasonably arrived at.
Our Decision
58.	We are satisfied for the reasons set out above that the Respondents’ decision on review 26 January and 17 March 2006 refusing restoration of excise goods and a motor vehicle, a Ford Focus C-Max registration AO54 NXE, was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. 
59.	We, therefore, dismiss the Appellants’ Appeal. 
60.	The Respondents applied for their costs in the Appeal in the sum of £3,656.32. The usual starting point is that the Respondents will not apply for costs against unsuccessful Appellants unless there are exceptional circumstances. In this instance the Respondents warned the Appellants that they would apply for costs if they continued to argue “own use”. According to the Respondents it was not until two hours before the hearing that Appellants’ counsel informed them that “own use” would not be argued in the Appeal. 
61.	We have been provided with correspondence from the Appellants’ solicitor dated  24 November 2006, which stated that the appeal was on the grounds of flawed process. Appellants’ counsel repeatedly tried to contact the solicitors for the Respondents in the week prior to the hearing to discuss the case. His calls were not returned.
62.	We do not consider that the Respondents’ blanket policy of applying for costs in Tribunal cases involving “own use” is justified. The Court of Appeal in Gascoyne   stated the Tribunal could re-open the issue of “own use” in certain circumstances. In any event the Appellants disputed the Appeal on the question of reasonableness, which did not prejudice the Respondents’ in the presentation of their case.  In all the circumstances we find no exceptional circumstances to make an award of costs against the Appellants. We, therefore, make no order for costs. 

      

                                MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 20  February 2007

LON/06/8022