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	United Kingdom VAT & Duties Tribunals (Excise) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Excise) Decisions >> Broxburn Bottlers Ltd v Revenue & Customs [2007] UKVAT(Excise) E01049 (05 July 2007) URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2007/E01049.html Cite as: [2007] UKVAT(Excise) E01049, [2007] UKVAT(Excise) E1049

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E01049

Approved Warehouse; failure to comply with conditions imposed by HMRC; Customs and Excise Management Act 1979 sections 92 and 93; The Excise Warehousing (Etc.) Regulations 1988, regulation 7; Notice 197; Notice 50.

EDINBURGH TRIBUNAL CENTRE

BROXBURN BOTTLERS LTD Appellant(s)

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): J Gordon Reid, QC

(Members): Mr K Prtichard, OBE., BL., WS

Ian M P Condie, CA

Sitting in Edinburgh on Monday 11 June 2007

for the Appellant(s) Mr D Harris

for the Respondents Miss Julie Strachan, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2007.
 


DECISION

Introduction

1. This is an appeal against two of three civil penalties imposed by HMRC by Assessment dated 21^st August 2006. One of those penalties was withdrawn following a review of the original decision to impose them. The remaining two relate to the alleged failure (a) to display section 50 Notices at certain points within, and (b) to have clear markings on the floor of the Appellants' excise warehouse at Broxburn.
2. The Appellants were represented by their Plant Director, David Harris, who gave evidence. He is not a shareholder. HMRC were represented by Julie Strachan, solicitor, Shepherd & Wedderburn, Solicitors, Edinburgh. She led the evidence of Keith Berwick, the officer who inspected the premises and made the original decision to impose the penalties. A bundle of documents was produced by HMRC. There was no dispute as to the authenticity, and where appropriate, the transmission and receipt of the various documents produced.

Legal Framework

3. Sections 92 and 93 of the Customs and Excise Management Act 1979 make provision for the regulation of excise warehouses. The Excise Warehousing Regulations (Etc.) Regulations 1988 SI 1988 No 809 enable HMRC to make various regulatory directions or requirements by public notice. Notice 197 dated May 2004, which relates to the holding and movement of excise goods is such a notice. Paragraph 6.6 requires the prominent display of a warning poster (Notice 50) at each entrance and exit to the warehouse site. Notice 50 posters are downloadable from the HMRC website. Production R/14 is such a notice. It states that the premises are approved by Customs and Excise, that goods may be held in the premises on which duty has not been paid, and warns that the concealing or removing of goods without Customs authority may lead to prosecution, fines, penalties or imprisonment.
4. Paragraph 45.3 of Notice 197 requires a record of all stock locations. It provides that all goods be kept in clearly identifiable locations so that the warehousekeeper can readily trace them to the stock account. That paragraph also requires the warehousekeeper to Note the appropriate stock account whenever the warehousekeeper moves goods to a new location in the warehouse.
5. Section 9 of the Finance Act 1994 enables penalties to be imposed for failure to comply with these regulations. Section 10 enables liability to be avoided where there is a reasonable excuse.

Factual Background

6. Ultimately, there was little dispute on the material facts. The Appellants store, bottle, and export excisable goods, principally but not exclusively whisky. They are contract bottlers; they do not own any of the goods they store and bottle. Their premises at Broxburn are an approved warehouse. Production R/17 is a plan of the warehouse.
7. Mr Harris has considerable experience in the whisky trade and the management of such premises. When he was appointed Plant Director in early 2005, business was at a low ebb. The Appellants were losing customers. Stock control was poor. There were serious health and safety, quality assessment and "accreditation" issues which had to be addressed. Over the last two and a half years Mr Harris has turned the business around. Stock control has improved; health and safety and accreditation issues have largely been resolved. Customers have returned; lucrative contracts have been won. Turnover has increased substantially. Instead of one shift per day, the Appellants now operate a three shift system. There are few customer complaints, and complaints of shortages are minimal. Throughout this period Mr Harris has maintained regular contact with HMRC and attempted to address the important issues (as he saw them) raised by HMRC from time to time.
8. Over the Christmas period shutdown 2005/2006, Mr Harris had the floor markings within the premises re-painted. These identify and delineate the numerous bays within the various parts of the premises where stock is kept. Bays are generally about 2m wide, and about 10m deep; goods are stocked 3-4m high. Over 50% of the premises are racked.
9. These identification markings (white lines and numerical codes painted on the warehouse floor) are important for identifying stock and correlating the physical stock and its location with the company's administrative records (the stock account) of these matters. Over time, and largely due to the physical movement of goods, these lines and codes become faded or obliterated, making it less easy to identify particular goods and correlate their location with the stock account even although each bottle and each case have unique product codes.
10. Reinstating the bay markings is time consuming and inconvenient. It requires to be done when the premises are not in operation and takes over a week to carry out. It is thus a costly exercise compared with any fine which HMRC might impose for failure to do the necessary work. Overhanging notices identifying and delineating each bay are an alternative to bay markings on the warehouse floor. However, the initial installation cost is also expensive and time consuming.
11. During an inspection on 31^st May 2006, Officer Berwick noted that no "Notice 50" notice was displayed in the Cask Warehouse. At the same inspection it was noted that the bay markings in the bulk warehouses, Cased Goods 3 and 4 had become obliterated. These points were confirmed in a letter to Mr Harris dated 12/6/06 [R/4]. On returning on 15^th August 2006, the notice was still not displayed and the bay markings had not been repainted. The locations in which goods were kept were thus not clearly identified. Accordingly, on or about 21/8/06 a penalty assessment was issued in relation to inter alia these matters. [R/7]. In evidence, Mr Harris accepted that there were three notices missing and did not dispute that bay markings had been obliterated. He recognised that if his experienced and knowledgeable warehouseman was absent through illness or for some other reason it might not be possible readily to trace all goods.
12. By letter dated 28^th August 2006, the Appellants requested a departmental review. That review confirmed the decision in relation to the two matters with which this appeal is concerned [R/12].

Submissions

13. Miss Strachan addressed us on the law as noted above. She submitted that there was no real dispute on the law or the facts and that therefore the two remaining penalties must be upheld. Mr Harris added little to what we have recorded in our findings of fact.

Decision

14. It is plain from our findings of fact that the Appellants have failed to show that the factual basis upon which the two remaining penalties proceed is incorrect or flawed. The application of the facts to the law is straightforward. The Appellants have not shown that the relevant notice was displayed. They have not demonstrated that the goods in the Cased Warehouses were in clearly identified locations. They have not demonstrated that they could readily trace them to the stock account. Moreover, they have not established a reasonable excuse for their failures. The appeal must therefore be dismissed.
15. Given the improvements made to the Appellants' business over the last two years or so, as set forth in paragraph 7 above, and the general good level of co-operation between HMRC and the Appellants, Mr Harris was of the view that these penalties were relatively trivial and was disappointed that HMRC had even bothered to impose them. Plainly, there is an element of discretion but HMRC will be reluctant, we suspect, to allow traders to persist in even minor infractions of the regulations, where it is economic to pay the penalty rather than remedy the infringement. It is to be hoped that parties can continue to co-operate so as to enable the successful rejuvenation of the Appellants' business, contributed to by Mr Harris's endeavours, to be maintained within the regulatory framework which HMRC require to oversee.

Disposal

The appeal is dismissed. We assume in the absence submissions that, in accordance with their usual practice, HMRC will not seek expenses. No order will be made in relation to expenses unless either party makes a written application therefore within 28 days the date of release of this Decision.

J GORDON REID, QC., F.C.I.Arb., CHAIRMAN
RELEASE: 5 JULY 2007

EDN/06/8021