The Commissioners for HM Revenue and Customs v Répertoire Culinaire Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Lady Justice Asplin,Lord Justice Patten |
| Judgment Date | 20 November 2017 |
| Neutral Citation | [2017] EWCA Civ 1845 |
| Docket Number | Case No: A3/2016/2305 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 November 2017 |
[2017] EWCA Civ 1845
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Mr Justice Birss and Judge Hellier
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Henderson
and
Lady Justice Asplin
Case No: A3/2016/2305
Mr Kieron Beal QC (instructed by the General Counsel and Solicitor to HMRC) for the Appellants
Mr Hugh Mercer QC and Mr Philippe Dewast (French Advocate) (instructed by Ann L Humphrey Solicitors) for the Respondent
Hearing dates: 4 and 5 October 2017
Introduction and background
This is a case about the liability to excise duty on consignments of cooking wine, cooking port and cooking cognac (to which I will refer collectively as "cooking liquors"), imported into the United Kingdom from France by the respondent Répertoire Culinaire Limited ("RCL") which is a wholesale trader in the food business based in Hackney, London E8.
The cooking liquors in question are ordinary red or white wine, port and cognac, produced in the usual way, to which salt and pepper have been added in sufficient quantity to make them undrinkable, although they remain suitable for consumption when used as an ingredient in cooked food or other culinary products.
The case has had a prolonged and rather complex procedural history, which began when a consignment of cooking liquors despatched by road to RCL by a French supplier, Ravel SA, was intercepted at the UK Customs Control Zone at Coquelles in France on 10 July 2002. Following inspection, the load was found to consist of 2,800 litres (in 70 boxes) of red wine, the same quantity of white wine, 160 litres (in 20 boxes) of port, and 80 litres (in 10 boxes) of cognac. The red and white wine had an alcoholic content by volume ("ABV") of 11%. The ABV of the port was 19%, and of the cognac 40%. There was no evidence that excise duty had been paid on the goods, either at Coquelles (which was a UK excise duty point) or elsewhere in France. Nor was there any Accompanying Administrative Document for the goods. The goods were therefore detained, and following further enquiries by the National Discreditation Team of HMRC they were formally seized on 16 July 2002 as liable to forfeiture under Regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 ("the 1992 Regulations") and section 49(1) of the Customs and Excise Management Act 1979 ("CEMA 1979"). The notice of seizure was addressed to the French consignor of the goods, Ravel SA.
It is common ground that the goods seized were all cooking liquors. The consignment note accompanying the goods described them as " vin de cuisine", and the invoice addressed to RCL from the supplier added the description " salé-poivré" against each of the items. RCL appointed a leading firm of London solicitors, Dechert, to act for it in relation to the seizure of the goods, and also in relation to the assessments to excise duty which I will shortly mention. On 2 August 2002, Dechert requested immediate return of the seized goods. This was refused, and a departmental review of the decision was then sought, which in turn upheld the original decision on 17 October 2002. RCL then exercised its right to appeal to the VAT and Duties Tribunal (as it then was) ("the VAT Tribunal") against HMRC's refusal to restore the goods.
Meanwhile, on 12 July 2002 HMRC's Holding and Movement Team had visited RCL's London premises where they met the company's marketing manager and a member of the purchasing team. It transpired that RCL had imported similar goods on a number of previous occasions, and that none of the goods were used by RCL itself to manufacture or process other goods, but all of them either had been, or were intended to be, sold on to external purchasers in the same state as they arrived in the UK. HMRC's officers examined 14 delivery notes dated between August 2001 and May 2002, as well as the relevant stock in hand which was still awaiting onward sale or delivery. On the basis that the goods were subject to duty, the total excise duty payable was calculated to be £59,737, and the stock in hand was detained in RCL's warehouse.
On 18 July 2002, HMRC made two assessments on RCL to excise duty, the first for £53,853 in respect of the imported stock which had already been sold on, and the second for £5,884 in respect of the stock in hand in the warehouse. The assessments were made on the basis that the goods were subject to duty at the time of importation into the UK under paragraph 4(1) of the 1992 Regulations, that the person liable to pay the duty on an importation from another Member State was the importer, and that RCL had not been approved to receive excise goods under duty suspension, nor had the duty been prepaid. A departmental review of the assessments was then requested, but the assessments were upheld on 27 September 2002. For reasons which remain obscure, however, no appeals were made by RCL against the assessments, even though they related to goods which were entirely separate from the consignment which had been detained at Coquelles and subsequently seized. In his oral submissions to us, Mr Mercer QC for RCL frankly accepted that the assessments ought to have been appealed within the usual time limit. We are in no position to say whose fault it was that nothing was done, but that timely appeals should have been brought can scarcely be doubted.
To avoid confusion, I will refer to the goods which were seized at Coquelles as "the seized goods", and to the imported goods which were the subject of the two assessments as "the imported goods". The managing director of RCL subsequently gave evidence to the VAT Tribunal that RCL had sold imported cooking liquors to 59 restaurants, three outside caterers, two hotels and one wholesaler whose customer base consisted entirely of restaurants. It is common ground that when cooking liquors are used as an ingredient in accordance with any recognised recipe, the finished product will always have an ABV of less than 5%.
The charge to, and exemption from, excise duty on cooking liquors under EU law, and the purported implementation of these provisions in domestic UK law
At this point, it is convenient to introduce the basic provisions of EU law which (as the Court of Justice of the European Union ("the CJEU") has now decided in the present case) apply to cooking liquors, and to describe the now admittedly defective manner in which these provisions of EU law were purportedly implemented in domestic UK legislation. As a preliminary observation, it should be noted that in 2002 there was no agreement within the EU about how such products should be treated, and many Member States, including France, took the view that cooking liquors fell wholly outside the scope of excise duty, with the consequence that they were entitled to move freely within the EU without any accompanying documents.
The governing directive for present purposes is Council Directive 92/83/EEC of 19 October 1992, on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages ("the Excise Directive"). The following recitals relating to exemptions are relevant:
"Whereas it is necessary to lay down at Community level the exemptions which apply to goods which are transported between Member States;
Whereas, however, it is possible to permit Member States an option to apply exemptions tied to end-uses within their territory;
…
Whereas Member States should not be deprived of the means of combating any evasion, avoidance or abuse which may arise in the field of exemptions;
Whereas Member States should be permitted to give effect to the exemptions required by this Directive by way of refund;
…"
Article 7(1) provides that: "Member States shall apply an excise duty to wine in accordance with this Directive".
Section V of the Excise Directive is headed "Ethyl Alcohol", and provides materially as follows:
" Article 19
1. Member States shall apply an excise duty to ethyl alcohol in accordance with this Directive.
2. Member States shall fix their rates in accordance with Directive 92/84/EEC.
Article 20
For the purposes of this Directive the term "ethyl alcohol" covers:
— all products with an actual alcoholic strength by volume exceeding 1,2% volume which fall within CN [ combined nomenclature] codes 2207 and 2208, even when those products form part of a product which falls within another chapter of the CN,
— products of CN codes 2204, 2205 and 2206 which have an actual alcoholic strength by volume exceeding 22% vol.,
— potable spirits containing products, whether in solution or not."
CN codes 2207 and 2208, to which reference is made in the first indent of Article 20, include various forms of spirit and (expressly) cognac. Wine is covered by CN 2204.
Section VII of the Excise Directive deals with exemptions. The main relevant provisions of Article 27 are as follows:
"1. Member States shall exempt the products covered by this Directive from the harmonised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:
…
(f) when used directly or as a constituent of semi-finished products for the production of foodstuffs, filled or otherwise, provided that in each case the alcoholic content does not exceed 8,5 litres of pure alcohol per 100 kg of the product for chocolates, and 5 litres of pure alcohol per 100 kg of the product for other products.
…
6. Member States shall be free to give effect to the exemptions mentioned above by means of a refund of excise duty paid."
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