[2009] UKFTT 85 (TC)

 TC00053

					Appeal Number : LON/2008/8048

EXCISE DUTY – Rebated fuel found in vehicle – Owner claimed not to be responsible – Whether reasonable excuse – Appeal dismissed

FIRST-TIER TRIBUNAL
TAX

	COLIN WILLIAMS	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents
							(Excise Duty)

				Tribunal:	MISS J C GORT (Judge)
						MR G MILES

Sitting in public in Bristol on 17 March 2009

The Appellant in person

Mr Rupert Jones of counsel, instructed by the solicitor’s office, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This is an appeal against a decision of the Respondents contained in a letter dated 15 May 2008 in which, on a review, the Appellant’s car, a Peugeot 4-5 Estate, would only be restored on payment of a fee of £660.  The vehicle had been seized on 15 January 2008 and was found to contain rebated gas oil.

2.	Before any evidence in the appeal was heard Mr Williams had objected to Mr Miles hearing the case on the basis that he believed that Mr Miles had unfairly upheld a decision of HMRC at an earlier hearing of a different matter.  That matter was, according to Mr Williams, currently under appeal to the High Court.  In the circumstances Mr Miles was prepared to recuse himself and Mr Williams was offered the choice of either the hearing proceeding and being heard by the chairman alone, or it being adjourned to a later date before a fresh tribunal.  At this point Mr Williams withdrew his objection to Mr Miles sitting and the hearing proceeded.  

The facts

3.	On 15 January 2008 Customs officers of the Road Fuel Testing Unit arrived at Mr Williams’ address in Bristol.  Mrs Susan Williams, Mr Williams’ wife, opened the door and confirmed that she and Mr Williams jointly owned the vehicle parked outside on the roadway.  The officers explained to Mrs Williams that they were there to test the fuel, and in her presence a sample of fuel was obtained from the running tank of the vehicle.  This fuel was red in colour and when tested was found to be positive as to rebated gas oil.  A formal sample of the fuel was taken.  

4.	Mrs Williams declined to be interviewed at the time or subsequently and she contacted Mr Williams on the telephone, who also declined to be interviewed.  

5.	The vehicle was seized and a Notice of Seizure (C156) Public Notices 12A, 75 and 990 were issued to Mrs Susan Williams and the officers explained to Mr Williams over the telephone the procedure for restoration of the vehicle and also how to appeal.  Mrs Susan Williams removed personal effects from the vehicle.

6.	Public Notice 12A explains how a person may challenge the legality of the seizure in a Magistrates Court by sending HMRC a notice of appeal within one month of the date of seizure (or the date of a Notice of Seizure).  Notice 75 is headed “Fuel for Road Vehicles” and sets out which fuel may be used in which road vehicles and the UK and EC law as to this.  It also sets out how to appeal against the restoration amount or other penalties imposed.  Notice 990 explains how to appeal against any decision to the VAT and Duties Tribunal.

The legislation

7.	The Customs & Excise Management Act 1979 (“CEMA”) provides:

Section 139(1) of CEMA provides that:

“Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty’s armed forces or coastguard.”

Section 141(1) of CEMA states that “where any thing has become liable to forfeiture under the customs and excise Acts”- 

(a)	any ship, aircraft, vehicle, animal, container (including any article of passengers’ baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and
(b)	any other thing mixed, packed or found with the things so liable,

shall also be liable to forfeiture”.

Section 152 of CEMA establishes that:

“The Commissioners may as they see fit – 

..(b)	restore, subject to such conditions (if any) as they think proper, anything forfeited or seized under the Customs and Excise Acts.”

	Paragraph 5 of Schedule 3 provides:
“If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of anything no such notice has been given to the Commissioners, or if, in the case of any such notice given, any requirement of paragraph 4 above is not complied with the thing in question shall be deemed to have been duly condemned as forfeited.”

8.	The Hydrocarbon Oil Duties Act 1979 (“HODA”) provides:

“12.	Rebate not allowed on fuel for road vehicles
	…

(2)	No heavy oil on whose delivery for home use rebate has been allowed (whether under section 11 above or 13AA(1) below) –

(a)	be used as fuel for a road vehicle; or
(b)	be taken into a road vehicle as fuel,

unless an amount equal to the amount for the time being allowable in respect of rebate on like oil has been paid to the Commissioners in accordance with regulations made under section 24(1) below for the purposes of this section.

13	Penalties for misuse of rebated heavy oil

(1)	Where any person – 

(a)	uses heavy oil in contravention of section 12(2) above, or
(b)	is liable for heavy oil being taken into a road vehicle in contravention of that subsection, his use of the oil or his becoming so liable (or, where his conduct includes both, each of them) 

shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties).

(6)	Any heavy oil –

(a)	taken into a road vehicle as mentioned in section 12(2) above or supplied as mentioned in subsection (2) or (3) above; or
(b)	taken as fuel into a vehicle at a time when it is not a road vehicle and remaining in the vehicle as part of its fuel supply at a later time when it becomes a road vehicle;

shall be liable to forfeiture.

9.	The Finance Act 1994 provide:

9.	Penalties for contraventions of statutory requirements

(1)	This section applies, subject to section 10 below, to any conduct in relation to which any enactment (including an enactment contained in this Act or in any Act passed after this Act) provides for the conduct to attract a penalty under this section.

(2)	Any person to whose conduct this section applies shall be liable –

(a)	in the case of conduct in relation to which provision is made by subsection (4) below, or by  or under any other enactment, for the penalty attracted to be calculated by reference to an amount of, or an amount payable on account of any duty of excise, to a penalty of whichever is the greater of 5 per cent, of that amount and £250; and
(b)	in any other case, to a penalty of £250.

10-(1)	Subject to subsection 2 below and to any express provision to the contrary  made in relation to any conduct to which section 9 above applies, such conduct shall not give rise to any liability to a penalty under that section if the person whose conduct it is satisfies the Commissioners or, on appeal, an appeal tribunal that there is a reasonable excuse for the conduct.

(2)	Where it appears to the Commissioners or, an appeal, an appeal tribunal that there is no reasonable excuse for a continuation of conduct for which there was at first a reasonable excuse, liability for a penalty under section 9 above shall be determined as if the conduct began at the time when there ceased to be a reasonable excuse for its continuation.

(3)	For the purposes of this section:-

(a)	an insufficiency of funds available for paying any duty or penalty due shall not be a reasonable excuse; and
(b)	where reliance is placed by ay person on another to perform any task, then neither the fact of that reliance nor the fact that any conduct to which section 9 above applies was attributable to the conduct of that other person shall be a reasonable excuse.”

Section 14(2):

(2)	Any person who is – 

(a)	a person whose liability to pay any relevant duty or penalty is determined by results from or is or will be affected by any decision to which this section applies,
(b)	a person in relation to whom, or on whose application, such a decision has been made or
(c)	a person on or to whom the conditions, limitations, restrictions, prohibitions or other requirements to which such a decision relates are or are to be imposed or applied,

may by notice in writing to the Commissioners require them to review that decision.

Section 15(1):

“Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either – 

(a)	confirm the decision; or
(b)	withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate.”

Section 16(4) to (6):

(4)	In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to one or more of the following that is to say – 

(a)	to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b)	to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c)	in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.

(5)	In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.

(6)	On an appeal under this section the burden of proof as to – 

(a)	the matters mentioned in subsection (1)(a) and (b) of section 8 above;
(b)	the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and
(c)	the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under Section 22(1) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid),

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.

10.	Mr Williams’ vehicle ran on diesel power, it was a vehicle which was not an ‘excepted’ vehicle in which duty-rebated fuel is permitted under Schedule 1 of HODA (as amended by section 9 of the Finance Act 2000) without the duty having first been paid, contrary to section 12(2)(1) of HODA. The vehicle and the illicit fuel were seized under section 139 of CEMA as liable to forfeiture; the fuel was so liable under section 13(6) of HODA, and the vehicle was so liable under section 141(1)(a) of CEMA as it had been used for the carriage, handling, deposit or concealment of the fuel.

11.	 The legality of the seizure of the fuel and the vehicle was not challenged within one month of the seizure, and therefore the vehicle was condemned as liable to forfeiture by the passage of time under paragraph 5 of Schedule 3 to CEMA.  By a letter dated 11 February 2008 Mr Williams had written to HMRC asking for the vehicle to be restored to him and in that letter he stated:

Red diesel was maliciously added to my tank and the Customs official M Woodey did not prove that I was responsible for it being in there.”

By a letter dated 13 April 2008 Mr Williams again wrote to HMRC this letter being in reply to a letter of 31 March 2008 in which an officer of HMRC offered restoration of the vehicle for a fee of £660, being made up of £250 for taking in the fuel, £250 for using the fuel and £3,160 for removal costs.  Mr Williams replied as follows:

“I don’t agree with your decision or the legality of the seizure.

“Please refer to the Magistrates/Crown Court as soon as possible.  It’s now been three months and nothing been solved.”

This letter was treated by HMRC as a request for a review of the decision of 31 March 2008.  By a letter of 15 May 2008 HMRC confirmed the decision only to restore the vehicle on payment of a fee of £660.  

The evidence

12.	The Tribunal heard evidence from the review officer of HMRC, Miss Helen Perkins, and also from Mr Williams himself.  

13.	Miss Perkins gave evidence consistent with her review decision, in which she had set out the Commissioners’ policy for the seizure and restoration of vehicles misusing duty-rebated fuel as follows:

“Whilst vehicles adapted for the misuse of controlled oils (e.g. having false tanks) for smuggling fuel (e.g. concealment) are to be seized and not restored …

“The Commissioners’ policy is to provide increasingly harsh restoration terms for the first two detections with a strict non-restoration policy on third detection.  However, restoration is always considered to uninvolved third parties such as hire and finance companies.  Every case is decided on its own merits including any mitigating or militating circumstances and exceptional hardship is always considered.  

•	First offence – seizure of the vehicle and restoration for the value of the civil penalties, 100% of the revenue evaded on that occasion and any storage costs incurred by the department or the value of the vehicle whichever is the lower.

		…”

In this case the matter was treated as a first offence.

14.	We note that neither in her letter containing the review decision, nor in the initial decision made by HMRC to restore the vehicle on payment of certain sums, was the value of the vehicle given.  It was however at no stage suggested by Mr Williams that the car was worth less than £660.  Nor is there any indication of what was the value of the revenue evaded.  

15.	In her consideration Miss Perkins had taken account of not only the Commissioners’ policy as set out above, but also such representations as had been made by Mr Williams.  She had considered whether or not there was evidence that Mr Williams had a reasonable excuse for the presence of the rebated fuel in his car, and whether the costs of £160 were proportionate to the sum of a civil penalty imposed.  She took account of the fact that Mr Williams and his wife both declined to be interviewed, and also his subsequent statement that the red diesel was maliciously added to his tank.  She was not aware of the matter of fuel being added to the tank having been reported to the police, or of any allegation being made to the police of the vehicle being tampered with. She therefore concluded that Mr Williams was responsible for the duty rebated fuel detected being in the running tanks of the vehicle.  She considered hardship only to the extent that this was a matter she referred to in her decision, and something that she considered to be the natural consequence of having a vehicle seized.   Overall she found no reason to disapply the Commissioners’ normal policy and upheld the original decision.

16.	In cross-examination by Mr Williams she accepted there was no evidence to the effect that he had put the rebated fuel into the car, but it was HMRC’s view that there was a strong inference that he had done so given that it was his vehicle, and it was found outside his property.  She had initially stated that the vehicle was found on the drive, but later accepted that there was no evidence of that.  She also referred to the fact that Mr Williams had provided no evidence or information as to how it had happened that the red diesel was present in the car, and there was no evidence that he had reported the matter to the police.

17.	In his evidence Mr Williams informed the Tribunal that he had been away working as a lorry driver on the day the car was seized. At that time the car, which was twelve years old, was not driveable. The clutch cable had broken and there was a fault to the driver’s door. It had last been driven some three to four days prior to the officer’s  arrival. Mr Williams thought that he himself had returned at the end of that week.  The reason he had not reported the matter of the car being tampered with to the police was because he only became aware that the red diesel was in the car after the officer’s visit, and he considered there was no point in reporting it at that stage as the vehicle had been seized.  In respect of his letter to HMRC saying that somebody had ‘maliciously’ added red diesel to the tank, he said:  “It was the only excuse I could come up with at the time.  Neither my wife nor I put it in.”  He believed that there were several people who might have been responsible for putting it in, namely (although unnamed by him) his enemies, whom, when cross-examined he only specified as his ‘competitors’.  

18.	Mr Williams accepted that he had personal effects in the car when it was taken away, but denied that the vehicle was being used at the time.  He also assumed that the people he had described ‘as competitors’ (although the context of this competition was not made clear to us) had not only put in red diesel but had also cut the clutch cable knowing that he was away at work at the time.  

The Respondents’ case

19.	The Tribunal was presented with lengthy argument as to why Mr Williams should not be entitled to open the matter of the legality of the seizure of the vehicle; but this was an issue with which the Tribunal was not concerned, the legality of the seizure not being a matter pursued by Mr Williams, we do not propose to set out those arguments here.  As to the question with which we were concerned, namely the reasonableness of the review decision, it was submitted that the officer had reasonably concluded that Mr Williams was responsible for the duty rebated fuel being in the vehicle and that it had not been planted by others.  Mr Williams and his wife had both refused to be interviewed, and no further information had been provided by Mr Williams as to who might have done it and why, or for what period the vehicle was unsupervised when it might have been tampered with.  These matters reinforced the reviewing officer’s view that Mr Williams was responsible for the duty rebated fuel detected in the running tanks of the vehicle.  The officer was entitled to take account of the fact that Mr Williams had not reported the matter to the police.  

20.	Mr Jones invited the Tribunal to take account of an incident which had occurred on the following day, 16 January 2008, but this was a matter for which there was no reliable evidence before the Tribunal, and although we did allow cross-examination as to that matter, given that Mr Williams had said in his own evidence in chief that he had been away for a few days after the officer’s arrival at his house, Mr Williams denied that the incident had happened, and therefore it is not a matter which we can properly take into account.

21.	It was submitted that the decision taken was reasonable and proportionate given the material that was before the officer at the time, and we should take account of Mr Williams having said that when he had said that somebody had maliciously put the rebated fuel in the tank, this was the “only excuse” which he could come up with at the time. It was submitted that Mr Williams himself lacked credibility and that his account was inherently unlikely.  

22.	With regard to the penalty imposed, the officer had reasonably taken account of the case of Anthony Barbagello (a case to which we were not given the relevant reference).  In that case it was held that as the restoration fee is charged by analogy to the position of a civil penalty under section 9 of the Finance Act, an Appellant is able to avoid the penalty if he is able to show a reasonable excuse within section 10 of the Finance Act.  The officer had reasonably taken that decision into account, and had properly considered proportionality as she was required to do by the Human Rights Act 1998.  

The Appellant’s case

23.	Mr Williams’ case in essence was that he was not responsible for putting red diesel into the vehicle, HMRC had not shown that he had put the red diesel in, the car at the time was unroadworthy and undrivable and it had not been shown that the car had been used with the red diesel in.  It was irrelevant that he had not attended an interview or complained to the police, the only issue with which the Tribunal had been concerned was as to who had put the red diesel into the vehicle.  

Reasons for decision

24.	In this case there is a burden of proof upon the Commissioners to show that there was rebated fuel in Mr Williams’ vehicle at the relevant time and that the vehicle had been used.  We take these matters to be disjunctive.  There is then a burden upon Mr Williams to show that he had a reasonable excuse for the rebated fuel being in the vehicle, and that it had not been used with it in.

25.	In the circumstances we are entirely satisfied that there was rebated fuel in Mr Williams’ vehicle, and indeed this was not a matter which he has contested.  Because he was not contesting the issue of the fuel being in the vehicle, the Commissioners had not called the officer, Mr Woodey, to give evidence about the circumstances of finding it there.  Mr Williams had not asked him to be present, which, had he done so might have assisted him in showing that the car was indeed not roadworthy at the time.  Unfortunately Mr Williams neither asked for Mr Woodey to be present, nor called his wife or any other person who might have been aware of the lack of roadworthiness of the car which he alleges was the situation at the time, and the only evidence before us as to it not being roadworthy is that of Mr Williams himself.  We find it surprising that, in the circumstances, Mr Williams did not immediately say to the officers on the telephone when he spoke to them on the day of the seizure that the car was not roadworthy, nor did he at any stage raise this issue until he appeared before us.  In the circumstances we find this explanation to lack credibility.  

26.	Whilst it would have been appropriate for HMRC to have provided a value of the car, given that the penalties are indirectly related to the value of the car, this lack is not fatal to the decision, particularly in circumstance where Mr Williams did not contest the issue.  

27.	Whilst we accept Mr Williams’ point that the Commissioners have not specifically shown that he himself was responsible for the rebated fuel being in the vehicle, nor that the car had been used with that fuel in it, we accept that it is an entirely reasonable conclusion for them to have drawn in the particular circumstances of this case.  Mr Williams has not discharged the burden of proof which there is upon him to satisfy us on the balance of probabilities that he was not so responsible and that the car had not been used with the fuel in it.  Neither has Mr Williams provided us with a credible reasonable excuse for the rebated fuel being in the vehicle, and in those circumstances this appeal is dismissed.

MISS J C GORT
TRIBUNAL JUDGE

RELEASED: 5 May 2009