Judgment summary
Mr Vasile Cerchez, a lorry driver, was stopped twice by UK Border Force at Dover Eastern Docks, on 30 June 2016 and 16 July 2016, each time transporting 30 pallets of beer which were seized because officers considered duty was due and unpaid (paras 1-2). HMRC assessed him for excise duty of £27,894 and £27,876 respectively under section 12A Finance Act 1994, and imposed wrongdoing penalties of £10,739 and £11,708 under Schedule 41 Finance Act 2008, calculated on the basis of deliberate behaviour with prompted disclosure (para 3).
Mr Cerchez appealed both the duty assessments and the penalties. The excise duty assessments and penalties were notified in 2017 to an address at which Mr Cerchez no longer lived, and HMRC subsequently pursued recovery via the Romanian tax authorities, leading to a garnishee order on 3 June 2019 that emptied his bank account and blocked further payments (paras 5-12). Mr Cerchez said this caused him to default on his mortgage, lose his flat, become separated from his family, and end up living in his lorry in the UK (para 13).
The substantive hearing began on 21 February 2024 and was adjourned so Mr Cerchez could produce documents relevant to whether he was employed by, and acting on instructions of, another party. He later produced two employment contracts, with Pro Logistics & Services Ltd and Rubicon Shipping Ltd (paras 20-21). Because HMRC's submissions suggested the contracts might not be genuine, the Tribunal directed a further video hearing, which took place on 16 February 2026, followed by written submissions on 24 March 2026 (paras 22-24).
The Tribunal held that Mr Cerchez was the 'holder' of the excise goods at the first UK duty point because he was in physical possession of them, and that he had not discharged the burden of identifying another person with a superior claim to be treated as holder (paras 104-112). His appeal against the excise duty assessments was therefore dismissed.
On penalties, the Tribunal found that HMRC had not established that Mr Cerchez's conduct was deliberate, since the allegations concerned failures to appreciate and investigate risks rather than actual knowledge that duty-unpaid excise goods were being carried (paras 126-128). However, the Tribunal found Mr Cerchez had no reasonable excuse for his default, as an experienced driver who should have noticed warning signs such as the unsealed trailer (paras 129-131). This reduced the penalty range to 10%-30% for prompted disclosure, and the Tribunal allowed a 90% discount for both seizures, reducing the penalties to 12% of potential lost revenue (paras 132-133).
The Tribunal further found that HMRC's decision not to reduce the penalties for special circumstances under paragraph 14 of Schedule 41 was flawed, because HMRC had failed to properly consider whether Mr Cerchez's overall predicament (beyond mere inability to pay) amounted to special circumstances (paras 139-141). The Tribunal concluded that the extreme and unusual circumstances, including loss of his home, savings and ability to work, and separation from his family, arising from the enforcement of the assessments, constituted special circumstances justifying reduction of both penalties to zero (paras 148-151).
Background
On 30 June 2016 and again on 16 July 2016, Border Force officers stopped Mr Cerchez at Dover Eastern Docks transporting 30 pallets of beer on each occasion, and seized the goods because they considered duty was due and there was no evidence of payment or security (paras 1-2).
HMRC assessed Mr Cerchez for excise duty under section 12A FA 1994 and imposed wrongdoing penalties under Schedule 41 FA 2008 for both seizures, calculated on the basis of deliberate behaviour with prompted disclosure (para 3).
The assessments and penalties were originally notified in August 2017 to an address Border Force held for Mr Cerchez, but he had moved and did not receive them (para 5). HMRC pursued recovery through the Romanian tax authorities, resulting in a garnishee order in June 2019 that emptied his bank account and blocked further transactions until the debt was settled (para 12). Mr Cerchez said this caused him to default on his mortgage, lose his flat, become separated from his wife and child, and live in his lorry in the UK (para 13).
Mr Cerchez's appeal was initially delayed by procedural issues including a late appeal application, a hardship application, the pandemic, and a stay behind the related case of Mr Perfect, whose Court of Appeal judgment on 15 March 2022 held that lack of actual or constructive knowledge of smuggling does not exempt a person from excise duty liability (paras 10-14).
Core dispute
The central issues were, first, whether Mr Cerchez was 'holding' the excise goods at the first UK duty point so as to be liable for the excise duty assessments, given that he said he was merely a lorry driver acting on the instructions of an employer whose identity he could not fully establish (paras 104-112).
Second, whether Mr Cerchez's conduct in relation to the wrongdoing penalties was 'deliberate', as HMRC contended based on his lack of due diligence and cooperation, or whether he had a reasonable excuse for his actions (paras 118-131).
Third, whether there were 'special circumstances' under paragraph 14 of Schedule 41 FA 2008 justifying a reduction of the penalties, in light of Mr Cerchez's personal circumstances arising from HMRC's enforcement action through the Romanian authorities (paras 134-151).
Court findings
The Tribunal held that Mr Cerchez was in physical possession of the excise goods at the first duty point in the UK and was therefore the 'holder' of those goods for the purposes of the Regulations and the Directive. He had not discharged the burden of identifying another person who should be treated as the holder in preference to him, despite producing two employment contracts, because HMRC's inquiries to the companies named in vehicle insurance documents went unanswered and the contracts he produced were inconsistent with his earlier statements (paras 104-112).
The Tribunal found that HMRC had not discharged the burden of establishing that Mr Cerchez's behaviour was deliberate, since the allegations against him concerned failures to appreciate risks and investigate warning signs, not actual knowledge that duty had not been paid or a conscious decision not to investigate (paras 126-128).
The Tribunal found that Mr Cerchez had no reasonable excuse for his default, as an experienced lorry driver who should have picked up on warning signs such as the unsealed trailer despite the presence of a seal number on the CMR (paras 129-131).
The Tribunal held that, since the behaviour was not deliberate, the applicable penalty range became 10%-30% of potential lost revenue for prompted disclosure, and applied a 90% discount for cooperation in both cases, reducing the penalties to 12% of potential lost revenue before considering special circumstances (paras 132-133).
The Tribunal found that HMRC's decision not to reduce the penalties for special circumstances was flawed, as HMRC failed to consider whether Mr Cerchez's wider predicament, beyond mere inability to pay, constituted special circumstances (paras 139-141). The Tribunal concluded that the extreme and unusual circumstances arising from the premature and remorseless enforcement of the duty and penalty assessments, including loss of his home, savings, ability to work, and separation from his family, amounted to special circumstances justifying reduction of the penalties to zero (paras 148-151).
Outcome
The Tribunal dismissed Mr Cerchez's appeals against the excise duty assessments of £27,894 and £27,876 (para 153).
The Tribunal allowed Mr Cerchez's appeals against the penalty assessments and substituted its own decision, under paragraph 19 of Schedule 41 FA 2008, that the amount of both penalties is reduced to zero (paras 152-153).
Major issues / areas of contention
- Whether Mr Cerchez was 'holding' the excise goods at the first UK duty point for the purposes of Article 8 of Directive 2008/118/EC and Regulation 13 of the Excise Duty (Holding, Movement and Duty Point) Regulations 2010, given he claimed to be an innocent agent acting under someone else's direction.
- Whether Mr Cerchez discharged the burden of identifying another person, such as an employer, who should be treated as the holder of the goods in preference to him.
- Whether the two employment contracts Mr Cerchez produced (with Pro Logistics & Services Ltd and Rubicon Shipping Ltd) were sufficient to identify such another person, and whether these documents were genuine.
- Whether Mr Cerchez's conduct in relation to the wrongdoing penalties under Schedule 41 Finance Act 2008 was 'deliberate', requiring subjective knowledge that duty-unpaid excise goods were being carried.
- Whether Mr Cerchez had a reasonable excuse for his conduct if it was found not to be deliberate.
- Whether HMRC's decision not to apply a reduction for special circumstances under paragraph 14 of Schedule 41 FA 2008 was flawed in the judicial review sense.
- Whether Mr Cerchez's personal circumstances, including the effects of the Romanian authorities' enforcement action on HMRC's behalf, amounted to 'special circumstances' beyond mere inability to pay, justifying reduction of the penalties to zero.