R Seabrook Warehousing Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Lord Justice Simon,Sir Geoffrey Vos |
| Judgment Date | 29 July 2019 |
| Neutral Citation | [2019] EWCA Civ 1357 |
| Docket Number | Case No: CO/3626/2017 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 July 2019 |
[2019] EWCA Civ 1357
IN THE COURT OF APPEAL (CIVIL DIVISION)
SITTING AT FIRST INSTANCE
PREVIOUSLY ON APPEAL FROM THE HIGH COURT OF JUSTICE, QUEEN'S
BENCH DIVISION, (ADMINISTRATIVE COURT)
(MR JUSTICE HOLMAN)
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
Lord Justice Simon
and
Lord Justice Henderson
Case No: CO/3626/2017
Mr Alistair Webster QC and Mr Michael Firth (instructed by Morrisons Solicitors LLP) for the Claimant
Mr Jonathan Kinnear QC and Ms Natasha Barnes (instructed by the General Counsel and Solicitor to HMRC) for the Defendants
Hearing dates: 21 & 22 May 2019
Approved Judgment
Introduction
This is a claim for judicial review, brought with permission granted by Underhill LJ on 2 October 2018, following the oral hearing before him on 28 September 2018 of the claimant's application for permission to appeal from the order of Holman J dated 13 October 2017, which had refused permission for the claim to proceed. Underhill LJ's order was made pursuant to CPR rule 52.8(5), which provides that where such an application for permission to appeal is made to the Court of Appeal, this court may itself grant permission to apply for judicial review instead of giving permission to appeal. By a further order made on 19 October 2018, after consideration of written submissions from the parties, Underhill LJ directed that the application for judicial review would be retained in this court instead of proceeding in the High Court: see CPR rule 52.8(6). Thus it came about that the hearing before the full court, which took place on 21 and 22 May 2019, was not the hearing of an appeal, but rather the first-instance hearing (albeit at appellate level) of the claimant's application for judicial review.
The justification for this relatively unusual procedure is that the case is agreed to raise some important points of principle about the lawfulness of the domestic statutory regime in the United Kingdom relating to excise duty. More specifically, the application challenges the lawfulness of some key features of the legislation which governs the holding of excise goods in duty suspension (i.e. before an excise duty point has arisen, and therefore before duty has been paid), by an authorised warehousekeeper in an excise warehouse.
The domestic legislation which we have to consider is principally contained in the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (SI 1999 No 1278) (“WOWGR”), which were made by the Commissioners of Customs and Excise (now the Commissioners for Her Majesty's Revenue and Customs, “HMRC”) in exercise of enabling powers in the Customs and Excise Management Act 1979 (“CEMA 1979”) and which came into force on 1 October 1999. The statutory scheme is supplemented and fleshed out by the guidance and requirements contained in Excise Notice 196, entitled “excise goods – registration and approval of warehousekeepers, warehouse premises, owners of goods and registered consignors”, issued by HMRC. The latest version of Excise Notice 196, which has gone through several iterations, is updated to 30 August 2018.
At the level of EU law, the principal governing legislation in this area is Council Directive 2008/118/EC of 16 December 2008, concerning the general arrangements for excise duty and repealing Directive 92/12/EEC (“the 2008 Directive”). The following recitals in the 2008 Directive give an indication of the broad purpose of the provisions with which we are mainly concerned:
“(8) Since it remains necessary for the proper functioning of the internal market that the concept, and conditions for chargeability, of excise duty be the same in all Member States, it is necessary to make clear at Community level when excise goods are released for consumption and who the person liable to pay the excise duty is.
…
(10) Arrangements for the collection and reimbursement of duty have an impact on the proper functioning of the internal market and should therefore follow non-discriminatory criteria.
…
(15) Since checks need to be carried out in production and storage facilities in order to ensure that the tax debt is collected, it is necessary to retain a system of warehouses, subject to authorisation by the competent authorities, for the purpose of facilitating such checks.
(16) It is also necessary to lay down requirements to be complied with by authorised warehousekeepers and traders without authorised warehousekeeper status.
(17) It should be possible for excise goods, prior to their release for consumption, to move within the Community under suspension of excise duty. Such movement should be allowed from a tax warehouse to various destinations, in particular another tax warehouse but also to places equivalent for the purposes of this Directive.”
In their skeleton argument in support of the application, counsel for the claimant have helpfully identified the issues of general importance to the excise duty regime which are said to be raised by this case:
“(1) Whether the domestic law requirement for a non-UK established business to have a “duty representative” in order to own warehoused goods and the corresponding imposition of an excise duty point if there is no such duty representative have a basis in EU law or are contrary to EU law on excise duty.
(2) Whether [ the same provisions] are contrary to the EU law prohibition on discrimination and the principle of freedom of establishment.
(3) Whether the due diligence requirements imposed on duty representatives and/or authorised warehousekeepers by HMRC, inter alia, through their interpretation of Excise Notice 196 are contrary to EU law.”
In the course of argument, it became clear, and Mr Webster QC for the claimant accepted, that a more appropriate formulation of the third issue would be whether the due diligence requirements contained in Excise Notice 196 are, on their true construction, contrary to EU law. The question of how HMRC interpret those requirements in practice, and in the circumstances of a particular case, cannot properly ground a lawfulness challenge to the terms of the Notice itself as being contrary to EU law.
The claimant, Seabrook Warehousing Limited (“Seabrook”), carries on a business that includes the warehousing of excise goods in duty suspension. Until the events which I am about to mention, Seabrook had been approved as both a warehousekeeper and a duty representative in accordance with the requirements of WOWGR with effect from 1 October 1999.
On 24 February 2017, HMRC wrote to Seabrook stating that they were minded to revoke its approval as a duty representative because HMRC were not satisfied that Seabrook was a “fit and proper” person to hold such approval. In particular, HMRC considered that, despite repeated warnings, Seabrook had failed to comply with the relevant requirements set out in Excise Notice 196, and also with its own internal due diligence policy. Since 1 November 2014, the former requirements have included the so-called “FITTED” criteria set out in section 10.2 of Excise Notice 196, an acronym which provides for checks to be undertaken into:
“ Financial health of the company you intend trading with
Identity of the business you intend trading with
Terms of any contracts, payment and credit agreements
Transport details of the movement of the goods involved whether or not you are directly involved in this
Existence/provenance of goods — where goods are said to be duty paid you should normally seek sufficient detail to satisfy yourself of the status of the goods
The Deal, understanding the nature of the transaction itself, including:
• how the cost of the goods is built up, for example, whether it includes appropriate taxes, transport etc
• why is it being offered
• whether it is too good to be true
• how the deal compares to the market generally”
The reasons why HMRC said they were minded to revoke Seabrook's approval, as set out in the letter, included allegations of:
(a) failure to provide satisfactory evidence of customers' VAT registration, company registration or registration under the European Operator Registration and Identification Scheme;
(b) failure to obtain evidence of customers' turnover/trading history;
(c) failure to obtain evidence of customers' financial accounts in 36 of the 39 accounts reviewed or critically assess negative indicators;
(d) failure to hold meetings with customers prior to entering a trading relationship;
(e) failure to sign contracts or payment/credit agreements with customers;
(f) failure to undertake updated customer checks every 12 months; and
(g) failure to undertake customer risk profiling in respect of 62% of the accounts reviewed.
On 6 March 2017, HMRC reissued the “minded-to revoke” letter with amended figures, but otherwise without any substantive changes.
Seabrook then made detailed representations in reply on 20 March 2017, but on 20 June 2017 HMRC notified Seabrook that its approval to act as a duty representative had been revoked with immediate effect. On 6 July 2017, Seabrook appealed to the First-tier Tribunal (Tax and Chancery Chamber) (“the FTT”) against the decision to revoke its approval as a duty representative.
On 7 August 2017, Seabrook issued the present claim for judicial review.
About a year later, on 29 August 2018, Seabrook received a further letter saying that HMRC were minded to revoke all of its remaining excise approvals, including its approval as an authorised warehousekeeper. HMRC again relied upon Seabrook's alleged failure to comply with the relevant due diligence requirements contained in Excise Notice 196. Seabrook provided a detailed response, but on 17 December...
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