FMX Food Merchants Import Export Company Ltd v Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lord Reed,Lord Hodge,Lord Kitchin,Lady Arden |
| Judgment Date | 29 January 2020 |
| Neutral Citation | [2020] UKSC 1 |
| Court | Supreme Court |
| Date | 29 January 2020 |
[2020] UKSC 1
Lord Reed
Lord Hodge
Lord Briggs
Lady Arden
Lord Kitchin
Appellant
Kieron Beal QC
Simon Pritchard
(Instructed by HMRC Solicitor's Office (Bush House))
Respondent
David Cavender QC
Valentina Sloane QC
(Instructed by RPC LLP)
Heard on 14 October 2019
( with whom Lord Reed, Lord Hodge and Lord Kitchin agree)
The main issue in this appeal concerns the meaning and effect of a short, innocent-sounding, phrase in article 221(4) of the (now superseded) Customs Code of the EU, contained in Council Regulation (EEC) No 2913/92 of 12 October 1992. The Customs Code regulated the collection of, and accounting for, customs duty throughout the EU (in 1992, the EEC). As is spelt out in the recitals to Regulation No 2913/92, the purposes of the Customs Code include securing a balance between the needs of the customs authorities in ensuring the correct application of customs legislation, on the one hand, and the rights of traders to be treated fairly, on the other, the establishment of uniform rules and procedure within the internal market, and the prevention of fraud or irregularity which would be liable adversely to affect the General Budget of the EU.
In order to understand the main issue about the meaning and effect of article 221(4) as inserted by Council Regulation (EC) No 2700/2000 of 16 November 2000, it is necessary first to explain some of the basic concepts used within the Customs Code. At the heart of it lies the concept of “customs debt” which is defined in article 4(9), in relation to imports, as follows:
“‘Customs debt’ means the obligation on a person to pay the amount of the import duties (customs debt on importation) or export duties (customs debt on exportation) which apply to specific goods under the Community provisions in force.”
By article 4(12) “debtor” means any person liable for payment of a customs debt.
In relation to imports, article 201(2) provides that a customs debt shall be incurred at the time of acceptance of the customs declaration in question, and article 201(3) identifies as the debtor the person making the declaration, and (if relevant) the person on whose behalf the declaration is made.
Recovery of the amount of the customs debt is governed by Chapter 3 of the Customs Code. Section 1 deals with entry of the debt in the accounts and communication of the amount of duty to the debtor (in both cases by the customs authority of each member state). Articles 218 to 220 lay down strict time limits for the accounting by customs authorities for customs debts including, in article 220, correcting the accounts where a customs debt has originally been entered at a level lower than the amount legally owed. Article 221 provides for the communication to the debtor of the amount of duty as soon as it has been entered into the accounts. Section 2, which begins with article 222, provides time limits and procedures for payment of the duty by the debtor. Those time limits run from the date of communication to the debtor of the amount of duty owed. Thus, although the debtor incurs a customs debt at the time of importation (when making the customs declaration), liability to pay it occurs only upon receipt of communication of the amount by the relevant customs authority.
Returning to article 221, it provided (at the material time) so far as is relevant as follows:
“ Article 221
1. As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures.
2. …
3. Communication to the debtor shall not take place after the expiry of a period of three years from the date on which the customs debt was incurred. This period shall be suspended from the time an appeal within the meaning of article 243 is lodged, for the duration of the appeal proceedings.
4. Where the customs debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three-year period referred to in paragraph 3.”
I have italicised the phrase which falls to be interpreted and applied on this appeal. By article 4(23) “provisions in force” include both Community and national provisions.
The issue may be summarised as follows. For the importer FMX Food Merchants Import Export Co Ltd, the respondent, which is the relevant customs debtor, it is said that article 221(4) confers an option on each member state to provide, in advance, an alternative fixed time limit in substitution for the three-year time limit for communication of the amount of duty, where the qualifying condition (namely an act which was liable to give rise to criminal court proceedings) is satisfied. I will call it the criminal proceedings condition. If the member state does not do so (and the UK did not) then the three-year time limit provided by article 221(3) remains in force, because any other outcome would offend against the EU principle of legal certainty.
For HMRC, the appellant, it is submitted that the three-year time limit in article 221(3) is automatically displaced wherever the criminal proceedings condition is satisfied. In such a case the requirement for legal certainty may be met either by a member state's provision of a substitute fixed time limit, or by the combination of a number of specific provisions of the national law which, together, satisfy the requirement for legal certainty or, as a last resort, by the general requirement of EU law that the communication should take place within a reasonable time. The relevant provisions of national law, it is argued, include one or more of the UK's provisions about abuse of process, the equitable doctrine of laches, or the provisions of the Limitation Act 1980.
Thus far, FMX's arguments have been broadly accepted by the First-tier Tribunal (“the FtT”) and by the Court of Appeal, whereas the Upper Tribunal (“the UT”) found in favour of HMRC.
The facts which gave rise to the present dispute are not (now at least) contentious and may be briefly stated. Between August 2003 and January 2004, FMX imported ten consignments of garlic, which were declared to be of Cambodian origin, thus purportedly entitling them to exemption from all import duties under the “Everything But Arms” amendment to the EU's generalised system of preferences made in favour of, amongst other countries, Cambodia in 2001.
In fact, the consignments all originated in China, so that (being outside the relevant quota for fresh garlic) they were subject both to ad valorem duty of 9.6% and additional anti-dumping duty of €120 per 100kg. The duty which should have been paid was £503,577.63.
The false declarations as to origin came to light in the course of HMRC's investigation of later imports, occurring after January 2004, leading to post-clearance demands in February 2007 for duty of £370,872.50 issued within three years from the relevant importations. The FtT dismissed FMX's appeal against those demands in December 2010, holding that the imports had all originated in China.
Following that outcome HMRC issued the post-clearance demand for duty in respect of the August 2003-January 2004 series of imports in March 2011, long after the expiry (if applicable) of the three-year time limit for communication in article 221(3), but only just over three months after the FtT's decision about the later imports.
It was found by the FtT and is now common ground that, in relation to the 2003–04 imports, all the garlic originated in China, that the makers of the certificates of origin knew that they were false, and would be used for the purposes of UK import declarations, that FMX presented these certificates to HMRC and that, although not implicated in the underlying fraud, FMX thereby committed an act that was liable to give rise to criminal court proceeding under section 167(3) of the Customs and Excise Management Act 1979, which creates a strict liability offence.
The result of those factual findings is that the criminal proceedings condition for disapplication of the three-year time limit for communication set out in article 221(4) was satisfied. It is, in passing, common ground that it is not necessary for HMRC to show that criminal court proceedings actually ensued or that the customs debtor was the person who or which committed the relevant criminal act: see Gilbert Snauwaert v Belgium (Joined Cases C-124/08 and C-125/08) [2009] ECR I-6793.
It is common ground that this phrase is apt to describe both EU provisions and applicable provisions of any relevant member state. The UK has not in fact enacted or prescribed any provisions taking the form of a substitute time limit for communicating a customs debt where the criminal proceedings condition in article 221(4) is satisfied. The UK has, of course, a substantial body of statutory limitation provisions, now consolidated in the Limitation Act 1980 (for England and Wales), but section 37(2)(a) provides that the 1980 Act shall not apply to any proceedings by the Crown for the recovery of any tax or duty, or interest thereon. The result is that there were no provisions in force in England and Wales at the material time which imposed any specific or fixed time limit for the communication of a customs debt in circumstances where the criminal proceedings condition in article 221(4) applied. If, as FMX contends, article 221(4) gives member states the option to prescribe a substitute time limit, failing which the three-year time limit in article 221(3) remains in force,...
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