E01122

EXCISE DUTY – NON RESTORATION OF MOTOR VEHICLE – The Appellant was the owner of the vehicle – not present at the seizure – the vehicle was used for smuggling excise goods – Appellant did not take reasonable steps to prevent the vehicle from being used for smuggling – evidence indicated that the Appellant knew about the smuggling attempt – non-restoration of  vehicle proportionate – no exceptional hardship –   review decision reasonable – Appeal dismissed

LONDON TRIBUNAL CENTRE

	MALGORZATA KOLUCH   	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      RAY BATTERSBY                       (Member)	  

Sitting in public in London on 25 April 2008

The Appellant appeared in person

Rupert Jones counsel instructed by the Solicitor of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION
The Appeal
1.	The Appellant was appealing against the Respondents’ decision on review dated 18 April 2007 refusing restoration of a motor vehicle, a Volkswagon Transporter, registration number RST 85 JU (hereinafter known as the vehicle).
2.	The Appellant’s grounds of Appeal were that
“1. She was not the driver of the seized vehicle at the time, nor is she the owner of the trailer where the seized goods were found. She was not aware that a trailer was attached to her vehicle during the crossing of the English Channel.
2.  Ms Koluch’s vehicle did not carry any excise goods
3.   Ms Koluch as a keeper/owner of the vehicle seized was not informed in time by HM Revenue & Customs about the seizure of her vehicle. She was later informed by the driver of the vehicle that her VW had been stopped and seized. Also she was not issued with Customs Notice 12 which would specify the procedure available to her to challenge the legality of the seizure. This was a procedural oversight on the part of the Officers. This deprived our client of the possibility to challenge the seizure much earlier in the process.”
The Issue
3.	On 12 February 2007 at Harwich International Port, Mr Wieslaw Koluch was stopped by  Customs Officers whilst driving the vehicle which was towing a trailer owned by a Daniel Smokowski. A Hennryk Zaprzala was a passenger in the vehicle. When stopped Mr Koluch confirmed that he did not have any prohibited goods and only five packets of cigarettes. He said he was transporting Polish food and drink.
4.	The Officers offloaded the trailer and discovered it had a false floor under which cigarettes were packed in grey plastic, sealed with brown tape. They also discovered cigarettes in the spare tyres of the vehicle and the trailer. The Officers found a total of 34,600 cigarettes (excise duty £5,116.99), 424 litres of beer (254.40 excise duty) and 48 litres of Vodka (£356.77 excise duty). The vehicle and trailer also contained Polish foodstuffs. The Officers were satisfied that the excise goods found in the vehicle and trailer were held for commercial purposes. The Officers seized the excise goods, the vehicle and trailer.
5.	The Appellant owned the vehicle but not the trailer. She employed her husband, from whom she was separated, to transport Polish foodstuffs to the United Kingdom,  and bring back new and second hand clothes which would be sold in her businesses in Poland. The Appellant purchased the vehicle under a credit agreement with a bank which held a 49 per cent share of the ownership of the vehicle. The Appellant was not present when her vehicle was stopped by Customs Officers. The Appellant asserted that she knew nothing about the trailer, and that the excise goods were carried without her permission and knowledge. Further the driver was expressly prohibited by his contract of employment from transporting goods subject to customs’ restrictions.
6.	None of the parties involved have instituted proceedings in the magistrates’ courts challenging the seizure of the excise goods, vehicle and trailer. The seizure notice was served on Mr Koluch, not the Appellant. 
7.	On 15 February 2007 the Appellant requested restoration of the vehicle which was refused on 13 March 2007. On 17 March 2007 the Appellant requested a review of the non-restoration decision which was considered by Mrs Hodge (formerly known as Mrs Gillespie) who upheld the decision refusing restoration of the vehicle.
8.	 We are required to determine whether Mr Hodge’s refusal of restoration of the vehicle was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable Mrs Hodge must have considered all relevant matters and must not have taken into consideration irrelevant matters.
9.	The disputed issues in this Appeal concerned the extent of the Appellant’s responsibility for the unlawful importation of excise goods on 12 February 2007, and the degree of hardship suffered by her arising from the non-restoration of her vehicle.
The Evidence
10.	Mr O’Shannessy of Adams solicitors prepared the Appellant’s case providing the Tribunal with a witness statement together with documentary exhibits translated into English. Mr O’Shannessy also arranged for the attendance of a Polish interpreter, Ms Alexandra Kwasniewska, to translate the proceedings for the benefit of the Appellant and the Tribunal. The Appellant, however, represented herself at the hearing and gave evidence upon oath. Mrs Deborah Hodge, the review officer gave evidence for the Respondents. The parties supplied bundles of documents which were received in evidence.
The Review Decision
11.	Mrs Hodge examined all the circumstances surrounding the seizure of the vehicle and excise goods except the legality or correctness of the seizure. She took account of the following facts in reaching her decision refusing restoration of the vehicle:
(1)	Mrs Hodge acknowledged that the vehicle was not adapted for smuggling, however, in her view the vehicle and the trailer were inextricably linked.  The trailer could not have been transported without the vehicle. Further illicit excise goods were found in the vehicle as well as in the trailer.
(2)	The Appellant supplied no evidence, in the form of orders, delivery notes or invoices to support her assertion that the vehicle was used for the delivery of foodstuffs.
(3)	 Mrs Hodge was unable to trace on the Internet the Polish shop in Luton which the Appellant said was the delivery address of the foodstuffs carried by the vehicle on 12 February 2007.
(4)	The vehicle made six journeys to the United Kingdom since September 2006. The duration of each trip was one week.  On the 14 October 2006 the vehicle was driven by a Robert Niedojadio and found to have foodstuffs and beer on board. On 18 December 2006 Mr Koluch and Mr Lukowski were in the vehicle when intercepted by Customs Officers who seized 48 litres of Vodka, 49.5 litres of wine, and 233 litres of beer from the vehicle.
(5)	The Appellant adduced no evidence that she took steps that might reasonably be expected of a responsible haulier to minimise the risks of illicit importations. Further the contract with Mr Koluch was silent about the consequences for him as an employee if he committed acts of gross misconduct or breached Customs regulations.
(6)	The loss of a vehicle did not constitute exceptional hardship and was proportionate to the Appellant’s degree of culpability. 
The Appellant’s Evidence
12.	 The Appellant explained  that she ran a Bureau de Change shop in Poland which sold new and second hand clothes obtained from the United Kingdom. The Appellant also owned a small delivery business operating between Poland and United Kingdom which supplied a number of shops in the United Kingdom with Polish and Eastern European delicatessen foodstuffs. 
13.	In her witness statement the Appellant stated that the foodstuffs in the vehicle seized on 12 February 2007 were destined for a delicatessen shop based at 153 Dallow Road in Luton. However, in cross-examination she said that the foodstuffs were to be delivered to several places in England, which included shops in Luton and Stowmarket.
14.	The Appellant  produced  no documentation evidencing the supplies of foodstuffs to delicatessen shops in the United Kingdom. The Appellant stated that the documents were with her accounts’ department. The Appellant did not bring the documents to the Tribunal because she considered the hearing was about getting her car back not proving the nature of her business. The Appellant could not recall the value of the invoice with the delicatessen shop in Luton. She believed that the cost of the foodstuffs transported on 12 February 2007 was about £850. The Appellant did not know the price she charged the delicatessen shops for the food. The income generated from the sale of foodstuffs was applied to the purchase of second hand clothes which were then brought back for resale in her Bureau de Change shop. 
15.	She bought the foodstuffs from MACRO which was a supermarket in Poland. She accepted that the foodstuffs found in the trailer were the same foodstuffs transported in her vehicle. The beer and cigarettes seized from the vehicle and trailer could be obtained from the MACRO supermarket.
16.	The Appellant denied all knowledge of the trailer and its owner, a Mr Daniel Smokowski. According to the Appellant the vehicle departed from Poland on 11 February 2007 without a trailer with a consignment of foodstuffs which probably included beer but no vodka. The Appellant intimated that the cans of beer were intended as gifts since she had not paid the excise duty on the beer.  The journey from Poland to Harwich was lengthy requiring an overnight stop. The Appellant paid for the fuel and gave the driver an allowance for overnight stops.
17.	The Appellant employed her husband, Mr Koluch, from time to time as a driver and odd-job man. The official address for Mr Koluch was the same as the Appellant’s. However, they had been legally separated in 1994, and lived apart, although they remained good friends. 
18.	The Appellant produced a contract for a task made between herself and Mr Koluch requiring him to provide services of transporting food from Poland to England and on his way back of new and second-hand clothes during the period of 11 – 17 February 2007. The Appellant agreed to provide Mr Koluch with the vehicle and food products. The contract contained a declaration of Mr Koluch that he would carry only those goods consigned to him. He was prohibited from transporting goods restricted by Customs regulations.
19.	The Appellant stated that the vehicle was driven to England on two or three occasions a year. She was not aware of the other journeys  completed by the vehicle as recorded by the Respondents.  Mr Koluch had access to the keys for the vehicle, and could have used it without her knowing, particularly as the vehicle was kept about ten kilometres from her home. The Appellant did not know about the seizure of the vodka and beer from the vehicle by the Respondents in December 2006. Mr Koluch did not tell her about it. As far as she was concerned everything was in order on the December 2006 trip, the paperwork and the clothes were brought back. 
20.	The Appellant stated that she owned four other vehicles.
21.	The Appellant asserted that she did not know about the vehicle being used for smuggling cigarettes. As far as she was concerned the vehicle was to be used solely for the transportation of food and new and second-hand clothes. She was not aware of the trailer which was fixed to her vehicle without her consent. The bank had exercised its lien on the vehicle. Further the Appellant was obliged to hire alternative means of transport to continue with her business.  As a result of the loss of her vehicle the Appellant suffered severe disruption to her business and additional costs which she could ill afford. 
Reasons
22.	The issue in dispute was whether Mrs Hodge’s refusal to restore the vehicle was a decision which no reasonable body of Commissioners could have arrived at. The jurisdiction of the Tribunal was to find the primary facts and to decide whether in the light of those findings Mrs Hodge’s decision was reasonable. In order for the decision to be reasonable Mrs Hodge must have considered all relevant matters and disregarded irrelevant matters.
23.	Our starting point is that we find that the vehicle was used for smuggling excise goods of significant value in respect of unpaid duty. We accept the Respondent’s argument that the vehicle and trailer were inextricably linked, in that it would not have been possible for the trailer and its contents to enter the United Kingdom without the vehicle. Further packets of cigarettes were concealed in the spare tyre of the vehicle. The smuggling attempt involved commercial quantities of excise goods, 34,600 cigarettes, 424 litres of beer and 48 litres of Vodka which were concealed under a false floor in the trailer and in the spare tyres for the trailer and vehicle.
24.	The Respondents adduced evidence of six entries of the vehicle into the United Kingdom since September 2006. Excise goods were discovered in the vehicle when it was intercepted by Customs Officers in October and December 2006. They seized the excise goods of vodka, wine and beer imported in December 2006. The pattern of frequent trips to the United Kingdom and the fact that excise goods were found in the vehicle on each occasion it was stopped suggested that the vehicle was being used as part of a systematic smuggling operation.
25.	The factual dispute at the heart of this Appeal was whether the Appellant took reasonable steps to prevent her vehicle from being used for smuggling. The Appellant asserted that she was not present when the vehicle was seized and did not   know about the trailer. Further her driver, Mr Koluch, was contracted solely for the transport of foodstuffs and clothes between Poland and the United Kingdom with an express prohibition on the carriage of Customs restricted goods. In contrast the Review Officer found no evidence that the Appellant exercised any control over the use of her vehicle, and that the contract was silent on the consequences for the driver if he breached customs regulations. The Review Officer did not accept the Appellant’s denial that she knew nothing of the smuggling perpetrated with her vehicle.
26.	We find the Appellant’s evidence contradictory in two material respects. The Appellant indicated in her witness statement that the foodstuffs were destined for a shop in Luton but later changed her evidence to making deliveries to several stores in England. The Appellant insisted that the vehicle only contained foodstuffs when it left Poland on 11 February 2007 but then acknowledged that the consignment contained cans of beer to be given away as gifts. 
27.	We consider the Appellant was not forthcoming and unconvincing about the operation and the financing of her business. She did not bring any documents to the Tribunal evidencing  the delivery of foodstuffs to shops in England. The Appellant was on notice from the review letter dated 18 April 2007 that Mrs Hodge drew an adverse inference from the absence of documentation, such as orders, delivery notes and invoices, supporting the deliveries. 
28.	The financial structuring of the business transactions was not transparent. The Appellant did not know the value of the specific delivery to the delicatessen in Luton. She estimated the cost of the foodstuffs at around £800 but could not put a figure on the profits she expected to make. The Appellant gave the impression that monies received on the foodstuffs would be expended on clothes which would then be resold in Poland. The delivery on 12 February 2007 involved significant underlying costs including the cost of diesel for a return journey estimated at 2,500 kilometres, overnight charges and wages of a driver for a trip which generally lasted seven days.  Finally the seized excise goods were Polish products available for purchase from the same retail outlet, MACRO, as the foodstuffs. We conclude from our analysis on the operation and the financing of the Appellant’s business that its financial viability was questionable, if it was based just on the wholesale of Polish foodstuffs to retail outlets in the United Kingdom.   
29.	The Appellant admitted in evidence that she did not exercise adequate control over the use of her vehicle. The Appellant stated that that she was unaware of some of the trips made in the vehicle since September 2006. The Appellant accepted that Mr Koluch had access to the ignition keys of the vehicle, and that it was parked some ten kilometres away from her home. 
30.	The Appellant relied on the contract with Mr Koluch to demonstrate that she took steps to minimise the risk of illicit importations. We consider the terms of the contract inadequate, in particular the absence of any clause dealing with gross misconduct on the part of the driver. It appeared that Mr Koluch disregarded the terms of the contract as evidenced by his previous importation of excise goods in December 2006. Also, according to the Appellant, Mr Koluch did not report to her the seizure of excise goods in December 2006.  The facts that  Mr Koluch had unrestricted access to the vehicle and that  he ignored his responsibilities as an employee together with his relationship to the Appellant as her separated spouse  indicated  that their business relationship  was more of a partnership rather than one of  employment.
31.	We hold on the facts that the Appellant did not take reasonable steps to prevent her vehicle from being used for smuggling excise goods into the United Kingdom. In addition we find on examination of the evidence relating to the organisation of her business and her business relationship with Mr Koluch coupled with doubts about her credibility arising from the contradictions in her evidence that the Appellant knew or ought to have known that he vehicle was being used to smuggle excise goods  on 12 February 2007.
32.	Our findings corresponded with the conclusions reached by Mrs Hodge on the limited information available to her. We find no evidence that Mrs Hodge took account of irrelevant matters.
33.	We are satisfied that the non-restoration of the vehicle was proportionate to the scale of the smuggling on 12 February 2007 and the Appellant’s culpability for it. We find no evidence that the Appellant suffered exceptional hardship from the loss of her vehicle. We acknowledge that she lost the use and value of her vehicle, and would be liable to repay the loan taken out on the vehicle. However, we consider those losses to be a direct consequence of the unlawful use of the vehicle, which in our view were not sufficient to support a claim for exceptional hardship. The Appellant stated that her business had been damaged by the non-restoration of her vehicle. The Appellant, however, did not quantify the extent of damage. Also the Appellant told the Tribunal that she owned four other vehicles which presumably could be used for her business.
34.	In our view the Appellant’s third ground of Appeal about the non-receipt of Customs Notice 12 was not relevant to the dispute about the reasonableness of Mrs Hodge’s review decision. There was no legal requirement on the Respondents to serve Notice 12 upon the Appellant because the vehicle was seized in the presence of Mr Koluch. Further she had ample opportunity to institute proceedings challenging the seizure because Mr Koluch told her about the forfeiture of the vehicle on the 12 February 2007 and gave her contact details of the Customs Officers involved.  It would appear that the Appellant made a conscious decision to initiate restoration proceedings before the Tribunal which disentitled her from adducing facts on the lawfulness of the seizure.  In any event we consider that the thrust of the Appellant’s case was about her purported non-involvement in the smuggling which was  best addressed by the Tribunal rather than by the magistrates under condemnation proceedings. 
Decision
35.	We are satisfied for the reasons set out above that the Respondents’ decision on review dated 18 April 2007 refusing restoration of a motor vehicle, a Volkswagon Transporter registration number RST 85 JU was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. We, therefore, dismiss the Appeal. We make no order for costs.

                                

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 26 June 2008

LON/07/8054