EO00915
EXCISE DUTIES — commercial consignments despatched under duty suspension status to Italy and Belgium — whether goods arrived or diverted — duty point — whether owner of goods liable for duty and VAT — FA 1994 s12(1A), DSMEG Regs 2001 reg 7(2) — VATA s 73(7B) — revocation of registered owner approval — WOWGR reg 5, CEMA s 100G(5) — Respondents’ evidence second-hand — Appellant’s evidence incredible — whether Appellant has satisfied burden of establishing arrival of goods at warehouse of destination — no — whether liable for payment of duty and VAT — yes — whether registered owner approval reasonably revoked — yes — appeal dismissed
MANCHESTER TRIBUNAL CENTRE
GLOBAL BEERS AND WINES LIMITEDAppellant
- and -
HER MAJESTY’S REVENUE AND CUSTOMSRespondents
Tribunal:Colin Bishopp (Chairman)
Brian Strangward
Sitting in public in Birmingham on 10 May, 2 and 3 August 2005
Derek Payne, tax adviser, for the Appellant
James Puzey, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2005
DECISION
1.In this appeal, Global Beers and Wines Limited (“Global”) challenges the Respondents’ decisions, upheld on review or local consideration:
(a)to assess Global for excise duty of £416,537 pursuant to section 12(1A) of the Finance Act 1994 and regulation 7(2) of the Excise Duty Points (Duty Suspended Movement) of Excise Goods Regulations 2001 (SI 2001/3022) (“DSMEG”);
(b)to assess Global for VAT of £72,694.12 pursuant to section 73(7B) of the Value Added Tax Act 1994; and
(c)to revoke Global’s registered owner approval, granted in accordance with regulation 5 of the Warehousekeepers and Owners of Warehoused Goods Regulations (SI 1999/1278) (“WOWGR”), pursuant to section 100G(5) of the Customs and Excise Management Act 1979.
2.Those decisions all arise from the Respondents’ conclusion that four consignments of excise goods, purportedly despatched by Global from authorised warehouses in the UK to authorised warehouses in Italy and Belgium, did not arrive at their destinations, that in each case an irregular departure from duty suspension occurred, and that Global “caused” that irregular departure within the meaning of regulation 7(2) of DSMEG. They say that, if that conclusion is correct, it necessarily follows that they had reasonable cause to revoke the WOWGR certificate. Global’s case is that the four consignments were properly despatched and that they arrived at their intended destinations. If, however, they did not arrive, Global did not know and had no reason to suspect that anything untoward had occurred.
3.Global was represented before us by Derek Payne, a tax adviser, and the Respondents by James Puzey of counsel. We were provided with a substantial amount of documentary evidence, and heard the oral evidence of Permjit Singh Dhillon, Global’s sole director, and Matthew Parsons, Jayne Barnbrook and Shelley Morales, all officers of the Respondents.
4.It was common ground that the consignments with which we are concerned, in three cases of vodka and in the fourth of whisky, left the UK authorised warehouse owned by Oakwood Storage Services Limited in Essex, where they had been held to Global’s order. The first left on 12 October, the second on 19 October, the third on 22 October and the last on 26 October 2001. An accompanying administrative document (“AAD”) was prepared by Oakwood, showing the consignor as itself, the transporter as Anglo Overseas Limited (“AOL”) and the consignee (that is, the authorised warehouse of destination) as Serio Import and Export (“Serio”) in Seriate, Italy. AOL is in each case described as the guarantor of the consignment, and in each case the AAD shows that the goods are to be held, on arrival, for the account of Global (at that time its name was Estion Limited). That is an oddity, if Global had in fact sold the goods, but we think it is likely to be the result of a mistake rather than of anything else. As these were, or purported to be, exports under duty suspension arrangements, Global did not account for UK excise duty and VAT when the goods were removed from the warehouse. In due course, Global received from AOL an invoice for the transport costs; each invoice sets out, among other details, the intended destination of the goods and bears the words “We certify that the above goods have been shipped as shown”. Of the AADs, only three were returned; neither party was able to throw any light on what had happened to the fourth.
5.Mr Dhillon’s evidence was that he set up Global in 2001, intending that it should engage in the export of alcoholic beverages especially to other member states of the European Union. We observe in passing that Global’s stationery describes it as an importer, rather than exporter, of beers and wines. He relied on recommendations to obtain customers beginning, he said, with some cash and carry outlets in Calais. Global opened accounts with two approved warehouses, Rangefield and Oakwood, both in Essex. The particular recommendation which is relevant in this appeal was made, Mr Dhillon said, by Oakwood’s manager. It was of Serio. Mr Dhillon knew that the warehousekeeper in the UK was expected to verify, through one of the Respondents’ offices in Glasgow, that the Italian warehousekeeper nominated by Serio (in the event, itself) was authorised to receive goods under duty suspension; the verification is known as a “SEED check”. Mr Dhillon told us that he established contact with Serio, which was the surname of its owner. He met Mr Serio, he said, at a hotel in London, and shortly after Serio placed an order for 1664 cases of whisky, which were the subject of the first consignment. He later met another representative of Serio whom he knew only as Tony. In all, Serio ordered four consignments but, as the fourth was in transit, Mr Dhillon received a message from Oakwood that it had been informed by the Respondents that Serio’s warehouse authorisation had been withdrawn by the Italian authorities, and the consignment could no longer be delivered to it. Mr Dhillon said that he managed to find another customer for the goods, Veltro International BVBA, a Belgian company, which used the authorised warehouse of Brasserie Caulier, also in Belgium. He was able to arrange for the AAD to be reissued (which is not the appropriate procedure—the existing AAD should have been amended) and for the lorry transporting the goods to be redirected to Brasserie Caulier’s address. He told us that re-selling the goods was comparatively easy as he had, coincidentally, had an approach from the owner of Veltro, a Mr Pee.
6.Serio’s payments for the three consignments it received were made in cash; Tony brought (most of) the appropriate sums, in sterling, to Mr Dhillon in the UK. He explained that he trusted Mr Serio and was willing to send the consignments to Italy on the strength of a promise of payment in cash. It appears that £15,000 was paid in advance of despatch of the first consignment, and the balance was paid within a week. A further £5000 was paid on the day the second consignment was sent, and the balance three days later: that information is extracted from the stubs of a receipt book Mr Dhillon produced. Payment for the third consignment was rather less prompt, however, and some of the money was paid, Mr Dhillon explained, only after the intervention of a friend and namesake who lived in Germany and who could more easily travel to Italy than Mr Dhillon; the namesake collected part of the balance due and transferred it to Global by bank transfer from Germany. Global’s invoice to Veltro was also paid in cash, about six weeks after the consignment was delivered. Mr Dhillon said he went to Belgium to collect the money.
7.The Respondents’ evidence was largely second-hand, consisting mainly of documents and statements provided to them by the Italian and Belgian authorities. It was produced by Mrs Morales, who had no personal knowledge of the matter at all; she had merely collected and assembled the information. Mr Parsons was able to give us a good deal of background information about the Commissioners’ approach to excise diversion frauds—they say that these consignments were diverted in the course of a fraud—and about the history of their enquiries in this case but his evidence, too, was drawn largely from documents obtained by him from others. Mrs Barnbrook was the officer who recommended that Global’s WOWGR authorisation should be revoked and, when her recommendation was accepted by her superior officer, who wrote to Global communicating the decision. It was based on the Respondents’ belief that Global had caused, or had been involved in causing, irregular departures from duty suspension arrangements. She told us that it was the Respondents’ policy that the mere fact of such involvement must lead to revocation. Again, Mrs Barnbrook relied on information provided to her—by both Mr Dhillon, during the course of a visit she made to Global as well as by her colleagues—and she did not make any further enquiries of her own.
8.Although, therefore, most of the factual basis of the Respondents’ case was not directly proved, it was before us and it is appropriate we record it since it is what they took into account in reaching their decisions. Much of the information we saw was not specific to these consignments, but related to rather wider enquiries the Respondents were making; and most, if not all, of it was before Lewison J in Customs and Excise Commissioners v Anglo Overseas Limited [2004] EWHC 2198 (Ch), and is described by him in some detail in his judgment.
9.Information provided to the Respondents by their Italian counterparts showed that, while Serio had indeed been an authorised warehousekeeper, its authorisation was withdrawn on 29 June 2001. That information did not immediately reach the Respondents and it was accepted that enquiries of the Respondents by Oakwood into Serio’s authorisation would not have revealed that the authorisation had been withdrawn until after the fourth of the consignments with which we are concerned had already been dispatched. That is consistent with Mr Dhillon’s evidence. It was apparent from what the Italian authorities had provided that Serio (or a man purporting to be a representative of Serio) borrowed the key to the premises for which it sought approval from the owner, on the pretext that Serio was considering taking a lease, then showed it to Italian officials in order to obtain the approval, but did not proceed to take the lease. The authorisation was revoked as soon as the Italian authorities discovered what had happened but, as Mr Parsons told us, the exchange of such information between customs authorities in the various member states could be slow and it was not until some time later that the information reached the Respondents. The Italian authorities had also examined the AADs purportedly returned by Serio and had concluded not only that they had been completed after the revocation of the authorisation but that the stamps and signatures ostensibly applied by the Italian authorities were false.
10.The information obtained from the Belgian authorities was that Veltro was engaged in the insurance business with no connection at all to the liquor trade and that, although Brasserie Caulier was an authorised warehousekeeper, it used its facilities only for the storage of products it had manufactured itself. The owner of the Brasserie denied any knowledge of the consignment, and said that the seals and signatures on various AADs produced to him and purportedly completed by the Brasserie (though not including the one used for Global’s fourth consignment which, as we have said, was not returned) were false. Veltro’s owner, too, denied having bought a consignment of spirits from Global. Part of the Respondents’ case is that Global’s was only one of several consignments supposedly bought by Veltro and redirected to Brasserie Caulier from Serio immediately after the revocation of Serio’s authorisation became known to the UK authorities.
11.Faced with such information, it is not surprising the Respondents took the view that the four consignments had not reached their intended destinations and that, even if the first three had, they could not have been received by an authorised warehousekeeper since the warehouse of destination was no longer authorised. We are, however, conscious that what was available to them, and produced to us, is not direct evidence, and has not been tested by cross-examination. Although the tribunal may admit almost any evidence it thinks fit (see rule 28(1) of the Value Added Tax Tribunals Rules 1986 (SI 1986/590)), we nevertheless have to consider what, if any, weight we should attach to it. It is, we think, appropriate to consider the Respondents’ evidence together with what Mr Dhillon told us, and the documentary material he produced. It is necessary also to bear in mind that the burden of establishing that the goods arrived at an authorised warehouse rests in each case on Global (see section 16(6) of the Finance Act 1994 and Tynewydd Labour Working Men’s Club and Institute Limited v Customs and Excise Commissioners [1979] STC 570) and that, although we may allow or dismiss the appeals against the assessments as we think appropriate in the light of our findings of fact (see section 16(5) of the Finance Act 1994 and section 84(5) of the VAT Act 1994) we may allow the appeal against the revocation of the WOWGR approval only if we are satisfied that the decision to revoke it was one at which the Respondents could not reasonably have arrived (see section 16(4) of the Finance Act 1994) since the decision is one as to an ancillary matter falling within paragraph 2(2) of Schedule 5 to that Act.
12.The difficulty for Global lies in our conclusion that much of Mr Dhillon’s evidence was implausible, and some quite incredible. He told us that Global was able to take on only one transaction at a time; that part of his evidence is quite believable, since we have the clear impression that Global did not have significant financial resources. Despite Mr Dhillon’s suggestion that there may have been other dealings, it transpired that the first sale to Serio was in fact only the second transaction into which Global had entered. The first was a sale to (Mr Dhillon said) a French customer, although the delivery had been made to a Portuguese warehouse (the Respondents say that this consignment too was diverted but there was no evidence of any kind on the subject before us and we disregard the possibility as a factor). Mr Dhillon also told us that after the four consignments with which we are concerned, Global sold other goods, but we had no separate evidence to support that claim. It was clear that there had been no other sales between the first and last of these consignments.
13.The most striking feature of Mr Dhillon’s evidence was the manner in which he claimed to have done business with his customers, both in the negotiation of sales and in his willingness to allow credit to them. By his own account, Mr Dhillon relied on the recommendation of a manager at Oakwood, a company to which he had only recently been introduced, and with which Global had only a very brief trading relationship. On the strength of that recommendation he struck up a short acquaintance with a man who was, or purported to be, Mr Serio. The first order placed by Serio was for goods to a value (excluding duty and VAT) of over £22,000. Mr Dhillon, as we have recorded, said that some was paid in advance, with the balance to be paid after delivery. Even taking that evidence at face value, it is in our view incredible that Mr Dhillon should take on trust Mr Serio’s assurance that the balance would be paid, and just as incredible that Mr Serio should hand over £15,000 in cash, to a man he barely knew, in advance of delivery. Even on Mr Dhillon’s evidence, his trust was misplaced since he had to ask his namesake to travel to Italy from Germany in order to secure payment. We find it implausible, at best, that a businessman honestly engaged in such a trade would expect to pay in cash, or receive cash in payment.
14.The manner in which Mr Dhillon claimed to have established contact with Mr Pee is also implausible and internally confused and, moreover, inconsistent with such documentary evidence as he produced himself. He told us that Oakwood’s manager had put him in touch with Mr Pee; yet he produced a letter from Mr Pee, dated 25 October 2001, stating that Global’s details had been provided to him by a French business partner. Mr Dhillon maintained that he had travelled to Brussels where he met Mr Pee, and he produced a receipt for an air ticket for travel on 7 November 2001, issued on 30 October but he also produced a letter from Mr Pee referring to a meeting on 31 October. Mr Dhillon tried to explain the inconsistencies by saying that his intended travelling companion, who spoke French, was taken ill and the trip was delayed, but one inconsistency was merely replaced by another and we do not believe Mr Dhillon’s explanation; Mr Puzey put it to him that he was making the explanation up as he went along, and we are satisfied that was an accurate observation. And even if, as Mr Dhillon said, Mr Pee had approached him shortly before he found it necessary to re-sell the fourth of Global’s consignments to Serio, it seems to us a remarkable stroke of luck, if it is true, that Mr Pee happened to be able and willing to buy exactly the same goods as Serio had ordered. But we are quite satisfied that what Mr Dhillon told us is not true. It is in our view significant that Global’s fourth consignment to Serio was only one of several diverted—or allegedly diverted—from Serio to Brasserie Caulier when the former’s authorisation was withdrawn.