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Repertoire Culinaire Ltd v Revenue & Customs  UKFTT 75 (TC) (24 April 2009)
EXCISE DUTY WINE
Excise duty wine
Appeal number LON/2002/8331
EXCISE DUTIES – Cooking wine and cooking cognac – whether subject to excise duty as ethyl alcohol – whether exempt from excise duty under art. 27.1 of Directive 92/83/EEC – whether s.4FA 1995 adequately implements art. 27.1(f) of the Directive – whether a reference should be made to the Court of Justice – Skatterverket v Gourmet Classic Limited (Case C-459/06) considered – Questions referred to the Court of Justice
REPERTOIRE CULINAIRE LTD Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS (Excise Duty) Respondents
Tribunal: JOHN WALTERS QC (Judge)
Sitting in public (as the VAT and Duties Tribunal) in London on 10 and 11 December 2008
Hugh Mercer QC and Philippe Dewast (French Advocate) instructed by Wilkins Kennedy, for the Appellant
Sarabjit Singh instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2009
Introduction and facts
- This is an appeal against a decision by Mr. G. A. Murray, a Review Officer of the Respondent Commissioners ("HMRC") communicated to Dechert, then acting on behalf of Repertoire Culinaire Ltd ("the Appellant") by a letter dated 17 October 2002 ("the Decision Letter"). Mr. Murray's decision was to refuse restoration of certain goods namely, 2800 litres of white wine, 2800 litres of red wine, 160 litres of port and 80 litres of cognac.
- The white wine and the red wine was 11% alcohol by volume (ABV), the port was 19% ABV and the cognac was 40% ABV.
- The Decision Letter contained the statement that "It is evident that the wine, port and cognac had salt and pepper added to them, the goods were 'undrinkable' and intended for culinary purposes".
- The CMR document (consignment note) accompanying the goods described them as 'vin de cuisine'. The invoice addressed to the Appellant from the supplier of the goods, Ravel S.A. of St-Galmier, France, gives the added description 'salé-poivré' against each of the goods and the customs code 2103909089. In this Decision we adopt a description of the goods as "cooking wine", "cooking port" and "cooking cognac", and generally as "cooking liquors".
- Restoration of the cooking liquors was refused on the grounds, principally, that HMRC considered that they "were subject to UK excise duty at the normal rates for alcohol".
- We attach to this Decision as Appendix 1 the text of an "agreed statement of undisputed facts" which the parties put before us. From this statement it appears (see: paragraph 18 thereof) that the position as at 19 July 2007 was that there was no agreement within the Community as to how the cooking liquors subject to this appeal should be treated. Some Member States took the view that cooking wine is not within the scope of excise duty under EC Directive 92/83/EEC ("the Directive") and therefore entitled to move freely within the EU without any accompanying document.
- There appear to be conflicting opinions given by the Excise Committee on the issue of whether cooking liquors are subject to excise duty under the Directive. Mr. Mercer QC, for the Appellant, refers to CED No. 234 of 1997, which appears to be supportive of the interpretation for which he contends, whereas Mr. Singh, for HMRC, claims support for his (contrary) contention in CED No. 365 of 2001 and CED No. 372 Final of 2002. The Tribunal notes, however, that the guidelines issued under reference CED No. 373 Final of 2002 were not unanimously approved.
- The Tribunal received a Witness Statement from M. Albert Allo, Chef du Bureau F/3, Contributions indirectes at the Direction Générale des Douanes et Droits indirects of the French Ministry of Economy, Finance and Industry, to which HMRC made no objection. We accept the statements of fact made in that Witness Statement and in the other Witness Statements to which we make reference below.
- M. Allo states that at the meeting of the Excise Committee on 22 November 2004, the Commission tabled a proposal for new guidelines (CED No. 497 of 2004) which would cancel the guidelines in CED No. 372 Final of 2002 and propose to consider cooking wine and cooking cognac as aromas which benefit for the exemption from excise duty provided for under article 27.1(e) of the Directive, instead of article 27.1(f).
- M. Allo further states that by then the position of Member States was confused, as recorded in the minutes of the Excise Committee held on 24 and 25 November 2005 (CED No. 505 of 2005).
- From M. Allo's evidence the Tribunal finds as follows.
- The position of France and Ireland is that cooking liquors are not products covered by the Excise Directive and may circulate freely within the European Union without the need for any accompanying document.
- Apparently France is the only producer of cooking wine and has a long well established practice of dealing with cooking wine. French Customs are well aware of the nature of cooking liquors which have been tested in an independent laboratory. From these tests it has been concluded that cooking liquors can only be used as food preparation. French Customs are equipped with appropriate means of control of the movements of cooking liquors and have had no history of fraud or abuse in their use.
- It is not possible (at any rate as a matter of economic practicality) either to reverse the mixing process to separate the alcoholic beverage from the pepper and salt or to isolate the alcoholic content of the wine in its entirety.
- M. Allo further states that having regard to the extent of confusion among Member States on this issue, a decision of the Court of Justice would be welcome and the French Government would consider intervening in judicial proceedings before the Court of Justice. (It should be noted that M. Allo's Statement was made (on 3 April 2007) before the case of Gourmet Classic – see paragraph 21 below – and also that the French Government apparently took no part in the proceedings before the Court of Justice in that case.)
- M. Allo also states that the Excise Committee has given consideration to the classification of cooking liquors as aromas which benefit from the exemption from excise duty provided for under article 27.1(e) of the Directive, instead of article 27.1(f).
- The Tribunal also received a Witness Statement from M. Alain Imola, president of the Syndicat National des Producteurs d'Alcools et produits dérivés pour metiers de bouche and Managing Director of Bardinet Gastronomie, which was not objected to by HMRC. M. Imola states that in both capacities he has acquired substantial knowledge of the operations of the exportation business of cooking liquors throughout the European Union. He states with reasons his opinion that cooking liquors are not subject to excise duty.
- The Tribunal also received a Witness Statement from M. d'Espous, the Managing Director of the Appellant, again not objected to by HMRC. M. d'Espous states that the Appellant has sold cooking liquor to 59 restaurants, 3 outside caterers, 3 hotels and one wholesaler, whose customer base consists entirely of restaurants. He confirms that the Appellant's customers use cooking liquor purchased from the Appellant as an ingredient incorporated into foodstuffs. He confirms that even before incorporation into a sauce or dish, the alcohol content of cooking wine is never above 5%. After incorporation, because of the process of simmering, the alcohol content is further diluted.
- Between the time when the appeal was lodged (on 4 November 2002) and the substantive hearing (10 and 11 December 2008) the issues debated between the parties have been refined. At the hearing the Tribunal was invited to adjudicate on two issues, as follows:
1) Are cooking liquors products subject to excise duty under the Directive?; and
2) If so, are cooking liquors exempt from excise duty by application of article 27 of the Directive?
- It was the Appellant's submission that we ought to refer questions on these issues to the Court of Justice of the European Communities ("ECJ"). HMRC opposed this.
- The first issue has already been considered by the ECJ in the reference in Skatteverket v Gourmet Classic Limited (Case C-459/06). On 12 June 2008 the ECJ delivered a judgment in that case in which it ruled that "the alcohol contained in cooking wine is, if it has an alcoholic strength exceeding 1,2% by volume, to be classified as ethyl alcohol as referred to in the first indent of article 20 of [the Directive]".
- In the light of the judgment of the ECJ in Gourmet Classic, HMRC submit that the first issue is now settled in their favour and that there is no sensible basis on which the same question can be put to the ECJ again. As to the second issue, HMRC submit that they have implemented the exemption under article 27.1(f) of the Directive in a rational and reasonable way, and in accordance with the wide discretion afforded to them by the Directive and that we are able to decide the second issue without making a reference to the ECJ.
- Mr. Mercer, submitting that we ought to make a reference to the ECJ on both issues, said that there are special features of the Gourmet Classic case which make it appropriate and proper for us to make a reference on the first issue, with which Gourmet Classic was concerned. He makes other submissions, based on alleged prejudice would be suffered by the Appellant if we do not make a reference on the first issue. He submits that we should also refer a question on the second issue.
- At the conclusion of the hearing we indicated that we would make a reference to the ECJ on both issues and asked the parties to consult as to the text of an appropriate reference. They have done so, prior to this Decision being released, and have jointly proposed a draft of the questions to be submitted to the ECJ for a preliminary ruling. We gratefully adopt the draft, to which we have made minor amendments. We attach to this Decision, as Appendix 2, the questions to be referred.
- In this Decision we deal, first, with the arguments on the two issues identified and then go on (under the heading Gourmet Classic) to record the parties' submissions on the question of whether we should make a reference to the ECJ in this case. We conclude by giving our reasons for deciding to do so.
First issue: are cooking liquors subject to excise duty under the Directive?
- As to the first issue, the parties agree that if cooking liquors are products subject to excise duty, that result will follow from an application of article 20 of the Excise Directive (definition of 'ethyl alcohol').
- Article 19 of the Excise Directive provides that member States shall apply an excise duty to ethyl alcohol in accordance with the Directive, and article 20 defines the term 'ethyl alcohol' for the purposes of the Directive.
- The definition in article 20 is as follows:
"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 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 exceeding 22% vol.
- Potable spirits containing products, whether in solution or not."
- To understand this definition reference must be made to the CN codes mentioned therein (and in those CN codes themselves). The codes are within Chapter 22 of the CN (beverages, spirits and vinegar). Specifically, they are:
CN code 2207 – Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher; ethyl alcohol and other spirits, denatured, of any strength :
CN code 2208 – Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages; compound alcoholic preparations of a kind used for the manufacture of beverages :
CN code 2204 – Wine of fresh grapes, including fortified wines; grape must other than that of heading 2009 :
CN code 2205 – Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances :
CN code 2206 – Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included :
CN code 2009 – Vinegar and substitutes for vinegar obtained from acetic acid :
The first issue – the Appellant's submission
- The Appellant's submission on this issue is that when considering the applicability of article 20 of the Directive in this case, the "products" on the facts of this case, are (a) the cooking wine, (b) the cooking port and (c) the cooking cognac.
- The "products" so understood do not fall within any of the codes within Chapter 22 of the CN, but within Chapter 21 of the CN (miscellaneous edible preparations) and specifically within CN code 2103, which is as follows:
CN code 2103 – Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard :
- Mr. Mercer refers to Note 1(a) to Chapter 22 of the CN (an overall note) which states that the Chapter does not cover "products of this chapter (other than those of heading 2209 [vinegar etc.] prepared for culinary purposes and thereby rendered unsuitable for consumption as beverages (generally heading No. 2103)".
- Mr. Mercer points to Mr. Murray's agreement that the cooking liquors do not fall within Chapter 22 of the CN, stated in the text of the Decision Letter, where he (Mr. Murray) says: "The invoice from Ravel S.A., a copy of which I enclose, shows the Customs tariff code 2103909089. The classification system is agreed internationally and I believe this is the correct code for the goods."
- Mr. Mercer submits that the scheme of the Directive is to split alcoholic beverages into 5 categories, reflected in Sections I to V (article 20 falling within Section V: Ethyl Alcohol). The categories are: beer, wine, fermented beverages other than wine and beer, intermediate products and ethyl alcohol.
- His submission is that the definition of "ethyl alcohol" in article 20 of the Directive excludes cooking wine and cooking port because these products do not fall in any of the three indents of the article.
- Specifically, the first indent of article 20 does not apply because cooking wine and cooking port are not products falling within CN codes 2207 or 2208 (which, he submits, cover spirits only, not wine).
- The second indent of article 20 does not apply because, although CN codes 2204, 2205 and 2206 cover respectively wine, fortified wine and other fermented beverages, products within the second indent must have an alcoholic strength by volume (ABV) exceeding 22%. As noted above, the cooking wine was 11% ABV and the cooking port was 19% ABV.
- The third indent of article 20 does not apply because neither the cooking wine nor the cooking port was "potable spirits", and neither contained products, whether in solution or not.
- He prays in aid the opinion given by the Excise Committee of the European Commission ("the Excise Committee") in relation to wine lees and grape marc in CED No. 234 of 1997. The Excise Committee was of the view that wine lees and grape marc would not, if standing alone, fall within CN codes 2207 or 2208, but would remain wine.
- Mr. Mercer recognises that cognac is classified under CN code 2208 (as a spirit) and that therefore cooking cognac could, at least prima facie, fall within the extended definition of ethyl alcohol in the first indent of article 20 of the Directive even though it forms part of a product, cooking cognac, which is within Chapter 21 of the CN (not Chapter 22). He submits that it does not actually fall within that definition because it is excluded from classification under CN code 2208 by Note 1(a) to Chapter 22 of the CN (see: paragraph 14 above) on the basis that it has been prepared for culinary purposes and thereby rendered unsuitable for consumption as a beverage. He maintains that, in any event, cooking cognac should be exempt from duty pursuant to article 27.1(f), considered below (the second issue).
The first issue - HMRC's submission
- Mr. Sarabjit Singh submits that, for the purposes of the first indent of article 20 of the Directive, the alcohol content of the cooking wine, the cooking port and the cooking cognac should be regarded as the "product" whose nature is investigated to see whether it comes within the definition of 'ethyl alcohol' in the article. The alcohol content is a product which forms "part of a product which falls within another chapter of the CN" for the purposes of the definition, namely CN code 2103.
- He referred to the opinion of the Excise Committee in relation to the tax treatment of cooking wine and cooking cognac in CED No. 365 of 2001. The Excise Committee was of the view that ethyl alcohol as referred to under headings 2207 and 2208 is not restricted solely to ethyl alcohol obtained by fermentation followed by distillation. He also referred to the Guidelines issued by the Excise Committee on 11 November 2002 under reference CED No. 372 Final, which noted that the delegations "almost unanimously" had accepted that "since classification in CN codes 2207 and 2208 is not exclusively reserved for ethyl alcohol obtained by distilling, cooking wine and cooking cognac, which have an alcoholic strength by volume of more than 1,2%, are to be deemed "ethyl alcohol" within the meaning of article 20 of the Directive. He submitted that the issue has been settled in the sense contended for by HMRC by the judgment of the ECJ in Gourmet Classic.
The second issue: if cooking liquors are products subject to excise duty within article 20 of the Directive, are they nevertheless exempt from excise duty by application of article 27.1 of the Directive?
- Article 27 of the Directive is contained in Section VII, headed 'Exemptions'.
- Article 27 relevantly provides as follows:
"1. Member States shall exempt the products covered by this Directive from 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-
(e) when used for the production of flavours for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1,2% vol.;
(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."
- The United Kingdom has purportedly implemented article 27.1(f) of the Directive by the enactment of section 4, Finance Act 1995 ("FA 1995").
- Section 4, FA 1995 is in the following terms:
"4 Alcoholic ingredients relief
(1) Subject to the following provisions of this section, where any person proves to the satisfaction of the Commissioners that any dutiable alcoholic liquor on which duty has been paid has been-
(a) used as an ingredient in the production or manufacture of a product falling within subsection (2) below, or
(b) converted into vinegar,
he shall be entitled to obtain from the Commissioners the repayment of the duty paid thereon.
(2) The products falling within this subsection are-
(a) any beverage of an alcoholic strength not exceeding 1.2 per cent,
(b) chocolates for human consumption which contain alcohol such that 100 kilograms of the chocolates would not contain more than 8.5 litres of alcohol, or
(c) any other food for human consumption which contains alcohol such that 100 kilograms of the food would not contain more than 5 litres of alcohol.
(3) A repayment of duty shall not be made under this section in respect of any liquor except to a person who-
(a) is the person who used the liquor as an ingredient in a product falling within subsection (2) above or, as the case may be, who converted it into vinegar;
(b) carries on a business as a wholesale supplier of products of the applicable description falling within that subsection or, as the case may be, of vinegar;
(c) produced or manufactured the product or vinegar for the purposes of that business;
(d) makes a claim for the repayment in accordance with the following provisions of this section; and
(e) satisfies the Commissioners as to the matters mentioned in paragraphs (a) to (c) above and that the repayment claimed does not relate to any duty which has been repaid or drawn back prior to the making of the claim.
(4) A claim for repayment under this section shall take such form and be made in such manner, and shall contain such particulars, as the Commissioners may direct, either generally or in a particular case.
(5) Except so far as the Commissioners otherwise allow, a person shall not make a claim for repayment under this section unless-
(a) the claim relates to duty paid on liquor used as an ingredient or, as the case maybe, converted into vinegar in the course of a period of three months ending not more than one month before the making of the claim; and
(b) the amount of the repayment which is claimed is not less than £250.
(6) The Commissioners may by order made by statutory instrument increase the amount for the time being specified in subsection 5(b) above; and a statutory instrument containing an order under this subsection shall be subject to annulment in pursuance of a resolution of the House of Commons.
(7) There may be remitted by the Commissioners any duty charged either-
(a) on any dutiable alcoholic liquor imported into the United Kingdom at a time when it is contained as an ingredient in any chocolates or food falling within subsection (2)(b) or (c) above; or
(b) on any dutiable alcoholic liquor used as an ingredient in the manufacture or production in an excise warehouse of any such chocolates or food.
(8) This section shall be construed as one with the Alcoholic Liquor Duties Act 1979, and references in this section to chocolates or food do not include references to any beverages."
- Section 4 FA 1995, as can be seen, provides inter alia a mechanism for repayment of excise duty on dutiable alcoholic liquor which has been used in the production or manufacture of food which has an alcoholic content of not more than 5 litres of alcohol per 100 kg of the food. The repayment is made on a claim, which must be made by a wholesale supplier being the producer or manufacturer of the food. Claims for repayment of amounts less than £250 (a limit which may be increased by the Commissioners) will not be met.
The second issue – the Appellant's submission
- The Appellant submits that cooking wine, cooking port and cooking cognac come within the exemption in article 27.1(f) whether used directly for the production of foodstuffs, or indirectly for the production of foodstuffs as a constituent of a semi-finished product (a sauce), provided that the alcoholic content of the resultant foodstuff product (Mr. Mercer gives boeuf bourguignon as an example) does not exceed 5 litres of pure alcohol per 100 kg of the foodstuff product.
- Mr. Mercer supports his submission that the foodstuff to be considered for the purposes of the application of article 27.1(f) is the resultant dish by comparison with the regime laid down in the article for chocolates, where it is plain, he submits, that the relevant "foodstuff" is the chocolate (he gives chocolates filled with Cointreau liqueur as an example).
The second issue – HMRC's submission
- Mr. Singh submits that a possible interpretation of article 27.1(f) is that the "product" referred to (on the facts of this case) is the cooking wine, cooking port and cooking cognac, and that exemption only applies if the alcoholic content of these products does not exceed 5%. It does in all three cases.
- He points out that this interpretation was "almost unanimously" accepted by the delegations constituting the Excise Committee which laid down the Guidelines in CED No.372 Final of 11 November 2002.
- However his main submission is that article 27 leaves Member States with a discretion to impose conditions of the exemption and that the United Kingdom's implementation of article 27.1(f) in section 4 FA 1995, while imposing conditions, is nevertheless potentially more generous than the interpretation favoured by the Excise Committee in CED No.372 Final. He makes the point that article 27.6 expressly permits Member States to give effect to the article 27 exemptions by means of a refund of excise duty paid, and that section 4 FA 1995 was structured to give effect to the exemption in article 27.1(f) in that way.
- He points out that under the provisions laid down in section 4 FA 1995, repayment of duty on cooking wine, cooking port and cooking cognac is possible, even in a case where the alcoholic content of the cooking wine, cooking port or cooking cognac exceeds 5% (as it does on the facts of this case) so long as the cooking wine, cooking port or cooking cognac is used in the production or manufacture of a food which contains no more than 5 litres of alcohol per 100 kg. He comments that, given the generosity of this interpretation, the United Kingdom is entitled to impose strict limits on its application.
- Mr. Singh submits that the Appellant is not entitled to duty relief under article 27.1(f) as implemented by section 4 FA 1995 because it did not use the cooking liquors as an ingredient in food products (section 4(3) FA 1995) but instead acted as wholesaler of the cooking liquors themselves.
- He submits that by restricting the exemption to, inter alios, those persons who used cooking liquors as an ingredient in a product or acted as wholesalers of the product in which the cooking liquors had been used as an ingredient, the United Kingdom promoted the correct and straightforward application of the exemption, because the product itself could be readily inspected to ensure that 100 kg of the product itself did not contain more than 5 litres of alcohol. He criticised the Appellant's interpretation of the exemption because it relied on the cooking liquors being used in the production of foodstuffs to be produced after the exemption had been applied, thus rendering it impossible to check that the 5 litres per 100 kg condition was satisfied and thereby encouraging abuse of the exemption.
- The circumstances giving rise to the reference in Gourmet Classic were unusual. Gourmet Classic Ltd. was a British undertaking wishing to market cooking wine on the Swedish market. Before marketing the cooking wine, Gourmet Classic Ltd. asked the Swedish Revenue Law Commission (Skatterättsnämnden) for an opinion confirming that its cooking wine was not subject to excise duty because, in its view, cooking wine was covered by the exemption laid down in article 27.1(f) of the Directive.
- The cooking wine featuring in Gourmet Classic consisted of a mixture of approximately 40% of ordinary wine, red or white, and approximately 60% of de-alcoholised wine to which a small amount of salt had been added. The alcoholic strength of the cooking wine was 4.5 litres of pure alcohol per 100 kg of the cooking wine.
- HMRC through their Tariff and Statistical Office informed Gourmet Classic Ltd. that its cooking wine was covered by CN subheading 2103 9090 89.
- In the course of the proceedings before the Swedish Revenue Law Commission (which performs an essentially administrative function in giving a preliminary opinion on matters which concern, in particular, taxpayers in their relationships with the public authorities with respect to their tax liabilities), the Swedish tax administration (Skatteverket) maintained that Gourmet Classic Ltd.'s cooking wine was subject to excise duty under paragraph 6 of the Swedish law on excise duty on alcohol (lagen om alkoholskatt) – which provides that excise duty is payable on goods covered by CN headings 2207 and 2208, with an alcoholic strength exceeding 1.2% vol., even when those goods form part of a product which falls within another chapter of the Combined Nomenclature.
- However the Swedish tax administration also submitted that Gourmet Classic Ltd.'s cooking wine was covered by the exemption laid down in point 5 of paragraph 7(1) of the Swedish law on excise duty on alcohol. This exemption states that no excise duty is payable on goods used directly in foodstuffs or as ingredients of semi-finished products for the production of foodstuffs, filled or otherwise, provided that the alcohol content in each individual case does not exceed 8.5 litres of pure alcohol per 100 kg of product used to make chocolates and 5 litres of pure alcohol per 100 kg of product used to make other foodstuffs.
- There was therefore agreement between Gourmet Classic Ltd. and the Swedish tax administration that Gourmet Classic Ltd.'s cooking wine must be regarded as ethyl alcohol within the meaning of article 20 of the Directive and that it benefited from the exemption laid down in article 27.1(f) of the Directive.
- The Swedish Revenue Law Commission gave its opinion based on the recommendation of the Swedish tax administration, although the President of the Swedish Revenue Law Commission issued a dissenting opinion, according to which cooking wine does not fall within the scope of the Swedish law on excise duty on alcohol.
- A special feature of the Swedish appellate system is that the Swedish tax administration may bring an appeal before the Swedish court (Regeringsrätten) about an opinion adopted by the Swedish Revenue Law Commission, even if the appeal seeks confirmation of that opinion. In this case, the Swedish tax administration brought an appeal before the Swedish court seeking to have the opinion given by the Swedish Revenue Law Commission upheld. Gourmet Classic Ltd. also contended that the Swedish Revenue Law Commission's opinion should be followed.
- The Swedish court however took the view that in order to give a ruling it was necessary to obtain the ECJ's answer to the question: "Is the alcohol contained in cooking wine to be classified as ethyl alcohol as referred to in the last indent of article 20 of the [Directive]?".
- When the reference came before the ECJ, the opinion of the Advocate General (Bot), which was delivered on 3 April 2008, was entirely concerned with the question of whether the ECJ had jurisdiction to give a ruling on the question referred by the Swedish court. The Advocate General's opinion was that the ECJ lacked such jurisdiction, on the ground, essentially, that what the Swedish court sought was an advisory opinion, and not a preliminary ruling justified by the need to resolve a genuine controversy.
- The ECJ (Fourth Chamber) dealt with the matter without an oral hearing, having heard the opinion of the Advocate General and having considered written observations submitted on behalf of the Commission and the Belgian and Portuguese Governments.
- In its judgment, dated 12 June 2008, the ECJ disagreed with the Advocate General's opinion and held that it was not being asked to give an advisory opinion on a hypothetical question and accordingly had jurisdiction to reply to the question posed by the Swedish court. (Its ground for this decision was that the procedure before the Swedish court was not simply to obtain confirmation of the opinion of the Swedish Revenue Law Commission, but to provide in the exercise of the court's judicial function a definitive legal judgment which would bind the tax authorities.)
- The ECJ therefore went on to consider and rule on the question referred, whether the alcohol contained in cooking wine is to be classified as ethyl alcohol as referred to in the first indent of article 20 of the Directive.
- The ECJ's ruling was that the alcohol contained in cooking wine is, if it has an alcoholic strength exceeding 1.2% by volume, to be classified as ethyl alcohol as referred to in the first indent of article 20 of the Directive.
- This ruling was, however, expressly given without prejudice to the exemption provided for by article 27.1(f) of the Directive – see:  of the judgment.
Gourmet Classic – the Appellant's submission
- Mr. Mercer submits that, in Gourmet Classic, the ECJ has not addressed or answered the Appellant's submissions on the first (article 20) issue. He also submits that this Tribunal is entitled to make a reference in order to seek further clarification from the ECJ on the article 20 issue.
- He contends that the ECJ has, in Gourmet Classic, simply stated its conclusion on the article 20 issue ("the fact remains that that edible preparation contains ethyl alcohol falling within headings 2207 and 2208 of [the CN]" – at  of the Judgment) without giving any reason for that conclusion, and certainly without considering the Appellant's arguments, summarised above, that cooking liquors do not fall within the definition of 'ethyl alcohol' in article 20 of the Directive. Neither has the ECJ considered his submission that cooking liquors do not fall within any of the definitions of the products covered by the Directive and are not subject to excise duty and are open to free circulation within the EU, as the cooking liquors, which are the subject of the appeal, were in free circulation in France before their importation into the United Kingdom.
- He submits that second (article 27.1) issue ought also to be considered by the ECJ and states (correctly) that that issue was not before the ECJ in Gourmet Classic. He contends that section 4 FA 1995 is not a permissible implementation of article 27.1(f) of the Directive, for the reasons summarised above. The departure displayed by section 4 FA 1995 from what he submits is the correct interpretation of article 27.1(f) would require to be justified by the United Kingdom, and such justification could only be afforded by concrete evidence of a serious risk of evasion, avoidance or abuse. He points to M. Allo's evidence that there is no such risk. Mr. Mercer cites Italy v Commission (Case C-482/98).
- Mr. Mercer submits that this Tribunal is not precluded by the ECJ's judgment in Gourmet Classic (or any other authority) from making a reference on the article 20 issue. He cites Belgium v Spain (Case C-388/95)  ECR I-3123 at  and Keck v Mithouard (Cases C-267-8/91)  ECR I-6097 at .
Gourmet Classic – HMRC's submission
- Mr. Singh submits that there is no sensible basis upon which the same (article 20) question can be put to the ECJ again, following its authoritative, binding and very recent ruling on the question in Gourmet Classic.
- He contends that there was nothing "very special" about the Gourmet Classic case or the circumstances of the ECJ's judgment in that case which would justify a second reference being made.
- As there are conflicting views between Member States on the questions raised in this appeal, the Tribunal took the view that an authoritative ruling by the Court of Justice on the application (if any) of the Excise Directive to cooking liquors was necessary to enable it to decide the appeal.
- While recognising that the ECJ's judgment in Gourmet Classic is both directly relevant and very recent, the Tribunal nevertheless considers that the Court of Justice may wish to revisit the issues raised in this case in the light of the Appellant's submissions on the first (article 20) issue which appear to the Tribunal to have persuasive force and seem not to have been raised in Gourmet Classic. The ECJ appears to the Tribunal to have been primarily concerned in Gourmet Classic with the jurisdiction issue arising in that case, which of course is absent from this appeal.
- Further, this appeal may (depending on the answer to the point raised on the first (article 20) issue) raise a further issue of Community law not addressed in Gourmet Classic, namely the second (exemption under article 27.1) issue. If the second issue requires to be addressed, the Tribunal would wish to have guidance from the ECJ on the question of whether section 4, FA 1995 adequately implements the article 27.1(f) exemption into UK law.
- The Appellant urged us to make a reference, notwithstanding the ECJ's judgment in Gourmet Classic and HMRC, while resisting that proposal, accepted that in these circumstances we are able, as a matter of Community law, to make a reference. The ECJ's judgment in SpA International Chemical Corporation v Amministrazione delle Finanze dello Stato ...Case 66/80) is authority for the proposition that, as a matter of Community law, this Tribunal is not (by reason of any prior judgment of the ECJ) deprived of our power to refer and we must decide whether there is a need to raise once again a question which has already been settled by the ECJ. That authority shows that there may be such a need especially if questions arise as to the grounds, the scope and possibly the consequences of an earlier judgment.
- In the Tribunal's view the conflicting opinions of the Member States referred to, and the arguments raised by the Appellant on Gourmet Classic, which we have set out above, raise sufficient questions as to the grounds, scope and consequences of the judgment in Gourmet Classic to justify, exceptionally, a second reference on the issues raised.
- We therefore stay all further proceedings relating to this appeal until the Court of Justice has given its preliminary ruling on the Questions set out in Appendix 2 to this Decision, or until further order.
JOHN WALTERS QC
RELEASE DATE: 24 April 2009
AGREED STATEMENT OF UNDISPUTED FACTS
(compiled as at 19 July 2007)
- Repertoire Culinaire Limited (hereafter "the Appellant") trades in the wholesale food business, at ION House, Sheep Lane, Hackney, London, E8 4QS.
- On 10th July 2002, at approximately 14.13 hours, a Renault tractor unit, registration number 127 APJ (hereafter "the vehicle") and trailer were intercepted by Officers of HMRC at the United Kingdom Customs Control Zone, Coquelles, France. The driver of the vehicle identified himself as Mr Aleksanor Smirnov from Estonia.
- Mr Smirnov produced a CMR document for the load, reference number N 242323, which showed 11 pallets of 'vin de cuisine'. The CMR indicated that the consignee was the Appellant.
- The load was then inspected by an Officer, who found 5 pallets each containing 70 boxes of white wine, 11% ABV. Each box contained 8 litres of wine, amounting to 2,800 litres of white wine in total. There were also 5 pallets containing the same quantity of red wine. One pallet contained 20 boxes of port, 19% ABV. Each box contained 8 litres of port, amounting to a total of 160 litres. Finally, there were 10 boxes each containing 8 litres of cognac, 40% ABV, totalling 80 litres.
- The goods were detained on the grounds that there was no AAD (Accompanying Administrative Document) for the goods and there was no evidence that UK excise duty had been accounted for.
- Further enquiries were then carried out by the Respondents' National Discreditation Team (NDT), which established the following:
a) The packaging on the cognac stated 'undrinkable', and had 'ingredients' of 1% (possibly salt and pepper).
b) The wine had ingredients of 2%.
c) The port did not have a label showing ingredients.
d) The invoice from the supplier Ravel S.A. at St Galmier in France to the Appellant, dated 8th July 2002, showed that the goods were predominantly 'vin cuisine' and the applicable Customs code was 2103909089.
e) Mr J Gill-Abbate from RH Freight Services in Nottingham confirmed that RH Group provided UK distribution services and acted as freight forwarders, and that the load was part of a groupage load.
f) Mr Gill-Abbate believed that the goods were for culinary purposes and therefore exempt from duty. He provided a Customs tariff code of 2103909059.
g) NDT considered that the correct Customs tariff code was that shown on the Ravel S.A. invoice, 2103909089. There was no such code as 2103909059.
h) Mr Chalopin submitted a fax dated 11th July 2002 to NDT, with accompanying documents in French from French Customs and Ravel Distillerie Saint Galmier. One of the documents from Ravel Distillerie referred to the wine as vin cuisine with the commodity code of 2103909089, and advised that the wine was rendered undrinkable by the addition of 10 grams of salt and 10 grams of pepper per litre.
- The Respondents' Holding and Movement Team visited the Appellant's premises on 12th July 2002, and met Mr E Chalopin, Marketing Manager, and Mrs T Hickey from purchasing. The following was established:
a) Mr Chalopin stated that the goods detained were not used by the Appellant to manufacture or process other goods, but were sold on in the same state they arrived in the UK.
b) It was explained to Mr Chalopin and Mrs Hickey that the Respondents' position was that the commodity code they had used, 2103909089, made the goods dutiable and that this commodity code was applicable throughout the EU. The Appellants' position was that duty was not payable on the goods and that French Customs did not class the goods as being subject to duty.
c) The Appellant had imported similar goods on a number of occasions in the past. Officers examined 14 delivery notes dated 3rd August 2001 to 14th May 2002 and stock on hand, and total excise duty due, on the basis that the Respondents' position was correct, was calculated to be £59,737. The goods had an ABV ranging from 11% to 60%, and the stock on hand was detained.
- Following their enquiries, the NDT recommended that the excise goods detained at Dover on 10th July 2002 should be subject to seizure. The goods were seized as liable to forfeiture under Regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 and section 49(1) of the Customs and Excise Management Act 1979, on 16th July 2002.
- The Appellant was notified of the seizure by letter dated 16th July 2002. The Appellant's representatives requested restoration of the excise goods on 2nd August 2002.
- By letter dated 28th August 2002, the Respondents notified the Appellant's representatives that the excise goods would not be offered for restoration. On 2nd September 2002, the Appellant's representatives sought a review of this decision.
- On 17th October 2002, the Respondents wrote to the Appellant's representatives and notified them that a formal review of the decision had taken place, which upheld the original decision to refuse to offer restoration of the excise goods, on the grounds that:
"A determinant factor in this case is whether the excise goods were liable to excise duty … I have concluded that the excise goods were properly liable to UK duty."
The Respondents' letter also advised the Appellant's representative of their right to appeal to the VAT and Duties Tribunal within 30 days.
- On 18th July 2002, two assessments for excise duty were issued- £53,853 for stock sold and £5,884 for stock on hand. These assessments were upheld by the London Appeals and Reconsiderations Team on 27th September 2002.
- In the Notice of Appeal dated 4th November 2002, the Appellant challenges the review decision dated 17th October 2002, which is the Respondents' review letter in relation to the non-restoration of the goods and which determined that the goods would not be restored because they were subject to duty.
- The nature of the products in issue in this appeal is as follows:
a. The cooking wine is wine and is a product formed exclusively from a process of fermentation.
b. The cooking wine, cooking port and cooking cognac are all produced by the addition of salt and pepper.
c. Through the addition of salt and pepper, the products become unfit for consumption as beverages, although they remain suitable for consumption when used as culinary products.
d. Once salt and pepper are added to the products, it is not possible to isolate the alcohol content of the products in its entirety.
e. The products are classified under the Customs Nomenclature CN 2103 909089 as sauces (foodstuff).
- In Working Document CED 234 of 1997, the European Commission expressed the opinion that, since the alcoholic product contained in wine lees and grape marc is not a product which, if not contained in lees or marc, would fall within CN 2207 or 2208, the first indent of Article 20 would not apply to it.
- Almost all Member States accepted Commission Guideline CED 372 Final, which stated that cooking wine and cooking cognac were subject to excise duty unless the conditions for obtaining the exemption provided for in Article 27(1)(f) of Directive 92/83/EEC applied. This Guideline was on the basis that cooking wine is within the first indent of Article 20 regardless of how the ethyl alcohol content is produced, whether by fermentation or distillation and whether or not the alcoholic ingredient of cooking wine is within CN headings 2207 and 2208.
- In CED 475, the Minutes of the Meeting of 1 and 2 April 2004, the President of the Committee expressly stated that the Commission Guidelines do not bind the Commission and that it is up to Member States if they wish to publish them on their own responsibility.
- The current position is that there is no agreement within the Community as to how the products subject to this appeal should be treated. Many Member States take the view that cooking wine is not within the scope of excise duty under Directive 92/83 and therefore entitled to move freely within the EU without any accompanying document.
- Cooking wine when used as an ingredient in a final product through any recognised recipe always yields a final product with an alcoholic content of less than 5%.
QUESTIONS TO BE SUBMITTED
TO THE ECJ FOR PRELIMINARY RULING
1:Are cooking wine and cooking port subject to excise duty under Directive 92/83/EEC in the Member State of importation on the grounds that they are within the definition of "ethyl alcohol" under the first indent of article 20 of Directive 92/83?
2:Is it consistent with the Member State's obligation to give effect to the exemption contained in article 27.1(f) of Directive 92/83, when read with article 27(6), and/or with article 28 EC and/or with the direct effect of those obligations and/or with the principles of equal treatment and proportionality to restrict the exemption for cooking wine, cooking port and cooking cognac to cases where alcoholic beverages have been used as an ingredient and to restrict the applicants for exemption to those persons who have used the alcoholic beverages as an ingredient in products and/or those persons who carry on business as wholesalers of such products and/or they produced or manufactured such products for the purposes of that business and subject to the further conditions that claims be made within an overall period of four months from the payment of duty and that the amount of the repayment be not less than £250?
3:Should the cooking wine and cooking port, if liable to duty under the first indent of article 20 of Directive 92/83, and/or the cooking cognac, subject to the present appeal, be treated as exempt from excise duty at the point of manufacture under article 27.1(f), alternatively article 27.1(e), of Directive 92/83?
4: In the light of articles 10 and 28 EC, what effect, if any does it have on Member States' obligations under articles 20 and 27.1(f), alternatively article 27.1(e), of Directive 92/83 if cooking wine, cooking port and cooking cognac have been released by the Member State of manufacture from the excise movement system under Directive 92/12 into free movement within the European Union?
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