Lithuanian Beer Ltd v Revenue And Customs

Factual and Procedural Background

This appeal arises from a decision of the Upper Tribunal (Tax and Chancery Chamber) ("the UT") dismissing an appeal by the Appellant, Company A, against a decision of the First-tier Tribunal ("the FTT"). The FTT had dismissed Company A's appeal against an assessment issued by the Respondents for underpaid excise duty on flavoured ciders imported by Company A. The flavoured ciders were subject to excise duty at the higher rate applicable to "made wines" rather than the lower rate for conventional cider. Company A mistakenly paid the lower rate from December 2007 to January 2011. Upon discovery of the mistake, the Respondents issued an assessment on 14 November 2011 for underpaid duty amounting to £189,661.57. Company A appealed on the sole ground that the assessment was made out of time under the limitation provisions of section 12(4) of the Finance Act 1994. The FTT and subsequently the UT rejected this argument, upholding the assessment.

Legal Issues Presented

1. Whether the Respondents had knowledge of evidence of facts sufficient to justify making the assessment more than one year before the assessment date, thereby rendering the assessment time-barred under section 12(4)(b) of the Finance Act 1994.
2. Whether the Upper Tribunal’s alternative reasoning, which was not raised by the Respondents and without prior notice to the parties, was procedurally fair and legally correct.

Arguments of the Parties

Appellant's Arguments

• Company A argued that the Respondents had knowledge of evidence of facts by 2 November 2010 through the HMRC officer Mr Ansah’s visit and review of documents, triggering the one-year limitation period and making the assessment issued on 14 November 2011 out of time.
• It contended that knowledge of the existence of evidence of facts, even if the officer had not fully digested or appreciated the contents, was sufficient to start the limitation period under section 12(4)(b).
• Company A challenged the UT’s alternative reasoning that the limitation period started only after a later cross-checking exercise was completed, asserting this was procedurally unfair as it was not raised prior to judgment and was legally incorrect.

Respondents' Arguments

• The Respondents submitted that actual knowledge of the contents of the evidence, sufficient to justify making the assessment, was required to trigger the limitation period, not mere knowledge of the existence of documents.
• They argued that Mr Ansah had only performed a preliminary review and had not acquired sufficient knowledge by 2 November 2010, with the limitation period starting only after Mr Gowrea completed his cross-checking in mid-2011.

Table of Precedents Cited

Court's Reasoning and Analysis

The court focused on the interpretation of section 12(4)(b) of the Finance Act 1994, which imposes a one-year limitation period running from when "evidence of facts" sufficient to justify an assessment comes to the knowledge of the Commissioners. The court emphasized that this knowledge must be actual, not constructive, meaning the relevant HMRC officer must have read and digested the evidence to understand what it shows, not merely be aware that relevant documents exist.

The court analyzed the factual findings that Mr Ansah, during his visit on 2 November 2010, identified relevant documents but did not examine them in detail or acquire knowledge of their contents before the critical date of 14 November 2010. The copies of the documents were only received later, and it was not established that Mr Ansah had acquired knowledge of the evidence’s contents before the limitation cut-off.

The court rejected the Appellant’s argument that mere awareness of the existence of evidence was sufficient to trigger the limitation period. It held that such an interpretation would broaden the limitation period excessively and undermine the statutory scheme intended to protect taxpayers from stale claims.

The court adopted the reasoning of the FTT and UT, which found that the knowledge required under section 12(4)(b) was only acquired after detailed examination of the evidence, which occurred after the limitation date. The court also agreed that the UT’s alternative reasoning, though procedurally unfair, did not affect the outcome as the primary ground was dispositive.

Holding and Implications

The court DISMISSED the appeal.

The direct effect of this decision is that the assessment for underpaid excise duty issued by the Respondents on 14 November 2011 is valid and not time-barred under section 12(4)(b) of the Finance Act 1994. The court reaffirmed the principle that actual knowledge of evidence sufficient to justify an assessment is required to trigger the limitation period, thereby providing clarity on the proper application of this statutory limitation provision. No new precedent beyond the application of established principles was set.