EXCISE DUTY – Restoration – Commercial vehicle – Decision to restore seized vehicle on payment of trade value of vehicle – Vehicle seized carrying consignment of 4.7 million cigarettes – Application of policy – Whether basic reasonable checks carried out by driver or haulier – Yes – Whether other special circumstances for departing from policy – Yes – Appeal dismissed – Further review directed

LONDON TRIBUNAL CENTRE

	TRANSORIENTAL-TRANSPORTES DE MERCADORIAS LDA	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	STEPHEN OLIVER QC   (Chairman)
						CAROLINE de ALBUQUERQUE 

Sitting in public in London on 28 January 2004

Jose Pires, lawyer from Portugal, for the Appellant 

Katina Sawyer, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	Transoriental-Transportes de Mercadorias LDA (“Transoriental”) appeals against a decision taken on review to offer restoration of a tractor and trailer (“the vehicle”) which had been seized by the Commissioners on 28 January 2002 upon payment of a fee of £50,555.  The review letter is dated 21 June 2002.  

Background facts to the review decision

2.	The vehicle was seized on 28 January 2002 at Dover Docks.  The driver was Mr Celestino Pereira da Silva.  The paperwork for the load which included a “consignment movement report” (CMR) indicated that it was yarn and viscose from Germany.  The consignor was referred to in the CNR as Wilhelm Schimming of  Wuppertal; the consignee was referred to as N W Textiles Ltd with a delivery address as Jarmains Ltd of Long Lane, Kirkheaton, Huddersfield, HD5.  

3.	Mr da Silva spoke almost no English, but when stopped he acknowledged that he had collected the goods from the Wuppertal address on the CMR. When the Customs officers searched the vehicle it rapidly became apparent that a large part of the load was cigarettes. The driver was arrested and cautioned and the vehicle was fully searched. Eight packages near to the vehicle’s rear doors contained yarn. The remainder of the load, 360 boxes, contains cigarettes.  It was estimated that the vehicle contained 4.7 million cigarettes.  

4.	The cigarettes, the tractor and the trailer were seized.  The driver was released from arrest and issued with the relevant seizure paperwork.  

5.	On 7 February 2002 Transoriental contacted the Commissioners and supplied evidence that they were entitled to the vehicle and requested its return.  Transoriental supplied further information regarding the vehicle on 11 February 2002.  

6.	The Commissioners made enquiries and discovered that the stated address for delivery of the goods, Jarmains Ltd, was a company that no longer existed.  N W Textiles, the stated consignee, was not expecting a delivery of yarn and did not use the goods described on the paperwork.   

7.	On 26 February 2002 the Commissioners requested that a representative of Transoriental should attend an interview at Dover to establish the facts and to enable consideration of restoration of the vehicle.  After an initial agreement to attend an interview to be held on 27 March 2002, Transoriental eventually declined the opportunity to be interviewed by letter dated 14 April 2002.   

8.	On 18 April 2002 the Commissioners issued a written decision and a warning letter to Transoriental stating that the vehicle would be restored upon payment of £50,555 (which was the value of the vehicle according to Glass’ Guide).

9.	Transoriental wrote to the Commissioners on 10 May 2002 disagreeing with the decision.  The Commissioners treated this letter as a request for a review to be conducted and, after carrying out a full review, the Commissioners decided to uphold the decision of restoration upon payment of £50,555.  

The law

10.	It has not been in dispute that the original decisions to seize the goods and the vehicle were lawful. The goods were not imported into the United Kingdom in accordance with the REDS Regulations. These (The Excise Goods (Holding, Movement, Warehousing and REDS) Regulation 1992) govern the commercial movements of excise goods.  Cigarettes are subject to excise duty on importation by virtue of section 2(1) of the Tobacco Products Duty Act 1979.  

11.	Customs and Excise Management Act 1979 section 152 provides that -  

“The Commissioners may as they see fit –

(a)	…
(b)	restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under [the customs and excise] Acts.”

12.	The decision to restore the vehicle and trailer on payment of £50,555 was reviewed in accordance with sections 14 and 15 of Finance Act 1994 and confirmed by the review officer’s letter of 21 June 2002.  The review decision is referred to in the statutory code as “a decision as to an ancillary matter”.  The present appeals lies under section 16 of Finance Act 1994.  Section 16(4) sets out the powers and the functions of this Tribunal in relation to a decision as to an ancillary matter.  So far as is relevant this reads 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 the 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; …”

13.	For the benefit of Transoriental whose representative and whose witnesses communicated through an interpreter, I need to point out certain features of the law so far as they cover the powers and functions of this Tribunal in this appeal.

14.	First, whatever view we may form of the circumstances leading to the seizure of the vehicle and their affect on the Appellant’s business, we cannot direct that the seized trailer and tractor be returned to them.  All we can do is to direct that the Commissioners’ decision to restore on payment of £50,555 is to cease to have effect and we can order a further review giving directions, for example, that the review officer is to take account of the facts as we find them in our decision (i.e. this document). 

15.	Second, it follows from what we have just said that we cannot substitute our own decision (as to the terms on which whether the vehicle is to be restored to Transoriental) for that of the review officer.  We have to determine whether we are satisfied that the decision of the review officer (to restore the vehicle on payment of £50,555) could not reasonably have been arrived at.  If we find it was reasonable, we have to dismiss the appeal.  If we conclude that it was not reasonable, we have to allow the appeal; the decision (to restore on payment of £50,555) then ceases to have effect and another review may take place as mentioned in the first point made above.

16.	Third, it is established law in the United Kingdom that the test of reasonableness involves the application that the principle set out by Lord Lane in Customs and Excise Commissioners v Corbitt (Numismatists) Ltd [1980] STC 231. Referring to the method to be adopted by the tribunal in its approach to the review of the exercise of a discretion, it is said:

“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.”

17.	Fourth, it will be seen from the review officer’s letter and the unchallenged evidence (in a witness statement of Gerry Dolan, an officer of the Customs and Excise) that the Commissioners apply policies relating to the restoration of heavy goods vehicles involved in the importation of illicit excise goods.  The law recognizes that they may maintain policies of this nature and apply them so long as they do not fetter the discretion that they are required to exercise when, for example, deciding whether to return such a vehicle and the terms of such restoration.  This means that they must take into account any special circumstances applicable to the person to whom the decision relates.  

18.	Fifth, where as here there is a policy regarding restoration of such vehicles, that policy must be proportionate and it must be applied in a proportionate manner.  This brings Article 1 of the First Protocol of the European Convention on Human Rights into the reckoning.  Article 1 gives individuals and companies such as Transoriental a fundamental right not to have their rights to property violated; at the same time it enables a State such as the UK “to enforce such laws as it deems necessary to control the use of property in accordance with the public interest”.  The proper approach has been laid down by the Court of Human Rights at paragraph 36 of its judgment in Air Canada v UK (1995) 20 EHRR 150 at 173:

“According to the Court’s well-established case law, the second paragraph at Article 1 must be construed in the light of the principle laid down in the Article’s first sentence. Consequently, an interference must achieve a “fair balance” between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph; there must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued.”

We will revert to this when we examine the decision of the review officer.   At this stage we add one comment.  Where, as here, the decision of the Commissioners as to the terms of restoration of the vehicle is not based on a claim that the owner is knowingly involved in the smuggling exercise, the principle of proportionality further requires that the case be considered on its particular facts and merits.  The grounds for the Commissioners’ claim here is that Transoriental failed to carry out basic “reasonable” checks.  This calls for a full appraisal of all factors including the checks that could reasonably have been carried out in the circumstances of this present case. 

19.	With those five points in mind we now examine the review officer’s decision.  We will then see how that decision stands up when it is reconsidered in the light of the evidence presented by Transoriental.  That evidence was, in the main, oral evidence, based on the witness statement of the managing partner (Mr Fernando Jorge Almeida Pinto), the driver of the vehicle (Mr Celestino Pereira da Silva) and a manager (Mrs Lurdes Pereira da Silva).

20.	The review officer had some photographs before him of the tractor and the trailer and diagram of the inside of the trailer.  We will refer to these in detail when we summarize the evidence.

The Review Decision

21.	The review officer’s decision summarized the background facts as set out in paragraphs 2-9 above.  It then set out the Commissioners’ restoration policy relating to heavy goods vehicles.  That policy had been effective since 16 July 2001.  It reads as follows:

“(1)	Where the Commissioners cannot be satisfied that the driver or haulier are not knowingly involved in smuggling excise goods and the revenue is significant, on the first detection the vehicle and trailer may be seized and not restored.

(2)	In other cases where the Commissioners cannot be satisfied that the driver or haulier are not knowingly involved in smuggling excise goods, on the first detection the vehicle and trailer may be seized and restoration offered for a fee equal to 100% of the revenue involved or the trade value of the vehicle and trailer; whichever is lower.  On the second occasion, the vehicle and trailer may be seized and not restored.  

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

(4)	Where the Commissioners are satisfied that the driver and haulier have taken all reasonable steps to ensure the legitimacy of the load, the vehicle and trailer may be seized and restored free of charge.

(5)	Any vehicle or trailer adapted for the purpose of smuggling may not be restored.  

22.	The considerations taken into account by the review officer were itemized and included the following factors which we have summarized from the review letter of 21 June 2002.

(i)	The circumstances showed that the cigarettes had been the subject of a commercial smuggling attempt and had been properly seized.

(ii)	The policy is to restore seized vehicles on payment of 20% of “revenue” when the driver or haulier can demonstrate that they have made reasonable checks to identify illicit or illegal goods being transported; but the review officer concluded that neither the driver nor Transoriental had made such checks.

(iii)	In particular, the trailer had not been sealed and the Customs and Excise’s inspection had taken about five minutes to discover the illegal cargo.  The addresses shown on the CMR and other paperwork no longer existed and NW Textiles was neither expecting a delivery of nor used yarn and viscose of the sort specified in the paperwork.

(iv)	It appeared unusual that a Portuguese company collecting goods in Germany would do so without making relevant enquiries, particularly as the arrangement had apparently been set up on a very casual basis.  Moreover it appeared a precarious way of carrying on business for an arrangement to be (as had been asserted in the letter from Transoriental) for the German consignor to contact the driver after delivery to raise invoices and make payment.

The review officer observed that Transoriental had not sent any representative for an interview that might have established what actions it had taken.  So, taking the considerations itemized above into account, the review officer concluded that Transoriental had not made basic reasonable checks regarding the importation.  Consequently a restoration fee equal to the trade value of the vehicle as published in Glass’ Guide (i.e. £50,555) was appropriate.  The alternative, i.e. 20% of the revenue involved, being £639,000, was higher and was not applicable.  

23.	Applying those considerations to the published policy and bearing in mind that the review officer had received no first hand explanation from anyone on Transoriental’s staff, we cannot fault the review officer’s decision on “reasonableness” grounds in the light of the information then available to him. However the Appellant appealed, represented by Mr Jose Pires, a lawyer from Portugal, and the three witnesses attended the hearing.

The oral evidence

24.	The evidence before us showed three further matters that were not in dispute.  First, in an English law sense, both the tractor and the trailer were on lease to Transoriental for just over four years from November 1999 from a finance lessor in Portugal. The terms of the lease required the lessee to use the tractor and trailer in a prudent and lawful manner. This information had been supplied to the Commissioners, in Portuguese documents, by Transoriental in February 2002.  The hire charge was Є2,800 per month and on 31 October 2003 Є58,000 of rent were owed to the lessor.  In fact, Mrs Lurdes da Silva explained, the amount outstanding at the time of the hearing was some Є40,000.  Second, the tractor and the trailer seized were the best and most valuable of Transoriental’s fleet, reduced from three to two by the seizure; the loss of the seized vehicle has damaged Transoriental’s business.  Transoriental is now behind with its Portuguese tax obligations and with its salary payments to staff.  Third, Transoriental, which only operates as a haulier, has had no record of fiscal abuse of any sort.  

25.	Mr Fernando Jorge da Almeida Pinto said he believed Transoriental had been deceived.  He explained that he had been contacted on 12 January 2002 by telephone by a man who had given his name as “Vitor” and who said he was representing a German firm.  This had been the first occasion on which Transoriental had done business with Vitor, who said he had obtained Transoriental’s telephone number from the address painted on one of its vehicles. Vitor referred to the possibility of transportation of some textiles.  Mr Pinto indicated willingness. Some days after that Vitor telephoned and asked for the transportation of merchandise from Germany to England. Mr Pinto was not told the identities of either consignor or consignee. Mr Pinto calculated the charge of Є2,015 and said that Transoriental would be ready to transport on 25 January 2002.  Vitor accepted, saying that the price would be paid “on the day and on the place of discharge” (which we take to be unloading) and that all details would be in the CMR. Mr Pinto then called up the driver (Celestino da Silva) and told him to expect a call from Vitor.  On 27 January, a Monday, the driver called Mr Pinto to say that the truck was loaded and about to set off.  It was put to Mr Pinto that he had received no details of the customer from Vitor before the start of the journey.  Mr Pinto’s response was - “That’s how I work”.  He added that it was normal for a Portuguese haulier to carry goods for German customers; euros, he said, “are the important thing”. Following the seizure, Mr Pinto said, he contacted Vitor who said he would go to Dover to resolve the problem.  From then on nothing was heard or seen of Vitor.  We accept Mr Pinto’s explanation so far; and it was not, as we have already noted, any part of the Commissioners’ case that Transoriental through its officers were knowingly involved in the smuggling enterprise.

26.	The arrangements for payment to Transoriental and for the provision by Transoriental of an invoice for its services were not satisfactorily explained to us by any of the witnesses. Mr Pinto said that the usual arrangement with a “direct” contract of this sort would be for payment to be made when the transportation contract was complete and the CMR was handed over to the consignee.  Mr Pinto had not seen the CMR before, but he said he expected that the consignees referred to in the CMR, Jarmains Ltd and North West Textiles, would pay the driver and the CMR would not be handed over until payment.  He also said that he expected that payment would be made in cash to the driver.  Mr Pinto acknowledged that the CMR gave no details of North West Textiles’ address, fax number, phone number or tax reference; nor did it contain any telephone or fax number or tax reference for Jarmains Ltd.  Mr Pinto said he did not need those details because he trusted his driver to get that information. The CMR gave only a P.O. Box number for the consignor, Wilhelm Schimming.  

27.	We accept that details of the arrangements may have been lost to us in translation, but we find Mr Pinto’s evidence deficient as regards payment and invoicing.  It leaves unanswered the question of how Transoriental was to produce and despatch a sufficient invoice to show the amount payable at the point of unloading.  Those unanswered questions would, we think, have put many hauliers on notice.  We have to address the issue of whether they should have been of concern to Transoriental which had never before dealt with Vitor, Wilhelm Schimming, North West Transport or Jarmains Ltd. We turn now to examine the driver’s evidence to ascertain whether he should have been put on notice and whether he had done anything to reassure himself of the lawfulness of the whole operation.

28.	Mr Celestino da Silva, the driver, said that he had been phoned by Vitor in the morning of 24 January.  Vitor had told him to go to a particular service station on the Aachen to Cologne motorway at 2.00pm on Friday 25 January.  Vitor was there and led Mr da Silva to a warehouse where the loading was to take place.  He told Mr da Silva that the load would not be ready until the end of the weekend.  Mr da Silva said that because the loading place had no “facilities” he left the trailer there and returned to the service station where he stayed for the weekend.  On Sunday evening he was contacted by Vitor who told him that he could pick up the trailer and that the documents were inside the trailer near the back door.  Mr da Silva collected the trailer and, he said, looked at the CMR and the documents relating to the load.  It had frequently happened to him, in his experience as a driver, that the trailer had been loaded in his absence. In his witness statement he observed that the bags were “identified as containing textile fibres”.  He added in oral evidence that one of them might have been half opened and its contents looked like textiles; he had not, however, inspected further inside the trailer. Had he known he was carrying tobacco he would, said Mr da Silva, have contacted his “boss”. He said that he had made many trips to England in the past, but he had not previously delivered goods to either Jarmains Ltd or to North West Textiles.  He had made no attempt to contact Jarmains Ltd and in any case he could speak no English. He would, he said, have used a map to find his way, or ask someone. Invoicing arrangements were, he said, between Transoriental’s headquarters and Vitor.  So far as he, as driver, was concerned all the information he needed was on the documents.

29.	We were shown photographs (produced by the Commissioners) of the tractor and the trailer.  One photograph, taken (it appeared to us) from some way above ground level was a rear view of the loaded trailer with its doors open.  In the foreground were two pallets each holding sixteen white packages.  We took those packages to be the yarn referred to in the CMR.  Behind them were brown cardboard boxes apparently shrink-wrapped to pallets.  These were just visible from the level of the camera.  As to whether they were visible to a person who, like Mr da Silva, opened the backdoors of the trailer to take out the papers before starting his journey, we are not satisfied.

30.	Another photograph shows a cardboard box that has been opened. Inside it and encased in a thick black plastic wrapper are boxes of Benson & Hedges cigarettes.

31.	The photographs indicate this.  A driver who, on his own and in the night of Sunday 27 January, was able to spot the brown cardboard boxes concealed behind the white packages of yarn, would have needed his suspicions to have been alerted to a level that required him to get a knife and, in breach of company rules (see below), cut the outside wrapper, prize open the cardboard box and cut through the black plastic.  Only then would he have discovered the cigarettes.

32.	Mrs Lurdes da Silva, manager of Transoriental, stated in evidence that her understanding of the proposed arrangements was that payment for the transport would be made at the place of unloading.  At the same time she said that Transoriental would issue the invoice when it had received the necessary information from the consignor.  In the present situation however Transoriental did not have any name, address or fax reference number for the consignor before the transportation commenced.  Opening packs of goods in the course of transit was, she said, “not allowed”.  We accept her evidence.

Conclusions

33.	The quantity of cigarettes found in Transoriental’s vehicle was such as to create a real suspicion in the mind of any person who hears about it now.  Mr da Silva and Mr Pinto must, that person is bound to reflect, have been put on notice by the sheer scale of the importation.  So, looking with hindsight at what happened, the case for the Commissioners that Transoriental, through Messrs da Silva and Pinto, failed to carry out basic reasonable checks is relatively easy to sustain.  It was the first time Transoriental had done business with Vitor.  They did not check his credentials.  Nor did they try to find out in advance details of consignor and consignee.  The arrangements for meeting the vehicle at a M-way service station and loading it up while the driver was away from the loading site seem suspicious and could have put the driver on notice that he and his vehicle were being used for a smuggling enterprise. The Commissioners point to the lack of any firm arrangements for payment and invoicing. Those, they say, indicate a casual way of carrying on business on Transoriental’s part.

34.	But hindsight can mislead.  We have to examine the events of January 2002.  We recognize that Mr da Silva was an experienced driver with seven years service with Transoriental.  Should he have been put on notice?  Should Mr Pinto have been put on notice?  If so, what basic reasonable checks should either or both of them have carried out?

35.	Transoriental’s business is, we think, that of a jobbing haulier.  It carries goods to order and transports them to destinations throughout Europe.  It has no special connection with England.  It comes and goes as its customers require.  To Mr da Silva there was, we infer, nothing special about being met at a M-way service station and escorted to a warehouse to pick up a load.  Nor was there anything very special about the fact that the trailer was loaded while he was away residing in his cab at the service station for two nights. The CMR may have been unusual in that it provided no phone or fax number for the consignee.  But Mr da Silva speaks no English, and we cannot see that a phone number would have helped him.  So far as he was concerned, therefore, we have to conclude that he sets off with a loaded trailer to an apparently genuine address in Huddersfield.

36.	Mr Pinto,the general manager, received the first contact from a person he only knew as Vitor.  He did not check Vitor’s credentials nor did he ask for details of and references for the consignor and the consignee.  He allowed the locked vehicle to leave the warehouse near Wuppertal without the details needed for an invoice.  The arrangements were casual.  But he said (and we accept this) he would expect to be paid at the place of unloading and only then would the driver have handed over the CMR.

37.	Were the circumstance such that Transoriental, through Mr Pinto and Mr da Silva, should have made special checks?  We are not satisfied that the arrangements put in place by Vitor and Mr Pinto were so unusual that Transoriental should have taken positive steps to make checks on Vitor and on consignor and consignee.  Transoriental is, as we have noted, in a small way of business picking up and carrying a wide range of goods to order often in response to a telephone call.  It was, as Mr Pinto said, quite common to sort out the payment and invoicing arrangements while the journey was on.  Mr da Silva’s naked eye check revealed what the loaders intended him to see, namely the packages of yarn.  Even if he had noticed the cardboard boxes behind them, shrink-wrapped to the pallets, it would, we think, have been going beyond the limits of reasonable conduct for him to have broken company rules and cut his way into them.  He might have called up Vitor on his mobile; but we would have expected Vitor to have given Mr da Silva (or Mr Pinto) a reassuring answer.

38.	Had the decision been ours to take, we would have decided that the vehicle be restored to Transoriental without payment. But we, unlike the deciding officers, have received a detailed and circumstantial explanation from the people involved on the Transoriental side. The Commissioners had invited those people to come and give their own accounts. The fact that they declined can only have aggravated the resistance on the part of the deciding officer and the review officer to what, on first impression, might appear a familiar and unconvincing narrative.

39.	A further consideration that we would have taken into account is the length of time that has passed since the seizure of the vehicle.  This has caused serious financial damage to Transoriental and to its staff.  The vehicle had been out of action for five months by the time of the review decision.  That factor caused a large financial loss to Transoriental.  The vehicle will have been out of action for well over two years by the time of any further review resulting from our present decision.  (In this connection we mention that we have looked at the Tribunal’s file.  There have been delays; but there are reasonable explanations for those delays.)  Moreover the damage resulting from the loss of one vehicle out of a fleet of three is more acute than that suffered by a haulage company with a fleet of thirty.  The tough non-restoration policy explained to us by Gerry Dolan (in a witness statement for the Commissioners) is based on the public interest in preventing smuggling; and this importation of 4.7 million cigarettes was smuggling on a large scale.  Here the application of the policy is directed, not at a haulier that knowingly played a part in the smuggling enterprise, but at one who, as the Commissioners saw it, had failed to take basic reasonable checks to ensure that his vehicle was not being used by others for smuggling.  For reasons given above we tend to the view that Transoriental did carry out reasonable basic checks.  But even if on a further review the Commissioners did not accept our overall conclusion, the financial loss suffered by Transoriental over the last two years and more is a circumstance that should be taken into account when applying the policy.

40.	Recognizing that we have no authority in this respect we recommend that the vehicle be returned to Transoriental without payment as soon as practicable.  Applying section 16(4) we direct that a further review be carried out within 45 days of the release of this decision by a different review officer.  The review officer shall take into account the findings and conclusions set out in this decision.

41.	We award Transoriental its costs of an amount to be agreed.  Failing agreement the matter should be referred back to this Tribunal for further directions.

STEPHEN OLIVER QC
CHAIRMAN

RELEASED:

LON/02/8227