E00587
BETTING AND GAMING — nature of machines — whether dutiable — appeal allowed in part
MANCHESTER TRIBUNAL CENTRE
KAMALJIT SINGH SANDHU
Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE
Respondents
Tribunal: Lady Mitting (Chairman)
Mr F Hazledine (Member)
Sitting in public in Birmingham on 12 November 2002, 12 February 2003 & 17 November 2003
The Appellant appeared in person on 12 November 2002 and 12 February 2003 but did not appear on 17 November 2003
Miss Sara Williams of counsel instructed by the Solicitor for the Customs and Excise for the Respondents
© CROWN COPYRIGHT 2003
DECISION
- From 1 January 1996 to 19 March 2001 the Appellant, Mr Kamaljit Singh Sandhu, ran a fish and chip shop from premises at 1 Park Corner, Ripley, Derbyshire. He was appealing against a review decision of the Commissioners notified to him by letter dated 20 June 2001. This decision upheld the decision of the Commissioners to issue first a default notice requiring the production of gaming machine licences, followed by a default licence schedule and finally a notice of assessment in the sum of £5,035 to recover machine licence duty.
- On the first day of the hearing, on behalf of the Appellant we heard oral evidence from a Mr Peter Dixon and Mr Sandhu himself who appeared in person. Mr Ian Duff, the reviewing officer, gave evidence for the Commissioners. When the case initially came on for hearing, Mr Sandhu raised for the first time the contention that one of his machines was not a gaming machine but a quiz machine which would not have been dutiable. No evidence of this was produced and neither party was in a position to argue the point so the hearing was adjourned to allow Mr Sandhu to produce what evidence he could to Mr Duff who would then re-review the Commissioners’ decision in respect of this machine. The hearing was re-listed for 17 June 2003 when Mr Sandhu did not attend. The clerk telephoned him and was told he had not received the notice of hearing but it would have been his intention to attend. Although it appeared from the tribunal file that the notice had been properly served, we decided to give Mr Sandhu the benefit of the doubt and the hearing was adjourned, to allow for his attendance, until 17 November. Again Mr Sandhu did not attend. Again the notice appeared to have been properly served but on this occasion, the listing officer had also spoken to Mr Sandhu after service of the notice to confirm that the date was convenient for him and was assured it was. On the final day of the hearing we therefore proceeded in the absence of Mr Sandhu.
Legislation
- Section 21 Betting and Gaming Duties Act 1981 (“the Act”) provides as follows:
“(1)Except in the cases specified in Part 1 of Schedule 4 to this Act, no [amusement machine] (other than [an excepted machine]) shall be provided [for play] on any premises situated in [the United Kingdom] unless there is for the time being in force [a licence granted under this Part of this Act with respect to the premises [or the machine].
(2)…
(3)…
(3A)For the purpose of this section an excepted machine is—
(a)a two-penny machine, or
(b)a five-penny machine which is a prize machine without being a gaming machine or which (if it is a gaming machine) is a small-prize machine, or
(c)a thirty-five penny machine which is not a prize machine.
(3AA)…
(3AB)…
(4)…”
- Section 22(2) provides:
“(2)For the purposes of this Act [an amusement machine is a small-prize machine if it is a prize machine and] the value or aggregate value of the benefits in money or money’s worth, which any player who is successful in a single game played by means of the machine may receive, cannot exceed [£10}.”
- The Act was amended by Schedule 2 Finance Act 2000. The following are the amendments which are material to this case. The reference to a “five-penny machine” in Section 21(3A) of the Act is amended by substituting “ten-penny machine.” Section 22(2) is also amended to limit the jackpot in the definition of a small prize machine to eight pounds.
- Schedule 2 Paragraph 4 sets out the amount of duty for various categories of machine, the relevant ones of which are:
“Category B: any gaming machine which is a small-prize machine or five-penny machine;
Category C: any gaming machine which is a medium-prize machine, unless it is also a five-penny machine.”
- Schedule 2 paragraph 10(1) provides as follows:
“1.This Schedule applies where it appears to the Commissioners that an amusement machine is or was provided for play on the premises in contravention of section 21(1) or 24(3) or (4) of this Act.
2.—(1)The Commissioners may give a notice which complies with the requirements of sub-paragraphs (3) and (4) below.
(2)In this Schedule such notice is referred to as a “default notice.”
(3)The notice shall state that one or more amusement machines appear to have been provided for play on specified premises (“relevant premises”) during a specified period (the “alleged default period”)—
(a)the first day of which falls not more than three years before the date of the notice and,
(b)the last day of which falls on or before the date of the notice.
(4)The notice shall request the production to the Commissioners on or before a specified date (the “due date”) of every relevant amusement machine licence.
(5)…
(6)…
(7)…
(8)…
Failure to produce a licence: grant of default licence
3.—(1)In any case where—
(a)the Commissioners give a default notice,
(b)the due date specified in the notice passes, and
(c)it appears to the Commissioners that at some time during the alleged default period specified in the notice one or more amusement machines were provided for play on the relevant premises so specified without an amusement machine licence being in force in relation to the machines,
the Commissioners may grant, in accordance with this paragraph, one or more licences in relation to each of the machines.
(2)— (7) …
Assessment of amount equivalent to duty
4.—(1)This paragraph applies where a default licence is granted in relation to an unlicensed machine.
(2)The Commissioners may, subject to the following provisions of this paragraph, assess to the best of their judgment, the amount which would have been payable under this Act as amusement machine licence duty if the default licence had been an amusement machine licence granted under Schedule 4 to this Act.
(3)— (8) …
6.(1)Section 14 of the Finance Act 1994 (reviews of decisions) shall apply to so much of any decision by the Commissioners as is of any of the kinds mentioned in sub-paragraph (2) below, as it applies to the decisions mentioned in subsection (1) of that section.
(2)Those decisions are—
(a)any decision that a default licence should be granted,
(b)any decision contained in an assessment under paragraph 4 above that a person is liable to pay an amount of duty, and
(c)any decision contained in an assessment under paragraph 4 above as to the amount of a person’s liability
Paragraph 10(2) provides as follows:
(2)This paragraph has effect in relation to amusement machines which appear to the Commissioners of Customs and Excise to have been provided for play on premises in contravention of section 21(1) or 24(3) or (4) of the Betting and Gaming Duties Act 1981 on or after the day falling three years before the day on which this Act is passed.”
Evidence
- The Commissioners were notified by the Amber Valley Borough Council, by letter dated 22November 2000, that Mr Sandhu was operating within his Fish Bar at least three £15 jackpot machines. Mr Sandhu did not hold a licence for any such machines and one of the Commissioners’ officers, Mr A Todkill, visited Mr Sandhu on 1 and 5 December 2000. On the premises Mr Todkill saw three £15 jackpot machines and one “Crimewatch” machine which was a 20p play with a £6 jackpot. He was told by Mr Sandhu that the three £15 machines, which he rented from G&S Leisure, had only been on the premises since 30 November and that they had replaced a £15 jackpot 20p play machine and two £8 jackpot 10p play machines which he had had for a couple of years and for which the appropriate licence fee had been paid by G&S Leisure. (See extract from Mr Todkill’s notebook).
- Mr Todkill established that Mr Sandhu had held a licence for a £15 machine until 31 May 1999 but not thereafter. On the basis of what he had seen and what he had been told by Mr Sandhu, Mr Todkill calculated that there was outstanding amusement machine licence duty in the sum of £6,310 and he wrote to Mr Sandhu on 8 February 2001 setting out his calculations.
- Mr Sandhu replied on 14 February in the following terms, thus contradicting the information which he had given verbally to Mr Todkill:
“With reference to fruit machines at 2 Park Corner, Ripley, Derbyshire Kaspian Fish Bar:
The machines on the premises at the times:-
1)Period1.12.98 – 1.6.99
£6 jackpot – crimewatch
£6 jackpot – nudge-banker
£6 jackpot – cops + robbers
2)Period1.6.99 – 30.11.2000
£6 jackpot – crimewatch
£8 jackpot – las Vegas
£6 jackpot – Miami-mice
3)Period 30.11.2000 onwards to 15/01/2001
For this short period three £15 jackpot machines were installed but removed on 15/01/2001. These were £15 King-fu - £15 Sonic Hedgehog - £15 Camelot.”
- Mr Todkill accepted the information given in Mr Sandhu’s letter and issued a default notice accordingly. The only evidence Mr Todkill had of the stake needed to play the machines was what he had been told by Mr Sandhu on the visit and what he had observed. He had observed three 25p and one 20p play machines. Mr Sandhu had told him that his £8 machines had been 10p play and Crimewatch and the original £15 machine had been 20p play. In the absence of any concrete evidence Mr Todkill based his calculations on all but the £15 jackpot machines being 20p play throughout. On this basis he treated the three £15 jackpot machines as Category C machines and all others as Category B. He accordingly on 5 March 2001 issued a Default Notice in the following terms:
“Category of MachineNo of machinesPeriod of Default
dd/mm/yy-dd/mm/yy
Category B301.12.1998-31.05.1999
Category B301.06.1999-31.05.2000
Category B301.06.2000-30.11.2000
Category C301.12.2000-31.01.2001
Category B101.12.2000-30.11.2001”
- Nothing was heard from Mr Sandhu and an assessment in the sum of £5,035 was raised based on the default licence schedule in precisely the same terms as the Default Notice except to limit the default period for the single Category B machine to 1-03-01.
- Mr Sandhu then requested a review of this decision and entered into correspondence with Mr Duff.
- In his letter to Mr Duff dated 3 May 2001, Mr Sandhu stated that the machines classed by Mr Todkill as category B in fact had been “five-pence play, five pound jackpot” and therefore non-dutiable. Mr Duff visited Mr Sandhu who again told Mr Duff that prior to the arrival of the £15 machines, all machines had been five pence play, five pound jackpot. Mr Sandhu explained that with the exception of the Crimewatch machine which he owned, all machines had been rented from G&S Leisure run by a Mr Wrigley from whom he had no paperwork whatsoever. Mr Duff asked whether Mr Sandhu could provide any other evidence that the machines had been five pence play and Mr Sandhu telephoned someone who apparently used to service the machines and Mr Duff spoke to this gentleman who confirmed to him that they had been five pence play. Mr Duff then visited the Ripley Arcade where he spoke to the manager. Mr Duff explained the nature of the machines that he was investigating and was told that they could be played at any stake between 5p and 20p. Mr Duff also tried to make some enquiries of G&S Leisure who had gone out of business but to no avail.
- In his review therefore, Mr Duff had machines which to him fell into three areas. There was the Crimewatch machine which Mr Duff decided had been quite rightly treated as a Category B machine by virtue of being 20p play. The £15 jackpot machines were clearly Category C machines by the nature of the size of their jackpot. There were then the remaining machines. Mr Sandhu had given conflicting information on the size of the jackpots and the amount of the stake. If the Commissioners had treated them or any of them as £15 jackpot machines then they would have fallen within Category C. However by accepting Mr Sandhu’s representations as to the size of the jackpot but treating them as 20p play, the Commissioners were, in Mr Duff’s words, giving Mr Sandhu the benefit of the doubt as they would then fall within Category B rather than C. Mr Duff therefore upheld Mr Todkill’s original assessment.
- Mr Sandhu, in his evidence, likened his shop frontage to a goldfish bowl with a large front window through which all that went on inside was highly visible. His shop was directly opposite that of one of his competitors who kept a close eye on Mr Sandhu’s doings and reported to the authorities any perceived misdemeanour. In Mr Sandhu’s view any operation of unlicensed machines would have been spotted instantly and reported. Additionally, Mr Sandhu told us he had had several inspections from the Commissioners in relation to his machines since 1980 and on every occasion the Commissioners had been satisfied. We were told that at least one of these inspections took place after December 1998 when apparently two officers came in and played the machines. They showed their identification cards to Mr Sandhu and left telling him everything was in order. There was no written contract between Mr Sandhu and G&S Leisure and Mr Sandhu had no paperwork to support any of the transactions. All his machines he told us had been non-dutiable until he took delivery of the three £15 machines. This departure had been at the instigation of Mr Wrigley in an attempt to increase Mr Sandhu’s turnover from the machines. He kept them for only a matter of weeks removing them on 15 January 2001 at the request of the Amber Valley Borough Council. Mr Sandhu knew that these machines were dutiable and he believed that Mr Wrigley was paying the duty out of the rental.
- Miss Williams put it to Mr Sandhu in cross-examination that his statements to the Commissioners had been conflicting and at variance with each other. Mr Sandhu put this down to him not having treated the case seriously enough at the outset because he believed that in any event the machines were non-dutiable. He said that he was also confused because of the number of differing machines, he had held over the years.
- Because Mr Sandhu did not attend the adjourned hearing, other than to maintain in his evidence in chief that the Crimewatch machine was a quiz machine he gave no oral evidence as to it’s nature. However we were shown a copy of a letter dated 17 February 2003 which Mr Sandhu had written to Mr Duff in which he confirmed that Crimewatch was a 20p play £6 jackpot machine. He described its format in some detail concluding that it was based on the game Cluedo. He specifically said that the machine was a video layout, the questions being displayed on the video screen and that it did not have any spinning reels. This conflicted with the entry in Mr Todkill’s notebook in which he noted from his observation of the machine
“£6 777R Crimewatch 20p”.
Mr Duff in his review letter of 18 March 2003 rejected Mr Sandhu’s description of the machine maintaining that the presence of the three 7s to win the jackpot showed the machine worked on a spinning reel basis and was not of a quiz format.
- Whenever Mr Sandhu changed machines, they were carried by a Mr Peter Dixon who worked in his spare time for G&S Leisure delivering fruit machines. Mr Dixon told us that it was he who had delivered the three £15 machines in November 2000. Before the delivery of these machines he had only ever delivered lower jackpot machines to Mr Sandhu, usually swapping them with machines from other sites. Mr Dixon could not remember the names of the £15 machines which he delivered but he remembered the size of the jackpot because he had never taken this nature of machine to a Fish and Chip shop before. This sort of machine usually went into pubs. Such had been the nature of his surprise that he told us he had asked Mr Wrigley why he was taking these machines to Mr Sandhu to whom he had always supplied five penny play machines before. Mr Wrigley had told him that it was to increase Mr Sandhu’s turnover.
Submissions
- Mr Sandhu conceded that the three £15 jackpot machines were dutiable and that that element of the assessment was therefore correctly raised and payable. All his other machines had been five penny play and non-dutiable, other than Crimewatch, which being a skill with prizes machine was also non dutiable.
- The Commissioners accepted that with the exception of the three Category C machines, the remainder of Mr Sandhu’s machines were all small prize machines but they were dutiable and could not fall within the definition of an excepted machine because it was their contention that the stake needed to play them exceeded 5p. The machines seen by Mr Todkill had all been 25p play or 20p play. Mr Sandhu himself had never mentioned that his previous machines had been five penny play until after the assessment had been raised and at no time had any corroborative evidence been provided to support Mr Sandhu’s contention.
Findings
- Mr Sandhu’s right of appeal is given by virtue of Section 16 Finance Act 1994. We canvassed with Miss Williams the nature of our jurisdiction.