OM Cash and Carry Limited v The Commissioners for HMRC

This decision concerns an application by the Respondents (HMRC) for a direction under Rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “FTT Rules”) to strike out the appeal by the Appellant (OM Cash and Carry Ltd) on the grounds that the case has no reasonable prospect of success.

HMRC also applied for permission to amend their original strike-out application. The Appellant objected to this application. The Tribunal directed that the application to amend the original application would be considered together with the strike-out application itself.

For the reasons given below, I permit HMRC to amend their strike-out application, and grant the application for the appeal to be struck out.

The hearing was listed to take place on Monday 7 July 2025. On Thursday 3 July 2025, the Appellant’s representative (Callistes Solicitors) emailed the Tribunal, stating that they would not be representing the Appellant at the hearing on 7 July 2025 because they had not been put in funds.

On the morning of the hearing, no one attended the Tribunal on behalf of the Appellant. HMRC’s representative twice called a publicly-available number for the Appellant (which is a business) but there was no reply.

Under Rule 33 of the FTT Rules, if a party fails to attend a hearing, the Tribunal may proceed in their absence if the Tribunal is satisfied that the party has been notified of the hearing or that reasonable steps have been taken to notify them, and considers that it is in the interests of justice to proceed with the hearing.

The Tribunal’s “Notice of Hearing” was sent on 12 March 2025. This gave the date of the hearing of the strike-out application as 7 July 2025, and included the information that “if you do not attend, the Tribunal may decide the matter in your absence”. The hearing bundle contained only the version of this notice that was sent to HMRC, so I had no direct evidence of where the Appellant’s version of the notice was sent.

However, as described in this decision below, Callistes had previously objected, on the Appellant’s behalf, both to the application to strike out the appeal and to HMRC’s application to amend their earlier application. HMRC’s application to amend refers to the hearing date of 7 July 2025. This demonstrates that Callistes were well aware that HMRC had applied to strike out the appeal, and their email of 3 July 2025 shows that they also knew of the date of the hearing.

I am therefore satisfied that Callistes had been notified of the hearing. As Callistes are named as the Appellant’s representative in the notice of appeal, it follows that I am also satisfied that the Appellant itself was either notified or that reasonable steps were taken to notify it (because its representative was notified). The reference to not having been put in funds also indicates that Callistes had, or had attempted to, discuss the impending hearing with their client.

I considered whether it was in the interests of justice to proceed. Rule 2(2) of the FTT Rules says:

“Dealing with a case fairly and justly includes--

(a)

dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;

(b)

avoiding unnecessary formality and seeking flexibility in the proceedings;

(c)

ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;

(d)

using any special expertise of the Tribunal effectively; and

(e)

avoiding delay, so far as compatible with proper consideration of the issues.”

The relevant factors here are (a), (c) and (e).

In relation to (a), the appeal concerns a short point of law. HMRC had sent Mr Holt to the hearing, and if the appeal was not heard, his time and the related costs would be wasted. Mr Holt confirmed that HMRC wanted the appeal to be heard.

In relation to (c), the lack of a representative means that the Appellant could not put forward oral submissions. But I had the Appellant’s grounds of appeal and its objection to the application for the appeal to be struck out stating why, in the Appellant’s view, the appeal has a reasonable prospect of success. While I did not have a skeleton argument from the Appellant, the Tribunal had previously directed (on 3 March 2025) that the Appellant’s response to HMRC’s strike out application would stand as its skeleton argument. The Appellant was given permission, under the same Tribunal directions, to provide a more detailed skeleton argument, but (so far as I am aware) it chose not to do so.

In relation to (e), postponing the appeal would inevitably cause delay for the parties in this case, and would be likely to cause delay to other court users.

I had a hearing bundle containing (in addition to, as already mentioned, the Appellant’s grounds of appeal and its objection to the application for the appeal to be struck out): HMRC’s skeleton argument; Tribunal directions; HMRC’s application to strike out, and their application to amend this previous application; a schedule of rates of excise duty for the relevant period; HMRC correspondence in relation to the demand for duty; extracts from relevant legislation, case law and HMRC guidance; and other relevant documentation. In my judgment I had sufficient information properly to consider the application.

I was mindful that the appeal concerns a large sum of money, but this factor on its own is not sufficient to require me to direct an adjournment, particularly in a situation where the Appellant had neither requested an adjournment nor explained to the Tribunal why it had failed to send a representative to the hearing.

I therefore decided that it was in the interests of justice to continue with the hearing in the Appellant’s absence. The Appellant is entitled under Rule 38 of the FTT Rules to apply for this decision to be set aside. Such an application would be granted only if it were just in all the circumstances so to do. If the Appellant wishes to make such an application it must be made in writing so that it is received within 28 days after the date this decision is sent to the Appellant.

The Appellant appealed against a demand for £13,596,151.25 made by HMRC on 23 March 2023. The demand was for excise duty and import VAT relating to imports of gutka made between March 2021 and December 2021.

Gutka is described in HMRC’s Excise Notice 476 as a “chewing mixture made from tobacco, nuts, spices, and so on”.

The Appellant appealed against the demand on 13 April 2023 on the grounds that the correct amounts of excise duty and import VAT had been declared and paid. The notice of appeal stated that gutka is different from other chewing tobacco products because only 2% of its net weight is made up of tobacco, with the other 98% of the ingredients being substances which do not attract excise duty.

The notice of appeal stated that the customs tariff code under which the tobacco product component of the goods was declared was “2403 9910 00 Chewing tobacco and snuff (nasal tobacco)”.

The grounds of appeal are as follows:

“It is plainly inappropriate to extend the excise duty regime to the entire weight of the Gutka whereby only a minority component is tobacco; to do so would make it commercially unviable to import into the United Kingdom and result in a situation whereby there is an unintended windfall arising based on the quantity, density and weight of substances other than tobacco which are not subject to excise duty.

“In light of the above, it is submitted that the Appellant has correctly declared and paid excise duty and VAT on the weight of the mixed goods which is tobacco product.”

On 27 December 2024, HMRC applied for the appeal to be struck out under Rule 8(3)(c) on the grounds that the Appellant’s case had no reasonable prospect of success.

Rule 8(3) of the FTT Rules provides, so far as material:

“(3)

The Tribunal may strike out the whole or a part of the proceedings if-

[…]

(c)

the Tribunal considers there is no reasonable prospect of the appellant's case, or part of it, succeeding.”

When considering an application to strike out proceedings under Rule 8, it is necessary to bear in mind the overriding objective of the FTT Rules. The overriding objective is set out in Rule 2, and is to enable to Tribunal to deal with cases fairly and justly. Dealing with a case fairly and justly includes the matters in Rule 2(2), which I have set out above.

The Upper Tribunal in The First De Sales Limited Partnership and others v HMRC [2018] UKUT 396 (TCC) (“First De Sales”) at [33] provides helpful guidance in relation to strike out applications:

The Upper Tribunal continued at [74]:

“The issue concerning section 225 ITEPA 2003 gave rise to a short point of construction. The FTT, correctly in our judgment, was satisfied that it had before it all the evidence necessary for the proper determination of the question and that the parties had an adequate opportunity to address it in argument. The Appellants' evidential case was, in our view, hopeless, based on the evidence before the FTT. The FTT was right to conclude it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction.”

Section 1 of the Tobacco Products Duty Act 1979 (“TPDA 1979”) provides, so far as relevant to this case:

“(1)

In this Act “tobacco products” means any of the following products, namely,—

(a)

cigarettes;

(b)

cigars;

(c)

hand-rolling tobacco;

(d)

other smoking tobacco;

(e)

chewing tobacco, and

(f)

tobacco for heating,

which are manufactured wholly or partly from tobacco or any substance used as a substitute for tobacco

[…]

(3)

The Treasury may by order made by statutory instrument provide that in this Act references to cigarettes, cigars, hand-rolling tobacco, other smoking tobacco, chewing tobacco and tobacco for heating shall or shall not include references to any product of a description specified in the order, being a product manufactured as mentioned in subsection (1) above”

TPDA 1979, s 2(1) provides:

“There shall be charged on tobacco products imported into or manufactured in the United Kingdom a duty of excise at the rates shown in the Table in Schedule 1 to this Act.”

The relevant rates set out in the Table in Schedule 1 to the TPDA 1979 show the rate for chewing tobacco as a certain price per kilogram. The rates have increased over time; for most of the period in question the rate was £134.24 per kilogram, rising to £144.17 per kilogram towards the end of the period.

The Treasury, under the powers conferred by TPDA 1979, s 1(3), has made the Tobacco Products (Descriptions of Products) Order 2003 (“2003 Order”). Article 8 of the 2003 Order provides as follows:

“Chewing tobacco

8 (1) Subject to paragraph (2) below, references to chewing tobacco in the Act include any product that—

(a)

is not cigarettes, cigars, hand-rolling tobacco, or other smoking tobacco,

(b)

consists of or includes tobacco, and

(c)

has been prepared so that it can be chewed.

(2)

References to chewing tobacco in the Act include any product prepared for chewing that does not include tobacco but consists in whole or in part of a substitute for tobacco, except for such a product that is intended solely as an aid to persons to give up smoking.”

Regulation 5 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (“2010 Regulations”) provides that:

“Subject to regulations 7(2) and 7A, there is an excise duty point at the time when excise goods are released for consumption in the United Kingdom.”

Regulation 6 of the 2010 Regulations provides, so far as relevant:

“(1)

Excise goods are released for consumption in the United Kingdom at the time when the goods—

(a)

leave a duty suspension arrangement;

(b)

are held outside a duty suspension arrangement and excise duty on those goods has not been paid, relieved, remitted or deferred under a duty deferment arrangement;

(c)

are produced outside a duty suspension arrangement; or

(d)

are charged with duty at importation unless they are placed, immediately upon importation, under a duty suspension arrangement.

(2)

In paragraph (1)(d) “importation” means—

(a)

the entry into the United Kingdom of excise goods, unless the goods upon their entry into the United Kingdom are immediately placed under a customs suspensive procedure or arrangement”

Regulation 12 of the 2010 Regulations provides, so far as relevant:

“(1)

The person liable to pay the duty when excise goods are released for consumption by virtue of regulation 6(1)(d) (importation of excise goods) is the person who declares the excise goods or on whose behalf they are declared upon importation.”

The Tobacco Products Regulations 2001 (“the 2001 Regulations”) include provisions relating to the registration of premises for the manufacture and storage of tobacco, and the payment of excise duty by tobacco manufacturers.

Regulation 4 of the 2001 Regulations provides that tobacco products may only be manufactured in a registered factory and empowers HMRC to register premises for these purposes.

Regulation 14 of the 2001 Regulations states, so far as material:

“(1)

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

(2)

For the purpose of calculating the amount of duty payable at the excise duty point, the weight of tobacco products (other than cigarettes) is their weight—

(a)

at the time of their entry into the production account, or

(b)

at such other time as the Commissioners may allow.

(3)

For the purposes of complying with this regulation a manufacturer must keep a production account that shows for each tobacco product the quantity produced, the type, brand and size of retail packet, and the date of production and entry into that account.

(4)

Except as the Commissioners may otherwise allow, the details referred to in paragraph (3) above must be entered into the production account immediately after whichever of the times specified in paragraph (5) below is the earliest practicable time for this to be done before removal from the registered factory.

(5)

The following times are specified for the purposes of paragraph (4) above—

(a)

the time when the tobacco products are first put into a state suitable for use;

(b)

the time when the tobacco products are first put into a state suitable for removal; and

(c)

the time when the tobacco products are first packed for delivery.

(6)

Except as the Commissioners may otherwise allow, a manufacturer must preserve a production account for not less than six years from the date of the last entry in that account.”

In Kevan Denley v HMRC [2017] UKUT 340 (“Kevan Denley”), the Upper Tribunal said at [74a]:

“an assessment to excise duty which has become due is not a matter of discretion. We also do not see it in any way as a penalty: it is due because, for the reasons we have given, a duty point has occurred regardless of any wrongdoing…”

HMRC’s original application for the appeal to be struck out, made on 27 December 2024, referred to paragraphs 1 and 2 of Regulation 14 of the 2001 Regulations. These are set out above.

The Appellant objected to the strike-out application on 11 February 2025 on the grounds that the appeal had a reasonable prospect of success. The Appellant stated that it relied on its grounds of appeal. The Appellant’s notice of objection set out some information on the uses and properties of gutka, reproduced relevant legislation, and stated as follows:

“9.

Heading 2403 is the customs tariff code heading entitled "Other manufactured tobacco and manufactured tobacco substitutes; 'homogenised' or 'reconstituted' tobacco; tobacco extracts and essences" and contains the customs tariff code under which the tobacco product component of the Goods was declared, namely, 2403 9910 00 "Chewing tobacco and snuff (nasal tobacco)".

10.

Tobacco products include chewing tobacco section 2(1) of TPDA. Chewing Tobacco is defined as a product which consists of or includes tobacco and has been prepared so that it can be chewed. The tobacco that is added to Gutkas is chewing tobacco that has already reached its Production Account Point (PAP) and removed from the factory as it can be chewed on its own or added to Gutkas. It follows that the duty payable at the exercise duty point is the weight of tobacco products (other than cigarettes) is their weight at the time of time of their entry into the productions account which is only the net weight of tobacco that is added to the Gutkas and not the net weight of the Gutka.

11.

Applying a purposive interpretation to the excise duty regime, it is plainly inappropriate to extend the excise duty regime to the entire weight of a product of which a minority component is tobacco; to do so would result (as here) in a perverse situation where there is an unintended windfall arising based on the quantity, density and weight of substances other than tobacco which would not otherwise be subject to excise duty. It would make it commercially unviable to import Gutka into the UK.”

On 24 March 2025, HMRC applied to amend their strike-out application on the grounds that the original application had incorrectly referenced Regulation 14 of the 2001 Regulations, which applies only to tobacco which is manufactured in registered factories, as opposed to imported tobacco. HMRC applied to amend their application to refer instead to the correct legal provisions regarding the imposition of excise duty on imported tobacco, which is Regulation 6 of the 2010 Regulations.

On 16 April 2025, the Appellant’s representative emailed the Tribunal as follows:

“As directed by the Tribunal, we, on behalf of the Appellant, write to object to the application of the Respondent dated 24 March 2025 to amend their application of 27 December 2024 for this appeal to be struck out.  Such application comes after the Appellant's response to their application of 27 December 2024 and the Respondent should have anticipated such response when filing their original application and should not be allowed to adjust their application after the Response of the Appellant. This will put the Appellant at further costs of providing another response.”

On 9 May 2025, the Tribunal wrote to the parties, referring to the hearing on 7 July 2025 and stating that the application for permission to amend the application would be considered at that hearing, along with the strike-out application itself.

I deal first with the question of whether HMRC should be permitted to amend their application for the appeal to be struck out.

The grounds on which HMRC seek the appeal to be struck out have not changed, namely, that the case has no reasonable prospects of success. They have sought an amendment because their original application referred to the wrong legal provisions and they wish to correct this.

I am satisfied that HMRC’s original strike-out application was indeed incorrect to cite Regulation 14 of the 2001 Regulations. Regulation 14 provides that excise duty must be paid at or before the excise duty point, then makes provisions about how tobacco products manufacturers should calculate the duty, and what records they should keep. This case does not concern the duty payable by a tobacco products manufacturer, rather it is about the duty payable on importation.

I note that the Appellant’s grounds of appeal, while addressing the duty payable on importation, also incorrectly cite Regulation 14 when setting out relevant statutory provisions.

It is clearly in the interests of justice that the Tribunal should make decisions based on the correct legal provisions. It would, nonetheless, be contrary to the interests of justice for HMRC to put forward a new legal argument in circumstances where the Appellant had no opportunity to prepare and present its case in response to that new argument.

However, I do not consider that this is what happened in this instance. The question in this case concerns the correct method for calculating excise duty on importation, and the Appellant addressed this question in its grounds of appeal. HMRC’s application to strike out the appeal referred, incorrectly, to the law concerning the imposition of excise duty when tobacco products are manufactured in a registered factory. This had the effect of compounding the previous error in the Appellant’s grounds of appeal and misleading the Appellant into addressing this point directly when it objected to the strike-out application. While HMRC’s error led the Appellant into making unnecessary arguments in its objection to the strike-out application, the Appellant had already made its key submissions in its grounds of appeal.

The provisions to which HMRC seek to refer in their amended application do not raise any novel legal point, but provide authority for the basic proposition that excise duty is payable when tobacco products are imported into the UK. This is not a point that can have taken the Appellant by surprise.

HMRC applied to amend their application on 24 March 2025, more than three months before the hearing on 7 July 2025. The Appellant has therefore been aware of HMRC’s error for this amount of time and had ample opportunity to raise any new grounds for objecting to the strike-out application.

The Appellant’s objection to the application to amend, set out above, states that HMRC should not be allowed to adjust their application after the Appellant’s response, and that this would put the Appellant to further costs. In the absence of any further response from the Appellant, however, I had no indication of what these further costs might be. It may be a reference to adviser time, but I am unable to infer what further work would have been required, beyond the straightforward task of redacting any previous incorrect references to provisions relating to the manufacture, rather than importation, of tobacco products.

The Appellant has been on notice, since the Tribunal’s communication of 9 May 2025, that the application to amend the strike-out application would be considered at the hearing on 7 July 2025, together with the strike-out application itself. It should therefore have been aware that if it had any additional arguments to raise, it needed to do so at or before the hearing.

I accept that the Appellant incurred some adviser time in responding to a legal point that HMRC raised in error and have now withdrawn. However I consider this factor to be outweighed by the inherent desirability of the Tribunal being directed to the correct legal provisions, the opportunity the Appellant has had to respond to the amended application, and the lack of novelty in the legal argument HMRC now wish to pursue.

For these reasons HMRC’s application to amend their strike-out application is granted.

The Appellant’s grounds of appeal raise a short point of law, namely that excise duty on gutka should be calculated on the weight of the tobacco contained in the gutka, and not on the net weight (ie net of packaging) of the gutka itself. The Appellant has not contested any other aspect of HMRC’s calculations.

Excise duty is due on the importation of chewing tobacco at a rate that is expressed as a certain number of pounds and pence per kilogram. Chewing tobacco is defined to include any product that is not cigarettes, cigars, hand-rolling tobacco, or other smoking tobacco, consists of or includes tobacco, and has been prepared so that it can be chewed.

The Appellant, in its grounds of appeal, did not expressly state that gutka is not chewing tobacco, but stated that the customs tariff code under which the tobacco product content [emphasis added] of the gutka was declared was “2403 9910 00 Chewing tobacco and snuff (nasal tobacco)”. The Appellant’s objection to the strike-out application expands on the “tobacco product content” point by stating that “the tobacco that is added to Gutkas is chewing tobacco” which “can be chewed on its own or added to Gutkas”.

As I understand it, this amounts to an argument by the Appellant that chewing tobacco is an ingredient of gutka, but gutka is not itself chewing tobacco.

I have no hesitation in finding that this proposition has no basis in the law. The definition of chewing tobacco includes a product that “includes tobacco”. Neither the fact that the product contains only a small percentage of tobacco, nor anything concerning how the product was manufactured, alters this. The law does not provide that a product containing less than a certain percentage of tobacco will not be classified as chewing tobacco. Gutka is a product that contains tobacco and the Appellant has not disputed that it can be chewed. It follows that gutka is, itself, chewing tobacco.

The Appellant’s objection to the strike-out application states:

“The tobacco that is added to Gutkas is chewing tobacco that has already reached its Production Account Point (PAP) and removed from the factory as it can be chewed on its own or added to Gutkas. It follows that the duty payable at the exercise duty point is the weight of tobacco products (other than cigarettes) is their weight at the time of time of their entry into the productions account which is only the net weight of tobacco that is added to the Gutkas and not the net weight of the Gutka.”

The references in this extract to the “production account” derive from the incorrect citation of Regulation 14 of the 2001 Regulations in HMRC’s application to strike out the appeal (which in turn may have derived from the incorrect reference to Regulation 14 in the Appellant’s grounds of appeal). As I have already described, Regulation 14 relates to the manufacture of tobacco products in registered factories. The disputed excise duty point in this case arose on importation, not on manufacture, and so the references to the production account have no relevance in this case. For completeness I note that there is nothing in the Appellant’s grounds of appeal to suggest that the gutka in question, or the tobacco product that was subsequently incorporated in that gutka, were manufactured in a factory that had been registered by HMRC under Regulation 4 of the 2001 Regulations.

I can also find no basis in the law for the proposition that excise duty is payable only on the weight of the tobacco content of the gutka, as opposed to the weight of the whole product (net of packaging). Excise duty is payable on chewing tobacco at a certain price per kilogram. If duty were payable only on the tobacco content of the chewing tobacco, there would be wording to that effect in the law.

The grounds of appeal also make what may be regarded as a policy argument: that applying excise duty to the entire weight of gutka would make it commercially unviable to import into the UK, and result in an unintended windfall based on the weight of substances other than tobacco which are not subject to excise duty.

The Tribunal’s task is to apply the law as it stands. It is therefore not within my powers to consider a submission based on public policy, or on whether the law has undesirable consequences.

The Appellant’s case, as expressed in its grounds of appeal, rests on this short point of law. The outcome does not require the Tribunal to make further findings of fact. It follows that this is, in my view, the type of situation listed in paragraph (vii) of First De Sales: a short point of law or construction where the Tribunal has before it the evidence necessary to determine the question properly and where the parties have had an adequate opportunity to address it in argument. I find that the Appellant does not have a realistic prospect of succeeding on this point of law. I therefore consider the Appellant’s grounds of appeal to have no reasonable prospect of success.

A further point I mention for completeness is that, in compliance with the Tribunal’s directions, the Appellant had provided HMRC and the Tribunal with a list of the documents on which it intended to rely at the hearing of the strike-out application. All of the documents in that list appear in the hearing bundle other than an undated document described as a “Memo from Vishnu”. Mr Holt confirmed that the “Memo from Vishnu” had not been provided by the Appellant. I decline to speculate on what that document might have contained and do not consider that the possibility that there might be something in it that could be relevant to the appeal means that I should refuse the strike-out application. Otherwise, I would in effect be failing to follow the guidance in First De Sales, that I should not allow a case to proceed to a hearing because “something may turn up which would have a bearing on the question of construction”.

I note that HMRC are aware that there may be large assessments on imports of products with a low tobacco content. Their published guidance on tobacco products duty (TPD18080) states as follows:

“Tobacco products intended for chewing include both the traditional type (originally used by miners) which is basically moist plugs of tobacco and the Asian type of chewing tobacco products. Whereas the first consists mostly of tobacco, the Asian products such as tulsi mix and guhkta may contain only a small percentage of tobacco. In either case the duty is based on the weight of the whole product i.e. excluding packaging but including any other ingredients such as nuts, leaves spices etc. This can make the product subject to an amount of duty which may seem disproportionate but that is the legal position and there is no policy to apportion duty to the tobacco content only. There have been instances of significant amounts being imported under misdescribed tariff headings and large assessments have resulted.”

The Appellant’s case plainly involves a large assessment of this type. I recognise that the Appellant may consider the outcome to be unfair, but I consider the law to be clear. I also note that this is not an instance where I have any discretion, as is shown by the extract from Kevan Denley that I have set out above.

I further note that the Appellant has appealed the whole of the demand made by HMRC on 23 March 2023, and that this demand was for import VAT as well as excise duty. The grounds of appeal, however, only relate to excise duty. As the Appellant’s grounds of appeal raise no argument that relates to import VAT, this element of the appeal also has no reasonable prospect of success.

For the reasons set out above, I find that the Appellant’s case has no reasonable prospect of succeeding. I therefore grant HMRC’s application and I strike out the appeal.

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 FTT 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.