FMX Food Merchants Import Export Co Ltd v HM Revenue and Customs

Under Article 221(4) of the Customs Code, a customs debt arising from an act liable to criminal proceedings may be communicated after the ordinary three-year period only where provisions in force identify the conditions for an extension, including a finite period fixed in advance. Article 221(4) does not authorise indefinite challenges by itself. General rules against procedural unfairness, abuse of process or laches cannot replace a foreseeable limitation period. A general domestic limitation period may be applied by analogy only where that approach results from a sufficiently foreseeable judicial practice. An express exclusion of Crown claims for tax or duty from the Limitation Act 1980 did not provide a lawful basis for indefinite recovery.

HMRC demanded customs duty on garlic imported between 2003 and January 2004 using false certificates of Cambodian origin. The First-tier Tribunal allowed FMX’s appeal, holding that the demand was communicated outside Article 221(3)’s three-year period and that Article 221(4) did not permit recovery without applicable domestic conditions: [2013] UKFTT 720 (TC).

The Upper Tribunal overturned that decision and held that Article 221(4) itself disapplied the three-year period: [2015] UKUT 669 (TCC). The Court of Appeal considered whether Article 221(4) permitted an indefinite limitation period, whether legal certainty required a period fixed in advance, and whether the Limitation Act 1980 supplied an alternative.

Appeal allowed unanimously. Henry Carr J delivered the leading judgment, with Newey LJ and Lewison LJ agreeing.

1. Article 221. Article 221(4) is enabling: it permits a Member State to extend the three-year period in Article 221(3), but does not require a domestic provision in every case. Its operation is nevertheless conditional on provisions in force setting out the relevant conditions. In light of Veloserviss [2015] ECLI:EU:C:2015:803 and Ze Fu Fleischhandel [2011] ECR I-03545, the period must be finite and fixed in advance. Article 221(4) cannot permit customs debts to remain open to challenge indefinitely.
2. Communication and legal certainty. The authorities concerning the manner of communication, including Molenbergnatie [2006] ECR I-02049 and Direct Parcel Distribution [2010] ECR I-00731, did not remove the requirement for a finite limitation period. The demand and accompanying letter identified no such period. A fact-dependent reasonable-time approach would be unforeseeable and could not cure the absence of a fixed limitation period. The common law and equitable rules against procedural unfairness therefore provided no answer.
3. Domestic limitation law. Section 37(2)(a) of the Limitation Act 1980, excluding Crown proceedings for recovery of tax or duty, could not lawfully support an indefinite period. Nor could the general six-year period, with fraud-related postponement, be applied by analogy. Ze Fu Fleischhandel required a sufficiently foreseeable judicially determined practice, and no such United Kingdom practice existed.
4. Further observations. The court noted, obiter, that abuse of rights might be relevant where the two-stage test identified in Emsland-Stärke [2000] ECR I–11569 was satisfied. The current Union Customs Code adopts a different scheme by requiring an extended period of between five and ten years.

The UT’s decision was set aside and FMX’s appeal was allowed.

1. Court of Appeal (Civil Division): [2018] EWCA Civ 2401 allowed FMX’s appeal and set aside the Upper Tribunal’s decision.
2. Upper Tribunal (Tax and Chancery Chamber): [2015] UKUT 669 (TCC) overturned the First-tier Tribunal and held that the customs-duty demand was not time-barred.
3. First-tier Tribunal (Tax Chamber): [2013] UKFTT 720 (TC) allowed FMX’s appeal, holding that the demand was communicated outside the applicable three-year period.