DECISION
1.
This appeal relates to the dispatch of three consignments of alcohol
from Edwards Beers and Minerals Ltd ("Edwards") in Leighton Buzzard
on 26 January 2010, 27 January 2010 and 28 January 2010 for delivery to Les
Vins Du Tunnel in France.
2.
HMRC say that the consignments did not leave the UK; the appellant that they arrived at their destination. If the appellant can show that it
is more likely than not that the assignment did arrive it will succeed in this
appeal.
3.
The Appellants (“A&R”) were originally represented by M&R Tax
Advisers Limited. However on 9 April 2013 M&R Tax Advisors Limited wrote
to the Tribunal stating that they were no longer instructed by A&R, and
that all correspondence should be sent directly to A&R. Following the
hearing, HMRC forwarded to the Tribunal a copy of an e-mail they had received
from A&R on the day of the hearing (but after the time the hearing commenced)
stating that they had been unable to attend the hearing because they were
unable to afford the cost of representation by counsel.
4.
A&R did not attend the hearing, but the Tribunal was satisfied that
they had been notified of the hearing and that it was in the interests of
justice to proceed.
5.
HMRC were represented by Mr Singh. He produced a bundle of documents
and correspondence in evidence. Included in the bundle were witness
statements from Lee Davis, a director of A&R, Joe Ciantar, head of security
at P&O Ferries Ltd, and Farshad Salili an officer of HMRC. We heard oral
evidence from both Mr Ciantar and Mr Salili
6.
Alcoholic liquor produced in, or imported into, the UK becomes in principle liable to excise duty when it is produced or imported. But the
liability to pay the duty is delayed and arises only at the "excise duty
point". This is usually the point at which the alcoholic liquor is
released for consumption. But the duty point may be postponed and the duty
‘suspended’ if the liquor is taken to an approved excise warehouse (a “bonded
warehouse”). The outline for the management of the duty was at the relevant
time provided for in Directive 92/12/EC.
7.
Article 15 of that Directive provides for arrangements permitting the
movement of excise goods between tax warehouses. These are "duty suspended
movements". Article 15 and the UK regulations require that an
intra-community movement of excise goods be covered by guarantee provided by
the warehouse keeper or the transporter. Such movements of goods are required
to be accompanied by an "Authorised Administrative Document”
(an “AAD”) This is a form prescribed by the Directive and regulations. It
contains a number of boxes most of which must be filled in by the consignor.
Four copies are prepared: one of the consignor, one for the consignee, one to
be receipted by the consignee (and if required also by the fiscal authorities
of the destination state) and returned to the consignor, and the fourth for
those fiscal authorities. All but the first copy must accompany the goods
whilst in transit.
8.
In this appeal the AADs for the movements in question were prepared by
Edwards and specified the guarantor as A&R. They also provide in box 11, ‘Other transport details’ the registration number of the tractor unit, a trailer
number and a seal number for the consignment. In every case the registration
number of the tractor unit was AF02ARH. The trailer numbers were AR104 for the
journey on 26 January 2010, AR103 for the journey on 27 January 2010 and AR102
for the journey on 28 January 2010.
9.
The Excise Duty Points (Duty Suspended Movements of Excise Goods)
Regulations 2001 provided for the occurrence of an excise duty point where
there was an "irregularity" in the course of the duty suspended
movement.
10.
Regulation 3 provides:
"(1) This regulation applies where:
(a) excise goods are:
(i) subject to a duty
suspended movement starting in the United Kingdom ...and
(b) in relation to those
goods and that movement there is any irregularity which occurs or is detected
in the United Kingdom.
(2) Where the Commissioners are satisfied that the
irregularity occurred in 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 states 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 the attention of the Commissioners.
...
11.
The regulations define “irregularity” to mean “an irregularity or
offence within the meaning of Article 20 of the Directive. Article 20 is
not particularly informative:
"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."
12.
However it seems clear that a movement of excise goods so that they are
released into free circulation when they should have been moving between
warehouses under duty suspension arrangements is an irregularity. If alcohol
destined for France did not leave the UK there must have been an
irregularity which occurred in the UK.
13.
Regulation 7 provided:
"7. (1) Subject to
paragraph (2) below, where there is an excise duty point as prescribed by
regulation 3 ... above, the person liable to pay the excise duty on the
occurrence that excise duty point shall be the person shown as the consignor on
the accompanying administrative document or, if someone other than the
consignor or is shown in box 10 of that document as having arranged for the
guarantee, that other person."
14.
In this appeal A&R had arranged to give a guarantee and its name was
in box 10. Thus if an excise duty point occurred A&R would be
liable for the duty which had thitherto been suspended.
15.
Sections 14 to 15F of the Finance Act 1994 provide that HMRC may be
required to review certain decisions including certain decisions to assess
excise duty. Section 16 permits an appeal in relation to such decisions of HMRC
on review. Section 16 (6) provides:
"On an appeal under
this section the burden of proof …as to [certain matters not relevant to this
appeal] shall lie upon the commissioners; but it shall otherwise be for the
appellant to show the grounds on which any appeal is brought have been
established."
16.
By reason of section 16(6), the burden is on the appellant to show that
the alcohol arrived at the warehouse in France. .
17.
To summarise: if the goods do not arrive at the warehouse in France then there must have been an irregularity. If the irregularity occurred in the UK then a duty point arises and A&R is liable for the duty as guarantor. If it is not
possible to determine where the irregularity occurred, a duty point
nevertheless occurs and A&R is liable as guarantor.
Background Facts
18.
On the basis of the evidence before us we find that the background facts
are as follows:
19.
A&R is in the business of national and international road haulage.
According to Mr Davis’s witness statement it currently operates a fleet of
approximately ten tractor units and twenty trailers. In addition it utilises a
small base of sub-contract haulage businesses which provides it with access to
five or six additional tractor units when it is particularly busy.
20.
On 18 January 2010, Mr Salili wrote to A&R imposing additional
conditions in respect of the movement of duty suspended excise goods that its
vehicles undertake under its movement guarantee. In particular A&R were
required to notify HMRC by fax or e-mail of any changes in the trailer or
tractor units used to move excise goods in advance of the vehicle leaving the UK.
21.
A&R sent HMRC pre-notifications that its tractor unit AF02ARH would
be collecting alcohol from Edwards and would be delivering the alcohol to the
warehouse of Les Vins du Tunnel in Calais in France using trailers AR104, AR103
and AR102 on 26 January 2010, 27 January 2010 and 28 January 2010 respectively.
The Accompanying Administrative Documents (“AADs”) for the loads were
consistent with this.
22.
On 1 February 2010, Mr Salili received information that tractor unit
AF02ARH had not travelled to France on those dates. Whilst the trailers AR104,
AR103 and AR102 had travelled to France on 26, 27 and 28 January respectively,
they were attached to tractor units GK020IB, YX05EWU and YX04HBG respectively,
and were manifested on the ferry as empty.
23.
On 9 February 2010 Mr Salili met Anthony Lucas, who was then a director
of A&R. Mr Lucas told Mr Salili that there had been no “trailer swaps” in
respect of any movements of excise goods between 26 January and 28 January
2010, or indeed in respect of any other past movements. Mr Salili discussed
some 35 different movements with Mr Lucas. In relation to the movements which
are the subject of this appeal, Mr Lucas reviewed A&R’s business records
and confirmed that tractor unit AF02ARH had been swapped with tractor units
GK02OJB on 26 January 2010, tractor unit YX05EWU on 27 January 2010 and tractor
unit YX04HBG on 28 January 2010. Mr Lucas confirmed to Mr Salili that these
were the tractor units that he claimed had transported alcohol from Edwards to France.
24.
No notification of these tractor swaps had been given to HMRC, in breach
of the additional condition attached to their movement guarantee by the letter
of 18 January 2010. By a letter dated 2 March 2010, a civil penalty was
imposed for the breach of the additional conditions, and this penalty has not
been challenged by A&R.
25.
Mr Salili wrote again to A&R on 3 June 2010 stating that his
enquiries had established that empty loads had travelled with tractor units
GK02OJB, YX05EWU and YX04HBG on 26, 27 and 28 January respectively, and that he
intended to raise an assessment to recover the duty payable on the alcohol
collected from Edwards.
26.
In a letter dated 30 June 2010, M&R Tax Advisors, A&R’s
representatives, stated that the account given by Mr Lucas at the meeting on 9
February was incorrect. In fact trailers AR104, AR103 and AR102 were
transferred from tractor AF02ARH to different tractor units, and that trailers
AR104, AR103 and AR102 had travelled laden to France with tractor units
YX04HBG, FJ55HUA and YX03JWV by Eurotunnel on 26, 27 and 28 January 2010
respectively.
27.
Mr Lucas resigned as a director of A&R on 20 December 2010. Mr
Davis was appointed as a director on 18 November 2011, following the
resignation of another director.
28.
Mr Davis explains in his witness statement that tractor units and
trailers may need to be exchanged for three reasons. The first is that drivers
and their tractor units may need to be exchanged because regulations limit the
number of hours that a driver can drive a heavy goods vehicle. Second, the
operator’s licence which applies to a specific tractor unit may limit its
national or international usage. Finally, tractor units are approved for
hauling up to a specified maximum weight. In consequence a change of tractor
may be required on a trailer’s return journey to reflect the goods being
carried. Mr Davis also explained that trailers may often leave the UK empty
because the UK is a net importer – and consequently it was often profitable for
A&R to run tractors with empty trailers out of the UK, in order to collect
a profitable return load (a “reload”)..
29.
In his witness statement, Mr Davis explains that Mr Lucas had made a
mistake in his account because, given the limited time available at the
meeting, he sought to respond to Mr Salili’s enquiries as quickly as possible
and only after a relatively cursory review of the business records. Mr Davis
states that according to the business records available to him:
(1)
Tractor unit AF02ARH collected the load in trailer AR104 on 26 January
2010. The tractor unit was exchanged for YX04HBG, which took the trailer to France on Eurotunnel.
(2)
Tractor unit GK02OBJ travelled to France on 26 January 2010 unloaded,
with a view to collecting a “reload”. A further exchange of tractor units
occurred in France, so that vehicle GK02OBJ subsequently returned to the UK with trailer AR104.
(3)
Tractor unit AF02ARH collected the load in trailer AR103 on 27 January
2010. The tractor unit was exchanged for FJ55HUA, which took the trailer to France on Eurotunnel.
(4)
Tractor unit YX05EWU travelled to France unloaded with a view to
collecting a reload. A further exchange of tractor units took place in France, so that YX05EWU returned with trailer AR103
(5)
Tractor unit AF02ARH collected the load in trailer AR102 on 28 January
2010 was exchanged with tractor unit YX03JWY, which took the trailer to France on Eurotunnel. The trailer was unloaded, and tractor unit YX03JWY returned to the UK with trailer AR102 with a reload.
(6)
Tractor unit YX04HB travelled to France unloaded with a view to
collecting a reload.
30.
Attached to Mr Davis’s witness statements are copies of Eurotunnel
transport documents showing that tractor YX04HBG travelled on 26 January 2010,
tractor FI55HUA travelled on 27 January 2010 and tractor YX03JWV travelled on
28 January 2010. Neither the trailer numbers nor the weights of the vehicles
are recorded.
31.
Attached to Mr Davis’s witness statement were copies of the CMR
International Consignment Notes receipted by Les Vins du Tunnel, and indicating
that the consignment had been checked (as required by Art 19(2) of the
Directive). Also attached to the witness statement were copies of “copy 3” of
the AADs which A&R had obtained from Edwards. Mr Davis submits that these
show that the movements had been properly discharged and that there had been no
irregularities.
32.
Mr Davis states that when he was appointed as a director, he found that
A&R’s records were in a state of disarray. Mr Davis took steps to improve
the company’s record keeping. However he has not been able to locate the
tachographs for the relevant tractor units for the relevant dates.
33.
We also had the benefit of a witness statement from Mr Joe Ciantar, head
of security at P&O Ferries Ltd (“P&O”), and he also gave oral evidence.
34.
Mr Ciantar told us that freight vehicles cannot be booked onto ferries
in advance. They all operate on a “turn up and go” basis. The procedure
adopted at Dover Eastern Docks is that the freight vehicle would first clear
the UK and French border controls by producing passports for all of the
drivers. Once the vehicle has cleared the border controls and security shed,
it proceeds to a weigh bridge and is weighed. A ticket is produced showing the
date, time and gross weight of the vehicle (being the combined weight of the
tractor unit and trailer). The weight of the vehicle is required by P&O for
the purposes of loading the ferry to maintain its stability.
35.
The vehicle then proceeds to the P&O check-in booths, where the
driver gives the clerk the weigh bridge ticket, his passport and documentation
showing details of the load. These details are recorded by the clerk on
P&O’s computer system. The clerk would check and record the registration
number of the tractor unit and the trailer number. The clerk can check the
tractor unit registration number using close circuit cameras. However the
trailer number is not always visible on the camera. If the trailer number is
written on the side of the trailer, it can be checked by the clerk. However,
if it is not, then the driver would be asked by the clerk for the trailer
number. The driver also declares whether the trailer is empty. P&O do
not check the content of the trailer. Payment is collected from the driver
either in cash or by card. Alternatively, the haulage company may have an
account with P&O. and this is the most frequent method of payment.
36.
Mr Ciantar told us that on the basis of the computer records maintained
by P&O:
(a)
On 26 January 2010 at 20:26 tractor GK02OJB and trailer 104 travelled
from Dover to Calais with driver Hawkins Paul. The vehicle was recorded as
being empty. The gross weight of the vehicle was 15,520kg. Mr Ciantar told us
that this weight was consistent with an empty load.
(b)
On 27 January 2010 at 19:45 tractor YX05EWU and trailer 103 travelled
from Dover to Calais with driver K Williams. The vehicle was recorded as being
empty. The gross weight was 15,440kg. Mr Ciantar told us that this weight was
consistent with an empty load.
(c)
On 28 January 2010 at 18:15 tractor YX04HBG and trailer AR102 travelled
from Dover to Calais with driver A Cecil. The vehicle was recorded as being
empty. The gross weight was 14,780kg. Again Mr Ciantar told us that this
weight was consistent with an empty load.
37.
A&R challenge Mr Ciantar’s evidence. Mr Davis’s evidence is that
A&R book ferry crossings in advance, and at the time of the booking, the
registration number of the tractor is provided, but not the number of the
trailer. Mr Davis also states that at the P&O check-in booths, the clerk
may, or may not request the trailer number, they may enter a trailer number
which is a fabrication of their own, or the driver may provide a trailer number
which is incorrect. In support of this contention, Mr Davis refers to P&O
recording trailers 257, EA101 and 252 as being hauled by their tractor units on
crossings on 26 and 27 January 2010, and that at the relevant time
A&R only hauled its own trailers, and did not at the relevant time have
trailer units with those numbers. Mr Davis contends that this demonstrates
that P&O’s records are unreliable. They should therefore not be relied
upon in the case of the trailers that were hauled by vehicles GK02OJB, YX05EWU
and YX04HG on 26, 27 and 28 January 2010.
38.
We have no hesitation in preferring the evidence of Mr Ciantar over that
of Mr Davis. We do so for the following reasons. First, Mr Davis in his
witness statement says that A&R’s record keeping was in a considerable
state of disarray and disorganisation – and indeed this was the reason why the
tachographs for the relevant tractor units could not be traced. The
considerable disarray and disorganisation of A&R’s business records would
also mean that evidence based on A&R’s business records cannot be treated
as wholly reliable.
39.
Second, the evidence of Mr Ciantar is that where the trailer number is
not visible to the clerk (either because it is neither visible on the camera
nor is painted on the side of the trailer), it is the driver that provides the
number. It is not plausible that (if the numbers are visible to the clerk),
the clerks would have got all three trailer numbers wrong, or alternatively if
the numbers were not visible, all three drivers would get all three trailer
numbers wrong - and in either case, the alleged wrong trailer numbers given
would coincidentally be those of the three trailers that A&R had initially
stated would travel laden and are listed on the relevant AADs.
40.
Finally, the basis on which Mr Davis asserts that A&R did not use
trailers 257, EA101 and 252 in January 2010 is unclear. He was not appointed
as a director until November 2011, and it is unclear when he actually joined
the company, or in what capacity he is able to make the statement that A&R
did not use these trailers on the ferry crossings. From the notes of a meeting
that Mr Salili had with Mr Lucas on 12 January 2010, we note that Mr Lucas
stated that A&R owned 6 trailers (AR101-AR106) and hired two more (AR107
and AR108).. Yet on 23 February 2010 tractor YX04HBG collected a full load of
beer from Edwards, but was later intercepted at Dover with a different trailer
(TR2116) containing forklift parts. This brings into doubt the veracity of
A&R’s assertion that at the relevant times they used no trailer other than
those numbered AR101 to AR108.
41.
Mr Davis also relies on the part 3 AADs and receipted CMRs to show that
the alcohol was received at their intended destination in France. We had no evidence before us as to the procedures adopted by Les Vins du Tunnel as
to the reliability of their systems and the accuracy of their receipts. In
addition, Mr Salili stated in evidence that one of the mechanisms used to evade
alcohol duty is to divert the duty suspended alcohol loaded from a UK excise warehouse somewhere in the UK before leaving empty for France. In France an identical load is borrowed, solely for the purpose of presenting the load to the
destination warehouse to get the AADs discharged. The borrowed load is
subsequently returned to the lender. The fraudster may then only have to bear
the cost of French duty, which is far lower than the corresponding UK duty. Although fact the AAD procedure appears on its face to show that no irregularities
have occurred, this is not necessarily the case. The same point applies to the
CMRs .that appear to have been receipted by the destination warehouse.
42.
We find that trailers AR104, AR103 and AR102 were used to collect the
alcohol from Edwards as specified on the AADs. We find that these trailers
left the UK empty on the material dates. We therefore find that the alcohol
must have been removed from the trailers whilst they were in the UK. We find that the receipts endorsed on the AADs and CMRs cannot be relied upon.
43.
We find that A&R have not shown that it was more likely than not
that the goods left the UK or arrived at Les Vins du Tunnel.
44.
In this appeal A&R’s grounds of appeal are that:
(1)
The original decision to impose the assessments for excise duty and VAT
were unreasonable and not proportionate;
(2)
There were no irregularities in the relevant three movements;
(3)
Even if there were irregularities, then
(a)
A&R had no knowledge of them, did not cause them, and cannot be held
liable for the excise duty and VAT; and
(b)
The irregularities did not take place in the UK
(4)
As the VAT assessment is based on the excise duty assessment, as the
excise duty assessment is invalid, so is the VAT assessment.
45.
The failure of the alcohol to arrive at Les Vins du Tunnel was an
irregularity. It was not possible to say it took place in France, therefore it is to be treated as taking place in the UK (and indeed we find that HMRC’s
submission that the alcohol did not leave the UK is proved). Thus an excise
point arises in the UK.
46.
A&R, being the guarantor of the delivery is liable for the duty.
The fact that A&R may have had no knowledge of the irregularity or may not
have caused them is irrelevant. It is liable by reason of being the guarantor.
47.
In the circumstances, HMRC’s decision to impose an assessment is
reasonable. As the amount of the assessment represents the duty and VAT
arising in respect of the goods in question, we find that the assessment is not
disproportionate.
48.
There was no dispute as to the amount of the duty. The assessment was
therefore properly made.
49.
We dismiss the appeal.
Costs
50.
As stated above, A&R’s representatives wrote to the Tribunal on 9
April 2013 stating that they were no longer instructed.
51.
On the same date, HMRC e-mailed A&R asking for confirmation by
midday on 10 April whether they intended to pursue the appeal. As no response
had been received by the deadline (and A&R did not respond to telephone
calls), HMRC had to assume that the hearing would go ahead. HMRC prepared the
appeal bundles for the Tribunal. HMRC put A&R on notice that if it
subsequently confirmed that was not pursuing the appeal, HMRC would apply for
its costs under Rule 10(b) of the Tribunal rules, as it would have been
unnecessarily forced to prepare for the hearing.
52.
In this context we note that A&R did not comply with the Tribunal’s
directions relating to the preparation of bundles or the provision of a
skeleton argument.
53.
A&R e-mailed HMRC on 22 April at 12:10pm (after the appeal hearing
had commenced) stating that they could not afford to pay for representation at
the hearing.
54.
HMRC have applied for their costs under Rule 10(b) of the Tribunal
Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009. This gives the
Tribunal discretion to award costs against any party it they (or their
representative) have acted unreasonably in bringing, defending or conducting
the proceedings.
55.
The Tribunal exercises its discretion to award costs in standard
category appeal sparingly. In particular, it is only fair that unrepresented appellants
(as was the case here after 9 April 2013) must be afforded a wide margin of
latitude in the conduct of any appeal.
56.
However, directions given by the Tribunal are there to be carried out,
and failure by a party to comply with express directions without good reason is
likely to amount to unreasonable conduct.
57.
We are therefore minded to allow HMRC to make an application for costs,
but only in respect of the reasonable costs necessarily incurred in the
preparation of the bundles specified in Direction 7 of the agreed directions
which were approved by the Tribunal on 11 October 2011. In relation to costs,
we direct as follows:
(1)
In accordance with Rule 10(3), HMRC must deliver a written application
together with a schedule of the costs claimed in sufficient detail to allow the
Tribunal to make a summary assessment of such costs if it so decides. Such
application must be delivered to the Tribunal and to the Appellant no later
than 28 days after the date on which this decision is released.
(2)
The Appellant shall deliver to the Tribunal and to the Respondents a
written statement of any representations that it may wish to make in respect of
the application and schedule. Such statement shall be filed no later than 28
days after the date on which the application for costs is received by it.
58.
The Tribunal shall then decide whether to proceed to make a summary
assessment without the need for a further hearing, or whether further
directions are necessary. Such decisions shall be made by a Tribunal Judge
sitting alone.
Rights of Appeal
59.
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.
NICHOLAS ALEKSANDER
TRIBUNAL JUDGE
RELEASE DATE: 21 October 2013
