Anandpreet Powar v The Commissioners for HMRC

The Respondents apply under rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 to strike out the appeal of the Appellant against a personal liability notice on the basis that there is no reasonable prospect of the Appellant’s case succeeding.

On 10 October 2016, HMRC issued 11 excise assessments against Drinks 4 Less (UK) Limited (“D4L”) in the sum of £195,105.

On 22 September 2017, a penalty was issued against D4L in the sum of £85,358.38. On the same date, a personal liability notice was issued against the Appellant in the amount of £85,358.38 (“the PLN”). It was issued under paragraphs 4 and 22 of Schedule 41 to the Finance Act 2008. The PLN holds the Appellant liable for the penalty issued to D4L relating to excise duty.

The Respondents submit that the Appellant’s grounds of appeal have no reasonable prospects of success and/or are an abuse of process because they effectively undermine the findings of fact made by a decision of the First-tier Tax Tribunal of Judge Brooks and Member Gable on 17 May 2024. That decision relating to VAT and its relevance to this application is considered in more detail below.

We considered all of the documentation provided which comprised of a hearing bundle of 127 pages, an authorities bundle of 246 pages, a case management bundle of 181 pages, a supplementary authorities bundle of 228 pages, and a skeleton argument from the Appellant. It was agreed that the strike-out application of the Respondents was to serve as their skeleton argument. We heard submissions from both parties. The Appellant was present at the hearing of the application.

The background facts are not disputed.

D4L was incorporated on 5 September 2011 and registered for VAT with effect from that same date.

Mrs Elah Shah was the director on incorporation of D4L and her appointment was terminated on the same date. Ms Monika Nieradko, the former wife of the Appellant, was appointed as a director of D4L on 5 September 2011 and remained a director until she was replaced by the Appellant.

The Appellant became the sole director of D4L on 8 September 2014 and remained as its sole director until its liquidation. He was also the sole shareholder of D4L.

The main business activity of D4L, as stated in its VAT1 registration application form, was “a wholesaler and distributor of drinks”.

D4L went into liquidation on 16 November 2023.

The decision of Judge Brooks and Member Gable of 17 May 2024 relates to a personal liability notice.

In summary, HMRC denied a claim by D4L for a deduction of input tax in the total amount of £186,694.46 relating to 179 of its transactions during its VAT accounting periods of 02/13 to 05/16 (inclusive). HMRC also issued a VAT assessment against D4L in the amount of £182,455. The basis of the denial of the claim for a deduction of input VAT and the assessment was that the 179 transactions were connected to a fraudulent loss of VAT and that D4L knew or should have known of that connection.

Additionally, a notice of penalty assessment was issued in the sum of £83,019.70 against D4L pursuant to Schedule 24 of the Finance Act 2007. The penalty was issued on the basis that D4L claimed a deduction of VAT in respect of which it knew it was not entitled and also because there were deliberate inaccuracies in its VAT returns of 02/14 to 05/16.

HMRC also issued a personal liability notice against the Appellant on the basis that he was responsible for the inaccuracies in the VAT returns of D4L. That personal liability notice was for £83,019.70 (subsequently reduced to £74,823,63).

The decisions against the denial of input VAT, the VAT assessment and the VAT penalty against D4L were appealed but subsequently those appeals and the AWRS appeal were withdrawn by the liquidator on 12 January 2024. That left the appeal of Mr Powar against the personal liability notice. That was considered by the First Tier Tax Tribunal at a hearing on 9 to 16 April 2024 resulting in the decision of 17 May 2024.

In the VAT decision of 17 May 2024, it was found that Mr Powar knew that the transactions of D4L were connected with the fraudulent evasion of VAT.

At paragraph 96 of that decision, it is stated: “For these reasons we consider that Mr Powar, and therefore the Company, not only should have known the transactions were connected to fraud but that it is more likely than not that Mr Powar actually knew of that connection” (our underlining).

It is stated (at paragraph 100) that: “Mr Powar accepts that, as he was responsible for everything done by it, the actions of the company were wholly attributable to him”.

In respect of the test for reasonable prospects of success, the detailed statement of principles set out by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15] was endorsed by the Tax and Chancery Chamber of the Upper Tribunal (Henry Carr J and Upper Tribunal Judge Sinfield) in The First De Sales Ltd Partnership and others v Revenue and Customs Commissioners [2018] UKUT 396 (TCC) at [33]:

“(i)

The court must consider whether the claimant has a ‘realistic’ as opposed to ‘fanciful’ prospect of success: Swain v Hillman [2001] 1 All ER 91.

(ii)

A ‘realistic’ claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].

(iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman.

(iv)

This does not mean that the court must take at face value and without substance everything that a claimant says in his statements before the court. In some cases, it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Liquid Products v Patel at [10].

(v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.

(vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.

(vii)

On the other hand, it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give a summary judgment because there would be a real, as opposed to fanciful, prospect of success. However, it is not enough to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

The liability for the PLN is imposed under paragraphs 4 and 22 of Schedule 41 to the Finance Act 2008.

Paragraph 4(1) states:

Paragraph 22(1) states:

The approach set out above with respect to reasonable prospects of success is the one that we have followed. In this case, the burden of proof lies with the Respondents. The standard of proof is on a balance of probabilities.

The Respondents rely upon the findings of fact made in the VAT decision of 17 May 2024 and assert that this Tribunal cannot go behind those findings of fact because they were between the same parties to the litigation.

It is stated that the liquidator has confirmed withdrawal from the appeals against the excise assessment and the excise penalty relating to D4L.

The Respondents submit that the amended Grounds of Appeal of the Appellant dated 8 October 2024 have no reasonable prospects of success and/or are an abuse because they effectively undermine the findings of fact made in the VAT decision of 17 May 2024 It is stated that the amended Grounds of Appeal do no more than repeat matters that have already been factually determined between the parties.

In short, the Respondents maintain that the VAT decision sets out the evidence extensively which is that the goods in the supply chains traced to D4L (and to Mr Powar) were smuggled goods that entered into the UK on the basis that no duty was paid and that at no point did anyone pay any duty for the goods that were being bought and sold. It is asserted that it cannot be sensibly suggested that the Appellant has anything approaching an arguable case that his behaviour was anything other than deliberate where he knew that he was operating in transactions connected with fraud.

Additionally, it is stated that Mr Powar is unarguably responsible for any act or failure which resulted in the penalty and that all acts must be attributable to him particularly as there is no one else.

The Appellant’s case is that it would be inappropriate for facts found in respect of a penalty from an entirely different act of legislation with an entirely different legal test to be relied upon by HMRC to discharge its burden of proof in this case and to deprive the Appellant of his opportunity to challenge the penalty as protected by Article 6 of the ECHR.

The Appellant submits that D4L’s withdrawal from the appeals is not conclusive against the Appellant.

It was stated that permission to appeal the VAT decision of 17 May 2024 has been refused by the First-tier Tribunal and by the Upper Tribunal on the papers but that an oral hearing for permission to appeal is pending before the Upper Tribunal on 10 December 2025 and that it would be premature to strike out this appeal because the decision upon which the Respondents principally rely in support of the strike-out application is itself subject to appeal.

It was asserted that, whilst the VAT decision involved the same parties, the personality liability notice in the VAT appeal was imposed under Schedule 24 of Finance Act 2007 and the PLN in this appeal has been imposed under Schedule 41 of the Finance Act 2008.

The Appellant states that the issue considered in the VAT decision related to whether or not there was an inaccuracy in the VAT returns of D4L whereas the issues in this appeal are different and the Appellant is entitled to present evidence and arguments in that respect.

It is asserted that, although the Appellant was the sole director of D4L, certain administrative functions were delegated to other companies and the Appellant intends to provide evidence that he reasonably relied upon those companies.

The Appellant maintains that he has not yet had a proper opportunity to present evidence demonstrating that he was unaware that the duty on the goods remained unpaid.

As referred to above, we must not conduct a mini-trial in reaching a conclusion and we have not done so.

The VAT decision refers to evidence relied upon from criminal proceedings. As stated above, the goods in the supply chains traced to D4L were smuggled goods. The decision of Judge Brooks and Member Gable states that the supply chains traced to D4L were part of a “large-scale movement of smuggled … alcoholic drinks”. As such, no duty would have been paid on those goods.

HMRC’s letter of 14 February 2017 to D4L (entitled ‘Outcome of Departmental Review’) states that no evidence of duty payment on goods purchased by D4L had been provided up to that point in time. That position has not changed. We find that no evidence of duty payment has been provided by the Appellant. Neither has the Appellant stated that any evidence relating to duty payment is to be forthcoming.

HMRC’s letter of 14 February 2017 also details the supply chain and entities involved with respect to the excise issues. Included are suppliers such as Mr Cash & Carry Ltd, Seltran Trading Ltd, Purity Supplies Ltd and Gujarr Ltd amongst others. These are some of the same suppliers detailed in the VAT decision. Mr Carey submitted that there is a complete overlap of suppliers relating to both the VAT and excise issues. That was not challenged by the Appellant and we so find.

At the hearing, it was submitted on behalf of the Appellant that he would like the opportunity to present evidence relating to reliance upon third parties in respect of administrative tasks dealing with due diligence. We were directed to the Appellant’s skeleton argument (specifically to paragraph 21) which states that certain administrative functions were delegated to other companies, namely Hydra Enhanced Analytical/Sertorius Solutions (the two operating as the same entity), Bachuus Solutions, and Tiberius Solutions Ltd.

The issue of due diligence is comprehensively addressed in the VAT decision (principally at paragraphs 69 to 85). Briefly, we will refer to two of a number of instances detailed in the VAT decision where inconsistencies between documents attached to due diligence reports and other correspondence did not have any effect on whether or not D4L traded with the supplier concerned.

In relation to Mr Cash & Carry, it is stated in the VAT decision that: “… it dealt with Mr Cash & Carry (see paragraph 35, above) even though it had received an undated introductory letter in which Mr Cash & Carry had described itself as a “leading international distributor of Spirits, Wines, Bears (sic) and Soft Drinks from around the world” despite the “Business activity description” in a VAT certificate that had been sent with the introductory letter being “Undifferentiated goods-producing activities of private household for own use”.

Another instance in the VAT decision in respect of due diligence related to D4L having begun to trade with AK Suppliers Ltd prior to a due diligence report having been commissioned by D4L in respect of AK Suppliers Ltd.

We find that the Appellant has not provided any specific detail at all of any evidence that he would seek to adduce in relation to demonstrating that reliance upon third party providers could potentially absolve him of his personal responsibility. We are cognisant also that the strike out application was made almost a year ago (on 5 December 2024) and the Appellant has, therefore, had ample time since then (and earlier in time) in which to provide or at least specify evidence that would be forthcoming in that respect. That has not been done.

The Appellant has submitted that striking out the appeal would be premature in light of the upcoming oral application to be heard on 10 December 2025 before the Upper Tribunal in respect of permission to appeal the VAT decision. We acknowledge that the pending application is close in time to this application. That having been said, it should not and does not prevent us from deciding this application based upon the position at this point in time.

The Appellant has submitted also that the strike-out application breaches the Appellant’s Article 6 ECHR right to a fair trial. The Respondents maintain that the Appellant has already been through an Article 6 compliant hearing resulting in the decision of 17 May 2024 which set out clear findings of fact. We were referred by both parties, amongst other cases, to the decision of CF Booth Ltd v Commissioners for HM Revenue and Customs [2022] UKUT 217 (TCC).

Mr Carey referred to a number of specific paragraphs in the CF Booth decision as follows:

“It is clear from cases dealing with the civil head of Article 6 that the right to a fair trial does not preclude a court or tribunal from striking out an action or giving summary judgment either on the grounds that it is an abuse of process or because there is no reasonable prospect of success…” (paragraph 56).

“It is also clear that although the penalty assessment involves a “criminal charge” for the purposes of the Convention, the proceedings in relation to tax penalties are, as a matter of domestic law, conducted through the civil tribunals, namely the FTT and, on appeal, the Upper Tribunal. The underlying procedure in the FTT is governed by the Tribunal Rules which are essentially civil in nature. The domestic rules relating to criminal procedure and evidence do not apply. No authority was cited to us which indicated that civil tax penalties, even those which constitute a “criminal charge”, should be dealt with otherwise than by civil tribunals, that the civil rules of procedure and evidence must be displaced by rules of criminal procedure and evidence or that the usual case management powers of the FTT should be overridden by Article 6” (paragraph 57).

We accept the submissions of Mr Carey and find that the Article 6 right to a fair trial of the Appellant has not been breached.

HMRC’s letter of 14 February 2017 details that, when excise goods are found in the UK which are not duty paid, a duty point is created under Regulation 6(1)(b) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. The person liable to pay the duty when excise goods are released for consumption by virtue of Regulation 6(1)(b) (holding of goods outside a duty suspension arrangement) is the person holding excise goods at that time.

The Respondents maintain that the only party who HMRC can demonstrate ‘held the goods’ is D4L. That D4L held the goods is not in dispute between the parties and we so find. In the VAT decision, it is stated (at paragraph 59) that: “In most cases Mr Powar collected the goods from suppliers in his van, a Mercedes Sprinter, and delivered them to his customers. On occasions the goods would be brought to the Company’s registered office and transferred to his van there or he would meet the supplier somewhere else, such as a carpark, where goods would be transferred to his van for delivery to customers…”.

It is submitted on behalf of the Appellant that he should have the chance to present evidence that he did not know that the acquired goods did not have duty paid on them. The Respondents submit that paragraph 4 of Schedule 41 is not concerned with knowledge and that it is simply not relevant. We agree. We consider that it is clear that after the excise duty point Mr Powar acquired possession of the goods when no duty had been paid and that he then dealt in the goods.

On balance, we consider that the Respondents have met the threshold for us to strike out the Appellant’s case. Based upon a consideration of the totality of the evidence, we do not find that there is a realistic prospect of the Appellant proving his case. Having reached that conclusion, it is not necessary for us to consider the issues of abuse of process or issue estoppel.

We find that the PLN was correctly calculated.

We find that Mr Powar is liable to the PLN.

In summary, we allow the application of the Respondents to strike out the appeal on the basis that there is no reasonable prospect of the Appellant’s case succeeding.

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.