Edwards v R.

On 6^th May 2003 the appellant pleaded guilty to a charge of being knowingly concerned in the fraudulent evasion of the duty chargeable on a quantity of tobacco contrary to section 170(2) of the Customs and Excise Act Management 1979 (“CEMA”). He was sentenced to two years’ imprisonment. No complaint is made about that sentence. In addition, confiscation proceedings were ordered. They were concluded on 27^th February 2004 when an order was made under section 75 of the Criminal Justice Act 1988 (“CJA”) that he pay £30,257.52 and, in default, serve 18 months’ imprisonment consecutively to the sentence already imposed. He appeals against the confiscation order.

The total amount of duty payable in respect of the quantity of tobacco was £311,627.48. The sum of £30,257.52 represented the totality of his assessed realisable assets.

The substantive issue at the confiscation hearing was whether the appellant had derived any “benefit” within the meaning of section 71 of the CJA, given that the tobacco had been seized by officers of Customs and Excise on 18^th June 2002, being the date on which the tobacco had been imported by the appellant, and before he had driven out of the port enclosure at Hull. The effect of the submission made in this court and below is that, had he driven out through the gates of the port, he would have evaded the duty payable on the tobacco and it would then have been open to the court to conclude he had obtained a benefit. Put the other way, the submission is that, since he had not left the port enclosure, he had not evaded duty and, as a result, had obtained no benefit.

The facts require a little elaboration. On 18^th June 2002 the appellant arrived at Hull docks on a ferry from Zeebrugge driving his own tractor unit and towing a refrigerated trailer. After the vessel had docked he disembarked, driving his tractor unit and trailer through the area of the port. He was stopped by customs officers and his load was inspected. The appellant, when asked about his load, stated that he was carrying frozen chips and sweetcorn. He produced a false CMR document in respect of his load. He did not disclose he was carrying tobacco. He was asked whether he knew what he could bring into the country by way of tobacco. In response, he produced a holdall containing goods consistent with personal use. Inspection of his vehicle revealed many packages of loose hand rolling tobacco, estimated to weigh 3158.6 kilogrammes, concealed behind frozen chips and sweetcorn.

Section 5 of the CEMA, in its material part, provides:

“(1)

The provisions of this section shall have effect for the purposes of the Customs and Excise Acts.

(2)

Subject to subsections (3) and (6) below, the time of importation of any goods shall be deemed to be –

(a)

where the goods are brought by sea, the time when the ship carrying them comes within the limits of a port;

(b)

…

(c)

…

(3)

In the case of goods brought by sea of which entry is not required under [regulation 5 of the Customs Controls on Importation of Goods Regulations 1991], the time of importation shall be deemed to be the time when the ship carrying them came within the limits of the port at which the goods are discharged.

(4)

…

(5)

…

(6)

…

(7)

…

(8)

A ship shall be deemed to have arrived at or departed from a port at the time when the ship comes within or, as the case may be, leaves the limits of that port”.

Section 43(1) of CEMA provides, in its material part:

“Save as permitted by or under the Customs and Excise Acts or section 2(2) of the European Communities Act 1972 or any Community regulation or other instrument having force of law, no imported goods shall be delivered or removed on importation until the importer has paid to the proper officer any duty chargeable thereon, and that duty shall, in the case of goods of which entry is made, be paid on making the entry”.

Importations of goods, including tobacco, from other Member States of the European Union have been provided for by Community regulation, namely Council Directive 92/12/EEC. In the United Kingdom special provision, giving effect to the Community regime, has been made for tobacco by the Tobacco Products Regulations 2001 (SI 2001 1712) (“the 2001 Regulations”) and generally by the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (SI 1992 3135) (“the 1992 Regulations”).

The relevant provisions in the above Regulations governing the payment of duty on tobacco are as follows. Regulation 6(1) of the 1992 Regulations states that “… duty shall be paid on or before an excise duty point”. Regulation 4(1) states:

“Except in the cases specified in paragraphs (2) to (6) below, the excise duty point in relation to any Community excise goods shall be the time when the goods are charged with duty at importation”.

Importations of tobacco which are outside the regime laid down in the 1992 Regulations for warehousing, holding and Registered Excise Dealer and Shipper (REDS) also fall within the 2001 Regulations, which also state when duty must be paid.

Regulation 14(1) states:

“Except where regulations 17 to 19 below (deferred payment) apply, the duty must be paid at or before the excise duty point”:

Regulation 12(1) states:

“Subject to the provisions of this regulation, the excise duty point for tobacco products is the time when the tobacco products are charged with duty”.

Regulation 17(1) that:

“Any person liable to pay the duty due on tobacco products to which this regulation is applicable may, subject to regulation 18 and 19 below [deferred payment, application for approval to the Commissioners for the approval of an arrangement], elect to defer payment of that duty until payment day;

(2)

This regulation is applicable to –

(a)

imported tobacco for which the excise duty point is the time of their importation; …..”

In our judgment it is clear that the appellant, not having paid duty on the tobacco in advance of importation, became liable to make payment at “the excise duty point”, namely “at importation”. Importation occurred when the ship carrying his tractor unit and trailer came “within the limits” of the Port of Hull. The time of importation is finite and not continuous. Once a ship comes within the limits of a port it is then and there at the “excise duty point”, although the limits of the port are extensive and, having entered, the ship remains within them.

Mr Bodnar, counsel for the appellant, accepted that the duty on the tobacco imported by the appellant became payable at the “excise duty point”, but submitted, by reference to section 43(1) and section 49(1) of CEMA, that until the goods had been removed from the port area the “excise duty point” had not been passed. If this submission is correct, duty had not, as a result, become payable and could not have been evaded. The submission is plainly wrong. It conflicts with the clear and unambiguous language of CEMA and the 1992 and 2001 Regulations, which state that “the excise duty point” for tobacco is at importation. His resort to section 43(1) CEMA cannot assist the argument. These and other sections of CEMA show how the Act distinguishes between an act of “importation” and the resultant status of the goods as “imported”. The definition of “importer” in section 1 demonstrates that there is no continuum in an act of importation. “Importer” is defined to include, for example, an owner of the goods “… at any time between their importation and the time when they are delivered out of charge”.

Sections 43-48 CEMA are concerned to regulate for goods which have been “imported”, not for the time at which duty becomes payable. That said, section 43(1), as well as prohibiting delivery or removal of goods until duty has been paid, states that “… duty shall, in the case of goods of which entry is made, be paid on making the entry”.

Section 49(1) enumerates circumstances in which goods improperly imported can be forfeited. They include where:

“(b)

any goods are imported, landed or unloaded contrary to any prohibition or restriction …and

(d)

any goods are imported concealed in a container holding goods of a different description”.

The power of forfeiture is conferred to enable goods which have been improperly imported but are still within customs areas, to be forfeited. In the case of R v Smith (Donald) 1973 1 QB 924, cannabis, en route from Kenya to Bermuda via London Heathrow, which never left the customs area but was taken off one flight to be placed on another was held to have been imported and to found a conviction for fraudulent evasion of the prohibition on its importation.

Next Mr Bodnar submitted that the appellant was at or in the “place of importation”. The phrase “place of importation” comes from section 49(1)(a)(iv) of CEMA:

“(1)

Where –

(a)

… , any imported goods, being goods chargeable on their importation with customs or excise duty are, without payment of that duty –

(iv)

removed from their place of importation or from any approved wharf …”

He submitted that, there being a place of importation, “the excise duty point” was at any point within the “place of importation”. For the reasons we have already given, the submission cannot be right. We are satisfied that the legislation clearly states when goods are imported and when they become liable to duty. The need to provide for enforcement thereafter, for example, when the goods are within the place of importation does not affect the position.

The appellant’s argument on evasion was, to a large extent, a variant of his submissions on whether duty had become payable. It was put in a number of ways but, in effect, amounted to a contention that, even if duty had become payable at importation, importation was a continuing process which was not complete until the appellant had left the whole area of the Port of Hull, which was to be regarded as the place of importation. The submission that there had been no evasion ran into a difficulty, to which the Recorder referred, namely that the appellant had pleaded guilty to the offence of evasion and not to an offence of attempted evasion. A doubt as to whether he had pleaded to evasion was laid to rest by the terms of the transcript. There was no basis of plea submitted to the court and we share the Recorder’s reservations about the legitimacy of admitting evasion for the purpose of the trial, but denying it in the confiscation proceedings. Nevertheless we heard the argument.

Section 170(2) CEMA states:

“(2)

Without prejudice to any other provision of the Customs and Excise Acts 1979, if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion –

…… of any duty chargeable on the goods; …

he shall be guilty of an offence under this section…”

Mr Bodnar’s argument involved the contention that, whilst the appellant was in the Port of Hull, he could not be said to have had acted fraudulently because, until he left the port, the option which he had to declare the goods was still available to him. His approach fails to distinguish between the substance of the offence and the evidence which may support it. A person fraudulently evades the duty chargeable on goods if, at the point of importation, he dishonestly intends not to pay the duty on the goods. His conduct subsequent to importation will be relevant to establish his intention at importation. Equally, conduct prior to the importation, for example the preparation of a false CMR document, will be relevant to the intention held at the time of importation.

The possession of the false CMR document by the appellant on goods upon which the duty was unpaid at importation amounted to evidence sufficient for him to be charged with evasion at any time after the importation. Further, his lies and subsequent conduct in response to questions from the customs officers provided further evidence going to establish his fraudulent intention at the time of importation. We agree that had the appellant, notwithstanding his possession of the false document at importation, declared the goods to the customs officers, it is unlikely he would have been prosecuted. But that is not to say that evidence that fraudulent evasion had occurred would not have been available. We accept that, had he been prosecuted, a jury may well not have been sure of his intention at the time of importation, having regard to his subsequent conduct in declaring the goods. However these are evidential considerations; just as the availability of the opportunity to declare the goods, whilst he was within the port, which is now relied upon by Mr Bodnar as negating the commission of the offence of evasion, is an evidential and not a substantive consideration.

The issue as to when a benefit has been obtained within the meaning of the CJA, in connection with customs and excise provisions, has recently been considered by the House of Lords in R v Smith (David) [2002] 1 Cr App R 466.

Section 71(5) of the CJA provides:

“Where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence, he is to be treated for the purposes of this Part of this Act as if he had obtained as a result of or in connection with the commission of the offence a sum of money equal to the value of the pecuniary advantage”.

A “pecuniary advantage” was defined by section 16(2) Theft Act 1968 as:

“(a)

any … charge … for which he makes himself liable [which] is evaded or deferred”.

In the case of Smith, cigarettes had been imported in a motor vessel at Hull and Immingham. Mr Smith sailed through the limits of the port of Hull and voyaged up the River Ouse to Goole, where the cargo was seized by customs officers. Duty had not been paid at importation, but the question for the House of Lords was whether Mr Smith had derived any benefit prior to their seizure and before their value could be realised by him. Lord Rodger (with whom all their Lordships agreed) stated (paragraph 26):

“In this case the respondent derived a pecuniary advantage by evading the duty at the moment when he imported the cigarettes. The sum equalling that pecuniary advantage is treated as property obtained by the respondent at that moment. In terms of section 74(5), its value must therefore be determined at that moment, disregarding the fact that, soon after, the customs officers seized the cigarettes at Goole.”

Mr Bodnar sought to avoid the effect of the judgment in Smith by distinguishing the appellant’s case on its facts. In particular, he urged upon us that Mr Smith had left the limits of the Port of Hull and had sailed to Goole, whereas the appellant was within the port area. By way of analogy he suggested, relying on Smith’s case, it was as though the appellant had driven from the port area and been stopped on the road.

In our judgment the difference on the facts to which he refers is immaterial. Once a person has evaded the payment of duty he has thereby deferred the liability to pay and has obtained a pecuniary advantage which amounts to a benefit within the meaning of the CJA. The legal consequences of an act of evasion are not affected by the exact time and place when the evasion is discovered and the goods are confiscated. Both Mr Smith and the appellant fraudulently evaded payment for tobacco at importation. Mr Smith’s voyage from the Port of Hull to Goole added nothing to the essential facts constituting the offence. Likewise, had the appellant left the port area and been stopped on the highway, the essential facts constituting the offence of evasion would have been the same. We should point out that the legal basis for a confiscation order is a conviction for an offence (see section 71(1) and (1A)). Further, section 71(5) provides for “… a pecuniary advantage as a result of or in connection with the commission of an offence …”.

Lord Rodger dismissed consideration “of the fate of the cigarettes”, to which the Court of Appeal had paid regard, as irrelevant to the determination of benefit. The fact that the cigarettes were seized was irrelevant. He supplied an illustration to demonstrate the fallacy in the Court of Appeal’s approach (see para 18). Had Mr Smith paid the duty as required and the boat had subsequently sunk with the loss of the cigarettes he would have suffered a loss of £130,000 (the duty paid) and the cigarettes. Had he not paid then, if the boat sank with the loss of the cigarettes, he would only have lost the cigarettes. It seems to us that it can be said with equal force in this appeal that had the appellant paid duty and parked his vehicle in the port area for a short time, before driving out on to a public road outside the port, and whilst in the port area the vehicle had caught fire destroying the tobacco, he would have lost both the duty and the load. Had his evasion been undetected and he had nevertheless parked in the port area for a short time and the vehicle had caught fire, he would have lost only the load.

Lord Rodger made general observations about the scheme of the CJA and the operation of the confiscation provisions (see paragraph 23). He observed:

“If in some circumstances it [the scheme] can operate in a penal or even a draconian manner, then that may not be out of place in a scheme for stripping criminals of the benefits of their crimes. ”

On this appeal it was not argued that the provisions of the CJA arguably gave rise to the unlawful confiscation of property and a breach of Protocol 1, Article 1 of the ECHR because they could give rise to double recovery of the duty. In response to enquiry from the court, counsel for the respondent stated that where a confiscation order has been made, based upon a benefit calculated by reference to the unpaid duty, the Customs and Excise authorities do not, as a matter of practice, seek recovery of the unpaid duty by way of civil proceedings. That both civil and criminal remedies are available is not in doubt. Should the Customs and Excise Authorities pursue a civil remedy where a confiscation order had been met, it is clear there would, in effect, be double recovery of the duty.

The firm practice of the Customs and Excise Authorities is, in our judgment, well placed. Mr Bodnar drew the court’s attention to section 71(1C) of the CJA which provides:

“If, in a case falling within subsection (1B) above, the court is satisfied that a victim of any relevant criminal conduct has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with that conduct –

(a)

the court shall have a power, instead of a duty, to make an order under this section;

(b)

subsection (6) below shall not apply for determining the amount to be recovered in that case by virtue of this section; and

(c)

where the court makes an order in exercise of that power, the sum required to be paid under that order shall be of such amount, not exceeding the amount which (but for paragraph (b) above) would apply by virtue of subsection (6) below, as the court thinks fit”.

Mr Khokhar representing Customs and Excise confirmed in answer to the court’s question that Customs and Excise do not intend to, and will not, institute any civil proceedings against the appellant in respect of the duty. In the light of this undertaking, we decided that no further argument was necessary concerning the possibility that there might otherwise have been a potential for double recovery.

It follows that this appeal is dismissed.