United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2006/E00944.html
Cite as: [2006] UKVAT(Excise) E944, [2006] UKVAT(Excise) E00944

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Amazon Trading International Ltd v Revenue and Customs [2006] UKVAT(Excise) E00944 (03 March 2006)

EO00943

EXCISE – Registered owner of warehoused goods – Refusal of registration – Previous registration revoked – Certificate not destroyed – Certificate provided to warehouse after revocation – Absence of director – Inadequate management – Review posed wrong legal test by asking whether refusal reasonable – Same decision however inevitable – John Dee [1995] STC 941 applied – Warehousekeepers and Owners of Warehoused Goods Regs 1999 S.I. 1999/1278, regs 5 and 7 – Appeal dismissed

LONDON TRIBUNAL CENTRE

AMAZON TRADING INTERNATIONAL LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: THEODORE WALLACE (Chairman)

ALEX McLOUGHLIN

Sitting in public in London on 17 February 2006

Jatinder Kaur, of Rehncy Shaheen, chartered accountants, for the Appellant

Alan Payne, counsel, instructed by the Acting Solicitor for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. This was an appeal against a review decision confirming a decision dated 5 October 2004 upholding a decision to refuse an application by the Appellant to be registered as an owner of duty suspended excise goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 ("WOWGR").
2. The evidence consisted of a bundle of documents and oral evidence by Amir Choudhary, the sole director and shareholder in the Appellant company, and by William Brown, the Review officer.
3. We find the following facts.
4. The Appellant started trading on 20 June 2002 at Park Royal, NW10 as a wholesaler, being registered for VAT in August 2003 with effect from the previous June.
5. On 14 July 2003 the Appellant was registered as an owner of duty suspended excise goods. On 7 February 2004 a registration certificate was issued which was apparently a revised certificate on change of details.
6. On 18 March 2004 Miss Fortune, of the WOWGR Registration Unit in Glasgow, wrote to the Appellant stating that with effect from the close of business on 18 February 2004 the registration had been revoked. The letter gave as the reason, "Your business is classed as missing and no longer requires to be registered as an Owner." The letter went on to state that the certificate of registration should be immediately destroyed.
7. Either the Appellant was not informed of the revocation for a month or an earlier letter not referred to in the letter of 18 March 2004 was omitted from the bundle.
8. At around the same time the Appellant was deregistered for VAT purposes also.
9. On 18 May 2004 Mr Choudhary wrote to Customs and Excise stating that on that day VAT officers had visited him and his accountant and reinstated the VAT number. The letter asked for reinstatement of the WOWGR registration.
10. The Appellant was visited on 29 July 2004 and on 11 August the application was refused. The review under appeal upheld that refusal.
11. At the relevant time the company had no regular employee apart from Mr Choudhary. However he spent substantial periods of time in Pakistan where he was endeavouring to set up a Theme Park in Islamabad. He was away from 14 December 2003 to 8 March 2004. When he was absent Mohammed Omer Sawer ("Omer") worked part-time at the company's office for two hours on three days a week. When Omer was not there the office was locked. There were no storage facilities. The company stored goods in other traders' warehouses.
12. It is clear that the conclusion that the Appellant was a missing trader was based on a number of unsuccessful attempts by Customs to make contact when Mr Choudhary was abroad.
13. On 4 May 2004 Linelock Ltd, a registered warehousekeeper, received from the Appellant company an application for an account to store goods. The application was accompanied by a copy of the Appellant's WOWGR and VAT certificates, notwithstanding that both registrations had been cancelled. The contact was given as "Omer" and his position as "manager". The application bore a signature purporting to be by a director. It appears that by a coincidence Customs were carrying out a routine inspection of Linelock Ltd on that day. On returning to the office, the Customs officer discovered that the Appellant's WOWGR authorisation had been revoked.
14. When visited on 29 July 2004 in connection with the application with which this appeal is concerned, Mr Choudhary had told the officer that he had not authorised the account application and that it had been completed by Omer. The officer recorded that Mr Choudhary said that he had not signed it and that he did not know who had done so.
15. According to the officer's notes Mr Choudhary said that he had been away in Islamabad before 8 March 2004 and had employed Omer as temporary manager. He stated that he did not know Omer well and had paid him by cash as he only worked a few hours a week. He told the visiting officer that all the documents were held at the accountants. The visiting officer recommended that the application be rejected.

The Decision and the Review

16. On 11 August 2004 the application was refused by Miss Fortune. Two reasons were given. The first was the account application to a warehouse at a time when the WOWGR registration had been revoked. The second was poor compliance such that the company was not deemed fit and proper to be re-registered as an owner.
17. The accountants, Rehncy Shaheen, asked for a review saying that the company had made no application during the period of revocation and that no explanation had been given of poor compliance.
18. The Review upheld the refusal. At the outset Mr Brown wrote,

"In carrying out my review I have had to determine whether the decision given by Ms Fortune was reasonable, based on current law, guidance and policy in this area."

We return to this.

19. The Review stated that a WOWGR certificate had been presented to a warehousekeeper at a time when the registration had been revoked and the Appellant had failed to destroy the certificate as required by regulation 7(2) of the 1999 regulations. It was also stated that by not having records of duty payment available at its principal place of business the company was not complying with paragraphs 3.1 and 5.5 of Notice 206.

The oral evidence

20. The evidence to the Tribunal by Mr Choudhary was most confused. The case for the Appellant was outlined by Ms Kaur and was confirmed by him under oath.
21. She told the Tribunal in opening that, although Mr Choudhary had received a letter cancelling the VAT registration when he returned from Pakistan on 8 March 2004, he had not received the letter of 18 March cancelling his WOWGR registration. Her firm had liaised with the VAT office to re-register the Appellant. The excise registration problem came to light when Abbey Forwarding had informed Mr Choudhary that the excise registration had been revoked; he had contacted Miss Fortune by telephone and she had said that she was unaware of the deregistration. Abbey told him to go back to Stratford Excise office who said that it had been revoked. Miss Fortune had then sent a copy of the letter of 18 March 2004. Ms Kaur said that there had been regular visits and the papers were at the accountants. The Review was correct in stating that an account application and copy certificate had been sent to a warehouse when the registration had been revoked, however Mr Choudhary had not known of the revocation.
22. As already stated Mr Choudhary confirmed what Ms Kaur had said in opening. He said that he was the sole director and shareholder; there were no full-time employees. Before August 2003 he had worked for another company dealing with beer and wine. The Appellant company had a turnover of around £100,000 a year selling beer and wine wholesale.
23. Cross-examined, he said that before he got his owner's registration certificate he was importing coke and orange juice. We note that throughout he referred to the company in the first person.
24. He told Mr Payne that he received the revocation letter of 18 March 2004 signed by Miss Fortune after he had contacted her in March. He contacted Abbey Forwarding in March when he returned from Pakistan. He said that when he approached Linelock he did not know of the deregistration.
25. When Mr Payne pointed out that the account application to Linelock was on 4 May whereas deregistration was in March he said that it was not his signature on the account application. He said that Omer was the name of the person in charge in his absence. He said that he only saw the account application when Customs showed it to him. He said that when asked Omer had told him that he had completed it. He agreed that the officer's note (see paragraph 14 and 15 above) was correct. He said that he was not surprised that someone had forged his signature on the account application. He told Mr Payne that he was not surprised that Omer had sent the account application. He said that Omer had not done anything wrong in just sending a piece of paper back to Linelock; the account at Linelock had not been used.
26. Mr Choudhary accepted that he could not produce any documents at the visit of 29 July. He said that the visit was not by appointment.
27. He said that Omer answered the telephone and did administration and paperwork part-time. He used to go to college; Mr Choudhary called him when he needed him; when he was away in Pakistan, Omer was there three days a week for two hours; otherwise the office was locked up. Sawer was Omer's surname; he found it out in 2005. Omer had no authority to sign any paperwork. He said that he had asked him about the Linelock account application in February 2005. When Mr Payne asked why he had waited 7 months to ask him, Mr Choudhary said that he was busy with his other business.
28. He said that he had handed his owner's certificate back to Customs in early May; before then he had put it in a safe place because he thought he would get the registration back. He said that he had told the VAT people back in December 2003 that he was frequently travelling.
29. Re-examined he said that when the Appellant was deregistered for VAT Rhency Shaheen were acting; Mr Sanger from VAT had visited their office two or three times. Mr Choudhary had explained that if any records were needed they should be contacted.
30. Mr Choudhary told the Tribunal that the Appellant did not have any storage facilities. He used a transport contractor to collect and deliver goods. He said that his only businesses were Amazon and the Theme Park in Islamabad. He was out of the country for about seven months of the year. He had read about his excise responsibilities but it was too long to read it all; he had received a lot of booklets.
31. Mr Brown the Review Officer said that the reference to paragraph 5.5 of Notice 206 (see paragraph 19 above) should have been to paragraph 5.1. He assumed that the original registration application form EX 60 would have been sent to the National Registration Unit at Glasgow but he had not seen it. Copies of notices were not always sent out with registration certificates but were accessible on the internet.

Submissions

32. Mr Payne said that nearly two months after the owner's certificate had been revoked with an instruction that it should be destroyed it had been sent by the Appellant to Linelock. Mr Choudhary said that Omer had sent it, however there was no reason for Omer to send it off on his own initiative. Omer was a part-time employee only working when Mr Choudhary was not in the UK.
33. As to compliance he said that Mr Choudhary had accepted that no records were available at the visit on 29 July 2004. Although he had said that the visit was not by appointment, Customs records indicated that the visit had been booked.
34. He said that the Appellant's conduct as owner was not satisfactory. He was absent abroad for many months leaving in charge a part-time employee whom he did not know well. Customs had been provided with no accounts for the business. The organisation was poor. The Appellant was not a fit and proper person to be registered as owner under WOWGR.
35. Ms Kaur said that the registration had been revoked in March 2004 on the basis that the Appellant was a missing trader. This was incorrect. Mr Choudhary had left a message with Customs before going away.
36. She said that Mr Choudhary had been confused as to dates in his evidence but this indicated that he was innocent: he had not worked out the dates carefully.
37. After the deregistrations he had dealt with the VAT registration first. Mr Choudhary did not know why Omer had sent the account application to Linelock. She conceded that it was negligent overall and that the certificate had not been destroyed. At the time of the July visit Mr Choudhary was trying to bring the records up to date.

Conclusions

38. The jurisdiction of the Tribunal under section 16(4) of the Finance Act 1994 is to consider whether the decision was reasonable applying the tests laid down by Lord Lane in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1980] STC 231, see Lindsay v Customs and Excise Commissioners [2002] STC 588 at [40]. If the decision is soundly based on facts and applies the correct legal principles, the Tribunal cannot substitute its discretion for that of the Commissioners.
39. The function of the Commissioners on review is not the same. It is to consider whether the decision should be confirmed, varied or withdrawn. This involves a full consideration of all the material before them on review. It is not confined to a consideration of whether the earlier decision was reasonable. The function of the Review officer is thus not the same as that of the Tribunal under section 16(4), see for example the Tribunal decisions in Birdane v Customs and Excise Commissioners (2002) E 341 and Hill v Customs and Excise Commissioners (2003) E 381.
40. In the present case the passage in the Review reproduced at paragraph 18 above states the wrong test. It is possible that the passage was no more than a form of words and that Mr Brown did carry out a full review and make his own decision for himself. However that was not the test which he set himself. The result is that the decision was defective in law.
41. That does not however end the matter. In John Dee Ltd v Customs and Excise Commissioners [1995] STC 941 the Court of Appeal decided that notwithstanding that a decision to require security for VAT was defective an appeal should not be allowed if it was inevitable that the decision would have been the same if the additional material there in question had been taken into account. The same logic applies in a case where the wrong test was applied. Although the legislation is different the same principle clearly applies to an appeal falling under section 16(4).
42. In the present case we are satisfied that the decision would inevitably have been the same if the Review officer had applied the correct test. This is a matter for the Tribunal rather than one of evidence from the Review officer.
43. The level of excise duty on alcohol is substantial. The ability of a person to trade in excise goods on which excise duty has not been paid involves a substantial risk to the exchequer. Very large sums of money have been lost to the Treasury by excise diversion frauds. There was no suggestion whatsoever that the Appellant had been involved in fraud in any way. Nevertheless Customs do exercise a tight control over the registration of traders to operate excise warehouses and to operate as an owner of duty suspended goods. There can be no doubt that Customs are entitled to exercise tight controls not only for the protection of the revenue but to protect legitimate traders. It is important that warehousekeepers should be able to rely on certificates of registration produced by owners.
44. In considering registration of owners Customs are clearly entitled to consider whether the owner is a fit and proper person to be registered. This involves the past compliance record of an applicant and will also involve consideration of the administrative arrangements of the applicant to ensure compliance with the regulations governing duty suspended goods. Where a company is the applicant it is necessary to consider its directors and management.
45. In the present case Mr Choudhary was a most unsatisfactory witness giving evidence which was both confused and contradictory. The case was opened, clearly on his instructions, on the basis that he had not received the revocation letter of 18 March, but had been sent a copy later and that he had not known of the revocation when the account application was sent to Linelock which was on 4 May. In evidence he said that he knew of the revocation in March and that Omer had sent the account application in his absence.
46. Assuming in Mr Choudhary's favour that he was confused in giving his evidence, the extent of his confusion indicates his fitness to discharge the Appellant company's obligations as a registered person. We are driven to the conclusion that he was thoroughly disorganised. His evidence as to the part played by Omer was to say the least unsatisfactory. He said that Omer was not authorised to sign any paperwork but earlier said that he was not surprised that Omer had sent the account application back to Linelock. Put at its lowest, Mr Choudhary left substantial administration to a student working part-time whose surname he did not know and who sent documents in the Appellant's name without informing Mr Choudhary and indeed against his instructions.
47. It is quite clear that Mr Choudhary disregarded the instruction in the letter of 18 March 2004 to destroy the revoked certificate but retained it so that a copy was sent to Linelock in May. The instruction reproduced the law under regulation 7(2) of the WOWGR 1999. The explanation that he kept it because he thought his registration would be restored is in our view unacceptable. There was no attempt whatsoever to obtain reinstatement until 18 May.
48. We are satisfied that the result of any new review would inevitably be the same.
49. We do not rely on the fact that the records were not available at the visit on 29 July 2004. It is not clear from Notice 206 that the business records must be kept at the principal place of business at all times. If that is a requirement it should be clearly stated. Paragraph 5.1 says that Customs will visit registered traders at their principal place of business from time to time and that the records must be easily available. There was no proper evidence as to an appointment and Mr Choudhary disputed it. Furthermore on 29 July the Appellant company was not a registered trader.
50. In reaching our conclusions we have not taken account of the material in various reports included by Customs in the bundle except in so far as they were admitted by Mr Choudhary or confirmed by other material. It is not satisfactory to seek to establish facts which are potentially in dispute by using such reports without calling the officers as witnesses. We also note that it is clear that not all relevant material was before the Review officer in particular the original EX 60 registration application which he had not seen and was not in the bundle
51. The appeal is dismissed.

THEODORE WALLACE

CHAIRMAN

RELEASED: 3 March 2006

LON/05/8035