Lawyers Serving Individuals and businesses

Landmark Case

Over the last 30 years Her Majesty's Revenue and Customs have on a daily basis detained goods where they believed or suspected that they may be liable to forfeiture because of the non payment of VAT or excise duty, purportedly under Section . 139(1) of the Customs and Excise Management Act 1979. In the recent case of Eastenders v HMRC [2012] EWCA Civ 15 the Court of Appeal having declared that practice to be unlawful.

Geraint Jones QC instructed by Rainer Hughes and representing the Eastenders group of companies. Jonathan Swift QC and Neil Sheldon instructed for HMRC. Section 139(1) of Customs and Excise Management Act 1979 provides:

"Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard."

The Claimants' case was that under Section139(1) it was a necessary condition for the lawfulness of detention of an item that it should in fact be liable to forfeiture and it was not sufficient that HMRC merely had reasonable grounds for suspicion or belief that duty might not have been paid. The goods had to be liable to forfeiture as a fact.

The Appeal raised challenging questions of law and statutory interpretation. Lord Justice Mummery (dissenting) confessed to "wavering on the way" to his decision, whilst Lord Justice Davies declared "My initial (and very preliminary) reaction on first looking at the papers was that one would expect HMRC to have the power, under Section 139, to detain goods pending further enquiries and that Section139 was to be so construed".

landmark Case

The majority decision of the Court of Appeal determined that the lower court'sanalysis of Section 139(1) could not be sustained and went well beyond the legitimate approach to statutory construction of Section 139. The phrase "liable to forfeiture" inSection.139(1) meant that there had in fact to have been a breach of the relevant obligation. It was not sufficient for an official of Revenue and Customs to reasonably believe that there had been a breach. Section 139 dealt with a power to interfere with property rights and such a power should not be construed more widely than reasonably necessary.

HMRC are not entitled to detain goods that they believe or suspect that they may be liable to forfeiture, traders may have experienced detention of goods whilst HMRC conduct their enquiries in respect of payment of VAT or duty excise, the judgment in the Eastenders case notes that such a practice is unlawful.

HMRC are seeking permission to appeal the decision to the Supreme Court.

The decision can be found at Bailli. Please click here.

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