[2010] UKFTT 223 (TC)

TC00524

Appeal number LON/2009/8005

Excise Duty – Seizure of vehicle – Refusal of Restoration – Whether refusal reasonable and proportionate in the circumstances – Yes – Appeal dismissed

FIRST-TIER TRIBUNAL
TAX 

OK TRANS LIMITED
		Appellant

	- and -

               UK BORDER AGENCY (Customs)
           (formerly known as Commissioners for HMRC)
           		Respondents

				TRIBUNAL:  Paulene Gandhi (tribunal judge)
						John Agboola MBA, FCCA (member)

Sitting in public in London on 17 February 2010

Mr Cifci, administrator appeared for the Appellant

Mr Rupert Jones, counsel for the Respondents 

© CROWN COPYRIGHT 2010

DECISION

1.     This is an appeal by OK Trans Ltd against HMRC’s decision of 13 November 2008.  In this decision HMRC state that they would not restore a MAN Tractor Unit, registration number R36 DKO, and Curtainsider Trailer, registration number TRL62 (hereinafter known as the vehicle) seized on 27 June 2008.

2.      There are two main issues for us to resolve:
a) Was Trans OK involved in ‘smuggling’ alcohol

b) If not did they take reasonable precautions to prevent the use of their vehicle in smuggling

3.    We must look to see whether the decision is proportionate and reasonable and whether it causes exceptional hardship.  

Law  
4.      The relevant legal provisions are as follows:
   
5.      Section 36 of the Alcoholic Liquor Duties Act 1979 provides that:
“36. Beer: charge of excise duty
(1) There shall be charged on beer—
(a) imported into the United Kingdom, or
(b)  produced in the United Kingdom,
 
a duty of excise [at the rates specified in subsection (1AA) below]”

6.   Regulations 13,15, and 20 of The Beer Regulations 1993 (Regulation 15 of the Beer Regulations being almost identically worded to Regulation 4 of the REDS Regulations) as amended by the Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002 provides that:
“Moving beer in duty suspension
 13.—(1)  Subject to the provisions of paragraphs (2) to (4) below, and without prejudice to Regulation 16 of the Excise Warehousing (Etc.) Regulations 1988 (Removal from Warehouse) and Regulation 9 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (Moving Excise Goods in Duty Suspension), beer may be removed without payment of duty—
 (a) from registered premises:
 (i)  to other registered premises or an excise warehouse; or
 (ii) for export, removal to the Isle of Man or shipment as stores;
 (b) from an excise warehouse to registered premises; and
 (c) from the place of importation to registered premises.

 (2) All removals of beer without payment of duty mentioned in paragraph (1)(a)(i) and (1)(b) above shall not be subject to any requirement imposed by regulations 10 and 11 of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (movement conditions and accompanying documents and certificate of receipt) but shall be subject to the requirements imposed by paragraph (3) below.

(3) Save in the case of beer to which the Excise Goods (Accompanying Documents) Regulations 2002 apply or as the Commissioners may otherwise allow, every removal of beer shall be subject to the following requirements—
 (a)  the duty chargeable in respect of the beer that is removed is secured by an approved guarantee;
 (b) the beer is accompanied by a document issued by the consignor and containing a unique reference number, his name and address, the date of despatch, the name and address of the consignee, the address of the place to which the beer is consigned, a description of the beer including its quantity, strength and package size, and a statement indicating that it is being moved without payment of duty;
(ba)  if the amount of beer produced in the brewery where the beer was produced is relevant for the purpose of determining the duty charged on the beer, the beer must be accompanied by a certificate of production in a form approved by the Commissioners;
 (c) in the case of export or shipment as stores, the consignor shall satisfy the Commissioners that the beer has been exported or, as the case may be, shipped as stores; and
 (d)  in any other case—
 (i)   the consignee who receives the beer shall within 14 days of the day upon which he received that beer issue a certificate containing such particulars as may be specified by the Commissioners in a notice published by them and shall keep a record of the issue of the certificate and shall keep any accompanying document issued to him; and
(ii)   the certificate mentioned in sub-paragraph (i) above shall be delivered to the consignor of the beer.

    (4)  For the protection of the revenue the Commissioners may by notice in writing addressed to a registered holder restrict or prohibit the movement of beer without payment of duty from his registered premises to other registered premises or to an excise warehouse.”

            (1A) In the case of beer acquired by a person in another member State for his own use and transported by him to the United Kingdom, the duty point is the time when that beer is held or used for a commercial purpose by any person.
   
(1B) For the purposes of paragraph (1A) above—
    (a)  “member State” includes the Principality of Monaco [San Marino and the United Kingdom Sovereign Base Areas of Akrotiri and Dhekelia] , but does not include the Island of Heligoland and the territory of Büsingen in the Federal Republic of Germany, Livigno, Campione d'Italia and the waters of Lake Lugano in the Italian Republic, Ceuta, Melilla and the Canary Islands in the Kingdom of Spain, or the overseas departments of the French Republic ,
(b)    “own use” includes use as a personal gift,
(c)     if the beer in question is—
(i)  transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or
(ii)     the person holding it intends to make such a transfer,

that beer is to be regarded as being held for a commercial purpose,

(d)   if the beer is not duty and tax paid in the member State at the time of acquisition, or the duty and tax that was paid will be or has been reimbursed, refunded or otherwise dispensed with, that beer is to be regarded as being held for a commercial purpose,
(e)     without prejudice to sub-paragraphs (c) and (d) above, in determining whether beer is held or used for a commercial purpose by any person regard shall be taken of—
(i)      that person's reasons for having possession or control of that beer,
(ii)   whether or not that person is a revenue trader (as defined in section 1(1) of the Customs and Excise Management Act 1979),
(iii)   that person's conduct, including his intended use of that beer or any refusal to disclose his intended use of that beer,
(iv)     the location of that beer,
(v)      the mode of transport used to convey that beer,
(vi)      any document or other information whatsoever relating to that beer,
(vii)  the nature of that beer including the nature and condition of any package or container,
(viii)    the quantity of that beer, and in particular, whether the quantity exceeds 110 litres,
(ix)      whether that person personally financed the purchase of that beer,
(x)       any other circumstance that appears to be relevant.

(2)     If any duty suspension arrangements apply to the beer, the duty point shall be the earlier of–
(a)    the time when the duty ceases to be suspended in accordance with those arrangements;
(b) the time when there is any contravention of any requirement relating to those arrangements; and
(c)   the time when the duty ceases to be suspended by virtue of paragraph (3) below.

(3) The duty ceases to be suspended when-
(a)   the premises on which the beer is held cease to be registered premises under Part IV of these Regulations;
(b)    the person holding the beer ceases to be registered under Part IV of these Regulations;
(c)    the beer is consumed; or
(d)    the beer leaves any registered premises unless–
(i)     the beer is consigned to other registered premises or an excise warehouse in accordance with requirements prescribed in Part V of these Regulations and Part IV of the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992; or
(ii)      the beer is delivered for export, shipment as stores or removal to the Isle of Man.

(4)     In this regulation “contravention” includes a failure to comply.

        Time and method of payment
         20.—(1)  Subject to paragraph (2) and save as the Commissioners may allow, the duty shall be paid at the duty point.

Undisputed facts
7.     The vehicle was intercepted on 27 May 2008 at Customs at Dover Eastern Docks.  The vehicle and its contents, namely 24 pallets (23,040 litres) of mixed beer (480 cases of Carlsberg Special Brew, 480 cases of Skol Super and 960 cases of Fosters), (the excise goods) were detained pending further enquiries. The excise duty evaded on these goods was £22,404.10.  These goods were allegedly destined for Absolute Bond Limited, for the account of UK Beers & Wines Limited.  CEM Logistik were shown as the haulier on the AAD and CMR documents, however the work had been sub contracted to OK Trans Limited.

8.      Enquires made at Absolute Bond established they were not expecting the load as described on the AAD.  Further they had no knowledge of any cancelled orders and the excise number quoted on the AAD had been withdrawn some five months earlier on 31 December 2007.

9.    Pursuant to these enquiries the customs officer involved was satisfied that the excise goods were held for a commercial purpose but none of the proper methods of bringing excise goods into the UK had been used.  Thus on 27 June 2008 the excise goods were seized as ‘liable to forfeiture’ under Sections 49(1)(a)(i) and 139(1) of the Customs and Management Excise Act 1979 (CEMA) and Regulation 16 of Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (the REDS regulations).  Further the excise goods were liable to forfeiture under Regulation 24 of the Excise Goods (Accompanying Documents) Regulations 2002, as the consignment did not comply with Regulation 12 thereof.

10.   The vehicle was seized under Sections 139(1) and 141 (1) (a) of CEMA because it had been used for the carriage of goods liable for forfeiture.

11.   When the excise goods were seized, OK Trans was issued with a Notice of Seizure dated 27 June 2008 and a Custom’s Notice 12A “Goods and/or vehicles seized by Customs”.  The Notice explained that OK Trans could challenge the legality of the seizure in a Magistrates’ Court by sending Customs a notice of claim within one month of the date of notice of seizure.  

12.   OK Trans did not challenge the legality of the seizure thereby implicitly confirming that the excise goods were held in the UK for a commercial purpose.  Accordingly with the passage of time the excise goods and vehicle were condemned as forfeit under paragraph 5 of Schedule 3 of CEMA (deemed condemnation) and their ownership passed to the Crown.

13.   On 1 July 2008 Trans OK wrote asking for the vehicle to be restored to them.  The letter stated:
“I believe that this issue has been solved about the load which the goods had nothing to do with our vehicle.  We have all the necessary paperwork for this truck so I see no reason why it is still in your possession.  We are a transporting company and we need our vehicle back as we have many jobs for it to do.  As a company we are losing out.”

14.   On 28 July 2008 OK Trans supplied a copy of the V5 vehicle registration document for the tractor unit to the Post Seizure Unit.

15.  On 29 July Mrs. Marshall of the Post Seizure Unit wrote requesting additional information concerning the vehicle and the measures adopted by the company to prevent their vehicles being used to smuggle goods.

16.   On 26 August 2008 OK Trans wrote to advise that the person dealing with the matter was away returning on 1 September 2008.  On 9 September 2008 the requested information was provided in writing to the Post Seizure Unit.  The following case was put forward:
•	In order to prevent vehicles from being used for smuggling instructions were given to drivers on a regular basis about company rules.  These rules include (i) drivers are not allowed to carry any loads without the company’s knowledge; (ii) drivers should take extra care that no other goods are loaded onto the trailer when loadings take place; and (iii) drivers cannot carry strangers in company vehicles for any reason.

•	Drivers used by the company are reliable and experienced in working between the UK and EU.  To this end OK Trans provided a copy of a reference from the previous employers, Canin Transport International Ltd of the driver involved (Alpaslan Gobekli).  OK Trans also provided a blank, unsigned copy of the terms and conditions of the driver’s contract.

•	When considering an agreement with a customer about the transportation of goods, the company consider whether they can provide full documentation such as commercial invoice, shipping instructions, CMR certificate and certificate of origin (if applicable).

17.    On 24 September 2008 Mrs. Arrowsmith of the Post Seizure Unit wrote requesting proof of ownership of the vehicle and further details regarding the movement of the excise goods in the vehicle.  In particular OK Trans was asked to explain how the contract was obtained from CEM Logistik (the haulier shown on the CMR and AAD), what checks were made to ensure CEM Logistik was a bona fide company, and which haulier made arrangements with the exporter/importer of the shipment.  

18.  On 6 October 2008 OK Trans wrote to the Post Seizure Unit enclosing the requested information.  OK Trans provided: 
•	A written instruction/agreement from CEM Logistik regarding the shipment dated 17 May 2008

•	Confirmation that no official enquiries were made about CEM Logistik as the company had “known them to be a haulier for quite some time”.

19.   On 10 October 2008 Mrs. Arrowsmith wrote to OK Trans stating that the vehicle would be restored to them upon payment of £10,270.

20.   On 23 October 2008 OK Trans requested a review of the conditional restoration decision.  The letter stated: 
“We feel that we have produce[d] to you all the relevant documents requested to show that we have made basic reasonable checks regarding the load, and had no connection with the illicit load, but being just the transporter.”

21.  On 24 October 2008 an officer wrote explaining the review process and inviting any further information to be submitted in support of the request for a review.  No further information was received prior to the review decision being taken.

22.   On 13 November 2008  a reviewing officer, Mr Harris, confirmed that having conducted a review, HMRC would not restore the vehicle.  This letter stated inter alia that: 
“Commissioner’s policy for the restoration of goods [and] vehicles that have been used for smuggling excise goods ….. depends on who is responsible for the smuggling attempt:  
A  If the haulier provides evidence satisfying the Commissioners that neither the haulier nor  the driver were responsible for or complicit in the smuggling attempt then:
•	If the haulier also provides evidence… that both the haulier and the driver carried out basic reasonable checks (including conforming with the CMR Convention) to confirm the legitimacy of the load and to detect any illicit load, the vehicle will normally be restored free of charge.

•	Otherwise on the  first occasion the vehicle will normally be restored for 20% of the revenue involved in the smuggling attempt (or for 100% of the trade value of the vehicle if lower.)  On a second or subsequent occasion occurring within 6 months of the first, the vehicle will not normally be restored.

B  If the haulier provides evidence satisfying the Commissioners that the driver , but not the haulier is responsible for or complicit in the smuggling attempt then:
•	If the haulier also provides evidence… that the haulier took reasonable steps to prevent drivers smuggling, then the vehicle will normally be restored free of charge unless

o	The same driver is involved (working for the same haulier) on a second or subsequent occasion in which case the vehicle will normally be restored for 100% of the revenue involved in the smuggling attempt (or for the value of the vehicle if lower) except that if the second or subsequent occasion occurs within 6 months of the first, the vehicle will not normally be restored.

•	Otherwise, on the  first occasion  the vehicle will normally be restored for 100% of the revenue involved (or the value of the vehicle if lower).   On a  second or subsequent occasion occurring within 6 months of the first, the vehicle will not normally be restored.

C  If the haulier fails to provide evidence satisfying the Commissioners that the haulier was neither responsible for nor complicit in the smuggling attempt then, if the revenue involved is less then £50,000 and it is the first occasion, the vehicle will normally be restored for 100% of the revenue involved (or the trade value of the vehicle if less).  The vehicle will not normally be restored on a second or subsequent occasion within 6 months , or if the revenue involved is £50,000 or more.”

OK Trans’ case
23.    In the notice of appeal dated 11 December 2008 OK Trans stated their wish to appeal against the non restoration decision on the basis that:
“We  had enough proof that shows we had been following instructions given by the customer only.”

HMRC’s  case
24. The extent that OK Trans are arguing that the decision not to restore the goods was unreasonable HMRC contend that the review decision not to offer the seized goods for restoration was one that could have been reasonably arrived at, for the following reasons:
a)   As far as the vehicle was concerned HMRC had regard to their stated policy that:
“if the haulier fails to provide evidence satisfying the Commissioners that the haulier was neither responsible for nor complicit in the smuggling attempt then if the revenue involved is less than £50,000 and it is the first occasion, the vehicle will normally be restored for 100% of the revenue involved (or the trade value of the vehicle if less).  The vehicle will not normally be restored on a second or subsequent occasion within six months or if the revenue involved is £50,000 or more”

b)   HMRC’s contention is that OK Trans haulier was involved in the smuggling attempt.  In view of the irregularities in the importation, namely, the ‘expired’ AAD and the receiving warehouse’s lack of knowledge of the importation the reviewing officer was justified in concluding that, on the balance of probabilities, the excise goods were being imported illicitly and/or involved in a diversion fraud.

c)  The company and its personnel have a history of involvement with smuggling excise goods: In 2003 Savas Celik, a director of the company, was arrested in connection with the fraudulent evasion of duty in the sum of £289,604.50 on 2,023,160 cigarettes.  Mr Celik was convicted in 2005 and sentenced in April 2006 to 18 month’s imprisonment.  Subsequently vehicles belonging to OK Trans have been seized on two occasions – on 21 February 2007 a company vehicle was detained containing 23,040 litres of beer; on 8 March 2007, another vehicle containing the same quantity of beer was also detailed.  Following enquires, both vehicles were seized on 1 April 2007.  The first vehicle was restored for the sum of £7,850; the second was not restored.  In both cases the reviewing officers determined  that OK Trans was (i) involved in the illicit smuggling attempt and (ii) failed to undertake reasonable checks as to the legitimacy of the load.

d)  In view of the above mentioned involvement in smuggling excise goods, the reviewing officer was reasonable to conclude that OK Trans was not an entirely innocent party to the movement of illicit goods, as claimed.  The officer formed the view that this further seizure was not an unfortunate coincidence for the company; rather on the balance of probabilities, the company was involved with the illicit movement.

e)   The amount of excise duty evaded was £22,404.10 i.e. under £50,000, and the previous seizure was over six months prior to the present seizure.  Nevertheless the reviewing officer took the reasonable and proportionate decision not to restore the vehicle as a result of OK Trans’ persistent offending. HMRC were entitled to form the view that when a company/individual habitually breaches the rules relating to excise duty, to the detriment of the exchequer and public purse they must be treated in a manner which reflects their actions.  To this end the reviewing officer was entitled to move beyond the stated policy and conclude that restoration was not reasonable in all the circumstances.

Per Mr Devlin in the tribunal’s judgment in Eugene Crilly v Commissioners of Customs and Excise EO00452:
“20. ….The policy itself also correctly in our view sets out to create the proper distinction between (a) those instances where the Commissioners have evidence to indicate that the driver or haulier are knowingly involved in the smuggling of excise goods (b) those instances where there is evidence to suggest that the driver or haulier, although not knowingly involved in smuggling have nevertheless failed to carry out such basic reasonably checks upon their vehicle as would have enabled the illicit load to have been identified, and (c) those instances where the driver or haulier have taken all reasonable steps to ensure the legitimacy of the load.  These various categories of illicit importations in our view warrant differential treatment in terms of a vehicle restoration policy, if the requirements of fairness and proportionality are to be satisfied. As the European Court of Human Rights emphasised at paragraph 54 of its judgment in AGOSI v United Kingdom (1986) 9 EHRR 1:
“The striking of a fair balance depends on many factors and the behaviour of the owner of the property, including the degree of fault or care which he has displayed, is one element of the entirety of circumstances which should be taken into account”.

It has to be correct that a policy on restoration should draw the type of distinctions addressed in the Commissioners’ policy. Wholly innocent drivers or hauliers, who have carried out all reasonable checks upon their vehicles to guard against the risk of the illicit importation of excise goods, yet whose vehicles are cynically made use of by the actions of others, should not be required to suffer a penalty in respect of the restoration of their vehicles. Similarly, it is surely correct that those hauliers or drivers who are involved in illegal smuggling activities should face the prospect of having their vehicles forfeited and not returned.  Furthermore, it seems to us that part of its legitimate aims in the public interest, the State is able to impose by means of a restoration policy obligations of vigilance on drivers and hauliers, providing that the burdens imposed as a result are not excessive so as to enable the relationship of proportionality to remain between the means employed and the aim sought to be realised.  The Commissioners’ policy in the instant case seems to us to satisfy these requirements.”

f)	Moreover the review officer reasonably expected that a haulier involved in the regular transportation of goods across international frontiers should make reasonable checks of the driver to prevent smuggling and be well aware of the risks involved in taking sub contracted work from other hauliers and in illicit loads being carried by drivers including the smuggling of firearms, explosives, and excise goods. As a matter of routine HMRC submit that a haulier should ‘vet’ other hauliers and drivers carefully and include rules and penalties in their employment contracts, ensuring that all drivers are covered by these arrangements.  The reasonable checks in HMRC’s policy were reproduced at Appendix E and F to the Review Letter.  The review officer reasonably concluded that OK Trans had not made reasonable checks to prevent smuggling, in particular (i) a failure to establish the credibility of the load being carried, details of the owners of the goods and the credibility of their intended destination and (ii) verifying that the intended destination i.e. a bonded warehouse was expecting the arrival of the shipment.

g)	Although OK Trans did take some measures to prevent smuggling, they appear to be ineffective and may simply be a façade to disguise OK Trans’ involvement.
h)	The review officer also paid particular attention to the degree of hardship caused by the loss of the vehicle.  He reasonably concluded that one must expect considerable inconvenience as a result of having a vehicle seized by Customs and perhaps a large expense in making other transport arrangements or even in replacing the vehicle.  Replacement of a seized vehicle with another does not necessarily require replacement with a vehicle of equal value if a cheaper vehicle will perform adequately.  Hardship is a natural consequence of having a vehicle seized and it would have to be exceptional hardship for the vehicle to be restored.  The officer did not regard the inconvenience and expense caused by non restoration of the vehicle in the case as exceptional hardship over and above what one should expect.  In the circumstances the review officer did not consider that OK Trans had suffered exceptional hardship and concluded that there was no reason to disapply HMRC’s policy of not restoring the vehicle in all the circumstances.

i)	Equally the decision not to restore the vehicle is reasonable and proportionate in light of Lindsay v Customs and Excise Commissioners (2002) 1 WLR 1766 para 63 where the  Court of Appeal stated:
“Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars would be rendered liable to forfeiture cannot reasonably be heard to complain if they lose their vehicles.  Nor does it seem to me that, in such circumstances, the value of the car used needs to be taken into consideration. Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance.  Cases of exceptional hardship must always of course be given due consideration.”

j)	There are no other exceptional circumstances in the case that should militate towards restoration.  

  Submissions of UKBA
25.     Mr Jones states that OK Trans have already been involved in two previous seizures and that:
“If you, as OK Trans, had had two vehicles seized the year before wouldn’t you be ultra cautious to make sure you were not caught up in the same type of behaviour”.

26     In summary Mr Jones relied on the following to submit that OK Trans were involved or complicit in the smuggling or did not take reasonable precautions to prevent the smuggling:
1.	The warehouse (Absolute Bond) was not expecting the goods and the AAD number had expired.
2.    The inadequacy of the paperwork OK Trans has produced and the checks that OK Trans have carried out 
3.   Mr Celik, the director of OK Trans, was sentenced in 2006 to 18 months imprisonment for fraud for the evasion of duty on cigarettes.  
4.    Mr Celik is ‘well involved’ as a director in OK Trans yet ‘it is worthy to note that he did not attend the tribunal today and nor did the driver involved in the seizure’. 
5.   OK Trans had two other vehicles seized in 2007.  The decision made on 1 April 2007 (pg 42) to seize the vehicle was made very close in time to the decision to seize the vehicle made on 31 March 2007 (pg 58) and involved identical methodology and involves the company director who was convicted of fraud.  Neither of these two cases was appealed.  HMRC held OK Trans responsible for the smuggle in both cases.
6.  Any company having three review letters from HMRC setting out the reasonable precautions to take must be aware of how HMRC is operating its policies.  Therefore the further seizures were not a coincidence rather OK Trans was involved in smuggling the excise goods. 

27.    He also stated that three further seizures of OK Trans’ vehicles were made in 2009 and this is within the review officer’s knowledge.  We will come to this evidence later.

Submissions of OK Trans
28.   Mr Cifci for OK Trans in summary stated that in the haulage industry 30%-40% of haulage contracts are verbal agreements.  OK Trans carry goods all over Europe and give proper instructions to their drivers on their responsibilities.  If their lorries did not have the proper documentation they would not get past border controls and Customs in  Europe.  

29.  The driver was asked orally to go and pick up the goods.  It is not the responsibility of OK Trans to inform anyone the goods are coming.  That is the responsibility of the people sending the goods - CEM Logistik.  Further it is unethical for OK Trans to ring up the place that is receiving the goods as it is considered to be going behind the backs of those who gave them the contract.  CEM Losistik gave OK Trans the job verbally.  In the event of any problems OK Trans contacts CEM Logistik not the people they pick up from.  If the drivers have any problems they contact OK Trans and OK Trans deal with any problems as the drivers do not necessarily speak English.  

30.    Drivers that pick up loads look at the CMR and compare it against the load.  If the driver is happy with the paperwork the driver carries on.  The nature of the load is on the CMR.  The driver will count the pallets on the lorry against the information on the CMR.  The driver has no right to check packages by opening them.  

31.   OK Trans’ job is to transport goods from A to B.  If those goods are not legitimate or the goods are not expected that is nothing to do with OK Trans and is not their fault.  There have been other occasions when HMRC visited OK Trans’ premises and restored vehicles and trailers. 

32.   Mr Celik did not attend today as his father is not well.  The driver is no longer with OK Trans.  He’s gone back to Turkey so OK Trans cannot get in touch with him.  The real situation on the ground is different to what HMRC state.  It is unreasonable of HMRC to expect the documents they want.

33.   Mr Celik’s fraud trial was unfair due to the prejudice shown by the jurors.  Mr Cifci produced a letter from one of the jurors to this effect.  Mr Cifci is not aware of whether Mr Celik ever appealed against his conviction.

Adjournment request
34.  OK Trans in the middle of the examination in chief of Mr Harris (the review officer) made an application for an adjournment to obtain legal representation because ‘the case was broader than we thought’.  Mr Cifci stated that lots of other issues had been brought up in the course of the tribunal hearing. 

35.  Mr Jones opposed the adjournment.  He stated that the issue of the previous interactions between OK Trans and HMRC was raised in the review letter of November 2008 and in HMRC’s Statement of Case of March 2009.  The appeal has been listed for several months.  The issues relate to the reasonableness of a vehicle being restored.  That issue has not changed.  There has been plenty of opportunity for OK Trans to seek advice and OK Trans knew of everything in the bundle.  OK Trans knows about their vehicles being seized in 2009 so this could not take them by surprise.  The seizure of the vehicles in 2009 is fresh to the decision but not to OK Trans.  

36.  We decided that in the interests of justice we would exclude all evidence relating to events post November 2008 because OK Trans had not been informed that the seizures of these vehicles was going to be in issue.  This is new information that has been raised today by Mr Jones and we accept that OK Trans have not had a chance to consider it and that it has taken them by surprise.  

37.   However we did not grant the adjournment as OK Trans were aware of all the issues in the case (apart from the above).  In our view OK Trans have had ample opportunity to seek legal advice and to prepare for their appeal.  In the past they have availed themselves of the assistance of solicitors so they are aware of the need to seek legal advice and have had plenty of opportunity to do so in this case.  

Conclusions
38.   In considering whether OK Trans took reasonable steps to ensure their vehicle was not used for smuggling and/or whether they were involved in or complicit in the smuggling we need to look at the steps HMRC expects a reasonable driver and haulier to take. Each of the three review letters sent to OK Trans contained appendices which set out these steps.  

39.  We consider Appendix E (pg 39) attached to the review letter of 13 November 2008 (the decision under appeal) and set out below some of the steps that are of particular relevance to this appeal:  
“Reasonable Checks to be Undertaken by Hauliers/Drivers to Prevent Smuggling in the load.  
Indications of negligence in failing to establish the illicit nature of the load will clearly be specific and varied …. Below are some of the common indicators that suggests the driver/haulier has not conducted those checks that could reasonably have been expected to reveal the illicit nature of the load.

The haulier has taken no steps to establish the credibility of the load being carried, the details of the owner of the goods nor the credibility of the destination to which the load is destined 

The driver and/or haulier have made no attempt to check that the destination for the goods is expecting them (particularly relevant for bonded warehouses in the context of diversion fraud)”

40.    We also considered Appendix F (pg 40):
“Indicators that suggest a Haulier has taken Reasonable Steps to Prevent Drivers Smuggling 
A copy of the terms and conditions of the driver’s contract is made available and these show that smuggling by drivers is considered to be an act of gross misconduct and will lead automatically to dismissal or other strong sanction

The haulier can supply a copy of a letter from them to the driver, signed by the driver, and clearly stating that smuggling is considered to be an act of gross misconduct and will automatically lead to dismissal or other strong sanction

The haulier has sought and obtained a copy of employment references from the driver’s previous employers

The haulier has made enquires of the driver’s previous employers to establish driver has had no previous dealings with Customs

The haulier can produce a record of an interview with the driver confirming that he had had no previous offence dealings with Customs”.

41.    It is clear from the evidence before us that OK Trans have taken some of the above steps but in our view the steps taken were inadequate.  For instance in their letter dated 09/09/08 (pg 90) OK Trans states the following:
In order to prevent their vehicles being used for smuggling they give instructions to their drivers about the company rules on a regular basis. These are:
They are not allowed to carry any loads without OK Trans’ knowledge
They should take extra care that no other goods should be loaded on the trailer when the loading takes place
They cannot take any strangers in company vehicles for any reasons etc.
Their drivers are reliable and experienced on working between UK and EU countries. They take extra care with the goods they carry.  
When they agree with a customer about transportation of goods they consider whether they can provide full documentation such as commercial invoice, shipping instruction, CMR, certificate of origin (if applicable) etc.

However despite the contents of this letter we have little evidence that these instructions were actually given in the instant case.  For instance we have a contract of employment (pgs 92-93) but this is undated and unsigned.  Trans OK could have provided the actual contact with the driver, Alpaslan Gobekli, who was responsible for driving the vehicle but have not done so nor have they provided an explanation as to why his contract has not been provided.  

42.    OK Trans have provided a letter from Canin Transport International dated 09/09/08 regarding Alpaslan Gobekli (pg 94) stating that he was employed by them between 06/02/06 and 30/12/07 and during his period of employment he showed himself as ‘trustworthy, dedicated person with a sense of responsibility’.  However we note that OK Trans have not provided any evidence of enquires made of the Canin Transport International or any other previous employers to establish that Alpaslan Gobekli had no previous dealings with Customs nor did OK Trans produce a record of an interview with Alpaslan Gobekli confirming that he had had no previous offence dealings with Customs.

43.   We have the agreement made with CEM Logistik dated 17/05/08 and OK Trans (pg 87) which asks OK Trans to collect and deliver 24 pallets from the addresses stated below.  
Collect from:
SSG trading c/o Dialog Logistik
Deliver to:
Absolute Bond

44.    We note this document is not signed.  Further the 24 pallets does not describe the goods being delivered.  There is also no evidence before us that OK Trans checked whether the driver had inspected the goods to see that it was in fact beer or that anyone (either OK Trans or the driver) had made contact with Absolute Bond, the warehouse, to check that the goods were expected or that anyone had checked with the exporter/importer that CEM Logistik were actually allowed to subcontract their haulage to OK Trans.   There is no mention on the AAD or CMR of OK Trans.  OK Trans have not explained how the contract was obtained from CEM Logistik nor have they provided details of their relationship and the regularity of contact between them and CEM Logistik.                                                   

45.    Regardless of what other haulage companies would do in similar circumstances or even the fact that OK Trans had gotten through other borders in Europe we would have expected OK Trans to have taken more precautions then they did with respect to bringing excise goods to the UK.  OK Trans state that it was not up to them to contact the receiver of the goods and if they had they would be seen to be going behind the backs of those who had subcontractors the work to them.  We do not accept that this is a reasonable explanation for a company in OK Trans’ position i.e. a company that had had vehicles seized before by HMRC for similar reasons.  We would certainly have expected them, once their vehicle was seized, to have taken all reasonable efforts to obtain its release by showing they were the innocent party for instance by contacting and providing evidence of contact with CEM Logistik and Absolute Bond Warehouse.  

46.   Despite OK Trans saying that instructions in relation to the transaction was received orally both by them and the driver  (apart from the transaction order at pg 87) we do not accept that it was reasonable for a company in OK Trans’ position to have relied on oral agreements.  In any case we accept Mr Jones’s submission that there must have been some records kept such as phone calls or emails relating to the collection and delivery of the 24 pallets.  Yet none of this documentation has been provided to us. For instance there must have been some communication in relation to how the driver would identify what goods he was to pick up and that Dialog Logistik were expecting him.  Further OK Trans must have kept records of this transaction for tax purposes.  At the very least there must have been records such as bank statements showing payment for delivering the goods yet the only evidence we have been provided with of the transaction is the information at page 87 (the instruction to collect and deliver 24 pallets).  

47.    It is also clear from the collection order (pg 87) that the goods were being collected from SSG Trading c/o Dialog Logistik.  Dialog Logistik is the same company from where twice in 2007 OK Trans collected beer (pg 41 and pg 55) and which resulted in two of their vehicles being seized.  HMRC’s enquiries revealed that Dialog Logistik was not an authorised warehouse and was therefore not entitled to hold or move duty suspended goods.   We accept Mr Jones’ submission that under these circumstances if OK Trans were dealing with this same company again they would have been very concerned and should have taken more precautions then they actually did to ensure that this current transaction was ‘above board’.  

48.    Despite two previous review letters (before the review decision relating to this appeal) both of which set out the steps HMRC considered it reasonable for hauliers to take OK Trans did not take the majority of these steps.  They state it is unreasonable to expect them to take all the steps HMRC consider reasonable.  If there were reasons why some of these steps could not be taken we would have expected a prudent haulier (particularly one who had difficulties with vehicles being seized in the past) to at least have discussed the matter with HMRC and to try to reach some agreement about what HMRC would consider reasonable steps for their particular company but this has not been done.  

49.   We did not hear oral evidence from anyone from OK Trans.  Mr Cifci, who made submissions on behalf of the company, was not involved in the company at the time of the seizure of the vehicle and excise goods in May 2008.  In our view, other than Mr Cific’s general comments on how haulage companies operate, we have little specific evidence from OK Trans of what occurred in relation to this seizure or indeed the previous seizures.   The people who would have been useful such as the driver were not present to give evidence.  Mr Cifci says the driver was not present as he had gone back to Turkey.  We accept Mr Jones’s submission that there is no evidence of whether he was sacked or simply chose to move on.   Had he been sacked this may have been evidence towards showing that OK Trans were not involved in the ‘smuggle’ and had taken reasonable steps to prevent ‘a smuggle’.  Given that OK Trans appealed on 17/12/08 and the appeal has been listed for some 15 months we would have expected a request by OK Trans for relevant information to be made from the driver.  No such evidence has been provided.

50.    The director of the company, Mr Celik, did not come to give evidence.  Mr Cifci said this was because his father was ill however no application for a postponement was made on this basis.  

51.  Of particular significance is that despite Mr Cifci’s submission that 30%-40% of haulage companies operate on oral agreements, OK Trans is a company that has three times in the past had vehicles seized and two of these vehicles were not restored.  They were sent review decisions in all three cases which set out the steps that HMRC considered reasonable for both hauliers and drivers to take.  As such we would have expected a company in OK Trans’ position to take extra care to ensure that their vehicles were not seized again.   We have little evidence that they did this. 

52.    We have a letter dated 25 May 2005 from Christine Lewton who was a juror at Mr Celik’s trial.  She  writes to him to state that in her view he had an unfair trial.   There is no evidence that Mr Celik appealed his conviction and that it was overturned.  Even if we did ignore  evidence of Mr Celik’s criminal conviction nevertheless, a company of which he is the director, has had two other vehicles seized in 2007 one of which was restored after the payment whilst the other one was not.  

53.   We do not have enough evidence before us to suggest that OK Trans were involved in or complicit in the smuggling.  However given the history of the use of OK Trans’ vehicles for smuggling, we consider that the measures taken by OK Trans to prevent smuggling were inadequate.  

54.   After considering all the facts, we are also satisfied that there are no exceptional circumstances justifying the restoration of the vehicle.  Mr Harris, the review officer, who gave evidence and whom we found to be a credible witness concluded that any hardship suffered by OK Trans as a result of the non-restoration was not over and above the normal hardship that would normally be expected.  We accept his conclusion.

55.  Our conclusions therefore is that the appeal should be dismissed.  No issues of costs were raised.

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.

TRIBUNAL JUDGE: 

RELEASE DATE: 18 May 2010