[2011] UKFTT 377 (TC)

TC01232

Appeal number: TC/2010/03246

Excise Duty – Forfeiture – Whether Person Reasonable – Yes – Appeal Dismissed

FIRST-TIER TRIBUNAL

TAX 

	KELMENDI GmbH	Appellant

	- and -

	
	UK BORDER AGENCY	Respondents

			TRIBUNAL:   DR K KHAN (Judge)

					

Sitting in public in London on 20 April 2011

Mr B L Erim Breshaj, officer, for the Appellant

David Badenham, Counsel, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	This is an appeal by the Appellant against the Respondent’s decision (“the Decision”) not to restore a consignment of beer (“the Goods”) attracting Excise Duty which had been seized.  The Respondents’ decision was set out in a letter dated 5 March 2010 (“the Decision Letter”). The Goods comprised 13,099.20 litres of beer.

Background

2.	On 31 October 2009, an unaccompanied trailer (No. BL503) was searched at Purfleet, Tilbury.  The trailer contained excise goods being 13,099.20 litres of beer.

3.	The Consignor of the goods was the Appellant. The Consignee was Birra Peja UK Ltd (“Birra Peja”).

4.	Pursuant to Regulation 4 and 6 of the Excise Goods (Holding, Movement, Warehousing and REDs Regulations 1992 (“the REDs Regulations”).  The REDs Regulations, UK duty was payable on the consignment of beer.

5.	UK Excise Duty had not been accounted for and so, pursuant to Regulation 60 of the REDs Regulations the Goods were liable to forfeiture.

6.	The Goods were seized under section 139(1) of the Customs and Excise Management Act (“CEMA”) 1979 as liable to forfeiture.

7.	The Appellant was served with a Notice of Seizure pursuant to section 139(6) and Schedule 3 CEMA.  The Appellant did not, as provided for by Schedule 3 CEMA, give notice within 30 days of the Notice of Seizure that they intended to claim that the seized goods were liable to forfeiture (had they done so then proceedings would have been commenced before the Magistrates’ Court).  Therefore, pursuant to paragraph 5 of Schedule 3 CEMA, seized goods were deemed to have been duly condemned as forfeit.

8.	The Appellant did, though, request that the seized goods be restored.  The Respondents have power, pursuant to section 152(b) CEMA to restore “as they see fit” things seized.  Goods are only restored in exceptional circumstances.

9.	The Appellant’s request for restoration of the seized goods was refused.  The decision in relation to restoration was reconsidered with the final decision being made on 5 March 2010 in the Decision Letter, which is now appealed.

10.	The issue for the Tribunal is whether the decision of the Respondents not to restore the seized goods was one that could not reasonably have been arrived at pursuant to section 16(4) of the Finance Act 1994.

The issues 

11.	The main issue is whether or not the Tribunal should exercise its power under section 16 Finance Act 1994 to alter the Respondents’ decision which is set out in the Decision Letter not to restore the goods.  The Decision records the Respondents’ policy which is that seized goods should not normally be restored.  However, each case is examined on its merit to see whether their exceptional circumstances justifies restoration.

12.	The Decision Letter states that the officer, Mr Raymond Benton (who gave oral evidence) concluded that there were no exceptional circumstances on the facts and that restoration should not be given.

13.	The job of the Tribunal is that it be satisfied that “… the Commissioners or other person making that decision could not reasonably have arrived at …” that decision.  In other words was the decision a reasonable one in the circumstances?

14.	The question is whether the decisions set out in the Decision Letter was outside the range of possible reasonable decisions.  The Tribunal would not substitute its own decision and therefore it does not matter if the Tribunal would arrive at the same decision or different decision.

15.	The onus is on the Appellant to prove their case.

The law

16.	The legislation in this area is well rehearsed.  It is found in sections 49, 100 and 152 of CEMA.  There are a number of other relevant regulations including the REDs Regulations, which are applicable.  Essentially, the goods are liable for forfeiture if duty should have been paid but has not been so paid.  Where items are seized, the Respondents are given power to restore those items and they do so subject to such conditions as they think proper.

17.	Sections 14-15 Finance Act 1994 gives a taxpayer the right to require the Respondents to review a decision not to restore items seized.

18.	The taxpayer is given a limited right of appeal as regards such a review.  The Tribunal’s power is set out in section 16(4) FA 1994.  This states, so far as relevant, that if the Tribunal finds the decision is outside the range of reasonable decisions then it has power to:

“(a)	To direct that the decision, so far as it remains in force, is to cease to have effect for such time as the Tribunal may direct;
(b)	To require the Commissioners to conduct, in accordance with the directions of the Tribunal, a further review of the original decision; and
(c)	In the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in the future”.

19.	That is the extent of the Tribunal’s power as laid down in law and there is no power to substitute its own decision.  If the Respondents’ decision is within the range of reasonable decisions, it is an acceptable decision.  We are therefore only concerned withwhether the Decision Letter not to restore the Goods was unreasonable, if it could not possibly have been arrived at as being one within the range of possibilities.

20.	We are provided with a bundle of documents by the Respondents which comprises correspondence between the parties and the Witness Statement of officer Raymond Brenton.

21.	All of the documents were admitted in evidence and there is no objection taken to any of the documents.

22.	We heard oral evidence from officer Raymond Brenton, Review Officer, HMRC.

The facts

23.	The Appellant is a limited company incorporated under the laws of Germany.  It carries on business as a wholesaler of food and imports goods from the Balkans and Europe to export.  The company turns over approximately €13m and has been in operation for over ten years.

Consignment of the Goods

24.	On 31 October 2009 an unaccompanied trailer was searched at Purfleet, Tilbury and the trailer contained 30 pallets of beer and one pallet of ash-trays.  The load was accompanied by documents consisting of an invoice (number 7158499 and dated 30 October 2009), the Load List (dated 30 October 2009) and a CMR (numbered UI8509223).

25.	The load was accompanied by a Simplified Accompanying Administrative Document (“SAAD”), a document required for intra EU trade and which records the sales goods and duty paid for each journey. 

26.	The haulier Britlink were informed that the trailer with the Goods had been detained as appropriate documentation (SAAD) had not accompanied the load.  The documentation provided was faulty and did not show that there was a pre-payment of the UK Excise Duty.  Britlink said that the Consignor was Kelmendi GmbH (Germany) and the goods were loaded at their premises on 29 October 2010 and the Consignee was Birra Peja UK Ltd.  Britlink stated that the relevant SAAD had been subsequently sent to HMRC for the load.

27.	On 5 November 2009 the UK Border Agency (“UKAB”) received a telephone call from Mr Blerim of Kelmendi GmbH, the exporter.  He stated the following:

(i)	The company regularly imports food into the UK and this was
	the company’s first export of beer to the UK.
(ii)	UK duty had been paid on the goods.
(iii)	The German duty agent, Dansas, had sent the SAAD.
(iv)	The goods were originally from Kosovo.

28.	The Respondents’ officers were satisfied that the Goods were held for a commercial purpose and none of the procedures for removing excise goods to the UK had been followed. The goods had been seized under section 139(1) CEMA as liable to forfeiture.  The Appellant’s vehicle, having been used to convey goods liable to forfeiture, was also seized.

29.	The Respondents’ officers sent a note of Notice of Seizure and Notice 12A, explaining the process for challenging the legality of the seizure.  The Appellant had not challenged the legality of the seizure, and the Goods were therefore being condemned by the passage of time, and forfeited to the Crown.

30.	Birra Peja UK Ltd has a registered address at 4 Glengall Road, London, NW6 7EP with VAT number 972109911.  The address on the documentation accompanying the Goods, was 109 Dudden Hill Lane, Neasden, London.

31.	On 17 November 2009, officers of UKBA visited 4 Glengall Road and spoke to Mr LLapshitca.  He stated as follows:

1.	He knew the Appellant company and its directors were Mr Ishmet and Mr Vllaznlm.
2.	Birra Peja UK were the Consignees.
3.	He offered no explanation for the wrong information on the paperwork, and had no paperwork nor instructions on the Goods.
4.	The orginary business of Birra Peja UK was luggage sale and manufacture.  Its registered address was an internet café.

32.	UK Border Agency conducted background checks on the Dudden Hill Lane address, finding that No.109 was a private residence and No.109B was a glass maker.  Neither of the occupants of the premises were aware of Birra Peja UK.

33.	The Appellant, since the seizure, have made the following observations in their correspondence:

(i)	This is the first occasion they transported beer from Germany to the UK.
(ii)	They have suffered economic loss as a result of the seizure since the goods have fallen in value.
(iii)	Birra Peja UK were reckless in relation to providing Kelmendi with an incorrect tax identification number. They should not pay the costs of that recklessness.

34.	On 30 November 2009 and 2 December 2009 the Appellant wrote to the Respondents requesting restoration of the goods and vehicle.

35.	By a latter date of 3 December 2009, an officer of UKBA acknowledged  receipt of the request for restoration and requested that the Appellant provide evidence of ownership of the goods.

36.	In a facsimile received on 4 December 2009, the Respondents received three invoices, a copy SAAD, Movement Certificate number U16327 and CMRs 322582 with a date stamped 22 October.

37.	The Respondents undertook a formal review of the decision and by letter dated 30 December 2009 refused restoration.  On 26 January 2010 the Appellant wrote requesting a review of the decision of 30 December 2009.  In a letter dated 29 January 2010 the Respondents explained the review process and invited the Appellant to provide any further information in support of their request for a review.  On 26 February 2010, the Appellant made further representations with regard to their case.

38.	The review officer considered all the relevant circumstances and identified the following as relevant to the issue of restoration:

(i) there was no exceptional circumstances that would justify the return of the goods; 
(ii) no efforts were made by the Appellant to inform themselves of the correct import procedures; 
(iii) no checks were carried out into the background of the importing company;
(iv) the importer appeared to be unknown and at stated address;
(v) the importer had incorrectly declared his VAT number;
(vi)the offloading point is suspected to be a “slaughter” point (i.e. a point were the goods are illegally distributed.

39.	For these reasons, the Respondents found that the decision not to restore the goods was fair, reasonable and proportionate in all the circumstances.

40.	By Notice of Appeal dated 1 April 2010 the Appellant appeals against the decision on review upholding the decision not to restore the goods.

The Appellant’s case

41.	The Appellant contends as follows:

1.	That they shall not be considered as complicit with Birra Peja UK in any attempt to evade duty.
2.	The rate of duty applied to the import is too high.
3.	This was their first importation into the UK and they were being pressed by their customer to make a quick delivery.
4.	The information supplied to them by Birra Peja UK regarding their address and VAT number was incorrect and they could do little about this fact.
5.	That they suffered significant hardship as a result of the seizure.
6.	That they relied on their freight forwarders in Germany (Ressie Spedition) to advise on the correct procedure.

The Respondents’ case

42.	The Respondents contend as follows:

1.	The Respondents’ decision not to restore the goods to the UK is in line with publicly stated policy. It is a reasonable and proportionate exercise of their discretion.
2.	The Goods have been condemned as forfeit by the passage of time.
3.	The Appellant made no efforts to inform themselves of the United Kingdom import regime and procedures.
4.	The Appellant made no effort to check the background of their customer.
5.	The Appellant is likely to have been complicit in the attempted deviation of the UK duty.

Discussion

43.	Let us look at the specific points raised by the Appellant.

44.	The Appellant’s letter of 30 November 2009 asked for the return of the trailer seized since this did not belong to the Appellant.  The trailer was returned.  The Appellant said in that letter that they have suffered a “great economic loss”.  The Respondents make the point that in all cases of seizure there is an economic loss and further they were the architects of their own loss in not carrying out appropriate due diligence.  The second point made by the Appellant, is that this is the first time that they have imported beer into the UK and they were unfamiliar with the procedure and paperwork.  The Respondents say that the fact that this is the first import does not present an exceptional circumstance and a first offence does not give rise to a defence.

45.	The second letter from the Appellant dated 4 December 2009 asked for the goods not to be disposed and to be returned.

46.	The third letter dated 7 January 2010 makes no representation regarding the forfeiture.

47.	The fourth letter dated 22 January 2010 is a request by the Appellant not to be treated differently from any other parties and states that the Consignee provided the wrong information which was included in the paperwork.  It refers to “reckless” behaviour by the customer.  The Respondents in reply made the point that it is necessary for proper agents to act on behalf of the company in conducting the transaction and in undertaking due diligence with regard to information provided to HMRC.  Further, there was no pre-payment for the Goods, which appeared to be unusual for such a large shipment.

48.	The fifth letter from the Appellant dated 6 February 2010 provides further documentation with regard to the importation of the goods.  It shows that the goods came from Kosovo to Germany and then to the UK.  The point made by the Respondents is that the Appellant was familiar with cross-border trade in Europe given the substantial company and business they operated and it is quite surprising that appropriate due diligence was not conducted before the goods were exported. Therefore there are no exceptional circumstances which allows restoration of the Goods.  Further, the documentation was inaccurate, there was more beer than declared on the CMR and the wrong address was given for the Consignee.  These were significant omissions.

49.	The Respondents make the general point that there was no checking of the required documentation and the Appellant was negligent in its dealings with the Goods.  It would be normal to expect a Consignor to have a proper agent, to conduct proper due diligence and have the correct paper work since they had imported goods previously into the UK.  The responsibility rests with the Consignor to check all details before providing those to HMRC.

50.	The Appellant says that they find themselves in this position because the Consignee was a dishonest person who has now disappeared.  Due consideration should be given to the fact that they were deceived.

51.	The Respondents in their consideration of all the facts and circumstances stated in the Decision Letter:

“I have considered the decision afresh, including the circumstances of the events on the date of seizure and the related evidence, so as to decide if any mitigating or exceptional circumstances exists that should be taken into account.  I have examined all the presentations and other material that were available to the Commissioners both before and after the time of the decision. …
It appears that at best your company made no effort to attempt to import these goods in the correct manner and made little or no checks on the importing company or the delivery address.”

For these reasons, the Respondents concluded that the seized excise goods should not be restored.

52.	In his evidence, Mr Brenton said that when beer is travelling under Duty Suspension, it travels from one warehouse to another and the documentation required must be strictly complied with.  There must be a pre-payment of duty.  The goods went from Kosovo to Germany and the duty was paid in Germany.  He said he found it unusual that the goods were sent from Kosovo to Germany when they were destined for the UK and it would have been easier to send the goods directly.  He said there was several aspects of this importation which raised suspicion and doubt.  The fact that the Consignee had disappeared and the address given for the goods in the UK was an Internet Café. The final destination being a storage company which supported the view that the cargo was intended to be “slaughtered” which meant distributed illegally without the payment of UK Excise Duty which amounted to some £9,000.  He explained the policy of the Respondents clearly, which is, that “seized excise goods should not normally be restored … except if the case was exceptional”.  There were no exceptional circumstances.

General conclusion

53.	We find that it was not unreasonable for the Respondents to seize the goods and not to restore them to the Appellant.  The consignment and importation appeared to be irregular and suspicious.  The Appellant had not conducted proper checking of the relevant information given in the paperwork.  It is necessary to undertake these checks and to have paperwork which is compliant with the regualtions.

54.	The Tribunal does have some concern with the statement of Mr Brenton that on the balance of probabilities, the Appellant is complicit in the illegalities.  The Tribunal does not believe there is sufficient evidence to clearly establish this probability and therefore does not agree this finding.  Given this finding, it makes no difference to the outcome of the appeal.  The loss of revenue, which would have resulted had this offence gone undetected, would have been substantial.  The Appellant failed at each stage of the transportation of the Goods to carry out basic reasonable checks and due diligence, which is required of all Consignors (or their agents).  This is a serious omission given that the Appellant is familiar with the importation rules within Europe.

55.	The Tribunal does not consider that the decision not to restore the Goods was anything other than entirely fair, reasonable and proportionate. The Tribunal is satisfied that the Respondents had not taken into account any irrelevant matters or failed to take into account any relevant ones.

56.	The company has not discharged the onus of showing that the Decision was not within the range of possible reasonable decisions which could have been arrived at.

57.	Accordingly the appeal is dismissed.

58.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

                                                   DR K KHAN
TRIBUNAL JUDGE

RELEASE DATE: 8 June 2011