Juno Sourcing Limited v The Commissioners for HMRC

At the hearing, we were provided with a considerable amount of written and witness evidence.

The written evidence took the form of a substantial hearing bundle of 1,966 pages.

The witness evidence was provided by:

A substantial part of the evidence simply confirmed the agreed facts which we have already outlined in paragraph 5 above. Accordingly, in this part of our decision, we will confine ourselves to describing the evidence which related to those of the relevant facts that were in dispute at the hearing.

The disputed facts related to the following issues:

In the sections of this decision which follow, we will describe briefly, in relation to each of the above issues:

The written evidence in the hearing bundle revealed the following:

Officer Gregory testified that, despite the absence of a detailed description of the PPE to which it related in the US documentation and the 16 kilograms difference between the weight recorded in the UK documentation and the weight recorded in the US documentation, he had accepted that the US documentation was evidence that the Category 1 Goods which had been delivered to the NHS Sheffield had been sent back to the US because that was what Mr Kneller had written in the review request as set out in paragraph 12 above.

We acknowledge that there is a large discrepancy between the weight recorded in the UK documentation and the weight recorded in the US documentation. However, there are various reasons why that might have been the case, including human error or the possibility that the package sent to the US included other PPE as well as the Category 1 Goods which had been delivered to the NHS Sheffield. In the light of that and the clear statement by Mr Kneller in his review request of 19 November 2021, we have concluded that the Category 1 Goods which were delivered to the NHS Sheffield were sent back to Logistics within a few weeks of their arrival at the NHS Sheffield.

The written evidence in the hearing bundle revealed the following:

Mr Kneller testified that not all of the PPE acquired by Deliver Net had ended up at Approved Organisations – in his opinion, the Category 1 Goods which had been delivered by the Appellant to Deliver Net “could have gone absolutely anywhere” because the supply chain was so chaotic and because not every supply chain in which Deliver Net participated had terminated in a delivery to an Approved Organisation.

Mr Osborn agreed. He accepted that:

The views of Mr Kneller and Mr Osborn were echoed by Mr Thomson. Having initially suggested that the mere fact that Deliver Net was an approved supplier of PPE to the NHS meant that the Category 1 Goods which had been delivered to Deliver Net were “highly likely” to have ended up at the NHS, he conceded that there was no way of knowing whether the Category 1 Goods had ended up there because the audit trail stopped at ARCO and he had no knowledge of what proportion of PPE acquired by Deliver Net or ARCO ended up at the NHS.

Mr Thomson added (in paragraph [29] of his witness statement) that his investigations into what had happened to the Category 1 Goods which had been delivered to Deliver Net suggested that the scale of PPE which was being moved, coupled with the chaotic nature of the PPE supply chains during the COVID-19 pandemic, meant that PPE was unlikely to be segregated within the supply chains. This meant that the participants in each supply chain were not in a position to confirm where particular consignments of PPE ended up.

Mr Ostapyak testified that AyMa had informed it that the NHS was cancelling contracts for the purchase of PPE because of issues with over-supply whilst Mr Osborn referred to the fact that AyMa had over–ordered and did not have enough customers for the PPE which it had ordered.

In response to a question from the panel in relation to the quality of the evidence that he had seen in relation to whether the Category 1 Goods which had been delivered to Deliver Net had ended up at the NHS, Officer Gregory said that, in his opinion, it was more likely than not that those Goods had done so – see the exchange between Officer Gregory and the panel at the end of Officer Gregory’s evidence on Day 2 at pages 79 to 81 of the hearing transcript.

The evidence set out above is supportive of the following five propositions:

We find all five of the above propositions to be facts for the purposes of this decision although we did not understand there to be any dispute between the parties in relation to any of them.

Turning then to the crucial question of whether, on the balance of probabilities, the Category 1 Goods which were delivered to Deliver Net ended up at the NHS or another Approved Organisation, we should start by delving a little deeper into the finding of fact set out in paragraph 22(4) above.

That proposition is based on the statistical evidence adduced at the hearing in relation to items of PPE which became available in the UK in general. However, it has limited value in the context of the issue which is presently being addressed because it is not linked to the specific items of PPE with which we are concerned. For example, it does not reveal:

In addition, the statistics include LRFs and it was common ground at the hearing that not all participants in the LRFs were Approved Organisations.

We have also noted that:

The points which we have mentioned in paragraphs 24 to 27 above mean that we simply have no idea whether any of the Category 1 Goods which the Appellant delivered to Deliver Net ended up at the NHS or another Approved Organisation. It is one thing to say that a significant proportion of the available PPE in the UK was delivered to the NHS and LRFs. It is quite another thing for us to be able to conclude that this means that, on the balance of probabilities, the Category 1 Goods which were delivered to Deliver Net ended up at the NHS or another Approved Organisation. There is inevitably a meaningful possibility that all of the Category 1 Goods which were delivered to Deliver Net did not end up at the NHS or another Approved Organisation but instead ended up elsewhere. The position is simply unknowable.

In the circumstances, we have concluded that the Appellant has not satisfied us that, on the balance of probabilities, any of the Category 1 Goods which were delivered to Deliver Net ended up at the NHS or another Approved Organisation.

We should add that in, reaching this conclusion, we have placed no weight at all on the statement by Officer Gregory which we have recorded in paragraph 21 above. That is because, in our view, it was very obviously a mistake made by Officer Gregory as a result of confusion on his part as to the question which he was being asked by the panel at the end of his evidence. We say that for the following reasons:

The written evidence in the hearing bundle revealed the following:

Mr Kneller confirmed that:

Ms Dhanoa, on behalf of the Appellant, submitted that the Category 2 Goods should be treated as having been included in the remission claim because:

We are unable to agree with this submission. In our view, there is overwhelming evidence to demonstrate that the remission claim related only to the 31 consignments of Category 3 Goods and did not include the Category 2 Goods. For instance:

It seems to us that this issue has arisen now solely because, in their letter of 18 April 2023, Shoosmiths mistakenly:

We consider that the mere fact that Shoosmiths’ letter containing that misunderstanding was appended to the C285, whilst confusing, did not have the effect of extending the remission claim to the Category 2 Goods because of:

We would add that this conclusion does not mean that we are entirely ignoring the fact that the Shoosmiths’ letter was appended to the C285. Despite the clear errors which it contained, the letter set out the general background to the making of the remission claim and, in particular, Mr Kneller’s previous attempts to engage the Respondents on the subject matter of the remission claim. To that extent, the letter still served a useful purpose as an appendage to the C285 and it should be regarded as doing no more than that.

The mistaken reference in Shoosmiths’ letter to the Goods which were exported to Europe and to NIRU Certificate 360–2020 has caused unnecessary confusion in these proceedings, as demonstrated first in Mr Kneller’s letter of 16 November 2023 (which was largely duplicative of Shoosmiths’ letter) and then in Officer Greda’s response to that letter of 29 December 2023. It has led to letters from Mr Kneller as the Appellant’s adviser in which, even though apparently accepting that the Goods exported to Europe were not part of the remission claim, he has sought to rely on the Respondents’ error in issuing NIRU Certificate 360–2020 to justify the remission claim. For example:

It seems to us that what has happened in this instance is that the Appellant and its advisers, having reached the conclusion that the error made by the Respondents in issuing NIRU Certificate 360–2020 would be helpful in justifying the remission claim under Articles 119 and 120 of the UCC – even though that error related to only two consignments of Goods and was remedied within a few days of being made – have focused so intently on that error that they have entirely lost sight of the fact that:

That is not a mistake which the Respondents have made, with the possible exception of some initial confusion on the part of Officer Greda in her letter of 29 December 2023 caused by Shoosmiths’ letter. After that date, the Respondents have – quite rightly in our opinion – consistently maintained the position that the Category 2 Goods were not included in the remission claim.

For the above reasons, we find as a fact that the remission claim related only to the Category 3 Goods and did not include the Category 2 Goods.

The written evidence in the hearing bundle revealed the following:

Both Mr Ostapyak and Mr Thomson testified that there was nothing defective about any of the Goods and they were fit for use within the NHS.

Mr Ostapyak referred to there being an over-supply within the NHS leading to the cancellation of purchase contracts by the NHS.

Mr Thomson said that AyMa had raised defects in the Goods as one of its arguments in seeking to escape its contractual liability to Logistics but added that the real reason why AyMa had sought to escape its contractual liability to Logistics was that it had over-ordered PPE and did not have enough customers to buy from it the PPE which it had ordered.

In the light of the evidence set out above, we find that, whilst AyMa did raise as an argument in the course of the commercial dispute between it and Logistics the fact that certain of the Goods had not been fit for purpose or compliant with the contract, there is no evidence that that was actually the case. The evidence of both Mr Ostapyak and Mr Thomson was that there was nothing defective in any of the Goods and that their rejection by AyMa was founded solely on the fact that AyMa was unable to sell the Goods on. In addition, the decision in favour of Logistics in the High Court made no mention of any defect in any of the Goods. On the contrary, Logistics was wholly successful in its claim for payment.

The written evidence in the hearing bundle revealed the following:

Both Mr Osborn and Mr Ostapyak mentioned August 2020 as the time when they first became aware that a commercial dispute between Logistics and AyMa had arisen. Mr Osborn also testified that, when the commercial dispute arose, he was aware of it from the outset because of his regular communications with Mr Ostapyak in relation to it and the mounting XPand warehousing costs.

It is difficult to be precise about exactly when the Appellant first became aware of the commercial dispute between Logistics and AyMa given the length of time which has passed since the events in question and the incomplete documentary record.

All we can say is that the earliest date on which it can be is early July 2020, just after the first rejection of a consignment of Goods by AyMa occurred. Given the evidence, we have concluded that, on the balance of probabilities, the Appellant would first have become aware of the commercial dispute at some point in July or August 2020.

The written evidence in the hearing bundle revealed the following:

Mr Kneller testified that the Category 2 Goods had left the UK on 17 April 2020 whilst Mr Osborn testified that, whilst he was not sure about the precise date, the Category 2 Goods would have left the UK within a few days of their arrival in the UK and certainly before NIRU contacted him to let him know that NIRU Certificate 360–2020 had been issued in error.

Officer Gregory said that the CMRs referred to in paragraph 51 above were certainly evidence that goods of some sort had moved from XPand in the UK to Italy or Spain but that, before he could be sure that the goods in question were the Category 2 Goods, he would want to marry up the description, weight and value of the goods, as set out in the relevant CMR, with the description, weight and value of the relevant Category 2 Goods, as described in the applicable importation documentation. The CMRs in this case lacked the required information and therefore he had no way of being sure that they related to the Category 2 Goods.

We acknowledge that there is insufficient information in the CMRs to treat them as conclusive evidence of the dates on which the Category 2 Goods destined for Italy and Spain left the UK. In addition, we were provided with no documentary evidence in relation to the Category 2 Goods that, according to the relevant application to NIRU of 14 April 2020 and the related NIRU Certificate (NIRU Certificate 360–2020), were destined for France or Germany.

Having said that, we see no reason to doubt the evidence of Mr Kneller and Mr Osborn to the effect that the Category 2 Goods left the UK within a few days of their arrival here. After all, the evidence we heard from each of them was that the sole reason for moving the relevant Goods through the UK rather than directly to the relevant EU Member States was that Heathrow was functioning more efficiently than other European airports at that time. The Goods were destined for the relevant EU Member States and it stands to reason that they would have been moved on as soon as possible after their arrival.

For that reason, we find as a fact that the Category 2 Goods left the UK on or around 17 April 2020 and certainly before 20 April 2020.

Having said that, this finding of fact is of limited relevance to this decision. It would be relevant only in enabling the Appellant:

Since we conclude in paragraphs 154 and 155 below that there is a general principle which precludes estoppel against the Crown, the fact that the parties’ common misunderstanding persisted at the point when the Category 2 Goods left the UK is of no assistance to the Appellant in this case and we include it only because it was a matter in dispute between the parties at the hearing.

Now that we have set out the facts relevant to this decision, we turn to the legal issues which need to be decided in order to determine the two appeals.

It is common ground that:

It follows from paragraph 60(2) above that the Appellant needs to show that, on the balance of probabilities:

It was common ground that, even though the UK had left the EU shortly before the importations which are relevant to this decision occurred, the legislation which is relevant to both appeals, as set out in more detail in this section of the decision and in the equivalent section of the part of the decision in which we address the appeal against the Remission Decision, is legislation which applied to the EU Member States. The reason for this is that the relevant importations were made within the “implementation period” for the UK’s withdrawal from the EU – see Section 1A(3) of the European Union (Withdrawal) Act 2018 and Part 4 of the “withdrawal agreement”, as defined in Section 39 of the European Union (Withdrawal Agreement) Act 2020. As such, the UK continued to be subject to the relevant legislation, which remained effective in the UK by virtue of the European Communities Act 1972 (the “ECA”) – in this case, more specifically, Sections 2 and 5 of the ECA.

At the time relevant to this decision:

At the time relevant to this decision, Articles 51 to 57 of Council Directive 2009/132/EC (the “Directive”) contained provisions which conferred an equivalent relief from import VAT to those conferred by Articles 74 to 80 of the Regulation in the context of customs duty.

On 3 April 2020, in response to the COVID-19 pandemic, under the powers set out in Articles 74 to 80 of the Regulation and Articles 51 to 57 of the Directive, the European Commission, by way of issuing the Commission Decision, introduced a relief from customs duty and import VAT on PPE and medical equipment imported into the UK and all 27 EU Member States.

Article 1 of the Commission Decision specified as follows:

The goods are intended for the following uses:

distribution free of charge by the bodies and organisations referred to in point (c) to the persons affected by or at risk from COVID-19 or involved in combating the COVID-19 outbreak;

being made available free of charge to the persons affected by or at risk from COVID-19 or involved in combating the COVID-19 outbreak while remaining the property of the bodies and organisations referred to in point (c);

The goods satisfy the requirements laid down in Articles 75, 78, 79 and 80 of Regulation (EC) No 1186/2009 and Articles 52, 55, 56 and 57 of Directive 2009/132/EC;

The goods are imported for release for free circulation by or on behalf of State organisations including State bodies, public bodies and other bodies governed by public law or by or on behalf of organisations approved by the competent authorities in the Member States.

Article 3 of the Commission Decision provided that Article 1 would apply to importations made from 30 January 2020 to 31 July 2020 but the period of relief was extended to 31 October 2020 by Commission Decision 2020/1101 and then to 31 December 2020 by Commission Decision 2020/1573.

At the time relevant to this decision:

As regards the C18, it was common ground at the hearing that:

The dispute between the parties centred on whether the conditions in both Article 1b and Article 1c of the Commission Decision were satisfied in relation to each consignment of Goods.

Ms Dhanoa submitted that both conditions were satisfied – at least so far as the Category 1 Goods and the Category 3 Goods were concerned – whereas Ms Brown, on behalf of the Respondents, submitted that none of the Goods satisfied both conditions.

Having said that, Ms Brown accepted that those consignments of Goods which entered the UK between 1 May 2020 and 31 October 2020 qualified for the temporary zero rate of VAT accorded to supplies of PPE by Article 4 of The Value Added Tax (Zero Rate for Personal Protective Equipment) (Coronavirus) Order 2020, which added an additional Group 20 to Schedule 8 of the VATA, as that temporary zero rate was extended by Article 3 of The Value Added Tax (Zero Rate for Personal Protective Equipment) (Extension) (Coronavirus) Order 2020.

The aggregate amounts set out in the C18 reflected the position outlined by Ms Brown.

In relation to the satisfaction of the conditions in Article 1 of the Commission Decision, Ms Dhanoa for the most part:

This position was in line with the Appellant’s admission, in paragraph [55] of its amended grounds of appeal, to the effect that:

goods must be imported for supply (directly or indirectly) to an approved body or organisation;

such a body or organisation must be based in the UK …”

Ms Dhanoa adopted that position in her opening submissions at the hearing and then throughout the hearing until the afternoon of the penultimate day of the hearing. At that point, she sought to raise a new ground of appeal in relation to the Category 2 Goods, to the effect that:

The Respondents objected to the application (and we upheld their objection) on the grounds which follow.

First, the application had been made at a very late stage in the proceedings. The Appellant could have made the application at any stage in the lengthy period leading up to the hearing or, at the very least, in making its opening submissions and before the cross-examination of the witnesses. Instead, it had chosen to do so just before the end of the hearing and after all the witness evidence had been heard. For example, it was too late for the Respondents to cross-examine the witnesses in relation to which body or organisation had used the Category 2 Goods or whether that body or organisation had been approved in its EU Member State. In our view, therefore, allowing the application would give rise to considerable prejudice to the Respondents.

Secondly, the proposed new ground of appeal was directly contrary to the position which the Appellant had consistently maintained throughout the dispute so far – to the effect that the importation of the Category 2 Goods did not qualify for disaster relief and that NIRU had made an error in issuing NIRU Certificate 360–2020 despite the fact that the Goods in question were to be exported to EU Member States. Indeed, as we have already outlined in paragraphs 31 to 41 above, both Shoosmiths’ letter of 18 April 2023 and Mr Kneller’s letters of 16 November 2023 and 26 January 2024 in relation to the remission claim sought to rely on NIRU’s error in granting that certificate as a basis for making the remission claim.

Thirdly, the Appellant had provided no reason for the lateness of the application. It appeared to us to arise from the fact that, immediately prior to making the application, the Appellant’s advisers had become aware that it was not making much headway in persuading us that the remission claim included the Category 2 Goods and they were therefore belatedly seeking to challenge the right of the Respondents to include the Category 2 Goods within the C18.

Finally, we did not think that the additional ground was likely to be successful. Article 123 of the Regulation made it clear that, where relief was conditional on goods’ being put to a particular use by a recipient, only the competent authorities of the EU Member State in whose territory the goods were to be put to that use could grant the relief and Article 123 of the Regulation had effect also in relation to import VAT (pursuant to Section 16(1)(b) of the VATA).

Although the language used in Article 123 of the Regulation was dealing with the use of goods, as opposed to the residence of the body or organisation importing the goods – so that it was relevant to the condition in Article 1a of the Commission Decision and not Article 1c of the Commission Decision – its effect was that only the competent authorities in the EU Member State in which goods were to be used could grant relief from customs duty and import VAT when goods entered the EU. In consequence, where goods such as the Category 2 Goods were to be put to use in an EU Member State and not the UK, only the competent authorities of the relevant EU Member State could grant relief from customs duty and import VAT. It was not a matter for the Respondents.

It followed that the Appellant was right to have accepted before applying to raise its additional ground of appeal that disaster relief was not available for Goods which were destined for hospitals in the EU Member States and that the additional ground of appeal had no prospect of success.

For the above reasons, although we recognised that we had a discretion to allow the new ground of appeal, we considered that admitting it would not be consistent with our obligation to deal with cases “fairly and justly”, as required by Rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Tribunal Rules”). We therefore held that the additional ground of appeal should not be admitted and we have not addressed that argument further in this decision.

So far as concerned the Category 1 Goods and the Category 3 Goods, Ms Dhanoa submitted that the ability to satisfy Article 1c of the Commission Decision did not depend on the Appellant’s showing that, on the balance of probabilities, the Goods in question had actually ended up at the NHS or another Approved Organisation. Instead, it was merely necessary for the Appellant to show that, on the balance of probabilities, at the time of the importation, it had intended and expected the Goods to end up at the NHS or another Approved Organisation.

She explained her position as follows:

In short, in this case, the importation of the Category 1 Goods and the Category 3 Goods qualified for disaster relief because, on the balance of probabilities, the Appellant’s intention and expectation, at the time of importation, was that the Goods in question were going to end up at the NHS.

Ms Dhanoa said that, in the alternative, in relation to the Category 1 Goods, if, contrary to her first submission, the relief was dependent on the Appellant’s showing, on the balance of probabilities, that the Goods in question had actually ended up at the NHS or another Approved Organisation, the Appellant had discharged that burden on the facts in this case.

As regards the Category 1 Goods which had been delivered to Deliver Net, the evidence demonstrated that it was more likely than not that they had been delivered to the NHS after passing through the supply chain and therefore we should conclude that, on the balance of probabilities, they had done so.

As regards the Category 1 Goods which had been delivered to the NHS Sheffield, the documentary evidence demonstrated that those Goods had actually been delivered to the NHS Sheffield and that was the end of the matter. Those goods had clearly ended up at the NHS and therefore, even if her primary submission based on intention and expectation was incorrect, those Goods clearly qualified for disaster relief.

We have not summarised the submissions of Ms Brown in relation to the C18 because we agree with them in their entirety and they are reflected in this section of this decision.

We must confess to being somewhat perplexed by Ms Dhanoa’s primary submission to the effect that mere intention or expectation on the part of the Appellant that the Goods would end up at the NHS was sufficient for disaster relief to be available. We agree that intention alone is sufficient when it comes to satisfying the condition for relief set out in Article 1a of the Commission Decision – which relates to the intended use of the Goods in question – but the language in Article 1c of the Commission Decision appears to us to impose a higher standard in relation to the Goods in question by requiring them to have been imported “by or on behalf of” an Approved Organisation.

The Goods in this case were clearly not imported “by” the NHS or another Approved Organisation because they were destined in the first instance for AyMa. They can therefore satisfy this condition only if they were imported “on behalf of” the NHS or another Approved Organisation. In our view, that phrase required the Goods in question actually to end up at the NHS or another Approved Organisation. If and to the extent that the Goods did not actually end up at the NHS or another Approved Organisation, they were not “imported for release for free circulation by or on behalf of [the NHS or another Approved Organisation]” within the meaning of Article 1c of the Commission Decision and therefore the relief was not available.

It follows that we consider that the mere fact that it was the Appellant’s intention or expectation that the Goods would end up at the NHS is not enough to satisfy the condition in Article 1c of the Commission Decision. In short, we do not understand the distinction which Ms Dhanoa sought to draw in making this submission between the “substantive conditions” of the legislation – breach of which would prevent the relief from applying pursuant to Article 79(1)(c) of the UCC – and the “evidential condition” of ascertaining where the Goods ended up after the operation of the supply chain. The latter was plainly inherent in the former in that it went to the question of whether the former were satisfied.

Consequently, we do not agree with Ms Dhanoa’s primary submission, as summarised in paragraphs 85 to 87 above.

We should add that the fact that disaster relief was dependent on the eventual receipt of the Goods by an Approved Organisation was precisely the reason why:

Of course, those notes did not have the force of law themselves and it is perfectly possible that their inclusion might have been based on a misunderstanding of the law by the Respondents but, for the reasons set out in paragraphs 92 to 95 above, we do not think this was the case.

On that subject, we should add that, in the course of these proceedings, the Appellant consistently described the issue of the C18 as the Respondents’ “resiling” from the approvals given in the NIRU Certificates.

We consider that, leaving aside NIRU Certificate 360–2020, which was issued in error and which the Respondents corrected within days of its being issued – albeit too late for the Category 2 Goods which had by then left the UK – the actions of the Respondents in denying disaster relief for Goods which they were not satisfied had ended up at an Approved Organisation or otherwise complied with the conditions for relief were entirely consistent with the notes to both the NIRU application forms and the NIRU Certificates. If the Appellant was under the mistaken impression that the issue of the NIRU Certificates meant that it had no ongoing obligations in relation to compliance with the conditions for disaster relief, then it had only itself to blame.

Given our conclusion that mere intention or expectation was not enough and that disaster relief was dependent on the relevant Goods’ ending up at an Approved Organisation, it necessarily follows that disaster relief cannot have been available in relation to the Category 2 Goods or the Category 3 Goods because it is common ground that none of those Goods ended up at an Approved Organisation.

That then leaves the Category 1 Goods, all but one consignment of which were delivered to Deliver Net and the remaining consignment of which was delivered to the NHS Sheffield but which we have found in paragraphs 12 to 14 above to have been sent back to the US.

As regards the Category 1 Goods which were delivered to Deliver Net, we have already set out in paragraphs 15 to 30 above our finding of fact to the effect that the Appellant has not established on the balance of probabilities that those Goods ended up at the NHS or another Approved Organisation. Consequently:

As for the Category 1 Goods which were delivered to the NHS Sheffield, the starting point is to note that the Commission Decision was enacted pursuant to the Regulation and the Directive – see Articles 74 and 76 of the Regulation and Articles 51 and 53 of the Directive – and that satisfaction of the condition in Article 1b of the Commission Decision required compliance with Articles 75, 78, 79 and 80 of the Regulation and Articles 52, 55, 56 and 57 of the Directive.

It follows that:

For the reasons set out above, we consider that disaster relief was not available in relation to any of the Goods, the C18 was validly issued and the appeal against the C18 fails.

At the time relevant to this decision, Section 3 of the UCC dealt with the repayment and remission of customs duty and provided as follows:

Subject to the conditions laid down in this Section, amounts of import or export duty

…;

defective goods or goods not complying with the terms of the contract;

error by the competent authorities;

equity.

An amount of import duty shall be repaid or remitted if the notification of the customs

Notwithstanding paragraph 3, repayment or remission shall be granted provided the

Repayment or remission shall not be granted where:

the goods, before being released for free circulation, were placed under a special

the defective nature of the goods was taken into consideration in drawing up the terms

the goods are sold by the applicant after it has been ascertained that they are defective

Instead of being taken out of the customs territory of the Union, and upon application

In cases other than those referred to in … Articles … 118 and 120, an amount of import or export duty shall be repaid or remitted where, as a result of an error on the part of the competent authorities, the amount corresponding to the customs debt initially notified was lower than the amount payable, provided the following conditions are met:

the debtor could not reasonably have detected that error; and

the debtor was acting in good faith ….

In cases other than those referred to in … Articles … 118 and 119 an amount of import or export duty shall be repaid or remitted in the interest of equity where a customs debt is incurred under special circumstances in which no deception or obvious negligence may be attributed to the debtor.

The special circumstances referred to in paragraph 1 shall be deemed to exist where it

At the hearing:

There are three preliminary points which we should make before starting our discussion in relation to the Remission Decision and they are as follows:

Ms Dhanoa submitted that the Appellant should be entitled to remission of the customs duty and import VAT on the Category 3 Goods:

In support of her submission that the Appellant should be entitled to remission under Article 120 of the UCC, Ms Dhanoa referred us to the decision of the FTT in Ocean Choice International v The Commissioners for Her Majesty’s Revenue and Customs [2023] UKFTT 289 (TC) (“Ocean Choice”). In Ocean Choice, the FTT concluded at paragraphs [178] to [203] that shortcomings in the conduct of the Respondents which had contributed to the customs duty that became payable amounted to special circumstances justifying a successful claim under Article 120 of the UCC.

We have not summarised the submissions made by Ms Brown in relation to the Remission Decision because, with the exception of certain points mentioned in paragraphs 121 to 147 below on which we do not agree with Ms Brown – which points do not form part of the ratio of this decision – we agree with them in their entirety and they are reflected in this section of this decision.

It was common ground at the hearing that the only provisions of the UCC which were potentially relevant to the Category 3 Goods were:

The starting point in considering this issue must be the observation that, since remission is the exception rather than the rule, the remission provisions need to be construed strictly – see Canadian Solar EMEA GmbH v The Commissioners for Her Majesty’s Revenue and Customs [2024] UKFTT 0085 (TC) at paragraph [149], referring to the decision of the Court of Justice of the EU in Heuschen Schrouff Oriental Foods Trading BV v Commission C–38/07 at paragraph [60].

Turning first to Article 118 of the UCC and applying the above principle, it can be seen that there are only two possible ways of construing that Article in the present context.

The first, which is the one favoured by Ms Dhanoa, is to say that the relevant Article applies where the goods in question were rejected because, at the time of release, they were alleged to be defective or to be non-compliant with the terms of the contract (even if it subsequently transpired that that was not the case) and the second is to say that the relevant Article applies where the goods in question were rejected because, at the time of release, they were actually defective or actually non-compliant with the terms of the contract.

We can see nothing in the language of the Article to encourage the former approach, particularly given the requirement referred to in paragraph 113 above to apply a strict construction to the remission provisions. In our view, the more natural reading of the language in Article 118 of the UCC is the second one, particularly given:

It follows that we consider that Article 118 of the UCC is not in point where the relevant goods are rejected because, at the time of release, they are alleged to be defective or non-compliant with the terms of the contract but it is subsequently established that neither of those was actually the case. Instead, the goods need, at the time of release, to have actually been defective or non-compliant with the terms of the contract.

It follows from this conclusion that, in the light of the facts which we have found in paragraphs 42 to 46 above, the Appellant is not entitled to succeed in its remission claim under Article 118 of the UCC. At the time that the Category 3 Goods were released, they were not actually defective and were not actually non-compliant with the terms of the contract, as the evidence of Messrs. Ostapyak and Thomson and the subsequent High Court decision infavour of Logisticsmade clear.

The fact that, during the period in which the Category 3 Goods were delayed in the XPand warehouse as a result of the commercial dispute between Logistics and AyMa, some of the Category 3 Goods ceased to be fit for purpose because they passed their expiry date is not relevant in this context for two reasons, as follows:

There is one further point which we would make in passing, although it was not raised in argument by either party. Article 118 of the UCC applies only where goods are rejected by the “importer”. In this case, it seems to us that there are only three possible “importers” – Logistics, which actually imported the Category 3 Goods, the Appellant, as the IoR which made the customs declaration on behalf of Logistics and which was liable to pay the customs duty and import VAT – see Article 79(4) of the UCC – or the Approved Organisation by whom, or on whose behalf, the Category 3 Goods were imported. Whichever one of those it was, it was not AyMa. As such, any rejection by AyMa of the Category 3 Goods on the grounds of defect or non–compliance with the terms of the contract would not fall within the Article in any event and, on that basis alone, Article 118 of the UCC would not apply to the Category 3 Goods.

Turning then to the application of Article 120 of the UCC, that Article applies “where a customs debt is incurred under special circumstances in which no deception or obvious negligence may be attributed to the debtor”.

It may be seen from this that the Article applies only if two conditions are satisfied as follows:

Starting with the first of those requirements, Article 120(2) of the UCC provides that the special circumstances referred to in Article 120(1) of the UCC “shall be deemed to exist where it is clear from the circumstances of the case that the debtor is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he or she would not have suffered disadvantage by the collection of the amount of import or export duty.”

In this case, we think that there are two possible bases for submitting that the customs duty and import VAT in respect of the Category 3 Goods arose in “special circumstances” as defined above. They are that:

We consider that the first of those circumstances affected all operators who were in the same business as the Appellant whilst the second, although involving a specific commercial dispute between Logistic and AyMa which did not itself affect other operators who were in the same business as the Appellant, amounted to no more than a particular example of the commercial risks run by all importers of goods. In other words, all importers face the prospect that their goods might be incapable of delivery as a result of a commercial dispute between the parties. We therefore consider that neither of the circumstances set out above involved the Appellant’s being in an exceptional situation as compared with other operators in the same business.

Consequently, the Appellant has not satisfied the first limb of the test in Article 120(1) of the UCC.

As we have observed in paragraph 109(2)(c) above, at the hearing, Ms Dhanoa said that there was a third reason for concluding that the first limb of the test in Article 120(1) of the UCC was satisfied, which was the conduct of the Respondents. In making that submission, Ms Dhanoa relied on the FTT decision in Ocean Choice at paragraphs [178] to [203].

We agree with Ms Dhanoa that, in this case, the conduct of the Respondents in dealing with the Appellant’s claim for remission has not been entirely beyond reproach. There were substantial delays in responding to Mr Kneller’s request as to how to make the remission claim, as we have outlined above. However, a crucial distinction between the facts in this case and those in Ocean Choice is that, in this case, any shortcomings in the Respondents’ conduct occurred at the stage when the customs duty and import VAT in respect of the relevant Goods had already arisen. The delays on the part of the Respondents in replying to Mr Kneller’s letters played no causative role in those liabilities. For that reason, we cannot see how the conduct of the Respondents in dealing with the remission claim can be said to amount to special circumstances for the purposes of Article 120(1) of the UCC.

For completeness, and in case there is any doubt about this, we should say that we recognise that, in addition to its less-than-perfect handling of the remission claim, the Respondents made an error in issuing NIRU Certificate 360–2020, which they have frankly acknowledged. However, that error, which they corrected within a matter of days, applied only to the Category 2 Goods, which we have held not to be included in the remission claim. It follows that that error is not relevant in considering the application of Article 120 of the UCC to the customs duty and import VAT which became payable in respect of the Category 3 Goods.

The above conclusion means that, strictly speaking, it is unnecessary for us to address the second limb of the test which the Appellant needs to satisfy before its remittance claim can succeed under Article 120 of the UCC.

However, since there was some discussion at the hearing in relation to how that limb of the test should properly be applied in this case, we would say as follows.

On the basis of our construction of the second limb of the test as outlined in paragraph 122(2) above, assuming that, contrary to the conclusion we have reached in paragraphs 123 to 129 above, either the COVID-19 pandemic or the commercial dispute between Logistics and AyMa amounted to special circumstances, we would need to consider whether any deception or obvious negligence on the part of the Appellant was inherent in those special circumstances.

In that regard, Ms Brown accepted that there had not at any stage in the process been any deception on the part of the Appellant.

However, she went on to suggest that there had been obvious negligence on the part of the Appellant in:

As regards the first of those submissions, we can see how, if the Appellant had an obligation to notify the Respondents under Article 80 of the Regulation and Article 57 of the Directive that the conditions for disaster relief had ceased to be satisfied in relation to the Category 3 Goods and failed to fulfil that obligation, that failure might amount to “obvious negligence”. However, in this case, we are not persuaded that:

In order to explain why we say that, we need to start by examining the architecture of the legislation and, in particular, the interaction between, on the one hand, Article 1 of the Commission Decision and, on the other hand, Articles 78 to 80 of the Regulation and Articles 55 to 57 of the Directive. Our interpretation of that interaction is as follows.

Article 1 of the Commission Decision provides that disaster relief is available when goods are imported to the UK and each of the three conditions set out in Article 1 of the Commission Decision is satisfied.

The provisions of the Regulation and the Directive specified above then deal with potential changes in circumstances affecting goods which have been admitted free of customs duty and import VAT after importation by an Approved Organisation has occurred. They apply where:

Each Article provides that, where it applies:

It may be seen that each of the Articles described above:

In particular, Article 80 of the Regulation and Article 57 of the Directive apply where an Approved Organisation, which has initially satisfied the conditions for entitlement to relief, subsequently ceases to do so. There is no other way to interpret the use of the word “cease” – as opposed to “do not” – in those Articles.

If we now turn to the Category 3 Goods in this case, it is apparent that those Goods were never delivered to an Approved Organisation and therefore never satisfied the conditions for relief in the first place. As we have outlined in our discussion in relation to the C18, the reason why customs duty and import VAT have arisen in relation to the Category 3 Goods is not that there has been a breach of any of Articles 78 to 80 of the Regulation or Articles 55 to 57 of the Directive in relation to those Goods but rather that the failure of the Goods to reach an Approved Organisation means that the Goods were not imported “by or on behalf of” an Approved Organisation and therefore did not satisfy the condition set out in Article 1c of the Commission Decision.

It follows from this conclusion that no notification obligation ever arose under Article 80 of the Regulation or Article 57 of the Directive or, for that matter, any of the other Articles listed in paragraph 138 above in relation to the Category 3 Goods. We would add that, were any such obligation to have arisen, it would have been an obligation owed by the Approved Organisation in question – in this case, the NHS – and not the Appellant. (The Appellant is not an organisation referred to in Article 74 of the Regulation or Article 51 of the Directive as it is not itself an Approved Organisation).

In addition, even if, contrary to the above conclusion, the Appellant had been subject to a notification obligation in respect of the Category 3 Goods, its failure to notify would not have been inherent in the special circumstances which caused the customs duty or import VAT to arise. Instead, those special circumstances – which we are assuming for present purposes to be the COVID-19 pandemic or the commercial dispute between Logistics and AyMa – would have caused the customs duty or import VAT to arise without regard to any notification obligation.

We therefore consider that, if the customs duty or import VAT did arise under special circumstances, then any failure on the part of the Appellant to inform the Respondents that the Category 3 Goods remained in the XPand warehouse did not amount to obvious negligence inherent in those special circumstances.

The starting point in Ms Brown’s second submission was that the Appellant was already aware of the commercial dispute between Logistics and AyMa as at 24 April 2020 when the first consignment of Category 3 Goods entered the UK and remained so aware throughout the period in which the Category 3 Goods were imported. Thus, she said, the Appellant should have arranged for the Goods to be placed in a temporary customs warehouse when they arrived in the UK, pending resolution of the commercial dispute, because it would then have been able to destroy or export the Goods without removing them from the temporary customs warehouse. This would have enabled the Appellant to avoid the customs duty or import VAT in the event that it proved impossible to deliver the Goods to AyMa or someone else on the basis that the end user would be an Approved Organisation.

We have already found as a fact that, contrary to Ms Brown’s submission, the Appellant was not aware of the commercial dispute between Logistics and AyMa as at 24 April 2020 but became aware of that commercial dispute only at some later date – which we have found to be at some point in July or August 2020 – see paragraphs 47 to 50 above. We can therefore see no basis for concluding that there was obvious negligence on the part of the Appellant in relation to the importation of the consignments of Category 3 Goods which arrived at the XPand warehouse prior to that date.

However, as regards the consignments of Category 3 Goods which arrived on or after that date, we agree with Ms Brown’s submission. It seems to us that, once the Appellant had become aware of the commercial dispute, it could have chosen to place the relevant consignments of Category 3 Goods in a temporary customs warehouse pending resolution of the commercial dispute and thereby avoided the customs duty or import VAT in the event that it proved impossible to deliver them to AyMa or someone else on the basis that the end user would be an Approved Organisation.

In the light of the above, we have concluded that, had the commercial dispute between Logistics and AyMa been sufficient to qualify as special circumstances, the Appellant would have been entitled to remission under Article 120 of the UCC only in respect of those Category 3 Goods which arrived at the XPand warehouse prior to the date when the Appellant became aware of the dispute.

In the light of our conclusions in relation to the potential application of Articles 118 and 120 of the UCC set out in paragraphs 112 to 149 above, the Appellant’s appeal against the Remission Decision fails.

The consequence of the conclusions we have drawn above is that the Appellant’s appeals against both the C18 and the Remission Decision are dismissed.

In saying that, we must express some sympathy for the Appellant in this case. The Appellant:

In particular, the Appellant might justifiably feel aggrieved that the Category 2 Goods, which were imported and then exported on the basis of the wrongly-issued NIRU Certificate 360–2020, have given rise to customs duty and import VAT. Had we concluded that the Category 2 Goods were included in the remission claim, we would have been inclined to uphold the claim in respect of those Goods on the basis of Article 120 of the UCC. However, for the reasons set out in paragraphs 31 to 41 above, we do not see how, on any fair construction of the remission claim, the Category 2 Goods can be said to have been so included.

Given the above conclusion, we considered whether the actions of the Respondents in issuing NIRU Certificate 360–2020 might be such as to enable the Appellant successfully to argue that the Respondents should be estopped from claiming customs duty and import VAT in respect of the Category 2 Goods and we therefore asked the parties for their submissions on that question at the hearing.

After hearing those submissions, we have concluded that the Appellant could not succeed in any such claim because the authorities reveal the existence of a long–established settled principle that the Crown cannot be estopped from applying the law and collecting tax which is properly due in accordance with the law – see Julian Frost v The Commissioners for Her Majesty’s Revenue and Customs [2010] UKFTT 344 (TC) at paragraph [15], citing Williams v Grundy’s Trustees 18 TC 271, and MWL International Limited and Maywal Limited v The Commissioners for His Majesty’s Revenue and Customs [2024] UKFTT 00402 (TC) at paragraphs [126] to [134]. We have therefore not considered whether, in this case, had it been possible to apply estoppel to the Respondents, the estoppel conditions would have been fulfilled and we express no view on whether those conditions would have been fulfilled on the facts in this case.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Rules. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.