Drinks and Food UK Limited v The Commissioners for HMRC

This appeal concerns the refusal by HM Customs & Excise (HMRC) of a claim for drawback of excise duty in the sum of £385,165.31 made by Drinks and Food UK Limited (Appellant).

For the reasons set out below we have determined that the Appellant’s claim is limited to the sum of £9,695.27.

The Appellant’s business is buying and selling wholesale drink and food. In the course of that business goods which are subject to excise duty are imported and exported. The Appellant’s excise goods which are the subject matter of this appeal were imported and originally warehoused under duty suspension arrangements in a bonded warehouse operated by London City Bond (LCB).

In or around February 2014, LCB notified the Appellant that HMRC had revoked the relevant authorisation to be a warehouse keeper in respect of the Appellant’s goods in October 2009. HMRC did not notify the Appellant of the withdrawal of the authorisation. As a consequence, for the period from October 2009 through to February 2014 the Appellant continued, incorrectly, to treat the goods held in the LCB warehouse as duty suspended goods. On 1 May 2014 HMRC assessed the Appellant to excise duty in relation to those excise goods. The amount assessed was £649,715. HMRC required that the assessment be paid otherwise the goods would have been seized and forfeit. At the time of the assessment the Appellant was notified that it would be entitled to claim drawback if the provisions of Excise Notice 207 (EN 207)were met. The Appellants paid the assessment in full on 5 June 2014 and there was no appeal against the assessment.

A Notice of Intention (NOI)to claim drawback was lodged by the Appellant with HMRC on 16 November 2020. The NOI was given the reference number DR144520. The export of the goods took place in a number of tranches on 7 December 2020, 8 December 2020 and 8 April 2020. On 21 April 2021 the Appellant submitted its drawback claim (Claim).

The Claim was refused on 2 September 2021 (Original Decision) on the basis that it had been made outside the required three-year time limit; a condition which, in HMRC’s view, it was inappropriate to waive (despite the statutory power to do so). The Original Decision and the relevance of the three-year time limit are considered in detail below.

An independent review of the decision was requested. The review conclusion letter, dated 24 November 2021, upheld the decision (Review).

There is a right of appeal against the Review. The Appellant exercised that right on 23 December 2021.

Article 9 Council Directive 2008/118/EC provides that excise duty shall be “levied and collected and, where appropriate, reimbursed or remitted according to the procedure laid down by each Member State”.

Article 33 of the same Directive states:

“1.

… where excise goods which have already been released for consumption in one Member State are held for commercial purposes in another Member State in order to be delivered or used there, they shall be subject to excise duty and excise duty shall become chargeable in that other Member State.

…

6.

The excise duty shall, upon request, be reimbursed or remitted in the Member State where the release for consumption took place where the competent authorities of the other Member State find that excise duty has become chargeable and has been collected in that Member State.” (emphasis added)

In simple and uncontroversial terms, the effect of these articles requires that where goods are moved from one member state to another after excise duty has been paid in the first member state, excise duty shall nevertheless be payable in the second member state but the first member state is required to reimburse or remit the excise duty paid to it upon the request of the owner of the goods; however, such reimbursement or remittance is made in accordance with the procedures of the reimbursing member state.

The UK provisions providing for reimbursement/remittance are principally contained in the Excise Goods (Drawback) Regulations 1995 (EGDR)authorised under section 2 Finance Act 1992 (No 2) which (so far as relevant) provides:

“(1)

Subject to the following provisions of this section, the Commissioners may, in relation to any duties of excise, by regulations make provision:

(a)

conferring an entitlement to drawback of duty in prescribed cases where the Commissioners are satisfied that goods chargeable with duty have not been, and will not be, consumed in the United Kingdom …”

The relevant parts of EGDR are:

Also relevant in this appeal are the provisions of the Duty Stamp Regulations 2006 (DSR). So far as relevant these provide as follows:

Finally, the provisions of sections 13 and 16 Finance Act 1994 (FA94)are relevant.

In accordance with the delegated powers set out in Regulation 7 EGDR HMRC have issued EN 207. The Tribunal was provided with a number of versions of EN 207: for the purposes of this decision we consider that dated 5 April 2019 (that extant for the first two tranches of export) (EN 207 (2019))and that dated March 2021 (extant in respect of the third tranche of export) (EN 207 (2021)). We were informed and understand that there were two April 2019 versions, one was extant for two days (9 – 11 April); we do not refer to this version as it was not in force at any time relevant to this appeal.

So far as relevant the key provisions of EN 207 (2019) are summarised below by reference to the relevant paragraphs numbers:

EN 207 (2021) includes substantively the same requirements as EN 207 (2019). However, there are some differences which it is important to note:

In order to understand the Original Decision and subsequent Review it is necessary to set the Original Decision in the context of some of the correspondence which preceded it.

We were provided with the witness statements of Mr Tristan Thornton, Mr Alan Powell (advisor to the Appellant in connection with the initial assessment), Mr Cornelis Dirkzwager (director of the Appellant), Mr Andrew Roy (of BWA Logistics Ltd (BWA)), and Mr Lawrence O’Rourke (original decision maker of HMRC). The statements of Messrs Powell, Dirkzwager, Roy and O’Rourke were all accepted and none of the witnesses were called to give evidence. Mr Thornton was subject to detailed cross examination. We note for the record that there are significant complexities when an advocate also gives evidence. The demarcation between evidence and submission in a matter such as this is not clearcut and the situation would have been better avoided by Mr Thornton ceding representation to someone else and limiting his contribution in the hearing to being a witness of fact.

There was considerable detail in the accepted statements. Much of that detail was helpful context but not, in the end, material to the decision we need to make.

From the statements and the other documentary evidence we make the following findings of fact.

When warehouse keeper authorisation affecting the goods to which this appeal relates was withdrawn the Appellant was not informed and remained in ignorance of the withdrawal for a period of over 4 years during which it continued to believe that the goods held by LCB were under duty suspension. Whilst it was subsequently accepted by HMRC that the there was an alternative basis on which authorisation would or could have been permitted, the effect of withdrawal was that the goods held by LCB were no longer considered duty suspended and there was a liability to excise duty. That liability was duly met by the Appellant in the expectation that it would then be able to secure a reimbursement or remittance of the duty where the goods were not ultimately consumed in the UK. A number of issues arose, and various means of securing reimbursement were unsuccessfully pursued. In this period some of the goods were sold in the UK; however, a substantial proportion of them remained duty paid in LCB’s warehouse. LCB continued to monitor and record, by way of record of rotation, where, within the warehouse, they were held.

In late 2019 Mr Thornton was instructed. Following instruction, on 15 November 2019, he wrote to HMRC. The letter stated:

“Pre-notification of drawback claim and advance request for waiver of condition

We write in relation to an intended forthcoming claim on behalf …[DFUK]. In order to process this claim, DFUK will need the advance confirmation from the Commissioners that the condition imposed by Regulation 7(6) of the [EGDR] be waived. …

[a full background to the history is then set out together with relevant law]

We do not ask the Commissioners to decide the claim itself in advance or to comment on or decide the applicability of the other conditions. DFUK otherwise expects to be able to meet all domestic and EU conditions governing drawback, therefore this request is limited in scope and reasonable in the circumstances”.

The letter was sent under a covering email which stated:

“… As per the attached, I am trying to help a company to deal with a large amount of goods that has [sic] been stuck in the UK for some years and the only issue is the condition relation to the amount of time that has passed since the duty was paid. If that condition can be waived, we can proceed to assist with the normal drawback procedure.”

After a nudge from Mr Thornton HMRC responded, on 27 December 2019, in the following terms:

“I have received a response from the Drawback policy team. They have said that the Drawback Centre can consider a Drawback claim in this situation even though the condition stated in [EGDR] regulation (6) … has not been met.

However, the claimant would have to show that the goods subject to the drawback claim are the same ones that were subject to the assessment on 1/5/14 (paid 5/6/14)

Also all other drawback conditions and requirements must be fully met to the Commissioners’ satisfaction”

Mr Thornton considered that the email of 27 December 2019 amounted to a waiver of the time limit condition in regulation 7(6) EGDR. Before us HMRC contended that it was not a waiver and that the time limit condition would be waived only were the Appellant to meet the other conditions for drawback.

There is a degree to which the difference between the parties in this regard is semantic as, in order for there to be a valid claim for drawback, the EGDR conditions (including those prescribed in a notice) must be complied with unless “otherwise allowed” by HMRC even if the time limit has been waived.

We did not have the benefit of any evidence from the author of the 27 December 2019 email but, in any event, we considered whether there was or was not a waiver of the time limit as a matter of construction of the email in context.

In that regard, and as communicated during the hearing, we consider that the only reasonable construction of the 27 December 2019 email is that there was a waiver of the regulation 7(6) time limit i.e. that HMRC would not refuse an otherwise compliant claim solely on the basis that it had been made outside the three-year time limit. We reach this view for the following reasons:

Following receipt of what Mr Thornton considered, and we have found, to be a waiver of the time limit condition in regulation 7(6) EGDR, he worked with the Appellant to remove the remaining goods which had been the subject of the assessment to outside the UK so as to claim drawback. He contacted LCB with a view to obtaining the information necessary for him to be able to trace the payment of duty on the assessment to the goods which remained in the warehouse. He was provided with records that enabled him to identify which goods had been the subject of the assessment through the original storage references and then, through the various rotation records, was able to confirm precisely which goods remained in the warehouse.

Having undertaken this exercise Mr Thornton was satisfied that the Appellant could proceed to arrange for the de-stamping and movement of the goods to The Netherlands. The Appellant approached BWA to carry out these tasks. BWA were selected because they were the cheapest provider (3-4 times cheaper than LCB).

Mr Roy’s unchallenged evidence sets out that BWA were experienced in the obliteration of duty stamps having been approved by HMRC and subject to a number of inspections over a period of time. He states that he was contacted by Mr Thornton in June 2020. Following some delays in setting up an account for the Appellant, he arranged for the transfer of four containers of goods from LCB to the BWA warehouse. On receipt the goods were logged using the same stock information as provided by LCB, new rotation numbers were recorded.

Using the rotation numbers HMRC were notified of the proposal to de-stamp the goods on 12 November 2020. Mr Roy was aware that de-stamping could not begin until at least 2 clear days after the notification was given. The notification indicated that the goods would not be removed by way of dispatch prior to 19 November 2020, i.e. after the two clear days’ notice had expired.

The duty stamps were removed using a Dremel hand drill to obliterate the words “for the UK market” with a sticker then placed over the site of the drilling. BWA’s business record of the stock information was noted to show that the relevant stock had been de-stamped. No record was made of the URNo of the stamp as Mr Roy did not understand there to be such a requirement in light of the other records maintained and which had been subject to HMRC inspection previously.

There is no evidence, and we find that the Appellant did not, at any time, seek to verify for themselves that the provisions of the DSR regarding obliteration were complied with by BWA until after HMRC had refused the claim.

Following the de-stamping exercise, Mr Thornton prepared and submitted the NOI. He completed form EX75 providing the following information:

The NOI was submitted under cover of an email dated 19 November 2020. The email provides the details of the suppliers from whom the goods were originally purchased. HMRC were informed that the goods were with BWA undergoing the process of duty stamp obliteration. The email of 27 December 2019 was enclosed. Mr Thornton also stated: “we understand that these goods will be able to be sent to the Netherlands on Wednesday 25 November 2020 for excise duty drawback purposes”. Mr Thornton’s oral evidence on the terms of that email were clear and we accept his evidence. He stated that the reference to 25 November 2020 was a reference to the first date from which, in accordance with EGDR, movement could commence. Such interpretation is entirely consistent with the language used in the email. We deal below with the legal significance of this date in paragraphs 88 to 95.

We were told that following export and as part of the preparation of the duty drawback claim itself (EX76) Mr Thornton identified a number of minor errors in the schedule accompanying the NOI. However, subject to those errors (which we address below), we find that the EX75 was accurately completed.

Mr Roy then made arrangements for the shipment of the goods. Given the volume of goods and the proximity to 31 December 2020 Mr Roy could not arrange for all of the goods to be transported in a single movement. Some but not all of the goods were shipped on 7 and 8 December 2020. The goods were loaded onto lorries and were transported to the Netherlands by way of roll-on-roll-off ferry. The goods were accompanied by the required customs documentation (single administrative accompanying document (SAAD)) which was duly certificated.

Included within the shipments made in December 2020, and thereby included on the SAAD documentation, were 112 cases of Vodka Dworek which had not been the subject of the 1 May 2014 assessment.

The final shipment did not take place until 8 April 2021. Mr Roy’s (again unchallenged) evidence was that the delay was caused by difficulties in the logistics industry following Brexit, though we also note that the UK at least was also in the second COVID lockdown from 5 November 2020 through to 8 March 2021. Again the movement was by way of lorry and roll-on-roll-off ferry. The Brexit appropriate export documentation (T1s) was issued.

No amendment was made to form EX75 prior to the movement of the goods.

Prior to the submission of the EX76 Mr Thornton gathered together the information and documentation he understood was required to submit the claim. He noted that he had not been provided with a CHIEF S8 showing a departed status of 60. He enquired of the customs agents and was informed that the S8 was no longer produced because it related to exports from the EU. He was advised that the correct document to use was known as an X2. Mr Thornton questioned this but continued to be advised that he had the only documentation available.

The drawback claim was submitted on 21 April 2021. The schedule accompanying the claim corrected the errors that had been identified in the schedule accompanying the NOI. The claim was for drawback of £376,724.41 in respect of spirits and £8,448.90 in respect of wine; the claim total was £385,165.31. The amendments made to the schedule were to notify that:

The consequence of these differences was that the claim made was £10,879.43 lower than as stated in the NOI schedules.

The claim was also accompanied by both the original EX75 and an EX75 signed and dated 21 April 2021. Mr Dirkzwagen’s unchallenged evidence was that the second EX75 included the same information as the original but was resigned and dated as he had misunderstood that he was being asked to provide a copy of the original. We accept his evidence and find that there was one NOI provided to HMRC, the original one.

Also provided were the relevant tracing documents. For the shipments made in December 2020 SAADs were also provided. Those SAADs included the 112 cases of Vodka which were shipped but not included in the NOI or subsequent claim. For the April 2021 shipment T1 (Transit Accompanying Documentation) was provided.

No CHIEF S8 showing a departed status of 60 was provided.

By letter dated 13 May 2021 the Appellant explained that they understood that a CHIEF S8 could not be obtained and provided such evidence as they had of the export.

At about that time Mr Thornton was also corresponding with HMRC on the unavailability of CHIEF S8s. That correspondence, and Mr Thornton’s evidence, on which he was cross examined, was that although he had been unaware of the issue prior to the 8 April 2021 export he was aware post that time that HMRC had agreed to waive the requirement for other exporters who had used lorries and roll-on-roll-off ferries as the means of movement. He considered that HMRC were required to waive the requirement because it was impossible to comply with.

As part of Mr Thornton’s engagement with HMRC on this issue generally, HMRC indicated that where no S8 was available HMRC may accept alternative evidence of export provided that there was a full explanation of the reason was to why the claimant could not obtain a S8. It was indicated that commercial evidence was insufficient as alternative evidence, and that official evidence of arrival was required.

From the correspondence it is unclear whether it is or is not possible to obtain a CHIEF S8 printout showing a departure status of 60 when using a roll-on-roll-off ferry. It is apparent that one could still have been obtained if an alternative means of movement had been used i.e. shipping via an inventory port.

In the Original Decision dated 2 September 2021 Officer O’Rourke identifies a number of respects in which the Appellant’s Claim does not meet the conditions of EGDR, including those specified in EN 207:

The letter concludes that as the conditions for drawback have not been satisfied the Claim is rejected.

A review was sought. The request for review asserted that the Original Decision had been unreasonable on four grounds which were summarised and then particularised. The summary stated:

“a.

[the decision to refuse] has failed to meet the portion of the claim in which there is no suggestion of any breaches of conditions or advance criteria required.

b.

It has taken into account or given improper weight to irrelevant factors including elements of the movement which were not subject to the claim or factors preceding November 2019 when assurance was sought that the claim could be accepted by HMRC.

c.

It has failed to take into account or give sufficient weight to relevant factors including the guidance published by HMRC, the legislation introduced by HMRC, and the system operated by HMRC in such a way as to make one of the export conditions impossible to meet.

d.

It fails to properly consider the exercise of the Commissioners’ discretion to waive any and all conditions which necessarily calls for a proper consideration of the impact on DFUK for rejecting the claim and any countervailing considerations.”

The particularised errors were identified as:

The Review dated 24 November 2021 focusses on the time limit condition. It rejects the Appellant’s contention that the email of 27 December 2019 represented a waiver of the time limit. The position adopted in the letter is that because other conditions for drawback have not been met and there are no other exceptional circumstances, there can be no waiver of the time limit. The letter does not indicate that HMRC had the power to waive any of the other conditions. The identified failures are as previously:

We considered the most appropriate starting point in this appeal was to identify the conditions which HMRC contend have not been met thereby entitling them to refuse, in its entirety, the Appellant’s claim for drawback. We then considered whether the conditions we identify have, or have not, been met. Having done so, and as set out below, we identified that there were conditions which had not been met.

That conclusion has required us to consider the second dispute between the parties: that concerning the Tribunal’s jurisdiction. The Appellant contends that were we to conclude (as we have) that there has been a failure to meet some of the conditions, then we have the power to require HMRC to conduct, in accordance with the directions of the Tribunal, a further review. The Appellant contends that we can make directions regarding the potential to waive any statutory conditions and those imposed in EN 207. HMRC contend that the Tribunal is permitted only to determine whether the conditions for an excise drawback claim as set out in EGDR and EN 207 have been met; to the extent that they have not then the appeal must fail and, in the alternative, that a requirement to re-review the decision would result in the same and inevitable answer that the claim be refused such that we should not exercise the power to require a further review.

We set out below our consideration in respect of each of the bases/conditions on which the Appellant’s claim was rejected, providing a summary of the party’s submissions on each following by our discussion and conclusion on each.

We are grateful to the parties for their detailed skeleton arguments, comprehensive oral submissions and responses to the additional questions raised after the hearing had concluded. In reaching our decision on this appeal we have considered everything drawn to our attention by way of submission and evidence. It is, however, inevitable, given the detail of the arguments and the quantity of material before us, that not everything in the appeal is given specific mention in this judgment.

There was some dispute between the parties as to what were and were not conditions/requirements for the purposes of a drawback claim.

HMRC contended that everything which was identified in EN 207 as a condition, requirement or direction, whether as a summary of the provisions of EGDR or in exercise of their powers to impose further conditions by virtue of EGDR, was conditions which had to be adhered to unless the condition in question had been waived by them.

The Appellant’s position is more nuanced but not entirely at odds with that adopted by HMRC. The Appellant accepts that any condition or requirement which is noted as having force of law in the 2021 version of EN 207 is a condition required to be met. The Appellant accepts that the equivalent (and largely identical) provisions in the 2019 version also have force of law despite no express wording to that effect.

However, the Appellant does not accept that every direction given by HMRC in EN 207, in particular by reference to the use of “you must” or “you shall”, is a condition having force of law such that a failure to comply represents a basis on which a claim for drawback may be refused. The Appellant contends that the following principles can be discerned from the case law on how and when it is appropriate to interpret the provisions of a notice as having force of law:

By reference to those principles it was submitted by the Appellant that careful consideration is required as to whether the contents of each and every section of EN 207 represents a condition as stated in EGDR or conveys with sufficient legal certainty that it is a condition imposed pursuant to the provisions of regulation 7(1)(b) EGDR and which must be met in order for there to be a valid drawback claim. Any lack of clarity or ambiguity as to whether the section represents a condition is, in the Appellant’s submission, to be resolved in its favour.

We consider that the correct approach to interpreting EN 207 is broadly that advanced by the Appellant. Parliament saw fit to specify in EGDR certain conditions to be met in making a drawback claim but also bestowed on HMRC the power to impose additional conditions as they see fit in a notice. However, in order to represent a condition which must be met, thereby restricting the basis on which a claim may be made, the conditions must be clear and precise and not impossible or excessively difficult to meet. To conclude otherwise would unnecessarily limit what is a broad right to recover duty paid where excise goods are not then consumed in the UK. This conclusion is also consistent with the broad discretion granted to HMRC to waive all and any conditions as HMRC may allow. We do not go as far as to say that any lack of clarity of ambiguity must be resolved in the Appellant’s favour; rather, a sensible and pragmatic interpretation must be applied to the terms of the notice by reference to the purpose of ensuring that drawback is appropriately repaid, and excise revenue protected from fraud.

HMRC contend that regulation 7(6) EGDR requires that a valid claim to drawback must be made by reference to a drawback event which occurs no more than 3 years after the payment of duty to which the claim relates. They acknowledge that they have the absolute power to waive the time limit condition but that they did not do so in those case. As a consequence, they contend that as the movements (by way of dispatch and export) occurred significantly more than 3 years after the payment of the assessment in June 2014 the claim, in its entirety, was properly rejected.

The Appellant contends that by the email of 27 December 2019 HMRC waived the time limit condition and as such the fact that the claim was submitted outside the otherwise prescribed 3 years is not a basis for rejection of the whole claim, in particular, it cannot be a basis for rejecting that part of the claim which is “untainted” by HMRC’s contention that other conditions too have not been met. They contend that £9,695.27 of the total claim should be allowed on this basis (HMRC do not contest that this figure has been correctly calculated).

There can be no question that the three-year time limit is a condition which restricts the right of a claimant unless waived by HMRC.

However, as set out in paragraph 30 we have found that there was a waiver of the time limit condition.

We consider that it is plain from the terms of EN 207 (in both versions) that HMRC have the power to reject or reduce a claim. The power to reduce a claim arises, as set out in EN 207 where “… the conditions and requirements of this notice and EGDR for some, and not all, of the goods declared on the NOI and drawback claim form”. Where the conditions and requirements are all met for part of the claim HMRC indicate that the compliant part of the claim will be met. To do so, in our view, meets the UK’s obligations under Article 33(6) Council Directive 2008/118/EC.

Accordingly, we find that the Appellant’s drawback claim was valid as regards £9,695.27 and HMRC were wrong to reject that part of the claim. We therefore allow the appeal in respect of this sum.

HMRC contend that the dispatch/export made by the Appellant and the associated drawback claim was not consistent with the NOI submitted and that the Appellant should have amended the details on the NOI when the Appellant found itself unable to move all the goods before 30 December 2020. In this regard HMRC say that the Appellant was in breach of EN 207 paragraph 4.12. In particular, HMRC contend that the information which the Appellant was required to have notified in order to validate the claim was:

The Appellant contends that the EX75 NOI form did not need to be changed as none of the required particulars had materially changed and that the minor amendments which were made to the accompanying schedule between the submission of the NOI and the Claim all had the effect of reducing the drawback claim and, as such, did not need re-notification.

Regulation 8(2)(a) EGDR provides the requirements to be included in the NOI where it is proposed that a claim for drawback be made “after export”. Whilst regulation 8(2)(b) introduced specific requirements for an export to the EU (i.e. a dispatch) the statutory requirements for the NOI itself did not distinguish between an export and a dispatch. The information required was: the Appellant’s name and address, the address of the premises at which the goods were available for inspection, the description of the goods including their nature and quantity, the amount of duty paid in respect of the goods, and the address to which they were to be exported.

Again, there can be, and was, no dispute that the provision of this information is a condition which must be met.

Both versions of EN 207 provide that the NOI is to be given (Paragraph 4.1). They also both specify the information to be provided.

The 2019 version provides that if the claimant intends to dispatch the goods to another EU country then the following information is also to be provided:

“the name and address of the premises the goods are being dispatched to in the other EU country. The name, address, VAT registration number, phone and fax numbers of the buyer in the other EU country …”

For an intended export of the goods outside the EU the information required was:

“the name and address of the premises the goods are being dispatched to in the other country. The name, address, phone and fax numbers of the buyer in the other country.”

The 2021 version includes the language from paragraph 80 in respect of dispatches from Northern Ireland to the EU and that from paragraph 81 for all other exports.

These paragraphs of EN 207 reflect the conditions laid down in EGDR.

EN 207 paragraph 4.12 requires that if the information on the NOI form (see emphasised quotation at paragraph 17(11) above) changes the changes must be notified to HMRC in writing and that if the changes affect the inspection of the goods (including a change in quantity of the goods) the period of notice for inspection will begin to run again.

The purpose of the requirements of paragraph 4.12 are reasonably apparent, HMRC must be able to ensure that a drawback claim made has been properly notified to them in order to ensure that the amount of duty repaid on a claim reflects the claimant’s statutory entitlement to remission/refund of previously paid duty.

The Appellant accepts that the requirements of paragraph 4.12 have force of law and must be met.

We were not referred to any authority which has considered the issue we have to determine with regard to whether the changes HMRC contend were required to be made to the NOI are matters which were required to be notified.

HMRC’s objection to the Claim by reference to what they assert was a declared date of dispatch of 25 November 2020 is, in our view, wholly mis-founded and, with respect, disingenuous.

Nothing within EGDR nor EN 207 requires a claimant to notify HMRC precisely when it is intended that the movement will take place, or the number of shipments that will be made.

Regulation 8(2)(d) EGDR requires that the goods and relevant documentation shall be available for inspection at identified and notified premises for “not less than two clear business days”. It is quite apparent that the use of “not less than” means that the period may be more than two clear business days.

As identified in paragraph 17(9) above EN 207 is clear that “if you intend to hold the goods for only the minimum period” the claimant should make sure that they have calculated the period correctly. The detailed examples provided on calculating the notice period both confirm that “the goods can be dispatched, exported … on or after [the day on which the notice period ends]”.

There is also nothing on form EX75 which requires an indication of the date of movement.

The Appellant signed and dated the EX75 on 16 November 2020, and it was provided to HMRC under cover of the email dated 19 November 2020 (see paragraph 38 above). We have found that the only reasonable interpretation of that email is that it was only on or after 25 November 2020 that the goods could be sent to the Netherlands in order to meet the requirement of 2 clear business days’ notice. In accordance with the narrative in EN 207 paragraph 4.10 the email sent at 17:38 on 19 November 2020 was not treated as received by HMRC until 20 November 2020 (it being sent after 16:00). The day of receipt does not count towards the period of notice and a business day is not a Saturday or a Sunday. The two clear days’ notice were therefore 23 and 24 November 2020 and the first business day after the end of the notice period was therefore 25 November 2020.

It would also be quite remarkable that HMRC would want to be notified of the precise date on which movements were intended to take place and then renotified every time the date of a movement changed.

We find:

Consideration of the language adopted by EGDR, and subsequently reflected in EN 207, in our view, reflects that a dispatch from anywhere in the UK prior to 31 December 2020 and from only Northern Ireland post 31 December 2020 was and is a subset of “export”. On the basis that a claimant is only entitled to drawback following a movement of duty paid goods to another EU country where payment of the relevant duty and associated VAT in the receiving EU country is evidenced, additional information is required regarding such exports.

We note that in response to the heading “reason for the claim” on the EX75 form available in November 2020 there were two options:

As such, there was no means on the EX75 which permitted notification of an intention to export (rather than dispatch) to an EU country. This was so despite the imminence of the end of the Brexit transitional period. HMRC were unable to provide us with any evidence that claimants generally were told that a movement to an EU country which would no longer treated as a dispatch post 31 December 2020 would have required a different notification or how that notification would have been made. In our view it is wholly unsurprising that there was no such notification. In the context of the anticipated difficulties of implementing Brexit and in the midst of a work from home order it was entirely reasonable that unnecessary administration be avoided. The EX75 information provided in boxes A – D (and where relevant E and F) would give HMRC everything they needed to ensure that the goods identified on the EX75 were being exported so as to justify a drawback claim.

The Appellant completed boxes A – F. As such HMRC were well aware that the goods for which notification had been given were destined for The Netherlands. EX76 and the accompanying documentation would confirm whether the movement took place before or after 31 December 2020 and thereby whether the duty and VAT required to be paid prior to that date had been so paid.

Viewing the terms of the NOI form (EX75) we do not consider that there was a change in the information required which, in this regard, required further notification to HMRC. Accordingly, the fact that a proportion of the goods were exported on 8 April 2021 cannot, of itself, justify a refusal of either the whole claim or that part of the claim relating to the goods exported on that date.

Our view in this regard is reinforced by the terms of paragraph 12.2 EN 207 (2021) which clearly envisages that a pre-Brexit NOI may have been completed for a post Brexit export to an EU country; it reminds claimants that they must have the correct supporting documentation but does not advise that they must notify a change in status.

There is no part of the claim which is only affected by the position taken by HMRC on this issue.

The provisions of regulation 8(2)(a) EGDR require the goods to be identified in the NOI. Such identification requires particularisation of the quantity and nature of the goods.

Paragraph 4.12 EN 207 indicates that a change in quantity of the goods is a matter which must explicitly be notified as a change and that such notification starts a period of amended notice. However, paragraph 12.1 explains that a claim will be reduced (as set out in paragraph 17(17) above) to the extent that the NOI and the claim form relate to the same goods (including quantity), there is a shortage of goods on the SAAD, where there has been a failure to notify a change in the NOI, or where the conditions and requirements are met only for some of the goods. In our view, the statement that they will reduce the claim rather than reject it in totality in these circumstances represents a waiver of any right HMRC may otherwise have had to reject the whole claim where only part of it is affected by a breach of condition.

It is therefore plain, by reference to the terms of EN 207, that HMRC will accept claims where there is a discrepancy between the NOI and the drawback claim but only to the extent that goods for which drawback has been claimed are also recorded on the NOI and notice for inspection has been effectively given. We consider this paragraph to represent a formal waiver of the requirement to notify changes which cause a reduction in a drawback claim.

The individual errors identified in the schedule attached to the NOI form are particularised at paragraph 44 above. In each case they resulted in fewer goods being dispatched/exported than had been notified. However, there was no need to reduce the drawback claim because the claim submitted had already been adjusted for the errors.

Given the terms of paragraph 12.1 EN 207 we consider that there is also a general waiver of the requirement to notify a reduction in the quantity of goods exported where the claimant themselves made the reduction in claim value. As such, we conclude that there was no failure to meet the conditions required for drawback by virtue of the errors identified in paragraph 44 above.

HMRC were therefore not entitled to refuse the entire claim on the basis of those errors. There is no part of the claim which is only affected by the position taken by HMRC on this issue.

HMRC contend that because one of the SAADs for the December 2019 dispatches included 112 cases of vodka the Appellant has failed to comply with the requirement that the goods were duty paid. During the hearing Ms McArdle indicated, in a response to a question put to her by us, that the Appellant should have made clear in the claim itself that the supporting documentation also demonstrated that further goods not part of the claim had been dispatched so as to ensure the claim was compliant.

The Appellant contends that there is no legal requirement to so notify HMRC. It is submitted that the claim cannot be said to be inaccurate because additional goods were dispatched at the same time.

We agree with the Appellant. The drawback claim was made in respect only of goods which on which duty had been paid (i.e. excluding the 112 cases of vodka) and in respect of which a NOI had been given. There is no requirement or condition within EGDR or EN 207 which precludes a movement including other goods and therefore there can have been no failure to meet such a condition.

HMRC contend that the Appellant is in breach of the condition requiring them to ensure that BWA recorded and maintained the record of each URNo obliterated.

In this regard HMRC emphasise the terms of paragraphs 4.1, 4.5 and 7.4 of EN 207. HMRC contend that these provisions unambiguously and clearly impose conditions on the Appellant: 4.1 imposes a condition that the drawback claim documentation has been submitted with the correct supporting material. They contend that paragraph 4.5 represents a clear condition that duty stamps be obliterated in accordance with the requirements of the DSR and the provisions of Notice DS5, and that paragraph 7.4 imposes a condition that the record of obliteration be provided with the claim.

The Appellant contends that there is no condition imposed on it (as distinct from BWA) to maintain a record of obliterated duty stamps and no condition requiring the provision of the relevant record of obliteration when making a drawback claim. The Appellant contends that paragraph 4.5 EN 207 does not have force of law. Unlike many of the provisions of the 2021 version it does not state that it has force of law and, the Appellant contends, that cannot be by mistake given the careful and painstaking exercise undertaken between the 2019 and 2021 drafts to clearly identify the sections having force of law. Further, the Appellant notes that the language adopted is not that of a condition.

In the alternative, the Appellant also contends that to the extent that there was a failure to comply with this condition the failure occurred because BWA had not maintained the relevant record of the URNos obliterated on the understanding, confirmed or at least not identified by HMRC, on their various inspections. This they contended indicated that the requirement was not a material one and failure to comply could be considered de minimis.

We note that regulation 24 DSR provides that “a person” must not deliberately obliterate or remove a duty stamp unless “he” has given HMRC two clear days’ notice of the date, time and address, at which “he” intends to obliterate the stamp and, for type A stamps (i.e. a free-standing stamp which is not part of a label) “he” makes a record of the unique reference number of that stamp in “his” ordinary business records.

We have carefully considered the provisions of DSR and DS5 and it is apparent that the Appellant was not a person who was registrable under the DSR, at least not as regards the goods to which the drawback claim relates. The Appellant was not a warehouse keeper and, as per paragraph 6.11 DS5, was not entitled to order and apply type A stamps. The Appellant was reliant on others to affix and obliterate duty stamps on the excise goods owned by it.

We consider that the plain reading of those provisions is that they apply to the person who will physically, and in a practical sense, undertake the obliteration. In this case, that is BWA and not the Appellant. As we have found at paragraph 35 BWA de-stamped the Appellant’s goods, maintained a record of the products that had been de-stamped but made no record of the URNos which had been obliterated. As such, it was BWA that were in breach of the regulation 24 DSR obligation.

The obligations on the Appellant under DSR appear to have been limited to notifying HMRC (at the duty stamp team) of the intention to export goods that had had the duty stamps obliterated at least two clear business days prior to export. Such notification can expressly run concurrently or separately to the drawback notification. The unchallenged evidence of Mr Roy confirms that this notice was duly given.

Paragraph 4.5 provides that before claiming drawback “you must first obliterate the duty stamps in accordance with the [DSR]” and reference is made to the provisions of DS5. The use of “you” is curious in the context of a duty drawback claimant which is not, and cannot be, authorised to obliterate duty stamps. The language of paragraph 4.5 would therefore appear to require that a person in the position of the Appellant ensures that the duty stamps were obliterated prior to dispatch/export and that such obliteration was carried out in accordance with the DSR and DS5.

The question arises as to whether that represents a condition, breach of which permits HMRC to refuse the claim in whole, or in respect of the part of the claim that relates to stamped goods.

We are clear that it is not a condition which enables HMRC to refuse the claim in its entirety. We reach that conclusion for similar reasons to those set out at paragraph 104 above.

However, on balance, we consider that it is a condition of drawback that the goods are, as a matter of fact, obliterated in accordance with the DSR. There is a significant fiscal risk arising to the exchequer if drawback is claimed and paid but the obliteration is not carried out fully in accordance with the requirements of DSR, such that it is reasonable and proportionate to expect that the claimant satisfy itself that the provisions of the DSR have been complied with. In this case the Appellant was provided with a record of de-stamping but did not apparently verify that BWA had fully complied with the obligations on them regarding the records what needed to be maintained, including a record of URNo.

In reaching that conclusion we have undertaken the evaluative exercise advanced by the Appellant in determining what is and what is not a condition. We note that there is no statutory requirement that the Appellant maintain a record of the URNo. The 2021 notice does not identify the provisions of paragraph 4.5 as having force of law. However, its terms are clear that prior to export the duty stamps must have been obliterated in accordance with the DSR. There is a rational basis for the requirement, and it is not a condition which is disproportionately onerous on a claimant who simply needs to obtain the necessary confirmation and supporting records of compliant obliteration and retain those in its own records thereby evidencing compliance.

HMRC reference the failure to obliterate “in accordance with the DSR” in the original decision to refuse and the Review confirms that the Appellant had not produced evidence which demonstrated compliance with the condition in paragraph 4.5. We agree with HMRC that there has been a breach of a condition. We consider below the consequence of such breach.

There was some dispute between the parties as to whether HMRC also were entitled to rely on what they latterly contended was a breach of paragraph 7.4 in the context of de-stamping. Paragraph 7.4 provides that a drawback claimant “must provide … an extract from your records showing the details of the stamps that were obliterated”. Neither the Original Decision nor the Review referenced this requirement as a basis on which the claim was rejected. However, it was subsequently referenced by HMRC after evidence had closed. The Appellant objected on the basis that it was a new argument and one which would have required them to produce evidence they are now precluded from producing.

The breaches of paragraphs 4.5 and 7.4 are clearly connected. In the case of a claimant who is not authorised to obliterate duty stamps we would interpret paragraph 7.4 as requiring the provision of the records they obtained from the party which obliterated the stamps in order to satisfy themselves that obliteration had been carried out in accordance with the DSR. In this case such evidence does not exist as it is admitted that obliteration was not carried out fully in accordance with the DSR as the URNos were not recorded by BWA. There can therefore be no evidence which the Appellant was capable of producing.

However, on the basis that HMRC’s decision did not reference the paragraph 7.4 de-stamping record keeping requirement and it was raised after the hearing and in connection with further submissions we requested, we agree with the Appellant that HMRC may not now defend their decision by reference to this alleged failure. In the end, however, that makes no difference given the failure to comply with paragraph 4.5.

Finally, and with regard to the Appellant’s contention that if we were to find there was a condition regarding de-stamping there was no failure justifying a rejection of or reduction in the claim as the failure was de minimis. We note that Lord Simon in CEC v JH Corbitt (Numismatists) Ltd [1980] STC 231 (Corbitt) indicated that a de minimis incidence of non-compliance with conditions imposed by HMRC represented a basis on which to challenge, in that case, a VAT assessment. However, we consider that a failure to ensure that URNos had been obliterated (and then provide the record) is not de minimis. We do so for the reasons identified in paragraph 124. The management of the unique duty stamp numbers is a key contributor to the prevention of excise fraud. It is reasonable for HMRC to need to know not only the product from which stamps have been obliterated but also which stamps have been so obliterated.

HMRC contend that the Appellant failed to provide a CHIEF S8 with a departed status of 60 or any of the alternative forms of documentation considered to be acceptable evidence of movement in breach of the condition contained in paragraph 7.4 EN 207 in respect of the goods exported on 8April 2021.

The Appellant does not deny that the requirements of paragraph 7.4 are a condition of drawback, and the Appellant accepts that it was in breach of this condition because it did not provide either a CHIEF S8 showing a departed status of 60 or the CDS equivalent but contends that the requirements specified in paragraph 7.4 were impossible to comply with as from 1 January 2021 the ferry ports no longer operated CHIEF.

In view of this concession we find that the Appellant failed to meet the condition requiring export evidence. We consider the implications of the breach below.

As set out in paragraphs 125 and 132 above the Appellant was in breach of the condition to ensure that the duty stamps were obliterated in accordance with the DSR and in breach of the condition to provide the particular documents specified in paragraph 7.4 as evidence of export.

HMRC contend that having done so the appeal should be dismissed on the grounds that we have no jurisdiction beyond a pure evaluation of compliance against the conditions imposed for a valid drawback claim. In particular HMRC contend that we have no jurisdiction to consider the reasonableness of their decision and that there is no basis on which they can be required to re-review the decision to refuse the drawback claim.

For the reasons already given, and as identified in paragraphs 74, we have determined that even were HMRC correct as to our jurisdiction the appeal would be allowed to the extent that £9,695.27 of the claim is valid.

The Appellant contends that HMRC are wrong on the question of jurisdiction. The Appellant contends that we have the power, pursuant to section 16(5) FA94 properly interpreted, to require HMRC to conduct a further review and to make directions in connection with that re-review. The Appellant contends that given we have that power it is within our jurisdiction to consider the reasonableness of HMRC’s decision to refuse the drawback claim and in the event we are satisfied that the Review came to an unreasonable conclusion, or was conducted failing to take account of relevant factors or taking account of irrelevant factors, we are able to make directions as to the matters which HMRC should and should not take into account when re-reviewing their decision to refuse the claim.

The first step in determining our jurisdiction is to interpret section 16(5) FA94. That section provides that in respect of an appeal such as this our powers “shallalso include power to quash or vary any decision and power to substitute [our] own decision for any decision quashed on appeal”.

The Appellant contends that the words “shall also include” are a reference to the powers granted to the Tribunal on an appeal in relation to an ancillary matter under section 16(4) FA94 which include the power to require HMRC to conduct a further review.

HMRC contend, by reference to the Upper Tribunal in Butlers Ship Stores v HMRC [2018] UKUT 58 (TCC) (Butlers Ship), that the powers under section 16(5) FA94 are standalone powers; the powers under section 16(4) FA94 providing a supervisory jurisdiction in respect of ancillary matters and an appellate jurisdiction as provided under16(5) FA94 in relation to other decisions.

In Butlers Ship the taxpayer had sought to challenge the FTT’s conclusion that its powers under section 16(5) FA94 included the powers identified in section 16(4) FA94. The argument advanced was, as here, that the language of section 16(4) FA94 confined the powers of the Tribunal to those identified in that section, giving the Tribunal only a supervisory jurisdiction in relation to ancillary matters but that for other decisions the Tribunal also had a full appellate jurisdiction. HMRC contended, as here, that the decisions to which section 16(4) FA94 relate are management decisions involving some element of subjective assessment appropriately reviewed by the Tribunal pursuant to a limited supervisory jurisdiction. It was therefore inappropriate to extend such supervisory jurisdiction to other decisions which did not involve the exercise of a discretion. HMRC therefore contended that the provisions of section 16(4) FA could not be used in the context of a challenge to a decision that the person was liable to excise duty once a duty point had arisen; it was contended that to do so was, in effect, to judicially review the assessment by the back door.

The Upper Tribunal had determined the appeal against the taxpayer on other grounds but proceeded to consider the jurisdiction question. It concluded that there was no error of law in the analysis of the FTT as set out in paragraphs 123 – 139 of the FTT judgment ([2016] UKFTT 501 (TC)). In those paragraphs the FTT had narrated that it is a creature of statute with no inherent judicial review jurisdiction and thus no inherent power to review alleged procedural unfairness. It concluded that the full appellate jurisdiction under section 16(5) FA94 did not provide for an assessment of the reasonableness of HMRC’s decision to assess. The FTT also went on to indicate that, on the evidence, there was nothing to justify a conclusion that HMRC had failed to assess to the best of their judgment or acted unreasonably or irrationally.

Contrary to the submissions made by HMRC we do not consider that Butlers Ship determines the jurisdiction in this appeal.

In the first instance the comments of the Upper Tribunal are obiter dicta and not binding on us. Further, there is no evaluation of the statutory language adopted in sections 16(4) and (5) FA94. Finally, and in light of the Court of Appeal decision in David Beadle v HMRC [2020] EWCA Civ 562, (Beadle)and subsequent decisions of the Upper Tribunal, it is not clear that the decision is soundly reached.

In Beadle the Court of Appeal confirmed that the tax tribunals have no inherent judicial review jurisdiction but concluded that in the context of an enforcement decision (i.e. a decision to assess for tax or penalty) there is a presumption that a taxpayer will be able to challenge the decision on public law grounds save where the scope for challenging alleged unlawful conduct has been circumscribed by the relevant statutory scheme. In the context of enforcement action the question will be whether the statutory scheme in question excludes the ability to raise a public law defence in proceedings which are dependent on the validity of the underlying administrative act (see paragraph 44 in particular).

In the case of The Executors ofDavid Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) (Harrison)the Upper Tribunal confirmed that in the context of an enforcement decision a challenge on public law grounds was permissible unless the statutory scheme precluded such a challenge. However, in the context of other (non-enforcement) decisions of HMRC clear words are required within the statutory language to permit the taxpayer to challenge the reasonableness of HMRC’s decision on appeal. The UT considered that there was no strong presumption against the FTT having power to consider public law arguments in a non-enforcement appeal; rather it was a question of statutory construction (see paragraphs 34 – 36).

The Upper Tribunal has affirmed that position in Caerdav Ltd v HMRC [2023] UKUT 179 (TCC). It is right to note that in the context of an appeal under section 16(5) FA94 against an assessment to customs duty in respect of which there is no discretion to assess there was considered to be no statutory scope to assess HMRC’s reasonableness and thereby the powers prescribed under section 16(4) FA94 did not need to be considered.

This appeal concerns a drawback claim. Whilst not squarely an enforcement decision, in our view, drawback represents a component of enforcement considered broadly. Article 33 of Council Directive 2008/118/EC requires that HMRC “shall” reimburse, or remit excise duty collected on the basis that excise goods were to be consumed here but in fact are subsequently consumed in another member state and thereby chargeable to excise duty in that other member state. It is therefore at least arguable that a decision on drawback is part of the framework in which the right duty is levied.

Despite this view, we have determined to approach the question of statutory construction of sections 16(4) and (5) FA94 on the basis that a drawback claim is not an enforcement decision.

We note, in accordance with regulation 7(1) EGDR, drawback claims are subject to conditions imposed by EGDR and by notice published by HMRC but in each and every case those conditions apply “unless [HMRC] otherwise allow”. There is therefore an inherent discretion as to the circumstances in which drawback will be permitted so as to achieve the collection of excise duty by reference to where excise goods are consumed.

We then turn to consider the provisions of section 16(5) FA94. It is a trite tenet of statutory construction that the language adopted by Parliament has been chosen for a reason and should be given meaning. The powers in section 16(5) FA94 “shall also include” the powers so stated. In our view it is plain that the provisions of section 16(5) FA94 are not standalone provisions, they are accretive or additional to something. It is, in our view, plain that they are additional to the powers in section 16(4) FA04. Those are the only powers mentioned in section 16. The provisions of section 16(4)(a) – (c) FA94 are expressed to be powers granted to the Tribunal in the context of management decisions requiring HMRC to exercise their discretion. The Tribunal’s jurisdiction in respect of administrative/management decisions is confined to the supervisory powers identified in section 16(4) FA94 and the Tribunal “also” has a full appellate jurisdiction in respect of other decisions.

Of course, it will not always be necessary or appropriate to exercise a supervisory jurisdiction on an appeal against an “other decision”. Where there is no discretion exercised by HMRC and/or no management decision there is unlikely to a basis for reviewing the process and basis on which HMRC have reached a decision. But, as here, where the source of HMRC’s power to determine whether a claim is payable is subject to conditions “save as [HMRC] may otherwise allow” we consider that the statutory framework is clear. We have a jurisdiction to consider the reasonableness of HMRC’s decision and, where unreasonable, to require them to re-review the original decision with directions on that re-review.

In our view, properly interpreted section 16(5) FA94 permits us to evaluate not only whether the Appellant has met the conditions imposed by EGDR and/or the additional conditions imposed in EN 207 by way of our appellate jurisdiction, we are also entitled to evaluate whether the decision whether or not to exercise their discretion to “otherwise allow” claims which do not meet the prescribed conditions has been exercised reasonably.

When undertaking the latter exercise, and following the guidance of the Court of Appeal in GB Hounsley Limited v HMRC [2016] EWCA Civ 1299, we consider that the approach we should adopt is as follows: