E00986

EXCISE DUTY – Restoration – Commercial vehicle – Vehicle used for smuggling cigarettes – Whether restoration fee reasonable – Yes – Appeal dismissed

LONDON TRIBUNAL CENTRE

	K W FINANCE          	 Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	STEPHEN OLIVER QC (Chairman)
						ALEX MCLOUGHLIN

Sitting in public in London on 24 August 2006

No appearance for the Appellant 

Sarabjit Singh, counsel, instructed by the Acting General Counsel and Solicitor for HMRC, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1	K W Finance (“KWF”) appeal against the decision of the Respondents (“the Customs”) to offer restoration of a vehicle and trailer upon payment of a restoration fee of £6,920.22.  The fee represents 10% of UK revenue evaded on the excise goods that had been seized in the circumstances explained in this decision.  The decision was confirmed on review in the letter of 16 December 2005.  The vehicle and trailer have now been restored on payment of £6,920.22.  

2	KWF were notified of the present hearing in July 2006.  Shortly before the hearing date they were reminded by fax of the hearing and asked whether they intended to appear.  They were also telephoned and a telephone message left on KWF’s “answerphone”.  When the appeal was called on for hearing there was no appearance for KWF.  Bearing in mind that they had been duly notified of the hearing and reminded close to the hearing date and that KWF had given no indication that it had difficulty attending on the due date, we decided to go ahead and hear the appeal in their absence.  Rule 26 of the Tribunals Rules permits this.  KWF have the right, exercisable within 14 days, to apply to the Tribunal to have the present decision set aside on such terms as the Tribunal considers to be just.  If they do wish to exercise their right to make an application to have this decision set aside, KWF must attend the application hearing through a representative.

Background Facts

3	KWF is a haulage company that operates from Zielona Gorna in Poland.

4	On 26 October 2005 KWF’s vehicle and trailer were found on a site at Burntwood in Staffordshire.  The vehicle had been used to carry furniture which had been offloaded from KWF’s vehicle.  The furniture was found to contain some 444,000 mixed brand cigarettes with an excise duty of £69,202.

5	The vehicle had been found by the police in exercise of a search warrant.  At the time it was noted that in the same area there was also a red Peugeot “Partner” van loaded with mixed brand cigarettes and on the floor there were further quantities of cigarettes among the remnants of the furniture, much of which had been destroyed.  A quantity of cash in sterling notes totalling £11,200 was found in a Marks & Spencer bag on the floor nearby.

6	The details from the CMR note indicated the consignor as Tex Logistic Limited of Zielona Gorna.  The place and date of taking over the goods was shown as Zielona Gorna.  An entry on 9 October 2005 recorded the consignee as Simon Kohn Furniture Limited of Bristol.  The description of the goods was shown as “upholstered furniture.”  

7	The officer was satisfied that the cigarettes were held for a commercial purpose.  There was no evidence the duty had been paid on the cigarettes and they were therefore seized as liable to forfeiture.  The vehicle and trailer were also seized as liable to forfeiture because they had been used for the carriage for goods liable for forfeiture.

8	On 1 October 2005 an application was made to the Customs for restoration of the vehicle.  On the same date KWF wrote to the Customs explaining that the vehicle had been leased to it by GTL Limited of Gdansk for three years.  KWF explained that the haulage had been ordered by Tex Logistic Limited and that the Customs could find all the relevant documents in a leather briefcase on a shelf above the driver’s seat of the vehicle.

9	On 2 November 2005 the Customs wrote to KWF requesting details of the vehicle and asking for documents showing the terms and conditions of the drivers’ contract, copies of employment references from previous employers, details of any measures taken by KWF to prevent the vehicle from being used for smuggling, checks made by KWF of the legitimacy of the consignor, the consignee and the load, details of any physical checks made on the load and copies of any instructions or written procedures issued by KWF to the drivers or other staff.  The same day KWF faxed a copy of a leasing agreement.

10.	On 2 November 2005 KWF wrote to the Customs asking formally for restoration of the vehicle, the trailer and the cargo.  KWF asked that the items should be returned because it was just a haulier.    As the haulage had been ordered by Tex Logistic Limited, KWF had, it was said, been unaware of and had no control over the contents of the load.  In the letter KWF stated that the ordering party had been in charge of the loading and that KWF could not therefore be held responsible for what was hidden in the cargo.  

11	On 4 November KWF provided the necessary data concerning the vehicle and the trailer.  KWF also gave brief details of the driver and another and stated that the contract with the drivers would be dissolved and that they would be pursued by KWF for reimbursement of the costs incurred in connection with the case.  

12	On 24 November 2005 Customs wrote to KWF offering restoration of the vehicle on payment of £6,920.22.  On 30 November 2005 KWF wrote to the Customs asking for a review of that decision.  On 16 December the review decision upheld the original decision to restore the vehicle on payment of £6,920.22.  

13	In the Notice of Appeal of 14 February 2006, KWF had contended that the charges referred to in the review decision appeared to be mere allegations.  KWF went on to state that there was no evidence to indicate its involvement.

Conclusions

14	Under Section 152(b) of Customs and Excise Management Act 1970, the Customs may, if they see fit, “restore, subject to such conditions (if any) as they think proper, anything forfeited or seized under the Customs and Excise Act.”

15	The Customs contention is that their decision to offer restoration of the vehicle and trailer for payment of the fee of £6,920.22 was reasonable and proportionate.  We examine their reasons.

16	The Customs referred to the International Consignment Note (CMR) accompanying the goods.  This stated that the goods should have been delivered to the premises of Simon Kohn Furniture Limited in Bristol.  Investigations showed, however, that Simon Kohn Furniture Limited was not expecting such a delivery and did not import goods from Poland nor indeed from any other country.  To this effect we were shown the witness statement of Sheridan Kohn, a director.  As it turned out the goods were delivered to the premises in Burntwood in Staffordshire which was over 100 miles from Bristol.

17	Why had they been diverted from the delivery address stated on the CMR to the address in Burntwood?  The Customs inferred that they could only have been diverted to the Burntwood premises with the consent of KWF.  In this connection we mention that KWF has stated that the goods may be unloaded at an address different to the delivery address on the CMR if the company ordering the goods provides its registered address on the CMR but has a warehouse located elsewhere, or if the goods are collected by a “middleman”: we refer to a letter of explanation from KWF dated 13 November 2005.  There is no evidence, however, that KWF was told or believed that it was delivering goods to the warehouse of the consignee stated on the CMR, i.e. Simon Kohn, or that arrangements had been made for the goods to be collected by a middleman.

18	So far, therefore, we cannot see that the Customs have acted unreasonably.  They have proceeded on realistic inferences that have not been displaced by evidence from KWF.  

19	We observe also that no evidence was provided by KWF as to when the delivery address had been changed, by whom, and whether KWF had been offered further payment for any additional mileage (some 100 miles) involved in delivering goods to an alternative address.

20	The Customs say that in the absence of any genuine explanation as to why the delivery address for the goods was changed, the likely inference is that KWF had been involved in the diversion of the goods because it knew about the attempt to smuggle these cigarettes inside the load.  In this connection Customs referred to an inconsistency in KWF’s account of events.  A letter of 30 November 2005 from KWF maintains that KWF’s drivers were not involved in the smuggling attempt and that KWF could not be held liable for what had happened.  But KWF also stated, in a fax of 4 November 2004, that the contracts of employment with the drivers involved would be dissolved and that KWF would sue those drivers for the costs incurred in connection with the seizure.  KWF stated that it could not accept drivers who might be involved in smuggling.  This suggested to the Customs that KWF knew that its drivers were involved in smuggling.  In the absence of any other explanation, and in the absence of any firm evidence to the contrary, we think that the conclusions drawn by the Customs were in all the circumstances reasonable.

21	We turn now to the restoration policy of the Customs for freight vehicles.  So far as is relevant the policy is that if the hauler is knowingly involved in an attempt to smuggle goods and the revenue involved is more than £50,000, the vehicle will normally not be restored.  On the basis of the conclusion of the Customs that KWF was likely to have been knowingly involved in the attempt to smuggle the seized goods, the decision to restore KWF’s vehicle and trailer for a fee of £6,920.22 cannot, we think, be criticised as unreasonable or disproportionate. 

22	The Customs have also based their case on the contention that KWF had failed to carry out basic reasonable checks to confirm the legitimacy of the load.  KWF had not, they said, checked to see whether Simon Kohn Furniture Limited had been expecting the goods and KWF had allowed the goods to be diverted without making any reference to Simon Kohn Furniture Limited.  Further, Customs point out, KWF has produced no evidence of any warnings given to drivers about the sanctions imposed for smuggling.  It seems to us that Customs could reasonably have concluded that KWF had failed to carry out the necessary checks and to insist on the proper standards of behaviour expected of drivers.

23	For all those reasons, we think that Customs were reasonable in refusing to restore the vehicle and the trailer in return for payment of a fee.  The fee itself, £6,920.22, seems to us to bear a reasonable relationship to the level of carelessness      of KWF.  We note that the actual restoration policy of the Customs indicates that where there has been a failure to carry out basic reasonable checks, the vehicle in question will normally be restored with 20% of the revenue involved in the smuggling attempt (if lower than the trade value of the vehicle).  Here the Customs, after considering the circumstances, have offered the vehicle for restoration on payment of only 10% of the revenue involved.  Not only have the Customs departed from their policy but they have also approached the amount of the penalty in a flexible manner. 

24	In all the circumstances we conclude that the penalty of £6,920.22 was proportionate and was not too harsh in the light of KWF’s culpability and the damage to revenue and legitimate trade that KWF’s failure to meet an acceptable standard of care has caused.

25	We dismiss the appeal. 

STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 13 September 2006

LON/06/8013