R (Eastenders Cash & Carry Plc and Others) v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judge | Lord Sumption,Lord Neuberger,Lord Carnwath,Lord Reed,Lord Mance |
| Judgment Date | 11 June 2014 |
| Neutral Citation | [2014] UKSC 34 |
| Date | 11 June 2014 |
| Court | Supreme Court |
[2014] UKSC 34
Lord Neuberger, President
Lord Mance
Lord Sumption
Lord Reed
Lord Carnwath
Appellant
Jonathan Swift QC Neil Sheldon James Puzey
(Instructed by HMRC Solicitors Office)
Appellant
James Pickup QC Marc Glover Niraj Modha
(Instructed by Rainer Hughes Solicitors)
Respondent
Geraint Jones QC Marc Glover Niraj Modha
(Instructed by Rainer Hughes Solicitors)
Respondent
Jonathan Swift QC Neil Sheldon James Puzey
(Instructed by HMRC Solicitors Office)
Heard on 27 and 28 November 2013
Lord Sumption AND Lord Reed (with whom Lord Neuberger, Lord Mance and Lord Carnwath agree)
Indirect taxes have always posed particular problems of enforcement, which account for the wide powers of investigation and seizure conferred by statute on the Commissioners charged with their collection. The exercise of these powers has given rise to dispute ever since Johnson's Dictionary offered its famous definition of excise in 1755 ("a hateful tax, levied by wretches"), and its author was threatened by the Commissioners with a libel action. The powers of the Commissioners of Customs and Excise were originally contained in a large number of enactments dealing with different aspects of an exceedingly complex legal scheme. The first modern consolidation was the Customs and Excise Act 1952 ("the 1952 Act"). The system is currently administered by Her Majesty's Commissioners of Revenue and Customs under the Customs and Excise Management Act 1979 ("the 1979 Act"), which re-enacts much of the 1952 Act, with substantial amendments. Some significant amendments have been made to the Act by the Finance Act 2013, but these were not in force at the relevant times, and we therefore refer throughout this judgment to the Act as it stood before they were made.
These two appeals are about the circumstances and the manner in which customs officers are empowered to detain goods on which duty has not been paid, or may not have been paid.
The Eastenders appeal
In the Eastenders appeal, customs officers entered Eastenders' warehouses and inspected consignments of alcoholic goods found there. They were acting under section 118C(2) of the 1979 Act, which authorises customs officers to enter and inspect business premises which they have reasonable cause to believe are being used in connection with the supply, importation or exportation of goods chargeable with excise duty and to inspect any goods found there. Section 118C(2) was repealed by the Finance (No 3) Act 2010 and replaced by other provisions, but we refer to the Act as it stood at the material time. Under section 118B, the officers may also require the production of documents. Eastenders' employees were unable to provide documentary evidence, such as purchase invoices, demonstrating that duty had been paid on the goods. Inspection of such documents as were produced indicated that duty might not have been paid. The officers decided to detain the goods pending the outcome of further enquiries into the question whether the appropriate duties had been paid: in particular, enquiries into the supply chains relating to the goods. The goods remained on Eastenders' premises pending the outcome of those enquiries but were subject to a direction given under section 139(5) of the 1979 Act, in terms of which the Commissioners can direct the manner in which any thing detained under the customs and excise Acts must be dealt with pending the determination as to its forfeiture or disposal. In subsequent correspondence, the Commissioners stated that the goods had been detained under section 139, subsection (1) of which empowers the Commissioners or their officers to seize or detain "any thing liable to forfeiture under the customs and excise Acts". By virtue of section 49, things liable to forfeiture include any dutiable goods imported without payment of duty.
Following their enquiries, the Commissioners seized most of the detained goods and returned the remainder. All of the seized goods were subsequently condemned as forfeited, and no issue arises about those. The present appeal relates to the goods which were detained but were subsequently returned, the officers' enquiries having proved inconclusive.
Eastenders applied, as the owners of the goods in question, for judicial review of the decision to detain them. The judge, Sales J, found that the officers had reasonable grounds to suspect that duty had not been paid on the goods that were detained. It was also found that the detention of the goods had not exceeded a reasonable period of time. Those findings were not challenged on appeal.
In these circumstances, Sales J held that the Commissioners had acted lawfully in detaining the goods, on the basis that they had the power to detain goods for a reasonable time, pending enquiries as to whether duty had been paid, where they had reasonable grounds to suspect that the goods might be liable to forfeiture. Sales J considered that that power was conferred by section 139(1) of the 1979 Act. No other possible source of the power had been suggested. The application for judicial review was therefore dismissed: [2010] EWHC 2797 (Admin); [2011] 1 WLR 488.
The Court of Appeal by a majority (Elias and Davis LJJ, Mummery LJ dissenting) reversed that decision. They held that section 139(1) applied only where goods were actually liable to forfeiture, and it had not been established that the goods in question were so liable. A declaration was accordingly granted that the goods not liable to forfeiture were unlawfully detained: [2012] EWCA Civ 15; [2012] 1 WLR 2067. There was again no contention that the power to detain goods on suspicion might be derived from any source other than section 139(1). It was subsequently decided that Eastenders could not be awarded costs, by reason of section 144(2) of the 1979 Act, which provides, in substance, that where a court holds that a seizure or detention was unlawful, no award of damages or costs may be made against the Commissioners if the court is satisfied that they acted on reasonable grounds: [2012] EWCA Civ 689; [2012] 1 WLR 2912. The Commissioners appeal to this court against the first decision. Eastenders were refused permission to appeal against the second decision. The point in relation to costs has however been argued in the First Stop appeal, as we shall explain, and whatever we decide about it must necessarily apply in both appeals.
The First Stop appeal
In the First Stop appeal, customs officers entered a warehouse and retail premises used by First Stop. They were acting under section 112(1) of the 1979 Act, which authorises customs officers to enter the premises of "revenue traders" as defined in section 1 of the Act (in substance, persons who deal in goods liable to excise duty) and to search for and examine any goods or materials connected with that trade. Under section 112A, inserted by the Finance (No 3) Act 2010, that power includes the power to examine documents. At the retail premises, the officers seized a small quantity of spirits on the ground that the "duty paid" stamps on them were defective. They also detained a much larger quantity of alcoholic drinks, whose provenance was unclear, while enquiries were made into the question whether duty had been paid. One of the directors of First Stop was informed by an officer that the goods were being detained pending further enquiries into their duty status. Written notices were provided stating that the goods had been detained "pending evidence of duty status (CEMA 1979, section 139)". Most of the detained goods were subsequently seized. The remainder were returned to First Stop. Condemnation proceedings in respect of the seized goods remained pending at the time of the hearing of these appeals.
First Stop were granted permission to apply for judicial review of the detention of those goods which were still detained, pending the outcome of enquiries, about four months after their initial detention. By the time the application was heard, all of those goods had been seized. The application came before Singh J after the decision of the Court of Appeal in Eastenders. The judge gave a total of three judgments on different issues which arose from the application. In the first, he held that the detention of the goods had been unlawful, since the reason given for the detention was the need for investigation, and it followed in his view from the decision of the Court of Appeal in Eastenders that goods could not lawfully be detained under section 139(1) of the 1979 Act for that purpose. That was so even if the goods might subsequently be found to be liable to forfeiture: in his view, goods could not lawfully be detained under section 139(1) for the purpose of ascertaining whether the power to detain them had been conferred by that provision: [2012] EWHC 1106 (Admin).
In a second judgment, Singh J held that section 144(2) did not protect the Commissioners against an award of costs, on the basis that the reason given for detaining the goods, being unlawful, could not amount to "reasonable grounds" within the meaning of that provision: [2012] EWHC 2191 (Admin).
In his third judgment, Singh J was concerned with the seizure notices. The question was whether a statement in the notices that "no evidence of UK duty payment has been provided" was a sufficient statement of the grounds for seizing the goods as "liable to forfeiture". The judge held that it was: [2012] EWHC 2975 (Admin).
All three judgments were...
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