UK smokers must pay full 'Death' duty

LAW REPORT: 1 June 1995

Regina v Customs and Excise Commissioners, ex parte Emu Tabac SARL and others.

Queen's Bench Division (Mr Justice Popplewell).

26 May 1995.

A scheme whereby smokers in the United Kingdom purchased "Death" and other brands of cigarettes in quantities of up to 800 at a time via an agent from a supplier in Luxembourg, and thus paid up to 40 per cent less in excise duty than if they had bought the cigarettes in the UK, was not permitted under the rules establishing the European internal market.

Mr Justice Popplewell refused four applications for judicial review challenging the detention or threatened detention, by the Customs and Excise Commissioners, of consignments of tobacco products purchased in Luxembourg or elsewhere in the EU and brought into the UK without payment of UK excise duty, and the decision of the commissioners, in a letter dated 21 February 1995, that UK excise duty is exigible in respect of such products under article 10 of European Community Council Directive 92/12/EEC.

The application was brought by (1) Emu Tabac SARL, a Luxembourgeois tobacconist, (2) The Man in Black Ltd, a UK company purporting to act as the agent of UK purchasers of cigarettes from the first applicant in Luxembourg, and (3) John Anthony Cunningham, a director of the second applicant company. Both the first applicant company and second (which traded as Tobacco Direct) were subsidiaries of the Enlightened Tobacco Co, manufacturers of Death cigarettes.

Also involved in the case was Imperial Tobacco Ltd, which was granted leave to intervene to argue that to allow the applicants' scheme to go ahead would cause considerable disruption to the UK tobacco industry.

Robert Venables QC, Timothy Lyons and Amanda Hardy (Thomas Eggar Verral Bowles, Horsham) for the applicants; Stephen Richards and Robert Jay (Customs & Excise Solicitors) for the Commissioners; David Vaughan QC and Mark Brealey (Gouldens), Imperial Tobacco.

MR JUSTICE POPPLEWELL said the applicants' case was that since a purchaser going personally to Luxembourg and bringing back cigarettes for personal consumption would pay only Luxembourg duty, the same must be true if the purchaser employed an agent, ie the second applicant, who personally went to Luxembourg on his behalf. They relied on article 8 of the Directive, which stated: "As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired." They contended that products might be "acquired" and "transported" by a private individual through someone else doing it on their behalf.

The Commissioners argued that the scheme fell within article 10(1) of the Directive: "Products subject to excise duty purchased by persons who are not authorised wharehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf shall be liable to excise duty in the Member State of destination."

Both the Commissioners and Imperial Tobacco argued the scheme was covered by UK legislation made in conformity with the Directive, namely the Excise Goods (Holding, Movement, Warehousing - REDS) Regulations 1992 and Excise Duties (Personal Reliefs) Order 1992. Having looked at article 8 in the light of the other provisions and of the history and purpose of the Directive, and having compared the language used both in its English form and more helpfully in the language used in the other Member States, his Lordship had decided that it did not encompass the use of an agent.

Under the Directive, a clear distinction was to be drawn between the purchase by an individual personally under article 8 and what was in effect a commercial exercise to be governed by article 10. The relevant UK legislation did give effect to the Directive and accordingly the application must be refused.

Paul Magrath, Barrister.