Global Foods Ltd v Revenue & Customs [2009] UKFTT 256 (TC) (08 October 2009)

DECISION

Introduction

1. This Excise Duty case originated with the detention and seizure in 2004 of several consignments of beer and one consignment of whisky from the Appellant. The Appellant conducted the trade in South Wales as a wholesaler of food and drink to small supermarkets in South Wales.

2. The Appellant’s trade was conducted at a fairly significant level. The company had traded since 1988; it employed 90 staff; it operated a substantial 60,000 square foot warehouse, and its annual turnover was generally at the level of about £45 million. Approximately one-third of its turnover related to alcohol, with the remaining two-thirds being food and non-alcoholic drink; in any week it might take in 300 different consignments of alcoholic drinks, and due to the short shelf-life of some of its goods, those goods were constantly being moved around its warehouse.

3. As a result of a routine visit by officers of HM Customs & Excise, the officers later detained, and eventually formally seized 7 consignments of beer and one of whisky. As a result of one of the four reviews that have already been undertaken into the original seizure decision, three of the consignments of beer were restored. The Appellant abandoned its claim for restoration of the whisky. We are accordingly now concerned with a claim for restoration of four consignments of beer, being consignments of Stella, Kestrel, Kronenberg and “Bud”.

4. There is a slightly curious split in the jurisdiction over Excise cases, where goods have been seized. Where the claimant wishes to challenge the legality of the seizure, for instance on the basis that alcohol or cigarettes seized are for “own use” or are a gift, or that the duty had been paid in respect of the seized goods, the challenge should be made within a one-month period and in the Magistrates’ Court. Once the legality of seizure has either been confirmed by that Court, or been deemed to be confirmed because no challenge has been brought within the one-month period, there remains the question of whether HMRC should restore the goods. They might properly do this on a number of grounds, for instance that the claimant from whom the goods had been seized was entirely innocent, and was perhaps to be described as “an innocent dupe”. Alternatively if the value of the goods greatly exceeded any supposedly lost duty it might be considered disproportionate to retain the goods. They might thus be restored or restored on conditions, such as the payment of the duty or double duty or on some other basis. The jurisdiction of this Tribunal is largely confined not to re-considering the legality of the seizure but to considering whether restoration has legitimately been refused. There are limited circumstances, however, where it can be proper for this Tribunal to consider whether the seizure was lawful.

5. In this case, having taken advice, the Appellant chose not to challenge the legality of the seizure before the Magistrates’ Court, ostensibly on the ground that it did not with to double the costs that it might incur if it also had to appeal to this Tribunal. The Appeal to this Tribunal has now been mounted on a number of grounds. These included the assertion that duty had been paid on the goods, that the Appellant honestly believed that duty had been paid on all the goods and that it had made a number of checks as regards its suppliers such that it was unreasonable for HMRC to refuse to restore the goods. It was also claimed that the forfeiture of the goods was a disproportionate penalty.

6. The three issues for us are thus:

whether it is legitimate for us to enquire into the legality of the original seizure;
whether, if it is, there are grounds for supposing that the facts relevant to whether duty was originally paid mean that the refusal to restore the goods was unreasonable or not; and
whether the alleged innocence of the Appellant and the checks made by the Appellant, or the disproportionate nature of the financial loss, resulting from the seizure, render it unreasonable that the goods have not been restored.

In the event that we reach the conclusion, having considered those three distinct points, that the last review by HMRC was unsatisfactory and that there should be a further review, we can order that there should be such a further review and we can indicate the points that we consider should be addressed in that review. Our decision is that the answers to each of the three questions and issues just posed are all in the affirmative, and we do order that there should be a further review.

7. The rest of this Decision is ordered in the following way. In paragraphs 8 to 26, we refer to the evidence given, and list the further general facts that we consider material, ignoring at this stage the effort to trace the supply chain in relation to the four consignments of beer. In paragraphs 27 to 30, we explain why we consider that it is legitimate for us to reconsider the facts in relation to whether duty had been paid or not, and in other words into the lawfulness of the seizure, and whether doubts in relation to that matter make the non-restoration unreasonable. In paragraphs 31 to 45, we will endeavour to list the particular facts relevant to the supply chain of each of the four consignments of beer, relevant to the issue of whether there is evidence that duty has, or may very well have, been paid on each consignment. Finally in paragraphs 46 to 56, we consider the other questions concerning mitigation, reasonableness and whether the seizure was or was not disproportionate.

The further general facts and the evidence

8. Evidence was given at the hearing by Mr. Iqbal, a Director of the Appellant, and by Frances Manley, the HMRC Officer who had conducted the last review.

9. We think it right to record that we did not find any of the evidence given to be particularly compelling or impressive. Mr. Iqbal made a number of assertions, but we were given no real information to decide whether the assertions were credible and correct or not, either in his evidence in chief, or whilst being cross-examined. For instance he asserted (a claim to which we will refer later) that there was confusion about which supplier had supplied the seized consignment of Stella. It was suggested that stocks were regularly moved around the warehouse and that while it was originally thought that the seized Stella had been supplied by Buntingford Supermarkets, it was later claimed that stocks had been moved around by the warehousemen and that the seized Stella had in fact been delivered by a different supplier, Barrel Booze. So far as we could see the Barrel Booze invoice contained no identification detail that proved that the seized Stella had in fact been supplied by Barrel Booze, albeit that the quantity tied up, and the price paid was very close to the price of the Stella on the Buntingford Supermarkets invoice. The information that was not given to us, and indeed that appeared never to have been asked for by HMRC, or supplied by Mr. Iqbal was how he operated his stock control, and whether all movements in the warehouse were logged or not. We can imagine that with computerised invoicing and stock control and a very efficient, modern, and doubtless highly costly warehouse system, all stock movements and information would be available and retrievable. We were left, however, with a picture that HMRC were contending that the claim about the changed supplier was dubious because it took 14 months before the change of supplier was first mentioned, matched against the supposition that the 90 staff probably did regularly move stock around in the manner asserted. This lack of information makes our decision difficult.

10. Another example of vague and somewhat unsubstantiated information was the claim by Mr. Iqbal that he made checks on his suppliers. We can certainly see that there were invariably invoices that contained VAT numbers, and we accept Mr. Iqbal’s claim that he checked that these VAT numbers were valid, since HMRC never suggested that any of the VAT numbers had been bogus. The Appellant appeared to have paid by cheque for all the contested consignments, so that while this proves little, it does at least eliminate the more major doubts that would have arisen had suppliers demanded cash payment, and been paid in cash. Beyond this however, and the general assertion that when a new supplier emerged, Mr. Iqbal would generally “ask around in the trade” as to whether the supplier was trust-worthy, we were unclear (and somewhat doubtful) as to what checks had been made, and whether HMRC and we should consider the checks satisfactory. Since the matter in dispute is nothing to do with VAT, but is the much more difficult issue of whether the entity producing or importing alcoholic drinks has paid duty, and invoices (particularly those at the end of quite a chain of suppliers) do not, and cannot, prove that duty has been paid, it was difficult to decide whether the vaguely mentioned checks that Mr. Iqbal asserted he made were adequate or not.

11. Whilst, thus, Mr. Iqbal’s evidence was unsatisfactory in the respect that it was somewhat vague and general and it was certainly not confirmed by other supporting evidence, we have to say that we found the evidence from Frances Manley to be significantly worse. We understand that when she undertook her review, that being the fourth review, she had been given a 45-day time limit by the VAT and Duties Tribunal in which to conduct the review. We also understand that Frances Manley’s mother was ill during that period and we believe that she died either in or shortly after the period. In a sense to her credit, Frances Manley considered that she had to complete her review within the 45-day period, albeit that the unfortunate result was that she had to cut short at least two lines of enquiry that we consider to have been vital. This made her review unsatisfactory. The Appellant’s counsel also suggested, with some validity, that her independent review had not been very independent because she had largely “re-hashed” the findings of a previous review, and compounded that by cutting short the lines of inquiry that we have just mentioned.

12. Whilst the circumstances perhaps go to explain why Frances Manley’s review was unsatisfactory (and we certainly told her that the Tribunal would unquestionably have extended the period for the review had the circumstances been explained, and had the request for an extension been made) we feel that we should record that the information (or often the lack of it) given by Frances Manley, in response to cross-examination was most unimpressive. She certainly appeared not to have been “on top of the case”. She did not know HMRC’s policy in relation to restoration where a claimant asserted innocence. She had rejected the Appellant’s claim that he had been innocent largely because he had bought a dubious quantity of poor whisky. She either did not know, however, or ignored the fact, that this whisky was purchased 11 years before 2004, that it was the Appellant’s first purchase of alcohol, and that in a curious manner it had been offered to him by his main ice cream supplier!!! Since the whisky in question was obviously a somewhat slow moving stock line, and had for some time been sold simply as cooking whisky, it seems entirely credible that the Appellant had purchased this whisky as an innocent dupe, and that on seeking still to get rid of it as cooking whisky 11 years later, this first foray into the alcoholic drink side of the business had been a serious error on the part of an inexperienced operator, rather than meaningful evidence that the Appellant (which was taking 300 consignments of alcoholic drinks a week!!) was now regularly, or indeed remotely, untrustworthy.

13. These general comments about the evidence are meant merely to record that we found some of Mr. Iqbal’s claims vague and unsubstantiated, though not necessarily for that reason false. We found Frances Manley’s evidence to be seriously unsatisfactory, such that we had very little confidence in her evidence or in the review that she had undertaken.

14. We will now list certain further facts.

15. On 3 March 2004 two HM C&E officers visited the Appellant’s premises, in part to restore goods that had been detained earlier, but also to undertake some checks that had been requested by one of the Compliance Teams of HM C&E. Two invoices were taken away. One related to a supply from Buntingford Supermarkets, and one a supply from Roxy International. The first was taken because the invoice was considered unsatisfactory because it contained no phone number, and the second was taken because it was of a supply of “Bud”. Apparently Budweiser beer is traded under its full name in virtually all countries, save in Belgium where a Czech company holds the Budweiser trade name, such that Anheiser-Busch has to sell its beer in that market under the “Bud” name. Accordingly a purchase of “Bud” was obviously of imported product where duty might have been avoided.

16. On the following day, HM C&E officers visited the address given in the Buntingford Supermarkets invoice, and found no trace of the supplier and so assumed that the trader might be a “missing trader”. On the same day they therefore returned to the Appellant’s premises and detained the consignments of beer supplied on the Buntingford Supermarkets invoice and the Bud supplied by Roxy International. The ground at this stage for the detention was the supposition that Buntingford Supermarkets was a missing trader, and that the purchase price of the Bud was suspiciously low, perhaps suggesting that duty had not been paid.

17. The owner of Buntingford Supermarkets did not remain “missing” for long, however, because Mr. Iqbal plainly contacted him, a Mr. Basra, and on 5 March, Mr. Basra contacted the HM C&E officials and said that the detained goods had suffered duty. Shortly thereafter he asserted in a fax that the goods had been purchased from Bookers Cash and Carry. Bookers Cash and Carry is, we believe, the largest drinks wholesaler in the UK with over 170 stores nationwide, and was and is of high repute, so that goods sourced from this supplier are almost inevitably bound to have suffered duty.

18. There was an HM C&E guideline to the effect that goods that are detained will normally either be released or else formally seized within a 10-day period of their initial detention. In this case it actually took seven months, until October, for the goods to be seized. We will make relatively little of this feature because it is obvious that numerous enquiries were being made to establish whether or not duty had been paid in respect of the various consignments of beer and the whisky. The formal notice of seizure was issued on 14 October. It gave very little information as to why each of the consignments was being seized and not restored, beyond the general claim that it was believed that duty had not been paid, and it ended by indicating that the Appellant should take proceedings before the Magistrates’ Court within a one-month period if it chose to challenge the legality of the seizure.

19. The Appellant chose not to take proceedings before the Magistrates’ Court, apparently on the basis that this would double the costs if, as it supposed, an appeal to the VAT and Duties Tribunal had also to be made on the grounds that the refusal to restore the goods was unreasonable.

20. The Appellant’s representatives provided certain further information and asked for a formal review of the seizure decision. This review resulted in a letter from Charles Dunn, who had undertaken the review, issued on 15 April 2005. We need to refer to three matters mentioned in this review letter.

21. First, the reason for not restoring the Stella was given. We will revert to this below when dealing specifically with the supply chain for the Stella.

22. Secondly various reasons were given for the refusal to restore the whisky. It appears that the labels were of poor quality and did not mention the name of the distillery, that the trade names were unheard of albeit that they sounded very Scottish, that the bottles were of non-standard size, that the bottles were designed to take screw caps but had actually been corked, and that the whisky was of poor quality and might even contain hazardous chemicals. There was thus a strong suspicion that duty had not been paid.

23. Finally Charles Dunn restored three of the consignments of beer. He said that “enquiries did not provide any indication of the goods being diverted from excise warehouses or improper importation without payment of duty, and therefore I am withdrawing the decision not to restore these particular goods”.

24. We will not refer to further correspondence and further reviews prior to the review that occasion this appeal. We simply record that at some stage the Appellant withdrew its claim for restoration of the whisky. Once the three consignments referred to in the preceding paragraph had been restored, and the claim for the return of the whisky had been abandoned, the matters remaining in dispute were the claims for restoration of the Stella, Kestrel, Kronenberg and the “Bud”.

25. A direction was issued by the VAT and Duties Tribunal following a hearing in September 2007, the direction requiring a further independent review to be conducted as regards the non-restoration of the remaining four consignments of beer, with that review to be conducted within 45 days of the issue of the direction.

26. The review was conducted by Frances Manley and the review letter issued on 12 December 2007. This appeal is against the refusal in that letter to restore any of the four remaining consignments of beer.

Should we consider facts material to the legality of the seizure, and thus facts that indicate whether or not it is proved or likely that duty had been paid on any of the four consignments?

27. We have already indicated that the jurisdiction of this Tribunal is generally to deal with issues concerning the reasonableness of the refusal to restore goods and not the initial legality or otherwise of the seizure. We also record that in this case the Appellant had taken advice as to whether to challenge the legality of the seizure in the Magistrates’ Court, and had decided not to do so.

28. It was certainly common ground between counsel for both the Appellant and the Respondents that there were cases where it was proper for us to consider matters relevant to the legality of the seizure. Indeed counsel for the Respondents helpfully referred us to the following remarks by Mr. Justice Evans-Lombe in CCE v.Weller [2006] EWHC 237 (Ch):

“whether or not an importer, having suffered a deemed forfeiture under paragraph 5 of Schedule 3, is able to raise the validity of the forfeiture on a review by the Commissioners and on appeal from them to the Tribunal, depends on two questions, first, did the importer have a realistic opportunity to invoke the condemnation procedure and, secondly, if he did, are there nonetheless reasons, disclosed by the facts of the case which should persuade the Commissioners or the Tribunal to permit him to reopen the question of the validity of the original seizure on an application for return of the goods”.

29. We consider in this case that it is proper for us to consider matters relevant to the legality of the seizure. This is principally for reasons that we consider satisfy the second of the questions posed by Mr. Justice Evans-Lombe, but to some degree for reasons connected with the first question.

30. The factors on which we rely are that:

the ground on which Charles Dunn released three of the seized consignments back to the Appellant was entirely geared to evidence that had been obtained months after the initial seizure, and all related to the legality of that seizure, rather than anything to do with mitigating circumstances or the innocence of the Appellant;
virtually the entire correspondence, and most of the enquiries undertaken in the years, not just months, that have followed the detention and the seizure have been directed to the effort to establish whether or not duty was paid on the importation of the seized goods;
it would accordingly seem extraordinarily perverse to ignore the factors that influenced the release of goods in Charles Dunn’s review and influenced the refusal to release others, and perverse to ignore the credibility of virtually all the subsequent enquiries, and just to confine our attention to matters concerning innocence, reasonableness and proportionality which have not been the main focus of attention;
those enquiries have been undertaken well after the date of seizure and much of the evidence advanced before us (whether or not conclusive) has all emerged since the initial seizure; and finally
we even take the view that in one very material sense the Appellant did not have a realistic opportunity to invoke condemnation proceedings within the first of the points addressed by Mr. Justice Evans-Lombe. In the case of an importation where the grounds for disputing the legality of the seizure are geared to “own use” or the proposition that the items are to be given away, the relevant facts are almost certainly readily available to the importer who can thus make his case with ease. By contrast where the legality of the seizure is geared to the issue of whether some initial importer has paid duty, as the Appellant may have believed to be the case, it is extraordinarily difficult for the person in the position of the Appellant here to establish this, and to mount its case in the Magistrates’ Court. It has repeatedly been pointed out by HMRC in this case that some of the information on which they have based their refusal to restore cannot be divulged to the Appellant because it relates to the confidential affairs of other taxpayers. HMRC has also been able to rely on procedures that have enabled them to access information from the Belgian and French tax authorities. And with all their enquiry powers, it still remains the case after five years, as distinct from one month, that there is no clear picture as to whether duty was paid in respect of the four remaining consignments of beer. That seems to suggest to us that the opportunity that the Appellant would have had in this case to dispute the legality of the seizure in November 2004 would have been very poor, when it had none of the powers and rights to information, and indeed none of the information, available to HM C&E officers themselves.

We accordingly decide that it is proper for us to consider facts relevant to the legality of the seizure, and the issue of whether the evidence suggests that duty was paid in this case.

The issue of whether we consider that Frances Manley’s review was satisfactory as regards matters relevant to whether or not duty had been paid in respect of the four remaining consignments of beer, and the factors that we consider should be taken into account in this regard on a further Review

31. We preface our remarks in relation to these matters with a general comment. The principal ground on which we direct that a further independent review should be held is that there are a number of respects in which we consider that the enquiries, and the grounds for the refusal to restore, given in Frances Manley’s letter of December 2007 are not acceptable. We should make it clear however that whilst there are points which should be considered in the further review, this is not a case where we consider that the outcome of that review is anything approaching a foregone conclusion. We do not in other words suggest that the last review was so deficient that the only conceivable outcome of the further review is that, in our view and expectation, the further review must result in the restoration of the goods or in the payment of equivalent compensation.

32. We will now deal with the facts relevant to each of the consignments of beer that remain in dispute.

The Stella

33. It was originally claimed by the Appellant that the Stella had been supplied by Buntingford Supermarkets, the invoice having referred to the relevant quantity of Stella seized, and the invoice having referred to the Stella, as “Imp”, meaning imported. Mr. Basra of Buntingford Supermarkets then claimed that duty had been paid in respect of it and that the Stella had been supplied to him by Bookers Cash and Carry.

34. Enquiries made by HM C&E officials with Bookers Cash & Carry indicated that that company only ever sourced their Stella from domestic production and that they cannot have supplied “imported” Stella. It has subsequently been assumed that this information must be correct.

35. In May 2005 the Appellant’s representative indicated that a mistake had been made. It was claimed that one consignment of Stella must have been located behind another in the warehouse and that the seized Stella must in fact have been supplied to the Appellant by a different supplier, namely by Barrel Booze. It was suggested that stock had been moved around in the warehouse, which was why it had initially been wrongly supposed that the seized Stella had been supplied by Buntingford Supermarkets. An invoice was then produced to demonstrate that at about the same relevant time, Barrel Booze had indeed supplied an identical consignment of Stella, described as “Stella Artois Conti” (which we take to mean “Continental” or imported”).

36. In the course of her enquiries, prior to concluding her review, Frances Manley e-mailed a colleague, the e-mail containing the following remarks:

“I am carrying out a further review for the non restoration of excise goods, in this case Stella Artois beer.

Beer was seized as it was imported “non UK product”.

The trader is now claiming that there was a mix up in warehouse and the seized beer was in fact purchased from Barrel Booze Ltd……..

It would help HMRC’s case considerably at Tribunal if we could check this out. Could someone visit Barrel Booze Ltd?”

We have already mentioned that Frances Manley issued this request close to the supposed deadline for completing her review, the result of which was that she received the following response:

“As discussed yesterday and again just now I have not been able to get the information you require from the Trader as the Records are in Archive and he was not available today within your timescales. As agreed, I will get Copy Documents and answers to your question on my next visit to BB. This information may be of use to you in the long term”.

Frances Manley concluded her review without knowing whether Barrel Booze confirmed that they had delivered imported Stella to the Appellant, and without ascertaining whether the Stella that we assume was delivered in accordance with the invoice had suffered duty. We note incidentally that the crate price for the Stella on the Buntingford Supermarkets invoice and the Barrel Booze invoice was virtually the same.

37. Frances Manley gave two grounds in her review for contending that the Stella seized was likely to have been that supplied by Buntingford Supermarkets. The first was that it was most unlikely that a mix up in the warehouse would only have come to light, when first mentioned on behalf of the Appellant, in May 2005, when the goods were detained 14 months earlier. Secondly, the Appellant’s warehousemen and HM C&E officers had identified the seized Stella as having come from Buntingford Supermarkets at the time.

38. The following are the points that we fail to understand, and that we consider should be taken into account on the further review. We note that not all of these points necessarily support the Appellant’s case.

Whilst it may sound odd that it would have taken 14 months for the Appellant to suggest that imported Stella cannot have been supplied by Buntingford Supermarkets, it appears from the documents that the Appellant was not notified by anyone until the issue of Charles Dunn’s review letter in April 2005 (i.e. after 13 months) that doubts had arisen in relation to the suggestion that Buntingford Supermarkets had sourced the imported Stella from Booker Cash and Carry. If this is correct, it may explain why the Appellant had not given further thought to its initial suggestion that the Stella had been supplied by Buntingford Supermarkets in the 13/14 month period. .
Has it yet been ascertained whether duty had been paid on the Stella apparently supplied to the Appellant by Barrel Booze? Frances Manley rightly considered this information to be significant and then ignored the point when there was insufficient time to obtain the information.
When it is said that the warehousemen had “clearly identified” the Stella to HM C&E offices as that supplied by Buntingford Supermarkets, what does this actually mean? Even assuming that the seized Stella had identification numbering and bar codes, neither of the invoices from Buntingford Supermarkets or Barrel Booze had any such detail. Accordingly there can be no particular credibility (absent a full summary of how stock control was managed in the Appellant’s warehouse) to the suggestion that the seized Stella was specifically identified by HM C&E officials as being from Buntingford Supermarkets, but equally no way of verifying the reverse, namely that the mix-up did genuinely occur, and that the seized Stella came from Barrel Booze.
Finally if it is the case that the seized Stella came from Barrel Booze and that duty was paid on that consignment, there is still the feature that other imported Stella was supplied by Buntingford Supermarkets which we assume cannot have been supplied by Bookers Cash and Carry. Presumably the duty status of this Stella would be irrelevant if it was not the Stella that had been seized, though we do note in passing that if there was evidence that the Barrel Booze Stella was shown to have suffered duty (the significant missing information) the prices paid by the Appellant for the two consignments were virtually the same, perhaps suggesting that if one consignment had suffered duty, then both might well have done.

The Kestrel and the Kronenberg

39. The facts and the concerns relevant to these two consignments are somewhat similar. The only material distinction appears to be that the UK producer of both indicated that the Kestrel had been specifically identified (by product codes) and had initially been exported to France under duty suspension. By contrast the Kronenberg had not been precisely identified by the same producer but a report from the producer suggested that initially UK duty was thought to have been paid on the Kronenberg.

40. The Kestrel and the Kronenberg were both supplied to the Appellant (at unit prices of £19.99 and £12.99 respectively) by Buntingford Supermarkets, and this information has never been doubted or changed and corrected. There was a change however in the information from Buntingford Supermarkets in that the original supplier was said to have been identified in error, and both consignments were later said to have been purchased from Parched Parrot (at unit prices of £15.99 and £11.79), with the Parched Parrot invoices contained the words “Duty Paid”. In turn Parched Parrot was said to have obtained its supplies from Own Label Wines, a business that had been conducted in partnership by a Miss Bisset and her then boyfriend. The purchase prices on the invoices from Own Label Wines to Parched Parrot were £14.99 and £11.49 respectively.

41. The ground for suggesting that duty had not been paid in respect of these two supplies was that there had been a missing trader in the supply chain, in that Miss Bisset had gone missing. During her own enquiry, however, officers assisting Frances Manley managed without much difficulty to find Miss Bisset who was no longer trading. In interview notes, Miss Bisset claimed that the two consignments had been purchased from Bookers Cash and Carry, though since four years had elapsed and she was no longer trading she eventually confirmed (having checked whether papers had been retained at her mother’s house where she was living in 2004) that the invoices must have been destroyed. When Frances Manley was asked whether the assisting officer should send a letter, asking Miss Bisset for written confirmation that duty had been paid on the two consignments, the interview note of the assistant simply reads “She advised not to send letter”. It appears therefore that the supposed missing trader re-emerged, and indeed was found without very much difficulty, and no confirmation was requested that duty had been paid, and seemingly no-one contacted Bookers Cash and Carry to ascertain whether they confirmed a supply to Own Label Wines as Miss Bisset had claimed.

42. Whilst it would seem imperative that HMRC should seek to ascertain whether Bookers Cash and Carry have a record of supplying the relevant beers to Own Label Wines in early 2004, we make one other observation in relation to these two beers. Having quoted the various unit prices above, it does seem that the various mark-ups made by the different suppliers have been quite significant, particularly the mark-up apparently made by Buntingford Supermarkets in relation to the Kestrel. Whilst this may lead to the supposition that duty may not have been paid, we do note that the mark-up made by Buntingford Supermarkets alone in relation to the Kestrel would seem to have been sufficient to match the cost of the duty (approximately 20 to 25% we believe) so that when asked to pay £19.99 per unit, there can surely have been no ground for any suggestion that the Appellant’s purchase price was itself low, such as to suggest to the Appellant that duty would not have been paid.

The “Bud”

43. We made the point in paragraph 31 above that whilst there were deficiencies in the last review, we did not feel that the evidence produced before us necessarily indicated that any of the goods had definitely borne duty or that there was a great likelihood that they had borne duty.

44. The facts relevant to the Bud are the closest to that conclusion being a reasonable inference.

45. When the Bud was purchased from Roxy International, the Appellant’s evidence was that two consignments had been purchased, and one had immediately been on-sold to a customer called “Eastenders Cash and Carry”. Accordingly as we understand it, one consignment was delivered to Eastenders, and the other to the Appellant. It then appears that the Appellant received the documents material to the consignment to Eastenders, and the suggestion is that Eastenders will have received the documents relevant to the supply to the Appellant. This has never been confirmed. As we understand matters, if the suggestion that the documents had mistakenly been switched was correct then this might confirm that duty had been paid in respect of the Bud supplied to the Appellant. This is because it would then tie up with information that a highly reputable company, Anglo Overseas Ltd, had accounted for duty in respect of four consignments of unidentified beer sold to Global Foods. We accept however that we have been unable to convince ourselves on the documentation that we were shown that the invoice from Roxy International could definitely be “tied up” with the evidence that Anglo Overseas Ltd had clearly paid duty.

Claims relating to the innocence of the Appellant

46. We turn now to the separate subject of whether even if there is no proof that duty has been paid, the Appellant purchased all consignments innocently. It is first relevant to mention several additional facts.

47. Mr. Iqbal said in evidence that he trusted the principals of both the companies Buntingford Supermarkets and Roxy International. He said that he had purchased six consignments from Buntingford Supermarkets, which had been trading for about a year. More relevantly, however, he had apparently known Mr. Basra of Buntingfords in his previous employment, and we understand that Mr. Basra, presumably in that previous employment, had been dealing with Booker Cash and Carry for about 30 years, and was considered to be one of their best customers. In this regard he received discounts offered to Booker’s 15 best customers. Mr. Iqbal also claimed to have known David Roxburgh of Roxy International for some period.

48. On 5 March 2004, HM C&E suspected that Buntingfords Supermarkets were a missing trader. Since Mr. Iqbal was obviously able to contact Mr. Basra extremely easily, and Mr. Basra approached HM C&E on the very next day, it seems fair to emphasise that this initial suspicion was wide of the mark. Indeed by 30 April 2004, Mr. Gareth Rushton of HM C&E wrote to the Appellant’s representatives and said that “I would like to stress that Mr. Basra of Buntingford Supermarkets has now been located, and indeed that no claim of wrongdoing is alleged by Customs and Excise against your clients, Roxy International or Buntingford Supermarkets”.

49. Frances Manley rejected Mr. Iqbal’s claim of honesty, and of being an innocent victim of non payment of duty (should the duty not have been paid) on three main grounds. First, without any regard being paid to the 11-year time gap since the purchase of the whisky, the purchase of dubious whisky was cited as the principal ground for concern. Secondly the unsatisfactory nature of the invoice received from Buntingford Supermarkets was the second point mentioned. We accept that there was no phone number on the invoice, but it otherwise contained full and clear identification of the goods and all the correct information for VAT purposes. And the absence of the phone number obviously did not in the event mean that Mr. Basra could not be found, or indeed that he would be unwilling to make immediate contact with HM C&E. Thirdly reference was made to the goods seized being “in the retail chain”, and goods being held in “commercial quantities”. That sort of remark and that point may be relevant in relation to a personal importer coming through Customs with an improbably large quantity of cigarettes, and there being every indication that the importer means to sell them, rather than smoke the cigarettes himself. As a suggested aggravating factor in the case of a trader with a turnover of £45 million, and the purchase of roughly 300 consignments of alcoholic drinks per week the remark that the seized goods were in a commercial quantity seems irrelevant and absurd.

50. Reference was also made to the feature that Global had paid for all supplies by cheque. This was disregarded as “normal business practice”, though again we think it fair to comment that since all purchases were evidenced by retained invoices, cheque payments and bank account evidence, it was perfectly clear that the Appellant never meant to obscure its supply chain.

51. We were given no evidence about standard mark-ups, and reasonable purchase prices of duty paid goods in early 2004. We do however note that no suggestion was made that any goods, except the Bud, were said to have been purchased at suspiciously low prices. We have even noted ourselves that Buntingford Supermarkets appeared to have made a very large profit on the sale of the Kestrel so that unless the Kestrel had in fact fallen off the back of a lorry (which was not suggested) it would sound as if the price paid for the Kestrel was if anything on the high side, rather than the reverse.

52. In relation to the Bud, we note that it is clear that the Bud was initially sold to the Belgian purchaser by Anheuser-Busch Europe Ltd of the UK at a Euro price which equated, when converted into sterling, and augmented by UK duty, to £12.76. Whether the gap between £12.76 and the purchase price from Roxy International of £13.20 was sufficient to give a reasonable margin to however many intermediate purchasers there may have been we do not know, albeit that not every dealer necessarily makes any hoped for level of margin. From the standpoint of Mr. Iqbal however, when he purchased at £13.20, and the clear fact is that the Belgian price plus UK duty came to only £12.76, we do not see any particularly credible case that the buyer must have suspected that UK duty would not have been paid.

53. We accordingly consider that in the review that we now order, these factors relating to innocence should be taken into account, and that account should be taken of the fact that in our view the grounds on which Frances Manley rejected the case that the Appellant might have been entirely innocent and ignorant of any failure to pay duty were flawed.

Proportionality

54. Relatively little was made in the hearing before us of the point that the forfeiture of goods should be proportionate to the amount at stake. We of course accept in this context that the risk of non-duty-paid goods being seized is a critical part of the armoury of HMRC in preventing evasion of duty.

55. Two factors that we consider should be taken into account in the next review are as follows. First the rate of duty on beer at the time was, we were told, roughly 20 to 25%. The lost duty seems to have been approximately £7,500 even if the truth of the matter is that no duty had been paid in relation to any of the beer. The cost price of the seized beer was substantially more than that, and the price that the Appellant would hope to have charged doubtless somewhat higher.

56. We are also conscious that whilst Buntingford Supermarkets appeared to have made a handsome profit on the sale of the Kestrel, beer is sold at fairly fine margins. Mr. Iqbal made the point that we find entirely credible, namely that it is a struggle for his business to be able to continue supplying small supermarkets and other small shops (seemingly a very worthwhile role to be performing in keeping some small shops alive) so as to make some profit himself and then to be able to match, or get somewhere close to matching the price at which the large supermarket chains are able to sell equivalent products. We do not for a moment suggest that competition with supermarket chains should be funded by avoidance of duty, but we do consider that there is a serious issue of proportionality when a trader loses the gross value of goods that he would aim to sell at a fairly fine margin, particularly when he may very well have been an innocent purchaser of those goods, should duty have been avoided, and when there still remains doubt as to whether duty was avoided or not.

Our Conclusion

57. Our decision is that within a reasonable time scale an independent officer should conduct a further review of the refusal to restore the four seized categories of beer to the Appellant, and that all matters considered in this Decision, and criticisms of the earlier review, should be taken into account. We repeat the point made in paragraph 31 however.

Costs

58. The Appellant’s counsel requested an order for Costs and pointed out that we could award costs as this case was initially set down for hearing before the VAT and Duties Tribunal, rather than the First-Tier Tribunal. We have considered this and consider that while there are many legitimate criticisms of the last review, and we hope that our remarks will result in the next, and hopefully final, review being more satisfactory, the outcome of this case and this Appeal is sufficiently finely balanced that we think it inappropriate to grant the Appellant an award of costs. Our decision is thus that each party should bear its own costs.

HOWARD M NOWLAN

TRIBUNAL JUDGE

Released: 8 October 2009

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (Excise Duty) Respondents