Thyssenkrupp Materials (UK) Limited v The Commissioners for HMRC

Under the inward processing suspension system, a customs debt does not automatically arise for all goods covered by a bill of discharge merely because one entry contains an error. The decision in Döhler Neuenkirchen concerned the complete failure to submit a bill of discharge within time and did not establish that rule.

Under Article 204 of the Community Customs Code, a debt arises only where an obligation or condition has not been fulfilled and the failure has a significant effect on the correct operation of the procedure. Minor or immaterial errors may be resolved by reference to supporting records. A bill of discharge need not reproduce errors in the original customs declaration or reconcile mechanically with HMRC’s database.

The appellant operated inward processing relief under the suspension system and submitted quarterly bills of discharge containing very large quantities of data. HMRC identified errors and mismatches between those bills and its Management Support System, and issued a demand for customs duty and import VAT.

The First-tier Tribunal dismissed the appeal, holding that any error or mismatch could create a customs debt on all goods covered by the relevant bill. It relied principally on Döhler Neuenkirchen, EU:C:2012:559. The central issues before the Upper Tribunal were whether that decision applied to errors in an otherwise timely bill, whether reconciliation with HMRC’s database was required, and whether immaterial errors could create a debt.

1. Appeal allowed. The Upper Tribunal rejected HMRC’s contention that a single error in a single cell of a timely bill of discharge created a customs debt for all goods covered by that bill. That result would be disproportionate and absurd, particularly where the bills contained hundreds of thousands of data points.
2. Döhler Neuenkirchen concerned the complete failure to submit a bill of discharge within the prescribed period. Its conclusion that the whole quantity was subject to a customs debt was tied to that failure and to the non-application of Article 859(9) of the Implementing Regulation. The decision did not address errors in individual cells of a timely bill and could not be applied by analogy.
3. Article 521(2) of the Implementing Regulation specifies the particulars required in a bill of discharge. It does not require the bill to reconcile with HMRC’s Management Support System without further investigation. The bill must accurately describe the goods at discharge, but Article 521(2)(e) does not require a trader knowingly to reproduce an error in the original import declaration.
4. The record-keeping obligations under Articles 515 and 516, read with Article 496(j), are distinct from the bill-of-discharge requirements. Supporting records may be used to verify and resolve discrepancies. A discrepancy with HMRC’s database therefore does not itself establish non-compliance or a customs debt.
5. Article 204(1) of the Community Customs Code excludes a debt where the failure has no significant effect on the correct operation of the procedure. Minor, immaterial and resolvable errors, including incorrect codes, quantities, dates or references, did not create debts on the facts considered. A material quantity error created a debt only for the relevant entry. The Tribunal could not determine the separate objection concerning transfer to an end-use customer on the material before it.
6. The Tribunal left open the possibility that a document so incomplete and inaccurate that it could not properly be described as a bill of discharge might have different consequences. That was not the position here. Ground 4, concerning reasons, did not require determination.

• Upper Tribunal (Tax and Chancery Chamber): appeal from the First-tier Tribunal allowed. The FTT decision, [2022] UKFTT 00443 (TC), was displaced to the extent that it treated the identified errors as creating a customs debt for all goods covered by the bills.
• First-tier Tribunal (Tax Chamber): appeal dismissed.