Challenging a seziure by HMRC, Condemnation of goods, Customs and Excise Management Act 1974, HMRC detention of goods, R (on the application of First Stop Wholesale Ltd) v Revenue and Customs Commissioners, s139 Customs and Excise Management Act, s144 Customs and Excise Management Act 1974, Sch 3 Customs and Excise Management Act 1974, UKBA
Customs and Excise – Forfeiture. The Court of Appeal, Civil Division, held that a judge had erred in finding that alcoholic goods detained by the Revenue and Customs Commissioners had been unlawfully detained and, further, that the Revenue was, therefore, liable to pay the taxpayer’s costs of the action challenging their seizure. The judge had mis-applied authorities upon which he had been bound.
The judgment is available at:  EWCA Civ 183
The instant proceedings related to challenges made by the claimant taxpayer to the detaining and removal by the Revenue and Customs Commissioners (the Revenue) of large quantities of alcohol from the warehouse and other premises of the taxpayer. The taxpayer challenged the detention of the goods by way of judicial review. First, it challenged the detention of goods after 4 November 2011, when, at that time, the Revenue gave as the grounds for detention that the goods were being detained and removed from premises pending evidence of duty status. The taxpayer submitted that detention had not been lawful where a legally insufficient reason for detention had been given at the time of detention. Secondly, the taxpayer challenged notices served pursuant to para 1 of Sch 3 to the Customs and Excise Management Act 1979 that goods seized and retained prior to 4 November 2011 were being detained ‘pending further inquiries into their duty status’. The taxpayer submitted that such notices had been unlawful because they had not stated that duty had not been paid on the alcohol. In the first judgment (the first judgment) the judge found that the detention by the Revenue of the taxpayer’s goods after 4 November 2011 had been unlawful because the reasons given in the notices for their detention had been ones which were flawed and erroneous as a matter of public law. He held that Eastenders Cash and Carry plc v Revenue and Customs Comrs  STC 817 (Eastenders No 1) had the effect that there was no power to detain goods pending evidence of duty status and that the purported exercise of the power to detain the goods was flawed by an error of public law because, whether or not it turned out later that the goods had in fact been liable to forfeiture, there was no power to detain for the purposes of investigation. Consequential to that decision, the judge held in a separate judgment (the second judgment) that, following Eastenders Cash & Carry plc v Revenue and Customs Comrs[ 2012] STC 2036 (Eastenders No 2), since the Revenue’s reasons for detaining the alcohol had been unlawful, there had been no reasonable grounds within s 144(2) of the Act for the Revenue to rely upon the ‘costs shield’. Accordingly, the Revenue was ordered to pay the taxpayer’s costs. In regard to the goods detained by the Revenue before 4 November 2011, the judge found that the notices served under para 1 of Sch 3 to the Act had not been unlawful because there could have been no doubt that the Revenue had been stating that it believed the duty had been owed on the goods in question (the third judgment). The Revenue appealed the first and second judgments. The taxpayer appealed the third judgment.
The Revenue submitted, first, that the judge had erred in his approach to Eastenders No 1 since, inter alia, the legality of detention could only be determined with hindsight after the full examination before the court in condemnation or other proceedings and, until then, it could not be said that the initial decision to detain was, in itself, unlawful. Secondly, the judge had erred in granting costs to the taxpayer. The taxpayer submitted that the notices served under para 1 of Sch 3 of the Act had been unlawful. Consideration was given to s 100 of the Act.
The court ruled:
(1) It was settled law that goods could be liable to forfeiture on grounds that had not been advanced or even known at the point of seizure or detention. Further, there was no requirement that, when detaining goods, the reason for their detention had to be given (see ,  of the judgment).
There was no requirement in the Act for any formal written notice of detention and it was not necessary for the notice required by para 1(1) of Sch 3 of the Act to be given at the time of seizure. Even in the case of seizure, notice was not required where goods were seized in the presence of the owner or the owner’s agent. Further, the fundamental principle of public law, namely, that, where the public law illegality concerned the decision-making process rather than the end result, the decision would be susceptible to judicial review and liable to be set aside even though the same result could be achieved lawfully without recourse to the illegitimate part of the reasoning, cut directly across and was inconsistent with the reasoning inEastenders No 1 (see - of the judgment).
Accordingly, in the instant case, the judge had erred in his approach and to the application of Eastenders No 1 and, in particular, upon his reliance upon public law principles (see  of the judgment).
The Revenue’s appeal against the first judgment would be allowed (see  of the judgment).
Padfield v Minister of Agriculture, Fisheries and Food  1 All ER 694 applied; Eastenders Cash and Carry plc v Revenue and Customs Comrs  STC 817 applied.
(2) In determining whether the Revenue could take advantage of the costs shield provided by s 144(2) of the Act, it was necessary to consider the objective grounds that existed for detaining the goods, which involved considering the reason relied on at the time of detention and the evidence provided (see  of the judgment).
In the instant case, the judge had placed his consideration upon a distinction that had been rejected in Eastenders No 2. Accordingly, he had fallen into error (see  of the judgment).
The Revenue’s appeal against the second judgment would be allowed (see  of the judgment).
Eastenders Cash & Carry plc v Revenue and Customs Comrs  STC 2036 applied.
(3) The seizure notices in regard to those goods seized before 4 November 2011 had stated that the goods had been seized on the basis that no evidence of duty payment had been provided and that each seizure had been pursuant to the relevant statutory provisions, including s 100 of the Act. If there had been any doubt, the express references to s 100(1)(e) of the Act had made it clear that the Revenue’s position had been that the alcohol was liable to forfeiture because duty had not been paid on it. Further, in any event, a notice under para 1 of Sch 3 of the Act was not a requirement for the exercise of the power to seize. Even where a notice had been required, there was no requirement that the notice been given at the time of seizure or decision to seize the goods (see ,  of the judgment).
Accordingly, the third judgment would be upheld (see  of the judgment).
Decision of Singh J  EWHC 1106 (Admin) Reversed.
Decision of Singh J  EWHC 2191 (Admin) Reversed.
Decision of Singh J  All ER (D) 67 (Oct) .