Is an innocent lorry driver who is unaware that he is carrying contraband nonetheless liable to pay excise duty on the load? The Court of Appeal considered that issue in a guideline case of interest to anyone engaged in cross-border European trade.
A lorry driver who was stopped at Dover was found to be carrying 26 pallets of beer on which duty had not been paid. Pursuant to the Excise Goods (Holding, Movement and Duty Point) Regulations 2010, HM Revenue and Customs (HMRC) served him with a demand for £22,779 in duty on the load, plus a penalty of £4,897.
In upholding the driver’s appeal against those bills, the First-tier Tribunal found that he had acted as an innocent agent and was unaware that he was carrying contraband goods. He was working cash-in-hand for what he believed to be a legitimate haulage firm but which turned out not to exist, and he could not reasonably have been expected to subject the documentation which went with the load to detailed scrutiny. The Upper Tribunal subsequently agreed with that decision.
In challenging the latter ruling, HMRC argued that, on a true interpretation of the Regulations and Council Directive 2008/118/EC, which they were designed to implement, the lorry driver was strictly liable to pay duty on the load. Having been in physical possession and control of the goods when they were seized, his liability arose regardless of whether he had actual or constructive knowledge of the fact that duty had not been paid on them.
In ruling on the matter, the Court noted that there was no direct previous authority on the issue of whether lorry drivers should be held liable in such circumstances. The case raised an important point of principle and the outcome would have significant implications for indirect tax policy and HMRC’s ability to fight excise fraud.
Given the prime importance of proportionality in EU law, the Court noted that it was certainly arguable that, if there had been an intention to impose strict liability, that would have been expressly stated in the Directive. However, there was no clear answer to the issues of European law raised and the Court referred the case to the Court of Justice of the European Union. Resolution of the excise duty aspect of the appeal was adjourned pending the outcome of that reference.
The Court, however, rejected HMRC’s appeal in respect of the penalty imposed on the driver. The tribunals had plainly been entitled to conclude on the evidence that his action in bringing into the UK goods on which duty had not been paid was not deliberate and that he had a reasonable excuse.