United Kingdom VAT & Duties Tribunals (Excise) Decisions

 


E01112

EXCISE DUTY – Whether diversion of alcohol lorry load despatched under duty suspension status to France – whether goods diverted – duty point –whether irregularity the responsibility of the Appellant – yes – Assessment for duty under DSMEG Regs 2001 (SI 2001/3022) regs 3, 4 and 7 and Assessment to VAT under VATA 1994 s73(7B) – Appeals dismissed.

LONDON TRIBUNAL CENTRE

JIGSAW WHOLESALE LIMITED	Appellant
and
THE COMMISSIONERS OF HER MAJESTY'S REVENUE AND CUSTOMS	Respondents

Tribunal: RODNEY P HUGGINS FCIArb (Chairman) ALEX McLOUGHLIN BA TD

Sitting in public in London on 17 and 18 March 2008

Mr David Southern, Counsel, instructed by Hepburns, Solicitors, for the Appellant company.

Kenneth Barnes, Counsel, instructed by HM Revenue and Customs Solicitor's Office for the Respondents.

© CROWN COPYRIGHT 2008 DECISION

The appeal and the issue

1. Jigsaw Wholesale Limited (the Appellant – Jigsaw) appeals against a review decision of the Commissioners contained in a letter from Miss Frances Manley (Miss Manley) a Review Officer of H M Revenue and Customs (Customs) dated 28 September 2006. She confirmed two assessments both dated 17 July 2006 as follows :

(1) An assessment of duty in the sum of £12,899 resulting from the movement of 2080 cases of Fosters Lager payable pursuant to the provisions of the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 (SI 2001/3022) (DSMEG ) ; and

(2) An assessment of VAT in the sum of £2,257 under section 73/7B of the Value Added Tax Act 1994 (the VAT Act 1994).

2. In outline, this appeal concerns the disputed liability of the appellant to excise duty and VAT arising out of a consignment of 2080 cases of Fosters Lager owned at the time by the appellant which was dispatched from an authorised bonded warehouse under duty supervision for transportation to France on 2 September 2005. The consignment or a very similar load reached Coquelles in Northern France on or about 5 September 2005 but the French customs authority rejected the consignment, On 8 September 2005 the same lorry, with the same trailer driven by the same person returned to the same bonded warehouse in Heath Park Industrial Estate, Dagenham, Essex.
3. The Appellant maintained that the goods which left the warehouse and were returned three days later were the same and therefore the facts did not give rise to a duty point in the United Kingdom.
4. The Commissioners contended that the returned goods were not the same goods as those which originally left the warehouse and therefore the appropriate statutory procedures had not been complied with. Therefore duty and VAT became payable.
5. Mr Munawar Khan (Mr Khan) gave evidence on behalf of his Appellant company and he was represented by Dr David Southern (Dr Southern) of counsel.
6. On behalf of the Commissioners, Mr Keith Barnes (Mr Barnes) of counsel called three witnesses, namely : Customs officer Roderick Clive Lissaman (Officer Lissaman), Officer Miss Manley and the manager of the bonded warehouse in Dagenham, Mr Kevin Arthur White (Mr White).
7. A bundle of agreed documents amounting to 129 pages was produced by the parties.

The facts

8. From the evidence before us we find the following facts.
9. Jigsaw was incorporated in the United Kingdom in 2002 and was in business as a wholesaler of wines, beers and spirits operating out of an office in Slough, Berkshire. The sole shareholder and director was Mr Khan. The company was registered for VAT from 18 April 2003. There are no employees.
10. The Appellant was in 2005 a revenue trader registered under section 100G of the Customs and Excise Management Act 1979 (CEMA) and Regulation 5 of the Warehousekeepers and Owners of Warehoused Goods Regulations 1999. (SI 1999/1278) (WOWGR).
11. The Appellant carried on its business as a broker in duty suspended goods such as wine, beers and spirits within the United Kingdom (UK) and also the European Union limited mainly to France.
12. When acting as a broker, Jigsaw sourced duty suspended goods to meet the orders by its customers. A typical transaction would entail the Appellant being contacted by a customer who would request a quantity of wine, spirits or beer. The company would then contact a bonded wholesale to ascertain if that wholesaler could fulfil the customer's request. If that was the case then the Appellant and the wholesaler would arrange for the goods held by the wholesaler in duty suspension at an authorised warehouse to be transferred out of the wholesaler's duty suspended account into the broker's duty suspended account. The broker could then arrange for the goods to be transported to the customer's duty suspended account at a similarly authorised warehouse elsewhere.
13. An authorised bonded warehouse is one which is authorised by the relevant customs authority to hold duty suspended goods. In order for an authorised warehouse to store goods in duty suspension the owner of the goods must have a duty suspended account with the authorised warehouse and be authorised by the relevant customs authority to deal in duty suspended goods in the UK. The authority to deal in duty suspended goods is provided by Customs granting a WOWGR Certificate. The Appellant possessed a WOWGR Certificate until September 2007 when it was revoked. This is being challenged by the Appellant.
14. One of the requirements to hold a WOWGR Certificate is that a financial guarantee must be held for a sum that is set by Customs. This guarantee is based upon an estimate of the work carried out by the relevant company. The Appellant held a financial guarantee in the sum of £30,000 which was backed up by a deposit of monies in a specified bank. The authorised warehouse is similarly required to have a guarantee. The reason the guarantees are required is to safeguard against the goods being removed from duty suspended arrangements without the relevant authority receiving payment of duty.
15. In addition to the requirements to hold a relevant authorisation and a financial guarantee WOWGR deal with the procedures to be followed when goods are moved from one authorised warehouse to another. These regulations provide that an Accompanying Administrative Document (AAD) must accompany duty suspended goods in transit at all times. An AAD is prepared in quadruplicate namely: one copy to be retained by the consigner, one for the consignee, one for the tax authority in the destination country and one to be returned to the consignee on receipt of the goods.
16. Bearing in mind the above rules, in order for goods to be transported from one authorised warehouse to another it is necessary for the dispatching warehouse to be informed in advance of the goods that are to be released to a specific carrier together with the trailer and cab details, and also with details of the financial guarantee that the goods are to be moved under so that the warehouse keeper can complete the AAD and ensure the goods are released to the correct transporter. No part of the AAD is ever in the possession of the broker.
17. Therefore, in a typical commercial transaction involving duty suspended goods a broker such as Jigsaw does not physically deal with the goods. The broker's sole involvement with the goods is purely on a nominal basis as the owner of the goods during the transit and also as the provider of the financial guarantee for the goods aside from providing the authorised warehouse keeper with notifications of release and details of the transporter. The haulier and the authorised warehouse keepers are responsible for all other areas of moving duty suspended goods.
18. We now set out the chronology and documentation for the consignment of the load ofFosters Lager involved in this appeal.
19. On 1 September 2005 Mr Khan received a fax from a French company called Detroit Distribution Sarl (Detroit) of 120 Rue Mouron, Calais for the supply of 2,080 cases of 4% Fosters Lager (a case consists of 24 cans). The order was to be delivered to a French bonded warehouse run by a company known as MT Manutention at Parc D'Enterprises, Courtimmo ZA, Courtimmo 62231, Coquelles, near Calais where Detroit had a duty suspended account.
20. Mr Khan had had previous dealings with Detroit since May 2005.
21. The Appellant through Mr Khan then immediately ordered the 2,080 cases (the load/goods) from Ellbrook Cash and Carry Ltd (Ellbrook) of Mitcham, Surrey at a cost of £15,184. Ellbrook had a duty suspended account at a bonded authorised warehouse belonging to Seabrook Warehousing Limited (Seabrook) at Dagenham, Essex and it was agreed the 2,080 cases would be transferred to Jigsaw's account. Mr Khan then asked Seabrooks as the warehouse keeper to arrange for the dispatch of the Fosters Lager under a duty suspension movement from their warehouse to Detroit's account at the French warehouse of MT Manutention at Coquelles in northern France.
22. On the same day, Mr Khan contacted an Irish transport company known as Capital Carriers to move the goods from Dagenham to the warehouse of MT Manutention. He had used this company previously to transport goods in similar circumstances. Capital Carriers sent a fax to Mr Khan confirming the contract and provided him with the registration number of the cab and trailer number of the vehicle which would collect the load. These details were passed on to Seabrook.
23. Seabrook operates a stock computer system and 24 pallets of Fosters Lager constituting 2,080 cases were prepared for transportation in accordance with the order. This entailed the computer system producing unique pallet labels numbered in rotation which were affixed firmly to each pallet. The computer system showed that the sell-by date on all the cans in the load was 31 May 2006. The cases containing the Fosters Lager were shrink-wrapped in polythene by a machine creating sealed units. The cases were then loaded into the trailer which had canvas sides. A rope was passed through the eyelets at the edges of the canvas sides and the rope ends sealed.
24. Seabrook prepared an AAD numbered 11070 with the usual copies in respect of the transaction and the Appellant through Mr Khan provided a movement guarantee. Jigsaw was the owner of the goods throughout the process. In addition to the AAD Seabrook prepared the usual International Consignment Note (a CMR) which accompanied the AAD in transit.
25. On Friday, 2 September 2005 a driver known as Mr Giles Burgess who worked for a transporter company known as Keown Transport instructed by Capital Carriers collected the goods from the Seabrook Warehouse and drove the cab and trailer as ordered by his employer to the Truckstop at Luton. He left them with the goods at Luton. Mr Burgess then went overnight to Sheffield by car and returned to collect the same cab and trailer to travel through the Channel Tunnel by train on Sunday, 4 September. When Mr Burgess arrived at Transmarche at the French end of the tunnel, Mr Burgess, as was customary, handed over the trailer to a 'shunterman' to take the trailer with its load onto the nearby warehouse of MT Mantention.
26. Later on 5 September 2005, Seabrook received a fax confirmation from MT Manutenion that the goods and the third page of the AAD had been received.
27. After carrying out several transport movements with his cab involving other trailers, a couple of days later Mr Burgess received instructions to travel back to Transmarche to pick up the load he had taken there the previous Sunday as he was told there had been a problem with the AAD as far as the French Customs were concerned and the load had to be returned to Seabrook.
28. On Thursday, 8 September 2005 Mr Burgess did as he had been instructed and went to Transmarche and picked up the same trailer he had taken over on 4 September.
29. At about 12.10 p.m. on 8 September Seabrook was advised by telephone from Capital Carriers that the load on AAD 11070 had been refused by French Customs and would be returned to their warehouse. Some ten minutes later a load arrived on a trailer drawn by cab registration number GNZ 8670 at Seabrook's, Dagenham warehouse purporting to be the load that had been expected. The cab and trailer were the same as had taken the load to France on 4 September.
30. Mr Burgess was the driver and he had a photocopy of page 3 of the AAD 11070, copy of the CMR together with a slip of paper numbered 087497 showing a French Customs stamp dated 6 September 2005. The copy of page 3 of the AAD had not been stamped by the French Customs Authority and was not an original part of the AAD.
31. Mr White who was the manager of Seabrook's warehouse and had been employed by them for twenty years (ten as manager) then had a conversation with Mr Burgess. He repeated what he had been told when he collected the trailer from Transmarche that the load had been refused by French Customs. Mr White then asked for the rear of the trailer to be opened in order that the load could be inspected. He discovered that the pallets were not the same as those supplied by Seabrooks; there were no Seabrook computer produced labels on them; the shrink-wrap was not the same as used when the load went out of Seabrook's Warehouse on 2 September – it was clear, not machined, only wrapped by hand; the lager cans were not in a good condition, they were rusty and some were leaking – because of this there was an infestation of beer flies in the wraps; there was no seal at the end of the ropes tying down the sides of the trailer.
32. The bad condition of the load and absence of the labels, different pallets and no shrink-wrapping led him to believe that it was a different load to the one which had gone out only six days earlier. Furthermore, he did not recollect any other occasions during his time with Seabrook when a situation such as this had arisen.
33. Seabrook then contacted MT Manutention asking for confirmation of the receipt of the load which had been indicated in their fax of 5 September. Another fax was received from MT Manutention stating that they had made a mistake and they had not received the load on 5 September.
34. Because of what had occurred, contact was then made the same day with Customs Officer Mr Lissaman at his office and he was asked to get to Seabrook's warehouse immediately. He arrived with another Officer at 14.00. Officer Lissaman interviewed Mr Burgess and inspected the trailer and its load. Mr Burgess told him that he had worked for a Mr Brian Keown and had been instructed by him to collect the load that morning from a Gulf Garage at Transmarche, Calais.
35. Based on this knowledge, Officer Lissaman decided to detain the load of goods from the trailer. They were unloaded into the warehouse in duty suspension.
36. On 9 September at about 11.45 Officer Lissaman received a telephone call from Brian Keown of Keown Transport, owner of the cab and trailer, who said he had taken the job from another source and he confirmed the same version of events as Mr Burgess had given the previous day. He said he would make further enquiries. He telephoned back again at 12.15 on the same day and said that Seabrook must have made an error and not marked the pallets and it was the same load insisting there would be no advantage in changing the goods unless they were out of date.
37. At 14.55 on 9 September, Officer Lissaman telephoned Mr Khan at Jigsaw's office. He confirmed the load had been sent out from Seabrook's warehouse on 2 September. Mr Lissaman informed him what Seabrook had stated. He asked what had happened to the original AAD page 3 and was told it was missing. He said he would try to find out what had happened.
38. Hearing nothing further from Mr Khan on 3 November 2005 Officer Lissaman wrote to Mr Khan as follows :

"Following our detention of these goods at Seabrook Warehousing Limited and their subsequent removal to the Queens Warehouse our enquiries have now concluded and the load has been seized. The reason for this as there was no accompanying documents, ie AAD or CMR and as a consequence they are seized under the Excise Goods (Accompanying Documents) Regulations 2002 Part 1V Regulation 12.

I am writing to you as you claim to be the owner of the goods. However, as I previously informed you the warehouse manager at Seabrook has confirmed to us that the consignment returned to the warehouse is not the same consignment that left from your account under duty suspension.

Therefore we will not be issuing you with a Notice of Seizure as you are not the owner of the goods. In addition, you will be issued for an assessment for the consignment that did not reach its destination."

39. Mr Lissaman then issued to the Appellant an assessment of Excise Duty and VAT totalling £15,156.71 on 12 January 2006. Officer Miss Manley notified the Appellant on 3 July 2006 that she had completed her review of the assessment and it had been withdrawn. The reason given was that she was not satisfied the assessment had been correctly issued and said, "so it cannot be maintained". She added that the decision to withdraw the assessment was made without prejudice to any further action Customs might wish to take.
40. On 17 July 2006 Customs Officer Christopher Ansah issued to Jigsaw two separate assessments for excise duty in the sum of £12,899 and VAT for £2,257. He supplied a separate calculation of how the duty was arrived at which has not been challenged by the Appellant.
41. Messrs Hepburns, the Appellant's Solicitors, by a letter dated 9 July 2006 but received by Customs on 10 August 2006 requested a Departmental Review of the two assessments. This was carried out by Officer Miss Manley. In her review letter dated 22 September 2006 she set out the background extensively and also the law. She concluded that after examination of all the information presented to her, the returned load was not the load which left the warehouse, and therefore as the Appellant had arranged the movement guarantee it was liable to pay the duty and VAT as a duty point occurred. Her review decision was to uphold the assessments.
42. The Appellant appealed against the review decision relating to the two assessments on 20 October 2006.

The legislation

43. UK excise duties on alcoholic beverages are imposed by the Alcoholic Liquor Duties Act 1979. Under section 36, Excise Duty is chargeable on (a) importation and (b) the manufacture of beer. However, duty only becomes payable when an "excise duty point" occurs. By virtue of section 41A payment of duty is suspended so long as the relevant goods are stored in excise approved warehouses.
44. The European Single Market came into operation on 1 January 1993. Fiscal frontiers and frontier checks for duty purposes were abolished. Transfers of goods between Member States including France and the United Kingdom ceased to be 'imports' and became 'intra-community acquisitions'. (Section 14 of the Finance Act 1992).

1. The Framework Directive

45. The Council Directive 92/12/EEC on the general arrangements for products subject to excise duty deals with the holding, moving and monitoring of excise products with the Single Market. It is commonly called the Framework Directive.
46. Article 6(1) of the Framework Directive provides that excise duty "shall become chargeable at the time of release for consumption" and is defined by sub-paragraph (d) as "any departure, including irregular departure from a suspension arrangement."
47. Article 6(2) continues :

"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 … Excise duty shall be levied and collected according to the procedure laid down by each Member State …"

48. Article 20 determines the Member State in which duty becomes chargeable, and also contains some provisions about the identity of the person liable to pay the duty. So far as material, it reads:

"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 the payment of the excise duties in accordance with Article 15(3), without prejudice to the bringing of criminal proceedings.

Where the excise duty is collected in a Member State other than that of departure, the Member State collecting the duty shall inform the competent authorities of the country of departure.

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 of 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."

49. In the United Kingdom, the provisions implementing Article 20 are set out in DSMEG. Regulations 3 and 4 are relevant here; they read :

"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; or

(ii) imported into the United Kingdom during a duty suspended movement; 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."

50. Article 20(1) provides that the guarantor shall be liable for payment of the duty. In the UK, the relevant corresponding provisions are to be found at regulation 7 of DSMEG:

"(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 administration 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."

The AAD procedure

51. Under the Excise Goods (Accompanying Documents) regulations SI 2002/501

(i) under Regulation 5 the AAD must be prepared by the authorised warehousekeeper (in this case Seabrook)

(ii) Regulation 6 provides :

(i) … an AAD

"(a) must not be amended, and

(b) must accompany the excise goods to which it relates at all times until those goods arrive at their ultimate destination."

The VAT assessment

52. The liability for VAT is imposed by section 73(7B) of the 1994 Act which reads :

"Where it appears to the Commissioners that goods have been removed from a warehouse or fiscal warehouse without payment of the VAT payable under section 18(4) or section 18D on that removal, they may assess to the best of their judgment the amount of VAT due from the person liable and notify it to him."

Arguments of the Appellant

53. Mr Southern submitted on behalf of the Appellant that there was no evidence to contradict the fact that this was a real commercial order for a real and identified customer (Detroit). It had not been suggested by the Respondents that there was anything colourable about the transaction. Nor was there any evidence to suggest that a diversion of the goods had taken place in the United Kingdom, if at all. The French Customs had turned back the goods when they reached France. The exact reason was not known but it was inferred there was a problem with the AAD. The Commissioners had not investigated what happened in France when the goods reached the bonded warehouse of MT Manutention or the French Customs. It was mere conjecture.
54. He said that the only support for the Commissioners' contention that the returned goods were not the same as the consignment which left the warehouse of Seabrook was the evidence of Mr White. Mr Southern pointed out that he may have been mistaken about how the goods had been packed originally. It could be that the goods may have been repacked when the load was inspected by French Customs. No motive had been suggested for the substituting 2,080 identical cases of Foster's lager.
55. The most probably conclusion from the facts was that the goods which were returned to the warehouse were the same as the goods which left (same number of cases, same lorry, same trailer, same driver, same AAD).
56. Mr Southern maintained that it did not follow from Article 19(2) of the Framework Directive that it is the arrival of the goods as opposed to the return of the AAD to the consignor which constituted the discharge. The mere fact of non-arrival at the warehouse of destination did not, in his opinion, constitute an irregularity. He quoted from the judgment of Mr Justice Lewison in the case of Commissioners of Customs & Excise v Anglo Overseas Limited [2004] EWHC 2/98 at paragraph 55 when he said :

" …Ms Stubbs disclaimed my 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 be 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 …"

57. Mr Southern argued that in order to uphold their assessments the Commissioners needed to establish the nature of the irregularity, the loss of duty incurred, where the irregularity occurred. He also pointed out that the Commissioners had not pleaded that DSMEG regulation 4 applied either in their Statement of Case or Mr Barnes' skeleton argument.
58. He also mentioned that Miss Marley had merely rubber-stamped her review decision. She had accepted all the statements put before her without carrying out any further investigations, For instance, there had been produced by the cab driver, Mr Burgess, a slip of paper showing a French Customs stamp dated 6 September 2005 and Customs had not looked into this at all. Mr Southern referred the tribunal to the judgment of Mr Justice Stephen Brown in R v Inland Revenue Commissioners, ex parte Harrow London Borough Council [1983] STC at pages 254 and 255. The Judge had concluded that where an officer was carrying out a review, therer must be an "effective and realistic approach to the relevant facts" and the officer should perform his duties reasonably. That, in his view, had not occurred in Miss Marley's review.
59. Mr Southern concluded saying that the inference was that the same load went out and the same load came back – no irregularity had occurred.

Arguments of the Respondents

60. For the Respondents, Mr Barnes based his case upon the evidence which pointed to three conclusions:

(a) The goods that were dispatched from Seabrook appeared to have been turned back from the French border by the French Customs, and subsequently went missing, if they had not already gone missing by the time that the AAD was presented to the French Customs.

(b) The purpose of the guaranteed movement scheme is that excise goods are moved under guarantee between bonded warehouses without payment of duty at a point of duty that would otherwise occur on movement between two EU countries, until the goods are released for consumption.

(c) In the circumstances, it was plain that : (i) an irregularity occurred in this case, in that goods went missing, and did not reach the bonded warehouse that was their destination: and, (ii) that this irregularity occurred in the UK, or alternatively, this irregularity was discovered in the UK.

61. He therefore submitted that the assessment of duty was properly raised under regulation 3 DSMEG and was properly raised in respect of the Appellant pursuant to regulation 7 of DSMEG. It was not disputed Mr Khan had provided the guarantee.

Reasons for decision

62. First, it is necessary to consider the jurisdiction of the tribunal. We were referred by Mr Barnes to the tribunal decision in Cleanaco Ltd v The Commissioners for Her Majesty's Revenue and Customs [2007] V &DR 21-43 (Cleanaco). As in this case, both counsel agreed that the duty appeal concerned a decision on review against a decision falling under section 14(1)(b) of the Finance Act 1994 which states under the heading "Requirement for review of a decision" …

"so much of any decision by the Commissioners that a person is liable to any duty of excise, or as to the amount of his liability as is contained in any assessment under section 12 above."

63. The duty assessment was raised under section 12 of the Finance Act 1994. Section 12 (1) states as follows :

" … 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 there had been a default falling within subsection (2) below.

64. Subsection (2) of section 12 includes

" (a) any failure by any person to make, keep, preserve or produce as required or directed by or under any enactment any returns, accounts, books, records or other documents.

(b) any omission from or inaccuracy in any returns, accounts books, records or other documents which any person is required or directed by or under any enactment to make, keep, preserve or produce …"

65. The assessment was issued on 17 July 2006 by Customs officer Mr Ansah. The review was carried out by Miss Marley and her decision is contained in her letter to the Appellant on 22 September 3006. The appeal relates to that review letter.
66. We consider that the correct statutory provisions have been complied with by the Commissioners for reasons which follow. We adopt the reasoning as set out in the Cleanaco decision in paragraphs 11 to 17 inclusive in this respect.
67. Both counsel also agreed that the tribunal's powers were contained in Section 16(5) of the Finance Act 1994 namely "the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal." The tribunal agrees with counsel.
68. Let us make it quite clear there is no evidence whatsoever that Mr Khan and his company were involved in anything other than what to them appeared a straightforward commercial transaction until after 2 September 2005. Up until Mr Burgess left his cab and trailer at the Truckstop at Luton all steps in the transaction had taken place in accordance with the rules and regulations. We accept the evidence of Mr White entirely, He was a credible witness. His warehouse staff had used the computer system at Seabrook to create labels in rotation which were affixed to their 24 pallets containing the Foster's lager. The cases were shrink-wrapped by machine in polythene creating sealed units. There is no evidence whatsoever that the tins of lager were anything but in good condition with a sale-by date of 31 May 2006 which was some eight months later.
69. The AAD was completed in quadruplicate and also the usual International Consignment Note. Mr Burgess was given these documents at the warehouse. He left the cab and trailer at Luton. No evidence was given as to the security of the Truckstop and we assume the vehicle and load could have been unattended. This could have given an opportunity for a diversion to take place although there is no evidence to sustain that suggestion. Also, no evidence was produced to the tribunal as to whether the original load actually travelled by train through the Channel Tunnel to Coquelles. What we have learnt through Mr White is that he was told by the driver, Mr Burgess, when he returned the goods on 8 September that there had been a problem with the AAD at French Customs and the load had to be returned to Seabrook. We therefore do not know if the original load reached France or the French Customs. Also, there is doubt whether the load ever reached the warehouse of MT Manutention. That warehousekeeer first said a load had arrived and then retracted this when asked again by Seabrook on 8 September.
70. When Mr Burgess delivered goods back to Seabrook's warehouse on 8 September, a telephone call purporting to come from Capital Carriers told Seabrook only ten minutes beforehand what was going to happen. No explanation was given to the tribunal as to why a longer period of warning was not given.
71. We have found as a fact on the balance of probabilities the goods delivered back by Mr Burgess on 8 September 2005 were not the same as went out from Seabrook's warehouse on 2 September. This is based on the evidence of Mr White supported by Officer Lissaman who also saw the condition of the load only some two hours after Mr Burgess had delivered it.
72. After only 4 days absence, the identity of the load and goods had completely changed. The pallets were different to those supplied by Seabrook; there were no Seabrook labels; the cases had been covered in different clear wraps by hand; the actual cans of Foster's lager were in a much worse condition than those which were originally taken out of the warehouse; there was an infestation of beer flies which, in or view, could not have been introduced within four days.
73. In addition, the original CMR and relevant part or parts of the AAD were missing. Mr Burgess only handed over photocopies. He also produced a slip of paper numbered 087497 showing a French Customs stamp dated 6/9/05 which appeared to be a receipt for French duty payment paid by "M Large, Anne-Marie" in the sum of "2800" (presumably euros). No further details of what this payment was for were provided to the tribunal.
74. As we have said, we are satisfied that the goods did not arrive at their intended destination, but we cannot say where they were diverted. Article 6(1) of the Framework Directive provides that excise duty "shall become chargeable at the time of release for consumption". This is defined by sub-paragraph (a) as "any departure, including irregular departure, from a suspension arrangement."
75. If goods are sent from one authorised warehouse to another, under a movement suspension arrangement, but fail to arrive, there is an irregular departure from the suspension arrangement. This proposition was accepted by the House of Lords in Greenalls Management Limited v Customs and Excise Commissioners [2005] 1 WLR 1757.
76. Therefore, we conclude that this case probably comes under article 20(2) of the Framework Directive and regulation 3(3) of DSMEG. If, however, regulation 3 does not apply then Article 20(3) and regulation 4(2) provide for an alternative duty point whichever of the two possibilities is appropriate, duty is due in the UK.
77. Article 20(1) provides that the guarantor shall be liable for payment of the duty. In the UK, the relevant corresponding provision is to be found in regulation 7 of DSMEG. The Appellant was the guarantor and is therefore liable for the duty.
78. It follows that the Appellant is liable in accordance with ordinary principles to account for the VAT. No independent evidence or submissions were advanced in respect of the VAT appeal. There was likewise no dispute about the amount of the assessment which also applied to the duty assessment.
79. The appeals against the duty and VAT assessments are therefore both dismissed. There is no order as to costs.
RODNEY P HUGGINS Chairman Release date : 15 May 2008

LON/2006/8088