Wednesday Law Report; Excise duty chargeable in the United Kingdom

10 June 1998 Regina v Hayward Court of Appeal (Criminal Division) (Lord Justice Judge, Mr Justice Curtis and the Recorder of Nottingham 8 June 1998

WHERE ARRANGEMENTS for the suspension of excise duty on goods held in bond in the United Kingdom were broken by the use of fraudulent documentation, duty immediately became chargeable in the United Kingdom.

The Court of Appeal dismissed the appellant's appeal against conviction of four counts of being knowingly concerned in the fraudulent evasion of excise duty contrary to section 170(2) of the Customs and Excise Management Act 1987. He had also been convicted of one offence of causing a false declaration to be made, contrary to section 167 of the Act.

The appellant had a legitimate business trading as "Beer Lovers" in Calais. The essential case against him was that, in the course of his business, he had arranged for spirits on which excise duty had been suspended in bonded warehouses in the United Kingdom to be placed on the market without duty ever having been paid.

Paul Lasok QC and Stephen Solley QC (Peter Rickson & Partners, Manchester) for the appellant; Anton Lodge (Solicitor to HM Customs and Excise) for the Crown.

Lord Justice Judge said that, at the trial, the appellant had admitted that he had arranged for false documents to be returned to the bonded warehouses in the United Kingdom which had released the spirits.

The single area of dispute about the facts was that the appellant maintained that all the spirits dealt with by him on that basis had been sold in France through his company, Beer Lovers. The prosecution accepted that some of the goods had indeed gone to Calais, but asserted that the bulk of them had never left the United Kingdom at all and had been disposed of here without payment of the appropriate excise duty. The essential feature of the appeal was that the judge had been wrong to rule and subsequently to direct the jury that it made no difference to the issue of guilt whether the appellant had sold the spirits free of duty in England or in France.

It had been submitted on behalf of the appellant that if the spirits from bond in England had reached France, whether as a result of dishonesty or not, the appellant might have evaded payment of excise duty in France, but that was a matter for French domestic law. The 1979 Act was concerned only with evasion of duty payable in the United Kingdom, and no such liability had arisen.

Regulation 1 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992, which implemented Directive 92/12 EEC, provided that excise duty was payable on the goods which were the subject of the counts against the appellant. Those goods could, however, be held or moved without payment of duty under suspension arrangements, and where those arrangements applied, the time when excise duty was chargeable was postponed.

Regulation 9 permitted the movement out of bond of goods under the umbrella of continuing suspension arrangements for export purposes, subject to the conditions in regulation 10. The goods had to be accompanied by "an appropriate document issued by the consignor".

In the present case, the "appropriate" accompanying documents did not comply with the conditions governing movement of goods under suspension arrangements. The goods had never been sent to the named consignees, nor had they arrived at the specified addresses, and stamps purporting to have been made by the relevant fiscal authorities were counterfeit. The suspension arrangement had therefore lapsed, and excise duty had immediately become chargeable.

The detailed analysis of the relevant articles of Directive 92/12 EEC by counsel for the appellant had not led the court to conclude that the domestic legal principles that suspension arrangements were vitiated by fraud in circumstances such as those in the present case were or might be inconsistent with Community provisions, and the judge's direction to the jury was therefore correct.