Supreme Court Decision In Eastenders / First Stop Wholesale v HMRC
The Supreme Court handed down judgment in the appeals of Eastenders Cash & Carry PLC and First Stop Wholesale Limited on 11 June 2014 (2014 UKSC 34). For the arguments advanced on the appeals (heard in November 2013), see my earlier article in this newsletter (edition 6, 14th May 2014).
As those who read my earlier article may recall, the appeals were concerned with the proper interpretation of s139(1) of the Customs and Excise Management Act (“the Act”) and the power of officers of HMRC to detain and seize goods which were “liable to forfeiture”. However, whilst all written and oral submissions before the Court concerned s139 of the Act, the Supreme Court in its judgment raised and founded its decision upon two further provisions of the Act which had not been the subject of argument from either side.
By virtue of s118C(2) of the Act, officers of HMRC can enter and inspect those premises which they have reasonable cause to believe are being used in connection with the supply, importation or exportation of goods chargeable with excise duty, and to inspect any goods found there. Furthermore, s112(1) authorises officers to enter premises of “revenue traders” and search for and examine any goods connected with that trade.
In the case of Eastenders the Commissioners had argued that whilst s118C(2) authorised detention of the goods until the statutory inspection had been completed, there was and always had been since the case of Jacobsohn v Blake and Compton (1844), a power to detain goods pending determination as to whether or not they were liable to forfeiture. The Commissioners did not seek to justify detention of goods (under s118C(2)) beyond the end of a visual examination. Subsequent detention, so the Commissioners argued, could only be justified under s139. This had been their argument both before Sales J. and the Court of Appeal.
In its judgment, the Supreme Court agreed with the Court of Appeal (§21) that neither the power of seizure or the power of detention conferred by s139(1) is exercisable on the basis of reasonable grounds for suspicion or belief. The right to seize or detain (§23) under s139 is dependent upon that property actually being liable to forfeiture under one of the various forfeiture provisions of the Act. However, the Court went on to state (§24) that whilst such was the correct interpretation of the statutory provision, it would have “troubling implications if the Commissioners and their officers had no other power to detain goods.”
From §26 of the judgment, the Supreme Court undertook a comprehensive review of the statutory background to the 1979 Act (a consolidating Act) and also the historic authorities, including Jacobsohn v Blake and Compton (ante), The Six Carpenters Case (1610) and Irving v Wilson (1791). They concluded (§48) that the submission of the Commissioners was too narrow an interpretation of the statutory provisions within the Act and that (§49) since the officers were carrying out a lawful inspection of the goods for the purpose of determining whether appropriate duties had been paid and had reasonable grounds to suspect that duty had not been paid, they were entitled by virtue of s118C(2) to detain goods for a reasonable period in order to complete the enquiries necessary to make their determination.
In the First Stop case, the officers were entitled to examine goods in accordance with s112(1) and to require production of documents. The officers could not fulfil the object of their examination by determining whether proper duties had been paid without making further enquiries. They had detained the goods whilst those enquiries were made. They had reasonable grounds for suspicion that duty had not been paid. The detention did not exceed a reasonable time.
Thus, whilst the Commissioners had not sought to argue that detention was justified in either case other than on the ground that s139 of CEMA authorised officers to detain goods “whilst enquiries were made as to their duty paid status” and the Court found that such a ground and such a reason (Eastenders) was insufficient, officers were, contrary to the arguments of the Commissioners, in fact detaining goods under permissible powers conferred by s118C(2) and s112(1).
This was a disappointing outcome for the Appellants. Their arguments on s139 had been successful, whilst the contrary arguments of the Commissioners had been rejected. The Supreme Court, however, having undertaken an extensive analysis of the legislative history of the Customs and Excise Acts, combined with reliance on ancient case law, had formulated an argument which the Appellants had had no opportunity to address.
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