Push Investment Group Limited v The Commissioners for HMRC

This appeal concerns the following decisions issued to Push Energy Limited (now Push Investment Group Limited) (Appellant)by HM Revenue & Customs (HMRC):

The Decisions concern the importation of a single consignment (Consignment)of 28 containers of silicon photovoltaic modules (Solar Panels) purchased by the Appellant from a counterparty Yingli New Energy Resources Co. Ltd (Exporter), a Chinese corporation. The Consignment was released into free circulation after the expiry date shown on the accompanying Export Undertaking Certificate (EUC). The Decisions were made on the basis that the expiry of the EUC resulted in the importation failing to meet the requirements of Implementing Regulations 1238/2013 (ADD Reg) and 1239/2013 (CVD Reg) (together Regs)such that they were ineligible for the exemption therein provided from ADD and CVD.

For the reasons set out below we dismiss the appeal.

Prior to the hearing certain basic facts were agreed.

We were provided with a hearing bundle consisting of 952 pages and a supplementary bundle of 89 pages. Included within those bundles were witness statements from Lee Maughan, Alice Hawkes and Andrew Khan on behalf of the Appellant and Prudencia Orridge on behalf of HMRC. All four witnesses gave sworn testimony and were cross examined. By the end of their testimony all facts relevant to our decision were agreed as follows:

At the relevant time that the Consignment was released for free circulation, movement of goods into and out of the European Union (EU)was controlled by the provisions of the Community Customs Code (Council Regulation (EEC) No 2913/92) (CCC). In summary, and by reference to the definitions provided in Article 4, the CCC provided that when goods imported into the EU were released into free circulation a customs declaration was required. Articles 62 – 67 CCC set out the provisions for customs declarations and required such declarations to be accompanied by all relevant documents specified in accordance with the relevant procedure. So far as relevant in this appeal, the declaration and associated documentation was required to be provided to HMRC on the date on which the goods entered free circulation. Pursuant to Article 201 the import duties (i.e. the customs duties and charges payable in the importation including, where relevant ADD and CVD) were payable at the time of the acceptance of the associated declaration, i.e. also the date that the goods entered free circulation.

Implementing Regulation 2454/93 (Implementing Reg) made further provision concerning entries of goods. Article 199 rendered the declarant of a customs declaration responsible for the accuracy of the information declared, authenticity of the documents attached and compliance with all obligations relaying to the entry. Article 218 specified the documentation required to accompany a customs declaration including “the documents required for the application of preferential tariff arrangements or other measures derogating from the legal rules applicable to the goods declared.”

On 30 November 2009, pursuant to Council regulation (EC) No 1225/2009 (1225/09) the EU introduced the power to impose ADD to prevent injury to the Community in respect of the importation of products sold at prices below those for comparable products traded in the ordinary course of trade within the EU. Article 8 of 1225/09 provided that the Commission may accept satisfactory voluntary undertakings from exporters of goods to which ADD would otherwise apply where such exporters agreed to set the price of goods traded with the EU at a price which prevented injury to the EU market. Where such an undertaking was accepted ADD would not be imposed on the imports.

The Provisional Anti-dumping Duty Regulation (EU 513/2013) (Provisional ADD Reg)dated 4 June 2013 provided that provisional ADD was imposed on imports of Solar Panels originating in, or consigned from, China precluding the “dumping” of such products into the EU market. Its recitals set out, at considerable length, the investigation leading to the conclusion expressed at recital 163 that the presence of Chinese Solar Panels at prices which undercut those of the Solar Panel industry in the EU had caused injury justifying the imposition of provisional ADD (confirmed at recital 262). The Provisional ADD Reg explicitly applied to exports to the EU by the Exporter (as provided in Article 1).

On 27 July 2013 in accordance with Article 8 of 1225/09 various Chinese exporters of Solar Panels, including the Exporter, provided a voluntary joint price undertaking (Undertaking) to the Commission. The Undertaking set a minimum import price (MIP)for the export of Solar Panels by the signatories of the Undertaking to importers in the EU. It also limited the volume of exports to be made (Annual Level). So far as relevant to the decision we need to make the Undertaking provides:

By Commission Decision 2013/423/EU (Acceptance)it was recorded that the Commission had accepted the Undertaking. In the recitals the Commission acknowledge the Annual Level and the MIP together with the reporting obligations limit the risk of circumvention of the Undertaking and it is in the interests of ensuring the security of supplies of Solar Panels to the EU that the Undertaking is accepted.

Recital 12 notes that to enable the Commission to effectively monitor compliance of the Undertaking “when the request for release of free circulation is presented to the relevant customs authority, exemption from [ADD] will be conditional on [a list of requirements including ‘a certificate issued by the CCCME containing at least the elements listed in Annex II and Annex III of the Provisional ADD Reg’]”. A further stated requirement was that the Solar Panels to which exemption applied were shipped either to a company related to the exporter which provided the Undertaking or “the first independent customer acting as importer” and in each case “for free circulation in the Union”.

Recital 13 explicitly required that unless, inter alia, the EUC was “presented” ADD would be payable. Similarly, as per recital 14, where the Commission withdrew acceptance of the Undertaking “and declare[d] the relevant undertaking invoices to be invalid, a customs debt shall be incurred at the time of the acceptance of the declaration for release into free circulation.” Recital 15 made plain that a customs debt may be incurred “as a normal trade risk, at the time of acceptance of the declaration for release into free circulation … even if an undertaking offered by the manufacturer from whom they were buying directly or indirectly, has been accepted by the Commission.”

The Acceptance was then confirmed by Implementing Regulation 2013/707/EU.

The Provisional ADD Reg was amended following the Acceptance, by Implementing Regulation 2013/748/EU. By virtue of Article 6, “imports declared into free circulation” from exporters subject to the Undertaking were exempted “on the condition that … such imports are accompanied by an [EUC] accordingly to Annex III” (Annex III reflected Annex VI of the Undertaking but amended the declaration to refer to Commission Decision 2013/423/EU). A customs debt was imposed at the time of acceptance of the declaration for release into free circulation where one or more of the conditions for exemption was not met.

The ADD Reg then imposed definitive ADD on imports of Solar Panels from China subject to the exemption previously recognised by the amendment to the Provisional ADD Reg. Article 3 of the ADD Reg provided for exemption on condition, inter alia, that “such imports are accompanied by an [EUC] according to Annex IV” (Annex IV materially and substantively reflects Annex VI of the Undertaking save that the EUC declaration has “Commission Decision 2013/707/EU” substituted for “Commission Decision [2013/423/EU]”). As such the EUC was required to state an expiry date three months from the date of issuance. Reflecting Article 6 of the Provisional ADD Reg, Article 3(2) provided that a customs debt shall be incurred “at the time of acceptance of the declaration for release into free circulation whenever it is established … that one or more of the conditions … is not fulfilled.”

The legislative provisions for CVD reflect precisely the provisions for ADD. The parties agreed that our conclusion on ADD would apply equally to CVD. Accordingly, we do not set out the relevant CVD legislation nor specifically address it further in this judgment.

We are grateful to both Counsel for their clear skeletons, submissions, and willingness to engage with our questions. We set out below our summary of those submissions on the law some of which we expand upon further in our discussion. We can assure the parties that we carefully reviewed their skeletons and our handwritten notes of the submissions in reaching our decision. Because we do not deal specifically with any point does not mean that it was not considered in the round when reaching our decision.

In essence, the Appellant argues that there is no legal requirement for the EUC to remain valid at the point the customs declaration is made. The EUC must have been valid initially, but if it was, the only requirement is that it accompanied the Consignment and was presented to HMRC when the goods were declared for free circulation. The Appellant contends that any other interpretation would mean it paid a price for the Consignment above the MIP, even though anti-dumping duty is only intended to apply where the price paid falls below the MIP.

Our starting point in resolving the issue before us, according to the Appellant, is to focus on the principles of interpreting EU law. Firstly, EU law must be interpreted in context and according to the provisions of EU law as a whole, regarding the objectives and evolution of the law. In this regard we were invited to consider the customs code as a whole and how entitlement to other reliefs and exemptions are justified.

Secondly, that the EU principles of legal certainty and proportionality should be observed.

The importance of legal certainty was emphasised by reference to HMRC v Isle of Wight (c-288/07 [2008] STC 2964) at paragraph 47in which it was said:

“47.

Moreover, as the court has repeatedly held, Community legislation must be certain and its application foreseeable by those subject to it ... That requirement of legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which they impose on them….

48.

The principle of legal certainty, which forms part of the Community legal order, must be observed both by the Community institutions and by the member states when they exercise the powers conferred on them by Community directives …”

As to proportionality, the Appellant notes, by reference to the judgment of the Supreme Court in R (oao Lumsdon) v Legal Service Board [2015] UKSC 41 at paragraph 24, that the principle requires that both legislation and administrative measures must not exceed what is necessary to achieve the relevant objectives pursued (see also paragraph 14 HMRC v Trinity Mirror plc [2015] UKUT 421 (TCC)).

Further, and critically, that it is not for an interpreting court to seek to correct what might appear to be a drafting lacuna in the relevant legislation. In this latter regard, we were referred to the judgment of the Court of Justice of the EU (CJEU) in Commission v UK (c0582/08 [2010] STC 2364:

“[46] As regards the alleged error and the Commission’s argument that its reading of the relevant provision is also consistent with the logic of the common system of VAT, it must be observed that, even assuming the Commission’s submissions are correct, it is not for the Court, … to make such an interpretation with the aim of correcting Article 2(1) of the Thirteenth Directive.

…

[51] The Court cannot, in the face of the clear and precise wording of a provision such as Article 2(1) of the Thirteenth Directive, interpret that provision with the intention of correcting it and thereby extending the obligations of the Member States relating to it …”

Applying these principles, the Appellant submits that the starting point must be the wording of the legislation. Article 3 of the ADD Reg requires only that “imports are accompanied by an [EUC] according to Annex IV of this Regulation.” It is contended that as HMRC accepts that there is no express requirement that goods must be released into free circulation before the EUC expires we are entitled to conclude that the ADD Reg does not specify that any step (export, import, customs procedure, or release into free circulation) must occur before the expiry of the EUC. Given the detailed and prescriptive nature of the exemption conditions, the absence of such a requirement cannot, it is said, be accidental. Absent such an express requirement the Appellant contends that to impose one would breach the principle of legal certainty as taxpayers have not been made explicitly aware of an obligation with very draconian consequences.

The Appellant also points out that at no point until after the ADD Reg had ceased to have effect on 3 March 2017, did HMRC raise the asserted requirement either directly or in the limited guidance provided in AD Measure 1960.

The Appellant contrasts this with other EU customs regimes. We were specifically referred to the requirements imposed to set the parameters within which importers are entitled to claim certain preferential customs duty rates where the origin of the goods imported can be demonstrated. Where proof of origin must be proven the Appellant sought to demonstrate that the legislative framework explicitly provides for submission of a valid proof of origin certificate, setting a generous period of validity (usually 12 months) but subject to an express requirement that the certificate be presented within the period of validity. The Appellant sought to demonstrate that such requirements provided a proportionate response to failure to comply in exceptional circumstances.

Addressing HMRC’s invitation that we apply a more purposive interpretation to the legislative provisions the Appellant contends that the legislative purpose of ADD sets the framework from which the purpose of the EUC should be determined. It is said that the purpose of ADD can be readily discerned from the very lengthy recitals to the Provisional ADD Reg. It is to prevent injury to the EU market from the importation of Solar Panels from China at significantly lower prices than can be achieved with EU manufacture. The EU market is protected either by the imposition of ADD or, following the Acceptance through adherence to the terms of the Undertaking which have the effect of guaranteeing that the named Chinese exporters, including the Exporter, export limited volumes of Solar Panels and adhere to strict pricing requirements. The point in time at which these protections are fixed is the date of the commercial invoice i.e. export rather than import.

Within that context the purpose of the expiry date on the EUC is not to impose a time limit on validity requiring the goods to have been released into free circulation prior to expiry, but rather to limit the period during which the certificate can be cancelled or reissued (save in the case of quality claims and force majeure). Following cancellation of an EUC the Annual Level allocated to the relevant commercial invoice is released and can be reallocated. Cancellation is thus possible only for three months and/or when the goods in question have been released into free circulation (necessarily closing any possibility of reallocation). That this is the case is said to be plain by reference to clause 4.2 of the undertaking read in conjunction with clause 5.8.

It is submitted that given the very precise and granular detail of the requirements for the EUC it would be surprising that anything more was required of the declarant than simply to present the certificate which had, since issue, accompanied the declaration. The point was reinforced when the specifications for reporting by the CCCME were considered. None of the reports required the CCCME to notify the Commission of the expiry date of certificates issued. The CCCME is required to report cancelled certificates. This underlined that unless the certificate had been cancelled prior to its expiry, the certifications provided confirmed and fixed the MIP and Annual Level in respect of the Solar Panels so certified and provided the EU and HMRC with all the assurances required of compliance with the Undertaking and thereby entitlement to exemption from ADD. Thus, there is no rationale for requiring release into free circulation within three months.

It is also contended that a factor further militating against an interpretation which imposes a fixed requirement that the certificate is valid at the point the goods are released into free circulation, absent an express legislative requirement, is that it gives rise to a disproportionate consequence. Missing the deadline, by even one minute is to impose, ADD, CVD and VAT thereon on a price which already exceeded the MIP irrespective of the reason for a failure to meet the asserted and non-legislative deadline which has also not been communicated to taxpayers.

In the alternative, the Appellant submits that if any step were required before the expiry of the EUC, it could only plausibly be the export or import of the goods, not their release into free circulation.

HMRC invite us to focus on the regimes for ADD and CVD as provided for in the Regs and in the context of the CCC and Implementing Reg in so far as it provides the mechanical infrastructure for the making of declarations and the associated requirements to produce relevant documents validating the declaration. They consider that the regime for ADD and CVD is distinct from that for preferential origin, and that the conditions for exemption from ADD and CVD are not to be read as if they were subject to the same flexibilities or exceptions as those for preferential origin certificates.

HMRC accept that the Undertaking is also part of the relevant context for interpretation of the requirements prescribed in the Regs but as the Undertaking itself it not part of the legislative infrastructure it can only inform the process of interpretation and may not supplant what the Regs requires.

There is no dispute that the Regs are to be construed purposively by reference to the EU principles of legal certainty and proportionality. HMRC accept that we should not correct or rectify or extend any failing in the Regs or impose additional obligations not provided for under the Regs. HMRC contend that whilst there is no expressly stated requirement for the EUC to be valid it is nevertheless an obvious stipulation within the terms of the Regs properly construed.

HMRC emphasise that the ADD and CVD exemptions are to be strictly construed, citing the decision of the CJEU in Baltic Agro AS v Maksu- ja Tolliameti Ida maksu- ja tollikeskus (Case C-3/13) (Baltic), which held that exemptions from anti-dumping duties “may be made only under certain conditions, in cases specifically provided for, and thus constitute an exception to the normal regime for ADD. The provisions which provide for such an exemption are, therefore, to be interpreted strictly”. Similarly, in HMRC v Isaac International Ltd (Case C-371/09) (Issac), the CJEU held that the legislature expressly and specifically made entitlement to the exemption subject to certain administrative restrictions (in that case an authorisation) which could not be set aside simply because the other requirements for exemption could be established. A strict adherence to the specific requirements for exemption was required.

It is contended that Article 3(1)(c) of the ADD Reg makes it a condition of exemption that imports declared for release into free circulation are “accompanied by an [EUC] according to Annex IV of this Regulation.” Annex IV requires that the EUC must state its expiry date, which is three months after issuance. HMRC argue that the presence of an expiry date is not a mere formality, but a substantive requirement, and that the Regs are clear that an expired EUC is not a valid certificate for the purposes of exemption.

The expiry date on the EUC is said to serve a critical function in the scheme of the ADD and CVD Regs. After the expiry date has passed the certificate is invalid otherwise the expiry date serves no purpose. HMRC submit that the expiry date is an effective check on the operation of the exemption regime preventing manipulation of the system, such as stockpiling goods in customs warehouses and releasing them at a time when the MIP or other conditions may have changed, thereby undermining the monitoring and control mechanisms established by the EU. This they contend is particularly relevant for imports by parties connected to the undertaking exporters if the MIP had changed from quarter to the next. The terms on which an EUC can be cancelled and reissued support the role of the expiry date as defining the validity of the EUC and entitlement to exemption from ADD and CVD.

Consistent with the administrative requirements of the CCC Article 67, HMRC contend that the relevant date for assessing the validity of the EUC is the date of the declaration for release into free circulation, not the date of export from the country of origin or the date of arrival in the EU. This requirement is echoed in the terms of the ADD and CVD Regs which reference presentation of the EUC at the time of release into free circulation.

HMRC accept that the principles of legal certainty and proportionality are relevant; however, they submit that the test for legal certainty is one of “sufficient rather than absolute certainty” (see R v Misra [2004] EWCA Crim 2375 at paragraph 30 – 37). They contend that the legislation is sufficiently clear as to the requirement for a valid, unexpired EUC, and that there is no lack of legal certainty in interpreting the Regulations as requiring strict compliance with the expiry date.

As to proportionality, HMRC observe that the Appellant’s challenge on the grounds of proportionality is a challenge to the terms of the Regs themselves. Any such challenge required a referral to the CJEU which, post Brexit, is no longer permissible by virtue of The Challenges to Validity of EU Instruments (EU Exit) Regulations 2019/673. They further submit that the requirement for a valid, unexpired EUC is not disproportionate; such a requirement is justified by the need to ensure effective monitoring and control of the exemption regime. In this regard, they refer to the decision of the Court of Appeal in Federation of Tour Operators v HM Treasury [2008] EWCA Civ 752, which held that the test for proportionality in the context of tax measures is whether the measure is “devoid of reasonable foundation.” HMRC submit that the requirement for a valid, unexpired EUC is plainly within the margin of appreciation afforded to the legislature and is not disproportionate.

Referencing back to Baltic and Issac and in reliance on Krohn & Schroder (C-226/18) and Jebsen & Jessen (C-543/19), HMRC contend that the specific and individual requirements for exemption need to be met. In the latter two cases the CJEU’s focus of attention was the requirements for the commercial invoice. A failure to meet precisely the specifications set out in the relevant Annex of the Regs rendered the invoice invalid and the importer was thereby denied the exemption.