United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E01050, [2007] UKVAT(Excise) E1050

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Dariusz Witkowski v Revenue & Customs [2007] UKVAT(Excise) E01050 (05 July 2007)

E01050

EXCISE DUTY - appeal against decision to restore vehicle subject to the condition of payment of a sum equal to value of vehicle – vehicle seized on leaving the United Kingdom when carrying containers which may previously have been used to conceal excise goods – no condemnation proceedings in Magistrates Court – uncertainty as to nature of correspondence from Appellant and whether it constituted a claim that vehicle not subject to forfeiture - whether Tribunal satisfied that the person making the decision could reasonably have arrived at it - no - appeal allowed - FA 1994 S 16(4)

LONDON TRIBUNAL CENTRE

DARIUSZ WITKOWSKI Appellant

- and -

THE COMMISSIONERS OF

HM REVENUE & CUSTOMS Respondents

Tribunal: Nicholas Aleksander (Chairman)

Shahwar Sadeque

Sitting in public in London on 14 June 2007

Mr Jacoub Muszymski for the Appellant

Mr Sarabjit Singh of Counsel, instructed by the Solicitor for the Commissioners of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The appeal

Mr Dariusz Witkowski (the Appellant) appeals against a decision on review dated 27 October 2006 (as amended by a subsequent letter dated 3 November 2006) which was to restore to the Appellant a Mercedes "Sprinter" van, registration number DW 8346T ("the vehicle") on condition of the payment of £10,750. We were informed that £10,750 is the trade value of the vehicle.

The evidence

The Appellant produced a notice (in Polish) which had been given to the driver of the vehicle at the time it had been seized.

A bundle of documents was produced by Customs. Oral evidence was given on behalf of Customs by Mr Raymond Brenton who conducted the review which is the subject of the appeal. Witness statements containing evidence on behalf of Customs were given by: Mr Francis William Milson, and Janice Elizabeth Rankin. As these witness statements had not been objected to they were taken as read at the hearing as evidence of the facts stated in them under Rule 21(3) of the Value Added Tax Tribunals Rules 1986 SI 1986 No. 590.

The factual background

The Appellant was the owner of the vehicle and runs a transport company based in Wrockaw, Poland. The Appellant's business includes delivering goods between the UK and Poland.

The Appellant had received a telephone order to deliver a consignment of goods from London to Poland. The CMR for the load showed that the sender of the goods was "Robstar Limited" of 57 Oliver Road, London E10 5LD, and the consignee was "East Connection" in Poland. The Appellant was told to collect the goods not at the address specified in the CMR, but at an address at the East Lane Business Park in Wembley. The goods were loaded on 4 June 2006 from another vehicle parked by the entrance gate. The driver, Zdzislaw Wegrzyn, was present when the vehicle was loaded and saw the boxes loaded onto the vehicle. The driver was shown the packaging and was told that the contents were metal parts for a battery charger.

Later that day, at Dover, the vehicle was intercepted by Customs on leaving the United Kingdom. It was carrying a load of 700 "dummy" battery chargers. It was travelling back to Poland.

The load comprised a number of cardboard boxes. In each box was a dummy battery charger. The dummy charger comprised a rectangular metal case, with the front, top, bottom and sides riveted together. The front of each charger was printed as a "Prolite" 35A 12V battery charger. There were three LED indicators marked "ready", "charge" and "mains", but they were not connected to anything. There was nothing inside the case other than a loose back panel (which was drilled to allow it to be subsequently riveted into place), and a length of loose white electrical flex. There were electrical sockets riveted into position on the loose back panel – but these were not connected to anything. The cases exhibited signs of previous use, with scratches apparent to the front panels.

Customs were aware of similar battery charger cases having been used for smuggling cigarettes from Poland. Between November 2005 and June 2006, Customs had intercepted three consignments of cigarettes concealed inside similar battery charger cases. In December 2005, over 1.9 million cigarettes were seized, in March 2006 over one million cigarettes were seized, and in May 2006 over five hundred thousand cigarettes were seized.

Customs were also aware that the Appellant had been intercepted by Polish customs on 22 April 2006 whilst driving the seized vehicle back to Poland from the UK. The vehicle was found to contain dummy battery chargers similar to those found in the vehicle on 4 June 2006. The consignee was the same: "East Connection". The sender was said to be "Rosstar Ltd" of 57 Oliver, F105 – Customs submit that this was the same consignor, but with typographical errors.

In the view of Customs, these dummy chargers had been adapted for the smuggling of cigarettes with the vehicle being part of the overall smuggling operations.

Customs were aware that on 13 May 2006 the Appellant was intercepted at Harwich driving the vehicle entering the UK carrying a sofa and three small chairs – he was delivering the sofa and two chairs to a friend and would be returning with the third chair. On 4 June 2006 the vehicle (driven by Zdzislaw Wegrzyn) was again intercepted at Harwich entering the UK with two pallets of tile glue for delivery to a private address in London. Customs considered that it was not economic for the Appellant to travel from Poland to the UK to deliver such a small load of furniture or to deliver a commodity that was readily available in the UK, and that the true purpose of the trips were to collect the empty dummy battery chargers. These would be taken to Poland where they would be filled with cigarettes for smuggling back into the UK.

The vehicle and the dummy chargers were therefore seized. The driver was issued with the relevant documents relating to seizure (in English), together with a notice in Polish. The latter Polish notice was presented at the hearing. Unfortunately we did not have a translation of the notice into English, however Mr Muszymski for the Appellant translated parts of the notice for us, and it would appear that the notice may not have clearly distinguished between the right of the Appellant to contest the seizure before the Magistrates Court, and the right to seek restoration of the vehicle.

The legislation relating to the issues in the appeal

Section 152(b) of the Customs and Excise Management Act 1979 provides:

"The Commissioners may, as they see fit- …

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under [the customs and excise] Acts … ."

Section 16 of the Finance Act 1994 (the 1994 Act) provides that an appeal shall lie to the Tribunal against a decision on review under section 15. Section 15 provides for the review of decisions which come within section 14. Section 14(1)(d) includes any decision specified in Schedule 5. Paragraph 2(1)(r) of Schedule 5 specifies any decision under section 152(b) "as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions subject to which any such thing is so restored."

Thus, although section 152(b) gives Customs a discretion as to whether or not to restore seized vehicles or goods, sections 14 to 16 of the Finance Act 1994 give a right of appeal to the Tribunal against a refusal to restore or the conditions of restoration. However, section 16 limits the jurisdiction of the Tribunal in respect of ancillary matters. Section 16(8) defines ancillary matters as those specified in Schedule 5. As a refusal to restore and the conditions of restoration are specified in Schedule 5. They are, therefore, ancillary matters. The relevant parts of section 16(4) provide:

"16(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal Tribunal on an appeal under this section shall be confined to a power, where the Tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say:

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

(b) to require the Commissioners to conduct, in accordance with the directions 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 give 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 the future."

Section 49 of the 1979 Act provides that goods which are imported without payment of duty are liable to forfeiture. Section 141(1)(a) provides that, where a thing has become liable to forfeiture, then any vehicle or container used for the carriage, handling or concealment of that thing is also liable to forfeiture. Section 139(1) provides that anything liable to forfeiture may be seized by a Customs Officer.

Paragraph 1 of Schedule 3 of the 1979 Act provides that Customs shall give notice of seizure to any person who, to their knowledge, was at the time of the seizure the owner or one of the owners. Paragraph 3 provides that, if a person claims that anything seized as liable to forfeiture is not so liable, he must give notice of his claim in writing to Customs within one month of the date of the notice of seizure or of the seizure. Paragraph 5 provides that, if a notice has not been given after that month, then the thing is deemed to be condemned as forfeit. Paragraph 6 provides that, if a notice has been given within that month, then Customs must take proceedings for the condemnation of the thing by the magistrates' court. If the court finds that the thing was liable to forfeiture then the court shall condemn it as forfeit. These legislative provisions make it clear that all matters concerned with forfeiture and seizure are not matters for the Tribunal but for the magistrates' court.

As mentioned above, section 152(b) of the 1979 Act provides that Customs may, as they see fit, restore, subject to such conditions (if any) as they think proper, anything forfeited or seized and sections 14 to 16 of the 1994 Act provides for appeals to the Tribunal with respect to decisions about restoration or the conditions of restoration.

Thus, although there is no appeal to the Tribunal against either forfeiture or seizure, there is an appeal to the Tribunal against a refusal to restore a vehicle or excise goods or the conditions of restoration.

The Review

The Appellant wrote to Customs asking to retrieve his vehicle in an undated letter received on 23 June 2006. In the letter the appellant said that he would "like to retrieve my vehicle". He said that the goods did not belong to him, but to his customer, as he was only providing transport services. Before this Tribunal, Mr Muszymski (for the Appellant) stated that this letter was intended to be a claim under Paragraph 3 of Schedule 3 to the 1979 Act that the vehicle was not liable to forfeiture. However, in fact this letter was treated by Customs as an application for restoration of the vehicle. By a letter dated 10 August 2006, Customs offered to restore the vehicle on payment of £10,750. The Appellant requested that this decision be reviewed.

The review was conducted by Mr Raymond Brenton. In a letter dated 27 October 2006 (as amended by his letter dated 3 November 2006), Mr Brenton upheld the original decision. In his review, Mr Brenton examined all the documents, including the notebooks of the officers involved in the interception on 4 June 2006, and correspondence with the Appellant. He referred to the applicable legislation. He also referred to the policy which was that goods vehicles involved in the facilitation of smuggling would not normally be restored if the amount of revenue involved is £50,000 or more. But that restoration would be considered where the revenue involved was less that £50,000, and on the first occasion the vehicle would normally be restored for a payment of 100% of the revenue involved (or the trade value of the vehicle if less).

In his review Mr Brenton relied upon the following matters:

(1) Records showed that the vehicle had undertaken similar journeys on 1 April, 21 April, 13/14 April and 27 May 2006, with the Appellant being the driver on three of those trips

(2) That the Appellant was stopped by Polish customs on the 21 April journey, and that the vehicle was transporting on that occasion a load of dummy battery chargers identical to those seized

(3) Dummy battery chargers similar to those seized had been used to conceal cigarettes being smuggled from Poland to the UK on three separate instances since November 2005

(4) That the load on the inward journeys made by the vehicle were uneconomic, and that, in his view, the purpose of the journeys was in substance to collect the empty dummy battery chargers on the outward leg of the smuggling circuit.

(5) That checks with Companies House and directory enquiries into Robstar Limited and Archive 22 (the address in Wembley from which the load had been collected) had proved fruitless, and there was no evidence that these were bone fide businesses.

Mr Brenton, in considering the restoration, did not review the legality or correctness of the seizure itself, on the basis that this should have been addressed in condemnation proceedings before the Magistrates Court.

Mr Brenton was satisfied on the balance of probabilities that the vehicle was involved, with the knowledge of the Appellant, in the facilitiation of smuggling cigarettes into the UK. Although the vehicle was not itself involved in the importation of the smuggled cigarettes, in the view of Mr Brenton the vehicle was involved by returning the empty containers (once used) back to Poland for refilling and reimportation into the UK. On that basis, Mr Brenton upheld the decision to offer restoration of the vehicle on payment of its trade value, namely £10,750.

The issues

Customs imposed the condition on the restoration of the vehicle because they were of the view that containers used for the handling or concealment of excise goods had been carried in the vehicle. They also argued that, because no notice had been given by the Appellant under paragraph 3 of Schedule 3 claiming that the vehicle was not liable to forfeiture, the deeming provision in paragraph 5 operated, and the vehicle was duly condemned as forfeited. The legality of the seizure was not therefore a matter which ought to be have been considered by Mr Brenton in his review and the Tribunal had no jurisdiction to decide it again.

The Appellant argued that the dummy battery chargers carried in the vehicle were not excise goods, that the Appellant had taken reasonable precautions to ensure that the vehicle was not used to transport smuggled goods and so the refusal to restore the vehicle without conditions was unreasonable. The Appellant also submitted that the Polish explanatory notice given to the driver at the time of the seizure was confusing, and that the Appellant's letter received by Customs on 23 June 2006 ought to have been treated as a notice under paragraph 3 of Schedule 3.

Mr Singh, for Customs, referred us to the decision of the Court of Appeal in Gora v Customs & Excise Commissioners [2003] EWCA Civ 525. A number of issues were before the Court of Appeal but, so far as this appeal is concerned, the relevant issue was whether the jurisdiction of the Tribunal was sufficient to satisfy Article 6 of the Convention in Schedule 1 of the Human Rights Act 1998. That issue was considered by Pill LJ in paragraphs 37 to 39 of his judgment. In paragraph 38 he set out the views of Customs on the jurisdiction of the Tribunal. These were that appellants were entitled to raise issues of blameworthiness before the Tribunal and, if successful, the Tribunal could remit the matter to Customs with such directions as it thought fit under section 16(4) of the 1994 Act. Customs would then retake the decision with the benefit of the Tribunal's ruling. The Tribunal was entitled to satisfy itself that the primary facts upon which Customs based their decision were correct. The Tribunal should then go on to consider whether, in the light of its findings, the decision on restoration was reasonable. Customs would not challenge such an approach and would conduct a further review in accordance with the findings of the Tribunal. In paragraph 39 Pill LJ accepted that view of the jurisdiction of the Tribunal and, in that light, decided that it met the requirements of the Human Rights Convention.

In the passages relied upon by Mr Singh, at paragraphs 54 to 59 of his judgment, Pill LJ considered whether the Tribunal had any jurisdiction in relation to forfeiture. He summarised the legislation relating to seizure and forfeiture and went on to hold that, where liability to forfeiture has been determined by a court, and also where liability to forfeiture is deemed because there have been no court proceedings, the Tribunal had no jurisdiction to re-consider the condemnation of the goods as forfeited. The Tribunal only had jurisdiction to consider appeals about non-restoration under section 152.

We do not read paragraphs 54 to 59 as authority for the view that, in appeals about non-restoration under section 152, the Tribunal cannot find the relevant facts. Such a conclusion would be inconsistent with paragraphs 37 to 39 of the same judgment. Also, they would cause injustice where there had been no court proceedings about seizure and forfeiture as then there would be no findings of fact by an independent and impartial tribunal. They would also cause injustice where there had been court proceedings about seizure and forfeiture but where the facts found were not relevant to the issue before the Tribunal or, indeed, where fresh evidence came to light which was not available to the court but was available to the Tribunal.

This reading is consistent with the decision of the Court of Appeal in Gascoyne v Customs & Excise Commissioners [2004] EWCA Civ 1162. At paragraph 55 Buxton LJ clarified the scope of Gora by stating that where no condemnation proceedings had taken place and the deeming provisions in paragraph 5 apply, the Tribunal can reopen the issue of the legality of the seizure – although the Tribunal should always have in mind considerations of abuse of process in considering whether such issues should be ventilated before it.

The question before the Tribunal is whether it is satisfied that the person making the decision to restore the vehicle subject to a condition could not reasonably have arrived at that decision within the meaning of section 16(4) of the 1994 Act. We have some reservations about whether Mr Brenton took into account all relevant factors and disregarded all irrelevant factors. In particular, Mr Brenton did not take into account the circumstances of the seizure, and the fact that the seizure took place whilst the vehicle was leaving the UK, there was no evidence that the vehicle was itself used to smuggle excise goods into the UK, and there was limited evidence that the dummy battery chargers being transported had themselves been previously used to smuggle cigarettes (or other excise goods) into the UK. In the light of our analysis of the case law, we do not consider that Mr Brenton can ignore the circumstances of the seizure and rely upon paragraph 5 of Schedule 3 which deems the vehicle to have been lawfully seized.

This is compounded by the apparent confusion generated by the Polish explanatory notice. From the parts of the notice translated to us by Mr Muszymski, it would appear that the notice may not clearly distinguish between the right of the Appellant to contest the seizure before the Magistrates Court, and the right to seek restoration of the vehicle. If the Applicant's letter was in fact a claim under Schedule 3 (as Mr Muszymski contends) and Customs had wrongly failed to issue condemnation proceedings, then it follows that the vehicle has never passed out of the Appellant's ownership. We did not have the benefit of a complete written translation of the notice into English, and without such a translation (giving context to the Appellant's original letter to Customs), it is not possible to assess whether his letter should be read as a request for restoration of the vehicle or as a notice under paragraph 3.

Decision

Accordingly we allow the appeal and require Customs to conduct a further review of their original decision. In conducting the review they should take into account the terms of the Polish notice (having obtained a translation of the Polish notice into English), the circumstances of the seizure itself, and whether the Appellant's letter received on 23 June 2006 ought properly to be regarded as a notice under Paragraph 3 of Schedule 3.

Costs

Mr Muszymski applied for costs in the event that the Appellant was successful in its appeal. Having heard the submissions from Mr Muszymski and Mr Singh, we consider that a contribution by Customs of £750 to the Appellant's costs is reasonable in all the circumstances.

Nicholas Aleksander

CHAIRMAN

RELEASE DATE: 5 July 2007

LON/06/8111