United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2002/E00430.html
Cite as: [2002] UKVAT(Excise) E430, [2002] UKVAT(Excise) E00430

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Alzitrans SL v Customs & Excise [2002] UKVAT(Excise) E00430 (28 August 2002)

EXCISE DUTIES – consignment of vodka from Spain destined for Belgium diverted to UK – freight cab trailer and contents seized by Commissioners – vodka not owned by freight operators – claim for restoration of vehicle and trailer - appeal allowed

PROPORTIONALITY – Article 6 ECHR and Article 1 of Protocol 1

LONDON TRIBUNAL CENTRE

ALZITRANS SL Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Peter H Lawson (Chairman)

Ray Battersby

Shahwar Sadeque M Phil M Sc

Sitting in public in London on 18 and 19 June 2002

Jolyon Maugham, Counsel, for the Appellant

Michael Patchett-Joyce, Counsel, for the Respondents

© CROWN COPYRIGHT 2002


 


DECISION
1. The Appellant carries on trade as a haulier specialising in the transportation of fruit and vegetables throughout the European Union. It appeals against the decision of the Commissioners which is a deemed decision (pursuant to section 15(2) of the Finance Act 1994) confirming an earlier decision of 5 March 2001 ("the Decision") by which the Commissioners refused to restore to the Appellant a freight cab and trailer (vehicle registration numbers V7889CX and V1452R respectively). By a letter dated 9 April 2001, the Appellant required the Commissioners to review the Decision. By a letter of 15 May 2001, the Review Officer indicated to the Appellant that it was not appropriate to carry out a review of the Decision until condemnation proceedings concerning the said vehicle had been concluded, if it were the case that the Appellant sought to contend that the vehicle was not liable to seizure. The Commissioners were unable therefore to carry out a review within the 45 days prescribed by section 15(2)(b) of the Finance Act 1994 and the Decision was thus deemed to be confirmed by that section. The grounds upon which the Commissioners' decision was made were as follows:
2. The Appellant company asserts ownership of a Volvo F12 Intercooler and trailer with vehicle registration V7889CX ("the vehicle"). It does not assert any interest in the goods contained in the vehicle and seized by the Commissioners on the same date.
3. On 10 January 2001 Customs officers intercepted the vehicle at Leicester Forest East motorway service area on the north-bound side of the M1 motorway. Officers inspected the contents of the trailer which was found to contain a full load of palleted boxes of Boroskov vodka.
4. The driver was asked to produce the relevant paperwork for the goods and provided an Accompanying Administrative Document ("AAD") 01/0000001 dated 8 January from the Destillerias Ferri S L of Alicante, Spain. The use of such documentation indicated the goods were being moved in duty suspension under the provisions of Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (SI 1992/3135). The AAD consigned 15,840 litres of vodka to N V Biekorf, Droog Dokkenwerg, Antwerp, Belgium. It was confirmed by the Commissioners that both these organisations were registered Excise traders under the REDS Regulations.
5. The driver also produced an international consignment note (CMR) reference number 0268054 dated 8 January 2001 showing Alzitrans SL to be the carrier of the goods with the same consignor and consignee. Box 3 of the CMR contained an added manuscript note which read "London City 129". The driver also produced an envelope with a number of delivery notes, an invoice for the goods and a letter making reference to the AAD and CMR referred to above. All were on Destillerias Ferri stationery and addressed to N V Biekorf.
6. The driver also produced a fax copy of a ferry booking made on 8 January for a crossing on 10 January from Calais to Dover. He also produced a manual tachograph record covering the period from 3 January 2001 to 10 January 2001. Also on that record were directions to the Salt Box Café on the A850 road and a mobile phone number. When asked about the details on the paper, the driver explained that he was to meet his contact at the café by using the mobile phone number. He did not have a name for his contact.
7. The vehicle and trailer were seized under s.139(1) of the Customs and Excise Management Act 1979 ("CEMA") as liable to forfeiture pursuant to section 141 of CEMA in that they were used in the carriage, handling, deposit or concealment of goods liable to forfeiture; namely 15,840 litres of vodka.
8. The goods were seized under s.139(1) of CEMA as being liable to forfeiture under Regulation 16 of the Excise Goods (Holding, Warehousing and REDS) Regulations 1992 ("the Regulations") in that there was a breach of Part IV, Regulation 7 of the Regulations (as to which see below).
9. The vehicle and goods were formally seized by a Notice of Seizure dated 12 January 2001. By a letter of 12 February, the Appellant gave notice in writing of a claim that the vehicle was not liable to seizure. The Commissioners therefore ordered proceedings for condemnation of the vehicle pursuant to section 139 and Schedule 3 of CEMA. Those proceedings were conceded by the Appellants on the 31 October 2001. There is no dispute therefore that the vehicle was properly seized.
10. By a letter of 23 February 2001 the Appellant advanced the following explanation of events:
    
    "Mr Espana, the general manager of Alzitrans, was contacted early in January by a Mr Santiago Ferri who sought to arrange the transportation of the consignment of vodka from the Ferri distillery in Valencia to Antwerp. Mr Espana had not previously had any contact with Mr Ferri but was told that if the delivery worked out well there might be three or four trips of this order every week. A price of 280,000 Pesetas was agreed for the delivery and arrangements were made for the goods to be collected from the distillery on 8 January 2001 at 8.00am. Mr Espana was assured that such paperwork as was necessary would be put in place by the consignors.
    
    The cab which was to haul the goods was otherwise engaged at the collection time and so arrangements were made for the goods to be collected by another vehicle. When the driver of that vehicle arrived back at Alzitrans' depot, Mr Espana noticed that the CMR had the registration number of the first cab, not the cab which was to be used for the journey to Antwerp. He therefore called Mr Santiago Ferri to explain that the registration number was incorrect. Mr Santiago Ferri told Mr Espana that he could change the registration number on the CMR. It was during this conversation that Mr Santiago Ferri advised Mr Espana that there had been a change of plan and that the vodka was instead to be taken to the United Kingdom where the driver would be contacted and a destination for delivery arranged. Mr Espana expressed concern at the change in destination but was assured by Mr Ferri that, because the United Kingdom was still in the EU, the paperwork just needed to be manually endorsed with the new destination and he asked Mr Espana to write the words "London City 129" on the CMR. A new price of 500,000 pesetas was negotiated for the delivery.
    
    After the cabs were switched, Mr Garcia headed for the United Kingdom. He left Spain on 8 January 2001 and arrived in the UK at approximately 1.00pm on 10 January 2001. He was contacted on his mobile phone by a man who Mr Garcia knew as "Johnny" and was told to take the M20 towards London and that he would be called again in an hour. He then received another call telling him to take the M1 towards Birmingham. He was told not to get off the motorway at the Birmingham exit but to continue on towards Leicester. He was told he should then proceed to the Salt Box Café, some 50km north of Burton-on-Trent where he would meet Johnny the following day, 11 January 2001, at some time between 10.30am and 11.00am and be given the final delivery point for the vodka. Mr Garcia realised he was going to be early for the meeting. He continued up the M1 to the Leicester Forest East services where he stopped for the night. He arrived at Leicester Forest East services at about 6.00pm. It was there that the cab, trailer and contents were detained by HM Customs & Excise.
    
    Mr Garcia tried to contact Johnny on the mobile telephone number that he had been given – a number which appears on the vehicle's manuscript tachograph record – but on explaining the situation was told by the person who answered the phone, that Johnny did not want to come to the phone and, indeed, no longer wanted the vodka.
11. The movement of excise goods such as alcohol in the Community is subject, inter alia, to Council Directive 92/12/EC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products. Pursuant to that Directive, excise goods may be moved throughout the Community under duty-suspension arrangements subject to specified conditions which include, inter alia, a requirement that the movement be between bonded warehouses and strict requirements in relation to an accompanying administrative documents: see Article 15 to Article 21 of the Directive.
12. Commission Regulation (EEC) No 2719/92 makes further provisions in respect of the accompanying administrative document for movement under duty-suspension arrangements.
13. The regulations applicable to the movement of excise goods under duty-suspension arrangements are thus uniform throughout the Community.
14. In the United Kingdom, the relevant provisions implementing Community law are contained, inter alia, in the Excise Goods (Holding, Warehousing and REDS) Regulations 1992 ("the Regulations"). Regulation 7 provides:
    
    "Save as the Commissioners may otherwise allow, no person may import Community excise goods of a certain class or description into the United Kingdom unless

(a) he is a Registered Excise Dealer and Shipper (i.e. a REDS, as defined in the Regulations) who has been registered in relation to excise goods of that class or description;

(b) he has arranged for a REDS who has been so registered to account for the duty;

(c) the goods are consigned to a tax warehouse which has been approved in relation to goods of that class or description; or

(d) he is in relation to the goods an occasional importer who has complied with the requirements of regulation 15 below".

15. Regulation 9(1) provides that Community excise goods may be moved in duty suspension from the place of importation to:

(a) a tax warehouse, provided that the excise goods are of a class or description specified in the Commissioners' approval of that tax warehouse;

(b) any other premises provided that the excise goods are moved under the instruction of;

(i) a REDS who is registered in respect of excise goods of the same class or description as the imported Community excise goods and who has complied with the requirements imposed by Regulation 12; or

(c) an occasional importer who has complied with the requirements imposed by regulation 15 (that occasional importers may not hold or consign excise goods in duty-suspension)."

16. Regulation 10(1) provides:
    
    "Save as the Commissioners may otherwise allow or require and except for movements between excise warehouses which the Commissioners may specify in a notice, a consignment of excise goods may not be moved under duty suspension arrangements unless:

(a) the duty chargeable on the excise goods, and any charge described in paragraph (4) below is secured as provided for in that paragraph;

(b) the excise goods are accompanied by an appropriate document issued by the consignor;

(c) the excise goods are transported in containers or packages;

(d) the consignment is retained intact until one hour or such lesser period as the Commissioners may allow after the time of arrival of the excise goods at their destination when any approved seal (referred to in subparagraph (e) below) may be broken or removed; and

(e) except as the Commissioners may allow, the containers of packages referred to in subparagraph (c) above are secured by a seal, the form of which has been approved by the Commissioners."

17. Mr José Ramó Espana Laporta of Calle José María Lopico 50 , 46600 Alzira, Spain provided a Witness Statement of which the following is a translation:
    
    "I am the General Manager of Alzitrans Limited of Camino San Barnebeu 46600 Alzira, Valencia, a Spanish company incorporated in accordance with Spanish law. I own a 33% shareholding of Alzitrans. My two brothers similarly own an equal shareholding of 33% of the company.
    
    In my role as General Manager it is necessary for me to make arrangements with consignors and consignees for the transportation of goods to numerous destinations primarily located in Spain and France.
    
    Alzitrans currently owns 14 lorries and employs 13 drivers. It also employs 1 administrative member of staff.
    
    Alzitrans is a family-run Spanish company whose business is the haulage of fruit and vegetables and other general cargo. Although Alzitrans itself was incorporated in 1993, the family has carried on business as hauliers for over 50 years.
    
    Alzitrans major clients are all based in the Valencia province. I would estimate that approximately 75% of our haulage work relates to citrus fruit transportation and that approximately 90% of all our citrus transportation is carried out on behalf of Guillein Export Ltd.
    
    The remaining 25% of our haulage work relates to the transportation of general goods and in particular the transport of Ford vehicle parts.
    
    Alzitrans exports its citrus cargoes exclusively to destinations in France whilst the vast majority of transportation of general goods is undertaken internally in Spain.
    
    I would estimate that Alzitrans makes a 10% profit from its overall annual turnover.
    
    Alzitrans does not normally export goods to the United Kingdom although it has previously transported approximately eight to ten cargoes of Ford vehicle parts. I can recall that we agreed to the transportation of the said parts to the UK due to a particularly high demand, which enabled us to agree a competitive price with the consignors.
    
    Alzitrans had no previous experience of dealing in excisable goods prior to entering into the agreement with the Ferri distillery for the transportation of the consignment of vodka. Alzitrans has an excellent reputation in Valencia and has never been involved in any other form of litigation with any of the customs, excise or regulatory authorities of any of the Member States of the European Union.
    
    Mr Santiago Ferri first contacted me by telephone in early January 2001. Mr Santiago Ferri informed me that he wished to arrange the transportation of a consignment of vodka from the Santiago Ferri distillery in Valencia to Antwerp in Belgium. He informed me that there might be three or four trips of this order every week for the next year if the delivery worked out well. This was clearly an attractive commercial offer and we therefore agreed a price of 280,000 pesetas for the delivery of the consignment of vodka. It was agreed that the goods would be collected from the distillery on 8 January 2001 at 8am and I was assured that all the relevant paper work would be put in place by the consignors.
    
    The truck originally allocated to haul the vodka consignment was in fact otherwise engaged on the morning of the 8 January and I therefore made arrangements for the goods to be collected by another vehicle. I checked the vehicle on its return from the distillery to the Alzitrans depot and noticed that the CMR document made reference to the registration number of the original truck (V-0927-BY) and not to the registration number of the cab which was in fact to be used for the journey to Antwerp (V-7889-CX).
    
    I called Mr Santiago Ferri at 13.14 on 8 January 2001 to explain to him that the registration number on the CMR was incorrect due to the change in vehicle. He told me that I need not worry and that I could change the registration number on the CMR myself. He then proceeded to inform me there had been a change of plan and that the vodka would now need to be taken to the United Kingdom. He asked me for the telephone number of our driver Mr Garcia and I agreed to call him back so as to enable me to locate it.
    
    I then called Mr Santiago Ferri once more at 13.16 and informed him that I was unhappy with the new arrangement. I told Mr Santiago Ferri that it would be necessary to re-negotiate the agreed fee as I was conscious of the additional ferry costs incurred in a trip to the UK and further of the likely delays resulting from queuing at the respective ports.
    
    January is an exceptionally busy time for our business since it is effectively peak season for the transportation of citrus fruits. Due to the high demand it is therefore often possible to increase our transportation prices due to the relatively limited number of trucks available. I was therefore particularly reluctant to arrange for a truck to travel to the UK at the previously agreed sum of 280,000 pesetas, as I knew that it would be more profitable to arrange for the transportation of citrus fruits closer to home.
    
    I explained my concerns to Mr Santiago Ferri and confirmed that we would only be prepared to transport the consignment of vodka to the UK for a fee of 500,000 pesetas, to which he agreed.
    
    I then asked Mr Santiago Ferri whether it would be necessary to obtain any additional documentation now that the vodka was to be transported to the UK rather than to Belgium. He assured me that this was not necessary since he had already paid the relevant taxes for the transportation of the goods to Belgium. He informed me that the United Kingdom was a member state of the European Union and as such the CMR merely needed to be endorsed with the new destination and it would not be necessary to pay any additional tax or to obtain any further documentation. Mr Santiago Ferri then asked me to write the words "London City 129" on the CMR and I duly followed his instructions.
    
    I had never previously had any form of contact with Mr Ferri. I do not know how or why he chose to contact us for the transportation of the consignment of vodka although I assume that he obtained our contact details through transportation contacts local to our area.
    
    I was however familiar with the Ferri distillery company which is located in Grandia. The distillery has been located in Grandia since I was a child and I have always understood it to have an excellent reputation. I was also well aware that the distillery was responsible for ensuring that we were supplied with the correct international consignment notes for the transportation of the boxes of vodka. Spanish law requires the consignor to prepare and provide all the necessary documentation for the transportation of goods and I therefore naturally assumed that Mr Santiago Ferri would be aware of the documentation required for the transportation of vodka into the UK. Alzitrans has no experience of transporting consignments of alcohol and I had no reason to suspect that I was being misled by Mr Santiago Ferri.
    
    Mr Garcia started work at Alzitrans on 25 July 2000. He was an exceptional driver and had made numerous trips to France to transport citrus fruits. he had however never transported a consignment of alcohol nor indeed had he ever transported any goods to the UK.
    
    I informed Mr Garcia of the change in destination and told him that I had supplied the consignor with his mobile telephone number and that they would contact him to confirm the exact destination for the delivery of the vodka consignment.
    
    It is common practice for consignors to alter their instructions as to the delivery location whilst the driver is in the process of transporting their goods. In the citrus industry for example a consignor may decide that the consignment of goods should be switched to an alternative market (e.g. from Paris to Lyons) and the driver is then contacted on his mobile telephone to be informed of the change in destination. This practice is commonplace and entirely legal. I therefore had no reason to be suspicious of Mr Ferri's decision to change the destination of the cargo of vodka. Similarly Mr Garcia would have had no reason to be suspicious of the various telephone calls received from the contact "Johnny" on his arrival in the UK. Mr Garcia would have been well aware of the customary need for consignors to switch destinations from his previous experience in the haulier business.
    
    Mr Garcia left the Alzitrans depot on the morning of the 8^th January 2001 and arrived in the UK at approximately 1pm on 10^th January 2001. It was apparent that Mr Garcia has still not been provided with directions on the morning of the 10^th January 2001 and I therefore rang Mr Santiago Ferri. He informed me that he had still not received confirmation of the drop off point and that he would find out and put a call through to Mr Garcia to confirm it to him.
    
    I understand that Mr Garcia subsequently received a call from a gentleman who introduced himself as "Johnny" and was instructed to take the M20 towards London. He was told that he would then receive a further call in an hour to be provided with further instructions. Mr Garcia made a note of Johnny's mobile telephone on the tachograph in the cab so that he could call him if necessary.
    
    Mr Garcia then received another call approximately 1 hour later telling him to take the M1 towards Birmingham. He was told to stay on the motorway and to continue towards Leicester.
    
    Mr Garcia then received a further call from Johnny who instructed him to proceed to the Salt Box Café, some 50 kilometres north of Burton-on-Trent. Johnny further informed Mr Garcia that he would arrive at the Salt Box Café sometime between 10.30am and 11am the following day, 11^th January 2001. Johnny confirmed he would inform Mr Garcia of the final delivery point on his arrival.
    
    Mr Garcia realised that he was going to be early for the meeting and so continued up the M1 to the Leicester Forest East Services, where he stopped for the night.
    
    I understand that Mr Garcia heard a knock on his cab door at approximately 20:40. On opening the door he spoke to Officer McWilliam of the Customs and Excise who asked him to open the back of the trailer so as to enable him to examine its contents. Mr Garcia then walked to the back of the trailer and opened the door. He was then asked to produce the relevant paperwork for the goods and he proceeded to provide the accompanying administrative document ("AAD") 01/00 00 001 dated 8^th January from the Distilerias Ferri. Mr Garcia also produced the International Consignment Note (CMR) with reference number 0268 054 dated 8^th January 2001 and the envelope provided by the distillery, which contained a number of delivery notes, an invoice for the goods and a letter making reference to the AAD and CMR documentation. He also handed over a faxed copy of the ferry booking made on 8^th January for the crossing on 10^th January from Calais to Dover. He also produced a manual tachograph record covering the period from 3^rd January 2001 to 10^th January 2001 and endorsed with the mobile telephone number of our contact "Johnny".
    
    I received a telephone call from Mr Garcia at 21:05 on the 10^th January 2001 to inform me that the Customs and Excise office had detained our vehicle. I told him to call the contact "Johnny" and informed him that no doubt he would be able to resolve any difficulties with the authorities.
    
    I then received a further call from Mr Garcia to confirm that he had tried to contact Johnny on the mobile telephone number which he had scribbled on the vehicle's manuscript tachograph record, further to his first telephone conversation with "Johnny" on his arrival in the UK. Mr Garcia told me that Johnny did not want to come to the phone and, indeed, no longer wanted the vodka.
    
    At 22:39 I received another call from Mr Garcia in which he explained the reasons for the detention of the vehicle. I was greatly alarmed by his comments and hurried to the office so as to obtain the telephone number of Mr Ferri. I rang Mr Ferri from the office at 23.01 and told him that the vehicle had been seized by Customs & Excise.
    
    Mr Ferri arrived at my office the following day at approximately 8.30 and I passed him all the papers which Mr Garcia had sent me by fax from the UK. He told me he was not overly concerned and that he would make arrangements to solve the problem.
    
    I rang Mr Ferri the following day at 10.49 and he told me that he was in Madrid and that he was checking over all the documentation. I rang him several times during the day for an update as to any possible progress and finally he told me that he would come and see me on the morning of Monday 15^th January.
    
    Mr Ferri did not appear at my office on Monday morning and I therefore contacted him at 16:37 to ask for an update. He told me that he was in England and that he had instructed an English lawyer to recover both the vehicle and the bottles of vodka. He informed me that there was no need for me to worry and that he would not leave England until the whole matter had been resolved.
    
    I called Mr Ferri the following day and he informed me that the English lawyer had confirmed that the vehicle should be returned by Friday of that week at the latest. I asked him to provide me with a telephone number of the English lawyer and he told me that he would provide it to me in due course.
    
    I called Mr Ferri once more on the 18^th January 2001 and he informed me that the vehicle would be released on the 23^rd or 24^th January 2001. I therefore called him on 23^rd January to ask whether it would be necessary for a driver to travel to England to pick up the vehicle. He told me to relax and informed me that he would contact me as soon as the lawyer was able to confirm that the vehicle was indeed ready to be released.
    
    I continued to call him on numerous occasions but it soon became apparent that the vehicle was not to be released. I eventually contacted a Mr Smith of the Customs & Excise Office and he informed me that they had not received any form of contact in relation to either the lorry or indeed the consignment of vodka.
    
    It was at that point that I realised that Mr Santiago Ferri had clearly lied to me and that he had in fact taken no steps to recover the vehicle on our behalf.
    
    I believe that the facts stated in this witness statement are true."
18. In response to questions asked by Mr Patchett-Joyce (through an interpreter) the following information emerged.
19. Alzitrans had been a family company since 1966 and it was incorporated in 1993. It was originally managed by his parents and it is now owned by him and his two brothers. The shares belong to the brothers and their wives, though the shares are held in the wives' names. There is no separation of assets as between husband and wife. Each brother has a transport company which he has power to control himself alone. He confirmed, with regard to paragraph 21 of his statement, that he had employed Senôr Garcia, who had been recommended by people in the business as an expert driver. He had experience of international driving before joining Alzitrans. A question arose about UK taxes when he was at the depot and he asked Senôr Ferri about this. At the beginning of January 2001 all the lorries were busy except when one of the drivers was not due for a rest day. All lorries which could be used were being used. 75% of his business was dependent on one customer who was the main client for distribution of citrus fruits. France was one of the destinations and for that country you need a CMR document.
20. He was interested in three or four international trips a week because at the start of the season new clients were looking for lorries without refrigeration. Their business is very seasonal and is mainly confined to three months of the year but he has to have vehicles available all the year round.
21. Mr Patchett-Joyce asked Senôr Espana whether he knew the name of Senôr Ferri and his company, and whether he made checks on someone he had not previously known. He had not, because he was very busy and did not have a practice of making such checks. Also he had no available lorries because they were so busy at that time of the year.
22. He had two telephone conversations with Senôr Ferri before the lorry was loaded and two or three more afterwards and before the seizure.
23. With regard to paragraph 20 of his witness statement he had a general knowledge of transport documentation but he had no special knowledge of the documentation required for exports to the UK. He did not need to know because responsibility for these matters falls on the consignor. The price of 280,000 pesetas did not give him a better profit than that for a consignment of citrus fruit, nor was the price better for a consignment to the UK than to Belgium. He agreed the price of 280,000 pesetas because his vehicle was not refrigerated, whereas an alternative journey was available for a refrigerated lorry to take a consignment to Lille. With regard to the CMR document Senôr Espana said that Senôr Ferri told him that the number of the vehicle did not matter but that there was going to be a change of destination. It was not necessary to change the registration number. He did not find the change odd in the least. It was normal to change the destination of a citrus fruit consignment frequently. He knew that "London/City 129" was not a physical address; it was not the actual destination because he had been told that the driver would be given further instructions. He was also content to change the name of the consignor and the consignee because he was following instructions from Senôr Ferri. It was a normal practice to change these details by mobile phone. He did not, in effect, consider these instructions unusual. It was not possible to deliver a consignment to the wrong place because the driver receives instructions from the consignee. Every driver has blank copies of this CMR document. This is the way things are done in Spain and it is an obligation of the haulier to have these documents.
24. After he had agreed the new price with Senôr Ferri he had no further contact with him.
25. In the final destination the driver would amend the document but in this case it was unchanged because of the seizure.
26. Senôr Espana had told Senôr Ferri that he wanted to amend the price after he had realised there were a number of odd factors. He had had very little business with the UK. The increase from 280,000 pesetas to 500,000 pesetas was large but the increased profit was not great. He agreed that there had been a quick renegotiation in the five hours between loading and departure. The increase was meant to cover ferry costs and the fact that he did not know the final destination. He did not press for details of the final destination but Senôr Ferri had promised to tell the driver. He did not agree that this was rather odd. He did not know that the consignment comprised 1320 cases of vodka. Senôr Ferri had requested transport and had not stated the number of boxes. The responsibility is to deliver the consignment. He was aware that the consignment was vodka but not the precise amount. He was concerned with the weight, not the quantity. The procedures followed were not out of the ordinary. Changes are always made. The only worry was that the destination stated (originally Antwerp) was not the final destination and there might be importation problems. He did not want the wrong address stated in case there were such problems. He did not have time to go to the distillery to fill in a new CMR document. He had told Senôr Garcia that he would be advised by Senôr Ferri as to the final destination. Senôr Garcia had let him know the instructions he received from Ferri including the café address. Senôr Ferri reassured him and said they would try to find final warehouses. Senôr Espana did say that it was not the correct procedure at this late stage. Senôr Garcia reported to him about going up the M1. He was not concerned because if Senôr Ferri knew what was happening it was not Senôr Espana's problem. He was always conscious of the driver's well-being.
27. Mr Patchett-Joyce asked Senôr Espana about the documents. There are five copies of the CMR. One is left with the consignor, and after delivery one receipted copy is left at the final destination. The other copies are left with the sender and one of those must be signed by the consignee and returned to the consignor as proof of delivery.
28. In reply to questions by Mr Maugham, Senôr Espana said that he regarded Senôr Ferri as acting for Ferri Distilleries. He was suing Senôr Ferri to claim damages for the lack of use of the seized lorry. He cannot do this until the future of the lorry is known. He could not sue Senôr Ferri himself because the consignor was the distillery.
29. Mr Maugham pointed out that there is no evidence to connect the consignor (Senôr Espana) with the vodka. He knew the company involved (Ferri Distilleries) but not the individual.
30. Evidence was given on behalf of the Commissioners by Robert McWilliam, a senior officer based at Mansfield Road, Derby. Before we record Mr McWilliam's evidence we need to refer to correspondence which took place between the Appellant's solicitors, Messrs Liddell Zurbrugg and the Commissioners.
31. On 23^rd February 2001 the solicitors wrote on behalf of the Appellant to the Queen's Warehouse Keeper requesting, pursuant to section 152 of the Customs & Excise Management Act 1979, the restoration of the cab and trailer unit, seized as allegedly liable to forfeiture on 10^th January 2001. They stated at the outset of the letter that the Appellant had no interest in seeking recovery of the contents of the trailer unit, being 15,840 litres of Boroskov vodka.
32. The letter went on to describe the history of this matter as already set out above. They then went on to say:
    
    "Our clients quite accept that it was naive to proceed to the United Kingdom on the basis of assurances given by Mr Ferri. However, our clients certainly did not have any interest in avoiding the payment of the appropriate duty. Indeed, given that they had no proprietary interest in the vodka, it is difficult to see how the position might be argued to be otherwise. Our clients value the good reputation that they enjoy in Valencia and most certainly would not have become involved in importing it had they appreciated what Community law, enacted in the United Kingdom in the form of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992, requires of them.
    
    Our client does not seek the return of the vodka. However, given all the circumstances, we would ask that the cab and trailer unit be restored. In a case where no intention to evade the payment of duty can be imputed to our client, we would argue that it is disproportionate to impose a punishment beyond that which our client has already suffered – i.e. being denied the use of their vehicle (for some six weeks to date) together with the costs of relocating Mr Garcia and pursuing this claim."
    
    They go on to refer to the Tribunal Decision in Bowd [1995] 2V&DR 212 at 226 that in considering whether to restore goods the state of mind of the applicant must be taken into account. "Given that our client's infraction of the law was an innocent – albeit a naive one – we do not consider that there can be any good reason for imposing further punishment over and above that which they have already suffered."
33. On 5^th March 2001 Mr McWilliam replied to the solicitors saying that "... the matter of seizure of the tractor unit and trailer are consequential to the seizure of the vodka.
34. [Therefore] in view of the fact that you have declared that your client has no interest in proceeding to condemnation for the vodka, I am now writing to confirm that the Commissioners of Customs & Excise are not willing to restore your tractor unit or your trailer.
    
    If you wish to appeal this decision please write to the Appeals Officer." and he gives an address in Peterborough and says that any request for a review of this decision must be made within 45 days of the date of his letter.
35. On 9^th April 2001 the solicitors wrote to Mr Ian Duff at the Peterborough office of the Commissioners formally asking him to review, within the terms of section 14(2) Finance Act 1994 Mr McWilliam's decision not to restore the cab and trailer unit.
36. They pointed out that Mr McWilliam's letter did not meet any of the points contained in their letter and they were, therefore, save for briefly responding to his argument, content to ask Mr Duff to review Mr McWilliam's decision on the basis of the material contained in their initial letter.
37. They went on to say that Mr McWilliam had misdirected himself in law in taking the approach that he was. He was wrong in contending that, because they did not seek recovery of the vodka, it follows "consequently" that the cab and trailer unit ought not to be restored. There was a very clear distinction between the vodka (ownership of which, prior to its condemnation, rested with the intended consignees) and the cab and trailer unit (ownership of which remained with the Appellant). They did not seek recovery of the vodka because their clients (the Appellant) do not own it and, given that it was in consequence of instructions given by the consignees that the Appellant find themselves in the position that they do, they were not inclined to seek recovery of it on the consignee's behalf.
38. In evidence Mr McWilliam accepted that his letter of 5 March was too brief.
39. After the date of the seizure he had received further information. Senôr Garcia had confirmed that he was never going to Antwerp. This confirmed, Mr McWilliam said, that it was not Mr Garcia alone who was concerned in the importation – he was acting on instruction. Mr McWilliam maintained that the Appellants were knowingly concerned in the importation of the vodka in that they allowed the driver to go to the Leicester East services on the M1 (north bound).
40. By letter dated 15 February 2001 Senôr Santiago Ferri certified that, "as being an intermediary and responsible for all the operation" he waived the purchase and return of 1320 boxes of Boroskov vodka that had been seized by the Commissioners and "who destination was Belgium".
41. We turn to Mr Maugham's submissions.
42. First, we will set out the relevant statutory provisions governing the appeal.
43. The appeals mechanism is set out in Chapter II of the Finance Act 1994. Section 14(2) provides, so far as relevant:
    
    Any person who is –
    
    (a) a person whose liability to pay any relevant duty or penalty is determined by, results from or is or will be affected by any decision to which this section applies;
    
    (b) a person ... on whose application such a decision has been made..." may by notice in writing require them to review that decision.
    
    Section 14(1) provides, so far as relevant:
    
    This section applies to the following decisions ... that is to say ...
    
    (d) any decision by the Commissioners or any officer which is of a description specified in Schedule 5 to this Act."
44. "Schedule 5 paragraph 2 provides, so far as is relevant:
    
    The following decisions under or for the purposes of the Management Act, that is to say -
    
    (r) any decision under section 152(b) as to whether or not anything forfeited or seized is to be restored to any person ..."
45. Section 15(1) provides:
    
    "Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so ..."
    
    Section 15(2) provides:
46. "Where -
    
    (a) it is the duty of the Commissioners in pursuance of a requirement by any person under section 14 above to review any decision; and
    (b) they do not, within the period of forty-five days beginning with the day on which the review was required, give notice to that person of their determination on the review,
    
    they shall be assumed for the purposes of this Chapter to have confirmed the decision."
47. Section 16 provides, so far as is relevant:
    
    "An appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say -
    
    (a) any decision by the Commissioners on a review under section 15 above (including a deemed confirmation under subsection (2) of that section) ..."
48. By letter of 23 February 2001, the Appellant asked the Commissioners to exercise their power under section 152(b) Customs and Excise Management Act 1979 to restore the vehicle and confirmed that they had no interest in seeking recovery of the vodka. That section provides, so far as is relevant:
    
    "The Commissioners may, as they see fit -
    
    (b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized ..."
49. By letter of 5 March 2001 the Commissioners refused. The operative paragraphs of that letter – which comprises the decision the subject of this appeal (the "Decision") – are as follows:
    
    "Thank you for your letters of 23 February 2001. The matter of seizure of the tractor unit and trailer are consequential to the seizure of the vodka.
    
    [Therefore] in view of the fact that your client has no interest in proceeding to condemnation of the vodka I am now writing to confirm that the Commissioners of Customs and Excise are not willing to restore your tractor unit or your trailer."
50. By letter dated 9 April 2001 the Appellant required the Commissioners to review the Decision. No response was received within the 45 day time limit and the Commissioners are, therefore, deemed to have confirmed the Decision.
    
    The Appellant subsequently appealed pursuant to section 16 and that is the appeal now before us.
51. Under section 16(4) Finance Act 1994, if the Tribunal "is satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it" they must allow the appeal. The test in that subsection is not to be given a narrow hearing, i.e. one which constrains the Tribunal to dismiss the appeal unless it is satisfied that the result of the decision is wrong. Rather the Tribunal must consider the "factual and legal basis" of the decision or the "route" to the decision. Mr Maugham referred to the case of Anthony Hendy (VAT Decision No: 17378 ) where at paragraph 61 the Tribunal stated:-
    
    "61. From the first appeals under the Finance Act 1994 the Commissioners have accepted that the subsection should not be narrowly construed, see Bowd v Commissioners of Customs and Excise [1995] V&DR 212 paragraphs 51 onwards. The approach at paragraphs 60 and 61 in Bowd was followed in Lindsay and Williams and accords with paragraph 23 of Hopping, which Mr McKay accepted. In particular the tribunal considered not only the end result of the decision but whether it was unreasonable in the legal sense. When considering the exercise of a discretion the courts have consistently concentrated on whether the factual and legal basis was correct rather than whether they would have come to the same conclusion. On this approach the words of section 16(4) are directed at the route to the decision and are not limited to irrationality in the result."
52. In other words, Mr Maugham submitted, if the Appellant satisfied the Tribunal that the basis on which the Commissioners arrived at the decision is unsatisfactory the appeal must be allowed.
53. Under section 16(6) the burden of proving the grounds on which the appeal is brought rests with the Appellant.
54. Mr Maugham described the Commissioners' decision in this case as a nonsense and clearly wrong as a matter of law. Therefore, it is ex-hypothesi unreasonable and on this he referred to the Bowd Decision [1995] B&DR 212 where, with reference to section 16(4), the Tribunal said:
    
    "60. In relation to the decision now under appeal we ask ourselves these questions:
    1. Did the Commissioners reach a decision which no reasonable Commissioners could have reached?
    2. Did the Commissioners take into account all relevant considerations in this case?
    3. Did the Commissioners leave out of account all irrelevant considerations?
    
    61. In all of these questions it is necessary that the Commissioners should have acted on a correct understanding of the law. A decision which rests on an error of law is ex hypothesi not reasonable."
55. The Commissioners, Mr Maugham said, have not, and cannot, contend that the decision is correct in law. He argued that their approach was to posit other reasons (the "Alternative Reasons") which would justify some other decision not to restore the vehicle. He argued that this approach is flawed because:

(i) as the Alternative Reasons are inconsistent with the original decision they cannot be advanced ex post facto as justification and he relied, in this respect, on R v Westminster City Council ex parte Ermakov [1996] 2 Aol ER 302 and R (on the application of Nash) v Chelsea College of Art and Design [2001] EWHC Admin 538.

(ii) The appeals mechanism is set out in the legislation for good reason and the Commissioners must engage with it.

56. In the Hendy case the Tribunal said, at paragraph 4, that a determination without reasons is not a proper compliance with section 15 of the Finance Act 1994. In that case, a Customs officer put in a statement producing 16 exhibits and gave oral evidence but this, the Tribunal held, was not a substitute for a proper review decision, nor was the paragraph in the Statement of Case setting out the Commissioners' contention.
57. The "Alternative Reasons" were set out in the Commissioners Statement of Case, as follows:
    
    "23. (i) the Appellant is an experienced haulier and ought to have been aware of the existence of strict procedures governing the movement of excise goods in the Community. In that regard it is of no relevance that the Appellant specialises in the transport of fruit and vegetables. The provisions relating to the movement of alcohol in the Community are uniform across the Member States and identical procedures exist in Spain and the United Kingdom. In the premises, the Appellant ought to have been aware of, inter alia, the requirement that movement of excise goods must take place between bonded warehouses, and of the requirements concerning accompanying administrative documents (AADs).
    
    (ii) The circumstances of the arrangement ought to have alerted the Appellant to the fact that the transaction involving the goods concerned was not legitimate, in particular:
    
    (a) the consignment was stated on the AAD as being destined for NV Biekorf, Antwerp, Belgium;
    (b) according to the Appellant, it was asked orally to amend the destination to "London City 129" but was not informed of, and did not enquire as to, the new consignee or the precise destination of the goods;
    (c) the only apparent contact in relation to the new destination was unknown to the Appellant and, according to the Appellant, was known only as "Johnny" and was contactable only by mobile phone;
    (d) according to the Appellant, on reaching London, the driver was told to go further than the "negotiated" destination and on to a transport café some 150km north of Burton-on-Trent where he would meet "Johnny" and would be told of an eventual delivery destination.
    
    24. The Commissioners contend that any reasonably competent trader ought to have realised that the goods did not form the subject of a legitimate transaction and were the subject of attempted smuggling. In the premises, given the value of the consignment concerned and the resulting duty evaded (amounting to £134,000), the conduct of the Appellant in these circumstances, and the legitimate desire on the part of the Commissioners to prevent alcohol smuggling, whether active or passive, the Commissioners contend that the decision not to restore the vehicle was reasonable and proportionate."
58. Mr Maugham went on to argue that if the tribunal was willing to consider the alternative reasons the decision not to restore the Appellant company's vehicle was disproportionate having regard to the Appellant's circumstances. He referred to the Privy Counsel case of De Freitas v Permanent Secretary Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1AC 69 where Lord Clyde said that the tribunal must ask itself:
    
    Whether:

(i) the legislative objective is sufficiently important to justify limiting a fundamental right;

(ii) the measures designed to meet the legislative are rationally connected to it;

(iii) the means to impair the right or freedom are no more than as necessary to accomplish the objective.

The first and second conditions are satisfied but, on the basis that:

(a) the Appellant's state of mind was "innocent albeit naive"

(b) that it was acting in the normal course of its business;

(c) that it did not stand to profit from any illegality

the Commissioners have gone considerably beyond what is necessary to secure the prevention of alcohol smuggling, therefore the alternative reasons disclose a lack of proportionality and the appeal must succeed.

59. Secondly, the alternative reasons fail to take into account that the Appellant does not specialise in the transportation of excise goods. The Commissioners state in the passage from their Statement of Case quoted above, that this is irrelevant. Therefore, Mr Maugham submitted, the Commissioners' decision is unreasonable.
60. Thirdly, Mr Maugham said, the Commissioners have taken irrelevant considerations into account because, in paragraph 24 of their Statement of Case, they expressly take into account the quantum of the excise duty chargeable on the vodka. That fact is irrelevant where, as here, the identities of the consignor and the haulier are different. He referred to the case of Alletta Nash [2001] EWHC Admin 538.
61. In the Ermakov case there was a statutory obligation to state reasons, but in the present case it is not clear that the Commissioners have to state reasons, though in fact reasons were composed in the Statement of Case to justify the original decision.
62. Mr Maugham's object in referring to these cases was to argue that the Commissioners had not made a proper decision or given a proper reason such as to allow the tribunal's jurisdiction to be limited under s.16(4) Finance Act 1994.
63. Senôr Espana, Mr Maugham said, was innocent, perhaps naïve, but at the worst, careless. He was acting in the normal course of his business. He was not a smuggler and did not stand to profit from any illegalities. The Commissioners had gone much too far. A fine might have been sufficient or a monetary penalty for restoration. Possibly confiscation of the vodka alone would have been sufficient. There was no evidence before us, Mr Maugham said, that other options, other than seizure of the vehicle, were even considered.
64. It is highly relevant, Mr Maugham said, that the Appellant company specialises in fruit and vegetables. Excise goods had never been carried before and the Commissioners have not taken these factors into account.
65. The Tribunal asked Mr McWilliam whether any enquiries had been made about Senôr Ferri of the Customs authorities of Belgium or Spain and Mr McWilliam said that no response had been received that they had any knowledge of the trader: i.e. Ferri.
66. Given that there was a bona fide warehouse consignor and a bona fide warehouse consignee and the AAD was outstanding, the Spanish Customs are responsible for pursuing the outstanding AAD and any outstanding excise duty. (See para. 4 above).
67. On the AAD any change of consignee has to be verified by the consignor's Customs. Mr McWilliam admitted that this question had not been asked.
68. We turn to Mr Patchett-Joyce's submissions.
69. Senôr Espana was, he said, fully aware of the CMR rules. He had been contacted by telephone by Senôr Ferri; he had never heard of him before but made no checks on him. The previously agreed fee of 280,000 pesetas had been increased to 500,000 pesetas without any negotiation and this might be thought to be odd. Senôr Espana had some knowledge of UK requirements and he knew that London 129 was not a physical address. The instructions to Senôr Garcia were relayed back to Senôr Espana, who spoke in turn to Senôr Ferri. The latter was "emollient and calming" but you would have expected Senôr Espana to make enquiries but he did not.
70. Mr Patchett-Joyce went on to comment on a number of points made by Mr Maugham.
71. He did not agree that the Ermakov case was relevant and pointed out that the Nash appeal was unsuccessful. The Commissioners had not been ignoring the legal mechanism or acting unfairly. There was nothing in principle unfair about confiscation and non-restoration. Senôr Espana, he suggested, had ignored one red light after another.
72. On proportionality, in the de Freitas case the first two items cited above were satisfied but the third "the means to impair the right or freedom are no more than is necessary to accomplish the objective" was not. Mens rea can be satisfied by circumstances that demonstrate perversity and a blind eye. This case was like a confidence trick. Senôr Espana had been lulled into a false sense of security. The suspension of his belief broke down when the lorry was on the M1. He should have told the driver to "park up" at that point.
73. To be "fraudently concerned" you do not need foreknowledge. You may start as a dupe or wilfully turn a blind eye.
74. The level of evasion is relevant to proportionality.
75. In his submission, the seizure of the vehicle was proportionate and non-restoration on the facts in this case was appropriate.
76. In reply, Mr Maugham submitted that Senôr Espana quite properly took the view he did. He commented on a number of points made by Mr Patchett-Joyce:

(i) It was not right to say that Senôr Espana took no steps. He had employed Senôr Garcia on a recommendation and kept him on the payroll for a year.

(ii) All available lorries were in use. The one used was unrefrigerated and could not be used for fruit and vegetables. To use an unrefrigerated lorry would take it out of circulation at a busy time. There are nine lean months in the year.

77. Mr Patchett-Joyce had said there had been no negotiation but Senôr Espana had said nothing to justify this. It was not fully explored. Senôr Espana had had, Mr Maugham pointed out, to bear the cost of the driver, the fuel and the ferry in both directions.
78. As to the change in destination, this happens all the time and is clearly quite normal. It did not set off any alarm bells at that stage.
79. Senôr Espana did not check the documentation thoroughly but the responsibility rests with the sender. The documents did not absolve Senôr Espana from complying with the REDS regulations. It is entirely normal that the consignor is responsible for the documentation. He has come to London to defend his reputation and does not accept that any moral obloquy can be attached to his conduct. He was careful, considerate and respectful and his answers were persuasive.
80. When he seized the vehicle, Mr McWilliam did not know the ownership of the vehicle or the vodka.
81. Senôr Espana had done nothing wrong except for using the wrong AAD and it followed that the Commissioners' action in seizing the vehicle was disproportionate and unreasonable.
82. The loss to the plaintive company was loss of profit for every working day the vehicle was not available. If the vehicle was restored the company would still have to meet the cost of returning it to Spain.
83. Our conclusions are:

(a) There were three principal parties to the drama:

(i) the consignor, Destillerias Ferri represented by Senôr Santiago Ferri.

(ii) the Appellant company represented by Senôr Espana and

(iii) the consignee, originally NV Biekorf, Antwerp, Belgium, but not ultimately identified, the seizure of the vehicle having been effected before it had reached its final destination.

84. Senôr Espana's evidence was that it was perfectly normal for the destination of vehicles under the Appellant company's control to be changed during a journey and this is, of course, simple to arrange by mobile telephone. As stated in paragraph 23 above, he did not find it odd or unusual for the destination of the consignment to be changed. He knew that "London City 129" was not a physical address but he had been told that the driver would be given further instructions. He was also content to change the name of the consignor and the consignee because he was following instructions from Senôr Ferri. He knew that the consignment comprised vodka but he did not know how many boxes. He was concerned with weight, not quantity. Senôr Ferri had said, untruthfully as it turned out, that he would try to find final warehouses.
85. We repeat these details because they seem to us central to the position of the Appellant company in this case.
86. We accept what the Appellant's solicitors said as set out in paragraph 32 above. The Appellant company had no interest in avoiding the payment of excise duty and VAT because, quite simply, they had no proprietary interest in the vodka.
87. We have concluded that the appeal should be allowed for the following reasons:

(i) the Commissioners' decision to seize the Appellant company's vehicle was unreasonable. Mr McWilliam, the officer who seized the vehicle, said that he considered that the Appellant company was "knowingly concerned" in the fraudulent evasion of excise duty. In our view, the evidence relied on by Mr McWilliam simply did not justify this conclusion.

(ii) Secondly, the seizure was disproportionate because the Appellant company was not knowingly concerned in the evasion of excise duty.

88. Under s.16(4) Finance Act 1994 we may do one or more of the following, that is to say:

(a) to direct that the decision so far as remains in force is to cease to have effect from such time as the tribunal may direct;

(b) to require the Commissioners to conduct in accordance with the direction of the tribunal a further review of the original decision; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not recur when comparable circumstances arise in future.

89. Pursuant to para 4(a) we direct that the Commissioners' decision is to cease to have effect from 11 January 2001 and the Appellant company's vehicle should accordingly be restored to it. The Commissioners must also pay compensation to the Appellant company for its loss of earnings attributable to the non-availability of the vehicle from 11 January 2001 to the date of its restoration.
90. We make no award under section 8 of the Human Rights Act 1998.
91. The Commissioners are to pay the Appellant's reasonable costs of the appeal and, if they cannot be agreed, the parties may apply to the tribunal for directions.
PETER H LAWSON CHAIRMAN RELEASED:

LON/01/8107-ALZ.LAW