Hessam Pty Ltd and CEO, Australian Customs Service - [2001] AATA 808

DECISION AND REASONS FOR DECISION [2001] AATA 808

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1785

GENERAL ADMINISTRATIVE DIVISION       )
           Re      HESSAM PTY LTD
  Applicant
           And    CHIEF EXECUTIVE OFFICER, AUSTRALIAN CUSTOMS SERVICE
  Respondent

DECISION

Tribunal Ms G Ettinger Senior Member
Date 25 September 2001

PlaceSydney

Decision           The decision under review dated 19 October 1999 of the Chief Executive Officer of the Australian Customs Service, in which it was decided to demand payment from Hessam Pty Ltd, t/as Whitehall Duty Free, the Applicant in these proceedings, of $1,608,653.40 in accordance with provisions of section 35A(1) of the Customs Act 1901 and section 60(1) of the Excise Act 1901, is affirmed.
  ..............................................
   Ms G Ettinger
  Senior Member
CATCHWORDS
Customs - whether the decision made pursuant to section 35A of the Customs Act and section 60(1) of the Excise Act to demand payment from the Applicant was the correct and preferable decision – decision affirmed -

LEGISLATION
Customs Act 1901 ss 35A(1), 79, 273GA(1)(a), 116(1), 114D(1)
Excise Act 1901 ss 5A, 60, 162C(1), 61

CASE LAW
Collector of Customs for the State of New South Wales and Southern Shipping Company Limited (1962) 107 CLR 279
Re Bollinger and Chief Executive Officer of Customs (1997/1998) 48 ALD 697
Collector of Customs for Victoria and Wilh Wilhelmsen Agency Pty Ltd (1956) 102 CLR 147

REASONS FOR DECISION

25 September 2001 Ms G Ettinger Senior Member

The decision under review before the Administrative Appeals Tribunal ("the Tribunal") was the decision of a delegate of the Chief Executive Officer, Australian Customs Service, ("ACS"), the Respondent in these proceedings, dated 19 October 1999 (T2), which was to demand payment of duty and excise from Hessam Pty Ltd, t/as Whitehall Duty Free, ("Hessam"), the Applicant in these proceedings, in accordance with provisions of section 35A(1) of the Customs Act 1901 ("the Customs Act") and section 60(1) of the Excise Act 1901 ("the Excise Act").
The Applicant was represented by Mr S Gageler SC of counsel and Mr J Clarke of counsel instructed by Glasheen Quilty, Solicitors, and the Respondent by Mr J Johnson of counsel instructed by the Australian Government Solicitor.
Oral evidence was given by Mr Melhem (Malcolm) Hanna Ayoub, Managing Director of Hessam and Ms Lesley Klinker, bond clerk, export manager and company secretary.
ISSUES BEFORE THE TRIBUNAL
The issue before the Tribunal was whether the demand for payment from Hessam of $1,608,653.40 in accordance with the provisions of section 35A(1) of the Customs Act 1901 ("the Customs Act") and section 60(1) of the Excise Act 1901 ("the Excise Act") by the Respondent, in connection with five shipments of tobacco products and cigarettes ("tobacco"), made on 19 October 1999, was the correct and preferable decision.
In doing so, the Tribunal had to consider whether pursuant to section 35A of the Customs Act, for imported tobacco products, or section 60(1) of the Excise Act in relation to locally manufactured tobacco products, Hessam had:

either failed to keep those goods safely; or
when so requested by the Collector, did not account for those goods to the satisfaction of the Collector.

I was mindful that there was no issue between the parties regarding the calculation of the quantum demanded by the Respondent of Hessam, solely a question of whether the making of the demand was the correct and preferable decision pursuant to the legislation.
LEGISLATIVE FRAMEWORK
The relevant legislation in this matter was the Customs Act 1901 ("the Customs Act"), in particular sections 35A(1), 79, 116(1), 114D(1), and the Excise Act 1901 ("the Excise Act"), in particular sections 5A, 60(1), 162C(1) and 61. As relevant, sections of the legislation follow.
The Tribunal's powers of review are derived from section 273GA(1)(a) of the Customs Act and section 162C(1) of the Excise Act.
Pursuant to section 35A of the Customs Act, persons having possession, custody or control of dutiable goods are required to keep them safely, and account for them to the satisfaction of the "Collector". As relevant, section 35A follows:
"35A Persons having possession of dutiable goods to keep them safely
(1)Where a person who has, or has been entrusted with, the possession, custody or control of dutiable goods which are subject to the control of the Customs:
(a) fails to keep those goods safely; or
(b)when so requested by a Collector, does not account for those goods to the satisfaction of a Collector;
that person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the duty of Customs which would have been payable on those goods if they had been entered for home consumption on the day on which the demand was made.
…"
Section 79 deals with warehouse licences and follows as relevant:
"79 Warehouse licences
(1)Subject to this Part, the CEO may grant a person or partnership a licence in writing, to be known as a warehouse licence, to use a place described in the licence for warehousing goods.
(2) A warehouse licence may be a licence to use a place for warehousing goods generally, goods included in a specified class or specified classes of goods or goods other than goods included in a specified class or specified classes of goods.
(3) A warehouse licence may authorize blending or packaging, processing, trading or other activities specified in the licence to be carried on in the warehouse."

Section 114D stipulates that goods must be dealt with in accordance with an export entry. As relevant it follows:
"114D Goods to be dealt with in accordance with export entry
(1) The owner of goods in respect of which an export entry has been communicated to Customs:
(a)must, as soon as practicable after an authority to deal with the goods is granted, deal with the goods in accordance with the entry; and
(b) must not remove any of the goods from the possession of the person to whom they are delivered or of any person to whom they are subsequently passed in accordance with the entry unless the entry has been withdrawn, or withdrawn insofar as it applies to those goods.
Penalty: $1,000."
Section 116 of the Customs Act deals with action to be taken when goods are not dealt with in accordance with an export entry. As relevant it follows:
"116 What happens when goods are not dealt with in accordance with an export entry?
(1) Where:
(a)goods are entered for export under section 114; and
(b)none of the goods or some only of the goods have been exported in accordance with the entry at the end of a period of 30 days after the intended day of exportation notified in the entry;
the authority to deal with the goods in accordance with the entry, so far as it relates to goods not exported before the end of the period, is, at the end of the period, taken to have been revoked.
…"
Pursuant to section 60 of the Excise Act, persons are charged with keeping excisable goods safely, and account for them to the satisfaction of the "Collector". As relevant section 60 follows:
"60 Persons to keep excisable goods safely etc.
(1) Where a person (including a manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of the Customs:
(a) fails to keep those goods safely; or
(b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector;
the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand."

Permission to remove goods may be given for goods which are subject to the control of the Australian Customs Service pursuant to section 61A of the Excise Act. As relevant, it follows:
"61A Permission to remove goods subject to Customs control without
entry
(1) A Collector may give permission in writing to a person specified in the permission to remove goods of a kind specified in the permission that are subject to the control of the Customs from a place so specified to another place so specified and, until the permission is revoked, the permission is authority for the person to remove goods of that kind that are subject to the control of the Customs accordingly.
(2) A Collector may give permission in writing to a person specified in the permission to remove goods subject to the control of the Customs that are specified in the permission from a place so specified to another place so specified, and the permission is authority for the person to remove those goods accordingly.
(3) Permission under subsection (1) or (2) may be given subject to the condition that the person to whom the permission is given complies with such requirements as are specified in the permission, being requirements that, in the opinion of the Collector, are necessary for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts.
(4) If, in relation to the removal of any goods, a person to whom permission has been given under subsection (1) or (2) fails to comply with a requirement specified in the permission:
(a)he is guilty of an offence against this Act punishable, upon conviction, by a penalty not exceeding $20,000; and
(b)if he failed to comply with the requirement before the goods were removed--the removal of the goods shall, for the purposes of paragraph 116(d), be deemed not to have been authorized by this Act."
Section 273GA of the Customs Act provides for appeals to the Tribunal arising from a decision of the Chief Executive Officer of the Australian Customs Service.
"273GA Review of decisions
(1)       Subject to this section, applications may be made to the Administrative Appeals Tribunal for review of:
(aa)     a determination by the CEO for the purposes of subsection 28(2);
(ab)     a determination by the CEO for the purposes of subsection 28(3);
(a)       a decision of a Collector under section 35A making a demand;
…"

EXHIBITS

The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the T-documents"), and the list of Exhibits which follows.
In relation to Exhibit A1, the T-documents, I noted that the sentence: "Immediately after they observed the prime mover depart, Customs Officers also observed Mr Ayoub standing in front of the roller door of the warehouse" which was part of paragraph 24 of T2/7 (Exhibit A1), was expressly withdrawn by the Respondent. Similarly, by agreement of the parties, and my concurrence, a sentence referring to Mr Ayoub in relation to movements of the third shipment at paragraph 74, Exhibit A1/14 was deleted.
Section 37 documents ("the T-documents") Excluding certain words as noted above in paragraph 10. Exhibit A1
Supplementary T-documents                   Exhibit A2
Documents compiled pursuant to a Direction of the Tribunal of 8 March 2001                   Exhibit A3
Statement of Ms L Klinker 17 July 2000 Exhibit A4
Statement of Ms L Klinker 4 June 2001 Exhibit A5
Statement of Mr M Ayoub 17 July 2000 Exhibit A6
Statement of Ms K A McKenzie (Brettell) 25 May 2001 Exhibit R1
Statement of Mr G S Dunn 25 May 2001 Exhibit R2
Statement of Mr G M Toft   24 May 2001 Exhibit R3
Statement of Ms L M Hingston   21 May 2001 Exhibit R4
Statement of Mr I A Horne 21 May 2001 Exhibit R5
Statement of Mr M C Jackson      21 May 2001 Exhibit R6
Statement of Mr R W Hignett        15 May 2001 Exhibit R7
Statement of Ms M Novotny         14 May 2001 Exhibit R8
Sample form of "Entry for Exportation"               Exhibit R9

BACKGROUND

By way of background I noted that the main parties in this matter were the Applicant Hessam, Kopiko Trading Company Pty Ltd ("Kopiko") and peripherally, SBI Shipping Pty Ltd ("SBI"), the latter not a party to these proceedings.
I noted that the premises of Hessam, the Applicant, are situated at Shop 2, 300 Forest Road Hurstville, New South Wales, and that it holds a Warehouse Licence pursuant to section 79 of the Customs Act which entitles it to store, display and demonstrate goods under bond. It is also licensed to sell goods to relevant travellers by means of an outwards duty free shop as defined by section 96A of the Customs Act. Further, pursuant to section 5A of the Excise Act, the shop at Hurstville is licensed to store "goods generally". Its managing director at the relevant time was Mr Melhem (Malcolm) Hanna Ayoub ("Ayoub").
This matter arose in relation to shipments of tobacco from the Applicant to Kopiko, a New Zealand company. A company search at Exhibit A3/40 indicated that Kopiko was incorporated on 10 December 1997, and that the sole shareholder and director was Peter Nicholas Saba, whose date of birth was given as 22 May 1962. The address given on the document above-mentioned indicated the company address as 172 Ponsonby Road, Ponsonby, Auckland, while in an "urgent" Australian passport application dated 13 January 1997 at T3/66, Mr Saba indicated a Sydney home address. The names of Mr Saba's parents recorded on his passport application form were as follows: Nicholas Peter Saba, father and June Saba (nee Ayoub) mother.
A further document at Exhibit A3/38 indicated that Mr Peter Nicholas Saba was the sole director and shareholder of Stephkat Ventures Limited ("Stephkat") of the same Auckland address as Mr Saba of Kopiko.
I noted that Exhibit A3/41 and 42, were New Zealand police and customs searches for the name Talofe and Talofae which were used by Kopiko in correspondence with the Applicant. The results of these showed that there were no passports held in either name, and a facsimile cover sheet dated November 1999 from the New Zealand Police stated as follows:
"A3/42 Talofae means a term of endearment e.g. You poor soul. It is not likely that anyone would name a child like in the Samoan customs.
However the name talofa means hello.
It is most likely a false name …"
Mr Gageler relying on Ms Novotny, handwriting expert, whose report was at A3/48, stated that it was possible that Saba and Talofae were one and the same person. I noted there was no disagreement from Mr Johnson.
Mr Gageler also drew to my attention the role of SBI, a third player in the matter who was not a party to the present proceedings, and from whom similar demands had also been made by the Respondent. SBI, or its associated company SBI Express Pty Ltd, was the shipping company which, through its operator Anthony Chalita, collected the tobacco products from Hessam, to be placed in containers and shipped to the purchaser, Kopiko in New Zealand. There was disagreement, addressed later on in these reasons, between the parties as to whether SBI was the agent of Hessam or of Kopiko.
I noted that there had been six shipments of tobacco to Kopiko between December 1997 and April/May 1998, and that the ACS had conducted covert surveillance on five shipments, subject of these proceedings, from the Applicant to Kopiko.
Mr Gageler detailed movements for one of the five shipments for which demands for payment by the Respondent had been made, to indicate the pathway which had been taken with regard to the movement of the various shipments. His description was in fact with regard to the "second" shipment, the first of five subject of the ACS demand. I noted the submission that similar procedures for removal of goods from the Applicant and for shipping, were employed for each shipment.
In that regard, Mr Gageler drew my attention to the letter dated 7 January 1997 (sic - 1998), from Ms L Klinker of Hessam to Mr Talofae of Kopiko at Exhibit A1/T7, responding to the latter's order, and requesting 50 per cent deposit in advance, with the balance to be paid when the goods were ready for shipping. Mr Gageler indicated that a booking confirmation from UDL, for "orange juice" dated 8 January 1998 was at Exhibit A2/ST1.
Mr Gageler drew my attention to Exhibit A2/ST6, a facsimile transmission dated 12 January 1997 (sic – 1998), from Mr Anthony Chalita of SBI for the attention of Mr David Talofae of Kopiko with regard to the cost and details of payment for a "1x 20 FCL Full Container". The message also stated that SBI had obtained an export clearance number ("ECN") for customs clearance.
I noted the submission of the Applicant that Kopiko had engaged SBI to collect the tobacco products from Hessam's premises and organise shipment to Kopiko in New Zealand. The document at Exhibit A1/T6 (with regard to Shipment No.1), dated 29 December 1997, indicated that 193 cartons of tobacco and some other goods, the latter not of concern in connection with this matter, were documented (ECN and container numbers noted), for export to Kopiko.
In an effort to distance Hessam from the further transport, Mr Gageler indicated a document Exhibit A2/ST3, with the letter head SBI Express Pty Ltd, to the account of SBI Shipping Pty Ltd with "Ref: Kopiko". Mr Gageler told me that it was Kopiko which made the arrangements with SBI, and that SBI invoiced Kopiko for doing so.
Mr Gageler indicated that after collection from Hessam by SBI, the goods were transported by Mr Chalita to a Patrick Stevedoring wharf at Botany. The procedure anticipated was that goods were to be packed into a container by Maritime Container Services Pty Ltd, (Exhibit A2/ST2), and then loaded aboard vessel KIW as indicated in Exhibit A2/ST1.
Mr Gageler submitted that the last time Hessam or any of its officers saw the goods was when Mr Chalita collected them in his truck. The evidence of the Hessam witnesses with regard to this process is dealt with later on in these reasons.
Documentation before the Tribunal indicated that investigators of the New Zealand Customs Service and Australian Customs Service ("ACS"), examined various of the containers and found the contents to contain only approximately three cartons of 10,000 cigarettes per carton, with the majority of the contents being soft drink and other products. Statements of the officers were admitted into evidence and discussed further on in these reasons for decision. In connection with this matter a search warrant had also been executed at the Applicant's premises by ACS officers on 7 May 1998. Mr Ayoub also gave evidence regarding the search, which is discussed later in these reasons.
EVIDENCE BEFORE THE TRIBUNAL
Oral evidence was given by Ms Lesley Florence Klinker, bond clerk, company secretary, and export manager of the Applicant, and Mr Melhem (Malcolm) Hanna Ayoub, former managing director of the Applicant. There were also statements of customs officers, McKenzie, Toft, Hingston, Horne, Jackson, and Hignett before the Tribunal as Exhibits R1 – R7.
evidence of mr melhem (malcolm) hanna ayoub – managing director of hessam pty ltd
Mr Ayoub, managing director of Hessam at the relevant time, whose statement of 17 July 2000 was before the Tribunal as Exhibit A6, also gave oral evidence. In his statement, he said that he and his wife, Danielle, were the two major shareholders in Hessam Pty Ltd t/as Whitehall Duty Free. Mr Ayoub said he was a developer, and that after the problems encountered with this matter, he had passed the business on to his partner in approximately July of 1999. He said his partner and Ms Klinker now controlled the company.
When asked by Mr Johnson whether he was the managing director of Hessam in 1997 and 1998, Mr Ayoub replied: "Correct … I don't know what you want to call it - legal point of view or not, but virtually the whole thing was done by my employee Lesley Klinker. I was a very busy man doing other work. …" He told the Tribunal that there were only three employees of the company at that time.

Mr Ayoub said that at the relevant time he ran a construction company from an office adjoining the shop, Whitehall Duty Free, and said that although he was aware of major decisions in relation to Hessam, Ms Klinker managed the incoming funds and other related information gathering. He said that he sometimes saw the relevant documents, and sometimes not. Mr Ayoub said that Ms Klinker had been doing this work for the past 25 years, even before he had taken over the company. In addition he had an accountant. Mr Ayoub told the Tribunal that J.C. Christie, the accountant, was an old man who handled the accounting for the various companies Mr Ayoub operated, (such as the duty free business, retail, service station and construction). He said that Mr Christie had now retired. Mr Ayoub said that he checked on Mr Christie's work because although Mr Christie had been well trusted by the previous owners of the company, he was in his seventies, and forgetful.
When questioned, Mr Ayoub confirmed that the handwriting in Exhibit A3/26 recording the credit of $58,000. to his account, was Mr Christie's. Mr Ayoub said that documents kept at home, such as those found during the execution of the search warrant on 7 May 1998, were photocopies, taken home to check on the above-mentioned payment, with the originals remaining in his office.
When questioned by Mr Johnson regarding whether he had seen documents at T6/22, T7/23, T/826, T/929, T10/35 and T10/36, which were related to the role of SBI in requesting ECN numbers and other details relating to the supply of tobacco products to Kopiko, Mr Ayoub said he could recall seeing some, and said he was not sure about others. He agreed he had been at his home when a search warrant was executed on 7 May 1998, and agreed he knew that some of the originals of those pages mentioned had been found torn up, on the top of a work bench next to the sink in the kitchen, and some in a garbage bin under the sink in his kitchen.
Mr Ayoub agreed he had torn up the documents, and when cross-examined regarding his reasons for tearing them up, Mr Ayoub said:
"At one stage we had problem with J. C. Christie in checking on the money and I had to make sure, at that particular time, is the money went into the statement when I've checked, and if you've found, you will check in the record of the company they were only copy, an original stayed at the head office, so I only make that time we were short of money and I had to make sure hundreds of thousands had come in. J.C. tells me he has but I took the copy of them and took the bank statement at home because I don't have time sometime to check and I checked on the bank statement we did receive them, and when we did confirm received them if I had – and I teared them to pieces and I put them in the bin or I left them laying arounds on my office. If I had reason not to show them to anyone, I would have put them in, you know, somewhere, toilet, burn them – just put them in my desk or in the kitchen. …" [reproduced verbatim]
Mr Ayoub agreed with Mr Johnson that the documents dated back to 1997. He insisted they had been torn up either a week or days before the search warrant was executed in May 1978. Mr Ayoub did not agree with Mr Johnson's suggestion that the documents were torn up in order to try and conceal them from the Customs officers. Mr Ayoub said that if he had thought there was anything wrong with regard to the documents, he would have destroyed them, but as they were just copies, and he had finished with them, he had torn them up.
In reply to Mr Johnson, Mr Ayoub agreed he had been told (implying by Ms Klinker), that there had been business dealings with Kopiko and Stephkat, and that Mr Saba's name appeared on various documents. He emphasised that the day-to-day running of the business was done by Ms Klinker, and a manager he referred to as John. Mr Ayoub said that he did not know Mr Saba, and when Mr Johnson suggested that that was untrue, Mr Ayoub disagreed, saying Peter Saba could be Peter Smith for all he knew.
In reply to Mr Johnson that he would have been aware of eight transactions with Stephkat between 3 February 1997 and 8 April 1997, the value of which ranged from $17,000. - $22,000. each, Mr Ayoub replied that he dealt with "heaps of companies", that he had staff dealing with such matters, and that he himself dealt with millions of dollars of property so that the above-mentioned amounts were insignificant.
Mr Ayoub denied he had ever made payments or made arrangements for payment to Kopiko or Stephkat, and said that all the dealings with Kopiko were purchases by Kopiko.
In reply to my questioning, Mr Ayoub said that Ms Klinker and Mr Christie saw all documents relating to the business, and that they informed him, as appropriate, of payments. He said that there were no documents which the above-named employees did not see, and although he may not have himself seen all, he said: "but I would be aware of what's going on of course."
evidence of ms lesley florence klinker – bond clerk, export manager, company secretary
Ms Klinker whose statements of 17 July 2000 and 4 June 2001 were Exhibits A4 and A5 before the Tribunal, also gave oral evidence. She gave evidence about her responsibilities in Hessam, indicating that she was the company secretary. Her other duties, such as stock control, despatching stock for export, and liaison with the Australian Customs Service ("ACS") were detailed in her statement.
In Exhibit A4, Ms Klinker stated that she first became aware of Kopiko in December 1997 when Hessam received a facsimile order from David Talofae. She stated that she packed the tobacco ordered by Kopiko into boxes with the assistance of Ms L Broadbent, another employee. She stated that (for the first shipment) the boxes were collected by Mr Eddie Chalita in a pantechnicon truck on approximately 18 December 1997. Ms Klinker stated that in relation to Shipment No.1, she and Mr J Dimitrio, another employee, had loaded the boxes into the truck, which had no internal container. Ms Klinker also stated that she did not see anything further and did not see the boxes packed into Container GSTU.2644.1930.
In commenting on Shipment No.2, Ms Klinker deposed in her affidavit that Mr Talofae had telephoned in January 1998 to ask her to send all the stock (tobacco) Hessam had. Ms Klinker stated that she then prepared document T7 (dated 7 January 1997 (sic - 1998)). The stock had been held at Oswalds Bond as it had previously been seized by the Office of State Revenue ("OSR"). Ms Klinker said that when the stock was returned, she packed it, faxed the details to Mr A Chalita, and the stock was again collected by his brother Eddie. Ms Klinker said that once again, "…there was no formal customs security arrangement for the cigarettes when they left Whitehall, there was no binding or tape on the load." (Exhibit A4 paragraph 17). Ms Klinker observed that once again she was not present when the goods were packed into containers as that was done at SBI.
As to Shipment No.3, Ms Klinker said that she had examined documents T14, and T15 and that they appeared to be accurate. This order also took place in January 1998, with some delay in payment, and hence, delay in shipment. Ms Klinker gave details of the same procedure as previously being followed with regard to the collection of the tobacco, and stated that again, she did not see the goods packed into a container.
As to Shipment No. 4, Ms Klinker referred to T19, and T20, and to similar procedures as for the other shipments, with the loading of tobacco at Hessam, on or about 13 March 1998. Ms Klinker's statement with regard to this shipment stated that "Customs returned the documents in a fairly haphazard fashion and it is now clear to me that a number of the documents taken by the ACS were not returned. …"
As to Shipment No.5, Ms Klinker acknowledged that documents at T24 and T25 originated from the Applicant. She stated that as previously, she and Ms Linda Broadbent packed the goods which were collected by Mr Chalita.
As to Shipment No.6, Ms Klinker acknowledged that documents at T29, T30 and T31 appeared to be correct records. She said that it appeared the tobacco had been collected by Mr Chalita on 24 April 1998 and taken to SBI.
Ms Klinker stated in Exhibit A4 that she had been upset when ACS had "raided" the Applicant's premises and taken considerable quantities of materials. Ms Klinker stated that it was during the "raid" that she became aware that the ACS suspected that tobacco in some of the six shipments had been diverted for home consumption. She wrote: "This came as a complete surprise to me."
In giving her oral evidence, Ms Klinker agreed when asked by Mr Johnson in cross-examination that she knew goods could not be taken from the warehouse for export unless they were first entered for export. She also acknowledged that she knew goods could not be taken from the warehouse for export unless an authority to deal with the goods had been given by the ACS. Ms Klinker acknowledged that she had relied on SBI to take those steps for Hessam in the transactions with Kopiko.
In her second statement, Exhibit A5, Ms Klinker said in relation to Mr Saba:
"That person was at no time known to me as being in any way associated with Kopiko. In later documents in the bundle from the AGS there is also reference to Mr Saba as having been involved with the Company Stephkat Ventures Pty Ltd at the time Whitehall dealt with Stephkat back in 1996 or 1997. … At no time did I ever meet the persons referred to as Peter Saba or David Talofae."
In cross-examination, Ms Klinker explained why she had said in her first statement that she did not know Mr Saba. She said that when she went through her invoices, she realised that Hessam had had dealings with Peter Saba and Stephkat by facsimile transaction only, in 1996 or 1997. Ms Klinker agreed when shown certain pages of Exhibit A3, that there had been approximately eight transactions between Hessam and Stephkat between 3 February 1997 and 8 April 1997.
When questioned about the relationship between Stephkat and Kopiko, Ms Klinker expressed surprise that they were related.
When asked by Mr Johnson why the transactions between Stephkat and Hessam had ceased so abruptly after 8 April 1997, Ms Klinker said that it was because the Office of State Revenue had put a restriction on Hessam's purchases from the tobacco company.
When asked if she saw incoming documentation with regard to the payment for goods, Ms Klinker answered that she saw bank statements. When referred to pages 19, 20 ,22, 23 of Exhibit A3, Ms Klinker said that she had not seen those documents (evidencing transfers from Kopiko), previously. Ms Klinker was not able to say who in the company handled those documents.
evidence of the customs officers and others
Exhibits R1 to R7 inclusive were affidavits of various ACS officers involved in the investigation of the Hessam matter. In each case, the officers broke container seals and conducted a covert examination of the contents, in the company of other officers, and the containers were resealed. The Applicant was not alerted to this until after the sixth shipment had been inspected, and a demand for payment of excise and duty was made for shipments No.2 – No.6.
Ms K A McKenzie (Brettell), officer of the New Zealand Customs Service, whose affidavit of 25 May 2001 was before the Tribunal as Exhibit R1 deposed in her affidavit how she had been involved in inspecting a container with a shipment of cigarettes from "Whitehall" to Kopiko in January 1998. Photocopies of her handwritten notes were attached. She deposed that certain of the cartons contained soft drink, satchels, aftershave and perfume. On a second visit, and after ascertaining that the seal remained unbroken, Ms McKenzie stated she was satisfied that there were only three cartons of cigarettes in the first container inspected, Container GSTU 2641930.
Ms McKenzie gave an account of her inspection of a further container APLS277735 on 17 March 1998. She counted 406 cartons with contents other than cigarettes and found only two cartons of cigarettes which contained 50 smaller cartons or "sleeves" each. As with the other shipments, the rest of the contents consisted of soft drink, juice and other products.
Mr G S Dunn, officer of the ACS, whose affidavit dated 21 May 2001 and attachments/photographs were before the Tribunal as Exhibit R2, deposed that he had been involved with inspecting Container AZLU2403653, Shipment No.4 at Darling Harbour on 16 March 1998. He recorded that the container contained three shippers of Rothmans 10/20 International cigarettes and the remaining cartons contained soft drink.
Mr Dunn also included a report of his role in the execution of the search warrant of Mr Ayoub's premises in the company of other officers.
Mr G M Toft, officer of the ACS, whose affidavit dated 24 May 2001 with attached handwritten notes was before the Tribunal as Exhibit R3, deposed that he had examined Container AZLU2400654, Shipment No.2, on 3 March 1998. He stated that he had seen a large number of cardboard cartons of a uniform size and shape. Three other cartons were different in size and shape. The latter contained 50 smaller cartons or 'sleeves' each labelled 200/20 Rothmans International cigarettes. He said that the three cartons were of the shape and size known as shippers. He stated that the rest of the cartons contained soft drink or juice.
A similar exercise was described with regard to Container AZLU2403653, Shipment No.4 in April 1998.
Mr I A Horne, officer of the ACS whose affidavit of 21 May 2001, was before the Tribunal as Exhibit R5, deposed that he was part of the group of officers who participated in executing the search warrant at the business premises of the Applicant on 7 May 1998. He stated that he removed certain documents from the premises.
Mr M C Jackson, officer of the ACS whose affidavit of 21 May 2001 with attachments was before the Tribunal as Exhibit R6, deposed that he examined the contents of Shipments No.3, No.4, No.5 and No.6. He stated that each contained only three 'shippers' of cigarettes, with the rest of the cargo consisting of soft drink and other products.
Mr R W Hignett, employee of the Department of Health and Aged Care, whose affidavit of 15 May 2001 with attachments was before the Tribunal as Exhibit R7, deposed that he was involved in the execution of the search warrant at Mr Ayoub's home on 7 May 1998. He referred to the removal of certain torn up documents and other items.
Ms L M Hingston, officer of the ACS whose affidavit of 21 May 2001 was before the Tribunal as Exhibit R4, deposed that she had worked on reassembling torn up documents (recovered during the execution of the search warrant at Mr Ayoub's house).
Ms M Novotny, handwriting and document examiner, whose report dated 14 May 2001 was before the Tribunal as Exhibit R8, reported on examining documents relating to Peter Saba's signature. Attachments to her report were amongst other items, photocopies of documents obtained during the execution of the search warrant.
SUBMISSIONS AND CONCLUSIONS
Having heard the evidence and submissions, I had to take these, and the legislation and case law into account to consider whether the correct and preferable decision was to affirm, set aside or vary the decision of the Respondent, which had made a demand for payment of Hessam pursuant to sections 35A(1) of the Customs Act 1901 and section 60(1) of the Excise Act 1901, in connection with five shipments of tobacco products and cigarettes. In doing so, I had to consider whether pursuant to section 35A of the Customs Act, for imported tobacco products, or section 60(1) of the Excise Act, in relation to locally manufactured tobacco products, Hessam had:

either failed to keep those goods safely; or
when so requested by the Collector did not account for those goods to the satisfaction of the Collector.

I noted that in a letter to Hessam dated 19 October 1999, in which the demand for $1,608,653.40 was made of it, the ACS informed Hessam that it had made a similar demand of SBI, stating however that its intention was to recover only the total amount ($1,608,653.40). Further, I noted that the quantum of the demand was not before the Tribunal.
I was mindful that SBI was the third party in this matter, the shipping agent whose operator Anthony Chalita was contracted to collect the goods from Hessam in his pantechnicon, to be placed in containers at other premises, and shipped to the purchaser, Kopiko, in New Zealand. I was mindful also that SBI was not joined as a party to the present proceedings, and that my deliberations did not include the appropriateness or otherwise of the Respondent's demands to SBI.
For the sake of completion, I noted that the premises of Hessam, the Applicant, are situated at Shop 2, 300 Forest Road Hurstville, New South Wales, and that it holds a Warehouse Licence pursuant to section 79 of the Customs Act which entitles it to store, display and demonstrate goods under bond. It is also licensed to sell goods to relevant travellers by means of an outwards duty free shop as defined by section 96A of the Customs Act. Further, pursuant to section 5A of the Excise Act the shop at Hurstville is licensed to store "goods generally". At the relevant time, its managing director was Mr Melhem (Malcolm) Hanna Ayoub.
I was mindful that section 114D of the Customs Act stipulates that goods must be dealt with in accordance with an export entry, that is, the owner of the goods, must, as soon as practicable after an authority to deal with the goods is granted, deal with the goods in accordance with the entry. The owner must not remove any of the goods from the possession of the person to whom they are delivered or of any person to whom they are subsequently passed in accordance with the entry unless the entry has been withdrawn.
Section 116 of the Customs Act deals with action to be taken when goods are not dealt with in accordance with an export entry. Where goods have been entered for export under section 114 of the Customs Act, and none of the goods or only some of the goods have been exported in accordance with the entry at the end of a period of 30 days after the intended day of exportation notified in the entry, the authority to deal with the goods in accordance with the entry, so far as it relates to goods not exported before the end of the period, is, at the end of the period, taken to have been revoked.
I was mindful that Hessam's obligations in relation to the goods destined for Kopiko were that pursuant to section 35A(1)(a) of the Customs Act and section 60(1)(a) of the Excise Act, it had a duty in possessing dutiable goods, to keep them safely. Pursuant to section 35A(1)(b) of the Customs Act, and section 60(1)(b) of the Excise Act, if Hessam, entrusted with the possession, custody and control of goods subject to the control of Customs, was not able to account for them to the satisfaction of the Collector, then on demand as made by the Respondent, it had to pay an amount of excise or duty which would have been payable on the goods as if they had been entered for home consumption on the day on which the Collector made the demand.
In making the demand, the Respondent indicated that it had reason to believe applying section 35A(1)(b) of the Customs Act, and section 60(1)(b) of the Excise Act, that the goods had not been accounted for, had not been exported as purported, and it was charging the Applicant as if the goods had been entered for home consumption.
I was mindful that the general procedure followed for the six shipments made between December 1997 and April/May 1998 was as follows:

an order from Kopiko to Hessam for the supply of certain tobacco products;
followed by payment from Kopiko (in several tranches in certain of the instances);
arrangements by Ms Klinker with SBI to secure an authority to deal with the goods pursuant to section 114C of the Customs Act following lodgment of an entry for export;

arrangements by Ms Klinker on behalf of Hessam to its agent SBI to collect the six shipments of goods (between December 1997 and April/May 1998)
arrangements for payment of shipping costs communicated to Kopiko.

There were minor variations in the procedure recorded, for example with regard to Shipment No.4, where it was discovered two different entries had been lodged for the same container with details of different goods and different values. An amended authority had been issued (A2/ST19).
I was mindful from Mr Ayoub's evidence, and the submissions made by Mr Gageler, that the Applicant sought to distance himself from any transactions which followed the removal of the goods by SBI's Mr Chalita in his pantechnicon. The Applicant's evidence was that the tobacco products were loaded directly into the pantechnicon at Hessam's warehouse, rather than into containers, and that containers were ordered by SBI for use later on in the process.

Shipment No.1 in container GSTU 2641930.
Shipment No.2 in container AZLU 2400654.
Shipment No.3 in container APLS 277735.
Shipment No.4 in container AZLU 2403653.
Shipment No.5 in container GSTU 4492265.
Shipment No.6 in container AZLU 2773489.

The goods ordered by Kopiko entered for export, and those found to have been exported during the covert ACS examinations were as stated in T36. No evidence was led by the Applicant to rebut these figures, and I accepted them. They were as follows:
tobacco entered for export tobacco found on acs examination

259 pkgs 3 shippers cigarettes
100 pkgs 2 shippers cigarettes
150 pkgs 3 shippers cigarettes
125 pkgs 2.3 shippers cigarettes
175 pkgs 4 shippers cigarettes

I accepted that in each of the above cases, SBI Shipping Pty Ltd ("SBI") or SBI Express Pty Ltd ("SBI Express"), a related company, was engaged by Hessam as its agent in relation to the export of the goods to Kopiko in New Zealand. In each of the above cases, SBI or SBI Express collected goods from Hessam's warehouse, arranged a container, and completed the necessary documentation on Hessam's behalf, which included an "Entry for Export" for a certain amount of tobacco, and a request for an ECN for that entry. The transactions all occurred between December 1997 and April/May 1998.
whether sbi was the agent of hessam or kopiko
Mr Gageler submitted that SBI acted as agent for Kopiko, and indicated that Kopiko, rather than Hessam, had paid for its services. The Applicant's submissions were that no director of Hessam or employee had ever met Mr Talofae who gave the orders on behalf of Kopiko from Auckland, although Ms Klinker said that she had corresponded with, and spoken to him by telephone. Mr Gageler submitted that the use of SBI's services had been Kopiko's choice, as Hessam had had no prior dealings with SBI. He submitted that no officer or employee of Hessam had seen the tobacco products once they had been collected from Hessam by SBI, neither had they seen the containers or their contents.
I noted some inconsistencies in the evidence of Mr Ayoub and Ms Klinker with regard to their knowledge of Kopiko and its associates, and with regard to documents. Ms Klinker, in her first affidavit, denied having any knowledge of Peter Saba whereas in her second affidavit, produced after the first had been served, acknowledged that she recalled having dealt with a person named Peter Saba of Stephkat in 1996/7. She stated that she had not met either Saba or Talofae. I noted that Mr Gageler did not disagree with Mr Johnson that what emerged after the ACS investigations was the likelihood that Saba and Talofae were the same person.
With regard to the issues of agency; I preferred the submissions of the Respondent which amounted to the fact that SBI completed what was required of it in relation to the legislative requirements for export on behalf of Hessam. I noted that SBI arranged for "Entry for Export" for a certain amount of tobacco products, and a request for an ECN for that entry on behalf of Hessam, and at the instruction of Ms Klinker. Further, SBI arranged for containers for each shipment. I noted correspondence from SBI requesting payment from Kopiko for the costs of the shipping, but was nevertheless satisfied from the evidence, that SBI acted as agent for Hessam in making the arrangements.
whether the acs should have informed hessam sooner of the results of surveillance
In considering whether the ACS should have informed Hessam sooner of the results of its surveillance, I was mindful of Mr Gageler's argument that any irregularities in the shipments found by ACS surveillance, amounted to a fraud perpetrated on the Applicant by the actions of third parties unknown to Hessam. He submitted they should have been brought to the attention of the Applicant as soon as they became evident.
Mr Johnson's explanation, which I noted, was that investigations of such a nature take time, and that there was no evidence before the Tribunal to satisfy it that the ACS officers had sufficient evidence to come forward sooner than they did. He emphasised that the surveillance indicated that the goods were not exported from Australia pursuant to the authority given, that the majority entered the commerce of Australia without the duty being paid, and that protection of the revenue, being the aim of the legislation, led to the conclusion that the Respondent was right in its demands of Hessam. Mr Johnson submitted that in addition, there could be many other reasons why details of investigations, particularly those which are covert, might not be revealed. He submitted that in any case, whether ACS informed the Applicant, or not, did not alter the fact that there was a failure to keep the goods safely, and that it was probable the goods had entered into commerce without the duty being paid.
I was mindful of the intent of the legislation and that the protection of the revenue was the foremost purpose of the legislation. It was therefore justifiable for the ACS to conduct the appropriate investigations until it was satisfied it had sufficient data to deal with the problem it perceived. The observations made, and the lesser amounts of tobacco exported in successive shipments, as recorded by the ACS officers, went to satisfying me that the surveillance was well rewarded. It was not for me to decide when they should or should not have disclosed the results to the Applicant.
consideration of section 35a(1)(a) of the customs act and section 60(1)(a) of the excise act
In considering the legislation, I next turned to the issue of whether Hessam had failed to keep the goods safely and/or not accounted for them to the satisfaction of the ACS, and whether any fault of a party was relevant. In that regard, I noted that Mr Gageler submitted on behalf of Mr Ayoub that his evidence and that of Ms Klinker should be accepted. He submitted that they had given evidence that they were not aware of any wrongdoing themselves, nor on the part of Kopiko or SBI, and that so far as they were aware, the tobacco products listed in the documents prepared, were exported in each of the six shipments. Hessam had, Mr Gageler submitted, been the innocent victim of a third party's fraud.
Mr Johnson submitted that there was no onus to demonstrate that there had been any fraudulent behaviour by the Applicant, only that it had to be brought within the terms of section 35A of the Customs Act and section 60(1) of the Excise Act.
In addressing the question of whether fault was relevant, Mr Gageler acknowledged that sections 60(1) of the Excise Act and 35A(1) of the Customs Act were concerned with the protection of the revenue. He referred to Collector of Customs for the State of New South Wales and Southern Shipping Company Limited (1962) 107 CLR 279, and conceded correctly, I found, that in respect of keeping the goods safely, pursuant to section 35A(1)(a) of the Customs Act and section 60(1)(a) of the Excise Act, there was virtually an absolute duty to keep goods safely while they were in the custody, care and control of the person. However he submitted further, that the ongoing duty altered, once they had left that custody, care and control.
Mr Gageler submitted that the Applicant relied on the discretion that had been exercised in Re Bollinger and Chief Executive Officer of Customs (1997-98) 48 ALD 697 and in Collector of Customs for Victoria and Wilh Wilhelmsen Agency Pty Ltd (1956) 102 CLR 147. Mr Gageler submitted that even though Wilhelmsen (supra), was a case in which section 149 of the Customs Act, a different provision from the one in the present case, applied, it had an analogous operation in that a discretion operated with respect to the liability of a ship owner or master.
Mr Gageler emphasised that in Bollinger (supra), Deputy President McMahon held that general considerations of fairness should not cause a discretion to be exercised in favour of the Applicant in that case. He submitted that in this case, the Applicant did not rely on a generalised issue of fairness, rather on the fact that the Applicant had been an innocent victim of fraud, and had done what was required of it under the legislation. He submitted that secondly, the Respondent was at all times aware of the fraud and did nothing about it.
Mr Gageler submitted in that connection, and applying similar principles, that Hessam should not be held responsible for any loss of duty which had occurred. He submitted that the ACS had in this case seen fit to:
"sit back and watch the revenue be defrauded for five shipments, without bringing the episode to a halt and without bringing to the attention of my client what had occurred, which was in a real practical sense, responsible for the loss of revenue."
In response to the above, Mr Johnson's submission was that investigations took time, and that there could be many reasons why details of investigations, particularly those which are covert, might not be revealed. He submitted that in any case, whether ACS informed the Applicant or not, did not alter the fact that there was a failure to keep the goods safely, and that it was probable the goods had entered into commerce with the duty being paid. Mr Johnson added that:
"Ms Klinker appeared to have absolutely no strategy whatsoever for checking up to make sure that these goods were dealt with in accordance with the authority after she handed them to SBI, and that the Applicant's duties did not cease at that point."
In considering the authority of Southern Shipping (supra), I noted that it was concerned with facts which included cartons of tobacco destined for export which were in a store located on a wharf in Hobart. The facts in that case were that on Easter Sunday (1957), the store was broken into, and the tobacco was stolen. It was held that Southern Shipping (supra) could be liable pursuant to section 60 of the Excise Act even though the key to the store had been given to the ACS. Mr Gageler, commenting that in that case, there were separate judgments by each member of the Court, submitted that each judge emphasised that section 60 of the Excise Act was a provision which existed for the protection of the revenue, and that therefore the references in section 35A(1)(a) of the Customs Act and section 60(1)(a) of the Excise Act, to failing to keep goods safely, should be interpreted as a reference to failing to deal with goods in a way where the revenue was protected, and therefore a failure to keep the goods safely.
He cited the judgment of Dickson CJ at 286 where his Honour said:
"It seems clear enough that when the consignors delivered the goods to the defendant as a carrier by sea, for doubtless they were received for shipment by the defendant as a carrier at the wharf, the possession was entrusted to the defendant. It may be that if, for however brief a period, the defendant lawfully surrendered or divested itself of the possession, custody or control of the goods, that would mean that the defendant's responsibility under section 60 was terminated or suspended."
Mr Gageler submitted that Taylor J had made a similar statement, and that Menzies J at 299 had made a statement to similar effect. He also submitted that in this case, Hessam had "lawfully surrendered or divested itself of the possession, custody and control of the goods when it handed them over to SBI …". This had occurred at Hessam's warehouse, he submitted. He submitted that the delivery made was a step in accordance with the entry made under section 114 of the Customs Act. He submitted correctly that the Applicant had a duty pursuant to section 114D of the Customs Act, as soon as practicable, to give effect to the authority granted, that is, to move the goods from the warehouse to the wharf and into a container. Mr Gageler submitted that Hessam had performed its duty, and having transferred the goods, no longer had the care, control and custody of the goods, because SBI was not in any sense, its agent. SBI had been engaged by Kopiko he submitted, and it was Kopiko who paid SBI to take the various steps it was to take or not take.
Mr Gageler added that in addition, section 114D(1)(b) of the Customs Act imposed an obligation on the Applicant, as owner of the goods, not to remove the goods from the possession of the person to whom they were delivered in accordance with the entry. He submitted that if delivery of the goods to the shipping agent was part of giving effect to the entry, then in accordance with that, it was not open to the Applicant to reverse that process. It could only do that if the entry was withdrawn he submitted. The Applicant therefore relied on section 116(1) of the Customs Act to effect an automatic revocation of the entry after the goods went missing he said. However, revocation alone was insufficient, he submitted, and there had not been a withdrawal of the entry. I was mindful that pursuant to section 116, if a deemed revocation had taken place as in this case, then the owner of the goods (Hessam), was obliged to withdraw the entry relating to the goods, with consequent penalties if it did not do so.
Mr Johnson submitted on the other hand, that it was Hessam which had relied on SBI. He submitted that the Applicant's liability did not cease once it had passed the goods to its agent. Mr Johnson drew attention to T21/62, the form specifying certain action to be taken with the shipment of tobacco dealt with in March 1998, and submitted that the Applicant had not complied with the legislation because it had not dealt with the goods in accordance with the authority therein specified. In that regard, Mr Johnson referred to the affidavits of officers of the ACS who deposed with regard to their observations regarding the shipments of tobacco and other products. Mr Johnson submitted that Shipment No.1 was not in issue, but Shipments No.2 – No.6, were.
I noted the Respondent's submissions and the evidence of the ACS officers who carried out the surveillance, (see above), that none of the contents of the five shipments No.2 – No.6 inclusive complied with what was on the relevant documentation relating to those shipments.
Mr Johnson drew my attention to the judgment of Dickson CJ at 287 in Southern Shipping (supra), and McTiernan J at 290 who stated:
"The task of keeping goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken."
Mr Johnson cited further passages from Southern Shipping (supra), submitting that the most important point to emerge from Southern Shipping (supra) was the lack of need to show any fault. He submitted however, that this was not a case where the Applicant had "proceeded consistently and in keeping with its obligations under the Customs Act or indeed under the Excise Act." He referred to the Statement of Facts and Contentions of the Respondent dated 25 May 2001, stating that the Respondent did not accept that the obligations under the legislation could be circumvented simply by the act of handing the goods over to the agent. The Applicant remained the owner of the goods, he submitted. Mr Johnson referred to Ms Klinker's evidence that she was the person responsible for ensuring that Hessam complied with the relevant legislative requirements. She had then, he submitted, entrusted the company's obligations to see that the conditions of the legislation were met by SBI, thereby causing SBI to act as agent for Hessam. I accepted the submissions of the Respondent and agreed with Mr Johnson's arguments which indicated that SBI acted as agent for Hessam.
The obligations, Mr Johnson emphasised were, pursuant to section 99(3) of the Customs Act, that warehouse goods were not to be taken from the warehouse for export unless they had been entered for export, and unless an authority to deal with the goods had been given. Ms Klinker had relied on SBI for that, Mr Johnson submitted, and as the goods had been diverted to home consumption, the Applicant had therefore failed to keep the goods safely.
I noted from Southern Shipping (supra) that it was held there that the placing of the key in the Customs office was for safe keeping and did not place Customs in possession of the goods in lieu of the defendant. I accepted the guidance of McTiernan J at 290 who stated: "The task of keeping goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken."
I was mindful also that Dixon J at 286 stated:
"It seems clear enough that when the consignors delivered the goods to the defendant as a carrier by sea for doubtless they were "received for shipment" by the defendant as a carrier at the wharf, the possession was entrusted to the defendant. It may be that if, for however brief a period , the defendant lawfully surrendered , or divested itself of the possession, custody or control of the goods, that would mean that the defendant's responsibility under s. 60 was terminated or suspended. Did placing the keys in the Customs office, at all events when it as locked up, work such a suspension or termination? The answer must be that it did not. It meant no more than that for safe keeping the key was placed in the Customs office, not that the Customs were thereby placed in possession of the goods in lieu of the defendant. …"
The efforts of Mr Ayoub in his evidence, and Mr Gageler on his behalf in submissions, to distance Mr Ayoub from the transaction with SBI by alleging that SBI was the agent of Kopiko, were unconvincing in the light of Southern Shipping (supra). I was satisfied that even if Kopiko had contracted with SBI, Hessam still bore an almost absolute liability pursuant to section 60(1)(a) of the Customs Act and section 35A(1)(a) of the Excise Act, to keep safely the tobacco allegedly destined for Kopiko. If, as I accepted from the evidence of the surveillance, the tobacco was not exported, and hence entered into home consumption, even if without Hessam's knowledge, then the Applicant failed within the terms of the legislation, in his duty to keep the tobacco safely. Sections 35A(1)(a) of the Customs Act and section 60(1)(a) of the Excise Act were therefore breached. However, in case I am incorrect in that finding, and because the Respondent made its finding in relation to sections 35(1)(b) of the Customs Act, and 60(1)(b) of the Excise Act, I have turned to also consider those provisions.
consideration of section 35a(1)(b) of the customs act and section 60(1)(b) of the excise act
I moved then to consider the implications of section 35A(1)(b) of the Customs Act, and section 60(1)(b) of the Excise Act, in this case. I was satisfied with Mr Gageler's submissions citing Dickson J at 286/7, and McTiernan J at 291 in Southern Shipping (supra) in support of his argument that there was a discretion which could be exercised by the Collector, now Chief Executive Officer of the ACS, in satisfying himself with regard to the accounting for the goods.
I noted Mr Gageler submitted that in Re Bollinger and CEO of Customs (1997-98) 48 ALD 697, the relevant section was section 61A of the Excise Act, which placed a particularly onerous obligation on a customs agent. Section 61A of the Excise Act, he submitted, was a section with a far more stringent requirement than section 60(1) of the Excise Act applicable in this case, and yet even there, a discretion could be exercised, he submitted.

I was satisfied applying Bollinger (supra), that in considering section 35A(1)(b) of the Customs Act, and section 60(1)(b) of the Excise Act, there was clearly a discretion in accounting for the goods to the satisfaction of the Collector or presently, the Chief Executive Officer of the ACS ("the CEO").
In considering whether the Applicant had accounted for the tobacco in the five shipments in question, to the satisfaction of the CEO of the ACS when requested, I noted the submissions of Mr Gageler that I should accept the evidence of Mr Ayoub and Ms Klinker. As to any inconsistencies in the evidence; Mr Gageler referred to Ms Klinker's evidence that she had not seen bank documents because they went to Mr Christie. He submitted that Mr Ayoub had given evidence that both Mr Christie and Ms Klinker operated the business for him at the relevant time, and it was therefore not within his direct knowledge whether Ms Klinker saw documents which went to Mr Christie. He submitted that it was only after Mr Christie retired, that Ms Klinker also did the banking. Mr Gageler submitted: "So, that at the time, the position appears to have been that the documents went to Mr Christie, and may or may not have been seen by Ms Klinker, depending on the circumstances."
I was mindful of Ms Klinker's statements at Exhibits A4 and A5, and her oral evidence that she had seen the company's bank statements at the relevant time. However I noted that when referred to documents at Exhibit A3 (torn up by Mr Ayoub), which related to payments for goods made by Kopiko, and which were recovered during the execution of the search warrant in May 1998, she said she had not seen those.
I was mindful also of Ms Klinker's evidence in her first statement which was that she had no knowledge of Mr Saba. I noted that after the first statement had been served, Ms Klinker changed her mind to having a recollection of dealings with Saba and Stephkat in 1996/7. Mr Johnson submitted that the denial of knowledge of Mr Saba by Ms Klinker, and her subsequent change of view regarding bank documents after she had seen Exhibit A3, simply demonstrated that it was done in an effort to distance the Applicant from what had happened, and to improve the Applicant's case. Given that there was a strong likelihood that Talofae and Saba were one and the same person, and that Hessam, and Ms Klinker in particular, had been dealing with Stephkat and Saba in 1996/7, I could not find Ms Klinker's evidence regarding her knowledge of the people involved in the tobacco transactions subject of this matter, and the documents, satisfactory. I was also mindful of the inconsistencies between Ms Klinker's evidence and that of Mr Ayoub regarding who had knowledge of bank statements and other documents.
Mr Johnson, referring to the affidavit of Mr Hignett, submitted that it was curious for documents 19, 20,22,23, 26,29,35 and 36 of Exhibit A3 to have been torn up and partly on the work bench and partly in a kitchen bin at Mr Ayoub's home, when a search warrant was executed in May 1998. Mr Johnson drew attention to Mr Ayoub's explanation for the documents having been torn up, which was that he was checking up on Mr Christie's accounting due to worries about Mr Christie's failing memory. He suggested that one conclusion I might draw from Mr Ayoub's explanation was that he was trying to distance himself from any suggestion of knowledge of Kopiko or Mr Saba.
Mr Gageler submitted that Mr Ayoub's explanation regarding the documents found at his home during the execution of the search warrant should be accepted. He said that notwithstanding a long and covertly conducted investigation, there had been no specific allegations of wrongdoing alleged at the Tribunal, and that accordingly, the submissions of the Respondent in closing be dismissed in their entirety. He submitted that Ms Klinker's evidence regarding her recollections and knowledge of Stephkat should be accepted.
I found that much of the evidence, and Mr Gageler's submissions regarding the transactions between Hessam and Kopiko were aimed at distancing Mr Ayoub from any part in them. Mr Ayoub was keen for me to accept that Ms Klinker was in charge of the business, even though it became clear that Mr Ayoub handled the documents in relation to the payment for the relevant transactions with Kopiko.
I was mindful that the entries were for a large amount of tobacco products, but that on each occasion (based on the ACS surveillance of shipments) Shipments No.2 – No.6 inclusive, subject of these proceedings, only a small number of tobacco products, (e.g. 2 of 100 cartons of tobacco products in shipment No.3 or 3 of 150 cartons of tobacco products in shipment No.4), and certainly not the amount entered for export, had actually left the country. It appeared from the evidence that the majority of the tobacco products entered for export did not leave the country, and were thus not dealt with in accordance with that entry. They were thus subject to customs and excise, to be paid due to entry for domestic consumption.
Taking into account all the evidence, submissions and case law, I was not satisfied that Hessam's responsibility for keeping the tobacco safely ceased when its agent SBI collected the goods from its warehouse as the Applicant submitted. It was unable to account for the whereabouts of the tobacco found to be missing in the ACS surveillance. I was therefore satisfied, as noted above, and exercising the same discretion as the CEO of the ACS, that Hessam had failed to keep the goods safely, pursuant to section 35A(1)(a) of the Customs Act and 60(1)(a) of the Excise Act, (Southern Shipping (supra) and Re Bollinger (supra)).
I remained unconvinced with regard to Mr Ayoub's evidence that Ms Klinker and Mr Christie had been operating the business entirely, and that he had not been aware of bank documents and payments with regard to Kopiko. I preferred the submissions of the Respondent, and did not find that the timing of the revelation of the discrepancies in the shipments recorded by the ACS officers as described, were a factor influencing my decision making. The records of the ACS investigations and the continuing orders and payments by Kopiko to Hessam in the absence of the export, implicated those parties if not SBI, to a role in diverting the goods for home consumption. It was likely that the goods had been diverted for home consumption either directly from Hessam or sometime before certain goods as listed in the surveillance reports were shipped by its agent SBI.
However, even if Hessam was not implicated, I preferred the submissions of the Respondent as to section 35A(1)(b) of the Customs Act and 60(1)(b) of the Excise Act, and found that Hessam was not able to account for the excise and duty not paid. The excise and duty had therefore to be paid as if they had been diverted for home consumption. The evidence before me did not convince me that Hessam had accounted satisfactorily for the goods pursuant to section 35A(1)(b) of the Customs Act and 60(1)(b) of the Excise Act. It was therefore in order for the Respondent to exercise the discretion to demand that Hessam pay the excise and duty as calculated, and it was therefore the right decision to be made in all the circumstances.
In any case I have found above that Hessam was in breach of section 35A(1)(a) of the Customs Act and section 60(1)(a) of the Excise Act in that Hessam had failed to keep the tobacco safely pursuant to the requirements of the legislation.
DECISION
Accordingly, the decision under review dated 19 October 1999 of the Chief Executive Officer of the Australian Customs Service in which it was decided to demand payment from Hessam Pty Ltd, t/as Whitehall Duty Free, the Applicant in these proceedings, of $1,608,653.40 in accordance with provisions of section 35A(1) of the Customs Act 1901 and section 60(1) of the Excise Act 1901 is affirmed.

I certify that the 124 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger
Senior Member
Signed:         .....................................................................................
  Associate
Date/s of Hearing  5 March 2001; 6 June 2001
Date of Decision  25 September 2001
Counsel for the Applicant        Mr S Gageler SC; Mr J Clarke
Solicitor for the Applicant         Glasheen & Quilty Solicitors
Counsel for the Respondent    Mr J Johnson
Solicitor for the Respondent    Australian Government Solicitor