[2010] UKFTT 122 (TC)

TC00433

Appeal number LON/09/7045

Excise Duty – drawback claims – whether goods available for inspection for two clear business days – no – whether sufficient evidence of duty paid – no – nature of Tribunal’s jurisdiction – whether HMRC’s decision not to waive compliance with strict requirements reasonable – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	PIERHEAD PURCHASING LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: 	JOHN CLARK (JUDGE OF THE FIRST-									TIER TRIBUNAL)
						SHEILA CHEESMAN						

Sitting in public at 45 Bedford Square London WC1B 3DN on 22 January 2010

John Shelley CTA (Fellow), Tax Representative, for the Appellant

David Manknell of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	Pierhead Purchasing Limited (“Pierhead”) appeals against a decision of the Respondents (“HMRC”), confirmed on review, to reject two claims to drawback of excise duty on two consignments of beer.
The law
2.	The relevant regulations of the Excise Goods (Drawback) Regulations 1995 (SI 1995/1046) provide:
“7     General conditions
(1)     Subject to paragraph (2) below and without prejudice to any condition imposed by, or in accordance with section 133 of the Act, every eligible claimant shall—
	(a) save as the Commissioners may otherwise allow, comply 	with the conditions imposed by these Regulations; and
	(b) in addition to those conditions, comply with such other 	conditions as the Commissioners see fit to impose in a notice 	published by them and not withdrawn by a further notice.
(2)     If the Commissioners consider it necessary for the protection of the revenue they may, by a notice in writing delivered to a revenue trader, require him to comply with such additional conditions as they think fit to impose.
(3)- (6) . . .
8     Conditions to be complied with before export
(1) . . .
(2)     where an eligible claimant intends to claim drawback after export he shall, before export, comply with the following conditions—
	(a) he shall deliver to the Commissioners at such address as 	they shall specify a notice in writing stating that he intends to 	claim drawback and containing the following particulars—
		(i) his name and address,
		(ii) the address of the premises at which the goods may 		be inspected prior to their export,
		(iii) the description of the goods, including their nature 		and quantity,
		(iv) the amount of duty paid in respect of the goods, 		and
		(v) the address of the premises to which the goods are 		being exported;
	(b) if the export is a dispatch he shall complete an 	accompanying document;
	(c) if the export is not a dispatch he shall complete a single 	administrative document; and
	(d) the goods and the accompanying document or single 	administrative document shall be available for inspection by 	the Commissioners, at any reasonable time, for not less than 	two clear business days following the day upon which the 	notice mentioned in sub-paragraph (a) above was received by 	the Commissioners.
10     Conditions to be complied with after export
Where an eligible claimant claims drawback after export he shall comply with the following conditions—
	(a) if the export is a dispatch, he shall include with his claim—
		(i) unless duty is not payable on that description of 		goods in the place to which they have been exported, 		the document evidencing payment of duty in that 		place, and
		(ii) the copy of the accompanying document which is 		endorsed with the certificate of receipt; or
		(b) if the export is not a dispatch, he shall include with 		his claim copy 3 of the single administrative document 		endorsed as described in Article 793 of Commission 		Regulation (EEC) No 2454/93.”
All references to regulations in this decision are to SI 1995/1046.
The facts
3.	At the hearing the evidence consisted of bundles of documents provided by Pierhead and HMRC respectively. A witness statement of Richard Hercules, a director of Pierhead, was also provided. Mr Hercules gave oral evidence. Additional evidence was provided by HMRC after the hearing; the questions arising in relation to such additional evidence are reviewed under “Discussions and Conclusions” below
4.	From the evidence we find the following facts. Where the facts were in dispute, we consider the evidence later in this decision.
5.	Pierhead’s business is that of supplying beer and wine from around the world on a wholesale basis. On 28 March 2008 an order was placed with Pierhead by Universal Boissons of Coquelles, France, for a quantity of lager beers of three types. As Pierhead encountered difficulty with supply, only part of the Carlsberg order could be fulfilled, and this had to comprise a mix of duty free under bond and duty paid for drawback.
6.	On 9 April 2008 shipping instructions were raised showing Pierhead as shipper, Universal Boissons as importer, Abbey Forwarding Ltd (“Abbey”, a UK bonded warehouse) as receiving agent and Schenker Wine Division as transport company and shipment guarantor. There were shipping instructions for two separate trailers. One (LX1503/E) was for 26 pallets duty paid under drawback and the other (LX1503/F) was also for 26 pallets, of which 24 were duty paid under drawback and two were duty free under bond.
7.	On 10 April 2008 Mr Hercules sent a message to Abbey. Although this was not described on its face as a fax message, we find that it was sent by fax. The main body of the message stated:
“You will later receive our fax instructions re 6 loads all ex your depot to MT Manut [the delivery address at Coquelles shown in the shipping instructions]. We wish to use Schenkers. Pls see attached details. Loads shd be booked into you for Monday/Tuesday. Wd like them out by end of week.”
8.	On 10 April 2008 Pierhead placed various orders with Carlsberg UK for consignments of lager beer to be delivered to Abbey. The two purchase orders included in the evidence contained the following details. Delivery was to be on “Monday/Tuesday 14th/15th April”. One was for “1 x 26 pallets (2080) Trays Carlsberg Lager 500ml”. The other was for “1 x 24 pallets (1920) Trays Carlsberg lager 500ml”. Both specified that the lager “Must be fresh stock and free of any Duty Free markings . . .”, and stated “Delivery Duty Paid required as follows . . .”
9.	On the same date Pierhead invoiced Universal Boissons for 48 pallets (4180 cases) of Carlsberg Special Brew, 48 pallets (4180 cases) of Carlsberg Lager, and 48 pallets (4180 cases) of Skol Super. The total of 144 pallets was to be delivered to “CFR Coquelles under bond”. Delivery was to be to MT Manut, which Mr Hercules informed us was a bonded warehouse. He explained that some of this consignment was already duty free and the rest was subject to the duty drawback regime which was being initiated by Pierhead.
10.	On 15 April 2008 Abbey issued a “Goods Received Note” numbered GR006036; this was faxed to Pierhead at 16.01, although the time showed against the “Print Date” (14/04/2008) was 16.11. It showed the quantity of cases received on the “Receipt Date (again 15 April) as 1920. The name of the supplier, Carlsberg, was written in by hand. The “Total Duty” was shown as £13,097.78. The “Total Cost” corresponded to the amount invoiced by Carlsberg, net of VAT.
11.	Another Goods Received Note issued by Abbey dated 15 April 2008 and numbered GR006032 showed a quantity of cases received as 2080. The copy in evidence did not carry any fax details. The “Print Date” showed the time as 14.09. As with the note already mentioned, the name of the supplier had been inserted by hand. The “Total Duty” was shown as £14,189.26 and the “Total Cost” corresponded to the amount invoiced by Carlsberg, net of VAT. Both notes related to the same type of Carlsberg lager.
12.	Various other such notes were issued by Abbey to Pierhead during the period from 14 to 22 April 2008 inclusive. Carlsberg issued various invoices to Pierhead for various quantities of lager beer. These were “palletised” and bore a stock barcode.
13.	On 16 April 2008 Pierhead submitted by fax to HMRC two Notices of Intention to Claim Drawback. The first, under reference 67385, related to 2080 cases on which the duty was specified as £14,189.26, and the second, under reference 67386, related to 1920 cases, with the duty shown as £13,097.98.
14.	Pierhead raised two “Warehousing Advice Notes” for these goods to be shipped on 18 April 2008 by Abbey to MT Manut by Schenker under duty drawback arrangements. In each case Abbey completed by dating and signing the “Certificate of receipt”, which was in the following terms:
“The goods listed above were received into this warehouse on 18/04/2008. . . For the purpose of subsequent exportation.”
Abbey’s address stamp was impressed at the foot of each of these documents. The purpose of completing the receipts on these was to show that the goods were moved into bond on the date shown.
15.	Subsequently Schenker invoiced Pierhead for two shipments of 2080 cases of beer. The invoices were dated 28 April 2008. One (showing “Your ref LX/1503/F”) showed the loading date as 15 April 2008, and the other (showing “Your ref LX1503/E”) as 18 April 2008. They showed the place of loading as Belvedere [Pierhead’s location, not Abbey’s premises] and the place of discharge as Coquelles.
16.	Two Administrative Accompanying Documents (“AADs”) were prepared by Abbey as consignor. (The copy pages in evidence were those returned to the consignor, without copies of any notes which may have been on the reverse giving instructions on the completion of the forms.) One AAD related to a single quantity of 2080 cases of Carlsberg lager, and the other to two quantities of, respectively, 160 cases and 1920 cases, with appropriate entries showing quantities, gross and net weights. Otherwise, the AADs were in identical terms. In box 6 the “Inv. Date” was shown as “17/04/08”. The “Date of dispatch” was shown in box 16 as “18/04/08”. In box 17, the entry was “5 days”. The details of the vehicles carrying the respective consignments were shown in box 11.
17.	The other sections of the AADs showed the date of receipt of the goods at Coquelles as 22 April 2008. The stamps showing the date of arrival indicated respectively that the hour of receipt was 15.10 for the single quantity of 2880 cases and 11.29 for the AAD covering the quantities of 160 and 1920 cases.
18.	In each case, the first page (numbered 5) carried a very faint date stamp showing the date as 18 April 2008. The question of these date stamps is considered later in this decision.
19.	On 16 June 2008 Pierhead submitted two forms for “Claim of Drawback of Excise Duty”, showing the amounts claimed as, respectively, £14,189.26 and £13,097.78. By letter dated 18 July 2008 from Mr A Renwick, an officer at HMRC’s National Drawback Centre, HMRC rejected those claims. There were two grounds for rejection. The first was that Pierhead had failed to give the correct two working days’ notice before moving the goods into bond; the date on which HMRC had received the Notice of Intention form was 16 April 2008, but the date of receipt on the Warehousing Advice Notes was 18 April 2008. The second ground was that Pierhead had failed to submit the required evidence of UK duty payment as detailed in HMRC’s Public Notice 207, section 10.6. [The relevant edition of Notice 207 was the one published in June 2007.]
20.	Separately, on 4 August 2008, Carlsberg UK Ltd confirmed to Pierhead that Excise Duty of £26,880 relating to invoices TK98362673 and TK98362674 [the invoices for the 2880 and 1920 cases of Carlsberg lager delivered to Abbey for Pierhead on 15 April 2008] had been paid on 23 May 2008.
21.	Stephen Doe, one of Pierhead’s employees, wrote to HMRC on 21 August 2008 requesting a formal departmental review of HMRC’s decision to reject the drawback claims. He explained that Pierhead had failed to give at least two full business days’ notice. The goods had arrived at Abbey on Tuesday 15 April, which meant that the two day notice of intent should have been 16 and 17 April, with dispatch organised for Friday 18 April. Unfortunately Pierhead had failed to submit its Notice of Intent until 16 April, allowing only one business day instead of two. During April 2008, Pierhead had been moving its duty suspended stocks (some 60,000 cases representing 700 product lines) from one duty suspended warehouse to another, and in the heat of the moment had failed to lodge the Notice of Intent. If it had realised its failure, it would have delayed the EU movement of the goods, but unfortunately, with the pressure resulting from the move of the stocks, this step had not been taken.
22.	In relation to the second reason for rejection of the drawback claims, Pierhead attached a copy of Carlsberg’s confirmation of the Excise Duty paid on the goods. Pierhead pointed out that the duties shown in Carlsberg’s confirmation differed from the total amount of Pierhead’s drawback claim; it had asked Carlsberg for a breakdown of the calculation of the duty amount, but Carlsberg had been unable to provide this.
23.	As no response had been given to Pierhead by HMRC, Mr Hercules wrote to HMRC on 19 September 2008 to request confirmation of receipt. On 29 October he telephoned for confirmation, which was given orally by phone. Mr Hercules wrote again on 13 November to ask about the position. On 18 December 2008 Mrs L Martin of HMRC wrote to Pierhead. She referred to her colleague’s letter of 23 October 2008, and indicated that she had been unable to complete the formal Departmental review within the 45 day statutory legal time limit. She explained that the reason for delay was an administrative error, and that as a result the decision given on 18 July 2008 was deemed to have been upheld. Pierhead could therefore appeal against the deemed decision. However, she intended to continue with her consideration of the case and would advise Pierhead of her conclusion as soon as possible.
24.	Mr Hercules responded on 29 December 2008. He pointed out that Pierhead had never received any letter dated 23 October, and explained what contacts he had made with HMRC. He asked for a copy of the 23 October letter. He indicated that Pierhead would hold off writing to the Tribunal centre in the hope that Mrs Martin might reconsider the outcome of the case. Mrs Martin replied on 12 January 2009 to explain that, contrary to HMRC’s procedures, an acknowledgment letter did not appear to have been sent to Pierhead on 23 October 2008. Instead she enclosed an example of such a letter to let Pierhead see what basic detail was normally contained in one of such letters.
25.	Mrs Martin gave HMRC’s review decision in her letter dated 26 January 2009. This upheld Mr Renwick’s decision. In relation to the proper notice not having been given, Mrs Martin was not prepared to accept the movement of stock as a valid reason, as she assumed the move not to have been unforeseen. As such, she would have expected Pierhead to have made the necessary arrangements to meet the drawback regulations at the relevant time. In relation to duty payment, she said:
“In the case of evidence of duty payment you have since submitted a statement from your supplier regarding the payment of duty on the beer but this does not tie up with the total amount of duty involved.”
26.	Notice of appeal against HMRC’s decision dated 18 July 2008 and the review decision dated 26 January 2009 was given on 12 February 2009.
27.	On 23 July 2009 Pierhead wrote to MT Manut to request confirmation that French Duty on the two consignments was paid. MT Manut’s response dated 17 August 2009 explained that for customer confidentiality reasons it was not in a position to discuss the duty payments of the individual customers who then became “owners” of the two loads, but did confirm that stock from those two loads delivered to the French market would have been French duty declared and French duty paid.
28.	At some unspecified point since the events giving rise to Pierhead’s appeal, Abbey had gone into liquidation, with the result that no communications from Abbey later than August 2008 were included in evidence, and no further assistance could be obtained from Abbey personnel to establish facts relevant to the appeal.
Arguments for Pierhead
29.	Mr Shelley referred to regulation 8(2)(d) of the Drawback Regulations. This referred to the goods and accompanying documents being available for inspection by HMRC for not less than two clear business days following written notice to HMRC given in accordance with regulation 8(2)(a). “Business day” was defined by regulation 4 as having the meaning given in s 92 of the Bills of Exchange Act 1882, ie any day other than Saturdays, Sundays or bank holidays.
30.	However, he submitted that the expression “business day” was also qualified by the words “available for inspection at any reasonable time” in regulation 8(2)(d). This invited the inference that the length of the business day for the purposes of carrying out an inspection was to be regarded as limited by the normal office hours between 0900 and 1700. He argued that it was not necessary for the Tribunal to determine the actual length of the business day. If there was any ambiguity as to the meaning of the length of the business day, this should, as a matter of law, ordinarily be construed in favour of Pierhead. Further, if there was any unresolved doubt as to the fact of compliance, this should also be construed in favour of Pierhead.
31.	The goods had been delivered to Abbey on Tuesday 15 April, and the Notices of Intention to Claim Drawback were provided to HMRC on 16 April. Thus the period of two clear days commenced on the following day, ie the morning of Thursday 17 April, and finished at the close of business on Friday 18 April. As shown by the Warehousing Advice Notes, 18 April was the date on which the goods were put under duty suspension arrangements within regulation 8.
32.	As HMRC had never requested an inspection or given any indication of an intention to inspect, it was not possible to confirm the time when the goods were actually taken out of the warehouse for shipment to Coquelles. However, it was clear from the AADs that the goods were not delivered in bond to Coquelles until Tuesday 22 April, so the goods might still have been available for inspection in the UK bond beyond the two day period prescribed by the regulations, Monday 21 April being a business day, in which case he submitted that Pierhead would probably have been compliant. The liquidation of Abbey had prevented enquiries from being followed up on this issue.
33.	Mr Shelley argued that it was open to HMRC to waive strict compliance with conditions laid down to protect the revenue, either generally under HMRC’s care and management powers, or specifically in accordance with regulation 7(1).
34.	Contrary to HMRC’s suggestion that the appeal fell within the principles considered in John Dee Ltd v Customs and Excise Commissioners [1995] STC 265, the position was governed specifically by the relevant legislation. He referred to the Tribunal’s power, pursuant to s 16 and paragraph 3(1)(j) of Schedule 5 to the Finance Act 1994 (“FA 1994”), to consider inter alia whether or not HMRC’s refusals to meet the drawback claims were reasonable decisions. This invited a consideration of three related issues:
(1)	Were the claims in fact time compliant in any event?
(2)	HMRC had never exercised their right of inspection, so that this reason for refusal lacked any real substance;
(3)	Even if there had been a failure to comply with the timetable condition under regulation 8, HMRC could have waived compliance with that condition.
35.	Mr Shelley invited us generally, in considering the evidence and coming to a decision, to consider that Pierhead and its agents had otherwise fully and properly taken all the proper steps in arranging the export sale of excise goods. The refusal of the drawback claims amounted to a substantial penalty. Even if it were to be found that Pierhead had been non-compliant, it was still open to the Tribunal to consider whether HMRC had been unreasonable to refuse the drawback claims.
36.	He submitted that it had never been part of the decision to refuse drawback that there had been a difference between Pierhead’s drawback claim and the duty as calculated by Carlsberg. If Carlsberg had wrongly calculated and paid a lesser amount of duty than that which was actually due, that was nothing to do with Pierhead. Correspondingly, if Pierhead had made an arithmetical error, it was still entitled to drawback (on a corrected claim) and a refusal based on these issues would be manifestly unreasonable. It was not a reason for refusing; in Mrs Martin’s review letter, it was not specified as a reason, only a comment.
37.	HMRC had referred to the subsequent limitation of drawback claims, and to R (Seabrook Warehousing Ltd and 7 other Claimants) v HMRC [2009] EWHC 1742 (Admin).  Drawback claims had not been abolished, as stated in HMRC’s skeleton argument. Their reference to the loss of duty through fraudulent drawback claims did not appeal to have any bearing on Pierhead’s case. HMRC’s argument that, given this context, it was impossible to say that HMRC had acted unreasonably or unlawfully in insisting on strict compliance with the requirements in the present case had taken Pierhead by surprise. This seemed to be a decision based on a “hidden agenda”. In any event, the level of duty loss for 2008-2009, at £25 million, appeared relatively minor. Mr Shelley queried the reason for raising this issue; if it was a matter of policy, it reflected on the reasonableness of HMRC’s decision.
Arguments for HMRC
38.	Mr Manknell explained that the two drawback claims made by Pierhead totalled £27,287.03. He referred to Mr Renwick’s letter, which specified two reasons for refusing the drawback claims. By the time of Mrs Martin’s review, there had been some evidence of duty payment.
39.	The receipts on the Warehousing Advice Notes were dated 18 April 2008, indicating that the goods had been moved into bond on that date; the warehouse had completed the date of departure. There was no evidence of any later date of movement of the goods. All the documents suggested that the goods had left on 18 April.
40.	The claim forms which Pierhead had completed contained a declaration as to various matters, in particular that the claims complied with the conditions laid down in the regulations and that the person making the declaration had read and understood HMRC’s Notice 207: Excise Duty Drawback. Pierhead was experienced; it had made some drawback claims in 2007. It was one of the biggest exporters of Carlsberg in 2009, so was familiar with the export of excise goods.
41.	Pierhead had failed to give the requisite two clear days’ notice. Mr Manknell referred to paragraph 8.4 of HMRC’s Notice 207 as issued in June 2007. This referred to giving notice which allowed at least two business days immediately following receipt of the Notice of Intention (“NOI”) at HMRC’s Glasgow Drawback Centre (the “DC”). It continued (the following text being in bold type):
“The day of receipt of the NOI by the DC does not count towards the period of notice, e.g. if the NOI is received at the DC on Monday, the inspection period is Tuesday and Wednesday.”
42.	Mr Manknell referred also to paragraphs 8.9 and 11.2 of Notice 207, and submitted that it was plain and unequivocal.
43.	He referred to Seabrook. HMRC were not suggesting that the limitation of drawback had directly impacted on the present case. The point being made was that drawback claims were notoriously prone to fraud, which was the reason for imposing strict requirements for such claims. The conditions were designed to reduce as far as possible the scope for fraud.
44.	It had not been suggested that HMRC’s requirements were unlawful. It was clear that Pierhead had not complied with those requirements. Two arguments had been advanced. Mr Shelley had suggested that the requirements were unreasonable to such an extent that they were unlawful. His second argument was that it could not be proved that Pierhead had not complied.
45.	On the question whether HMRC had acted unlawfully, Mr Manknell accepted that there was a general power to waive compliance; however, HMRC would require a very good reason to do so. The review letter had dealt with the question of Pierhead moving its stocks, and there had been no evidence on this from Mr Hercules. His reliance on an agent had not been a good reason for failing to comply with these important requirements.
46.	Mr Manknell initially contended that the role of the Tribunal in an appeal of this nature was limited to a review of the rationality of HMRC’s decision on the usual Wednesbury or John Dee principles (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, [1947] 2 All ER 680, CA; John Dee v Customs and Excise Commissioners [1995] STC 265). In the light of our questions and Mr Shelley’s reference to s 16 of the Finance Act 1994 (“FA 1994”), he accepted that the position in relation to the refusal of the drawback claims was governed by that section. However, he submitted that the question of HMRC’s decision not to waive compliance with the Regulations remained within the principles derived from those cases.
47.	On Pierhead’s contention that two clear days’ notice may have been given if the time of exportation was after 17.00, there had been no evidence whatsoever presented to HMRC to show that the exportation had been after that time. Even if it had taken place later than 17.00, if it had taken place at any time on 18 April, it could not be said that there were two clear business days’ notice. The words used were “business days”, and not “during the hours of business on two days”. The critical date was when the goods left the warehouse, and all the documents suggested that the goods had left on 18 April. Even if HMRC had actually made an inspection on 17 April, the goods would not have been able to be moved until 19 April.
48.	In relation to evidence of duty paid, the claim forms submitted by Pierhead on 19 June failed to supply any such evidence. In the decision of 18 July HMRC had therefore refused the claim additionally on the basis that Pierhead had failed to submit the required evidence of UK duty payment as specified in Notice 207. Subsequently, in its letter of 21 August, Pierhead had submitted a letter from Carlsberg as evidence of UK duty payment, but the duty amount stated as having been paid on the invoices by Carlsberg did not match up with the duty shown as due on the two Notices of Intention. HMRC had been entitled to say that the drawback claims had not been made out. Mr Hercules had said that the mismatch had been Carlsberg’s fault; however, there had been no attempt to reconcile the amounts nor any correspondence with Carlsberg to resolve what duty had been paid. There were no grounds to suggest that Carlsberg’s figure was wrong.
Discussion and conclusions
Nature of the Tribunal’s jurisdiction
49.	As the question of the nature of our jurisdiction has been raised, we consider this before considering Pierhead’s substantive appeal. Section 16(4) and paragraph 3 of Schedule 5 FA 1994 (before amendment by SI 2009/56 in respect of appeals made after 31 March 2009) provide as follows:
“16     Appeals to a tribunal
. . .
(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.”
“(8) Subject to subsection (9) below references in this section to a decision as to an ancillary matter are references to any decision of a description specified in Schedule 5 to this Act which is not comprised in a decision falling within section 14(1)(a) to (c) above.”
“Schedule 5
3.—
(1)      The following decisions under or for the purposes of the Alcoholic Liquor Duties Act 1979, that is to say—
	(a)-(i) . . .
	(j) any decision as to whether or not drawback is to be allowed 	in any case under section 42 (drawback on exportation etc) or 	as to the conditions subject to which drawback is so allowed.”
(Section 42 is expressed to have been repealed by s 5 and other provisions of the Finance Act 1998, but there has not yet been any commencement order for the repeal to take effect.)
50.	Thus, in relation to HMRC’s decision to reject the drawback claims, the Tribunal is required to examine whether or not it was a decision which HMRC could reasonably have reached.  This invites the application of the “Wednesbury” test. Although doubts have been expressed in certain cases as to the continuing validity of the test laid down in Wednesbury in the context of proportionality and Convention rights, it appears to have been accepted by the Court of Appeal in Association of British Civilian Internees, Far Eastern Region v Secretary of State for Defence [2003] EWCA Civ 473 at [33]-[37] that the test is to be treated as valid unless the House of Lords (now, the Supreme Court) decides otherwise.
51.	In examining this question, the Tribunal must look at the material which was taken into account by HMRC in order to arrive at that decision. It is also necessary, in considering whether HMRC could reasonably have arrived at the decision, to examine the matters which HMRC were required to consider and to exclude from consideration matters which were not relevant to what HMRC had to consider; see the judgment of Lord Greene MR in Wednesbury [1948] 1 KB 223 at 233-234:
“The court is entitled to investigate the action of the local authority with a view to seeing whether they have taken into account matters which they ought not to take into account, or, conversely, have refused to take into account or neglected to take into account matters which they ought to take into account.”
52.	Although Mr Manknell argued that the Wednesbury principle applied to the decision of HMRC not to waive the strict requirements of the Drawback Regulations as supplemented by those in Notice 207 imposed pursuant to regulation 7, there is a statutory provision which applies to an appeal against such a decision. The appeal is not one in respect of an “ancillary matter” falling within s 16(4) FA 1994, but an appeal against another decision falling within s 16(5), which provides:
“(5)     In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.”
53.	Subject to the qualification which we mention below as to the limited extent of the arguments put to us on this issue, it follows that John Dee applies, and that the proceedings before the Tribunal are, in this respect, “in the nature of an appeal and not one of review” as mentioned by Turner J ([1995] STC 265 at 276).
54.	This is to be contrasted with the limited nature of the Tribunal’s powers under s 16(4) FA 1994.
HMRC’s refusal of the drawback claims
55.	Turning to the substance of the appeal, Pierhead’s Notices of Intention to Claim Drawback were not submitted to HMRC until 16 April 2008. Under regulation 8(2)(d), the goods and the AADs were required to be available for inspection by HMRC “for not less than two clear business days following the day upon which the notice . . . was received by [HMRC]”. The two “business days” were therefore 17 and 18 April.
56.	Consistently with regulation 8(2)(d), paragraph 8.6 of Notice 207 indicated that the two business days’ notice was the minimum required. Although any inspection by HMRC during the period of availability of the goods for such purpose is expressed by regulation 8(2)(d) to be “at any reasonable time”, we do not accept Mr Shelley’s argument that this restricts the time during which the goods are to be available. The nature of the obligation is that the goods are to be available for inspection for the relevant period, irrespective of whether an inspection actually takes place.
57.	Although there was no specific evidence to this effect, our understanding is that HMRC carry out limited numbers of such inspections. It would not in our view be appropriate to limit claimants’ general obligations to comply with the requirement to make the goods available for a minimum of “two clear business days” by qualifying the latter words with an expression such as “during reasonable business hours”. The requirement would be made uncertain in its extent because the practical interpretation of such an expression would vary between different businesses with possibly wide differences in hours of business.
58.	Thus we do not accept Mr Shelley’s submission that the period of two clear business days finished at close of business on Friday 18 April. That submission would in any event have required Pierhead to demonstrate that the goods did not leave Abbey’s premises until after close of business; there was no specific direct evidence to indicate when the goods left, either on that day or subsequently. We go on to consider what inferences can be drawn from the other evidence to establish when the goods were moved from Abbey’s premises.
59.	The Warehousing Advice Notes carried the date “18/04/08” on the Certificates of Receipt. On the first page of each, against the heading “Date of Departure”, the date was also inserted, in the same handwriting as on the Certificates of Receipt, as “18/04/08”. Mr Hercules’ evidence was that these Warehousing Advice Notes were for the goods to be shipped on that date by Abbey to MT Manut by Schenker under duty drawback arrangements. Schenker’s invoices dated 28 April referred respectively to the “loading date” as 15 April and 18 April. We find that the first must have been completed in error; it is clear from the shipping instructions, which used the reference number shown on Schenker’s invoice, that the consignment was the full one of 2080 cases under drawback, and these could not have left Abbey’s premises on 15 April. The relevant AAD carried the date 18 April, and we find that the loading date should also have been shown on Schenker’s invoice as 18 April.
60.	Both AADs were signed and dated by Abbey on “18/04/08”. They each carried an indistinct impression of a date stamp. On the first AAD, the only distinct part of the stamp is the part showing the actual date: “18 Apr 2008”. The date on the second is less distinct, but we conclude on examination of the copy in evidence that it is the same.
61.	Apart from the question of the date, it was questioned in the course of the hearing whether these date stamps might have been added to the AADs by HMRC. Mr Hercules was recalled later in the hearing to answer questions on this possibility. His evidence was that if it had been a “Customs stamp”, it could only have been added when the AADs were with Abbey, which would imply that HMRC must have been at Abbey’s warehouse to see the goods. Both copies of the AADs had to come back from France, so they would have had to be stamped before the goods left Abbey’s premises. If instead the stamp had been added while the goods were in transit, a “stop and enquiry” would have had to take place. The goods could not have been examined at the port without an examination notice.
62.	Following the hearing, we have closely examined the impressions of the date stamps on the copies of the AADs included in the evidence. Although the first shows the date clearly, it is not possible for us to make out any of the details at the top of the stamp. The second shows a less clear impression of the date, but there is a slightly more distinct indication of the heading, when examined under a bright light; the first word is “Abbey”.
63.	Also following the hearing, HMRC made an application by letter carrying the date 4 February 2010 for the admission of a witness statement made by Frances Manley, a Review Officer of HMRC. This statement was made on 5 February 2010.
64.	By Directions made by the Tribunal Judge on 15 February 2010, it was directed that subject to the Tribunal being satisfied as to the making and dating of Ms Manley’s statement, it should, in accordance with the “overriding objective” contained in Rule 2(1) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009 No. 273(L.1)), be admitted. By a letter dated 17 February 2010, HMRC indicated that the date of their letter should have read 5 February 2010. It was also directed that if Pierhead wished to object to Ms Manley’s evidence, it should do so within 14 days of the release of the Directions. No such objection having been received, the statement stands as evidence. (We comment below on the approach taken by HMRC in applying for admission of this witness statement.)
65.	In the statement, made in the absence of Mrs Martin on maternity leave, Ms Manley stated that Mr Renwick of HMRC’s office in Glasgow had reviewed the spreadsheet prepared by HMRC’s Glasgow Drawback Centre (“DC”); this showed no record of any request made by the DC for a visit in respect of the two drawback claims. HMRC’s office in London had informed Ms Manley that they believed the stamps on the AADs to be stamps of Abbey Forwarding and that HMRC’s London Holding and Movement officers were not in the habit of stamping AAD documentation in this way. Ms Manley also indicated that she had reviewed the AADs and could make out the word “Abbey” more clearly on the second AAD; the stamp on the first AAD appeared to be the same stamp.
66.	On the basis of our own examination, supplemented by Ms Manley’s evidence, we are satisfied that the stamps were added to the AADs by Abbey and not by HMRC.
67.	All the documentation is therefore consistent with the goods having left Abbey on 18 April. We accept that Schenker’s invoices do not appear to have been prepared as carefully as might have been expected; apart from the erroneous date on one, they both give the place of loading as Belvedere, which was clearly incorrect. However, taking these invoices into account with the rest of the documentary and other evidence, we are satisfied on the balance of probabilities that the goods did leave Abbey on 18 April. This would be consistent with Mr Hercules’ fax of 10 March to Abbey, indicating that he would like the goods out by the end of the week, which must have meant the week ending 18 April.
68.	The one part of the evidence which might have cast doubt on our conclusion is the arrival date of the goods as shown on the receipt sections of the AADs. On the basis of a departure date of 18 April, it appears surprising that the goods were not received in Coquelles until 22 April (the following Tuesday), even allowing for the intervening weekend. Mr Hercules indicated that the time allowed for transit would generally be 24 hours, although goods could be delivered on the same day as that of departure.
69.	Although there was a relatively long period between 18 April and the arrivals as confirmed by the receipts, there was no evidence either to explain the delay or to invite the conclusion that the departure date of the goods was any later than 18 April. In the absence of any such evidence, we adhere to our finding that the goods did leave Abbey on that date.
70.	Mr Manknell argued that even if the goods had been inspected by HMRC on 17 April 2008, the day after notice was given to the DC, it would still not have been possible for them to be moved until 19 April. We are inclined towards acceptance of this submission, although in these hypothetical circumstances it may not have been reasonable for HMRC to insist on the goods remaining available for inspection once an inspection had actually taken place.
Evidence of the duty paid
71.	When Pierhead submitted the drawback claim forms, it did not attach any evidence of the duty paid; the duty amounts were merely stated in the body of the forms. The printed forms included the following words at the beginning, under the heading: “Before you fill in this form please read the notes on the back and Notice 207”. We were not supplied with copies of the words on the reverse of the forms. Paragraphs 10.5 and 10.6 of the relevant edition of Notice 207 make clear what evidence is required, paragraph 10.6 setting out what is required if the claimant is unable to provide the original duty document. No such details were provided with the forms.
72.	As the requirement in paragraph 10.6 of Notice 207 is “. . . to show a clear audit trail between the goods which are the subject of the claim and the original payment document”, the later submission of the Carlsberg letter dated 4 August 2008 did not fulfil the condition. It was submitted with Pierhead’s request for a formal Departmental review. Stephen Doe, Pierhead’s employee who had originally submitted the claim forms, explained in the 21 August letter that the duties shown on Carlsberg’s letter were different from those shown on the claims; he had asked Carlsberg for a breakdown of their duty amount, but they had been unable to provide it. The enclosures to Mr Doe’s letter were the original drawback documents together with duty payment details as supplied by Carlsberg UK Ltd.
73.	Even taking into account the material enclosed with Mr Doe’s letter, the information supplied by Pierhead did not fulfil the requirements set out at paragraph 10.6 of Notice 207. For all claims, these were a copy of the original purchase invoice for the goods subject to the drawback, and a written schedule setting out a series of details. These were the name and VAT registration number of the business that paid the duty, the payment date and amount, the reference number of the relevant duty paid document, and the name, address and VAT registration number of any businesses which took ownership of the goods between duty payment and their being purchased by the claimant, including transaction dates.
74.	The paragraph warned that where claimants were unable to provide the specified information, or satisfactory alternative evidence (which should be discussed with the claimant’s assurance officer in advance) claims would be rejected.
75.	The requirements in Notice 207 are given legislative force by regulation 7(1)(b). Thus, irrespective of the absence of an explanation of the difference between the duty amounts shown in the claim forms and the amount given by Carlsberg in its 4 August letter, Pierhead had not met the requirements.
76.	Even though Pierhead was aware of the discrepancy between the total amount of its claims and the total duty as confirmed by Carlsberg, it took no further action to establish the verified amount. It should have been possible for Carlsberg to establish from its own records the duty paid on the goods subsequently supplied to Pierhead, although we accept that these may well have been only a small part of a much bigger amount of goods on which Carlsberg made its duty payment. We note from the amounts and duty rates shown on Abbey’s “Goods Received Notes”, as well as Mr Hercules’ witness statement, that the duty calculations appear to be accurate if based on the information shown on those documents; this indicates that the information provided by Carlsberg may not have been accurate, so there would have been good grounds for Pierhead to make further enquiries of Carlsberg. We also note that HMRC do not appear to have insisted on compliance with regulation 10 as to the provision of evidence of payment of duty in France, although Pierhead did eventually obtain the letter from MT Manut dated 17 August 2009; it is not clear whether this was passed to HMRC, and if so, at what point.
Conclusion on HMRC’s decision to reject the claims
77.	Under s 16(4) of the Finance Act 1994, our powers are limited. It is only in circumstances where we are satisfied that HMRC could not reasonably have arrived at their decision that we can take any of the actions set out in s 16(4)(a) to (c). We find that neither the original decision nor the review decision brings us to that conclusion. Even at the point when the review was requested, the necessary information concerning the duty paid had not been supplied, nor was it provided at any later stage. In respect of the requirement to make the goods available for inspection for two clear business days, our conclusion is that this was not met, as on the balance of probabilities the goods left Abbey’s premises on 18 April. Further, Mr Doe’s letter of 21 August 2008 had acknowledged that the delay in submitting the Notices of Intention until 16 April resulted in allowing only one full business day instead of the required two. Taking account of all these circumstances, we are not satisfied that HMRC could not reasonably have arrived at their original decision or the decision to confirm it on review.
HMRC’s decision not to waive compliance with the conditions
78.	Our finding under s 16(4) is necessarily based on the absence of compliance by Pierhead with the strict requirements set out in the Drawback Regulations and Notice 207. We now consider the question of HMRC’s decision not to (or omission to decide to) waive compliance with those strict requirements by exercising their power under regulation 7(1)(a) of the Drawback Regulations.
79.	Mr Manknell referred to the decision of the Tribunal in The Vintry (2006 Excise Decision E00969). It held that HMRC’s decision not to allow drawback even though the conditions in the Drawback Regulations had not been complied with had been unreasonable. He argued that the decision had been wrong. It had predated Seabrook. We do not accept his submission. Seabrook concerned the broader question of the abolition of entitlement to drawback for alcoholic liquors under “warehousing for export” arrangements, rather than a decision taken within the Drawback Regulations.
80.	In The Vintry, the Tribunal’s decision concerned the question whether it would have been appropriate for HMRC to allow drawback even though the conditions laid down in the Drawback Regulations had not been complied with. The Tribunal held that s 16(5) FA 1994 applied to the appeal, but acknowledged (at paragraph 23) that because the appellant was not legally represented, it was not well placed to make a ruling about the precise nature of the tribunal’s jurisdiction without a full argument. In the present case, we did not have full argument on the matters covered at paragraph 22 of The Vintry, so we have similar reservations to those expressed at paragraph 23.
81.	At paragraph 36 of the decision, the Tribunal held that HMRC’s decision was sufficiently unreasonable as to be wrong. It allowed the appeal, quashed HMRC’s decision, and substituted a decision that the drawback of UK duty paid on the wine in question should be paid to the appellant.
82.	Mr Manknell also referred to the decision of the Tribunal in Charles Cooper Ltd v HMRC (Beer Duty) (2009 Excise Decision E01168). We note that this appeal was heard by the same Tribunal Chairman who had presided in The Vintry. In Charles Cooper the Tribunal dismissed the appeal because the technical requirements for the claim had not been satisfied and HMRC had not seen fit to exercise their power to allow a departure from those requirements.
83.	In Charles Cooper there does not appear to have been any challenge to the decision not to exercise that power. (The Tribunal referred to regulation 10 without specifically mentioning again regulation 7(1)(a) when quoting the words “save as the Commissioners may otherwise allow”.) The decision cannot therefore be regarded as an authority on the question whether or not it is appropriate for HMRC to decide not to exercise their powers under regulation 7(1)(a).
84.	Mr Shelley argued that in Pierhead’s case, even if we considered that it had been non-compliant, it was still open to us to ask whether it was reasonable for HMRC to refuse drawback. He argued that the amount of duty represented a substantial penalty for non-compliance, and that all the other documents showed that the goods had moved properly. There had been no revenue loss, and no revenue risk. It was not a reasonable way of dealing to work on the basis of a “paperwork exercise”. Any doubt was to be resolved in favour of Pierhead. There had been a complete audit trail.
85.	Mr Manknell stressed the factors which had been considered in Seabrook, in particular the scope for potential fraud, in examining the extent to which strict compliance with the requirements should be insisted on rather than being dispensed with in accordance with regulation 7(1)(a). He emphasised Pierhead’s experience in dealing with export goods. He argued that HMRC would require a very good reason to waive compliance. No convincing reasons had been given in Mr Doe’s letter dated 21 August 2008. In the review letter, Mrs Martin had indicated that she would assume Pierhead’s move of stock not to be unforeseen and that Pierhead would have been expected to make the necessary arrangements to meet the Drawback Regulations at the relevant time.
86.	Although Mr Manknell referred to Pierhead’s experience as an exporter, we note from Mr Hercules’ evidence that Pierhead’s experience of drawback claims was relatively limited. There had been a small number of claims in 2007, and none after these 2008 claims.
87.	Despite this, our conclusion on HMRC’s decision not to waive compliance with the strict conditions contained in the Drawback Regulations and Notice 207 is that it was not an unreasonable decision, taking into account the nature of Pierhead’s business and the general need to ensure compliance on the part of “eligible claimants” within regulation 6. In contrast with the appellant in The Vintry, Pierhead had (as Mr Manknell argued) better reason to know what it was doing when making its claims.
88.	In arriving at our decisions on both issues, we have been conscious of the difficulties caused for Pierhead by the liquidation of Abbey and the consequent absence of evidence which might have strengthened Pierhead’s case. Unfortunately, we are limited in arriving at our conclusions to considering the evidence actually presented to us.
89.	We are also aware of the harshness of the strict requirements imposed in respect of the drawback regime. We note the comments made by the Tribunal in Charles Cooper at paragraph 17 of its decision; although these are not entirely appropriate here, we do understand Pierhead’s concern at the level of “penalty” which has resulted from its failure to comply with the requirements.
HMRC’s delay in dealing with the review
90.	We must express our concern at the time which HMRC took to respond to Pierhead’s request for a review. Pierhead would have been justified in pursuing an appeal based on the deemed confirmation of HMRC’s decision, but instead took the reasonable course of awaiting the outcome of the delayed review. We do not consider the lapse of time between 21 August 2008 and 26 January 2009 to be acceptable, whatever administrative errors may have occurred.
HMRC’s application to admit Ms Manley’s witness statement
91.	Although the Tribunal Judge decided to admit the witness statement, the way in which HMRC applied to admit it was open to criticism. Rather than supplying the witness statement together with the covering letter and asking that both be put before the Tribunal Judge, it would have been better to make the application (stressing the urgency) without initially supplying the statement. This would have enabled the decision on the application to be made without any suggestion that the submission of the witness statement might be prejudicial. It would also have avoided raising the concerns which Mr Shelley expressed, at least some of which we found understandable in the light of the way in which the application was actually dealt with.
Costs
92.	Mr Shelley submitted that as the appeal had been made before 1 April 2009, the former costs regime should apply. Mr Manknell agreed with this submission. Under paragraph 7 of Schedule 3 to The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009/56), this is a matter for the Tribunal’s discretion. We agree to order accordingly. As we are dismissing Pierhead’s appeal, and as this is an appeal in respect of which under the previous regime HMRC would not have sought costs, we make no order for payment of costs.
Summary of decision
93.	
(1)	In respect of HMRC’s decision to reject the drawback claims, Pierhead has not succeeded in satisfying us that HMRC could not reasonably have arrived at their original decision or the decision to confirm it on review.
(2)	In respect of HMRC’s decision not to waive compliance with the requirements for the making of the drawback claims, we find that it was not unreasonable.
We therefore dismiss Pierhead’s appeal.
Right to apply for permission to appeal
94.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN CLARK

TRIBUNAL JUDGE
RELEASE DATE: 18 March 2010