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	First-tier Tribunal (Tax)
You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Cycle Citi Corporation Ltd v Revenue & Customs [2009] UKFTT 205 (TC) (10 August 2009) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00158.html Cite as: [2009] UKFTT 205 (TC)

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[2009] UKFTT 205 (TC)

TC00158

CUSTOMS DUTY AND VAT – cycle parts imported for Appellant – Appellant's private customs warehouse destroyed by fire whilst goods in transit – goods transferred to a third party and its own customs warehouse by Appellant's agents without reference to Appellant or to HMRC – third party went into liquidation without paying duty and VAT due – post clearance demand issued to Appellant for duty and VAT – whether Appellant liable for duty and VAT – yes – appeal dismissed

FIRST-TIER TRIBUNAL (TAX CHAMBER)

CYCLE CITI CORPORATION LTD Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Judge)

Howard Middleton (Member)

Sitting in public in Manchester on 9 July 2009

Mr. A H Petrou, director, for the Appellant

Mr. Mario Angiolini of counsel, instructed by the General Counsel and Solicitor to Her Majesty's Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009
 


DECISION

1. This is an appeal by Cycle Citi Corporation Ltd ("Cycle Citi") against a decision on review by the Commissioners of HM Revenue and Customs ("HMRC") upholding a post clearance demand for customs duty of £4,833.29 and import VAT of £11,317.96 said to arise out of irregularities concerning the importation of a consignment of imported bicycle goods unlawfully removed from HMRC's supervision through their unauthorised transfer from Cycle Citi's customs warehouse premises.
2. Before us Cycle Citi was represented by its director, Mr. A H Petrou, and the Commissioners by Mr. Mario Angiolini of counsel. Mr. Angiolini kindly provided us with HMRC's bundle of copy documents, and Mr. Petrou added to it by producing a number of relevant papers.
3. The facts are not in dispute and may shortly be explained in the following way. Cycle Citi was an importer of bicycles and bicycle parts and at the relevant time operated a type C private customs warehouse. Such a warehouse could be used only to store the warehouse owner's own goods.
4. For the purposes of the importation with which this appeal is concerned Cycle Citi engaged the services of CFSP Services Ltd ("Services") and authorised it to make customs declarations on its behalf. Services used customs freight simplification procedure ("CFSP") to clear goods through customs and declare them to Cycle Citi using customs Procedure Code 71 00 00.
5. In November 2005 Cycle Citi's warehouse was badly damaged by fire. As a result of the damage Cycle Citi considered it unsafe to store high value parts on that part of the premises covered by its customs warehouse authorisation.
6. At the time the fire occurred the disputed consignment of bicycle parts was already in transit to the UK from Taiwan, and consequently could not be stopped. The consignment arrived in the UK on 10 December 2005. Services made three separate declarations to clear the imports and associated supplementary declarations were completed on 4 January 2006. The declarations were made on behalf of Cycle Citi and declared the goods to Cycle Citi's customs warehouse, authorisation number 433845.
7. As a result of an assurance visit undertaken by HMRC on 21 November 2006, they discovered that the goods consigned to Cycle Citi were never transported to its warehouse but were instead transferred to another trader, Ingenuiti Ltd ("Ingenuiti") which was also authorised to operate a customs warehouse. Cycle Citi did not seek the authorisation of HMRC prior to transferring the goods nor did it ever inform them that such a transfer had taken place. Authorisation or agreement to a transfer was a requirement of transfer.
8. Ingenuiti has since entered into administration and Cycle Citi has been unable to provide copies of Ingenuiti's warehouse records showing that the goods included in the disputed consignment were properly entered to Ingenuiti's customs warehouse or into Ingenuiti's warehouse records. The only evidence which Cycle Citi has been able to provide is a letter dated 24 January 2008 from a Mr. McGrane, a former director of Ingenuiti, stating that that company received the disputed consignment in December 2005 and that it was "entered into our records". Following disclosure of that letter HMRC examined the records of Ingenuiti, as provided by the company's liquidator, but were unable to identify any entry in them in respect of the disputed consignment. Printouts from Service's own records show that the goods had been transferred from Cycle Citi to Ingenuiti.
9. As a result of those irregularities Mrs. Acock, an officer of HMRC, concluded that the goods had been unlawfully removed from customs supervision and issued a demand for the customs duty and VAT the subject of the appeal on 15 February 2007. On 8 March 2007 Cycle Citi requested a formal departmental review of that decision. On 15 May 2007 HMRC upheld the earlier decision.
10. The relevant provisions of European Council Regulation 2913/92, the Customs Code, are articles 37, 101, 102 and 203. Article 37 provides that goods brought into the customs territory of the Community shall from the time of entry be subject to customs supervision and remain there for as long as necessary to determine their customs status, if appropriate, and, in the case of non-community goods, until their customs status is changed, they enter, inter alia, a free warehouse. Article 101 provides that the warehouse keeper shall be responsible for, inter alia, ensuring that whilst the goods are in the customs warehouse they are not be removed from customs supervision. By way of derogation from Article 101, Article 102 provides that where the authorisation concerns a public warehouse it may provide that the responsibilities referred to devolve exclusively upon the depositor, who shall at all times be responsible for fulfilling the obligations arising from the placing of goods under the customs warehousing procedure. Article 203 provides that a customs debt on importation shall be incurred through the unlawful removal from customs supervision of goods liable to import duties, and shall be incurred at the moment when the goods are removed from customs supervision; the debtor is the person who removes the goods from customs supervision. Article 199 of the European Commission Regulation 2454/93, the implementing regulation, provides that 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 provided, the authenticity of the documents attached, and compliance with obligations relating to the entry of the goods in question under the procedure concerned.
11. Mr. Petrou submitted that Services should never have entered the consignment in question in Cycle Citi's name in the first place. He maintained that the company had rectified its error by subsequently transferring the consignment into Ingenuiti's records, observing that there was correspondence confirming that. He maintained that so far as Cycle Citi was concerned the transfer was legal and proper and Cycle Citi had no need to do any more than it had done: it had complete trust and faith in its agent and believed it knew customs procedures.
12. Mr. Angiolini observed that Cycle Citi was liable for the declaration made by Services that the cycle parts were destined for its warehouse. The goods were sent elsewhere without reference to or authorisation of HMRC. That amounted to a failure to observe HMRC procedures laid down for the purpose, and gave rise to the debt included in the post-clearance demand. Mr Angiolini observed that if HMRC had been able to confirm that Services had properly entered the goods into the import system, they would have accepted that article 204 applied and would have remitted the duty and tax claimed.
13. In Mr. Angiolini's further submission, if Services were at fault, since that company was said to be acting as Cycle Citi's agent, it was liable to its principal for its action. Cycle Citi might have an action in negligence against Services for its actions, but that was not a matter for the tribunal. In all the circumstances, the appeal should be dismissed; HMRC made no application for costs.
14. Whilst we have considerable sympathy for Cycle Citi, and have carefully considered all the submissions made by Mr. Petrou, we have no alternative but to accept the submissions of Mr. Angiolini as representing the law we must apply. We therefore dismiss the appeal but make no direction as to costs. Mr. Petrou made mention of the fact that the current economic conditions would severely limit his ability to pay the sum claimed. In those circumstances, we express the hope that HMRC will accept payment by instalments over a period to be agreed with Mr. Petrou.

MAN/2007/7022

DAVID DEMACK

JUDGE

Release Date: 10 August 2009