Logfret (UK) Ltd v HM Revenue and Customs

Under the duty-suspension scheme, a deemed irregularity arises when excise goods have not been recorded on the electronic movement system as received at their specified destination by the end of four months. It is insufficient to prove later receipt. An irregular departure from the suspension arrangement ends the movement for the goods concerned, and the irregularity may be detected after the movement has ended. Proof of receipt must come from, or be endorsed by, the competent authorities of the destination state. The additional month available to an uninformed guarantor permits investigation and evidence, but does not extend the four-month period. A new argument on the location of an irregularity cannot be raised on a second appeal where it might have altered the evidence at first instance.

Logfret guaranteed excise duty on four alcohol consignments dispatched from UK warehouses under duty-suspension arrangements. Three consignments were not recorded as received at their destinations. The fourth was recorded as received in Italy nearly eleven months after dispatch.

The First-tier Tribunal allowed Logfret’s appeal: [2017] UKFTT 0484 (TC). The Upper Tribunal reversed that decision: [2018] UKUT 0422 (TCC). The Court of Appeal considered the meaning of the four-month period, when a movement ends, the evidence available to a guarantor, and whether a new argument under Article 10(5) of the Council Directive 2008/118/EC could be raised on appeal.

Sir Timothy Lloyd gave the judgment of the court. Rose LJ and Coulson LJ agreed. The appeal was dismissed.

1. End of a movement. Article 20(2) describes the ordinary end of a movement when the consignee takes delivery. But an irregular departure from the duty-suspension arrangement is a release for consumption under Article 7(2)(a). It brings the movement to an end for the goods concerned, even where they will never reach the specified destination. Duty becomes chargeable under Article 7(1).
2. Detection during a movement. The references in Article 10(2) and (4) to an irregularity detected during a movement concern an irregularity occurring during the movement. Detection may occur later, after the irregularity has ended the movement.
3. Four-month deeming rule. Under Article 10(4), if by the end of four months the goods have not been recorded on EMCS as received by the consignee, and no irregularity has been detected, an irregularity is deemed to have occurred in the Member State of dispatch. The deemed result can be avoided only by showing within the relevant period that the goods arrived within time or by showing where the actual irregularity occurred. A report of receipt recorded long after four months was therefore irrelevant to Movement 4.
4. Evidence of receipt. Evidence relied on to prove receipt under Article 10(4), read with Article 28, must be a report of receipt through EMCS or evidence emanating from, or endorsed by, the competent authorities of the destination Member State. Commercial documents alone were insufficient.
5. Guarantor’s additional month. The second paragraph of Article 10(4) gives an uninformed guarantor one month to provide evidence of the same matters available under the first paragraph. It does not extend the four-month period for proving receipt.
6. Article 10(5). The argument that the location of the irregularity had been ascertained within three years was not raised before the First-tier Tribunal. Since it might have affected the evidence and conduct of the hearing, it was not open on this second appeal. The court expressed no concluded view on the construction of Article 10(5) or regulation 82 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010.

1. Court of Appeal (Civil Division): Dismissed Logfret’s appeal against the Upper Tribunal’s decision: [2020] EWCA Civ 569.
2. Upper Tribunal (Tax and Chancery Chamber): Allowed HMRC’s appeal and reversed the First-tier Tribunal’s decision: [2018] UKUT 0422 (TCC).
3. First-tier Tribunal: Allowed Logfret’s appeal against the excise-duty assessments: [2017] UKFTT 0484 (TC).