UT/2019/000009 - [2024] UKUT 00176 (TCC)

The FTT received oral evidence from Mr Ali and saw a bank statement produced by him in the name of Palm Palace. It also received evidence from the HMRC officer who attended the seizure and made a visit to the address at which Mr Ali said he bought some of the tobacco together with documentary evidence which included the lock up unit rental agreement, direct debit instructions, and the invoices Mr Ali had provided in relation to some of the tobacco.

In its discussion of the issues the FTT made various findings and recorded points of detail in the parties’ submissions which we outline as relevant.

The weight of the tobacco seized was a matter of dispute, with Mr Ali estimating this was 80-100kg whereas the FTT found the weight was that recorded by HMRC: 515kg (FTT [20]).

Mr Ali provided three invoices dated 15 January 2016, 10 March 2016 and 20 May 2016. These detailed the seller as “The Price 30” and the purchaser as “Palm Palace Restaurant”.

The invoices covered only 185kg out of 515kg. HMRC pointed out: 1) there was no VAT number on the invoices although they purported to charge VAT; 2) the duty on one kilogram of shisha tobacco is £107.71 but the price was £30 per kilogram; 3) two of the invoices had the same sub-total (£2100) but were for different amounts of tobacco (65kg and 70kg).

The FTT recorded HMRC’s submission that it later visited the location in Queensway Market, London where the tobacco was said to have been purchased establishing that:

The FTT found (FTT [22]) that the duty had not been paid and that the tobacco was released for consumption under Regulation 6(1)(b) at the time of the seizure.

As regards physical possession the FTT [27] explained:

In relation to the lock up unit, the FTT had recorded the documentary evidence HMRC had produced as including 1) a storage agreement in the name of the appellant with a move in date of 1 November 2015, 2) an insurance application form, and a “proof of insurance” document in the name of the appellant and 3) a direct debit instruction form with details of a bank account in the name the appellant. (The FTT noted the bank account number and sort code on the form were the same as those on the bank statement produced by the appellant at the hearing which was in the name of Palm Palace). It recorded his submissions (at FTT [5]), which included that the lock up unit was owned by Palm Palace, that Mr Ali was their employee (he had been a director before but had had step down for health reasons), that his work involved visiting a shop in Queensway Market at the request of a Palm Palace director to buy tobacco, and that the van was also owned by Palm Palace and their logo on the side.

In relation to whether the appellant was the person holding the tobacco at the relevant timetheFTT understood his argument to be that he was acting as an employee of Palm Palace. The FTT noted Mr Ali had not made such argument in his correspondence with HMRC and in his grounds of appeal. It noted his letter to HMRC of 16 August 2017 referred only to himself in relation to the goods and stated: “I purchased the goods and paid all relevant taxes and…have kept copies of all receipts for myself”. The FTT also noted his grounds referred to himself as the purchaser of the tobacco and the person paying for it and had asked for the assessment to be waived so that he could “continue with our business which is our only income”. The FTT noted that Mr Ali had not disputed that he had physical possession of the tobacco and that he had agreed he was responsible for the lock up unit and van and that he had purchased the tobacco (FTT [27]).

As regards knowledge (which the FTT considered relevant under the case-law that applied at the time), the FTT found (at FTT [29]) that it was “…clear that the appellant knew that he was in physical possession of [the Tobacco]” and referred to the referral the Court of Appeal had made in Perfect. The FTT distinguished that, considering it clear that Mr Ali knew he was in possession of tobacco and that he should have known it was not duty paid. The FTT therefore concluded he was liable to pay the duty when the goods were released for consumption.

The FTT found Mr Ali was holding the Tobacco within the meaning of Regulation 10 and was therefore liable to pay the duty ([FTT (30)]).

The FTT also considered whether an earlier duty point could be established as follows:

Concluding the assessment had been correctly made, the FTT dismissed Mr Ali’s appeal.