Greenalls Management Limited (Respondents) v. Her Majesty's Commissioners of Customs and Excise (Appellants)

Where excise goods subject to a duty-suspension arrangement are unlawfully diverted to the consumer market, they are “made available for consumption” within regulation 4(2)(a) of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992. That event fixes the excise duty point even though the diversion occurs after the goods leave the warehouse and is committed by an unidentified person.

Regulation 5(4) consequently makes the authorised warehouse keeper liable. The keeper’s prescribed connection with the goods may precede the diversion, provided it arose after the goods became chargeable to duty. Liability lasts only while the relevant suspension arrangement continues.

An authorised warehouse keeper released approximately 250,000 bottles of vodka to carriers for purported export to Belgium and Spain without payment of excise duty. The export documentation was fraudulent, and the vodka was diverted for illicit sale.

Jacob J held that regulation 4(2)(a) of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 required the goods to be made available for consumption “from the warehouse”. He remitted the case for further factual findings. The Court of Appeal, [2003] EWCA Civ 896, dismissed the Commissioners’ appeal and allowed the warehouse keeper’s appeal.

The central issue before the House was whether the unlawful diversion created an excise duty point under regulation 4(2)(a) and thereby made the warehouse keeper liable under regulation 5(4).

1. Appeal allowed unanimously. Lord Hoffmann delivered the leading speech. Lord Nicholls, Lord Steyn and Lord Hope agreed with his reasons. Lord Walker concurred with hesitation. The issue was determined in favour of the Commissioners.

2. Per Lord Hoffmann, goods diverted during a movement-suspension arrangement were “made available for consumption” within regulation 4(2)(a) of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992. The provision did not require the goods to be made available by the warehouse keeper or from the warehouse. Its language covered an unlawful diversion occurring after departure from the warehouse. This construction also fulfilled the domestic court’s duty, so far as possible, to interpret the provision consistently with article 6(1) of Council Directive 92/12/EEC.

3. Per Lord Hoffmann, once regulation 4(2)(a) fixed the excise duty point, regulation 5(4) unambiguously imposed liability on the authorised warehouse keeper. Regulation 5 was a domestic allocation of liability and was not itself governed by the Directive. That distinction did not permit regulation 4(2)(a) to bear different meanings when fixing the duty point and when engaging regulation 5(4).

4. Per Lord Hoffmann, regulation 4(2) provided a complete chronological code for fixing the excise duty point while suspension arrangements applied. Sections 94 and 95 of the Customs and Excise Management Act 1979 could not fill an alleged gap. Section 94(6) expressly subordinated their incidental operation in fixing the duty point or identifying the liable person to regulations made under section 1 of the Finance (No 2) Act 1992.

5. Per Lord Hoffmann, regulation 5(4) was intra vires. Section 1(4) of the Finance (No 2) Act 1992 permitted liability to rest on a prescribed connection existing at another time, provided it was no earlier than the time when duty became chargeable. A warehouse keeper remained connected with goods moved from its warehouse under the relevant suspension arrangement. Liability ended when that arrangement ended; it was not unlimited in time.

6. Lord Walker accepted that fiscal liabilities, especially potentially draconian liabilities, required reasonably clear statutory words. He regarded regulations 4 and 5 as exceptionally obscure and considered that conforming interpretation had little, if any, role in construing regulation 5. Nevertheless, because the matter had been overtaken by amending legislation, he did not carry his doubts to dissent.

1. House of Lords: By [2005] UKHL 34, unanimously allowed the Commissioners’ appeal and determined the issue in their favour.
2. Court of Appeal: By [2003] EWCA Civ 896, dismissed the Commissioners’ appeal and allowed the warehouse keeper’s appeal, although the members of the court gave differing reasons.
3. High Court: Jacob J held that regulation 4(2)(a) required the goods to have been made available for consumption “from the warehouse” and remitted the matter to the tribunal for factual findings about when the diversion occurred.