[2010] UKFTT 153 (TC)

TC00459

Appeal number LON/2007/8043

EXCISE DUTY – seizure of vehicle – refusal to restore – whether reasonable? Yes on the facts – Appeal dismissed

FIRST-TIER TRIBUNAL     
TAX 

	HUNOVA-TRANS KFT	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Excise Duty)	Respondents

		 TRIBUNAL: 	TRIBUNAL JUDGE:       ADRIAN SHIPWRIGHT
					TRIBUNAL MEMBER: SANDI O’NEILL	

Sitting in public in London on 10 and 11 November, 2009

Timothy Deal, Counsel, instructed by Stockinger, solicitors for the Appellant

Rupert Jones, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010
DECISION

Introduction
1.	 This decision concerns Hunova-Trans KFT‘s (“the Company”) appeal against the Respondents’ (“HMRC”) decision not to restore a DAF tractor unit and its curtain sided trailer (together “the Vehicle”).  The Respondents’ decision was set out in a letter dated 21 March, 2007 (“the Decision Letter”).  
The Issue 
2.	 The issue in this case is whether or not the Tribunal should exercise its powers under section 16 Finance Act 1994 to alter HMRC’s decision set out in the Decision Letter not to restore the Vehicle.  To do this requires the Tribunal to be satisfied “...that the Commissioners or other person making that decision could not reasonably have arrived at...” that decision i.e. it is not within the range of possible reasonable decisions. 
3.	The essential question then is was the decision set out in the Decision Letter outside the range of possible reasonable decisions. It does not matter whether we would have reached the same or a different decision.  
4.	The Tribunal if the decision is outside the range of reasonable decisions then has power:
      “(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 review or further review as appropriate 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 review or further review as appropriate, 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”.
That is the extent of the Tribunal’s powers in this context. There is no power to substitute its own decision if HMRC’s decision is within the range of possible reasonable decisions.
5.	We are not concerned in this decision with whether or not the seizure of the Vehicle was technically legal or not.  We are only concerned with whether the decision set out in the Decision letter not to restore the Vehicle was unreasonable in the sense of a decision that could not reasonably have been arrived at as being one within that range of possibilities. 
6.	If the seizure was illegal this might go to whether or not it was unreasonable not to restore it.  That is not the issue here and is not considered further.  Counsel for the Company very properly accepted the legality of the seizure and said he was not seeking to challenge that legality in these proceedings. It was not sought to argue that the cigarettes were for personal use nor that they were not liable to duty.

The Law 
7.	The law in this area is well known.  Excise goods on which duty should have been, but has not been, paid are liable to seizure (see, for example, regulation 16 REDS Regulations and section 139 Customs and Excise Management Act 1979 (“CEMA”)).  Any vehicle, container etc used to carry such goods is also liable to forfeiture (see section 141 CEMA).
8.	Where items are seized HMRC are given power to restore anything so seized and may do so subject to such conditions (if any) as they think proper.
9.	Sections 14-16 Finance Act 1994 give a taxpayer the right to require HMRC to review a decision not to restore items seized.
10.	The taxpayer is given a limited right of appeal as regards such a review if dissatisfied with it.  However, The Tribunal’s power is only that set out in section 16 FA 1994.This, so far as is relevant, is set out above.  

The Evidence
11.	We were provided with a volume of documentation.  This was an agreed bundle of documents. The documents were all admitted in evidence no objection having been taken to any of the documents.
12.	We heard oral evidence from:
(1)	Istvan Kandala;
(2)	Kepes Janos;
(3)	Brian Rayden
13.	A witness statement was provided for Mr Kandala and for Mr Rayden and they were cross examined. No witness statement was produced for Mr Janos. He was examined and cross examined.
14.	Two witness statements were produced for Mr. Attila Jakab, the managing director of the Company.  One was dated 14 March, 2007.  The other was dated 15 May, 2007 and its admissibility was disputed. We decided to let it in but to bear the objections in mind in deciding what weight to give to it. Mr Jakab did not appear and was not cross examined. 
15.	A witness statement was produced for Mr Glenn Mayo, the case officer.
16.	Duly sworn translators were used where needed when hearing the evidence.

The Facts 
17.	.	From the evidence we make the following findings of fact.
 (1)	The Company 
(a)	The Company is a company incorporated in Hungary.  It carries on business as a road transport company particularly across Europe.  It is a commercial business started in early 2002.
(b)	It now has 12 trucks and employs 16 people.  In 2006 it had eight trucks.
(c)	It hauls all sorts of goods.  We were told it carries goods for prominent companies and major suppliers mainly in Europe.
(d)	The Company has an annual conference for its drivers to discuss issues such as smuggling.  The Hungarian state requires certain exams to be passed by commercial drivers. The Company complied with these requirements.
(2)	The Vehicle 
(a)	The Vehicle consisted of a DAF FT 95 XF430 tractor unit, registration number FJN 866, and a curtain sided trailer registration number FZM 766  
(b)	The Vehicle was leased.  The value of the tractor unit of the Vehicle set out in the lease document was £61,857.81 and that of the trailer £16,210.59.  The lease term was from April 2004 to March 2007.
(c)	Lease payments were made in respect of the Vehicle after the seizure. The Company said this caused it hardship. The lease term ended in March 2007.
(3)	Both tractor unit and trailer were in very good condition when seized as they were still relatively new.
(4)	The Interception and Seizure
(a)	The Vehicle was intercepted at Dover Eastern docks on Monday 28 August, 2006.
(b)	The Vehicle was being driven by Mr. Istvan Kandala (“the Driver”).
(5)	The Load 
(a)	The Vehicle contained 33 pallets in the trailer.
(b)	The Driver produced an invoice and a CMR note covering 33 pallets of plastic bowls.  These were consigned according to the documents by Tiltman France Sarl of Compeigne, France to Norplast Limited in Newcastle upon Tyne in the UK using the Company as the carrier.
(c)	In addition to plastic bowls there were 5,069,200 cigarettes in the load.  These five million plus cigarettes would attract £808,790.86 in Excise Duty.
(d)	These cigarettes were hidden in the load of plastic bowls in the trailer.  In rows 1-9 from the front of the trailer (inaccessible from the front when the trailer doors are closed) all of the boxes of cigarettes were placed inside of two rows of boxes of bowls; in rows 10-15 from the front of the trailer not only were the boxes of cigarettes hidden behind two rows of boxes of bowls (as for rows 1-10) but they were also hidden below a layer of boxes of bowls.  In row 16, nearest the rear doors and most accessible, a complete row of pallets of boxes of bowls hid the cigarettes from view.  The boxes containing the plastic bowls had white labels on them describing the content as white soup bowls but the cartons of cigarettes did not. The cigarettes were surrounded by boxes of bowls when loaded. All the boxes were shrink-wrapped. 
(e)	The Company did not dispute the presence of the cigarettes but denied knowledge that they were there until discovered by HMRC.
(f)	HMRC officers seized the cigarettes and the Vehicle on the grounds that they were satisfied that the cigarettes were held for commercial purposes but none of the proper methods of removing excise goods to the UK had been used.
(6)	The Driver
(a)	The Driver, Mr Istvan Kandala, is a Hungarian National.  He speaks little English.  The Company said that the Driver had been known to them as a trustworthy person for four years and had no criminal record.  They also say they had warned the driver to avoid illegal activities. 
(b)	We note that the Transport Manager had known the Driver since the Driver was a child.
(c)	A good conduct certificate was produced in respect of the Driver.
(d)	The Driver was charged with Excise offences but the charges were not proceeded with.  The Driver was arrested and strip searched on 28 August, 2006.  
(7)	Norplast Limited  (“Norplast”)
(a)	Norplast was the consignee of the plastic bowls according to the documents produced.
(b)	Norplast is a company which exists and is incorporated in England.
(c)	It does not deal in plastic bowls.
(d)	HMRC officers had made inquiries of Norplast to establish this.  They were told that none of the companies in the group dealt in plastic bowls and Norplast was not expecting the consignment in question.  
(e)	Mr. Mayo said in his witness statement that Mr. Colin Foard who was responsible for Norplast confirmed by e-mail that the company did not order the plastic soup bowls from the manifested consignor, the company Tiltman Sarl of Compeigne in France.  
(f)	He was told Norplast is primarily in the business of plastics distribution particularly in the field of rigid plastic sheeting and it did not deal in plastic bowls.  
(g)	Mr Mayo also confirmed that the French authorities visited Tiltman’s address at his request and confirmed that there is a warehouse on the site but did not supply any further detail.
(8)	The Itinerary    
(a)	The Driver left Hungary on Tuesday 22 August 2006 with a load of tyres for Tours in France.  This meant he was likely to arrive in Tours (near Paris) on Thursday of that week.  This was a regular journey so timings were relatively easy to gauge.
(b)	The Company knew it would have a journey back to Hungary from Newcastle upon Tyne in the UK at the start of the next week for white goods.
(c)	The Company did not like to run vehicles empty. Accordingly, we were told that the Company sought a journey from France to the UK.  If there were no jobs then the Driver was told to wait for directions.  
(d)	The Company, we were told, sought this journey through a website called TimoCom   (see below).  Mr Kepes Janos, the Transport Manager, entered the details on Thursday 24 August 2006.
(e)	He was contacted on Friday 25 August 2006 by a man called Michel on a mobile phone.  The contact was not via the TimoCom website but by a phone call from a mobile phone.  The details of the number of pallets and the price etc. were agreed on the phone as was the meeting place during that phone call.  This was all done in one phone call.
(f)	He then received a fax from Tiltman on 25 August confirming the details of the shipment on 28 August 2006.  The fax gave no VAT number, e mail or web address for Tiltman.
(g)	The Transport Manager said he checked the name on the website and one with two “n’s” came up in the same location.  He said he was happy with this.  He did not consider the spelling difference to be suspicious. The Company Transport Manager did not consider that contact via mobile phone or the meeting in a car park to be suspicious either.  He did not check the phone or fax numbers given on the fax he had received prior to the shipment.  
(h)	The Driver spent the weekend in his truck in a lorry park watching movies.  We were told this was cheaper than going to England.  The Driver was told by phone when and where to meet on Monday morning to collect his load for England.  
(9)	 The Meeting and the Loading
(a)	The arrangement was for the Driver to take the Vehicle to junction 9 of the A1 Motorway Northbound parking area where he would be met and taken to the loading place.  The Transport Manager told us that this was for faster loading.
(b)	The Driver told us he did this and was met by one man.  In his interview he said there were four men involved.
(c)	The Driver said he arrived at the parking area, parked up and was then approached by a man who spoke to him in English.  This man led the Driver to the loading site. The man drove his own car and the Driver followed in the Vehicle to the loading site. The Driver did not recall the name of the loading site. 
(d)	The Vehicle was loaded in a loading bay or similar area by four “longshoremen”. The Driver said he was there. However, he was offered coffee. The Driver said he loved coffee and so he went to drink some coffee. 
(e)	He said that the Vehicle was in his sight whilst he drank coffee. Even if this   were the case, he was at some distance from the loading and we could not be sure that he had seen exactly what was happening.
(f)	The Driver did not devote his whole attention to supervising the loading on his own evidence.
(g)	Michel phoned the Transport Manager when loading was complete.  The Transport Manager also thought he had had a phone call with the Driver. The Driver did not recall one.
(10)	The Website - TimoCom
(a)	TimoCom on its website  says it “sees itself as a service providers to the freight industry”
(b)	Currently the website says it is the market leader for “freight and vehicle exchanges and is a virtual marketplace for companies involved in transportation”.
(c)	The website is used by hauliers and consignors seeking business.    The website is a prepaid programme. The Company had it installed on two machines in its office.  There was an ID number. The Company used the website frequently. It could be accessed by anyone in the Company‘s office.  The website was not shown to have strong security features at the relevant time.  It seems any one could register on it on suitable payment as a haulier or consignor.
(11)	Restoration
(a)	On 9 October 2006 the Company wrote to HMRC requesting restoration of the Vehicle.  The Company said it had no knowledge of the illegally transported cigarettes and that the forfeiture would cause undue harm to the Company.
(b)	On 6 November, 2006 HMRC offered to restore the Vehicle on payment of £35,500 as insufficient steps have been taken by the Company to prevent smuggling.
(c)	On 22 December, 2006 the Appellant requested a review of this decision.
(d)	On 21 March, 2007 the review officer wrote setting out the result of a review. This was that the original decision to restore the Vehicle for a fee was varied and that the vehicle was not to be restored. The main reasons given were that the revenue involved was more than £50,000 and HMRC were not satisfied that the Company was uninvolved in the smuggling 
(e)	The Review Officer told us that this decision was unusual. 
(f)	The Company then appealed to the Tribunal. 

The Submissions of the Parties
The Appellant’s Submissions in outline
18.	In essence, the Appellant submitted that:
(a)	the decision was disproportionate having regard to the value of the vehicle, the hardship to the Company and the lack of intent;
(b)	HMRC’s decision not to offer the vehicle for restoration was unreasonable.  It was even more unreasonable not to do so on terms.
19.	The following matters must be borne in mind:
(1)	The Company behaved properly.  
(2)	It complied with industry standards.  
(3)	The Driver was not met by a gang but only by one person.  The Vehicle according to the Driver’s evidence remained within his sight during its loading.  
(4)	The Driver thought that the description on the CMR matched what was loaded. 
(5)	HMRC have taken insufficient account of the Driver’s good conduct and have failed to consider the full circumstances.
20.	Accordingly, it is unreasonable and disproportionate not to have allowed restoration of the Vehicle. 
HMRC’s Submissions in outline
20.	In essence, HMRC submitted that:
(1)	the Vehicle was properly and lawfully seized and condemned as forfeited under paragraph 5 Schedule 3 CEMA.
(2) The whole setup of the transaction was odd and suspicious.   The reasons for this included the following:
(a)	It was strange that the setup was done through a mobile phone call rather than going through the security of the website.  There was no attempt to check the phone number on the system.  There was no attempt to check the mobile phone number used to call the Company.
(b)	Further one would not expect a responsible haulage company to meet someone in a motorway car park to collect a load if that load was legitimate.  This seems foolish and dangerous behaviour.
(c)	The arrangements had all the hallmarks of “slaughter”.  The apparent load is one of low value that could be easily jettisoned when a diversionary phone call sends the lorry to its real destination where the cigarettes could be unloaded and the plastic bowls dumped.
(d)	Taken all together it is unlikely that someone will behave in that way unless there was something in it for them.  It then becomes a perfectly rational explanation for the behaviour.
21.	The onus is on the taxpayer to show that HMRC’s decision does not fall within the range of decisions that meet Wednesbury reasonableness.  It has failed to do this.  The whole of the circumstances must be considered and on doing so it is not unreasonable to conclude that the Company at the very least ‘turned a blind eye’ and had not done sufficient to prevent the possibility of smuggling. Smuggling by someone was involved here – hence the refusal on review to restore the vehicle. This is not seem unreasonable looking at all the circumstances on HMRC’s argument.
Discussion
22.	The issue for determination here, as discussed above, is whether or not the decision set out in the Decision Letter is within the range of decisions that could reasonably be arrived at.
23.	We do not consider that what HMRC decided was so disproportionate or gave rise to such hardship that it was a decision that was not within the range of reasonable decisions.  Having heard Mr. Rayden give evidence we are confident that he took all the relevant circumstances into account including the Company‘s point as to lack of intent and good conduct.
24.	We do not consider it unreasonable to consider that the contact by a mobile and the arrangement to meet in a car park were suspicious.  Further we do not consider it unreasonable for HMRC to take into account the possibility of a “slaughter” i.e. where the load appears to be legitimate when it goes through customs and excise but once it has left customs and excise the driver would be telephoned and told to go to a different destination.  The contraband would then be extracted and the other goods either sold on or if of a low value destroyed. 
25.	In our view HMRC took all the circumstances into account and reached a decision that was within the range of decisions that could be reasonably arrived at. 

Conclusion
21.	We have found that HMRC’s decision as set out in the Decision Letter was within the range of decisions that could be reasonably arrived at.  Accordingly, the powers to vary that decision are not engaged and the Company’s appeal is dismissed.

The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   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.

                                         ADRIAN SHIPWRIGHT
TRIBUNAL JUDGE
RELEASE DATE: 8 April 2010