HM Revenue & Customs v Mills

In forfeiture and restoration proceedings, a notice seeking condemnation proceedings under Schedule 3 to the Customs and Excise Management Act 1979 may be withdrawn before proceedings begin. The statutory deeming provisions then apply if no effective challenge remains. However, deemed forfeiture does not necessarily determine every factual basis on which forfeiture might have occurred. Where mixed goods provide an independent basis for forfeiture, the taxpayer may remain entitled to raise whether his own goods were for personal use. A reviewing authority must consider materially relevant matters and disregard irrelevant ones. The statutory test of whether the decision could reasonably have been reached encompasses such fundamental errors.

HM Revenue and Customs appealed against a VAT Tribunal decision concerning the forfeiture of a vehicle used to transport imported tobacco. The Tribunal had found that the taxpayer’s solicitors’ correspondence required condemnation proceedings, that the notice could not be withdrawn, and that the taxpayer could still raise whether his share of the tobacco was for personal use. It also held that the reviewing officer had unreasonably treated a minor discrepancy in the declared quantity as deliberate misleading.

The central issues were whether the condemnation notice had been withdrawn, whether Schedule 3 to the Customs and Excise Management Act 1979 deemed the forfeiture conclusive, whether the own-use issue remained open because the goods were mixed with another person’s goods, and whether the Tribunal had applied the statutory review jurisdiction correctly.

1. Appeal dismissed. The Tribunal had erred in holding that a notice requiring condemnation proceedings could not be withdrawn. A notice may be withdrawn before proceedings commence. The correspondence, read with the alternatives explained in Notice 12A, unequivocally showed that the taxpayer sought restoration rather than condemnation proceedings. The tobacco and vehicle were therefore to be regarded as lawfully forfeited under Schedule 3 to the Customs and Excise Management Act 1979.
2. The deeming effect of Schedule 3 did not necessarily determine every underlying fact. The ordinary abuse of process principle prevents a taxpayer from reopening forfeiture, or facts necessarily underlying it, where he had a realistic opportunity to invoke condemnation proceedings and should have done so. But the taxpayer’s own-use issue was not necessarily determined because the vehicle carried mixed goods and the vehicle could have been forfeited because the other importer’s goods were liable to forfeiture. The taxpayer was not bound by the other importer’s failure to challenge his own forfeiture: Fox v HMCE [2002] EWHC 1244 (Admin).
3. The reviewing officer wrongly assumed that the own-use issue was unavailable and therefore failed to consider a materially relevant matter. She also treated a minor discrepancy in the declared quantity as deliberate misleading, although the evidence, including the production of receipts for the full quantity, did not support that conclusion.
4. Under section 16(4) of the Finance Act 1994, the Tribunal’s jurisdiction extends to fundamental failures to consider relevant matters or reliance on irrelevant matters where those errors materially affect the decision. The Tribunal was entitled to make its own findings of primary fact: Golobieswska v Commissioners of Customs & Excise [2005] EWCA Civ 607. Its findings on personal use were not shown to be unsustainable.
5. The approach in Commissioners of Customs & Excise v Weller [2006] EWHC 237 (Ch) was accepted. The relevant questions are whether the taxpayer had a realistic opportunity to invoke condemnation proceedings and, if so, whether the facts nevertheless justify permitting the validity or underlying basis of forfeiture to be reopened.

• High Court (Chancery Division): appeal from the VAT Tribunal dismissed; the Tribunal’s order for a further review stood, subject to any necessary fine tuning.
• VAT Tribunal: appeal against the restoration decision allowed; HMRC was directed to conduct a further review.