General Transport Service SPA v Revenue And Customs

Excise duty becomes chargeable in a Member State where goods released for consumption in another Member State are held there for commercial purposes. Article 37 of Directive 2008/118/EC does not remove that charge merely because competent authorities seize and later destroy the goods. “Transport” bears its ordinary meaning, so goods seized and held pending forfeiture are not destroyed during transport. Authorised destruction concerns arrangements connected with the natural hazards of transportation, including substantially damaged goods which remain technically usable as excise goods. It does not cover seizure and forfeiture of smuggled goods.

The appellant, an Italian logistics company, arranged the transport of wine from Italy to the United Kingdom. The wine had been released for consumption in Italy, was held for commercial purposes in the United Kingdom, and was seized at Purfleet after arriving without the required duty-suspension documentation or payment of duty. The seizure was not challenged, and the wine was later deemed condemned and forfeited under Schedule 3 to the Customs and Excise Management Act 1979.

HMRC imposed an excise wrongdoing penalty under paragraph 4(1) of Schedule 41 to the Finance Act 2008. The First-tier Tribunal dismissed the appellant’s appeal, and the Upper Tribunal dismissed its further appeal: [2019] UKUT 0004 (TCC). This appeal concerned whether Article 37 of Directive 2008/118/EC prevented an excise duty point, and therefore the penalty, after the goods were seized and destroyed.

1. Appeal dismissed. The wine satisfied Article 33 of Directive 2008/118/EC. It had been released for consumption in Italy and, on arrival in the United Kingdom, was held for commercial purposes in order to be delivered there. It was therefore subject to UK excise duty, an excise duty point arose under regulations 5 and 6 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010, and the appellant became liable to a penalty under paragraph 4 of Schedule 41 to the Finance Act 2008 (paras [49]-[50]).
2. Article 37 did not disapply that result. “Transport” has its ordinary meaning. The wine ceased to be transported when Border Force seized and held it pending forfeiture; its later destruction therefore did not occur during transport (paras [52]-[53]).
3. The phrase “as a consequence of authorisation by the competent authorities” refers to official permission for destruction in arrangements connected with the natural hazards of transportation. It may cover goods substantially damaged in transit which remain technically usable as excise goods, but does not cover destruction following seizure and forfeiture of smuggled goods (para [54]).
4. The court rejected reliance on Prankl and Dansk. Those decisions concerned the earlier directive or materially different circumstances and did not assist in construing the clearly worded, new Article 37. The fact that excise duty is a tax on consumption does not mean that duty is payable only when goods are actually consumed; Article 33 specifies when they become chargeable (paras [56]-[61]).
5. The court declined to determine HMRC’s alternative deemed-duty argument based on Jones. The point was academic because the appellant accepted that, unless Article 37 removed it, an Article 33 duty point had arisen. The Upper Tribunal’s comments on Jones, particularly at paragraphs 50 to 57 of its decision, should not be regarded as authoritative without fuller argument in an appropriate case (paras [63]-[66]).

• Court of Appeal (Civil Division): Appeal dismissed. The court upheld the result below on the construction of Article 37, while stating that the Upper Tribunal’s separate analysis of the deemed-duty issue should not be treated as authoritative: [2020] EWCA Civ 405.
• Upper Tribunal (Tax and Chancery Chamber): Appeal from the First-tier Tribunal dismissed: [2019] UKUT 0004 (TCC).
• First-tier Tribunal: Appeal against HMRC’s penalty assessment dismissed. The tribunal held that the goods became chargeable to UK excise duty when held for commercial purposes in the United Kingdom and that later destruction did not prevent the penalty.