Tudor Wines & Spirits Ltd v The Director of Border Revenue [2011] UKFTT 424 (TC) (29 June 2011)
[2011] UKFTT 424 (TC)
TC01277
Appeal number: TC/2010/06624
Appeal
against decision not to restore alcohol and vehicle – goods for commercial
purpose – duty not prepaid – whether decision not to restore reasonable –
appeal dismissed
FIRST-TIER TRIBUNAL
TAX
TUDOR
WINES & SPIRITS LIMITED Appellant
-
and -
THE
DIRECTOR OF BORDER REVENUE Respondents
TRIBUNAL: J. Blewitt (Judge)
T.
Bayliss (Member)
Sitting in public at Birmingham on 8 June 2011
Mr. J. Vaghela for the
Appellant
Miss D. Riley, Counsel
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. By
Notice of Appeal dated 14 August 2010 the Appellant, through his agent Mr
Vaghela of Vaghela & Co (Services) Ltd, appealed against the decision of
the Respondents (“UKBA”) dated 29 June 2010 not to restore alcohol and a
vehicle seized from the Appellant on 30 March 2010.
Undisputed background facts
2. Mr
S. Hothi, the Company Secretary of the Appellant Company was intercepted by an
officer of the UKBA at Dover Eastern Docks on 30 March 2010. He was found to be
carrying in a Mercedes Sprinter van:
(a)
1,899.6 litres of beer attracting unpaid excise duty in the sum of
£1,886.47, and
(b)
297 litres of wine attracting unpaid excise duty in the sum of £635.64.
3. Mr
Hothi was interviewed by an officer of the UKBA during which he provided a Duty
Deferment document and receipt for the goods which had been purchased in Calais. In interview, Mr Hothi explained that he had also brought excise goods back to the
UK in June 2009 but had not, on that occasion, been intercepted. Mr Hothi
stated that he intended that some of the goods would be sold at the off-licence
which is the Appellant Company in this Appeal.
4. The
officer was satisfied that the excise goods were held for a commercial purpose
and that Mr Hothi did not have the correct authorisation documents for the
proper removal of excise goods into the UK. Consequently the goods were seized
under section 139 (1) CEMA 19798 as being liable to forfeiture by virtue of
both Regulation 16 of the REDS regulations, section 49 (1) (a) (i) CEMA 1979
and regulation 24 of the Excise Goods (Accompanying Documents) Regulations
2002. The vehicle was also seized under section 139 (1) CEMA 1979 as being
liable to forfeiture under section 141 (1) (a) of the same Act, as it had been
used for the carriage of goods liable to forfeiture.
5. By
letter dated 6 April 2010, the Appellant’s agent withdrew the Appellant’s
appeal to the Magistrates’ Court, but sought restoration of the goods and the
vehicle. The grounds relied upon were:
(a)
The Appellant Company is a genuine VAT registered trader operating as an
off-licence;
(b)
The Appellant had no intention of avoiding the payment of duty on the
goods purchased. It was a case of ignorance of the law and excise duty
procedures as opposed to an attempt to smuggle alcohol;
(c)
The non-payment of duty prior to importation was a genuine error due to
the unawareness of the requirement to prepay the excise duty before bringing
the alcohol into the UK;
(d)
This is the first offence by the Appellant Company and leniency should
be shown, as contrary to other fraudsters who have no intention to pay any duty
or taxes.
(e)
Documents were provided in support of restoration, including the
supplier’s sale invoice, DVLA registration document, valid certificate of
insurance and valid MOT.
6. By
letter dated 12 May 2010, the UKBA notified the Appellant of its decision to
refuse restoration of the goods and the vehicle.
7. By
letter dated 18 May 2010, the Appellant’s agent requested a review of the
decision dated 12 May 2010. The grounds relied upon were:
(a)
The grounds stated in the letter of 6 April 2010 as summarised at
paragraph 5 of this Decision;
(b)
The seized goods were small in quantity and cost £2,607.00 (excluding
VAT), bought from a genuine EU trader with VAT in the sum of £510.98 and this
was the Appellant Company’s first occurrence which was a result of ignorance of
the law regarding prepayment of VAT. The Appellant’s agent queried whether
there was an issue as to double taxation as excise duty had already been paid
in France;
(c)
This is not a case where a fraudster would be attempting to smuggle
£100,000s worth of alcohol into the UK without any intention to pay VAT, taxes
etc as the Appellant is a genuine trader with no such intentions;
(d)
The Appellant is prepared to pay the excise duty due on the goods seized
whereby no loss of revenue would occur. The Duty Deferment document proves that
there was no intention to avoid payment of duty;
(e)
The only mistake was not to prepay the duty due to ignorance of law and
procedure. “To err is human” and “to forgive is divine”. This was the first
occurrence;
(f)
The vehicle seized was a commercial vehicle as opposed to a private
vehicle attempting to smuggle goods. A minimum request is made for restoration
of the vehicle;
(g)
Unless the review is favourable, the Company will collapse and
jeopardise its creditors’, employees’ and Director’s livelihoods.
8. By
letter dated 26 May 2010, an officer of the UKBA wrote to the Appellant’s agent
inviting any further information in support of the request for a review. No
further information was provided by the Appellant or his agent.
9. By
letter dated 29 June 2010, the Review Decision of Mr Raydon, Customs Review
Officer for UK Border Force, was sent to the Appellant’s agent, confirming that
the goods and vehicle would not be restored.
The Appeal
10. The Notice of
Appeal dated 14 August 2010 contended that the decision not to restore the
goods and vehicle was wrong for the following reasons:
(a)
The Appellant had no intention to avoid paying excise duty as it has
been a genuine VAT registered trader in the UK for some time. The trader is a
one man band and not fully aware of the stringent importation rules and
regulations. It is a case of ignorance of the law rather than avoidance of
payment of duty;
(b)
The Appellant is willing to pay the duty owed for the restoration of the
alcohol seized. It may also be the case that excise duty was already paid in France;
(c)
The confiscation and threatened disposal of the vehicle is causing
hardship and possible cessation of the trader’s activities and thus jeopardise
the livelihoods of its employees and Director;
(d)
The amount of alcohol is under £3,000, which is hardly a case of someone
attempting to import £100,000s worth of alcohol into the UK with no intention to pay VAT, taxes etc;
(e)
This is the first time the Appellant has been involved in such an
incident and the law should give the Appellant the benefit of doubt and be
lenient;
(f)
The Appellant contends that the alcohol and vehicle should be restored
on payment of the excise duty not prepaid before importation.
Evidence
11. We heard
evidence from Mr S. Hothi, the driver of the vehicle seized and Company
Secretary of the Appellant Company.
12. Mr Hothi
explained that the main suppliers for the Appellant Company were cash and carry
warehouses in the UK. Mr Hothi stated that he had decided to go abroad in 2009
in order to familiarise himself with the price of alcohol which could be
purchased in France and research the possibility of importing alcohol. Mr Hothi
stated that on that occasion he had imported the guideline amount for personal
use and that the goods imported were not sold in the off-licence.
13. Mr Hothi stated
that he decided to go to France again in March 2010 as he had been told that
the price of alcohol was good and a specific warehouse had been recommended to
him. Mr Hothi stated that on arrival he did not find the prices to be as he had
hoped, but he nevertheless purchased beer and wine. Mr Hothi stated that he had
not informed his father, the Appellant Company Director, of his intention to
purchase alcohol in France as his father was abroad at the time. Mr Hothi
stated that his father was in the process of obtaining advice from their
accountant Mr Vaghela, as he was considering trading in the wholesale of
alcohol and that was the reason for obtaining the Deferment Document.
14. Mr Hothi stated
that when he was intercepted by UKBA officers, he believed he had the correct
paperwork to import the goods purchased in France but was made aware by the
officers that the duty must be prepaid.
15. Mr Hothi stated
that since the seizure the Appellant Company has ceased trading as the vehicle
was essential to the purchase goods from UK warehouses. Mr Hothi agreed that
UKBA officers had visited the Appellant’s premises in March 2010, prior to his
trip abroad, when goods were detained, a number of which were subsequently
seized as invoices could not be provided.
16. Mr Hothi
contended that he had made a genuine mistake due to his ignorance of the law
and that had he known that the duty must be prepaid, he would have asked his
accountant Mr Vaghela to make the necessary arrangements.
17. In cross
examination, Mr Hothi stated that he agreed the notebook account of the
interviewing officer who had intercepted him on 30 March 2010 as accurate,
although he subsequently stated that he disputed that he had stated that he had
imported 2 pallets in 2009. Mr Hothi stated that he had not signed the notebook
due to feeling pressured during the interview, but that it was, in the main, an
accurate account.
18. Mr Hothi agreed
that the purpose of his trip on 30 March 2010 was to import alcohol for a
commercial purpose and that he had taken the deferment document as he believed
he was following the correct procedure, which was an impression he had formed
from speaking to his father and Mr Vaghela in 2009. Mr Hothi stated he was led
to believe that once the goods were sold by the Appellant Company, he was
required to provide the receipts to his accountant who would arrange for the
duty to be paid. Mr Hothi accepted that his understanding was incorrect, that
he did not have the documents required for the importation of the goods and
that the duty must be prepaid.
19. Mr Hothi
accepted that no evidence had been provided in support of the assertion that
the seizure of the goods and vehicle had caused financial difficulties to the
Appellant. He stated that the Company ceased trading following the seizure and
that he had left it to his accountant to inform the UKBA.
20. We also heard
oral evidence from Mr Raydon, the Review Officer who explained that the
Deferment Document did not allow the Appellant to import goods without payment
of duty as the UKBA would not be aware of the fact that goods had been imported
unless the importer was intercepted. Mr Raydon explained that the only option
available to the Appellant would have been to obtain an Occasional Importer
Licence, where the duty is prepaid and documents authorising the importation
are provided. Mr Raydon stated that the reason for such stringent procedures
being in place is as a result of the system for importing goods being
manipulated by the use of VAT documents and Deferment Documents without payment
of excise duty.
21. Mr Raydon
referred us to his detailed Review Decision dated 29 June 2010 and took us
through the reasons for his decision not to restore either the alcohol or the
vehicle seized on 30 March 2010.
22. In respect of
the goods, Mr Raydon explained that it was agreed by the Appellant that this
was a commercial consignment. As a result of Mr Hothi not paying the excise
duty prior to importation, or obtaining the correct authorising documents, the
goods were liable to forfeiture.
23. In respect of
the vehicle, Mr Raydon stated that he had considered if any steps had been taken
by Mr Hothi to follow the correct procedure. Mr Raydon noted that the Appellant
had an accountant, to whom Mr Hothi had spoken about the possibility of
importing goods for sale in the off-licence, and Mr Raydon took the view that
the Appellant’s accountant and Mr Hothi should have been aware of the
procedures to follow. Mr Raydon also took into account that Mr Hothi had been
abroad the previous year in order to purchase goods and consequently concluded
that Mr Hothi should have been aware of the rules and regulations governing
importations. Mr Raydon stated that in such circumstances, the general policy
of UKBA is not to restore the goods.
24. Mr Raydon stated
that he found it significant that only 3 weeks prior to the Appellant’s trip to
France, UKBA records showed that officers had detained goods from the
Appellant’s premises as they were not satisfied that duty had been paid. Mr
Raydon confirmed that a quantity of the goods detained were subsequently seized
and that no challenge was raised by the Appellant to the seizure.
25. Mr Raydon stated
that having considered these factors, he concluded that the Appellant must have
known of the correct procedures to follow and therefore the goods were
correctly seized. Mr Raydon considered the various grounds of appeal in support
of the Appellant’s application for restoration, but concluded that to make such
a mistake, as contended on behalf of the Appellant, so soon after goods had
been seized was either careless or deliberate, and in such circumstances to
restore the goods would, in the Officer’s view, encourage smuggling. The
Officer also concluded that this was not a “first occurrence” as submitted by
the Appellant’s agent, as goods had been imported in June 2009.
26. The Officer went
on to consider the issue of proportionality in order to assess whether there
should be a deviation from the policy not to restore the goods/vehicle. Mr
Raydon compared the value of the vehicle, estimated as £1,525, as against the
unpaid excise duty in excess of £2,500 and concluded that non-restoration of
the vehicle was proportionate.
27. Mr Raydon also
considered the issue of hardship raised on behalf of the Appellant. At the time
of making his decision, there was no evidence in support of the Appellant’s
contention that the non-restoration would cause financial difficulties. Mr
Raydon accepted that no doubt a degree of hardship would be caused by the loss
of the vehicle and the potential expense of its replacement/other transport
arrangements. Mr Raydon concluded that the Appellant had chosen to become
involved in a smuggling attempt and that the consequences in terms of hardship
caused were not exceptional so as to justify deviating from policy. Mr Raydon
invited the Appellant to provide any fresh information in support of his case
which had not formed part of the Review.
28. In cross
examination, Mr Raydon confirmed that he found that Mr Hothi, as driver of the
vehicle and Company Secretary, was the haulier responsible for the importation
and that no reasonable checks had been made by Mr Hothi to ensure that the
correct procedures were followed. Mr Raydon explained that taken together with
the trip in 2009 and the seizure of goods from the Appellant’s premises on 9
March 2010 he remained of the view that the goods and vehicle should not be
restored. Mr Raydon stated that despite the oral evidence of Mr Hothi that the
Appellant had ceased trading, there was no evidence in support of this
information or to corroborate the contention that it was as a direct result of
non-restoration in this case that trading had ceased.
29. Mr Raydon
confirmed that at the time of conducting his Review, he had full information
before him regarding the seizure of goods on 9 March 2010. Mr Raydon agreed
that this information, and that pertaining to Mr Hothi’s trip in 2009, had formed
part of his decision and that he had treated both factors as aggravating
features.
Submissions
30. It was submitted
by Miss Riley on behalf of UKBA that ignorance is no defence; the goods were
imported for a commercial purpose and therefore correctly seized and deemed as
forfeit.
31. Miss Riley
invited us to take into consideration the fact that the Appellant had been
involved in running a commercial business for approximately 18 months and had
the advice and assistance of his accountant in doing so. Miss Riley noted that
Mr Hothi had spoken to his accountant prior to his first trip abroad in 2009
and whether or not goods were imported commercially on that occasion, there had
been discussions between the Appellant and Mr Vaghela about commercial
importation. Consequently, Miss Riley submitted, the Appellant either must have
been aware or should have been aware of the correct procedures to follow and
the fact that the Appellant believed he only needed a Deferment Document was an
indication of the lack of checks made by the Appellant to ensure he complied
with legislative procedures.
32. Miss Riley
submitted that the note of interview when Mr Hothi was intercepted was accurate
and that Mr Hothi’s evidence had changed during the hearing when he
subsequently disputed the amount he had told the officer he had imported in
June 2009. Miss Riley contended that the Review Decision must take account of
evidence and information available at the time of the decision, and that the
Appellant had never previously challenged the note of interview.
33. Miss Riley
submitted that there was no evidence of hardship available to Mr Raydon when he
undertook his review, that the issue of proportionality had been considered and
that Mr Raydon’s conclusion was reasonable. Miss Riley contended that there
were factors present which Mr Raydon was entitled to treat as aggravating, such
as Mr Hothi’s trip abroad in 2009 and the seizure of goods from the Appellant’s
premises on 9 March 2010. It was also submitted that although the Appellant may
have been entitled to recover any duty paid in France, this was reliant on the
Appellant following correct importation procedures and therefore did not render
the decision not to restore the goods and vehicle unreasonable.
34. On behalf of the
Appellant, Mr Vaghela accepted that the Appellant was importing the goods for a
commercial purpose and that ignorance of the law is no excuse.
35. Mr Vaghela
submitted that he was unaware of Mr Hothi’s trip in March 2010 otherwise he
would have reiterated the correct advice as to procedures to follow to his
client. Mr Vaghela submitted that the seizure of the goods and vehicle on 30
March 2010 had contributed to the collapse of the Appellant Company and that as
Mr Raydon had confirmed that his decision would not have changed, it was
irrelevant whether or not this information was given to UKBA.
36. Mr Vaghela
submitted that that Mr Raydon had taken into account irrelevant matters, namely
Mr Hothi’s trip abroad in 2009 and the seizure of goods from the Appellant’s
premises on 9 March 2010. Mr Vaghela contended that, as a result the decision
not to restore the goods and vehicle was unreasonable and invited us to treat
the appeal with leniency.
37. In response to a
query from Mr Bayliss regarding the Notice of Appeal which refers to “the
confiscation…is causing hardship and possible cessation of the trader’s
activities…” Mr Vaghela explained that at the time of lodging the appeal notice
on 14 August 2010, he was unaware that the Appellant had ceased trading.
Decision
38. The issue for
us to determine was whether Mr Raydon’s decision on review not to restore the
goods or vehicle to the Appellant was reasonable and whether Mr Raydon had
considered all relevant matters and disregarded all irrelevant considerations
in reaching his decision.
39. In reaching our
decision we took into account the grounds of appeal relied on by the Appellant
and all of the evidence, both written and oral, before us.
40. It was not in
dispute that the Appellant was a VAT registered trader and that the goods
seized on 30 March 2010 had been imported for commercial purposes, namely to be
sold by the Appellant.
41. We found the submission
that Mr Hothi was unaware of the rules governing the commercial importation of
goods did not amount to an excuse and had properly been treated by Mr Raydon as
a factor which did not justify restoration of the goods or vehicle given that Mr
Hothi had the benefit of an accountant with whom he had discussed the
possibility of purchasing alcohol abroad, and consequently he either was or
should have been aware of the documents required and procedure to be followed.
We found that Mr Hothi’s evidence that he had gone to France in 2009 to
research the prices of alcohol was a relevant consideration, irrespective of
the amount of alcohol purchased on that occasion, in assessing the steps which
he had taken to ensure compliance with legislation. We found that the trip in
2009 and the seizure of goods from the Appellant’s premises on 9 March 2010
were factors properly taken into account by Mr Raydon and correctly treated as
aggravating features, being indicative of a previous occasions involving the
importation or non-payment of duty on alcohol which at the very least ought to
have put Mr Hothi on notice that there was a stringent regime to be followed.
We found that the Officer’s conclusion that the seizure on 30 March 2010 should
not be treated as the first incident was reasonable and that in assessing the
Appellant (through its Company Secretary Mr Hothi) as responsible for the
smuggling attempt, we concluded that Mr Raydon’s decision not to deviate from
UKBA’s restoration policy was reasonable.
42. We accepted the
submission by Miss Riley that the tax paid on the goods in France may have been recoverable by the Appellant but that this does not affect the issue
of restoration. We found that Mr Raydon had taken the correct approach in
considering whether the Appellant made any checks to ensure he was complying
with the correct procedure and that the responsibility ultimately rested with
the Appellant.
43. We found that
the Officer had properly addressed the issue of proportionality and that his
conclusion (that not to restore the goods and vehicle was proportionate) was
reasonable. We considered the submission on behalf of the Appellant that the
value of the alcohol seized was relatively small. We found that Mr Raydon had
correctly taken into account the value of the goods and vehicle in considering
whether his decision not to restore the goods was proportionate and we did not
accept the submission that smuggled goods must be of a high value or that a
small value of seized goods justified restoration more than a high value.
44. We accepted that
Mr Raydon had considered whether any exceptional hardship existed in this case.
No evidence of any hardship was put before Mr Raydon, despite invitations to
the Appellant on a number of occasions to provide any fresh evidence in support
of restoration. We noted that the review decision itself made clear that
further consideration would be given to restoration if fresh evidence was
produced, yet at no time between cessation of trade in the summer of 2010 and
the hearing was any information provided to Mr Raydon that the Appellant had
ceased trading or that the cause of cessation was a result of seizure of the
goods and vehicle. We noted that no evidence was provided at the hearing in
support of Mr Hothi’s assertions and we found that the reference made in the
Notice of Appeal to “possible cessation” when, on Mr Hothi’s evidence the
Appellant had ceased trading prior to the Appeal Notice being lodged, caused us
to question the reliability of the evidence. We found that Mr Raydon’s decision
that there was no evidence of any exceptional hardship such as could
lead him to conclude that the good or vehicle should be restored was entirely
reasonable and on the information available both at the time of the review
decision and the hearing we could not see how any different conclusion could be
reached.
45. In conclusion,
we found that Mr Raydon had taken into account all relevant factors and
disregarded all irrelevant matters in reaching his decision on review. We found
that the decision not to restore the goods or vehicle was both reasonable and
proportionate and that there was no evidence of any exceptional circumstances
existing in this case.
46. The appeal is dismissed.
47. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 29 June 2011
