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	United Kingdom VAT & Duties Tribunals (Excise) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Excise) Decisions >> Garrett Trading Ltd v Revenue & Customs [2007] UKVAT(Excise) E01061 (22 August 2007) URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2007/E01061.html Cite as: [2007] UKVAT(Excise) E1061, [2007] UKVAT(Excise) E01061

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E01061

EXCISE DUTY – goods removed from warehouse – duty suspended movement guaranteed by the Appellant – liable under the guarantee – Appellant not causing the occurrence of an excise duty point

VAT – removal of goods from fiscal warehousing regime

LONDON TRIBUNAL CENTRE

GARRETT TRADING LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

PRAFUL D DAVDA FCA

Sitting in public in London on 25-27, 30 and 31 July 2007

Andrew Young, counsel, instructed by Mills & Reeve LLP, for the Appellant

Rebecca Stubbs, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1. This is an appeal against a decision on review on 2 March 2006 to uphold assessments to excise duty dated 5 December 2005 for £310,016, and against an assessment to VAT made on the same date on goods removed from warehouse for £54,252.80. The Appellant was represented by Mr Andrew Young, and Customs by Ms Rebecca Stubbs.
2. The Appellant's case in relation to the three assessed transactions is that it bought vodka and whisky stored in a tax warehouse owned by Promptstock Limited from York Wines Limited and sold them to Balbinder Unipessoal LDA ("BUL"), a Portuguese company which at BUL's request it shipped to DIT Spedition Logistik ("DIT"), a tax warehouse in Germany under a duty suspended movement. The transport was provided by See Transporte, an Austrian company, which subcontracted it to Mid Cheshire Transport Limited with its director Mr G Marshall driving two of the loads and an employee Mr Yarwood the third. Mr Marshall says that they swapped trailers with another lorry at Transmark in Calais which took the alcohol to DIT while he returned with a different trailer carrying bottled water under a contract with Cotrama Logistique, a French company, to transport bottled water to England. Normally he travelled out to France to collect the water with an empty trailer, but on these occasions he took the Appellant's goods, although for security reasons he declared the trailer as being empty to Seafrance, the ferry company. Customs' case is that the goods never left the UK and were "slaughtered" ie were split up into smaller loads and sold on the black market in the UK.
3. We had two ring binders of documents and we heard evidence from the following: Stuart Maggs, director of the Appellant; Mr John Morrissey, freight services manager, Seafrance; Sheila Brown, freight commercial executive, Eurotunnel; Keith Pedder, investigator, Garda Global; Jamie Bajram Zequiri, investigator, Charterhouse International Associates; Alex Leighton, investigator, Garda World; Gary Clarke, manager, Prompstock Limited; Rosemarie Buckley, Customs officer; Jane Barr, Customs officer; and Geoffrey Edward Marshall, managing director, Mid Cheshire Transport Limited (by video link). In addition, witness statements were accepted from: Martin Harman, customer services supervisor, P&O Ferries Limited; Stephen Atmore, operations manager, Dover Harbour Board. We saw a witness statement from Rainer Storch, manager of DIT, who did not give evidence, and we did not give any weight to it.
4. The documentary information about the assessed transactions, which we accept as facts (except where stated later in this decision), is as follows:

AAD 2101

(1) On 25 October 2005 the Appellant gave release instructions to Promptstock to release 572 cases of one litre Glens vodka and 832 cases of 70cl High Commissioner whisky to See Transporte to be transported to DIT whose address is given as Guterhallenstrasse, 35 Freiburg, Germany.

(2) On the same day the Appellant gave instructions to See Transporte to transport the goods from Promptstock to DIT whose address is given as Guterhallenstrasse, 35 Freiburg, Germany.

(3) On 26 October 2006 See Transporte instructed Mid Cheshire Transport Ltd to bring V282 KWR from Promptstock to Tranasmack [Transmark?] F-Calais and asking for details of the trailer and time of arrival, but not giving any details about who to meet there. The price was £201.

(4) The CMR dated (illegible) receipted 27 October 2005 from Promptstock to DIT whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (this address is also on a stamp added by DIT and is different from the address above) lists the goods and identifies the carrier's vehicle as V282 KWR.

(5) The AAD dated 26 October 2005 names Prompstock as the consignor, DIT as consignee whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (a different address from above) and the Appellant as guarantor. It identifies the vehicle as V282 KWR without a trailer number. The quantity of vodka has been changed from 6,864 (572 times 12) to 2,574 (6,864 times 37.5% proof) on page 3 (the receipted copy) (the quantity of 40% proof whisky is correctly stated at 2,795.52 (832*12*0.7*0.4). The country of destination is given as France (the default on the template); on page 1 (the copy retained by Promptstock) this is changed to Germany. Also on page 1 the number of the AAD appears to have been changed to 2111 which may be a mistake (the goods on AAD 2111 were identical to those on AAD 2101). The certificate of reception given by DIT on the back of the form is apparently dated 18 October 2005 but against DIT's signature and stamp the date is apparently overwritten as 28 October 2005 (both being 28 October 2005 would be more likely than the former being 18 October 2005 which is before the date of the AAD). There is also a signature and stamp apparently given by the German customs authorities.

(6) The records of Seafrance, the shipping line, show that vehicle N39NCK with trailer HH01 driven by Mr G Marshall [of Mid Cheshire Transport Limited] travelled from Dover to Calais on 26 October 2005 at 2100 hours on a booking made by Cotrama Logistique, France. Mid Cheshire Transport Limited had a contract with Cotrama to transport bottled water from France to Liverpool or London for which they paid two ferry or Eurotunnel crossings. (We believe that Seafrance's timings are all using French time but we shall refer to the time as recorded unless stated otherwise.) The weight is the default figure of 12 tonnes for an articulated lorry indicating that it was declared to be empty. The procedure is that the weighbridge ticket is produced and if the weighbridge ticket shows a discrepancy of more than 5 tonnes from the declared weight the vehicle would not be accepted as empty.

(7) Mr Marshall's evidence was that he collected the load at Purfleet, which is about 12 miles from Prompstock's warehouse in Upminster. He was told by telephone to meet another driver (a different one on each occasion) whose mobile telephone number, vehicle and trailer registrations were given in Transmark, a lorry park in Calais, and change trailers. He did not remember the name of the drivers. He did not produce any mobile telephone records to substantiate this. The new trailer would be used to carry the bottled water back to the UK for Cotrama.

(8) Seafrance recorded the same lorry and trailer numbers on the return journey of 27 October 2005 at 1245 hours.

(9) 2 November 2005. The Appellant invoices BUL, reference BUL 0004.

(10) 3 November 2005. Fax from the Appellant to B Kandola RDE&T of BUL giving the date of delivery of the goods as 26 October 2005.

(11) The German fiscal authorities responded, after the assessment had been made, to a mutual verification request as follows (in translation):

"The goods transported under duty suspension were entered in the records of the firm on 28 October 2005. It was impossible to establish if the 572 packages of Glens Vodka (2574 litres alcohol) and 832 packages of whisky had really been there and if they had been stocked in the warehouse. The tome of the receipt of the good is unknown, however the goods were further dispatched on the same day with an AAD. No detailed information could be given about the actual means of transport."

AAD 2160

(12) 7 November 2005. Instruction from the Appellant to Promptstock to release 1664 cases of 70cl Glens Vodka to See Transporte for transport to DIT Guterhallenstrasse, 35 Freiburg, Germany.

(13) 7 November 2005. Instruction from the Appellant to See Transporte to collect the goods from Promptstock and deliver them to DIT Guterhallenstrasse, 35 Freiburg, Germany.

(14) The AAD dated 8 November 2005 names Promptstock as consignor, DIT as consignee whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (different from above) and the Appellant as guarantor. It identifies the vehicle as AO51 LMY and the trailer number DT03 is added in manuscript on page 1 (the copy retained by Promptstock). The receipt signed by DIT is dated 17 November 2005. There is also a signature and stamp apparently given by the German customs authorities

(15) The CMR (date illegible) names DIT DIT whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (a different address from above) and identifies the carrier as AO51 LMY.

(16) See Transporte's fax to Customs states that truck AO51 LMY swapped the trailer to truck T610 EJB on 9 November 2005 which shipped with Seafrance from Dover to Calais at 2030 hours.

(17) Seafrance records T610 EJB with trailer MCT3 (which is different from trailer DT03 added to the AAD) as sailing from Dover to Calais on 9 November 2005 at 1900 hours with Mr Yarwood [a retired driver who did some work for Mid Cheshire Transport Limited] as driver on the account of Cotrama Logistique, France. The weight stated is the default 12 tonnes and no particulars of goods are recorded.

(18) Seafrance's records show T610 EJB as returning at 1115 hours on 10 November 2005 with the same trailer.

(19) 7 November 2005. Invoice from York Wines to the Appellant.

(20) 15 November 2005. Invoice from the Appellant to BUL reference BUL 0012.

AAD 2179

(21) 8 November 2005. Instruction from the Appellant to Promptstock to release 1664 cases of 1 litre Glens Vodka to See Transporte for delivery to DIT whose address was given as Guterhallenstrasse, 35 Freiburg, Germany.

(22) 8 November 2005. Instruction from the Appellant to See Transporte to transport the goods from Promptstock to DIT whose address was given as Guterhallenstrasse, 35 Freiburg, Germany.

(23) CMR (date illegible) to DIT whose address is given as DIT whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (a different address from above) identifies the vehicle as THW 872.

(24) The AAD dated 9 November 2005 names Promptsoock as consignor, DIT as consignee whose address is given as Fritz-Rinderpacher-Str, 77933 Lahr, Germany (different from above) and the Appellant as gurantor. It identifies the vehicle as THW 872 and the trailer number 3 is added in manuscript. The number of cases of vodka has been altered from 1664 to 1663 because one case was apparently smashed. The date of receipt signed and stamped by DIT is 10 November 2005. There is also a signature and stamp apparently given by the German customs authorities

(25) 8 November 2005. Invoice from York Wines to the Appellant.

(26) 9 November 2005. BUL purchase order to the Appellant.

(27) On 9 November 2005 two Customs officers recorded that Mr Whittaker was the driver of TKW [which presumably should be THW] 872 with trailer 3 which left at 1500 hours, who stated that he would travel to Strasbourg via Calais arriving the next day, that the trailer would not be changed and that the return load would be bottled water. Mr Marshall's evidence was that he collected the loads at Purfleet, which is about 12 miles from Prompstock's warehouse in Upminster.

(28) See Transporte stated in a fax of 10 November 2005 to Customs that truck THW 872 swapped the trailer to truck N39 NCK on 9 November 2005 which shipped from Dover to Calais on 10 November 2005 at 1030 hours.

(29) Seafrance's records show that vehicle N39 NCK with trailer 3 shipped from Dover to Calais on 10 November 2005 at 1030 hours driven by Mr G Marshall on the account of Cotrama Logistique of France. Mid Cheshire Transport Limited had a contract with Cotrama to transport bottled water from France to Liverpool or London for which they paid two ferry or Eurotunnel crossings. Nothing is recorded in the goods section and the weight is the default of 12 tonnes for an articulated lorry indicating that it was declared to be empty.

(30) Seafrance records show vehicle N39 NCK with trailer HH01 returning from Calais to Dover on 10 November 2005 at 1700 hours.

(31) 15 November 2005. Invoice from the Appellant to BUL reference BUL 0013.

5. We make the following inferences from these facts:

(1) It is odd that in all three cases Mr Marshall (or Mr Yarwood) collected the goods from Purfleet, 12 miles from Promptstock's warehouse. In all cases the lorry that travelled with Seafrance was different from the lorry identified in the AAD and CMR. The vehicles listed on the AADs and CMRs did not travel on Seafrance, Eurotunnel or P&O.

(2) The Seafrance records for AAD 2101 show lorry N39 NCK with trailer HH01 travelling from Dover to Calais at 2100 hours on 26 November 2005 and returning at 1345 on 27 November 2005, which is consistent with going out empty and returning with bottled water, but inconsistent with handing over the trailer to another driver at Transmark which delivers the goods to DIT on 28 November 2005.

(3) It is odd that AAD 2160 shows the goods leaving on 8 November, which is consistent with the Dover to Calais crossing on 9 November 2005, but the date of receipt is not until 17 November 2005. Seafrance's records show the same lorry and trailer travelling from Dover to Calais at 1900 hours on 9 November 2005 and returning at 1115 hours the next day which is consistent with going out empty and returning with bottled water, but inconsistent with handing over the trailer to another driver at Transmark but if this occurred why did it not arrive at DIT until 17 November 2005? This suggests that the reference to trailer DT03 on the AAD and CMR is wrong. Alternatively, if the Seafrance records are right it suggests that empty trailer MCT3 was substituted for trailer DT03 loaded with the goods while in the UK. We consider that the latter is the more likely explanation and so find.

(4) AAD 2179 shows that lorry N39 NCK with trailer 3 (this being the trailer number observed by the officers who saw Mr Whittaker and which is added in manuscript to the AAD) travelled from Dover to Calais at 1030 hours on 10 November 2005 but the same lorry returned with trailer HH01 at 1700 hours on the same day, which would be consistent with trailer 3 being taken on by a different lorry from Calais, arriving at DIT on 10 November 2002. The Seafrance records show vehicle N39 NCK and trailer HH01 previously going from Dover to Calais at 2345 hours on 7 November 2005 and returning at 1245 hours on 8 November 2005. The next record is the movement out and back on 10 November 2002. Unless therefore trailer HH01 travelled out with a different vehicle on 9 or 10 November 2005 (about which we have no information since the search of Seafrance's records was for the vehicle N39 NCK), it is probable that the record of trailer 3 going out on 10 November 2005 is wrong and was declared to Seafrance because of the Customs officers recording it departing with Mr Whittaker, and the trailer that went out on 10 November 2005 was in fact HH01. The Seafrance procedure is that a camera records the lorry's registration number so that the check-in clerk can see it (this is used for invoicing and is therefore important to Seafrance). The clerk does not leave the booth and so has to rely on the driver's statement for the trailer number. We cannot therefore have confidence that details of the trailer are always correctly recorded. We considered allowing the Appellant to enquire of Seafrance whether trailer HH01 travelled out on those days with a different vehicle if such a search is indeed possible, but decided that this was not necessary. We consider the most likely explanation is that the trailer that travelled out on 10 November 2005 was the empty trailer HH01 and not the loaded trailer 3, and we so find.

6. The procedure at Dover is that first the driver goes to one of four weighbridges which produce a ticket showing the weight of the vehicle. If the printer is not working the gates will not open. Mr Marshall said that he found the weighbridge out of action about 5 per cent of the time. Mr Atmore, the operations manager of Dover Harbour Board, whose witness statement was accepted, produced a list of 65 faults with the weighbridge for the period 5 September 2005 to 30 November 2005 during which there was always at least one weighbridge working. On the dates travelled in relation to the assessments there were no faults reported on 26 October 2005 or 10 November 2005 and the fault on 9 November was reported at 0859 hours which would have been rectified by the time of travel of 1900 hours. We accept Mr Atmore's evidence, although from the recorded number of faults we can also accept that Mr Marshall sometimes had problem with the weighbridge. We find that on the occasions of travel relating to the three assessed transactions in this appeal weighbridge tickets would have been given.
7. The Appellant's witnesses, Mr Leighton and Mr Zeqiri tested the Seafrance system by travelling with a lorry DK55 ENV and trailer IHH 009 loaded with pallets and declaring it as empty. The weighbridge ticket timed at 15:54:58 on 2 October 2006 gives a weight of 25,100 Kg but the ticket does not record the vehicle. Mr Zeqiri was the passenger and states that the driver was not asked for the weighbridge ticket and the vehicle was accepted as being empty even though the sides were bulging. Mr Morrissey, Freight Services Manager of Seafrance produced a record showing that a Mr "Zequir" (which being an unusual name we assume refers to Mr Zeqiri) had travelled with a Mr Bamford and checked-in for the ferry at 1753 hours (French time, which is 1653 hours UK time) with the vehicle declared as empty with the default weight of 12 tonnes recorded. Mr Leighton followed the lorry in a car and filmed it up to the point where lorries and cars enter Dover at a different place. His film shows the lorry arriving at Dover at 1639 hours. We therefore have evidence of a lorry arriving at Dover at 1639 hours, a weighbridge ticket at 1554 hours and check-in at 1653 hours, which cannot all be correct. One possibility is that the camera was not set to Summer time and that it took an hour from the weighbridge to check in, a distance of 800 metres; another possibility is that the time on the camera was correct and the vehicle arrived at 1639, went through the weighbridge and checked in at 1653 (in which case the weighbridge ticket cannot relate to this vehicle). We find the evidence confusing. At best, it is evidence that something went wrong once. We find it highly improbable that, if the lorry had on all three occasions been loaded, the check-in clerk would not have noticed the discrepancy between the weight on the weighbridge ticket and the statement that it was empty.
8. We do not accept Mr Marshall's evidence that he parted with the trailer to an unnamed driver in Transmark in Calais. The story is improbable without any evidence of the identity of the driver or the lorry that took over the trailer or of mobile telephone records of his contacting the driver. See Transporte did not give details of the change of vehicle either; they did give details of the change that took place in the UK. Cotrama Logistique paid for the ferry to France and it is suggested that BUL was charged for the same journey. We prefer the Seafrance statements showing that the vehicle travelled in both directions with the same trailer for AAD 2101 and 2161, and we have found that the trailer recorded as going out with AAD2179 was in fact HH01 and not 3 as recorded by Seafrance. We also prefer Seafrance's records that the trailer went to France empty of each occasion. Even if the check-in person at Seafrance did not see Mr Ziqiri's weighbridge ticket on one occasion and accepted a partly-loaded trailer as empty, we do not find it credible that this happened on three occasions to Mr Marshall and Mr Yarwood. No satisfactory explanation has been given about why Mr Marshall and Mr Yarwood collected the trailer at Purfleet, a mere 12 miles from Promptstock's warehouse, or why Mr Whittaker told the Customs' officers that he was making the trip himself. Accordingly we find as a fact that the excise goods in the three assessed transactions did not leave the UK.
9. Other facts we find are:

(1) The Appellant is registered with Customs as a registered owner under the Warehouse Keepers and Owners of Warehoused Goods Regulations 1999.

(2) On 6 May 2005 Lloyds TSB Bank plc gave a guarantee to Customs originally limited to a total of £20,000 for the Appellant's liability to Customs relating to an irregularity in intra-Community duty suspended movements of excise goods. This was varied by letter from Customs to Lloyds on 14 November 2005 to a limit of (a) £20,000 for any transaction which began before that date (which is the case for all three assessed transactions) and £50,000 for transactions begun on or after that date, subject to an overall limit of £50,000. Customs wrote to the Appellant on 7 December 2005 saying that its increased guarantee of £50,000 had been accepted on that date. We are unclear whether the 7 December 2005 letter refers to a new guarantee.

(3) The Appellant is shown as providing the guarantee in box 10 of the three AADs.

(4) The Appellant made VAT returns for periods 03/05 and 06/05, paid central assessments for periods 09/05 and 12/05. It made nil returns for periods 03/06 to 06/07. It did not make any returns of EC sales and Mr Maggs said he had never seen a form for returning this.

(5) Mr Maggs applied for a registration pack as a High Value Dealer under Money Laundering Regulations on 14 July 2005 which he did not complete as it came with a video that he could not play and was complicated. He volunteered to the Customs' officers during his interview on 28 November 2005 that he had read the leaflet and was aware of the need to be registered. Customs issued a penalty for non-registration on 27 January 2006, which was upheld on review on 24 April 2006. On 19 June 2006 Customs threatened a further penalty if the Appellant did not register within the next 14 days, following which he registered.

(6) DIT's warehouse approval was revoked by the German customs authorities in February 2006 following two diverted alcohol movements apparently made on 2 and 5 September 2005 involving AADs with false stamps.

10. The Appellant made the following purchases from York Wines Limited and sales to BUL between 17 October 2005 and 15 November 2005 (the first three items above the bold line are the subject of the assessments under appeal; assessments in relation to the remaining items have been withdrawn as being out of time):

AAD No.	Goods	Buying price per case £	Selling price per case £	Margin £
2101	572 Glens Vodka 1l 832 High Commissioner Whisky	12.00 14.50	12.00 15.00	0 416
2160	1664 Glens Vodka 0.7l	10.00	10.50	832
2179	1664 Glens Vodka 1l	10.00	10.50	832
2049	1664 Glens Vodka 0.7l	12.00	10.50	(2,496)
2070	1664 Glens Vodka 0.7l	10.00	10.50	832
2087	1664 Glens Vodka 0.7l	10.00	10.50	832
2103	572 Glens Vodka 1l 832 Glens Vodka 0.7l	12.00 10.00	12.00 10.50	0 416
2111	572 Glens Vodka 1l 832 High Commissioner Whisky	12.00 14.50	12.00 15.00	0 416
2117	1664 Glens Vodka 0.7l	10.00	10.50	832
2123	1144 Glens Vodka 1l	12.00	12.00	0
2138	832 Glens Vodka 0.7l 572 Glens Vodka 1l	10.00 12.00	10.50 12.00	416 0
2153	1864 Glens Vodka 0.7l	10.00	10.50	832
Credit note	2860 Glens Vodka 1l	(0.50)		1,430
Total margin				5,590

Note. We did not have details of AADs 2087 and 2117 and have taken the figures from a schedule produced by the Appellant during the hearing.

11. We draw a number of inferences from the table:

(1) The trading pattern is very odd with a normal margin of 50p per case but on five occasions cases of 1 litre vodka are sold at cost of £12. Those occasions each comprise 572 cases, except for AAD 2123 where it is twice that quantity. The credit note dated 23 March 2006 (4 months after the last transaction) reducing the price of 1 litre vodka by 50p per case is for 5 times 572 cases = 2860 cases. There are five transactions but one (AAD 2123) is double size and so the total is six times 572 cases. This suggests that the credit note was intended to give the Appellant a gross profit of 50p per case on each sale, consistently with the margin on sales of 0.7l vodka and the whisky, but the total was again miscalculated presumably because the double quantity was overlooked. After the credit note one is therefore still left with one sale of 572 cases of 1 litre vodka at cost of £12.

(2) In AAD 2049 the cost of 0.7 litre Vodka should have been £10 consistently with all the other purchases of 0.7 litre Vodka but nobody seems to have noticed that the invoice creates a loss of £2,496 as this was still not corrected at the time of the credit note.

(3) Mr Maggs did not seem concerned when this was pointed out and seemed confident that York Wines Limited would sort it out. He had obtained prices from York Wines before agreeing a sale price to BUL giving him the 50p mark-up. While it is odd that Mr Maggs did not check the invoices or the credit note we do not find this suspicious. He knew he could rely on York Wines from his past dealings with them. We also note that he told Customs at his interview on 28 November 2005 that York Wines had taken back the orders he had pending when Customs stopped further movements, thus suggesting good relations between the Appellant and York Wines. Sorting out these errors may have been prevented by Customs having the Appellant's documents.

(4) While the apparent existence of a deal whereby the Appellant always made 50p a case gross profit regardless of the cost is odd, we do not find this suspicious so far as the Appellant is concerned. A person engaged in an excise diversion fraud needs to set someone up with a transaction that on paper requires a duty suspended movement to an EU destination. These transactions seem to fit that category.

(5) We were shown a list of payments on account towards the total sale price of £214,320 made up of payments of £46,000 on 21 November 2005, £69,993 on 14 December 2005 and £69,993 on 20 December 2005, leaving £28,334 outstanding. An undated fax from BUL with a header of a date that is partly cut off but is in June 2006 states that they owe the balance of about £28,400 "which if at your request will be transferred to your bank." Mr Maggs says in his witness statement that he is instructing solicitors to recover this. If, as we suspect, these were transactions orchestrated by fraudsters one would expect them to make the transactions look as normal as possible. We find it very surprising that an amount which is about five times the total gross profit he made on all these transactions is still outstanding some 18 months later without the Appellant doing anything about it, even allowing for the additional difficulty of collecting a debt in Portugal. Again, it is possible that Customs having the Appellant's papers may have contributed to the problem. Perhaps the explanation is that when Customs started to investigate the transactions the fraudsters considered that the Appellant was no further use to them and there was no need to pay him until they were forced to do so. In the light of the other factors we do not consider that this aspect suggests that the Appellant is party to the fraud.

12. Council Directive 92/12/EEC ("the Directive") provides in article 6:

Excise duty shall become chargeable at the time of release for consumption or when shortages are recorded which must be subject to excise duty in accordance with Article 14 (3).

Release for consumption of products subject to excise duty shall mean:

(a) any departure, including irregular departure, from a suspension arrangement;…

(2) The chargeability conditions and rate of excise duty to be adopted shall be those in force on the date on which duty becomes chargeable in the Member State where release for consumption takes place or shortages are recorded. Excise duty shall be levied and collected according to the procedure laid down by each Member State, it being understood that Member States shall apply the same procedures for levying and collection to national products and to those from other Member States.

It is common ground that the goods here started in a tax warehouse and are subject to a suspension arrangement on their transfer to a tax warehouse in Germany. Article 15 provides:

Without prejudice to the provisions of Articles 5 (2), 16, 19 (4) and 23(1a), the movement of products subject to excise duty under suspension arrangements must take place between tax warehouses.

…

The risks inherent in intra-Community movement shall be covered by the guarantee provided by the authorized warehousekeeper of dispatch, as provided for in Article 13, or if need be, by a guarantee jointly and severally binding both the consignor and the transporter. The competent authorities in the Member States may permit the transporter or the owner of the products to provide a guarantee in place of that provided by the authorized warehousekeeper of dispatch. If appropriate, Member States may require the consignee to provide a guarantee."

Here Customs have permitted the guarantee to be provided by the owner, the Appellant.

Article 20 provides:

"1. Where an irregularity or offence has been committed in the course of a movement involving the chargeability of excise duty, the excise duty shall be due in the Member State where the offence or irregularity was committed from the natural or legal person who guaranteed payment of the excise duties in accordance with Article 15 (3), without prejudice to the bringing of criminal proceedings.

Where the excise duty is collected in a Member State other than that of departure, the Member State collecting the duty shall inform the competent authorities of the country of departure.

When, in the course of movement, an offence or irregularity has been detected without it being possible to determine where it was committed, it shall be deemed to have been committed in the Member State where it was detected.

Without prejudice to the provision of Article 6 (2), when products subject to excise duty do not arrive at their destination and it is not possible to determine where the offence o[r] irregularity was committed, that offence or irregularity shall be deemed to have been committed in the Member State of departure, which shall collect the excise duties at the rate in force on the date when the products were dispatched unless within a period of four months from the date of dispatch of the products evidence is produced to the satisfaction of the competent authorities of the correctness of the transaction or of the place where the offence or irregularity was actually committed. Member States shall take the necessary measures to deal with any offence or irregularity and to impose effective penalties.

If, before the expiry of a period of three years from the date on which the accompanying document was drawn up, the Member State where the offence or irregularity was actually committed is ascertained, that Member States shall collect the excise duty at the rate in force on the date when the goods were dispatched. In this case, as soon as evidence of collection has been provided, the excise duty originally levied shall be refunded."

If the irregularity occurs in the state of departure excise duty is due in that state from the person who guaranteed payment in accordance with article 15. If the goods do not arrive and it is not possible to determine where the irregularity occurred it is deemed to occur in the state of departure.

13. In domestic law, s 1 of the Finance (No.2) Act 1994 provides:

(1) Subject to the following provisions of this section, the Commissioners may by regulations make provision, in relation to any duties of excise on goods for fixing the time when the requirements to pay any duty with which goods become chargeable is to take effect ('the excise duty point').

..

(4) Where regulations under this section prescribe an excise duty point for any goods, such regulations may also make provision—

(a) specifying the person or persons on whom the liability to pay duty on the goods is to fall at the excise duty point (being the person or persons having the prescribed connection with the goods at that point or at such other time, falling no earlier than when the goods become chargeable with the duty, as may be prescribed);…

The Regulations are the Excise Duty Points (Duty Suspended Movements of Excise Goods) Regulations 2001 ("DSMEG").

In these Regulations –

"duty suspended movement" means

(a) a movement of excise goods which:

(1) starts at a tax warehouse in one member State and is intended to finish by the arrival of those goods with either:

(i) the authorized warehousekeeper at a tax warehouse or a registered or non-registered trader in another member State; or

(ii) the authorized warehousekeeper at a tax warehouse in the same member State having passed through at least one other member State during the course of the movement; and

(2) in respect of which the excise duty to which those goods are subject by virtue of Article 5 of the Directive is suspended pursuant to suspension arrangements as defined in Article 4(c) of the Directive; and

(b) does not include any movement that has been discharged as described in Article 19(3) of the Directive;

'irregularity' means an irregularity or offence within the meaning of Article 20 of the Directive;

Irregularity occurring or detected in the United Kingdom

 - (1) This regulation applies where:

(a) excise goods are:

(i) subject to a duty suspended movement that started in the United Kingdom; or

(ii) imported into the United Kingdom during a duty suspended movement; and

(b) in relation to those goods and that movement, there is an irregularity which occurs or is detected in the United Kingdom.

(2) Where the Commissioners are satisfied that the irregularity occurred in the United Kingdom, the excise duty point shall be the time of the occurrence of the irregularity or, where it is not possible to establish when the irregularity occurred, the time when the irregularity first comes to the attention of the Commissioners.

(3) Where it is not possible to establish in which member State the irregularity occurred, the excise duty point shall be the time of the detection of the irregularity or, where it is not possible to establish when the irregularity was detected, the time when the irregularity first comes to the attention of the Commissioners.

(4) For the purposes of this regulation, detection has the same meaning as in Article 20(2) of the Directive.

…

Payment

 - (1) Subject to paragraph (2) below, where there is an excise duty point as prescribed by regulation 3 or 4 above, the person liable to pay the excise duty on the occurrence of that excise duty point shall be the person shown as the consignor on the accompanying administrative document or, if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person.

(2) Any other person who causes or has caused the occurrence of an excise duty point as prescribed by regulation 3 or 4 above, shall be jointly and severally liable to pay the duty with the person specified in paragraph (1)."

The consignor on the AADs is Promptstock. The Appellant is shown in box 10 of the AADs as guarantor.

14. The assessment to excise duty was made under s 12 of the Finance Act 1994:

(1A) Subject to subsection (4) below, where it appears to the Commissioners—

(a) that any person is a person from whom any amount has become due in respect of any duty of excise; and

(b) at the amount due can be ascertained by the Commissioners,

the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative.

The appeal against excise duty is against the decision on review under s 14. The powers of the Tribunal in relation to excise duty are set out in s 15:

"(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."

15. In relation to the VAT assessment s 18B of the VAT Act 1994 provides:

(2) Subsections (3) and (4) below also apply where—

(a)     there is a supply of goods;

(b)     those goods are eligible goods;

(c)     either—

(i)     that supply takes place while the goods are subject to a fiscal warehousing regime; or

(ii)     after that supply but before the supply, if any, of those goods which next occurs, the person to whom the former supply is made causes the goods to be placed in a fiscal warehousing regime;

(d)     in a case falling within paragraph (c)(ii) above, the person to whom the supply is made gives the supplier, not later than the time of the supply, a certificate in such form as the Commissioners may by regulations specify that he will cause paragraph (c)(ii) to be satisfied; and

(e)     the supply is not a retail transaction.

(3) The acquisition or supply in question shall be treated for the purposes of this Act as taking place outside the United Kingdom if any subsequent supply of those goods is while they are subject to the fiscal warehousing regime.

(4) Where subsection (3) does not apply and the acquisition or supply in question falls, for the purposes of this Act, to be treated as taking place in the United Kingdom, that acquisition or supply shall be treated for the purposes of this Act as taking place when the goods are removed from the fiscal warehousing regime.

It is subs (4) that is in point here. Section 18D provides:

(2) Any VAT payable on the supply or acquisition shall (subject to any regulations under subsection (3) below) be paid—

(a)     at the time when the supply or acquisition is treated as taking place under the section in question; and

(b)     by the person by whom the goods are removed or, as the case may be, together with the excise duty, by the person who is required to pay that duty.

16. Mr Young, for the Appellant contends in outline:

(1) The documentary evidence in the form of the receipted AADs shows that the goods were received. In relation to VAT Advocate General Kokott in Teleos plc v Customs and Excise Commissioners C409/04 concluded at [86]:

"If the supplier, acting in good faith, presents objective proofs that the goods supplied by him have left the State of origin and the authorities of that State thereupon exempt the supply from tax in accordance with Article 28c(A)(a) of the Sixth Directive, payment of the tax cannot be retrospectively demanded from the supplier in the circumstances of the main dispute in this case if it turns out that the proofs presented contained false information but the supplier neither knew nor could have known anything of it. That does, however, apply only where the supplier has done everything in his power to ensure the proper application of the provisions on VAT."

Her opinion was based on the principle of legal certainty and should also be applied to excise duty.

(2) The same principle can be seen in INZO v Belgium Case C-110/94 Judgment at [21]:

"As the Commission has observed, it is contrary to the principle of legal certainty for the rights and obligations of taxable persons to depend on facts, circumstances or events which occurred after the tax authority made a finding in respect of those rights and obligations."

(3) De Haan C-61/98 shows that in relation to customs duties a special situation may exist where there was an absence of deception or obvious negligence on the part of the person liable justifying the remission of duty.

(4) Greenalls Management Ltd v HMRC [2005] 1 WLR 1754 cannot be relied on by Customs because the House of Lords were not referred to art 14 of the Directive which provides:

Authorized warehousekeepers shall be exempt from duty in respect of losses occuring under suspension arrangements which are attributable to fortuitous events or force majeure and established by the authorized of the Member State concerned. They shall also be exempt, under suspension arrangements, in respect of losses inherent in the nature of the products during production and processing, storage and transport. Each Member State shall lay down the conditions under which these exemptions are granted. These exemptions shall apply equally to the traders referred to in Article 16 during the transport of products under excise duty suspension arrangements.

The UK has not laid down any such conditions.

(5) Section 12(1A) of the Finance Act 1994 says that Customs may assess, thus providing a discretion that should be exercised in favour of a person who has provided objective proof of intra-Community trade, and which Customs has not been exercised properly.

(6) The decision to assess constitutes an interference with the Appellant's human rights under art 1 of Protocol 1 of the Convention. The exception for "conditions provided by law" was inapplicable because the Appellant had no means of knowing what documentation would satisfy Customs as evidence of removal of the goods from the UK and whether or not the documents provided would satisfy them. In addition the interference with the right of property must be in the public interest and be proportional.

17. Miss Stubbs, for Customs, contends in outline:

(1) The issues for the Tribunal are:

a. whether an excise duty point arose under reg 3 of DSMEG. This requires the Tribunal to determine:-

i. whether there was an irregularity (within the meaning of articles 6 and 20 of the Directive and regulation 3 of DSMEG); and

ii. if so, whether:-

the irregularity occurred in the United Kingdom; or

if it is impossible to establish where the irregularity occurred;

b. was Garrett the person shown in box 10 of the relevant AADs as having provided the guarantee under which the load was moved; alternatively

c. did Garrett cause the occurrence of the excise duty point within the meaning of regulation 7(2) of DSMEG;

d. is Garrett liable for the value added tax to which it has been assessed.

(2) The Appellant's case about the manner in which the goods were transported is implausible. Its pattern of trading was implausible.

(3) At the very least, Garrett arranged for goods it owned to be taken away from Promptstock, the UK tax warehouse, loaded onto a lorry and be driven away, and in respect of which it received substantial payments. The Commissioners contend that, in these circumstances, Garrett caused the occurrence of the duty point, namely the departure of the goods from the suspension arrangement, by, at the lowest, making goods available for diversion and acquiescing in that diversion. The Tribunal in Global Beers and Wines Limited v H M Revenue and Customs, a decision released on 22 September 2005, considered (at paragraphs 27 and 28) that this was sufficient for the purposes of regulation 7(2) The goods did not cross the Channel. An irregularity within art 20 of the Directive occurred in the UK and excise duty is payable pursuant to art 20(1) of the Directive. Regulation 3 of DSMEG is applicable and, because it is not possible to establish the time when the irregularity occurred, the excise duty point is the time when the irregularity first came to the attention of Customs, 11 and 18 November 2005, as stated in the assessment. The Appellant is liable under reg 7(1) or (2) of DSMEG.

(4) Since excise duty is due VAT is also due under s 73(7) of the VAT Act 1994.

(5) The Appellant cannot rely on the Advocate General's Opinion in Teleos because the VAT assessment was not a retrospective assessment; it was made before the end of the relevant accounting period. De Haan is an interpretation of a provision of the Customs Code which is not applicable here.

(6) On human rights the requirement about conditions provided by law is a low one, which is satisfied here, see Sunday Times v UK [1979] ECHR 6538/74:

In the Court's opinion, the following are two of the requirements that flow from the expression 'prescribed by law.' Fistly, the law must be adequately accessible: the citizen must be able to have an indication that is adequate in the circumstances of the legal rules applicable to a given case. Secondly, a norm cannot be regarded as a 'law' unless it is formulated with sufficient precision to enable the citizen to regulate his conduct: he must be able—if need be with appropriate advice—to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. Those consequences need not be foreseeable with absolute certainty: experience shows this to be unattainable. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice.

… To sum up, the Court does not consider that the applicants were without an indication that was adequate in the circumstances of the existence of the 'prejudgment principle.' Even if the Court does have certain doubts concerning the precision with which that principle was formulated at the relevant time, it considers that the applicants were able to foresee, to a degree that was reasonable in the circumstances, a risk that publication of the draft article might fall foul of the principle."

18. For the purposes of the Directive, on the basis of our finding of fact that the goods did not leave the UK, there has been an irregular departure from a suspension arrangement, which is accordingly a release for consumption in the UK within art 6(1)(a). This is the interpretation given by Lord Hoffmann in Greenhalls Management Ltd v Customs and Excise Commissioners [2005] 1 WLR 1754 in which the facts were similar, that excise goods had been diverted after leaving the warehouse, at [12]:

"Article 6(1) of the Directive was plainly intended to impose excise duty at the time when the goods were unlawfully diverted. The diversion was an 'irregular departure' from a suspension arrangement and therefore a 'release for consumption' which should have triggered a charge to duty. However, if sub-paragraph (a) does not cover what happened, there is no other paragraph of regulation 4(2) which does. An interpretation of sub-paragraph (a) which covers the facts of this case is therefore not only in accordance with the ordinary meaning of the language but required by the duty of a domestic court to interpret legislation, so far as possible, to comply with the terms of the Directive."

We should mention that Lord Walker considered that the domestic law provision imposing liability on the warehousekeeper was not implementing the Directive because, under art 6(2) of the Directive, that was a matter of domestic law. However, he did not press his doubts to a dissent. Mr Young contended that the House of Lords had overlooked the exception to the strict liability of a warehouse keeper in art 14 comprising fortuitous events or force majeure, and losses inherent in the nature of the products during production and processing, storage and transport. However it seems to us that none of these was applicable there and so art 14 was not in point. Accordingly, we find that there has been an irregularity within art 20 of the Directive which must have occurred in the UK. Duty is accordingly payable in accordance with art 20 by the person who guaranteed payment of the duty in accordance with art 15, which is the Appellant as owner. The result is the same in domestic law. Under reg 3 of DSMEG an irregularity (which has the same meaning as in art 20 of the Directive) occurred in the UK and the excise duty point is the time the irregularity occurred or when it first came to Customs' attention. By art 7 the person liable to pay is the person who is shown in box 10 of the AAD as having arranged the guarantee, which is the Appellant. It is jointly and severally liable with the person who caused the occurrence of the excise duty point, if that person can be identified.

19. We consider that the liability of the guarantor to excise duty is strict unless the exception in art 14 of the Directive applies, which we find it does not. The Directive refers in art 13(a) to the warehousekeeper providing a compulsory guarantee to cover movements. This is subject to art 15(3), which provides that the risks inherent in intra-Community movement shall be covered by a guarantee provided by the warehousekeeper, or jointly and severally by the consignor and transporter, or by the transporter or the owner alone. The Directive therefore envisages that the guarantee is required to cover the risks, which suggests a strict liability.
20. Assuming that the variation of the guarantee on 14 November 2005 (see paragraph 9(2) above) governs these transactions the maximum liability under the guarantee is (a) £20,000 per transaction and (b) £50,000 in total. The amount of the assessment in respect of three transactions is £310,016 split between the three transactions as to £105,027 (AAD 2110), £102,525 (AAD 2180) and £102,464 (AAD 2179). Alternatively, if the 7 December 2005 letter relates to a new guarantee the limit may simply be £50,000 in total. Whichever is the case the total limit applicable to these transactions is £50,000. Both art 20 of the Directive and reg 7 of DSMEG seem to assume that the guarantee is sufficient to cover the duty, which in this case it is not. In principle, one would expect that the liability of a person solely (in view of our conclusion in the next paragraph that the Appellant did not cause the occurrence of the excise duty point) on the basis that it arranged the guarantee to be limited to the guaranteed amount. If DSMEG intended to override the contractual limit we would have expected clearer words than "the person liable to pay the excise duty on the occurrence of that excise duty point shall be…if someone other than the consignor is shown in Box 10 of that document as having arranged for the guarantee, that other person." Since we did not hear any argument about the relevance of the amount of the guarantee, if Customs contend that this is not the case we give liberty to them to apply for a resumed hearing to determine whether the Appellant's liability is limited to the amount of the guarantee by notice to the Tribunal within 30 days of the date of release of this decision; and we give liberty to either party to produce further evidence showing the amount of the guarantee at the relevant time if either party contends that it is not £50,000.
21. We do not find that the Appellant caused the occurrence of an excise duty point or caused the irregularity within reg 7(2) of DSMEG. So far as Mr Maggs and the Appellant are concerned, we do not consider that they were involved in any fraud and we accept Mr Maggs' evidence. Miss Stubbs contended that Mr Maggs had been negligent but we disagree. Whether a person is negligent depends on their experience. Although Mr Maggs had at least nine years' experience of dealing in duty paid excise goods, during which he dealt with York Wines Limited, he had dealt in duty suspended excise goods only since May 2005 and these comprised 136 transactions in which beer came to the UK from Italy. Mr Maggs then met Mr Kandola when visiting a distillery in Antwerp. Later Mr Kandola asked if he could supply Glens Vodka, which was a standard product of York Wines with whom he had been dealing earlier in relation to duty paid excise goods. This may have seemed a piece of luck to Mr Maggs but we are more sceptical and it suggests to us that the persons who orchestrated the fraud were well aware of this. The transactions the subject of the assessments in this appeal in October and November 2005 were the first transactions undertaken by the Appellant where goods moved out of the UK. Mr Maggs was content to contract the transport and warehousing to others without asking any questions (through ignorance, rather than turning a blind eye, in our view). He did not receive any complaints from DIT about non-receipt of the goods that might have put him on notice. He said in evidence that he did not see the AADs at the time. Even if he had known to ask Prompstock whether the receipted AADs had been received, he would have been told that they had been, and on the face of it the paper work seems in order. We suspect that he had been spotted by the fraudsters (and it not for us to identify them) as an inexperienced person with a Customs guarantee who would be likely to be content if he were given a profit of 50p per case, which enabled the fraudsters to "slaughter" the load. He was relying on York Wines, with whom he had a longstanding business relationship, to honour the profit of 50p per case but he clearly did not check the invoices or the credit note (although Customs having the documents may have contributed to this). We do not give much weight to his failure to submit EC Sales Lists, which we consider was through ignorance, or to his failure to register as a High Value Dealer, when he was aware he should have been but was apparently put off by the complications of registration. Much more surprising is that the Appellant has still not been paid the full amount by BUL and Mr Maggs did not seem to be concerned or to be doing anything about it. For the reasons given above we do not consider that this fact points to the Appellant and Mr Maggs being involved in the fraud.
22. In Teleos the supplier of the goods acting in good faith zero-rated their transfer to Spain and Customs accepted the evidence of the intra-Community supply for VAT purposes. Later, further evidence came to their notice which demonstrated that the earlier evidence was false. The Advocate General (Kokott) found that Customs could not retrospectively reopen the liability of the supplier who was unaware that the proof was false so long as the supplier has done everything in his power to ensure the proper application of the VAT provisions. In so deciding she accepted at [79] that she was not following decisions on customs duty, such as Faroe Seafood, C-153/94 and C-204/94, and Pascoal Filhos, C-97/95 concerning false certificates of origin. For customs duty only one party, the importer, was liable; in VAT the procedure for intra-Community acquisition and supply determines in which state the VAT is paid. The Opinion, assuming that it is upheld by the Court, is distinguishable on the facts here. Customs were not initially satisfied with the evidence of the AADs of receipt in Germany. The Appellant made no VAT returns for the period 12/05 in which the transactions occurred, and the assessment was made in December 2005 before the VAT return was due. For that reason the principle of legal certainty as explained in INZO, C-110/94, is inapplicable. Nor do we consider that she would have reached the same decision in relation to excise duty, even though, like VAT, the question is in which country the duty is payable. Excise duty has its own rules that require a guarantee to cover the risks inherent in intra-Community movement. The Directive's exceptions to the strict liability of a warehousekeeper in art 14 are extremely limited and comprise only fortuitous events or force majeure, and losses inherent in the nature of the products during production and processing, storage and transport. None of these is applicable here, even if one could read the exceptions applying to the owner who has provided a guarantee. We therefore find that the Opinion cannot be applied to excise duty.
23. The liability to VAT follows the excise duty liability and is payable by the Appellant as the person by whom the goods are removed from the warehouse. We have found that the exception made by the Advocate General in Teleos, while applicable in principle, does not apply on the facts to the Appellant.
24. We agree with Miss Stubbs' contentions in relation to Mr Young's Human Rights Act contentions. We consider that the requirement of "conditions provided by law" in art 1 Protocol 1 of the Convention is satisfied. We also agree with her that the special situation referred to in de Haan justifying remission of customs duty derives from a specific provision in art 239 of the Community Customs Code that has no application here.
25. With regret therefore, because we consider that Mr Maggs is the victim of a fraud, we are bound to find in favour of Customs and dismiss the appeals in principle, subject the determination of the quantum of liability to excise duty if Customs contend that this is not limited to the amount of the guarantee (and if so, the amount of the guarantee) by notice to the Tribunal within 30 days of the date of release of this decision, failing which we determine that the excise duty is limited to the guaranteed amount of £50,000.
26. At the request of the parties we reserve the question of costs. Either party may make an application to the Tribunal for costs in principle (leaving aside the figures for the moment) within 30 days of the date of release of this decision.

JOHN F AVERY JONES

CHAIRMAN

RELEASE DATE: 22 August 2007

LON/06/8024 and 8003