United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E1043, [2007] UKVAT(Excise) E01043

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Maola-Sakwa Przewozy Krajowe I Zagraniczne Export-Import Irenewsz Adamowski v Revenue & Customs [2007] UKVAT(Excise) E01043 (17 May 2007)

E01043

Excise Duty – Tractor and Trailer unit sized – Whether decision of the Commissioners to offer restoration for a fee of £35,050 was reasonable and proportionate – Held it was – Appeal dismissed

LONDON TRIBUNAL CENTRE

MAOLA-SAKWA PRZEWOZY KRAJOWE I ZAGRANICZNE

EXPORT-IMPORT IRENEWSZ ADAMOWSKI Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: DR KAMEEL KHAN (Chairman)

ALEX McLOUGHLIN

Sitting in public in London on 8 May 2007

The Appellant did not appear and was not represented

Sarabjit Singh, instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The Appellant did not appear in person or by representative and Mr Singh, for the Commissioners, submitted that the Tribunal should proceed to consider the appeal in the exercise of its powers under Rule 26(2) of the Value Added Tax Tribunals Rules 1986. The Tribunal accepted this submission and proceeded accordingly.

The Appellant appeals against the decision of the Commissioners as contained in the review letter dated 2 March 2006, in which restoration of a Scania tractor unit ("the tractor unit"), Polish Registration number DW 8497 K and a curtainsider trailer unit ("the trailer unit") Polish registration number FNW 11EA, was offered for a fee of £35,000.

The Tribunal heard no oral evidence but a bundle of documents including witness statements by HMRC officers David Harris and Helen Belinda Perkins, various correspondence between the parties, transcript of the interview with the driver, insurance and leasing documents relating to the vehicles and various relevant HMRC documents were provided to the Tribunal.

From the evidence, the Tribunal finds the following facts.

Maola-Sakwa Przewozy Krajowe I Zagraniczne Export-Import Irenewsz Adamowski, hereinafter referred to as "the Appellant" or "Maola-Sakwa", are a haulage company whose business address is UI Zielonogorska 32/3, Kozuchow, 67120, Poland.

On the 23 November 2005, Officers of Her Majesty's Revenue and Customs, hereinafter referred to as "the Officers", intercepted and then seized the tractor and trailer unit at the Eastern Docks, Dover. Mr Jan Prokopowicz was driving the vehicle.

The CMR consignment note described the load as `Pampers' disposable nappies allegedly destined for Proctor & Gamble in Manchester. The consignment note stated that there were 26 pallets and referred to a load that was actually delivered in March 2005.

The vehicle was scanned and then examined. During the examination 1,535,800 cigarettes were found. The Officers found that the middle pallets had been removed and replaced with pallets containing cigarettes. These boxes containing cigarettes were commercially marked in the same way as the rest of the load. Inside the sealed boxes were `Pampers' nappies in heat sealed bags, each had a nappy at the top and bottom so as to appear legitimate. Other boxes within the load that did not contain cigarettes had been packed with sawdust. The trailer had a Proctor and Gamble seal, but the tilt cord had been cut and reattached with glue.

When intercepted, the driver stated that he was initially delivering a load that consisted of radiators from Rybnik, Poland to Birtley, England. He stated that an employee or agent of the Appellant, `Marik', had then instructed him to swap trailers at the `Shell' service station, outside Frankfurt. He was given a new trailer and a new consignment note for the load containing `Pampers' and cigarettes. An invoice was also located in the vehicle that indicated that an identical outward load of `Pampers' was returning to Poland on the following day: 24^th November 2005. This invoice already bore the stamp of the Manchester dispatch office.

The driver confirmed that he had worked for the Appellant for 11 years and had previously transported goods to Proctor and Gamble, the last occasion being approximately 6 months previously. He confirmed that he had been instructed to drive to a car park in Manchester, where he would be met. He claimed to know nothing about the cigarettes. He claimed that the only documents he had were those initially produced at interception. Upon sight of the second set of documents, the outward invoice, he admitted receiving both sets at the `Shell' service station, outside Frankfurt.

The Officers were satisfied that the goods were held for a commercial purpose. The goods were seized on 23^rd November 2005 at 05.08 hours.

The driver was arrested and charged by Customs pursuant to CEMA section 170(2) for being knowingly concerned in the fraudulent evasion, or attempted evasion, of excise duty. He was subsequently convicted of this offence.

The correspondence leading to this Appeal is as stated below.

On 15^th December the Appellant's representatives wrote to establish what legal steps, if any had been taken, in relation to the seizure of 23^rd November 2005. The Respondent acknowledged this letter of 16^th December 2005 and asked for further information to be provided in relation to the vehicle and to the driver. The Respondent received no response and so a further letter was sent on 5^th January 2006.

The Appellant replied to these requests on 6^th January 2006 and asked for restoration of the tractor unit and trailer and provided the requested information:

1 The tractor unit was subject to a lease hire agreement between the Appellant and Vooksbank Leasing, Poland.

2 The trailer was the registered property of the Appellant.

3 The Appellant between 1^st January 2005 and 31^st December 2007 employed the driver. The Appellant had no references for the driver, because he did not require any. A copy of the contract of employment was enclosed. No duties or responsibilities of the driver were detailed.

4 On 17^th November 2005 the Appellant was instructed to by LKW Intertransportorganisation AG to transport 21, 476 Kilogrammes of heaters from Rybnik, Poland to Birtley, England.

5 It was alleged that the driver carefully checked the load in order to ensure that it corresponded to the CMR, reference 0103771.

6 No written instructions were provided to the driver.

7 There was no time to check the authenticity of the consignor/consignee.

On the 19^th January 2006 the restoration request was refused. In a letter received by Customs on 1^st February 2006, the Appellant asked for a formal departmental review. The grounds for this were that restoration was necessary in order for the Appellant to continue with his commercial activities. On the 2^nd February the Respondent wrote asking for any additional information. None was provided.

The review letter was sent on the 2^nd March 2006. Restoration of the tractor unit and trailer were offered for a fee of £35,050. This fee was equivalent to the valuation of both units. The Respondents, confirming this, on 15^th March 2006, sent a further letter.

The Appellant wrote on the 20^th March notifying the Respondent of its intention to appeal the decision contained within the review letter of 2^nd March 2006. The Appellant also wanted to extend the 30-day time limit for an appeal by 21 days. In a letter dated 24^th March 2006 the Respondent notified the Appellant that an extension was not possible.

The Appellant served a Notice of Appeal on 24^th March 2006.

The Appellant's grounds of appeal are disclosed in the Notice of Appeal as follows:

"The restoration fee for both the vehicle and trailer amounts to £35,050 is beyond appellant's financial possibility. Payment of above-mentioned fee may cause financial hardship or even bankruptcy."

The legislation relevant to this Appeal is as stated below.

1 139(1) CEMA 1979, which provides:

"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."

2 Regulation 16 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (SI 1992/3135 as amended), which establishes:

"Excise goods, in respect of which duty has not been paid, shall be liable to forfeiture where a breach of regulation 6 above or of any regulation contained in Part IV, V or VI of these Regulations, or of any condition or restriction imposed by or under such a regulation, relates to those excise goods."

3 Section 49(1)(a)(i) CEMA 1979, which states:

(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 that duty –

i. unshipped in ay port,

those goods shall, subject to subsection (2) below, be liable to forfeiture."

4 Sections 141(1)9a) and 141(1)(b) CEMA 1979, which provides:

"(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the customs and excise Acts –

(a) any ship, aircraft, vehicle, animal, container (including any article of passengers' baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and

(b) any other thing mixed, packed or found with the thing so liable,

shall also be liable to forfeiture."

5 Regulation 24 of the Excise Goods (Accompanying Documents) Regulations 2002 (SI 2002/501) as amended, which establishes:

"If in relation to any excise goods that are liable to a duty of excise that has not been paid there is –

(a) a contravention of any provision of these Regulations, or

(b) a contravention of any condition or restriction imposed by or under these Regulations,

those goods shall be liable to forfeiture."

The Commissioners' case is as stated below.

For the avoidance of doubt, it is the Respondent's case that the goods were seized lawfully. The goods were seized on 23^rd November 2005 at 05.08 hours. When the goods were seized a `Seizure Information Notice' and a `Customs Notice 12A' were issued. The notice explained that a notice of appeal could be made within 1 month of the date of seizure. No challenge has been made regarding the legality of the seizure. The things seized are, therefore, seized lawfully and duly condemned as forfeit to the Crown by the passage of time provision within the Customs and Excise Management Act 1979 ("CEMA 1979") Schedule 3 paragraph 5.

It is the Commissioners' case that the decision to offer conditional restoration dependant upon the payment of £35,050 is reasonable and proportionate. The decision is one, which a reasonable body of commissioners could have reached for the following reasons:

21.1 Upon entry into the United Kingdom 1,535,800 cigarettes were detected, despite concealment, in the Appellant's vehicle. The cost of this shipment to the United Kingdom revenue is £238,171.86. This is a significant amount and poses a serious risk to United Kingdom revenue.

2 The driver admits during interview that another employee or agent of the Appellant, `Marik', instructed him to pick up the cigarettes and nappies. This involvement demonstrates the planned and deliberate nature of the attempted smuggling operation.

3 The Appellant has failed to explain the presence of `Marik'.

4 The Appellant has failed to explain why a stamped invoice for `Pampers' nappies bound for Poland was found in the vehicle the day before it was stamped.

5 The Appellant has failed to explain what has happened to the alleged shipment of heaters on behalf of LKW Intertransportorganisation.

6 The Appellant was renting the vehicle from Volksbank Leasing and therefore, had a responsibility to ensure that the tractor and trailer were not being used for illegal operations. No precautions were taken to discharge this responsibility:

6.1 No written instructions wee issued to the driver

6.2 No references were sought for the driver before the commencement of his employment

6.3 No duties and/or responsibilities were detailed in the driver's contract of employment

6.4 Oral instructions from an employee or agent of the Appellant were given to the driver to swap trailers while en route to his destination

6.5 The Appellant has failed to explain inconsistencies in the accounts of how long the driver worked for the Appellant.

It is the Commissioners' policy to seize commercial vehicles involved in smuggling. This is proportionate response to the threat of serious damage to the United Kingdom revenue (Eugene Crilly v Commissioners for Customs and Excise 19^th March 2003).

Hardship is a corollary of seizure and is to be expected. The Appellant has failed to demonstrate that their case is in any way exceptional. (Lindsay v Her Majesty's Customs and Excise [2002] 3 All ER 118).

This is not the first occasion that the Appellant has been involved in smuggling. On the 25^th January 2005 a trailer was intercepted and it was established that it had been adapted to conceal 483,520 cigarettes. The said trailer was also from the Appellant and destined for Proctor and Gamble in Manchester.

If the Appellant alleges that they had no involvement, it is contended that the Appellant took no reasonable steps to prevent the driver from smuggling.

The Tribunal dismisses the Appeal for the following reasons:

The Tribunal finds that the decision of the Commissioners was both proportionate and reasonable.

The Appellant's haulage company had not taken reasonable steps to prevent the driver from smuggling and in particular had not obtained employment references from the driver's previous employers and the driver's contract of employment did not explain that smuggling by drivers is considered an act of gross misconduct and would lead to automatic dismissal, or other strong sanctions

The driver had made no attempt to check the contents of the load by checking inside the packages or taking samples. This would be a reasonable action to take in the circumstances.

The Appellant was unable to properly explain why a stamped invoice was found with the driver the day before the date on the stamp or to explain the role of "Marik", who appeared to be working for the Appellant.

The duty sought to be avoided was £238,000 and a conditional restoration on payment of £35,050 is proportionate in the circumstances. This had to be considered in the light of the fact that this is not the Appellant's first involvement with smuggling, vehicles are not normally restored after a second offence.

In the circumstances the appeal is dismissed. The Tribunal agrees with the submissions of Mr Singh for the Commissioners and the decision to offer conditional restoration upon the payment of £35,050 is reasonable and proportionate.

DR KAMEEL KHAN

CHAIRMAN

RELEASED: 17 May 2007

LON/2006/8025