United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2005/E00932.html
Cite as: [2005] UKVAT(Excise) E00932, [2005] UKVAT(Excise) E932

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Keown Midlands Ltd v Revenue and Customs [2005] UKVAT(Excise) E00932 (08 December 2005)

EO00932

EXCISE DUTY — restoration of trailer — Appellant no involvement and no responsibility for unlawful importation of alcohol — Appellant's previous offence not relevant to circumstances of the appeal — Respondents failed to apply their mind to the individual circumstances and the issue of proportionality — was the decision not to restore the seized trailer reasonable — no — appeal allowed

MANCHESTER TRIBUNAL CENTRE

KEOWN MIDLANDS LIMITED Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Tildesley OBE (Chairman)

Alban Holden

Sitting in public in Birmingham on 19 October 2005

Derek Payne of Grove Business Services for the Appellant

Ben Mills, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 18 May 2005 not to restore a trailer, registration CS27.

The grounds of Appeal as set out in a letter dated 15 April 2005 were that

"Mr Keown had no knowledge of, nor involvement in the circumstances surrounding seizure of the trailer, he should not be held culpable. He is being penalised for something that happened outwith his knowledge and consent".

The Issue

On 28 October 2004 at the UK Control Zone at Coquelles, France, Customs Officers stopped Mr Kelly who was driving a tractor and trailer carrying a load of alcohol. The Officers found that the alcohol importation was not supported by the appropriate documentation. They seized the alcohol, the tractor unit and the trailer. The Appellant was the owner of the trailer and had no involvement with the importation of the alcohol.

The issue is whether the Respondents' decision to refuse restoration of the trailer was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable the decision maker must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Evidence

We heard evidence from Brian Keown, the owner of Keown Midlands Limited. We received in evidence the witness statement of Deborah Carole Gillespie, the Review Officer who refused restoration of the trailer on 18 May 2005. The Respondents supplied a bundle of documents.

In this decision we have referred to the Appellant as Mr Keown who for all intents and purposes is Keown Midlands Ltd.

The Respondents' Review Decision of 18 May 2005

Mrs Gillespie's consideration for refusing restoration of the trailer was concise. She concluded from the Respondents' restoration policy for freight vehicles that the restoration decision was dependent upon whom was responsible for the smuggling attempt, whether reasonable checks had been undertaken by the haulier and whether this was the first seizure.

She found that Mr Keown had not carried out any reasonable checks to prevent smuggling. He admitted that he was oblivious as to who was using his trailer and the use to which it was put. Mr Keown had a tractor unit seized by the Respondents in similar circumstances in August 2004, and, therefore, this was not his first offence. For these reasons Mrs Gillespie refused restoration of the trailer.

Customs' Restoration Policy for Freight Vehicles

The policy for heavy goods vehicles is designed to tackle cross border smuggling rigorously and to disrupt the supply of excise goods to the illicit market significantly. The details of the policy are as follows:

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

(2) In other cases if the Commissioners are not satisfied that the driver or haulier are not knowingly involved in smuggling excise goods: then on the first detection the vehicle may be seized and restoration offered for a fee equal to 100% of the revenue involved; or the trade value of the vehicle (whichever is the lower). On the second occasion the vehicle may be seized and not restored.

(3) If the Commissioners are not satisfied that the driver or haulier has carried out what Customs consider to be basic reasonable checks which would have identified the illicit load: then on the first occasion the vehicle may be seized and restoration offered for a fee equal to 20 per cent of the revenue involved; or the trade value of the vehicle (whichever is the lower). On the second detection the vehicle may be seized and not restored.

(4) If the Commissioners are satisfied that the driver and haulier have taken all reasonable steps to ensure the legitimacy of the load the vehicle may be seized and restored free of charge.

(5) Any vehicle adapted for the purposes of smuggling may not be restored.

In the policy vehicle includes trailer.

Facts Found

On the 28 October 2004 at the UK Control Zone at Coquelles Customs Officers intercepted a Mr Kelly who was driving a heavy goods vehicle carrying a consignment of 23,040 litres of Stella beer. The Officers were not satisfied that Mr Kelly had the correct import documentation for the alcohol with the result that the beer and the vehicle (tractor unit and trailer) were seized on 9 December 2004. The excise duty on the beer consignment was £14,640.

Mr Kelly was a self-employed driver. He worked on a freelance basis for Campbell International, a hauliers firm based in Northern Ireland owning two trucks. A Mr Campbell was the owner of Campbell International and drove one of the trucks. Campbell International engaged Mr Kelly to do several runs abroad starting on 27 October 2004 when he took out a tractor unit and trailer empty and travelled from Luton to Transmark at Calais where he swapped trailers bringing back a load to Thurrock Services. On 28 October 2004 he repeated the trip, going out empty and exchanging the trailers at Transmark but this time he was stopped by Customs Officers. Mr Kelly was paid £80 a day by Campbell International

Keown Midlands Ltd owned the seized trailer which was bought for £6,000 from MVS Surplus Vehicle Centre on 24 September 2003. Brian Keown operated through Keown Midlands Ltd to carry on his business as an independent haulier and driver. The Appellant owned one tractor unit and trailer which was driven by Mr Keown.

Mr Keown sub-contracted his services to another haulier GMB Transport which was based in Northern Ireland and had haulage contracts throughout the United Kingdom and the continent. As part of the sub-contracting arrangements Mr Keown was required to provide his own tractor unit and trailer with the trailer placed in a pool. Mr Keown would retain the use of his tractor unit but not his trailer which would be used by GMB Transport for transporting loads. Mr Keown received assignments from GMB Transport usually by telephone. He would be told where to pick up and drop off his load and the identification number of the trailer which held the specific load. Under these arrangements Mr Keown would be using different trailers drawn from the pool for each assignment. Mr Keown had no control over the use of his trailer once it was placed in the pool. He would not know and have no way of finding out the use to which GMB Transport put his trailer.

Mr Campbell of Campbell International had also subcontracted his services and vehicles to GMB Transport. Campbell International shared with the Appellant the same pool of trailers under the control of GMB Transport which explained why Mr Kelly was pulling the Appellant's trailer when stopped by Customs Officers on the 28 October 2004. Although both Mr Campbell and Mr Keown were subcontractors of GMB Transport, they operated independently of each other and would not know about the jobs done by the other for GMB Transport.

Mr Keown had never met either Mr Campbell or Mr Kelly prior to the incident on 28 October 2004. It had taken Mr Keown sometime to locate his trailer. When Mr Keown discovered that his trailer had been seized he tried to contact Mr Campbell but he did not return Mr Keown's phone calls. Mr Keown requested return of his trailer from the Respondents on 4 March 2005.

Mr Keown had no formal contract with GMB Transport. If he did not permit his trailer to be used in the pool, GMB Transport would not give him jobs. Mr Keown was required to purchase another trailer, which cost him £4,500, to continue as a sub-contractor with GMB Transport. As far as he was aware GMB Transport carried out no checks on the use to which trailers were put. Further GMB Transport issued no written instructions to its sub-contactors about taking the appropriate steps to ensure that the loads carried by them met legal requirements.

Mr Keown was completely unaware of the events on the 28 October 2004. He did not know that Campbell International was contracted to transport a consignment of alcohol on Mr Keown's trailer from Calais to the United Kingdom. It was impossible for Mr Keown to perform any checks on whether Mr Kelly and Campbell International had complied with the documentary requirements for transporting the alcohol. Mr Keown did not have any control over how Campbell International and Mr Kelly undertook the sub-contracting work allocated to them by GMB Transport.

Mr Keown was not the driver nor the haulier in connection with the consignment of alcohol detained by the Respondents on 28 October 2004 and later seized by them. In this instance the driver was Mr Kelly with GMB Transport and Campbell International sharing the haulier responsibilities.

Mr Keown accepted that Customs Officers stopped him in August 2004 for carrying a load of alcohol without the correct paperwork. His tractor unit and trailer were seized together with the alcohol importation. Mr Keown did not appeal against the seizure nor request restoration of his vehicle. Mr Keown's account differed from the version put to him by the Respondents' Counsel at the hearing who suggested that seizure of the vehicle arose from Mr Keown's unlawful use of red diesel.

The Jurisdiction of the Tribunal

The Respondents' power regarding restoration of goods which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:

"confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it, to do one or more of the following, that is to say –

a) to direct that the 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;

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 that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future".

The precondition to the Tribunal's exercise of one or more of its three powers, namely, that the person making a decision could not reasonably have arrived at it, falls within the guidance given by Lord Lane in the decision in Customs and Excise v JH Corbitt (Numismatists) Ltd [1980] STC 231 at page 239:

"…..if it were shown the Commissioners had acted in a way in which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight".

Was the Review Decision of 18 May 2005 Reasonable?

We conclude from the facts found that Mr Keown had no involvement with the unlawful importation of alcohol on the 28 October 2004. He was neither the driver nor the haulier responsible for the consignment of alcohol. It was impossible for Mr Keown to carry out checks on the use of his trailer by Campbell International because he had no control over the use of his trailer once it was lodged in the pool operated by GMB Transport. Mr Keown had no authority to direct either Mr Kelly or Campbell International on their respective responsibilities as driver and haulier. Mr Keown was not culpable for the unlawful importation on 28 October 2004.

Mrs Gillespie in her review decision performed no analysis of Mr Keown's involvement with the unlawful alcohol importation on 28 October 2004 and of his relationship with Mr Kelly and Campbell International. Mrs Gillespie assumed that Mr Keown was the haulier for the consignment and, therefore, responsible for carrying out checks. Whilst we accept that Mr Keown and his representative could have provided the Respondents with more detailed information about the pooled arrangements for the trailer, Mrs Gillespie had sufficient information before her to realise that the facts of the case were not straightforward and that a more detailed analysis of Mr Keown's potential culpability was required.

We consider that Mrs Gillespie placed too much weight on Mr Keown's previous "offence". There was a fundamental conflict between the Appellant and the Respondents about the circumstances of the "offence". The Respondents were of the view that it involved unlawful use of red diesel, whereas the Appellant stated that it concerned the illegal importation of alcohol. It would have been helpful if Mrs Gillespie had set out the circumstances of the "offence" in her review decision. We have proceeded on the basis of an illegal importation of alcohol. We find that there was a significant difference between the circumstances of Mr Keown's previous offence and those of the Appeal. In the former Mr Keown was directly involved as the driver and haulier of the vehicle carrying the alcohol consignment and responsible for ensuring that the documentary requirements were met for the consignment. In the latter we found as fact that Mr Keown had no involvement and no responsibility for the alcohol importation brought in by Mr Kelly. This variation in the facts questions the relevance of Mr Keown's previous "offence" to the restoration decision which was the subject of the Appeal. Mrs Gillespie did not address the relevance of the previous "offence" in her consideration.

We consider that Mrs Gillespie failed to apply her mind to the critical issue of proportionality which required consideration of the following factors:

(1) Mr Keown's actual culpability for the alcohol importation on 28 October 2004. We found that Mr Keown was neither the driver nor the haulier for that consignment. Further he had no involvement and no responsibility for the importation.

(2) The value of the trailer which was £6,000.

(3) Mr Keown was dependent upon the trailer for his livelihood. If he did not have a trailer he could no longer remain as a sub-contractor with GMB Transport. Mr Keown was required to purchase another trailer for £4,500

(4) Mr Keown exposed himself to a risk that his trailer might be used for illegal importations by placing it in a pool to be used by the other sub-contractors of GMB Transport. However, he had no choice in the matter if he wished to continue as a sub contractor for GMB Transport. Further the extent of that risk had to be assessed against the likelihood that other sub-contractors would misuse the trailer knowing that their livelihood depended upon them remaining within the law.

(5) Whether the revenue evaded by the importation on 28 October 2004 was significant. We formed the opinion from the representations made by Respondents' counsel at the hearing that the revenue evaded of £14,640, although large, was not significant in the context of the Respondents' policy for freight vehicles.

(6) Whether the aims of the restoration policy were satisfied in the particular circumstances of this appeal by restricting the non-restoration to the tractor unit and the alcohol consignment which impacted directly on those persons culpable for the unlawful importation.

Thus the question to be addressed in the Appeal was whether the non-restoration of the trailer was proportionate having regard to Mr Keown's culpability, the significance or otherwise of the revenue evaded and whether in this instance the policy aims were satisfied by limiting the non-restoration to the tractor unit and the alcohol consignment.

We conclude from the above analysis that Mrs Gillespie in her decision of 18 May 2005 simply applied the Respondents' restoration policy on freight vehicles without due regard to the individual circumstances appertaining to Mr Keown. Further, she gave excessive weight to Mr Keown's previous "offence" and failed to address the issue of proportionality.

We are, therefore, satisfied that the Review Officer's decision of 18 May 2005 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994.

Our Decision

In view of our finding that the Respondents' decision of 18 May 2005 was unreasonably arrived at, we allow the Appeal.

Orders

We make the following orders pursuant to our decision to allow the Appeal and in accordance with section 16(4) of the Finance Act 1994:

a. The decision not to restore the Appellant's trailer shall cease to have effect from the date of release of this decision.

b. The Commissioners shall conduct a further review of the decision not to restore the trailer and serve the same on both the Appellant and the Tribunal within 30 days of release of this Decision.

c. An Officer not previously involved with the case shall conduct the further review.

d. The further review shall be on the basis of the Tribunal's findings of fact as set out in paragraphs 9 to 18 and 21 to 25 of this decision and shall consider whether restoration should be made in the form of compensation and if so shall specify the amount of compensation and the basis of the calculation.

e. The Review Officer shall take account of any further material or representations made by the Appellant within 14 days from release of this decision. The representations shall be made to HM Customs and Excise, Review Team, Detection South Region, Crownhill Court, Tailyour road, Crownhill, Plymouth, PL6 5 BZ.

f. The Appellant will have a further right of appeal to the Tribunal if dissatisfied with the outcome of the further review.

We further order that the Respondents pay the costs of the Appellant in connection with the Appeal hearing. The parties are at liberty to apply to the Tribunal to determine the quantum of costs, if no agreement can be reached between them.

MICHAEL TILDESLEY

CHAIRMAN
Release Date: 8 December 2005

MAN/05/8025