United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E1039, [2007] UKVAT(Excise) E01039

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Boleslaw Turbanski v Revenue & Customs [2007] UKVAT(Excise) E01039 (24 April 2007)

E01039

EXCISE GOODS – Restoration of vehicle – Appellant's son-in-law used Appellant's vehicle to bring in 19,000 cigarettes from Poland in a specially adapted compartment – Appellant unaware of adaptation or of intended visit – Whether Appellant who was in the UK could be expected to take steps to prevent car being used by son-in-law for smuggling – Appeal allowed

LONDON TRIBUNAL CENTRE

BOLESLAW TURBANSKI Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: MISS J C GORT (Chairman)

MR P D DAVDA FCA

Sitting in public in London on 27 February 2007

The Appellant in person

Miss Fiona Darroch of counsel for the Respondents

© CROWN COPYRIGHT 2007

DECISION

This is an appeal against a decision by the Respondents contained in a letter dated 5 May 2006 not to restore to the Appellant a Mercedes car which had been seized pursuant to section 139(1) and 141 of the Customs and Excise Management Act 1979 on 15 December 2005.

The Appellant, Mr Turbanski, was the owner of the car, but not the driver of the car at the time it was seized. It was a vehicle which he used for the purposes of his occupation as a taxi driver when in Poland.

The Background

On 15 December 2005 a Mr Kamil Milaszewski, Mr Turbanski's son-in-law, was stopped by Customs at Dover Eastern Docks whilst driving the Appellant's Mercedes car. On being stopped he said he was driving to visit the Appellant, and he declared that he had with him one carton of cigarettes. Upon a search of the vehicle 19,000 cigarettes were discovered in the car concealed within an adapted fuel tank. The cigarettes and the car were both seized, and Mr Milaszewski was issued with a `Seizure Information Notice' and a Customs notice explaining the procedure for appealing.

On 19 December 2005 Mr Turbanski wrote to the Commissioners asking for the return of the vehicle and stating that his son-in-law, Mr Milaszewski, had asked to borrow the car to come to work in England. He had not mentioned bringing any cigarettes. Mr Turbanski provided proof of ownership, including registration documents for the car and his own ID card.

On 22 February 2006 Mr Turbanski attended an interview at Dover where he provided further information. The gist of the information he gave was that he himself had been working in England, having flown here on 13 August in 2005. He had flown because it took more than twenty hours to drive to England. The car had been left with his wife in a garage at his home. His wife had given his son-in-law permission to drive the car whilst he himself was away. The son-in-law did not own a vehicle. There was no financial arrangement concerning its use. He did not know of Mr Milaszewski's intention to drive from Poland to the UK, nor did he know about the adaptation of the fuel tank on the vehicle or that cigarettes would be brought over. None of the cigarettes were for him.

Following a letter of 21 March 2006 from the Commissioners refusing restoration of the vehicle, on 24 March Mr Turbanski asked for a review of that decision. By a letter dated 29 March 2006 he was asked to provide any further information in support of his request for a review, but nothing further was received.

At the outset of the hearing there was no appearance by or on behalf of Mr Turbanski, and after having allowed considerable time for the Appellant to arrive at court, the case was called on. The Respondents applied for the appeal to be dismissed for want of prosecution, but the Tribunal decided to hear the case under the provisions of rule 26(2) of the VAT Tribunals Rules 1986 in Mr Turbanski's absence. Having heard from the Respondents, the appeal was dismissed, the Tribunal announced its decision at the hearing. There was an application by Miss Darroch for the costs of the hearing to be reserved in the event that might apply under rule 26(2) for the decision to be set aside. The Tribunal did not accede to that request. As the Tribunal was leaving the court Mr Turbanski arrived and made an application for the appeal to be re-opened. This was agreed to and the matter was re-opened.

The legislation

The Tobacco Products Duty Act 1979 provides:

"1. Tobacco products

(1) In this Act `tobacco products' means any of the following products, namely:

(a) cigarettes;

(b) cigars;

(c) hand-rolling tobacco;

(d) other smoking tobacco; and

(e) chewing tobacco,

which are manufactured wholly or partly from tobacco or any substance used as a substitute for tobacco, but does not include herbal smoking products.

(2) Subject to subsection (3) below, in this Act `hand-rolling tobacco' means tobacco –

(a) which is sold or advertised by the importer or manufacturer as suitable for making into cigarettes; or

(aa) which is of a kind used for making into cigarettes; or

(b) of which more than 25 per cent by weight of the tobacco particles have a width of less than 1mm.

Charge and remission or repayment of tobacco products duty

(1) There shall be charged on tobacco products imported into or manufactured in the United Kingdom a duty of excise at the rates shown, […], in the Table in Schedule 1 to this Act.

(3) …"

(Emphasis added)

The Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002:

The Tobacco Products Regulations 2001 state:

"4. (1) Amend the Tobacco products Regulations 2001[8] as follows:

(2) In the definition of "duty" in regulation 3(1) before the word "means" insert –

"except in regulation 12(1B) 9d) below,"

(3) In regulation 12, after paragraph (1) insert –

"(1A) In the case of tobacco products acquired by a person in another member State for his own use and transported by him to the United Kingdom, the excise duty point is the time when those goods are held or used for a commercial purpose by any person."

(1B) For the purposes of paragraph (1A) above –

"(a) `member State' includes the principality of Monaco and San Marino, but does not include the Island of Heligoland and the territory of Busingen in the Federal Republic of Germany, Livigno, Campione d'Italia and the waters of Lake Lugano in the Italian Republic, Ceuta, Melilla and the Canary Islands in the Kingdom of Spain, or the overseas departments of the French Republic …".

(b) "own use" includes use as a personal gift,

(c) if the goods in question are –

(i) transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or

(ii) the person holding them intends to make such a transfer, those goods are to be regarded as being held for a commercial purpose,

(d) if the goods are not duty and tax paid in the member State at the time of acquisition, or the duty and tax that was paid will be or has been reimbursed, refunded or otherwise dispensed with, those goods are to be regarded as being held for a commercial purpose,

(e) without prejudice to sub-paragraphs (c) and (d) above, in determining whether excise goods are held or used for a commercial purpose by any person regard shall be taken of –

(i) that person's reasons for having possession or control of those products,

(ii) whether or not that person is a revenue trader (as defined in section 1(1) of the Customs and Excise management Act 1979),

(iii) that person's conduct, including his intended use of those goods or any refusal to disclose his intended use of those products,

(iv) the location of those products,

(v) the mode of transport used to convey those products,

(vi) any document or other information whatsoever relating to those products,

(vii) the nature of those products including the nature and condition of any package or container,

(viii) the quantity of those products, and in particular, whether the quantity exceeds any of the following quantities –

3,200 cigarettes

400 cigarillos (cigars weighing no more than 3 grammes each)

200 cigars

3 kilogrammes of any other tobacco products

(ix) whether that person personally financed the purchase of those products,

(x) any other circumstance that appears to be relevant,

(4) In regulation 23(1), after paragraph (a), insert –

"(aa) they were acquired by a person in another member State for his own use and transported by him to the United Kingdom."

(Emphasis added)

By Regulation 16 of the Excise Goods (Holding, Movement Warehousing and REDS) Regulations 1992 (SI 1992/3135) excise goods, in respect of which duty has not been paid, shall be liable to forfeiture where there has been a breach of regulations.

Section 49 of the Customs and Excise Management Act 1979 ("CEMA") provides:

"1. Where –

(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being goods chargeable on their importation with customs or excise duty, are, without payment of duty –

i. unshipped in any port,

ii. unloaded from any aircraft in the United Kingdom,

iii. unloaded from any vehicle in, or otherwise brought across the boundary, into, Northern Ireland, or

iv. removed from their place of importation or from any approved wharf, examination station or transit shed;

(b) …

( c) …

(d) …

(e) …

(f) any imported goods are concealed or packed in any manner appearing to be intended to deceive an officer,

… those goods shall … be liable to forfeiture.

Section 88 CEMA 1979 provides:

Where –

(a) a ship is or has been [in United Kingdom waters]; or

(b) an aircraft is or has been at any place whether on land or on water, in the United Kingdom; or

(c) a vehicle is or has been within the limits of any port or at any aerodrome or, while in Northern Ireland, within the prescribed area,

while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods, that ship, aircraft or vehicle shall be liable to forfeiture.

Section 139 CEMA 1979 provides:

"(1) Any thing liable to forfeiture under the Customs and Excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard."

Section 141 CEMA 1979 provides as follows:

"(1) … where any thing has become liable to forfeiture under the Customs and Excise Acts –

any ship, aircraft, vehicle … which has been used for the carriage, handling, deposit … of the thing so liable to forfeiture … and

… any other thing mixed, packed or found with the thing so liable, shall also be liable to forfeiture."

Section 152(b) CEMA 1979 provides that the Commissioners may as they see fit, restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized. Section 152 CEMA 1979 provides that:

"The Commissioners may, as they see fit –

(a) …

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under the Customs and Excise Acts."

The jurisdiction of the Tribunal is pursuant to the Finance Act 1994, section 16(1), 16(4) and Schedule 5. This matter falls to be an ancillary matter as defined in Schedule 5 to the Act and the Tribunal, if it finds that the Respondents have acted unreasonably in not restoring the thing seized, can make an order under the Finance Act 1994, section 16(4):

"…

(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such a time as the tribunal may direct;

(b) to require the Commissioners to conduct, in accordance with the direction of the tribunal, a further review of the original decision; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to given directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."

The evidence

At the hearing of the appeal both Mr Turbanski and Mr Milaszewski gave evidence before the Court. The Appellant's evidence was given via an interpreter, a Mr Krzysztos Wajrak. Mr Wajrak was not an official interpreter, but was a lawyer in Poland. The review officer, Miss Deborah Gillespie, gave evidence on behalf of the Respondents.

Mr Turbanski's evidence was that he had bought the car in 2004 in Germany where it had been used as a taxi. There was confusion as to the date when he had actually bought the car and when it had first been registered in Poland as a taxi, which appeared to be 12 January 2005. Mr Turbanski had bought it for use by him as a taxi in Poland, and had so used it before he came to England in January 2005. On that occasion he had driven to the United Kingdom from Poland, and had remained here for some three to four days and had then driven back again. He had returned to the United Kingdom in August 2005 having arranged through friends to obtain a job as a lorry driver. Between January and August 2005 he had used the car in Poland as a taxi almost every day. He stated that he would have been aware had the car been adapted at that time.

In Poland any person with a driving licence was permitted to drive a car with the permission of the owner, provided the car was insured. It was therefore possible for he himself, his wife, his daughter or his son-in-law to drive the car, and they all did. He had worked at night as a driver and they had used the car in the daytime for shopping. Between August and December 2005 he had returned to Poland on one occasion only, round about the end of October for two weeks. Again on that occasion he had travelled by aeroplane. He had used the car very little on that occasion when he was in Poland because he did not wish to re-adapt to driving on the other side of the road.

Mr Turbanski had also bought a cheap car when he was in England, but had since sold it. He was living on the edge of Spalding and needed a car to drive to work and to do the shopping. He was living on a farm where there were about eighty Polish drivers, some of whom had cars, and who would give him a lift to work.

Mr Turbanski had been unaware that the Mercedes had come to England on 14 November, and he had not been visited by his son-in-law on that occasion. He had been telephoned by his son-in-law in December when he had been stopped by the Customs. That was the first time that he had become aware that the car was in England. He had, however, known that his son-in-law would at some point come to the United Kingdom, but he did not know when that would be.

Mr Milaszewski, Mr Turbanski's son-in-law, gave his evidence in English, which he spoke very well. He had been married to Mr Turbanski's daughter for six years and they had two children. He was at the time of the hearing working in the United Kingdom for a transport company as a translator.

Hr informed the Tribunal that he had first come to England in January 2005. On that occasion he had travelled by bus. He had come again on 14 November 2005 in the Mercedes to visit friends, and to attempt to arrange the import to Poland of cars from the United Kingdom. He had not told the Appellant he was coming on that occasion. On the occasion of his visit on 14 November he had been to stay with a friend where he had `met some Arabs' who told him that the Mercedes would be very easy to prepare for smuggling, and there would be `good money in it' if he brought cigarettes in the car. He was shown how to adapt the Mercedes to carry the cigarettes. He had intended coming to the United Kingdom to look for a job, but the friends he had met on the 14^th had told him that there was no point in doing that.

In 2005 Mr Milaszewski had stayed in England between January and May, when he had returned to Poland. In that period he had had many different jobs, mainly labouring. He had adapted the Mercedes himself, having borrowed money from a friend to pay for the cigarettes. The journey itself had taken two days. None of his evidence was challenged by the Commissioners.

The review officer, Mrs Gillespie, was asked by Miss Darroch whether, if she had been aware of the son-in-law's evidence prior to making her decision, it would have made any difference to her decision. Her reply was: "It would and would not have made a difference". She explained this by saying that it was the Commissioners' policy not to restore any vehicles which had been adapted for smuggling. However, in this case the vehicle was not owned by the person who had committed the offence. At the time she had made her decision she had taken the view that Mr Turbanski was probably complicit, and must have been aware both of the adaptation and of the fact that his son-in-law was coming to see him. Having heard the evidence that Mr Turbanski did not know of the visit or the adaptation, it would be possible to consider restoration.

In her decision letter Mrs Gillespie had set out a summary of HM Revenue and Customs policy for restoration of private vehicles in the following terms:

"The Commissioners' general policy is that private vehicles used for the improper importation or transportation of excise goods should not normally be restored. The policy is intended to be robust so as to protect legitimate UK trade and revenue and prevent illicit trade in excise goods. However vehicles may be restored at the discretion of the Commissioners subject to such conditions (if any) as they think proper (e.g. for a fee) in the circumstances such as the following:-

…

if the vehicle was owned by a third party who was not present at the time of the seizure, and can show that they were both innocent of and blameless for the smuggling attempt then consideration may be given to restoring the vehicle for a fee; if in addition to being both innocent and blameless the third party demonstrates that they had taken reasonable steps to prevent smuggling in the vehicle then consideration may be given to restoring it free of charge."

Mrs Gillespie set out that she was guided by the Commissioners' policy but not fettered by it in that she considered every case on its individual merits.

Mrs Gillespie informed the Tribunal the decision had been based on her view that she did not accept that Mr Turbanski had been unaware of such a large adaptation, and did not consider that he was innocent and blameless for the purposes of the policy, nor that he had taken reasonable steps to prevent his vehicle from being used for smuggling. She had also paid attention to the degree of hardship caused by the loss of the car, and considered that since Mr Turbanski had been in the United Kingdom since August 2005, without this vehicle, and had now bought another one, the inconvenience caused did not result in exceptional hardship over and above what would normally be expected when a vehicle was lost. She concluded there was no reason to disapply the Commissioners' policy of not restoring the car.

In accordance with the policy, it was Mrs Gillespie's opinion that, in addition to being innocent, Mr Turbanski must demonstrate that he took reasonable steps to prevent the vehicle from being used for smuggling, and if he could demonstrate that, then restoration would be free of charge. However, in the present case he had taken no steps to prevent such use. Mrs Gillespie said that in some circumstances she would have considered restoring the car for a fee equivalent to the revenue on the goods involved, which was £2,758 plus the cost of the removal of the adaptation to the fuel tank which she estimated at about £955. She estimated the trade value of the car at £2,333. In this case, where the trade value was lower than the value of the revenue on the goods involved, the charge for restoration would be the value of the vehicle plus the cost of repair. She was personally surprised that the son-in-law would drive to the United Kingdom to see his father-in-law and not tell him that he was coming, particularly in view of the fact that he telephoned his father-in-law when he arrived.

When questioned by the Tribunal as to what would constitute a reasonable step to prevent smuggling, Mrs Gillespie was only able to suggest that there should have been an agreement that, if the son-in-law did misuse the vehicle, then there would be consequences. She also suggested that the Appellant should have made it a requirement of the loan that the vehicle was not to be taken abroad, or that he was to be informed if the vehicle were to be taken abroad. She did not accept that the policy with regard to "reasonable steps" only applied to commercial vehicles.

Mr Turbanski was recalled in order to ascertain what arrangements he had made with his son-in-law as to how he could use the car. His evidence was that there had been no such arrangements because the son-in-law was an adult and Mr Turbanski had not thought that his son-in-law would do anything so stupid with his car. The son-in-law knew the car was owned by the bank and that the loan would not be paid off until 2012. There had been no conditions imposed on the son-in-law. The insurance in existence for the car covered any qualified driver to travel anywhere, which was the usual situation in Poland.

The Respondents' case

Miss Darroch accepted that the appeal presented the Respondents with a difficulty because a proper and fully detailed account of the circumstances in which the son-in-law was driving the car had only emerged during the hearing. The Commissioners had asked in correspondence for further information, and in the course of the interview with the Appellant there was nothing to indicate the truth of what had happened, particularly as he had simply answered "I don't know" to the majority of the questions. It was therefore difficult for Mrs Gillespie to have arrived at a proper decision when she had not been provided with all the relevant information.

She submitted that the Commissioners were entitled to consider that the position with regard to insurance in Poland meant that there was no barrier to the son-in-law regaining access to the car in the future, were it to be restored.

She further submitted that, in the present case because the value of the car was exceeded by the duty on the cigarettes, restoration was not an option. Whilst if the Appellant were both innocent and blameless, then consideration could be given to restoration free of charge, this could not occur because of the value and the cost of restoring the car to its pre-adaptation state. In any event, it could not be said that the Appellant had taken reasonable steps to prevent the car being used for smuggling. However, she accepted that no effective control could be exercised because of the Polish insurance system. In the circumstances it would be inappropriate to restore the vehicle free of charge.

The Appellant's case

On behalf of the Appellant it was submitted that there was a very different culture in Poland, and that it would not have been reasonable for the Appellant to put conditions on his son-in-law when he allowed him to use the car. It had not occurred to him to think that the car would be used for wrong doing, he had just lent it so that his family would be more mobile. It was difficult for the family to travel by bus. He had not told his son-in-law not to use the car for smuggling because it had never occurred to him that it would be so used. He had not given all the information to the Commissioners at the interview because he had been provided with an interpreter who was inadequate, and who had told him simply to answer the questions yes or no, which he had done. In addition he relied on the fact that he had taken out a loan to buy the car, which was therefore owned by the bank.

Reasons for decision

The Tribunal has no hesitation in accepting the Appellant and his son-in-law's account of what had happened in this case. Mr Turbanski had, in an open-hearted way, allowed his son-in-law the use of his car after he himself started working in England. We accept that he knew nothing of the adaptation which was carried out on this car. The Commissioners' records show that there had only been one previous visit to the United Kingdom by this Mercedes, which had been on 14 November 2005, returning on 15 November 2005. There is therefore absolutely no evidence of any regular use by the son-in-law for the purposes of smuggling with this vehicle, (or, in fact, in any other vehicle) nor indeed was there any suggestion by the Respondents that that was the case. The position as far as the Respondents are concerned is that there was in fact no loss to the revenue because they apprehended the cigarettes which Mr Milaszewski had hoped to bring in avoiding paying duty. There is some evidence of hardship to Mr Turbanski's wife in that she lives in a village and needs a car for doing the shopping, but this cannot be said to be `exceptional' hardship.

We find that the Appellant is both innocent and blameless of the smuggling attempt. Whilst it is clear that he did not take any steps to prevent the smuggling in the vehicle, we find it very difficult to see what, in the particular circumstances, could be considered to be a reasonable step which he could have taken. His son-in-law had been his son-in-law for six years, and had two children. He was living with Mr Turbanski's wife, with whom the car had been left and was quite clearly completely part of Mr Turbanski's family. The insurance provisions in Poland are much as they used to be in this country some years ago, in that any person could drive a car provided he had a licence, if the car itself were fully insured. This would appear still to pertain in Poland and therefore there were no restrictions that the Appellant could have put on his son-in-law's use of the car which would have prevented what occurred, other than his saying that he was not to take the car abroad. Imposing such a condition would have anticipated that the son-in-law was likely to use the car for a nefarious purpose, which the Appellant clearly had not. We do not consider it unreasonable for him not to have contemplated the use by the son-in-law of the vehicle for smuggling purposes, especially given that the car was left in his wife's charge.

We feel that this case should be distinguished from smuggling in a commercial vehicle where the owner should be expected to anticipate that his employees might contravene the law and where he is in position to take appropriate steps.

In all the circumstances therefore we allow this appeal and direct that the matter be referred back to the Commissioners to reconsider on the basis of the above facts.

MISS J C GORT

CHAIRMAN

RELEASED:24 April 2007

LON/06/8049