Introduction

Revenue and Customs v. Perfect ([2019] EWCA Civ 465) is a pivotal case adjudicated by the England and Wales Court of Appeal (Civil Division). The core issue revolves around the strict liability imposed on a lorry driver, Mr. Martyn Perfect, who was found transporting goods without the appropriate excise duty being paid. This case not only scrutinizes the interpretation of EU directives as implemented by UK statutory instruments but also challenges the boundaries of strict liability within the realm of indirect tax policy and anti-fraud measures.

The case highlights significant debates regarding the extent of liability for individuals who may unwittingly participate in tax evasion schemes, particularly focusing on whether knowledge of the illicit nature of the goods is a prerequisite for liability under excise duty regulations.

Summary of the Judgment

The judgment was delivered by Lord Justice Baker, addressing whether a lorry driver found transporting excise goods without paid duty is strictly liable under the relevant EU directives and UK regulations. Mr. Perfect, who acted as a driver for "Kells Transport," was stopped at Dover Docks with a consignment of beer lacking valid excise documentation. HM Revenue and Customs (HMRC) initially assessed him for the unpaid duty and imposed penalties. However, the First-tier Tribunal (FtT) and the Upper Tribunal ruled in favor of Mr. Perfect, recognizing him as an innocent agent without knowledge of the evasion.

HMRC appealed the Upper Tribunal's decision, contending that strict liability should apply regardless of the driver's knowledge, emphasizing the importance of such liability in combating excise fraud. The Court of Appeal, however, identified unresolved questions of EU law and referred these to the Court of Justice of the European Union (CJEU) for a preliminary ruling. Consequently, while the appeal on the assessment was adjourned pending the CJEU's decision, the Upper Tribunal's decision to dismiss the penalty imposed on Mr. Perfect was upheld.

Analysis

Precedents Cited

The judgment extensively references both EU and domestic case law to navigate the complexities surrounding strict liability for excise duties:

• Van de Water v Staatssecretaris van Financien (Case C-325/99): Established that mere possession of excise goods without paid duty constitutes a release for consumption.
• Greenalls Management Ltd v Customs and Excise Commissioners [2005] UKHL 34: Affirmed strict liability for duty irrespective of intentional evasion, emphasizing the objective nature of excise duty regulations.
• Taylor and Wood v R [2013] EWCA Crim 1151 and Tatham v R [2014] EWCA Crim 226: Addressed liability of innocent agents, clarifying that lack of knowledge about the illicit nature of goods mitigates liability.
• B & M Retail Ltd v HMRC [2016] UKUT 429 (TCC) [2016] STC 2456 and Davison and Robinson Ltd v HMRC [2018] UKUT 437 (TCC): Reinforced the principle that liability attaches to holders of goods unless they are innocent agents lacking knowledge of illicit activities.
• McKeown and others v Revenue and Customs Commissioners [2016] UKUT 479 (TCC) [2017] STC 294: Highlighted that physical possession alone does not equate to holding goods for duty purposes without knowledge of their illicit nature.

Legal Reasoning

The court delved into the legislative framework, particularly Council Directive 2008/118/EC and its implementation via the 2010 Regulations. The crux of the legal debate centered on the interpretation of "holding" and "making delivery" of excise goods. HMRC argued for strict liability, positing that intent or knowledge of tax evasion should not be prerequisites for liability. Conversely, Mr. Perfect's defense hinged on his lack of knowledge and intention, classifying him as an innocent agent.

The Court of Appeal acknowledged the comprehensive nature of past cases but recognized that the specific circumstances of this case presented unresolved questions under EU law. The principle of proportionality and fairness, fundamental to EU legal principles, were pivotal in assessing whether imposing strict liability without knowledge aligns with the Directive's objectives. The court thus deferred these substantive legal questions to the CJEU to ensure a harmonized interpretation across the EU.

Impact

This judgment is poised to have significant implications for the enforcement of excise duty regulations and the broader fight against tax evasion. If the CJEU upholds strict liability irrespective of an individual's knowledge, it could lead to increased enforcement actions against transporters and agents who may not be directly involved in fraudulent activities. Alternatively, recognizing the necessity of intent could protect innocent agents but potentially create loopholes for deliberate evaders.

Furthermore, this case underscores the tension between national enforcement mechanisms and overarching EU directives, highlighting the complexities in achieving uniformity in tax enforcement across member states. The outcome will influence policy formulations and operational strategies of tax authorities like HMRC in combating excise fraud while balancing fairness towards individuals inadvertently caught in such schemes.

Complex Concepts Simplified

Strict Liability

In the context of excise duties, "strict liability" implies that an individual can be held responsible for unpaid taxes on goods they possess or transport, regardless of their intent or knowledge about the evasion. This means that even if the person was unaware that the duty was unpaid, they could still be liable.

Innocent Agent

An "innocent agent" refers to an individual who is involved in transporting or handling goods without knowledge of their illicit nature or the fact that duties have not been paid. This classification aims to protect those who are unwitting participants in fraudulent activities.

Excise Movement and Control System (EMCS)

EMCS is an EU-wide electronic system designed to monitor and record the movement of excise goods that are under duty suspension within the EU. It generates unique Administrative Reference Codes (ARC) to track these goods throughout their transport.

Conclusion

Revenue and Customs v. Perfect serves as a critical examination of the boundaries of strict liability within the framework of EU directives on excise duties. The case brings to the forefront the delicate balance between effective tax enforcement and the protection of individuals who may unknowingly be entangled in fraudulent schemes. By referring pivotal questions to the CJEU, the Court of Appeal ensures that the interpretation of these regulations aligns with both statutory intent and overarching EU principles of fairness and proportionality.

The outcome of this case will not only influence future legal interpretations but also shape the operational dynamics of tax authorities in their ongoing battle against excise fraud. It emphasizes the necessity for clear legislative language and the importance of safeguarding the rights of innocent parties within tax enforcement mechanisms.