European Brand Trading Ltd v HM Revenue and Customs

Once excise goods have been condemned by a court, or deemed duly condemned under Schedule 3 to the Customs and Excise Management Act 1979, the condemnation is conclusive between the owner and HMRC. A restoration or review appeal cannot reopen whether the goods were liable to forfeiture or whether duty was paid. HMRC may consider mitigating circumstances, policy exceptions and proportionality, but proportionality must be assessed on the assumption that the goods were lawfully forfeited and duty was unpaid. The prescribed condemnation procedure is the route for challenging seizure. It is compatible with article 6 of the ECHR and article 1 of the First Protocol.

HMRC detained and later seized EBT's wine and beer for alleged non-payment of excise duty. EBT initially challenged the seizure but withdrew its challenge, after which the magistrates' court condemned the goods as forfeited. HMRC refused restoration. The First-tier Tribunal allowed EBT's appeal by consent but directed a fresh review examining material relevant to the duty-paid status of the goods. The Upper Tribunal (Morgan J) held that the review could not reopen that issue: [2014] UKUT 0226 (TCC). The appeal concerned whether actual or deemed condemnation prevented HMRC or the FTT from investigating liability to forfeiture or payment of duty, including where the restoration application preceded condemnation.

The Court of Appeal, in a judgment given by Lord Justice Lewison with which Lord Justice Ryder and the Chancellor agreed, dismissed the appeal.

1. Paragraphs 3, 5 and 6 of Schedule 3 to the Customs and Excise Management Act 1979 create a statutory route for challenging seizure and obtaining a judicial determination of liability to forfeiture. The magistrates' formal order created a rem judicatam between HMRC and EBT. EBT could not go behind that order merely because no evidence had been called.
2. The effect of deemed condemnation under paragraph 5 must be the same as actual condemnation by a court. The statutory fiction includes the consequences and incidents which necessarily follow from the deemed state of affairs. The principle in East End Dwellings Co Ltd v Finsbury BC [1952] AC 109, 132 was applied. It was therefore a necessary consequence of condemnation that the goods were treated as forfeited and that excise duty had not been paid.
3. HMRC v Jones [2011] EWCA Civ 824 was applied beyond the precise deemed-condemnation facts. The FTT's jurisdiction on a restoration appeal is confined to reviewing HMRC's discretionary decision. Once condemnation has occurred, neither HMRC nor the FTT may investigate the actual duty-paid status or liability to forfeiture of the goods.
4. The restoration discretion retains practical content. HMRC may consider exceptional circumstances, knowledge, belief, due diligence, other relevant steps and mitigating circumstances. A refusal to restore must also be proportionate. That assessment must proceed on the assumption that the goods and any vehicle were validly and lawfully forfeited and that duty was unpaid. A policy against restoration remains open to challenge by judicial review on ordinary public-law grounds.
5. If restoration is sought before condemnation but condemnation occurs before the decision, the later condemnation governs. The owner must use the statutory notice-of-claim and condemnation procedure to dispute seizure. Race v HMRC [2014] UKUT 331 (TCC) was followed, and the same approach had been adopted in Shaw v HMRC [2016] UKUT 4 (TCC). The Convention arguments failed: HMRC v Jones established compliance with article 6 of the ECHR and article 1 of the First Protocol. The obiter observations in Gascoyne v HMRC [2004] EWCA Civ 1162 did not represent the law. Morgan J was therefore correct to hold that further investigation of duty payment was irrelevant.

1. Court of Appeal (Civil Division) — Dismissed the appeal from the Upper Tribunal. [2016] EWCA Civ 90.
2. Upper Tribunal (Tax and Chancery Chamber) — Morgan J held that the restoration review could not reopen whether duty had been paid after the goods had been condemned or deemed condemned. [2014] UKUT 0226 (TCC).
3. First-tier Tribunal — Allowed EBT's appeal by consent but directed HMRC to conduct a fresh review considering material relevant to the duty-paid status of the goods. That direction led to HMRC's appeal to the Upper Tribunal.