London Tribunal Centre Lon/2005/8020

E00976

EXCISE DUTY -- s16 FA1994 -- Restoration of vehicle subject to fee -- Whether review decision reasonable? Yes in particular circumstances -- Appeal dismissed

LONDON TRIBUNAL CENTRE LON/2005/8020

McGEOWN HAULAGE LIMITEDAppellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMSRespondents

Tribunal:ADRIAN SHIPWRIGHT (Chairman)

MICHAEL SHARP

Sitting in public in London on 21 April 2006

Tim Nesbitt, Counsel for the Appellant, instructed by Aaron & Partners LLP

Michael Barnes, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

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DECISION

Introduction

1. This is an appeal by McGeown Haulage Limited (“the Company”) under section 16 FA 1994 against a review decision upholding the imposition of a “restoration fee” of £14,875. The decision appealed against (“the Review Decision”) is set out in a letter dated 20 January 2005.

The Issue

1. The essential issue in this case is whether the Review Decision was “reasonable”. The burden is on the Company to show that it is unreasonable if the Company is to succeed.
2. There was no issue in this case as to the validity of the seizure or the jurisdiction of the Tribunal.

The Law

Statute

1. Section 16 FA 1994 gives a circumscribed and somewhat unsatisfactory jurisdiction to the Tribunal. It allows the Tribunal to order a further review in circumstances like this case.
2. Section 16 FA 1994 provides (insofar as is relevant here):

“(1)Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say—

(a)any decision by the Commissioners on a review under section 15 above (including a deemed confirmation under subsection (2) of that section); and

(b)any decision by the Commissioners on such review of a decision to which section 14 above applies as the Commissioners have agreed to undertake in consequence of a request made after the end of the period mentioned in section 14(3) above.

….

(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; 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”.

1. The importation of tobacco into the United Kingdom for commercial purposes attracts Excise Duty. Power is given to the authorities to forfeit goods on which duty should have been paid but has not actually been paid. Where goods such as tobacco have become liable to forfeiture any vehicle used for the carriage of those goods is also liable to forfeiture (see paragraph 16 REDS Regulations and section 141 CEMA 1979). HMRC are given power to restore any goods or vehicles seized subject to such conditions (if any) as they think proper (see section 152 CEMA 1979).

Authorities

1. A number of authorities were cited to us. We were provided with copies of the reports of the following cases which we have read and considered carefully:

Thyssen Haniel Logistic Case C-459/93

Holz Geenen Case C309/98

International Transport Roth Gmbtl v Home Department [2002] EWCA(Civ) 158

Colgan Transport Limited v Customs & Excise 2003 MAN 2002/8061

Eugene Crilly v Customs & Excise 2003 LON 2002/8047

David Buckley v Customs & Excise2003 MAN 2002/8062

H & S Handel and Transport Gmbh v Customs & Excise 2004 LON 2003/8175

Desmond Rogers (t/a LJR Transport) v Customs & Excise LON 2003/8095

Customs & Excise v Bantex Ltd [2003] 3009 (Ch)

Customs & Excise v Alzitrans SL [2003] EWHC 75 (Ch)

Evidence

1. A bundle of documents was produced. No objection was raised to any of them and they were all admitted in evidence.
2. We heard oral evidence from

(1)Adrian McGeown, the managing director of the Company; and

(2)David Harris, the reviewing officer.

Witness statements were produced and admitted as evidence in chief. The witnesses were cross examined.

Findings of Fact

1. From the documents and the evidence we make the following findings of fact.

The Company and its business

(1) McGeown Haulage Limited carries on business from Northern Ireland. It has premises in Armagh.

(2)The Company’s business is that of a general haulage company, undertaking varied work carrying loads, very often on a one off basis.

(3)The loads that are collected and delivered are very commonly from mainland Europe, and trucks go all over Europe.

(4)The Company has 10 to 15 vehicles it has paid for outright and another 15 on finance terms.

(5)At the relevant time the Company had a Scania tractor unit (registration number N773 KSE) and a towing trailer registration number (MGT 260) (together “the Vehicle”).

Employment of Folkis

(6) At the time of the seizure the Vehicle was driven by Alfredo Folkis, a man of Lithuanian origin.

(7)Mr Folkis had worked for another local firm for two or three years before he was employed by Mr McGeown on behalf of the Company.

(8)Mr Folkis was known to employees of the Company who seemingly thought “he was ok”.

(9)No reference was sought for Mr Folkis, seemingly because it was thought that his previous employer was likely to want to keep him and so was likely to refuse a reference. No reference was sought from anyone else.

(10)No check was made as to the honesty of Mr Folkis or as to his criminal record other than to ask Mr Folkis. No other checks of any kind were made before Mr Folkis was employed.

The Seizure

(11)On 21 September 2004 the Company was contracted to carry a load of books from Germany. Mr Folkis and the Vehicle were assigned to carry the load. He picked up the load on 21 September 2004.

(12)He picked up in addition some 2007 kilograms of Hand Rolling Tobacco, seemingly in Belgium.

(13)Mr Folkis and the Vehicle were stopped and searched at Coquelles. The tobacco was found during the search.

(14)Mr Folkis was charged with smuggling. He pleaded guilty and was given a custodial sentence.

(15)HMRC seized the Vehicle.

(16)The Company requested the restoration of the Vehicle by letter dated 22 September 2004.

The Decision

(17) Mr Millard of the Post Seizure Unit wrote on 26 November 2004 offering to restore the Vehicle for a fee of £14,875.00. This was a reduction from the fee of £16,650 in the original offer letter of 23 November 2004. This reduction reflected the poor condition of the Vehicle.

The Review Decision

(18) The Company by letter dated 20 December 2004 requested a review of the Decision.

(19)Mr Harris carried out the review of the Decision.

(20)Mr Harris gave evidence and we found him a truthful and careful witness. We believe him when he says he considered the whole matter again with an open mind. We find this as a fact.

(21)He considered (inter alia):

(i)the officer’s Notebook entries signed by Mr Folkis;

(ii)the Seizure Information Notice;

(iii)the Revenue Goods Tally Sheet;

(iv)the Appellant’s letter of 22 September 2004;

(v)HMRC’s letter of 4 October 2004;

(vi)Fax from the copy not dated but seemingly faxed on 6 October 2004 attaching a memo signed by Mr Folkis but with a date seemingly of 9 March 2004 (“the Document”);

(vii)HMRC’s letter of 23 November 2004 offering restoration for a fee of £16,650.00.

(viii)Appellant’s letter of 25 November 2004 explaining old not streamlined R Cab model and trailer has “many hours on fridge motor” so worth less than £16,650.

(ix)HMRC’s letter of 26 November 2004 offering restoration for a fee of £4,875.00;

(x)Appellant’s letter of 20 December 2004 requesting a review of the case;

(xi)HMRC’s letter of 23 December 2004 acknowledging the request for a review;

(xii)Notes of interview with Mr Folkis started 21 September 2004, and resumed 17 November 2004;

(xiii)Appellant’s Memo to all drivers;

(xiv)Letter dismissing Mr Folkis;

(xv)Print from automatic Number Plate Reader showing driver used after dismissal.

The Document

(22)Mr Harris wrote:

“It is clear to me that you undertook no checks to ensure that your driver Mr Folkis did not have any previous dealing with HM Customs or whether he even had a previous criminal record during his earlier employment. I view such an omission on your part to have fallen short of the reasonable checks a haulage company would be expected to undertake of its business.

In addition, I have noted from the transcripts of the interviews with Mr Folkis, he is (as of November 2004) of the view that he is employed by you. You appear to have confirmed this to me when, during our telephone conversation, you told that you had employed Mr Folkis to drive for your company on several occasions after the date of seizure. Also, that on 1 October 2004 (you confirmed the meeting during our telephone conversation he signed the document you have supplied to HM Customs (“the Document”) which purported to explain Mr Folkis his obligations as regards smuggling and is apparently dated 9 March 2004 (“the Document”).

You have also provided me with a facsimile note, which is you say, a copy of the letter of dismissal to Mr Folkis which I note is dated 5 October 2004. However, records available to me show that Mr Folkis was, until at least 29 December 2004, still driving for you to the Continent and appears to have made at least five such trips for your company since the date of his supposed dismissal.

Such inconsistencies do not persuade me that you have acted honestly in your dealings with HM Customs.

I have also looked at the documentation which accompanied this vehicle. As became apparent the only documentation which accompanied the movement was a delivery note. This is clearly in contravention with the CMR convention (as amended by Protocol to the CMR, Geneva, 5 July 1978) and would have alerted a vigilant haulier that all was not well with this movement of goods and should have produced a response to investigate the complete absence of a CMR document.

I am also drawn to the fact that in April 2004 another one of your vehicles and drivers was involved in the illicit movement of 5,000,000 cigarettes. On that occasion the vehicle was restored to you without any fee.

For the reasons set out above I conclude that the original decision should be upheld. The restoration amount of £14,875.00 is both proportionate and reasonable in the circumstances.”

(23)We have no reason to disagree with Mr Harris. In particular, as regards the Document we have no reason to doubt Mr Harris’s versions. We prefer his view to Mr McGeown who was not always able to recall or remember matters clearly when giving evidence. Mr Harris had no reason to fabricate this evidence. We find, as a matter of fact, that he did not fabricate it. Accordingly, we find that the Document was signed in October, not March 2004.

The Policy

(24)In the letter communicating the Review Decision Mr Harris wrote:

“The Commissioners’ policy concerning the restoration of heavy goods vehicles is designed to further tackle cross border smuggling and significantly disrupt the supply of excise goods to the illicit market. It is also aimed at hauliers who, whilst not actively involved in the importation of illicit excise goods, have not carried out reasonable checks that would have identified the illicit load.

Where the Commissioners have evidence that the driver is knowingly involved in smuggling excise goods and the haulier has taken reasonable steps to prevent smuggling by their drivers, the vehicle will be restored free of charge. If the company has not taken reasonable steps to prevent smuggling, restoration will be offered for the revenue evaded, or the value of the vehicle, whichever is the lower amount. If there is a subsequent seizure within six months, the vehicle will not normally be restored.”

Submissions of the Parties

The Company’s submissions in outline

1. In short form the Company’s submissions were:

(1)The Policy as a general matter was rigid and inflexible and bound to lead in many cases to a disproportionate result. Accordingly, it should not be allowed to stand as a matter of UK and European Law (including the Human Rights Act). It was wrong that the Policy was not publicly available.

(2)Mr McGeown did take the steps that could reasonably be taken in this case. Accordingly, on the terms of the Policy as set out in the letter of 20 January 2005 he was entitled to restoration without payment.

(3)In more detail it is as follows:

(a)The starting point in considering any seizure case is Lindsay recognising that Article 1 of the First Protocol to the ECHR was enjoined. Accordingly, any sanction such as seizure had to be proportionate and this includes a financial condition for the return of the vehicle.

(b)Proportionality applied to a policy a well as the individual case. This has been recognised in a number of cases (see eg Ates, Alzitrans).

(c) The most important case is H&S Handel where the President found a much larger restoration sum disproportionate.

(d)Here the policy was rigid and inflexible and took no account of the Appellant’s notice etc concerning smuggling or the lack of causative effect of the omitted matters making them logically irrelevant.

(e)Even if there were faults (which is disputed) they were modest so that the penalty was disproportionate.

HMRC’s submissions in outline

1. In short form, HMRC’s submissions were that the Review Decision was reasonable. In more detail they were:

(a)the policy is lawful;

(b)the application in this case was lawful; and

(c)the end result was proportionate.

Accordingly, there was no basis to intervene especially as the Appellant had failed to disprove this.

Discussion

Introduction

1. The Parties submissions raise a number of issues.

(1)The effect of the Policy

(2)The Review Decision

(3)Its reasonableness?

(4)Its proportionality?

The Policy

1. The purpose of HMRC’s policy was said by them to be “to facilitate and guide the exercise of its statutory function in relation to haulage vehicles seized following the discovery of large quantities of excise goods imported for a commercial purpose without compliance with the appropriate statutory provisions.” We accept that this was the case here. We are satisfied that in this case it was, at most, only a starting point. The position in other cases is not an issue here.

The Review Decision

1. The Review Decision considers all the relevant available information (see paragraph 10(21). It carefully considers the Document and its implications as well as the rest of the available information. Mr Harris set out HMRC’s policy so far as was relevant but he did not apply it rigidly or inflexibly in this particular case. Rather it was dealt with in a subtler way as a starting point informing the approach taken and not as a rigid determinative matter.

Was it reasonable?

1. We consider that in all the circumstances the Review Decision was reasonable. It has not been shown by the Appellant to be unreasonable. We find this as a fact.

Was it disproportionate?

1. We have carefully considered all Mr Nesbitt’s attractive arguments and the cases he referred to. Whilst other cases may be illuminating we have to decide the present case. In the light of all the evidence including the lack of real inquiry, the Document and the earlier history we consider that in the particular circumstances the Review Decision was proportionate. It has not been shown to be disproportionate. We find this as a fact.

Result

1. We have found the Review Decision to be both reasonable and proportionate. Consequently, it has not been shown that the Review Decision was unreasonable. The appeal is accordingly dismissed.

Conclusion

1. We have found that the Review Decision in the particular circumstances of this particular case was reasonable and proportionate. Accordingly, the appeal is dismissed.
2. We record that we find it most unsatisfactory that the Policy is not published. It would be of great utility to all parties if it were published and would strengthen HMRC’s position. We also associate ourselves with the President’s comments in H & S Handel about the Policy and how it can lead to unfairness. The present case is one where it did not lead to such a result. We would urge HMRC to review the Policy in the light of the President’s comments and to publish. Such flexibility and transparency would be advantageous to all parties.

ADRIAN SHIPWRIGHT

CHAIRMAN

RELEASE DATE: 11 August 2006

LON/2005/8020

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