Establishing Strict Liability for Excise Duty: Revenue And Customs v Perfect [2022] EWCA Civ 330: England and Wales Court of Appeal (Civil Division)

Introduction

The case of Revenue And Customs v Perfect ([2022] EWCA Civ 330) addresses crucial aspects of excise duty liability within the United Kingdom's legal framework post-Brexit. Mr. Martyn Perfect, a lorry driver, was assessed a substantial excise duty for transporting goods without paying the requisite taxes. This case delves into the interpretation of Regulation 13 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010, exploring the extent of liability imposed on individuals merely in possession of excise goods, irrespective of their knowledge or intent.

The primary issue revolves around whether individuals like Mr. Perfect, who transport goods without an inherent interest or knowledge of their illicit status, can be held strictly liable for excise duty under the prevailing regulations and corresponding EU directives. This commentary dissects the Court of Appeal's judgment, evaluating its alignment with EU law, the implications of Brexit on legal interpretations, and the broader impact on excise duty enforcement.

Summary of the Judgment

In March 2019, the England and Wales Court of Appeal initially dismissed HMRC's appeal concerning the penalty imposed on Mr. Perfect but referred a question of EU law to the Court of Justice of the European Union (CJEU). The CJEU's decision in June 2021 reinforced the notion that liability for excise duty under Article 33 of the 2008 Directive and Regulation 13 of the 2010 Regulations is strict, not contingent upon the individual's knowledge or intent.

Following the CJEU's ruling, the Upper Tribunal and subsequent hearings considered the impact of the United Kingdom's withdrawal from the EU. Ultimately, the Court of Appeal upheld HMRC's assessment, establishing that Mr. Perfect's lack of knowledge does not absolve him from excise duty liability.

The judgment underscores that under the specified regulations and directives, mere possession and control of excise goods suffice for liability, aligning with the broader policy objectives of preventing tax evasion and ensuring the integrity of the internal market.

Analysis

Precedents Cited

The judgment references several key cases that have shaped the interpretation of excise duty liability:

B&M Retail Ltd v Revenue and Customs Commissioners [2016] UKUT 429 (TCC): Emphasized the obligation of Member States to ensure excise duties are paid on goods released for consumption, highlighting the necessity of strict liability to prevent market distortions.
Davison and Robinson Ltd v Revenue and Customs Commissioners [2018] UKUT 437 (TCC): Reinforced the principle that in the absence of information on prior duty payment, the holder of goods is liable for excise duty.
Greenalls Management Ltd v Customs and Excise Commissioners [2005] UKHL 34: Established the acceptance of strict liability within the regime under successive Directives, as discussed by Lord Hoffmann.
Commission v Portugal, C-126/15 [2017] EU:C:2017:504: Highlighted the Directive's objectives to prevent tax evasion and abuse, supporting strict interpretations of liability provisions.

These precedents collectively support the Court's stance on enforcing strict liability, ensuring that the enforcement mechanisms under excise duty regulations are robust and effective.

Legal Reasoning

The Court's legal reasoning pivots on the interpretation of Article 33 of the 2008 Directive and Regulation 13 of the 2010 Regulations. The judgment articulates that the term "holding" in this context strictly refers to physical possession, irrespective of the holder's knowledge or interest in the goods.

The Court emphasized that the underlying policy of the Directive is to prevent tax evasion and ensure all excise duties are duly paid. In aligning with this objective, the Court affirmed that strict liability is a necessary feature of the excise duty regime. The absence of a requirement for the holder to have knowledge of the tax status of the goods does not contravene principles of fairness or proportionality, given the public interest in maintaining market integrity.

Additionally, the Court navigated the complexities introduced by Brexit, asserting that existing obligations under the Withdrawal Agreement necessitated adherence to CJEU judgments made prior to the end of 2020. This adherence ensures continuity and consistency in legal interpretations, even as the United Kingdom redefines its relationship with EU law.

Impact

The judgment has significant implications for the enforcement of excise duties within the United Kingdom:

Legal Precedent: Establishes a clear precedent that strict liability applies to individuals holding excise goods, irrespective of their knowledge or intent.
Compliance and Enforcement: Enhances HMRC's capacity to enforce excise duties effectively, acting as a deterrent against potential smuggling and unauthorized distribution of excise goods.
Business Practices: Impacts logistics and transportation sectors, necessitating greater diligence in verifying the legitimacy of consignors and the duty status of goods being transported.
Legal Clarity Post-Brexit: Clarifies the extent to which CJEU decisions remain binding post-Brexit, providing guidance on the application of EU-derived laws within the UK's domestic legal system.

Future cases involving excise duty liability will reference this judgment to determine the extent of an individual's liability, thereby shaping the landscape of tax enforcement and compliance.

Complex Concepts Simplified

Strict Liability

Strict liability refers to a legal standard where a party is held liable for certain actions or omissions regardless of intent or knowledge. In the context of this case, Mr. Perfect was held liable for excise duty without any requirement to prove that he knew the goods were subject to such duties or that he intended to evade taxes.

Excise Duty Point

The excise duty point determines the moment when excise duty becomes payable on goods. Under Regulation 13 of the 2010 Regulations, it is when goods are first held for a commercial purpose in the UK. This concept is pivotal in establishing who is liable for duty.

Article 33 of Directive 2008/118/EC

This article outlines the conditions under which excise duty is chargeable when goods are moved between Member States. It specifies who is liable to pay duty based on the holding and delivery of goods, reinforcing the principle of strict liability.

Withdrawal Agreement

The Withdrawal Agreement governs the legal relationship between the UK and the EU post-Brexit. It includes provisions that ensure certain EU laws and court decisions remain binding in the UK, providing legal continuity in areas such as excise duty until the transition period ends.

Conclusion

The Court of Appeal's decision in Revenue And Customs v Perfect firmly establishes the principle of strict liability in the context of excise duty liability under UK law. By aligning with EU directives and reinforcing the policies aimed at preventing tax evasion, the judgment ensures robust enforcement mechanisms are in place. This case serves as a critical reference point for future excise duty disputes, emphasizing that individuals in possession of excise goods bear liability regardless of their knowledge or intent. Furthermore, the judgment navigates the complexities introduced by Brexit, maintaining legal consistency and upholding the integrity of the UK's excise duty regime.

Stakeholders, particularly those in the logistics and transportation sectors, must recognize the heightened responsibilities and potential liabilities outlined in this judgment. Ensuring compliance with excise duty regulations is paramount to avoiding substantial penalties and contributing to the effective functioning of the internal market.

Establishing Strict Liability for Excise Duty: Revenue And Customs v Perfect [2022] EWCA Civ 330