DHL Air Limited v The Commissioners for HMRC

HMRC’s 10 July 2017 decision to refuse end-use authorisation was a relevant decision under s13A(2)(j) FA 1994, being of a description specified in Schedule 5 FA 1994 (paragraph 1(f): “any decision, in any particular case, as to whether or not the … use of any procedure is to be, or to continue to be, authorised …”)

HMRC were required to review the decision, per s15C FA 1994

the appellant appealed within 30 days of the conclusion date

the decision was a decision as to an ancillary matter as defined in s16(8) – hence, s16(4) is engaged.

requiring HMRC to conduct, in accordance with the directions of the tribunal, a further review of the original decision of HMRC (to refuse authorisation) (s16(4)(b)); and

(in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review) declaring the decision to have been unreasonable and giving directions to HMRC as to steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future (s16(4)(c)).

[17] Although appeals against refusal of approval under the AWRS are a relatively new jurisdiction for the FTT, there are other statutory provisions which confer a supervisory jurisdiction upon the FTT, or its predecessor the VAT Tribunal, to review the reasonableness of HMRC decisions rather than conduct a full merits appeal of those decisions. The nature of the test to be applied by the FTT in such cases was described by the House of Lords in Customs and Excise Comrs v JH Corbitt (Numismatists) Ltd [1981] AC 22 and was not in dispute here. The tribunal’s supervisory power is to consider whether the appellant has shown that the commissioners had acted in a way in which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight. A similar test was applied in Lindsay v Customs and Excise Comrs [2002] 1 WLR 1766 in the context of a decision by the commissioners to seize a car that the appellant had been driving when he was found to be smuggling substantial quantities of cigarettes and tobacco through the Shuttle control zone at Calais. In upholding a decision that the forfeiture of the car was a disproportionate interference with the appellant’s rights under the Human Rights Act 1998 to the peaceful enjoyment of his possessions, the Court of Appeal in Lindsay held that the commissioners had failed to have regard to all material considerations, namely that the imported items were for the use of family and friends and not for commercial purposes. HMRC also drew our attention to the decision of this court in John Dee Ltd v Customs and Excise Comrs [1995] STC 941. That case concerned a requirement imposed by HMRC that the taxpayer company provide security as a condition of continuing to make VAT taxable supplies. Neill LJ, with whom Roch and Hutchison LJJ agreed, held that counsel for the taxpayer had rightly conceded that where it is shown that even if the additional material which had wrongly been discounted had been taken into account, the decision would inevitably have been the same, the tribunal can dismiss the appeal.

[18] The nature of the exercise carried out by the FTT in an appeal under section 16(4) of the Finance Act 1994 was considered further in Gora v Customs and Excise Comrs [2004] QB 93 (“Gora”). The appeals in Gora arose from the seizure of alcoholic liquor by customs officers who were not satisfied that duty had been paid correctly. The officers also seized the car in which the alcohol had been transported. One issue before the tribunal had been whether the jurisdiction and powers of the tribunal in hearing an appeal under section 16(4) against a refusal to restore the appellants’ property were sufficient to satisfy the requirements of article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms, in particular the right to peaceful enjoyment of possessions conferred by article 1 of the First Protocol to the Convention. The perceived inadequacy of the tribunal’s jurisdiction arose where the appellant challenged the factual findings on which the commissioners’ decision to refuse to restore goods was based. The commissioners accepted in Gora that the tribunal’s role would be to satisfy itself that the primary facts upon which the commissioners had based their decision were correct. The tribunal would not be limited to considering only whether there had been sufficient evidence to support the commissioners’ findings. The tribunal would then go on to decide whether, in the light of its findings of fact, the decision was reasonable. Counsel for HMRC in Gora submitted that the commissioners would then conduct any further review they were directed to undertake in accordance with the findings of the tribunal. Pill LJ accepted that view of the jurisdiction of the tribunal: see para 39 of his judgment with which Chadwick and Longmore LJJ agreed. He held that in the light of the commissioners’ acceptance that the tribunal would have that role, the tribunal’s jurisdiction and powers did satisfy the requirements of article 6.

[19] In the present appeals, although [counsel for the taxpayers] did not assert that the traders’ human rights had been infringed by the refusal of approval under the AWRS, HMRC accepted that the Gora principle applied. Thus, the role of the FTT in these appeals will be to decide for itself any disputed primary facts on which HMRC’s decision was based and then consider whether the refusal to grant approval was one which a reasonable officer could make on the basis of the facts as found.

[20] More recently in CC & C Ltd v Revenue and Customs Comrs [2015] 1 WLR 4043, paras 15 and 16 Underhill LJ noted that the fact that the criterion for the tribunal’s intervention is formulated in terms of unreasonableness “reflects the fact that the management of the excise system is a matter for the administrative discretion of HMRC”. In his view, that is because decisions such as whether a registered owner remains a fit and proper person to trade in duty-suspended goods (being the particular scenario in issue in that case) are ones which HMRC:

“are peculiarly well-fitted to judge, since it requires what is necessarily to some extent a subjective—albeit evidence-based—assessment of such matters as the attitude of the trader and its principal employees to due diligence issues and their sensitivity to the risk of becoming involved, albeit unintentionally, in unlawful activities.”

He continued that “this careful calibration of the powers” of the tribunal under section 16(4) “plainly represents a deliberate balance between HMRC’s need to take effective management decisions in relation to excise matters and the interests of those affected by such decisions.”

referred to Article 211.3(b) which, it said, “essentially” meant that authorised persons “must have a good history of compliance”;

referred, in relation to the appellant’s “compliance history”, to

then commented that “the debts and in particular the entry of goods contrary to Customs explicit instructions, as described above, constitute evidence of poor compliance with Customs requirements and the applicable legislation and therefore, applying the current legislation, [the appellant does] not qualify for authorisation to operate End Use at this time”.

We appreciate that for our End Use authorisation to be granted it is necessary for [the appellant] to provide HMRC with assurance that the operation of End Use will be carried out correctly.

As you have raised concerns about the adequacy of our systems, we are happy to agree with you an enhanced compliance process to ensure that we meet any necessary requirements to the satisfaction of HMRC (including a process above and beyond our existing systems, should you require us to do so). To this end, we make a proposal below which we suggest should give HMRC sufficient assurance.

Our proposal is that [the appellant] will limit the use of End Use for a period of 12 months to aircraft only (i.e. [the appellant] will not operate End Use in respect of aircraft parts). We will also not rely on the End Use authorisation to cover any imports of aircraft parts covering the retroactive period.

We consider that this should provide HMRC with sufficient assurance of the proper conduct of the operations for the purposes of Article 211.3(b), particularly on the basis that

the discharge procedure for aircraft, compared to aircraft 'parts', is significantly loss complex;

imports of aircraft by [the appellant] in any 12 month period is likely to amount to no more than six entries; and

the time between import and discharge is a matter of days as opposed to months for aircraft.

As stated above, the discharge requirements for aircraft require significantly less tracking, inventory management and evidence of discharge compared to aircraft parts. In order to discharge aircraft imported to End Use, it is necessary to simply apply the aircraft to the prescribed use which can be evidenced by production of the registration certificate of that aircraft in the appropriate public records.

[The appellant] would be happy to provide HMRC with a full audit trail for each aircraft including evidence of registration for all aircraft for which it intends to rely of End Use.

We consider that HMRC should consider the above proposal in light of the fact that prior to the issue referred to in your letter, [the appellant] had been operating End Use without incident going back to 2002. During this time the various systems and operations in place were subject to numerous HMRC audits without issue.

In terms of the period in question which has given you cause for concern, we would like to point out that we did take reasonable care over attempting to ensure that HMRC's conditions concerning End Use were properly observed. We took advice from two experienced agents who directed us that the aircraft could be imported under simplification and entered them accordingly (admittedly incorrectly). We also took advice from a DHL operator in another Member State who regularly imported aircraft who advised us that the aircraft could be imported under simplified procedures. Unknown to us that Member States authority did not operate a value threshold for aircraft and so we believed that the simplification route advised by our agents was the correct one particularly in the light of the introduction of the new UCC and the withdrawal of the End Use Public Notice. Indeed when we sought clarification around the conditions one of your colleagues mentioned that 'HMRC were still trying to get to terms with the new procedures'.

I think it would be fair to say that the issue was NOT that the aircraft were not entered to End Use - they were, but that the wrong procedure and commodity codes were used by our agents thus demonstrating there was no intent to avoid End Use controls per se.

It is of concern that the UK appears to demand a more onerous level of control over aircraft imports than some other Member States but we recognise that that is a separate issue.

You might also appreciate that it was Chris Dolan (our Senior Indirect Tax Manager and Single Point of Contact with HMRC) who actually discovered the errors in interpretation and drew this to our attention and voluntarily disclosed this to HMRC, which I trust demonstrates that we have been proactive and have a diligent approach to Customs compliance.

We would also like you to note that Chris Dolan will provide supervision and support to [the appellant] during the proposed l2 month period. Chris Dolan will also be supported by Hannah Cooper (DHL-Indirect Tax Manager) who will also provide assistance to the business in respect of this matter.

referred to Article 211.3(b) and said that it “links holding a special procedure authorisation to the requirements expected of an AEO [authorised economic operator]. When we look at these (Articles 38 and 39) this shows us that the applicant must not only be capable of meeting the assurance of proper conduct going forward, but must have a good history of compliance with Customs matters”;

referred to the £154k and £2k customs debts, and the import of the seven aircraft, in very similar manner to HMRC’s letter of 11 April 2017;

commented that “whilst [the appellant] may be able to show the ability to comply with some of the requirements of authorisation for a Special Procedure, the debts and in particular the entry of goods contrary to Customs explicit instructions, as described above, constitute evidence of poor compliance with Customs requirements and the applicable legislation and therefore [the appellant does] not qualify for authorisation to operate End Use at this time.”

expressed disappointment that HMRC’s decision letter was materially the same as their letter of 11 April 2017 and made no reference to the appellant’s proposal “to limit End Use to aircraft only for a period of 12 months” in order to alleviate HMRCs concerns regarding proper conduct;

expressed surprise at HMRC’s view that any action had been taken in respect of the importation of the seven aircraft against HMRC’s explicit instruction;

advanced other arguments as to why HMRC’s decision was incorrect.

it said that from 2002 until 2015 [the appellant] held an authorisation to operate end-use for aircraft and aircraft parts. The previous authorisation had lapsed and though an application was made to renew this in 2015 it was not pursued; and the new retroactive application was made for both civil aircraft arid civil aircraft parts;

it summarised the appellant’s 5 May 2017 letter, saying that it detailed the appellant’s proposals for how it might conduct its business in a manner such that would satisfy HMRC that the appellant could work with them to properly discharge the requirements under an end-use authorisation. It noted that the appellant “proposed limiting the authorisation to a period of 12 months only to cover solely aircraft, leaving aircraft parts out of the equation”;

it summarised the appellant’s 24 July 2017 letter;

it stated that HMRC considered that the entire premise of Article 211 was that the applicant must have good compliance in the area in which they are applying for an authorisation; and that, effectively, Article 211.3(b) links holding a special procedure authorisation with AEO – and Articles 38 and 39 pertaining to AEO clearly show a link to compliance history;

it stated that the appellant’s 5 May 2017 letter appeared to concede that HMRC had cause to raise concerns about the adequacy of the appellant’s systems – which was put forward as a reason for making the proposals in regard to limitations for the authorisation;

addressing points made by the appellant about changes made to the end-use procedure, HMRC did not believe the procedures had changed that much, in that the procedure used by the appellant on importation of the seven aircraft would have been incorrect at any time;

it noted that the appellant (Nick Hill, its logistics manager) had been “instructed” by HMRC (Officer Graney) as early as 21 May 2015 (by email) that entire aircraft do not carry Air Worthiness Certificates but Certificates of Airworthiness and that these are different. It was fully explained that entire aircraft cannot be imported using the Air Worthiness Scheme and Officer Graney also set out where guidance could be found from more than one source;

it said that in addition to the reasons already given for refusal, there was another point which ought to be made: according to the letter, Article 211.2(e) “states that an applicant should not have made any late or retrospective applications in the past.” HMRC noted that the appellant had made both late and by default, late applications for retrospection.

for a period of 12 months starting from date of grant of authorisation by HMRC, and

for the retroactive period of the authorisation i.e. from 5 March 2015 to date of grant of authorisation by HMRC.

The proposal was not, therefore, a “new” application.

HMRC’s decision focused on whether the appellant satisfied the requirement of providing the necessary assurance of the proper conduct of the operations (per Article 211.3(b));

HMRC’s decision regarded having a good history of compliance with customs matters as a prerequisite for satisfying Article 211.3(b) and, as a result (because HMRC’s decision was of the view that the appellant did not have a good compliance history) HMRC’s decision did not, in substance, take into account the appellant’s proposal (per [32-34] above);

the reason HMRC’s decision regarded having a good history of compliance as a prerequisite to meeting the condition in Article 211.3(b) is that they thought, due to the deeming provision following the semi-colon in Article 211.3(b), the criteria for the granting of the status of AEO (referred to in Article 38 and set out in Article 39) were somehow incorporated into Article 211.3(b). I find this to be a mistaken reading of Article 211.3(b): the fact the persons who meet certain criteria are deemed to fulfil condition X, does not make it a prerequisite for anyone wishing to meet condition X, that they also meet those criteria;

HMRC’s decision regarded the fact that the appellant had previously applied for retrospective clearance as meaning that one of the conditions for granting authorisation with retroactive effect, that in Article 211.2(e), was not satisfied;

HMRC’s decision took into account the following ,which it considered to constitute evidence of poor compliance with customs legislation:

HMRC’s decision took into account that HMRC had “instructed” the appellant, by email of 21 May 2015, that the “Air Worthiness Scheme” did not cover aircraft, but only aircraft parts. I find that “Air Worthiness Scheme” here refers to the tariff suspension. I find that the relevant part of the email of 21 May 2015 read: “Please also bear in mind that the Airworthiness Certificate scheme cannot be used to import entire aircraft. See art 1 of the regulation. Entire aircraft do not carry Airworthiness Certificates, they carry Certificates of Airworthiness, which are different”;

HMRC’s decision did not come up with its own suggestions as to conditions to be incorporated into an authorisation so as to provide the “necessary assurance” per Article 211.3(b).

the authorisation referred to in Article 211.1 is mandatory – the authorisation referred to in Article 211.2 is not an alternative to the authorisation referred to in Article 211.1. The latter simply describes supplementary conditions, where that authorisation is granted with retrospective effect; and

the conditions set out in Article 211.3 as to the persons to whom authorisation may be granted are also mandatory, subject to it being “otherwise provided”. (Article 211.2 is not a case of it being “otherwise provided” – there is nothing in 211.2 to suggest this and, moreover, 211.2 does not purport to govern the same matter as 211.3 i.e. the persons to whom authorisation shall be granted).

the primary focus is on the proper conduct of the operations, looking forward from the date of the application,

“the operations” means operations connected with the end-use procedure for which authorisation is sought (and that would extend to all aspects of the procedure, including, for example, record-keeping under Article 214), and

there is a correlation between what assurance is necessary and what is involved in those operations.

the necessary assurance of the proper conduct of the operations can be provided in whatever manner is relevant in the circumstances: in this case, where the applicant has been operating customs procedures for some time, assurance can be provided by the strength of its past record of customs compliance. A strong record would reasonably be seen as indicating systems and controls within the business operations that support proper conduct of the operations going forward;

whilst such assurance can also be provided in the form of promises of future conduct and conditions incorporated into any authorisation given (the tailpiece to Article 211.1 expressly envisages conditions to the permission to use the procedure in question being set out in an authorisation), the applicant’s past record, in the areas of customs procedures as well as in other areas of compliance, can be relevant to the assessment of whether or not such promises or conditions provide the necessary assurance. That assessment is a matter for the administrative discretion of HMRC as the body managing the customs system, subject to the supervisory jurisdiction of the tribunal. Clearly, though, a poor past record of compliance, in the area of customs or indeed in another area of compliance, can be a relevant circumstance to take into account (and HMRC will have to make a reasonable judgement as to whether promises of better future conduct by an applicant with a poor compliance record provide the necessary assurance); and

the overall assessment of what assurance is necessary for proper conduct of the operations in question is, as above, a matter for HMRC’s administrative discretion, subject to the supervisory jurisdiction of the tribunal.

It follows from my construction of Article 211 that HMRC’s decision, in not substantively taking into account the appellant’s proposal (as I have construed it at [32-34] above), failed to take into account a relevant matter. This is because the proposal, if incorporated as a condition in an authorisation, might have provided the necessary assurance etc (whether it would have provided this I, as the tribunal, cannot say – this is a matter for HMRC’s administrative discretion). Moreover, it cannot be said in the circumstances of this case that HMRC’s decision would inevitably have been the same, had they taken the appellant’s proposal (as I have construed it) into account – it is genuinely unclear what HMRC would have decided had they engaged substantively with the appellant’s proposal and considered whether it provided the necessary assurance etc.

HMRC were wrong to regard the condition in Article 211.2(e) as not satisfied on the facts of this case: the condition is that “no authorisation with retroactive effect has been granted to the applicant within three years of the date on which the application was accepted” (emphasis added) – I find that the last time an authorisation with retroactive effect was granted to the appellant was in January 2008 (agreed fact 3), and so this condition was bound to be satisfied. HMRC’s decision thus took an irrelevant matter into account in considering that one of the conditions for authorisation with retroactive effect was not satisfied. However, in the circumstances of this case I find that HMRC would inevitably have made the same decision, even if they had left this irrelevant matter out of account: it is clear from the circumstances that HMRC regarded the “poor compliance history” point, and Article 211.3(b), as the predominant reason for their decision; their point about Article 211.2(e) was, in effect, an after-thought.

As regards the items at [35(5-6)] above (compliance history), I find, based on my construction of Article 211, that these were potentially relevant matters. I consider below the appellant’s argument, in the alternative, that even if these matters were relevant, they were not, in context, evidence of poor compliance.

As regards item [35(7] – the fact that HMRC’s decision did not come up with its own additional conditions so as to enable grant of authorisation to the appellant – I find that there was no legal obligation on HMRC to do this; neither did it comprise the leaving out of account of any relevant matter. I explain below at [83-86] why this did not render HMRC’s decision “disproportionate”. It is therefore a point that is outwith the jurisdiction of this tribunal.

understandable given confusion (including on the part of HMRC) about the operation of the tariff suspension; and

not the fault of the appellant, as it engaged agents to deal with customs matters on its behalf.

The customs declarations for these imports were handled by two customs agents:

the customs value of each of the aircraft ranged from about £13 million to £20 million.

the customs declarations put customs procedure code 40 00 001 in box 37 of the form, which is for “Procedure”. This customs procedure code is for aircraft parts. It is the customs procedure code for the tariff suspension procedure.

the customs declarations put “140” in box 36 (“Preference”). This is the code for “Special end-use resulting from the Common Customs Tariff”. This was inconsistent with the procedure in box 37 – but also incorrect as the appellant did not have end-use authorisation.

overall, the customs aspects of the imports were managed for the appellant by the appellant’s logistics manager, Mr Hill, and his staff (who instructed, and were in regular direct communication with, the customs agents); as logistics manager, Mr Hill was responsible for the importation of aircraft (and aircraft parts) as and when required.

both the appellant as a corporate entity, and Mr Hill individually, knew

Mr Hill made it clear to both customs agents that the appellant did not have end-use authorisation at the time;

Mr Dolan was director of indirect taxes UK & Ireland for the group of which the appellant was part. He acted as the single point of contact with HMRC on strategic issues which impacted on the group’s customs and other indirect tax matters. Part of his role included advising and supporting group companies – including the appellant – on indirect tax matters and when a tax/legal issue in this area was brought to his attention either by HMRC or a group company. From July 2015, he had been closely involved in the appellant’s dealings with HMRC relating to end-use relief in the 2012-2015 period, culminating in the raising of the £154k customs debt (detailed facts about which are found in Appendix 2);

without consulting or informing Mr Dolan, Mr Hill engaged the two customs agents to handle the importations on the understanding that no customs duty came due; I make this italicised finding based on Mr Hill’s oral evidence in cross examination (which was that the understanding was specifically that the tariff suspension procedure would be used), in line with the following (more contemporaneous) documentary evidence:

The italicised finding is also supported by the fact that, in the weeks and months between the importations of each of the aircraft, no questions were asked or surprise expressed by the appellant as to why no customs duty came due on the importation or importations that had already taken place.

Mr Dolan informed HMRC of the incorrect customs declarations in his 8 March 2017 email (i.e. just over two weeks after the importation of the last of the seven aircraft).

have informed, and taken advice from, Mr Dolan (given his deep involvement, expertise and experience) prior to making any of these importations, and

not have permitted its agent to make the importations using the customs procedure code for the tariff suspension, given the appellant’s knowledge that the tariff suspension did not apply to aircraft.

the tariff suspension read as follows (articles 1 and 2.1):

HMRC Notice 770 (as at 25 February 2016) said this at 8.9 (under heading, “Goods imported with airworthiness certificates Council Regulation 1147/2002”):

HMRC Notice 3001 (“Customs special procedures for the UCC”) at Annex C (updated 6 December 2016) said this in the section on end-use at paragraph 4.7 (special procedures for aircraft and aircraft parts):

CPC 40 00 001 and 002 (codes for various “parts”) said this at 9.1 (as part of “notes”):

As I have found above, there was no confusion on the part of Mr Dolan or Mr Hill as to the non-applicability of the tariff suspension to aircraft (notwithstanding any possible confusion arising from the extracts above). As for the two customs agents, there was no direct evidence before the tribunal as to confusion on their part about the operation of the tariff suspension caused by the italicised terminology above; however, DHL Global Forwarding (in relation to six of the importations, including the first two) could have contacted Mr Dolan for clarification if it had wished to do so.

it was in respect of the import of approximately 1,660 aircraft parts by the appellant between 9 September 2012 and 6 March 2015. The appellant had treated the imported parts as falling within its 2010-15 end-use authorisation.

it was raised

an appeal to the tribunal against it by the appellant was withdrawn about 11 months after the appeal was notified.

contrary to the first basis on which it was raised, the movements of aircraft parts from East Midland Airport, prior to their use in maintenance of aircraft, to other sites in the EU or in the UK by the appellant in the 2012-2015 period, did not take those parts outwith the appellant’s 2010-15 end-use authorisation; and

as to the second basis on which it was raised, it was wrong and/or unreasonable of HMRC not to have accepted the appellant’s records as adequate to show that the aircraft parts had been put to the end-use required in the appellant’s 2010-15 end-use authorisation.

the appellant’s main base was at East Midlands Airport. Its fleet, as at August 2015, consisted of 22 Boeing 757 aircraft and four Boeing 767 aircraft which were operated by the appellant on intercontinental routes (transatlantic and to Bahrain and Lagos). The four Boeing 767 aircraft were operated directly by the appellant. The 22 Boeing 757 aircraft were leased to European Air Transport GmbH (“EAT”), a sister company, under a “wet lease” arrangement i.e. the appellant provided aircraft, crew, maintenance and insurance;

the appellant’s aircraft needed regular maintenance and this involved the fitting of replacement aircraft parts as and when required, either because existing parts were faulty or because they needed to be swapped out for independent maintenance. As a result, the appellant regularly needed to import aircraft parts from outside the EU;

the appellant arranged fitting of the imported aircraft parts where it was practical and necessary to do so. This could be at either East Midlands Airport or at other sites within the EU (e.g. Leipzig);

parts were moved from East Midlands Airport for either planned maintenance or as needed in “aircraft on ground” (due to faulty part) situations.

it authorised the import of civil aircraft and parts for civil aircraft;

it required that processing operations (i.e. maintenance and operation of company civil aircraft (freighter aircraft) – which was also the prescribed end-use) be carried out “at premises stated in box 1(b) of the [application form for end-use relief]”;

item 1(b), which called for “processors name and address” was left blank in the form as completed by the appellant; item 1(b) was immediately under, and in the same rectangular box as, item 1(a). which called for “applicant’s name and address (including postcode)” and had been completed with the appellant’s East Midlands Airport address;

it required that the goods received under the authorisation (i.e. civil aircraft and parts for civil aircraft) be put to the prescribed end-use (i.e. maintenance and operation of company civil aircraft (freighter aircraft)) within the period specified on box 12 of the application form. This (as completed by the appellant) said: “date of delivery to up to 12 months from removal from bonded warehouse for parts”. The authorisation also stated that end-use was completed when the goods had been used for the prescribed end-use purpose;

it was not a “single” authorisation i.e. it did not involve customs administrations in more than one member state.

CCC article 82.1, which stated:

CCC IP article 293.3(f), which required that end-use authorisation include “the places where the goods have to be assigned to the prescribed end-use”, unless such information is “deemed unnecessary”;

CCC IP article 300.1, which stated:

CCC IP article 297 had a procedure in respect of transfer of materials for maintenance or repair of aircraft; but this was not followed on the facts of this case;

the UCC had not come into force and so was not relevant customs law during the 2012-2015 period: as noted above, whilst recital (1) to the UCC refers to itself as the CCC “recast”, it also states that this was as a result of a number of amendments having to be made to the CCC.

intended to limit where processing operations/prescribed end-use under the authorisation could be carried out; and

did not deem information about where the goods were to be assigned to their end-use, “unnecessary” in the language of CCC IP article 293.3(f) (as the authorisation indicated that there was to be a place where processing operations would be carried out).

establish that customs supervision is to continue up to the point of prescribed end-use; and

expressly envisage authorisation specifying the places where the goods have to be assigned to the prescribed end-use.

the authorisation itself provided as follows:

the appellant’s completed application form for the 2008 authorisation (renewed in 2010) stated in box 3 (“Records and accounts”): “main accounts” c/o EAT at an address in Brussels; “all systems computerised”; “accounting system: JD Edwards”; “stock: parts – Trax”. In response to item 11 (“means of identification”), it stated: “by reference to serial numbers”;

the hearing bundle contained a copy of HMRC Notice 770 as at 25 February 2016, with no paragraph 2.8. The Notice did, however, state at paragraph 3.13 (“What records must I keep?”):

Trax was a commercial system for tracking inventory held by the appellant; all imported aircraft parts were recorded on Trax; Trax did not, however, identify imported pieces of inventory by reference to their customs entry number;

JD Edwards was an accounting system. It contained information that included the customs entry number for an imported aircraft part;

Trax and JD Edwards did not link to one another;

given this disconnect between the Trax and JD Edwards systems, one way in which the appellant was able to show how a particular imported part, identified by way of customs entry number, was used (as shown in its inventory tracking system, Trax), was via that part’s “airway bill number”. This is because the airway bill number

overall, the process of showing how a particular imported part had been used was manual (as opposed to automated), time-consuming, and laborious for the appellant – and therefore costly in terms of management time and resources. I make this finding based on evidence including the explanation in Mr Hill’s second witness statements as to why the appellant could not provide HMRC, in 2015, with a “full audit trail” for “each and every” aircraft part it said it had put to end-use (and why the appellant instead proposed to HMRC that a “sample exercise” be undertaken), as follows:

the appellant provided no end-use information to HMRC for about 1,260;

the appellant provided very basic information to HMRC (one line on a spreadsheet about each, with no specific information as to the end-use to which the part was put) for about 424 (generally those of higher value);

of those 424,

HMRC was not satisfied with the information as to end-use as regards all but 9 of the 49 imports for which (as per the above) the appellant provided more detailed information in regard to their use.

the 2017 application for end-use authorisation was for aircraft parts as well as for aircraft; and, as I have found at [32-34] above, even if the appellant’s proposal had been accepted and incorporated into an authorisation, it would have included a period when aircraft parts would have been in scope; and

given my conclusion at [79] above that it was not unreasonable for HMRC’s decision to have found that the customs debts and in particular, the importation of the seven aircraft wee evidence of poor compliance, it follows that it was not unreasonable to require some assurance as “necessary” in the circumstances; and, per [48] above, the question of exactly what assurance was necessary was one for HMRC in its administrative discretion, subject to the supervisory jurisdiction of the tribunal.

it is the applicant that best knows what kind of assurance (by way of promises or conditions) it can realistically provide; and

the “right to be heard” letter (mandated by Article 22.6) fairly gives the appellant notice of the customs authority’s concerns.

article 172 DA, headed “Retroactive effect”, cross refers to Article 22.4, which (in the context of decisions relating to the application of the customs legislation taken upon application) states:

article 172.1-3 DA reads as follows:

the important background point is that the appellant did not import any aircraft (or aircraft parts) subsequent, and relying on a favourable response from HMRC, to its 2017 application for end-use authorisation. This means that the seven aircraft are the only imports for which the outcome of the first appeal could make any practical difference;

this in turn means that if the first appeal were allowed, with the tribunal requiring a further review of HMRC’s decision and, on further review, authorisation were granted, but on the basis that it could not be granted with retroactive effect going back at least to the importation of the last of the seven aircraft (i.e. 21 February 2017), that would be an entirely “academic” outcome;

thus, the question of whether authorisation could have been granted with retroactive effect, at least to 21 February 2017, is one that might validly affect the tribunal’s decision as to which, if any, of its s16(4) FA 1994, it should exercise, were it to find that HMRC’s decision was “unreasonable” (in the terms of that sub-section): the tribunal might well decline to require a further review by HMRC under s16(4)(b), if it knew that the outcome would be entirely academic, due to the impossibility of either article 172.2 or 172.3 DA applying.

the previous authorisation (that appellant’s 2010-15 end-use authorisation, granted on 16 February 2010 – to which I will refer in this section as the “old” authorisation) was granted under the CCC, not the UCC. HMRC prayed in aid certain non-legally binding European Commission guidance (dated 28 October 2022) on special procedures;

there were important differences between the “old” authorisation and that sought in the 2017 application, being

and so the 2017 application therefore cannot be said to concern renewal of an authorisation for the same kind of operation and goods.

it argued that HMRC’s approach depends on a special interpretation of the word “authorisation” in Article 211.2(h), namely that “authorisation” in Article 211.2(h) must mean a UCC authorisation (and not a CCC authorisation); and that such a special interpretation was problematic for several reasons, including that the special interpretation should logically apply to Article 211.1, so requiring replacement of all CCC authorisations from the bringing into force of the UCC (1 May 2016); and

to the extent the argument had any merit, it was unlawful for HMRC to treat the appellant differently from taxpayers in materially similar circumstances without objective justification: see R oao Gallaher Group Ltd v Competition and Markets Authority [2018] UKSC 25 per Lord Carnwath.

where an application concerns renewal of an authorisation for the same kind of operation and goods, the application is submitted within three years of expiry of the original authorisation.)

recital 56 to the DA, which states (emphasis added): “In order to safeguard the legitimate interests of economic operators and ensure the continued validity of decisions taken and authorisations granted by customs authorities on the basis of the provisions of the Code and oron the basis of[the CCC] …, it is necessary to establish transitional provisions in order to allow for the adaptation of those decisions and authorisations to the new legal rules.” This indicates that the UCC comprises “new legal rules” and that, without transitional provisions, authorisations granted under the CCC would become invalid on the bringing into force of the UCC; and, consequent on this

article 251.1(a) DA, which states: “Authorisations granted on the basis of [the CCC] … which are valid on 1 May 2016 shall remain valid as follows: (a) for authorisations having a limited period of validity, until the end of that period or 1 May 2019, whichever is the earlier”.

emphasised “the ordinary principles of judicial review”, notably in that case irrationality and legitimate expectation (see at [41]),

found that it made no difference to the result in the case whether one applied a test of objective justification or of rationality (see at [43]), and

concluded at [45] that “if objective justification were needed” for the public body in the case taking a different approach to one of the claimants than it had to a third party, then, on the facts, sufficient such justification was present; “nor was it irrational” for the public body to do so.

this case is analogous to Unipack v Direktor et al (Case C-391/19) (9 July 2020), where the European court stated at [30] “[t]he failure to comply with obligations under the [UCC] and the measures resulting from it cannot justify more favourable treatment of the economic operator responsible for that failure”;

this is not a case where an application has been made shortly after importation or expiry of an authorisation: the previous authorisation expired on 6 March 2015, more than two years before the application was made;

the events surrounding the importation of the seven aircraft are not suggestive of exceptional circumstances.

a customs code that had been used by the operator earlier had been deleted (leading the early expiry of a binding tariff information decision issued to the operator);

the customs authorities had not objected to the imports being made under an incorrect customs code;

the customs authorities imposed additional customs duties, as they were now subject to an anti-dumping duty.

the early expiry of the validity of a binding tariff information due to an amendment to the combined nomenclature;

a failure by the customs authorities to take action in relation to imports bearing an incorrect code;

the fact that the goods had been used for a purpose exempted from anti-dumping duty.

an economic operator cannot rely on failure to comply with the amended combined nomenclature to submit inaccurate declarations or to avoid the duty to make a prior declaration;

a careful operator, who has acquainted itself with a published classification regulation, cannot simply continue to import goods under an incorrect code on the sole ground that the classification has been accepted by the customs authorities;

though the use of the goods is a ground for exemption from anti-dumping duty, it cannot justify the importer’s failure to comply with the established procedure for applying for an exemption.

the nature of the relief for aircraft;

the changes of law in relation to the relief for aircraft;

the different application of the law by different member states;

the end-use authorisation application made by the appellant on 30 March 2015;

HMRC’s failure to make a decision on that application;

the proposal made by the appellant (in its 5 May 2017 letter); and

proposals made by the appellant subsequent to HMRC’s decision.

CCC article 6 required that HMRC take a decision on the applications and notify the applicant “at the earliest opportunity”;

CCC IP article 292.7 (within the chapter on end-use) required that the applicant be informed of the decision to issue an authorisation, or of the reasons why the application was rejected, within thirty days of the date on which the application was lodged or of the date on which any outstanding information requested was received by the customs authorities; however that period did not apply in the case of a “single” authorisation (which it appeared, from the appellant’s application form, that the 2015 authorisation was – see [150] in Appendix 2 below);

based on my findings of fact in Appendix 2, it was clear from the circumstances that HMRC were not going to grant the authorisation sought by the applicant in 2015:

The appellant’s application was an application for authorisation with retroactive and prospective effect. The appellant’s proposals that end-use will only be used in respect of aircraft (not aircraft parts) and for a limited period (now entirely in the past) are assurance of the proper conduct of the operations. They do not constitute a new application for end-use authorisation. As to the first sentence here, I refer to my finding at [26] above. With regard to the second sentence, I also refer to my findings at [32-34] above as respect the appellant’s proposal (these findings also address the third sentence here) and at [47-48] above as regards the meaning of the “assurance” etc.

The appellant’s compliance with end-use (whether in respect of aircraft or aircraft and aircraft parts) does not justify refusal of authorisation. I refer to my findings at [47-48] above.

When considering the necessary assurance of the proper conduct of the operations, HMRC cannot reasonably take into account the manner of the importation of the seven aircraft. I do not agree: see [79] above.

There can be no necessary assurance of the proper conduct of the operations with respect to any civil aircraft registered with the Civil Aviation Authority before importation which is delivered to the operator at the time of importation. The appellant provided sufficient assurance of the proper conduct of the operations which took place. Therefore DHL’s end-use authorisation may reasonably be granted. It would be unreasonable for HMRC to refuse to grant DHL’s application for end-use authorisation. I do not agree with the first sentence: see [80-81] above. The following sentences are beyond the scope of the tribunal’s s16(4) FA 1994 jurisdiction.

It is unnecessary for the appellant to hold a guarantee under Article 86. I deal with this further below.

In light of (1) above, the appellant’s 2017 end-use authorisation application was a renewal application under article 172.3 DA. It was therefore unnecessary for the appellant to show exceptional circumstances. Alternatively, if exceptional circumstances are required, those circumstances exist in this case. I disagree with the first two sentences: see [103] above. The third sentence is beyond the scope of the tribunal’s s16(4) FA 1994 jurisdiction: see [114] above.

Article 211.3(c) provides that one of the conditions for granting authorisation to a person is that “where a customs debt or other charges may be incurred for goods placed under a special procedure, they provide a guarantee in accordance with Article 89”; and

the appellant, in its application, as well as in the covering letter to it dated 31 March 2017, stated that a guarantee was required (and completed an application form for customs comprehensive guarantee).

the appellant offered to provide a guarantee as set out in its application for customs comprehensive guarantee (form CCG1) dated 31 March 2017; and

the reason that HMRC declined that application was that they refused the appellant’s application for authorisation.

grant authorisation; and

decide that exceptional circumstances are present, such that the authorisation can take effect from 4 March 2016.

This would mean that the seven aircraft would qualify for end-use relief: see [4] above.

the introduction of non-Union goods (here, the seven aircraft) into the customs territory of the Union, their removal from customs supervision, or the movement, processing, storage, etc of such goods within that territory; or

the end-use of goods within the customs territory of the Union.

a customs debt incurred pursuant to article 79 is extinguished where the following conditions are fulfilled:

(per Article 124.1(h)); and

certain reliefs also apply in cases where a customs debt is incurred pursuant to Article 79, on condition that the failure which led to the incurrence of a customs debt did not constitute an attempt at deception (per Article 86.6). The relevant relief, the appellant argued, was end-use relief, as end-use relief was either an autonomous measure providing for a reduction in, or exemption from, customs duty on certain goods or favourable treatment specified for certain goods by reason of their end-use (see Article 56.2(f) and (g), as referred to in Article 86.6)

It was not in dispute that the appellant’s use of an incorrect procedure on importation of the aircraft was not at attempt at deception.

Also, the first requirement of Article 124.1(h) is satisfied, since article 103(e) DA deems that to be the case where the person concerned informs the competent customs authorities about the non-compliance before either the customs debt has been notified or the customs authorities have informed the person that they intend to perform a control (which was the case here – see the email of 8 March 2017 from Mr Dolan to HMRC).

However,

the customs law – certainly as regards the points that the tariff suspension procedure did not apply to aircraft, and that authorisation was required to use the end-use procedure – was not especially complex,

the appellant had professional experience that was directly on-point (through which it had gained the knowledge just referred to), and

the appellant clearly took inadequate care around the correct customs procedure on importation of the seven aircraft.

items (1), (2), (3) of the appellant’s list above are descriptions of customs legislation with which the appellant was required to comply, and so cannot be described as an exceptional situation as compared with other operators in the same business;

I cannot see that items (4) and (6) of the appellant’s list answer to the expression, “exceptional situation”; and item (7), even if it did, post-dates the incurring of the £3m customs debt;

As regards item (5) of the appellant’s list: as the tribunal has “full” (rather than “supervisory”, per the first appeal) jurisdiction in the third appeal, it is appropriate that I make a finding as to whether this comprises an exceptional situation per Article 120.2. Given my findings at [115(3)], it is quite clear as a practical matter, as I say at [116], why HMRC never made a decision on the 2015 renewal application: both parties knew what the decision would have been (to refuse the application). I find for that reason that item (5) of the appellant’s list does not comprise an exceptional situation as compared with other operators engaged in the same business as the appellant.

as regards findings of fact: [25-34], [35(6)], [53-55], [58-59], [61-66], [68], [70-79], [115] and [122] above; the agreed facts; and Appendix 2 below; and

as regards analysis of law: [35(3)], [40-50], [80-87], [92-103] and [105-113] above.

The appellant is a cargo airline based at East Midlands Airport. The appellant is part of the Deutsche Post DHL Group.

The appellant’s first end-use authorisation was granted on 8 March 2002. It expired on 7 March 2007.

The appellant applied for renewal of the end-use authorisation on 15 January 2008. This was granted by HMRC on the same day (i.e. 15 January 2008) with retroactive effect from the date of expiry of the previous authorisation. The authorisation was valid until 6 March 2010.

A further application was made on 12 February 2010. This was granted on 16 February 2010. It authorised the appellant for the period 7 March 2010 to 6 March 2015.

On 5 February 2013, Officer Andrew Coulsey of HMRC contacted the appellant about an assurance exercise on end-use in relation to the appellant. Officer Coulsey requested details of goods the appellant had entered to end-use in 2012. The appellant agreed to send details of one week’s imports for week 49 in 2012. This data was received by Officer Coulsey as a spreadsheet on 11 April 2013.

On 15 April 2013, Officer Coulsey emailed the appellant about an additional six entries which were not shown on the appellant’s spreadsheet. Officer Coulsey also requested a meeting to review the appellant’s records and procedures.

On 19 April 2013, the appellant responded with the following details on the six entries: (a) it had found details of four of them; (b) it confirmed that one was not in fact for the appellant; and (c) it had been unable to find a record of the sixth.

On 13 May 2013, Officer Coulsey provided the appellant with a copy of the entry the appellant had no record of. On 20 May 2013, the appellant came back with details in relation to that entry. The appellant confirmed that it was for appropriate goods and stated which plane those goods had been fitted to.

On 3 June 2013, Officer Coulsey emailed the appellant to request a visit to see the appellant’s records and procedures.

On 25 July 2013, a visit was carried out by Officer Coulsey to the appellant at its premises at East Midlands Airport.

The appellant’s end-use authorisation again expired on 6 March 2015. On 30 March 2015 an application was made to renew that authorisation retroactively. That application was never decided by HMRC.

Following the appellant’s application in March 2015, Officer Jackie Graney of HMRC commenced another review of the appellant’s operation of end-use.

On 14 April 2015, Officer Graney emailed the appellant with a list of questions. Attached to the email were two spreadsheets. The appellant replied on the same day and further correspondence was exchanged between the appellant and Officer Graney throughout April.

An email from Officer Graney on 15 April 2015 was replied to by the appellant on 17 April 2015.

A further request for information from Officer Graney on 22 April 2015 was replied to by the appellant on 28 April 2015.

On 1 May 2015, Officer Graney emailed the appellant to indicate that she had concerns with the way in which the appellant had been operating end-use. The appellant arranged a call with Officer Graney on 7 May 2015 to discuss these concerns. Officer Graney subsequently emailed the appellant again on 11 May 2015.

On 19 May 2015, Officer Graney had a further call with the appellant. This was followed by an email from Officer Graney to Mr Nick Hill of the appellant on 21 May 2015.

On 7 July 2015, after an agreed extension of time, the appellant responded to Officer Graney’s email of 11 May 2015. Officer Graney replied on 10 July 2015.

On 22 July 2015, Officer Graney sent a Right to be Heard (RTBH) letter to the appellant. In that letter, Officer Graney said that she had made the decision to raise a demand for £4,850,838.62 of customs duty and £36,898,259.85 of import VAT. £4,670,889.20 of the customs duty and £35,533,357.14 of the import VAT in the demand related to four aircraft.

On 27 July 2015, the appellant provided evidence of the proper discharge of end-use in respect of those four aircraft. This extinguished £4,670,889.20 of the potential customs duty and £35,533,357.14 of the potential import VAT referred to by Officer Graney in her letter on 22 July 2015.

Further correspondence followed and on 4 September 2015, HMRC formally notified the appellant of what it considered to be a remaining customs debt relating to goods declared to end-use. This comprised £165,684.68 in Duty and £1,265,722.41 in Import VAT.

On 10 September 2015 the appellant provided a declaration that all aircraft operated by it are qualifying aircraft within the meaning of the Value Added Tax Act 1994, Schedule 8, Group 8. As a result, the goods imported by the appellant were properly zero-rated for import VAT. This resulted in a further reduction in the total alleged debt and the removal of all liability to import VAT.

The claim for zero rating was accepted by Officer Graney in a letter dated 18 September 2015. However, Officer Graney maintained that the customs debt remained.

The appellant asked for a review of Officer Graney’s decision. Further evidence was provided by the appellant which showed that some of the goods which were subject to the demand for customs duty had been put to the prescribed use.

The review was completed on 26 February 2016. The review upheld the original decision but accepted that it needed to be varied so as to reduce the amount of duty owed. Subsequently, on 4 March 2016, HMRC formally confirmed a reduction in the alleged debt. The reduced debt alleged by HMRC was £154,280.91 in customs duty.

In 2016, the appellant appealed the debt of customs duty to the First-tier Tribunal. The appeal proceeded up to the service of witness evidence by HMRC. This included a witness statement from Officer Graney.

On 16 February 2017, the appeal was withdrawn by the appellant .

Separately, the appellant was also the subject of a demand by HMRC for £2,269.72 of customs duty in November 2015. That demand related to the incorrect entry of goods to end-use and the appellant promptly paid it.

Between 14 June 2016 and 21 February 2017, the appellant made the following importations of seven civil aircraft from the United States of America.

At the time of the importations, civil aircraft were eligible to be imported by a trader with the appropriate end-use authorisation at a zero rate of duty by reason of their end use as civil aircraft. The seven aircraft were therefore eligible, in principle, for end-use. They were also in fact applied to the prescribed end-use.

The declarations for all seven aircraft showed that the aircraft had been put to CPC (or customs procedure code) 40 00 001. CPC 40 00 001 is for parts, components and other goods falling within specified chapters of the Tariff and of a kind to be incorporated or used in the manufacture, repair, maintenance, rebuilding, modification or conversion of aircraft. It is the CPC for duty suspended importation of aircraft parts under Regulation 1147/2002. It does not apply to importations of entire aircraft. The use of CPC 40 00 001 was therefore incorrect.

On 8 March 2017 Mr Chris Dolan emailed Officer Coulsey of HMRC. Mr Dolan is employed by the Deutsche Post DHL group and acts as a single point of contact with HMRC with respect to customs matters. He also provides advice and support to individual group companies, including the appellant.

Further correspondence followed between Mr Dolan and HMRC.

On 10 March 2017, Officer Coulsey clarified via email that end-use can only be used by authorised importers. He also clarified that CPC 40 00 001 is for use with aircraft parts “with airworthiness certificates”, not aircraft.

The appellant made a retrospective application for end-use authorisation on 4 April 2017.

Officer Graney subsequently issued a Right to be Heard Letter on 11 April 2017. This indicated that she was minded to refuse the end-use authorisation application.

The appellant responded to Officer Graney by letter dated 5 May 2017.

On 10 July 2017 Officer Graney refused the end-use authorisation application. The appellant requested a statutory review by a letter dated 24 July 2017.

The end-use authorisation decision was upheld on review on 30 November 2017. The appellant then appealed the end-use authorisation decision on 22 December 2017.

On 6 December 2017 HMRC issued a post-clearance demand notice (or C18) for a customs debt of £3,010,108.52 on the importation of the aircraft between June 2016 and February 2017. The appellant requested a statutory review and the customs debt demand was upheld by HMRC on 26 April 2018. The appellant then appealed the customs debt demand on 24 May 2018.

On 3 July 2018, the appellant wrote to HMRC requesting a refund of the customs debt of £3,010,108.52. That request was made pursuant to Article 120. On 5 November 2018, HMRC refused to grant that request. The appellant then appealed the repayment decision on 5 December 2018.

On 30 November 2020, HMRC made an application for directions permitting the admission of additional evidence and amendments to their statement of case. On 25 January 2021 the appellant opposed that application and applied to strike out parts of HMRC’s case. Both applications were heard by the First-tier Tribunal at a two-day hearing on 29 and 30 April 2021 before Judge Popplewell. In a decision dated 11 June 2021, the First-tier Tribunal allowed HMRC’s application and refused the appellant’s.

Officer Graney would be dealing with the appellant’s end-use authorisation application

As she was aware that there had been “some problems in the past with the operation of” the appellant’s end-use authorisation “and in particular with the records that have been kept”, Officer Graney would be carrying out a “desk audit” of the appellant’s imports, “initially over the past twelve months”, “prior to granting a renewal of the authorisation”

She accordingly attached two excel spreadsheets, one showing “all the entries [the appellant had] made to end-use” during that period, and one listing the entries that she wanted a “full documentary audit trail” for. She asked for

Additionally, in the light of the problems which have been identified in relation to the way in which you have been operating End Use and the fact that your previous authorisation expired on 6 March 2015, I must advise you to cease importing to End Use until we have been able to ascertain whether it will be possible to allow a new authorisation to be issued. Please note that from a legal perspective, as of 7 March 2015 [the appellant] no longer held an End Use Authorisation.

I understand that this is not good news from your perspective, however I look forward to receiving the above information at your earliest convenience, in order that we can hopefully move the situation forward and consider whether a new authorisation can be issued.

All the customs records were provided by the customs team in DHL Aviation UK Ltd (a sister company to the appellant)

One particular column showed parts that had been transferred out of the appellant to other sites

“blanks” meant the appellant was prepared to pay import duties on those parts; “0” meant parts that had not been transferred out to other sites; and “1” meant parts that had been transferred to other sites.

Date

Airway bill number

CPC

Nature of parts (EXP or ROT)

Whether there was a certificate of airworthiness

Quantify transferred out of appellant to other sites (for a number of entries “0” was indicated, but in many entries this was blank)

Country of destination

she did not think that Mr Hill’s spreadsheet had picked up all the imports that the appellant had made to end-use (she had compared the number of entries in Mr Hill’s spreadsheet to that on HMRC’s systems, and found considerable difference: 1,276 as against 1,627 for the period from 10 July 2012 (i.e. three years before the date of Officer Graney’s email)); in particular, there were four aircraft on the report from HMRC’s systems, as against only two on Mr Hill’s spreadsheet;

because of this, and because of the time it had taken the appellant to produce the data so far, she had decided she needed to take steps to secure the potential duty due: and therefore would be calculating the potential duty due on all imports to end-use by the appellant during the last three years, but curtailed at 6 March 2015; she would issue a “right to be heard” letter which would give the appellant a further 30 days to complete the work on its end-use records;

the customs entry number, which she described as one of a few “crucial” pieces of information, was missing from Mr Hill’s spreadsheet;

the information on the HMRC systems indicated that the appellant had continued to import under end-use until at least 1 July 2015. She then said:

Further to your application to renew the above authorisation it has become apparent from basic audit checks that you have failed to maintain a record of the goods which you have imported under this authorisation, or the End Use to which you have put them. This is in direct breach of the conditions of that authorisation.

The figures were said to reflect the duty and import VAT on all imports made by the appellant to end-use in the period 23 July 2012 to 6 March 2015; and

Officer Graney expressly said that she was aware that the majority of this debt related to four import duties that appeared to be for aircraft, two of which may have been identified (in Mr Hill’s spreadsheet).

“Importation of civil aircraft”: Mr Dolan would very soon be sending her records of proper discharge under end-use for the four aircraft (and this would reduce the debt considerably) (as was indeed the case – see agreed fact 20);

“Rotables”: Mr Dolan said a significant number of items qualified for the tariff suspension relief if accompanied by certificates of airworthiness; he said “some are in stock whilst others have been fitted to qualifying aircraft and we have a full audit trail for these”; he asked to be permitted exceptionally to make substitute entries for these goods;

“Expendables”: Mr Dolan said that there were a lot of transactions, which he would have to review in more detail, and the appellant might be able to “reconstruct control accounts”; but “it might prove more cost effective to consider the items as being diverted to home use and pay the duty and VAT reckonable”. But, he said, he would revert to Officer Graney on this;

“End-use – moving forward”: Mr Dolan said that “the end-use relief for aircraft and aircraft parts needs to be restored effective from the date of lapsing and I would be grateful if you could please consider this accordingly as discussed as we will certainly be importing aircraft in the very near future”.

The main issue appeared to be the weakness in the appellant’s linking import entries with its Trax inventory system. Mr Dolan said he believed that once goods were recorded on Trax, there was clear evidence that actual items imported for end-use had either been fitted to civil aircraft or exported from the EU;

Items (i.e. aircraft parts) moving between sites were not moved “between End-Users” but “within the End-Use authorisation”;

When parts were moved from one site to another, to service the 757 aircraft, there was no supply for end-use purposes as EAT already owned the parts – the appellant saw this as simply moving goods within inventory;

The letter said as follows:

To demonstrate that the aircraft parts (as well as the aircraft) imported in the 2012-2015 period highlighted by HMRC had been put to an eligible use, the DHL indirect tax team had taken a sample of consignments and successfully traced them to end-use. Some examples of the results found were attached. Four entries (one for each year, 2012-2015) were chosen at random. As regards “rotables” (high value engine parts), 424 of the 1,468 import entries were traced to end-use

It had failed to retain records for goods imported by it to end use.

It had removed goods from the one authorised site, and therefore from customs supervision, by sending them to other UK sites and entities and other EU sites and entities without any formal procedure having been followed.

Mr Dolan’s letter and attached schedule had provided information only about 424 of the 1,664 entries (for aircraft parts) made to end-use in the period (i.e. no information was provided about 1,240 entries for aircraft parts entries made to end-use); and

Even with regard to the 424 entries in Mr Dolan’s schedule,

it had suitable record keeping [for the relevant period i.e. September 2012 - March 2015] to meet the requirements for end-use relief

it had demonstrated to HMRC that end-use relief was adequately discharged in respect of the entries that gave rise to the customs duty in question

for the 1,668 import entries (entered to end-use) giving rise to the “original” customs duty alleged, the appellant had provided evidence in relation to 428 entries; it was unreasonable, the appellant said, to expect evidence for each of the entries

it was inconsistent with the purpose and spirit of CCC to operate the regime in an unnecessarily onerous way. It argued, in the alternative, (i) airworthiness certificates justified relief from customs duty on certain entries (ii) reliance on CCC IP article 544(c) to provide relief from customs duty; (iii) the 4 March 2016 demand for customs duty was out of time.

the appellant had not met all the requirements of its 2010-15 end-use authorisation; it did not maintain full records for end-use, as required under the terms of its authorisation

the appellant failed to provide all of the records requested by Officer Graney

the appellant cannot rely on certificates of airworthiness to claim relief, as any claim must be made at the time of import

since HMRC were unable to verify a significant proportion of the total number of entries, they had to conclude, on balance, that the appellant could not show that these goods were put to the prescribed use and that they were therefore removed from customs supervision. Consequently a customs debt fell due

the records supplied by the appellant demonstrate that proper procedures had not been followed as far as the transfer of goods was concerned. The appellant had imported goods to a third party’s site when that third party was not on the appellant's 2010-15 end-use authorisation and later sent to another entity (often in another EU member state) without the proper transfer procedure taking place. Those other entities may have been end-use-authorised in their own right, but as the transfer process was not followed, the goods were removed from customs supervision

goods imported under end-use should remain under customs supervision in accordance with CCC article 82. The appellant did not put all the goods imported to the prescribed end-use. The appellant removed from customs supervision, goods imported under end-use relief (for instance by transferring end-use goods to an unauthorised site) and consequently, a debt was incurred under CCC article 203

The appellant had not produced records to show that certain goods imported under end-use were put to prescribed use; as a result it has breached the conditions of its end-use authorisation and a debt has been incurred under CCC article 204.