20497

VAT – EC SALES LIST – Penalty of £500 imposed for failing to send the return on time – Appellant failed to satisfy the Tribunal on balance of probabilities that it had sent the form in time for the Commissioners to receive it by due date – Appellant offered no alternative explanation for not dispatching the return on time – Appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

	RASHMI KNITWEAR & LEISUREWEAR 	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      JOHN KIPPEST                          (Member)	  

Sitting in public in Birmingham on 22 October 2007

Mahesh Dhameja for the Appellant 

Kim Tilling of the Solicitor’ Office for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against a civil penalty in the sum of £500 for failing to submit an EC Sales List for the fourth quarter of 2005 on time.
2.	The Appellant asserted that it posted the relevant EC Sales List in time for the Respondents to have received it by the due date. 
3.	Under section 66(7) of the VAT Act 1994 the Appellant has a defence to the penalty if it can satisfy the Tribunal that the EC Sales List has been submitted at such a time, and in such a manner that it was reasonable to expect that the List would be received by the Commissioners within the appropriate time limit.
The Legal Framework for EC Sales List
4.	The legal provisions for EC Sales List are found in sections 65, 66 and paragraph 2(3) schedule 11 of the VAT Act 1994 and regulations 21 to 23 of the VAT Regulations 1995.
5.	Essentially the EC Sales List is a return of sales to VAT registered customers in other Member States. The return is submitted quarterly to the Commissioners within 42 days of the end of the quarter. There are provisions to make annual returns if certain conditions apply.
6.	A penalty liability notice is issued if a trader defaults with his return of the EC Sales List.  No action will be taken against a trader who remedies the default within 14 days of receipt of the liability notice. However, the trader remains liable to a penalty without notice if he defaults again within a period of 12 months from the date of the penalty liability notice.
7.	The penalty consists of a daily penalty of £5 for the first failure for every day in default up to a maximum of 100 days.
8.	The trader has two defences to the penalty either he sent the return in such a manner and time for the Commissioners to receive it by the due date or he had a reasonable excuse for the default. The Tribunal has no general power to mitigate the penalty.
The Factual Background
9.	The Appellant was a family owned company, manufacturing leisure and knit wear mainly for export to Europe.
10.	In June 2004 the Appellant was experiencing difficulties with receiving mail at its business address because of the number of business units located there. In those circumstances  the Appellant informed the Respondents to send future correspondence to the home address of one of the partners in St Barnabas Road, Leicester. 
11.	On 12 January 2006 the Respondents issued the Appellant with a Penalty Liability Notice for its failure to return the EC Sales List for the quarter ending 30 September 2005.  The Notice was sent to the address at St Barnabas Road. The Notice warned the Appellant that it would be liable to a daily penalty of £5 unless it remedied its default within 14 days of receipt of the Notice. The Notice also advised the Appellant that if it failed to submit other EC sales lists on time within the next 12 months it would be penalised without notice.
12.	On 20 January 2006 the Appellant submitted its EC Sales List for the quarter ending 30 September 2005, which was within the 14 day period of amnesty granted by the Penalty Liability Notice.
13.	On 26 June 2006 the Respondents informed the Appellant that they had not received its EC Sales List for the last quarter of 2005 which was due on 11 February 2006. As this constituted a further default within the 12 month period of the Penalty Liability Notice dated 12 January 2006, the Appellant was liable to a civil penalty of £500.
14.	 On 18 August 2006 the Appellant contacted the Respondents stating that it believed it had sent the EC Sales List for the last quarter of 2005. The Respondents sent him a duplicate form to complete which was returned on 30 August 2005.
The Appellant’s Case
15.	Mr Mahesh Dhameja made a statement on behalf of the Appellant. He explained that the Appellant had experienced difficulties with receipt of mail because of the number of business units in the premises in which the Appellant conducted its manufacturing operations. As a result of these difficulties in 2004 the Appellant informed the Respondents to send future correspondence to the home address of one of the partners for the Appellant.
16.	Mr Dhameja supplied a bundle of documents in which he provided copies of  EC Sales Lists for various periods from 2004 to 2007 and VAT returns for various periods from 2002 to 2007 to demonstrate that the Appellant  sends its returns on time.
17.	Mr Dhameja stated that the Appellant posted the EC Sales List for the fourth quarter of 2005 on time. However, the Appellant held no certificate of posting and did not retain a copy of the original form sent to the Respondents. Mr Dhameja explained that the Appellant had only started to keep  copies of VAT returns and Sales Lists  after this incident with the penalty.
18.	Mr Dhameja informed the Tribunal that the Appellant encountered problems with its EC Sales Lists for specific quarters of 2006 and 2007 and a recent VAT return, where it appeared that the Respondents may have lost the relevant forms. Mr Dhameja relied on these recent problems to suggest that the Respondents must have lost the EC Sales List which was the subject of this Appeal.
19.	Mr Dhameja pointed out that the Appellant was a small family business which could not afford to pay the fine.
Reasons for Decision
20.	The onus was on the Appellant to demonstrate on the balance of probabilities that it had sent the EC Sales List for the fourth quarter of 2005 in time for the Respondents to receive it by the due date.
21.	Mr Dhameja stated that the relevant EC Sales List had been sent on time in the bar coded envelope supplied by the Respondents. However, Mr Dhameja could supply no details of when and how it was posted. The Appellant held no certificate of posting, and did not retain a copy of the original. 
22.	Mr Dhameja’s explanation that the Appellant had only started to retain copies of returns after this incident was contradicted by the copies of EC Sales Lists and VAT Returns in the Appellant’s bundle some of which pre-dated the EC Sales List for the fourth quarter of 2005.
23.	A prudent business person would have kept a copy of the EC Sales List for the fourth quarter of 2005 and obtained a certificate of posting, particularly as the Appellant was on notice that any further default in the next 12 months would be punishable with an automatic civil penalty.
24.	We find that the Appellant’s difficulties with the Respondents over the EC Sales Lists for specific quarters of 2006 and 2007 not relevant to this Appeal. There was no identifiable single cause for the difficulties, the details of which offered no support for the Appellant’s suggestion that the Respondents had somehow mislaid the EC Sales List for the fourth quarter of 2005.
25.	We also consider the Appellant’s submissions about mail deliveries have no bearing upon the circumstances of this Appeal. The Appellant’s problems with its mail deliveries occurred in 2004.  Since then the Respondents have sent their correspondence and returns (including the EC Sales List for the fourth quarter of 2005) to the address in St Barnabas Road, Leicester, as nominated by the Appellant. In any event the Appellant’s case was that it had sent the relevant EC Sales List on time, which suggested that it had received the blank return from the Respondents. 
26.	We have no power to mitigate the penalty on the grounds of hardship to the Appellant.
27.	The Appellant has produced no credible evidence to substantiate its assertion that it posted on time the EC Sales List for the fourth quarter of 2005. The Appellant has given no alternative explanation for its failure in respect of the said EC Sales List.
Decision
28.	The onus was on the Appellant to demonstrate on the balance of probabilities that it had sent the EC Sales List in time for the Respondents to receive it by the due date. The Appellant has supplied no credible evidence of when and how it sent the EC Sales List for the fourth quarter of 2005. The Appellant offered no other reason for its failure in respect of the said EC Sales List. We, therefore, dismiss the Appeal make no order for costs.

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 6 December 2007

MAN/07/0479