[2011] UKFTT 25 (TC)

TC00902

	Appeal number: LON/2008/8113

Excise Duty -- warehouse -- application for registration as an owner of goods under Warehousekeepers and Owners of Goods Regulations 1999 ("WOWGR") -- whether decision of HMRC could reasonably have been arrived at -- jurisdiction of Tribunal -- appropriate remedy under section 16 (4) Finance Act 1994 -- appeal allowed -- directions to Commissioners

FIRST-TIER TRIBUNAL

TAX 

	EASTENDERS CASH AND CARRY PLC	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	GUY BRANNAN (TRIBUNAL JUDGE)							GILL HUNTER (TRIBUNAL MEMBER)		

Sitting in public at 45 Bedford Square, London WC1 on 11 November 2010

Geraint Jones QC, Counsel, instructed by Anami Law, for the Appellant

Richard Smith, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

  DECISION

1.	This is an appeal against a decision of the Respondents ("HMRC") to refuse the Appellant's application for registration as a registered owner under the Warehousekeepers and Owners of Goods Regulations 1999 ("WOWGR").
Background
2.	Beers, wines and spirits are subject to excise duty. Goods which are liable to excise duty may be held in what is called excise duty “suspension” after those goods have been manufactured or imported. In other words, excise duty which would otherwise be payable in respect of those goods is suspended until they are released onto the home (i.e. UK domestic) market. Goods in respect of which duty is suspended must be physically held in specified excise warehouses.
3.	Both the keepers of excise warehouses and owners of goods held in excise warehouses must be registered under WOWGR. This is because excise warehousekeepers and owners of goods held in excise warehouses have control over goods which are held in excise duty suspension and must ensure that the goods are not released onto the home market without duty being paid. If such goods were so released and sold on the home market without duty being paid (an event known as "diversion") HMRC would not receive the duty that was otherwise payable and a fraud would be committed on the exchequer.
4.	The Appellant is a wholesaler which, amongst other things, sells beers, wines and spirits.
5.	The Appellant applied to HMRC to be registered as an owner under WOWGR on 17 March 2008. 
6.	HMRC refused the Appellant’s application on 24 June 2008. The reason given by HMRC for this refusal was that the two directors and shareholders of the Appellant, Mr K. Singh and Mr A. Windsor, each had an un-spent conviction dating from 1997 for being knowingly concerned in the fraudulent evasion of duty chargeable on goods.
7.	On 24 July 2008 the Appellant requested a review of HMRC's refusal pursuant to sections 14 and 15 Finance Act 1994.
8.	HMRC failed to conduct the review within the 45 days statutory time limit. In accordance with section 15(2) Finance Act 1994 the original decision was deemed to have been upheld.
9.	On 16 September 2008 HMRC's Review Officer wrote to the Appellant's representative indicating that she would consider the application, despite the formal upholding of the original decision pursuant to section 15(2) Finance Act 1994 and requested further information or evidence in the light of the directors’ convictions. No further information was received and on 1 December 2008 she concluded her review which upheld the original decision. In short, the reasons were that the convictions referred to in paragraph 6 above justified the refusal of the Appellant's application and represented a reasonable and proportionate exercise of HMRC's discretion.
10.	The Appellant appealed against the original refusal by lodging a Notice of Appeal on 25 September 2008, within the relevant time limit.
11.	On 12 May 2009 the Appellant wrote to HMRC seeking a second review pursuant to section 14(5) Finance Act 1994 and providing additional information. The review was not completed within the statutory 45 day time limit with the result that the original decision was once again deemed to be upheld by virtue of section 15(2).
12.	On 24 July 2009 the Appellant filed an Application to Amend Grounds of Appeal to include an appeal against the deemed confirmation of the original decision of HMRC made on or about 26 June 2009. This Tribunal directed that the application would be allowed unless a notice of objection was served within 14 days. We understand that no such objection was lodged.
13.	Although the review period in respect of the second review had expired, a second Review Officer, Mr Charles Dunn, considered the case but again confirmed the original decision in a letter of 12 August 2009. In addition to the reasons previously given for refusing the Appellant's application, Mr Dunn gave further reasons. These new reasons related to allegations that HMRC, in a period from 2007 to 2009, had seized and/or detained goods owned by the Appellant or one of its associated companies of which Mr Windsor and Mr Singh were directors.
14.	After a hearing on 10 November 2010 we decided that evidence relating to the additional reasons given by Mr Dunn should be excluded. The evidence on which this decision is based, therefore, concerned only the reasons for the refusal of the application on 24 June 2008 and the two subsequent deemed confirmations of this decision. 
15.	The documentary evidence was contained in a bundle produced by the Appellant, which contained, inter alia, witness statements of Mr Windsor, Mr Singh, and Mr Panesar (the senior partner of the firm of solicitors advising the Appellant) and Mr Dyer (the HMRC officer who gave the original decision on 24 June 2008) as well as correspondence between the parties and other documentary material. In addition, Mr Dunn gave evidence on behalf of HMRC.
Statutory background
16.	The relevant statutory provisions are contained in the Customs and Excise Management Act 1979 ("CEMA"), WOWGR and the Finance Act 1994.
17.	Section 100G CEMA provides:
"(1) For the purpose of administering, collecting or protecting the revenues derived from duties of excise, the Commissioners may by regulations under this section (in this Act referred to as "registered excise dealers and shippers regulations") --
(a) confer or impose such powers, duties, privileges and liabilities as may be prescribed in the regulations upon any person who is or has been a registered excise dealer and shipper; and
(b) impose on persons other than registered excise dealers and shippers, or in respect of any goods of a class or description specified in the regulations, such requirements or restrictions as may by or under the regulations be prescribed with respect to registered excise dealers and shippers or any activities carried on by them.
(2) The Commissioners may approve, and enter in a register maintained by them for the purpose, any revenue trader who applies for registration under this section and who appears to them to satisfy such requirements for registration as they may think fit to impose.
(3) In the customs and excise Acts "registered excise dealer and shipper" means a revenue trader approved and registered by the Commissioners under this section.
(4) The Commissioners may approve and register a person under this section for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under the regulations prescribe.
(5) The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section
(6) The regulations may make provision for treating revenue traders as approved and registered under this section in cases where they are members of a group of companies (within the meaning of the regulations) which is approved and registered in accordance with the regulations."
18.	Regulation 5 of WOWGR provides:
"(1) For the purposes of section 100G of the Act, the Commissioners may approve revenue traders who wish to deposit relevant goods that they own in an excise warehouse and register them as registered excise dealers and shippers in accordance with section 100G (2) of the Act.
(2) A revenue trader who has been so approved and registered shall be known as a registered owner."
19.	Regulation 18 of WOWGR provides:
"(1) The approval and registration of every registered owner shall be subject to the conditions and restrictions prescribed in a notice published by the Commissioners and not withdrawn by a further notice."
20.	Section 14 (1) (d) Finance Act 1994 (as it was enacted at the relevant time) provided that the provisions of section 14 (which obliges HMRC to review a decision, if required to do so) apply to decisions which are described in Schedule 5 to the Act. Schedule 5, paragraph 2 (p), provides:
"(p) any decision for the purposes of section 100G (registered excise dealers and shippers) as to whether or not, and in which respects, any person is to be, or to continue to be, approved and registered or as to the conditions subject to which any person is approved and registered...."
21.	Section 14(5) Finance Act 1994 (as it was enacted at the relevant time) provided:
"(5) A person shall be entitled to give notice under this section requiring a decision to be reviewed for a second or subsequent time only if –
(a) the grounds on which he requires the further review are that the Commissioners did not, on any previous review, have the opportunity to consider certain facts or other matters; and
(b) he does not, on the further review, require the Commissioners to consider any facts or matters which were considered on a previous review except in so far as they are relevant to any issue to which the facts or matters not previously considered relate."
22.	Section 15(2) (as it was enacted at the relevant time) provided:
"(2) Where –
(a) it is the duty of the Commissioners in pursuance of a requirement by any person under section 14 above to review any decision; and
(b) they do not, within the period of forty-five days beginning with the day on which the review was required, give notice to that person of their determination on the review, they shall be assumed for the purposes of this Chapter to have confirmed the decision."
23.	Section 16(4) Finance Act 1994 sets out the jurisdiction of this Tribunal and provides:
"(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say—
(a)     to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b)     to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c)     in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.”
24.	Section 16 (8) Finance Act 1994 provides that decisions described in Schedule 5 to the Finance Act 1994 are referred to as "ancillary matters" within section 16. Thus, it was common ground that HMRC's decision to refuse the Appellant's application for registration as a WOWGR registered owner is an ancillary matter for these purposes, with the result that this appeal against that decision can be addressed by this Tribunal in accordance with section 16(4).
Second preliminary issue
25.	As described in paragraph 14 above, we excluded certain evidence relating to additional reasons given by Mr Dunn in his letter of 12 August 2009 ("the first preliminary issue"). We spent the first day of the time originally allocated to the substantive hearing in this appeal hearing and considering counsel's submissions on this issue.
26.	On the beginning of the second day, having released our decision on the first preliminary issue on the morning of 11 November 2010, Mr Jones on behalf of the Appellant submitted that we should adjourn the appeal to a differently constituted panel on a future date.
27.	Mr Jones submitted that, although we had not read the evidence which we decided to exclude relating to the additional reasons given by Mr Dunn, the thrust of the allegations (referred to in paragraph 13 above) had been made plain by counsel for HMRC in his skeleton argument and in his submissions the previous day. In the circumstances, Mr Jones argued that those allegations were so prejudicial that, even if the Tribunal said it would put those matters from its mind when reaching its decision on the substantive appeal, justice would not be seen to have been done when viewed objectively. Mr Jones drew an analogy with the case of inadmissible evidence coming before a jury. In those cases, particularly where the inadmissible evidence went to the core of the case (which he submitted was the case in this instance), the jury would be discharged.
28.	Mr Smith explained that, because Mr Jones’s skeleton argument had been served late, his own skeleton argument had been exchanged virtually simultaneously and he had not been aware, until he saw his opponent's skeleton argument, that Mr Jones was objecting to the admission of the prejudicial material referred to above. We accepted Mr Smith's explanation and we wish to make it plain that we consider that no criticism should be made of his conduct.
29.	Mr Smith on behalf of HMRC submitted that it was in the interests of justice that the appeal be heard as soon as possible. There was no prospect of the Tribunal being affected by prejudicial material. We had not read the evidence in question and the references to that material in Mr Smith's submissions had been in outline only. Mr Smith argued that this Tribunal was not analogous to a lay jury. It was perfectly possible for the Tribunal to put relatively anodyne knowledge of the gist of the excluded evidence from its mind and no reasonable bystander would think that we had been prejudiced by our knowledge, such as it was.
30.	We rejected Mr Jones’s application for an adjournment and reconstitution of the panel. This Tribunal is a specialist tribunal. In this case it consists of a legally qualified judge and a lay member, both of whom are experienced in the field of taxation. We considered that we were perfectly capable of putting out of our minds the very sparse knowledge that we had of the excluded evidence and taking our decision based solely on the evidence that was before us. It seemed to us that the analogy with a lay jury was wholly misconceived. Accordingly, we proceeded to hear the evidence and our decision has been based solely on this evidence, with no regard or weight being given to any allegations or evidence which we had decided to exclude.
Third preliminary issue
31.	Having given our decision on the second preliminary issue, a third preliminary issue emerged in the discussion between counsel of documents to be retained in the bundle. It had been agreed between counsel that various witness statements produced by HMRC relating to the evidence which we had decided to exclude should be extracted from the bundle. However, our decision on the second preliminary issue having been given, Mr Smith submitted that the only relevant facts were those available to the decision maker, Mr Dyer. Mr Smith submitted that the Appellant's witness statements were not relevant because they were not before Mr Dyer when he took his decision. Moreover, it was not Mr Dyer's function to act as an investigator in order to establish all relevant facts. He had simply to consider the facts put before him as well as those established by checks with his compliance colleagues.
32.	Mr Jones submitted that it was necessary for the Tribunal, when examining the reasons which Mr Dyer gave for his decision, to be aware of the facts which appertained when the decision was taken. Mr Jones intended to argue that Mr Dyer had failed to take account of certain factors which appertained at the time of this decision and which he should have taken into account. It was therefore necessary to consider evidence in respect of those facts. To restrict the evidence simply to facts known to Mr Dyer when he took his decision was too narrow.
33.	We decided that the bundle should not have the witness statements, served on behalf of the Appellant, removed. It was perfectly possible for the Tribunal to determine for itself what matters were relevant. It did not seem to us that the admission of the witness statements on behalf of the Appellant would add materially to the length of the hearing.
Witness evidence
34.	After having dealt with three preliminary issues, the substantive hearing finally commenced with the witness statements of Mr Windsor, Mr Singh and Mr Panesar being admitted into evidence on behalf of the Appellant, save as regards those parts which related to evidence which was excluded as a result of our decision on the first preliminary point.
35.	From these witness statements (which were not challenged by Mr Smith, save to the extent that certain statements purported to be matters of opinion) the following salient points emerged.
Witness statement of Mr Windsor
36.	Mr Windsor and Mr Singh are the only two directors of the Appellant and each owns 50% of the Appellant's share capital.
37.	The Appellant was incorporated on 2 April 2002 as a private limited company. It subsequently re-registered as a public limited company although its shares are not publicly traded.
38.	The business of the Appellant comprises the wholesale of wines, beers, spirits, soft drinks, groceries, cigarettes and confectionery to public houses, off-licences, confectionery and small independent grocery and general retailers.
39.	The Appellant's accounts filed at Companies House for the year ended 31 March 2009 showed an annual turnover of £106 million and pre-tax profits of £845,000.
40.	Mr Windsor's witness statement contained the following statement:
"11.The Appellant has an excise duty and VAT deferment account. The Appellant accounts to HMRC for the duty and VAT through the deferment account. The Appellant's deferment account was approved by HMRC approximately 3 years ago and is currently set at £800,000 per month. The Appellant operates up to the level of the approval. The way that the account operates is as follows. VAT and duty payments are debited to the account and HMRC take the VAT payments on the 15th of each month and the duty payments at the end of the month. When purchasing goods, the Appellant always accounts for the duty and VAT through its deferment account and authorises the relevant warehousekeeper to allocate the duty and VAT to the deferment account. Once this authorisation has been given the warehousekeeper or the bond raises [sic] and submits a Form W5D which is the form used nationally throughout the country to notify HMRC of the Appellant's VAT and duty liabilities. The warehousekeeper is then able to release the goods from duty suspension to the Appellant for sale on the UK market.
12. For instance, A purchases goods from a warehouse, B and upon the A[sic] delivering a release note to B, B issues a Form W5D, which comprises of [sic] a cash remittance advice. The Form W5D confirms the aggregate total amount of Duty payable on the goods released and payable by A, pursuant to the release note issued by A. B cannot release the goods without issuing the Form W5D. Upon the Form W5D being issued, A is debited the Duty sum payable via its deferment account, as like [sic] the Appellant, with its deferment account. The payment is debited from A's deferment account on a set date, upon which time the Form W5D is lodged at the National Warrant Processing Unit by A, which is subsequently then returned to A, duly stamped.
I confirm that as from 1 March 2009, the monthly deferment limit has been increased to £736,930 and that the Commissioners agreed to cancel the financial guarantee. "
41.	Mr Windsor considered that the benefit to the Appellant's business of obtaining a WOWGR registration would be very significant and that the Appellant would be able to compete more effectively if it had such a registration.
42.	Mr Windsor acknowledged that both he and Mr Singh had un-spent convictions handed down over 12 years ago relating to being knowingly concerned in fraudulent evasion of duty.
43.	Mr Windsor considered that the convictions of himself and Mr Singh were unsafe, referring to the decision of the Court of Appeal in R v Atul Patel, Michael Roberts Villiers and others [2001]  EWCA Crim 2505 and drew the Tribunal's attention to the report prepared by Mr Justice Butterfield. Mr Windsor said that he did not wish to appeal his conviction at the relevant time as the ordeal was far too much and overbearing upon him and his family.
44.	Mr Windsor pointed out that the Appellant's initial application for a WOWGR registration was an "open" application, i.e. an application for an unrestricted registration. This was later modified in a subsequent application which indicated that the Appellant was willing to accept a restricted WOWGR registration ie that the Appellant was willing to accept a restriction on exporting.
45.	In commenting upon Mr Windsor's witness statement, Mr Smith drew attention to the final page of the witness statement which contained the Statement of Truth. The page was numbered "11". The final paragraphs on that page were paragraphs 51, 52 and 53. However, the preceding three pages were numbered "10", "11" and "12" and ran from paragraphs 46 to 58 (inclusive), page 11 containing part of paragraph 51, all of paragraphs 52 and 53 and part of paragraph 54. Mr Smith suggested that Mr Windsor had, in fact, signed an earlier and shorter witness statement. If so, in our view, this was an improper way for Mr Windsor's witness statement to be presented to the Tribunal.
Witness statement of Mr Singh
46.	Mr Singh's statement was very short, simply accepting the facts in Mr Windsor's statement as true and correct.
Witness statement of Mr Panesar
47.	Mr Panesar's witness statement contained details of his involvement in the various applications made by the Appellant to HMRC, which we did not consider material. In addition, as Mr Smith pointed out, the witness statement contained various statements of opinion or of submission on points of law which, in our view, did not constitute evidence on the facts.
Witness statement of Mr Dyer
48.	Mr Dyer's witness statement was admitted into evidence and was not contested. 
49.	Mr Dyer is the HMRC officer who took the decision to refuse to register the Appellant contained in his letter of 24 June 2008. His witness statement read as follows:
"Since 2004 all applications to register premises as an Owner of Goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR) have been sent to and processed by the National Registration Unit (NRU), Portcullis House, Glasgow. I am one of the managers responsible for processing such applications in the NRU. I have worked in this capacity for four years and six months.
On 19th March 2008 an application for registration under WOWGR was received in the NRU from Eastenders Cash & Carry PLC. A copy is attached at appendix ND1. This application was referred to our Local Compliance office at Stratford for a pre-approval visit on 27th of March 2008 as per our normal procedures.
On 14th May 2008 a report written by Officer Teresa Jolly was received in the NRU which recommended rejection of the WOWGR application which was endorsed by her senior officer Alan Thrippleton. A copy of officer Jolly's report is attached at appendix ND 2. The specific reason for the recommendation was that background reports had highlighted un-spent convictions against present directors of Eastenders Cash & Carry PLC, namely Kulwant Singh and Alex Windsor. Both had been convicted of being knowingly concerned in fraudulently evading Duty chargeable on Goods in November 1997 and April 1997 respectively. It was considered therefore that Eastenders PLC was not a fit and proper entity to be to be approved as owners of goods under WOWGR.
Taking this factor into consideration I fully concurred with officer Jolly's recommendation and drafted a letter to Eastenders PLC informing them of the decision to reject the application and giving the reason. My letter was issued on 24 June 2008 and a copy is attached at appendix ND3."
50.	Mr Dyer's evidence was not challenged by the Appellant. We shall return later to the appendices attached to Mr Dyer's statement.
Evidence of Mr Dunn
51.	HMRC called Mr Charles Dunn to give evidence, which he did under affirmation.
52.	Mr Dunn is an officer of HMRC in their review office dealing with excise duty matters.
53.	Mr Dunn gave an explanation of the operation of the duty deferment account -- that is to say, the type of account which the Appellant had operated for approximately 3 years. Mr Dunn explained that when goods were removed from an excise warehouse excise duty had to be paid. Form W5D would have to be completed on the withdrawal of goods from the warehouse. Schedules showed what goods had been removed from the warehouse and therefore HMRC would be aware of the amount of duty due. Monthly payments of duty under the deferred duty account would mirror that amount.
54.	Usually, HMRC require a guarantee from a bank or similar financial institution of the monthly amount due in respect of a deferred duty account. However, under the Excise Payment Security System ("EPSS") all guarantees are reviewed once they had been operating satisfactorily for a number of years and the requirement for a guarantee of the duty deferment account may be removed in some cases.
55.	From a letter dated 23 February 2009 from HMRC to the Appellant, to which Mr Dunn was referred by Mr Smith, Mr Dunn accepted that it appeared that the requirement for a guarantee was removed in the early part of 2009.
56.	Mr Smith asked Mr Dunn what opportunity there was to abuse the duty deferment account scheme. Mr Dunn replied that the opportunity for abuse was limited since HMRC would find out within approximately one month of any abuse. In respect of WOWGR, however, only a registered owner can store goods in an excise warehouse and the payment of duty is suspended until the goods are removed. No duty would be payable, however, if the registered owner transferred the goods to another excise warehouse in the UK or exported them. Duty would only be payable if the goods were transferred to home use. 
57.	Mr Smith also asked Mr Dunn about the level of risk to HMRC posed by owners of goods registered under WOWGR. Mr Dunn replied that registered owners were seen by HMRC as having a duty to protect the public revenue. It was comparatively more difficult to detect fraud by a registered owner (who had control of the goods) and the fraud could go undetected for a long period. In Mr Dunn's view this was the main distinction in the level of risk between a WOWGR registered owner and a trader who had a deferred duty account. Mr Dunn considered that the level of risk to HMRC in respect of a registered owner was greater than the level of risk posed by a trader operating a deferred duty account.
58.	In cross-examination Mr Jones referred Mr Dunn to HMRC Notice 201 which set out HMRC's criteria in respect of applications for registration as a registered owner under WOWGR. Mr Jones compared these criteria with those in respect of applications for a deferred duty account (HMRA 4040 published on 24 April 2008 --" Excise Payment Security System (EPSS) -- the authorisation criteria". Mr Jones suggested to Mr Dunn that HMRC's approach in respect of applications for registration under WOWGR and in respect of applications for a deferred duty account was very similar or identical as regards matters of probity. Mr Dunn accepted that there was no material difference and that they were similar. Mr Dunn also accepted that there were circumstances in which a warehousekeeper could be deceived by fraudulent documents produced by either a registered owner or the holder of a deferred duty account.
59.	In re-examination Mr Dunn confirmed that a person who was not a registered owner under WOWGR usually has to pay duty (or have the duty debited to his deferred duty account) when removing goods from an excise warehouse. One exception, however, to this general rule was where goods were being exported. In this case a trader without a WOWGR a certificate would inform the warehousekeeper of the proposed export and HMRC would receive a guarantee in respect of the duty from the warehousekeeper and/or the transporter. Mr Dunn agreed with Mr Smith's suggestion that since entries in the deferred duty account were dependent on returns made by the warehousekeeper the risk of fraud was lower because it generally required complicity between un-registered purchaser of goods and the warehousekeeper. Mr Dunn confirmed that registered owners and warehousekeepers both had to go through a similar process when applying for registration to demonstrate their trustworthiness. Only a WOWGR registered owner or a registered warehousekeeper could own goods in an excise warehouse. A registered owner could move goods out of an excise warehouse provided the warehousekeeper was satisfied with the documents produced by the registered owner. Once the goods were in transit there was an opportunity for fraud (i.e. diversion) because the WOWGR registered owner did not need to involve a knowing third-party.
60.	Overall, although at some points Mr Dunn's evidence seemed confusing, the thrust of his evidence was that a WOWGR registered owner, who had a greater degree of control over the goods held in duty suspension, posed a greater risk to HMRC than the holder of a deferred duty account -- although Mr Dunn accepted that, in terms of assessing probity, the application processes for a WOWGR registered owner and a deferred duty account were very similar.
Documentary evidence
Exhibits to Mr Dyer's witness statement
61.	There were a number of exhibits attached to Mr Dyer’s witness statement.
62.	The first exhibit was the original application made by the Appellant for registration as an owner under WOWGR which was dated 17 March 2008 and which Mr Dyer says was received on 19 March 2008. The application form itself is in standard form and contains very little background information.
63.	The second exhibit was a written report from Teresa Jolly, an HMRC officer, to whom Mr Dyer referred the application, as described in his witness statement.. Paragraph 1 of the report, under the heading "Checks and tests undertaken", reads as follows:
"Contacted warehouse unit of expertise regarding spent and unspent convictions. E-mail received confirming that the convictions that the directors have are unspent.
Alex Windsor received a concurrent sentence of 36 months on 2/4/97 for five different offences or relating to Excise fraud and evading duty.
Kulwant Hare Singh received a sentence of 42 months on 3/11/97 for offences relating to Excise fraud."
64.	Paragraph 5 of the report, under the heading "Conclusions, comments on compliance", states the following:
"WOWGR application to be rejected due to the unspent convictions of both  directors."
65.	The remaining boxes on the form are blank save for officer Jolly's details and the date of 12 May 2008. Attached to officer Jolly's report was an e-mail from officer Jolly to Mr Alan Thrippleton, who was officer Jolly's superior. The e-mail, dated 12 May 2008 stated:
"This is the application that I recently discussed with you. It is for rejection, please can you forward to the NRU."
66.	This was followed by a further e-mail from Mr Thrippleton to the NRU (i.e. to Mr Dyer) dated 14 May 2008, which enclosed officer Jolly's report and stated as follows:
"Submitted for rejection of WOWGR application as per officers [sic] attached 465b.
Any further info please contact the officer direct."
67.	The final exhibit to Mr Dyer's witness statement was the letter of 24 June 2008 which he wrote to the Appellant:
"I am writing to advise that your application to be registered under WOWGR has been rejected as per section 5.8 Public Notice 201 (July 2002).
In reaching this decision the following has been taken into account:
•	The present company Director Kulwant Singh, has an unspent conviction under the Rehabilitation of Offenders Act 1974 dating from November 1997 for being knowingly concerned in fraudulently evading Duty chargeable on Goods.
•	The present company Director Alex Windsor, has an unspent conviction under the Rehabilitation of Offenders Act 1974 dating from April 1997 for being knowingly concerned in fraudulently evading duty chargeable on Goods.
Therefore HM Revenue & Customs do not consider the above company to be a fit and proper entity to be approved as WOWGR owners."
68.	The letter concluded by giving details of the review and appeal procedures.
69.	As noted above, there were two subsequent reviews of this decision but in both cases the 45 day time limit for the review expired before HMRC concluded their review with the result that under section 15(2) Finance Act 1994 the original decision is taken to have been confirmed.
Correspondence
70.	After receiving Mr Dyer's letter of 24 June 2008, the Appellant's solicitors, Anami Law, replied by a letter dated 24 July 2008 requesting a formal reconsideration of the decision in accordance with sections 14 and 15 Finance Act 1994. The letter gave two grounds for appeal against the decision, as follows:
"a) The failure of the officer to comply with internal policy and/or guidance,
b) In any event, the decision was neither reasonable nor proportionate."
71.	The letter then amplified both these reasons, as follows:
"Failure to comply with internal policy and/or guidance
HMRC has the power to register owners of excise goods held in an excise warehouse under s.100G of the Customs and Excise Management Act 1979 and reg. 5 WOWGR 1999. The legislation gives HMRC discretion as to the criteria to apply when considering an application, but does not state what the criteria are.
HMRC published its criteria for approving Excise businesses in August 2006 in its publication Excise News 05/06. It stated that traders wishing to be approved as, inter alia, a registered owner must demonstrate that they "are fit and proper to carry out an excise business". Under the heading "When might we refuse an application for approval to carry on an Excise trade?" it stated:
"We will normally refuse applications for approval where:
... the applicant has an unspent conviction,"
The use of the word "normally" in Excise Notice 05/06 means that there must be exceptions to the rule. In order to determine whether a person with an unspent conviction would fall outside the normal policy the officer must be under a duty to consider all information. In other words, automatically refusing an application on the basis of an unspent conviction, without considering all other information, is contrary to HMRC's policy.
Further, in HMRC's guidance for its officers engaged in deciding whether to approve applications by Excise businesses, HMRA 2030 states that the term "fit and proper" suggests applicants must meet or exceed a level of suitability, compliance and integrity in how they conduct, or appear likely to conduct their tax affairs with HMRC. HMRA2040 states that "... officers must consider and test all the information reasonably available....” Again it is incumbent on the officer therefore to consider all factors in an application before reaching a decision.
However, it is apparent from the letter dated 24 June 2008, that the only information taken into account by the officer was the fact of the two directors’ previous convictions. Therefore he did not follow HMRC's stated policy and internal guidance of the considering all factors before arriving at a decision.
Such factors must include:
•	the individuals have served their sentences and therefore paid their debt to society,
•	the offences were committed more than 10 years ago,
•	the good character of the directors since their term of imprisonment was served,
•	the way in which they have run any businesses since that time, including their tax compliance record,
•	whether the application can be allowed subject to stringent conditions.
Reasonableness and Proportionality
HMRA2040 also states that the HMRC are obliged to act reasonably and proportionately (HMRC's emphasis) with respect to a requirement. It adds that the policy cannot be so rigid that it restricts officers from considering each application on its own merits and from arriving at a decision that would have been reasonable if the policy had not been restrictive.
If, as is suggested above, the officer's decision was based on offences committed over 10 years ago, without some other evidence or suspicion of a significant risk to the revenue if Eastenders’ application was allowed, it does not amount to a reasonable decision."
72.	The letter concluded with certain comments concerning proportionality.
73.	HMRC replied on 12 August 2008 stating that the entitlement to a request for a review would be considered by a Miss Angela Cook. The letter noted the 45 day period permitted for the review by virtue of section 15 of the Finance Act 1994. The letter also noted that if Miss Cook was unable to give a decision by day 45, she would endeavour to give her decision as soon as possible thereafter.
74.	Anami Law acknowledged receipt of Miss Cook's letter on 15 August 2008.
75.	On 16 September 2008, Miss Cook wrote to Anami Law acknowledging that she had been unable to meet the 45 day deadline and that in accordance with section 15 (2) of the Finance Act 1994, the HMRC decision given on 24 June 2008 "is deemed to be upheld.” Miss Cook stated, however, that she intended to continue with her consideration of the Appellant's case and said that a full decision would be issued as soon as possible. Miss Cook concluded her letter as follows:
"I have had the opportunity to review the paperwork relating to the decision in light of your letter of 24 July 2008 and I can advise that enquiries have been made regarding both Eastenders Cash & Carry Ltd as well as associated businesses to which Mr Hare [Mr Singh] and Mr Windsor are connected. I am continuing to carry out my own enquiries into what information was used to reach the decision but I would point out to you that in the paragraph you have quoted from in the Excise News 05/06,' When might we refuse an application for approval to carry on and Excise trade?' the very first item states ' the legal entity applying or its key employees, have been involved in significant revenue non-compliance or fraud'. In both Mr K S Hare and Mr A Windsor's cases the unspent convictions were for 'Being knowingly concerned in fraudulently evading duty'. If you have any further information and/or evidence to support your case please forward it to me at the above office."
76.	Miss Cook wrote again to Anami Law on 1 December 2008. In her letter she stated:
"I have looked carefully at the information you have provided and the departmental guidance and publications you refer to. There is now a new Notice 196, which deals with Authorisations, Approvals and Registrations, and section 5 explains about the Registration of owners of excise goods in warehouse. Section 2, General information on approvals and registrations, states "HMRC regularly reviews the compliance of existing authorised excise warehousekeepers and owners and robustly challenges all new applications". This reflects the statement contained in the Excise News 05/06.
With regard to your comments on failure to comply with internal policy and/or guidance, I would point out that the offences that both directors were found guilty of and to which the unspent convictions relate were "Being knowingly concerned in fraudulently evading duty chargeable on goods". The reason for the rejection of the application to register was that the offences are directly concerned with the evasion of duty. Had the offences been unconnected with the evasion of duty or other taxes then it is possible that further enquiries would have been made to establish whether there were factors that might allow registration, perhaps with conditions attached.
Your comments on reasonableness and proportionality are noted however HMRC has a responsibility to protect the revenue and therefore have to take into consideration the nature of the offences for which there is an unspent conviction. HMRC guidance, HMRA 2030, does specifically mention that where traders have been shown to be involved with fraud or duty evasion they are not considered to be ‘fit and proper’ persons.
Conclusion
Having studied all the information provided to me and checking the Departmental guidance and public notices I consider that the decision to reject your client's application to register as an owner of goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999, issued on 24 June 2008, was correct."
77.	Anami Law wrote again to HMRC on 12 May 2009 seeking an application for a second review based on new facts in accordance with section 14(5) Finance Act 1994. This lengthy letter argues that HMRC did not take into account HMRC publications and guidance, the performance of the Appellant's business or its tax compliance record since the convictions of Mr Singh and Mr Windsor in 1997.  Anami Law refer to the size and scale of the Appellant's business. They also indicate that the Appellant was prepared to place a restriction on its WOWGR application, viz a restriction on exporting. The letter refers to the Appellant's duty deferment account and the fact that HMRC had agreed to cancel the financial guarantee. The letter also argued that the convictions related to trading activities associated with London City Bond and referred to R v Atul Patel and others, suggesting that if Mr Singh and Mr Windsor had appealed their convictions they would inevitably have been overturned. The letter also pointed out that the new Public Notice 196 allowed for discretion and that an unspent conviction on its own did not automatically mean that an application should be rejected.
78.	HMRC did not complete their review within the 45 day time limit with the result that under section 15 (2) Finance Act 1994 the original decision was upheld. On 12 August 2009 Mr Charles Dunn replied to the letter of 12 May 2009 giving additional reasons for upholding Mr Dyer's original decision, as well as the reasons already given. In accordance with our decision on the first preliminary issue, these additional reasons have been excluded in our consideration of this appeal.
HMRC obligations and guidance
79.	HMRC's Public Notice 201 (July 2002) "Warehoused Goods: Registered Owners and Duty Representatives", the public guidance which we were told was in force at the relevant time, contained guidance on applications under WOWGR to become a registered owner. Paragraph 5.8 of the Notice reads as follows:
"Do you ever turn down any applications?
Yes. We may refuse to approve you. In particular, we will not approve and register anyone who (at the time of applying) has an "unspent" conviction under ROA (other than minor motoring offences) or has accepted a compounded settlement during the preceding three years."

80.	HMRC published further guidance (available in June 2008) in HMRA 4040 under the heading "Refusal/cancellation: What are the grounds for refusing or cancelling discretionary approvals?” The guidance read as follows:
"Grounds for refusal/cancellation of Distiller, WOWGR and REDS applications include:
•	the legal entity applying, or its key employees, have been involved in a significant revenue non-compliance or fraud in any of the Revenue and Customs’ regimes;
•	applicant provides false information with the clear intention to deceive;
•	applicant has unspent convictions;
•	there is a proven link between key personnel/directors and other known non-compliant or fraudulent businesses;
•	the proposed business is not commercially viable or has significant credibility issues;
•	the trader cannot demonstrate a genuine business need to justify the registration/license; 
•	outstanding departmental debts and no efforts have been made to pay the debt;
•	REDS (not agents) unable to obtain duty deferment; ...."
81.	Further general guidance was given by HMRC in HMRA 2040 (published April 2008, ie before Mr Dyer's decision) as follows:
"In respect of warehousekeepers, owners/duty representatives and  REDS  approvals, section 100G of CEMA enables the Commissioners to approve and register any revenue trader who appears to them to satisfy such requirements for registration as they may think fit to impose and subject to such conditions or restrictions as they may think fit or as may be specified by or under the regulations prescribed. The Commissioners are obliged to act reasonably and proportionately with respect to any condition, restriction or requirement.
Officers are acting on behalf of the Commissioners and are also obliged to arrive at reasonable decisions given the information that they have available to consider in each case. In order to arrive at reasonable decisions officers must be able to exercise some discretion where required. Our policy on approvals and registration cannot be so rigid that it restricts officers from considering each application approval on its own merits and from arriving at a decision that would have been reasonable if our policy had not been restrictive. This doesn't mean that a light touch must be applied to approvals but that officers must consider and test all the information reasonably available to them and arrive at a sensible conclusion that can be clearly put before a review officer or tribunal chairman.
Current regulations and Notice 197 "Excise Goods; holding & movement" publicise the current registration requirements to existing and potential registered traders. Notice 197 is being revised to reflect the revised approvals and registration policy introduced under the Alcohol Strategy. The main principles are that we will only approve and register traders where applicants can demonstrate that they:
•	Meet all HMRC's requirements as set out in the relevant Public Notices and legislation;
•	Are a legitimate business with a genuine business need for approval;
•	 Can meet any throughput criteria so that their approval will not require unreasonable resources to ensure that all duties are paid and administrative requirements met;
•	Will run their Excise activities in a transparent way that will enable satisfactory audit and assurance of the onward supply chain by the relevant authorities.
HMRC will not approve traders where a potential and demonstrable risk is identified in relation to a specific application that suggests it is against the public interest for the authorisation to be granted. This guidance provides further detail that officers need to consider when deciding whether to recommend that an applicant should be granted an approval, authorisation and/or registration."
82.	We set out in the following paragraphs HMRC’s guidance as it was subsequently varied after Mr Dyer's decision.
83.	HMRC Public Notice 196 "Excise Goods: Authorisation of Warehousekeepers, Approval of Premises and Registration of Owners" was revised in November 2008 and the relevant extracts read as follows:
"HMRC may not grant an exercise warehouse premises approval if:
•	....
•	....
•	the legal entity applying for approval or its key employees have been involved in significant revenue non-compliance
•	....
•	the applicant has unspent convictions
•	...."
84.	The current version of HMRA 2040 reads substantially as set out in paragraph 81 above. In addition, HMRA 2050 under the heading "General information: What is the objective of HMRC's approval and registration policy?" provides:
"The approval and registration policy aims to enable HMRC to authorise individuals, companies and premises where there is an acceptably low revenue risk, a genuine business need has been demonstrated and where granting the approval will not result in an unreasonable demand upon finite assurance resources."
85.	Further current guidance (which we were informed was not in existence in June 2008) is contained in HMRA 4010 under the heading "Refusal/cancellation: When can we refuse an application for approval, registration, or license?" and reads as follows:
"Where we have the discretion, any decision to refuse ... must be based on a solid foundation of evidence that satisfactorily supports the decision at a Tribunal hearing. Your evidence must show that, on the balance of probability, the trader is not a “fit and proper" person to hold the warehouse, distillery or REDS based approval/license/registration, that there is, or would be, a significant risk to the revenue, or that any of the requirements stated within this guidance have not been satisfactorily met within the trader's application. Your decision should be based on the suitability of the business and its key officials. The credibility of the business should be considered a factor in the decision."
Submissions on behalf of the Respondent
86.	Mr Smith submitted that the question before the Tribunal was whether Mr Dyer's decision of 24 June 2008 was a decision that could not reasonably have been arrived at within the meaning of section 16(4) Finance Act 1994.
87.	The test of "unreasonableness" was the standard Wednesbury test (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223) i.e. did the decision-maker take account of only the relevant factors and exclude from his consideration irrelevant factors, did he fail to take account of the relevant factors and, notwithstanding that the foregoing tests may be satisfied, was the decision in any event plainly irrational. 
88.	It was necessary to look at all the evidence reasonably available to Mr Dyer. Mr Dyer was, Mr Smith submitted, not an investigator and there was nothing in the legislation that required him to undertake extensive investigations. He had made enquiries of the local compliance unit but it was not necessary for him to go further in an attempt to ascertain background information.
89.	Mr Smith submitted that none of the Appellant's two requests for a review or the information contained in the witness statements served on behalf of the Appellant were before Mr Dyer when he took his decision. Instead, the most important piece of evidence before Mr Dyer was the convictions and sentences of Mr Windsor and Mr Singh.
90.	Mr Smith addressed the statements in Mr Jones’s skeleton argument concerning the safety of the convictions of Mr Windsor and Mr Singh, where it was said that, as those convictions arose out of a trade at the London City Bond, they were unsafe. Mr Smith submitted that there was no evidence before Mr Dyer that the convictions were unsafe. Neither Mr Singh nor Mr Windsor had appealed (or, if they had done so, the appeals were unsuccessful). The suggestion in Mr Windsor's witness statement that he could not face the ordeal of appeal seemed odd. Both men had received such lengthy sentences that an appeal would have been expected, particularly since the convictions were so closely related to the trade sector in which they worked.
91.	Mr Jones in his skeleton argument had referred to the decision of the Court of Appeal in R v Atul Patel and others [2001] EWCA Crim 2050, where convictions in respect of excise fraud relating to London City Bond were set aside as being unsafe as a result of the failure of the prosecution to disclose the role of certain informants. Mr Smith argued that there was nothing before the Tribunal to indicate that the convictions of Mr Windsor and Mr Singh could be criticised on the same grounds. Mr Dyer could not have looked at this case and concluded that the convictions against Mr Windsor and Mr Singh were unsafe. Moreover, Mr Smith drew attention to the judgment of Longmore LJ (at [25]) in which he referred to the first relevant prosecution in relation to fraud at London City Bond where the trial took place in 1999. In the case of Mr Windsor and Mr Singh, their trials took place in 1997.
92.	Mr Smith referred to Mr Dyer's witness statement where it was clear that the basis of his decision on 24 June 2008 was that both the directors of the Appellant had been convicted of fraudulent evasion of duty. He referred to Mr Jones's skeleton argument where he had drawn attention to the statement in Public Notice 201 (see paragraph 79 above) that HMRC would refuse an application for registration if the applicant had an unspent conviction. Mr Jones had ridiculed the statement saying that it would lead to a refusal of an application if the applicant had been convicted of dangerous driving or, even, of blasphemy. Mr Smith said that, in this case, the convictions of the two directors and shareholders of the Appellant were entirely relevant because they were convictions for excise fraud. The convictions could not be spent under the Rehabilitation of Offenders Act because of the length of sentence imposed.
93.	As regards paragraph 5.8 of Public Notice 201, Mr Smith submitted that it did not lead to an unreasonable decision in this case. Mr Dyer was faced with an application from a company, the two directors and shareholders of which had been convicted of excise fraud. Although paragraph 5.8 indicated that HMRC "will not approve and register anyone who (at the time of applying) has an "unspent" conviction", the application of this policy to the facts before Mr Dyer did not lead to an unreasonable conclusion in the instant case. It was a conclusion which HMRC could reasonably have arrived at for the purposes of section 16(4) Finance Act 1994.
94.	As regards the distinction between the level of risk faced by HMRC in respect of a WOWGR registered owner and the holder of a deferred duty account, Mr Smith submitted that considerably more risk arose in the case of a WOWGR registered owner. A registered owner can present documents to a warehousekeeper (e.g. to the effect that the goods are being moved to another excise warehouse in the UK) and remove the goods. It is at that time that the risk of excise fraud arises. It can, said Mr Smith, be very difficult for HMRC to detect fraud otherwise than after the event; by that time a considerable amount of duty may have been evaded. HMRC devote substantial resources to tackling diversion excise fraud. There is no need to devote such resources to deferred duty accounts since there is plainly a difference in risk.
95.	As regards the Appellant's submission that HMRC treated the Appellant's WOWGR registration submission in an irrational or contradictory manner from the way in which they dealt with the Appellant's position as a holder of a deferred duty account, it was important to remember that there was still a financial guarantee of the Appellant's financial obligations in place until 1 March 2009 i.e. the guarantee was still in place when Mr Dyer took his decision. Mr Dyer had no reason to believe that there was any contradictory treatment since at the time of his decision a guarantee was required. The requirement for a guarantee was later dropped since the Appellant had been paying its bills on time and there was limited risk for HMRC.
96.	Even if the Tribunal found against him on his main submissions, Mr Smith argued that the powers of the Tribunal were limited by section 16(4). In this event, the appropriate remedy would be contained in section 16(4)(b) i.e. to require  HMRC to conduct, in accordance with the directions of the Tribunal, a further review of the original decision. In reviewing the decision HMRC will be able to take into account, not just the directions of the Tribunal, but all relevant facts which had become known since the original decision was taken.
Submissions on behalf of the Appellant
97.	Mr Jones opened his submissions by clarifying that the remedy he sought was that contained in the section 16(4)(c), viz a declaration that Mr Dyer's decision had been unreasonable and for directions to HMRC as the to the steps to be taken in securing that repetitions of the unreasonable conduct do not occur again when comparable circumstances arise in future. Mr Jones returned to this point later in his submissions.
98.	Mr Jones argued that Mr Dyer had taken his decision solely on the basis of the convictions of Mr Windsor and Mr Singh 11 years before. Mr Dyer had decided that because of these convictions the application of the Appellant for registration under WOWGR had, ipso facto, to fail. Mr Jones referred to Mr Dyer's witness statement, where he gave the convictions as the reason for his decision. He also drew attention to the word "Therefore ..." in Mr Dyer's letter of 24 June 2008 which, in his view, emphasised the fact it was the convictions alone that led to the application being refused. The reason for Mr Dyer's approach, in Mr Jones's view, was paragraph 5.8 of Public Notice 201 which stated that HMRC "will not approve and register anyone" who had an unspent conviction. Mr Jones compared this with HMRC's Public Notice in respect of "FAQ: Excise Payment Security System (EPSS) -- the authorisation criteria" (i.e. in respect of deferred duty account applications) which contained a similar statement ("If you have serious offences (proven or charged) on record with the Department you will not be authorised.") In practice, as regards deferred duty accounts, we note that a less restrictive approach appears to be taken – see paragraphs 127 and 128 below.
99.	Mr Jones noted that these public pronouncements of HMRC were subsequently varied. Notice 196 now states that HMRC "may" not approve an application where the applicant had unspent convictions. This was a significant change, in Mr Jones's submission, from the prescriptive and inherently unreasonable guidance (which also appeared to relate to any type of unspent conviction) in Public Notice 201.
100.	Mr Jones submitted that in considering whether Mr Dyer's decision was reasonable it was necessary to consider the underlying HMRC guidance which he would have felt bound to follow. That guidance was, in Mr Jones's submission, irrational and the fact that it had subsequently been changed to make it less prescriptive was significant.
101.	Mr Jones referred to the evidence of Mr Dunn and in particular his evidence under cross-examination when he stated that HMRC's approach as regards probity in applications for registration as an owner under WOWGR and for a deferred duty account was essentially the same or very similar. Mr Jones suggested that the greatest opportunity for excise fraud arose when a trader purports to export the goods but instead diverts the goods onto the domestic market. He commented that Mr Dunn had struggled to differentiate the level of risk faced by HMRC in these circumstances when dealing with a WOWGR registered owner or a holder of a deferred duty account. 
102.	In Mr Jones's submission there was no difference in risk. If a fraudulent deferred duty account holder removed goods from a warehouse purportedly for the purposes of exporting them, fraudulent documents would be produced as evidence of the intention to export, the warehousekeeper would be duped, the goods would leave the warehouse and excise duty would be evaded since nothing would be added to the deferred duty account. The fraud, according to Mr Jones, would not be discovered within 28 days because the deferred duty account would show that no duty was payable. 
103.	That situation had to be compared with that of a WOWGR registered owner. If the registered owner wanted to perpetrate a fraud it would likewise have to produce fraudulent paperwork. Again, if the warehousekeeper accepted forged documents, the same risk arose for HMRC.
104.	 In both cases, Mr Jones submitted, where forged documents were concerned, the period of time in which the fraud might be discovered was the same. Mr Jones challenged Mr Dunn's evidence that in the case of a deferred duty account the fraud would be discovered in 28 days. If the warehousekeeper had been duped by fraudulent documents the account would show that no duty was due. The argument that there was a differential in risk between a WOWGR registered owner and a deferred duty account holder therefore broke down. This, therefore, called into question the reasonableness of the distinction drawn by HMRC between an application for registration as a WOWGR owner (which the Appellant had been refused) and for a deferred duty account (which the Appellant had been granted).
105.	Mr Jones submitted that in determining an application for WOWGR registration, in order to determine the level of risk to HMRC all relevant factors, including the applicant's trading history and background ought properly to have been brought into account. The convictions of Mr Windsor and Mr Singh, although unspent, were 11 years old at the time of Mr Dyer's decision. These convictions had to be looked at in context. More than a decade had passed in which the Appellant's compliance record had not been called into question. In Mr Jones's view, this had not been considered by Mr Dyer -- only the convictions had been considered (Mr Jones again referred to the word "Therefore ..." in Mr Dyer's letter of 24 June 2008). It was also irrational to leave out the Appellant's record in respect of the deferred duty account, particularly if there was no differential in the level of risk to HMRC.
106.	In Mr Jones's submission concentrating solely on the unspent convictions was a plain error of approach and was therefore Wednesbury unreasonable.
107.	Furthermore, Mr Jones submitted that Mr Dyer should have gone further and looked at the Appellant's application for WOWGR owner registration in a wider context. In particular, Mr Jones suggested that Mr Dyer should have considered the following factors:
•	the facts that gave rise to each unspent conviction,
•	the convictions were more than 10 years ago,
•	that Mr Windsor and Mr Singh had no other convictions in the intervening years,,
•	that the Appellant had a deferred duty account for over three years of almost £800,000 per month upon which there had been no default,
•	that the test of there being "an acceptably low revenue risk" applied as much to the deferred duty account as to registration as a WOWGR owner and that it was unreasonable to differentiate between a deferment account and WOWGR registration,
•	that HMRC accepted that all its other criteria for WOWGR registration were satisfied,
•	that conditions could have been applied e.g. the requirement of a guarantee or the scope of the WOWGR registration could have been limited
•	previous tax payment and compliance history
•	that the Appellant had a turnover in excess of £100 million per annum
•	the outcome of any proper risk assessment, relating to risk to the revenue
108.	Mr Jones said that none of these factors had been taken into account by Mr Dyer in making his decision. He had taken into account only one factor: the unspent convictions of Mr Windsor and Mr Singh.
Additional submissions
109.	Mr Smith pointed out that the original application before Mr Dyer was for an unrestricted registration as a WOWGR owner. The first time a restriction was suggested was in Anami Law’s letter of 12 May 2009.
110.	Mr Smith also submitted that a declaration under section 16(4)(c) Finance Act 1994 was not appropriate. The Tribunal should only make a declaration under that provision where a decision "has already been acted on or taken effect and cannot be remedied by a further review". In this case, the remedy, if the Tribunal found in favour of the Appellant, was for Mr Dyer's decision to be subject to a further review. If Mr Dyer's decision was considered defective it could certainly be remedied by a further review. Section 16(4)(c) was intended for cases where the decision had been acted upon and could not be remedied. For example, where there was a claim for restoration of goods which had been seized and the goods had been destroyed, section 16(4)(c) provided a suitable remedy. That was not the case in this appeal.
111.	Mr Jones argued that section 16(4)(c) did provide an appropriate remedy. The options open to the Tribunal in section 16(4)(a) to (c) were not mutually exclusive since the introductory words referred to the Tribunal having power to "do one or more of the following". Paragraphs (b) and (c) were the equivalent of the old prerogative orders of mandamus and declaratory relief. The two remedies went hand-in-hand.
Discussion
Decision under appeal
112.	The facts giving rise to this appeal involve three decisions. The first decision was given by Mr Dyer on 24th of June 2008. There were two subsequent "deemed" decisions by virtue of section 15 (2) Finance Act 1994 as a result of the failure of HMRC to give notice to the applicant of their determination of the review within 45 days beginning on the day on which the review was required. 
113.	In our view, although the Appellant amended its grounds of appeal to include a subsequent deemed decision, this appeal is clearly against the original decision of Mr Dyer contained in his letter of 24 June 2008, since the effect of section 15 (2) is that that original decision was confirmed each time HMRC failed to reply within the 45 day time limit. We respectfully agree with the decision of the VAT and Duties Tribunal (Miss JC Gort (Chairman) and Mrs JM Neill) in Grapevine Storage Services Ltd v The Commissioners for Her Majesty's Revenue & Customs E01100 (2008) which reached the same conclusion on this point.
Section 16 (4) Finance Act 1994 -- jurisdiction of the Tribunal
114.	It is common ground that Mr Dyer's decision was on an "ancillary matter" for the purposes of section 16(4) Finance Act 1994.
115.	The jurisdiction of the Tribunal under section 16(4) is limited. The powers contained in section 16(4) (a) to (c) may only be exercised "where the Tribunal are satisfied that the HMRC or other person making that decision could not reasonably have arrived at it." It is not for the Tribunal to decide whether it agrees or disagrees with the decision that HMRC have reached (unless a decision is plainly irrational) or whether it would have reached some different conclusion. The Tribunal's jurisdiction is purely supervisory. In each case the onus of proof lies upon the Appellant.
116.	The jurisdiction laid down in section 16(4) is, in our view (and which we understood to be common ground between counsel), the same as that of Wednesbury unreasonableness. In that case the test propounded (ibid.  at page 230) was whether a local authority had acted, or reached a decision, in a manner "so unreasonable that no reasonable authority could ever have come to it". As Lord Greene MR said (at pages 233-234)  :
"...a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting "unreasonably." Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. 
The court is entitled to investigate the action of the local authority with a view to seeing whether they have taken into account matters which they ought not to take into account, or, conversely, have refused to take into account or neglected to take into account matters which they ought to take into account. Once that question is answered in favour of the local authority, it may be still possible to say that, although the local authority have kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere." 
117.	Where HMRC has a statutory discretion it cannot be fettered in such a way that, in exercising that discretion, officers fail to take account of factors which are relevant to their decision. Whilst we understand the need and desirability for public guidance to give some indication of how HMRC would typically exercise its discretion, this guidance cannot be so prescriptive that it effectively prevents the discretion being exercised in the light of all relevant considerations. In this respect, Public Notice 196 (published a few months after Mr Dyer's decision) which indicates that HMRC "may" not give approval to an application where there are unspent convictions seems more appropriate than the earlier Public Notice 201 which provided that HMRC "will"  not give approval in such circumstances. The former formulation indicates the exercise of a discretion to approve, notwithstanding the existence of unspent convictions, whereas the latter appears to exclude the possibility of the discretion being exercised and seems to be at variance with the guidance contained in HMRA 2040 (see below).
Was Mr Dyer's decision of the 24 June 2008 one that could not reasonably have been arrived at?
118.	Applying these tests to the evidence before us it is plain that Mr Dyer's decision took account only of the convictions of Mr Windsor and Mr Singh. There is no evidence that any other factors were taken into consideration. We do not know why this was so. It may be that Mr Dyer was simply following the guidance in paragraph 5.8 of Public Notice 201 or it may be that he thought that those convictions were so important that no other factors needed to be taken into account. It does not matter why he considered one factor and not others; it only matters whether he failed to take into account matters which he should have done. In our view, he should have taken into account other relevant factors.
119.	In this context it is relevant to note the contents of HMRA 2040 (which was in force when Mr Dyer took his decision) quoted at paragraph 81 above -- in particular, the following paragraph:
“Officers are acting on behalf of the HMRC and are also obliged to arrive at reasonable decisions given the information that they have available to consider in each case. In order to arrive at reasonable decisions officers must be able to exercise some discretion where required. Our policy on approvals and registration cannot be so rigid that it restricts officers from considering each application approval on its own merits and from arriving at a decision that would have been reasonable if our policy had not been restrictive. This doesn't mean that a light touch must be applied to approvals but that officers must consider and test all the information reasonably available to them and arrive at a sensible conclusion that can be clearly put before a review officer or tribunal chairman.” (Emphasis added)
120.	By only considering one factor, Mr Dyer appears to have failed to consider other relevant factors and to have failed to apply the guidance contained in HMRA 2040.
121.	In particular, there is no evidence that Mr Dyer considered the compliance record in respect of all direct and indirect taxes of the Appellant and its directors in the period since 1997. This was information which was reasonably available to Mr Dyer. The report from officer Jolly made no reference to these matters: it mentioned only the convictions of Mr Windsor and Mr Singh almost 11 years before. At the very least, this information should have been considered.
122.	When considering the compliance record of the Appellant it would be relevant also to consider whether the Appellant had discharged its obligations satisfactorily in respect of the deferred duty account. There is no evidence that this was considered.
123.	In considering the Appellant's application, Mr Dyer was, in our view, obliged to consider all information that was reasonably available to him. This does not, however, require him to become some form of amateur sleuth. In particular, we do not think that Mr Dyer was obliged to investigate the soundness of the convictions of Mr Windsor and Mr Singh. There was no evidence of any appeal against the convictions and Mr Dyer was entitled to assume that the two individuals were correctly convicted. Although we have been referred to the Patel case in the context of prosecutions relating to London City Bond, there is no reason why Mr Dyer should assume the role of an informal Court of Appeal in determining whether that decision rendered the convictions of Mr Windsor and Mr Singh unsafe or unsatisfactory. This seems to us to go well beyond what could reasonably be required of Mr Dyer.
124.	In Mr Jones's submissions it was said that Mr Dyer should have considered the conditions or restrictions could have been applied in respect of the Appellant regarding a WOWGR registration e.g. the requirement of the guarantee or registration limited in scope (e.g. excluding exportation). The original application, however, was for an unrestricted WOWGR registration, the proposal for a restricted WOWGR registration only coming much later in respect of the application for a second review. This, therefore, was not before Mr Dyer when he took his decision and he was entitled, in our view, to deal with the application on its terms as an application for an unrestricted registration. However, in our view, he should at least have considered whether a restricted registration would have addressed concerns that HMRC had as regards the risk to the revenue of the Appellant's application. It may be that it would have made no difference to his conclusion but there is no evidence that he addressed his mind to this question. 
125.	Mr Jones also submitted that it was irrational for Mr Dyer to differentiate between a deferred duty account and a WOWGR registration. Mr Jones argued that Mr Dyer, had he properly directed himself, should have taken account of the fact that there was no logical reason to draw a distinction.
126.	We do not agree with Mr Jones's submission in respect. It is true that in assessing an application for registration as a WOWGR owner HMRC should take account of the potential risk to the revenue. In this case, however, we are not satisfied that HMRC cannot draw a distinction between the two circumstances, viz registration as a WOWGR owner and the operator of a deferred duty account. It was plain in his evidence that Mr Dunn considered that a WOWGR registered owner, who could own goods held in an excise warehouse, exercised greater control over goods held in duty suspension than the holder of a deferred duty account and a greater risk of diversion thereby arose. Although, in assessing probity of applicants in both cases HMRC may apply very similar tests, as Mr Dunn accepted, it does not follow in our view that the level of risk to the revenue in both cases is the same. Although we accept that in some types of fraud there may be a similar risk, we do not consider it appropriate for this Tribunal to substitute its view for that of HMRC in the area of assessing risk to the revenue. HMRC have considerable experience of the numerous different types of excise fraud and the different techniques used to evade duty. It would not, in our view, be appropriate to challenge HMRC's assessment of risk in the two situations except on the clearest of evidence that its view was irrational. In our view, the Appellant has not satisfied us on the balance of probabilities that the two situations are in all circumstances entirely comparable. As we have already said, we believe that the fact that the Appellant had been approved to operate a deferred duty account and its compliance record with regard thereto was a factor that should have been taken into account by Mr Dyer. We would not, however, go beyond that.
127.	Before leaving the subject of the comparison of a WOWGR registered owner with the holder of a deferred duty account we should note that in the papers provided to us in an un-dated HMRC guidance note relating to the criteria applied to applicants for a deferred duty account (“FAQ: Excise Payment Security System (EPSS) -- the authorisation criteria") the following statements are made:
"Offence history
If you have serious offences (proven or charged) on record with the Department you will not be authorised.
Note: You may re-apply three years after the offence action was finalised or five years if a custodial term was imposed."
128.	We mention this only to draw attention to the fact that, at least as regards applications for deferred duty accounts, HMRC guidance specifically contemplates that persons convicted of offences carrying a custodial term may reapply at a later date.
129.	In summary, therefore, our conclusion is that by failing to take account of relevant factors other than the convictions of Mr Windsor and Mr Singh, the decision taken by Mr Dyer on 24 June 2008 was a decision that could not reasonably have been arrived at for the purposes of section 16(4) Finance Act 1994.
Which power under section 16 (4) Finance Act 1994 should the Tribunal use?
130.	Where, under section 16(4), the Tribunal is satisfied that HMRC or other person making the decision could not reasonably have arrived at it, the Tribunal has power "to do one or more of the following":
“(a)     to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b)     to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c)     in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.”
131.	In his submissions (but not in his skeleton argument) Mr Jones asked that the Tribunal give a declaration and directions under section 16(4)(c). In his view the decision of Mr Dyer on 24 June 2008 had "already been acted on or taken effect" since there was no WOWGR registration. He submitted that the Tribunal could declare that decision unreasonable and give directions under subparagraph (c) as to the steps to be taken for securing that repetitions of the unreasonableness do not occur in future. Mr Jones drew attention to the introductory words enabling the Tribunal "to do one or more of the following". The powers of the Tribunal were not mutually exclusive. Subparagraph (c) was a form of declaratory relief and subparagraph (b) was akin to the old prerogative order of mandamus.
132.	Mr Smith submitted that it was not appropriate for the Tribunal to give a declaration and directions under subparagraph (c). He argued that a declaration and directions under subparagraph (c) were more appropriate in cases where there had been a claim for restoration of seized goods which had been refused and the goods had been destroyed. In that case, there was no point directing that the original decision be reviewed. In this case, it was possible to remedy the original decision by a further review, in accordance with the directions of the Tribunal.
133.	We agree with Mr Smith's submission. We consider that the Tribunal has a discretion as to which remedy or remedies it should order. In our view, there seems to be no reason why Mr Dyer's decision cannot be remedied by a further review. Accordingly, we propose to require the Commissioners to conduct a further review of the original decision and to give directions to the Commissioners pursuant to subparagraph (b). To be clear, we do not consider that the only circumstances in which directions could be given under subparagraph (c) are those in which seized goods have been destroyed, although we agree with Mr Smith’s suggestion that it would be a suitable case for a declaration under subparagraph (c). For example, if, as in the Grapevine case, the parties agree that the original decision cannot be remedied by a further review it may well be appropriate for directions to be given under that subparagraph. In this case, however, we see no reason why the original decision cannot be remedied by a further review and therefore do not consider it appropriate to make an order under subparagraph (c).
134.	There are two further matters that arise in this context. In John Dee Ltd v HM Customs and Excise [1995] STC 941 the Court of Appeal decided that, notwithstanding that a decision to require security for VAT was defective, an appeal should not be allowed if it was inevitable that the decision would have been the same if the additional material there in question had been taken into account. Although the legislation is different the same principle should, in our view, apply to an appeal falling under section 16(4). In our view, in the instant case, we are not satisfied that it is inevitable that on a further review HMRC will take the same position. In this context, we note that in the John Dee case it was held that the finding that it was "most likely" that the same decision would have been taken was not sufficient to satisfy the inevitability test.
135.	Secondly, the role of HMRC in conducting a further review is, in our view, to take a fresh decision on the Appellant's application. In Amazon Trading International Ltd v Commissioners for HM & Excise EO00943 the VAT and Duties Tribunal (Chairman: Mr Theodore Wallace) commented as follows:
"The function of the Commissioners on review is not the same [as the Tribunal on appeal].  It is to consider whether the decision should be confirmed, varied or withdrawn.  This involves a full consideration of all the material before them on review.  It is not confined to a consideration of whether the earlier decision was reasonable.  "

136.	 In further reviewing Mr Dyer's decision of 24 June 2008, HMRC are entitled to take account of all submissions made and of information provided by the Appellant in its original application and its applications for subsequent reviews. In addition, in the interests of fairness, we consider that HMRC should invite the Appellant to provide any information in relation to additional facts or matters which it considers appropriate in respect of a further review. In our view, HMRC are also entitled to take into account any relevant facts or circumstances which have arisen since the date of the original review up to the date of the review which they undertake pursuant to this decision. In effect, therefore, HMRC on review will take an entirely fresh decision on the facts known to them at that date.
137.	We allow this appeal.
Our directions
138.	We give the following directions to HMRC under section 16 (4) (b) Finance Act 1994.
139.	We direct that HMRC carry out a further review of Mr Dyer's decision of 24 June 2008. We further direct that such review take account of all relevant facts and circumstances relevant to the making of the decision. In particular, we direct that HMRC, in addition to taking account of the convictions of Mr Windsor and Mr Singh in 1997:
(1)	take account of the compliance record in respect of all taxation matters of the Appellant and its directors, including the operation by the Appellant of a deferred duty account;
(2)	whether the Appellant and/or its directors and/or its shareholders have been convicted of any other relevant criminal offences since 1997;
(3)	consider the incremental risk to the revenue resulting from granting the Appellant registration as an owner for the purposes of WOWGR when compared with any risk to the revenue resulting from the operation by the Appellant of a deferred duty account;
(4)	consider whether all other relevant conditions for registration under WOWGR have been satisfied;
(5)	consider any further representations which the Appellant may see fit to make for the purposes of the further review;
(6)	consider whether it would be appropriate to place any conditions or restrictions upon any WOWGR registration; and
(7)	consider whether, in the light of the foregoing and any other relevant facts or circumstances, the acceptance of the Appellant's application to be a WOWGR registered owner would constitute an acceptably low revenue risk.
140.	In allowing this appeal and giving the above directions we wish to make it clear, even at the risk of repetition and of stating the obvious, that we are not giving instructions to HMRC as to what decision should be taken. HMRC, having taken account of all relevant factors, may, on a further review, take the same decision as Mr Dyer took on 24 June 2008 or HMRC may take a different decision. That is a matter entirely for HMRC. It is not the role of this Tribunal to tell HMRC what decision it should take. Our role is simply to ensure that the decision is taken in the light of all relevant considerations and information reasonably available to HMRC and without taking into account irrelevant considerations or information, so that the decision which HMRC finally take is one at which HMRC can reasonably arrive.
141.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

GUY BRANNAN

TRIBUNAL JUDGE
RELEASE DATE: 29 December 2010