Retail Ltd v Commissioners for HMRC

JurisdictionEngland & Wales
JudgeSir Ross Cranston,‘Sir Ross Cranston’
Judgment Date24 January 2018
Neutral Citation[2018] EWHC 134 (Admin)
CourtQueen's Bench Division (Administrative Court)
Docket NumberCO/2799/2017 CO/2813/2017
Date24 January 2018

[2018] EWHC 134 (Admin)




Royal Courts of Justice


Sir Ross Cranston

(Sitting as a Judge of the High Court)




The Queen on the Application of

(1) Retail Limited
(2) Universal Cycles Limited
(3) Brands Holdings Limited
Commissioners for HMRC


Mr T Lyons QC (instructed by RPC) appeared on behalf of the Claimant.

Mr O Thomas QC (instructed by HMRC) appeared on behalf of the Defendant.

Sir Ross Cranston

There are three applications for permission to apply for judicial review by companies within the Sports Direct Group of companies: Universal Circles Limited (“UC”), Brands Holdings Limited (“BHL”) and Retail Limited (“SDR”). For convenience in this judgment I will refer to the claimants' case, plural, even though I recognise that the cases of the three companies are not identical.


The essential challenge is to a decision of the HMRC on 9 th March 2017 to issue a C18 post-clearance notice to the claimants demanding the retrospective payment of customs duty, import VAT and anti-dumping duty in relation to UC. That was for a period from 2007 to 2012. It amounted to some £8 million for anti-dumping duty, along with customs duty of almost £1.5 million and import VAT of over £1 million. C18 notices were also issued to BHL and SDR, but for different amounts and for different periods. As with UC, the sums involved are considerable.


The notices were in respect of the importation of bicycles of disputed origin. The bicycles were declared to originate from Sri Lanka. There was an investigation by the European Anti-fraud Office (“OLAF”) and it was concluded that the bicycles originated in China. The C18 post-clearance decision letter states that the goods had been presented on false Form As. Thus, there were no valid proofs of origin in accordance with Art.97(n)(1) of Commission Regulation (EEC) 2454/93.


The immediate background to the issue of the C18 notices was that in January 2016 HMRC met the claimants and made them aware of its investigation into the origin of the imported bicycles. In a letter of 2 nd February 2016 HMRC confirmed the key points covered in the meeting and then set out requests for information in relation to a whole range of matters, including the knowledge of the claimants regarding the origin of the imports. The claimants responded without the requested information, but raised the issue of time limits for HMRC to proceed.


In December 2016 HMRC issued its “right to be heard” letter. In that letter it stated its belief, on the basis of the evidence in the OLAF report, that there was an act which at the time it was committed was liable to give rise to criminal court proceedings. The nature of the act was that a company called City Cycles had made false declarations to the Sri Lankan authorities to obtain the false Form As which were subsequently issued. The “right to be heard” letter added that UC caused those false Form As to be delivered to HMRC and that the false forms committed an act that was liable to give rise to court proceedings under s.167(3) of the Customs and Excise Management Act 1979 (“the 1979 Act”). The letter then said:

“This conclusion is made irrespective of whether Universal Cycles knew or was reckless as to the falseness of the Forms A.”

The letter then went on to set out in some great detail the nature of offending under s.167(3).


There was a separate letter of that same date as the “right to be heard” letter, 19 th December 2016. In that letter HMRC said that for the avoidance of doubt it did not allege that UC knowingly or recklessly made an untrue declaration.


On 7 th April 2017 the claimants appealed to the First-tier Tribunal Tax Chamber (“the FTT”). There is no need for me to refer to the respective cases advanced by the parties before that Tribunal, although I observe that HMRC state at the conclusion of their statement of case that they reserved their position in relation to the position of the claimants under s.167(1) of the 1979 Act. The relevant paragraph added that HMRC did not currently have all the information that had been requested from the claimants and that it reserved its position pending receipt of that information, disclosure in the proceedings, and the Tribunal's findings of fact.


These judicial review applications were lodged on 8 th June 2017. In the UC judicial review the claimant contended, firstly, that HMRC's C18 letter was issued out of time; secondly, that there was a breach of its legitimate expectations, given what was said in the HMRC Guidance, and, thirdly, that there were no reasons given by HMRC for departing from the Guidance. In the challenges by BHL and STR, grounds 3 to 5 track grounds 1 to 3 in the UC challenge. Grounds 1 and 2 in those judicial review applications, which do not appear in the UC challenge, are first that the necessary statutory conditions for issue of the C18 notices were not fulfilled and, secondly, that HMRC failed to act in accordance with its own guideline in this regard.


There is no need to traverse in detail the summary grounds which HMRC lodged in response to these judicial reviews, but there was a reference to s.167(3) of the 1979 Act. In addition, the summary grounds referred to the failure of the claimants to provide information which had been requested to make an assessment of their likely involvement. In effect, the summary grounds were saying that there was therefore a question mark over the claimants' likely involvement in the misconduct.


The applications were considered on the papers by Whipple J on 18 th October 2017. First, she identified the UC challenge as the lead case in respect of grounds 2 and 3, in other words, the legitimate expectations and reasons challenges. Secondly, she gave permission on those grounds in all three cases, although she did not rule out the possibility that HMRC could raise delay. Thirdly, Whipple J ordered that permission in all three applications in respect of the claimants' remaining grounds should be considered later, at a hearing. That is how the matter comes to me.


In accordance with her order, I need to consider permission on ground 1 in the UC application and ground 3 in the other cases. For reasons which will become obvious, I will call this the Art.103 ground. There is then the issue of the claimants' application notice dated 8 th December 2017 for a reference of the Art.103 ground to the Court of Justice of the European Union concerning the interpretation of that article, in other words Art.103.2 of the Union Customs Code.


Next is the issue of HMRC's application that matters should be stayed in this court pending the outcome of the claimants' appeal in the FTT. Finally, there are grounds 1 and 2 in the DHL and STR applications, although Mr Lyons QC accepts that they fall away were permission to be refused on the Art.103 point and no reference made to the Court of Justice of the European Union (“CJEU”).


The European Union's Customs Code (“UCC”) recast is contained in Regulation (EU) No 952/2013 of the European Parliament and of Council. It replaces earlier provisions in the Community Customs Code.


In short, the claimants argue that the C18 notices were out of time on a proper and EU-compliant construction of Art.103.2 of the UCC. Art.103 appears in a chapter entitled “Recovering of payment, repayment and remission of the amount of import and export duty.” It is headed “Limitation of customs debt,” and it reads, in part:

“1. No customs debt shall be notified to the debtor after the expiry of a period of three years from the date on which the customs debt was incurred.

2. Where the customs debt is incurred as a result of an act which at the time it was committed was liable to give rise to criminal court proceedings, the three-year period laid down in paragraph 1 shall be extended to a period of a minimum of five years and a maximum of ten years in accordance with national law.”


Essentially the claimants' case is that Art.103.2 is to be construed as an exceptional provision and, therefore, in a limiting way in as much as the term “criminal court proceedings” is concerned. As advanced by Mr Lyons QC, the claimants' case is that that phrase, “criminal court proceedings”, means offences requiring mens rea. In this case, the claimants contend that the HMRC case relies on s.167(3). That is framed in strict liability terms and provides that the persons involved in documentation or making statements which are untrue in any material particular are liable on summary conviction to a penalty. By contrast, s.167(1) of the 1979 Act requires a person to act knowingly or recklessly in relation to documents or statements untrue in any material particular since, in Mr Lyons' submission, HMRC are proceeding on the basis of s.167(3), and not s.167(1), the limitation period in the claimants' case was under Art 103(1) and thus was three years. Consequently, the C18 notices were time-barred.



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