Uab Migoresta v The Commissioners for HMRC [2025] UKFTT 1062 (TC)

[2025] UKFTT 01062 (TC)Case No TC09621
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 17 March 2025Date Judgment date: 28 August 2025
Taylor House, London
Appeal reference: TC/2022/14165
EXCISE DUTY – whether the excise duty assessment was lawfully made – yes – whether the Appellant as the employer of the driver and owner of the vehicle was “holding” the cigarettes – yes – whether the excise duty assessment could be challenged on grounds of proportionality – no - appeal dismissed.
Before
TRIBUNAL JUDGE MICHAELA SNELDERSMANU DUGGAL
Between
UAB MIGORESTAAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentDid not appear and was not represented for AppellantRupert Davies of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Introduction

[1]This is an appeal against an assessment of excise duty dated 29 July 2021 in the sum of £235,936 arising out of the seizure of 760,220 cigarettes from the Appellant’s vehicle at Dover Docks on 2 August 2020. The original appeal was also against an excise penalty in the sum of £141,577.80, however HMRC withdrew that penalty on 13 March 2025 and the appeal before us is therefore only against the excise duty assessment in the sum of £235,936 which was issued on 29 July 2021 (“the Assessment”).[2]The Appellant (“Migoresta”) did not appear and was not represented at the hearing.[3]On 11 March Migoresta’s representative applied on behalf of Migoresta for the hearing to be postponed because Rolandas Pasukonis, the director and sole shareholder of Migoresta, was unable to travel to the UK to attend the hearing (“the Postponement Application”).[4]In the Postponement Application Migoresta stated that it was not possible to provide an indication of when Mr Pasukonis would be able to travel to the UK to attend any postponed hearing and therefore applied in the alternative for the Tribunal to proceed with the hearing in his absence.[5]On 14 March 2025 the Tribunal notified the Appellant that its Postponement Application was refused.[6]The Tribunal was satisfied that Migoresta and its representative had been notified of the hearing and the Tribunal’s refusal of the Postponement Application and that it was in the interests of justice to proceed with the hearing in the Appellant’s absence pursuant to rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

Procedural Background and facts

[7]We were provided with an electronic documents bundle of 545 pages, which included a five page written witness statement from Rolandas Pasukonis, the director and sole shareholder of Migoresta. We also had written witness statements from Alfie Anchor, an officer of Border Force, and John Curtis Crammond, an officer of HMRC. Both Officers gave oral evidence at the hearing. We also had a 4 page skeleton argument from the Appellant and an 18 page skeleton argument from the Respondents.[8]From all of the documentary, written and oral evidence we make the following findings of fact:(1) On 2 August 2020, Migoresta’s employee, Mr Egidijus Balcius, was stopped by Officer Anchor at Dover Eastern Docks whilst driving a goods vehicle owned by Migoresta. Mr Balcius had arrived at Dover from Calais. Officer Anchor searched the vehicle and found 760,220 mixed brand cigarettes (“the Cigarettes”) concealed within wooden boards and cabinets.(2) The multi-part consignment note which must accurately describe and accompany goods travelling by road (“the CMR note”) stated that the goods were consigned by Dzūkų Baldai to Wren Kitchens.(3) When Officer Anchor discovered the Cigarettes he gave Mr Balcius a sheet of paper on which he was asked questions in Lithuanian regarding the load. Mr Balcius provided his answers in writing in Lithuanian. The translated answers state that he was employed by “Joint Stock Company Migoresta” that he had collected the already loaded vehicle from the “garage where vehicles are kept”, that he “only checked how the cargo is secured”, that the delivery instruction he was given was “to phone the number on the CMR note” and that the instruction was given to him by the “Manager of Joint Stock Company "Migoresta"”.(4) The Cigarettes and vehicle were seized and Mr Balcius was issued with copies of the forms BOR156 (the seizure information notice) and BOR162 (the warning letter about seized goods) which states that HMRC may take further action including issuing an assessment for evaded duty and a wrongdoing penalty. He was also issued with Public Notices 1 and 12A which informed him how to challenge the seizure.(5) On 20 January 2021 Border Force agreed to restore the vehicle and trailer to Migoresta for a fee of £5,291 which Mr Pasukonis says he believed meant that no further action would be taken against Migoresta.(6) On 28 May 2021 HMRC issued letters to Mr Balcius, Migoresta and the consignor in English only stating that HMRC was considering assessing them for the duty. The letters were accompanied by a number of fact sheets including, CC/FS1d - General information about compliance checks into Excise matters, CC/FS9 – The Human Rights Act and penalties and CC/FS12 - Penalties for VAT and Excise wrongdoings, Excise Duty Schedule.(7) These letters also asked questions and invited responses. Notably the questions put to Migoresta included the following: “• What is your standard procedure for accepting driving work?• How and from whom was the job obtained? Please provide all available documentation, including the booking request, invoices and any correspondence between you and the supplier• Have you previously transported goods for this supplier? If so, please provide details of other work completed or scheduled, please provide any relevant supporting documents.• Have you previously transported goods to this consignee? If so please provide details of other work completed or scheduled, please provide any relevant supporting documents.• Please confirm what procedures are in place at your company to avoid becoming involved in excise duty diversion?• What checks did you ask your driver to make on the load and paperwork?• Did you place any seals or other security measures on the goods that you were transporting, and if not, why not?• Who was responsible for loading the goods onto the vehicle?• What checks were carried out prior to and after loading?• Please provide details of any checks you carried out (due diligence) on other parties involved in this job. If none, why not?• Please provide details of all parties you expected to be involved in the movement. If the parties involved differed from the original arrangements, please provide details of the changes and why they took place.”(8) HMRC did not receive any response to these letters from any of the recipients.(9) On 29 July 2021 HMRC issued letters to Migoresta, raising the Assessment and stating their intention to raise a penalty.(10) On 19 August 2021 Mr Balcius replied to the letter of 28 May 2021, in which he answered the questions put to him and stated the following: “• He had been employed by Migoresta company.• He no longer worked for Migoresta having left in September 2020, as he was scared following the index incident, which was not the first such incident at the company.• He checked the load was secured, but the load was not sealed.• He did not know that the cigarettes were in the trailer – he just followed instructions.• He did not know the consignor.”(11) On 23 August 2021, HMRC wrote to Mr Balcius informing him that they were no longer pursuing him for the duty or penalty.(12) By letter dated 2 September 2021, HMRC issued the penalty to Migoresta company.(13) On 17 December 2021 HMRC received a letter from Migoresta stating that they “did not know anything about the smuggling,” and contesting the penalty.(14) On the same day HMRC issued a letter to Migoresta advising them of the review and appeal options available to it.(15) On 16 November 2022 Migoresta received a letter from the State Tax Inspectorate in Lithuania seeking to collect payment of the Assessment and penalty.(16) On 22 November 2022 Migoresta’s representative in London, LLA Advice Limited, wrote to HMRC requesting that the debt collection action be paused while they submitted a late appeal to the Tribunal.(17) On 9 December 2022 HMRC wrote to Migoresta confirming that debt collection action was temporarily postponed.(18) Migoresta submitted its appeal to the Tribunal on 22 December 2022, including an application for permission to make a late appeal to the Tribunal.

Application to make a late appeal to the Tribunal

[9]The statutory deadline for the Appellant to appeal against the Assessment is set out in section 16(1B) of the Finance Act 1994 as 30 days from the date of the assessment.[10]The Assessment is dated 29 July 2021, therefore the Appellant had until 28 August 2021 to submit its appeal to the Tribunal.[11]The Appellant did not appeal to the Tribunal until 22 December 2022, which is 481 days late.[12]The grounds for Migoresta’s late appeal are that it thought that the agreement from Border Force to release the vehicle on payment of £5,291 in January 2021 was the end of the matter. Further, because the correspondence, Assessment and penalty were issued in English only, Mr Pasukonis had not understood these. Mr Pasukonis had only appreciated the significance of the subsequent correspondence from HMRC, when he received a letter from the State Tax Inspectorate in Lithuania on 16 November 2022 seeking to collect the unpaid Assessment and penalty. At this point Mr Pasukonis instructed LLA Advice, based in London, to advise them, and LLA Advice subsequently lodged the appeal with the Tribunal on 22 December 2022.[13]The Tribunal has a broad discretion under section 16(1F) to permit late appeals. The Tribunal is required to approach the exercise of this discretion on the basis of the principles set out by the Upper Tier in Martland v Revenue and Customs Commissioners [2018] UKUT 178 (TCC) (“Martland”) and Revenue and Customs Commissioners v Katib [2019] UKUT 189 (TCC) (“Katib”).[14]HMRC do not oppose Migoresta’s application to submit its appeal late to the Tribunal.[15]The starting point for the Tribunal is that we should not grant permission to appeal out of time unless we are satisfied that on balance it should be. The factors for us to take into consideration when carrying out that balancing exercise are the length of the delay, the reasons for the default and all the circumstances of the case.[16]The delay of 481 days is clearly serious and significant delay. We find however that there is some merit in the Appellant’s reason for the delay and that there would be prejudice to the Appellant if he is denied the opportunity to appeal against the Assessment which is for a significant sum. Also, HMRC do not oppose the Appellant’s application to make a late appeal and have not submitted that they will be prejudiced if the Appellant’s late appeal is allowed to proceed.[17]We find therefore that the prejudice to the Appellant of not being granted permission to make a late appeal to the Tribunal outweighs the prejudice to HMRC if we grant permission. We therefore grant the Appellant’s unopposed application to submit its appeal late to the Tribunal.

Point at Issue

[18]The Appellant’s stated grounds of appeal as set out in its statement of case dated 10 December 2024 are as follows:
“Grounds of Appeal 6. The Appellant challenges the assessment and penalty on the following grounds: 6.1 Proportionality and Financial Hardship a. The penalties imposed are disproportionate to the scale of the Appellant’s operations and financial capacity: 2021 turnover: €738,099; net profit: €2,683. 2023 turnover: €1,098,035; net profit: €6,607. 2023 turnover €307,942; net profit: €500. b. Payment of the penalties would result in severe financial hardship, risking bankruptcy and job losses for the nine employees, including socially disadvantaged individuals. c. The Appellant relies on regular cash flow to meet its financial obligations, and such penalties would disrupt operations irreparably. d. The Appellant considers that the principle of proportionality requires that each case should be considered on its particular facts, including the scale of importation, whether it is a 'first offence,' whether there was an attempt at concealment or dissimulation and the degree of hardship that will be caused by forfeiture. 6.2 Procedural Missteps and Unclear Communication a. HMRC correspondence was issued in English, and the Appellant, lacking legal representation and adequate language skills, did not fully understand the notices. b. The Appellant relied on a prior Border Force decision dated 20 January 2021, in which the seized vehicle and trailer were restored for a fee of £5,291. This led the Appellant to believe the matter had been resolved. c. There were significant delays in HMRC’s communications, and the Appellant received no confirmation of receipt for its responses. 6.3 Lack of Constructive Knowledge a. HMRC’s assertion that the Appellant’s behavior was “deliberate and concealed” is unfounded: i. The driver, Mr. Egidijus Balcius, stated he did not load or witness the loading of the vehicle. ii. The Appellant relied on CMR documentation provided by the client and no reason to suspect any illegal activities. iii. The Appellant has implemented compliance policies, including regular training and due diligence measures, which were not acknowledged by HMRC. 6.4 Procedural and Evidential Weaknesses a. HMRC’s reliance on the driver’s statements fails to establish constructive knowledge on the part of the Appellant. b. The calculation of penalties based on “potential lost revenue” with minimal reductions for cooperation is unfair, given the Appellant’s financial and operational constraints.”
[19]The grounds of appeal under the heading of Lack of Constructive Knowledge and Procedural and Evidential Weakness are only relevant to the penalty assessment which HMRC has since withdrawn.[20]The Respondents response to the grounds of appeal is as follows:
“The Respondents contend that the Appellant has provided no evidence to substantiate the legitimacy of the load, movement, order, parties involved etc. Further, the Appellant has provided no information regarding who the goods were received from, who loaded the goods, which due diligence were undertaken etc. 49. The Respondents contend that ignorance of government bodies is not a reasonable excuse to not pay attention to official letters being issued. 50. The Respondents contend that financial situations are not a reasonable excuse to not pay excise duty legally due on goods being imported into the UK. 51. It is submitted that as a matter-of-fact UK duty was due on the goods imported by the Appellant pursuant to section 13 of the Excise Duty (Holding, Movement and Duty Point) Regulations 2010, and that the Respondents are entitled to recover that duty pursuant to section 12(1A) of the Finance Act 1994. 52. It is regulation 13(2) that identifies the Appellants as the person liable to pay the duty, as they were found holding the goods. ….. The Appellant was issued Public Notice 1 and 12A on the day of the seizure by Border Force. Section 3 of Notice 12A states: a. “If you believe something should not have been seized, you can challenge the legality of the seizure. That will lead to a court hearing where HMRC or Border Force has to prove the seizure was lawful. The burden is on the claimant to prove goods are duty paid. b. You may believe that HMRC or Border Force had no legal right to seize something because, for example: i. excise goods brought to the UK from an EU country were for your own use or to be given away ii. goods imported from outside the UK and EU were within your statutory allowance iii. duty has been paid on UK excise goods that are liable to duty.” 55. The Appellant was entitled to challenge the legality of the seizure to the Magistrates Court by lodging a notice of claim within 30 days of the seizure. As no challenge was made, paragraph 5 of Schedule 3 to CEMA provides that the goods in question shall be deemed to have been duly condemned as forfeited. 56. The Court of Appeal judgment in Revenue and Customs Commissioners v Jones & another [2011] EWCA Civ 824 held that the Tribunal has no jurisdiction to go beyond the deeming provisions of paragraph 5 Schedule 3 of CEMA. That approach was confirmed by the Upper Tribunal in the case of The Commissioners for Her Majesty’s Revenue and Customs v. Nicholas Race [2014] UKUT 0331 (TCC), European Brand Trading v HMRC [2016] EWCA Civ 90 and more recently in The Commissioners for HM Revenue and Customs v Liam Hill: [2018] UKUT 0045 (TCC).”

The law

[21]Regulation 13 of the Excise Goods (Holding & Movement and Duty Point) Regulations 2010 (“the Excise Duty Regulations 2010”) sets out that excise duty arises on the facts of this appeal and who is liable for it. Regulation 13(1) states:
“Where excise goods already released for consumption in another member state are held for a commercial purpose in the United Kingdom in order to be delivered or used in the United Kingdom the excise duty point is the time when those goods are first so held.”
[22]Regulation 13(2) states:
“Depending on the cases referred to in paragraph (1), the person liable to pay the duty is the person – (a) Making delivery of the goods; (b) Holding the goods intended for delivery; or (c) To whom the goods are delivered.”
[23]Regulation 88 of the Excise Duty Regulations 2010 states that:
“If in relation to any excise goods that are liable to duty that has not been paid there is— (a) a contravention of any provision of these Regulations, or (b) a contravention of any condition or restriction imposed by or under these Regulations, Those goods shall be liable to forfeiture.”
Those goods shall be liable to forfeiture.”[24]Section s139 of the Customs and Management Act 1979 (CEMA) states that:
“ (1) Anything liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard.”
[25]Any person is entitled to challenge the legality of a seizure by giving notice of their claim to HMRC within 30 days of the seizure (paragraph 3 of Schedule 3 to CEMA). Where no challenge is made, paragraph 5 of Schedule 3 to CEMA provides that the goods in question shall be deemed to have been duly condemned as forfeited and the legality of the seizure can no longer be challenged.[26]Section 12(1A) and (4) of the Finance Act 1994 provide as follows:
“(1A) Subject to subsection (4) below, where it appears to the Commissioners— (a) that any person is a person from whom any amount has become due in respect of any duty of excise; and (b) that the amount due can be ascertained by the Commissioners, the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative. … (4) An assessment of the amount of any duty of excise due from any person shall not be made under this section at any time after whichever is the earlier of the following times, that is to say— (a) subject to subsection (5) below, the end of the period of 4 years beginning with the time when his liability to the duty arose; and (b) the end of the period of one year beginning with the day on which evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge;…..” (a) that any person is a person from whom any amount has become due in respect of any duty of excise; and (b) that the amount due can be ascertained by the Commissioners, the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative. … (a) subject to subsection (5) below, the end of the period of 4 years beginning with the time when his liability to the duty arose; and (b) the end of the period of one year beginning with the day on which evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge;…..”

Burden of proof

[27]The Burden of proof is on the Respondents to prove that the assessments were validly and lawfully raised. The burden then moves to the Appellant to show that it has established valid grounds of appeal.[28]The standard of proof is the usual civil standard of the balance of probabilities. Discussion and Our view Validity of Assessment

Discussion and Our view

[29]The Cigarettes were seized by Officer Anchor at Dover Eastern docks.

(d) as follows:

“(2) Notice need not be given under this paragraph if the seizure was made in the presence of – … (d) in the case of anything seized on or from a vehicle, the driver of the vehicle”
[30].Mr Balcius was also issued with information on how to challenge the legality of the seizure and request restoration of the goods within 30 days of the seizure. Migoresta did not challenge the legality of the seizure within that time or at all. As a result, the Cigarettes are deemed to be duly condemned as forfeited under paragraph 5 of Schedule 3 to CEMA 1979 (HMRC v Jones & Jones [2011] EWCA Civ 824).[31]It follows from the above that duty was due on the Cigarettes pursuant to regulation 13 of the Excise Duty Regulations 2010, as this was the basis on which they were seized and, as that seizure was not challenged, duty was due on them. HMRC are entitled to recover that duty pursuant to section 12(1A) of the Finance Act 1994.[32]Regulation 13(2)(b) of the Excise Duty Regulations 2010 provides that the person “holding the goods intended for delivery” is liable to pay the duty.[33]In his witness statement dated 4 November 2024, Mr Pasukonis concedes that Migoresta was “holding” the Cigarettes for the purpose of the liability to duty where he states:
“I do not dispute responsibility for “holding” the goods, irrespective of the knowledge of their nature”
[34]The Upper Tribunal in Hartleb Transport [2024] UKUT 34 (TCC) (“Hartleb”) at [78] stated:
“We find the factors identified by the UT in Dawson to be a useful guide in determining who to regard as holder in circumstances where physical possession and de facto and /or legal control are separated as they are in our situation,…”
[35]These factors were summarised in Hartleb at [71] as follows: “The four matters identified by the UT were, in summary:(1) who had physical possession at the time the alleged earlier excise duty point occurred,(2) who is the person alleged to have de facto or legal control over the goods who it is said should be assessed rather than the subsequent holder and how that person is said to have control and the basis on which it was being exercised,(3) the time at which the excise duty point arose, and(4) where the goods were being held at the relevant time (see [149] of the UT decision). Having established them it was for the Tribunal to then assess, taking into account those facts, who should be regarded as the holder.[36]Migoresta was the employer of the driver and owner of the vehicle in which the Cigarettes were found. Applying the four factors set out in Hartleb, the driver, Mr Balcius, had physical possession of the Cigarettes when they entered the UK and the excise duty point occurred. Mr Balcius, as an employee of Migoresta, was under Migoresta’s control, as was the vehicle in which the Cigarettes were held.[37]Migoresta is therefore the holder of the Cigarettes at the excise duty point for the purpose of regulation 13(2)(b) and Migoresta is therefore correct to concede this point.[38]The Assessment was made and notified to Migoresta by letter dated 29 July 2021, which is just under 12 months from the date the liability arose and therefore well within the four years’ time limit that HMRC had to make the Assessment.[39]For all the reasons set out above we find that the Assessment was validly and lawfully raised and issued to Migoresta.

Appellant’s grounds of appeal

[40]Migoresta’s grounds of appeal are set out in full in paragraph 18 above. We will address the grounds of appeal that are relevant to the Assessment in turn.

Proportionality and Financial Hardship

[41]The question of proportionality in relation to duty assessments has been considered in a number of First-tier Tribunal (FTT) decisions including Lane vHMRC [2015] UKFTT 423 (TC), Staniszewski v HMRC [2016] UKFTT 0128, Hughes v HMRC [2019] UKFTT 700 (TC), Michalska v HMRC [2019] UKFTT 173 (TC), Fleming v HMRC [2016] UKFTT 849 9TC) and Paul David Eveleigh v HMRC [2023] UKFTT 00356 (TC).[42]In all of these decisions the FTT concluded that, while the doctrine of proportionality may be relevant to penalties, it is not relevant to the quantum of the duty itself.[43]This Tribunal is not bound to follow these FTT decisions but as set out at [23] of HMRC v Sutterwalla [2024] STC 1271:
“the principle of judicial comity, or horizontal stare decisis, requires that a FTT should follow the decision of a previous tribunal of co-ordinate jurisdiction unless ‘convinced’ or ‘satisfied’ (there is no practical difference between the two) that the earlier decision was wrong (see Gilchrist v HMRC [2014] UKUT 169 (TCC) at [91] to [94]).”
[44]None of the written submissions on behalf of Migoresta submit that the doctrine of proportionality should be applied to the Assessment. Indeed, in Migoresta’s skeleton argument Mr Pasukonis states:
“The Appellant contends that while statutory excise duty is fixed by law, any additional penalty must be proportionate - and in this instance, it is not.”
This statement suggests that Migoresta concedes that the doctrine of proportionality is not relevant to the Assessment.[45]Irrespective of that concession, and for completeness, we agree with the earlier FTT decisions set out above and find that the doctrine of proportionality is not relevant to the Assessment.[46]It follows that Migoresta’s ground of appeal that the Assessment is disproportionate and will lead to financial hardship must fail.

Procedural Missteps and Unclear Communication

[47]The fact that the Assessment was issued to Migoresta in English only, that there were delays in HMRC’s communications with Migoresta and Mr Pasukonis’ belief that the release of Migoresta’s vehicle for a fee was an end to the matter, do not affect the underlying statutory excise duty that Migoresta is liable to pay as a result of the importation of the Cigarettes on 2 August 2020. It follows that this ground of appeal must also fail.

Conclusion

[48]For all the reasons above we dismiss the appeal against the Assessment in the sum of £235,936.

Right to apply for permission to appeal

[49]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 28th AUGUST 2025