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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lindsay v Customs and Excise [2002] EWCA Civ 267 (20 February 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/267.html Cite as: [2002] Eu LR 290, [2002] STC 588, [2002] RTR 18, [2002] 3 All ER 118, [2002] 1 WLR 1766, [2002] EWCA Civ 267, [2002] STI 238, [2002] WLR 1766

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LONDON TRIBUNAL CENTRE
(MR RODNEY HIGGINS)

		Royal Courts of Justice Strand London WC2A 2LL
		20 February 2002

LORD PHILLIPS, MR:

Introduction

1. In March 2000 Mr Lindsay, the respondent, bought himself a beautiful new car. It was a Millenium Special Edition of a Ford Focus, coloured yellow. He paid about £12,000 for it, a discount of £3,000 on the showroom price, granted to him because his father had worked for Ford. On 23 July 2000 he was about to drive onto the Shuttle in Calais to return to England after an early morning shopping expedition. When he entered the 'control zone' he was stopped by a British Customs Officer. She found that he was carrying a substantial quantity of cigarettes and tobacco. He said that he had purchased some of this for members of his family with money provided by them. She then said that he should have paid duty on the goods. She purported to forfeit both the dutiable goods and Mr Lindsay's car, in which those goods were being carried.
2. Mr Lindsay challenged the Customs' right to forfeit his car, following a procedure which I shall describe in due course. His challenge was successful. On 1 November 2001 the VAT & Duties Tribunal ('the Tribunal') ruled that the decision to deprive him of his car was disproportionate and would cause him undue hardship. His car should be restored to him or he should be paid compensation in lieu.
3. This case raises issues of principle which arise in hundreds of similar cases which are 'in the pipeline'. For this reason permission has been given by the single judge to the Commissioners for Customs and Excise to appeal against the Tribunal's decision direct to the Court of Appeal. The appeal has been given an expedited listing. This course was rendered possible because the Tribunal endorsed its decision with a certificate that the decision involved a point of law relating wholly or mainly to the construction of an enactment, a statutory instrument or of the Community Treaties and Community Instruments which had been fully argued before it and fully considered by it: see the Value Added Tax Tribunals Appeals Order 1986, Article 2(b).

The statutory framework

4. The Commissioners have a considerable armoury which they can bring to bear against those who bring excise goods into this country without paying duty on them. Criminal proceedings can be brought pursuant to section 170 of the Customs and Excise Management Act 1979 ('CEMA'). Under that section the Commissioners have to establish that the defendant fraudulently intended to evade the payment of duty. Their policy is, however, only to bring a criminal prosecution in the most serious cases. Their normal course is to rely, by way of sanction, upon statutory powers of forfeiture and condemnation, which do not involve a finding that a criminal offence has been committed. That is the course that they adopted in the present case.
5. The statutory scheme, which covers both substance and procedure, is complex. The best place to start is with the Excise Duties (Personal Reliefs) Order 1992, as amended by the Excise Duties (Personal Reliefs) Amendment Order 1999 and the Channel Tunnel (Alcoholic Liquor and Tobacco Products) Order 2000 ('the 1992 Order'), which deals with the circumstances in which relief from liability to pay duty is, and is not, available.
6. The 1992 Order applies to goods subject to excise duty ('excise goods') which are imported into the United Kingdom. It includes provisions which deal specifically with 'shuttle train goods'. These are goods brought into the 'control zone' at Calais by a passenger who is about to embark in the shuttle train ('the Shuttle") for passage from France to England. Such goods are treated as having been imported into the United Kingdom for the purpose of the regulations. This case is concerned with such goods, and accordingly I shall extract from the 1992 Order the relevant provisions that relate to them. These are as follows:

"2. Interpretation

(1)In this Order-

'Community traveller' means a person who makes a journey between a member State and the United Kingdom .... or a person who is about to embark or has embarked on a shuttle train in France for a journey to the United Kingdom;

....

'cross-border shopping' means the obtaining of excise goods duty and tax paid in the Economic Community provided that payment has not been, and will not be, reimbursed, refunded or otherwise dispensed with;

....

'own use' includes use as a personal gift provided that if the person making the gift receives in consequence any money or money's worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order.

....

3. Relief from duty of excise - cross-border shopping

Subject to the provisions of this Order a Community traveller entering [a control zone or] the United Kingdom shall be relieved from payment of any duty of excise on excise goods which he has obtained for his own use in the course of cross-border shopping and which he has transported.

[3A Relief from duty of excise - conditions - shuttle train goods

(1) In relation to shuttle train goods, this article shall have effect for the purpose of determining whether relief has been treated as having been afforded under article 3 above.

(2) No relief shall be treated as having been afforded if the goods are held for a commercial purpose.

(3) Where the shuttle train goods exceed any of the quantities shown in the Schedule to this Order the Commissioners may require the person holding the goods to satisfy them that the goods are not held for a commercial purpose.

(4) In determining whether or not any person holds shuttle train goods for a commercial purpose regard shall be taken of the factors listed in sub-paragraphs (a) to (j) of article 5(2) below.

(5) If the person holding the goods is required so to do but fails to satisfy the Commissioners that he does not hold them for a commercial purpose, it shall be presumed that the goods are held for a commercial purpose.

(6) Where the person holding the goods so fails to satisfy the Commissioners that he does not hold them for a commercial purpose, for the purpose of any proceedings instituted in accordance with paragraph 8 of Schedule 3 to the Customs and Excise Management Act 1979 or any appeal under section 16 of the Finance Act 1994, his failure shall cause the goods to be treated as 'goods held for a commercial purpose'.

....

The factors listed in Article 5(2) are the following:

(a) his reasons for having possession or control of those goods;

(b)whether or not he is a revenue trader;

(c)his conduct in relation to those goods and, for the purposes of this sub-paragraph, conduct includes his intentions at any time in relation to those goods;

(d)the location of those goods;

(e)the mode of transport used to convey those goods;

(f)any document or other information whatsoever relating to those goods;

(g)the nature of those goods including the nature and condition of any package or container;

(h)the quantity of those goods;

(i)whether he has personally financed the purchase of those goods; and

(j)any other circumstance which appears to be relevant."

7. Finally, the Schedule referred to in Article 3A provides:

"Tobacco Products

(a)800 cigarettes;

(b)400 cigarillos (that is to say cigars weighing not more than 3 grammes each);

(c)200 cigars;

(d)1 kilogramme of tobacco products other than in a form mentioned in paragraph (a), (b) or (c) above;

Alcoholic beverages

(e)10 litres of spirits;

(f)20 litres of intermediate products (that is to say products defined as intermediate products in Article 17(1) of the Council Directive 92/83/EEC);

(g)90 litres of wines (but only 60 litres may be sparking wines);

(h)110 litres of beer."

8. I now turn to the statutory provisions which lay down the consequences of importing excise goods without paying duty. Section 49 of CEMA provides that goods that are imported without payment of duty chargeable on them are subject to forfeiture. Section 141 provides, so far as material, that where anything becomes liable to forfeiture, any vehicle which has been used for its carriage also becomes liable to forfeiture. Section 152 provides, so far as material, that the Commissioners may, as they see fit, restore, subject to such conditions as they think proper, any thing forfeited or seized under CEMA.
9. Finally, I turn to the provisions that deal with procedure. Under Schedule 3 to CEMA if the Customs' right to forfeit is challenged, the Customs have to take out condemnation proceedings in the Magistrates Court. Although he initially made such a challenge, Mr Lindsay subsequently withdrew this. Instead he has pursued a challenge, not of the Commissioners' statutory powers, but of the manner in which they exercised those powers. The avenue that he pursued was open to him by virtue of certain provisions of the Finance Act 1994 ('the 1994 Act'). Sections 14 to 16 of the 1994 Act, when read together with Schedule 5 to that Act, provide for a two-tier system of review and appeal of decisions which include that taken to forfeit Mr Lindsay's car. The first stage was to seek a review of the decision from a Customs and Excise Review Officer, a Mrs Diane Florence. By letter dated 22 November 2000 she confirmed the decision.
10. Mr Lindsay appealed from Mrs Florence's decision to the Tribunal. Under Schedule 5 to the 1994 Act a decision whether or not to forfeit a vehicle is deemed to be a decision 'as to an ancillary matter'. Section 16(4) of the 1994 Act provides:

"(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say-

(a)to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;

(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and

(c)in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."

'Goods held for a commercial purpose'

11. The documentary evidence in this case suggested to me that there was a degree of confusion as to what was meant by 'goods held for a commercial purpose' in the 1992 Order. When I explored this with Mr Hugh McKay, who appeared for the Commissioners, it became apparent that this was indeed the case. The Order is intended to give effect to the provisions of Council Directive 92/12EEC of 25 February 1992 ('the Directive') and the confusion stems from that Directive.
12. The Directive deals with the incidence of excise duty within the internal market. Article 6 provides that 'excise duty shall become chargeable at the time of release for consumption'. Article 7 of the Directive provides that, where products released for consumption in one Member State are being held 'for commercial purposes' in another Member State, excise duty shall be levied in the latter Member State.
13. Article 8 provides:

"As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired."

14. Article 9 provides:tc \l 1 "Article 9 provides\:"

"1. Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purpose in another Member State.

In this case, the duty shall be due in the Member State in whose territory the products are and shall become chargeable to the holder of the products.

2. To establish that the products referred to in Article 8 are intended for commercial purposes, Member States must take account, inter alia, of the following:

- the commercial status of the holder of the products and his reasons for holding them,

- the place where the products are located or, if appropriate, the mode of transport used,

- any document relating to the products,

- the nature of the products,

- the quantity of the products.

For the purposes of applying the content of the fifth indent of the first subparagraph, Member States may lay down guide levels, solely as a form of evidence. These guide levels may not be lower than:

(a) Tobacco products

cigarettes 800 items

cigarillos (cigars weighing not more than 3g each) 400 items

cigars 200 items

smoking tobacco l,0kg;

(b) Alcoholic beverages

spirit drinks 10 l

intermediate products 20 l

wines (including a maximum of 60 l of sparkling wines) 90 l

beers 110 l."

15. Thus the Directive makes express provision for products acquired by private individuals for their own use and for products which are held for a commercial purpose. The Directive does not expressly provide for the case of the private individual who buys goods on behalf of others but not in circumstances which would naturally be described as being 'for a commercial purpose'. An example is the holidaymaker who purchases some cigarettes for and at the request of a relative who has provided him with the purchase money.
16. Mr McKay submitted that, under the Directive, such a situation would be deemed to be one where the goods were held 'for a commercial purpose'. He further submitted that the same was true of the references to holding goods 'for a commercial purpose' in the 1992 Order. His submission was that holding goods 'for a commercial purpose' was the precise antithesis of holding goods 'for one's own use'. Thus, any person with excise goods in his car would either be holding them for his own use or holding them for a commercial purpose. So far as Mr Lindsay was concerned, if he had bought cigarettes for members of his family, he was holding them 'for a commercial purpose' even though he was not going to make any profit from the transaction.
17. Mr McKay may be right about the Directive, although the only authority that bears on the point to which we were referred lends no support to his thesis (see R v Customs & Excise ex parte Emu Tabac SARL [1998] ECR 1-1605). So far as the 1992 Order is concerned, I cannot accept that a holidaymaker who is bringing back some cigarettes for his sister, in anticipation that she will reimburse him the purchase price, can properly be said to be holding the cigarettes 'for a commercial purpose'. The holidaymaker will be liable to pay duty on the cigarettes by reason of the provisions of the Tobacco Products Duty Act 1979. He will not be entitled to relief because he has not obtained the cigarettes for his own use. It does violence to the English language, however, to say that he is holding the goods 'for a commercial purpose'.
18. At various stages of the story with which we are concerned, there has been confusion as to whether Mr Lindsay was deprived of duty relief because he was not holding the cigarettes and tobacco for his own use, or because he was holding them 'for a commercial purpose'. This confusion was unfortunate. As I shall explain, I consider that there is a very significant distinction between a man who is bringing cigarettes into England to distribute to members of his family against reimbursement, and a man who is bringing cigarettes into England in order to sell them at a profit. At no time does anyone appear to have thought it material to consider into which category Mr Lindsay fell.

The Commissioners' Policy

19. Customs Officer, Robert Pennington, who is employed in the Commissioners' law enforcement directorship, gave evidence to the Tribunal of the Commissioners' policy in relation to the forfeiture of vehicles:

"4. 55. .... The [Commissioner's] policies are designed to penalise those who make a living from selling alcohol and tobacco without payment of duty, not the honest Community travellers. In 1993 when the Single Market was introduced the revenue eroded on smuggled excise goods brought into the UK was in the region of £30 to £40 million. By the year 2000 this had escalated to £3.8 billion from tobacco smuggling alone. To try and keep abreast of this increasing problem more robust methods of dealing with the seizure and reclamation of vehicles used to smuggle excise goods into the UK were initially brought into force in 1998. Then the general practice was that, if an individual had excise goods seized for the first time, the vehicle could only be restored after the payment of a sum of £250 or a sum equivalent to 50% of the duty due on the goods seized as liable to forfeiture whichever was the greater.

56. Despite this tougher policy being applied, the use of vehicles in excise smuggling continued in an upward trend and to outline this, in 1998, a total of 3,163 vehicles were seized containing excise goods with a revenue value of £142 million and in 1999 there were 5,200 vehicles seized containing excise goods to the value of £348 million.

57. The UK Government introduced its current policy on 13 July 2000 after the Paymaster General had, on 22 March 2000, reaffirmed the Government's commitment to ensure that smugglers face the toughest possible sanctions and penalties available. Now vehicles are seized and not restored on the first attempt they are detected being used in smuggling. This policy applies to all types of motor cars and light commercial vehicles except those which are genuinely rented. Only exceptional circumstances can justify a departure from the policy. An example was a motor car adapted for and used by a disabled driver."

20. Mr Pennington added that individual applications for restoration were considered on their own merits and officers bore in mind the need for proportionality.tc \l 1 "Mr Pennington added that individual applications for restoration were considered on their own merits and officers bore in mind the need for proportionality."
21. We asked to see the document in which the policy was originally promulgated. It was in the form of a circular letter (a DCL) dated 13 July 2000 to various Customs Officers, including Review Officers. I shall read a few extracts from this document:

"1. The Government's intention to tackle tobacco smuggling announced on 22 March by the Paymaster General included not only a £209 million investment in Customs but also a commitment to ensure that those caught would face the most severe penalties and sanctions available.

2. One of the most direct ways to strike at the smugglers' activities is by seizing the vehicles they use to smuggle in their contraband. As the Paymaster General has said, we are determined to ensure that this sanction is as tough as it can be. The more effective this sanction is, the more we will hit the smugglers in the pocket and reduce the profitability of their illegal trade.

3. We are now in the process of applying the toughest possible sanctions in terms of our vehicle seizure policy. We are tackling the different components involved - eg privately owned cars and light goods vehicles, hire or lease vehicles and commercial tractors & trailers - in separate, but coherent, bite-size chunks.

....

6. This revised policy sends out a strong message about vehicles to all those involved in smuggling: there are no second chances - if you use it, you will lose it. This policy is aimed at those who are profiting from smuggling or who are deliberately flouting the law. We would expect discretion to be applied where it is a case of the infrequent honest traveller who is genuinely unaware of the conditions of the Personal Reliefs Order and has made modest purchases on behalf of family who have not travelled.

....

Revised Policy - 'No Second Chances'

8. With immediate effect, our headline policy will be that any car or light goods vehicle (other than rented) used for smuggling or for transporting smuggled or diverted excise goods within the UK will be seized and not restored. Restoration will be very much the exception, not the rule, irrespective of whether it is the first time the smuggler has been caught. This policy is to be applied vigorously both at the ports and at all inland locations where it can be proved that a vehicle was used to transport goods which are liable to seizure.

....

11. Occasions which merit on the spot restoration will be very rare and by their nature unpredictable. Therefore, this DCL does not attempt to explore every possible scenario when restoration on the spot might be applicable. It leaves that decision to officers on the ground, with the advice of their senior officers where appropriate, who have the necessary expertise and experience. However, in general, the decision to restore should be because:

*it would be entirely disproportionate to refuse to restore the vehicle (one example could be on a first time 'technical' offence where a minimal amount of tobacco has been bought back for a relatives consumption with payment at cost)

*it would be seen as inhumane not to restore.

12. It is important for seizing officers to bear in mind the issues of proportionality and human rights (ECHR) when considering whether restoration is appropriate. It is not intended that restoration will be an option in any other circumstances."

The primary facts

22. The following primary facts were found by the Tribunal:

"Mr Lindsay is a night lorry driver who works at nights on weekdays solely in Great Britain. He lives at his parents' home in Dagenham, Essex and has a girlfriend who lives elsewhere. They have two children aged 6 and 3 and his girlfriend is pregnant. He supports his young family. He has four sisters and one brother. The four sisters are all married and live in their own homes.

In the year 2000 on 13 May, 27 May, 11 June and 9 July, Mr Lindsay made journeys in his vehicle from Cheriton to Coquelles and thence into France and Belgium to purchase cigarettes, tobacco and alcohol.

The last two occasions were Sunday trips and Mr Lindsay used the early bird service of the Channel Tunnel shuttle train leaving Cheriton at approximately 5.30am and arriving back at Coquelles between 9.15am and 9.30am. The summer time in France and Belgium is one hour ahead of the UK.

On Sunday 23 July 2000 Mr Lindsay, accompanied by his father, drove his vehicle from Dagenham to catch the same early bird service as before from Cheriton at about 5.30am. As on the previous occasions, the sole purpose of the visit was to buy excise goods whose retail price in Belgium and France is considerably less than in the UK because of the UK excise duties. They drove to a town in Belgium called Adinkerke, just across the border with France where they purchased the cigarettes and tobacco. The cost was £2,107 and they paid in cash. The cost of the cigarettes and tobacco included Belgian excise duty.

They then returned to France and stopped at a store near Calais to purchase the alcohol.

Mr Lindsay and his father went through French Customs and were stopped at 8.55am by British Customs Officers at the juxtaposed immigration control at Coquelles.

Mr Lindsay and his father were interviewed by Customs officer, Laura Bloomfield. She was told that they had been to France that morning to a cash and carry supermarket off junction 19 on the Motorway system. They were returning to Dagenham where they lived when they were stopped. Mr Lindsay was asked what he had bought and he replied 'booze, cigarettes and tobacco'. The back of the car and the unlocked boot were examined and found to contain goods which consisted of:

(i) two boxes of Benson & Hedges cigarettes (totalling 15,300 with a revenue value of £2,026.62).

(ii) one box of Superkings cigarettes (totalling 3,200 with a revenue value of £418.56).

(iii) one box of Golden Virginia hand-rolling tobacco; and

(iv)one box of Old Holborn hand-rolling tobacco (weighing together 10 kilos with a revenue value of £951)

(v)there were also loose cartons of Silk Cut cigarettes and a few cases of beer and bottles of spirits.

Mr Lindsay and his father were asked who were the owners of the goods. Mr Lindsay replied that the goods belonged to both of them. When asked whether all of them were intended for the two of them, Mr Lindsay replied that some of them were for other family members who had already paid some money for cigarettes."

The seizure

23. What has been described as a "civil caution" was given by Officer Bloomfield in the following terms:

"You have in your possession excise goods in excess of the guidance levels, which for tobacco is one kilogram, cigarettes is 800. Relief from payment of UK excise duty is afforded subject to the condition that these goods are not imported or held or used for a commercial purpose. I require you to satisfy me that these goods have not been imported for a commercial use. If you fail to do so, then these goods will be seized as being liable to forfeiture. However, at this point you are not under arrest and you are both free to leave these controls."

24. Both Mr Lindsay and his father indicated that they understood the caution, but made no further comment and were asked no further questions.
25. The excise goods and vehicle were then seized by the Commissioners.
26. This is the first example of the confusion that I referred to earlier in relation to the test for entitlement to relief. Mr Lindsay had already stated that some of the cigarettes were for members of his family, who had paid for them. That was enough to establish that he was not entitled to relief in respect of them. The statement in the caution, that if Mr Lindsay failed to satisfy Officer Bloomfield that the goods had not been imported for commercial use they would be seized, was not appropriate when she already had information justifying seizure. Had it been the Commissioners' policy to draw a distinction between (1) importation for family or friends against reimbursement and (2) importation for sale at a profit then it would have been appropriate to explore whether to accept Mr Lindsay's explanation that the former was the position. This was not, however, the case. It should be noted, that the reason for seizure that Officer Bloomfield recorded in her notebook was that the levels of excise goods brought in were above the guidance level and that Mr Lindsay had received payment for these from members of his family.
27. Subsequently, additional information was provided by or on behalf of Mr Lindsay as to the circumstances in which he had purchased the cigarettes and tobacco. He, his father and mother were heavy smokers. He and his father smoked hand-made cigarettes from Old Holborn and Golden Virginia Tobacco. He would smoke up to 50 of these a day. In addition they would smoke manufactured cigarettes on social occasions. Other members of his family were also heavy smokers. £900 of the money used to buy the cigarettes and tobacco had been provided by his sister Jane and her husband, his brother Steve and his girlfriend and his sisters, Clare and Jackie. A quantity of the cigarettes acquired were for their use.
28. This account does not appear to have been challenged. The Tribunal observed, 'the reason for the trip is not in dispute – to purchase cheap cigarettes, tobacco and alcohol for themselves and other members of their immediate family'. Had it been considered material whether the purchase had been for members of the family or for commercial resale, I consider that it would have been surprising if the former had been accepted without question. Mr Lindsay had made four previous trips on the Shuttle to purchase cigarettes, tobacco and alcohol in the previous three months. He had stated that he had only purchased 400 cigarettes on each occasion, but the Tribunal does not appear to have accepted this part of his evidence. The cigarettes and tobacco in Mr Lindsay's car on 23 July would have kept him and his immediate family going for many months, however hard they puffed. It seems to me that, had the issue been raised, the Tribunal could properly have concluded that Mr Lindsay was using his vehicle for commercial smuggling.

The first reconsideration

29. On 2 August 2000 Mr Lindsay's solicitors wrote to the Commissioners challenging their seizure of his vehicle on the ground that they had wrongly found that there was a commercial purpose behind the importation of the goods. I have not seen their letter, but I suspect that this may have evidenced further confusion as to the test for entitlement to relief from duty. This letter led to the initiation of the condemnation proceedings, which were subsequently withdrawn. At that point Mr Lindsay asked to have the seizure of his vehicle reviewed.
30. The Commissioners declined to offer the vehicle for restoration to Mr Lindsay. The reasons for not doing so were set out in a letter dated 4 October 2000 from Officer Skues. He explained that the Commissioners' efforts were directed towards deterring and detecting fraud, failure to pay duty that was due, irregularities and encouraging compliance with procedures established to control movements of excise goods. Against this background:

(i)the appellant had tobacco and cigarettes many times in excess of the Guidance levels;

(ii)he had received payment for the goods imported on behalf of persons not travelling;

(iii) he had declined to stay and answer questions

and therefore failed to satisfy theofficers as to his entitlement.

31. I interpose to comment that the third reason evidenced a misunderstanding of the true position.

tc \l 1 ""The review

32. Mr Lindsay then appealed against this decision to the Review Officer, Mrs Florence, by letter of 16 October 2000. He made a number of points in that letter, including the fact that he was paying for his vehicle through a finance company and a bank loan. He did not mention the value of the vehicle.
33. In her decision letter of 22 November, rejecting this appeal, Mrs Florence stated, in the course of outlining the facts:

"The Officer explained to you that due to the quantity of excise goods you were importing you were required to satisfy her that the excise goods were for your own use and not some other (commercial) purpose. She told you that if you failed to so the goods would be liable to forfeiture."

34. Later, when explaining why there was no entitlement to duty relief, she said:

"Relief from the payment of any excise duty afforded under the 1992 Order is only if the goods are for own use and that the individual has transported them. This is not the case here. You had entered into a commercial transaction with your family to purchase excise goods on their behalf. They are deemed not to be for 'own use' under the legal definition quoted earlier, therefore there is no relief from the payment of excise duty on these goods and this rendered them liable to forfeiture."

35. Here again there is confusion between purchase for family members and purchase for a commercial purpose.
36. In refusing to reverse the Commissioners' decision, Mrs Florence said this:

"Restoration Policy

With effect from 14 July 2000 the Commissioners' policy regarding privately owned vehicles used for the improper importation of excise goods is that they will not be restored, even on the first occasion they are so used. That policy applied at the time of the seizure of the vehicle. A car may however, be restored to a third party where it has been stolen and the matter was reported at the time.

....

Relief from the payment of any excise duty afforded under the 1992 Order is only if the goods are for own use and that the individual has transported them. This is not the case here. You had entered into a commercial transaction with your family to purchase excise goods on their behalf. They are deemed not to be for 'own use' under the legal definition quoted earlier, therefore there is no relief from the payment of excise duty on these goods and this rendered them liable to forfeiture."

The Tribunal's decision

37. In his notice of appeal to the Tribunal, Mr Lindsay, through his solicitor, Mr Woodcraft, referred for the first time to the value of his vehicle. He advanced the following contentions:

"7. The seizure of Mr Lindsay's car was a penalty out of all proportion to the question or amount of tobacco involved. The car was new and worth approximately £15,000. Mr Lindsay having purchased the car with a finance agreement with Ford Credit in the sum of approximately £12,000.

8. The amount of tobacco in question amounted to £2,107. Even if the duty on that was the same amount again, since the tobacco has been seized by Customs and Excise and its restoration is not being sought by Mr Lindsay, Mr Lindsay has already effectively incurred a substantial penalty equal to the duty which would have been paid. For the car to be seized on top of that is oppressive and disproportionate to the matter concerned. Seizing a car of this value exceeds even the amount of the fine which would ordinarily be payable in a criminal matter."

38. The Tribunal, chaired by Mr Rodney Huggins, heard oral evidence from Mr Lindsay, supported by his mother, and from the various Customs Officers involved in the procedure. The Tribunal produced a reasoned decision twenty pages in length. The argument advanced on behalf of Mr Lindsay included the contention that 'the forfeited goods were intended for the private use of the Appellant and members of his immediate family and there was no commercial element'. In relation to this submission, the Tribunal held at paragraph 69:

"Except for the Appellant's mother, the others had given the Appellant some £900 for their cigarettes. The total cost of the cigarettes and tobacco acquired in Adinkerke, Belgium was £2,107 and therefore approximately 43.8% of the total goods were bought with money provided by others and this quantity was not for 'own use' of the Appellant and his father. We consider these words 'own use' do not include other members of the family who pay in advance for tobacco brought back for their use. The Appellant's mother does not come within this category because her cigarettes were a gift from the Appellant and his father. We also find that this arrangement with other members of the family made the transaction 'commercial' since they were benefiting financially from the transaction in that the excise goods were cheaper than in the UK. The Appellant and his father were effectively agents for other members of the family in this enterprise."

39. While the first part of this paragraph was plainly correct, the same cannot be said of the penultimate sentence. The fact that the other members of the family were benefiting financially from the transaction because the goods were cheaper than in the UK did not make the transaction 'commercial' within the normal meaning of that word. Were it otherwise, Mr Lindsay's purchase for his own use could also have been said to be 'commercial'. This is a further example of the scope for confusion about the appropriate test.
40. However, the principal issue before the Tribunal, was whether the Commissioners' decision not to restore Mr Lindsay's car to him was one that they 'could not reasonably have arrived at' – within the meaning of those words in section 16(4) of the 1994 Act. Since the coming into force of the Human Rights Act 1998, there can be no doubt that if the Commissioners are to arrive reasonably at a decision, their decision must comply with the Convention. Quite apart from this, the Commissioners will not arrive reasonably at a decision if they take into account irrelevant matters, or fail to take into account all relevant matters – see C & E Commissioners v JH Corbitt (Numismatists) Ltd [1981] AC 22 at 60 per Lord Lane. It was argued before the Tribunal that the Commissioners' decision fell at both hurdles. It violated the Convention in that it involved depriving Mr Lindsay of his rights under Article 1 of the First Protocol to the Convention to the peaceful enjoyment of his possessions in circumstances which were disproportionately harsh. By the same token, because of the policy which was applied, the decision ignored the relationship that the value of the car bore to the duty that should have been paid, although this was a highly relevant matter.
41. Article 1 of the First Protocol provides:

"Every natural legal person is entitled to the peaceful enjoyment of his possessions. On-one should be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provision shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

42. In the course of referring to a previous decision of the Tribunal in the case of Dereczenik (Decision C00138) the Tribunal cited the following passage from the judgment of the Strasbourg Court in Air Canada v UK (1995) 20 EHRR 150 at paragraph 36:

"According to the Court's well-established case law, the second paragraph of Article 1 must be construed in the light of the principle laid down in the Article's first sentence. Consequently, an interference must achieve a 'fair balance' between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as whole, including the second paragraph: there must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued."

43. The Tribunal applied this test and found that, on the facts of this case, it was not satisfied. The essence of their reasoning appears in the following passages:

"We accept the evidence of Customs Officer Florence that the policy was hardened considerably and no consideration is given to the value of the motor vehicle seized in relation to the value of the duty sought to be avoided. The tribunal accepts that the Respondents have the right to exercise a policy with regard to such seizure, but it must achieve the 'fair balance' referred to in the Air Canada case. In our judgment the current policy does not achieve the fair balance since it excludes the reviewing officer from giving any real consideration to proportionality which, as has been demonstrated in this decision, is a fundamental concept of European law.

....

In this appeal, under the present policy, the reviewing officer considering restoration of a vehicle is excluded by the Commissioners' policy from giving full consideration to all relevant matters when deciding whether or not to restore the vehicle to its owner subject to conditions or otherwise. The evidence of Mrs Florence on this point is quite clear. Her discretion under s 152 of CEMA is fettered by the policy.

....

The Commissioners are entitled to formulate a policy, but where that policy restrains a discretion conferred by statute, that policy is at first sight unreasonable.

The tribunal finds that the value of the vehicle at time of seizure was at least £10,500. The reasons for that are that the new cost was just under £12,000 and Glass's guide for a year old Ford Focus was £8,500. This car was four months old and only had 5,000 miles on the clock. The excise duty assessed on the forfeited goods was approximately £3,500. These values are disproportionate and this factor should have been taken into account by the reviewing officer. She should not have ignored it.

The appellant is a lorry driver with a partner and small family of two children to support. He also has to pay hire purchase instalments on his motor car with most of the loan of £6,000 outstanding at the date of seizure. We find that by being deprived of his vehicle he suffers undue hardship."

44. Accordingly the Tribunal allowed the appeal. There is a dispute as to whether the terms in which they did so fell within their jurisdiction, so it is necessary to recite those terms verbatim:

"Exercising its power under s 16(4) of the Finance Act 1994 the tribunal directs that the seized vehicle is to be restored to the Appellant.

In the event of the vehicle having been disposed of, or having deteriorated whilst in the custody of Customs, then the tribunal has given guidance in paragraph 86 of this decision as to the value pertaining at the date of the seizure which the Commissioners shall take into account when compensating the Appellant. If the parties are unable to agree the amount of compensation then either party is at liberty to apply to the tribunal for a direction in this respect."

The issues before us

45. I have expressed some reservation about Mr Lindsay's evidence that the goods in his car were destined only for himself and his close family. That evidence has, however, been accepted and it is not for this Court to review the Tribunal's findings of fact. The major issue before this Court is one of principle. It is whether the current policy of the Commissioners so fetters their discretion when reviewing decisions taken to forfeit vehicles of those who evade duty on cigarettes, tobacco and alcohol as to prevent them from considering proportionality and thus to render their decisions unlawful.

The Commissioners' Contentions

46. The Commissioners challenge the jurisdiction of the Tribunal to direct the Commissioners to return Mr Lindsay's car to him, or to pay compensation in lieu. That challenge is, however, subsidiary to their challenge to the finding that their policy is unlawful. That finding is, so they submit, at odds with the decision of the President of the VAT and Duties Tribunals, Mr Stephen Oliver QC, in the case of Hopping v Commissioners of Customs and Excise, delivered on 25 September 2001 (E00170). The Commissioners' submissions are largely founded on that decision and, in particular, on the following passages:

"So is application of the 'use it and lose it' policy proportionate? In the words of the Air Canada decision the question is whether the policy and the decision as to its application in the present circumstances represents a reasonable relationship for the proportionality between the means employed and the aim pursued.

We start with the aim pursued. We see this as a legitimate aim for the reasons already given. The aim is found in the summary of Gerry Dolan's evidence. The policy is designed to check the increase in smuggling and the loss of revenues and the damage to the business of local traders.

On the other side of the balance is the means employed. Seizure and the refusal to restore the vehicle are, on first impression, direct violations of the owner's fundamental right of peaceful enjoyment of this vehicle. The result is capable of being arbitrary to the point of extravagant. The financial loss resulting from the refusal to restore an expensive car could many times exceed the loss of revenue sought from the smuggling operation. A less invasive way of dealing with the seized car might be to offer to release it on payment of a prescribed amount. Those are negative features which on their face tell against the Commissioners' policy being a proportionate reaction. But there are other factors which tend to balance up the 'means employed' by the Commissioners with the aim pursued. The first of these is that the actual means employed, ie seizure and refusal to restore, is a suitable way of preventing smuggling. Take away the vehicle and it can no longer be used for bootlegging. When a vehicle has been used every ten days to make short round trips to Calais and back it is realistic that that vehicle should be removed from circulation as a means of bootlegging. Second, to refuse to restore is even-handed. It is a course of action that is blind to the value of the vehicle and to the financial means of the owner. In other words it treats all bootleggers alike. This tends to outweigh the other, less invasive, course open to the Commissioners of offering to return the vehicle on payment of a monetary amount. Third, the owner who makes a bootlegging trip to France and whose vehicle is taken will know the score before he embarks on his smuggling operations. In a real sense he ventures his vehicle as one of the stakes of his dishonest enterprise. He foregoes his claim to any unqualified fundamental right of peaceful enjoyment of the vehicle before he sets off on his trip. Fourthly, so long as the seizure and refusal to restore the vehicle does not cause physical suffering or result in excessive inconvenience to defenceless third parties, its impact will be directed at the owner.

Every case will have to be dealt with on its own facts. But in principle we do not see a lack of balance when the factors set out above are brought into the reckoning. Where the owner is the driver he will know that he risks losing the vehicle when he sets out to bootleg. He takes the risk and loses when he is caught."

47. Mr McKay submitted that the principles set out in this passage were correct. He emphasised that the current policy was one which had been reached incrementally and only after less stringent policies had failed. The amount of revenue being lost was cogent justification for the policy. The Tribunal's criticism of the failure to have regard to the value of the vehicle was misplaced. That was a factor which the policy could properly disregard.

Mr Lindsay's contentions

48. On behalf of Mr Lindsay, Mr Philip Baker has added an extra string to the bow that was deployed before the Tribunal. There it was Mr Lindsay's case that the Commissioners' policy precluded the application of proportionality that was an essential if the requirements of the Human Rights Convention were to be observed. Before us Mr Baker has broadened his attack on that policy by contending that it also precludes the application of the doctrine of proportionality that forms an essential element of European Community law.
49. Mr Baker submitted that the principle expounded by the Strasbourg Court in Air Canada was only the starting point. To say that a balance had to be struck between the interests of the community and the rights of the individual did not go far enough. It was necessary to consider whether the deprivation of the individual's property was fair to the individual. The Strasbourg jurisprudence showed that the individual should not be subjected to an excessive burden (see Lithgow v UK (1986) 8 EHRR 329 at paragraph 120). It was impossible to apply the appropriate test of proportionality without having regard to, among other matters, the value of the vehicle seized. The Review Officer had failed to do so because she was fettered by the Commissioners' policy.
50. Mr Baker was critical of the decision in Hopping. In particular, he submitted that it was not 'even-handed' to disregard the value of the vehicle and the financial means of the owner. Both had to be taken into account if the effect of the penalty was not to be arbitrary and potentially unfair.
51. Turning to European Community Law, Mr Baker submitted that here also the principle of proportionality had to be observed. Where penalties were imposed for the unlawful importation of goods, they must not be disproportionate (see Louloudakis v Elliniko Demosio (Case C-262/99) at paragraphs 63-69).

The applicable principles

Human rights

52. The Commissioners' policy involves the deprivation of people's possessions. Under Article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is 'to secure the payment of taxes or other contributions or penalties'. The action taken must, however, strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued (Sporrong & Lonnroth v Sweden (1982) 5 EHRR 35 at paragraph 61; Air Canada as cited above). I would accept Mr Baker's submission that one must consider the individual case to ensure that the penalty imposed is fair. However strong the public interest, it cannot justify subjecting an individual to an interference with his fundamental rights that is unconscionable.

European Community law

53. It does not seem to me that the doctrine of proportionality that is a well established feature of European Community law has anything significant to add to that which has been developed in the Strasbourg jurisprudence. There is, however, a passage in Louloudakis, which is helpful in the present context in that it is of general application. I quote from paragraph 67:

"Subject to those observations, it must be borne in mind that, in the absence of harmonisation of the Community legislation in the field of the penalties applicable where conditions laid down by arrangements under such legislation are not observed, the Member States are empowered to choose the penalties which seem appropriate to them. They must, however exercise that power in accordance with Community law and its general principles, and consequently with the principle of proportionality."

54. There are then references to Strasbourg authority. The judgment continues:

"The administrative measures or penalties must not go beyond what is strictly necessary for the objectives pursued and a penalty must not be so disproportionate to the gravity of the infringement that it becomes an obstacle to the freedoms enshrined in the Treaty."

Conclusions

55. Broadly speaking, the aim of the Commissioners' policy is the prevention of the evasion of excise duty that is imposed in accordance with European Community law. That is a legitimate aim under Article 1 of the First Protocol to the Convention. The issue is whether the policy is liable to result in the imposition of a penalty in the individual case that is disproportionate having regard to that legitimate aim. More specifically, did it have that effect in the case of Mr Lindsay?
56. Mr McKay argued that the policy paid due regard to the principle or proportionality. When considering whether to restore a forfeited vehicle, the Review Officer would always give due consideration to the representations made by the owner. The demands of proportionality would be borne in mind.
57. It is true that the DCL referred to making a decision to restore when it would be 'entirely disproportionate to refuse to restore' and required seizing officers to 'bear in mind the issues of proportionality and human rights'. The general tenor of the letter made it plain, however, that restoration should only be ordered in exceptional circumstances, and this message was reinforced by the example given of such circumstances – 'a first time "technical offence" where a minimal amount of tobacco has been brought back for a relative's consumption with payment at cost'. The policy did not suggest that any regard should be paid to the value of the car. More significantly, in my view, it did not suggest that, save in the exceptional case referred to above, it was relevant to consider whether the goods were being imported to be distributed between family and friends or whether the importation was pursuant to a commercial venture under which the goods were to be sold at a profit.
58. In this context it is appropriate to refer to the comments of the Strasbourg Court in AGOSI v United Kingdom (1986) 9 EHRR 1 at paragraph 54:

"It is to be observed that although there is a trend in the practice of the Contracting States that the behaviour of the owner of the goods and in particular the use of due care on his part should be taken into account in deciding whether or not to restore smuggled goods - assuming that the goods are not dangerous - different standards are applied and no common practice can be said to exist. For forfeiture to be justified under the terms of the second paragraph of Article 1, it is enough that the explicit requirements of this paragraph are met and that the State has struck a fair balance between the interests of the State and those of the individual. The striking of a fair balance depends on many factors and the behaviour of the owner of the property, including the degree of fault or care which he has displayed, is one element of the entirety of circumstances which should be taken into account."

59. In that case the Court held that the forfeiture by the Customs of 140 Krugerrands, which had been smuggled into the country in breach of import restrictions, did not violate Article 1 of the First Protocol.
60. In considering the Commissioners' policy it is appropriate to bear in mind the scale of the evil against which it is directed. Mr Baker referred us to a Report by the Comptroller and Auditor General released a week ago which includes details of measures taken by the Customs to combat fraud. This records a large number of options available against tobacco smuggling, only one of which is 'increased emphasis on asset confiscation to remove the economic rewards of smuggling'. Yet the target over a five year period is no more than to reduce the proportion of the United Kingdom market that is represented by smuggled cigarettes from 21% to no more than 18%. The statistics referred to by Mr Pennington demonstrate that the average revenue value of goods in vehicles seized exceeds £50,000. The trade that is carried on in smuggled cigarettes is massive.
61. It is also relevant to bear in mind that the free movement of persons within the internal market, albeit that this is subject to the requirement for Shuttle travellers to drive through the control zone, greatly facilitates the illicit importation of excise goods into the United Kingdom. When reckoning up the risk, the potential smuggler will have regard not merely to the consequences of apprehension but to the likelihood that this will occur.
62. Finally it is right to bear in mind that notice is given to travellers that they are only entitled to bring back excise goods duty free if they are for their own use and that smuggling can lead to the forfeiture of their vessels. Anyone who uses his car for smuggling is likely to be taking a calculated risk.
63. Having regard to these considerations, I would not have been prepared to condemn the Commissioners' policy had it been one that was applied to those who were using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at a profit. Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles. Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration. Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance. Cases of exceptional hardship must always, of course, be given due consideration.
64. The Commissioners' policy does not, however, draw a distinction between the commercial smuggler and the driver importing goods for social distribution to family or friends in circumstances where there is no attempt to make a profit. Of course even in such a case the scale of importation, or other circumstances, may be such as to justify forfeiture of the car. But where the importation is not for the purpose of making a profit, I consider that the principle of proportionality requires that each case should be considered on its particular facts, which will include the scale of importation, whether it is a 'first offence', whether there was an attempt at concealment or dissimulation, the value of the vehicle and the degree of hardship that will be caused by forfeiture. There is open to the Commissioners a wide range of lesser sanctions that will enable them to impose a sanction that is proportionate where forfeiture of the vehicle is not justified.
65. I do not think that it would be impractical to distinguish between the truly commercial smuggler and others. The current regulations shift the burden to the driver of showing that he does not hold the goods 'for commercial purposes' when these exceed the quantity in the Schedule. In a case such as the present the driver importing for family or friends should be in a position to demonstrate that that is the case if called upon to do so (see the comments of Lord Woolf CJ in Goldsmith v Custom and Excise Commissioners [2001] 1 WLR 1673 at pp 1679-70).
66. Unfortunately, in the present case and, I suspect, in others, the Customs Officers have drawn no distinction between the true commercial smuggler and the driver importing goods for family and friends. Because of the confusion to which I referred at the outset, the cars of both have been treated as subject to almost automatic forfeiture. Review Officer Florence appears to have understood that the Commissioners policy rendered it irrelevant whether or not Mr Lindsay's story was true and equally irrelevant the value of his car and the effect that its deprivation would have on him. I believe that she correctly interpreted the policy.
67. For these reasons, I consider that the Tribunal was correct to decide that Mrs Florence's decision could not stand because she had failed, when reaching it, to have regard to all material considerations. To that extent the Commissioners' appeal must be dismissed. It remains to consider whether the terms of the relief directed by the Tribunal fell within their jurisdiction.

Jurisdiction

68. The Tribunal directed that Mr Lindsay's vehicle should be restored to him and that, if this were not possible, the Commissioners should pay him compensation. In so doing they purported to be exercising jurisdiction conferred by section 16(4) of the 1994 Act. That subsection expressly spells out the powers of the Tribunal in the circumstances of this case. They include the power to direct that the decision appealed against ceased to have effect and to require the Commissioners to conduct a further review of the original decision in accordance with the directions of the Tribunal. Mr Baker sought to persuade us that that was all that the Tribunal had done. The decision appealed against was that the vehicle should not be restored. If that decision ceased to have effect, it followed, inevitably, that the vehicle would have to be restored and the Tribunal had done no more than give this direction.
69. I do not agree. The Tribunal have done more than direct that Mrs Florence's decision ceased to have effect. They have purported to reverse it. That is something that they had no jurisdiction to do. To make this plain it is only necessary to contrast subsection (4) of section 16 with subsection (5), which provides:

"In relation to other decisions, the powers of an appeal tribunal on appeal under this section shall also include the power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal."

70. I consider that the appropriate Order is that the Commissioners conduct a further review of Review Officer Florence's decision in the light of the decision of the Tribunal and this judgment. tc \l 1 "I consider that the appropriate Order is that the Commissioners conduct a further review of Review Officer Florence's decision in the light of the decision of the Tribunal and this judgment. "
71. LORD JUSTICE JUDGE: I agree with the judgment of the Master of the Rolls on the issues of principle and their application to this appeal. My brief observations are by way of emphasis only. There is usually a marked distinction between those who smuggle alcohol, cigarettes and tobacco for profit and those who, without profit, smuggle amounts in excess of the permitted limits for their personal use and occasional distribution to family members and close friends. The vehicles used by those whose activity falls into either category are liable to be seized.
72. Given the extent of the damage caused to the public interest, it is, in my judgment, acceptable and proportionate that, subject to exceptional individual considerations, whatever they are worth, the vehicles of those who smuggle for profit, even for a small profit, should be seized as a matter of policy. However, the equal application of the same stringent policy to those who are not importing for profit fails adequately to recognise the distinction between them and those who are trading in smuggled goods. Accordingly the policy is flawed.
73. In my judgment, the question whether the power to seize the vehicle of a non-profit making smuggler should be exercised is fact dependent, requiring a realistic assessment of all the circumstances of the individual case, including the alternative sanctions available to the Commissioners, rather than the virtually automatic imposition of a burdensome and, at times, oppressive prescribed penalty.
74. MR JUSTICE CARNWATH:I agree with the judgment of the Master of the Rolls on both issues.
Order: Appeal allowed to extent that it challenges the jurisdiction of the tribunal. Matter to be remitted to the Commissioners to conduct a further review of Miss Florence's decision in the light of the decision of the tribunal and this judgment. No orders as to costs. Leave to appeal to the House of Lords refused.