United Kingdom VAT & Duties Tribunals (Excise) Decisions

OB Soft Drinks Ltd v Revenue & Customs [2007] UKVAT(Excise) E01013 (22 January 2007)

EO01013

EXCISE DUTY – Appeals against: (a) decision on review to uphold an original decision to revoke the Appellant's registration as a Registered Owner of Duty Suspended Goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 SI 1999/1278; (b) deemed confirmation on review of a refusal to offer to return excise goods seized when held under bond by the Appellant; and (c) assessment to excise duty under s.12(1A) Finance Act 1994 in respect of relief which ought not to have been given or which would not have been given had the facts been known or been as they later turn out to be – A factual issue determinative of appeals (a) and (b) and relevant to appeal (c), namely whether the vehicle of the haulier with whom the Appellant had contracted to transport excise goods in duty suspension from a bonded warehouse in the UK to a bonded warehouse in France was or was not empty when it was intercepted by Customs at the Cheriton terminal of the Channel tunnel – that factual issue decided in favour of Customs, that is that the vehicle was empty when so intercepted – appeals (a) and (b) dismissed – provisional decision in relation to appeal (c) – with directions to be made to hear an alternative ground of appeal in that appeal, in relation to which the Tribunal allowed an application to amend the grounds of appeal

LONDON TRIBUNAL CENTRE

O B SOFT DRINKS LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: JOHN WALTERS QC (Chairman)

ALEX McLOUGHLIN

Sitting in public in London on 25, 26 and 27 September 2006

Timothy Brown, Counsel, instructed by Vincent Curley & Co., Solicitors, for the Appellant

Robert Kellar, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

CROWN COPYRIGHT 2007

DECISION

1. The Tribunal heard together three appeals by the Appellant (respectively registered at the Tribunal under references LON/2005/8107, LON/2005/8111 and LON/2005/8118 – which we refer to below as "appeal 8107", "appeal 8111" and "appeal 8118" respectively).
2. Appeal 8107 is against a decision on review to uphold an original decision to revoke the Appellant's registration as a Registered Owner of Duty Suspended Goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 SI 1999/1278 ("WOWGR"). The original decision was dated 4 August 2005, and the decision on review was dated 21 September 2005.
3. Appeal 8111 is against an assessment to excise duty in the sum of £11,907.07 issued under section 12(1A) Finance Act 1994 ("FA 1994"). The assessment was notified to the Appellant by a letter dated 17 August 2005. The Appellant requested a departmental review of the assessment, and, following a review, the assessment was upheld and this fact was notified to the Appellant by a letter dated 28 September 2005.
4. Appeal 8118 is against a deemed confirmation on review of a refusal to offer for return excise goods (1,800 cases (24 x 500 ml) Carling Black Label @ 4.1%) seized when held under bond by the Appellant. The relevant notice of seizure sent to the Appellant was dated 26 August 2005.
5. The same factual issue is determinative of all three appeals on the basis of the grounds of appeal stated in the three notices of appeal. The grounds of appeal given in the notice of appeal in relation to appeals 8107 and 8111 are that:

"it is alleged [by the Commissioners that] a transport company employed by the Appellant to deliver a consignment of duty suspended goods to a warehouse in France left the UK with an empty vehicle and this is factually incorrect".

6. The grounds of appeal given in the notice of appeal in relation to appeal 8118 are the same, with the addition that:

"Customs have as a result of that decision which is currently under appeal [LON/05/8107 & LON/05/8111] seized goods from [the Appellant] which were held under bond."

7. At the start of the hearing of the appeals we heard an application from Mr. Brown, on behalf of the Appellant, to amend his grounds of appeal in appeal 8111 to include as alternative grounds a technical point based on the House of Lords' decision in Greenalls Management Limited v Customs and Excise Commissioners [2005] UKHL 34 and a point on an alleged incompatibility of regulation 3(2) of the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001, SI 2001/3022 with article 20 of Council Directive (EEC) No. 92/12 (the "Excise Duty Directive").
8. This application was resisted by Mr. Kellar on the grounds that the amendment had been raised too late. The Tribunal however decided to allow the application, and admit the amendment, but to stand over any argument on it until a later occasion. All the appeals were accordingly heard on the basis of the original grounds put forward by the Appellant, which, as we have observed raise a factual issue which, if decided by the Tribunal in favour of the Appellant, would be determinative of the appeals in its favour. On the other hand, should we (as we have in fact done for the reasons given below) decide the factual issue in favour of the Commissioners for HM Revenue and Customs ("Customs"), the amended grounds of appeal become "live" and our decision is therefore preliminary in relation to appeal 8111 (only) and we make consequential directions accordingly.

The evidence

9. The Tribunal heard oral evidence from Robin Mountain, Andrew Mountain, Michael Taylor, Lucio Buttarelli, Karin Quarterman, Aaron Stoakes and Nicholas Dyer. We also considered the documents before us and the witness statements made by Neill Austin and Phil Simpson as indicated below. We accept the evidence and find facts accordingly, except where we indicate the contrary below.
10. The Appellant is a company which began trading in March 2005 as a wholesaler of duty suspended alcoholic products. It purchased excise goods in the UK and moved them under duty suspension to French duty suspended warehouses in France, MT Manutention Sarl ("MT Manut") and EDW. Its customer, a French business called Vins de Frethun would receive the goods from the French warehouse, excise duty having been paid in France. (French excise duty is at a lower rate than UK excise duty.)
11. The events with which these appeals are chiefly concerned took place on 11 July 2005. However before that date, by a letter dated 20 October 2004, Customs had imposed conditions to apply to the Appellant's registration under WOWGR. Further, Customs had directed on 6 April 2005, that only duty-paid movements of goods were to be allowed in the case of the Appellant, from the excise warehouse conducted by Abbey Forwarding Ltd. at West Thamesmead Business Park, London SE 28 "Abbey Forwarding"). This direction was lifted after a period, and the conditions applicable to the Appellant's registration under WOWGR were revised, by a letter dated 21 June 2005, sent by Customs to the Appellant, in which the following additional condition (among others) was imposed:

"7. The haulage company must take the goods from the UK warehouse direct to the French warehouse. Confirmation that the haulier will not subcontract and that the vehicle/trailer details as shown on the AAD will be used to the completion of the movement."

12. Robin Mountain is the sole proprietor of a haulage business called Rob Mountain International. He owns six lorry tractor units and six trailers. He has been in business for about 9 years. In early June 2005 he received a telephone call from Lucio Buttarelli, who stated he was the owner of the Appellant company and asked him (Robert Mountain) to transport beer from a bonded warehouse in England to a bonded warehouse in France. This led to a contract being signed (the contract dated 23 June 2005 is in evidence) between the Appellant and Rob Mountain International for the carriage of duty-suspended goods owned by the Appellant, from Abbey Forwarding to MT Manut, a bonded warehouse at Coquelles, France (near the southern entrance to the Channel tunnel). The contract stated that Rob Mountain International's duties were, among other things: not to engage any sub-contractor to carry the Appellant's goods (clause 4.1). Rob Mountain International was also obliged (clause 4.7.4) to keep the CMR and AAD (documentation) under its control and undamaged at all times until delivery with goods to the Consignee.
13. Rob Mountain International received instructions on five occasions to move goods owned by the Appellant from Abbey Forwarding to M.T. Manut at Coquelles.
14. Robert Mountain's evidence was that on 11 July 2005 he picked up 24 pallets of beer from Abbey forwarding, leaving their premises at about 12 noon. He then travelled to Snodland, which is an area on the M20 motorway at Junction 4, arriving there about 12.45 p.m.. He met his brother, Andrew Mountain, there. He had previously arranged the meeting and for his brother to take the load over to France.
15. Robert Mountain said in evidence that the reason why he did not move the load all the way to France was because he had a pre-arranged appointment, connected with his then ongoing divorce.
16. Robert Mountain said he remained at Snodland until Andrew Mountain drove off in the direction of Dover. He (Robert Mountain) took his brother's car and returned to Lincolnshire.
17. The meeting at Snodland took place on a piece of waste ground, where there is a snack bar. Robert Mountain said in evidence that he had met his brother there, chatted to him, had a snack, exchanged overnight things (Robert Mountain took his out of the truck and Andrew Mountain put his into the truck), drew his brother a map to show how to get to MT Manut, and Vins de Frethun, where the consignment was to be delivered ultimately, told him where to hand in the paperwork when he got to France, and left. The accompanying documentation was in the truck the whole time. He said there were no changes to the load at Snodland, that he had walked round the trailer and seen that the TIR cord and seal were still intact.
18. He admitted that he had not told Lucio Buttarelli that he would not be taking the load to France. He admitted that he should have told him. He said he was too concerned about a divorce hearing. He agreed in cross-examination with Mr. Kellar's suggestion that his behaviour in not abiding by the contractual terms was dishonest.
19. The tachograph document in evidence showed that the truck's arrival at Snodland had been at 13.52 and its departure from Snodland was at 15.52. Robert Mountain agreed that he had stopped at Snodland for about 2 hours.
20. Andrew Mountain is a self-employed haulier (so he is not a proprietor or employee of Rob Mountain International). His evidence was that he was asked by his brother, Robert Mountain, on 11 July 2005 (or, according to his oral evidence, on the evening of 10 July 2005) to assist at short notice in driving one of his vehicles. He agreed to meet Robert Mountain at Snodland and drive Rob Mountain International's vehicle to France. He said he arrived at Snodland at about noon and that his brother arrived at about 2.30p.m. His recollection was that he left Snodland in the vehicle at about 3.30 p.m. and arrived at the Channel tunnel terminal at Cheriton at about 4.45 p.m. While he was waiting to move on to the shuttle, he was instructed by Police and Customs officers to move the vehicle into a lay-by. His evidence, given in his witness statement, was that one of the officers inspected his passport but at no time did any officer inspect the load inside the vehicle or break the seal which had been put in place when the goods were removed from the UK bond. He was allowed to continue his journey to France and eventually arrived at MT Manut, where, he said, a French customs officer (or, according to his second witness statement, possibly an employee of MT Manut) broke the seal on the lorry and clambered over the goods to count the number of pallets. Andrew Mountain was then allowed to proceed to Vins de Frethun for the final delivery. He then proceeded to a location near Brussels where he had a return load to collect.
21. Andrew Mountain denies the allegation made by Customs that the vehicle he drove to France was empty. He says that as an experienced driver of lorries he knows the difference between the sensation of driving a fully lorry ands the sensation of driving an empty one.
22. In cross-examination, Andrew Mountain said that the snack bar at Snodland was 5 minutes' walk away from the place where the vehicles were parked, or less. He said his brother left Snodland before he did (whereas Robert Mountain has said that Andrew Mountain had left first). He said that at Cheriton one officer had walked around the truck, looking under it, while another had searched the cab.
23. He denied that he had said "No, I'm empty" in answer to the Customs officer's question, whether he had a load He said he could not recall whether he was asked if he had a load. He said he did know at that time about the return load he was to bring back, because Robert Mountain had given him an address for it. He denied having said to the Customs officer "I'll get a call from my boss", pointing out that Robert Mountain was not his boss. He said an officer was outside the vehicle: he saw him walking and looking under the trailer. It was not possible to see inside the curtain-sided trailer, unless the curtain was cut, because of the seal.
24. Andrew Mountain said in oral evidence that on arrival in France, he went to Transmark, a big service area, where he had coffee, saw another English driver and chatted. He spent 1½ to 2 hours there and did not check the seal on the vehicle. He affirmed that from the way the vehicle was handling, it seemed to be still full at that stage. He then attempted to follow the directions which Robert Mountain had given, but he got lost. He contacted his brother by phone at about 10.30 p.m. or 11.00 p.m. on the evening of 11 July 2005 and got further directions from him. He then proceeded to MT Manut warehouse, arriving there between 11.10 p.m. and 11.20 p.m. He slept in the vehicle that night. The next morning he handed the documentation in at the warehouse at about 7.00 a.m. A clearing agent of French customs came out, and he or Andrew Mountain broke the seal and he climbed in to the trailer to check the number of pallets. That agent later gave Andrew Mountain permission to go on to Vins de Frethun, the ultimate consignee.
25. Andrew Mountain said that the tachograph was operating correctly between Snodland and MT Manut, but that he had disabled it between MT Manut and Vins de Frethun, in order to conceal an evasion of the regulations on continuous driving by lorry drivers. There was therefore no tachograph record of the journey to Vins de Frethun. However the tachograph was then enabled and there was a record for the journey from Vins de Frethun onwards.
26. In cross-examination Andrew Mountain said that he had not seen the contract between the Appellant and Rob Mountain International. He estimated that his stop at Snodland would have been about an hour, being 25 minutes for a snack, 5 minutes to check the vehicle, 5 to 10 minutes to explain directions, 15 to 20 minutes to move things between the vehicles. When it was put to him in cross-examination that the tachograph had shown that the trailer was stopped at Snodland for two hours, his response was that it must have taken longer at the snack bar than he had thought. He denied that there had been any trailer swapping.
27. When it was put to him that the tachograph showed that the vehicle had travelled 40 Km. between the tunnel and MT Manutention, whereas the map showed that the distance between the two was 8 Km., he made no comment.
28. He admitted that his disabling of the tachograph was a dishonest action, intended to deceive the authorities concerned with the regulation of drivers' hours.
29. Lucio Buttarelli, the Company Secretary of the Appellant, explained that the form of the contract which Robert Mountain had signed on behalf of Rob Mountain International, had been drafted by the Appellant's tax advisers, Vincent Curley & Co., with a view to safeguarding the Appellant's position, with regard to its registration under WOWGR.
30. His evidence relating to the events of 11 July 2005 was that he had approached Rob Mountain International and spoken to Robert Mountain and entered into the contract with Rob Mountain International. After that, the first he heard was when he received a telephone call from Karin Quarterman on 13 July 2005 revoking his WOWGR registration. He was later on the same day informed by Karin Quarterman that the reason for the Customs' direction revoking the WOWGR registration was that they believed that the vehicle used by Rob Mountain International to transport the goods was found to be empty when intercepted outbound by a Customs officer at the Channel tunnel. He instructed Vincent Curley & Co. to request a review of the decision and to make further inquiries with Rob Mountain International, MT Manut and Vins de Frethun. That decision was withdrawn but was replaced by the decision to revoke the Appellant's WOWGR registration of 4 August 2005, which is the basis of appeal 8107.
31. He said that before he had become aware of Customs' direction to revoke the registration, he had arranged to purchase a further load of excise goods which was stored at Abbey Forwarding awaiting transportation. Customs would not allow the Appellant to move those goods under suspension of duty, and Mr. Buttarelli said he could not afford to pay the excise duty. The load at Abbey Forwarding was subsequently seized by Customs on 26 August 2005. This seizure is the basis of appeal 8118.
32. On 17 August 2005 Mr. Buttarelli received a Notice of Assessment for excise duty from Customs demanding payment of excise duty of £11,907.07. He understood that this assessment related to the load of excise goods which was despatched on 11 July 2005 in the vehicle which Customs alleged had been found to be empty on inspection at the Channel tunnel. This assessment is the basis of appeal 8111. He said that Customs alleged that the load had been diverted into the UK without payment of duty.
33. He said that he understood that Customs accepted that a consignment of excise goods was received at MT Manut, but alleged that it was a different consignment of excise goods to the one that he had arranged to be transported from Abbey Forwarding.
34. Mr. Buttarelli firmly denies any allegation that he has or attempted to divert duty suspended alcohol into the UK without the payment of excise duty. He said he believes that the allegations are ridiculous as he would not know how to attempt to arrange a duplicate consignment of goods to be loaded onto a vehicle in France. He said he failed to understand the logic of Customs' decision.
35. Mr. Buttarelli said that he did not believe he had contravened condition 7 of his WOWGR registration, that "the haulage company must take goods from the UK warehouse direct to the French warehouse". He says he was not aware that Rob Mountain International had changed drivers en route and only subsequently found out that this had happened for personal reasons relating to Robert Mountain.
36. He says that Customs' decision to revoke his WOWGR registration has prevented him from trading and caused severe financial hardship.
37. In oral evidence he explained the background to the consignment despatched on 11 July, 2005. Vins de Frethun faxed its order to the Appellant. On receipt of the fax, Mr. Buttarelli ordered the excise goods required from York Wines, a supplier which, like the Appellant, has an account at Abbey Forwarding. Abbey Forwarding then, on instructions, transferred the goods from York Wines' account to the Appellant's account. Mr. Buttarelli despatched a form to Karin Quarterman's office to advise her of all the information regarding the consignment. He contacted Robert Mountain, originally via the internet. He spoke to him and ascertained that he had an international licence and that he would offer his haulage services at a reasonable price. Robert Mountain had had no difficulty in signing the contract which Customs had insisted on. With regard to this particular consignment, Mr. Buttarelli telephoned Robert Mountain and then sent him a form with details, and then a contract. He called Abbey Forwarding to find out if the load had been picked up. He later called Robert Mountain to ask if everything was all right. It was after he had received a telephone call from Karin Quarterman in which she had revoked his WOWGR licence that he found out that there had been a driver swap on 11 July 2005. He was surprised and upset. He remonstrated with Robert Mountain to the effect that he should have told him (Mr. Buttarelli) of this change and he would then have advised Customs. He (Mr. Buttarelli) simply did not believe Karin Quarterman's assertion that the vehicle was empty on examination at the Channel tunnel.
38. He received from the French authorities a copy of the AAD document, with the appropriate stamp, confirming that the goods had been received in France. He had paid the French excise duty in advance, on 11 July 2005. This had been a requirement of his customer, Vins de Frethun, in order to enable the goods to be delivered straightaway. He (Mr. Buttarelli) had likewise been paid in advance by Vins de Frethun for the goods.
39. The first Customs officer to give evidence was Karin Quarterman. She is based at Oxford and her duties include what she describes as "the assurance of the Holding and Movement of duty suspended alcohol". She had first visited Mr. Buttarelli on 14 September 2004 as a result of his application to become a registered owner under WOWGR. Mr. Buttarelli had explained that he was setting up his business to sell beer to two clients in France. He intended to store the beer in duty suspension in the UK and despatch it to a French warehouse for his clients. She was Mr. Buttarelli's contact regarding his registration and the conditions necessary for carrying out exports of excise goods in duty suspension. Her evidence was that the Appellant commenced trading on 17 March 2005 moving full loads (approximately 1,920 cases of beer per consignment) from Abbey Forwarding to Vins de Frethun, per their accounts at EDW and MT Manut (French warehouses near the Channel tunnel).
40. In the course of her duties she acquired information that excise goods despatched by the Appellant from Abbey Forwarding were not being exported to France, but were instead being delivered for collection to the M20 service station at Maidstone, Kent. This caused her to request another department of Customs to issue a Commissioners' Direction in relation to the Appellant's goods at Abbey Forwarding. Subsequently on 7 April 2005 she again visited Mr. Buttarelli, informing him that she was not satisfied that the beer the Appellant was moving from Abbey Forwarding was reaching its stated destination in France, and that she believed it was being diverted within the UK, and that therefore she had asked for the Commissioners' Direction to be imposed. Mr. Buttarelli denied asking for the goods to be delivered to the M20 service station and stated that as far as he was aware the goods had been delivered to France and he had CMRs to prove this. On 14 June 2005, Karin Quarterman again contacted Mr. Buttarelli and advised him that in order to remove the Commissioners' Direction, she would be adding a number of conditions to his WOWGR approval. He advised her that Vincent Curley & Co. were in the process of drafting a contract for his new haulier. The new conditions were imposed and the Commissioners' Direction was removed on 21 June 2005.
41. On 22 June 2005, Karin Quarterman received a final draft of the haulage contract from Vincent Curley & Co. and responded to the effect that it was satisfactory. On 24 June 2005 she received notification from Mr. Buttarelli that he had identified a new haulier, Rob Mountain International, and he faxed her a copy of the contract between the Appellant and Rob Mountain International.
42. On 12 July 2005, Karin Quarterman received notification of the examination of the vehicle the previous day at Cheriton, and the information that the vehicle was found to be empty. At about 3 p.m. on 12 July 2005, she received a fax from MT Manut with a copy of the receipted AAD and a copy of a French document, (Edition des entrées sur commande). Based on this information, she requested that a second Commissioners' Direction be imposed on Abbey Forwarding in relation to goods held to the account of the Appellant.
43. On 13 July 2005 she received from Mr. Buttarelli a fax with a number of documents attached, which included a delivery note from MT Manut to Vins de Frethun, a CMR relating to a movement of goods from MT Manut to Vins de Frethun. These documents apparently related to the load in question .
44. At her request, officers visited Robert Mountain on 15 July 2005 and took a statement from him.
45. On 2 August 2005 she sent a report to the WOWGR unit in Glasgow recommending that the Appellant's registration should be revoked. On 4 August 2005, the revocation was issued by Nicholas Dyer, an officer of the WOWGR unit in Glasgow.
46. On 11 August 2005 she wrote to Mr. Buttarelli advising him that the revocation of the registration had created an excise duty point and that duty of £12,204.74 was due on goods which the Appellant was at that time storing at Abbey Forwarding and that if the duty was not paid by 25 August 2005, the goods might become liable to forfeiture.
47. On 17 August 2005 she wrote to Mr. Buttarelli issuing an assessment to duty in that amount, and on the same day wrote again issuing another assessment for £11,904.07 relating to the goods despatched on 11 July 2005.
48. On 25 August 2005, she established that the assessment for £12,204.74 had not been paid and requested another Customs officer to seize the related excise goods on her behalf.
49. On 26 August 2005, she received information that only 1,800 out of the 1,920 cases subject to the assessment for £12,204.74 excise duty were found at Abbey Forwarding had been seized.
50. On 7 September 2005, she wrote to the Appellant advising of the withdrawal of the assessment for £12,204.74, following the seizure.
51. On 15 September 2005, she received a communication from the French Customs authorities to the effect that the AAD issued by Abbey Forwarding on 11 July 2005 was registered at MT Manut on 12 July 2005 at 08:25 hrs., and that without the goods being handled they were despatched to Vins de Frethun the same day at 08:54 hrs.
52. She examined three tachograph charts for the vehicle in question for 11 and 12 July 2005, which were provided by Rob Mountain International to Customs officers on 3 August 2005. They indicated the following (all times and distances being approximate):

"11 July 2005: Robert Mountain departed Amberhill (near Boston) at 06:40 hrs. The vehicle travelled 228 Km. stopping at 10:00 hrs. at Abbey Forwarding. The journey recommenced at 13:10 hrs. The vehicle was driven a further 43 Km. stopping at 13:50 hrs. at Snodland. The tachograph chart was removed at 15:25 hrs. and a tachograph was inserted 25 minutes later at 15:50 hrs. The journey commenced from Snodland at 15:50 hrs. travelling 60 Km. and stopping at 16:35 hrs. Between 16:35 hrs. and 18:16 hrs. there were small shunting movements totalling about 3.5 Km. and she assumed that this was during Customs' interception at Cheriton. The vehicle was stationary between 18:16 hrs. and 19:15 hrs. while it was travelling through the Channel tunnel. On departing the tunnel, the vehicle travelled 13.5 Km. stopping at 19:20 hrs. for 2 hours and 5 minutes. Between 21:35 hrs. and 23:23 hrs. the vehicle was apparently driven and stopped intermittently covering a further 26 Km., finally stopping at 23:23 hrs. in Coquelles (the Tribunal assumes at MT Manut). On 12 July, the driver being Andrew Mountain, the tachograph was inserted at 09:25 hrs. and the journey commenced then. The vehicle travelled 250 Km., stopping at 12:40 hrs."

53. In oral evidence, Karin Quarterman said that in her experience a common method of working a fraud was to make a movement appear legitimate by paying French duty and getting the paperwork stamped up to legitimise the movement. For this purpose, a cheaper identical load is substituted in France for the load leaving the UK warehouse. The difference between the tax burden (duty and VAT) attaching to beer in France and the UK could be in the region of £10,000 for a load of 24 pallets of beer (1,920 cases).
54. The AAD is completed by the despatching warehouse. The first copy is kept by that warehouse. A copy (which has travelled with the goods) is receipted by the receiving warehouse and transmitted back to the despatching warehouse. She said that only if something was ostensibly wrong with the paperwork would Customs be automatically notified. In this case, on the face of it, the AAD shows that the goods despatched from Abbey Forwarding have been received at MT Manut. She suspected, however, that MT Manut had received a substitute load, which had been acquired in France before delivery. Customs had requested the assistance of the French customs authorities to inquire into the matter, and the report from them indicated as follows:

"The load was checked by MT MANUT staff when it was taken charge of. The UK seal which had been put on was broken at this point. There were no officials present at this stage of the proceedings. In any event, no report or document would have been drawn up if the load was satisfactory."

55. In her opinion, the 2 hour wait at Snodland indicated by the tachograph was sufficient time to unload the load of beer and remove it. The journey of 40 Km. in France prior to arrival at MT Manut appeared to Karin Quarterman to involve a lot of stopping and would be consistent with loading a duplicate load of beer at a warehouse or cash and carry. Her suspicion was that the Appellant's customer in France was set up to perpetrate a fraud.
56. In cross-examination Karin Quarterman accepted that she had been given prior notification by Mr. Buttarelli that the load in question was to be moved on 11 July 2005 and the Tribunal was handed a copy of this information, dated 8 July 2005. This information detailed the numbers of the truck and trailer to be used in the movement.
57. Karin Quarterman did not make the request for the vehicle to be stopped at Cheriton, and she was not aware that the vehicle was going to be stopped. It was stopped at the request of a colleague (called Sabrina) working on Customs National Alcohol Intelligence Team in London, following information passed to them by Abbey Forwarding. Karin Quarterman found out that the vehicle had been stopped on the day after it had happened (12 July 2005) as a result of a telephone call from her colleague at the National Alcohol Intelligence Team.
58. The colleague told her that the Appellant's vehicle had been stopped, searched and found to be empty. She was not surprised to receive the information. She was asked in cross-examination how common it was for a vehicle which had been stopped by Customs and found to be empty to continue to make a delivery in France. She answered that she did not know and that it was unusual to stop the lorry on the outbound journey.
59. She said that transferring a load of beer would not necessarily require a fork lift truck. It could be done manually if two vehicles were parked back to back.
60. She said in cross-examination that she did not believe the evidence of Andrew Mountain that the vehicle was full.
61. Michael Taylor, an officer based in Dover engaged in anti-smuggling duties, then gave evidence. He was the officer who intercepted the truck at Cheriton on 11 July 2005. He questioned Andrew Mountain. His evidence was that after he had asked for and received Andrew Mountain's passport, he asked him whether he had a load and received the answer "No, I'm empty". When asked whether he had a return load, he said "I don't know yet", and he would find out from "a call from my boss". His statement was based on his notebook. The Tribunal saw the original notebook which had been completed within hours of the interview.
62. Michael Taylor had said that if Andrew Mountain had said he had had a load in the trailer his (Michael Taylor's) line of questioning would have been quite different. He would have asked him for documents and further details of the load and so on.
63. He said that the National Alcohol Intelligence Team had requested this particular vehicle to be intercepted and "rummaged" – that is, searched. This interception was perhaps the 10^th or 12^th one that he had conducted on that particular shift.
64. He completed a "South Region Freight Interception Sheet" containing brief details, "trigger notes", during the interception. Among those details was the entry "M/T" against "Export Load". In cross-examination, Michael Taylor explained that "M/T" signified "empty", and was not a reference to M.T. Manut, a name with which he was not familiar. Michael Taylor himself did not see that the trailer was empty, but he was in control of the rummage and it was reported to him that it was empty. The interception data includes the assessment "nil result", which Michael Taylor explained signified that everything was found to be consistent with what Andrew Mountain had declared. He completed the full report of the interception later that evening at 9.40 p.m. after he had spoken to Sabrina, the colleague at the National Alcohol Intelligence Team, and she had asked him to make a notebook entry. He would only make a notebook entry if the matter was of interest to another department. Usually the interception sheet suffices as a record of an interception.
65. Aaron Stokes then gave evidence. He is a Customs officer engaged in anti-smuggling duties. He said that at approximately 5.20 p.m. on 11 July 2005, he examined the trailer at Cheriton. He found it to be not locked or sealed and to be completely empty.
66. He liaised with Michael Taylor after he finished his search. He created his notebook entry on 20 July 2005, which was the date on which he was requested to make a note by an officer of the National Alcohol Control Team.
67. Nicholas Dyer than gave evidence. He was a Customs officer employed as manager of the WOWGR registrations team in Glasgow. He said that he has liaised with Karin Quarterman from before the end of 2004 in relation to the Appellant's business. He acted on Karin Quarterman's report to revoke the Appellant's WOWGR registration in consequence of what was reported as a breach of condition 7 of the registration in the journey on 11 July 2005.
68. He has not seen the French Customs report which stated that the UK seal was broken when the load carried was checked by M.T. Manut staff. He said in cross-examination that if he had been aware of it, he would still have reached the same conclusion on revocation of the registration, based on the evidence of colleagues.
69. Mr. Brown, for the Appellant, brought to the Tribunal's attention two witness statements of persons who did not give oral evidence. They were: Neill Austin, the general manager of MT Manut and Phil Simpson, the general manager of Vins de Frethun.
70. Referring to the load delivered on 11-12 July 2005, Neill Austin states in two witness statements as follows:

Statement dated 8 August 2005: "The transport company engaged by [the Appellant] delivered goods to our bonded warehouse. The driver of the transport company would have produced the AAD to Manut. Manut would inspect the goods and endorse the AAD and subsequently return a copy to the UK bond. I have been shown a copy of an AAD … dated 8 July 2005 and I can confirm that this document would have been received and signed by an employee of Manut. Manut would complete a document marked 'Edition des entrées sur commande' to evidence the fact that the goods had been received; a copy of this document was faxed to [the Appellant]. I have been shown a copy of the document … and can confirm that this is a true copy of the document that Manut would have prepared. I can say from our company records that the transport company delivered the goods in vehicle [details given] and were destined for a business called Vins de Frethun in Coquelles."

Statement dated 3 October 2005: "I can say that there is no legal requirement in France that the seal must be intact when it is received at our bonded warehouse. … I can say that in general, approximately eighty per cent of our vehicles arrive with the seal intact. Twenty percent of the time the driver of the vehicle may break the seal while he is in the queue waiting for the goods to be checked. This is done primarily to save time as the driver will roll back the plastic curtain in anticipation of the load being checked quicker. I have checked our records for the 12 July 2005 and I can confirm that the vehicle [details given] arrived with a full load. I can say from records held by the company that our warehouse manager, Frederic Baudart, was on duty that day and he would have inspected the goods on the vehicle. I can also confirm there were no French Customs officers present that day."

71. Phil Simpson in his statement confirmed that Vins de Frethun had received and paid for all the supplies ordered from the Appellant.

Jurisdiction

72. The decision appealed against by appeal 8107 is a decision within para. 2(1)(p), Schedule 5, Finance Act 1994 ("FA 1994"), and the decision appealed against by appeal 8118 is a decision within para. 2(1)(r) of the same Schedule. Both, therefore, are ancillary matters within s.16, FA 1994 (see: s.16(8)) and the appeals are therefore governed by s.16(4), which gives the Tribunal restricted powers on appeal. Appeal 8111, being against an assessment to excise duty, is an appeal on which the Tribunal has a full appellate jurisdiction. We note, lest it be thought that the point has been overlooked, that Mr. Kellar, for Customs, made no submission to the effect that appeal 8118 was an abuse of the Tribunal's process, and we do not consider that it is.

The issue

73. The main issue in all three appeals, at this stage, is whether the vehicle, when intercepted at Cheriton, was carrying a load (as the Appellant submits), or was empty (as Customs submits). Mr. Kellar did not press the Appellant's breach of condition 7 of the registration (against the haulier subcontracting) as an independent justification for the revocation of the Appellant's WOWGR registration.

The submissions

74. Mr. Brown, for the Appellant, reminded the Tribunal that both Robert Mountain and Andrew Mountain had given evidence that the seal remained intact on the vehicle throughout the journey and Andrew Mountain had said that he was sure the trailer was full throughout, by the way the vehicle handled. He pointed out that Aaron Stokes, who had been present at the initial questioning of Andrew Mountain by Michael Taylor did not recall the driver (Andrew Mountain) saying that the vehicle was empty. He points out that the "trigger notes" compiled by Michael Taylor at the time of the questioning were not offered to Andrew Mountain for him to confirm their accuracy. Michael Taylor noted a "nil result" on the interception sheet, which was not, in terms, a note that that the vehicle was empty. Michael Taylor could not say from his own knowledge that the trailer was empty. Aaron Stokes did not write up his notebook until 9 days after the interception and therefore its reliability was questionable. He had said that he had probably examined 70 vehicles in the intervening time. It was unlikely that Aaron Stokes could remember the specific vehicle 9 days later when he had made his notebook entry and witness statement.
75. Mr. Brown relied on the fact that the AAD had been stamped by MT Manut confirming the arrival of the load at the French warehouse. The seal number (relating to Abbey Forwarding) was recorded in the AAD. There were no notes on the AAD by anyone from MT Manut (or anyone else) to the effect that there was no seal, a broken seal, or a seal with a different number to that on the AAD, on the load's arrival at the warehouse. He relied also on the French customs report that the load was checked by MT Manut and stamped when taken charge of, and the UK seal which had been put on was broken at this point. The reference to "the UK seal" must be taken to have been made in direct response to Karin Quarterman's enquiry which had referred to a particular seal (number 8249). The inference should be that it was the same seal that was broken at MT Manut, although he acknowledged that there was no direct evidence that the number was checked on arrival at MT Manut.
76. There was evidence that Andrew Mountain had only £50 on him at the time of the interception at Cheriton and the vehicle was "rummaged", and no more cash was found. Andrew Mountain clearly did not have enough money to buy a substitute load.
77. He defended Andrew Mountain's credibility but accepted that the evidence carrying the greatest weight was that of the receipted AAD and the French customs' reply.
78. With regard to the decision to revoke the Appellant's WOWGR registration, Mr. Brown pointed out that Nicholas Dyer, who said in evidence that he had relied on Karin Quarterman's report, cannot have relied on the fact that there was a change of driver in breach of condition 7 of the registration, because that had not been mentioned by Karin Quarterman. In any event, Mr. Buttarrelli was unaware of the change of driver at he cited the Tribunal Decision of Whitehead Machinery (Partnership) v Commissioners of Customs and Excise as support for the proposition that it would be unreasonable to revoke a registration because of something which was not the injured party's fault.
79. Mr. Keller, for Customs, submitted that if the trailer was empty on the interception at Cheriton, it followed that there had been a breach of condition 7. It also followed that whatever goods reached MT Manut and Vins de Frethun were not, on the balance of probabilities, the goods that left Abbey Forwarding. In these circumstances the most likely explanation was that there had been a substitute loading in France before delivery to Manut MT, as suggested by Karin Quarterman.
80. He submitted that Robert Mountain and Andrew Mountain lacked credibility of this issue and the Customs evidence was clearly to be preferred for three core reasons– (a) the Customs evidence was itself compelling; (b) Both Robert Mountain and Andrew Mountain had admitted dishonesty; and (c) Robert mountain's evidence and Andrew Mountain's evidence were inconsistent, one with another.
81. As to the Customs evidence being compelling: Michael Taylor's evidence was that Andrew Mountain had said that the trailer was empty and Aaron Stokes gave evidence was that he had searched the trailer and found it to be empty. Their evidence was supported by the contemporaneous interception sheet. Andrew Mountain accepted that most of Customs' note of the interview corresponds with what he would have said. His challenge to Customs' version of the interview was very selective. Mr. Keller reminded the Tribunal that Michael Taylor had said that if Andrew Mountain had indeed said that he was carrying a full load, his (Michael Taylor's) line of questioning would have been very different. He submitted that Andrew Mountain's assertion that he was asked no questions at all about the load he was carrying was incredible.
82. As to the admissions of dishonesty: Robert Mountain had admitted this in relation to the substitution of drivers in breach of contract. Andrew Mountain had admitted this in relation to his not putting in the tacograph between MT Manut and Vins de Frethun, and in writing in the wrong start point on the tachograph when he did put it in. Robert Mountain's actions may not have been dishonest, strictly speaking, but Andrew Mountain's actions were both dishonest and illegal. Andrew Mountain's dishonesty should, in Mr. Keller's submission, weigh very heavily against his credibility in relation to the events surrounding the journey.
83. As to Andrew Mountain's not having any cash on him, this did not prove anything. Mr. Kellar submitted that an arrangement for paying for a substitute load could well have been put in place in advance, and in any event Andrew Mountain was not searched personally for any money he might have had on him.
84. As to the inconsistencies in the evidence of Robert Mountain and Andrew Mountain: these arose in relation to the time of arrival at Snodland. Andrew Mountain said that Robert Mountain arrived at 2.30 p.m.; Robert Mountain said he arrived at 12.45 p.m. In relation to the duration of the stop at Snodland, Andrew Mountain said it was one hour; Robert Mountain said it was two hours. A two-hour stop would be consistent with the removal of the load from the trailer. The tachograph evidence of stopping activity in France is consistent with the loading of a substitute load.
85. Robert Mountain's evidence and Andrew Mountain's evidence was inconsistent in relation to the organisation of a return load. Robert Mountain said that a return load had not been verified. Andrew Mountain said there definitely was a return load organised for an address in Belgium.
86. Andrew Mountain's evidence about the number of stops in France, before getting to MT Manut – that he visited Transmark, and got lost, was not mentioned at all in either of his two witness statements. This was a material omission and was not corroborated by Robert Mountain's statement – although Andrew Mountain had said that he had called Robert Mountain from France for directions when he got lost.
87. Andrew Mountain's evidence about the route he took in France, that when he got lost, Robert Mountain told him to carry on the way he was going, was inconsistent with the tachograph evidence showing that he had travelled 40 Km. to get to MT Manut, which was only 8 Km. from the Channel tunnel.
88. Mr. Brown in reply sought to explain the inconsistencies in the evidence referred to by Mr. Kellar on the basis that Robert Mountain was under pressure due to the impending divorce hearing and therefore it was not surprising that his evidence on timing and on the return load was inaccurate. Andrew Mountain's evidence on these points should be preferred. The omission of reference to the stops in France from the witness statements could be explained by the fact that the statements had been directed to refuting the allegation that the trailer was empty at Cheriton. No explanation had been given by Customs for the evidence in the French customs report that the seal was intact on the arrival of the load at MT Manut.
89. Mr. Brown asked rhetorically: how likely is it that a vehicle which is stopped going out by UK Customs and found to be empty would subsequently arrive at a French warehouse carrying a load purportedly from a UK bond? He submitted that if anyone was attempting to commit the sort of fraud alleged in this case by Customs had been stopped by UK Customs on the way out, where there would be a record of the interception, it is highly improbable that such a person would continue with the attempted fraud.

Conclusion

90. We can state our conclusion relatively briefly. On the issue of fact as to whether Andrew Mountain was carrying a load when he was intercepted by Customs at Cheriton, we find that he was not. We prefer the evidence of Michael Taylor and Aaron Stokes (which we find convincing) to that of Robert Mountain and Andrew Mountain, which had all the inconsistencies to which Mr. Keller drew our attention in his submissions.
91. We wish to state that we make no findings of fact to the effect that either Mr. Buttarelli or Vins de Frethun was aware of or involved in any fraudulent or illegal activity, although such was suggested by Karin Quarterman. Indeed we do not regard the state of knowledge of either Mr. Buttarelli or of Vins de Frethun as directly relevant to the main issue of whether or not Andrew Mountain was drawing a load of excise goods when he was intercepted at Cheriton.
92. On that main issue, we are particularly persuaded by Michael Taylor's evidence that if Andrew Mountain had said he had had a load in the trailer his (Michael Taylor's) line of questioning would have been quite different. He would have asked him for documents and further details of the load and so on. This seems to us eminently likely and plausible. Coupled with this, we find Andrew Mountain's evidence, that he could not recall whether he was asked (by Michael Taylor) if he had a load, to be eminently unlikely and implausible. The presence or absence of a load in the trailer seems to us to be likely to be the point of most interest to an intercepting Customs officer.
93. We reject Mr. Brown's criticisms of the evidence of Michael Taylor and Aaron Stokes as insubstantial.
94. Picking up Mr. Brown's submission that the evidence carrying the greatest weight was that of the receipted AAD and the French customs' reply, we note that the existence of the receipted AAD is consistent with both the Appellant's and Customs' version of events. If a substituted load had been delivered to MT Manut, then, of course, an apparently correct AAD would have been receipted and returned to Abbey Forwarding.
95. The point in the French customs' reply on which Mr. Brown places the greatest emphasis is, of course, the statement that the UK seal which had been put on at Abbey Forwarding was broken at the point when the load was checked and taken charge of by MT Manut staff.
96. However the force of this evidence seems to us to be undermined when reference is made to the evidence of Neill Austin, the general manager of MT Manut. He stated that there is no legal requirement in France that the seal must be intact when a load is received at the bonded warehouse, and in one fifth of cases (his estimate) the driver of the vehicle may break the seal while he is in the queue waiting for the goods to be checked. The MT Manut warehouse manager, Frederic Baudart, not any officer of French customs, was on duty on 12 July 2005 at the time the load was received at MT Manut. Neill Austin did not state that the seal on this particular load was found to be intact and was broken when the load was checked by Frederic Baudart. We have no evidence from Frederic Baudart himself. The French customs' report can only, we consider, on the balance of probabilities, have been derived from information given by the staff of MT Manut. In these circumstances it would be impossible for us to rely on the French customs' report to reach a conclusion which would be contrary to the import of the evidence of Michael Taylor and Aaron Stokes which, as we have said above, we accept. We find that, as Aaron Stokes said in evidence, the trailer at the time of the interception at Cheriton, was not locked or sealed and was completely empty.
97. We accept the tachograph evidence as reported by Karin Quarterman to be in all essential respects correct and therefore we find that the timing of the stop at Snodland allowed the load which had been collected at Abbey Forwarding to be irregularly removed, and also allowed for a collection of a substitute load, once the vehicle had arrived in France. We accept Mr. Kellar's point that Andrew Mountain's not having any cash on him at the time of the interception at Cheriton (if that was the fact) does not prove anything. An arrangement for paying for a substitute load could well have been put in place in advance.
98. We answer Mr. Brown's rhetorical question (see paragraph 89 above) as follows. Once the load had been irregularly removed at Snodland, but the vehicle was still carrying the AAD and other documentation relating to it when it was intercepted at Cheriton, Andrew Mountain realistically had the choice either of failing to deliver any load to MT Manut, with obvious repercussions as to his (or Robert Mountain's) culpability in diverting the load which had been picked up at Abbey Forwarding, or of collecting a substitute load and delivering it to MT Manut as the original load. It is not unlikely or improbable that (as we find) he should have chosen to take the latter course.
99. For these reasons we find that Andrew Mountain was drawing no load when he was intercepted at Cheriton. It follows that we hold that the decision to uphold the decision to revoke the Appellant's registration under WOWGR was reasonable, and we dismiss appeal 8107. For these reasons also, we hold that the refusal to offer for return to the Appellant the seized excise goods was reasonable, and we dismiss appeal 8118.
100. As indicated above, this decision is preliminary in relation to the appeal against the assessment, appeal 8111. We find in relation to the assessment that the sum assessed relates to excise duty for which relief has been given but ought not to have been given, or for which relief would not have been given had the facts been known or been as they later turned out to be (see: section 12A(1) FA 1994). We will give directions for the appeal to come on again for hearing of the alternative grounds of appeal, which are the subject of Mr. Brown's amendment which we have allowed (see above, paragraph 8).
101. We give Customs liberty to apply to a Chairman of these Tribunals sitting alone in relation to their costs of these appeals.

JOHN WALTERS QC

CHAIRMAN

RELEASE DATE: 22 January 2007

LON/2005/8107; LON/2005/8111; LON/2005/8118