The European Court of Justice is to consider whether a scheme under which smokers in the United Kingdom could purchase "Death" and other brands of cigarettes in quantities of up to 800 at a time via an agent from a supplier in Luxembourg, and thus pay up to 40 per cent less in excise duty than if they had bought the cigarettes in the UK, was permitted under the rules establishing the European internal market.
The Court of Appeal made the reference on an appeal against the decision of Mr Justice Popplewell (Independent, 1 June 1995), refusing judicial review applications to challenge the detention by the Customs and Excise Commissioners of consignments of tobacco products purchased in Luxembourg and brought into the UK without payment of UK excise duty, and their decision that UK excise duty was exigible in respect of such products under article 10 of European Community Council Directive 92/ 12/EEC.
The applications were brought by (1) Emu Tabac SARL, a Luxembourgeois tobacconist, (2) The Man in Black Ltd, a UK company purporting to act as the agent of UK purchasers of cigarettes from the first applicant in Luxembourg, and (3) John Anthony Cunningham, a director of the second applicant company. Both the first applicant company and second (which traded as Tobacco Direct) were subsidiaries of the Enlightened Tobacco Co, manufacturers of Death Cigarettes.
Imperial Tobacco Ltd was granted leave to intervene in the case, to argue that the applicants' scheme would cause considerable disruption to the UK tobacco industry.
Robert Venables QC, Timothy Lyons and Amanda Hardy (Thomas Eggar Verral Bowles, Horsham) for the applicants; Stephen Richards and Robert Jay (Customs & Excise Solicitors) for the Commissioners; David Vaughan QC and Mark Brealey (Gouldens) for Imperial Tobacco.
Lord Justice Schiemann, giving the judgment of the court, said travellers within the Community could now buy a certain amount of tobacco in a low duty country and carry it across frontiers to a high duty country without exposing themselves to additional tax. The appellants' scheme enabled a UK resident, without leaving the comfort of his armchair, to obtain tobacco which he had purchased in a shop in Luxem- bourg, paying only the lower duty applicable in that country. But the Commissioners argued that they were entitled to collect UK duty on such goods under UK legislation.
The appellants relied on article 8 of the Directive: "As regards products acquired by private individuals for their own use and transported by them the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired." They contended this was wide enough to cover goods acquired and transported by an agent on behalf of a private individual.
The Commissioners argued that the scheme fell within article 10(1) of the Directive: "Products subject to excise duty purchased by persons who are not authorised warehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf shall be liable to excise duty in the Member State of destination."
As a question of construction of article 8, and taking into account the wording of the article in other Member State languages, their Lordships were inclined to agree with Mr Justice Popplewell that the wording pointed to the narrow concept of "transport" and did not encompass the use of an agent.
However, since the language was sufficiently wide not to rule out the wider concept, and since their Lordships were unable to derive any assistance from the legislative history of the provisions, the matter would be referred to the European Court of Justice for a ruling.
Since the reference would involve considerable delay, the appellants had applied for interlocutory relief, to prevent the Commissioners interfering with their trade in the meantime. But since their Lordships were not presently persuaded by the appellants' submissions, and since, but for the reference, they would have dismissed the appeal, they were not minded to grant such interlocutory relief.
Paul Magrath, Barrister
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