Appeal Reference: TC/2010/01211

[2010] UKFTT 595 (TC)

TC00845

Appeal reference: TC/2010/01211

EXCISE DUTIES – seizure of and refusal to restore Appellant’s vehicle – commercial importation of tobacco – purchase made by Appellant’s passenger – Appellant’s assertion he was not complicit in the purchase – proportionality – hardship – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

MR. HITESH DESAIAppellant

- and -

THE DIRECTOR OF BORDER REVENUE Respondents

Tribunal: Lady Mitting (Judge)

Jane Shillaker(Member)

Sitting in public in Birminghamon 23September 2010

Ben Williams of counsel for the Appellant

Rupert Jones of counsel for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1. Thedecision under appeal is that of the Respondents, taken on review and dated 17 December 2009, to refuse to restore to the Appellant his VW Golf motor car LA55 CEV, seized on 1 October 2009. Mr. Desai gave oral evidence and on behalf of the Respondents we heard oral evidence from the reviewing officer, Mrs. Deborah Hodge.
2. The background facts were not in dispute and we find them to be as follows. On 1 October 2009, Mr. Desai’s vehicle was intercepted at Coquelles in France. It was being driven by Mr. Desai and his passenger was a Mr. Jonathan William Shepherd. In answer to preliminary questions the two men said that they had been to Le Touquet for two days to play golf. The trip had been planned at the last minute and followed a similar trip the previous weekend, which had been such a good deal they decided to go again. On the back seat of the vehicle the intercepting officer spotted a 1kg pack of Golden Virginia tobacco. They were asked whether there was any other tobacco in the vehicle, to which Mr. Shepherd answered “yes, we bought 480 pouches”. The men were then asked whether they had purchased any tobacco goods when they had travelled the previous weekend, to which they both replied “no”. They were asked who the tobacco was for, to which Mr. Desai answered “me” and Mr. Shepherd answered “me and my Dad”. Mr. Shepherd and Mr. Desai then both signed the officer’s notebook, Mr. Desai adding “I agree with the above” and Mr. Shepherd adding “I agree with the above statement”. They were then read the commerciality statement.
3. A search of Mr. Shepherd’s wallet revealed two receipts dated 25 September 2009 (ie on the trip of the previous weekend) for a total of 580 pouches of tobacco. It was put to them by the officer that they had stated that they had not bought anything on their previous trip to which Mr. Shepherd had said in response, “I admit when we came last time we bought tobacco. It was such a good deal we decided to go again”. The men were told that they were not under arrest and were free to go, but if they elected to leave then the car and tobacco would be seized. Mr. Desai told the officer that he needed his car for work, to which Mr. Shepherd added “don’t worry about your car. I will get you one for work. I’m the guilty one. You just carried it in your car”. The men declined to stay for further interview and left, the Respondents seizing the motor car and the 24kg of tobacco.
4. By letter dated 8 October 2009, Mr. Desai’s solicitors wrote requesting the restoration of the vehicle. The letter explained that Mr. Desai had been taking two weeks’ holiday from work. He and Mr. Shepherd decided to go to play golf in France(the first of the two trips). They travelled in Mr. Shepherd’s car and on the way back Mr. Shepherd stopped to purchase some tobacco. It was explained that Mr. Desai didn’t think anything of this as the purchase and subsequent use of the tobacco was nothing to do with him. He did not know how much tobacco Mr. Shepherd had bought and was not in any event aware of what quantities one was allowed to bring back into the country. The two then arranged a further trip to France for a further game of golf. This time they went in Mr. Desai’s car. On the way back to the Eurotunnel, Mr. Shepherd asked if they could stop and buy tobacco again, which they did. Again, it was explained that Mr. Desai was not involved in the purchase and took little notice of what Mr. Shepherd was doing. On neither occasion was Mr. Desai any part of Mr. Shepherd’s plans and did not stand to benefit in any way from what Mr. Shepherd had been doing. A further letter of 12 November 2009 raised the issue of proportionality, valuing the car at around £14,000 whereas the duty evaded had totalled £2,986. The solicitor added that he himself had since spoken to Mr. Shepherd who was quite clear that Mr. Desai did not stand to gain at all by what he, Mr. Shepherd, had done on 1 October. Against this background, the matter came up for review before Mrs. Hodge. Mrs. Hodge outlined the background information and the Respondents’ policy in respect of the restoration of private vehicles. She explained that the general policy in respect of private vehicles used for the improper importation of excise goods is that they would not normally be restored. However at the discretion of the Respondents they could in certain circumstances be restored – if, for example, the excise goods were carried for supply on a not-for-profit basis or the quantity was small and it was a first occurrence or the vehicle was owned by an innocent or blameless third party. There had been no application for condemnation proceedings and Mrs. Hodge treated the importation as being for a commercial purpose. In her consideration, she noted the clear untruth told by the travellers when they denied purchasing any tobacco on their first trip. She noted the combined total purchased within a few days was 54kg and in the absence of any suggestion that the goods were to be passed on on a “not-for-profit” reimbursement basis, she concluded that that they were held for profit. She did not accept Mr. Desai’s attempt to distance himself from the importation by laying the blame on Mr. Shepherd and she again noted Mr. Shepherd’s constant use of the word “we” and also Mr. Desai’s answer as to who the tobacco was for, namely “me”. Mrs. Hodge stated that she was not applying the provision which allowed restoration on terms for a first offence and a small quantity because, first, 24kg was not a small quantity, and secondly this was not a first offence as the men admitted they had travelled the previous week, purchasing a similar amount. Mrs. Hodge rejected the pleas of hardship and proportionality, quoting the judgments of Lord Phillips and Lord Justice Judge in the case of Lindsay v Customs and Excise Commissioners 2002 EWCA Civ. 267.
5. It was Mrs. Hodge’s view, as expressed in her letter, that both Mr. Shepherd and Mr. Desai were involved in some way in the purchase. She stated:

“In my opinion the most likely explanation for the purchase of a total of 53kg of hand-rolling tobacco is that they intended to sell it to make a profit.”

Further, in rejecting the claim that Mr. Desai was not involved in the purchase, she stated:

“I do not accept that your client was not involved and took little notice of what his friend was buying, as he now claims.”

1. There was one aspect of Mrs. Hodge’s review letter which she accepted in her evidence, in the light of further information, had been incorrect. Records revealed that Mr. Desai was the owner of a further Volkswagen vehicle which she had taken to be available to him for use, thus showing that he was not suffering any hardship by the loss of the seized vehicle. Mr. Desai told us that this vehicle was in SORN and produced a number of photographs showing that it was nothing more than a shell and was quite obviously far from drivable. In the light of this evidence, Mrs. Hodge accepted that this vehicle had not been available to Mr. Desai.
2. In his oral evidence, recalling the first trip which had been organised by Mr. Shepherd and was in Mr. Shepherd’s car, Mr. Desai stated that the trip to the tobacco outlet had involved a small diversion. He had known nothing of Mr. Shepherd’s intentions and had stayed in the car while Mr. Shepherd went in to make his purchases. He was aware from looking through the rear view mirror that Mr. Shepherd made two trips into the shop, emerging on each occasion with a couple of large boxes, which Mr. Desai put at roughly one half metre long by 30 centimetres wide and 30 centimetres deep. Mr. Shepherd put them in the boot and there was, according to Mr. Desai, no discussion at any time between the two of them as to Mr. Shepherd’s purchase. The second trip had been the idea of Mr. Desai and was booked by him and took place in his car. Mr. Shepherd asked if a further visit could be made to the same outlet and Mr. Desai duly drove there. On this occasion he went in with Mr Shepherd and browsed but again took no part in and no notice of what Mr. Shepherd was doing. He was aware of how much Mr. Shepherd had bought because he had to open the car up and observe the boxes being loaded. Again we were told there was no discussion about this purchase either at any stage on the journey.
3. When asked, in evidence in chief, if it was correct that Mr. Shepherd had said “we” throughout in his replies to the intercepting officer, Mr. Desai answered that he could not recall but that it was incorrect as he had had no involvement. When asked why he had denied purchasing any tobacco on the first trip, he answered to the effect that he was nervous, shocked and worried about what was in the car. When asked why he had said the tobacco was for him, he said he was concerned about losing his car and had wanted to stick up for Mr. Shepherd. He refused to stay for questioning because he did not think it would serve any useful purpose. If he had thought that it would help him get his car back he would have stayed.
4. In his evidence in chief, Mr. Desai described feeling uncomfortable on the second visit to the shop, but Mr. Shepherd was older than he was and was somewhat intimidating and Mr. Desai did as he was asked. He felt that the purchase could not have been for own use but did not know the details or the quantities involved. In cross-examination, Mr. Desai accepted that looking back he could see that on both occasions Mr. Shepherd had been up to no good. He also accepted that by the time of the second occasion he, Mr. Desai, knew there was something wrong in what Mr. Shepherd had been doing. It was put to him by Mr. Jones that on 1 October he “knowingly assisted” Mr. Shepherd in his purchase, to which Mr. Desai replied “correct”.
5. In respect of the claim of hardship, Mr. Desai told us he earned approximately £1,500 per month net and he produced a list of outgoings which totalled £1,441 per month. He had savings of £1,400 which he told us would be accounted for by his solicitor’s fees in relation to this case. He had a credit card debt and a student loan debt totalling £3,585. The seized vehicle had been purchased in January 2008 for approximately £18,000 of which £11,750 had been paid in cash and the remainder by putting in a part exchange vehicle. He could not afford to purchase a replacement. Since the seizure he had been using a car lent to him by Mr. Shepherd which was in fact the car which Mr. Shepherd had used on the first trip. He was not now in regular contact with Mr. Shepherd but he assumed that he would want his car back at some stage.
6. In his closing submissions, Mr. Williams accepted that the importations had on both occasions been commercial, but as to whether or not they were “for profit” Mr. Desai did not know as he had no knowledge of Mr. Shepherd’s intentions. As far as Mr. Desai was concerned this was in any event immaterial as he, Mr. Desai, did not stand to profit. The second importation was carried in his car but he did not stand to gain and he personally was not holding it for profit. There were, Mr. Williams submitted, many reasons why people lied, not necessarily to conceal their guilt although Mrs. Hodge, he contended, had closed her mind to the possibility of there being any other reason. Mr. Desai’s explanation for his lies was not inconsistent with him being a credible witness. In his support for Mr. Shepherd he was, in effect, overborne by a more domineering character. Whilst accepting that Mr. Desai had to accept a degree of complicity he was in no way an equal partner with Mr. Shepherd. The overriding distinction to be drawn was whether a profit was to be made by the participants. In this case Mr. Desai had been complicit only in “assisting by passive non-resistance” ie he went along with Mr. Shepherd without resistance but was no more active than that. Mr. Williams submitted that the first importation should not be taken into consideration. This is not a case of repeat offenses because on the first occasion Mr. Desai had merely been a passenger, he had no knowledge of what was to come and no guilty knowledge. There was no evidence, in Mr. Williams’ submission, that Mr. Desai knew his vehicle could be seized before they were in fact stopped. In fact until the second purchase was made he didn’t have any cause for concern. Mr. Williams submitted that the Respondents’ policy needed to cover a variety of situations and there were always going to be situations which did not fall precisely within the policy, and this was one such. In trying to accommodate these facts into the Respondents’ policy, Mrs. Hodge had been over-rigid in its application. She had applied the guidelines inflexibly and had drawn inferences without considering other possibilities.
7. Mr. Jones submitted that Mrs. Hodge’s decision was fully reasonable. There had been two large importations, the only conclusion which could be drawn, being that they had to be for profit. Mr. Jones relied on the admission of both men that the tobacco was for them and that they had both sought to deny being involved on the previous occasion.
8. Whilst being permitted to find the facts, indeed this is a necessary part of our role, the jurisdiction of the tribunal is strictly limited to assessing the reasonableness of Mrs. Hodge’s decision. We have to be satisfied, the onus of proof being on the Appellant, that the decision reached by Mrs. Hodge was not one which no reasonable panel of commissioners could have reached. In reaching our own conclusions, we consider whether Mrs. Hodge took into account all relevant factors or whether she considered something which was not relevant; whether she attached appropriate weight to these factors or whether she made any error in law. We start by citing three paragraphs from the case of Lindsay referred to above. First, the comments of Lord Phillips in paragraphs 63 and 64:

“63. Having regard to these considerations, I would not have been prepared to condemn the commissioners’ policy had it been one that was applied to those who were using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at a profit. Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose those vehicles. Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration. Those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance. Cases of exceptional hardship must always, of course, be given due consideration.

64. The commissioners’ policy does not, however, draw a distinction between the commercial smuggler and the driver importing goods for social distribution to family or friends in circumstances where there is no attempt to make a profit. Of course even in such a case the scale of importation, or other circumstances, may be such as to justify forfeiture of the car. But where the importation is not for the purpose of making a profit, I consider that the principle of proportionality requires that each case should be considered on its particular facts, which will include the scale of importation, whether it is a “first offence”, whether there was an attempt at concealment or dissimulation, the value of the vehicle and the degree of hardship that will be caused by forfeiture. There is open to the commissioners a wide range of lesser sanctions that will enable them to impose a sanction that is proportionate where forfeiture of the vehicles is not justified.”

At paragraphs 72 and 73 Lord Justice Judge said:

“72. Given the extent of the damage caused to the public interest, it is, in my judgment, acceptable and proportionate that, subject to exceptional individual considerations, whatever they are worth, the vehicles of those who smuggle for profit, even for a small profit, should be seized as a matter of policy. However, the equal application of the same stringent policy to those who are not importing for profit fails adequately to recognise the distinction between them and those who are trading in smuggled goods. Accordingly the policy is flawed.