United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2006] UKVAT(Excise) E00990, [2006] UKVAT(Excise) E990

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Status Supplies (t/a Olton International v Revenue & Customs [2006] UKVAT(Excise) E00990 (12 September 2006)

E00990

EXCISE TRANSIT PROCEDURE - revocation of excise duty guarantee given by transporter under CEMA 1979 s 157 - AADs not accompanying consignments from UK to France under duty suspension - transporter purporting to create substitute AAD - excise goods consigned to France diverted to West Midlands - AAD purporting to show receipt of goods in France not proved - observations on reasonableness of revocation - appeal dismissed

MANCHESTER TRIBUNAL CENTRE

STATUS SUPPLIES LTD T/A

OLTON INTERNATIONAL Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Johnson (Chairman)

Marjorie Kostick BA FCA CTA

Sitting in public in Birmingham on 14-16 February, 16-17 May and 31 July 2006

Graham Brodie, counsel instructed by Patwa, Solicitors for the Appellant

James Puzey, counsel, instructed by the Solicitor for HM Revenue and Customs for the Respondents

DECISION

Nature of the appeal

This appeal, made under section 16(1)(a) of the Finance Act 1994 ("the 1994 Act"), is against a deemed confirmation by H M Customs and Excise ("Customs") of a decision contained in a letter dated 2 December 2004 written to the Appellant by Mrs Jackie Spenceley of Customs, in which she cancelled a guarantee required to be given to Customs on behalf of the Appellant under section 157(1) of the Customs and Excise Management Act 1979 ("the 1979 Act").

There exists a review decision made by Mr William Brown of Customs, communicated by him to the Appellant by a letter dated 31 January 2005, in which he was expressed to uphold Mrs Spenceley's earlier decision. However notice of that decision was not given to the Appellant in time, ie within 45 days of the request for it. By section 15(2) of the 1994 Act, Customs are therefore to be assumed to have confirmed Mrs Spenceley's decision in any event. Strictly, therefore, the review letter dated 31 January 2005 is irrelevant.

The cancellation of the guarantee was pursuant to section 157(2)(c) of the 1979 Act, and was stated by Mrs Spenceley to be because of "AAD movement irregularities" notified to the Appellant by Customs in a letter dated 4 November 2004. That letter was written by Mr Benjamin John Graham of Customs. Although the notice of appeal, served on 22 February 2005, states that letter to have contained the original decision, and the out-of-time review decision notified on 31 January 2005 to be the decision appealed against, neither of which is correct, this is purely technical. The tribunal has been concerned with the circumstances of the alleged "AAD movement irregularities".

The cancelled guarantee was one entered into by a named insurance company, whereby that company undertook with Customs to pay any sum for which the Appellant might become liable to Customs, for any alleged irregularity resulting in the loss of inter alia excise duty. The guarantee was dated 21 May 2003 and was accepted by Customs on 23 May 2003.

The jurisdiction being exercised by the tribunal is that under section 16(4) of the 1994 Act. Under that sub-section, we have the powers therein specified, if we are satisfied that the Commissioners of Customs and Excise or other person making the decision appealed against "could not reasonably have arrived at it". The single issue between the parties has therefore been, was the decision of Mrs Spenceley to cancel the guarantee, or, put more accurately, the deemed confirmation of that decision on review, such that Customs could not reasonably have arrived at?

We were informed that Customs had issued certain assessments against the Appellant for excise duty and value added tax allegedly evaded, but that these had been withdrawn. Consequently any such assessments are not the subject of appeal.

Background and relevant legislation

The Appellant, based at Hockley Heath, Solihull, is and was in business which included the transporting from the UK to France of goods under excise duty suspension, with accompanying administrative documents ("AADs"). As is not disputed by the parties to this appeal, AADs are the essential means under community law whereby the movement of goods being transported under duty suspension can be policed. There is an obvious potential for excise goods on which duty has not yet been paid to reach the wrong hands, so that payment of duty is evaded. Community law seeks to avoid that happening.

Article 18(1) of Council Directive 92/12/EEC ("the Directive") provides that products subject to excise duty moving under duty suspension arrangements between Member States of the European Community shall be accompanied by a document drawn up by the consignor, whose form and content are to be established as the Directive provides.

Article 19 of the Directive provides in detail for the drawing up of this document – the AAD – in quadruplicate, for what is to happen to the four copies of the document, for the information those copies are to contain, and for verification of the movement as between consignee and consignor.

Article 15(3) provides for a system of guarantees to cover what are described as "the risks inherent in intra-Community movement". Such guarantees are to be given on behalf of the authorised warehousekeeper of the goods, or may be given by the transporter or the owner of them. In this case, we are concerned with such a guarantee given by the transporter.

The significance of AADs is shown by the provision in article 15(4) that the liability of the authorised warehousekeeper of despatch, and, if the case arises, that of the transporter may only be discharged "by proof that the consignee has taken delivery of the products, in particular by the [AAD] referred to in article 18 under the conditions laid down in article 19."

It is moreover not in dispute between the parties to this appeal that the relevant operations of the Appellant were covered by the Excise Goods (Accompanying Documents) Regulations 2002 SI 2002/501 ("the Regulations").

Under regulation 6(1)(a) of the Regulations, the AAD must not be amended, save as provided in regulation 6(4) and (5), and under regulation 6(1)(b), the AAD "must accompany the excise goods to which it relates at all times until those goods arrive at their ultimate destination."

Under regulation 20(1), every transporter of excise goods to which the Regulations apply "must ensure, so far as it is in his power to do so, that the Community provisions are complied with at all times." This is fortified by regulation 20(2), under which the transporter must, "whilst the goods remain in his custody or under his control", be ready to produce to an officer any AAD covering the goods, when required to do so.

The alleged "AAD movement irregularities" referred to in the letter from Customs dated 4 November 2004 all occurred during a short period commencing on 22 September 2004. They involved three road tractor units, to which trailers were attached, forming articulated "sets". These tractors had the Registration Nos T441ADN, T442ADN and V350GGS respectively.

With regard to T441ADN and V350GGS, the burden of Customs' complaints has been that AADs had become separated from the loads to which they related, and, in one of those cases, that a purported duplicate AAD had been created when it should not have been. As there is no dispute as to the relevant facts underlying the movements of these two vehicles, we can summarise in a fairly short compass the position relating to them.

T441ADN

On 22 September 2004, the tractor T441ADN collected a trailer load of lager from Brandford bond, Oldham, consigned to France. The tractor took the trailer to a vehicle park in Braintree, Essex. On 24 September 2004, the tractor took the trailer to Ashford, Kent, where it was transferred to another tractor, V51GBM.

The AAD for the load was not passed to the driver of V51GBM. The AAD was found by Customs in the cab of tractor T441ADN as that tractor proceeded to France with another (empty) trailer.

Mr Martyn Moseley, a director of the Appellant, purported to create a duplicate AAD for the load, which he sent to Ashford by car to be handed to the driver of V51GBM. The load was then taken to France and was on the face of it delivered to the recipient French warehouse, EDW, Wimille.

It is thus beyond dispute that the AAD found by Customs was not with the load throughout the time that the load was under the control of the Appellant as transporter.

V350GGS

On 23 September 2004, the tractor V350GGS collected a trailer load of lager from Rangefield bond, Purfleet, Essex, consigned to France. The load was taken to Braintree. The trailer was uncoupled and the tractor V350GGS departed without leaving the AAD with the load.

The trailer was then hitched up to another tractor, M652VOO, and the load left the Braintree premises without its AAD. When stopped by Customs, the tractor and trailer were not on the face of it bound for France.

Subsequently, the tractor V350GGS returned to Braintree with the AAD for the load.

Again, therefore, it is not disputed that the relevant AAD was not with the load throughout the time that the load was under the control of the Appellant.

Explanations for the irregularities in respect of the loads initially pulled by T441ADN and V350GGS respectively

The Appellant's explanations for these irregularities are as follows.

In respect of the load initially pulled by T441ADN, Mr Moseley was concerned that the load might be seized by Customs, who were known to be interested in what was going on at the Braintree premises. The Appellant therefore wished to get the load away from Braintree promptly, and to that end it switched tractors for the load. When Mr Moseley realized that the AAD was no longer with the load, he attempted to get Brandford bond to issue a duplicate AAD. Brandfords declined to do this, so Mr Moseley made a duplicate AAD himself. In so doing, he regarded himself as in the position of the warehousekeeper, seeing that he had control of the excise goods for the time being as the transporter of them. In creating the duplicate AAD, he sought to correct the wrongful state of affairs that he realized had arisen by reason of the true AAD having become separated from the load to which it related.

In respect of the load initially pulled by V350GGS, the driver of that tractor forgot to leave the AAD with the load when he left Braintree. As soon as he realized what had happened, he returned to the Braintree premises with the AAD. Meanwhile, the driver of tractor M652VOO, an employee of London Transport, had asked to "borrow" the trailer containing the load, so that he could carry out a rolling valve test on the unit. He is said not therefore to have been bound for anywhere in particular when he left Braintree, with his tractor hitched to the trailer containing the load. It is not clear if and when the trailer might have been returned to Braintree, or gone to France, as the unit was stopped by Customs on the open road heading away from Braintree.

Principal factual dispute between the parties

Most of the time of the tribunal has been occupied by the alleged movement irregularities in respect of the load initially pulled by tractor T442ADN – the second movement.

It is not in dispute that that tractor collected a trailer-load of 480 cases of Special Brew, 480 cases of Skol Super, 480 cases of Kestrel and 540 cases of Tennents from Rangefield bond on 22 September 2004, consigned to France.

It is further not in dispute that T442ADN pulled that load as far as the Braintree premises, where the trailer containing the load was unhitched from the tractor.

At the heart of this appeal is what happened to the load next.

The Appellant is adamant that the load was collected from Braintree for transportation to France by a driver of unknown identity acting on behalf of La Manche Eurl. The tribunal has been provided with copies of the AAD indicating on its face that the consignment reached EDW, Marck, France, on 23 September 2004, and was endorsed by French Customs as having done so. The customer for the consignment was Europlus Trading Ltd.

The Appellant has not, however, been able to shed any light on the actual movement of the goods from Braintree to France. Mr Moseley's position has been, in essence, that that was out of his hands. He has stated that the load left Braintree, so far as he is aware, at about 3 am on 23 September 2004. The Appellant did not take responsibility for transporting the load to France because, so Mr Moseley maintains, it was required in France more quickly than he could arrange to transport it.

Nevertheless, the AAD records the Appellant as transporter of the goods, and it identifies T442ADN as the tractor. The question arises how the Appellant, which clearly had control of the load at least until Braintree, discharged its responsibility for the load from the moment T442ADN was unhitched from the trailer containing the load.

The case of H M Revenue and Customs ("HMRC") as to what happened to the load after reaching Braintree is very different from that of the Appellant.

HMRC say that Customs mounted an observation operation over the trailer-load at Braintree. Customs had been observing the load ever since it had left Rangefield bond. They observed – and indeed filmed – what they believed was the unloading at Braintree of the trailer containing the load, using a fork-lift truck, and the placing of the load onto a different trailer. That trailer was then hitched to a tractor, Registration No N63ECC, and it left Braintree.

Customs proceeded to follow the unit, keeping it under observation, until it arrived at industrial premises in Woden Road, West Bromwich at about 5.45 am on 23 September, where the trailer was unloaded. The case of HMRC is therefore that this load, consigned under duty suspension arrangements, was diverted from its intended destination, namely France, to an industrial unit in the West Midlands, presumably for distribution without payment of excise duty.

The factual case of the Appellant and that of HMRC are thus in stark contrast. Both explanations of the destination of the goods cannot be right. The tribunal must find the true facts, and having done so, decide whether cancellation of the guarantee was a matter that could not reasonably be justified, taking account of the other irregularities that there have been in the Appellant's case.

Analysis of the alternative factual positions

There is no overlap between the alternative factual positions.

HMRC are not in a position to disprove collection of the load by an unknown French driver, early in the morning of 23 September 2004, if the load that Customs observed being transferred to another trailer, and pulled away to the West Midlands by tractor N63ECC, was not the load collected by T442ADN the previous day from Rangefield bond.

On the final day of the hearing, HMRC sought to use certain written evidence which we ruled to be inadmissible by reason of the Crime (International Co-operation) Act 2003. That evidence, if admitted, might have cast doubt on the validity of the AAD apparently evidencing the arrival of the goods at EDW. Having regard to section 9(2) of that Act, Mr Puzey, who appeared for HMRC, rightly did not press for that evidence to be admitted.

Similarly, on the final day of the hearing, the Appellant sought to use written evidence relating to EDW that, in the absence of the attendance of the witness for cross-examination, was excluded pursuant to rule 21(4) of the Value Added Tax Tribunals Rules 1986 (as amended) ("the tribunal rules").

In respect of that evidence, we had taken the view on 17 May 2006 that we would wish to receive evidence from or relating to EDW, bearing in mind the intensity of the conflict of evidence between the alternative factual positions of the parties. In view of that conflict, we were not of the opinion that we ought to regard the AAD evidencing the arrival of the ex-T442ADN load at EDW as a self-proving document; we were concerned that no evidence vouching for it had been produced by the Appellant; we were concerned to respect rule 21 of the tribunal rules; and, in view of the need to adjourn the hearing to a later date in any event, we were prepared to allow, as we did, an adequate opportunity for the AAD to be properly proved.

On the final day of the hearing, the Appellant was allowed to reopen its case for that purpose. Mr Brodie's instructing solicitor, Ms Fatema Patwa, explained in a witness statement made on that day that the witness that the Appellant intended to call to prove the AAD, Mr Manuel Gluck, was unavailable, and the reasons for this. We found the reasons for his absence to be unconvincing. In consequence, given that his written evidence was objected to by HMRC, we were not prepared to admit it.

The result is that the tribunal has had no evidence specifically directed to the receipt of the goods in France, apart from what is evidenced by the AAD on its face.

The position of the Appellant is that the disputed load is shown to have gone to France, and that the observations of Customs at Braintree, and the goods that may thereafter have gone to the West Midlands and been unloaded there, did not relate at all to the disputed load. The position of HMRC is that the evidence adduced in support of their case related to the disputed load, so that the load cannot have gone to France as alleged by the Appellant. So the finding of the tribunal as to which of these conflicting matrices is correct is decisive of this aspect of the appeal.

Evidence received by the tribunal

The tribunal has received a good deal of evidence in this case. The following witnesses gave oral evidence:

For the Appellant:

Mr Martyn Moseley;

Mr Mark Thomas Sumner (the driver of T441ADN on 22 September 2004);

Mr Michael David Welham, Warehouse Manager at Rangefields, Purfleet (he had no specific recollection of the movements with which we are concerned; his evidence had to do with the loading methods used for wagons carrying beer that he was familiar with).

For HMRC:

Ms Tracey Gail Wright of HMRC (her evidence related to a previous movement incident, involving excise goods transported by the Appellant, which occurred on 20 August 2003);

Ms Lorraine Susan Ashwell of HMRC (she was involved in mobile surveillance of T442ADN on 22 September 2004 as it went from Purfleet to Braintree, and then kept watch at the Braintree premises on 23 September 2004 and made a video recording);

Mr Douglas Murray Rowe of HMRC (he observed V350GGS at Rangefield bond, Purfleet on 22 September 2004 and later made observations at Braintree);

Mr Jonathan Grellier, Primary Contract Manager of Carlsberg UK Ltd (he had no personal knowledge of the movements with which we are concerned; his evidence had to do with loading methods used for wagons carrying beer that he was familiar with);

Mr Kevin Chapman, Packaging Process Engineer of InBev UK (he also had no personal knowledge of the movements with which we are concerned; his evidence also had to do with loading methods used for wagons carrying beer that he was familiar with);

Mr Benjamin John Graham of HMRC (his evidence related to Customs' dealings with Mr Moseley, having regard to the Appellant's explanations of the movements in dispute).

The witnesses who gave oral evidence had all also made at least one written witness statement – three such statements, in the case of Mr Moseley.

In addition, the following witness statements were specifically read or referred to, without objection:

Ms Lynne Veronica Norris of HMRC (who interviewed Mr Raymond Norman Groves, driver of T442ADN on 23 September 2004);

Mr Adam Michael Hanrahan of HMRC (who questioned the driver of M652VOO on 23 September 2004);

Mr Vincent Dean Baker of HMRC (who operated a video camera, recording happenings at the Braintree premises on 22 and 23 September 2004);

Mr Andrew Graham, an unemployed lorry driver (who has not heard of the Appellant or Mr Moseley, has not worked for them, but was arrested in June 2002 – ie long before the incidents with which we are concerned – on suspicion of being concerned with the evasion of excise duty involving EDW);

Ms Jacqueline Spenceley of HMRC (who gave the original decision in issue in this case);

Mr Kevin William Harvey Davies of HMRC (his evidence has had the object of placing before the tribunal photographs, taken at the Queens' Warehouse, Dover on 3 April 2006, of the packaging of beer on pallets); and

Mr Matthew Christopher Parsons of HMRC (giving his experience of the packaging of beer on pallets, and of the diversion of excise goods between the UK and France; the evidence of opinion contained in the statement is, by agreement between counsel, disregarded by this tribunal).