R A International Ltd v  Revenue & Customs [2006] UKVAT(Excise) E01004 (29 November 2006)

E01004

EXCISE DUTIES – Consignment of beer transported under movement suspension arrangements from England to France – Receipted AAD never returned to despatching warehouse – Assessment for UK duty on the load – Liability of guarantor – DSMEG Regs 3,4 and 7(1) – Guarantor liable for duty – Appeal dismissed

MANCHESTER TRIBUNAL CENTRE

R A INTERNATIONAL LTD           Appellant

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS  Respondents

Tribunal:LADY MITTING (Chairman)
MR  M. FAROOQ

Sitting in public in Birmingham on 30 October 2006

Derek Payne. VAT consultant, for the Appellant 

Peter Woodhouse, counsel, instructed by the Acting Solicitor for HM Revenue & Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.The decision under appeal is that of the Commissioners, taken on review, confirming an assessment to excise duty in the sum of £26,790.  The assessment was raised on 26 September 2005 and related to one single consignment of beer being carried under duty suspension by the Appellant company from UK Excise Warehouse Promptstock Ltd and to be delivered to EDW Marck Excise Warehouse in France (“EDW”)

2.We heard oral evidence from Mr Roger Arnold, managing director of R A International and on behalf of the Commissioners from Linda Cunningham and Paul Bebbington.

Legislation

3.The relevant Regulations governing this movement are set out in Regulations 3, 4 and 7 of the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (SI 2001/3022) (“the DSMEG Regulations”)
Irregularity occurring or detected in the United Kingdom
3.(1)This regulation applies where:
(a)excise goods are:-

(i)subject to a duty suspended movement that started in the United Kingdom; or

(ii)imported into the United Kingdom during a duty suspended movement; and

(b)in relation to those goods and that movement, there is an irregularity which occurs or is detected in the United Kingdom.

(2)Where the Commissioners are satisfied that the irregularity occurred in the United Kingdom, the excise duty point shall be the time of the occurrence of the irregularity or, where it is not possible to establish when the irregularity occurred, the time when the irregularity first comes to the attention of the Commissioners.

(3)Where it is not possible to establish in which member State the irregularity occurred, the excise duty point shall be the time of the detection of the irregularity or, where it is not possible to establish when the irregularity was detected, the time when the irregularity first comes to the attention of the Commissioners.

Failure of excise goods to arrive at their destination

4.(1)This regulation applies where:

(a)there is a duty suspended movement that started in the United Kingdom; and

(b)within four months of the date of removal, the duty suspended movement is not discharged by the arrival of the excise goods at their destination; and

(c)there is no excise duty point as prescribed by regulation 3 above; and

(d)there has been an irregularity.

(2)Where this regulation applies and subject to paragraph (3) below, the excise duty point shall be the time when the goods were removed from the tax warehouse in the United Kingdom.

(3)	The excise duty point as prescribed by paragraph (2) above shall not apply where, within four months of the date of removal, the authorised warehousekeeper accounts for the excise goods to the satisfaction of the Commissioners.

Payment

7.(1)Subject to paragraph (2) below, where there is an excise duty point as prescribed by regulation 3 or 4 above, the person liable to pay the excise duty on the occurrence of that excise duty point shall be the person shown as the consignor on the accompanying administrative document or, if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person

The Commissioners’ evidence

4.Promptstock had, on their W1 warehousing return for June 2005 declared a consignment of 1,920 cases of Special Brew beer being moved under cover of an Accompanying Administrative Document (AAD) reference 1071 to EDW.  The AAD should have been discharged by the return by EDW to Promptstock of a certified copy.  It came to Mr Bebbington’s attention that this had not occurred, indicating to him that the goods appeared not to have been received by EDW.  He duly wrote to Promptstock by letter dated 26 July 2005 advising the company that it had failed to discharge AAD 1071.  In response Promptstock faxed Mr Bebbington a copy CMR document.  This document referred to AAD 1071; described the goods being carried as 1,920 cases of Special Brew and referred to the transporting vehicle as registration number L898 NNW and the trailer as 106.  It bore an EDW stamp and carried the handwritten qualification “Sous reserve de qualite et de quantite”.  Promptstock also provided Mr Bebbington with a copy of their copy of the AAD.  When Mr Bebbington received it, it had written in hand in the bottom left hand corner 
“EDW
Never received this”

Someone at Promptstock had obviously written this but it is not known who and it is not clear whether it was meant to refer to the receipted AAD or  to the goods.
5.Promptstock also provided the Commissioners with a copy of a letter from them dated 11 July 2005 to EDW advising EDW that Customs officers were looking for outstanding AADs and asking EDW to confirm whether they had received, inter alia, AAD reference 1071.  Somebody had endorsed on the bottom of this letter “Sent good in report”.  We assume that this was meant to read “Sent goods in report” because it was accompanied by a schedule of consignments received from Promptstock between 2 May 2005 and 10 May 2005.  There is no reference on the schedule to AAD reference 1071 although it is apparent from Mr Arnold’s evidence that the consignment should have been received on 2 May.

6.Four months after despatch, the AAD had still not been returned and an excise duty point was therefore created.  The Appellant’s name had been inserted in box 10 of the AAD as guarantor and in accordance with Regulation 7, the Appellant therefore bore liability for payment of the duty and Mr Bebbington duly raised his assessment against the Appellant. Mr Payne applied to the Commissioners by letter dated 1 November 2005 for a departmental review maintaining that the goods had been properly delivered as witnessed by the CMR, duly stamped by EDW.  The review was carried out by Miss Cunningham who upheld Mr Bebbington’s decision relying strictly on Regulations 3, 4 and 7.

7.It is open to the Commissioners to accept alternative evidence of receipt of the goods (section 71.1 Notice 197 “Excise Goods Holding and Movement”).  Section 71.1 provides that where the warehousekeeper has made every reasonable effort to obtain the original receipted copy of the AAD but has not been able to, the Commissioners may accept a receipted copy 2 of the AAD or a replacement copy 3 of the AAD or an official letter from the fiscal authorities in the consignee’s member State confirming that the goods covered by the relevant AAD had been received by the consignee.  Section 71.2 states that in some, very exceptional, circumstances where the consignor has been unable to obtain any of the accepted forms of evidence that the goods had arrived at their intended destination, the Commissioners may consider other evidence on a case by case basis.  71.2 stresses that this would very rarely be applied and only in cases where the evidence showed as a minimum that the goods were received at the consignee’s premises and that they were declared and that the goods must be clearly identified as those shown on the original AAD.

8.Mr Payne wrote in to Miss Cunningham asking her to accept the CMR as alternative evidence. By further letter dated 11 January 2006 Miss Cunningham refused so to do because the CMR was a commercial document which did not meet the criteria of alternative evidence of receipt as set out in section 71.1.

9.In her oral evidence, Miss Cunningham expanded on this decision pointing out that the AAD had a specific purpose of fiscal control whereas the CMR was a purely commercial document.  The CMR did not, for example, record the excise numbers of the consignor or the consignee, nor did it detail the guarantor. The AAD also accompanies the goods and when receipted is evidence of receipt of the specified load.  The CMR, to Miss Cunningham, evidenced, if genuine, the receipt of A load, not necessarily the load.

The Appellant’s evidence

10.Mr Arnold told us that on Thursday 28 April 2005 one of his vehicles registration number L898 NNW (“898”), with trailer 106, picked up a consignment of 1,920 cases of Special Brew from Promptstock in Upminster Essex for onward delivery to EDW Marck in Calais.  Mr Arnold had a policy of sending only his newer vehicles abroad because of the higher costs incurred in the event of a breakdown overseas.  898 was therefore driven to Ashford in Kent and there the trailer was exchanged to a different cab registration number BUO4 PYG (“PYG”) which was just returning from France.  From this point therefore PYG was now attached to trailer 106 and it would be this complete unit which would be making the onward delivery to France.  However delivery of the load was not to be made until Monday, May 2nd so PYG returned to the Appellant’s depot in Birmingham where the trailer 106 was removed and parked and PYG made another return trip to France with another loaded trailer. On Sunday 1st May, PYG with trailer 106 left Birmingham, travelled to Folkestone and from there crossed through the Tunnel to Calais where the consignment would have been delivered to EDW. Mr Arnold produced two documents intended to evidence the vehicle’s journey, neither of which had previously been produced to or seen by the Commissioners.  First, he produced a book of “Daily Running Sheets” which contained a day-by-day record of the movements of all his vehicles:- vehicle number, driver, journey and whether a reload for return.  The record for Thursday 28 April records “898 … load Promptstock”.  We were then referred by Mr Arnold to an entry in the book for Tuesday 3rd May showing PYG travelling to Calais and reloading in Paris.  This Mr Arnold initially told us was the delivery of this consignment.  However this entry was in direct contradiction to Mr Arnold’s second document which was a copy confirmation from Euro Tunnel Freight that PYG had travelled through the Tunnel overnight on Sunday May 1st/Monday 2nd.  It thus transpired and Mr Arnold confirmed that the entry on 3rd May related to a different load altogether and he had not in fact recorded the relevant movement of PYG with the load in question because it occurred on a Sunday and Bank Holiday Monday and it was not worth his while making up the book with only one entry for each of the days.

11.Mr Arnold was able to tell us which documents (the CMR and AAD) should have accompanied the load and how they would be dealt with but he was not able to give any primary evidence about this load, as he had not been the driver.  Mr Arnold told us he saw this as a regular transaction with nothing to alert him to any problem.  He received back his copy of the CMR of which he had no cause to doubt its veracity and which enabled him to bill his client and we were referred to an invoice dated 16 May 2005 addressed to European Taste Eurl in the sum of £650 and detailing “28/04/05 to collect 1920 cases of Special Brew from Promptstock Upminster and deliver to EDW, Marck”.  We were told the invoice was paid although no proof of payment was produced.

12.In cross-examination Mr Arnold was asked what steps he had taken to obtain a copy of the AAD when he had heard from Mr Bebbington.  Mr Arnold said that he had in the past asked EDW for copy AADs and had been refused on the basis he was not legally entitled to them. On hearing from Mr Bebbington, his secretary had telephoned EDW to ask if there was a problem with this AAD and was told there was not.  She did not develop this or ask for a copy as they had been refused in the past.  Mr Arnold said they had also asked Promptstock for a copy but was told they had not received it.

Submissions
15.It was accepted by both parties that the burden of proof was on the Appellant.   It was the Commissioners’ contention that a duty point arose under either Regulation 3 or Regulation 4, they could not say which because they did not know what had happened to the goods.  They may or may not have been delivered but in any event there had been an irregularity in the non-return of the receipted AAD.  Although it was in the power of the Commissioners to accept alternative proof of delivery there was here insufficient evidence. The CMR, even if genuine, did no more than acknowledge receipt of 1,920 cases of Special Brew.  There was nothing to prove that it was the load in question.

16.Mr Payne contended that this was, as far as the Appellant was concerned, a perfectly normal transaction recorded properly in the Appellant’s books and with an audit trail showing its progress from start to finish. The CMR should have been accepted by the Commissioners as alternative evidence as it clearly showed delivery and receipt for the consignment.  The fact the CMR showed the incorrect number for the delivery vehicle was immaterial. It was the goods which mattered, not the vehicle.  If there was an irregularity, it was quite outside the control of RA International.  The company did precisely what they were contracted to do in that they transported the goods from consignor to consignee and this is evidenced by the fact that they were paid. The Appellant did all that was legally required of it. Mr Payne’s final submission which he had not previously mentioned or given notice of was that as the Commissioners had no evidence that any irregularity occurred within the UK, the transaction was outside the jurisdiction of UK duty.

Conclusions

17.Dealing with Mr Payne’s final point first, Regulation 3(1)(b) specifically provides for the regulations to engage when the irregularity either occurs within or is detected within the UK.  The irregularity was quite clearly discovered within the UK when Mr Bebbington was checking for the discharge of the AAD.  The transaction therefore clearly falls within the scope of UK duty.  Mr Payne did not take any point on the inability of the Commissioners to say conclusively whether they were relying upon Regulation 3 or Regulation 4 but this would in any event be immaterial as both engage Regulation 7. There was no argument on the Appellant’s liability as a guarantor if liability lies.

18.It was Mr Payne’s contention that the Commissioners ought to have accepted the CMR as alternative evidence.  It is however clear to us that the very specific requirements set out in section 71.1 and 71.2 of Notice 197 are not present.  We are not at all satisfied that Mr Arnold “made every reasonable effort” to obtain the original receipted copy 3 and he was unable to produce a receipted copy 2 or a replacement copy 3.  71.1 is therefore not complied with.  We cannot see that the circumstances in this case are “very exceptional” and see no reason why 71.2 should apply at all but in any event the alternative evidence acceptable under 71.2 “must clearly identify the goods as those shown on the original AAD”.  In our view the CMR does not do that.  The description of the goods is certainly similar but the CMR is specifically qualified to the effect that the load has not been checked as to quality or as to quantity.  Whoever stamped the CMR was not therefore guaranteeing the load.  We have no idea who stamped the CMR or whether it was a valid EDW stamp.  The CMR refers to vehicle 898 with trailer 106.  We know from Mr Arnold’s evidence that it was not 898 which made the delivery and there is no firm evidence that 106 was the trailer in question either.  Clearly whoever stamped the CMR did not check the registration number and the trailer number otherwise the discrepancy in registration would have been noted.  For all these reasons the decision of Miss Cunningham that there was no acceptable alternative evidence was the only reasonable decision which could have been reached.

19.As we have said, the onus is on the Appellant to satisfy us that the goods were in fact delivered.  Mr Payne referred to a complete audit trail and we therefore will look at the documents which have been produced to us to evidence that trail.  We have been shown a fax from the Appellant to Promptstock confirming that they had been instructed to collect a load of Special Brew on Thursday 28 April for delivery to EDW.  There is no reference in the fax to the amount to be collected, merely that it is one full load.  We were then shown the daily running sheets which reveal only that 898 collected a load from Promptstock on Thursday 28 April.  It does not say what was collected and the onward journey from there is not recorded.  The Euro Tunnel ticket refers only to the vehicle PYG and to nothing else.  This is really meaningless because we note from the daily running sheets which we were shown which cover Thursday 28th, Friday 29th, Tuesday 3rd, Wednesday 4th, Thursday 5th and Friday 6th PYG made a return journey to Calais every single day.  There is therefore nothing in either the daily running sheets or the Euro Tunnel receipt to prove that this consignment crossed the Channel.  We then have the CMR which for all the reasons we have already referred to above does not in our view evidence receipt.  Finally we have the invoice.  Even if paid (and we cannot make any finding either way on this as we were shown no evidence of payment) payment of the invoice cannot be consistent only with the transaction having been carried out.  That alone is not enough to show that the goods reached their destination.  The Appellant has not discharged the burden of proof and has not satisfied us on the balance of probability that the goods were duly received by EDW.

20.It must follow from this that the assessment was correctly made.  It was correctly raised against the Appellant as guarantor and as the name entered in box 10 of the AAD and the appeal must therefore be dismissed.

21.The Commissioners made no application for costs and we make no order.

LADY MITTING
CHAIRMAN
RELEASED: 29 November 2006

MAN/06/8009