FMX Food Merchants Import Export Company Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Newey,Mr Justice Henry Carr |
| Judgment Date | 30 October 2018 |
| Neutral Citation | [2018] EWCA Civ 2401 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/0872 |
| Date | 30 October 2018 |
[2018] EWCA Civ 2401
IN THE COURT OF APPEAL
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Mr Justice Birss
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Newey
and
Mr Justice Henry Carr
Case No: A3/2016/0872
Mr David Cavender QC and Ms Valentina Sloane (instructed by RPC) for the Appellant
Mr Kieron Beal QC and Mr Simon Pritchard (instructed by HMRC Solicitor's Office) for the Respondents
Hearing date: 11 October 2018
Introduction
This appeal concerns the imposition by the Respondents (“HMRC”) of customs duty on various importations of garlic into the United Kingdom made by the Appellant (“FMX”) between 2003 and January 2004. The goods were falsely declared to be of Cambodian origin. The garlic was in fact of Chinese origin, and therefore subject to a quota payment and to anti-dumping duty. HMRC issued a post-clearance demand on 1 April 2011 for customs duty on these importations in the sum of £503,577.63 (“the Demand”).
Prior to issue of the Demand, the First Tier Tribunal (“the FTT”) had dismissed an appeal by FMX against a post-clearance demand issued on 22 February 2007 for duty in respect of similar imports by FMX that occurred after January 2004 (“the Earlier Demand”); FMX Food Merchants Import Export Co Ltd v HMRC [2011] UKFTT 20 (TC). However, the FTT allowed an appeal from the Demand on the basis that it was communicated to FMX after the expiry of a three-year time limit specified by Article 221(3) of Council Regulation (EEC) No. 2913/92 of 12 October 1992, as amended by Regulation (EC) No 2700/2000 of the European Parliament and of the Council of 16 November 2000 (“the Customs Code”), and that Article 221(4) could not be relied upon to override that time limit; [2013] UKFTT 720 (TC) (“the FTT Decision”). The FTT Decision was overturned by the Upper Tribunal which decided that the communication of the Demand was not time barred; [2015] UKUT 0669 (TCC) (“the UT Decision”).
The facts
There is no challenge to the following facts, as found by the FTT:
(i) false declarations were made to the Cambodian authorities, on the basis of which Form A Certificates recording Cambodian origin were issued and presented to HMRC;
(ii) the individuals who made those declarations were well aware that the false certificates would be presented to HMRC for the purposes of the UK import declaration;
(iii) FMX caused the false certificates to be presented to HMRC to support its claims that the garlic should benefit from the relevant exemptions from customs duty as being of Cambodian origin;
(iv) in presenting the false certificates to HMRC, FMX committed an act that was liable to give rise to criminal court proceedings under section 167(3) of the Customs and Excise Management Act 1979 (“the CEMA”), which is a strict liability offence.
On behalf of FMX, Mr David Cavender QC relied upon [20] of the FTT Decision, where the Tribunal recorded that:
“No assertion was made by HMRC that the Appellant [FMX] was a knowing participant in the fraud, so we do not consider that point further.”
On behalf of HMRC, Mr Kieron Beal QC relied upon various facts found by the FTT in its decision concerning the Earlier Demand. The Tribunal considered whether FMX had acted in good faith within the meaning of Article 220(2)(b). In order for FMX to be treated as having acted in good faith, the Tribunal held that it must have “ acted without deception and exercised appropriate diligence or ‘due care’ in its import arrangements” [51]. The Tribunal was not satisfied that FMX had acted with good faith in this sense. It found that FMX, and its director, Mr Pignatelli, were aware that Chinese garlic was being smuggled into the European Union via third countries, where false certificates of origin were issued. FMX was therefore aware that there was a risk of false certificates being supplied but had made no contractual arrangements with its supplier to ensure that the risk was managed.
I do not consider that issues concerning FMX's knowledge and conduct are relevant to the arguments presented on this appeal. FMX's case is that the time period specified in Article 221(3) has not been extended and therefore the Demand is time-barred. If this is right, then even if FMX had full knowledge of the fraud, and had perpetrated the fraud itself, that would make no difference. HMRC's case is that Article 221(3) has been disapplied by Article 221(4), and that there is no fixed time period for communication to the debtor (other than that the period should be a reasonable one). If this is right, since the relevant offence is one of strict liability, it would be unnecessary to prove that FMX was a knowing participant in the fraud.
FMX submitted that HMRC could have communicated the Demand earlier, and thereby have been within the three-year period specified in Article 221(3). HMRC knew of the fraud on 1 February 2007, which came to light following a mission of the European Anti-Fraud Office (“OLAF”), which confirmed that the certificates were false. HMRC issued the Earlier Demand on 22 February 2007. They then waited until they had succeeded in the FTT before issuing the Demand on 30 March 2011. This was just under seven years after the importation complained of, and just under four years after HMRC knew of the fraud. On the facts of this case, this would have made no difference. The three-year limitation period, if FMX is correct in its submissions, would still have applied to the importation of fraudulently declared garlic for the period from May 2003 to the end of 2004.
Relevant provisions of the Customs Code
The Customs Code was in force at the relevant times but has now been replaced by Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (“the UCC”). The Customs Code provided for an EU wide system of rules governing (amongst other things) goods imported from third countries.
Article 201 of the Customs Code provides that a customs debt on importation shall be incurred through the release for free circulation of goods liable to import duties. Import duties are defined in Article 4(10) as being “ customs duties and charges having an effect equivalent to customs duties payable on the importation of goods.” They are incurred at the time of acceptance of the customs declaration.
Article 201(3) provides that:
“The debtor shall be the declarant. In the event of indirect representation, the person on whose behalf the customs declaration is made shall also be a debtor.”
Articles 217 – 221 impose obligations on Member States to ensure that customs debts are accounted for and paid within certain time periods and that the amount of the customs debt is communicated to the debtor. Article 220 provides (with certain exceptions which are not relevant) that where a customs debt has been entered into the accounts at a lower level than the amount legally owed, the amount of the duty which remains to be recovered must also be entered in the accounts.
Article 221(3) specifies a three-year time for communication to a debtor of a customs debt, from the date when it was incurred:
“Communication to the debtor shall not take place after the expiry of a period of 3 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.”
Article 221(4) provides that:
“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.”
Article 4(23) defines “ provisions in force” as “ Community or national provisions”.
Section 167 of the CEMA (insofar as relevant) provides:
“ Untrue declarations, etc
(1) If any person either knowingly or recklessly –
(a) makes or signs, or causes to be made or signed, or delivers or causes to be delivered to the Commissioners or an officer, any declaration, notice, certificate or other document whatsoever; or
(b) makes any statement in answer to any question put to him by an officer which he is required by or under any enactment to answer,
being a document or statement produced or made for any purpose of any assigned matter, which is untrue in any material particular, he shall be guilty of an offence under this subsection and may be arrested …
…
(3) If any person –
(a) makes or signs, or causes to be made or signed, or delivers or causes to be delivered to the Commissioners or an officer, any declaration, notice, certificate or other document whatsoever; or
(b) makes any statement in answer to any question put to him by an officer which he is required by or under any enactment to answer,
being a document or statement produced or made for any purpose of any assigned matter, which is untrue in any material particular, then, without prejudice to subsection (4) below, he shall be liable on summary conviction to a penalty of level 4 on the standard scale.
(4) Where by reason of any such document or statement as is mentioned in subsection ( 1) or (3) above the full amount of any duty payable is not paid or any overpayment is made in respect of any drawback, allowance, rebate or repayment of duty, the amount of the duty unpaid or of the overpayment shall be recoverable as a debt due to the Crown or may be summarily recovered as a civil debt.”
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