[2009] UKFTT 211 (TC)

TC00164

CUSTOMS DUTY – end use – post clearance demand – reliance on article 220 of the Code – appeal allowed.

FIRST-TIER TRIBUNAL

TAX 

	AIR AND MARINE SERVICES LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS 	Respondents

				TRIBUNAL: 	Judge Richard Barlow

Sitting in public in Manchester on 6 April 2009 (closing submission in writing completed 1 June 2009)

Mr. D Taylor, director, for the Appellant

Mr. R Chapman of counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	The Appellant appeals against the Commissioners’ deemed confirmation of their earlier decision to issue a post clearance demand for customs duty in the sum of £6,005 in respect of a number of importations of polyurethane tape.  The importations were carried out by the Appellant between 18 August 2004 and 14 December 2006.
2.	It is agreed between the parties that the tape falls within Tariff classification 3919 10 38 10 which, in the Customs Tariff produced to me at the hearing, reads as follows:
“Self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes, of plastics, whether or not in rolls:
…
Other
Self adhesive tape of metalised polyurethane containing glass beads for use in the manufacture of life-saving equipment.”
3.	However, for the year beginning 1 January 2005 annex 1 to Council Regulation 2658/87, which established the Common Customs Tariff, and which is amended every year reads as follows:
3919 10 38
“Other”
It does not have the more detailed description referred to in the UK Customs Tariff produced at the hearing, which I therefore assume was added for the UK’s own purposes.  In view of the fact that ultimately this case does not turn on any question whether or not the goods fell within CN heading 3919 10 38 10 – because that is agreed – I need not resolve that conflict.  It is however illustrative of the complexity of the legal provisions.
4.	The final digits “10” are those added by the UK under article 5(3) of Council Regulation 2658/87 “for national purposes”.  The Commissioners have alleged, in a Schedule showing how they calculated the duty notified in the C18 demand, that the correct commodity code was 3919 10 38 20 which they now contend is not the case.  In their Statement of Case they allege that the Appellant entered the goods under 3919 10 38 10, which is the correct code.  Elsewhere however they have alleged that several different codes were entered, some of which were incorrect.
5.	As no evidence was produced to prove which codes had been entered I will proceed on the basis alleged in the Statement of Case and therefore on the basis that the Appellant entered the correct codes.
6.	The goods in question were subject to end-use control and there is a very small footnote at the end of the annex to Council Regulation 2658/87 in respect of sub-heading 3919 10 38, amongst others, which reads:
“Control of the use of this special purpose shall be carried out pursuant to the relevant Community Provision.”
The UK Tariff is more informative as the foot note is on the same page as sub-heading 3919 10 38 and it reads “Subject to end-use control - See Volume 1, Part 11.”
7.	Regulation 1255/96 provided that some goods could be entered at nil rates of duty.  By the time that Regulation was replaced by 1897/2006 it had been amended 37 times and although the EUR-LEX site provided some assistance by issuing consolidated versions from time to time showing the amendments, those consolidated versions are not published in that form in the Official Journal.
8.	At some time between 1996 and the dates of importation relevant to this appeal, goods under sub-heading 3919 10 38 originating, amongst other countries, from Japan were added to those for which a nil rate of duty applies but that did not remove the requirement that they were subject to end use control.
9.	The undisputed evidence of the Appellant was that the goods in question only had one possible end use which was that specified in the UK Tariff.
10.	The Appellant did not have end-use authorisation and was not able to confirm, indeed it is not the case, that its customers had end-use authorisation.  The Appellant did attempt to obtain retrospective end-use authorisation but was unable to do so.  That was in part at least because there is a limit of 12 months for any such retrospection under article 294(3) of Commission Regulation 2454/93/EEC (the Implementing Regulation) and in part because the formalities necessary to regularise the situation could not be met because the Appellant’s customers were not authorised and the Commissioners were not prepared to exercise any discretion they may have had to allow retrospection even for the 12 months preceding the application.
11.	On several occasions before the Appellant imported any of the goods in question its directors or members of staff had telephoned the Respondents’ information line services.  One particular call is of special relevance and the Respondents’ own records of it are quoted below.  The call was made on 9 July 2004, before any of the relevant importations.  Karen Taylor, who was an employee of the Appellant called.  The Respondents’ record of the advice given is:
“Caller querying duty rates on 3919103810 from Japan as at 13/1/04, advised 6.5% full duty, checked suspension with tariff team, they advised duty is automatically free from all third countries and has been since November 2003.  Faxed confirmation to 0151 929 3909.”
12.	At the end of the hearing I invited the parties to make their final submission in writing and in particular I asked them to deal with the question whether the failure to comply with the requirement that the goods, which were in fact put to the specified end use, should be put to that use only with authorisation, was itself a reason to disapply the nil rate of duty and to apply the 6.5% rate.  They did not deal with that issue and there is a limit to how far the tribunal can be expected to carry out independent research into such issues.  However, as I have concluded that, under article 220 of Council Regulation 2913/92 (the Customs Code), the Appellant is excused payment of the duty because of an official error by the Respondents, I do not need to require the parties to address me further about that issue.
13.	The Respondents cited Hewlett Packard France v Directeur Général des Douanes Case C-250 [1993] ECR I-01819, Olagasti & G Srl and Others v Amministrazione delle Finanze dello Stato Case C-47/95 and others [1996] ECR I-06579, Viva Mexico v Commissioners of Customs and Excise (Decision C00130) and Iluminatronica v Chefe da Divisiao de Procedimentos Aduaneiros e Fiscalis Case C-251/00 [2002] ECR I-10433, Mercarnate v Chefe do Servico da Conferencia Final da Alfondego, [1991]  ECR I-3277, Faroe Seafood [1996] ECR I-2465, Invicta Poultry v Customs and Excise [1998] EWCA Civ 755, Binder v Hauptzollamt Bad Reichenhall [1989] ECR 2415, Align Rite Ltd v Commissioners of Customs and Excise (Case No. C00121) and Top Hit Holzvertrieb GMBH v Commissioners Case 378/98.
14.	From those cases they derive the following propositions:
i.	Only errors attributable to acts of the competent authorities themselves confer entitlement to waiver of the duty.
ii.	The error must be such as to create a legitimate expectation on the part of the importer that he can act in accordance with the erroneous information.
iii.	The trader must comply with the relevant provisions and can be expected to read the Official Journal “attentively”.
iv.	The importer must make such enquiries as might be expected of a reasonably prudent importer.
v.	The importer must give enough detailed information, when seeking advice, to enable the authorities to give an accurate answer.
vi.	The importer must indentify the correct subheading.
15.	The error relied upon by the Appellant is that specified in paragraph 11 above.  Clearly the information came from the competent authorities and I hold that it was unequivocal as to the rate of duty.  The Appellant was told the nil rate was “automatic” from all third countries.
16.	That advice did not include any direct reference to end-use.  I hold that the Appellant did give sufficient information to enable the authorities to give an accurate answer as to that as well as to the rate of duty because the very fact that the goods were classified under sub-heading 3919 10 38 10 itself disclosed that they had to be for the specified end-use.  That sub-heading, including the final two digits, is referred to in the note of the advice given.
17.	It is true that the Commissioners are under no obligation to offer advice and were specifically asked about the duty rate, but given the information they had, it should have been obvious that the Appellant should have been given the additional information that end-use authorisation was needed or at the very least there was a legitimate expectation that such information would be given.  If the Commissioners are right to allege that the 6.5% rate applies because end-use authorisation was not obtained then the information that the nil rate applied could only have been given on the assumption that end-use authorisation was in place but, if it was, then the Appellant would not have needed the advice in the first place and it should have been obvious to the Respondents that by the very fact it was seeking advice about the rate that showed that the Appellant was unaware of the need to obtain end-use authorisation.  Therefore the Respondents should not have advised the nil rate was applicable unless they had first satisfied themselves the Appellant knew it needed the authorisation and had obtained it or would do so.  The Respondents gave advice which consisted of considering whether either the 6.5% rate or the nil rate applied without seeking confirmation that the necessary additional fact, which they now say had to be in place, was in fact in place.
18.	In the Invicta Poultry case Lightman J held as follows:
“In determining whether this condition [reasonable detectibility] is satisfied, all the circumstances of the individual case must be assessed objectively, taking into account the nature of the error, the professional experience of the trader concerned and the degree of care which he had exercised.”
[…]
“It is well established that in conducting this exercise it must be taken into account that a trader has available to detect any error the [Official] Journal and the provisions of Community law there printed.  The principle is clear that ‘everyone is deemed to know the law’. […] This principle is more realistically understood and applied under Community law than it is under English law: the trader is only expected to derive from the Journal such knowledge as would be derived by an attentive reader.  Where the complexity of the law is such as to defeat the reasonable efforts of such a reader, a greater knowledge and understanding may not be attributed to him: whether it will or not depends on all the circumstances.”
19.	The reference to reasonable detectibility in that passage is a reference to the provision in article 220 of the Code which prevents a person from relying on the official error if it could reasonably have been detected by that person.
20.	Applying that principle and those set out in paragraph 14 above and on the basis of all the circumstances I hold that the Appellant is entitled to the benefit of article 220 and so, even if the 6.5% rate could apply in principle, which I have not held to be the case as it is unnecessary to reach a decision on that and I have not heard submissions on it, the appeal is allowed.

MAN/2007/7039

RICHARD BARLOW

TRIBUNAL JUDGE
RELEASE DATE: 14 August 2009