The Commissioners for HM Revenue and Customs v Martyn Glen Perfect
| Jurisdiction | England & Wales |
| Judge | Lord Justice Baker |
| Judgment Date | 19 March 2019 |
| Neutral Citation | [2019] EWCA Civ 465 |
| Date | 19 March 2019 |
| Docket Number | Case No: A3/2018/0911 |
| Court | Court of Appeal (Civil Division) |
[2019] EWCA Civ 465
Lord Justice Patten
Lord Justice Baker
and
Mr Justice Nugee
Case No: A3/2018/0911
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
The Upper Tribunal (Tax and Chancery Chamber)
UT/2016/0038
Royal Courts of Justice
Strand, London, WC2A 2LL
Jessica Simor QC (instructed by HMRC's Solicitors) for the Appellant
David Bedenham (instructed by Rainer Hughes) for the Respondent
Hearing dates: 12 February 2019
Approved Judgment
Lord Justice Baker (giving the judgment of the Court):
The principal question arising on this appeal is whether a lorry driver who at the excise duty point is found to be carrying goods in respect of which duty has not been paid is strictly liable to pay the duty under EU law as implemented by statutory instrument in this country.
The point arises on an appeal by the Commissioners for HM Revenue and Customs (“HMRC”) against a decision of the Upper Tribunal (Whipple J and UTJ Greenbank) upholding an earlier decision of the First-tier Tribunal (“FtT”) in which it set aside an assessment served on the respondent, together with a penalty imposed by him under statute.
Counsel for HMRC contended that this case raises an important point of principle or practice, the outcome of which will have significant implications for indirect tax policy and HMRC's ability to fight excise fraud.
Summary of facts
The following summary is taken principally from the decision of the FtT.
The Excise Movement and Control System (“EMCS”) is an EU-wide electronic system for recording and validating movements of duty-suspended excise goods within the EU. Authorised warehouse keepers and registered consignors of duty-suspended goods must complete and submit an electronic administrative document (“eAD”) via the EMCS before the goods are moved. Once the information entered on the eAD is validated, EMCS generates a unique Administrative Reference Code (“ARC”) for that particular movement. The ARC must travel with the goods and be available for presentation when requested. The consignor is therefore obliged to provide the person accompanying the goods during the course of the movement with a hard copy of a commercial document on which the ARC is clearly stated.
The respondent, Mr Martyn Perfect, is an experienced lorry driver. In August 2014, he began working for a firm which he identified to HMRC as “Kells Transport”, having been offered work in a telephone call from an individual he knew only as “Des”. As far as he was aware, the firm was based at a lorry park in Basildon in Essex where he would go to pick up the vehicle that he was asked to drive. The lorry would always be filled with fuel and he never had occasion to fill it up himself. If there was a job to do, he would receive a telephone call from “Des” and would go to the lorry park and pick up an empty trailer which he would take to a secure trailer park in Calais and swap for another trailer loaded with goods to be brought into the UK. He agreed to work for the company for £250 per week on the basis of two or three days' work, or more if he worked for a longer period. He would find the relevant documentation for the load in a tube on the side of the trailer, sometimes in a plastic wallet. He would look at the documentation, which consisted of a freight contract and delivery note, to ascertain the nature of the goods he was carrying and their destination. He was paid in cash at the end of the week.
On 6 September 2013, the appellant collected a lorry from Calais which was loaded with 26 pallets of beer. He looked at the documentation which confirmed that the consignment consisted of beer and that the ultimate destination was a warehouse in Barking. On arrival at Dover Docks, he was stopped by the UK Border Force officers who, on checking the documentation, found that excise duty due on the consignment of beer had not been paid. The ARC identified on the contract documents had been allocated to a previous consignment. The contract stated that the consignor was a German bonded warehouse called Major Weine KG, that the consignee was a UK bonded warehouse called Seabrook Warehousing Ltd, and that the transporter was called “D Khells”, with an address in County Fermanagh. When questioned, the appellant said that he was employed by a “D Kells” based in Basildon in Essex. Subsequent enquiries by HMRC have failed to locate a haulier or transport company with such a name based in Basildon. The postcode on the freight contract relates to a company called S.D. Kells Ltd which operates a chain of department stores in Northern Ireland.
As the goods had been transported without appropriate documentation, the lorry and goods were seized. Following the seizure, the appellant spoke to “Des” and told him what had happened. He was subsequently paid his money for the week but had no further contact with “Des” and did not work for him again. Notice of the seizure was sent to the consignor and to the appellant. The seizure of the goods was not challenged and as result they were duly condemned as forfeit.
Before the FtT, it was accepted by HMRC that the appellant would have no means of checking the ARC and whether it had previously been used because the system is only accessible by the UK Border Force or HMRC. The FtT found that the appellant had no information which could have led him to conclude that he knew he was carrying goods in respect of which excise duty had not been paid. The FtT added that it would not expect a lorry driver in his position to have subjected the documentation to detailed scrutiny and that it was unlikely that he would pick up discrepancies such as the different spelling of “Kells”.
The FtT described the investigation carried out by HMRC as very limited. In particular, it made no attempt to identify the legal owner of the lorry, nor undertook any other search of DVLA records. At all times, HMRC has accepted that, although the evidence pointed overwhelmingly to an attempt to deliver excise goods to this country without payment of duty, it did not show that the appellant was actively involved in this attempt or that he himself deliberately attempted to evade excise duty.
Nevertheless, on 20 February 2014, HMRC sent a letter to the appellant headed “assessment and penalty explanation” in which it stated that, in the circumstances, the commissioners were entitled to assess him for the excise duty under s.12(1A) of the Finance Act 1994 and impose penalties under Schedule 41 to the Finance Act 2008; that, by virtue of the appellant's actions, an excise duty point had been created in the UK and excise duty had become liable on the goods seized in accordance with regulation 13(1) and (2) of the Excise Goods (Holding Movement and Duty Point) Regulations 2010, (“the 2010 Regulations”) in the sum of £22,779; and that, as a result of his behaviour, it was imposing a penalty under Schedule 41 of the 2008 Act in the sum of £4,555. Following a review carried out at the request of the appellant's solicitors, the Revenue maintained the assessment of duty owed and increased the penalty to £4897.48.
On 4 September 2014, the appellant filed a notice of appeal against the assessment and penalty to the Tax Chamber of the FtT. On 19 October 2015, the FtT (Judge Timothy Herrington and Mr Michael Bell ACA CTA) allowed the appeal and ordered that both the assessment and penalty should be discharged. HMRC appealed against that decision to the Tax and Chancery Chamber of the Upper Tribunal. On 8 December 2017, the Upper Tribunal dismissed the appeal in relation to the assessment and upheld the FtT's decision as to the penalty on different grounds.
On 19 April 2018, HMRC filed a notice of appeal to this Court against the Upper Tribunal's decision. On 25 June 2018, Floyd LJ granted permission to appeal.
The legislative and regulatory framework
Council Directive 2008/118/EC (concerning the general arrangements for excise duty and repealing Directive 92/12/EEC) (“the 2008 Directive”) harmonises the principles to be applied across the EU concerning the point at which excise duty is levied on excise goods and the duty-suspended movement of goods between Member States. As its title indicates, the 2008 Directive replaced Council Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (“the 1992 Directive”). Ms Simor submitted that jurisprudence interpreting the 1992 Directive assists in interpreting the corresponding provisions of the 2008 Directive. That may be so, but it must be borne in mind that the scope of the 1992 Directive was somewhat narrower than that of the 2008 Directive.
Recital 8 to the 2008 Directive provides:
“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.”
Chapter II of the Directive, headed “Chargeability, Reimbursement, Exemption” contains general provisions about those aspects of excise duty. Under section 1, headed “time and place of chargeability”, Article 7 of the Directive provides, inter alia:
“(1) Excise duty shall become chargeable at the time, and in the Member State, of release for consumption
(2) For the purposes of this Directive, ‘release for consumption’ shall mean any of the following:
(a) the departure of excise goods, including irregular departure, from a duty suspension arrangement;
(b) the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of...
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