Court of Appeal summarises the correct test for liability to pay excise duty upon goods imported as part of an illegal conspiracy

R. v Doran (Robert), R. v Gray (Patrick) Court of Appeal (Criminal Division) 17 March 2015 [2015] EWCA Crim 384

Martin Evans for the Crown

Summary: The court summarised the correct test for liability to pay excise duty upon goods imported as part of an illegal conspiracy. A judge had correctly concluded that two offenders were liable for excise duty because they were in control of the bills of lading when the goods arrived, and used them to take possession of the goods. The fact that the goods were under surveillance the entire time did not mean that customs officers had been in control of the goods.

Abstract: The appellant offenders (D) appealed against confiscation orders made following their guilty pleas to conspiracy to evade excise duty. The CPS appealed against the judge's apportionment of the benefit of criminal conduct. D had imported two shipping containers from Dubai. The contents of the containers were listed as "toys", but when examined in Felixstowe they were found to be full of cigarettes. Customs officers followed the consignment to a warehouse, where arrests were made and the goods seized. The excise duty payable on the cigarettes was approximately £3.3 million, and the VAT was approximately £500,000. Confiscation proceedings were issued against D. The judge found that the benefit of their criminal conduct amounted to £4.3 million, namely the pecuniary advantage obtained from the unpaid duty and VAT, updated to current values. That sum was then apportioned between the conspirators. The CPS appealed against the apportionment. D appealed against the amount of the order. The court was required to determine whether (i) the judge was wrong to find that D had incurred a liability to pay excise duty and VAT; (ii) D had obtained a benefit from their criminal conduct; (iii) the orders were disproportionate in the light of the ECHR Protocol 1 art.1. D relied on R. v Bajwa (Naripdeep Singh) [2011] EWCA Crim 1093, [2012] 1 W.L.R. 601 and submitted that they were not liable for excise duty because customs knew about the cigarettes before the ship docked, and the conspiracy could not have been achieved as they had lost control of the goods to customs officers before arrival.

Offenders' appeal dismissed, CPS appeal allowed. (1) The issue of liability to pay excise duty was to be answered by an assessment of whether under the Tobacco Products Regulations 2001 reg.13(1) D were "holding the tobacco products" when the vessel entered the limits of Felixstowe port or, under reg.13(2) and reg.13(3)(e) they had caused the tobacco products to enter the port. In addition, the person liable to pay the duty had to have "the prescribed connection with the goods", under the Finance (No. 2) Act 1992 s.14, when the excise duty point was reached, Bajwa and R. v White (Ian Leslie) [2010] EWCA Crim 978, [2010] S.T.C. 1965 applied, Greenalls Management Ltd v Customs and Excise Commissioners [2005] UKHL 34, [2005] 1 W.L.R. 1754 followed and R. v Taylor (Stephen) [2013] EWCA Crim 1151 considered. The liability to pay VAT was coterminous with the liability to pay excise duty (see paras 16, 24-26 of judgment). D could derive no comfort from the outcome of Bajwa because the bills of lading for their two containers had not been seized, but were held by their agent. Further, customs officers had not intervened but had merely kept the consignment under observation until it entered port. The bills of lading constituted D's evidence of title and were used to take physical possession of the containers three days after the vessel docked. D had not abandoned their connection with the goods but had remained in possession and control of the containers until they were seized at the warehouse, Bajwa considered. The fact that the consignment was under surveillance did not result in a disconnection between the goods and D for the purpose of reg.13. The fact that the bills of lading referred to toys rather than cigarettes was not an issue because D knew that the containers were loaded with cigarettes. There had been ample evidence on which the judge could find that D had caused the tobacco products to pass the duty point while retaining a significant connection with those goods, R. v Smith (David Cadman) [2001] UKHL 68, [2002] 1 W.L.R. 54 followed (paras 33-34, 36-39). (2) The court was bound by the decision in Smith , in which the House of Lords held that if a defendant derived a pecuniary advantage in consequence of the evasion of a debt, even a fleeting advantage, then he was to be treated as having received that pecuniary advantage, Smith followed (para.42). (3) D had obtained nothing but a debt to the state to pay excise duty. Whether the confiscation order was proportionate was closely bound to the question of whether the value of the pecuniary advantage obtained was the face value of the debt incurred. If it was not, then no question of proportionality arose. If it was, then provided there was no risk of double recovery by the Revenue, a confiscation order in the amount of the pecuniary advantage obtained was a proportionate means of ensuring that D did not gain from their criminal conduct (paras 46-48). (4) The judge had been wrong to apportion the benefit obtained, R. v Ahmad (Shakeel) [2014] UKSC 36, [2014] 3 W.L.R. 23 followed (para.49).

Judge: Pitchford LJ; Cooke J; Lang J

Counsel: For the Crown: Martin Evans. For the appellants: David Perry QC, Jonathan Ashley-Norman.

Solicitor: For the Crown: CPS. For the appellants: Bivonas Law LLP.