[2010] UKFTT 156 (TC)

TC00461

Appeal numbers: LON/08/8010
								  LON/08/8082

Excise Duty – whether duty chargeable - whether excise duty point established within UK - whether liability under guarantee established – whether amount of liability limited by the amount of the guarantee – whether the revocation of the Appellants WOWGR licence was reasonable or should be reconsidered

FIRST-TIER TRIBUNAL

TAX 

	JIGSAW WHOLESALE LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Excise Duty)	Respondents

				TRIBUNAL: 	JUDGE MRS.S.M.G.RADFORD
						MS. S.O’NEILL (MEMBER)

Sitting in public in London on 20 and 21 January 2010

Mr David Southern for the Appellant

Mr Richard Smith instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

The Appeals
1. There are two appeals: 
(a)  LON/08/8082 which is an appeal against an assessment to excise duty (‘the assessment appeal”); and 

(b) LON/08/0810 which is an appeal against the cancellation of the Appellant’s registration as a revenue trader under the Warehousekeepers and Owners of Warehoused Goods Regulations SI 1999/1278 (‘the WOWGR appeal”). 

2. In the assessment  appeal the Appellant appealed against a review decision dated 8 August 2008 given under Section15 FA 1994 upholding an assessment to excise duty dated 11 March 2008 in the amount of £75,531.07 (‘the Assessment’) made on the Appellants under Section 12(1A) FA 1994. 

3. The Appellant was assessed as liable to excise duty on the basis that the Accompanying Administrative Documents (“AADs”) for three loads of excise goods, the movement of which had been guaranteed by the Appellant, did not travel with those goods at all times prior to arrival at their ultimate destination contrary to regulation 6(1) of the Excise Goods (Accompanying Documents) Regulations 2002 (“EGAD”). This breach created an excise duty point pursuant to regulation 21(2)(b)(i) of EGAD.

 4. In the WOWGR appeal the Appellant appealed against a review decision dated 20 May 2008 given under Section 15 FA 1994 upholding the Revenue decision of 11 September 2007 to revoke the Appellant’s WOWGR certificate.  The notice of appeal is dated 23 January 2008.
5. The Tribunal’s jurisdiction in relation to the two matters is different:
(a) The Assessment is a decision covered by Section 14(1)(b) FA 1994 which has been upheld on review. It can be appealed under Section 16(1)(a) FA 1994 and is not an ancillary matter so the Tribunal’s jurisdiction is as set out in Section16(5) FA1994 i.e. a full appellate jurisdiction;

(b) The decision to revoke the Appellant’s WOWGR registration pursuant to Section 100G (5) Customs and Excise Management Act 1979 (“CEMA”) is an ancillary matter (FA1994 Schedule 5, paragraph 2(p)) and the Tribunal’s jurisdiction is as set out in Section 16(4) FA1994. It is a supervisory jurisdiction to allow the appeal only if it is satisfied that the Respondents could not reasonably have arrived at their decision. The directions that the Tribunal may make consequent on allowing such an appeal are also limited by Section 16(4) FA1994.

6. The amount of the Appellant’s movement guarantee was limited to £30,000. If the Appellant is liable for excise duty then the Tribunal has to decide whether the Assessment should be limited to the amount of the guarantee.

THE ASSESSMENT

Background
7. Prior to 11 September 2007 the Appellant was registered as a Registered Owner of duty suspended goods under 	Section 100G of CEMA and Regulation 5 of WOWGR. In all the transactions under consideration the goods in question were either owned by the Appellant and kept under bond at Rangefield Import Export Limited (“Rangefield”) or obtained by the Appellant for the purpose of these transactions.

      8. On 9 March 2007 S.C.S. Trading Ltd (“SCS”) ordered a consignment of beers from the Appellant for delivery to the account of Globimex Eurl at M.T. Manutention, a customs warehouse in France.  The Appellant acquired the goods from Elbrook Cash and Carry on 9 March 2009 for £18,373.   The Appellant issued a release note S1137 to the warehouse on 9 March 2007. This was documented on AAD/03/0037. The Appellant instructed Glencar Distribution (“Glencar”) to provide the transport.   The goods were collected on 12 March 2007.  The Appellant invoiced SCS for the goods in the amount of £18,826 on 14 March 2007.  

      9. On 9 March 2007 SCS ordered a consignment of beers from the Appellant for delivery to the account of Globimex Eurl at M.T. Manutention, a customs warehouse in France. The Appellant acquired the goods from Elbrook Cash and Carry. The Appellant issued a release note S1136 to the warehouse on 9 March 2007. This was documented on AAD/03/0040. The Appellant instructed Glencar to provide the transport.   The goods were collected on 12 March 2007.  The Appellant invoiced SCS for the goods in the amount of £17,966.60 on 14 March 2007.  

      10. On 9 March 2007 SCS ordered a consignment of beers from the Appellant for delivery to the account of Globimex Eurl at M.T. Manutention, a customs warehouse in France.  The Appellant acquired the goods from Elbrook Cash and Carry.    The Appellant issued a release note S1138 to the warehouse on 9 March 2007. This was documented on AAD/03/0041. The Appellant instructed Glencar to provide the transport.  The goods were collected on 12 March 2007.  The Appellant invoiced SCS for the goods in the amount of £18,826.60 on 14 March 2007. 

       11. Three AADs numbered 03/0040, 03/0037, and 03/0041 dated 12 March 2007 were prepared by Rangefield in relation to the supply of goods to SCS which were to be transported on different vehicles by Glencar to M.T. Manutention at their premises in Coquelles, France. 

12. On 13 March 2007 at approximately 00.05 at the Outward Bound Freight Examination Area of the Channel Tunnel, Cheriton, Kent, officers of HMRC stopped a Scania lorry, registration R414 OEF. The driver of the vehicle identified himself as Giles Burgess, produced a passport to confirm that fact and also confirmed that his trailer was empty. This was found to be correct when the officers conducted a search. However four AADs and three unused corresponding seals were found in the cab of the vehicle. The four AADs were numbered 03/0037, 03/0039, 03/0040 and 03/0041. 03/0039 related to a different account to that of the Appellant. It related to the HFDS account which was to be transported to M.T. Manutention by Thomas Markham.

13. Mr. Burgess was interviewed by an officer of HMRC at approximately 00.31 on 13 March 2007. Mr. Burgess stated that he was employed by Mr. Brian Keown. Mr. Burgess said that he had picked up a load of beer from Rangefield, a bonded warehouse in Purfleet Essex, at 09.30 on 12 March 2007. On the instructions of Mr. Brian Keown he then dropped the trailer containing those goods at Ashford truck stop, picked up an empty trailer and continued on to the Channel Tunnel. He kept the paperwork for the load of beer he had picked up in the cab (the paperwork found in the cab of the vehicle included an AAD for the goods he had picked up). While he was at Ashford truck stop he was given other paperwork by another driver whom he claimed never to have met before. His instructions were to drop all the paperwork off “on a beach” in Calais, although he had no idea where this would happen or to whom he had to give them.
	
14. At the end of the interview HMRC asked Mr. Burgess to contact Mr. Keown and ask that the goods he had picked up from Rangefield be returned there. He did this. However, the goods were not returned. 

 15. Three of the four AADs found in the cab of the vehicle registration R414 OEF included a movement guarantee number 977M. This was a guarantee which the Appellant had the benefit of using (the principal to the guarantee was HSM Technologies, an associated company). These three AADs 03/0037, 03/0040 and 03/0041 were dated 12 March 2007 and were completed in response to release notes issued by the Appellant, signed by Mr Munawar Khan, quoting movement guarantee number 977M. Each had Rangefield as the place of dispatch and M.T. Manutention, Coquelles, France as the place of destination; both of these are bonded warehouses. The transporter on each AAD was “Jigsaw/Glencar Distribution” however HMRC was subsequently unable to trace Glencar and the vehicle R414 OEF was owned by Mr. Brian Keown, the employer of Mr. Burgess.

16. Each of the AADs showed that the goods in question were to be transported by different vehicles, one of which was R414 OEF. One other was also registered to Mr. Brian Keown, although said to be owned by someone else who had been refused an operator’s licence.

17. A representative of Rangefield confirmed that no duplicate AADs had been requested or produced. The AADs in the cab of vehicle R414 OEF were therefore the only AADs produced by Rangefield for those goods when they were dispatched from Rangefield’s bond warehouse. When found they were not travelling with their corresponding goods.

18. In addition to the AADs, a further document was found within the cab of vehicle R414 OEF which was a delivery instructions note for goods, identical to the goods the vehicle was meant to be carrying, on SCS’s headed paper with a delivery address of Unit B2, Millbrook Close, Chandlers Ford Industrial Estate, East Leigh, Southampton. This was not a bonded warehouse.

19. According to the documents the missing goods were owned by the Appellant and were supposed to be in transit under a movement guarantee in which the Appellant was the named party.

20. On 11 March 2008 HMRC raised the Assessment on the basis that a contravention had been detected in the United Kingdom and that a duty point had thereby been created under regulation 21(2)(b)(i) of  EGAD.

The Law
21. Excise duty is chargeable on beer when it is imported into or made in the UK (Section 36(1) of Alcoholic Liquor Duties Act 1979). However, EU law (under Council Directive 92/12/EEC) permits suspension of the liability to pay excise duty when the beer is held in a suspension arrangement, which includes being held in a bonded excise warehouse or being moved between two such warehouses. The domestic law on suspension arrangements is contained in the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992.

22. An excise duty point is created when the beer is released for consumption from such a suspension arrangement. Release for consumption from a suspension arrangement includes any departure from it, be it regular or irregular.

23. Regulation 6(1) of EGAD is contained within Part II of the Regulations and provides:

Subject to paragraphs (4) and (5) below, an accompanying administrative document
(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.
 
24. Regulation 21 of EGAD provides (so far as is relevant):
(1)	The excise duty point to goods to which these Regulations apply and in respect of which there has been a contravention described in paragraphs (2), (3) or (4) below is the time specified in paragraph (5) below.

(2)	For excise goods to which Part II above applies (exports under duty suspension arrangements) the contraventions are – 
...
(b) whilst the goods are in the United Kingdom - 
(i) contravention of or failure to comply with regulation 6(1) ...
(5) The excise duty point is – 
(a) for excise goods to which Part II above applies, the time the goods were removed from the excise warehouse;

25. Regulation 22 of EGAD provides (so far as is relevant):

(1)	Subject to paragraphs (2) to (4) below, the person liable to pay the excise duty at the excise duty point is – 

(a)	for excise goods to which Part II above applies (exports under duty suspension arrangements), the authorised warehousekeeper;
...
(2)	The authorised warehousekeeper is not the person liable to pay the excise duty in accordance with paragraph 1(a) above in any case where – 

(a)	the contravention that occasioned the excise duty point was not caused by the authorised warehousekeeper and occurred after the goods had been removed from the excise warehouse, and
(b)	the authorised warehousekeeper did not provide security for the export, and
(c)	the transporter or the owner of the goods did provide security for the export.

(3)	In any case where paragraph (2) above applies, the person liable to pay the excise duty due at the excise duty point is the transporter or the owner of the goods who provided security for the export.

       26. Section 12(1A) FA provides:
Subject to subsection (4) below [time limit], 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.

 27. The rules concerning excise duty points were harmonised within member states of the EU at the material time by Directive 92/12/EEC (“the Directive”). Article 4(c) thereof gives the following definition:
suspension arrangement: a tax arrangement applied to the production, processing, holding and movement of products, excise duty being suspended
28.  Article 6 of the Directive provides:
1. Excise duty shall become chargeable at the time of release for consumption or when shortages are recorded which must be subject to excise duty in accordance with Article 14 (3).
Release for consumption of products subject to excise duty shall mean:
(a) any departure, including irregular departure, from a suspension arrangement;
2. 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, it being understood that Member States shall apply the same procedures for levying and collection to national products and to those from other Member States.
29. Article 15 of the Directive provides:
1. Without prejudice to the provisions of Articles 5 (2), 16 and 19 (4), the movement of products subject to excise duty under suspension arrangements must take place between tax warehouses.
2. Warehousekeepers authorized by the competent authorities of a Member State in accordance with Article 13 shall be deemed to be authorized for both national and intra-Community movement.
3. The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorized warehousekeeper of dispatch, as provided for in Article 13, or if need be, by a guarantee jointly and severally binding both the consignor and the transporter. If appropriate, Member States may require the consignee to provide a guarantee.
The detailed rules for the guarantee shall be laid down by the Member States. The guarantee must be valid throughout the Community.
4. Without prejudice to the provision of Article 20, the liability of the authorized 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.
30. Article 18(1) of the Directive provides:
Notwithstanding the possible use of computerized procedures, all products subject to excise duty moving under duty-suspension arrangements between Member States shall be accompanied by a document drawn up by the consignor. This document may be either an administrative document or a commercial document. The form and content of this document shall be established in accordance with the procedure laid down in Article 24 of this Directive.
 31. Article 19(2) of the Directive provides:
When products subject to excise duty move under the duty-suspension arrangements to an authorized warehousekeeper or to a registered or non-registered trader, a copy of the accompanying administrative document or a copy of the commercial document, duly annotated, shall be returned by the consignee to the consignor for discharge, at the latest within 15 days following the month of receipt by the consignee.

32. Article 20 of the Directive provides:
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), 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.
33. Regulation 7 of DSMEG provides:
(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.
(6) The regulations may make provision for treating revenue traders as approved and registered under this section in cases where they are members of a group of companies (within the meaning of the regulations) which is approved and registered in accordance with the regulations.
The Facts 

34. An AAD is a document in quadruplicate. It is completed by the consignor, or warehousekeeper of despatch, prior to the excise goods being transported. If the goods are to be delivered to another bonded warehouse, the warehousekeeper of which will be the consignee, then that warehouse must return one copy of the AAD to the consignor as a receipt for the delivery of the goods.
35. Regulations governing the AAD are contained in regulation 2719/92/EEC. 
•	One copy to be retained by the consignor (no.1)
•	One for the consignee (no.2)
•	One to be returned to the consignor on receipt of the goods (no.3)
•	One for the tax authorities in the destination state (no.4)
36. Each copy of the AAD is marked with a number to identify it. This number may be in the right hand corner as part of the document as was the case with AADs 03/0037, 03/0040 and 03/0041. When the load is put into the trailer the warehouse seals it with a metal seal with a number that corresponds to the AAD which relates to the load of excise goods.
37. Messrs. Dyer, Rhoades and Bryant, officers of HMRC with the Revenue Fraud Detection Team, Ms. Day and Ms. Cunningham of HMRC gave evidence to the Tribunal concerning the alleged breach.

38. Mr. Dyer gave evidence that on 13 March 2007 he was on duty at the Outward Bound Freight Examination Area of the Channel Tunnel at Cheriton, Kent. He was present when Officer R. McCann of HMRC intercepted vehicle R414 OEF.
39. He asked the driver Giles Burgess what was in his trailer and was told that it was empty, that he was going to get a load of timber from Belgium and that the trailer had come from Ashford.
40. Mr. Dyer assisted Officer McCann in a search of the lorry cab and witnessed her removing a quantity of paperwork from the centre console.
41. Officer McCann had written in her notes which were produced to the Tribunal that she had found the four AADs and other paperwork under a removable plastic plate/trim in the centre console. Officer McCann was not available to give evidence to the Tribunal as she is on long term sick leave but on direct examination Mr Dyer stated that he saw her remove papers from under the centre console.
42. Mr. Rhoades gave evidence that he was on duty that night at the Freight Control and while he did not see Officer McCann remove the paperwork recalled her saying that it was found “hidden” in the cab.  
43. He had interviewed the driver Mr. Burgess who said that he worked for Mr. Brian Keown who was based in Luton but had an office in Northern Ireland.
44. He said that the Appellant had named Glencar of County Antrim as the transporter but Glencar could not subsequently be traced by HMRC although Glencar had sent a fax to HMRC on 10 April 2007 stating that they had subcontracted the consignments to M. Porter Transport of London. They also provided details of the cab and trailer swaps. No trace could be found of M. Porter Transport either.
45. Mr. Burgess had told him that he had started his journey that morning in Dagenham and had then driven to Rangefield at Purfield where he picked up a load of beer.
46. He then went to Ashford truck stop where he dropped his trailer keeping the paperwork for his load of beer in the cab of his truck as instructed by his boss, Mr. Brian Keown. He was instructed by Mr. Keown to pick up an empty trailer and was told by him to drop the paperwork “anywhere on the beach” in Calais and then return to the UK.
47. He was given the other paper work by another driver whom he had never seen before. 
48. He was asked whether the three sets of paperwork which did not refer to the goods he had been carrying related to three other consignments leaving Rangefield that day. He said that he presumed so although he had not really looked at the paperwork.
49. At the request of Mr. Rhoades he then called Mr. Keown and told him that the goods that should have been on his trailer were to be returned to Rangefield. The goods however were not returned to Rangefield.
50. Mr. Bryant of HMRC gave evidence that he had witnessed the interview of Mr Burgess and produced his notes taken at that interview which confirmed what had been said.
51. The address on the delivery note found during the inspection of the vehicle R414 OEF was the address of Star Beers, a trading name for SA Restaurants in Southampton, which is not a registered warehouse. The alcohol listed on the delivery note was identical to the consignment of beer picked up by Mr. Burgess that morning and listed on AAD 03/0040.
52. The delivery note was signed and dated “12/3/07”. The Tribunal accepted that the signature was likely to be that of an individual representing Star Beers and that it was likely that the beer was delivered there.
53. Duplicate copies of the original AADs found in the cab of vehicle R414 OEF were subsequently returned to the dispatching warehouse to indicate receipt of the goods by the bonded warehouse in France but the dispatching warehouse, Rangefield, confirmed that it was not the provider of these endorsed AADs.
54. Ms Day gave evidence concerning the paperwork. She said that Rangefield, who were the only party who could issue the AADs, did not issue duplicate AADs. They would however have supplied a copy of copy no.1 to the Appellant as guarantor for the movement.
55. As HMRC had a complete set of the original AADs Rangefield should not have accepted the copy no. 3s that were sent back to them. They had no original signature and a warning letter was issued to Rangefield.
56. She said that the copy no. 3s sent back to them must have been photocopies of the copy no.1s. On checking the documents in question the Tribunal noted that the word “No” (referring to number) in the right hand corner had been written in manuscript over something whereas the originals had the word “No” typed and only the numerals in manuscript.
57. Ms. Day said that Rangefield had been visited by HMRC on 13 March 2007 and knew that the originals had been found in the cab of the lorry so they should not have accepted the copies. The copy no. 3s should be kept with the copy nos. 2 and 4 at all times until the goods reached their destination. The warehousekeeper ought to have put the seals on the vehicles but the seals found were unused.
58. Ms. Cunningham produced to the Tribunal AAD number 03/0040 together with the CMR relating to it; AAD 03/0037 together with the CMR relating to it; AAD 03/0039 together with the CMR relating to it; AAD 03/0041 together with the CMR relating to it; delivery note headed SCS Trading Ltd signed MO dated 12/03/07; and three unused metal seals numbers 0663108, 663104 and 00663107, all of which had been found in the cab of vehicle R414 OEF on 13 March 2007.
59. These had come into her possession when she asked the Officers in Dover to forward them to her. 
60. On 11 March 2008 HMRC wrote to Mr. Khan, director of the Appellant, informing him that in breach of Regulation 21(2)(b) of EGAD AADs 03/0037, 03/0040 and 03/0041 had not accompanied their respective excise goods until they arrived at their ultimate destination of MT Manutention, Parc de Enterprises, Courtimmo, Coquelles France.
61. In the light of this discovery the Appellant was assessed to £75,531.07 being the excise duty in respect of the goods.
62. The Appellant’s legal representatives requested a review of the Assessment and this was carried out by Hazel Havard of HMRC who after due consideration confirmed the Assessment.
63. On an unspecified date HMRC had visited the Appellant’s office and discussed the issue of security and the matter of the guarantee to be provided. 
64. At that time Mr. Khan of the Appellant told HMRC that he estimated that the Appellant would be making some 4 movements a week and the level of the guarantee was calculated on that basis. 
65. Mr Khan told HMRC that the average movement was of some £25,000 in value. Based on that and the estimate of 4 movements per week a guarantee of £30,000 was agreed by HMRC on 24 March 2004. This was provided by the Appellant’s bank HSBC.
66. However a schedule was subsequently obtained of all the movements out of Rangefield for the Appellant. From 9 January 2007 until 13 March 2007 there were 107 movements in total amounting in a 9 week period to an average of 11.4 movements per week.
The Appellant’s submissions
67.  The system for collection of the duty is based not on law but on HMRC’s discretion.
68. It is based on 2 inconsistent objectives: the freedom of movement and the maintenance of largely varying excise duty.
69. HMRC does not produce the people responsible for what went wrong but assumes that someone needs to be held responsible. The evidence therefore is limited and unsatisfactory and HMRC needs to speculate that there was a fraud on the Revenue. This however is no basis on which to reach a decision based on law.
70. The faults of the system should not be blamed on the Appellant. It is common ground that the warehousekeeper of dispatch received receipted AADs in respect of the three consignments.  To that extent the Appellant had discharged the burden of proof in showing that the movements of goods were regularly conducted and discharged.  HMRC can only disprove that by showing that the receipted AADs must have been forgeries. 
      71. The law is that the AAD must at all times accompany the goods to which it relates until the goods reach their final destination.  However, multiple copies of an AAD can exist.  If the AADs held by HMRC are the “originals”, then an excise duty point occurred under EGAD r 21(2)(b)(i),  as HMRC contend.       
 72. The AADs found were the originals of copy nos. 2 and 4 but copy no.3 was missing. Unless the three AADs held by HMRC are the ‘original’ AADs there was no irregularity.
73. The copy no.3s AADs faxed to Rangefield were copies of the original AADs – HMRC said they could not be but they only had copy nos. 2 and 4.
74.  On that basis the Appellant’s appeal against the Assessment should be allowed. There was no irregularity in the movement of the goods and no evidence that the goods were still in the UK at the time the AADs were found. 
75. A crucial question was whether the French Fiscal authority stamps were authentic but HMRC did not contact the French Fiscal authorities to check whether the stamp was their stamp.
76. If the excise goods were going to France then all that was needed were the copy no. 3s. As long as one part of the AAD is with the goods there is no irregularity.
77. The scenario could have a simple explanation: there was a trailer swop; the goods were accompanied by the copy no.3 which was then faxed back to Rangefield thus discharging the liability of Rangefield and the Appellant.

78. Some of HMRC’s evidence revolves round the hearsay evidence of Officer McCann. Although this is admissible less weight should be attached to it as she was unable to give evidence. There is therefore no direct evidence that the documents in question were found concealed in the cab of the lorry.

79. HMRC did not examine the tachograph to see exactly where Mr Burgess had driven the cab.

       80. If there was an excise duty point under Regulation 21 of EGAD, then liability for that duty is imposed on persons under Regulation 22.  The question is whether that liability is strict and therefore does not require the demonstration of fault on the part of the person charged.  

       81. Brokers cannot be the guarantors of their customers’ or haulers’ probity. The    safeguards in the system are geared to the warehousekeeper and the haulier, not the vendor of the goods, who is unlikely to have independent knowledge of the customer. The broker’s primary concerns are that the customer has a warehouse account and that he pays for the goods. 
    
 82. Counsel for the Appellant referred to the skeleton argument in which he had submitted that to impose strict liability in these circumstances would extend liability too widely and in a disproportionate manner, inconsistent with Community law as in Optigen Ltd v C & E Comrs; Fulcrum Electronics Ltd v C & E Comrs; Bond House Systems Ltd v C & E Comrs (Joined cases C-354/03. C-355/03 and C-484/03) [2006] STC 419 and the Advocate General’s opinion at paragraphs [27] to [31] and paragraph [42]: 
“this approach … would drastically shift the burden of the problem from the tax authorities to the private sector, at the expense of legitimate trade and the proper functioning of the VAT system.” 
93. While these cases relate to VAT rather than excise duties, both forms of tax are subject to Community law requirements and to impose strict liability under Regulation 21 of EGAD would be a disproportionate obstacle to the free movement of goods in the single market. 
94. There is no strict liability under Article 21 and no reason to distinguish VAT from excise duty in this regard (Bond House Systems, Fulcrum Electronics and Optigen Ltd)	
	95.  Under   general principles of Community law, a public authority may not impose obligations on a citizen except to the extent to which they are strictly necessary in the public interest to attain the purpose of the measure [‘principle of proportionality’]. The means chosen must be reasonably likely to attain the objective and the detriment inflicted on those concerned must not be disproportionate to the general benefit. See Garage Molenheide v Belgium (Joined Cases C-286/84 etc) [1998] STC 126. 

      96. In this case it is not alleged that the Appellant or Mr Khan were engaged in or had knowledge of any wrong-doing.   

       97.  Liability is restricted for 2 reasons – firstly because this is not a guarantee but 
simply insurance and secondly the liability of the guarantor and the owner of the goods is coterminous – one limits the other.

98.  In any event where, as in the UK, a guarantee from the owner of the goods is 
accepted as covering the risks inherent in the intra-Community movement of goods the Appellant’s liability cannot exceed the amount of his guarantee. 

99. The guarantee was provided by HSBC which limited the liability to £30,000.

100. The different rates of excise duty in the different Member States mean that the guarantee must be valid throughout the European Union and so the amount requested is a rough and ready guess at the potential liability. It may well be that the providers of the guarantee in the UK are over insured for the EU and the EU underinsured for the UK.

101. Where the person on whom liability to excise duties is visited is the guarantor, the Tribunal has held that liability to excise duties is not restricted to the amount of the movement guarantee.  This is because he has an independent liability to the tax as decided in Anglo-Overseas Ltd and Garrett Trading Ltd (No 2)

      102. Counsel for the Appellant submitted that this reasoning is erroneous. In these cases the Tribunal has assumed that the person providing the guarantee is the ‘primary obligor’, and so has an independent liability for any duty which is payable. However, this is incorrect. 

103. Most taxes work by identifying an activity or transaction or event which gives rise to a liability to tax and identifying a person on whom to visit the liability. 

104. Excise duties are quite different.  The tax is imposed on the goods. That is why the primary remedy of the tax authorities for unpaid excise duties is seizure of the goods. What the guarantor is undertaking to pay is the liability which attaches to the goods. 

105. Horizontal Directive, art 15(3) states:  “The risks inherent in the intra- Community movement of goods shall be covered by the guarantee”.  That is what the guarantee is covering.  The liability of the owner only arises if and because he has provided the guarantee.  Regulation 22 of EGAD refers to “the owner of the goods who provided security for the export”.  He is not liable to duty as such.  He is liable to duty as the provider of the guarantee. 

106. If the guarantee limits his liability, that is the limit of his liability.  If HMRC take the view that a guarantee does not cover the risks inherent in the intra- Community movement of goods, they should not have accepted the guarantee or should seek a guarantee in the larger amount.  To seek to impose an unlimited liability on the owner as the person providing the guarantee would, again, be disproportionate. 

HMRC’s submissions
107. Counsel for HMRC contended that by diverting goods to the black market where excise duty is not collected then the seller makes a greater profit.
108. In the case of G.van de Water v Staatssecretaris van Financien (Case C-325/99) in the opinion of the Advocate General it was stated at paragraph 41:
“Under that tax system as we have seen, operations on products subject to excise duty can    only be performed in tax warehouses and the products can only move between establishments of that type. Goods can be held outside the procedure in question if, duty having become chargeable, the tax has been assessed and paid, On the other hand, if the goods are not in a tax warehouse or moving between tax warehouses and if, therefore, they exist outside a suspension arrangement without the applicable duty having previously been paid, it is because they were improperly departed from that regime or were never admitted to it because they were imported or manufactured outside the system established by the directive. These are precisely the situations which the directive itself assimilates to release for consumption in Article 6(1)”.
109. Rangefield received three instructions on 9 March 2007 from the Appellant to release the three loads of beer to Glencar for transportation under Movement Guarantee No. 977M. They produced the AADs and retained copy no.1 and completed copy nos. 2, 3 and 4. They wrote the seal and trailer numbers on the AADs in blue biro and they were signed by a T.Cranfield. Glencar was asked to pick up the goods on 12 March 2007.
110. The AADs were separated from the goods in the UK therefore this was a breach of Regulation 21 (2)(b) of EGAD.
111. Mr. Burgess kept AAD 03/0040 and received AADs 03/0037, AAD 03/0041 and AAD 03/0039 at Ashford. At the time he was stopped at the Channel Tunnel it was highly unlikely that the goods could already have gone to France with the AADs and that the AADs were found on their way back from France.
112. He only had copy nos. 2 and 4 but copy nos. 2, 3 and 4 have to be kept together. HMRC argued that the copy no. 3s may have been taken out to be sent back to Rangefield to make it look as though the goods had been received.
113. The copy no. 3s produced have a manuscripted “No” whereas the original had a printed “No”. Although the copy no. 3s produced by the Appellant appeared to have a French stamp on them, this might just indicate that goods had been bought in France, taken to the warehouse for the French Fiscal authorities to inspect and stamp. Additionally the only description on the copy no. 3s was “Biere” without specifying a make or type of beer.
114. The facts pointed to the goods and the AADs being separated and that is enough to prove the breach. EGAD 22 (3) establishes liability in this case.
115. The language used in EGAD is security and not guarantee – the word guarantee derives from the EU legislation.
116. The liability goes from the warehousekeeper to the person who has provided the security. If it is not known who caused the contravention then the liability stays with the guarantor.
117. Even if there may be someone else at fault that person is not primarily responsible for the excise duty as it stays with the guarantor who has strict liability.
118. EGAD is not in conflict with the Directive and this was confirmed by the Attorney General in Van de Water:
“In that connection, it should be borne in mind that, as the Court of Justice pointed out in its judgement in Commission v France the harmonisation effected by the directive is only partial since it merely classifies the products, organises a system for their movement and defines the chargeability conditions.
The directive identifies the products which, under Community law, are subject to excise duty, while establishing the time at which the chargeable event occurs and that at which the excise duty becomes chargeable. It also specifies the State in which the excise duty is to be levied and, for some cases (not including that of Mr Van de Water), the person who must pay it”.
119. Further in Van de Water:
“It may be the person who within a Member State other than that in which the products were released for consumption, holds those products for delivery or the person who makes the delivery or uses the products for the purposes of a trader carrying out an economic activity independently or for the purposes of a body governed by public law. Depending on the circumstances, the duty may also be due from the relevant trader or body governed by public law( Article 7(2) in conjunction with Article 7(3)).
The duty may also be chargeable to the person holding the products subject to excise duty for commercial purposes in a Member State other than that of release for consumption (second paragraph of Article 9(1)).
Where an irregularity or offence is committed in the course of an intra-Community movement of products subject to excise duty, the excise duty will be due from the natural or legal person who guaranteed payment of the excise duties.
120. In Greenalls Management Limited v Customs and Excise Commissioners [2005]  1 WLR Lord Hoffman said:
“It is not easy to understand why the judge decided to add these words. He did not accept the argument of Mr Venables QC that a restriction in the scope of the paragraph was needed because otherwise the regulation, read with 5(4), would be unreasonable and unfair, imposing upon the warehouse keeper a liability which "he had done nothing to deserve". Counsel had submitted that for this reason one should imply a requirement that the goods had been made available for consumption "by the warehouse keeper". But the judge rejected this submission. He said that there was nothing unreasonable about making the warehouse keeper liable for the duty even though he did not himself intend to depart from the suspense arrangements. It is practical because the commissioners do not have to investigate the extent, if any, to which the warehouse keeper was to blame in parting with the goods. If someone else was responsible, the warehouse keeper is not without remedy. By virtue of the joint and several liability created by regulations 5(5) and (6), he has a right of recourse against those primarily responsible for the diversion. Of course he may in practice find it difficult to pursue them. But the commissioners are in the same position. The warehouse keeper can reduce the commercial risk by requiring a bond or guarantee. Whether he does so or is content to run the risk of having to pay the duty without effective recourse is a matter for him. No one is obliged to run an excise warehouse. It is a privilege which carries obligations.”
121. The onus for the excise duty is on the warehousekeeper unless he makes other arrangements. Even if the loss of excise duty occurs because of someone else’s fault he has joint and several liability by virtue of Regulations 5(5) and (6) of EGAD but has recourse if there is another person responsible by virtue of the Regulations.
122. Counsel for the Appellant had submitted in his skeleton argument that to impose strict liability in these circumstances would extend liability too widely and in a disproportionate manner inconsistent with Community law.
123. However the cases he had cited were VAT cases which could not be read across to excise duty in this case. VAT is different because HMRC can go to both the supplier and the purchaser for the VAT. If the documents are forged HMRC would look to the purchaser for the VAT. For excise duty HMRC can only look to the owner who provided the security.
124. In Greenalls it was said to be possible to find someone else responsible because of the joint and several condition contained in Regulations 5(5) and (6) of EGAD but this was not for HMRC but for the owner to establish.
125. Although Counsel for the Appellant had contended that the Appellant had done all that it could to ensure that the goods reached the bonded warehouse in France, HMRC did not agree. 
126. The Appellant had taken no steps whatsoever to see that the haulier did not divert the goods; there were no written contracts; the haulier was allowed to subcontract and the Appellant had done nothing to monitor the haulier. In HMRC’s view the Appellant could have done immeasurably more.
127. The scheme and purpose of the legislation is that the warehousekeeper is primarily liable for the duty as he has the goods under his control; he releases the goods to the haulier and the guarantee for the movement places the liability on someone else.
128. On the question of whether the guarantee could limit the extent of the liability, the decisions in various cases went against the Appellant.
129. In Anglo Overseas Limited Colin Bishopp considered whether it was possible for the terms of the guarantee to limit the Appellants 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”. 
130. If the guarantee was only a matter of agreement between HMRC and the owner then this would have the effect of HMRC binding France, Italy and the other Member States.
131. If the guarantee was limited then the French Fiscal authorities for instance would not be able to recover the full amount of the excise duty if the irregularity occurred in France.
132. The guarantee is only something to be looked to should the excise duties become due.  It is acceptable to have a third party guarantee but this cannot limit or replace the guarantor’s own liability.
133. In Garrett Trading Limited (No.2) v The Commissioners for Her Majesty’s Revenue and Customs (E1126) the conclusion was the same although the reasoning of the Chairman of the VAT Tribunal was different.
134. HMRC regards the Appellant as liable because it provided the guarantee.
135. The Appellant believes it is not liable because all it did was provide the guarantee. The Appellant views the provision of the guarantee as a matter of little consequence as long as it knew nothing of where the goods went. In any event the Appellant submits that it can only be responsible to the extent of the guarantee. HMRC seek to prevent this type of “ostrich” behaviour by enforcing the various provisions in order to prevent a loss of excise duty.
136. It is important that someone provides a guarantee for the excise duty on the goods and takes responsibility for the way in which the goods are moved. How they are diverted is not important but just the fact of the diversion.
137.  If the liability to excise duty was limited to the amount of the guarantee, £30,000 in this case, then those responsible for the diversion would get away with considerable fraud.  

THE WOWGR APPEAL
The Law
138. Section 100G of CEMA provides:
(1) For the purpose of administering, collecting or protecting the revenues derived from duties of excise, the Commissioners may by regulations under this section (in this Act referred to as “registered excise dealers and shippers regulations”)— 
(a) confer or impose such powers, duties, privileges and liabilities as may be prescribed in the regulations upon any person who is or has been a registered excise dealer and shipper; and
(b) impose on persons other than registered excise dealers and shippers, or in respect of any goods of a class or description specified in the regulations, such requirements or restrictions as may by or under the regulations be prescribed with respect to registered excise dealers and shippers or any activities carried on by them.
(2) The Commissioners may approve, and enter in a register maintained by them for the purpose, any revenue trader who applies for registration under this section and who appears to them to satisfy such requirements for registration as they may think fit to impose.
(3) In the customs and excise Acts “registered excise dealer and shipper” means a revenue trader approved and registered by the Commissioners under this section.
(4) The Commissioners may approve and register a person under this section for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under the regulations prescribe.
(5) The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section. 
(6) The regulations may make provision for treating revenue traders as approved and registered under this section in cases where they are members of a group of companies (within the meaning of the regulations) which is approved and registered in accordance with the regulations.
139. Regulation 5 of WOWGR provides:
(1) For the purposes of section 100G of the Act, the Commissioners may approve revenue traders who wish to deposit relevant goods that they own in an excise warehouse and register them as registered excise dealers and shippers in accordance with section 100G(2) of the Act.
(2) A revenue trader who has been so approved and registered shall be known as a registered owner.
140. Regulation 16 of WOWGR provides:
The Commissioners may require any relevant revenue trader to provide such security, or further security, as they may think appropriate for the payment of any excise duty that is or may become due from him.
141. Regulation 18 of WOWGR provides:
(1)	The approval and registration of every registered owner shall be subject to the conditions and restrictions prescribed in a notice published by the Commissioners and not withdrawn by a further notice.

142. Section 14(1)(d) FA 1994 provides that it applies to decisions which are described in Schedule 5 to that Act, requiring the Commissioners to review such a decision should the same be requested. Schedule 5, at paragraph 2 (p) describes the following decision:

(p) any decision for the purposes of section 100G (registered excise dealers and shippers) as to whether or not, and in which respects, any person is to be, or to continue to be, approved and registered or as to the conditions subject to which any person is approved and registered or as to the conditions subject to which any person is approved and registered;
143. Section 14(3) FA 1994 provides:
The Commissioners shall not be required under this section to review any decision unless the notice requiring the review is given before the end of the period of 45 days beginning with the day on which written notification of the decision, or of the assessment containing the decision, was first given to the person requiring the review.
144. Section 16(1)(b) FA 1994 provides that an appeal shall lie to the Tribunal with respect to a review which the Commissioners carried out following a request which was made after the 45 day period laid down in section 14(3).

The Facts 

145. HMRC may approve revenue traders who wish to deposit their goods in an excise warehouse. Such registration entitles that trader to own and buy goods which are held in excise warehouses.
146. On the 11 September 2007 HMRC wrote to the Appellant informing it that its registration as a Registered Owner of duty suspended goods under the WOWGR Regulations had been revoked.
147. It had been revoked for the following reasons:
(a) In accordance with CEMA 100G (5) it was not considered a viable    business.
(b) The owner was not a fit and proper person and posed a risk to HMRC. It had significantly exceeded the number of loads per week on which the movement guarantee was based and failed to make any approach to HMRC to increase the level of the guarantee or advise them of the situation.
(c) The principal had not expressed due caution as to by whom the guarantee was used. He had allowed the movement guarantee to be quoted by his haulier and exercised no control or monitoring of the use of his movement guarantee.
(d) It had failed to carry out reasonable due diligence checks on its customers and haulier.
(e) The vehicle declared to be transporting its goods under duty suspension to a destination outside the UK was detected on 13 March 2007 leaving the UK unladen and carrying 4 original AADs, unused seals and a delivery note to an unapproved warehouse. When interviewed about this the owner was unable to offer any explanation as to why this situation had arisen or the whereabouts of the goods. This was a breach of EGAD Regulation 6 (1)(b) which states an accompanying administrative document must accompany the excise goods to which it relates at all times until those goods arrive at their ultimate destination.
(f) Further to checks and local compliance visits by HMRC, they had been unable to find any trace of the haulier M. Porter Transport of London who was subcontracted by the Appellant’s appointed haulier Glencar.
148. The Appellant asked for a review of this decision on 22 October 2007 on the basis that (taking each point in turn):
(a) No evidence had been produced in support of a contention that this was not a viable business.
(b) HMRC set the movement guarantee level. They were notified of all movements and consequently it had always been in the hands of HMRC to increase the requirement for a guarantee according to the number of loads notified.
(c) No authority has ever been given to any other person in connection with loads of which the company is aware and has authorised.
(d) No evidence was provided to show that reasonable due diligence was not undertaken.
(e) The company has no knowledge of it as the goods should only be moved in accordance with instructions given to the dispatching bond which should complete the information on the AAD and the haulier should only deliver to the address as shown. A company is not responsible for the completion of any documentation concerning the goods in transit.
(f) This is information known to HMRC and is not information within the knowledge of the company.
149. Ms. Cunningham, the reviewing officer for HMRC replied on 19 February 2008 in more detail:
(a) HMRC have concerns regarding the credibility of the business. It was their understanding that the Appellant held no contracts with its suppliers, customers or haulier. The Appellant claimed that the haulage company was paid £200 to transport a consignment of beer to the continent. This cost does not accurately reflect the costs involved in a UK to EU movement, such as fuel, channel crossing expenses, wages etc. The Appellant has stated that all business is done by fax but despite numerous requests by HMRC has failed to provide fax transmission reports to support this claim.
(b) Public Notice 197 “Excise Goods: holding and movement” states at paragraph 15.1 that a person registered under the WOWGR regulations must review their level of security at least every six months. They should write to the Financial Securities Centre if their trading pattern changes and this change means that they need an increased level of guarantee. The Appellant should have kept a record to show that this check was undertaken. The Appellant had failed to make any approach to HMRC to increase the level of guarantee despite having exceeded this on a number of occasions.
(c) The Appellant’s movement guarantee had been quoted on several AADs where the goods did not appear to have reached their destination. Even though its guarantee was at risk the Appellant hired a haulier who did not exist at the address provided in the Republic of Ireland and who had subcontracted the work to a third party who also could not be traced.
(d) The Appellant was referred to the comments immediately above.
(e) As the owner of the goods and as the entity providing the movement guarantee it was the Appellant’s responsibility to ensure that the goods and accompanying paperwork reached their intended destination in a lawful manner. The onus was on the Appellant to carry out proper diligence checks on the haulier. HMRC repeated their previous contentions concerning vehicle R414 OEF which when inspected at the outbound UK controls was found to be empty when it should have been fully loaded. Further on inspection was found to have been hidden in the driver’s cab four original AADs and CMRs, three original unused seals and also a signed delivery note showing that a load identical to the load that should have been on the vehicle when stopped had been delivered to an address in Southampton. The address in Southampton was that of Star Beers which was not a registered warehouse and was not authorised to receive excise goods in duty suspension.
(f) HMRC repeated that the Appellant had contracted Glencar hauliers as its contractors who had subcontracted the job to M. Porter Transport of London of whom HMRC could find no trace.
150. Ms. Cunningham concluded that her review had shown that HMRC had reasonable cause to revoke the Appellant’s registration under Section 100G of CEMA.
The Appellant’s submissions
151. It appeared that the main factor for this decision was the incident on 13 March 2007.  It seemed possible that the officer might not have been fully informed about the return of the copy no.3s to the warehouse and for that reason the revocation ought to be reconsidered.

152. As to the Appellant’s lack of due diligence this was a small business with limited resources and the Appellant felt that due diligence had been done with regard to its customers. Registered owners rely on the warehousekeepers to check the hauliers when they are changed at short notice.

HMRC’s submissions
153. Dealing with the revocation of the WOWGR licence, Counsel for the Respondents submitted that HMRC had acted under Section 100G (5) CEMA.
154. There were 6 issues in dispute according to the letter from the Appellants legal representatives.
155. In reviewing the decision Ms. Cunningham dealt with each of these issues in turn and took into account all that was necessary. Counsel for the Respondent submitted that:
(a) The evidence produced demonstrated that this was not a credible business. No contracts were held with the supplier, haulier or customer. The amount of £200 charged by the haulage company did not accurately reflect the costs for fuel, wages and channel crossing involved in an UK to EU movement. Mr Khan, director of the Appellant infrequently receives confirmation that the goods have arrived and does not seek such confirmation.
(b) There was clear evidence that the number of loads moved each week and on which the guarantee had been based had been regularly exceeded. When visited the Appellant had said that there would be 4 or 5 movements a week each of some £25,000 value but Ms Day had found that between 9 January 2007 and 13 March 2007 in one week there were as many as 22 movements.
(c) The evidence showed that the Appellant had not expressed due caution as to by whom the guarantee was used. It had allowed the movement guarantee to be quoted by its haulier and had exercised no control or monitoring of the use of the movement guarantee.
(d) The Appellant had done no due diligence on its customers or hauliers.
(e) There had been no attempt by the Appellant to check who was moving the goods even when it was a movement guaranteed by it. Glencar claimed to have subcontracted the work to M. Porter Transport but it had ended up with Mr. Brian Keown.
(f) The transport of the goods is the responsibility of the owner of the goods.
156. All of that was relevant to the issues in dispute. The reviewing officer, Ms Cunningham had dealt with each issue in the letter from the Appellant’s legal representatives’ letter and made no mistake in law in upholding the decision to revoke the Appellants WOWGR licence.
157. Even if she had seen the copy no. 3 AADs provided by the Appellant it would have made no difference to her. They only referred to beer. Although the quantities corresponded to those noted on the copy no.1s there were no brand names given to the beer and thus the beer could have been obtained from a cash and carry in France and taken to the bonded warehouse in France for a stamp.
158. Although the decisions in Anglo Overseas and Garrett were only decisions of the VAT tribunal and therefore not binding on this Tribunal they were of persuasive value.
159. Section 16 of FA 1994 states that in order to find the revocation unreasonable it “should have been a decision not reasonably arrived at”…
160. In order to assess HMRC’s decision the Tribunal has to decide whether the reviewing officer acted in a way in which no reasonable person could have acted.
161. In accordance with Section 16(4) FA1994 if the Tribunal found that the decision had not been reasonably arrived at then it could find that the revocation of the licence should cease to have effect. This would not mean however that the Appellant would get its licence back but rather that HMRC would need to conduct another review.

Findings

162. In conclusion Counsel for the Appellant had submitted that there were four questions for the Tribunal:

(a) Were the three AADs which the Revenue seized at Cheriton on 13 March 2007 the original AADs? 

(b) If an excise duty point arose under EGAD r 21, is liability strict? 

(c) If the Appellant is liable to duty under EGAD r 22, was his liability   restricted to the amount of the guarantee? 

(d) Having regard to the answers to these questions, was the revocation of the WOWGR certificate reasonable? 

163. We find that the legislation is unambiguous – Regulation 6(1)(b) of EGAD states the AADs must travel with the goods at all times. Contrary to Counsel for the Appellant’s submission there is no scope within the legislation to allow that as long as one part of the AAD is with the goods there is no irregularity.

164. We find that the evidence of the HMRC inspecting officers is clear: that four
 AADs numbered 03/0037, 03/0039, 03/0040 and 03/0041 were found concealed in the cab of Mr Burgess together with a signed delivery note addressed to Unit B2, Millbrook Close, Chandlers Ford Industrial Estate, East Leigh, Southampton which is not a bonded warehouse.

165. The goods specified in the delivery note were identical to the goods covered by AAD 03/0040 which Mr. Burgess should have been transporting to a bonded warehouse in France. The trailer attached to his cab was empty.

166. The copy no.3s AADS faxed to Rangefield do not correspond to the original copy no.1s, 2s and 4s of the numbered AADs 03/0037, 03/0040 and 03/0041 in the possession of HMRC but seem to be an altered copy of the copy no.1. Rangefield confirmed that it was not the provider of these seemingly altered AADs.

167. We find that the AADs for the three loads of excise goods, the movement of which had been guaranteed by the Appellant, did not accompany the goods to which they related at all times prior to arrival at their ultimate destination in Coquelles, France thereby creating an excise duty point at the time the goods were removed from Rangefield.

168. We find that this breach created an excise point pursuant to regulation 21(2)(b)(i) of EGAD. The Appellant is therefore liable to pay the excise duty as the contravention was not occasioned by the warehousekeeper and the Appellant provided the security for the export.

169. In respect of the guarantee and as to whether it could limit the extent of the liability we adopt Colin Bishopp’s reasoning in Anglo Overseas as it appears in paragraph 129 above. 

170. We agree that “There is nothing in the Directive or in DSMEG which 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 liability”.

171. We examined Notice 197 and noted that the onus was on the Appellant to increase the amount of the guarantee if the number of movements per week exceeded those that he had notified to HMRC. The movement guarantee was regularly exceeded yet no attempt was made to inform HMRC. Had the Appellant done so the amount of the guarantee at that time was unlikely to have been accepted and HMRC would no doubt have increased it. 

172. The liability is strict under the legislation and the fact that a third party provided
a guarantee is not sufficient to limit the Appellant’s liability to this amount. If this were so then there would be considerable scope for fraud on the public purse.

173. In respect of the decision to revoke the Appellant’s WOWGR licence we find
that the HMRC officer who reviewed the decision fully dealt with all points made by the Appellant’s legal representatives and that her decision was reasonable.

174. Despite Counsel for the Appellant’s submission that the HMRC officer who reviewed the decision relied on the 13 March 2007 incident we find that this was not so.

175. The Appellant did not act responsibly with regard to its business. The Appellant was unable to produce any contracts with its supplier, haulier or customers. The Appellant carried out no checks on the hauliers moving its goods or the use by them of its guarantee.

Decision

176. The Tribunal dismisses the appeal against the assessment of £75,531.07.

177. The Tribunal finds that the Assessment is payable in full and not limited to £30,000, the amount of the guarantee.

178. The Tribunal finds that the revocation of the Appellant’s WOWGR licence on 11 September 2007 was reasonable. 

The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

TRIBUNAL JUDGE S.M.G.RADFORD

RELEASE DATE: 9 April 2010