Scottish High Court of Justiciary Decisons

MANJIT SINGH and JASWINDER SINGH v. HER MAJESTY'S ADVOCATE [2001] ScotHC 20 (26th April, 2001)

[1] The appellants are husband and wife. On 26 October 1998 they appeared for trial in the Sheriff Court at Paisley on an indictment libelling the fraudulent evasion of Value Added Tax amounting in total to £167,030.77 contrary to section 72(1) of the Value Added Tax Act 1994. There was a further charge against the first appellant of fraud but this charge was withdrawn at the conclusion of the Crown case. The appellants were convicted of the charge to the extent that there was substituted for the figure stated above the words "an unknown sum" of VAT.

[2] The substance of the Crown case concerned an investigation by Customs and Excise officers into the accounts of two restaurants in Paisley and Glasgow respectively, the appellants being the sole partners in these businesses. Observations were carried out by Customs and Excise officers on the two restaurants over a period with the intention of building up a picture of trading at each of the restaurants and thereby producing figures for a composite week. From the observation logs the officers attempted to calculate the number of adults having a sit-in meal at each restaurant and the number of carry out transactions and the number of home delivery transactions at both restaurants. A very large number of schedules were prepared and spoken to by the two principal Customs and Excise officers who gave evidence, Mr. Grace and Mr. Whiting. Meal bills from both restaurants which were recovered on search of the appellant's house were annotated in such a way that it was possible to distinguish between sit-in meals, carryout meals and home delivery meals. By totalling the amounts of sit-in meals and by dividing this total by the number of person taking these meals, these officers were able to obtain what they regarded as the average cost per head of a sit-in meal at each restaurant. They further totalled the bills for carryout meals and home deliveries and by dividing these totals by the number of bills, they obtained what was regarded as the average cost of a carryout transaction and a home delivery transaction. These average costs were then applied to the observation figures for the three different meal types to bring out the likely turnover for each restaurant for the three meal types in the composite week. Various calculations were then made comparing the declared figures with what Customs and Excise regarded as the true figures and so bringing out in the end of the day an under declaration of VAT liability. Part of the material used in the evidence was provided from documents obtained from the partnership's accountant, Mr. Russell, who gave evidence for the Crown. These comprised Simplex VAT books which he prepared for the restaurants, using meal bills and purchase invoices supplied by the first appellant. Using information contained in these books, Mr. Russell completed quarterly VAT returns which were subsequently placed before the first appellant to sign. He then obtained a cheque for the requisite amount from the first appellant and posted the return and cheque to Customs and Excise. Information from the same books was used to prepare cash accounts for the partnership business. In evidence Mr. Russell explained that in the years to 5 April 1990, 1991, 1992 and 1993 he required to add sums exceeding £143,000 to the sales figures for both restaurants to make the accounts balance. He had asked the first appellant for an explanation for the apparent shortfall in sales but had received no such explanation. These discrepancies were not disclosed to Custom and Excise. This witness also accepted in general terms that if he found a situation where he had to increase the sales figures, this would suggest that the true sales figures had not been disclosed. The figures in the Simplex books formed a link in the evidence directed to the comparisons made between the declared figures in the quarterly VAT returns and the calculations of the appropriate figures derived from the schedules prepared by the Customs and Excise officers from observation and the bills recovered from the appellants' house. The Crown case therefore depended crucially upon both material derived from the items recovered by Customs and Excise officers on a search of the appellant's house and material derived from the books obtained by Customs and Excise officers from Mr. Russell.

[3] The meal bills were recovered from the appellants' house on 6 December 1993. The search proceeded under a warrant obtained by Mr. Grace on 3 December 1993. On that date Mr. Grace, as an officer of Customs and Excise and an authorised person for the purposes of Schedule 7 to the Value Added Tax Act 1983, ("the 1983 Act"), presented a petition under the Criminal Procedure (Scotland) Act 1975 and the 1983 Act to the sheriff at Glasgow. In the petition it was averred that there was reasonable ground for suspecting that a fraud offence which appeared to be of a serious nature was being, had been or was about to be committed on the two restaurant premises. The petition went on to relate that evidence of the commission of such an offence was to be found at the appellants' house at 2 Lubnaig Road, Newlands, Glasgow. Mr. Grace, as the petitioner, craved the court "to issue a warrant authorising any such authorised person or persons not exceeding four (4) in number and such other persons (not being authorised persons) as appear to him or them to be necessary to enter said premises (i.e. the appellants' house) at any time between the hours of 0600 and 2100 on any day within one month from this date, if necessary by force, to search them...and to seize and remove any documents...found there which he has or they have reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of a fraud offence which appears to him or to them to be of a serious nature..." On that date the sheriff granted warrant in the terms "The Court having considered the foregoing Petition and relative information on oath grants warrant as craved."

[4] From the Sheriff's report it appears that Mr. Grace had in all obtained four search warrants, all of which were executed on 6 December 1993, that concerning the appellants' house being one of them. During the course of the trial and during the evidence in chief of Mr. Grace, objection was taken on behalf of both appellants to the admissibility of the evidence obtained by way of the search of the appellants' house. As recorded in the Minutes of Proceedings, reference was made to paragraph 10, and in particular subparagraph (5), of Schedule 7 to the 1983 Act. The objection was repelled. Subsequently in the course of the evidence in chief of Mr. Grace, objection was taken on behalf of both appellants to evidence referring to documentation recovered from the appellants' accountant on the ground that the recovery had not proceeded under a search warrant. Reference was made to paragraph 8 of Schedule 7 to the 1983 Act. It appeared that this documentation was taken after the search warrant had been executed at the appellants' house on 6 December 1993 and after an interview of the first appellant by Mr. Grace and Mr. Whiting on the same day. That interview had proceeded, as was clear from a transcript of it, after the first appellant had been cautioned and told that he was going to be asked questions about fraudulent evasion of value added tax.

[5] Grounds of appeal have been lodged for both appellants directed to the sheriff's decision to reject the objection to the admissibility as evidence of the documents recovered upon the search of the appellants' house. In his report the sheriff records that the objection was based upon the assertion that the requirements of paragraph 10(5)(a) of Schedule 7 to the 1983 Act were not followed by the Customs and Excise officers when executing the warrant. After setting out the terms of the warrant, he states as follows:

We would only add that we were told that the objection was determined at the time upon an agreed basis of fact which is accurately set out in the sheriff's report already quoted.

[6] Paragraph 10 of Schedule 7 to the 1983 Act as amended is headed "Entry and search of premises and persons". The relevant parts of that paragraph are as follows:

[7] Miss Scott for the first appellant (whose submissions were adopted by Mr. Gebbie for the second appellant) submitted that each of the eight Customs and Excise officers was, in terms of section 48 of the 1983 Act, an authorised person. Eight officers, each of whom was an authorised person, had entered the appellants' house upon execution of the search warrant. This was an irregularity. The search warrant specifically authorised only four authorised persons to do so. No evidence had been given to the effect that any of those eight officers present were otherwise "necessary" persons. There was no material before the sheriff otherwise on which the court could hold that the irregularity was excusable (see Mowbray v. Valentine 1991 SCCR 494). This was no mere technical defect. Reference was made to R. v. Crown Court at Lewes, ex p. Hill (1991) 93 Cr. App. Rep. 60. No attempt had been made to excuse the irregularity before the sheriff (see Hepburn v. Vannet 1997 SCCR 698). Rather the presence of all eight officers had been justified as being permitted by the scope of the warrant. The matter also fell to be considered within the context of the European Convention on Human Rights and, in particular, the provisions of Article 8 providing for the right to respect for a person's private and family life and home and the related requirement that, amongst other things, there should be no interference by a public authority with the exercise of that right except such as is in accordance with the law. Such an exception was to be interpreted narrowly as had been said in the case of Cremieux v. France (EHRC 25 February 1993).

[8] In relation to the objection to the admissibility of the evidence recovered from the appellants' accountant, the sheriff records in his report as follows:

Paragraph 8 of Schedule 7 is headed "Furnishing of information and production of documents". Sub-paragraphs (2), (3),(4B) and (4C) provide as follows:

Paragraph 10A of Schedule 7 is headed "Order for access to recorded information etc." Sub-paragraphs (1) and (2) provide as follows:

At this stage it is also convenient to note that paragraph 10B makes provision for a procedure where documents et cetera are removed in the exercise of a power conferred by or under paragraph 10 or 10A. In particular, sub-paragraphs (1), (3), (4), (7) and (8) provide as follows:

[9] For the first appellant Miss Scott submitted that the sheriff had erred in his decision that in the circumstances the Customs and Excise officers had available to them the powers to proceed under paragraph 8(2)(b) to remove documents from the office of Mr. Russell. Having regard to the fact that search warrants had already been obtained for the search of other premises and indeed to the fact that the first appellant had already been interviewed by Mr. Grace and Mr. Whiting about an allegation of fraudulent evasion of value added tax, the use of powers under paragraph 8 was no longer available to Customs and Excise officers because it was apparent that the purpose of the seizure of the documents was in connection with a suspected offence "in connection with the tax". Even if on the face of paragraph 8 it could be said that wide powers had been given to the Commissioners in the policing of value added tax, the court should look jealously at such legislation, and if there was ambiguity in the legislation looked at a whole, such ambiguity must be resolved in favour of existing legal rights and particularly in favour of an individual's freedom of person or privacy. Reference was made to E.M.I Records Ltd. v. Spillane 1986 1 WLR 967 and to Reg. v. I.R.C., ex p. Rossminster 1980 AC 952 and more particularly to the judgment of Lord Denning in the Court of Appeal at pp. 977-8.

[10] In reply to these submissions, in relation to the execution of the search warrant at the appellants' house, the advocate depute accepted that there had been an irregularity in that, contrary to the clear terms of the warrant which was restricted the power to enter the premises and to search them to four authorised persons and in addition such other persons, not being authorised persons, as appeared to be necessary, eight authorised persons had entered the premises. But, he said, only four officers had in fact carried out the search. It was these officers who had conducted the search and had removed the relevant material. No doubt the remaining four officers had entered ostensibly under the authority of the warrant but they had not availed themselves of the full powers of the warrant since they had not concerned themselves with the search. The advocate depute accepted that it could be said that Mr. Grace and Mr. Whiting were present in the house as managers of the search operation. Nevertheless, in the circumstances, the irregularity was excusable in terms of the tract of authority founded upon Lawrie v. Muir 1950 JC 19. It could not be said that there had been bad faith or deception on the part of these or any of the other officers. There had therefore been no miscarriage of justice because the irregularity was excusable and could now be excused.

[11] In relation to the removal of documents from the premises of Mr. Russell, the appellants' accountant, the advocate depute maintained that the provisions of paragraph 8 of Schedule 7 were widely framed and gave the requisite powers to the Customs and Excise officers to require production by Mr. Russell of the documents which were removed. There were competing interests to be resolved here. It was to be observed that the judgment of the Court of Appeal in the Rossminster case was reversed in the House of Lords and therefore the judgment of Lord Denning should be applied with caution. Accordingly, there had been no irregularity in the manner in which the documents were taken into the hands of the Customs and Excise officers. They were lawfully taken and thus were admissible in evidence at the trial.

[12] In our opinion, the submissions for the appellants in relation to both grounds of appeal are well founded. In relation to the search of the appellants' house, we observe in the first place that Parliament, in enacting the provisions of paragraph 10 of Schedule 7, made specific provision in sub-paragraph (5) to enable the sheriff to place restrictions upon the manner in which the powers conferred by the search warrant would be exercised in relation to the number of authorised persons who could do so and the times of day during which the powers could be exercised. These restrictions are plainly conceived in favour of the individual or individuals whose rights are affected by execution of the warrant. As Lord Wilberforce observed in the Rossminster case at p. 997E:

Similar reflections of view are to be found elsewhere in the speeches of their Lordships in that case. In the present case, the Crown, very properly we would say, did not seek to support the decision of the sheriff on the basis upon which that decision proceeded, namely, that the four additional officers were to be regarded as "necessary". It is plain that the sheriff had not taken into account the specific requirement in the warrant that any person who was judged to be "necessary" for the purposes of the execution of the warrant, was not to be an authorised person. Some debate took place before us as to what kind of persons might fall under the umbrella of the phrase "necessary". But we do not consider it helpful to express any views on the matter other than to agree with the Crown that, in this case, the four additional officers could not be regarded as "necessary" persons, within the terms of the warrant, for the purposes of entry or search of the premises. Indeed, when regard is had to the part that these four additional officers appear to have played in the operation, we are far from satisfied that they can be said to have taken no part in the search. Their presence not only increased the number of individuals physically within the premises but diverted the appellants' attention from the search itself since the occasion was used to interview the second appellant and to attempt to interview the first appellant. Furthermore, the fact that two of their number, Mr. Grace and Mr. Whiting, were the most senior officers present and that Mr. Grace had been instrumental in obtaining the search warrant, suggests that they were as interested in the conduct of the search as those officers who were actually carrying it through. In any event, standing the admitted irregularity, it was for the Crown to excuse it. (See Mowbray v. Valentine: Hepburn v. Vannet). No attempt was made before the sheriff to do so. Rather, it was argued that their presence was justified by reference to the terms of the warrant itself. But the warrant will not bear the interpretation that was sought to be placed upon it before the sheriff. Indeed, the matter goes further because there was no evidence to show that the appellants were aware of the existence of such a restriction within the warrant or to show that they knew that they could have objected to the entry of more than four officers into their house. On the other hand, the full terms of the warrant ought to have been known to the Customs and Excise officers attending at the house and before it was entered. In these circumstances, we must conclude that the search warrant was unlawfully executed and that the items taken were unlawfully taken. Accordingly, the evidence derived from those items was inadmissible.

[13] In relation to the second ground of appeal, we are satisfied that at the time when the Customs and Excise officers visited the premises of the appellants' accountant, Mr. Russell, the investigation of an offence was already well under way. The power by reference to which it is said that the officers acted, is that to be found in paragraph 8 (3) of Schedule 7. It is to be observed that that sub-paragraph begins, reading short, "where...an authorised person has power to require the production of any documents from any...person" referred to in the preceding sub-paragraph. But that power is one in respect of which "every person who is concerned...in the supply of goods or services in the course of or furtherance of a business etc...shall...upon demand made by an authorised person produce...for inspection by that person...any documents relating to the goods or services..." (our emphasis). It does not permit removal except as provided by sub-paragraph (4B), that is to say, "if it appears to (the authorised person) to be necessary to do so", and that only "at a reasonable time and for a reasonable period". But such removal can only be for the purposes of inspection, and this construction of the limited purpose of the power appears to us to be consistent with the limited nature of the time at which and the period during which the documents will be taken. It is also consistent with the terms of sub-paragraph (4C) which allows for the provision by the authorised person of a copy of a document removed, free of charge, to the person by whom it was produced. We can envisage many circumstances in which the Commissioners may wish, through inspection, to ensure that records are being properly kept by taxable persons or indeed to compute the tax without having any ground for suspicion that any offence in connection with the tax has been, is being or is about to be committed. We would add that we were not addressed on an issue which arose in the case of E.M.I. Records Ltd. v. Spillane, namely whether the documents which were removed from Mr. Russell were documents which could be made subject to a valid notice served under paragraph 8(3). We assume that they were such documents, namely, documents being held to the sole order of the appellants. On the other hand, in circumstances where an investigation is taking place and Customs and Excise officers have reasonable grounds for believing that an offence in connection with the tax is being, has been or is about to be committed, leaving aside paragraph 10, Parliament has also provided, in terms of paragraph 10A, for their right to apply for an order for access to any recorded information, including any document of any nature whatsoever, which may be required as evidence for the purpose of any proceedings in respect of such an offence, which is in the possession of any person. The fact that this power is available where an investigation is taking place is clearly to be inferred from the references in paragraph 10B to "the officer in overall charge of the investigation". But that order can only be made if a judicial officer is satisfied that such reasonable grounds exist. In the Rossminster case Lord Scarman said:

In our opinion, the existence of the requirement in paragraph 10A to apply to a judicial officer for such powers (and the powers referred to in the Rossminster case then to be found in section 20C of the Taxes Management Act 1970 were very similar to those in paragraph 10 of Schedule 7) presupposes that Parliament intended to protect individuals who were suspected of such offences from fishing expeditions carried out under the guise of the provisions of paragraph 8 to obtain documents which might be required as evidence against them for the purpose of criminal proceedings. We accept that in paragraph 10A the order sought is against "any person" as opposed to "any premises". But that provision, like paragraph 10, requires that a judicial officer "is satisfied" as to the reasonable grounds for believing that an offence is being, has been or is about to be committed. It is a protection not only to the person who will be subject to the order against arbitrary removal of papers which may or may not be his, but it is also a protection for those who are suspected of an offence and whose papers may be in the hands of an agent, so that such documents will not be taken for the purposes of a criminal investigation except to the extent that a judicial officer is satisfied that there are grounds for doing so. Paragraph 10A did not form part of the original scheme of Schedule 7. In our opinion, it is impossible not to conclude that one of the purposes of the provisions of that paragraph was to protect those suspected of an offence in connection with the tax, who had become the subject of an investigation by Customs and Excise officers, against the arbitrary recovery of documents held to their order by a third party, which documents could subsequently be used in evidence against them. The structure of the provisions in paragraph 8 and of those in paragraphs 10A and 10B appears to us to draw a ready distinction between the position where a criminal investigation is under way, and, in particular, where those who are the subjects of the investigation have already been made aware of the allegation by those who are investigating the offence, and the position where the documents are sought to be produced for the purposes of managing value added tax. It follows that in the present case the seizure and removal of documents from the appellants' accountant was not lawful and that neither these documents nor evidence derived from them were admissible in evidence. In all, we regard it as axiomatic that, just as with any other officials who are granted special powers to be exercised in the public interest but which involve interference with an individual's right to privacy, Customs and Excise officers must exercise their powers only within the limits which are granted to them and, if they do not do so, then they act in excess of those powers and unlawfully.

[14] The advocate depute accepted that if we were to sustain the first ground of appeal, the convictions of both appellants would require to be quashed. The material evidence against each appellant was, as he accepted, derived from the documents recovered both from the appellants' house and from the appellant's accountant. Without such evidence, there clearly was no evidence sufficient for conviction of either appellant. In these circumstances it is unnecessary to consider the further grounds of appeal that were argued for each of the appellants.

[15] For the foregoing reasons we shall allow the appeal for each appellant and quash the conviction of each appellant.