Greenalls Management Ltd v Commissioners of Customs and Excise
| Jurisdiction | UK Non-devolved |
| Judge | LORD HOPE OF CRAIGHEAD,LORD STEYN,LORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD WALKER OF GESTINGTHORPE |
| Judgment Date | 12 May 2005 |
| Neutral Citation | [2005] UKHL 34 |
| Court | House of Lords |
| Date | 12 May 2005 |
[2005] UKHL 34
HOUSE OF LORDS
The Appellate Committee comprised:
Lord Nicholls of Birkenhead
Lord Steyn
Lord Hoffmann
Lord Hope of Craighead
Lord Walker Of Gestingthorpe
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives, with which I agree, I would allow this appeal.
My Lords,
I have had the advantage of reading the opinion of my noble and learned friend Lord Hoffmann. I am in complete agreement with it. I would also make the order which he proposes.
My Lords,
In 1998 Greenalls Management Ltd ("Greenalls") delivered approximately 250,000 bottles of Black Death vodka, manufactured in Warrington by an associated company, from their excise warehouse to carriers acting for a company allegedly engaged in exporting vodka to Belgium and Spain. No duty was paid on the basis that the goods were being moved from the warehouse for export. In fact the documentation supplied to Greenalls was fraudulent and the vodka never reached the destinations specified. It was diverted for illicit disposal. The question in this appeal is whether Greenalls are liable for the duty.
The rules concerning excise duties in the Member States of the European Union have been partially harmonised by Council Directive (92/12/EEC) of 25 February 1992, "on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products" ("the directive"). The directive was adopted as part of the creation of a single market without fiscal frontiers. The main purpose of the directive was to have a single set of rules for determining the moment at which duty became payable, so as to avoid a situation in which duty could be levied on the same goods in different countries. Article 6.1 provides that excise duty shall become chargeable "at the time of release for consumption". The article then goes on to define what "release for consumption" means. It includes "any departure, including irregular departure, from a suspension arrangement."
A "suspension arrangement" is defined in article 4(c) as being a "tax arrangement applied to the production, processing, holding and movement of products, excise duty being suspended". It presupposes that duty has become chargeable. Liability to pay is then suspended. There are various types of suspense arrangements in UK law but for present purposes only two are relevant. First, there are holding suspense arrangements under regulation 8 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 SI 1992/3135 ("the regulations"). These allow dutiable goods to be held in an excise warehouse without payment of duty. Secondly, there are movement suspense arrangements under regulation 9. These allow goods to be moved without payment of duty from a port to a warehouse or from a warehouse to a port or from a warehouse to a warehouse.
In the present case, the duty became chargeable when the vodka was made: see section 5 of the Alcoholic Liquor Duties Act 1979. Payment of the duty was suspended under regulation 9(2)(b), which provides that goods may be moved in duty suspension "from a tax warehouse…for export".
There is no dispute that there was an irregular departure from the suspension arrangement. Accordingly, there was a "release for consumption" within the meaning of article 6.1 of the directive. As a matter of European law, excise duty had to become chargeable at the time of the irregular departure. On the other hand, the directive says nothing about who should be liable to pay the duty. This is a matter which is left to Member States to decide for themselves: see van de Water v Staatssecretaris van Financiën Case C-325/99 [2001] ECR I-2729. To find out whether Greenalls became liable, it is therefore necessary to look at the United Kingdom legislation.
Section 93(2)(e) of the Customs and Excise Management Act 1979 ("CEMA") gives the commissioners power to make regulations enabling them to allow goods to be removed from warehouses without payment of duty "in such circumstances and subject to such conditions as they may determine". Section 1(1) of the Finance (No 2) Act 1992, which comes within a group of sections headed "abolition of fiscal frontiers etc", was clearly intended to enable the United Kingdom to give effect to the directive. It confers power on the commissioners to make regulations "for fixing the time when the requirement to pay any duty with which goods become chargeable is to take effect ('the excise duty point')." Subsection 1(4) adds that regulations which prescribe an excise duty point may also make provision?
"specifying the person or persons on whom the liability to pay duty on the goods is to fall at the excise duty point (being the person or persons having the prescribed connection with the goods at that point or at such other time, falling no earlier than when the goods become chargeable with the duty, as may be prescribed."
The regulations were made under various statutory powers, including CEMA and the 1992 Act. Regulation 4 determines the excise duty point and regulation 5 specifies the person liable to pay the duty.
Regulation 4(2) deals with the excise duty point when "any suspension arrangements apply to any excise goods". It lays down a chronological hierarchy. The excise duty point is to be the earlier of a list of events, of which the following are relevant:
"(a) the time when the excise goods are delivered for home use from a tax warehouse or are otherwise made available for consumption, including consumption in a warehouse;
(b) the time when the excise goods are consumed;
(f) the time when the excise goods leave any tax warehouse unless—
(i) the goods are consigned to another tax warehouse in respect of which the authorised warehouse keeper has been approved in relation to the deposit and keeping of those goods, and the goods are moved in accordance with requirements prescribed in regulations 9 and 10 below;
(ii) the goods are delivered for export…"
In the circumstances of this case, paragraph (f) did not apply because the goods were delivered for export. But they were not lawfully exported. They were diverted for sale in the consumer market. The Commissioners say that in those circumstances the excise duty point was determined by paragraph (a). The goods were "made available for consumption". On the facts of this case, there can be no doubt that they were made available for consumption. The identity of the person who made them available is unknown. But the language does not require that they should have been made available by anyone in particular. It simply says that they must have been made available for consumption.
Such an interpretation is also necessary to enable the regulations to give effect to the directive. Article 6(1) of the directive was plainly intended to impose excise duty at the time when the goods were unlawfully diverted. The diversion was an "irregular departure" from a suspension arrangement and therefore a "release for consumption" which should have triggered a charge to duty. However, if paragraph (a) does not cover what happened, there is no other paragraph of regulation 4(2) which does. An interpretation of paragraph (a) which covers the facts of this case is therefore not only in accordance with the ordinary meaning of the language but required by the duty of a domestic court to interpret legislation, so far as possible, to comply with the terms of the directive.
The importance of identifying the precise paragraph in regulation 4(2) which determines the excise duty point arises out of the fact that regulation 5, which specifies the person liable to pay the duty, does so in some cases by reference to the paragraph under which the excise duty point occurs. In particular, regulation 5(4) says that when the excise duty point specified in paragraph (a) of regulation 4(2) occurs, the person liable to pay the duty is the authorised warehouse keeper. It follows that if the correct interpretation of regulation 4(2) is that paragraph (a) determines the excise duty point in this case, that is an end of the matter. Greenalls are liable to pay the duty.
It is important to bear in mind that although regulation 5 is entirely domestic and is untouched by the duty to interpret legislation to give effect to European law, that is irrelevant in this case because there is no ambiguity or problem of any kind about the interpretation of regulation 5(4). Once one has interpreted paragraph (a) of regulation 4(2) and come to the conclusion that the facts of the present case fall within it, no interpretative bias is required to conclude that the person liable for duty is the warehouse keeper. With all respect to my noble and learned friend Lord Walker of Gestingthorpe, I do not see how any method of construction can make regulation 5(4) mean anything else. No doubt it is permissible, in the interpretation of regulation 4(2)(a), to bear in mind that a consequence of construing it to include certain facts will be that regulation 5(4) will make the ware house keeper liable. But one is still construing 4(2)(a), not 5(4), and the obligation to give effect to the directive applies with full force. Regulation 4(2)(a) cannot mean one thing for the purpose of giving effect to the directive and another thing for the purpose of applying regulation 5(4).
In any case, construing regulation 4(2)(a) to give effect to the directive requires no great intellectual effort. The construction I have suggested is, in my opinion, the ordinary meaning of the words. It is therefore...
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