‘167. A right of deduction shall arise at the time the deductible tax becomes charged.’ 168. In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT, which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person.’
‘(1) Subject to paragraph (2) below, and save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which VAT became chargeable. (2) At the time of claiming deduction of input tax in accordance with paragraph (1) above, a person shall, if the claim is in respect of– (a) a supply from another taxable person, hold the document, which is required to be provided under regulation 13; ... […] Provided that where the Commissioners so direct, either generally or in relation to particular cases or classes of cases, a claimant shall hold, instead of the document or invoice (as the case may require) specified in sub-paragraph (a) … above, such other documentary evidence of the charge to VAT as the Commissioners may direct.’
‘[2] The classic way in which the fraud works is as follows. Trader A imports goods, commonly computer chips and mobile telephones, into the United Kingdom from the European Union (“EU”). Such an importation does nto require the importer to pay any VAT on the goods. A then sells the goods to B, charging VAT on the transaction. B pays the VAT to A, for which A is bound to account to HMRC. There are then a series of sales from B to C to D to E (or more). These sales are accounted for in the ordinary way. Thus C will pay B an amount which includes VAT. B will account to HMRC for the VAT it has received from C, but will claim to deduct (as an input tax) the output tax that A has charged to B. The same will happen, mutatis mutandis, as between C and D. The company at the end of the chain – E – will then export the goods to a purchaser in the EU. Exports are zero-rated for tax purposes, so Trader E will receive no VAT. He will have paid input tax but because the goods have been exported he is entitled to claim it back from HMRC. The chains in question may be quite long. The deals giving rising to them may be effected within a single day. Often none of the traders themselves take delivery of the goods which are held by freight forwarders.’
‘[9]. … The Appellant can demonstrate that the assessments for 07/13 to 01/15 inclusive were out of time. Under s73(6) VATA 1994, HMRC have the longer of two years from the end of the accounting period, or one year after sufficient evidence of facts to have raised the assessment. The decision was issued on3 April 2017 , longer than two years after the end of each of these periods. [10] HMRC assert that the last piece of material evidence was received by HMRC on5 August 2016 , …[being] Sage reports and original copies of invoices relating to period 01/16. [The appellant contends that] none of this information related to (and therefore was not material to) periods 07/13 to 01/15. … that HMRC held all relevant evidence of facts they have relied upon in this case for more than one year prior to3 April 2017 . HMRC chose nto to assess those periods, waiting until they could make assessments for later period. In doing so, they exceeded the time limits imposed on them for the earlier periods. Combining those assessments with assessments for later periods cannot reasonably extent [sic] the statutory time limits …’
‘It is correct that I was a director of Baba Wholesale, but I was not responsible for any losses there.’
‘[Mr Johal] was fully aware of all previous matters and took the company with its outstanding liabilities of VAT and other bills, which I understand he has paid. However HMRC keep writing to me …’
‘If I had known that he had problems with HMRC, I would look for alternative.’ (5) It was put to Mr Johal that the key to him in purchasing Trade Release was the VAT number. Mr Johal did not dispute, and said that ‘HMRC took up to 6 months to issue a VAT number’
‘can’t remember who he was; Vivek – can’t remember his surname, Finlay, Raj, A girl’—‘three or four staff’. (3) When asked who would be replying to customers’ emails, the reply was: ‘We never received any emails from customers’; ‘suppliers – some of them.’
‘We just pay them to check the phones were there.’
‘No, not generally familiar with MTIC’
‘There is evidence to show that at the time of the deal Baba had an awareness of MTIC fraud. - In July 2003, a standard Redhill letter was issued outlining due diligence, the role of Redhill, verifying VAT numbers and the high risks of MTIC fraud. - In April 2003, a warning letter was issued regarding Securities, Joint and Several liability and evidence of deduction of Input Tax. - In May 2003, a further letter was issued requesting that Baba verify the details of potential wholesale suppliers/customers to guard against MTIC fraud. - Baba was given 2 veto letters during a visit in May 2003 informing that 1 trader has been deregistered and that the other trader had had its VAT number hijacked to facilitate MTC fraud; and - The dangers of MTIC fraud were discussed, along with due diligence, Joint and Several liability and third party payments at visits to Bab prior to the period this deal took place.’
‘At no point did I deny the fact that I took over the company in June 2012.’ (2) On24 October 2012 , the appellant’s PPOB was visited unannounced by HMRC for ‘Post-registration MTIC Assurance’ reasons between 11:48 to 11:54 hours, and Mr Johal was present; HMRC concluded the short visit by indicating that a meeting would be arranged with the director. When HMRC telephoned Mr Johal at 14:50 hrs the same day to arrange a meeting, Mr Johal got ‘a bit aggressive’ (per note of phone call [B12/93]), and said he would call HMRC back, but that did not happen. HMRC’s repeated calls to Johal were not answered either. (3) On2 November 2012 , HMRC invited Johal to a meeting on15 November 2012 at their Uxbridge office, and to call to re-arrange if he was unable to make the appointment. In the absence of any response, HMRC would de-register the appellant. (4) On6 February 2013 , Johal phoned HMRC to request the appellant’s VRN to be reactivated as he was looking to do a deal. The reactivation happened at some point after the call. Mr Johal’s take on the reactivation was that he had received ‘authorisation from HMRC to trade’. (5) On15 April 2014 , an announced MTIC Assurance Visit took place at EDW’s PPOB at 75 Waterside Trading Centre, Hanwell, (9,000 to 10,000 square feet in size). Mr Johal was present with Raj Shah (accountant). MTIC Awareness Letter was issued. (6) It was noted during the Assurance visit that the appellant did not ‘have a WGWR/REDS etc’ [Wigan/Redhill VAT office verification]. The appellant purchased stock from Bonds warehouses such as Seabrooks. (7) The question was put to Johal that Phoenix, IK Drinks, AK Suppliers, Infinity, etc. were neither Bonds nor large national suppliers, and if the appellant had bought from national wholesalers, such as Bottleneck (Broadstairs, Kent) as per purchase orders exhibited with Johal’s witness statement, the issue of defaulting traders would not have arisen. Johal did not reply to the question directly, but agreed that the deals under appeal were not from ‘large national suppliers’. (8) Johal was referred to what his accountant Raj Shah stated during the VAT visit, that the appellant ‘is making losses’; ‘the expenses are too high on the staff side’, and ‘the margins have been too low’
‘Not exactly; these two letters were informing EDW of other traders.’
‘it is not open to a party to call a witness to give evidence which that party will say is not only wrong but deliberately so’, and went on to say: ‘… where a party wishes to assert that the evidence given in chief by a witness whom he has called is not only wrong, but is wrong on purpose. The most obvious instance is one where the witness has turned coat and has deliberately failed to come up to proof. Here the position seems clear. The party cannot cross-examine his own witness by reference to his proof of evidence or other previous statement unless and until the court has ruled that he is hostile. Nor may he call evidence to establish the general bad character of his witness.’
‘If a prima facie case is made out, capable of being displaced, and if the party against whom it is established might by calling particular witnesses and producing particular evidence displace that prima facie case, and he omits to adduce that evidence, then the inference fairly arises, as a matter of inference for the jury and not a matter of legal presumption, that the absence of that evidence is to be accounted for by the fact that even if it were adduced, it would not displace the prima facie case. But that always presupposes that a prima facie case has been established; and unless we can see our way clearly to the conclusion that a prima facie case has been established, the omission to call witnesses who might have been called on the part of the defendant amounts to nothing.’
‘In our legal system generally, the silence of one party in face of the other party's evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. …’
‘Of course, patently there must be some limitation imposed upon the application of this rule. For example, any party upon whom the burden of proof on any issue is imposed must always adduce a prima facie case on such issue to go to the jury, and the failure of the other party to the litigation to call witnesses who may be expected to elucidate the matter cannot fill in any gaps in the proof required …’
‘Looking at the authorities from Blatch v Archer (1774) 1 Cowp. 63 right up to Earle v Eastbourne District Community Hospital [1974] V.R. 722, it may be accepted that the effect of a party failing to call a witness who would be expected to be available to such a party to give evidence for such a party and who in the circumstances would have a close knowledge of the facts on a particular issue, would be to increase the weight of the proofs given on such an issue by the other party and to reduce the value of the proofs on such issue given by the party failing to call the witness.’
‘The consciousness indicated by conduct may be, not an indefinite one affecting the weakness of the cause at large, but a specific one concerning the defects of a particular element in the cause. The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance of document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanations by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.’
‘From this line of authority I derive the following principles in the context of the present case: (1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, then if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.’
‘It is correct that I was a director for Baba Wholesale, but I was not responsible for any losses there’
‘[59] The test in Kittel is simple and should not be over-refined. It embraces not only those who know of the connection but those who “should have known”. Thus it includes those who should have known from the circumstances which surround their transactions that they were connected to fraudulent evasion. If a trader should have known that the only reasonable explanation for the transaction in which he was involved was that it was connected with fraud and if it turns out that the transaction was connected with fraudulent evasion of VAT then he should have known of that fact. He may properly be regarded as a participant for the reasons explained in Kittel.’
‘In my judgement, contemporaneous written documentation is of the very greatest importance when assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can be checked against it. It can also be significant if the written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw references by its absence.’