Appeal Numbertc/2009/12035

[2011] UKFTT 308 (TC)

TC01169

Appeal numberTC/2009/12035

Customs duty & import VAT - inward processing relief – failure to respect time limits for re-export – whether ‘obvious negligence’ or ‘special situation’ – correct customs debtor – entry details – Articles 59, 118, 204 & 239 of Regulation 2913/92 andArticles199, 200, 205, 222-224, 859, 860, 899 & 905 of Regulation 2454/93 – appeal allowed

FIRST-TIER TRIBUNAL

TAX CHAMBER

BRADGATE CONTAINERS LIMITEDAppellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (customs duty)Respondents

TRIBUNAL:Judge Malachy Cornwell-Kelly

Mr Mohammed Farooq

Sitting in public at Temple Court, Bull Street, Birminghamon 12April 2011

Mr Malcolm Cropley, Sales Manager of Bradgate Containers Limited, for the Appellant

Ms Olivia Chaffin-Laird instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2011

1

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, butbills 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 and2454/93 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 Bradgatemeasuring 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 thatBradgate, already admitted to the IPR scheme, wouldbe 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. Bradgatereplied 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 June2009.

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 eventlooked 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 ifBradgatehad 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 ofBradgate, 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 thatBradgate 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 voluntarilytaken 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 IPRand the position for which Mr Cropley arguescould appearinconsistent 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 werehastily picking up on a legal obligation which they had neglected. In addition, we are struck by the force ofMr 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 Bradgatedid 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 CustomsCode’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,