United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2006/E00949.html
Cite as: [2006] UKVAT(Excise) E949, [2006] UKVAT(Excise) E00949

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Humberside Shipping and Freight Forwarding Ltd v Revenue & Customs [2006] UKVAT(Excise) E00949 (28 March 2006)

EO00949

EXCISE DUTIES — excise goods transported under movement suspension arrangement — intended destination in Spain — Spanish warehouse denying receipt and contending that AAD produced falsified — no evidence that lorry on which goods loaded crossed Channel at material time — conclusion that goods diverted in UK — liability of guarantor — assessment for UK duty on goods — Excise Directive art 15(3) — DSMEG Regs, regs 3, 4, 7(1) — exercise of reasonable care irrelevant — guarantor liable for duty — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

HUMBERSIDE SHIPPING AND FREIGHT FORWARDING LIMITED

Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS

Respondents

Tribunal: Colin Bishopp (Chairman)

Jon Denny

Sitting in public in Manchester on 18 January 2006

Derek Payne, consultant, for the Appellant

Jonathan Cannan, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006
 


DECISION

1. In this appeal Humberside Shipping and Freight Forwarding Limited ("Humberside") challenges an assessment to excise duty of £99,366. The assessment, upheld on the obligatory review, relates to a single consignment of spirits removed from an authorised warehouse in the UK for transport, under a duty suspension arrangement, to an authorised warehouse in Spain. The Respondents say that the goods and the accompanying administrative document ("AAD") did not arrive at the Spanish warehouse, and that the goods were diverted. An excise duty point arose and Humberside, as guarantor for the purposes of the transportation, became liable to pay the duty. Humberside's case is that it acted in good faith, that it had evidence other than the AAD to show that the goods had in fact arrived at their intended destination, and that it was inappropriate to assess it for the duty when it had done all in its power to ensure that the goods were correctly transported.
2. Humberside was represented by Derek Payne, a consultant with experience of excise duty cases, and the respondents by Jonathan Cannan of counsel. We heard the evidence of Ronald Osborne, Humberside's managing director, of Eileen Foster , the officer who undertook the review and upheld the assessment, and David Lowe, an assurance officer. Mr Lowe gave only formal evidence and he will, no doubt, forgive us if we do not set it out. We had also the unchallenged statements of several further HMRC officers, who had carried out various formal tasks during the course of the Respondents' investigations, and of the freight managers of three ferry companies, and a bundle of documents.
3. The events with which we are concerned occurred in September 2003. Humberside (which was then known as Chip Logistics Limited—we shall continue to refer to it as Humberside) was in the business of transporting goods, although we understand that most, if not all, of the haulage itself was subcontracted. Humberside had obtained approval by the Respondents of its movement guarantee, with a limit of £100,000, covering its movement of alcoholic beverages and we understand most of its business consisted of such movements. The guarantee was granted in accordance with article 15(3) of Council Directive 92/12/EEC; it was common ground—save for Mr Payne's argument that the exercise of due care was relevant—that, by virtue of regulation 7(1) of the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (SI 2001/3022) ("the DSMEG Regulations") the guarantor (if he is so identified on the AAD in place of the consignor) is liable to pay the duty if there is an irregularity occurring or detected in the United Kingdom, or the goods fail to arrive at their destination within the meanings of, respectively, regulations 3 and 4 of the DSMEG Regulations. Within the bundle of documents were copies of letters written by the Respondents to Humberside reminding it of its potential liability, and we are satisfied that Mr Osborne, who told us he had many years' experience in the business, was made aware of Humberside's responsibilities.
4. In early September 2003, Mr Osborne told us, he received an approach from Pierhead Purchasing Limited, which was the owner of various excise goods stored in an approved warehouse in Manchester. Pierhead wanted, or said it wanted, to arrange for the transport of the goods from the Manchester warehouse to an authorised warehouse in Arnedo, Spain. Mr Osborne obtained a quotation from a a haulage company, Silvercrest Transport Limited, which used the trading name of TLC, for the transport itself, and provided Humberside's quotation for the collection, transport and delivery, with the benefit of Humberside's guarantee, to Pierhead, which duly accepted it. Mr Osborne verified, by means of a "SEED" check with the Respondents' Glasgow office, that the Spanish warehouse was indeed authorised, and the arrangements for the transport of the goods were concluded.
5. The goods were loaded onto TLC's vehicle, at the Manchester warehouse, on 25 September 2003. For reasons which did not become entirely clear, the loading was witnessed by Mr Lowe and one of the officers whose unchallenged statement we had. The loading and departure of the lorry were uneventful. The officers took a copy of the AAD which had been completed in respect of the load.
6. None of the foregoing was controversial; the parties did not agree, however, about what had happened to the goods once they left the Manchester warehouse. Mr Osborne told us that he had had no reason to suppose that the goods had not arrived at the Spanish warehouse, as intended. The arrangements had been negotiated by Mr Osborne's son, who is employed by Humberside, but Mr Osborne had overseen them himself, and he had considered this a straightforward contract. He had received and paid TLC's invoice, and Humberside's invoice to Pierhead had been paid. We saw copies of Humberside's bank statements showing the two payments. Humberside had received from TLC a certificate that the delivery had been completed and it later received an apparently receipted CMR (the international consignment note which is used when goods, whether or not liable to duty, are transported from one country to another), but he was very vague about whether the CMR was received from TLC or from the Spanish warehouse. He had had to chase TLC for the receipted CMR, and he had telephoned the Spanish warehouse—the reason for his doing so was particularly obscure—at some time before it was provided, but when it arrived it seemed to be in order. He could not recall whether he had received a copy of the receipted AAD at the time and, if he had, who had provided it. It was not until December 2004, Mr Osborne said, that it was suggested to him that the goods had not in fact arrived; the Respondents then wrote to Humberside to that effect and sending the assessment which is now under appeal.
7. For reasons which, again, did not fully emerge, the Respondents undertook some enquiries about the consignment. First, they asked the three freight managers whose unchallenged statements were available to us to interrogate the ferry companies' records to ascertain whether there was any record in them that the lorry on which the goods had been loaded had crossed the Channel at or about the relevant time. Each said there was no such record, although there were several records showing that the same lorry had crossed the Channel on other dates. Secondly, enquiries were made of the Spanish tax authorities, who in turn made enquiries of the Spanish warehouse. It emerged—from evidence which was also unchallenged—that the warehouse had received neither the goods nor the AAD, and that the stamp and signature on the copy of the AAD which was returned to the Manchester warehouse and obtained by the Respondents had been falsified. It was clear to us that the stamp and signature on the purportedly returned AAD are very similar, if not identical, to those on the receipted CMR which Humberside obtained.
8. We agree with Mr Cannan that Mr Osborne's evidence about his procuring the receipted CMR was confused and internally inconsistent. Even after making due allowance for the passage of time and its effect on Mr Osborne's recollection, we are satisfied that his evidence that he believed that this had been an uneventful delivery, and that he had had no concerns about it at the time, is untrue. In particular, we are satisfied that he was uneasy about the delay in the return of the CMR. We have no reason to suppose that he thought that the goods had been diverted, but we are sure he realised that all might not be well.
9. That conclusion, however, is of only incidental relevance. The burden of proof, in an appeal of this kind, is on the appellant: see Finance Act 1994, section 16(6). It is, therefore, for Humberside to satisfy us that the goods arrived at the warehouse in Spain. Mrs Foster agreed, when she gave her evidence, that the information provided by the Spanish authorities was second-hand, and that she had not made, or caused to be made, any enquiries of TLC. Nevertheless, she considered that the information she had was reliable and clear. The Spanish warehouse had told its local tax authority that it had not received the goods, and that the stamp and signature on the purportedly returned AAD were not genuine (and produced samples of genuine stamps and signatures, which are markedly different) and there was evidence that the lorry on which the goods had been loaded had not crossed the Channel at the relevant time. It was a reasonable assumption, she thought, that they had not arrived.
10. We agree, and we are of the view, too, that Mr Payne's attack on Mrs Foster's approach and conclusions—that the evidence available to her was all second-hand—overlooks the incidence of the burden of proof. In the ordinary case, if apparently genuine documentation evidencing a duty-suspended movement is produced, and there is no other reason to doubt it, it might be accepted that the goods duly arrived at their destination. But where doubt is cast on the authenticity of the documentation and there are other reasons to suspect that the journey might not have been completed, as here, the onus shifts to the transporter—in this case Humberside—to demonstrate that the goods did in fact arrive. In our judgment Humberside has failed to do so. It has been able to produce a CMR whose authenticity is doubtful and evidence that it paid the haulage company's charge, and was itself paid, but that is not enough to show that the goods reached their destination. On the contrary, we are satisfied that the goods did not arrive but (since it seems to us clear they did not cross the Channel) were diverted within the United Kingdom.
11. There was some discussion at the hearing about the inter-relation of regulations 3 and 4 of the DSMEG Regulations, a topic about which Mrs Foster told us she needed to seek advice from other officers. This is a matter considered by the Court of Appeal in re Arena Corporation Limited, Customs and Excise Commissioners v Arena Corporation Limited [2004] EWCA Civ 371, at [46] to [51]. As we have indicated, we favour the view that the goods were diverted within the United Kingdom, but if we are wrong in that view, the irregularity was plainly detected in this country, and in either case regulation 3 applies. If one can be sure only that the goods failed to arrive regulation 4 comes into play but, as the Court of Appeal explained, it is not necessary to determine which of the two regulations has been engaged as long as it is clear that one them has; in either case, the guarantor is liable in accordance with regulation 7(1). It is of no avail to argue, as Mr Payne sought to do, that Humberside had taken all reasonable care; the guarantor's liability is not dependent on care but on the mere fact that either regulation 3 or regulation 4 is engaged. The reasons for that proposition were explained, albeit in a slightly different context, by Lord Hoffman in Greenalls Management Limited v Customs and Excise Commissioners [2005] 1 WLR 1754, at [17]. We are satisfied that one of the two regulations is indeed engaged, that the assessment was correctly made, and that the appeal must be dismissed. We make no direction in respect of costs.

COLIN BISHOPP

CHAIRMAN

RELEASE DATE:28 March 2006

MAN/05/8021