Greenalls Management Ltd. v Customs and Excise

Where excise goods leave an authorised warehouse lawfully under duty suspension for export, a later unauthorised diversion and domestic consumption does not, without clear words, make a blameless warehouse keeper liable for duty merely because the goods have left suspension.

The duty point and the person liable are distinct questions. The domestic regulations must be read consistently with the Council Directive 92/12/EEC where possible, but the Directive does not itself prescribe the person liable. Joint and several liability provisions for owners or persons causing the duty point cannot be used as an alternative route to impose liability on the warehouse keeper.

Greenalls Management Ltd operated an authorised warehouse for alcoholic beverages. It delivered consignments of vodka under duty suspension for export to Spain or Belgium. The goods were later diverted and sold in the United Kingdom without Greenalls’ knowledge or involvement.

The VAT and Duties Tribunal held Greenalls liable for excise duty. On appeal, Jacob J held that there were insufficient facts to determine when the irregularity occurred and remitted the matter to the Tribunal. Both parties appealed to the Court of Appeal.

The central issue was whether the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 made the warehouse keeper liable where goods lawfully dispatched for export subsequently left suspension arrangements through a third party’s actions.

Appeals allowed and dismissed. Greenalls’ appeal was allowed, the Commissioners’ appeal was dismissed, the assessments were quashed, and the case was remitted to the VAT and Duties Tribunal. The Commissioners were ordered to pay Greenalls’ costs.

1. Chargeability and liability. Schiemann LJ held, with Carnwath LJ agreeing substantially and Staughton LJ agreeing with the order, that the chargeability of duty and the identity of the person liable were separate questions. Under the Council Directive 92/12/EEC, an irregular departure from suspension made duty chargeable. G van de Water v Staatssecretaris van Financien Case 325/99 explained that the Directive did not harmonise national procedures for collecting duty or prescribe the person liable. Articles 15(3) and 20 contemplated recovery through a guarantee.
2. Warehouse keeper’s liability. The goods had been delivered for export when they left the warehouse and later ceased to be subject to suspension when diverted. Regulation 5(4), however, imposed liability on the authorised warehouse keeper only when the duty point specified in regulation 4(2)(a) occurred. Reading regulation 4(2)(a) to cover irregular domestic consumption might give effect to the Directive’s chargeability rule, but it could not be carried through to regulation 5(4) where the blameless warehouse keeper had no prescribed connection with the goods at the later point.
3. Clear words and alternative liability. The Finance (No.2) Act 1992 required liability to be imposed by reference to a prescribed connection. Applying the principle that taxation requires clear language, the Court declined to construe regulation 5(4) as imposing liability in these circumstances. Regulation 5(5) did not provide an alternative route: it dealt with persons specified in regulation 5(6) who had the relevant connection, and did not make the warehouse keeper jointly and severally liable outside regulation 5(4).
4. Other recovery routes and factual distinction. The Court noted that the Customs and Excise Management Act 1979, particularly section 95, placed liability on the proprietor after lawful removal. Hayward [1998] EWHC Crim 1898 was distinguishable because the accompanying documents there were treated as falsified from the outset; here they appeared regular when the goods left the warehouse. Staughton LJ likewise considered that the export exception applied and that regulation 4(2)(a) did not govern the case.

• Court of Appeal (Civil Division): Allowed Greenalls’ appeal, dismissed the Commissioners’ appeal, quashed the assessments and remitted the case to the VAT and Duties Tribunal. [2003] EWCA Civ 896
• High Court, Chancery Division: Jacob J held that there were insufficient facts to determine liability and remitted the matter to the Tribunal.
• VAT and Duties Tribunal: Held that Greenalls was liable to pay the excise duty.