Dula Miah T/A Village Tandoori v Her Majesty's Revenue and Customs, V 19084
| Jurisdiction | UK Non-devolved |
| Judge | MICHAEL S JOHNSON |
| Judgment Date | 24 May 2005 |
| Respondent | Her Majesty's Revenue and Customs |
| Appellant | Dula Miah T/A Village Tandoori |
| Reference | V 19084 |
| Court | First-tier Tribunal (Tax Chamber) |
19084
VAT PENALTIES — evasion — Indian takeaway — rewriting of “meal bills” — conflict of evidence between trader and former employee as to fraud — evidence of former employee preferred — best judgment and penalty assessments upheld — mitigation of penalty increased to 20 per cent to reflect cooperation by trader in permitting cashing up exercise on which assessments based — otherwise appeal dismissed
VAT — HUMAN RIGHTS — right to fair trial — admissibility of evidence of employee — relevance of absence of caution — other human rights arguments considered — human rights of the Appellant found to have been properly protected
MANCHESTER TRIBUNAL CENTRE
DULA MIAH trading as VILLAGE TANDOORI Appellant
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Tribunal: Michael Johnson (Chairman)
John Davison
Roland Presho
Sitting in public in North Shields, Tyne and Wear on 4 – 7 October 2004, in Manchester on 30 November 2004 and in North Shields on 21 and 22 March 2005
Peter Smallwood, VAT consultant, appeared for the Appellant on 4 – 7 October 2004, Vincent Curley, advocate, appeared for him on 30 November 2004, and Andrew Young, counsel, appeared for him on 21 and 22 March 2005
James Puzey, counsel instructed by the Acting Solicitor for HM Revenue and Customs, appeared for the Respondents throughout
© CROWN COPYRIGHT 2005
DECISION
The assessments under appeal
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The tribunal has before it appeals against two assessments (“the best judgment assessments”) made under section 73(1) of the Value Added Tax Act 1994 (“VATA”) and one assessment (“the penalty assessment”) made under section 76(1) of VATA. They all relate to the Appellant’s take-away business at 10 Ann Street, Hebburn, Tyne and Wear, carried on under the name “Village Tandoori”.
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The best judgment assessments were made because it appeared to the Commissioners of Customs and Excise, as they then were, that the Appellant had not accounted for all the value added tax due in respect of his business. The penalty assessment was made because it appeared that he had dishonestly evaded that tax. Before the tribunal the Appellant has challenged both the alleged tax evasion and the basis of the best judgment assessments.
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The dates, amounts and periods of the best judgment assessments are as follows–
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10 July 2001 for £16,232.00, plus interest of £2,251.48, covering the periods 1 October 1998 to 31 December 1998, 1 January 1999 to 31 March 1999, 1 April 1999 to 30 June 1999, 1 July 1999 to 30 September 1999, 1 October 1999 to 31 December 1999, 1 January 2000 to 31 March 2000, 1 April 2000 to 30 June 2000 and 1 July 2000 to 30 September 2000;
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10 July 2001 for £1,190.00, plus interest of £40.21, covering the period 1 October 2000 to 31 December 2000.
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These assessments were amended assessments, the amounts originally assessed being £19,761.00, plus interest of £2,075.08, and £1,375.00, plus interest of £8.64 respectively.
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The penalty assessment was made on a date in July 2001 – the precise date being unclear – at the rate of 90 per cent of the total of the best judgment assessments, that is to say in the amount of £15,679.00 (rounded down).
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A further, distinct, assessment for £26,843.00, plus interest of £5,648.05, made against the Appellant under section 73(1) of VATA on 26 February 2001, and covering the periods 1 September 1995 to 30 June 1998 and 1 July 1998 to 30 September 1998, was withdrawn in 2000. The tribunal is accordingly not concerned with that assessment.
Foundation of the assessments under appeal
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The best judgment assessments were founded upon observations made of the Appellant’s business by officers of HM Customs and Excise (“Customs”). Customs engaged in two kinds of scrutiny, viz firstly, days on which they perused the “meal bills” for sales transacted at the Appellant’s premises, comparing these with the details of test purchases of meals made by officers of Customs on those days; and secondly, days on which officers of Customs observed the cashing-up procedures at the close of trade.
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Perusal of “meal bills” and test purchases took place on Friday, 19 November 1999; Saturday, 27 November 1999; Thursday, 9 December 1999; and Saturday, 11 March 2000. On two of those days, ie 27 November 1999 and 9 December 1999, Customs also carried out covert observations of the Appellant’s premises to count the number of sales. Customs thus felt able to gauge the correctness of the declared takings of the Appellant’s business. They noted that not only were the declared “meal bills” not always correct, but that on the two days of covert observations, it appeared that there was a suppression rate of 140 per cent between transactions observed and those declared.
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On two further days, ie Friday, 25 February 2000 and Tuesday, 13 June 2000, officers of Customs were present when the Appellant cashed up. With the figures thus obtained for takings, Customs possessed a yardstick to compare with the declared takings of the business on other occasions. Such comparison yielded alleged average suppression rates in respect of takings on Fridays of 158.27 per cent and in respect of takings on Tuesdays of 36.03 per cent.
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In consequence, and having interviewed the Appellant on several occasions without obtaining a satisfactory explanation of the apparent suppression, Customs decided to make the best judgment assessments based on suppression rates of 158.27 per cent for the Appellant’s trading periods from 1 October 1998 to 31 December 1999 and 36.03 per cent from 1 January 2000 to 31 December 2000. In other words, they confined themselves to the apparent suppression rates extracted from the cashing-up figures obtained as mentioned.
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Customs first visited the Appellant on 4 November 1999. Between then and the first of the cashing-up occasions attended by Customs, on 25 February 2000, there was a rise in the Appellant’s declared weekly takings. Moreover on 28 November 2000, Customs obtained a witness statement from Miss Anissa Abdullah Hasan, a former employee of the Appellant. She has since married and has become Mrs Hussain, which is how we shall refer to her in this decision. Mrs Hussain alleged in November 2000 that the Appellant had instructed her to write spurious “meal bills” to match given figures for takings for the business on particular days of trading, the figures being supplied to her by the Appellant.
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The question of the liability of the Appellant to a civil evasion penalty arose. Section 60(1) of VATA provides that in any case where for the purpose of evading VAT, a person does any act or omits to take any action, and his conduct involves dishonesty, he is to be liable to a penalty. The starting point for the amount of such penalties is the amount of the VAT evaded, but that amount is open to reduction pursuant to section 70 of VATA.
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In view of the matters mentioned in paragraphs 7 to 11 above, and the lack of any reasonable explanation as to those matters from the Appellant, either in interview or subsequently, Customs decided to make the penalty assessment in addition to the best judgment assessments, based on dishonest evasion of tax. They allowed a 10 per cent reduction in the penalty under section 70 of VATA for cooperation on the part of the Appellant.
Scope of the dispute
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The notice of appeal against the penalty assessment asserted that the burden of proof as to tax evasion and dishonesty on the part of the Appellant rested upon Customs, as provided by section 60(7) of VATA. The notice made reference to the decision of the Court of Appeal in Han (GK) & Yau (D)(Trading as “Murdishaw Supper Bar”) [2001] STC 1188, in which the court held that civil penalties made pursuant to section 60(1) of VATA give rise to criminal charges within the meaning of article 6(1) of the European Convention on Human Rights and Fundamental Freedoms (“the Convention”). The correctness of those assertions is accepted by Customs.
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The notice then alleged that the standard of proof to be discharged by Customs was the criminal standard whereby the tribunal should be satisfied beyond reasonable doubt. We were informed by Mr Smallwood, who represented the Appellant at the hearing in October 2004, that this allegation was abandoned in favour of the allegation that the correct standard was proof to a high degree of probability, as adopted by the tribunal in Gandhi Tandoori Restaurant v Customs and Excise Commissioners [1989] VATTR 39. Again, Customs accept the correctness of this.
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The notice next alleged that Customs had not disclosed all the material relevant to their investigation of the Appellant, thus denying him a fair trial as provided by article 6 of the Convention Mr Smallwood told the tribunal that since the appeal was...
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