Dhadwal v Revenue & Customs

Factual and Procedural Background

This appeal concerns amended assessments of excise duty and VAT totaling approximately £22.7 million, upheld on review. The assessments relate to alleged involvement in a fraudulent scheme to evade excise duty and VAT on alcoholic drinks imported and sold in the UK. The Appellant’s liability arises under the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 and the VAT Act 1994, contingent on his involvement in the fraud. The respondents allege that the Appellant, together with another individual, conspired to use the identities of two legitimate businesses without permission to import and deal in excise goods while evading duty and VAT. The sole issue is whether the Appellant was a party to this fraudulent evasion. The appeal was heard over multiple days in late 2011 before the First-tier Tribunal (Tax Chamber).

Legal Issues Presented

1. Whether the Appellant was involved in the fraudulent evasion of excise duty and VAT relating to importation and onward sale of alcoholic goods.
2. Whether the evidence adduced proves, on the balance of probabilities, that the Appellant acted as a conspirator in the fraud.
3. Whether the Appellant is liable to pay the assessed excise duty and VAT under the relevant statutory provisions.

Arguments of the Parties

Respondents' Arguments

• The Appellant put himself forward as one of the hijacked business identities (Jattinder Singh) to facilitate the fraud.
• The Appellant was linked to a laptop computer (RC/2) used extensively in the fraudulent scheme, supporting his involvement.
• There was significant circumstantial evidence of close association with the known conspirator and a history of unsatisfactory business dealings by the Appellant.

Appellant's Arguments

• The Appellant denied representing himself as Jattinder Singh; the evidence relied upon was insufficient and contradicted by witness testimony.
• The Appellant disputed using the implicated computer for fraudulent purposes; some evidence was shown to be false or unreliable, including expert testimony withdrawn due to the expert’s criminal prosecution.
• The circumstantial evidence of association and business record did not prove involvement in the fraud.
• The burden of proof rested on the Respondents to prove involvement to the civil standard, which they failed to do.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Tribunal accepted that a fraud involving evasion of excise duty and VAT on imported alcoholic goods had occurred and that the other alleged conspirator was involved. However, the critical factual issue was whether the Appellant was also involved as a conspirator. The Tribunal carefully examined the evidence regarding the Appellant’s alleged impersonation of Jattinder Singh, concluding that the evidence was inconclusive and did not prove such representation. The key witness’s evidence was found to be based on assumption rather than direct knowledge, and documentary evidence was missing or contradictory.

Regarding the computer RC/2, the Tribunal noted that some evidence linking the Appellant to its use was either false or unreliable, including expert reports withdrawn due to the expert’s prosecution. The Tribunal considered circumstantial evidence of association and business dealings but found that it did not establish involvement in the fraud. The Tribunal also considered the Appellant’s visit to Istanbul and use of the computer there, finding the evidence inconclusive and not demonstrating fraudulent activity.

The Tribunal emphasized that the burden was on the Respondents to prove involvement on the balance of probabilities and found that the evidence fell short of this standard. The Tribunal expressed concern about the Respondents’ conduct, particularly the use of an unqualified expert and the production of false documents, but noted it had no power to investigate these issues further.

Holding and Implications

The appeal is allowed. The Tribunal found that the Respondents failed to prove that the Appellant was involved in the fraudulent evasion of excise duty and VAT.

As a result, the Appellant is not liable to pay the assessed excise duty or VAT. The decision does not establish any new legal precedent but resolves the dispute between the parties on the basis of the evidence presented. Any application for costs must be made within 42 days of the decision. The Tribunal also noted concerns about the Respondents’ handling of the case but indicated it lacked authority to take further action.