Bradgate Containers Ltd v Revenue & Customs [2011] UKFTT 308 (TC) (10 May 2011)

DECISION

Introduction

1 This appeal is against the decision of the Commissioners contained in a letter dated 24 June 2009 upholding a post clearance demand note dated 13 March 2009 issued to Bradgate Containers Limited for £1,695.99 customs duty and value added tax in respect of import entry 120/038200E made on 9 August 2007. The appeal comes before the tribunal under section 16 of the Finance Act 1994.

2 It is common ground that the goods imported were entered for inward processing relief (IPR) and were in fact processed and re-exported, but bills of discharge vouching re-export of the goods were not submitted within the time limits applicable. The issues in the appeal were thus: (i) whether Bradgate could in that case benefit from the provisions in the Community Customs Code and its Implementing Regulation – Regulations 2913/92 and 2454/93 respectively – allowing remission of the duty otherwise due where there has either been no ‘obvious negligence’ on the part of the importer, or where the latter has found itself in a ‘special situation’ and (ii) whether, in any event, Bradgate fell within Article 204(3) as the person liable for the duty. These provisions are explained fully below.

Evidence

3 We received oral evidence from Mr Malcolm Cropley the Sales Manager of Bradgate, and from Ms Sharon Barbouti a Higher Executive Officer of the Commissioners and the reviewing officer whose review upheld the issue of the post clearance demand note. We also had an agreed bundle of documents and correspondence. We regarded both Mr Cropley and Ms Barbouti as honest and straightforward witnesses. The evidence was as follows.

4 Bradgate carries on the business of providing large steel containers into which customers’ equipment is installed but is not itself involved in the transport, haulage or shipping of goods. It was admitted to the IPR scheme in 2006 and has to date used the IPR scheme on 13 occasions.

5 On 2 October 2008, Bradgate was sent a letter by the Commissioners in relation to two cases in which the company had used the IPR scheme, but bills of discharge vouching re-export had not been submitted in time. In that letter, the Commissioners stated that they were exercising their discretion under Article 859 of Regulation 2454/93 to remit the duty nonetheless due, accepting that Bradgate had not then been guilty of ‘obvious negligence’, but making it quite clear that now that the company was aware of the importance of submitting bills of discharge on time the discretion would not be used in its favour again.

6 The goods in question in this appeal consisted of electrical equipment imported from the United States in order to be integrated into a steel container made by Bradgate measuring some 18 metres in length, 5 metres in width and 4 metres in height, to be exported as a whole to Nigeria. They were imported on 9 August 2007 and declared to customs by a shipping agent called Concordia International Forwarding Limited, which entered them for IPR citing Bradgate as the consignee; as such it is said by the Respondents that Bradgate, already admitted to the IPR scheme, would be responsible for the discharge of the scheme obligations.

7 The standard time for the processing allowed under IPR to take place is six months. The six months was up on 9 February 2008 and the Commissioners wrote to Bradgate pointing out that the six month period had expired and requesting the submission of a bill of discharge within 30 days. Bradgate replied by email on 25 February that it was trying to trace records “on what the actual consignment was and whom it came from” and requested information to help it do so. The Commissioners supplied the necessary information the next day.

8 Bradgate replied to that saying that “The freight forwarder never sent any paperwork to us and we were totally unaware that this was in the IPR system. ... All that remains now is for us to find out which job it was for and when it was re-exported so that we can send you the C99 [the bill of discharge]. How much time do we have left? I am concerned that it may take some time to trace this as we have a lot of these types of transactions but we normally get told about them on entry.” Bradgate then identified the goods in question and found that their customer had overrun on its project and was not ready for the processed product. Bradgate therefore asked the Commissioners for an IPR extension of 12 months, which was granted, to expire on 9 February 2009. The need to comply with that deadline was emphasised.

9 The deadline was not met on 9 February 2009 and no approach to the Commissioners had been made to explain why. The post clearance demand note referred to above was therefore issued on 13 March, 30 days having expired since 9 February. On 23 March, Bradgate wrote to say that the goods had been exported on 7 March, and the documentation would be supplied “in the next 7 days”. They added the comment that “Our contract is only to deliver to the dockside and we are currently awaiting shipping documents from our customer as to proof of export.” That proof was not in fact supplied until 7 May and Bradgate’s letter enclosing it contained the further comment: “As we are not the importer of the goods fitted or the exporter of the completed packages we have no control over the issuing of a C88 which we believe is the normal requirement.”.

10 On 12 May the Commissioners, although they accepted that the goods had been exported, formally declined to cancel the demand note on the ground that Bradgate had not submitted a bill of discharge within 30 days of the expiry of the throughput period previously notified to them i.e. within 30 days of 9 February 2009. The review decision of 24 June upheld that refusal. Bradgate appealed to the tribunal on 30 June 2009.

11 The reviewing officer, Ms Barbouti, conceded that she had not examined the circumstances of the previous defaults, the subject of the letter of 2 October 2008, to see if they were on all fours with the present case or whether this one was materially different and might merit a renewed exercise of discretion; but she told us that she had in any event looked at the matter afresh. Ms Barbouti had not seen the entry itself and could not be certain who had entered the goods on import, but she felt confident that the entry would have been made by Concordia - though there had been no thought of seeking this duty from them.

12 Ms Barbouti told us that if Bradgate had sought advice before the deadline for re-export had arrived they could have been pointed to the possibility of placing the goods in a customs warehouse in order to continue their duty suspension until the re-export could take place, notwithstanding that the IPR suspension had come to an end.

13 Mr Cropley, giving evidence on behalf of Bradgate, said that he had never before seen the import entry the printout of whose details was before the tribunal, and he maintained strongly that the imported goods had been entered for IPR without Bradgate’s knowledge - though he conceded that he could not be totally certain that no one in the company had given the shipping agent Bradgate’s IPR details to enable the entry for IPR to be made in their name.

14 The printout of the entry details was apparently bespoken by the reviewing officer Ms Barbouti on 23 July 2010, that is a month after her review decision had been made and after the appeal to the tribunal had been lodged. It showed that the entry had been made by the submission of a SAD (Single Administrative Document) and it also showed, by reference to VAT registration numbers, that Concordia was the declarant and Bradgate the consignee; the printout also noted Concordia as the paying agent. The customs duty was stated as £252.71, the remainder due being VAT (which we understand is in principle reclaimable by Bradgate as input tax).

15 Mr Cropley asserted in oral evidence that Bradgate was neither the importer of the goods which had been fitted in their containers, nor their exporter, and that the shipping agent had acted for the US seller of the goods. Referring to the situation in February 2008, Mr Cropley said that “we did not know that the agent in the UK had suspended duty, we had no idea he had done this” and he continued “we had to take it [the IPR issue] in-house and sort it out ourselves; it was not handled on our behalf correctly”. Bradgate had paid for the goods from the US seller (the entry printout showed the invoiced amount as $18,261.66) but Mr Cropley could not recall whether the invoice had dealt with the import charges or not; the document was not in evidence.

16 In a letter dated 22 May 2009, Mr Cropley went on to explain that “Our contract with the customer was to deliver the completed packages to quayside only. We were not responsible for the export of the packages from the UK.” Mr Cropley conceded that Bradgate had at the time been “green” about the IPR regime and that their records and associated administration had not been in good order; as of today, the position is different and the company is on top of the administration required in operating the IPR scheme, with some 75% of its business involving IPR. Mr Cropley insisted, however, that the position in 2007 had been different and that he had not been aware that Bradgate had been implicated in the Scheme in regard to these goods.

17 We accept as being proved at least on the balance of probabilities all the evidence which we have recounted, save that relating to Bradgate’s position in relation to the IPR regime on which we must now make a finding.

18 The evidence of Bradgate’s attitude to IPR in this case, both that which emerges from the contemporaneous written sources and from Mr Cropley’s oral evidence on oath before us, could be seen as suggesting that Bradgate had been something of a bystander in the matter and had done no more than voluntarily taken on itself the burden of seeking to regularise the IPR implications of what the shipping agent Concordia had done. Mr Cropley asserted strongly that Concordia had acted without authorisation from Bradgate, but he believed on instructions from the US suppliers of the goods.

19 There was however no evidence to support the understanding that the US supplier had taken responsibility for the discharge of IPR and the position for which Mr Cropley argues could appear inconsistent with the actual behaviour of Bradgate. Thus, a company which had no liability in respect of IPR might, when approached by the Commissioners in February 2008, have been expected to say so and wash its hands of the Commissioners’ claim; but in fact it did the opposite, by taking the matter on board to resolve.

20 That, however, must be set against the fact that no evidence is available from the party making the entry, Concordia International. The printout from the electronic record does not evidence any commitment or active involvement by Bradgate itself, and it shows Concordia as the paying agent. Moreover, Mr Cropley’s admission that his company was “green” in regard to the IPR system in 2007 is as much consistent with their feeling a need to sort matters out for the sake of good working relations with the Commissioners as with the opposite possibility that they were hastily picking up on a legal obligation which they had neglected. In addition, we are struck by the force of Mr Cropley’s evidence on oath, in a matter in which the financial stakes are modest and where such vigorous protest by a trader who was unsure of his facts would not be expected.

21 We are mindful that the burden of showing that Bradgate was not responsible for the discharge of IPR obligations rests on that company, and that it is not for the Commissioners to prove their case. But, while bearing that in mind however, we are satisfied on the balance of probabilities that the evidence shows that Bradgate did not know that it had been entered as the responsible person for the purposes of IPR on 9 August 2007, and that the company had not authorised such an entry to be made on its behalf. We find that its action in seeking to regularise the IPR position in February 2008 was voluntary.

Legislation

22 The relevant legislation is as follows.

Regulation 2913/92 – the Customs Code

Article 59

1 All goods intended to be placed under a customs procedure shall be covered by a declaration for that procedure.

2 Community goods declared for an export, outward processing, transit or customs warehousing procedure shall be subject to customs supervision from the time of acceptance of the customs declaration until such time as they leave the customs territory of the Community or are destroyed or the customs declaration is invalidated.

Article 118

1 The customs authorities shall specify the period within which the compensating products must have been exported or re-exported or assigned another customs-approved treatment or use. That period shall take account of the time required to carry out the processing operations and dispose of the compensating products.

2 The period shall run from the date on which the non-Community goods are placed under the inward processing procedure. The customs authorities may grant an extension on submission of a duly substantiated request by the holder of the authorisation.

Article 204

1 A customs debt on importation shall be incurred through:

(a) non-fulfilment of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they are placed, or

(b) non-compliance with a condition governing the placing of the goods under that procedure or the granting of a reduced or zero rate of import duty by virtue of the end-use of the goods,

in cases other than those referred to in Article 203 unless it is established that those failures have no significant effect on the correct operation of the temporary storage or customs procedure in question.

2 The customs debt shall be incurred either at the moment when the obligation whose non-fulfilment gives rise to the customs debt ceases to be met or at the moment when the goods are placed under the customs procedure concerned where it is established subsequently that a condition governing the placing of the goods under the said procedure or the granting of a reduced or zero rate of import duty by virtue of the end-use of the goods was not in fact fulfilled.

3. The debtor shall be the person who is required, according to the circumstances, either to fulfil the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they have been placed, or to comply with the conditions governing the placing of the goods under that procedure.

Article 239

1 Import duties or export duties may be repaid or remitted in situations other than those referred to in Articles 236, 237, and 238:

- to be determined in accordance with the procedure of the committee;

- resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned. The situations in which this provision may be applied and the procedures to be followed to that end shall be defined in accordance with the Committee procedure. Repayment or remission may be made subject to special conditions.

2 Duties shall be repaid or remitted for the reasons set out in paragraph 1 upon submission of an application to the appropriate customs office within 12 months from the date on which the amount of the duties was communicated to the debtor.

However, the customs authorities may permit this period to be exceeded in duly justified exceptional cases.

Regulation 2454/93- the Customs Code’s Implementing Regulation

Article 199

Without prejudice to the possible application of penal provisions, the lodging with a customs office of a declaration signed by the declarant or his representative shall render him responsible under the provisions in force for:

- the accuracy of the information given in the declaration,

- the authenticity of the documents attached,

and

- compliance with all the obligations relating to the entry of the goods in question under the procedure concerned.

Article 200

Documents accompanying a declaration shall be kept by the customs authorities unless the said authorities provide otherwise or unless the declarant requires them for other operations. In the latter case the customs authorities shall take the necessary steps to ensure that the documents in question cannot subsequently be used except in respect of the quantity or value of goods for which they remain valid.

Article 205

1. The official model for written declarations to customs by the normal procedure, for the purposes of placing goods under a customs procedure or re-exporting them in accordance with Article 182 (3) of the Code, shall be the Single Administrative Document.

2. Other forms may be used for this purpose where the provisions of the customs procedure in question permit.

3. The provisions of paragraphs 1 and 2 shall not preclude:

- waiver of the written declaration prescribed in Articles 225 to 236 for release for free circulation, export or temporary importation,

- waiver by the Member States of the form referred to in paragraph 1 where the special provisions laid down in Articles 237 and 238 with regard to consignments by letter or parcel-post apply,

- use of special forms to facilitate the declaration in specific cases, where the customs authorites so permit,

- waiver by the Member States of the form referred to in paragraph 1 in the case of existing or future agreements or arrangements concluded between the administrations of two or more Member States with a view to greater simplification of formalities in all or part of the trade between those Member States,

- use by the persons concerned of loading lists for the completion of Community transit formalities in the case of consignments composed of more than one kind of goods,

- printing of export, transit or import declarations and documents certifying the Community status of goods not being moved under internal Community transit procedure by means of official or private-sector data-processing systems, if necessary on plain paper, on conditions laid down by the Member States,

- provision by the Member States to the effect that where a computerized declaration-processing system is used, the declaration, within the meaning of paragraph 1, may take the form of the Single Administrative Document printed out by that system.

4. When formalities are completed using public or private computers which also print out the declarations, the customs authorities may provide that:

- the handwritten signature may be replaced by another identification technique which may be based on the use of codes and having the same legal consequences as a handwritten signature. This facility shall only be granted if the technical and administrative conditions laid down by the competent authorities are complied with,

- the declarations thus produced may be directly authenticated by those systems, in place of the manual or mechanical application of the customs office stamp and the signature of the comptetent official.

5. Where in Community legislation, reference is made to an export, re-export or import declaration or a declaration placing goods under another customs procedure, Member States may not require any administrative documents other than those which are:

- expressly created by Community acts or provided for by such acts,

- required under the terms of international conventions compatible with the Treaty,

- required from operators to enable them to qualify, at their request, for an advantage or specific facility,

- required, with due regard for the provisions of the Treaty, for the implementation of specific regulations which cannot be implemented solely by the use of the document referred to in paragraph 1.

Computerized customs declarations

Article 222

1. The customs authorities may authorize the declarant to replace all or part of the particulars of the written declaration referred to in Annex 37 by sending to the customs office designated for that purpose, with a view to their processing by computer, codified data, or data made out in any other form specified by those authorities, corresponding to the particulars required for written declarations.

2. The customs authorities shall determine the conditions under which the data referred to in paragraph 1 are to be sent.

Article 223

The customs authorities may authorize the use of computers, inter alia, as follows:

- they may stipulate that the data necessary for completing the formalities in question shall be entered in their computerized declaration-processing systems, without a written declaration being required,

- they may provide that the declaration within the meaning of Article 205 (1) shall be constituted by entry of the data in the computer if a document corresponding to a declaration is not produced.

Article 224

1. When formalities are completed using public or private computer systems, the customs authorities shall authorize persons who so request to replace the handwritten signature with a comparable identification device, which may be based on the use of codes, and which has the same legal consequences as a handwritten signature.

2. The customs authorities may authorize the persons concerned to make out and transmit by computer in whole or in part the supporting documents referred to in Articles 218 to 221.

3. The facilities referred to in paragraphs 1 and 2 shall be granted only if the technical and administrative conditions laid down by the customs authorities are met.

Article 859

The following failures shall be considered to have no significant effect on the correct operation of the temporary storage or customs procedure in question within the meaning of Article 204(1) of the Code, provided:

- they do not constitute an attempt to remove the goods unlawfully from customs supervision,

- they do not imply obvious negligence on the part of the person concerned, and

- all the formalities necessary to regularize the situation of the goods are subsequently carried out:

1. exceeding the time limit allowed for assignment of the goods to one of the customs-approved treatments or uses provided for under the temporary storage or customs procedure in question, where the time limit would have been extended had an extension been applied for in time;

Article 860

The customs authorities shall consider a customs debt to have been incurred under Article 204 (1) of the Code unless the person who would be the debtor establishes that the conditions set out in Article 859 are fulfilled.

Article 899

Without prejudice to other situations to be considered case by case in accordance with the procedure laid down in Articles 905 to 909, where the decision-making customs authority establishes that an application for repayment or remission submitted to it under Article 239 (2) of the Code:

- is based on grounds corresponding to one of the circumstances referred to in Articles 900 to 903, and that these do not result from deception or obvious negligence on the part of the person concerned, it shall repay or remit the amount of import duties concerned.

'The person concerned` shall mean the person or persons referred to in Article 878 (1), or their representatives, and any other person who was involved with the completion of the customs formalities relating to the goods concerned or gave the instructions necessary for the completion of these formalities,

- is based on grounds corresponding to one of the circumstances referred to in Article 904, it shall not repay or remit the amount of import duties concerned.

Article 905

1. Where the decision-making customs authority to which an application for repayment or remission under Article 239 (2) of the Code has been submitted cannot take a decision on the basis of Article 899, but the application is supported by evidence which might constitute a special situation resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned, the Member State to which this authority belongs shall transmit the case to the Commission to be settled under the procedure laid down in Articles 906 to 909.

The term 'the person concerned` shall be interpreted in the same way as in Article 899.

In all other cases, the decision-making customs authority shall refuse the application.

2. The case sent to the Commission shall include all the facts necessary for a full examination of the case presented.

As soon as it receives the case the Commission shall inform the Member State concerned accordingly.

Should it be found that the information supplied by the Member State is not sufficient to enable a decision to be taken on the case concerned in full knowledge of the facts, the Commission may ask for additional information to be supplied.

3. Without awaiting completion of the procedure laid down in Articles 906 to 909, the decision-making customs authority may, if requested, permit the customs formalities relating to the re-export or destruction of the goods to be carried out before the Commission has given a ruling on the application in question. Such permission shall be entirely without prejudice to the final decision on the application.

Conclusions

23 The case falls, in principle, within the scope of Article 204(1)(a) as one where there is “non-fulfilment of one of the obligations arising, in respect of goods liable to import duties ... from the use of the customs procedure under which they are placed”, namely the failure to re-export within the time limits appropriate. It was common ground that the relevant limits were exceeded, and a customs debt is therefore prima facie due in respect of the goods. We consider below the question of who is the debtor for the purposes of this article but first we consider whether either of the grounds on which the debt may be cancelled is applicable, assuming for this purpose that Bradgate is correctly identified as the debtor.

24 Article 204(1)(a) does not apply to establish a customs debt where “it is established that the failure in question has no significant effect on the correct operation of the temporary storage or customs procedure in question”. Article 859 of the Implementing Regulation applies this where “all the formalities necessary to regularise the situation of the goods are subsequently carried out” – which is the case here – and the fault has been “exceeding the time limit allowed ... where the time limit would have been extended had an extension been applied for in time”. Although it was submitted that one extension only could be allowed, and had already been given, it is not clear to us what in the legislation so provided. The main question however remains: was there ‘obvious negligence’ on the part of the presumed debtor?

25 On this, the principal authority to which we were referred was the decision of the Court of Justice in Case-48/98 Firma Söhl & Söhlke v Hauptzollamt Bremmen [1999] ECR I-7877. In that case, the Court interpreted the same expression used in Article 239 as requiring account to be taken (i) of the complexity of the provisions non-compliance with which has resulted in the customs debt being incurred, (ii) the professional experience of the trader concerned, and (iii) the care taken by the latter. Holding that the term ‘obvious negligence’ should be interpreted in the same way wherever it occurred in the legislation, the Court observed (at paragraph 52) that:

Since a lack of ‘obvious negligence’ is an essential condition of being able to claim repayment or remission of import or export duties, it follows that the term must be interpreted in such a way that the number of cases of repayment or remission remains limited.

26 Bearing this in mind, we reach the conclusion that the condition requiring the absence of ‘obvious negligence’ was not satisfied. The workings of the IPR scheme in itself have not been claimed as particularly complex, especially in regard to the time limits for re-export which are quite straightforward. Bradgate’s professional experience of the IPR scheme back in 2007 was not great, but as regards compliance with the time limits the evidence has shown that the previous remission of duties and the warning accompanying it in October 2008 provided all the experience needed in the matter. Lastly, it cannot be said that Bradgate took enough care to deal with matters within the time limits, or to refer to the Commissioners when it was apparent that they would be unlikely to be met. The missed possibility of using the customs warehousing procedure to extend the time for re-export, by reporting Bradgate’s difficulty to the Commissioners and seeking their advice, only reinforces that conclusion.

27 Under Article 239, which deals generally with cases where duty may be repaid or remitted, the available ground is that there has been no ‘obvious negligence’ on the part of the debtor. Article 899 of the Implementing Regulation gives effect to this in relation to the various types of situation enumerated in Articles 900 to 904, none of which in fact apply to this case.

28 Article 905 then, as a longstop, provides that where the customs authority in question cannot take a decision on the basis of Article 899 “but the application is supported by evidence which might constitute a special situation resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned, the Member State to which this authority belongs shall transmit the case to the Commission”. Counsel for the Commissioners informed us that if we were to conclude that there had been no ‘obvious negligence’ on Bradgate’s part, the case would be referred to the Commission for a ruling under the procedure laid down in Articles 906 to 909 of the Implementing Regulation. Since we have found that there was ‘obvious negligence’ on the part of Bradgate, there is no occasion for examining whether a ‘special situation’ existed or for referring the case to the Commission.

29 We turn therefore to the second question, whether Bradgate is correctly assessed as the ‘debtor’ within the meaning of Article 204(3). We remind ourselves that this provision envisages that:

The debtor shall be the person who is required, according to the circumstances, either to fulfil the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they have been placed, or to comply with the conditions governing the placing of the goods under that procedure. (emphasis supplied)

30 We are also mindful of the provision in Article 199 of the Implementing Regulation that “the lodging with a customs office of a declaration signed by the declarant or his representative shall render him responsible under the provisions in force for ... compliance with all the obligations relating to the entry of the goods in question under the procedure concerned.” This provision applies, mutatis mutandis, whether the entry is made in hard copy or electronically, and we have found as a fact that Bradgate did not authorise Concordia to act as their agents in this case, and that Concordia was shown on the customs entry as both the declarant and the paying agent. We therefore conclude that in the particular circumstances of this case Bradgate does not fall within the definition of ‘debtor’ in Article 204(3) in relation to the debt established under Article 204(1). The appeal therefore succeeds.

31 This document contains the full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal no later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (customs duty) Respondents

Malachy Cornwell-Kelly

Tribunal Judge

RELEASE DATE: 10 May 2011

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Bradgate Containers Ltd v Revenue & Customs [2011] UKFTT 308 (TC) (10 May 2011) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01169.html Cite as: [2011] UKFTT 308 (TC)