United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E836, [2004] UKVAT(Excise) E00836

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Kimpton & Anor (t/a P & H Kimpton Transport) v Customs and Excise [2004] UKVAT(Excise) E00836 (13 December 2004)

E00836

EXCISE DUTY – Restoration of Tractor unit used for transporting large quantities of vodka – whether appellant had taken all reasonable steps to prevent diversion – finding that Appellant had acted with lack of care – appeal dismissed.

LONDON TRIBUNAL CENTRE

PETER ANTHONY KIMPTON and

HELEN KIMPTON

Trading as P & H KIMPTON TRANSPORT

Appellants

and

THE COMMISSIONERS OF CUSTOMS AND EXCISE

Respondents

Tribunal Chairman: Rodney P Huggins FCI Arb (Chairman)

Elizabeth M MacLeod CIPM

Sitting in public in Birmingham on 18 November 2004

Derek J Payne, VAT Consultant, for the Appellants

Fiona Darroch, Counsel, instructed by the Solicitor for Customs and Excise for the Respondents.

... CROWN COPYRIGHT 2004

DECISION

The appeal

Peter Anthony Kimpton (Mr Kimpton) and his wife Helen Kimpton trading as P & H Kimpton Transport (the Appellants) appeal against two decisions of the Commissioners contained in letters both dated 8 April 2002 reviewed and confirmed in a letter dated 24 June 2002. The two decisions were refusals to offer restoration of the Appellants' tractor unit, registration number X5PHK (X5) and two trailers numbered 139635 and 139636 each loaded with 1,430 cases containing 17,610 litres of Kovitch Vodka.

The issue

The question is straightforward. Was the decision not to restore the Appellants' tractor X5 reasonable arrived at by the Commissioners ?

Absence of the Appellants

Later in 2002 after the seizure of the tractor X5 on 15 February 2002, Mr Kimpton was taken ill with heart trouble brought on by the collapse of his business following the circumstances of the case. Subsequently, he has suffered strokes causing him severe difficulties. Because of his high risk of recurrent strokes he was advised, medically, not to appear in person at the hearing. His wife, the other Appellant, was also unable to attend as she has to look after her husband and in any event did not participate in the activities of their firm to any real extent and was not involved in the events out of which the appeal emerged. Mr Payne told the tribunal that in his opinion Mr Kimpton was not even fit enough to make a comprehensive statement.

My Payne did not call any witnesses and relied upon the transcripts of Mr Kimpton's interviews with Customs Officers and the documentation in the bundle of documents produced on behalf of the Commissioners by Mrs Darroch.

She called three witnesses, namely :

Bernard Martyn Wills (Mr Wills) who was the reviewing Customs Officer

Alison Jean Haseltine (Officer Haseltine) who was the investigating Customs Officer

Officer Tarsem Bhogal (Officer Bhogal) who made enquiries of the bonded warehouse where the vodka consignments on both occasions were destined.

The facts

From the evidence, we find the following facts.

Mr Kimpton told Customs Officers when interviewed that he had been a haulage contractor since 1996 with a yard in Royston, Herts where he lived. His wife was a partner in his haulage business but only carried out administrative duties of a minor nature. He controlled the day-to-day activities.

By the end of 2001 he had four tractors and had been hauling in Europe for some twelve months off and on but he told the Customs Officers when interviewed on 26 January 2002 that he had not been involved in transporting quantities of alcohol until January 2002.

On 26 January 2002, two tractor vehicles, registration numbers X5 and Y6PHK (Y6) both belonging to the Appellants with a trailer attached to each tractor were stopped separately at Dover Eastern Docks by Customs Officers. Each trailer was loaded with 1,430 cases containing 17,610 litres of Kovitch Vodka. The value of the revenue of each load was £187,785 making a total of £375,570.

Vehicle Y6 was the first vehicle stopped at about 13.00 hours. It was being driven by Mr Kimpton accompanied by Mr Terence Chillingworth. They produced an Accompanying Administrative Document (AAD) dated 25 January 2002 from Distillerias Yoar SL C/Ruiz De Alda, Los Arcas, Spain consigning 17,160 litres of vodka from Yoar Distilleries to Rangefield Import Export Limited, Battery Wharf, 98-100 Abbey Road, Barking, Essex. The transporter was given as "Key Trade Ltd".

Whilst searching the cab of tractor Y6, Customs Officers discovered another AAD dated 18 January 2002 which again consigned 17,160 litres of vodka from Yoar Distilleries to Rangefield Import Export Limited which is a bonded warehouse. The transporter was again Key Trades. In addition, a CMR and invoice relating to this earlier assignment were found. The invoice was addressed to Keytrades UK Ltd of Unit C7 Deal Enterprise Centre, Western Road, Deal, Kent. Mr Kimpton and Mr Chillingford were interviewed briefly.

As Mr Chilingworth was suffering from angina, the vehicle Y6 was restored immediately on humanitarian grounds by the Customs Officers who had stopped the vehicle but the attached trailer was detained and formally seized on 15 February 2002.

Vehicle X5 arrived at Dover Eastern Docks after a journey by another P & O ferry at about 5.30 p.m. It was being driven by Mr Peter Jessop accompanied by a Mr Peter Richardson. Both were employees of the Appellants. They too had an identical AAD as the load of vodka was of exactly the same quantity as that brought over by Y6. Both of the drivers

X5 and its trailer were detained and later seized by Customs on 15 February 2002.

At his interview on 26 January with Officer Ramsey, Mr Kimpton told her in answer to a question as to what were his delivery instructions for the load that he was going to ring up for the address but was not prepared at that moment to say who he was telephoning. He was asked if he was taking the load to the delivery address on the CMR which was given as "Rangefield". He said he did not know. He planned to take the trailer to his yard that day.

In his interview on 30 January with Officer Haseltine in response to her questions he said that :

(a) He had transported two consignments of vodka the previous week in two lorries. He had collected the vodka from the same distillery on 18.1.02.

(b) On the earlier trip, prior to reaching Calais, the contact he had only known as "JJ" telephoned him to say that the two lorries must on no account travel in the same boat. He thought that the loads must have been stolen. The revenue cost did not occur to him. He had no further contact numbers for JJ.

(c) On that earlier trip he had been instructed by JJ to deliver the loads to Rangefield. However, because it was late, the loads had to be parked in his yard. On Monday, 21.1.02, JJ telephoned to say that they were really busy at the warehouse and asked for the trucks X5 and Y6 to go to Truckworld, Grays, Thurrock. The loads were delivered there. The men who offloaded the goods took one set of paperwork, but would not sign for anything. The drivers delivering on his behalf were loathe to offer any other paperwork through fear.

(d) he had not been paid for the earlier job. He had not been able to contact JJ further.

(e) He later had a call from Mike of Keytrades who offered him a job transporting goods from Spain. He was reluctant because he had not been paid for the earlier job. Mike denied any knowledge of his company having contact with him earlier. However, when the fax came through it had the same collection address as that given to him by JJ and was again for the two loads of vodka. Mike managed to convince him he was a legitimate company and that we would get his money and it would all be going to a bond in London.

(f) When they arrived to collect the two loads of vodka, he was given exactly the same paperwork including AADs and invoices as had occurred on the previous occasion.

(g) After arriving in Dover with the second load of vodka, he telephoned the other driver, Peter, who was still in France, to tell him to deny all knowledge of the earlier trip. He was worried that the stuff had been stolen and that the men who had collected it might get nasty.

During his interviews, Mr Kimpton said that both the vehicles were registered to his firm but the two trailers had been hired from a company in Welling, Northampton who did not have any knowledge of the purpose for the hire. As a result the Commissioners released both the trailers subsequently.

Michael Turner of Keytrades was interviewed on 11 February 2002 by Officer Haseltine. He indicated to her that he had not paid for the vodka, nor sold any to UK customers yet. The faxes upon which he was questioned were, he said, misleading; he had nor dealt with the Appellant on the previous trip, nor had he any knowledge of that trip, and he took the view that someone had appropriated his company's name and paper, when he was shown copies of the paperwork and invoices relating to the earlier trip. He had sent faxes to Rangefield on 25 January 2002. He was unconcerned about the method by which the haulier took the delivery to the bond. Since that interview, Mr Turner has not been traceable.

The Two AADs and CMRs for the consignment of vodka dated 25 January 2002 showed Rangefield Import Export Ltd (Rangefield) as the destination address The detained two loads of vodka had been booked into Rangefield's Bonded Warehouse by fax on 28 January 2002 from Keytrades UK Ltd under their account. The delivery was to be made using vehicles X5 and Y6. This was after the vodka had been detained at Dover on 26 January. The identical consignments dated 18 January 2002 were never booked into Rangefield not received by them nor were any cancellations made. Rangefield never received any other deliveries of this type of vodka in the quantities mentioned in the fax.

Correspondence then ensued between the Respondents and the Appellants in which notice of seizure was given, on the grounds that the vehicles were carrying excise goods on which duty had neither been paid or deferred, and which were therefore liable to forfeiture. The Appellants requested restoration of the vehicle, registration number X5 PHK and the two trailers in a letter dated 25 February 2002, which was refused by the Respondents by a letter dated 8 April 2002. A review was requested by a letter from the Appellants' representatives, dated 10 April 2002. The review was carried out (but not within the statutory period of 45 days) and the decision not to restore communicated to the Appellant by a letter dated 24 June 2002 from Mr Wills.

21. In her letter dated 25 February 2002 written on behalf of her firm when she requested the return of the lorry X5 and two trailers, Mrs Kimpton said :

"I would at this point like to tell you that no money has been received by us for any of the loads and the costs to our business have been terrible. Please can you consider all of the above when deciding this request, it's just a shame there are not more guidelines to assist a haulier when taking on work like this because I'm sure if the consequences of jobs like this were more known you would not get hauliers doing work of this apparent nature."

In his lengthy letter, Mr Wills set out the background to the case and the applicable legislation. He quoted the Freight Vehicle Restoration Policy as follows :

"The Commissioners' policy concerning the restoration of heavy goods vehicles including trailers, is designed to rigorously tackle cross border smuggling and significantly disrupt the supply of excise goods to the illicit market. The current policy has been effective since 16 July 2001 :

Where the Commissioners cannot be satisfied that the driver or haulier are not knowingly involved in smuggling excise goods and the revenue is significant, on the first detection the vehicle may be seized and not restored.

Any vehicle adapted for the purposes of smuggling may not be restored."

He then set out the reasons for the seizure and his reasons to confirm the contended decision not to offer restoration of the vehicle X5. he stated :

"The department and your trade Association, the RHA, have made consistent efforts to warn hauliers such as you about the risks of improper importations of excise goods. The anonymity of your directing contact, "JJ" and the clandestine nature of the delivery were clearly suspicious. Indeed, you admitted in interview that you thought it may have been stolen and the revenue cost never occurred to you.

The circumstances of the unloading and the refusal of the two men who unloaded the goods to sign the paperwork must have confirmed the illicit nature of the enterprise. You became a party to this by your failure to notify any Authority of the events.

I have considered GBS' letter of 10 April and find that although you may not have been familiar with AADs, you must have been aware that this delivery was far from "in order". They say that the only variations from the original instructions (the AAD) was the change in the delivery arrangements. This is the crux of the matter – improper importations are frequently legitimate right to the last moment when the diversion occurs. To have stored the loads securely overnight at his yard would have been acceptable as long as delivery was made, as soon as reasonably possible, to the AAD Box 7

or 7a address – that was Rangefield."

Legislation

Part IV of The Excise Goods (Holding, Warehousing and REDS) Regulations 1992 articulates the law governing the movement of excise goods which are imported into the UK.

Regulation 10(2) provides:

'Except as the Commissioners otherwise allow, imported Community excise goods which are subject to duty of excise that has not been paid and which are not consigned to a tax warehouse shall upon their importation be consigned to a REDS.'

[REDS is described in Regulation 2 as "a registered excise dealer and shipper … "]'

'Regulation 16 provides that

'Excise goods, in respect of which duty has not been paid, shall be liable to forfeiture where a breach of regulation 6 above or of any regulation contained in Part IV, V or VI of these Regulations, or of any condition or restriction imposed by or under such a regulation, relates to those excise goods.'

Forfeiture of excise goods, seizure of vehicles and restoration

The Customs and Excise Management Act 1979 ('CEMA') provides :

139 Provisions as to detention, seizure and condemnation of goods etc

(1) anything liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard.

140 Forfeiture of Spirits

Where, by any provision of, or any instrument made under, the Customs and Excise Acts 1979, any spirits become liable for forfeiture by reason of some offence committed by a revenue trader, then –

(a) were that provision specifies the quantity of those spirits but does not specify the spirits so liable, the Commissioners may seize the equivalent of that quantity .. from any spirits in the stock of that trader

and

(b) where that provision specifies the spirits so liable, the Commissioners may if they think fit, seize instead of the spirits so specified an equivalent quantity of any other spirits in the stock of that trader'

141 Forfeiture of Ships etc used in connection with goods liable to forfeiture.

(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the customs and excise Acts –

(a) any ship, aircraft, vehicle, animal, container (including any article of the a passengers' baggage) or any other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and

(b) any other thing mixed, packed or found with the thing so liable.

152(b) Power of the Commissioners to mitigate penalties etc

The Commissioners may, as they see fit, restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized.

Review and appeals procedure

Section 14(1)(d) of the Finance Act 1994 ('FA 1994') provides that any decision by the Commissioners of a description specified in Schedule 5 to that Act may be subject to the review and appeals provisions contained in sections 14 to 16 FA 1994. Paragraph 2(1)(r) of Schedule 5 specifies that one of the decisions subject to such a procedure is :

"any decision under section 152(b) as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions subject to which any such thing is so restored."

By section 14(2)FA 1994, a person affected by a decision of the Commissioners may require that it be reviewed in accordance with the rest of that section and with section 15. Upon a review taking place, the decision may be either confirmed, withdrawn of varied and appropriate consequential steps taken.

The jurisdiction o the VAT and Duties Tribunal in this case is conferred by section 16 of the FA 1994. The subject matter of the appeal must, in accordance with section 16(2) FA 1994 be "any decision by the Commissioners on a review under section 15 above".

Section 16(8) states that decisions falling within the description contained in Schedule 5 to the FA 1994 (which therefore includes decisions about whether or not to restore a vehicle) are to be considered as 'ancillary matters'. Section 16(4) provides as follows :

"In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say –

(a) to direct that decision, so far as it 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 directions 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 a 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 occur when comparable circumstances arise in future."

Pursuant to section 16(6) FA 1994, the burden is on the Appellant so to satisfy the Tribunal in this appeal.

The arguments for the Appellants

Mr Payne relied upon the grounds of appeal attached to the Notice of Appeal, the last paragraph of which summarises his submission as follows :

"P & H Kimpton Transport maintain that they are being held responsible and accountable for the actions of their principals in these transactions and that they merely carried out written and verbal instructions to the best of their ability. They took reasonable precautions to ensure that they were in possession of correct paperwork and that their loads conformed with covering documentation. They contend that it was not their duty to challenge amended directions given by those principals and that they acted in good faith at all times. They are being heavily penalised as a result of these seizures, the grounds of which were not of their making."

He added that his clients had no experience in this field of transportation of alcohol from the Continent into England. He requested the tribunal to take that into account. Mr Kimpton was never aware that he had to deliver the consignments to a registered bonded warehouse. He believed that when the loads were handed over at Truckworld, they were being taken to a proper establishment.

The Appellants did not challenge the seizure of the vodka, they sought restoration of the vehicle X5. As Y6 was restored, it was reasonable to suppose that the other vehicle would be treated likewise. His clients had exercised as much care as was required.

The arguments of the Respondents

Ms Darroch for the Commissioners submitted that they contended the goods carried in the seized vehicle were liable for forfeiture. The consignments of vodka imported in the week prior to 26 January 2002 were moved in breach of regulation 10 of the REDS regulations, and were therefore liable to forfeiture under regulation 16 of the REDS regulations. The goods being imported on 26 January 2002 became liable to forfeiture under s.140 CEMA, and the vehicles liable to seizure under s.141 CEMA. Accordingly, this was a lawful seizure of both goods and vehicles.

The decision not to restore the Appellants' vehicle and trailers was both reasonable and proportionate in all the circumstances The vehicle and trailers were lawfully forfeited, having been used to smuggle consignments of excise goods into the country. The value of revenue involved exceeded £50,000 and accordingly it was the policy of the Respondents not to restore the vehicle.

She contended that the Appellants were aware of the illicit nature of the endeavour to which they were a party, on both importations, and summarised those factors upon which the Respondents relied.

No exceptional circumstances had been brought to the Respondents' attention which would warrant a departure from their policy.

She argued that within the meaning of s16(4) of the FA 1994, and in the light of the decision in Lindsay v Customs and Excise Commissioners [2002] STC 588 (Lindsay) the Commissioners' decision not to restore fell within the margin of appreciation allowed to the government, under Article 1 of the First Protocol, in the absence of any exceptional circumstances.

Conclusions

First, it is necessary for the tribunal to consider whether the chain of events in this appeal enabled the seizure of the vehicle X5 to take place.

The facts in this case relating to the seizure are not in dispute as Mr Payne accepted that the seizure was correct. The two consignments of vodka which were brought from Spain in the week prior to 26 January 2002 were imported and transported in breach of regulation 10, the consignments were liable to forfeiture under regulation 16 of the REDS Regulations.

41. The vodka which was imported in two loads on 26 January 2002 became liable to forfeiture and seizure under section 140 of CEMA. We are satisfied on the evidence before us, that Keytrades was the trader within the definition in paragraph (b) of section 140,ie on the balance of probabilities it was the trader and the importer on both occasions in January 2002 not just 26 January. Office Haseltine, who we found an

entirely credible witness, described Mr Turner of Keytrades, who she

interviewed on 11 February 2002, as evasive and uncomfortable. His statement is therefore unreliable and muddled with apparent inaccuracies. What is factual is that the AADs on both 18 and 25 January described the "Agente de transporte" as Keytrade Ltd.

Since the vodka became liable to forfeiture under section 140 of CEMA then the vehicle X5 and two trailers were also liable to seizure under section 141 CEMA as they were carrying the consignments. The tribunal therefore finds that the seizure of the vehicle X5 was lawful.

The second issue to be determined is whether the Commissioners' decision not to restore the vehicle X5 was both reasonable and proportionate in all the circumstances.

We bear in mind particularly Mr Payne's submission that the decision was unreasonable since the Appellants as hauliers became answerable for the shortcomings of their customers, when the Appellants had committed no offence.

This is a submission which would, if it was correct, stop the Commissioners from imposing any penalty on the honest but negligent haulier. Therefore, we consider that the Commissioners are entitled to impose by means of a restoration policy obligations of vigilance on hauliers, provided that the burdens imposed as a result are not disproportionate. There are many other judicial decisions which endorse this rationale and we would mention the decision of the Belfast Tribunal (Chairman: Mr A F W Devlin) in Crilly v Customs and Excise Commissioners (Decision No E452) as confirming the legality of the Commissioners' policy.

The relevant passage from the decision in Crilly from paragraph 20 is as follows :

"Furthermore, it seems to us that part [sic] of its legitimate aims in the public interest, the State is able to impose by means of a restoration, policy obligations of vigilance on drivers and hauliers, providing that the burdens imposed as a result are not excessive so as to enable the relationship of proportionality to remain as between the means employed and the aim sought to be realized. The Commissioners' policy in the instant case seems to us to satisfy these requirements."

Thus, the Commissioners were entitled to have a policy as stated by Mr Wills in his evidence before us and mentioned in paragraph 22 above.

We find that Mr Kimpton and his drivers failed to carry out procedures and reasonable checks which would have prevented the importation of illegitimate loads which were seized together with his firm's lorry X5. We rely upon the following factors:

(i) In interview, Mr Kimpton evaded questions concerning who had commissioned his services and the destination of the loads, other than to assert that both deliveries were undertaken on behalf of Keytrades.

(ii) He initially denied importing excise goods during the previous week, later suggesting, after admitting the first transportation, that he had misunderstood the question as it had been put to him.

(iii) Mr Kimpton had complied with instructions from an unnamed customer not to deliver the first consignment to the bonded warehouse specified on the AAD, but to deliver them instead to 'Truckworld' in Grays, Thurrock, thus failing to ensure that the goods reached their lawful destination, with the ensuing payment of excise duty.

(iv) He was unwilling for information concerning payment for his services to be recorded, and unsure as to how he would be paid.

(v) The arrangements which were made in respect of both consignments were sufficiently shrouded in mystery, (such as the instruction that loads should be transported on different sailings) that Mr Kimpton suspected that the goods were stolen, yet he continued with their transportation.

(vi) He did not know that the loads intercepted on 26 January would be delivered to Rangefield in Essex, although he had been told that they would be going to a bond in London.

(vii) The loads delivered in the previous week, for the same company, had not been signed for, nor had they been delivered into bond, giving rise to a suspicion that they were stolen, in which case duty would certainly have been evaded.

Taking these matters into account, we take the view that the

We have taken into account in reaching this decision the guidance given by Lord Phillips MR in Lindsay at paragraph 40 :

"Since the coming into force of the Human Rights Act 1998, there can be no doubt that if the Commissioners are to arrive reasonably at a decision, their decision must comply with the [Human Rights Convention]. Quite apart from this, the Commissioners will not arrive reasonably at a decision if they take into account irrelevant matters, or fail to take into

account all relevant matters: see Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd[1980] STC 231 at 239, [1981] AC22 at 60 per Lord Lane"

Were there any other relevant matters which Mr Wills failed to have regard ? In his letter dated 24 June 2002, he referred to Mr Kimpton's letter of 25 February 2002 (see paragraph 21 above) and he said, "I am fully able to sympathise with the financial situation which you describe. However, the circumstances under which Mr Kimpton himself described the delivery of the initial two loads of spirits was in clear breach of Section 10(2) of Excise Goods (HMWR) Regs 92 above". We agree with his reasoning.

Mr Wills was not aware of Mr Kimpton's health problems when he gave his decision and therefore was unable to give any consideration to that factor. We find in any event that there is no medical evidence to support any suggestion his illness is as a direct result of the seizure of his vehicle.

Finally, we consider the principle of proportionality.

The amount of the revenue lost on the first importation is calculated at £375,570.The two trailers were eventually released by Customs as the owners were not aware of the purpose of the hire.

The vehicle Y6 was released immediately to Mr Kimpton on humanitarian grounds and has not been seized again and Mr Wills made it clear this would not occur.

We are left with vehicle X5 which has been seized and not restored. We were informed that trade value was £47,000.

Taking these matters and valuations into account and in the light of the evidence before us, the Court of Appeal judgment in Lindsay and the requirement of proportionality, we decide that the Commissioners' decision falls within the margin of appreciation allowed under Article 1 of the First Protocol of the European Convention as mentioned in Lindsay at p.137 paragraph 60 et seq.

Decision

The tribunal finds there is no ground upon which to ask the Commissioners to conduct any further review of their decision not to restore vehicle X5 and dismisses the appeal.

There is no order as to costs.

Rodney P Huggins

Chairman

Release Date; 13 December 2004

LON/02/8180