Customs & Excise Commissioners v The Arena Corporation Ltd (2004)
A company was rightly ordered to be wound up on the basis of a debt due to Customs for liability to excise duty under the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 reg.7(2).
A company (C) and the individual (S) who owned and controlled it appealed against a winding-up order made against C and summary judgment given against S. In 2001 and 2002 C, through S, engaged in 19 transactions involving the movement of alcoholic products from two bonded warehouses in England to bonded warehouses in Italy and Belgium. Customs considered that irregularities had occurred on each of those movements such that "excise duty points" had occurred under the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 reg.3 or reg.4 with the result that C became liable to pay excise duty pursuant to reg.7(2). Customs therefore made assessments to excise duty on C for over £1.8 million and presented a petition for the compulsory winding up of C on the ground that it was unable to pay the debt. C appealed against the assessments to the VAT and Duties Tribunal, but in the meantime the court appointed a provisional liquidator of C who commenced proceedings against S. The judge then ordered C to be wound up and gave summary judgment against S. C and S submitted that (1) reg.7(2) of the 2001 Regulations was invalid as it was inconsistent with Council Directive 92/12; (2) that the assessments under reg.7(2) were invalid because there were no excise duty points under reg.3 or 4; and (3) the judge was wrong to conclude that C had no real prospect of a successful appeal against the assessments.
(1) Regulation 7(2) was not invalidated by any inconsistency with Council Directive 92/12. Article 6 of the Directive provided generally for excise duty to become chargeable at the time of release for consumption, defined to include any departure, regular or irregular, from a suspension arrangement. Under Art. 6 it was member states that set chargeability conditions and defined the persons by whom duty was payable. There was nothing in the policy or terms of the Directive to suggest that there was to be implied in the imposition of liability on the guarantor, a prohibition on the imposition of liability on anyone else, be he the authorised warehousekeeper, the consignor or the transporter, in implementation of Art.13(a) and 15(3) of the Directive. The terms of Art.6(2) were inconsistent with any such implied prohibition, recognising as they appeared to, the freedom of member states to impose non-discriminatory internal taxation as permitted by Art.90 EC Treaty. Excise duty was not a European based tax but a domestic tax which had been adapted along with similar taxes in other member states to make it compatible with the single market (Greenalls Management Ltd v Commissioners of Customs and Excise (2003) EWCA Civ 896, (2003) 1 WLR 2609 applied). The judge was right that reg.7(2) was not ultra vires the enabling power in Finance (No. 2) Act 1992 s.1(4). It was intended to impose liability for the duty on those goods on the person who caused the underlying irregularity. Such a person had a sufficient connection with the goods so as to come within the terms of s.1(4) and authorise reg.7(2). Although an excise duty point might arise by detection after the occurrence of the irregularity, it could not be before the goods became chargeable to duty. Since s.1(4) referred to the latter time, no question of inconsistency arose. Therefore there was no bona fide defence to the winding-up petition based on the alleged invalidity of reg.7(2). (2) Questions of complicity arose as part of the question of causation, not as additional ingredients to a finding of liability. If C was complicit in the diversion of the consignments then the judge was entitled to conclude that C caused the irregularities. On the evidence there were excise duty points under reg.3 or reg.4 of the 2001 Regulations because there were irregularities committed in the UK or detected in the UK. (3) Although the witnesses were not cross-examined, S's evidence was so incredible that the judge was entitled to disbelieve him. There was no real prospect of C and S establishing to the satisfaction of the tribunal either that the consignments did arrive at the Belgian warehouse or that C was not complicit in their non-arrival. Therefore the order to wind up C was rightly made and the summary judgment against S justified.