United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E00467, [2003] UKVAT(Excise) E467

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Harding v Customs & Excise [2003] UKVAT(Excise) E00467 (04 August 2003)

Seizure of load of vodka and vehicle – haulier sole trader with one vehicle – restoration of the vehicle offered on payment of value of vehicle – what enquiries should Appellant have made – disproportionate under First Protocol of Human Rights Convention – Appeal allowed

MANCHESTER TRIBUNAL CENTRE

NICHOLAS HARDING

(Trading as Nick Harding Transport) Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mrs E Gilliland (Chairman)

Mrs M Crompton

Sitting in public at Manchester on 28 April 2003

Mr G Mahood of counsel for the Appellant

Mr J Close of counsel instructed by the Solicitors Office of HM Customs & Excise for the Respondent.

DECISION

This is an appeal by Nicholas Harding who at the material time traded as Nick Harding Transport (the Appellant) against a decision of the Commissioners to offer restoration of the vehicle used by the Appellant for the purposes of his business as a haulier on payment of a restoration fee. The vehicle was an HGV tractor unit registration number N851 DUA and a trailer registration number BFR 04. The tractor unit was on lease to the Appellant from Singer & Friedlander Commercial Finance and the trailer was on hire from BFR International. The restoration fee set out in the Commissioners' review letter dated 19 September 2001 was £30,857 but this was subsequently reduced by Mr. Murray, the reviewing officer to £23,350. The figure of £30,857 represented 20% of the duty involved and £23,350 was the value of the vehicle. The vehicle was the only vehicle which the Appellant had.

The facts not in dispute are that at approximately 07:55 hours on Monday 16 July 2001 the Appellant was stopped by HM Customs & Excise at the Import Freight Building, Eastern Docks, Dover. Some questions were initially put to the Appellant by the officer who stopped him, paperwork was examined, and the Appellant then at the request of the officer moved the vehicle to an examination bay. Another officer then interviewed the Appellant and a copy of the manuscript note of the interview, duly signed by the Appellant, is included within the bundle of papers before the tribunal. After the interview had been concluded the Appellant was informed that the vehicle and the excise goods, which were a load of Vodka, were being detained pending further enquiries to determine whether the importation of the goods was legitimate. Further enquiries were carried out by the ImpEx Team of HM Customs & Excise and as a result of these inquiries the goods and the vehicle were seized on 24 July 2001. The seizure information was posted to the Appellant on 27 July 2001. The Appellant had been told a few days before that the load and the vehicle would be seized and on 24 July 2001 the Appellant had sent by fax a letter to HM Customs & Excise requesting the return of the vehicle. By a letter dated 6 August 2001 the Appellant was informed that the vehicle would be restored on payment of a restoration fee of £30,857.

The Appellant required a review of this decision. It was reviewed by Mr. Murray who confirmed the decision in his letter dated 19 September but subsequently amended the amount of the restoration fee to the value of the vehicle in his letter dated 17 April 2002. Mr. Murray has given evidence before the tribunal.

The Appellant in his evidence to the tribunal has confirmed that he was in July 2001 a self employed haulier and had been such for some 3 years. Prior to that he had been an employed driver for a haulage company. Subsequent to the seizure of the vehicle, he once again became an employed lorry driver. We accept his evidence that the seizure of the vehicle had the effect of destroying his business as a self employed haulier and that he has not been able to afford to replace the vehicle.

The Appellant's instructions in relation to the load of vodka had been received on the previous Wednesday by telephone from Barry Reid who was a person he knew at BFR International BV, a Dutch freight shipping agency. He was to pick up spirits from the distillery at Chinchon in Spain. He had never picked up goods from there before and although he had carried spirits before, he had never done so for BFR International. Of the loads he had carried before, some went to warehouses (whether or not bonded he did not know), some he delivered direct to customers and others to the yard. In the present case his instructions were to deliver the load to Europex at Rotherham. He would be paid 30 days from the time he invoiced BTR International. It has not been suggested that the amount he was to be paid was anything other than normal for a journey to Rotherham from Spain.

So far as the paperwork was concerned, he had produced the relevant CMR and AAD documentation to HM Customs & Excise at Dover. He confirmed that he had been present when the vodka had been loaded and that he had locked the trailer after loading. He said that the seal on the trailer had been put on by Norfolk Line, the ferry operator. He had completed the CMR based on the information which had been given to him by a woman at the place of loading. The consignee named on the CMR and the AAD was Trapp Seller Ltd of 68/74 Tooley Street London SE1 2TF. So far as Europax of Rotherham was concerned, whilst it was a bonded warehouse, it was not in fact approved by HM Customs & Excise for the receipt and storage of spirits. The Appellant however was not aware that it had not been approved for spirits. The load manifest for Norfolk Line on 16 July 2001 showed the goods as "fruit juice". The quantity of Kalinka vodka seized was 14,880 litres, the duty on which totalled £154,285.14.

The reason why the vodka and the vehicle were seized was that the respondents as a result of the enquiries they made and the information available to them determined that the vodka had been imported improperly in contravention of the Excise Goods (Holding Movement and REDS Regulations 1992 (the REDS Regulations). The REDS Regulations govern the commercial movement of excise goods and make provision concerning excise goods moving under duty suspension and movements of duty paid goods. It has not been suggested before us that the goods were not being imported improperly, or that the seizure of the goods or the vehicle was not within the scope of the relevant statutory provisions and we are only concerned with the question of the terms on which the vehicle is proposed to be restored to the Appellant.

The stated ground of appeal in the notice of appeal dated 1 October 2001 is that "the decision of the officers is in the light of the circumstances unreasonable and in breach of my rights under the Human Rights Act".

Mr Mahood, who has represented the Appellant at the hearing, has submitted that in demanding the restoration fee the Commissioners' decision was unreasonable in the circumstances, was grossly disproportionate, and that the decision failed to comply with the First Protocol to the European Convention of Human Rights. The Commissioners have contended that the Appellant did not take all reasonable steps to ensure that the vodka was imported in accordance with the REDS Regulations and that in all the circumstances the offer of restoration at a restoration fee of £23,350 was reasonable and in line with the current policy of the Commissioners. The enquiries made by the ImpEx Team had established that Europax, although a bonded warehouse was not permitted to receive spirits and that Trapp Seller did not have a customer for the goods and that they were not required. The ImpEx Team had concluded that there was no intention for the vodka to go to bond at all. The Commissioners view was that an inward diversion and illicit importation had been planned. The tribunal has been told that Europax subsequently brought condemnation proceedings in respect of the vodka. The Commissioners' witness had only imprecise information but he was satisfied that the decision had been in the Commissioners' favour. As we have already stated however, it is not in issue before us that the goods were imported in breach of the REDS Regulations and were liable to forfeiture.

The view which was taken by Mr Murray in his review was that the Appellant had not made sufficient inquiries. There had been a revision of the policy of the Commissioners in relation to seized vehicles which had come into effect on 16 July 2001 which was the day on which the Appellant had been stopped. Mr. Murray himself was new to the job at that time and was not able to assist the tribunal as to what had been the policy before that date, save that he understood that the general policy had been that if freight goods were seized the vehicle carrying them would not be restored to the haulier. The new policy, he said, introduced a greater degree of proportionality and made it easier for the "front line" staff to deal with a situation. The Appellant, he said, fell into the band defined by Mr Murray as circumstances where the haulier had no knowledge but was negligent on the basis that he had not made basic reasonable checks. Thus there would be restoration of the vehicle on terms and on payment. The appropriate fee he subsequently determined was the value of the vehicle. This he said was a new policy but he was satisfied that there would have been negotiations with the haulage industry and that there would have been publicity about the policy, although he was unable to say what publicity had been given or when it had been given. A leaflet was produced to the tribunal primarily warning lorry drivers against turning a blind eye to tobacco smuggling but saying among other matters that the lorry driver should contact the delivery address if alcohol was being carried to check that the delivery was expected. The date upon which this leaflet was made available is unknown and there is no evidence that it had been distributed before 16 July 2001 or that the Appellant had seen it or ought to have been aware of it.

In his evidence the Appellant said that he knew that Europax was a bonded warehouse but that he did not know that it had a limitation as to no spirits. He said that the man in the street would not have known that there were different types of bonded warehouses. He did not see any need to check the delivery address (Europax) because he knew it was bonded and he knew where it was. He also said that he was not unaware of problems associated with drug smuggling and the like, but claimed to be unaware of the responsibilities which the Government had placed on haulage companies as to what was brought into the country. He knew that training was required for carrying chemicals, but said no-one knew of a need to be trained in carrying alcohol. He knew that a vehicle could be seized where there was smuggling. He, however, was not trying to smuggle. His instructions had been to attend and receive a load. When he was given his instructions, the freight forwarder had said that the load would be vodka or gin. At Chinchon, he had told the person to whom he was sub-contracted that he was leaving and requested him to book him on the ferry. He had completed the CMR form. He did not state in box 6 of the CMR form that the load was vodka and had simply written in "28 pallets". The Spanish lady had given him the AAD documents and the addresses. He had asked which was the address for the delivery and had written it down on the CMR together with the name of the buyer. He had not considered whether or not the transaction was legitimate as he had no reason to consider it illegitimate. So far as what were reasonable checks, the Commissioners he said could not tell him when he enquired of them and when he had written to his MP it took some 10 months for the information to be obtained

In cross-examination it was put to him that he had failed to take reasonable steps to check that Europax was bonded for spirits, the suggestion apparently being that he, or someone at the distillery at Chinchon or perhaps Barry Reid at BFR International should have checked with HM Customs & Excise. It was also suggested that he should have checked with Trapp Sellers that they had a buyer and with Europax that they were expecting a load of vodka. The Appellant's response was that he saw no need to make those checks. He knew Europax and its address and he believed that it was a bonded warehouse. He was not aware that there were different types of bonded warehouse. He also knew Trapp Sellers.

It has been accepted by the Commissioners that the Appellant was not knowingly involved in the illicit importation of the vodka in breach of the REDS Regulations and having seen and heard the Appellant give his evidence and be cross-examined we are satisfied and find that the Appellant was an honest witness. We are also satisfied and find that he believed he was delivering the vodka to a bonded warehouse in Rotherham for Trapp Sellers. He knew both Europax and Trapp Sellers and as far as he was concerned this was a normal and legitimate transaction. He had carried spirits on a number of previous occasions, although his evidence indicates that this had not been for BFR International and was probably for other consignees and to other bonded warehouses.

One of the matters relied on by HM Customs & Excise in deciding to offer restoration of the vehicle on payment of the restoration fee was that the cargo manifest of the ferry operator described the load as "fruit juice". Customs have access to the manifest and may use it when considering what vehicles should be stopped for examination. The manifest is completed by an operative of the ferry company on information supplied by the haulier. What in fact happened, in the present case the Appellant said was that a man came along and asked what the load was. The Appellant did not know who he was and he replied fruit juice. When he was asked why he had falsely declared the cargo as fruit juice, the Appellant said that if he had declared the cargo as vodka or any other high value load, he believed that there would be a real risk that his vehicle might be hijacked or broken into and the cargo stolen when he stopped somewhere on his journey. There was also a risk that the seals could be broken during the ferry crossing. We accept that this is why he described the load as fruit juice. When he arrived at Dover and was asked what he was carrying, he immediately said he was carrying vodka.

The tribunal has to consider what would have been a reasonable and proper approach for the Appellant as a reasonable haulier conversant with the responsibilities placed on hauliers carrying excise goods such as spirits to take in the circumstances in which he found himself. We do not consider however that the Appellant should in the circumstances of the present case have been expected to phone ahead to check that Europax was properly bonded to receive spirits. It is in our view unrealistic and we believe likely to be impractical also to expect a haulier on being given the delivery address at the distillery to telephone ahead to HM Customs to check that the warehouse which he knows is a bonded warehouse and believes to be properly bonded is in fact bonded for spirits. The mistake was an honest mistake and in our view was not an unreasonable mistake for a haulier to make. So far as the Appellant was concerned, he had been instructed to collect a load of spirits by an apparently reputable person, Barry Reid of BFR International for whom he had carried other goods before. The Spanish distillery appeared to be a reputable business, or at least there has been no suggestion that he should have suspected all might not be well. The consignee and the person to whom the delivery was to be made were known to the Appellant as were their addresses, which were genuine addresses. The paperwork appeared to be in order although the Appellant left box 6 on the CMR incomplete. There was nothing to suggest to the Appellant that the vodka was not to be delivered to a bonded warehouse.

Further we do not consider that the Appellant acted unreasonably in not checking with Trapp sellers or Europax to see that they were expecting the delivery. They were apparently reputable companies known to the Appellant with genuine addresses and there was in our view no reason why the Appellant should as a reasonable person have suspected that anything might be amiss.

The question of the impact of the Human Rights Act in relation to the seizure of vehicles used to bring smuggled goods into the United Kingdom was considered in Commissioners of Customs and Excise v Alzitrans SL.[2003] EWHC 75 (Ch). That too was a case involving a load of vodka and the seizure of the haulier's vehicle. In that case the haulier was Alzitrans SL, a Spanish company. The tribunal, had found that Alzitrans SL had not been knowingly concerned in the illicit importation of the vodka and that it was unreasonable and disproportionate for HM Customs to refuse to restore the vehicle. Blackburne J. held that on the tribunal's findings of fact it was disproportionate and thus in breach of the first protocol to the Convention (and thus unreasonable). In that case the vehicle was being forfeited and not returned. In the present case, although technically HM Customs are willing to restore the vehicle it is only on terms that the Appellants pays the market value of the vehicle. In practice this is tantamount to the forfeiture of the vehicle because the Appellant is being deprived of the full value of the vehicle. It is also clear that the Appellant does not have the means to pay the full value of the vehicle.

In Alzitrans Blackburne J. expressed his conclusions in paragraphs 45 and 46 of his judgment as follows:

"45. In my judgment, on the tribunal's findings of fact, the Commissioners' decision not to restore was indeed disproportionate and therefore not one which they could reasonably have arrived at. It follows that on this issue the Tribunal came to the correct conclusion. Looking at their findings of fact, it is not difficult to see why.

Alzitrans was not the smuggler, merely the unwitting means by which the smuggling was to be achieved. It was unwitting in the sense that, according to the uncontroverted evidence, although it knew its cargo was vodka (if not the precise quantity) it understood that the necessary documentation was in order and that the relevant taxes had been paid. It had made no attempt to conceal its cargo and as appears from other evidence before the Tribunal (in particular Mr McWilliam's first witness statement), co-operated fully with Mr McWilliam and his colleagues when the vehicle was intercepted. The vehicle, one of fourteen belonging to Alzitrans' haulage business, was self evidently a part of the means whereby Alzitrans, as haulier, carried on its business. Moreover, according to the evidence, Alzitrans had a blameless trading record, had been in existence for many years, had an excellent reputation in the area where it was based, had never carried alcohol; before and had only journeyed in the past to this country on eight or ten occasions, on each occasion to consign a quantity of vehicle parts".

The court also observed that Alzitrans had been deprived of the use of the vehicle for over 2 years.

Mr Mahood, counsel for the Appellant,, naturally relied strongly on the decision of the High court in Alzitrans and on what Blackburne J. said in the passages we have referred to. He was in our view right to do so. The present case has virtually all the features referred to in Paragraph 46 of the judgment and in substance the Appellant is being deprived of the full value of the vehicle. The Appellant had somewhat more experience of transporting spirits into this country than Alzitrans but like Alzitrans he was the unwitting means by which the smuggling was to be achieved. Unlike Alzitrans the vehicle was the only vehicle the Appellant had and the effect of the seizure has been to deprive the Appellant of the business he had been carrying on for 3 years. The Appellant had been in the haulage business for many years and there has been no suggestion that he had been in trouble with Customs before or that he did not have a good reputation in the haulage business. We regard the restoration of the vehicle on payment of its value of £23,350 as disproportionate and in breach of the first protocol and that accordingly the decision of the Commissioners was unreasonable. We also consider that the Appellant in the circumstances of this case did not fail to take reasonable precautions or fail to make reasonable enquiries.

It is not for this tribunal to substitute its view for that of the Commissioners but the appeal is allowed and the matter is remitted to the Commissioners under S. 16(4)(b) of the Finance Act 1994 to conduct a further review.

The Appellant has asked for costs and we direct that the Commissioners pay the Appellant's costs. If the amount of the costs is not agreed, either party may apply to a Chairman sitting alone for the costs to be assessed.

Mrs E Gilliland

Chairman

Released:

MAN/01/8297