Euro Wines (C&C) Ltd v HM Revenue and Customs

A reverse burden of proof in proceedings criminal for the purposes of article 6(2) is compatible with the presumption of innocence where, in its particular statutory context, it is reasonable and proportionate. The inquiry considers the seriousness and stigma of the penalty, the legitimate regulatory objective, the ability to rebut the presumption, and the safeguards available to the person penalised.

For excise-goods penalties, requiring traders to prove that duty has been paid is proportionate where they can undertake due diligence, rebut the presumption, and establish a reasonable excuse. The burden is not invalid merely because payment of duty is an element of the offence or because the facts are not within the trader’s sole knowledge.

The appellant was a wholesale dealer in alcoholic drinks. It bought excise goods from a supplier which HMRC connected with missing traders and could not show to have paid excise duty. HMRC imposed a reduced penalty of £31,864.40 under paragraph 4(1) of Schedule 41 to the Finance Act 2008.

The First-tier Tribunal dismissed the appellant’s appeal. The Upper Tribunal held that the penalty proceedings were criminal for article 6 purposes, but dismissed the appeal because the reverse burden in section 154(2) of the Customs and Excise Management Act 1979 was compatible with article 6(2). The appellant appealed to the Court of Appeal on that compatibility issue alone.

1. Appeal dismissed. The statutory reverse burden requiring the trader to prove that excise duty had been paid was compatible with article 6(2) of the European Convention on Human Rights and Fundamental Freedoms.
2. The governing question was whether the burden enacted by Parliament unjustifiably infringed the presumption of innocence. That required an assessment of the particular provision in its context, including the importance of what was at stake, the rights of the defence, the opportunity to rebut the presumption, and the proportionality of the means to the legitimate aim. The approach in Sheldrake v DPP [2004] UKHL 43 and the Strasbourg authorities was applied.
3. The penalty under Schedule 41 was essentially regulatory. It did not require proof of fault and carried no moral or social stigma. It applied to traders who had chosen to deal in dutiable goods, in a sector where payment of duty was of central importance and where due diligence as to the provenance of stock should be routine.
4. The statutory scheme contained substantial safeguards. The trader could prove that duty had been paid. A trader who had taken reasonable steps could establish the reasonable-excuse defence under paragraph 20 of Schedule 41. The statutory provisions also permitted mitigation in special circumstances. Due diligence need not guarantee that duty was paid: where reasonable steps had been taken but unpaid duty was later discovered, the reasonable-excuse defence would be available.
5. Difficulty in proving payment, and uncertainty as to whether HMRC or the trader would be better placed to do so in an individual case, did not determine the issue. Nor was there a categorical rule against reversing the burden as to an element of an offence rather than a defence. The proportionality assessment remained contextual. Given the longstanding evasion risk and its serious consequences for public finances, placing this limited burden on excise traders was reasonable and proportionate.

• Court of Appeal (Civil Division). Dismissed the appellant’s appeal and upheld the compatibility of the reverse burden with article 6(2).
• Upper Tribunal (Tax and Chancery Chamber). Held that the penalty proceedings were criminal for article 6 purposes, but dismissed the appeal because the reverse burden was compatible with article 6(2).
• First-tier Tribunal. Dismissed the appeal against the penalty, holding that there was no reasonable excuse and initially rejecting the article 6 argument on the basis that the proceedings were not criminal.