Cully v Customs & Excise [2003] UKVAT(Excise) E00580 (30 December 2003)

EXCISE DUTY – Restoration – Trailer unit used for transporting large quantities of illicit whisky – Whether Appellant had taken all reasonable steps to prevent diversion – Finding that Appellant had acted with lack of care – Appeal dismissed

LONDON TRIBUNAL CENTRE

	MICHAEL ANTHONY CULLY	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

		Tribunal:	RODNEY P HUGGINS FCI Arb, FRSA   (Chairman)
				RUTH WATTS-DAVIES MHCIMA  FCIPD				 

Sitting in public in London on 5 December 2003

The Appellant did not attend and was not represented 

Michael Thomas, counsel, instructed by the Solicitor for Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

The appeal
1.	Mr Cully (“the Appellant”) appeals against a decision contained in a letter dated 30 August 2002 in which the Commissioners reviewed and confirmed an earlier decision of the Commissioners not to offer to restore a Renault Magnum Intercooler tractor unit, registration number M647 PHN (“the vehicle”).  A trailer being drawn by the vehicle was found on 9 May 2002 to contain pallets each containing 64 cases of illicit whisky destined for the black market.  The total amount of whisky in the trailer was 15,659 litres.

2.	At the hearing the Appellant did not appear nor did anyone on his behalf and no reason for his absence was given.  The hearing notice had been sent to the Appellant’s legal representative and the Appellant himself in good time at their notified addresses.

3.	The tribunal decided to proceed under Rule 26(2) of the Value Added Tax Tribunals Rules 1986 as amended as the Appellant can apply within 14 days after the date of release of the decision to have it set aside if there is a proper reason.  The Appellant is therefore protected because he can apply to have the appeal re-heard.  The Appellant should note, however, that if his application is to be entertained by a tribunal he must appear or arrange to be represented at the hearing of his application.

4.	Mr Michael Thomas put in a bundle of 86 pages including copies of correspondence, the transcripts of two recorded interviews with the Appellant, statements of Customs witnesses and other ancillary documents.  He called three witnesses, Customs officers Timothy Louis Marshall, (“Mr Marshall”) and Charles William Roebuck (“Mr Roebuck”) who apprehended the Appellant and John Raymond Rushforth (“Mr Rushforth”) the Customs reviewing Officer.

The facts

5.	From the evidence we find the following facts.

6.	The Appellant lives in Luton and told Customs Officers when interviewed that he has been a haulage contractor working on his own for some six or seven years in the transport business.

7.	Mr Cully has been involved on two previous occasions when his transport vehicles were seized by the Commissioners whilst carrying loads of alcohol.  The latest occasion was on 31 January 2002 when his lorry index number 93KE4590 with semi-trailer were stopped when he was entering the United Kingdom at the Eastern Docks, Dover, Kent.  A decision was made by the Commissioners that if he paid a restoration fee of £13,750 in respect of his lorry and trailer then they would be released to him.  This was reviewed on 16 July 2002 and the Appellant appealed against that review decision.  The appeal was heard before another tribunal on 12 June 2003 (the earlier tribunal decision).  The appeal was dismissed and there has been no further appeal against that tribunal decision.

8.	It was revealed in the earlier tribunal decision that the Commissioners’ records showed the Appellant had imported consignments of beer and spirits on at least six occasions prior to that case.  Further, the record also showed that the Appellant was owner and driver of a freight vehicle carrying a full load of spirits that was seized by the Commissioners on 29 January 1999.

9.	On 9 May 2002 officers of Customs and Excise including Officers Marshall and Roebuck from the Detection North Leeds Flexible Anti-Smuggling team entered the yard of Stansfield Haulage, Shay Lane, Halifax, Yorkshire at approximately 7.30a, and saw pallets of cases being off-loaded by a forklift truck from a 40 feet curtain-sided trailer at the rear of the vehicle.  The cases indicated they contained High Commissioner brand whisky.  The trailer was identified by the marks H>H.02 KEL-BERG I/D T11710BPW.  Mr Cully was standing by his vehicle and the trailer and he was accompanied by Mr Saemus Victory who had been a passenger in the tractor unit. Mr Cully told Officer Marshall that he was the owner of the vehicle.  When the Customs Officers arrived three pallets had already been off-loaded from the trailer and each contained 64 cases of High Commissioner whisky.  Every case contained 12 x 0.7 litres at 40% alcohol by volume.  On the trailer there were a further 23 pallets each holding 64 cases of similar size and marked bottles.  One of the cases was seen to be damaged on the top of the load and it contained two broken bottles.  Tape on the pallets said they came from Glen Catrine Boarded Warehouse, Catrine, Ayrshire, Scotland.  Both Mr Cully and Mr Victory were arrested.  Before Mr Cully was taken to the police station in Halifax, he was told by Officer Roebuck that the tractor unit, trailer and spirits loaded on it had been seized at 8.13am.  Arrangements were made for the removal of the vehicle trailer and load after the arrest had taken place.

10.	The Customs Officers inspected the cab of the tractor unit and did not discover any documentation relating to the load of High Commissioner whisky.  They did find a letter of instruction addressed to Cully Transport asking for some 1,975 cases of seven types of spirits including 192 cases of High Commissioner whisky to be collected on Wednesday, 17 April 2002 and delivered to a Spanish address in Madrid.

11.	The same day, Mr Cully was interviewed under caution at Halifax Police Station by Officers Marshall and Elaine West.  He was accompanied by his legal representative Mr Don Levinson.

12.	In response to questioning Mr Cully explained that he did not know what the goods he had been carrying were and he did not look at the paperwork.  He had picked the trailer up from the Isle of Sheppey from a road of which he could not remember the name.  He had never been there before and was given the trailer’s number to locate it.  The man who had contracted with the Appellant for him to make this delivery was only known to him as “Jaz”.  He did not know his surname or the name of the organization.  The Appellant had met Jaz when Jaz had approached him in Spain at the beginning of 2001.  Jaz typically telephoned the Appellant the day before when he wanted a job doing and paid him at the end of every month.  In the last six months he had not transported any other trailer loads full of spirits.

13.	Mr Cully was interviewed again at Halifax police station on 7 June 2002.  The interview was conducted by Customs Officer Marshall and S Davies. On that occasion replying to questioning he explained that he was given instructions over his mobile phone in order to find the yard in Halifax.  It was standard practice for Jaz to contact him by telephone during jobs because directions and addressed were not given out beforehand.  He could not remember where in Spain he had first met Jaz.  It made no difference to him what his cargo was.  He was not concerned that the load did not have any accompanying paperwork.  It was not his problem.

14.	By letter dated 21 June 2002 Mr Cully wrote to Customs stating, “Please treat this letter as my formal application for the immediate return of my Renault Intercooler Tractor Unit index number M647 PHN.  The matter has become extremely urgent and requires your immediate attention”.

15.	Officer Roebuck replied to the Appellant on 4 July 2002 informing him that the tractor unit would not be restored drawing his attention to section 3 of the ‘Explanatory Note to Seizures’ on the reverse of form C156 which he had issued to him and to section 141(1) of the Customs and Excise Management Act 1979.  Mr Cully replied by letter dated 9 July challenging the validity of the seizure of the tractor unit and disagreeing with the decision not to restore it.  He added “There are no allegations or charges against me and indeed your enquiries in relation to me have been brought to an end.”  Officer Roebuck took advice and whilst the documentation was being considered by an Appeals and Complaints Officer in Hull, Officer Roebuck wrote to Mr Cully on 5 August 2002 informing him that the matter was being looked into.  On 7 August Mr Cully wrote again asking that his letter be treated as “a second formal application for return of vehicle M647 PHN”.  He continued “On advice from my solicitor to make this request due to two newspaper articles he has sent to me advising me to forward these copies to Mr Roebuck with this application for a return.  I look forward to hearing from your office by return.”  The first article was a report on the case of Fox v Commissioners of Customs and Excise before Mr Justice Lightman, judgment 23 July 2002.  The second article related to a report of the judgment of the Divisional Court dated 31 July 2002 reported at [2002] 3 WLR 1219 where the Respondents were Hoverspeed Limited and four individuals.  [This judgment was subsequently reversed on appeal by the Court of Appeal in a judgment handed down on Tuesday, 10 December 2002]

16.	By a letter dated 10 August 2002 the Commissioners acknowledged receipt of the Appellant’s letter and gave notice that it was being forwarded to the Appeals and Complaints Officer dealing with the appeal.  Officer Rushworth as a Review Officer, conducted a thorough review and informed the Appellant of the outcome on 30 August 2002.

17.	This review letter itemized all the correspondence and set out the evidence of the Customs Officers.  Mr Rushworth said that he had taken all these matters into account and had decided to uphold the decision not to restore the vehicle.  He gave as his reasons the following points:

•	You were in possession of a large load of illicit excise goods, namely whisky, when you were intercepted at Halifax in May 2002.

•	From the points of view both of your duty of care to others and your own health and safety it is reasonable to expect that you would need to know the nature and packing of the goods you were carrying and yet, if your explanation of events is to be believed, you showed a total disregard for this.

•	Having already been the subject of a Customs interception during 2002, also coincidentally for a large load of whisky, it is also reasonable to expect that you would have learned to undertake basic checks to ascertain the nature of all of your loads but apparently you did not.

•	The Principal behind this illicit load is apparently a shadowy figure known to you only as ‘Jaz’ who you met because he approached you in Spain some 18 months previously.  If you are to be believed.  Your trust in him is unquestioning.

•	Your descriptions of the collection and subsequent delivery of your load are, at best, hazy, especially bearing in mind the timing of your first interview.

•	There were significant inconsistencies across the two interviews that throw considerable doubt on the efficacy of your answers.

•	I can find no evidence to support your written statement that you were ‘previously assured that the tractor unit would be returned to you.’

•	The matter of whether or not there are further allegations or charges against you is irrelevant to the decision not to restore the vehicle.

•	With reference to the article ‘Fox v Commissioners of Customs and Excise’, a copy of which you submitted along with your letter dated 7 August 2002, this matter is irrelevant to your circumstances as it is concerned with the Customs and Excise Management Act 1979 section 141(1)(b).  Your vehicle was seized under the provisions of section 141(1)(a).

•	With reference to the Times article this is also irrelevant to the facts of this case as it is concerned with cross channel shopping.”

18.	During the course of the investigation into this matter by Customs it was discovered that a faxed letter was sent by Jack Baars Wholesale of Harrow Weald on 3 May 2002 to London Bridge Vaults which is a bonded warehouse also trading as Seabrook asking for the release and transport of two loads to Santos, Algeciras, near Cadiz, Spain and one of the loads was “1,664 cases High Commissioner 70cl x 12”.  This was acknowledged by Seabrook on 7 May 2002 asking for collection to be arranged from the bonded warehouse at 10-20 Stainer Street, London DE1 9RL on 8 May 2002.  An invoice was issued for the order of the load of cases of whisky on 7 May 2002 and the invoice notes that this load was collected by “Tri HH02”.  There is also a note on the invoice that one case of this consignment was damaged with a broken bottle.

19.	Mr Cully appealed on 22 March 2003 stating as his grounds, “There are no allegations or charges against me and in the circumstances the seizure was unlawful”.

The law

20.	Excise duty is chargeable upon spirits under s.5 of the Alcoholic Liquor Duties Act 1979:

“5  Spirits : charge of excise duty

	There shall be charged on spirits - …

(b)  distilled, or manufactured by any other process whatsoever, in the 
       United Kingdom

A duty of excise [at the rate of [£19.56] per litre of alcohol in the spirits].”

21.	Under Section 92 of the Customs and Excise Management Act 1979 (CEMA 1979) the Commissioners may approve, for such periods and subject to such conditions as they think fit, places of security for the deposit, keeping and securing - …

“(c)	of goods manufactured or produced in the United Kingdom … and permitted by or under the customs and excise Acts to be warehoused without payment of any duty of excise chargeable thereon.

22.	By virtue of section 100(2) of CEMA 1979 where –

“(e)	any goods which have been lawfully permitted to be removed from a warehouse or Queen’s warehouse without payment of duty for any purpose are not duly delivered at the destination to which they should have been taken in accordance with that permission,

those goods shall be liable to forfeiture.”

23.	Section 139 of CEMA 1979 provides:

“(1)  Any thing liable to forfeiture under customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty’s armed forces or coastguard.”

24.	If goods are liable to forfeiture a vehicle used for transporting those goods is liable to forfeiture by virtue of section 141 CEMA 1979 which states:

“(1)  Without prejudice to any other provision of the Customs and Excise Acts 1979 where anything has become liable to forfeiture under the Customs and Excise Acts – any ship, aircraft, vehicle, animal, container (including any article of passengers’ baggage) or any other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time it was so liable or for the purposes of the commission of the offence which later became so liable … shall also be liable to forfeiture.”

25.	The Commissioners have a discretion to restore forfeited items under s.151 of CEMA 1979 which provides:

“152  Power of Commissioners to mitigate penalties, etc

The Commissioners may, as they see fit –

…

(b)  restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts.”

26.	The Review procedure is governed by section 15 of the Finance Act 1994 which provides that:-

“(1)  Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either –

(a)	confirm that decision; or

(b)	withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate.”

27.	In an appeal of this nature the jurisdiction of the VAT and Duties Tribunal is governed by section 16(4) of the Finance Act 1994. (the 1994 Act)  It provides as follows:

“(4) 	In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say –

(a)	to direct that decision, so far as it remains in force, is to cease to have effect from 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 future.”

Conclusions

28.	First, it is necessary for the tribunal to consider whether the chain of events in this appeal enabled the seizure of the vehicle to take place.

29.	The tribunal is satisfied on the evidence that a consignment of 15,569 litres of whisky with the brand name High Commissioner came originally from the Glen Catrine bonded warehouse at Catrine, Ayreshire, Scotland since Mr Roebuck found that there was tape on each of the pallets containing the cases of whisky identifying that source.

This consignment without payment of any excise duty chargeable thereon was then transferred to a bonded warehouse of Seabrook Warehousing Limited (Seabrook) in South East London. On or about 8 May 2002, on the instructions of Jack Baars Wholesale Seabrook released the consignment again without any excise duty being paid for delivery to Santos Logo Almanenje Y Distribution SA at Muelle Isla Verde, Algeciras, Cadiz, Spain.  The consignment was brought on a trailer with the mark HH02 to a road on the Isle of Sheppey where it was parked.  Overnight, the Appellant driving his vehicle picked up the trailer and drove to Stansfield Transportation’s premises at Halifax, Yorkshire.  Customs Officers arrived on 9 May 2002 at about 7.30am to discover the consignment being unloaded.  Because it was quite evident that that the excise duty had never been paid on the consignment and Section 100(2) of CEMA 1979 had been breached, the consignment was seized under Section 139 of CEMA 1979.  The vehicle and trailer were taken by Customs under Section 141 of CEMA 1979.  The tribunal finds that the seizure was lawful.

30.	The second issue to be determined is whether the Commissioners arrived at the decision made by Officer Roebuck reasonably within Section 16(4) of the 1994 Act.

31.	As was pointed out in another tribunal decision of Jason Thomas Bowd v Commissioners of Customs and Excise [1995] V&DR 212, when considering the word “reasonably” it said, “In our view, the word “reasonably” is to be construed in the wider sense used by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 when he stated at page 229:

“… A person instructed with a discretion must, so to speak, direct himself properly in law.  He must call his own attention to the matter which he is bound to consider.  If he does not obey those rules he may truly be said, and often is said, to be acting ‘unreasonably’.  Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.  Warrington L J in Short v Poole Corporation [1926] Ch 66 gave the example of the red-haired teacher, dismissed because she had red hair.  That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters.  If it is so unreasonable that it might almost be described as being done in bad faith; and, in fact, all those things run into one another.”

32.	The approach to be adopted by a tribunal in reviewing the exercise of a discretion conferred on the Commissioners (albeit a different discretion) was put in this way by Lord Lane in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1980] 2 WLR 653 at p.663:

“It could only properly [review the discretion] if it were shown that the Commissioners had acted in a way in which no reasonable panel of Commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.”

This does not allow the tribunal to look at the decision and simply disagree with it and substitute its own decision.

33.	We therefore return to the review decision and to what Officer Rushworth said about it in evidence before the tribunal.  The principal mattes upon which that decision was based are set out in paragraph 17 above.  In our view the evidence before the tribunal leads us to find the following factors:

(a)	The story that Mr Cully did not know what he was carrying is simply not 	credible.

(b)	It is reasonable to expect a haulier to know the nature and packing of the loads 	which he transporting in order to ensure the safety of himself and others.

(c)	The Mr Cully was previously intercepted on 31 January 2002 transporting 	15,660 litres of whisky on which duty had not been paid. On that occasion 	both the Mr Cully’s vehicle and the whisky were seized.   On that occasion Mr 	Cully’s vehicle was offered for restoration upon payment of £13,750.

(d)	Mr Cully was therefore well aware of the potential consequences if he was 	found transporting illicit alcohol and the need to undertake basic checks.

(e)	For the same reasons Mr Cully was not telling the truth when he stated in 	interview that he had not transported alcohol during the previous six months.

(f)	Mr Cully gave inconsistent answers when he was interviewed.

(g)	It is not credible that Mr Cully placed the amount of trust which he claims to 	have done in ‘Jaz’ whom he hardly knew and who operated in the way in 	which he did.

34.	For these reasons, we find the review decision was one which a reasonable body of Commissioners would have arrived at within the Wednesbury criteria.

35.	Finally, we have to consider whether the current Customs and Excise Policy not to restore seized vehicles used for commercial smuggling or diversion (as is the case here) is reasonable.

36.	We rely upon the Court of Appeal judgment in Lindsay v Customs and Excise Commissioners [2000] STC 588 CA when it as confirmed that it is reasonable for the Commissioners to have a policy of not restoring seized vehicles used to import excise goods for a commercial purpose where the excise duty has not been paid.  This policy exists in order to prevent the evasion of duty and to protect legitimate trade.

37.	The Appellant may wonder why he was not offered restoration for an appropriate fee as occurred in his earlier tribunal decision.  The above policy contains a provision which reads as follows:

“Where the Commissioners are not satisfied that the driver or haulier has carried out what Customs consider to be basic reasonable checks, which would have identified the illicit load, on the first occasion the vehicle may be seized and restoration offered for a fee equal to 20% of the revenue involved or the trade value of the vehicle, whichever is the lower.  On the second detection, the vehicle may be seized and not restored.”

This was, in fact, the third such detention as far as the Appellant was concerned.

Decision

38.	The tribunal finds there is no ground upon which to ask the Commissioners to conduct any further review of their decision on 30 August 2002 and dismisses the appeal.

39.	In view of the fact that the Appellant did not appear at the earlier tribunal hearing nor on this occasion without reason, the tribunal awards the Commissioners the sum of £500 towards its costs.

RODNEY P HUGGINS
CHAIRMAN

RELEASED:

LON/03/8101