[2010] UKFTT 37 (TC)

TC00351
Appeal Number: MAN/2008/8064 

FIRST TIER TRIBUNAL TAX

EXCISE DUTY – NON-RESTORATION OF JEWELLERY – Appellant asserts that she was blameless for failing to declare the jewellery – No persuasive evidence to support her assertion – The Review Officer, however, disregarded relevant facts – no commercial gain from importation – jewellery not concealed – decision unreasonable – Appeal allowed.  

DECISION NOTICE 
Rule 35(2) The Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 

	NIMCO MOHAMED	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

Tribunal:	MICHAEL TILDESLEY OBE (Judge)
JOHN LAPTHORNE (Member)

Sitting in public at Birmingham on 11 December 2009

Jennifer Barker counsel instructed by SMK solicitors for the Appellant  
Vinesh Mandalia counsel instructed by the Solicitor’s office of HM Revenue & Customs, for HMRC

© CROWN COPYRIGHT 2010

DECISION
The Appeal

1.	The Appellant was appealing against HMRC decision on review dated 20 December 2007 refusing restoration of thirty pieces of gold and silver jewellery.
2.	 On 6 August 2007 at Birmingham Airport Cargo Centre Customs Officers intercepted a package addressed to the Appellant from Dubai. The C3 Customs declaration with the package stated that it contained 36 children’s dresses and four women’s gowns.  The Officers discovered 17 gold bangles, eight pendant sets consisting of gold pendants, pairs of earrings and rings; and a five-piece silver earring and ring set in three polythene bags of clothing within the package. The Officers seized the jewellery.
3.	The Appellant instigated condemnation proceedings but withdrew the Appeal on 24 September 2007. The Appellant accepted that the jewellery had been lawfully seized. The Appellant contended that the non-declaration of the jewellery was an honest mistake on the part of the freight forwarder in Dubai, and that in all the circumstances the refusal to restore the jewellery was disproportionate. HMRC countered that there was no reliable evidence to demonstrate that the non-declaration was an honest mistake. HMRC considered that the non-declaration of the jewellery was an aggravating feature of the case which justified its refusal to restore the goods. 
4.	The Tribunal’s jurisdiction in this Appeal is limited to deciding whether Officer Hodge’s refusal to restore the jewellery was reasonable. In order for the decision to have been reasonable Officer Hodge must have considered all relevant matters and must not have taken into consideration irrelevant matters. The Tribunal cannot substitute its own view for that of Officer Hodge. If the Tribunal considers the decision unreasonable it can only refer the matter back to HMRC for another review conducted by a different Officer.
5.	The Tribunal heard evidence from the Appellant. The Appellant’s grasp of the English language was poor. Her husband, Hassan Harabai, acted as interpreter. Mrs Deborah Hodge, the review officer gave evidence for HMRC. A bundle of documents was supplied in evidence, which included witness statements of the Appellant’s aunt and three friends of the Appellant. HMRC had requested their attendance, and in those circumstances objected to the admission of the statements.
The Facts Found
6.	The Tribunal found the following facts:
(1)	The Appellant was a Somalian National seeking asylum in the United Kingdom.
(2)	The Appellant’s friend, Katro, was due to get married in the United Kingdom. The wedding ceremony took place on 10 August 2007 at the Regent Park Banquet Hall in Birmingham.
(3)	According to Somalian customs, the wedding would be celebrated over three days, followed by a gathering of the female guests with the bride at which gifts would be given to the bride.
(4)	The Appellant and her three friends, Nimro, Rado, and Bakeen decided to give jewellery as a wedding present to Katro. They also agreed to purchase jewellery and gowns for themselves to wear at the wedding, and dresses for their children. Between them they had 24 children. of whom 15 were girls.
(5)	The Appellant and her friends decided to ask the Appellant’s aunt, Safiya Aden, to buy the dresses and jewellery in Dubai where the prices were much cheaper than in the United Kingdom.  The Appellant’s friends forwarded $2,500 to the Appellant’s aunt so that she could purchase the goods. The aunt gifted the Appellant with her share of the dresses and jewellery. 
(6)	On 1 August 2007 the aunt took the goods into the Offices of FEDEX in Dubai for onward transportation to the United Kingdom. According to the Appellant, the aunt left it to FEDEX employees to complete the necessary documentation with the aunt paying FEDEX the amounts due including the duties, if any, on the goods. The aunt was illiterate and did understand the documentation which was completed in English.  The FEDEX employees, however, included amongst their number, Somalian speaking individuals.
(7)	The documentation sent with the package consisted of the package label, a pro-forma invoice and a C3 Customs Declaration. The package label addressed to the Appellant named the goods as children’s dress, 70 per cent polyester and 30 per cent cotton, and woman’s long gown dress, 100 per cent polyester, with a Customs value of $152. The pro-forma invoice likewise referred to the goods as children’s dress and long gowns (40 items) with a value of $152 plus £172 for freight charges. The original invoice documentation did not record the jewellery. The C3 Customs Declaration was completed in Dubai, and made no mention of the jewellery. The C3 document also contained two further errors, the Appellant was declared to be a diplomat which she was not, and the box dealing with goods obtained under a tax free scheme upon which duty was payable was ticked no.
(8)	On 6 August 2007 a Customs Officer searched the package on its arrival into the United Kingdom. The Officer discovered the jewellery within three polythene bags of clothing. He seized the jewellery because it had not been declared. The clothing was allowed to proceed. The Officer did not record that the jewellery was concealed.
(9)	On being informed by HMRC that the jewellery was being held at Birmingham Airport, the Appellant contacted her aunt in Dubai. According to the Appellant, FEDEX accepted responsibility for failing to declare the jewellery, and purportedly sent a letter of apology by fax to the Appellant. No letter of apology was adduced in evidence before the Tribunal. 
(10)	The Appellant appeared to rely on a commercial invoice exhibited at page 18 of the bundle. This invoice recorded the Appellant’s aunt as the exporter of the goods, and the Appellant as the consignee. The invoice itemised four categories of goods: the children’s dresses, the long gowns, 16 bracelets valued at $1200, and eight Jondals’ sets (one ring, one necklace and two earrings) valued at $1800. The quantity of jewellery on the invoice did not correspond with that seized by HMRC. The signature on the invoice was indecipherable with no information about the identity of the signatory. There was nothing on the face of the invoice linking it with FEDEX. Further the Appellant produced no document evidencing such a link.
(11)	HMRC arranged for an independent valuation of the jewellery, which came out at £5,713.16 as at 12 October 2007. The duty owed on the jewellery was £1,167.62.
(12)	The Appellant had offered to pay the outstanding duty in return for the jewellery. HMRC declined the offer.
7.	The Tribunal decides the following on the facts found:
(1)	There had been a failure to declare the jewellery on the documentation in respect of its importation into the United Kingdom.
(2)	The Appellant did not satisfy the Tribunal on the balance of probabilities that FEDEX employees in Dubai were responsible for the error regarding the non-declaration of jewellery items. The Appellant’s explanation that her aunt was illiterate and left the form filling to FEDEX employees was undermined by the admission that FEDEX employed Somalian speaking individuals. Further, the Appellant did not provide documentary evidence from FEDEX admitting responsibility for the error.  There was no persuasive evidence linking FEDEX with the invoice at page 18 of the bundle. Finally, the Appellant’s account of what happened in Dubai was second hand and of no evidential value.
(3)	The Tribunal is satisfied that the jewellery was purchased for the personal use of the Appellant and her friends, and as a wedding gift. The Tribunal finds that the wedding took place on the 10 August 2007. The Appellant supplied photographs of the wedding ceremony in which she identified her friends, and a receipt dated 10 August 2007 for the hire of Regent Park Banquet Hall.  There was a close relationship in time between the purchase of the jewellery and the date of the wedding. Finally, the Tribunal considers the Appellant to be a truthful witness on the reasons for the purchase of the jewellery.
(4)	The Tribunal finds no persuasive evidence that the jewellery had been concealed within the package. HMRC Brief for the condemnation proceedings exhibited a page 37 in the bundle alleged that the jewellery had been concealed or packed in a manner intended to deceive an Officer. Officer Hodge, the review Officer, fairly testified that she could find no corroboration for the allegation of concealment. The   notebook of the Officer who seized the jewellery did not record such an allegation. Officer Hodge was unable to contact the Officer as he has now retired from the Service.
Consideration
8.	HMRC’s power regarding restoration of goods which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:
“confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it, to do one or more of the following, that is to say –
a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the Tribunal may direct;
b) to require the Commissioners to conduct, in accordance with the directions of the Tribunal, a further review of the original decision;
c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future”.
9.	The precondition to the Tribunal’s exercise of one or more of its three powers, namely, that the person making a decision could not reasonably have arrived at it, falls within the guidance given by Lord Lane in the decision in Customs and Excise v JH Corbitt (Numismatists) Ltd  [1980] STC 231 at page 239:
“…..if it were shown the Commissioners had acted in a way in which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight”.
10.	The Tribunal is not entitled to substitute its own decision for that of Officer Hodge. Further the Tribunal is not at liberty to hold Officer Hodge’s decision unreasonable because the Tribunal might disagree with it.  In deciding the reasonableness of Officer Hodge’s decision the Tribunal, however, has a comprehensive fact finding jurisdiction to establish whether the primary facts upon which Mrs Hodge’s decision were correct (see Gora and others v Customs and Excise Commissioners [2003] EWCA Civ 525).
11.	Counsel for the Appellant submitted that HMRC’s refusal to restore the jewellery interfered with the Appellant’s right to  peaceful enjoyment of her possessions, which engaged the provisions  of Article 1 Protocol 1 of the European Convention of Human Rights (ECHR). Counsel acknowledged that HMRC was entitled to interfere with the Appellant’s right to peaceful enjoyment to secure payment of taxes but only to the extent that such interference was proportionate to the Appellant’s contravention. According to counsel, the facts of this Appeal demonstrated that the Appellant was blameless. FEDEX was responsible for the non-declaration of the jewellery on the documentation. The Appellant had offered to pay the outstanding duty based on HMRC’s valuation of the jewellery which was considerably more than the duty that would have been due if the forms had been completed correctly with the purchase price of the jewellery. Thus in all the circumstances the non-restoration of the jewellery was wholly disproportionate.
12.	Counsel for HMRC disagreed, contending that there was no persuasive evidence that FEDEX was responsible for the documentation errors. He likened the Appellant’s submission that payment of duty was a sufficient penalty to that of a shoplifter offering to pay for goods after being apprehended. In counsel’s view, HMRC policy on restoration was consistent with the principles of Article 1 Protocol 1 of ECHR. HMRC was entitled not to restore goods which have been lawfully seized. The policy, however, required each case to be examined on its merits to determine whether restoration may be offered exceptionally. In this Appeal the Appellant did not dispute the lawfulness of the seizure.  Officer Hodge had applied the policy correctly. She started with the premise that goods should not normally be restored especially if there were aggravating circumstances. Officer Hodge placed weight on the fact that there had been a failure to declare the jewellery which constituted an aggravating circumstance. Officer Hodge considered the non-declaration and the Appellant’s failure to provide a satisfactory explanation warranted the non restoration of the jewellery. Counsel concluded that in all the circumstances Officer Hodge’s decision was reasonable.
13.	Officer Hodge’s decision included the statement that 
“Although the documentation indicates that the goods were intended for personal use, I am not persuaded that 36 children’s dresses and 4 gowns fit into that category. The jewellery consisted of eight pendant sets, 17 bangles and a necklace set of significant value and I suspect that all of the goods were imported for commercial disposal”.
14.	The Tribunal considers that Officer Hodge’s finding of a commercial importation had some influence on her decision to confirm the non-restoration of the jewellery. Officer Hodge in her evidence before the Tribunal indicated that she was prepared to accept that the jewellery had been imported for personal use. Officer Hodge considered her concession did not undermine her original decision to refuse restoration of the jewellery.
15.	The Tribunal agreed with Officer Hodge’s principal findings of non-declaration and inadequate explanation for the default. The Tribunal rejected the Appellant’s assertion that FEDEX was responsible for the documentation errors. The Tribunal’s findings of fact, however, disagree with Officer Hodge in two respects. First the jewellery was imported for the personal use of the Appellant and her friends, and as a wedding gift. Second, there was no persuasive evidence of the concealment of jewellery within the package.
16.	The question, therefore, was whether the difference between the Tribunal’s findings and those of Officer Hodge were material in the sense that they were relevant facts which Officer Hodge should have had regard to in the exercise of her discretion, and which had the potential to influence her decision. HMRC’s policy on restoration was starkly brief and gave the impression that failure to declare was determinative of the issue. This impression was reflected in the submissions of counsel which polarised the dispute between the two extremes of the spectrum of restoration with payment of the duty on one hand  and non-restoration on the other. 
17.	In order for the policy to be consistent with Article 1 Protocol 1  ECHR it needs to strike a fair balance between public interest and the protection of individual rights.  The Court of Appeal in Lindsay v. Customs and Excise Commissioners [2002] EWCA Civ 267 held that in restoration decisions the striking of a fair balance involved a realistic assessment of all the circumstances of an individual case. This included considering the alternative sanctions available to the Commissioners rather than the automatic imposition of an oppressive penalty which could amount to an unconscionable interference with the rights of an individual. An alternative sanction may be restoration subject to the payment of a substantial financial penalty in addition to the satisfaction of the outstanding duties,
18.	The Tribunal decides that the application of the policy on restoration in order to conform with Article 1 Protocol 1 ECHR requires consideration of the degrees of culpability associated with a failure to declare. The Tribunal finds that importation for personal use and concealment were relevant in assessing the Appellant’s blameworthiness, in that the unlawful importation was not done for commercial gain, and that the contravention was relatively unsophisticated. Thus in these two respects the Tribunal holds  Officer Hodge’s decision unreasonable.
Decision
19.	The Tribunal finds that HMRC decision of 20 December 2007 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. The Tribunal allows the Appeal
Orders
20.	The Tribunal is not entitled to order HMRC to restore the jewellery to the Appellant with or without conditions. In exercise of the Tribunal powers on Appeal  under section 16(4) of the Finance Act 1994 the Tribunal makes the following orders:
a.	The decision to refuse restoration of the jewellery shall cease to have effect from the date of release of this decision.
b.	HMRC shall conduct a further review of the decision not to restore the jewellery and serve the same on both the Appellant and the Tribunal within 30 days of release of this Decision.
c.	An Officer not previously involved with the case shall conduct the further review.
d.	The further review shall be on the basis of the Tribunal’s findings of fact set out in paragraphs 6 and 7 of this decision. 
e.	The Review Officer shall take account of any further material or representations made by the Appellant within 21 days from release of this decision. The representations shall be made to HM Revenue and Customs Review Team, Detection South Region, Crownhill Court, Tailyour Road, Crownhill, Plymouth, PL6 5 BZ.
f.	The Appellant will have a further right of appeal to the Tribunal if dissatisfied with the outcome of the further review. 
21.	The Tribunal makes no order for costs. The Appellant did not seek an order.

                                 MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
RELEASE DATE: 19 January 2010

1.	A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making   an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.