Customs and Excise v Arena Corporation Ltd
| Jurisdiction | England & Wales |
| Judge | (Mr Justice Lawrence Collins),Mr Justice Lawrence Collins |
| Judgment Date | 12 December 2003 |
| Neutral Citation | [2003] EWHC 3032 (Ch) |
| Court | Chancery Division |
| Date | 12 December 2003 |
| Docket Number | 7962 of 2002 |
[2003] EWHC 3032 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION 7962 of 2002
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lawrence Collins
7962 of 2002
HC02 C 03642
In the Matter of THE ARENA CORPORATION LIMITED
Mr Paul Girolami QC and Mr Matthew Smith (instructed by Moon Beever) for the Petitioners.
Mr George Bompas QC and Mr Andrew de Mestre (instructed by Berg & Co) for
The Arena Corporation Ltd and Peter Schroeder.
Mr David Alexander (instructed by Isadore Goldman) for the Provisional Liquidator.
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken
of this judgment and that copies of this version as handed down may be treated as authentic.
I Introduction
This judgment is given following the hearing of (a) a contested winding-up petition presented against The Arena Corporation Ltd ("Arena") by HM Customs and Excise ("Customs") in respect of excise duty and VAT in the amount of £1,833,649.77; and (b) an application by Arena's provisional liquidator (appointed on Customs' application on December 5, 2002) for summary judgment against Mr Peter Schroeder, the beneficial owner and controller of Arena.
As I said in Re Anglo-German Breweries Ltd [2002] EWHC 2458 (Ch), which involved several of the same issues as this matter (and in which the same counsel appeared for Customs and for the company against which the petition had been presented), the fraudulent diversion of duty suspended alcohol into the market without payment of duty and VAT is estimated to cost the exchequer some £450 million p.a. Alcoholic goods can lawfully be manufactured, sold, held or moved by the owner without payment of duty, provided that they remain in bond. Fraudulent diversion occurs by the creation of false administrative documents ("AADs") which permit the release of the duty suspended products from a bonded warehouse. Goods kept in such a warehouse can move from one such warehouse to another without the payment of tax provided the necessary documentation accompanies the goods showing that they are going to another bonded warehouse (both within the United Kingdom and also other EU countries).
In theory the bonded warehouse system is enforced by the requirement that one of the AADs must be returned by the warehouse of destination to the warehouse of despatch by the 15th day of the month following receipt to evidence the fact that the goods are still in bond. If it is not received in that period the warehouse of despatch is required to report this fact to Customs, and if it is not received within 4 months of despatch (and no alternative acceptable evidence of delivery is provided) the warehouse of despatch becomes liable for the duty.
There is widespread evasion of these controls by alcohol being unlawfully diverted onto the UK home market through the use of AADs being returned with false stamps evidencing receipt of the goods by the supposed warehouse of destination. The false documents achieve a release of the goods from a bonded warehouse, supposedly to be passed to another such warehouse, but in fact the goods never arrive, and instead they are fed into the home market where they are sold at a reduced price, usually for cash, because duty and VAT have not been paid.
II Applicable legislation
The relevant provisions governing movements of duty suspended goods and the liability for excise duty on them are contained in the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (the "DSMEG Regulations"), which came into effect on September 28, 2001 and replaced parts of the Excise (Holding, Movement Warehousing and REDS) Regulations 1992 (the "REDS Regulations").
The DSMEG Regulations were made under sections 100G and 100H of the Customs and Excise Management Act 1979, section 1 of the Finance (No 2) Act 1992 and section 2(2) of the European Communities Act 1972. The Regulations were enacted (like the REDS Regulations) in part to implement the provisions of Council Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended ("the Directive"). The Directive introduced a partial harmonisation across the Community of certain provisions relating to excise duty (and other indirect taxes except VAT and other Community taxes) on the consumption, holding and movement in the Community of mineral oils, alcohol and alcoholic beverages and manufactured tobacco.
The Directive is given effect by the detailed rules made in the DSMEG Regulations, and therefore reference may be made to the Directive to interpret the Regulations in accordance with the usual principles.
Under the Directive excise duty is to be chargeable at the time of release for consumption, which includes "any departure, including irregular departure, from a suspension arrangement" (Article 6(1)(a)). Under the Community law system of movements of duty suspended goods it is compulsory for an authorised warehouse keeper who consigns such goods to provide a guarantee to cover the movements: Article 13(a). Articles 13 and 15 permit the tax authority to obtain guarantees from other persons in place of the authorised warehouse keeper, but that was not done in this case.
By Article 15(1) the movement of products subject to excise duty under suspension arrangements is to take place between tax warehouses. By Article 15(3): "The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorized warehouse keeper of dispatch, as provided for in Article 13…" By Article 15(4):
"Without prejudice to the provision of Article 20, the liability of the authorized warehousekeeper of dispatch and, if the case arises, that of the transporter may only be discharged by proof that the consignee has taken delivery of the products, in particular by the accompanying document referred to in Article 18 under the conditions laid down in Article 19."
All products moving under duty-suspension arrangements between Member States must be accompanied by a document drawn up by the consignor (the accompanying administrative document – the "AAD"), which is to be drawn up in quadruplicate, with one copy to be kept by the consignor, a second for the consignee, a third to be returned to the consignor for discharge, and a fourth copy for the competent authorities of the Member State of destination: Articles 18(1) and 19(1). The second, third and fourth copies must travel with the goods. The second copy is used by the warehouse of destination for its records. The third copy is used as a receipt of the consignment and must be returned to the warehouse of despatch within 15 days of receipt, and the fourth copy is provided for the use of the tax authorities of the Member State of destination. The Member State of destination may stipulate that the third copy should be endorsed with the official stamp of its tax authorities prior to its return to the warehouse of destination. The United Kingdom has not taken advantage of this power, but Italy and Belgium have done so, and that accounts for the relevance in the present case of the genuineness of the customs stamps.
By Article 20:
"1. Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the Member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15(3), without prejudice to the bringing of criminal proceedings.
Where the excise duty is collected in a Member State other than that of departure, the Member State collecting the duty shall inform the competent authorities of the country of departure.
2. When, in the course of movement, an offence or irregularity has been detected without it being possible to determine where it was committed, it shall be deemed to have been committed in the Member State where it was detected.
3. Without prejudice to the provision of Article 6(2), when products subject to excise duty do not arrive at their destination and it is not possible to determine where the offence or irregularity was committed, that offence or irregularity shall be deemed to have been committed in the Member State of departure, which shall collect the excise duties at the rate in force on the date when the products were dispatched unless within a period of four months from the date of dispatch of the products evidence is produced to the satisfaction of the competent authorities of the correctness of the transaction or of the place where the offence or irregularity was actually committed. Member States shall take the necessary measures to deal with any offence or irregularity and to impose effective penalties.
…"
The rationale of these provisions is that in cases of diversion it is often very difficult, or impossible, to determine the moment or place of the diversion (and thus the moment of "release for consumption" of the goods under Article 6). Accordingly Article 20(3) provides that where it is not possible to determine where the offence or irregularity was committed, the offence or irregularity is deemed to be committed in the Member State of departure.
The DSMEG Regulations provide for the occasions when a charge to duty arises in relation to movements which are duty-suspended (this is called "the excise duty point," namely the time when the requirement to pay duty is to take effect: Finance (No 2) Act 1992, section 1(1)) They...
To continue reading
Request your trial
-
HM Revenue & Customs v Sed Essex Ltd
...he gleaned from the judgments in Re Anglo German Breweries Ltd [2002] EWHC 2458 (Ch), [2003] BTC 5021 (Lawrence Collins J), Re The Arena Corporation Ltd [2003] EWHC 3032 (Ch), [2004] BPIR 375 (Lawrence Collins J) and [2004] EWCA Civ 371, [2004] BPIR 415 (the Court of Appeal), Customs & ......
-
Harish Bhanderi v The Commissioners of Customs and Excise, E 00814
...(2) Jack Baars and (3) Carol Baars [2004] EWHC 18 (Ch); The Arena Corporation (in provisional liquidation) v Peter Schroeder [2003] EWHC 3032 (Ch); and Commissioners of Customs and Excise v The Arena Corporation and Peter Schroeder EWCA Civ 371. In the latter appeal, leave to appeal to the ......
-
Customs & Excise v Jack Baars Wholesale and Others
...with a (prescribed) connection with the goods, however appropriate that may have been on the facts of In re The Arena Corporation [2003] EWHC 3032 (Ch)paragraph 48. It is not a complete answer because as, as I read Reg 4 (2), liability under Reg 7 (2) can arise without the person liable bei......
-
Trapps Cellars Ltd (in liquidation) v The Commissioners for Her Majesty's Revenue & Customs, TC 03310
...in intra-Community movement”. It was also noted by the High Court at paragraphs 2 and 4 of its judgment in In re Arena Corporation [2003] EWHC 3032. 156. We find that the Appellant did not take due care to prevent the consignments 15 going missing: see §§99-105. Had it undertaken this due d......