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FMX Quick Summary
Post-clearance demand issued over 3 years after the event for £1/2 million on Chinese garlic wrongly described as Cambodian. Fraud in Far East, origin declarations false, so criminal act in UK in presenting wrong declarations. European Customs Code allowing a Member State to chase debt older than 3 years if from criminal act on enacting specific national provisions. But no enacted UK provisions for such, so normal 3 year time limit applied, demand issued out of time and so invalid. Appeal Allowed.
FMX was an importer of fruit and vegetables, including garlic. In an earlier case, FMX1 decided in December 2010, FMX was held liable for a post-clearance demand, issued within the normal 3 year window, for import duties on Chinese garlic, wrongly shown as Cambodian. In April 2011 HMRC issued a further demand of £503,000 for alleged duty on similar garlic imports going back to earlier imports from August 2003 to January 2004. The Tribunal found that there was a fraud by Far East exporters to wrongly label fresh Chinese garlic as frozen Cambodian, so benefiting from preferential import duties. HMRC made no allegations against the UK importer FMX. The Customs Code, Regulation 2913/92, art.221 provides for a customs debt to ordinary only be communicated to the importer within 3 years. But where the debt was the result of acts which could be liable to criminal proceedings the Member State may under conditions set out in provisions in force extend that period over 3 years. Given the Form A was materially wrong there were two routes to establishing UK criminality so as to extend to time periods past 3 years. Under the Customs & Excise Management Act 1979 s.167 it is an offence under ss(1) to knowingly or recklessly make or deliver to HMRC a materially false document, such as an import declaration of origin Form A. Under the same ss(3) there is a similar but only strict liability offence, i.e. not requiring any guilty mind.
The Tribunal held that the Far Eastern fraudsters had committed an act liable to criminal proceedings under s.167(1) whilst FMX was liable to an act under s.167(3). It also found that the fact any criminal proceedings against FMX had become time-barred long before the post-clearance demand was irrelevant, there did not need to be actual criminal proceedings. But the key question, following submissions by Eamon McNicholas for FMX, was whether the Customs Code art.221(4) permitting the UK to go back beyond 3 years had ever actually been enacted into UK law. There were no express or specific provisions in UK law extending the time limit, still less any "conditions" as required in the Code. The fact that the UK had failed to enact any appropriate specific provisions, setting out the conditions for an extended time limit, meant that there were no such provisions in force to disapply the default 3 years period. Hence the demand was issued out of time and was invalid. Appeal allowed.
Comment - This is a key case giving clear legal authority for importers in the long-running garlic import sage. With interest added going back a decade the potential total liability HMRC were chasing could have been around £2/3 million. A crippling amount of money and in the circumstances very unfair on FMX given HMRC were trying to rely on a technicality, i.e. of an act liable to criminal proceedings, even a strict liability summary offence under CEMA s.167(3). But in trying themselves to rely on a legal technicality, to get a second bite at FMX, the problem was HMRC had themselves not complied with the basic requirement to have a law to rely on.
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