Tribunal Upholds Excise Duty and Penalty for Deliberate Evasion in Hagi-Nicovici Case

Citation: [2023] UKFTT 967 (TC)
Judgment on

Introduction

In the First-tier Tribunal case of Dan Andrei Hagi-Nicovici v The Commissioners for HMRC [2023] UKFTT 967 (TC), the Tribunal was tasked with determining whether the appellant, a lorry driver, was liable for unpaid excise duty and a wrongdoing penalty for an alleged deliberate attempt to evade excise duty. The case presents an examination of strict liability in the context of excise goods and the implications of a transporter’s knowledge and conduct in relation to smuggled goods.

Key Facts

The appellant, Mr. Dan Andrei Hagi-Nicovici, was stopped by Border Force at Dover docks while carrying a load of 26,064 litres of mixed beers on which no excise duty had been paid. Despite Mr. Hagi-Nicovici’s claim of innocence, he was assessed for the excise duty amounting to £32,251 and a wrongdoing penalty of £11,287. The Tribunal had to consider whether Mr. Hagi-Nicovici was liable for the excise duty under Regulation 13 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (the Regulations) as well as the associated penalty under Schedule 41 Finance Act 2008.

Excise Duty Liability

The Tribunal derived its authority to rule on the excise duty from the provisions set forth in the Excise Goods (Holding, Movement and Duty Point) Regulations 2010, where Regulation 13 stipulates that the excise duty point occurs when excise goods are held for a commercial purpose in the UK, and that the duty is to be paid by the person making the delivery, holding the goods, or to whom the goods are delivered. As the appellant was in physical possession of the goods, the case law of HMRC v Perfect [2019] EWCA Civ 465 (Perfect 1) and Perfect 2 were pertinent, which established that an individual transporting goods upon which excise duty was payable at the time when those goods became chargeable is liable for that duty, irrespective of their knowledge or intention concerning the evasion of said duty. In Mr. Hagi-Nicovici’s case, the liability was strict, and he was thus responsible for paying the stated excise duty.

Penalty for Deliberate Behavior

The wrongdoing penalty application was anchored on Schedule 41 of the Finance Act 2008, which addresses penalties related to excise duties. The penalty is determined by the ‘potential lost revenue’ and can be tiered, depending on whether the act was deliberate, concealed, or due to a failure to take reasonable care. The principle extrapolated from Tooth v HMRC [2021] UKSC 17 provided that an intentional act of mislead is classified as deliberate behavior within the penalty framework.

In applying this, the Tribunal considered the circumstances surrounding Mr. Hagi-Nicovici’s actions, including several suspicious factors, such as inconsistencies in his story, lack of formal employment documentation, and peculiarities regarding the load’s seal and documentation. The Tribunal determined that this cumulative evidence indicated Mr. Hagi-Nicovici knew about the attempt to unlawfully evade excise duty and acted deliberately.

Outcomes

The Tribunal found that Mr. Hagi-Nicovici was liable for excise duty as the person “making delivery of the goods” or “holding the goods intended for delivery.” Moreover, they concluded that his behavior was categorized correctly as “deliberate,” leading to a prescriptive application of a wrongdoing penalty under Schedule 41 of the Finance Act 2008.

The Tribunal dismissed Mr. Hagi-Nicovici’s appeal, effectively upholding the initial assessments made by HMRC, both for the excise duty and the penalty for deliberate behavior.

Conclusion

The case of Dan Andrei Hagi-Nicovici v The Commissioners for HMRC reinforces the principles of strict liability within the legal purview of excise duty for goods transported across borders and the implications for transporters in possession of such goods. It underscores the importance of intentionality—or the lack thereof—in determining penalties for wrongdoing in the case of possible smuggling. The Tribunal’s meticulous approach demonstrates the importance of rigorous examination and cumulative consideration of evidence in establishing the deliberate evasion of excise duty. Legal professionals practicing in the UK should take note of this case as a clear affirmation of the existing statutory provisions and their practical application within the jurisdiction of excise law.

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