United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2008] UKVAT(Excise) E1090, [2008] UKVAT(Excise) E01090, [2008] V & DR 71

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Anglo Overseas Ltd v Revenue & Customs [2008] UKVAT(Excise) E01090 (27 February 2008)

E01090

EXCISE DUTIES — Appellant's guarantee used for purpose of intra-community transport of excise goods in duty suspension — Appellant only minimally involved in consignments —whether any consignments arrived at stated destination — no — whether duty point within UK established — yes — whether liability under guarantee established — yes — whether maximum amount of liability limited by terms of guarantee — no — whether any of assessments time-barred — no — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

ANGLO OVERSEAS LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Sitting in public in Manchester on 3, 5 to 7, 10, 12 to 14, 17 and 18 December 2007

Paul Chaisty QC and Mark Harper, counsel, instructed by Hill Dickinson, for the Appellant

Peter Mantle, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008

DECISION

Dramatis personae

Abad	Miguel Abad, a Spanish authorised warehouse
AOL	The Appellant, Anglo Overseas Limited
Calderdale	Calderdale Distribution Limited
Caulier	Brasserie Caulier, a Belgian authorised warehouse
Cleanaco	Cleanaco Limited, an owner of excise goods
Global	Global Wines and Spirits Limited, formerly Estion Limited, an owner of excise goods
Hermes	Hermes Credit and Guarantee plc
HMRC	Her Majesty's Commissioners for Revenue and Customs, formerly Her Majesty's Customs and Excise (for simplicity I use HMRC when referring to either body)
Messias	Sociedade Agricola e Comercial dos Vinhos Messias, a Portuguese authorised warehouse
Mr Chaisty	Leading counsel for the Appellant
Mr Finch	Peter Finch, at the relevant time AOL's risk manager
Mr Heppenstall	John Heppenstall, director of Calderdale
Mr Mantle	Counsel for HMRC
Mr Morton	John Morton, an employee of AOL
Mr Parsons	Matthew Parsons, the officer ultimately responsible for the disputed assessments
Oakwood	Oakwood Storage Services Limited, a UK authorised warehouse
Rangefield	Rangefield Services Limited, a UK authorised warehouse
Sands	A J D Sands Limited, an owner of excise goods
Serio	Serio Import-Export, an Italian authorised warehouse
WVL	Westwood Vintners Limited, an owner of excise goods

Introduction

I am required in this appeal to determine a number of questions which arise from what is commonly known as excise diversion fraud. The principal issue is whether, and if so to what extent, the Appellant Anglo Overseas Limited ("AOL"), which the Commissioners accept was unwittingly duped into allowing its movement guarantee to be used by others, is liable to pay the excise duty due on several consignments of alcoholic liquor purportedly transported from authorised warehouses in the United Kingdom to authorised warehouses in other member States of the European Union, under duty suspension, but which failed to arrive at their stated destinations. There are, as might be expected, several discrete questions within that overall issue.

Formally, these are two consolidated appeals against five assessments to United Kingdom excise duty, amounting in total (after a modest amendment by elimination of one consignment which the Commissioners recognised had been incorrectly included) to £4,494,974. I shall come to the detail of the assessments at a later stage. Each of the assessments was upheld on the obligatory review. Despite prompt appeals to this tribunal by AOL, the Commissioners issued a winding-up petition which AOL vigorously defended. It came before Lewison J in July 2004 and, in a detailed judgment ("the winding-up judgment") of 5 October 2004 ([2004] EWHC 2198 (Ch), unreported), he dismissed it. He concluded, in short, that AOL had an arguable case before this tribunal and that it would not be right to make an immediate winding up order. Although Lewison J carefully refrained from deciding matters which are the province of this tribunal both parties sought to draw support from various comments he made and I shall need to refer to the judgment from time to time.

I shall deal with the facts before coming to the law and its application to those facts. At first, there was a significant dispute between the parties on a matter of fact, that is whether the Commissioners, knowing or strongly suspecting that excise goods were to be diverted onto the black market, deliberately allowed consignments of such goods to be moved in the hope of catching the perpetrators, thereby exposing AOL to a liability which, had the Commissioners behaved differently—for example by warning it—it would have escaped. The evidence on this topic was extensive but towards the conclusion of the hearing AOL indicated that it no longer wished to pursue the argument that it could escape any liability it might otherwise have had for this reason. In my view it was entirely right to do so; even if, which I doubt, it could succeed as a matter of law the evidence did not establish the necessary factual basis of an argument founded, as AOL's was, on the judgment of the Court of Justice in De Haan Beheer BV v Inspecteur der Invoerrechten en Accijnzen te Rotterdam (Case C-61/98) [1999] ECR I-5003. I shall, therefore, largely ignore the evidence on that topic, which leaves comparatively little in dispute.

Before me, AOL was represented by Paul Chaisty QC, leading Mark Harper, and the Commissioners by Peter Mantle of counsel. I heard the oral evidence of Mr Finch, Mr Parsons and Fiona Harrison, the officer who issued the assessments, although she did so on, effectively, Mr Parsons' instructions. I had also the unchallenged statements of Guy Bailey, an officer of HMRC, Philip Brown, at the relevant time AOL's managing director, Mr Morton and Denis Parsons, a director and the company secretary of AOL, together with a great deal of documentation. The description of the facts which follows can be taken to be undisputed, and to represent my findings, unless I have indicated otherwise.

The facts

The background

AOL has been in business since 1925. It is a freight forwarder, dealing with the transport of its customers' goods both within the United Kingdom and overseas; at the time with which I am concerned, late 2001, about 70 per cent of its business (which amounted to more than 200,000 consignments a year) consisted of arranging the transport of goods between the United Kingdom and other member States of the European Union. It had and has very limited capacity of its own to transport goods, and almost always sub-contracts the transport to haulage companies. Only a small proportion of the goods whose transport AOL arranged were liable to excise duty, but AOL had handled such goods for most, if not all, of its life, principally from its depot in Dover and its three depots in Scotland. At the time of the hearing AOL had in all 14 UK depots and a staff of more than 200 people.

Because AOL regularly dealt with the transport of excisable goods within the European Union, it had an intra-Community movement guarantee. A guarantee of this kind was obtained in 1998 when HMRC advised Mr Finch that the form of guarantee it then had was no longer acceptable (for reasons which are of no present significance). Mr Finch gave some information about AOL's expected volume and type of movements to HMRC who suggested a guarantee of £100,000 which AOL, with the assistance of its brokers, secured from Independent Insurance Company plc ("Independent"). Mr Finch's evidence was that he did not understand how HMRC had reached a figure of £100,000, which was, he thought, more than AOL needed, but as the cost of the guarantee was small and the amount decided on left room for growth he decided not to obtain a guarantee for a lesser sum. He did not read HMRC's Public Notice (No 197) on the subject—indeed, he was not even aware of its existence—and I am quite sure he thought at the time that the guarantee was little more than a formality. He believed, he said, that HMRC would monitor AOL's trade and would let him know if it became necessary to obtain a guarantee for a higher amount. The guarantee was in a form suggested, if not prescribed, by HMRC. The document produced by Independent contained several errors but they were corrected and the revised guarantee was accepted by AOL's local HMRC office (local, that is, to its own head office at West Thurrock). The guarantee was used on many occasions without ever being called upon between its being accepted by HMRC and about June 2001, when Independent went into liquidation.

Independent's liquidation meant that AOL had to obtain a new guarantee, which it was able to do; on this occasion the guarantee was obtained from Hermes. Since the guarantee is central to this appeal I have set out its first six clauses (the remainder are merely formal) in full in an annex to this decision. It was dated 27 July 2001 and is endorsed with a record that it was accepted by HMRC on 30 July and given a reference number, G/007/SLT.

It was clear from his evidence that Mr Finch's principal concern at the time was to ensure that AOL had a new guarantee in place by 31 July 2001, the deadline imposed by HMRC for the replacement of guarantees which had been issued by Independent. It is equally clear that he was rather less concerned about the meaning and effect of the guarantee. It is true that it follows a form drafted and provided by the Commissioners, who alone must bear responsibility for the obscurity, if not worse, of clause 5 and for the strange pretension in clause 6 to a right to cancel (rather than withdraw approval of) an agreement to which they were not a party. But the glaring omission of the words "of the amount mentioned above, unless it is" between "limit" and "established" in clause 4, which renders the clause meaningless, though no doubt initially the error of a typist, indicates that no-one, at Hermes, AOL or HMRC, troubled to read the document carefully. Indeed, Mr Denis Parsons was under the impression, as his statement shows, that the guarantee provided a limit of indemnity of £100,000 for each and every load, which plainly it does not. I had no evidence, or any other material, from Hermes but it seems to me that Hermes, as well as Mr Finch, treated the guarantee as little more than a formal requirement. Mr Finch did not conceal the fact that he did not really understand its significance until some months later. It clearly did not occur to him that the amount of the guarantee should be reconsidered, though I do not think there had, at the time when this guarantee was taken, been any material change in the nature and volume of the consignments of excise goods handled by AOL since 1998 when the original guarantee with Independent was obtained.

The consignments

Mr Morton was employed by AOL at its Bradford depot. His position in late 2001 was as AOL's European Export Supervisor and he was personally responsible for exports to France. AOL had a list of approved hauliers which it engaged to transport goods with which it was dealing. Among the approved contractors was Calderdale. In early September Mr Heppenstall, Calderdale's director, with whom Mr Morton was evidently well acquainted, telephoned him and asked whether Calderdale, which did not have a guarantee of its own, might use AOL's movement guarantee to cover a number of consignments which, it appears, Calderdale had been asked to transport. The Bradford depot was not one which dealt with consignments of alcoholic liquor, and Mr Morton had no experience of handling such consignments, but he knew that AOL handled consignments of excise goods at other depots. He made enquiries of a superior about the possibility of Calderdale's using AOL's guarantee, and was at first told that it was not possible. Then Mr Heppenstall suggested a change in the arrangements: AOL would contract with their owners (Calderdale's customers) for the movement of the goods, and would engage Calderdale as the transporter. Calderdale was to invoice AOL for its charge for the transport, and AOL was to send an invoice for that amount, plus £100 per consignment, to the customer, the £100 representing AOL's charge for its involvement and the use of the guarantee. Mr Morton was referred to Mr Finch, who approved the arrangement.

During September, October and November 2001 some 48 consignments relevant to this appeal were handled in this manner. The customers—Cleanaco, Global, Sands and Westwood, with none of whom, Mr Morton believed, had AOL previously dealt—were all introduced by Calderdale. AOL's only involvement was to allow its name to be recorded as guarantor, with the reference number of its guarantee, on the accompanying administrative documents ("AADs", to which I shall return later) and to handle the invoicing as I have described. Mr Morton evidently informed himself about the formalities under which duty suspended movements of excise goods take place, and he took care to obtain from Calderdale the discharged AADs and consignment notes, or CMRs (the latter evidencing the commercial movement of any goods, and not only excise goods, from one country to another) and to keep them safely. It is apparent from his statement that Mr Morton was conscious that he was in unfamiliar territory, and was watchful. Although, he said, the number of consignments was greater than he had expected, there was nothing to suggest to him, until late October or early November 2001, that anything untoward was happening. In particular, he received no complaint that goods had not arrived at their stated destination.

His statement suggests that Mr Morton's recollection of events in late October or early November 2001 is rather vague. It does not quite coincide with Mr Finch's evidence, though the differences between them are, I think, insignificant for present purposes.

On 5 November 2001 a load being taken, or purportedly taken, from Oakwood in Essex to Messias, in Portugal, and guaranteed by AOL, was detained by HMRC officers in a lay-by on the A30 at Staines. The officers were suspicious because the vehicle was not on a route which might be expected to have been used to travel to an appropriate ferry port and because they believed (incorrectly, as they discovered later on the same day) that Messias was not an approved warehouse. Mr Finch (and, it seems, Mr Morton) knew nothing of the detention until 22 November, although (unknown to him until later) HMRC had been in touch by telephone with two of Mr Finch's colleagues in West Thurrock on the two previous days. At HMRC's request Mr Finch attended HMRC's offices at Dover on that day when this incident was discussed, as well as HMRC's wider concerns, although they were put, at this stage, in rather vague terms.

HMRC's case is that Mr Finch, on behalf of AOL, was offered but declined the opportunity of withdrawing AOL's guarantee of the consignment, which was still in the UK. Mr Finch put the matter differently but it is not necessary for me to decide where the truth lies; it is sufficient to record that the guarantee was not withdrawn. Although HMRC had continuing doubts about the legitimacy of the consignment, not least because no protest about the detention had been made, they could not continue to detain a load for which a valid guarantee was in place. It was released and was eventually returned to Oakwood. The duty due on this load, should any duty have been due at all, was erroneously included in the first of the relevant assessments, and its removal led to the amendment I have mentioned.

Despite the vague terms in which HMRC's concerns had been put, Mr Finch realised that the continued use by Calderdale of AOL's guarantee posed unacceptable risks for AOL, and he immediately withdrew his approval of its future use, and it was not used again. There was continuing dialogue between Mr Finch, directors of AOL and various HMRC officers in the following weeks, and I accept—as did HMRC—that AOL did everything in its power to assist HMRC in the enquiries they were making. In particular, Mr Finch obtained from Mr Morton all of the documentation relating to the consignments it had guaranteed in AOL's possession at that time, assembled that information and passed it on to HMRC. Mr Finch agreed that the information he provided was probably not complete; in fact it was not, because some of the AADs and CMRs had not been returned—in particular from Abad, a supposed Spanish destination—and in a few cases the CMR had been returned while the AAD had not.

What Mr Finch did not know until later was that HMRC had introduced enhanced controls at Oakwood's and Rangefield's premises on 7 November 2001. HMRC officers had already been monitoring some of the loads leaving the warehouses more closely than would be usual for some time, but from 7 November HMRC officers were permanently in attendance at the warehouses, monitoring each load as it entered or left. The number of departures declined immediately by a very large amount, a clear sign, HMRC say, that many, if not most, of the earlier departures were not legitimate. All but one of the consignments guaranteed by AOL left before the enhanced controls were put in place; the exception left on 20 November.

One load which left Oakwood after the enhanced controls had been put in place—though not a load guaranteed by AOL—was escorted by HMRC officers to Dover, where it departed, ostensibly destined for Caulier. On 20 November a lorry was intercepted at Ipswich. It was found to have just entered the UK from the Netherlands. Its load was declared by the accompanying paperwork to consist of nappies but on examination of the trailer it was found to contain the goods which had been exported to Dover. HMRC argue that this discovery is an indication that the goods and, inferentially, other loads were all destined to be broken up ("slaughtered") and sold on the black market in the UK.

On 7 February 2002 HMRC made a number of raids, including on AOL's Bradford depot. AOL's directors had, however, been forewarned of the raid, since HMRC were by then satisfied that its involvement was entirely innocent. They were not, then, satisfied about Mr Morton's involvement; his home was raided and he was arrested, but later released without charge, and I understand HMRC accept that he was not a knowing participant in any wrongdoing. Others raided were Oakwood, Rangefield and Calderdale; many of the documents relevant to this appeal were seized in the course of those raids. Oakwood and Rangefield were subsequently closed down. A director of one of Calderdale's customers, WVL, whose consignments had been guaranteed by AOL, Mr Heppenstall and two others were prosecuted for conspiracy to contravene section 170 of the Customs and Excise Management Act 1979 (which imposes penalties for the fraudulent evasion of excise duty). One of those others pleaded guilty, and the remaining three defendants were convicted after a trial. Their convictions were, however, quashed on appeal and I was told that when this appeal was heard they were awaiting re-trial. Both Mr Finch and Mr Morton gave evidence for the prosecution at the original trial and I understand they are expecting to do so again at the re-trial.

AOL accepts that most of the relevant consignments did not arrive at their declared destinations, but that concession was not made in respect of the four consignments sent, or supposedly sent, to Abad in Spain. Before determining whether or not those consignments arrived it is necessary to describe the nature of the evidence available to HMRC, the manner in which it was obtained, and the chronology. There were four declared warehouses of receipt, and it is convenient to deal with the evidence warehouse by warehouse.

Duty suspension

First, however, it is necessary to describe the process by which intra-Community movements of excise goods under duty suspension take place and are documented. Excise goods produced within the European Union, or imported into it (with the exception, irrelevant for present purposes, of some non-commercial production and importations) becomes chargeable with duty. The need for payment of the duty is, however, deferred while the goods remain in one of two kinds of suspension arrangement—a holding suspension and a movement suspension. A whisky distiller, for example, will have (as a condition of his approval as a distiller) an authorised warehouse attached to the distillery, in which whisky he has produced is stored while it matures. As long as the whisky remains in the warehouse (and is not consumed) the duty on it, though chargeable, need not be paid; it is suspended. If the whisky is removed from the warehouse, the suspension comes to an end and the duty becomes payable unless the removal is also under duty suspension conditions. A duty-suspended movement may take place within a member State or between member States. In either case, the goods must be transferred from one authorised warehouse to another—and consequently from one holding arrangement to another. It is common ground that all the goods the subject of the assessments were held in duty suspension at the warehouses of Oakwood or Rangefield, both of which were authorised for the purpose.

A duty-suspended movement can, therefore, be legitimate only if the warehouse of receipt is authorised. Warehousekeepers in the UK can check whether a warehouse elsewhere to which they have been asked to consign goods is authorised by making an enquiry of HMRC's SEED unit in Glasgow ("SEED" is the acronym of System for the Exchange of Excise Data). An enquirer is required to provide such information as he has (which must meet a minimum level) about a warehouse and is then told whether it matches the SEED record; HMRC will state only that it does or does not, and that the warehouse is authorised or is not, and will not provide corrections or missing data. The database is maintained from HMRC's own records of UK warehouses and information provided to them by the fiscal authorities in other member States. The information is provided at only three-monthly intervals and is therefore liable to be out of date. It was also apparent from the evidence I heard that the attention the fiscal authorities in some member States pay to the information is less than might be desired and that the accuracy and reliability of the database are, therefore, questionable.

A duty-suspended movement of excise goods from an authorised warehouse in one member State to an authorised warehouse in another must be documented by an AAD. The document, the form and correct use of which are prescribed by Council Directive 92/12, articles 18 and 19, and by Commission Regulation 2719/92/EEC (Annex 1 to which sets out the prescribed form), contains a number of boxes, most of which are to be filled in by the consignor, which is the authorised warehousekeeper of dispatch. I do not need to deal with all of the boxes; together they identify the consignor, the consignee (that is, the warehouse of destination), the nature of the goods and the transporter, and provide other formal information. Importantly for present purposes, Box 10 identifies the guarantor of the consignment which, in all the cases with which I am concerned, was AOL. Each AAD has four copies: the first is to be retained by the consignor and the second by the consignee, the third is to be receipted by the consignee and, if required, by the fiscal authorities of the destination member State and then returned to the consignor, and the fourth is retained by those fiscal authorities. All but the first copy must accompany the goods while they are in transit. Receipting of the third copy by the fiscal authorities of the destination country is mandatory in some countries but not in others (including the UK, which also does not require copy 4 to be lodged with HMRC). It is odd, though nothing appears to turn on it, that Mr Morton was able to obtain receipted AADs, or at least copies, from Calderdale although they should have been returned to the dispatching warehouses. As I have mentioned, there were a few instances in which the AADs were not returned at all.

The investigations

HMRC's enquiries were extensive. The paramount objective, it was clear, was to secure evidence against and prosecute those responsible for what HMRC regarded as a major fraud, and the civil aspects of the investigation, though not unimportant, took second place. Mr Parsons was in charge of the civil investigation and made some of the enquiries but several officers—most dealing principally with the parallel criminal investigation—were involved. It was Mr Parsons who eventually brought all the information which was obtained, so far as it was relevant to the recovery of the duty, together, and who calculated the duty which was due. The accuracy of his calculations—once the amendment to which I have referred was made—was not disputed and I shall say nothing about those calculations.

The enquiries in which Mr Parsons was interested were directed primarily to establishing whether the AADs, which appeared to show that the goods had arrived at their declared destinations, were reliable. It was, therefore, necessary to seek assistance from the fiscal authorities in Italy, Portugal, Spain and Belgium, in which countries the stated warehouses of destination were situated.

Mr Parsons already had some information about the Italian warehouse, Serio. The SEED unit and, through it, Mr Parsons became aware of the fact of the revocation, but not the reasons for it, on 26 October 2001. Those reasons became known to HMRC on 24 January 2002 when, coincidentally, a senior Italian officer was in London and two officers (neither of whom was Mr Parsons) spoke to him there. What eventually emerged was that a Mr Baldesi, or a man purporting to be Mr Baldesi, borrowed a key to a vacant warehouse from its owner on the pretext that he intended to take a lease, and needed to show local customs officers the warehouse in order to obtain approval of it as an authorised warehouse. The customs officers were shown around, and approval was granted in September 2000. However, Mr Baldesi did not take a lease. The fact that he had not done so came to the notice of the Italian authorities on 22 June 2001 and the authorisation was revoked on 29 June. When he was interviewed on 24 January 2002 the Italian officer was able to say that the fiscal stamps on the copy AADs supposedly recording the receipt by Serio of the consignments were false, and to confirm that the warehouse could not lawfully have received the goods because of the earlier withdrawal of its approval. Mr Baldesi's pretence became fully known to the Italian authorities on 28 January 2002, when they interviewed the owner of the warehouse.

On 9 July 2002 two HMRC officers (neither of whom was Mr Parsons) interviewed another Italian officer, in Italy. He informed them of the circumstances in which Serio's authorisation was withdrawn—that is, he passed on the additional information obtained from the interview of the landlord—and said that the Italian authorities knew of only two consignments supposedly received by Serio, both fraudulent (though the nature of the fraud was not revealed, at least to me); neither of those consignments originated with Oakwood or Rangefield, nor has either any connection with AOL.

Thirty-one of the consignments with which I am concerned (after eliminating the intercepted consignment which was returned to Oakwood) were purportedly transported to the warehouse of Messias in Portugal; 27, including that intercepted, departed from Oakwood and five from Rangefield. In every case the owner was WVL and the supposed customer Top sàrl, a French company. On 25 March 2002 Mr Parsons and another officer visited the tax authorities in Lisbon where they interviewed Messias's local representative. They showed him the copy AADs purportedly receipted by Messias and he told them that the stamps and signatures were in each case not genuine, that he had never heard of WVL, Top sàrl, Oakwood or Rangefield and that Messias used its small warehouse only for the storage of its own goods, principally wine it had produced itself. On the following day Mr Parsons interviewed a Portuguese customs officer who informed him that the stamps and signatures purportedly applied to the copy AADs by the Portuguese authorities were all false, and that the Portuguese authorities had no records of any of the consignments.

Although I did not fully learn the reasons which led to them, it was clear from his evidence that Mr Parsons and his colleagues had grave suspicions about the legitimacy of consignments emanating from Oakwood, Rangefield and a number of other authorised warehouses in the London area from at least the early summer of 2001. It became equally clear that there were suspicions about Serio, though again I do not know why. As I have mentioned, Mr Parsons learnt that Serio's authorisation had been withdrawn on 26 October 2001. Mr Parsons asked his colleagues to find out whether any movements destined for Serio had left within the previous few days and, if so, to instruct the dispatching warehouses to have the loads brought back. In fact, some at least of the loads were diverted (or purportedly diverted) to Caulier (see, for the manner in which this was done, Global Beers and Wines Limited (2005, Decision E00915)).

Investigations into Caulier began on 24 January 2002 when an HMRC officer attended its premises with Belgian officers. The proprietor told them that the stamps and signatures supposedly evidencing receipt by Caulier of the consignments said to have been transported to it—some direct, others diverted or purportedly diverted from Serio—were false, and that Caulier had never received consignments from Oakwood or Rangefield. On 5 February the same officer saw the Belgian official who, according to the AADs which HMRC already had, had stamped and signed them on behalf of the fiscal authorities. He informed the officer that the stamps and signatures were false. Corroborative evidence was obtained from another Belgian officer on the same day.

All of the consignments said to have been sent to Caulier were also said to have been bought by Veltro International SPRL. On 3 June 2002 a different HMRC officer, with Belgian officers, interviewed the principal shareholder and director of Veltro, who informed them that Veltro was an insurance broker which had never dealt in alcoholic goods, and had had no dealings with Caulier or with any UK company.

I have dealt with this evidence quickly—concentrating on the chronology rather than the detail—since AOL did not argue that any of the goods arrived at Messias, Serio or Caulier. In the winding-up judgment, Lewison J said, at [60], of the consignments supposedly sent to Messias, and after reciting the evidence I have set out above, "In the face of this evidence, I do not think it can be seriously contended that the goods did arrive at the destination declared by the AAD." I respectfully agree; and the evidence in relation to Serio and Caulier is no less compelling. The evidence relating to the consignments said to have been sent to Abad, however, was less cogent and Mr Chaisty invited me to infer that, in this case, it was insufficient to defeat the indication of apparently properly receipted CMRs (as I have mentioned, the AADs were not returned, or at least were not found) that the goods had duly arrived.

Whether the Abad consignments arrived

HMRC did not make any investigations themselves in Spain, but relied on information supplied to them by the Spanish authorities. On 11 September 2002, in response to a request for information by HMRC, the head of the regional customs and excise duties office made a statement to the local police to the effect that Abad had declared no receipts of excise goods from either Oakwood (from which all the relevant loads were removed) or Rangefield in September, October or November 2001; the consignments relevant in this appeal left Oakwood on 5, 6 (two consignments) and 20 November 2001. The Spanish officer also stated that attempts to examine documents held by Abad had been unsuccessful since the Spanish officers who made the enquiries found that Abad had closed down and it had not been possible to contact its directors. Other material obtained from the Spanish authorities shows that those enquiries were made on or about 28 August 2002. The date on which Abad closed down remains obscure, but I infer in the absence of any indication to the contrary in the Spanish officer's statement that some documents had been sent by Abad to the fiscal authorities during September, October and November 2001 and that Abad was open and authorised during that period.

HMRC's argument was that the absence of any record of the receipt of the goods in the Spanish authority's files necessarily indicated that the goods had not arrived, or at the least had not been properly accounted for. Spanish practice, I was told, was that the copy 3 AAD must be presented for stamping, and the copy 4 for retention, by the customs authorities. There was ample evidence that other consignments sent or about at this time from Oakwood by WVL and Cleanaco (of the four loads, three were sent by WVL and one by Cleanaco) had not arrived at their destinations and it was reasonable to infer that these consignments, too, had not arrived. I bear also in mind that in an appeal by Cleanaco to this tribunal (Cleanaco Limited, 2007 Decision E01012) it was admitted by Cleanaco that the goods had not arrived.

AOL's case, as Mr Chaisty put it, was that, first, the evidence that the goods did not arrive relied on assumption and inference rather than, as in the case of Serio, Messias and Caulier, clear evidence of falsification of receipt stamps and signatures and, in Serio's case, of the absence of authorisation at the material time; and, second, that one of the four loads destined for Abad departed on 20 November 2001, two weeks after the enhanced controls had been put in place and when it might be thought that only legitimate loads were being transported. It could properly be inferred that that consignment was legitimate and that it arrived, and if that is a proper conclusion it is equally to be inferred that the other three loads arrived.

The difficulty in Mr Chaisty's way is that he is inviting me to draw a positive conclusion from the absence of negative indicators. I am not persuaded that there are no negative indicators—in my view the absence of any evidence of receipt in the Spanish authority's records is a clear negative indicator—but even if there were none, this is not a case in which it is to be assumed, in the absence of evidence to the contrary, that the consignments arrived at their declared destination; the burden is, rather, on AOL to demonstrate that they did arrive (see Finance Act 1994, section 16(6), set out below). There are no receipted AADs. CMRs, even if apparently duly receipted, are of lesser value as they do not need to be produced to an independent authority. The fact that a load which left Oakwood after the imposition of enhanced controls and was escorted to Dover then re-entered the country is an indication that not all the consignments which left Oakwood at that time were legitimate. It is impossible to say that AOL has discharged the burden. In my view the only reasonable conclusion is that the goods did not arrive.

The assessments

HMRC's policy was that officers in Mr Parsons' position did not make assessments, but it was nevertheless Mr Parsons who decided that assessments should be made, and who calculated the amounts of duty for which, he thought, AOL was liable. He arranged that Ms Harrison, an officer authorised to do so, should issue the assessments. Since there was some dispute about the extent, if any, to which she had applied her own mind to the assessments, I should say that I am satisfied that she did exercise some independent thought, and was not merely mechanically following Mr Parson's instructions, though I am not convinced that there is any continuing relevance in the point. There are five assessments in issue in this appeal:

(1) An assessment ("the Portuguese assessment") dated 6 June 2002 in the sum of £3,012,069.37, later reduced to £2,903,957. All the consignments included in the amended assessment were purportedly transferred from Oakwood or, in a few cases, Rangefield, to Messias, having been sold or purportedly sold by WVL to Top sàrl.

(2) An assessment dated 4 February 2003 in the sum of £416,937. The consignments included in this assessment were purportedly sent from Oakwood to Serio on the instructions of Global (then known as Estion). No customer was identified (according to the AADs, the goods were to be held on arrival to Global's order).

(3) An assessment also dated 4 February 2003 in the sum of £677,778. The consignments included in this assessment were sent, or purportedly sent, from Oakwood to Serio, Caulier or Abad on the instructions of Cleanaco. In three cases no customer was identified; in the remaining four it was said to be Veltro.

(4) A further assessment dated 4 February 2003 in the sum of £200,935. The two consignments relevant to this assessment were purportedly sent from Oakwood to Serio on the instructions of Sands, and were to be held to Sands' order.

(5) A fourth assessment of 4 February 2003 in the sum of £295,367 representing the duty on three consignments of spirits sent, or purportedly sent, from Oakwood to Abad on the instructions of WVL, which claimed to have sold them to Brainstorm NV.

Other assessments have been made against the owners; the assessments made against Cleanaco and Global were the subject of their appeals to this tribunal by which I have mentioned. Nothing turns on those assessments save that, to the extent that HMRC make any recovery from the persons assessed, the amount (if any) due from AOL will be abated.

The law

The starting point must be Council Directive 92/12/EEC which is now the primary source of the legislation on excise duties throughout the Community. Its purpose is to ensure that duty is paid on excise goods (defined by article 3 to include, among other things, "alcohol and alcoholic beverages") when they are "released for consumption", that is, at least for the purposes of this appeal, the time when they cease to be within a legitimate duty-suspended arrangement. Duty then becomes payable at the rate prescribed by the member State in which the release for consumption occurs. Some basic terms are defined by article 4:

"For the purpose of this Directive, the following definitions shall apply—

(a) authorised warehousekeeper: a natural or legal person authorised by the competent authorities of a member State to produce, process, hold, receive and dispatch products subject to excise duty in the course of his business, excise duty being suspended under a tax-warehousing arrangement;

(b) tax warehouse: a place where goods subject to excise duty are produced, processed, held, received or dispatched under duty-suspension arrangements by an authorised warehousekeeper …;

(c) suspension arrangement: a tax arrangement applied to the production, processing, holding and movement of products, excise duty being suspended …."

Article 6 provides for the payment of duty. So far as material, it is as follows:

"1. Excise duty shall become chargeable at the time of release for consumption … Release for consumption of products subject to excise duty shall mean...

(a) any departure, including irregular departure, from a suspension arrangement …

The chargeability conditions and rate of excise duty to be adopted shall be those in force on the date on which duty becomes chargeable in the member State where release for consumption takes place or shortages are recorded. Excise duty shall be levied and collected according to the procedure laid down by each member State …."

Holding suspension arrangements are dealt with by articles 11 to 14; only articles 11, 12 and part of article 13 are relevant here. They are in these terms:

"11.1 Each member State shall determine its rules concerning the production, processing and holding of products subject to excise duty, subject to the provisions of this Directive.

11.2 Production, processing and holding of products subject to excise duty, where the latter has not been paid, shall take place in a tax warehouse.

12 The opening and operation of tax warehouses shall be subject to authorisation from the competent authorities of the member States.

13 An authorised warehousekeeper shall be required to—

(a) provide a guarantee, if necessary, to cover production, processing and holding and a compulsory guarantee to cover movement, subject to article 15(3), the conditions for which shall be set by the competent authorities of the member State in which the tax warehouse is authorised …."

The provisions relating to duty-suspended movements are to be found in articles 15 to 21. Articles 18 and 19 prescribe the use of AADs and describe the procedure to be followed which I have outlined at paragraph 21 above, and as nothing turns on their detail I do not need to set them out here. Articles 16, 17 and 21 are of no application to this case. The relevant parts of the remaining articles, 15 and 20, are as follows:

"15.1 … the movement of products subject to excise duty under suspension arrangements shall take place between tax warehouses …

3 The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorised warehousekeeper of dispatch, as provided for in article 13, or, if need be, by a guarantee jointly and severally binding on both the consignor and the transporter. The competent authorities in the member States may permit the transporter or the owner of the products to provide a guarantee in place of that provided by the authorised warehousekeeper of dispatch … The detailed rules for the guarantee shall be laid down by the member States. The guarantee shall be valid throughout the Community.

4 Without prejudice to the provision of article 20, the liability of the authorised warehousekeeper of dispatch and, if the case arises, that of the transporter may only be discharged by proof that the consignee has taken delivery of the products, in particular by the accompanying document referred to in article 18 under the conditions laid down in article 19 …

1 Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with article 15(3) …

2 When, in the course of movement, an offence or irregularity has been detected without it being possible to determine where it was committed, it shall be deemed to have been committed in the member State where it was detected.

3 Without prejudice to the provision of article 6(2), when products subject to excise duty do not arrive at their destination and it is not possible to determine where the offence or irregularity was committed, that offence or irregularity shall be deemed to have been committed in the member State of departure, which shall collect the excise duties at the rate in force on the date when the products were dispatched unless within a period of four months from the date of dispatch of the products evidence is produced to the satisfaction of the competent authorities of the correctness of the transaction or of the place where the offence or irregularity was actually committed …."

The implementation of the Directive in the United Kingdom's domestic law, so far as it is material to this appeal, is effected by the Finance Act 1994, as amended, and the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (SI 2001/3022), commonly known as "DSMEG". Section 12 of the 1994 Act provides for the making of assessments to excise duty:

"(1A) Subject to subsection (4) below, where it appears to the Commissioners...

(a) that any person is a person from whom any amount has become due in respect of any duty of excise; and

(b) that the amount due can be ascertained by the Commissioners;

the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative …

(4) An assessment of the amount of any duty of excise due from any person shall not be made under this section at any time which is after the earlier of the following times, that is to say...

(a) … the end of the period of three years beginning with the time when his liability to the duty arose; and

(b) the end of the period of one year beginning with the day on which evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge …."

A person wishing to challenge an assessment made in accordance with subsection 12(1A) must first seek a review, and if dissatisfied appeal against the review decision: see sections 14, 15 and 16(1), (2). It is not disputed that AOL has complied with those requirements. It is also undisputed that in a case of this kind the tribunal has a full appellate jurisdiction, and is not limited (by subsection 16(4) of the Act) to directing a further review. Subsection 16(6) places the burden of proof on AOL.

The 1994 Act does not prescribe the circumstances in which liability for the payment of duty arises. There are numerous other Acts and statutory instruments which do so, but in this case the only provisions of relevance are to be found in DSMEG. Those which I must consider in this appeal are as follows:

"2 Interpretation

In these regulations... …

'authorised warehousekeeper' has the same meaning as in article 4(a) of the Directive;

'the Directive' means Council Directive 92/12/EEC …

'duty suspended movement' means

(a) a movement of excise goods which:

(1) starts at a tax warehouse in one member State and is intended to finish with the arrival of those goods with …

(i) the authorised warehousekeeper at a tax warehouse … in another member State; … and

(2) in respect of which the excise duty to which those goods are subject by virtue of article 5 of the Directive is suspended pursuant to suspension arrangements as defined in article 4(c) of the Directive ….

'guarantee' means the guarantee provided in accordance with the provisions of article 15(3) of the Directive;

'irregularity' means an irregularity or offence within the meaning of article 20 of the Directive …

3 Irregularity occurring or detected in the United Kingdom

(1) This regulation applies where:

(a) excise goods are...

(i) subject to a duty suspended movement that started in the United Kingdom … and

(b) in relation to those goods and that movement, there is an irregularity which occurs or is detected in the United Kingdom.

(2) Where the Commissioners are satisfied that the irregularity occurred in the United Kingdom, the excise duty point shall be the time of the occurrence of the irregularity or, where it is not possible to establish when the irregularity occurred, the time when the irregularity first comes to the attention of the Commissioners.

(3) Where it is not possible to establish in which member State the irregularity occurred, the excise duty point shall be the time of the detection of the irregularity or, where it is not possible to establish when the irregularity was detected, the time when the irregularity first comes to the attention of the Commissioners.

(4) For the purposes of this regulation, detection has the same meaning as in article 20(2) of the Directive.

4 Failure of excise goods to arrive at their destination

(1) This regulation applies where:

(a) there is a duty suspended movement that started in the United Kingdom; and

(b) within four months of the date of removal, the duty suspended movement is not discharged by the arrival of the excise goods at their destination; and

(c) there is no excise duty point as prescribed by regulation 3 above; and

(d) there has been an irregularity.

(2) Where this regulation applies and subject to paragraph (3) below, the excise duty point shall be the time when the goods were removed from the tax warehouse in the United Kingdom.

(3) The excise duty point as prescribed by paragraph (2) above shall not apply where, within four months of the date of removal, the authorised warehousekeeper accounts for the excise goods to the satisfaction of the Commissioners.

7 Payment

(1) Subject to paragraph (2) below, where there is an excise duty point as prescribed by regulation 3 or 4 above, the person liable to pay the excise duty on the occurrence of that excise duty point shall be the person shown as the consignor on the accompanying administrative document or, if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person.

(2) Any other person who causes or has caused the occurrence of an excise duty point as prescribed by regulation 3 or 4 above, shall be jointly and severally liable to pay the duty with the person specified in paragraph (1) above.

8 Time for payment

Any excise duty that any person is liable to pay by virtue of [regulation 7] shall be paid by that person at or before the excise duty point."

The issues

The parties agreed at the outset of the hearing that there were six discrete issues, but, as I have mentioned, towards the end of the hearing Mr Chaisty indicated that AOL no longer pursued one argument. The five remaining issues, for whose description I am indebted to Mr Mantle's skeleton argument, are:

(1) Whether the consignments were each the subject of a "duty suspended movement" within the meaning of DSMEG regulation 2. This issue raises two supplementary points:

(a) whether the goods existed at all; and

(b) if they did exist, whether there was an intention that they would arrive at their destinations as those destinations were identified on the relevant AADs.

(2) Whether, in respect of the first assessment, duty points arose under DSMEG regulation 4. This issue raises several questions:

(a) is regulation 4 inapplicable because the goods arrived at their declared destinations?

(b) did excise points instead arise under regulation 3 (displacing regulation 4)?

(c) was there any irregularity within the meaning of regulation 4?

(d) is regulation 4 invalid, so that HMRC cannot rely on it, because (i) article 20 of the Directive is invalid; or (ii) because regulation 4 fails to implement the Directive properly?

(e) if no excise points arose by reason of regulation 4, are the assessments valid?

(3) Whether, in respect of the four assessments made in 2003, the duty points arose by reason of regulation 3 or regulation 4.

(4) Whether the 2003 assessments are time-barred.

(5) Whether AOL's liability is limited to an amount less than that assessed because of the terms of its guarantee issued by Hermes.

Two of the subsidiary issues can be dealt with quickly. In his skeleton argument Mr Chaisty pointed to the logical difficulty of HMRC's position, in contending that the AADs were false and therefore unreliable in some respects, but could nevertheless be relied on as evidence that the goods referred to in them existed, and (as the calculation of the assessments assumed) were of the kinds and in the quantities specified. At the hearing he did not pursue the argument with great vigour. In my view there is nothing in it. There was no evidence, and no reason to think, that this was part of some other scheme, such as a VAT fraud (in which fictitious goods are sometimes used); on the contrary, I am satisfied that HMRC are right in their belief that the intention of those behind the consignments was to divert the goods and sell them, free of excise duty, on the black market. The goods found in the vehicle which was intercepted at Staines corresponded, I understand, with those specified on the accompanying documents, and the load which returned to the UK and was intercepted at Ipswich likewise contained goods corresponding with those declared on the AAD. I see no reason why I should conclude that the other lorries, or any of them, did not contain the specified goods when they left Oakwood or Rangefield. It seems to me unlikely that a warehousekeeper would expose himself to the risk that he would have to account for—and, if he failed to do so, pay the duty on—a fictitious load if the lorry in which it was supposedly transported were intercepted. I am satisfied that the goods did exist; that finding disposes of the first subsidiary point of issue (1). I have already indicated that I am satisfied that none of the relevant goods arrived, which disposes of issue (2)(a).

Were the consignments "intended" to arrive at their stated destinations?

Mr Chaisty argued that, if HMRC are right in their view that all of the consignments were slaughtered and sold on the black market, it can never have been intended that they would reached their stated destinations. The definition of "duty suspended movement" in regulation 2 of DSMEG was apt to include only legitimate movements, where there was a genuine intention of due delivery of the goods, and not fraudulent movements such as those with which I am concerned. In the winding-up judgment Lewison J said:

"50 … Reg 2 of DSMEG defines a 'duty suspended movement'. Part of the definition is that it is a movement in respect of which duty is suspended 'pursuant to duty suspension arrangements as defined in article 4(c) of the Directive'. But it does not seem to me that article 4(c) does define duty suspension arrangements in terms clear enough to enable the reader to understand precisely what they are, and when they apply. That is not the end of the difficulties in interpreting reg 2. The opening part of the definition refers to a movement of goods [which]:

'(1) starts at a tax warehouse in one member State and is intended to finish with the arrival of those goods with [an authorised warehousekeeper]' (emphasis added).

51 On the face of it, an intention is a state of mind formed by a natural or legal person … But whose intention is relevant for the purposes of the definition? And must it be a genuine intention? Suppose that the consignor and the transporter of the goods both intend that a load should be slaughtered after leaving a tax warehouse in England and before crossing the Channel. Can it be said that the movement was 'intended' to finish by the arrival in a tax warehouse in another member State? If they fraudulently filled in an AAD declaring that the point of arrival would be another tax warehouse in, say, Belgium, does that make a difference? In other words, can 'intended' be read as 'apparently intended'? And if an innocent guarantor is himself deceived by the fraudulent paperwork, is his intention relevant?

52 I do not have, and do not need to have, answers to these questions on this petition. But it seems to me at least arguable that if the movement of goods never was intended to arrive at a tax warehouse in another member State, there would not have been a duty suspended movement of goods. So far as the consignor of the goods is concerned, this may mean that his liability arises as soon as the goods leave the warehouse. But so far as the guarantor (like AOL) is concerned his liability arises only by virtue of reg 7. Reg 7 applies only where an excise duty point arises under reg 3 or reg 4. Both these regulations only apply where there is a duty suspended movement of goods. If there is no duty suspended movement of goods, then reg 7 cannot apply, and the guarantor cannot be liable."

Mr Chaisty accepted that contrary views had been expressed by Mr Michael Briggs QC (now Briggs J) in HM Revenue and Customs v Autotech Design Limited [2006] EWHC 1596 Ch, a case on which Mr Mantle relied. The learned deputy judge said, after reciting the extracts from the winding-up judgment which I have set out,

"41 … On the face of it, Mr Justice Lewison seems to have concluded that where there was no intention by anyone that the goods should arrive at a tax warehouse in another member State, it was arguable that neither regulations 3, 4 or 7 of DSMEG would apply due to there having been no duty suspended movement of goods. Put shortly, the effect of that argument appears to be that the worse the irregularity or offence, in the sense that all the parties shared a dishonest intention to divert the goods by way of an excise duty fraud, the less applicable should be the regulations designed, among other things, to combat just such a fraud."

Then, after dealing with a matter which is not in issue here, he continued:

"45 It follows that I must approach head on the argument as to whether regulation 3 applies at all to a case where there was no intention that the goods should reach their destination. With respect to Lewison J, even if the argument which he describes … is arguable, it is not an argument which, in my judgment, has any real prospect of success …

46 … while as a matter of linguistics the word 'intended' construed in isolation might have the meaning treated by Lewison J as arguable, such a construction would, in my judgment, be so destructive of one of the main purposes of DSMEG, construed as implementing the Directive, as to compel its rejection if any other reasonable or non-destructive meaning is available. In my judgment, such a meaning is available. I consider that the phrase 'intended' and the words which follow in regulation 2, are a reference to the place of arrival to be found by reading the relevant AAD and discerning the intent as to the place of arrival disclosed in that document … That conclusion would, in my judgment, if necessary, easily be reached by implying the word 'apparently' before the word 'intended', and the implication is, in my judgment, necessary to prevent DSMEG being reduced to a brutum fulmen in the battle against excise fraud …."

Mr Mantle pointed out that, while Lewison J had expressed himself only tentatively, deciding no more than that the point was arguable, the judgment in Autotech Design disposed of Mr Chaisty's argument, and it was binding on this tribunal. Mr Chaisty's response was that I should prefer what was said by Lewison J to the judgment in Autotech Design since, he said, the point had not been fully argued and the judge had failed to take account of the remarks of Lord Walker in Greenalls Management Limited v Customs and Excise Commissioners [2005] 1 WLR 1754 at [39]:

"… it is still a principle of British law that if taxes and duties are to be imposed, they should be imposed by clear words. That does not require a return to literal interpretation: see the observations of Lord Wilberforce in W T Ramsay Limited v Inland Revenue Commissioners [1982] AC 300, 323, and those of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 999-1000. But if Parliament is to impose fiscal liabilities which might be regarded as draconian it should do so in terms which, fairly construed, are reasonably clear."

I have little hesitation in preferring what was said by Briggs J in Autotech Design. I accept Mr Chaisty's contention that he reached his conclusions in the absence of full argument, since Autotech Design was represented by a director rather than by a lawyer. Nevertheless it seems to me that he differed from Lewison J after very careful consideration. I recognise the force of what Lord Walker said in Greenalls, but it does not seem to me that it is of any application here. Since Lewison J expressed himself only in tentative and inconclusive terms, what he said is not binding on this tribunal whereas what Briggs J decided is—in that I agree with Mr Mantle—but even if it were not binding I agree with his conclusions and with his reasons. To my mind, Mr Chaisty's argument is little more than pedantry; it is obvious what is meant. Furthermore, as Lewison J said, it is necessary to consider, if true intention is the yardstick, whose intention is in question. The obvious candidate is the person who is said to be liable for the duty, in this case AOL. AOL may not have known, consignment by consignment, what the stated destination was, but it can only be assumed that in each case it intended the consignment to reach that destination, whatever it might have been. That, it seems to me, is sufficient intention to satisfy regulation 2. Accordingly I determine issue (1) in HMRC's favour.

Were the assessments incorrectly made?

In the letter accompanying the first assessment (the Portuguese assessment), dated 6 June 2002, HMRC stated that "As the goods have failed to arrive at their destination within four months of the date of removal an excise duty point has arisen within the meaning of regulation 4(2) of [DSMEG]". In each of the letters accompanying the remaining four assessments, all dated 4 February 2003 and all in substantially the same terms, there appeared the sentences: "As an irregularity has occurred or been detected, in the United Kingdom, an excise duty point has arisen within the meaning of regulation 3 of [DSMEG] … Or, in the alternative, as the goods have failed to arrive at their destination within four months of the date of removal an excise duty point has arisen within the meaning of regulation 4 of [DSMEG]". The letters also set out the dates of the excise duty points for which HMRC contended; the letters of 4 February 2003 gave alternative dates for duty points arising under regulations 3 and 4 respectively. HMRC did not seek to resile from or amend that reasoning when the reviews were carried out.

Mr Chaisty emphasised that the decision to rely on regulation 4 in making the first assessment was deliberate, as Mr Parsons' evidence confirmed; his view at the time (after he had taken advice on the point) was that if HMRC had relied on regulation 3 it would have been necessary to specify the irregularity which led to the occurrence of a duty point within that regulation. Since HMRC could show no more than that the goods did not arrive at their stated destinations, they were forced to rely on regulation 4. Yet, Mr Chaisty said, HMRC's position throughout had been that the consignments had never left the UK, but had been slaughtered here. That had been their case in the prosecution to which I have referred, and it was the assumption on which the statements and other material produced in this case had proceeded. It followed that a duty point arose under regulation 3, because there was an irregularity which occurred or was detected in the United Kingdom (paragraph (1)(b)); and by its own terms regulation 4 was excluded if there was a duty point within regulation 3: see paragraph (1)(c). In addition, if a duty point were to arise under regulation 4, it was necessary to demonstrate an irregularity beyond the failure of the goods to arrive at their declared destination, an irregularity which had not been shown.

For the proposition that mere non-arrival was not sufficient he relied on what Lewison J said in the winding-up judgment at [55]:

"[Counsel for HMRC] disclaimed any suggestion that the mere fact that the goods did not arrive at the destination stated on the AAD itself amounted to an irregularity. This seems to me to be right. If, for example, the goods failed to arrive because the lorry carrying them was destroyed in a road accident, that would not, on the face of it, seem to be an irregularity. Moreover, the requirement of an irregularity under condition (d) is an additional requirement to the fact of non-arrival under condition (b)."

I interpose, parenthetically, at this point that I have some doubt whether the second and third sentences of that extract are entirely correct: the judge appears to have overlooked article 14.1 of the Directive, which affords relief from the consequences of what, by implication, is an irregularity of this kind. I agree however with the fourth sentence; the use of the word "and" after each of the first three sub-paragraphs indicates that the conditions must be cumulative. But in this case it seems to me an inescapable conclusion that there was an irregularity over and above the failure of the goods to arrive, that is the falsification of the AADs (or, in a few cases, their non-return). I do not understand how the production of falsified documents, particularly when the use of the documents is compulsory, could be regarded as anything other than irregular, even if the falsification was designed to conceal the fact that the goods had not arrived at their stated destinations. Similarly the failure to comply with the mandatory requirement that the receipted AAD be returned must be an irregularity.

At first sight there is more in Mr Chaisty's point that HMRC could not maintain, in another context, that the irregularities, if any, occurred in the UK while saying, in this case, that they could show no more than that the goods did not arrive. Regulation 4 could not be invoked if it was excluded by the establishment of a duty point by regulation 3 and, on HMRC's own case, a duty point did arise in accordance with regulation 3.

Mr Mantle argued that the issue must be judged by reference to HMRC's knowledge in June 2002, when the first assessment was made. In order to succeed on this issue, he said, AOL would need to show that the only reasonable conclusion HMRC could then have drawn was that the consignments had not left the UK, or alternatively that there was an identifiable irregularity detected in the UK. In other words, AOL had to advance a positive case which led to the conclusion that only regulation 3 could be used, and it had failed to do so. But even if it had done so, the result would be a duty point within regulation 3, also leading to liability within regulation 7, and AOL's position would be the same.

In my judgment Mr Chaisty's argument approaches this question in the wrong way. None of the assessments was made—as his skeleton argument asserted—"pursuant to" or "under" either regulation 3 or regulation 4 (a point also made by Lewison J in his judgment on the winding-up petition, at [70]). The assessments were made using the power conferred by section 12(1A) of the 1994 Act, because (if HMRC are right) regulation 7 of DSMEG imposed liability for the duty on AOL. Section 12 is the charging provision: regulations 3 and 4 merely determine whether a duty point has arisen within the United Kingdom and, if so, when. Regulation 7 determines on whom the liability is imposed "where there is a duty point as prescribed by regulation 3 or 4". That requirement is satisfied, in my judgment, whether regulation 3 or regulation 4 is in point, provided only that one of them is. That conclusion is, I think, consistent with the view expressed by the Vice-Chancellor in re The Arena Corporation Limited [2004] EWCA Civ 371, at [50] to [51]. The reference to regulation 4 in respect of the first assessment, and to regulations 3 and 4 in respect of the others, is in my view no more than explanation; it is not an operative part of the assessment itself. A person faced with such an assessment might argue that no duty point has arisen at all, or he might challenge the date on which HMRC contend it arose; but it does not seem to me that he can avoid liability by arguing that the reference is to the wrong regulation.

If that conclusion is correct, there is little to be gained by a detailed enquiry designed to establish which of regulations 3 and 4 is in point. As the Vice-Chancellor said in re The Arena Corporation, a case whose facts were very similar to those in this case, at [51], "If there is no excise duty point under regulation 3 then there must be under regulation 4." There is, of course, one difference between the regulations, in that regulation 4 fixes the duty point at the date of removal whereas regulation 3 fixes it at a date which must necessarily be later than the date of removal. That difference leads to two consequences: the starting date for the calculation of interest will be later under regulation 3; but the time limit for the making of an assessment imposed by section 12(4)(a) of the 1994 Act will expire earlier if the duty point arose under regulation 4. But it does not seem to me that the difference, and the consequences of that difference, make it imperative that HMRC determine correctly which is the correct regulation, to the extent that an assessment made in the belief that a duty point arose under one regulation will fail if a duty point arose, but under the other regulation. In my view the date of the duty point may be adjusted in the light of additional evidence, by agreement between HMRC and the person said to be liable or, if necessary, by this tribunal, without affecting the underlying validity of the assessment.

Is regulation 4 invalid?

That conclusion may not, however, assist HMRC if, as Mr Chaisty maintained, regulation 4 is wholly invalid since, if regulation 3 is not in point, there is no other provision of DSMEG which would impose liability for the duty on AOL. As I have indicated, he pursued two arguments: that article 20.3 of the Directive was invalid; and that, even if it were valid or its invalidity could be cured, regulation 4 failed to implement it properly.

In Distillerie Fratelli Cipriani SpA v Ministerio della Finanze (Case C-395/00) [2002] ECR I-11877 the consignor, which was said to be liable to pay the duty on consignments which had been diverted, had acted in good faith and did not learn until after the expiry of the four-month period prescribed by article 20.3 that the apparently properly receipted AADs returned to it in fact bore false stamps. The Advocate General said, at paragraph 67 of his opinion:

"… the national court must set aside the application of article 20.3 by reason of its incompatibility with the fundamental principle of the respect of the right of defence, that incompatibility being incapable of resolution by means of the methods of interpretation proposed by the Commission."

However, as Mr Mantle pointed out, the Court put its view rather differently at paragraph 54 of the judgment:

"… article 20.3 of the Directive is invalid in so far as the period prescribed therein of four months for evidence to be provided of the correctness of the transaction or of the place where the irregularity was actually committed may be relied on against a trader who has guaranteed the payment of excise duty but was not in a position to know, at the appropriate time, that the duty-suspension arrangement had not been discharged."

Thus the Court (and, I should add, the Advocate General, at paragraph 68 of his opinion) took the view that it was necessary to do no more than restrict the enforcement of the time limit (and even then only in some circumstances); the article survived in every other respect. The time limit (repeated in regulation 4(3) of DSMEG) is immaterial here: it is not a case in which HMRC are refusing to accept evidence produced more than four months after the date of dispatch of the goods. Thus, as it seems to me, any invalidity of article 20.3 (and consequently of regulation 4(3)) does not help AOL. However, whereas article 20.3 requires only that "evidence is produced", without specifying by whom it is to be produced, regulation 4(3) requires the warehousekeeper to produce it. It appears that the draftsman overlooked the fact that, although the warehousekeeper, as consignor, is primarily liable, others may assume the liability in his place. The error and the consequent failure to implement article 20.3 correctly, Mr Chaisty said, rendered regulation 4(3) invalid.

It does not seem to me that there is anything in this point. By using the same reasoning as that adopted in Distillerie Fratelli, the error can be cured by the tribunal's simply refusing to allow HMRC to rely on the restriction should they attempt to do so. Alternatively one could adopt a purposive approach, a possibility suggested by Lewison J in the winding-up judgment. At [67] he said:

"Whereas article 20(3) leaves open the identity of the person who may avoid liability by producing the necessary evidence, reg 4(3) restricts that right to the 'authorised warehousekeeper'. AOL is not the authorised warehousekeeper; it is merely the guarantor. On the face of it, therefore, it does not have any right to avoid liability. It may be that a purposive construction of the regulation would solve this difficulty, but in my judgment that is not the sort of question to be decided on a petition to wind up."

As Mr Mantle pointed out, the adoption of a purposive approach derives considerable support from the more recent decision of the Court of Appeal in HMRC v IDT Card Services Ireland Limited [2006] STC 1252, and especially paragraphs [73] to [92] of the judgment of Arden LJ. After discussing the manner in which domestic legislation is to interpreted when there is conflict, or apparent conflict, between it and Community legislation or the Human Rights Convention, she concluded by saying that "I see no reason why the same robust techniques used to make legislation compatible with the ECHR should not equally apply to make domestic legislation comply with the laws of the European Union."

Whether the correct approach is parity of reasoning or the adoption of a purposive interpretation, the deficiencies of article 20.3 and of regulation 4(3) do not, in my view, assist AOL in this appeal.

Whether regulation 3 or regulation 4 is appropriate

In the light of those conclusions, issues (2)(e) and (3) seem to me to raise essentially the same question, that is whether duty points arose because of the operation of regulation 3, or because of regulation 4. For the reasons I have already given the answer to this question (as long as one regulation or the other is in point) has no bearing on the question whether AOL has any liability, but it may affect the date on which interest began to accrue. It is not a material factor in determining whether any of the assessments was out of time since it was agreed that, whenever duty points arose (if at all), it was less than three years before the assessments were made, and section 12(4)(a) of the 1994 Act is not offended.

Mr Mantle pointed out what seems to me to be an insuperable difficulty for AOL. As I have found, none of the relevant consignments arrived at the declared destination, and there was an additional irregularity in each case. Thus regulation 4 is engaged unless it is excluded by the operation of regulation 3 (see regulation 4(c)). Thus the only means open to AOL of escaping a duty point within regulation 4 is to show that one arose under regulation 3. The burden of doing so is on AOL: see section 16(6) of the 1994 Act. It is a heavy burden; AOL does not have, nor could it be expected to have, access to evidence about the fate of the goods. Nevertheless, I share HMRC's view (and that of the Vice-Chancellor in the factually similar case of re The Arena Corporation) that the probability is that the goods did not leave the UK, but were sold on the black market here. Some support for that conclusion can be derived from the fact that one load was intercepted at Staines and another, having been escorted to Dover, found its way back to the UK, as I have related. On the balance of probabilities I am persuaded that the irregularity occurred within the UK in each case, and that, in consequence, a duty point arose in accordance with regulation 3 rather than regulation 4.

Did duty points arise in the United Kingdom?

However, an additional argument raised by Mr Chaisty was that, as detection of the irregularities occurred, not in the UK, but in Portugal, Spain, Italy or Belgium, regulation 3 could not apply so as to create a duty point in the UK: any assessment on AOL for the duty would have to be made by the country of detection, as article 20 of the Directive required. The argument pre-supposes that it is not possible to determine where the irregularity occurred: article 20.2; thus the question is largely academic in view of my earlier conclusions, but I can deal with it quite shortly.

The Directive does not make it clear what is meant by "detected", and regulation 3(4) of DSMEG, rather unhelpfully, merely gives "detection" the same meaning as it has in article 20.2. It seems to me that I must give the words their ordinary meaning. Mr Chaisty's argument depends for its success on my being persuaded that, for example, the Italian authorities' discovery of Mr Baldesi's deception amounts to the detection of an irregularity in respect of the consignments supposedly sent to Serio, but in my view that cannot be so. The Italian authorities knew nothing of those consignments (and the Portuguese, Spanish and Belgian authorities nothing of the consignments purportedly sent to their countries) until HMRC made enquiries about them. On any reasonable view, it was HMRC which detected the irregularities; the overseas authorities did no more than provide evidence. I am not persuaded that there is any basis on which it might be concluded that article 20.2 places the duty point in a country other than the UK.

Were the 2003 assessments out of time?

It was common ground that the first assessment was made in time; Mr Chaisty's argument that section 12(4)(b) was offended related only to the four assessments made on 4 February 2003. The time limit imposed by subsection (4)(b) runs from "the day on which evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge". It is necessary, therefore, to examine the information in HMRC's possession—and not only Mr Parsons' possession—by 5 February 2002. Before doing so it is necessary to put the matter in context by examining Mr Parsons' approach to the making of an assessment.

He told me that he asked himself whether any assessment he proposed to make was one which would withstand scrutiny on review and, if one should follow, on appeal to this tribunal. If he concluded that he did not have enough evidence to satisfy that test, he would not make an assessment (I am conscious that Mr Parsons did not himself make the assessments in this case, but he was the guiding mind and it is clear that Ms Harrison would not have made them if Mr Parsons had not asked her to do so). He added that he considered it necessary to have official confirmation of evidence obtained from persons who were not officials of a fiscal authority. Thus, for example, although what the owner of Caulier had said was persuasive, it was not impossible that he, too, was a participant in the fraud and Mr Parsons felt he needed in addition the corroborative evidence obtained, as it happens on 5 February 2002, from the Belgian officials. Though it is cautious, it does not seem to me that Mr Parsons' approach is open to serious criticism. It is clear that the view of the officer responsible for an assessment is to be taken into account in determining when the information in his possession was sufficient to justify the making of an assessment (see Pegasus Birds Limited v Customs and Excise Commissioners [2000] STC 91 at [11] to 15]); thus some margin of discretion must be allowed. Of course, the officer must act within the bounds of what is reasonable.

It should also perhaps be mentioned that section 12(1A) does not require the Commissioners to make an assessment, as many similar provisions do, "to the best of their judgment" (and, since subsection 12(1) does contain that phrase, its omission from subsection (1A) must be taken to be intended) but, rather, to what seems at first sight to be a less stringent standard, namely that "it appears to the Commissioners". The nature of the standard to be met was considered in BB Supply Centre Limited v HMRC [2003] V & DR 493 in which the same issue—that is, whether section 12(4)(b) rendered an assessment out of time—arose. I share the view of that tribunal (albeit the point does not seem to have been argued before it), at paragraphs 28 to 30, that "we have to be satisfied that any assessment … would have stood up to scrutiny as being to best of judgment"—in other words, despite the difference of wording, there is no material difference in the test.

By the end of January 2002 HMRC knew that: there were serious concerns (at the least) about the legitimacy of consignments leaving Oakwood and Rangefield; that Serio's approval had been withdrawn in June 2001, though loads had purportedly been sent there after that date; that the Italian stamps applied to the Serio AADs were false; that some of the loads sent on WVL's instructions to Portugal had not arrived; that a load supposedly on its way from Oakwood to Portugal had been stopped in Staines and, eventually, had been returned to Oakwood; that a load leaving Oakwood purportedly for Caulier and escorted to Dover had returned to the UK with false documentation; that AOL had guaranteed at least some of the relevant loads; that Caulier had never received any excise goods from Oakwood or Rangefield; and that Caulier's purported stamps and signatures were forged. I accept, as Mr Chaisty emphasised, that by late 2001 many of the officers involved in the criminal investigation were satisfied that there had been large-scale diversion of consignments which had left Oakwood and Rangefield, and that several documents—including, for example, material laid before magistrates when search warrants were applied for—indicated that HMRC had strong evidence to support their belief.

Mr Chaisty also pointed me to a number of documents, dated in December 2001 and January 2002, in which HMRC officers expressed the view that they had enough evidence to make assessments, and to the fact that they had indeed made a number of assessments, against WVL, Sands, Global and Cleanaco, on 6 February 2002—in order, Mr Parsons said, that they could be served when the raids took place. However, none of the consignments guaranteed by AOL was the subject of any of those assessments.

Material information which came into HMRC's possession only after 4 February 2002 included: that the Belgian customs stamps and signatures were forged; the paperwork seized during the course of the raids which took place on 7 February 2002; corroboration in Italy of what they had been told in London in January 2002; and the information about Abad which I have described.

Mr Parsons told me that he considered that the additional information obtained in Italy and Belgium in July and June 2002 respectively was necessary if the assessments to which that information was relevant were to be capable of withstanding scrutiny. I did not find that part of his evidence convincing. In my view there was ample evidence, by January 2002, that Serio could not lawfully have received the consignments supposedly sent to it, and that the Italian fiscal stamps were forged. The additional information obtained in July 2002, corroborative though it may have been, contained nothing new: it was merely more evidence of the same facts. Similarly, the information obtained in Belgium in June 2002 added nothing new; it was no more than corroboration of what HMRC had already obtained, though in this case on 5 February 2002.

However, it does not seem to me that the unconvincing nature of Mr Parsons' evidence on those points leads to the conclusion that the assessments were made out of time. By late 2001 HMRC knew that AOL had guaranteed some of the consignments, but Mr Finch accepted, as I have said, that the information he had provided was probably not complete. Almost certainly it was not, since the Abad AADs, and quite possibly some others, had not been returned. I do not think HMRC can be criticised for marrying the information Mr Finch had provided in late November or early December 2001 with other available documentation, or for seeking verification of it. The source documentation (some of which was in the possession of Oakwood, Rangefield or Calderdale) was not secured until 7 February 2002. There was suspicion, Mr Parsons told me, that Mr Morton was involved in the fraud, and that AOL's guarantee might have been used on some occasions without its authority, although it is true to say that both of those suspicions proved groundless. I do not overlook the evidence about the strength of various officers' beliefs that there had been a fraud and that assessments could be made, but those beliefs, and the assessments made at that time, related to the (as HMRC believed) principals, and not to others such as AOL.

Some criticism might be made of Mr Parsons that, even on his own view of the matter, all the necessary evidence was available by late August 2002 yet the assessments were not made until nearly six months later (and I was surprised to discover that he had no system of any kind for reminding him of the time limit before it expired), but HMRC are allowed a full year and in my judgment they have not exceeded that period. I am satisfied that some of the material reasonably considered necessary for the making of each of the 4 February 2003 assessments, that is material necessary for a valid assessment against AOL, was not in their possession before 5 February 2002. Thus I conclude that all the assessments were in time.

For completeness I should add that there was no evidence, rather than suspicion or inference, available to HMRC that the Abad consignments had not arrived until August 2002 and on any view the assessments relating to those consignments were made within the one year time limit. I recognise that there is some force in the argument that the assessments relating to the Abad consignments were based on conspicuously less evidence than those relating to the consignments purportedly sent to Serio, Caulier and Messias, and that evidence of roughly equivalent value about those consignments was available by January 2002. That proposition is not entirely correct if I am right in my view that HMRC were right to check the information provided by Mr Finch in November 2001 against the material they obtained on 7 February 2002. But it also seems to me that HMRC are entitled to reasonable time to seek additional evidence in support of their case (though not more evidence of facts already adequately established); for the reasons I have already given they are not required to (nor should they) assess on limited or incomplete evidence when it is reasonable to suppose that better and complete evidence (or evidence which might undermine their belief) is available. In the case of the Abad assessments, it was clear by August 2002 that nothing more could reasonably be hoped for; that was not the position in relation to Caulier on 4 February 2002.

Do the terms of its guarantee limit AOL's liability?

Mr Chaisty accepted that, assuming the other conditions on which liability for the payment of duty depended were satisfied, AOL, as the "other person" referred to in DSMEG regulation 7, whose name appears in Box 10 of the relevant AADs was liable, in principle, for the payment. He also accepted that the provisions of regulation 7 were consistent with, and were the domestic implementation of, article 15.3 of the Directive. His argument was that, by prescribing the form of the guarantee which AOL had obtained from Hermes and by fixing its limit at £100,000, HMRC had limited the extent of the duty for which they could assess to that amount. He put the argument as one of estoppel: HMRC had indicated by their conduct that AOL was fully protected by the guarantee it obtained and it was not open to them to go behind that indication.

He relied on a number of authorities which I do not think it is necessary for me to explore. There is some doubt whether this tribunal can determine issues of estoppel but, even if it is open to me to do so, I am quite satisfied that the factual foundation on which Mr Chaisty's argument must be based if it is to succeed is not made out. Before coming to the facts it is necessary to say a little about the law.

Article 13 of the Directive requires a warehousekeeper to "provide a guarantee", and to do so in accordance with conditions laid down by the relevant member State. Nowhere in the Directive is there any indication that the member State may limit the warehousekeeper's liability to a particular amount: the only inference which is to be drawn from the Directive, taken as a whole, is that the entire duty is the responsibility of the warehousekeeper, until the suspension arrangement is properly discharged. It would be surprising if it were open to, say, the United Kingdom to accept a limited guarantee when (as article 15.3 indicates) the guarantee is to binding throughout the Community, and when the consequence would be that, if a duty point were to arise in France, the French authorities, without having any say in the matter, were able to recover duty only to the limit of the guarantee. What I have said about the warehousekeeper applies equally to any other person who offers a guarantee in the warehousekeeper's place. DSMEG, which simply adopts the Directive, must have the same meaning.

It is, I think, the use of the phrase "provide a guarantee" which has led to confusion. It does not appear to be a mistaken translation: the corresponding French text is "fournir une garantie", which has the same meaning. But what is intended, in my judgment, is that the warehousekeeper is expected to guarantee the duty. It may be that the draftsman had in mind that the warehousekeeper would execute some document to the effect that he assumed that obligation; what the Directive does not do, in my judgment, is allow for the warehousekeeper (or other person assuming liability) to provide a third party "guarantee", given (as in this case) by an institution such as an insurance company, to replace and, as is suggested in this case, limit his own liability. There is nothing in the Directive or in DSMEG which, in my judgment, allows a guarantor to limit his liability, or which permits the fiscal authority to accept a guarantee for anything less than the full amount of the duty.

The manner in which the requirement is set out in Public Notice 197 is at best difficult to follow and at worst misleading. It confuses the guarantee required by article 13 with what, as it seems to me, is the security for that guarantee which HMRC require as the condition of approving a warehousekeeper, or another person wishing to stand as guarantor. Use of the word "guarantee" to cover both is ill-advised, and I have some doubts whether the author of the Notice entirely understood the distinction, but careful examination of the Notice does make it clear that the guarantor (meaning the warehousekeeper or other person whose name appears in Box 10 of an AAD) remains liable for the duty regardless of the terms of the security, as I prefer to call it, he may have obtained. The Notice also makes the point, at paragraph 8.3, that "You will have to make commercial decisions about the cover you may need." That statement (which in my view clearly places the onus on the person seeking that cover to determine its amount) is consistent only with the security's amounting to protection for what may be a greater liability. I accept too Mr Mantle's point that the limit of indemnity contained in clause 3 of the document provided by Hermes is consistent only with AOL's having a potentially greater liability.

Mr Chaisty relied on the contrary view expressed by the tribunal in Garrett Trading Limited (2007, Decision E01061). At paragraph 20 it said "Both art 20 of the Directive and reg 7 of DSMEG seem to assume that the guarantee [meaning the third-party guarantee] is sufficient to cover the duty, which in this case it is not … If DSMEG intended to override the contractual limit we would have expected clearer words than 'the person liable to pay the excise duty on the occurrence of that excise duty point shall be … if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person.'" That view was expressed rather tentatively, no doubt because, as the tribunal recorded, it had heard no argument from HMRC on the point. In my view, for the reasons I have given, the contractual limit does not affect the measure of the underlying liability.

As I have recorded, Mr Finch did not read the Notice, and therefore he cannot have been misled by anything in it. For his argument to succeed Mr Chaisty must demonstrate that, by some act or omission on their part, HMRC led AOL to believe that the guarantee, or security, provided by Hermes was sufficient to satisfy any liability AOL might incur, or which gave it a legitimate expectation to the same effect. I find nothing in the correspondence between AOL and HMRC, nor anything unsaid which should have been said by HMRC in that correspondence, which might have led Mr Finch to believe that HMRC were willing to limit AOL's liability to £100,000, or indeed any sum. Nor have HMRC since conducted themselves in a manner which might have led AOL to conclude that there was any such limitation. Mr Finch's professed belief that HMRC would monitor the nature and volume of AOL's trade with a view to reviewing the limit of the guarantee should that be appropriate was, I find, an unfounded assumption on his part; there is no evidence of any kind to support it.

Moreover, had Mr Finch addressed his mind to the matter, he should have realised that the acceptance by HMRC of a limitation on AOL's liability was highly improbable. The limit on Hermes' liability was set by reference to what Mr Finch told the HMRC officers of AOL's expected trade. At the time, AOL's dealings in consignments of excise goods consisted, he told me, of approximately two consignments a week, usually of beer and wine. That, too, is what he told HMRC. The consignments with which I am concerned were transported over a period of about six weeks; there were, in that period, 48 consignments, all of spirits. AOL knew, or ought to have known, that its pattern of business had changed—indeed, it could decide in advance whether or not it should accept consignments of a kind and of a volume which led to that change. HMRC had no such advance knowledge; their monitoring, if there were any, could only be of consignments which had already arrived at their destination or, possibly, were in transit. It cannot be open to a trader who has secured approval of a guarantee on the strength of a representation about the volume of his trade to rely on that approval—and the limit on his liability which, if AOL's case is otherwise correct, came with that approval—when the representation is found to be materially wrong, whether because he has deliberately misrepresented the volume of trade (which is not this case) or because of changed circumstances.

I should, finally, deal with the use by regulation 7 of DSMEG of the words, in relation to a participant in AOL's position, "having arranged for the guarantee". At first sight that phrase also suggests a third party guarantee. But if I am right in my interpretation of the Directive, what is meant is the person who has "provided" a guarantee, by himself standing as guarantor. Box 10 of an AAD requires the insertion, if relevant, of the name of a guarantor if that is some person other than the dispatching warehousekeeper. The guarantor of all the relevant consignments is identified on the corresponding AADs as AOL, and not Hermes. Article 13 of the Directive permits the owner or transporter of goods to act as guarantor, and enables fiscal authorities to require a consignee to do so, but the class of possible guarantors is otherwise closed.

I am therefore satisfied that AOL stood as guarantor for the entirety of the duty on each of the relevant consignments.

Conclusions

In summary, my conclusions are:

(1) Each of the relevant consignments was the subject of a duty suspended movement within the meaning of DSMEG regulation 2;

(2) None of the consignments arrived at its stated destination;

(3) Duty points probably arose within the United Kingdom in accordance with DSMEG regulation 3 but, if not, they arose within regulation 4;

(4) If HMRC referred to the wrong regulation in the covering letters accompanying the assessments, the assessments are not thereby invalidated but the stated date of the excise duty point may need to determined afresh;

(5) Any defect there may be in regulation 4 can be cured and is not material to AOL's liability;

(6) The assessments were all made in time;

(7) AOL's liability is not limited by reason of the terms of its guarantee.

The appeal is, therefore, dismissed. I give HMRC permission to apply for a direction in respect of costs.

COLIN BISHOPP

CHAIRMAN
Release Date: 27 February 2008

MAN/02/8246 & MAN/05/8031

ANNEX

Guarantee obtained by AOL from Hermes

The text and punctuation of the first six clauses of the guarantee are reproduced exactly from the original

Ref. No 151630/5028974

Guarantee for intro-community movements (authorised warehouses, registered premises and UK removals for warehousing, re-warehousing, exportation or shipment as stores, without payment of duty).

BY THIS DEED OF GUARANTEE

HERMES Credit and Guarantee plc

Surety House, Lyons Crescent, Tonbridge, Kent TN9 1EN

"the Guarantor" hereby undertakes to pay, to the Fiscal Authorities of the member States listed in schedule 1 hereto^[1], during the continuance of this Guarantee and immediately on demand, the sum or sums stated by such a Fiscal Authority in such demand as being the amount or amounts, or balance thereof, for which the principal

Anglo Overseas Limited

609, London Road, Thurrock RM20 3BJ.

is or may become liable to the States listed in schedule 1 by reason of losses incurred – with the exception of those attributable to natural waste or other legitimate cause – or of infringements or irregularities committed in relation to:

(a) intro-community movements of goods chargeable with duty which has not been paid;

(b) premises occupied by the Principal and authorized or registered by the Commissioners of Customs and Excise to hold, manufacture or process goods within the meaning of the Customs and Excise Acts.

(c) the removal within the United Kingdom of Great Britain and Northern Ireland of duty suspended or duty relieved excise goods from any one place to any other place, including exportation or shipment for use as stores.

For the purposes of this Guarantee "duty" shall include any customs duty, excise duty, charge levy or other sum to which the goods are or may become liable (with the exception of monetary penalties).

Save the total liability of the Guarantor in respect of demand made under this Guarantee shall not exceed the sum of One hundred thousand pounds sterling (£100,000), there is no restriction either on the number of demands that may be made by the Fiscal Authority hereunder or on the amount or amounts that may be claimed in each such demand

The Guarantor undertakes to pay upon the first application in writing by the Fiscal Authority of any State referred to in Schedule 1 hereto, and without being able to defer payment beyond a period of 30 days from the date of application for payment, the sums requested up to the limit established to the satisfaction of the Fiscal Authority that the transaction or operation was conducted without any infringement or irregularity within the meaning of paragraph 1.

The Fiscal Authority may, upon request of the Guarantor and for any reasons recognised to be valid, defer the period within which the Guarantor is obliged to pay the requested sums beyond a period of 30 days from the date of application for payment. The expenses incurred from granting this additional period and in particular any interest must be calculated in such a way that the amount is equivalent to that which would be charged to that end on the money market or financial market in the state concerned. This amount may not be reduced by the sums already paid in pursuance of this Guarantee unless recourse is had to the Guarantor in respect of any transaction or operation which began before the receipt of the earlier application for payment or during the 30 days following that receipt.

This Guarantee shall be valid from the date of its acceptance by the Commissioners of Customs and Excise. This Guarantee may be cancelled at any time by the Guarantor or by the Commissioners and this cancellation shall take effect 30 days after notification thereof to the other party. The Guarantor shall remain responsible for payment of the sums which become payable in respect of any transaction or operation covered by this Guarantee which began before the date on which this cancellation took effect, even if the demand for payment is made after that date.

Note 1 The schedule is not reproduced. Oddly, it includes several countries which were not (and, in some cases, are not) member States of the European Union. The list does however include the UK, Spain, Portugal, Italy and Belgium. [Back]