Criminality excluded customs duty time limit, Supreme Court rules
The three year time limit in the former EU Customs Code for issuing a post-clearance demand for customs duties is automatically disapplied where the debt arises from activity which is "liable to give rise to criminal court proceedings", the UK Supreme Court ruled today.
Lord Reed, Lord Hodge, Lord Briggs, Lady Arden and Lord Kitchin unanimously allowed an appeal by HM Revenue & Customs, which sought £503,577.63 in import and anti-dumping duties from FMX Food Merchants Import Export Co Ltd in respect of 10 consignments of garlic to the UK in 2003 and 2004. The garlic was declared to be from Cambodia but in 2007 the European Anti-Fraud Office concluded that it was actually from China. FMX was not said to be involved in the underlying fraud. HMRC's demand was issued in 2011.
Under the code then applicable, Council Regulation (EEC) No 2913/92, by article 221(4) in those circumstances "the amount may... be communicated to the debtor after the expiry of the three-year period" in article 221(3).
The First-tier Tribunal held that article 221(4) could not apply because the UK had no provisions in force extending the time limit. The Upper Tribunal accepted HMRC's argument that article 221(4) automatically displaced the limit, even in the absence of an alternative, but the Court of Appeal held that that approach violated the principle of legal certainty.
Lord Briggs, with whom Lord Reed, Lord Hodge and Lord Kitchin agreed, said the purpose of article 221(4) was to preserve the integrity of the criminal process whilst leaving the conditions (including time limits) for communication of a customs debt to each member state. Therefore, the disapplication of the three-year time limit was the automatic result of the likelihood of criminal court proceedings. It did not require the selection by a member state of a different time limit.
On the question of legal certainty, neither of the domestic doctrines of laches and abuse of process could apply, nor could the Limitation Act 1980, which was stated not to apply to customs debts. However there was a strand of EU jurisprudence to the effect that, where provisions appeared to allow legal action without any time limit, the principle of legal certainty required it to be done within a reasonable time. Applying this approach, on the facts HMRC did act within a reasonable time.
Lady Arden considered that the effect of EU jurisprudence concerning the old Customs Code was that EU law deferred to national law and therefore did not require members states to enact a definite time limit. Domestic public law might impose a requirement for HMRC to act within a reasonable time, which might be enforced by judicial review, but she rejected the majority’s reliance on EU decisions, on the basis that the code left the question of time limits to individual member states. That might be one reason why article 221(4) had since now been revised (the current Customs Code is Council Regulation (EU) No 952/2013.) Therefore, the communication of the post-clearance demand in the present case was not subject to a time limit.
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