England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand London WC2A 2LL
		November 29 2002

Mr Justice Lawrence Collins:

I Introduction

1. The fraudulent diversion of duty suspended alcohol into the market without payment of duty and VAT is estimated to cost the exchequer some £450 million p.a. Alcoholic goods can lawfully be manufactured, sold, held or moved by the owner without payment of duty, provided that they remain in bond. Fraudulent diversion occurs by the creation of false administrative documents ("AADs") which permit the release of the duty suspended products from a bonded warehouse. Goods kept in such a warehouse can move from one such warehouse to another without the payment of tax provided the necessary documentation accompanies the goods showing that they are going to another bonded warehouse (both within the United Kingdom and also other EU countries).
2. In theory the bonded warehouse system is enforced by the requirement that one of the AADs must be returned by the warehouse of destination to the warehouse of despatch by the 15th day of the month following receipt to evidence the fact that the goods are still in bond. If it is not received in that period the warehouse of despatch is required to report this fact to Customs & Excise, and if it is not received within 4 months of despatch (and no alternative acceptable evidence of delivery is provided) the warehouse of despatch becomes liable for the duty.
3. There is widespread evasion of these controls by alcohol being unlawfully diverted onto the UK home market through the use of AADs being returned with false stamps evidencing receipt of the goods by the supposed warehouse of destination. The false documents achieve a release of the goods from a bonded warehouse, supposedly to be passed to another such warehouse, but in fact the goods never arrive, and instead they are fed into the home market where they are sold at a reduced price, usually for cash, because duty and VAT have not been paid.

II Anglo German Breweries Ltd and the assessments

4. Anglo German Breweries Ltd ("AGB") operates an excise warehouse at 227-247 Gascoigne Road, Barking, Essex. The warehouse was approved under section 92 of the Customs and Excise Management Act 1979 and AGB is therefore an "authorised warehouse keeper". At all relevant times AGB carried on business as a bonded warehouseman, for the most part trading with other bonded warehouses in other parts of the EC on its own account in alcoholic drinks "duty-suspended," i.e. where the liability to pay excise duty and VAT on the drinks in question is suspended. As an authorised warehouse keeper and consignor of excise duty goods, AGB has provided a guarantee to the Commissioners to cover the movements of excise duty goods from the warehouse.
5. On May 8, 2002 AGB was assessed by the Commissioners of Customs and Excise ("the Commissioners") in respect of excise duty and VAT on 25 consignments of alcohol, and on May 9, 2002, the Commissioners presented a winding-up petition in respect of the excise duty and VAT, amounting in aggregate to £3,089,855. On the same day Mr Richard Hooper was appointed as provisional liquidator.
6. The assessments relate to 25 shipments which were made by AGB between September 2000 and November 2001. 20 of the consignments were (or purported to be) duty suspended shipments to an Italian bonded warehouse trading as MTB Import Export ("MTB"); and 5 of them were (or purported to be) to a Portuguese bonded warehouse operated for Sociedade Agricola e Comercial Vinhos Messias, SA ("SAVM").
7. The goods comprising all the consignments were all owned by AGB. The consignments were mostly of vodka and whisky, and the number of cases in each consignment varied from about 1100 to about 3000. The first 15 consignments were transported by a haulage company called Deanvine Ltd, and the other 10 were carried by WEB Distribution (8 consignments) and JJ Cahill (2 consignments).
8. The position of the Commissioners is that these consignments never arrived at MTB or SAVM, and that AGB had no genuine business of exporting duty suspended alcohol, and that the overwhelming probability is that the loads have been broken up and sold at knock down prices on the black market. This is highly profitable in the UK because of the very large proportion of the duty-paid price which excise duty and VAT represent. Typically the amount of duty and VAT involved is about £125,000 per full consignment of spirits. The illicit profit would be in the region of £50,000.
9. Mr Neil Forrester is the sole director of AGB. The company secretary was Mr Mohammed Ahmed, who also acted as book-keeper or accountant. Mr Fallur Rehman was another employee at the relevant time, whose duties included arranging for the hauliers to collect the goods. Mr Tufail Ahmad was in charge of the sales and marketing of AGB and the receipt of payments on its behalf. He is alleged by the Commissioners to be a de facto or "shadow" director of AGB. He has been convicted and sentenced to 6 years imprisonment for excise diversion fraud, and was released from prison in January 2000. In or about April 2000 Silver Star Investments Inc., a Delaware company, purchased all the shares in AGB. Tufail Ahmad denies owning Silver Star.
10. On May 9, 2002 the VAT assessments were appealed in the name of AGB in the VAT and Duties Tribunal (the "Tribunal"), on instructions from Mr Forrester, and a review of the excise duty assessments was demanded. On May 24, 2002 there was a preliminary hearing in the Tribunal and it was directed that the VAT appeal be heard without payment or deposit of the VAT by AGB. The excise duty assessments were reviewed, and upheld, by the Commissioners, and on June 24, 2002, again on instructions from Mr Forrester, the Commissioners' decision was appealed to the Tribunal in the name of AGB. On the same day the Commissioners conceded, pursuant to section 16(3) of the Finance Act 1994, that the appeal could be entertained, notwithstanding that the duty had not been paid or secured, on the ground of hardship that would otherwise be suffered by AGB.
11. On May 31, 2002 the provisional liquidator issued proceedings in the High Court against, amongst others, Mr Forrester and Mr Tufail Ahmad, and has obtained worldwide freezing injunctions against them and Mr Mohammed Ahmed.
12. In August and early September 2002 the provisional liquidator sought to intervene in the appeals in the Tribunal, in the name of AGB, on the ground that he had been given the power in the High Court order by which he was appointed to conduct proceedings in the name of AGB, including before the Tribunal. By letter dated September 6, 2002 the Tribunal indicated that the proper course was for the provisional liquidator to apply to be substituted as an appellant.
13. The statement of affairs produced by the provisional liquidator indicates that AGB is insolvent without making any allowance for the claims by the Commissioners, and the provisional liquidator has given evidence that it appears from the investigations which he has carried out that AGB is insolvent even without the debt which the Commissioners claim is due from it; and that the landlord of its premises has forfeited its lease for a year's arrears of rent (£120,000) which AGB cannot pay.
14. There is no reply to the evidence that AGB is insolvent. The largest asset shown in the statement of affairs is an investment in Merry Down plc (£650,000), but it seems that AGB has never received the share certificate, and there is plainly a dispute between AGB and the company which AGB asserts sold it the shares (Best Trading Ltd, its landlord), as to whether there was any agreement to sell the shares.

III Evidence on the alleged diversion

15. The principal evidence for AGB consists of several witness statements by Mr Vincent Curley, who was formerly employed by the Commissioners investigating commercial fraud, and is now the managing partner of Vincent Curley & Co., a firm which provides professional services in connection with VAT, excise and customs duties, including the conduct of appeals in the Tribunal. Although he does report some statements made to him by the officers of AGB, and by Mr Tufail Ahmad, and by the hauliers who are claimed to have delivered the consignments to Italy and Portugal, most of his evidence consists of argument and comment, some of which is of a very partisan nature.
16. Mr Forrester and Mr Mohammed Ahmed identified Mr Tufail Ahmad as the person who dealt with MTB and SAVM. Mr Curley in his witness statements reports what they (and Mr Rehman) told him, the effect of which is as follows: Mr Rehman sent invoices to MTB; Mr Mohammed Ahmed said that he did not personally deal with MTB or SAVM to secure orders or receive payment (matters which were dealt with by Mr Tufail Ahmad), but he conducted correspondence and prepared invoices, and he had no reason to doubt that the transactions were genuine; Mr Forrester said that he did not personally deal with sales to MTB or SAVM, but he had no reason to doubt that the dealings were genuine. Mr Forrester denies having done anything wrong. Mr Tufail Ahmad does not deny dealing with them or involvement with receipt of cash, but (to quote Mr Curley) he does not agree with the allegation that the goods were never delivered, and says that "as far as he was aware" no diversion had taken place, the sales were genuine and deliveries took place. In his witness statement, Mr Tufail Ahmad says: "If, as appears to be the case, there has been a fraud, I did not perpetrate or connive at it though my conviction would make me the perfect scapegoat for the true fraudsters in Italy and Portugal."
17. The three hauliers involved in the supposed shipments told Mr Curley that the consignments were delivered to Italy and Portugal, but Mr Cahill and his driver Mr Chatfield have now made witness statements, the effect of which is that on the instructions of Mr Tufail Ahmad lorries were sent empty, with bogus documentation, to Italy and Portugal, to create the fiction that deliveries were made to MTB and SAVM.

Consignments to MTB

18. MTB was originally an unincorporated business owned by Mr Renato Michelotti trading as Michelotti Renato. It had a bonded warehouse in Arco, a small rural town near Trento. In 2000 it was taken over by two Milanese businessmen, Mr Bizzarro and Mr Tosini, and incorporated as Michelotti Renato srl, which trades as MTB Import/Export. The evidence is that after the takeover Mr Michelotti was no longer involved in the management of the business, but continued the day to day operation of the bonded warehouse. Mr Michelotti told the Italian customs authorities and the representatives of the provisional liquidator that he cannot recall ever seeing English drivers or English lorries making deliveries, although they did sometimes collect goods.
19. In answer to a request by the Commissioners under the European Excise Mutual Assistance Directive, the Italian Agenzia Delle Dogane informed them that MTB never received any goods from AGB, and that false stamps of Italian customs have been endorsed on AADs to demonstrate that the goods were delivered to MTB. For example, 1664 cases of Vodka were bought by AGB from Gujjar Beer and Wine in Calais on January 23, 2001 (assessed consignment No. 2) for £15,808, and sold to MTB on same day for £21,216, for delivery on January 26. The Italian Customs stamps on the AADs are false.
20. Italian customs have informed the provisional liquidator that they have no reason to believe that the consignments were "slaughtered" (i.e. broken up and sold in smaller quantities) in Italy.
21. There is evidence from the provisional liquidator that at least one AGB consignment (which is not the subject of these assessments) was purportedly delivered to MTB when in fact it had been closed by the Italian customs authorities (and only reopened at the end of September 2001).
22. Mr Cahill's company, JJ Cahill, was the haulier in relation to one of the consignments to MTB (No 17). Mr Cahill at first told the provisional liquidator and Mr Curley that the shipments were genuine, but he has now made a witness statement (as has his driver, Mr Chatfield) that they were bogus. He says that he dealt with Mr Tufail Ahmad. The driver on all of the long trips was Mr Chatfield. The evidence from Mr Cahill is that his company never made any deliveries to MTB in Arco or anywhere else in Italy.
23. In relation to assessed consignment No 17 Mr Cahill says that Mr Ahmad asked Mr Cahill to arrange for 2 packages to be taken to Italy, which were delivered by AGB to JJ Cahill on October 12, 2001. One was bulky, and another slimmer package had a CMR for 3000 bottles of Bacardi Rum on 30 pallets (although the maximum capacity of the trailer which Mr Chatfield was to drive to Italy was 26 pallets). On October 15, 2001 Mr Cahill put the packages in the cab of the lorry.
24. After Mr Chatfield went through the Frejus tunnel, Mr Ahmad instructed Mr Cahill that Mr Chatfield should go to a service area near Milan, where someone would collect the packages. Mr Chatfield gave the packages to a person who Mr Chatfield subsequently recognised from photographs as Mr Bizzarro. According to Mr Chatfield, Mr Bizzarro stamped the pieces of paper, and returned the envelope to Mr Chatfield. Mr Ahmad telephoned Mr Chatfield and asked if the Italian had taken the packages. Mr Chatfield then went to Belgium to collect Stella Artois lager for delivery in the UK to AGB.

Consignments to SAVM

25. Five of the consignments were allegedly sold and delivered to SAVM. In the case of some of the consignments there are letters and faxes purportedly passing between AGB and SAVM, in which SAVM places orders and confirms that payment will be made by courier, or in which AGB offers whisky and vodka for sale. Faxes purportedly from SAVM and signed by Joao Rocha (marketing director) show the fax number of SAVM as 35 121 793 4922, and an address at Terminal TIR, Alverca.
26. SAVM is a family company founded in 1926. It is now run by Mr José Vigario who denies receiving any of these consignments. His evidence is that SAVM produces wine, port, sparkling wines and brandies, and its products are sold in Portugal and exported to other countries in Europe. It does not, and has never imported any goods for sale in Portugal (except that it sometimes buy liqueurs and spirits from a Dutch Company, de Kuyper).
27. SAVM has a warehouse facility and trading bond at Camarate. The building at Camarate is owned by a separate company called Vinland, with which it has had a trading relationship for many years. Vinland stores its own goods at the warehouse in Camarate, but SAVM's products are stored in bond and this is in a secure part of the warehouse which is always kept entirely separate from the stock of Vinland. SAVM's bonded warehouse at Camarate is relatively small, holding a maximum of approximately 1,000 cases of wine. When SAVM receives goods to the bonded warehouse at Camarate, the documents are stamped by an officer of Alfandega, who is based at Alverca, at Terminal TIR.
28. The evidence is that the number 35 121 793 4922 is registered to a funeral parlour. There are two faxes dated March 2002 which were apparently sent from that number, but the documents show that they were sent in June 2002. The solicitor for the provisional liquidator visited the premises of the funeral parlour in June 2002, and the managing partner, Mr Filipe Costa, told him that he had never heard of AGB or SAVM. Mr Vigario's evidence is that SAVM has never had a director called Mr Joao Rocha, and that Alverca Terminal TIR is a depot for road haulage firms, and SAVM does not have, and has never had, any branch, agent or associate based there. He has also confirmed that the letterhead of the faxes from SAVM and the SAVM stamps on the AADs are forgeries.
29. Mr Vigario says that on April 30, 2002 he received a telephone call from Mr Manuel Reis of Vinland who told him that he had received delivery notes and invoices from AGB. Mr Vigario was extremely concerned because SAVM had never had any dealings with AGB. Mr Reis told him that he had found the documents in a post office box no longer used by Vinland. The invoice contained a reference to SAVM, although it was incorrectly given, and referred to it being at Camarate, Sacavem. Sacavem is a separate town from Camarate, and SAVM does not have any premises there.
30. Mr Parsons, of the Commissioners, visited Portugal in April 2002 and was present when statements were taken by the Portuguese police and fiscal authorities. The evidence of Mr Reis, the managing partner of Vinland, was consistent with that of Mr Vigario. He confirmed that the stamp on one of the AGB AADs was not one he recognised and not one used by SAVM, and that the signature was not of one of Vinland's employees. Mr Vigario confirmed that a fax allegedly sent by SAVM in Camarate to AGB had not been sent from his office, and was not signed by one of his employees. He had no knowledge of AGB, and did not import any merchandise from outside Portugal. The fiscal authorities confirmed to the Commissioners that the fiscal stamps and signatures were false.
31. The evidence from Mr Cahill is that his company never made any deliveries to SAVM at Camarate or anywhere else in Portugal. Mr Cahill and Mr Chatfield have made statements to the effect that the trip which purported to carry the fifth consignment was made by Mr Chatfield with an empty lorry. Mr Chatfield was instructed by Mr Tufail Ahmad to stop at the services on the A1 just north of Lisbon, and the envelope given to Mr Cahill by Mr Ahmad was collected by a Portuguese man driving a taxi on November 6, 2001. A man with a strong Indian accent asked Mr Chatfield to wait until he received another envelope from a person in a taxi, and then hide the envelope. Mr Chatfield says that he received a telephone call from Mr Ahmad, who said that if he were stopped by Customs, he should say that he had delivered a full cargo to Portugal. He then went to Belgium to pick up another load of Stella Artois.

Cash payments

32. Between February 2001 and May 2002 AGB received £7.9m in cash. The provisional liquidator says that in his 32 years of experience as accountant, auditor and insolvency practitioner he has never encountered a legitimate firm involved in export and import which conducts the majority of its business in cash.
33. Mr Tufail Ahmad denies the suggestion that the cash transactions are dubious. AGB had lost money from dishonoured cheques. It made commercial sense to receive clear funds before goods could be released to any company, and telegraphic transfers take too long to arrive from abroad. In order to accommodate customers who wanted goods immediately AGB obtained cash in advance to be safe rather than sorry. Mr Forrester told the provisional liquidator that the funds were required in sterling because AGB did not want to bear the exchange risk, and that Mr Ahmad kept a cash counting machine in an adjoining building.
34. The cash books and paying-in slips purport to show that £900,000 came from MTB and £300,000 from SAVM. Mr Rehman told the provisional liquidator that the cash was hand delivered by courier, and that the persons delivering the cash were mostly Asian but never Portuguese or (with one exception) Italian. Mr Rehman (and also Mr Forrester) told the provisional liquidator that customers were not given receipts. The provisional liquidator says that it is inconceivable that a person delivering such large sums of cash would hand it over without a receipt to confirm safe delivery for his principal.
35. As regards the alleged shipments to Italy, the Italian customs' authorities confirm that an Italian citizen may not lawfully remove cash of more than 10,000 Euros from Italy without special records and certification. MTB has never sought such permission and the customs authorities in Italy were not aware of large amounts of cash ever having been removed from its bank account. Mr Michelotti said that MTB did not buy or sell goods, but merely stored them, and he was not aware of MTB drawing large cheques from its bank account, particularly in sterling.

IV The issues and applicable principles

36. The principal issue is whether the fact that an appeal has been made to the Tribunal (and that security has not been required) means that a winding-up order should not be made, either because the Commissioners are not creditors, or because the debt may not be enforced, or because there is a bona fide dispute as to the amount claimed. Subsidiary issues arise as to whether (if AGB's arguments on the principal issue are substantially right) other creditors should be substituted, or (if there is no substitution) whether the petition should be dismissed or adjourned.
37. The Commissioners' position is that: (1) the assessments made by the Commissioners are in themselves sufficient to support the making of a winding-up order; but even if it is legitimate to go beyond the assessments and look at the underlying merits, AGB cannot, on the facts and law, show a bona fide dispute on substantial grounds as to the whole of the petition debt; (2) in those circumstances, the fact that AGB has lodged appeal documents against the Commissioners' assessments does not prevent the making of a winding-up order; and the court should do so; and (3) if (contrary to the Commissioners' case) it is for some reason inappropriate to make a winding-up order on the petition debt, this is a case where the court should substitute other creditors, or (failing that) adjourn rather than dismiss the petition.
38. AGB's position is that pending determination of the appeals in the Tribunal, there is no recoverable debt due from AGB, or, alternatively, there is a bona fide dispute, or, as a matter of discretion, the petition should be dismissed because otherwise AGB will be denied the opportunity of challenging the assessments.
39. The relevant principles are these. Where there is a substantial dispute as to the whole of the debt (or, in other formulations, a bona fide dispute or a dispute on substantial grounds; see Welsh Brick Industries [1946] 2 All ER 197), the court will not normally make a winding-up order: e.g. Stonegate Securities Ltd v Gregory [1980] Ch 576; Alipour v. Ary [1997] 1 WLR 534. This is so even if it is otherwise shown that the company is insolvent: see e.g. Mann v. Goldstein [1968] 1 WLR 1091. But in those circumstances it may substitute another creditor as petitioner; ibid p. 1098.
40. It is sometimes said that where the debt is disputed, the alleged creditor has no locus standi to present a petition: Mann v. Goldstein, at 1098-1099, approved in Stonegate Securities Ltd. v. Gregory, at 580. But this is a rule of practice only. A person is still a creditor, for the purposes of presenting a petition, so long as he has a good arguable case that a debt of sufficient amount is owing to him: Re Claybridge Shipping Co SA [1997] 1 BCLC 572, 574, per Lord Denning MR (decided in 1981). Accordingly, the court retains a discretion to allow the petition to proceed where the effect of a dismissal would deprive the petitioner of a remedy, or otherwise injustice would result, or for some other sufficient reason the petition should proceed.
41. A creditor who has obtained judgment may present a petition based on the judgment debt even though the judgment is subject to an appeal (and even if the judgment is subject to a stay of execution), but the proceedings may be suspended if security is given for the amount of the judgment debt. If the appeal has good prospects of success, that cannot turn the judgment debt into a disputed debt, but may be a factor in the exercise of the discretion.
42. The present case is not one of a disputed debt. The structure of the legislation is that (a) any amount due by way of customs or excise duty may be recovered as a debt due to the Crown: Customs and Excise Management Act 1979, s. 137(1); (b) where an amount of customs or excise duty, or VAT, has been assessed and notified, it is "deemed to be an amount due and may be recovered accordingly": Finance Act 1994, s 12(3); Value Added Tax Act 1994, s. 73(9). There is no doubt that the assessments have been made and notified, and there can be no question but that, subject to the issue raised by AGB on the effect of the appeals to the Tribunal, the assessments result in debts due from AGB.
43. The principal question is whether the qualifications in the Finance Act 1994, s. 12(3) ("subject to any appeal under section 16") and the Value Added Tax Act 1994, s. 73(9) ("subject to the provisions of this Act as to appeals") have the effect that if there is an appeal pending in the Tribunal the amount of the assessment is no longer "an amount due" and/or may not "be recovered accordingly," at any rate if the Commissioners (or the Tribunal) have determined that on the grounds of hardship security need not be lodged for the amount of the duty. AGB argues that if they have that effect then the Commissioners have no locus standi and the petition should be dismissed.
44. The primary submission of both parties is that the underlying merits of the appeal are not relevant. But if necessary, the Commissioners submit that there is no bona fide dispute and the appeal is hopeless, and AGB submits that its appeals have a reasonable prospect of success and that there is therefore a bona fide dispute on substantial grounds.

V Statutory background

Excise duty

45. Under the Finance Act 1994, section 12(1) and (1A), the Commissioners have power to assess duty on a person from whom duty has become due in respect of any duty of excise. Section 12(1) applies where there has been a default under section 12(2) (especially failure to make returns, or inaccuracy in returns). Section 12(1A), which the Commissioners submit is applicable in the present case, gives power to the Commissioners to assess duty where the amount of duty can be ascertained by the Commissioners.
46. By Finance Act 1994, section 12(3):

"Where an amount has been assessed as due from any person and notified in accordance with this section, it shall, subject to any appeal under section 16 below, be deemed to be an amount of the duty in question due from that person and may be recovered accordingly, unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced."

47. The effect of section 14 is that, where the Commissioners have decided that a person is liable to excise duty, that person may require the Commissioners to review the decision: section 14(1)(b), (3). After the review by the Commissioners (section 15) an appeal lies to the Tribunal: section 16(1)(a). On the review under section 15 the Commissioners have power to withdraw or vary their decision (section 15(1)(b)) and on the appeal under section 16 the Tribunal may quash or vary any decision (section 16(5)).
48. By section 16(3):

"An appeal which relates to, or to any decision on a review of, any decision falling within any of paragraphs (a) to (c) of section 14(1) above shall not be entertained if any amount is outstanding from the appellant in respect of any liability of the appellant to pay any relevant duty to the Commissioners (including an amount of any such duty which would so outstanding if the appeal had already been decided in favour of the Commissioners) unless ...

(a) the Commissioners have, on the application of the appellant, issued a certificate stating either ...

(i) that such security as appears to them to be adequate has been given to them for the payment of that amount; or

(ii) that, on the grounds of the hardship that would otherwise be suffered by the appellant, they either do not require the giving of security for the payment of that amount or have accepted such lesser security as they consider appropriate;

or

(b) the tribunal to which the appeal is made decide that the Commissioners should not have refused to issue a certificate under paragraph (a) above and are satisfied that such security (if any) as it would have been reasonable for the Commissioners to accept in the circumstances has been given to the Commissioners."

VAT

49. By the Valued Added Tax Act 1994, section 73(7A) and (7B), the Commissioners may assess VAT due from a fiscal warehouse keeper who has failed to pay VAT or where a person has removed goods from a warehouse or fiscal warehouse without payment of VAT.
50. By section 73(9) where an amount has been assessed and notified to any person under those subsections:

"… it shall, subject to the provisions of this Act as to appeals, be deemed to be an amount of VAT due from him and may be recovered accordingly, unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced."

51. By section 83(p) an appeal lies to the Tribunal with respect to (inter alia) an assessment (or the amount of an assessment) under section 73(7A) or (7B). Section 85 allows for there to be an agreement to discharge or vary an assessment. Section 87 provides for the enforcement of a tribunal decision as a judgment.
52. By section 84(3) where the appeal is against an assessment under (inter alia) section 73(7A) or (7B) it shall not be entertained unless the amount that the Commissioners have determined to be payable as VAT has been paid or deposited with them, or on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the Tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.

Council Directive 92/12/EEC, February 25, 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended ("the Directive")

53. The Directive is given effect by the detailed rules made in the Regulations to which reference is made below, and it follows that reference may be made to the Directive to interpret their provisions in accordance with the usual principles applicable to the interpretation of national instruments made pursuant to Community obligations.
54. Under the Directive excise duty is to be chargeable at the time of release for consumption, which includes "any departure, including irregular departure, from a suspension arrangement" (Art 6(1)(a)). Under the Community law system of movements of duty suspended goods it is compulsory for an authorised warehouse keeper who consigns such goods to provide a guarantee to cover the movements: Art 13(a). Articles 13 and 15 permit the tax authority to obtain guarantees from other persons in place of the authorised warehouse keeper, but that was not done in this case.
55. Authorised warehouse keepers are to be exempt from duty in respect of losses occurring under suspension arrangements which are attributable to fortuitous events or force majeure: Art 14(1). There is no suggestion that fraud on the part of AGB's trading partners could amount to force majeure for AGB: see Case 296/86 Anthony McNicholl Ltd v. Minister for Agriculture [1988] ECR 1491.
56. By Art 15(1) the movement of products subject to excise duty under suspension arrangements is to take place between tax warehouses. By Article 15(3): "The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorized warehouse keeper of dispatch, as provided for in Article 13…" By Art 15(4):

"Without prejudice to the provision of Article 20, the liability of the authorized warehousekeeper of dispatch and, if the case arises, that of the transporter may only be discharged by proof that the consignee has taken delivery of the products, in particular by the accompanying document referred to in Article 18 under the conditions laid down in Article 19."

57. All products moving under duty-suspension arrangements between Member States must be accompanied by a document drawn up by the consignor (the accompanying administrative document – the AAD), which is to be drawn up in quadruplicate, with one copy to be kept by the consignor, a second for the consignee, a third to be returned to the consignor for discharge, and a fourth copy for the competent authorities of the Member State of destination: Arts 18(1) and 19(1). The second, third and fourth copies must travel with the goods. The second copy is used by the warehouse of destination for its records. The third copy is used as a receipt of the consignment and must be returned to the warehouse of despatch within 15 days of receipt, and the fourth copy is provided for the use of the tax authorities of the Member State of destination. The Member State of destination may stipulate that the third copy should be endorsed with the official stamp of its tax authorities prior to its return to the warehouse of destination. The United Kingdom has not taken advantage of this power, but both Italy and Portugal have done so, and that accounts for the relevance in the present case of the genuineness of their customs stamps.
58. By Article 20:

"1. Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the Member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15(3), without prejudice to the bringing of criminal proceedings.

Where the excise duty is collected in a Member State other than that of departure, the Member State collecting the duty shall inform the competent authorities of the country of departure.

2. When, in the course of movement, an offence or irregularity has been detected without it being possible to determine where it was committed, it shall be deemed to have been committed in the Member State where it was detected.

3. Without prejudice to the provision of Article 6(2), when products subject to excise duty do not arrive at their destination and it is not possible to determine where the offence or irregularity was committed, that offence or irregularity shall be deemed to have been committed in the Member State of departure, which shall collect the excise duties at the rate in force on the date when the products were dispatched unless within a period of four months from the date of dispatch of the products evidence is produced to the satisfaction of the competent authorities of the correctness of the transaction or of the place where the offence or irregularity was actually committed. Member States shall take the necessary measures to deal with any offence or irregularity and to impose effective penalties.

…"

59. The rationale of these provisions is that in cases of diversion it is often very difficult, or impossible, to determine the moment or place of the diversion (and thus the moment of "release for consumption" of the goods under Article 6). That is why Article 20(3) provides that where it is not possible to determine where the offence or irregularity was committed, the offence or irregularity is deemed to be committed in the Member State of departure. The Commissioners submit that Article 20(2) (concerning the place where the irregularity was "detected") provides the same result in this case, but does not apply in circumstances where Article 20(3) applies more specifically.

Regulations

60. The relevant UK implementing legislation for the 15 shipments to September 27, 2001 were the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992, SI 1992 No. 3135 ("the REDS Regulations"), and thereafter for the other 10 shipments the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001, SI 2001 No 3022 ("the DSMEG Regulations"). Both were made under the Customs and Excise Management Act 1979 and the Finance (No. 2) Act 1992, and the latter also under the European Communities Act 1972, section 2(2). The provisions concerning AADs are implemented in domestic legislation by Regulations 10(1)(b) and 11 of the REDS Regulations and, from April 1, 2002, by the Excise Goods (Accompanying Documents) Regulations 2002.
61. The REDS Regulations provide for the payment of duty at the excise duty point, and by Regulation 4(2):

"If any duty suspension arrangements apply to any excise goods, the excise duty point shall be the earlier of...

(a) the time when the excise goods are delivered for home use from a tax warehouse or are otherwise made available for consumption, including consumption in a warehouse;

(b) the time when the excise goods are consumed;

(c) the time when the excise goods are received by a REDS or by an occasional importer or by an importer for whom the REDS is acting, or when the duty ceases to be suspended in accordance with those duty suspension arrangements;

(d) the time when the premises on which the excise goods are deposited cease to be a tax warehouse;

(e) …

(f) the time when the excise goods leave any tax warehouse unless...

(i) the goods are consigned to another tax warehouse in respect of which the authorised warehousekeeper has been approved in relation to the deposit and keeping of those goods, and the goods are moved in accordance with the requirements prescribed in regulations 9 and 10 below;

(ii) the goods are delivered for export, shipment as stores, removal to the Isle of Man; or

(iii) any relief is conferred in relation to the goods by or under the customs and excise Acts."

62. Excise goods may be moved in duty suspension from a tax warehouse to any other tax warehouse, or for export: Regulation 9(2). Provision is made for accompanying administrative documents in Regulation 11.
63. The DSMEG Regulations provide:

"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.

(4) For the purposes of this regulation, detection has the same meaning as in Article 20(2) of the Directive.

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 authorized warehousekeeper accounts for the excise goods to the satisfaction of the Commissioners.

….

"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.

(2) Any other person who causes or has caused the occurrence of an excise duty point as prescribed by regulation 3 or 4 above, shall be jointly and severally liable to pay the duty with the person specified in paragraph (1) above."

64. Under DSMEG Regulation 7 "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."
65. The interpretation and application of the DSMEG Regulations is much more straightforward than that of the REDS Regulations, and the Commissioners have proceeded on the basis that, for the purposes of this petition, if (contrary to their principal submission) the merits of the underlying assessment and of the appeals are relevant), then there can be no doubt that the combined effect of Regulations 4 and 7 of the DSMEG Regulation was to entitle the Commissioners to make the assessment under sections 12(1) or 12(1A) of the Finance Act 1994 on AGB as consignor, or guarantor, or as a person who caused the occurrence of the excise duty point, in relation to the last 10 consignments. The Commissioners say that AGB is liable for the duty whether or not it itself is implicated in the wrongful diversion of the goods; but they contend that the strong indications are that AGB is implicated in a diversion fraud. The Commissioners contend that the more apt DSMEG Regulation is Regulation 4, but say that the same result as to where excise duty is payable applies in this case under Regulation 3 (deemed detection in the UK).

VI Arguments

66. The principal argument for AGB is, in summary, as follows. The Tribunal directed pursuant to the Value Added Tax Act 1994, section 84(3), that the VAT appeal be entertained without payment or deposit, and the Commissioners agreed they did not require security for purposes of the Finance Act 1994, section 16(3), pursuant to their power to do so "on the grounds of hardship".
67. The words "subject to any appeal under [the relevant section]" in section 73(9) of the Value Added Tax Act 1994 and section 12(3) of the Finance Act 1994 are to be construed in the same way, in each case suspending any assessment when an appeal to the Tribunal is pending, and when (as in this case) the Commissioners or the Tribunal have applied the hardship provisions under section 16(3) of the Finance Act 1994 or section 84(3) of the Value Added Tax Act 1994. Accordingly, pending the determination of the appeal against those assessments, there is no enforceable debt due from AGB in respect of those assessments. The principal authorities relied on were Commissioners of Customs & Excise v Broomco (1984) Ltd (Court of Appeal, July 31,2000) and Bennett v. Commissioners of Customs & Excise (No. 2) [2001] STC 137, at 148.
68. According to AGB, there is a bona fide dispute as to liability. It should be possible for AGB to pursue its case without being compelled to pay the amount of the disputed tax, and section 12(3) of the Finance Act 1994 and section 73(9) of the Value Added Tax Act 1994 should be interpreted so as to be effective to give them a genuine right of appeal; and AGB relies on Coleman v. Commissioners of Customs & Excise [1999] V & DR 133, where HH Stephen Oliver QC, decided that section 84(3) of the Value Added Tax Act 1994 was not disproportionate since the taxpayer was not required to pay the tax in dispute in order for the appeal to be entertained if he could establish hardship, an issue which was to be decided by the Tribunal on the merits. But he did decide that section 84(2) was susceptible of undermining the fundamental principle of correct taxation and correct application of the compliance rules because (inter alia) it was automatic, and it used denial of access to the tribunals as an incentive to compliance: section 84(2) has the effect that appeals other than those specified in section 84(3) are not to be entertained unless the appellant has made all the returns which he is required to make and has paid the amounts shown as payable in the returns.
69. AGB says that if the matter is one of discretion, no order should be made, because otherwise AGB would be denied the opportunity of challenging the assessments: in effect it will be precluded from having access to the proper court for determining whether or not it in fact owes anything to the Commissioners.
70. AGB claims that the provisional liquidator was attempting to intervene in the appeals to the Tribunal with a view to ensuring that the appeals are dismissed. If AGB has a good case, it will have been stifled, which would be contrary to principles of EU law and to principles which underlie the Human Rights Act 1998. By contrast, if the petition is dismissed, the appeal before the Tribunal will continue and the merits of AGB's defence will be considered.
71. The Commissioners' position is that the assessments themselves are sufficient to support a petition and an order (relying on Re D&D Marketing UK Limited, Evans Lombe J., March 26, 2002 and Cozens v. Commissioners of Customs & Excise [2000] BPIR 252, C.A.) and the mere fact that an appeal may have been lodged in the Tribunal does not prevent the making of a winding-up order. The mere lodging of an appeal cannot as matter of principle cause the underlying debts the subject matter of the assessments to become bona fide disputed on substantial grounds, when otherwise they are not, and cannot be, disputed. If it were relevant and necessary to go into the extent to which AGB was implicated in the wrongful diversion of the consignments, there can be, the Commissioners submit, no substantial dispute that, through Mr Tufail Ahmad, it was so implicated.
72. The Commissioners accept that it would only be in a small number of cases that a petition would proceed in the case of an appeal. If there is a genuine appeal, nothing would be stifled. But here, they say, all the discretionary elements point in favour of a winding-up order. There is uncontested evidence that the company is insolvent, Mr Ahmad is in Pakistan, and the officers of the company claim to know nothing.
73. Alternatively it is submitted that Barking and Dagenham Council (who are creditors for about £36,000) should be substituted as petitioners and an order should be made. In the further alternative, it is submitted that if a bona fide dispute on substantial grounds is shown, then the petition should be adjourned (with the provisional liquidator still in office) rather than dismissed, because AGB is insolvent and there are serious grounds for concluding that it is involved in fraudulent activities; the Commissioners risk finding themselves without any remedy if AGB does indeed owe the liabilities which the Commissioners claim; and, in the circumstances, the interests of the creditors generally would be prejudiced by the dismissal of the petition.
74. The position of the provisional liquidator is that, if there is a choice before the court, the interests of the creditors would not be best served by dismissing this petition and handing AGB back to the director and shareholder(s).

VII Conclusions

Construction issue

75. The main authority on which AGB relies is Commissioners of Customs & Excise v Broomco (1984) Ltd (Court of Appeal, July 31, 2000). Broomco was formerly called Anchor Foods Ltd., and had been served with demand notices in respect of customs duties for New Zealand dairy products imported into the United Kingdom. It made an application to the Commissioners under Finance Act 1994, section 16(3)(a), for a certificate that adequate security had been given, and when that was refused, the Tribunal decided that the Commissioners should not have refused security (apparently on the ground that implementation, pending appeal, of the demand notes would cause irreparable damage) and that the appeals should be entertained.
76. There were two appeals before the Court of Appeal: one from a decision of Neuberger J refusing an application for summary judgment and granting a stay of the action, and another from the same judge refusing to wind up the company and staying the petition. I was informed that it was common ground that there existed a bona fide argument as to the company's liability, which had been raised by the appeals to the Tribunal; notwithstanding that, the Commissioners sought judgment on the demand notes, and also (when the application for summary judgment failed) an order winding up the company.
77. The principal issue on the summary judgment appeal was whether the judge was right in holding that the issue of irreparable damage under Article 244 of the Community Customs Code (established by Council Regulation 2913/92/EEC) was one to be exclusively determined by the Tribunal, as Broomco contended, or whether, as the Commissioners contended, it could be decided by the court as part of the enforcement process.
78. Article 244 provides:

"The lodging of an appeal shall not cause implementation of the disputed decision to be suspended.

The customs authorities shall, however, suspend implementation of such decision in whole or in part where they have good reason to believe that the disputed decision is inconsistent with customs legislation or that irreparable damage is to be feared for the person concerned.

Where the disputed decision has the effect of causing import duties or export duties to be charged, suspension of implementation of that decision shall be subject to the existence or lodging of a security. However, such security need not be required where such a requirement would be likely, owing to the debtor's circumstances, to cause serious economic or social difficulties."

79. Article 245 provides that the provisions for the implementation of the appeals procedure were to be determined by the Member States, and in the United Kingdom the procedure is to be found in sections 14 to 16 of the Finance Act 1994.
80. Nourse LJ said that it was implicit in a decision by the Commissioners to grant a certificate under section 16(3) that they recognised that they were required under Article 244(2) not to implement the decision. That meant that they had decided that Article 244(2) applied and that they must have decided that irreparable damage was to be feared for the debtor. The debtor had a right of appeal to the Tribunal both in respect of the security required under Article 244(3), but also in respect of the question of irreparable damage under Article 244(2), and both questions were exclusively for the Tribunal.
81. On the winding-up appeal Nourse LJ referred to the argument by counsel for Broomco that, if the summary judgment appeal were dismissed, the Commissioners would be neither creditors nor contingent nor prospective creditors within section 124(1) of the Insolvency Act 1986 and therefore had no locus standi to present a petition. Nourse LJ said that those submissions were plainly correct.
82. AGB submits that this decision is Court of Appeal authority for the proposition that where an appeal is pending to the Tribunal and on hardship grounds security has not been required, then the Commissioners are not creditors.
83. I do not accept this submission. That was a case on the Community Customs Code, whose provisions, being part of a detailed and unconditional Council Regulation are directly applicable and are directly effective in the United Kingdom. Where it requires suspension of the implementation of a decision, then its provisions must be given direct effect in the United Kingdom. That is why Nourse LJ said that where the Commissioners have ruled in favour of the appellant on a hardship application, the effect is that the implementation of the decision must be suspended.
84. But the decision is one on the directly effective Community Customs Code, which requires suspension of the implementation of an assessment where (among other conditions) irreparable damage to the person concerned is feared, and where the provision of security would be likely to cause serious economic or social difficulties.
85. This is an excise duty and VAT case, and not a customs case. The Community Code does not apply. The Broomco decision does not decide that the pendency of an appeal (with or without a hardship determination) suspends enforcement of an assessment outside the area of customs duties. The decision in Broomco has, in my judgment, no application to the operation of the relevant sections of the Finance Act 1994 and the Value Added Tax Act 1994, which are set out above.
86. As I have said, in the final section of the judgment in Broomco, in relation to the winding up appeal, Nourse LJ said that he accepted the argument by counsel for Broomco that if the summary judgment appeal were dismissed the Commissioners would be neither creditors nor contingent nor prospective creditors within section 124(1) of the Insolvency Act 1986 and therefore had no locus standi to present a petition. I do not consider that this can be read in isolation from the rest of the judgment, which (a) was concerned with the specific provisions of the Community Customs Code suspending implementation, and (b) was concerned with an appeal the bona fides of which was not in issue.
87. There are two other decisions which touch upon, but do not decide, the question. In Bennett v. Commissioners of Customs & Excise (No. 2) [2001] STC 137, at 148, Patten J said that once the appeal process under sections 83 and 84 of the Value Added Tax Act 1994 is complete, or if no appeal is made, then the amount specified in the assessment is deemed by section 73(9) to be the amount of VAT due and may be recovered accordingly; and that the words "subject to the provisions of this Act as to appeals" in section 73(9) should not be read as qualifying anything but the deeming provision in that section. Accordingly an appeal did not prevent a new assessment following an adjudication of an assessment which has been withdrawn. The judgment was not concerned with the question before me, and I do not consider that when Patten J said that the VAT was due "if no appeal is made" he was intending to express the view (still less, decide) that if an appeal was made, the VAT would not be due .
88. On the other hand, in Cozens v. Commissioners of Customs & Excise [2000] BPIR 252 counsel for the Commissioners had submitted that the sum in the assessment remained a debt due until the assessment was successfully appealed, and Mummery LJ said (obiter) that he agreed with the propositions advanced by the Commissioners. But since the issue in the present case was not before the Court of Appeal, I do not regard this agreement with submissions as authority in itself for the proposition that only a successful appeal prevents the VAT being due.
89. The only directly relevant authority is Re D & D Marketing (UK) Ltd, March 26, 2002 (Evans-Lombe J), where VAT assessments for more than £9 million were made. The company claimed that the mobile telephones on which the VAT was assessed were imported by another entity and sold to the company, and contended that the total liability was £104,000. The assessments were subject to appeal. A winding-up order was resisted on the ground of the pending appeal to the Tribunal.
90. This was not a case where there was a dispensation from the provision of security on hardship grounds. Broomco does not appear to have been cited. The winding-up order was made. Evans-Lombe J considered that the mere lodging of appeals could not make the VAT cease to be due, when section 84(3) provided that where there was an appeal the VAT must be paid or secured before the appeal could be admitted and dealt with. Evans-Lombe J said that that conclusion was re-enforced by what Mummery LJ had said in Cozens, and not affected by what Patten J had said in Bennett, which was obiter, and if it meant what the company said it meant, should not be followed. If, however, the company stood a reasonable chance of succeeding on appeal, it would not be appropriate to make a winding-up order. But it did not have such a chance.
91. AGB does not say that the mere lodging of appeals prevents the sums assessed from being due, or prevents the making of a winding-up order. What it says is that a combination of the following has that effect: (a) the provision in section 12(3) of the Finance Act 1994 and section 73(9) of the Value Added Tax Act 1994 that amounts assessed are deemed to be an amount of excise duty or VAT due from the person assessed but "subject" to the applicable appeal provisions; and (b) the provisions in section 16(3) of the Finance Act 1994 and in section 84(3) of the Value Added Tax Act 1994 which have the effect that an appeal may be entertained notwithstanding the absence of payment of the provision of security where the Commissioners or the Tribunal have determined hardship. It supports this submission by reliance on Coleman v. Commissioners of Customs & Excise [1999] V & DR 133, where, as I have said, HH Stephen Oliver QC, decided that section 84(2) had the effect of denying access to the Tribunal as an incentive to compliance.
92. I am satisfied that the Commissioners are right on this point. It is essentially a question of construction of the expression "subject to any appeal under section 16" in section 12(3) of the Finance Act 1994 and the expression "subject to the provisions of this Act as to appeals" in section 73(9) of the Value Added Tax Act 1994.
93. The debt becomes due on assessment, and it is plain that the mere lodging of an appeal cannot suspend the obligation since the Tribunal can be seised with a hardship application after the appeal has been lodged. There is nothing in the relevant sections that expressly suspends the obligation or its enforcement. In my judgment the natural meaning of the provisions in section 12(3) of the Finance Act 1994 and section 73(9) of the Value Added Tax Act 1994 is that the debt is due and may be recovered unless and until the Tribunal decides that it is not due in whole or in part. This fits well with the other exception in both sections, namely that the debt is due and may be recovered "unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced." The sections therefore deal with the eventualities of withdrawal or reduction by the Commissioners on informal or formal review, and the determination by the Tribunal that the whole or part of the amount assessed is not due. The continuing enforceability of the debt is not a denial of access of the right to appeal. I also accept the submission of the Commissioners that if the appeals had the result that the Commissioners were not creditors, they would be in a worse position than an ordinary litigant, who could obtain provisional remedies pending resolution of the issues.

Conclusions on the facts

94. The question of the merits of the appeal can arise in one of two ways. First, it can arise if I am wrong in my conclusion that Broomco has no application to this case, but right in considering that Nourse LJ spoke of the company not being a creditor against the background that it was common ground that the amount assessed was the subject of a bona fide and substantial dispute. Second, even if (as I have found) the Commissioners are creditors, the merits of the appeal are plainly to be taken into account in the exercise of the discretion.
95. The evidence of the provisional liquidator is that he has looked for evidence which would tend to support the validity of those transactions, but has failed to find any supporting material to suggest there ever were any dealings with SAVM, or that the goods ever arrived in Italy or Portugal. There is no evidence of expenditure on travel, which there would have been if the substantial export business were genuine. There were only 4 people in the office; and although AGB was ostensibly exporting to EU countries there was no obvious sales or marketing activity. Since the appointment of the provisional liquidator, he has received no enquiries from customers, which he says is inexplicable if there was a genuine business.
96. In his first witness statement, Mr Curley relied strongly on CMRs produced by Mr Hogger of Deanvine Ltd to conclude that that documentation "constitutes compelling evidence that the goods, allegedly exported to Italy by AGBL were in fact not so diverted into the United Kingdom as is alleged…" In addition CMRs for Web Distribution and Cahill consignments also supported the proposition that goods were delivered to the bonds in Italy and Portugal. He relied on faxes between AGB and the overseas bonds to conclude: "… it is my professional opinion as an experienced commercial fraud investigator that the weight of documentary evidence thus far made available by [the Commissioners] and examined by my firm, clearly demonstrates that AGBL sold and delivered the goods the subject of such assessments to the bonds in Italy and Portugal and that, if a fraud existed, it was a fraud on the part of such bonds and that therefore any excise duty loss was a loss sustained not by [the Commissioners], entitling it to raise the assessments which are the subject of the petition debt, but to the Italian and/or Portuguese excise authorities." In his experience it was not unusual for businesses to accept and pay in cash, and it is not unknown for overseas businesses to pay in sterling.
97. In his second witness statement he says that he remains of the firm opinion that the documents lead to the conclusion that the goods were removed from the United Kingdom. He says that the enquiries which he had made and the analysis of AGB's records show the genuine export of goods by AGB to MTB and SAVM. He relies on the documents of the carriers and what he has been told by them, and also by Mr Rehman, including the fact that Mr Rehman said he posted invoices to MTB and SAVM. In particular he says that he had spoken to Mr Tufail Ahmad, who said that so far as he was aware no diversion of goods had taken place and that the sales to MTB and SAVM were genuine and the deliveries took place.
98. In his third witness statement he says that he believes that Mr Bizzarro and Mr Tosini committed a diversion fraud in Italy using false Italian customs stamps, and using another bank account. He accepts that the evidence suggests that some of the other parties to transactions with AGB were fraudulent and evading excise duty in one country or another, but it was inherently unlikely and certainly not necessary for AGB to be involved in such a fraud. The cash payments had now been explained, and the officers of AGB had now given their evidence, and he concludes: "It is was quite clear from the Provisional Liquidator's evidence that the goods in question left the UK."
99. I accept the submission for the Commissioners that for there to be any substantial contradiction of the direct evidence relied on by the Commissioners, there ought to be at the very least some detailed explanation and substantiation of the dealings which AGB claims to have had with MTB and SAVM. The principal evidence which has to be answered consists of evidence : (1) from Italy and Portugal as to the falsity of the AADs; (2) from the Italian customs authorities and from MTB that the consignments did not arrive; (3) from SAVM that the Portuguese consignments did not arrive; (4) from Mr Michelotti of MTB and of Mr Vigario of SAVM that they had had no dealings with AGB and no (or no credible) evidence of any such dealings actually occurring; (5) that the address of SAVM was inadequate and wrong and that the supposed fax number of SAVM was in fact that of a funeral parlour with no connections with SAVM, and that its warehouse was not large enough to take any of the shipments; (6) that AGB supposedly dealt with MTB and SAVM exclusively in cash brought by hand from Italy and Portugal with no receipts being taken, and without (except in one case) the involvement of Italian or Portuguese persons; (7) from Mr Chatfield that he made deliveries only of envelopes in empty lorries to Italy and Portugal for AGB on the instructions of Mr Tufail Ahmad, and the evidence of Mr Cahill which confirms Mr Chatfield's evidence.
100. As I have said already, the sole registered director of AGB, Mr Forrester, and the company secretary and accountant, Mr Mohammed Ahmed, both say they did not deal with the sales (or purported sales) to MTB or SAVM or the receipt of payments in respect of such dealings, which were all in cash; and they do not give evidence about them.
101. The only person apparently in a position to give evidence as to the genuineness of the sales to MTB and SAVM, or why they should deny receipt of the shipments, is Mr Tufail Ahmad. Mr Curley says in his second witness statement that he had spoken to Mr Ahmad, who told him that he did not agree with the allegations made that the goods sold to MTB and SAVM were never delivered and were instead diverted and sold illegally in the United Kingdom. He said that as far as he was aware no diversion of goods had taken place and the sales were genuine and the deliveries took place. Although he claims to have dealt directly with MTB and SAVM and has made a witness statement denying wrong-doing, he has not given any account of his dealings with MTB or SAVM or put forward any substantial case to contradict or explain the evidence that the consignments in question never reached, nor were intended to reach, MTB or SAVM.
102. There is no evidential basis for the suggestion by Mr Curley that there were diversions in Italy or Portugal either before or after the shipments were supposed to have arrived at MTB or SAVM. If the shipments were diverted prior to reaching MTB or SAVM, then AGB's case would be that the transactions from its point of view were normal commercial transactions. It would be able to give evidence about the genesis of the transactions, and there would not be the essentially incredible cash arrangements. If there were a diversion abroad of shipments which AGB thought were genuine shipments to MTB and SAVM there would have been no need for false addresses and fax numbers for SAVM.
103. The theory that the goods were diverted after arrival at MTB and SAVM is inconsistent with the evidence that the warehouse at SA could only hold 1,000 cases, when each Portuguese consignment was well over 1,000 cases. It is also inconsistent with the evidence that deliveries were supposedly made to MTB whilst the warehouse had been closed by Italian customs. I also accept that, except on the basis of unsupported speculation, it is difficult to think of a good reason why the witnesses from MTB and SAVM would have any reason to lie about whether the goods arrived, when the movements into the warehouses would, if they had occurred, been legitimate duty-free movements.
104. AGB's witnesses do not (with one exception) even say that Mr Vigario and Mr Michelotti are not telling the truth. The only exception is that Mr Curley says "I must at once state that Mr Vigario is plainly an unreliable witness." This is apparently based on Mr Vigario's statement that (contrary to the address shown on the faxes from AGB to SAVM) SAVM does not have any premises at Sacavem, which Mr Curley says is a contradiction of what Mr Vigario said in his fax about the invoice and delivery notes having been "addressed to our branch of Sacavem". But this appears to be nothing more than a recitation of the documentation containing the false address, and does not contradict the statement that SAVM has no premises there, and that Sacavem is a separate town from Camarate.
105. Accordingly, I accept the submission for the Commissioners that it is impossible to conclude that there is any substantial case that the irregularities/diversions occurred in Italy or Portugal to the exclusion of the UK. Where the conditions for duty suspension are not fulfilled in respect of a movement between bonds in different EC countries, including where it is not possible to tell what exactly has happened to the goods in question, the liability for duty falls upon the despatching warehouse, to whom (subject to limited and inapplicable exceptions) the risks associated with an intra-Community movement of goods are allocated under the relevant provisions. On that basis AGB is liable for the duty the subject matter of the petition whether or not it itself is implicated in the wrongful diversion of the goods; but the strong indications are that AGB is implicated in a diversion fraud.
106. For the sake of completeness I should mention that it was also suggested on behalf of AGB, in reliance on Case C-61/98 De Haan [1999] ECR I-5003, that a person might be relieved of liability in relation to import or export duties where national authorities have not informed that person that an investigation is being carried out and where the national authorities have in the interest of the investigation deliberately allowed offences or irregularities to be committed, thus causing the principal to incur a customs debt, which placed the principal in an exceptional situation in comparison with other operators engaged in the same business. I accept the submission by the Commissioners that there is no evidential basis for the point, and it is simply speculation by Mr Curley.
107. In my judgment, therefore, the Commissioners are creditors, and AGB on the evidence is plainly insolvent, and I will therefore make a winding-up order. If I had come to a different conclusion on the principal point, I would have substituted Barking and Dagenham Council as petitioner.