H G Bendall v Customs and Excise [2003] UKVAT(Landfill) L00020 (28 February 2003)

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United Kingdom VAT & Duties Tribunals (Landfill Tax) Decisions

You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Landfill Tax) Decisions >> H G Bendall v Customs and Excise [2003] UKVAT(Landfill) L00020 (28 February 2003)
URL: http://www.bailii.org/uk/cases/UKVAT/Landfill/2003/L00020.html
Cite as: [2003] UKVAT(Landfill) L00020, [2003] UKVAT(Landfill) L20

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LANDFILL TAX - Waste deposited on registered site - Whether deposited temporarily within the law - Whether material recorded in Appellant's books in fact deposited elsewhere - Whether assessment to best judgment - Whether amount should be reduced - Parkwood considered

CIVIL PENALTY - Admissibility of interview - Whether conduct dishonest

LONDON TRIBUNAL CENTRE

H G BENDALL Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MISS J C GORT (Chairman)

MISS A WEST FCA

Sitting in public in Bristol on 18 and 19 July and in London on 28 November 2002

Mr N Popplewell, solicitor of Burges Salmon, for the Appellant

Mr Christopher Mellor of counsel, for the Respondents

© CROWN COPYRIGHT 2002

DECISION

This is an appeal against two decisions of the Commissioners dated 16 September 1999 and 30 June 2000. The first decision was an assessment to landfill tax pursuant to section 60 of the Finance Act 1996 ("the Act") in the sum of £43,633 the second decision is a civil evasion penalty pursuant to paragraph 18 of Schedule 5 of the Act in the sum of £13,089.

Background

The Appellant, trading as Bendalls of Lydney, operates a landfill site ("the site") at Canal Works in Lydney Gloucestershire. At all material times a waste management licence issued under Part II of the Environmental Protection Act 1990 was in force at the site. In addition the Appellant owned land adjacent to the canal site which was known as the "Industrial site". On 22 April 1998 planning consent for the "raising of levels for future industrial development and the creation of flood compensation lakes" was obtained in respect of the Industrial site. On 2 November 1998 an application was made for the registration of an exempt activity at that site, being the raising of land prior to industrial development through the importation of inert waste and the creation of lakes for flood compensation. This application was accepted on 13 November 1998.

In addition to the two above sites, Mr Bendall also owned a farm.

On 5 July 1996 an officer of the Commissioners carried out a landfill tax education visit prior to the introduction of the tax. The Appellant applied for registration for landfill tax on 9 September 1996 and was registered with effect from the introduction of the tax on 1 October 1996. This registration was only in respect of the Canal site.

The Appellant's first return was a `nil' return, as were all subsequent returns. On the first return he had written "closed by environment agency".

Officers of the Commissioners became aware that soil was being deposited at the Canal site and an officer visited the Appellant on 27 May 1998. Following that visit there was a further visit on 19 March 1999 when the Appellant's books and records were examined. It appeared to the Commissioners that around 98,000 tons of soil had been received by the Appellant between 1 October 1996 to 31 January 1999. The Appellant stated inter alia that he had tipped the soil elsewhere but did not say where.

On 27 July 1999 the Appellant was interviewed by an officer of the Commissioners. He confirmed that he had overall control of the books and records and maintained that they were correct. It was his belief that no landfill tax was due since only capping off had taken place and other waste was only stored temporarily.

On 1 September 1999 there was a further interview with the Appellant and this interview was the subject of an application on his behalf that it should not be admitted into evidence before the Tribunal. After hearing argument on the point, it was decided to admit the interview de bene esse. At the close of that interview the Appellant had certified a schedule amounting to £43,633 as a complete disclosure of underdeclared tax. No tax was paid by the Appellant.

The civil evasion penalty, which was issued on 30 June 2000, was reduced by 70% to reflect the Appellant's co-operation.

The law

Section 40 of the Act provides as follows:

(1) Tax shall be charged on a taxable disposal.

(2) A disposal is a taxable disposal if -

(a) it is a disposal of material as waste,

(b) it is made by way of landfill,

(c) it is made at a landfill site, and

(d) it is made on or after 1 October 1996.

Section 64 of the Act provides:

(1) A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material.

(2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant.

Section 65 provides that:

(1) There is a disposal of material by way of landfill if -

(a) it is deposited on the surface of the land or on a structure set into the surface, or

(b) it is deposited under the surface of land.

(2) …

(3) Sub-section (1)(b) above applies whether the material -

(a) is covered with earth after it is deposited, or …

Section 66 provides inter alia that land is a landfill site if it is licensed as such under environmental legislation.

Section 62 provides:

(1) For the purposes of this Part, regulations may make provisions under this section in relation to a disposal which is a taxable disposal (or would be apart from the regulations).

…

(7) The regulations may only provide that a disposal is to be treated as not being a taxable disposal if or to the extent that -

(a) the disposal is a temporary one pending the incineration or recycling of the material concerned, or pending the removal of the material for use elsewhere, or pending the sorting of the material with a view to its removal elsewhere or its eventual disposal, and

(b) the temporary disposal is made in an area designated for the purpose by an authorised person.

Regulation 38(2) of Part XI of the Landfill Tax Regulations 1996 provides:

This part applies to a disposal where -

(a) …

(b) …

(c) the disposal is a temporary one pending all of the material being put to a qualifying use within the relevant period; and

…

Regulation 20 provides for credit payments. Regulation 21 provides:

(1) An entitlement to credit arises under this Part where -

(a) a registered person has accounted for an amount of tax and, except where the removal by virtue of which sub-paragraph (b) below is satisfied takes place in the accounting period in which credit arising under this Part is claimed in accordance with Part IV of these regulations, he has paid that tax; and

(b) in relation to the disposal on which that tax was charged, either -

(i) the re-use condition has been satisfied; or

(ii) the enforced removal condition has been satisfied.

(2) The re-use condition is satisfied where -

(a) the disposal has been made with the intention that the material comprised in it -

…

(b) removed for use (other than by way of a further disposal) at a place other than a relevant site.

(c) that material, or some of it, has been recycled, incinerated or permanently removed from the landfill site, as the case may be, in accordance with that intention.

Paragraph 18 of Schedule 5 to the Act provides:

(1) Where -

(a) for the purpose of evading tax, a registrable person does any act or omits to take any action, and

(b) his conduct involves dishonesty (whether or not it is such as to give rise to criminal liability)

he is liable to a penalty equal to the amount of tax evaded, or (as the case may be) sought to be evaded, by his conduct; but this is subject to sub-paragraph (7) below.

Paragraph 25 provides for mitigation of the penalties.

The evidence

The Appellant gave evidence to the effect that the canal works were bought in his name in or around 1973 as a greenfield site. Because of problems with access he was effectively prevented from carrying on business on that site until 1986 or so. At that time he bought various ransom strips which had previously prevented him from gaining access to the site.

In1988 he obtained planning permission to fill the canal site with inert waste and material for future industrial use. He intended carrying on the business as a scrap yard which he had run previously from another site.

When he bought the canal site the surface of the land was approximately two metres below the level of the road. It was a condition of the 1988 planning consent that he would bring the level of this site up to a level not greater than that of the nearby road. He did this by putting down inert material and builders waste. In particular he wanted to create a satisfactory base to carry on with his scrap metal and waste transfer business.

By 1996 he had not only filled in the area but had brought the level up to 1½-2 metres above the level of the road. This constituted a breach of the 1988 planning consent.

In order to be able to use the Canal site for his scrap business and as a waste station he had to produce a working plan to the local authority. This required him to lay down concrete and drain the site to make an appropriate surface on which to run the businesses. Before he could lay concrete on the site he had to take the level back to the level of the road. This he did over a period of years by moving the soil and redistributing it across the remaining two acres of the site.

In March 1994 he was granted a waste disposal licence for the canal site by the Gloucestershire County Council Waste Regulation Authority. In July 1996 he made the application for planning consent for the industrial site which was granted on 22 April 1998. In that year he made the application to register the land raising development on the industrial site as an exempt activity, which application was subsequently accepted on 13 November 1998. Thus the industrial site was not a landfill site for tax purposes.

In 1997 the Appellant made an application to regularise the situation at the canal site which was covered by a number of different planning consents for tipping and waste management activities. This application was given consent on 13 May 1997 and included permission to operate the site as a waste transfer station and metals recycling facility. Part of the consent was a defined final restoration scheme for the northern part of the site.

Although from 13 November 1998 it was possible for the Appellant to take in waste and tip it onto the industrial site without any liability to account for landfill tax, he was not able to do so immediately. He was under an obligation first of all to concrete the canal site and put in proper drainage, secondly he could not afford the cost of removing the waste stockpiled on the canal site to the industrial site. The Appellant had continued to accept waste onto the canal site in anticipation of the planning consent being granted quickly. He had stockpiled waste on the canal site as a temporary expedient, intending to move it to the industrial site as soon as he had the planning permission and confirmation from the environment agency that the industrial site would be an exempt site for landfill tax purposes. The local authority became aware that he was in breach of the planning conditions under the planning consent granted in May 1997, and enforcement notices were served on him. This obliged him to move the stockpiled waste from the canal site to the industrial site at a cost of about £15,000.

The Appellant claimed that in 1995 to 1996 not much waste had been taken in because the canal work site was up to the level permitted. However in or around 1996 the Severn Trent awarded contracts to renew pipelines in the Lydney area and the contractors needed somewhere to dump the spoil. He had some room at the canal site, but not enough, and at that time another site, the Lydney Estate, was available and he therefore charged contractors for dumping waste directly onto the Lydney Estate site. The charge to the contractors for the spoil depended on whether it was contaminated with tarmac, which he would have to sort out. He kept the tarmac for the road he needed to put down between the canal site and the industrial site.

Mr Bendall stated that it was his honest view that, notwithstanding the advice he had repeatedly been given by the Respondents, landfill tax was not due since he was not tipping waste on a permanent basis on the canal site after the summer of 1996. Any such tipping was on a purely temporary basis as a stockpile for moving to the industrial site as and when planning consent was granted. Prior to the introduction of landfill tax he charged approximately £2.00 per tonne (plus VAT) but in 1997 and 1998 he was charging £3, £4 or slightly more, per tonne plus VAT, for waste tipped on the canal site and at the Lydney Estate and at his farm. He had not charged his customers landfill tax in respect of the material, but had accounted for VAT on all such amounts.

An agreed bundle of documents was produced, and in addition there was a witness statement provided from the Appellant. Photographs of the site were included in the bundle.

Mr Alan Dumper, a senior officer with Customs and Excise visited the Appellant at the canal site on 5 July 1996 to educate him as to landfill tax.

Following the Appellant having submitted nil returns, and in particular his having written on his return dated 28 February 1997 "closed by environment agency", Mr Dumper wrote to him on 24 March 1997 asking him to advise if the closure was permanent and whether the Appellant would be seeking deregistration from landfill tax. On his copy of that letter the Appellant has written: "Mr Dumper on holiday. Rang secretary 9.15 22-4-97 and explain." It was Mr Dumper's understanding that the canal site was not operational, and he wrote to this effect to the Appellant on 23 June 1997 stating that if they were to maintain the registration as the Appellant had requested in his telephone call of 22/4/97, then he must render his returns by the due date. He explained in evidence that he had thought at the time that the canal site was not accepting any material. He was however informed that vehicles had been seen entering the site carrying waste for disposal and wrote to the Appellant to this effect on 25 November 1997. By a letter dated 27 November 1997 the Appellant replied to Mr Dumper stating inter alia: "We have recently obtained planning permission to cover our site with topsoil (not waste) to return it to agricultural and to tree planting use as the site is full, therefore, no tax would be due." Mr Dumper replied on 10 December 1997 confirming that such material was liable to landfill tax other than where the Appellant could clearly demonstrate that the material being accepted as site restoration material was not discarded by its producer.

Mr David Farr, a senior officer of Customs and Excise, had received a letter from the Appellant on 1 May 1998 stating that the canal site was completed prior to landfill tax being introduced and only capping off was required therefore he requested deregistration. Mr Farr visited the site on 27 May 1998, it was open, no records were available but the site appeared to him to be in current use. Following the visit Mr Farr wrote to the Appellant on 19 June 1998 stating that soil discarded as waste and used since 1 October 1996 to cap-off the landfill site was liable to landfill tax at the £2.00 per tonne rate. The Appellant was told that this should be declared on his landfill tax return using the best estimates he could. Mr Farr also confirmed that soil bought in from suppliers whose principal activities included supplying soil was not liable to landfill tax. The Appellant was asked to forward copies of invoices relating to such supplies since 1 October 1996. The Appellant was informed that Mr Farr did not propose to deregister him at this time because a completion certificate had not been issued for the existing landfill site and a final decision on how to treat landfill at the adjacent site had not been made by the environment agency.

At his visit Mr Farr had been told that the Appellant only bought in the odd barrow-load for land filling, and that he had bought in restoration soils to restore the site but he had produced no evidence of this and he had made no mention of stockpiling. The Appellant was not advised of the possibility of tax-free areas being available to him as it was not the Commissioners' policy to give such advice.

By letter dated 21 September 1998 Mr Farr informed the Appellant that as no landfill tax had been declared since 1 October 1996 he was obliged to make an assessment for landfill tax on the evidence available. He estimated 1,000 tons of inert waste at £2.00 per tonne, and therefore issued an assessment for £2,000. On 15 October 1998 an assessment in the sum of £1,998 tax, £15.00 interest and £99.90 for an underdeclaration penalty was issued making a total of £2,154.90.

The Appellant did not pay this and wrote again asking to be deregistered.

Mrs Sally Blackford, a landfill tax appeals officer, undertook a review of the assessment raised by Mr Farr and also of his decision not to deregister the Appellant. By a letter dated 30 November 1998 Mrs Blackford upheld both decisions. The Appellant wrote to Mrs Blackford in December 1998 saying that topsoil had been taken onto the site for stockpiling and not for land filling. Mrs Blackford contacted the environment agency who informed her that further soil had been deposited on the site since the assessment was raised, he having visited the site on 6 January 1999 and seen that soil was deposited well above the permitted level. In Mrs Blackford's notes it is recorded that the Appellant was intending to shift the soil to the site adjoining once the licences were in place because that site would be exempt from landfill tax. In a note of 12 February 1999 to Mr Mordecai-Lamerton it is recorded that the Appellant had discussed with her tax-free areas and he wanted to know how to obtain one. He was advised that retrospective approval could not be given.

Mr Mordecai-Lamerton, a senior officer of Customs and Excise, had taken over the case in February 1999 from Sally Blackford and had received a memo from her. He arranged to visit the Appellant on 3 March 1999 at the canal site. At that visit he explained to the Appellant that the only exception to material deposited being liable to landfill tax was if the Appellant had been purchasing material to restore the site. The Appellant told Mr Mordecai-Lamerton that the material was only being temporarily stored on the site, and he intended to remove it to the adjacent site that he was in the process of purchasing, but the purchase had been delayed. Mr Mordecai-Lamerton explained to the Appellant that he should have asked for a tax-free area and approval for removals, but those would only have allowed for deposits to remain tax-free or rebated for a twelve-month period. The Appellant stated he would like a tax-free area to store any new waste and was advised to write to the office when his request would be considered. The Appellant had told Mr Mordecai-Lamerton that when the tax came in he was two metres above the agreed planning level, and that he was now about three metres above the planning level. In his notes of the visit Mr Mordecai-Lamerton recorded that if one metre of waste were tipped over the site which was 12,100 square metres, then £14,400 tax would be due.

Following the visit the Appellant wrote asking Mr Mordecai-Lamerton to "confirm your agreement to having a Tax-Free Area" at the site in Lydney. With that letter he enclosed the May 1997 planning consent for land raising for future industrial development on the adjacent site, and stated that the environment agency had registered the industrial site on the register of exempt activities. He accepted that landfill tax was due for the nominal amount of topsoil which was currently stored on the canal site which had been imported to complete the restoration. He further stated that the material stockpiled above the licensed levels over the past two months were for use on the adjacent land and had not been landfilled on the canal site. Mr Mordecai-Lamerton sent him a letter granting approval of a tax-free area and he also confirmed to him the liability of the material going on to the site. He paid a further visit to the site on 19 March 1999 to obtain details of tonnages of waste disposed at the canal site from a red cash analysis book in which sales entered were described as tipping, spoil, rest, material and soil. On the basis of these records Mr Mordecai-Lamerton estimated that £49,857 was due in underdeclared landfill tax. During this visit he was told by the Appellant that some of the material recorded as entering the canal site had actually been disposed of at an unofficial site elsewhere in the area. The Appellant would not give Mr Mordecai-Lamerton details of that site but offered to take him there.

In arriving at the estimate of underdeclared landfill tax Mr Mordecai-Lamerton had taken as a guide the amount of 2 tonnes per metre, because, having seen a bulldozer running over the land, he had concluded that the soil would be compacted. The amount which he derived from the records was very close to his original calculation at the site visit.

Mr Mordecai-Lamerton had taken a series of photographs of the site which were produced to the Tribunal.

The case was reported as a possible commercial fraud. A meeting took place with the Appellant, Mr Mordecai-Lamerton and Mr Nicholas Pass, a senior officer of Customs and Excise at the Gloucester office of Customs and Excise on 14 June 1999. The Appellant signed Mr Mordecai-Lamerton's notes of that interview. At that meeting Mr Bendall contested the Customs and Excise view of landfill tax and reiterated that it was not due. The Appellant stated that he wished to speak to his accountant and solicitor before being interviewed.

On 27 July 1999 a tape recorded interview with the Appellant was carried out by Mr Pass and Mr Mordecai-Lamerton was also present. At the outset of that interview the Appellant was informed that it was a civil not a criminal interview, he was not under caution and he was not under arrest and was free to leave at any time. He was also free to seek any legal advice that he might wish. (No challenge was made to the admissibility of this interview.)

In the course of the interview the Appellant stated inter alia that he did not keep any records relating to landfill tax because he did not think that he was "eligible" for landfill tax. He kept other books and records. He had completed the landfill tax registration form only because he thought it was a statutory requirement. He believed that everybody had to sign it. He was not prepared to comment on why he had put on his first return "closed by environment agency".

The Appellant confirmed that he had not charged any landfill tax during the periods October, November, December, January 1997. He stated that the site had been finished before landfill tax was even introduced. He believed that he was not obliged to pay landfill tax because the site was completed before the tax was introduced and that was why he had not paid any.

The interview had commenced at 11.07, at the outset Mr Pass had referred to the interview being on the basis that it related to the "alleged evasion" of landfill tax, and at 11.34 the interview was suspended for the Appellant to read notice 730. The interview had recommenced at 11.47am. The Appellant said he understood the notice. He agreed that the more co-operation he gave Customs and Excise in the investigation the more chance of the reduction of any potential penalty there could be.

At one point the Appellant stated that he believed that by sending in the returns he was declaring tax, and repeated that it was his belief that no tax was due. It was put to him that when Mr Mordecai-Lamerton visited the site the level was approximately three metres high, and the Appellant had said that when landfill tax came into operation the site was approximately two metres high, one metre having been put onto the site since. The Appellant made no comment on this. The Appellant stated: "The material was tipped on a temporary basis. I understood tax would be due only if it was being laid there as a permanent fixture as it were. All the material over and above, when the tip was finished was all going to be removed and I cannot see how landfill tax can become due on something which is not fixed. … It was going to be removed to my new exempt site which is next door." He also agreed that a certain amount of waste material was brought in. When it was put to him that the books and records did not reflect this, the Appellant stated that this was because good topsoil was taken in for nothing and there was no payment either way.

Following that interview Mr Mordecai-Lamerton wrote to the Appellant on 1 August 1999 stating inter alia that the assessment made by Mr Farr in the sum of £1,198 have been withdrawn as the periods he had assessed were covered by the new assessment. He made reference to the fact that the Appellant had said that some of the material in the records related to material not tipped at the licensed site but at another site whose address he had refused to disclose. 50% of the material listed in the records was said to be tipped at the site from the middle of 1997 to early 1998. Mr Mordecai-Lamerton repeated his earlier offer that if he were given the address of this landfill site he would consider reducing the assessment accordingly. A copy of the assessment and how it was made up, in the sum of £48,856 was enclosed.

On 10 August 1999 Mr Mordecai-Lamerton and Mr Pass visited the Appellant's farm at the Appellant's request to see where some of the material had been disposed of illegally. A reduction of landfill tax was agreed in principle, Mr Mordecai-Lamerton's note records that the Appellant was due to write informally with the details and it also records that the Appellant stated he wished to reconsider his interviews insofar as civil evasion penalties were concerned before any action was taken. He also requested that Mr Mordecai-Lamerton write to him outlining the department's position, which was agreed.

In his first interview the Appellant had not accepted that he had deliberately evaded the payment of landfill tax nor that he had acted dishonestly. He did not make any comment when asked if he accepted that landfill tax was now due. It was put to him that he was deliberately trying to stall the payment and therefore evade the payment of landfill tax by contending that it was not due. He replied that he believed only that tax was due on material tipped on a permanent basis and he had always believed that. He was not prepared to sign a schedule accepting the landfill tax total prepared on the schedule because he both disagreed with the calculation and he contended that the tax was not due.

Following the visit to the farm Mr Mordecai-Lamerton agreed to reduce the assessment by approximately £7,000 but stated that he did so reluctantly as no written evidence of the matter was produced to him. An amended assessment in the sum of £43,633 plus interest was sent to the Appellant on 16 September 1999. The process by which this was dealt was that tax said to be due for the period 1/97 to 1/98 was no longer included in the assessment, and the assessment therefore referred only to period 7/98, 10/98 and 1/99.

The second interview with the Appellant took place on 1 September 1999 in the presence of Mr Pass, Mr Mordecai-Lamerton and Simon Reece, a partner in the firm of Greenfield Associates who was there with the Appellant.

At the start of that interview it was again explained that this was a civil interview and not a criminal one, the Appellant was not under caution nor under arrest and he was free to leave at any time. The Appellant was asked if he understood this and he replied "Yes". He was also told that he was free to seek any legal advice that he may wish. He said he was happy to continue with the interview.

It was put to him that following a meeting on 10 August 1999 he had requested a second interview. He was asked if that was correct to which he replied "Yes". He also agreed that that was why they were there that day.

The Appellant was asked whether he considered that the correct landfill tax had been declared from 1996 to 1999 and he replied "Yes". He considered he had declared the correct amount of landfill tax and he believed that they were nil returns. At this point Notice 730 was handed out to the Appellant. There was a brief adjournment whilst it was read. The Appellant gave it as his understanding of the Notice that if he co-operated any potential liability would be reduced. Mr Reece stated that he was satisfied that the Appellant understood the Notice. It was again put to the Appellant that he had requested a second interview on 10 August in order to further explain his position regarding the landfill tax. The Appellant agreed that was correct. Mr Reece then set out what the Appellant had understood the position to be and what he had been doing. He also said that he had advised the Appellant that because the material was deposited on a licensed site it was due for landfill tax, even though it was going to be later removed and transferred onto another type of site that was not liable for tax. The Appellant then agreed with the suggestion that he now accepted that landfill tax was due. He also was prepared to accept that it was a reasonable position for a reasonable person to have accepted the advice that Customs and Excise had given on numerous occasions or to seek other professional advice. The following question was then put: "Therefore do you accept that by your continual refusal to pay landfill tax during 1997, 1998 and the early part of 1999 that you have deliberately evaded the payment of landfill tax?" He replied "Under the circumstances and following the previous meeting I can see that that could be the case." Question "Do you accept that you have evaded the payment of landfill tax?" Answer "Yes." Question "And subsequently do you also accept, Mr Bendall, that by evading the payment of the landfill tax for 1997, 1998 and early 1999 you have committed a dishonest act?" Answer "Yes." Following these questions and answers the Appellant was also asked about an underdeclaration and an evasion of VAT which he was also prepared to accept, although in fact there was no such underdeclaration or evasion as it subsequently transpired.

The Appellant accepted that through 1997, 1998 and 1999 he had not sought any professional guidance. Thereafter repeated questions were put to the Appellant as to whether or not he had evaded landfill tax, to all of which he agreed.

Following the interview it was accepted by the Respondents that the payment of the landfill tax could be by instalments. On 30 June 2000 the Appellant was notified that a penalty was due with a 30% reduction for co-operation.

In cross examination Mr Mordecai-Lamerton confirmed that he had assumed that all the landfill which appeared in the books was tipped onto the site because the Appellant had no other legal site on which he could tip. He had not agreed to visit the other site since the Appellant would not give him its address and he would have needed to confirm with the environment agency if it was an exempt or an illegal site. It would have been perfectly possible for the Appellant to have taken him to somebody else's site which was not the site in question and therefore he needed to make enquiries beforehand.

As far as the site at Woodlands farm was concerned, the Appellant had previously agreed that he had no licence for that site so Mr Mordecai-Lamerton considered that checking was not so important; what was important was to agree how much material was on the site.

Mr Mordecai-Lamerton acknowledged that there was a discrepancy between what was put to Mr Bendall at page 16 of the first interview when it was said that he had indicated that roughly one metre had been put onto the site since the landfill tax come in, as compared with his notes of the visit where he had recorded that the Appellant had stated "that when landfill tax came in 1/10/96 he was two metres above the agreed planning level and that he was now about three metres above the planning level." He agreed that there was no reference to where the extra metre had come from. He acknowledged that he had wrongly issued an assessment to VAT.

Mr Pass also gave evidence as to the interview to the Tribunal. It was his evidence that it was originally intended formally to interview the Appellant on 14 June, but the Appellant had not wanted an interview then as he had wanted to seek legal or professional advice. Notice 730 had been read to the Appellant when it was issued to him during the first interview at a point when the evasion issue had become relevant. Mr Pass accepted that the VAT assessment had been withdrawn because VAT had been paid correctly by the Appellant.

Mr Pass accepted that parts of the interview had not been recorded, but had said the tape had only been switched off when the Notice 730 was given because it was felt there would be too much pressure on the Appellant if the tape were on at that time. After the issue of the Notice 730 everything had been recorded.

Mr Pass informed the Tribunal that he had dealt with the Appellant before in 1976 under the civil evasion procedures for VAT evasion.

It was Mr Pass's impression that the Appellant was more willing to co-operate after having come clean about the illegal tipping at his farm which he had visited with Mr Mordecai-Lamerton. He believed that it was because of the illegal tipping that the Appellant had regularly replied "No comment" in the course of the first interview.

Mr Pass believed that it was perfectly possible to impose a civil evasion penalty even without any form of confession. It would have been possible to have put forward the case for a penalty without the second interview. However in those circumstances the penalty would have been greater. It was not his own job to impose the penalty.

Mr Pass stated that he had repeatedly asked if the Appellant accepted his actions were dishonest because Schedule 18 (sic) of the Finance Act mentioned dishonesty and it was clearly stated in the civil evasion notice. He believed that it was his job clearly to put the questions so that an appellant could refute them or not and there would be no ambiguity which would be a matter which would be taken into account when deciding the level of penalty if any.

Mr Pass did not accept the Appellant's evidence contained in his witness statement that he had been coerced into making admissions. He agreed that there were conversations when the tape was switched off, but it was explained at the time to the Appellant that if he had done nothing wrong then he did not have to admit anything. He was also told that if he co-operated there would probably be a reduction of 50%. Mr Pass had subsequently recommended a 30% penalty because of the admissions in the second interview. Account had also been taken that the Appellant had written (by a letter dated 25 October 1999) offering to pay off the full amount of some £56,000 with time to pay. It was put to Mr Pass that it had been Mr Mordecai-Lamerton's evidence that the Appellant asked if he would want a second interview and Mr Pass had replied that he could not dispute Mr Mordecai-Lamerton's evidence but as far as he was concerned the Appellant had wanted the interview in order to pay as little penalty as possible. He believed that the Appellant had properly considered the questions put to him at interview. He accepted that he had told the Appellant that if he admitted dishonesty the penalties would be reduced and this had been said on 14 June.

The Appellant in his evidence was adamant that he had not asked for a second taped interview, it was Mr Pass who had suggested it. He claimed that he had agreed to it because he was being badgered to do so. He claimed that on several occasions, including during the first interview, at the meeting at the farm and during the second interview he had been told by Mr Pass that if he admitted dishonesty the penalty would be reduced.

He also claimed that during the course of the farm visit he had told the officer that there was another site where waste had been tipped, but he did not give the name of the owner nor the address because he thought it best to keep it to himself. He had not mentioned this other site in the course of the interview because it was a local estate belonging to a neighbour and he "did not want any interruptions where the material went".

He accepted that he had not mentioned during the interview the question of redistribution of spoil, which he had set out in his witness statement.

The Appellant accepted that the records of interview were accurate and he had admitted underdeclaring landfill tax and acting dishonestly, however he said he was coerced into making those replies and made them unwillingly as a result of what was said to him, namely that if he admitted that he owed tax and that he had acted dishonestly he would suffer a lesser penalty. He claimed that promises were made to him prior to the interview by both the officers involved. He agreed to everything that was said in the second interview because he thought that was the best way of reducing the penalties.

He also claimed in his witness statement that both the environment agency and the planning authority had told him that in view of the fact that he was in breach of his planning conditions, and his licence, they were going to close the site, and it was on the basis of this threat that he sent in the landfill tax return to which Mr Dumper had referred. He had taken Mr Reece with him as moral support, and had not taken a lawyer because he thought he could handle it himself and save the expense of a lawyer.

In cross-examination the Appellant said he understood the implications of being VAT registered and had been registered since its introduction, but that he did not "broadly understand" what the implications of being registered for landfill tax were.

By a letter dated 7 October 1996 Mr Dumper had stated to the Appellant: "Following your verbal request the Commissioners of Customs and Excise are prepared to accept your proposals to charge landfill tax based on the following …" (There then followed references to different sizes of lorries.) The Appellant disputed that they were his proposals and said that Mr Dumper had asked him what a lorry would hold, and he believed that it was Mr Dumper's proposals to which he had agreed.

In cross-examination the Appellant had also said that he had made landfill tax returns in respect of the quarters ended 31/10/00 and 31/01/01 claiming a refund of £68,295.64 because: "I filled in to get back what they tried to get out of us. It was the exact figure they were claiming." However he acknowledged that he had not paid either the assessment or the penalty. Finally in re-examination he said that he had been prepared to take the officers to the estate, but he did not want them going on their own and he would have had to have spoken to the estate first.

Simon Reece gave evidence on behalf of the Appellant which we accept. He described Greenfield Associates as being group planning and environment consultants. He himself was a Chartered Geologist, a Fellow of the Institute of Quarrying, a Member of the Institute of Waste Management, he had a degree in geology and an MA in hazardous waste management, he had no legal training, but he knew about planning and environmental law.

He further described himself as being the Appellant's technical adviser with regard to waste management, and he liaised with the planning department and the environment agency which he had done since 1994. In 1996 to 1998 he had often visited the canal site.

During those visits the Appellant had been moving earth from one part of the site to another in order to put down a concrete pad for the waste management licence. An area of about 2000 square metres was laid down. About 1½ to 2 metres of material had been moved which was equal to approximately 4000 cubic metres. This equated to about 8000 tonnes of material.

He had attended the second interview to clarify the Appellant's position as to licensing and planning. He was not expecting the type of discussion that took place.

He agreed that Notice 730 had been given but did not remember whether or not he and the Appellant had read it together. He had not discussed it in detail with the Appellant. He was not qualified to advise on dishonesty and had never come across these particular issues before.

With regard to landfill tax, he knew the basics but did not get involved in it in detail. His expertise was with regard to where the boundaries where, and also heights and levels.

In cross-examination he agreed that he had signed the schedule for landfill tax. He had not been involved in looking at the books and his evidence related only to the redistribution of the earth.

The Respondents' case

(1) Admissibility of the second interview

The Tribunal was referred to the case of Customs and Excise Commissioners v Han & Yau [2001] STC 1188 at paragraphs 80-84, where Potter LJ approaches the question that the Commissioners may be vulnerable to the Tribunal excluding as inadmissible evidence obtained during an interview, or subsequently, as a result of supplying to the taxpayer a statement of practice in Customs and Excise Notice 730. He continued:

"If such rulings were to become widespread it would significantly affect the ability of the Commissioners successfully to defend appeals and would threaten at the basis of the whole of the civil evasion penalty régime. Arguments have apparently already been `flagged' to the effect that the inducement procedure may amount to a breach of the right to silence and the right against self-incrimination. Whether this is correct has not been argued before us. However, I would only observe that the fears of the Commissioners seemed to me likely to prove unfounded in this respect.

It appears that the inducement procedure, at least as refined in December 2000, makes explicit to the taxpayer, in addition to the information supplied in Customs and Excise Notice 730, that the civil evasion investigation is not being conducted with a view to prosecuting the trader for VAT evasion, that the trader is not obliged to co-operate in the Customs investigation, and it is entirely a decision for the trader to decide whether or not to speak to the investigating officer or assist generally in the investigation. It must be remembered that the requirement of art 6(1) in relation to a third trial, together with what has been held to be the implicit recognition of a right to silence and a privilege against self-incrimination, are of a general nature and are not prescriptive of the precise means or procedural rules by which domestic law recognises and protects such rights.

It by no means follows from a conclusion that art 6 applies that civil penalty proceedings are, for other domestic purposes, to be regarded as criminal and, therefore, subject to those provisions of the Police and Criminal Evidence Act 1984 and/or the codes produced thereunder, which relate to the investigation of crime and the conduct of criminal proceedings as defined by English law. … I would merely add my view that, if matters are made clear to the taxpayer on the lines indicated in [77] above at the time when the nature and effect of the inducement procedure are also made clear to him (whether by Customs and Excise Notice 730 or otherwise), it is difficult to see that there would be any breach art 6. It also seems to me that, even if the Police and Criminal Evidence Act 1984 were applicable, it is most unlikely that a court or tribunal would rule inadmissible under section 76 or section 78 any statements made or documents produced as a result, at any rate in the absence of exceptional circumstances. On the other hand it follows from this decision that a person made subject to a civil penalty under section 60(1) of the Value Added Tax Act 1994 will be entitled to the minimum rights specifically provided for in art 6(3)."

We were also referred to the Tribunal case of W&B Sharland t/a Sharland Fir Tree Café v Commissioners of Customs and Excise (LON/99/1361), where the tribunal referred to the then Lord Chief Justice, Lord Bingham of Cornhill in the Privy Council who, in the case of Brown v Stott, said:

"The Convention contains no express guarantee or privilege against self-incrimination thus the right we have to consider in this case is an implied right. While it cannot be doubted that a right must be implied, there is no treaty provision which expressly governs the effect or extent of what is to be implied."

We were also referred to the Tribunal cases of K H Mu & C B Mu v Commissioners of Customs and Excise (LON/00/578), Keith Motors (Christchurch) Ltd v Commissioners of Customs and Excise (LON/00/813), and Yarl Wines v Commissioners of Customs and Excise (LON/00/861).

In the last-named case the Tribunal chairman said at paragraph 126:

"It is clear from the decision of the Privy Council in Brown v Stott [2001] 2 WLR 817 that the right not to incriminate oneself and the right to silence both of which are implied in art 6 of the European Convention on Human rights are not absolute, but they are closely related and that they arise from the right to a fair trial and the presumption of innocence. In that case a compulsory provision of a sample for a blood alcohol test was held not to be incompatible with the right against self-incrimination. In Saunders v United Kingdom (1996) EHRR 313 the obligation to answer the inspectors' questions was held incompatible. Mr Thomas stressed the absence of compulsion in this case we accept his submission that the use of the Notice 730 procedure does not breach article 6 but we note that the observations of Potter LJ in Han & Yau are qualified in that his Lordship referred to the nature and effect of the procedure being made and to "the absence of exceptional circumstances."

It was submitted that, whilst Mr Morcedai-Lamerton had accepted that a second interview may have been suggested to the Appellant, Mr Pass was certain that the Appellant had requested the second interview. On the evidence the Appellant had wanted to seek advice, as he had said he did before the first interview, and therefore it seemed probable that he had requested it. He had been given Notice 730 at the first interview and again at the second interview. The officer's notes of the meeting on 10 August 1999 clearly stated that the Appellant had stated he wished to reconsider his interview about the civil evasion penalties. Mr Mellor also relied particularly upon the fact that twice during the course of the second interview the Appellant had agreed that he had requested a second interview, and that by a letter dated 23 August 1999 Mr Pass had written to the Appellant reminding him that on 10 August 1999 he had requested another interview and that was scheduled for 1 September 1999.

There had been no compulsion upon the Appellant, the Notice 730 procedure had been appropriately applied and there had been no breach of article 6. The Appellant had clearly understood that his presence was voluntary, he had had a consultant with him at the time of the second interview, the interviews took place against an unobjectionable course of correspondence between the parties dealing with the Commissioners' investigations and they had set out what the interview was about, the Appellant had had time for reflection prior to attending each interview, no admissions had been made in the first interview, and the use of the contents of the interviews which were freely given was reasonable and proportionate.

The case relied on by the Appellant, John Lucas Murrell v Commissioners of Customs and Excise (Decision No.16878) was distinguishable in that the case was heard before the case of Han & Yau and there was no argument in it as to admissibility. That case no longer represented the law. The case of Ajay Chandubhai Kumai Patel v Customs and Excise Commissioners (Decision No17248) was also relied on by the Appellant. That case was also distinguishable in that the notes of interview were problematic, and the fact that no caution had been given was said to be contrary to article 6, but this was not the view expressed by their Lordships in Han & Yau. Furthermore it had been held that aspects of the interview were "profoundly unsatisfactory".

It was the Appellant's case that the interview should be excluded because admissions of dishonesty were inadmissible. However the right against self-incrimination was not an absolute right. In the absence of compulsion the admissions were not inadmissible.

The fact that no caution had been given was not of itself a breach of article 6. The officers disputed that improper pressure had been applied on the Appellant, it being clear the Appellant could leave at any time. He was told at the interview that this was the case and that it was not a criminal interview. These things had also been said at the first interview.

The Appellant had questioned the relevance of the questions about dishonesty. These were relevant because the officers were both trying to establish whether they could impose a civil penalty, and because of the effect any such admission would have on the mitigation of any penalty. The notice itself refers to the following:

"At interview an early and truthful admission of the extent of the arrears and why they arose will attract a considerable reduction."

It was accepted by the Respondents that the civil penalty régime was criminal in nature, and that certain rights were granted under article 6(3) of the Human Rights Act, however it did not therefore follow that the interview was subject to the conditions of the Police and Criminal Evidence Act.

It was not true that the Appellant's admission of dishonesty did not affect mitigation, in the present case he had been given a 70% reduction following the second interview. It was Mr Pass' evidence that the admissions had made a difference.

The Appellant had sought advice for the first time following the first interview.

It was further submitted that the interview was relevant to the assessment as well as to the civil penalty. The Appellant was now disputing the amount owed under the assessment.

The fact that the Appellant had a right under article 6 not to incriminate himself did not mean that all incriminating admissions were inadmissible, see the case of Han & Yau. There had been no cases since Han & Yau where it had been held that there should be a caution. In the present case the questions were reasonable and proportionate. It was not inappropriate to ask if he had been dishonest.

(2) The assessment

It was submitted that in the present case all of the criteria set down in section 40 of the Act were fulfilled:

(a) There was a disposal of material (soil) as waste within the meaning of section 64. This was evidenced by the invoices. If the waste producer intended to discard or throw away the material by disposing of it as landfill , that disposal will be liable to landfill tax and the position does not change simply because the landfill site operator, or another party, makes use of the material. It is the intention of the person making the disposal which is paramount. The Appellant's intention was irrelevant in the present case (see NSR Ltd v Commissioners of Customs and Excise (L00007), ICI Chemicals & Polymers Ltd v Commissioners of Customs and Excise [1998] V&DR 310 and F L Gamble & Sons Ltd v Commissioners of Customs and Excise (L00004). The Appellant claimed to have bought some of soil that had been deposited on the site, but he had produced no invoices in respect of these purchases, nor had he provided the names and addresses of the suppliers. He had produced records showing charges he had invoiced for tipping on the site.

(b) The material was clearly deposited on land within the meaning of section 65

(c) The land in question was a landfill site within the meaning of section 66; there was a Waste Disposal Management Licence extant at all material times.

(d) The disposals to which the assessment relates were made after 1 October 1996.

The Appellant had relied on the case of Leigh Land Reclamation Ltd & Others v Walsall Metropolitan Borough Council [1993] Env.L.R. 16 which concerned the Control of Pollution Act 1974. In that case it had been stated by Bingham LJ (as he then was):

"I would, for my part, entirely agree that the meaning of `deposit' takes it colour from the context in which the word is used. This statute is concerned primarily at least, with the manner in which waste is disposed of. Its provisions, and the conditions in the licence, are directed towards the mode of final disposal and not to the intermediate processes. For the purposes of this Act, waste is, in my view, to be regarded as deposited when it is dumped on the site with no realistic prospect of further examination or inspection to reject goods of which deposit is not allowed under the licence."

It was submitted by Mr Mellor that that case must be distinguished in that the landfill legislation made it clear in section 65 that a deposit was a disposal by way of landfill. Under section 64 the intention of the depositor was paramount and it was plain from the Act that it did not have to be the final resting place.

In the case for F L Gamble & Sons Ltd, the Tribunal had looked at three entirely separate separates sets of legislative provisions which were applicable to the activity carried on by the Appellant and had concluded that the Tribunal had only to interpret the provisions of the landfill tax legislation. It was submitted that that was the present case. The Tribunal was referred to the case of R v Metropolitan Stipendiary Magistrate, ex parte London Waste Regulation Authority [1993] 3 All ER 113 where Watkins LJ had held that the case of Leigh (supra) was wrongly decided.

It was submitted that the assessment had been made to best judgment, the Appellant had not shown, following the case of Rahman (t/a Khayam Restaurant) v Customs and Excise Commissioners [1998] STC 826, that the assessment had been reached dishonestly or vindictively or capriciously; or was a spurious estimate or guess in which all elements of judgment were missing; or was wholly unreasonable.

The Appellant had submitted that Mr Mordecai-Lamerton had not taken adequate account of the fact that the Appellant had told him that 50% of the waste was tipped elsewhere. However it was clear from the documents that the Appellant had not said 50% of all deposits were made elsewhere, nor that it was for the entire period. Mr Mordecai-Lamerton's notes record that the Appellant had said he had been tipping elsewhere in 1996, through 1997 to possibly early 1998. Furthermore Mr Mordecai-Lamerton had offered to go to the other site if the Appellant would provide the address, but the Appellant had refused to take him to the address. When he had later taken Mr Mordecai-Lamerton to the farm, Mr Mordecai-Lamerton had made an allowance for this. He was not to know that this was not the site that had been referred to by the Appellant. In the second interview Mr Reece had said that some of the waste was "going to be later removed and transferred onto another type of site that was not liable for tax." There was no reference to there being a further site, nor to the quantity. It was not until the witness statement for the proceedings that the address of the Lydney estate was given to the Commissioners. Mr Mordecai-Lamerton had offered to go to any other site but the Appellant refused to give the address. It was reasonable for Mr Mordecai-Lamerton to have refused to go since he would not have known where he was being taken and he needed to check with the environment agency to see if the site was exempt.

With regard to the challenge of the amount of the assessment, the following submissions were made:

(i) No document was produced to support tipping elsewhere, all the invoices were made out to the canal site.

(ii) The farm deposits were taken into consideration.

(iii) There was no evidence to produced from (a) to show that he had been dumping on the Lydney estate. On the basis of the Appellant's own evidence it would be illegal. The burden of proof in any event was upon the Appellant.

(iv) The assessment was based on the Appellant's own records and invoices, and all on the face relate to the one site.

(iv) It was clear that the Appellant had accepted material on the canal site after 1 October 1996. The redistribution claim by the Appellant was not relevant since it was not the basis on which the assessment was calculated. It would not affect the records.

It had been submitted on behalf of the Appellant that the balance of material was stock-piled and used for capping-off, and had not been made by way of landfill since it was in breach of the planning consent and waste management licence. This matter was quite irrelevant to the question of landfill tax. It was also irrelevant that the waste was used for capping-off (see Gamble paragraph 42).

It was also not claimed by the Appellant until 14 December 1998 that the material was being stockpiled and was only a temporary disposal. The Appellant had failed to notify the Respondents that deposits were made and therefore there was no obligation on the Respondents to consider the matter of it being a tax-free area.

Under the Landfill Tax Regulations 1996 Part V paragraph 21(4)(i) it was clear that an entitlement to credit only arose where a registered person had accounted for an amount of tax. In this case the Appellant had not paid any tax. Furthermore any temporary deposit had to be permanently removed no later than one year after the date of the disposal which had not taken place in the present case. Finally under regulation 21(4)( c) any such removal had to be a further taxable disposal of the material, whereas in the present case the Appellant had said he would be moving it to an exempt site.

(3) The penalty

We were referred to the case of Stuttard & Other v Customs and Excise Commissioners [2000] STC 342 at page 348 where Carnwath J stated:

" In most of these cases the sort of analysis of the term `dishonesty' that one finds in Ghosh is unnecessary. Dishonesty is an ordinary English word, and in most cases it is a straightforward jury question whether there has been dishonesty."

The judge then went on to refer to the tribunal's decision and states:

"What the tribunal is saying is that an intelligent person like him, with his background, would have known with `a moment's thought' that it was an inherently dishonest system. …

It does use the word `recklessness', and I readily accept that recklessness by itself is not dishonesty. But it may be evidence of dishonesty."

It was accepted that the burden of proof was on the Respondents with regard to dishonesty, but in other matters it was on the Appellant.

It was submitted that in the present case dishonesty was proved even if the second interview was not admitted. The Respondents relied on the following:

(a) The Appellant made a false statement when he wrote on his first landfill tax return that the site had been "closed by environment agency".

(b) It was not accepted that the environment agency had told the Appellant that the site would be closed because they actually gave planning permission on 13 May 1997 in respect of the site.

(c) The Appellant had not produced any relevant contravention notices which it might be expected would be sent out before any threat of closure was made.

(d) In the course of the first interview the Appellant said "no comment" when asked to expand on the note he had made on the return.

(e) Even if the Appellant had thought the site was to be closed, he had still failed to declare that he was accepting disposals of material onto the site.

The Appellant's version of matters and explanation changed since the start of the matter as follows:

5/7/96 The Appellant said he was accepting waste to level off

27/11/97 The Appellant said he was covering the site off

1/5/98 The Appellant again said he was cover the site off

27/5/98 The Appellant said he was restoring the site

19/10/98 Again he said he was restoring the site

On 14 December 1998 there is the first mention of stockpiling

16/7/02 (the Appellant's witness statement) he first mention that the soil was being redistributed.

The test to be applied was as set out in R v Ghosh [1982] QB 1053 and that it must be known that the taxpayer "knew that according to the ordinary standards of reasonable and honest people that what he was doing would be regarded as dishonest".

The standard of proof was the civil standard of proof to a high degree of probability (see First Indian Cavalry Club Ltd & Chowdhury v Customs and Excise Commissioners [1998] STC 293).

It was only at the hearing that the Appellant had said for the first time that the records referred to material deposited on illegal sites.

On 5 July 1996 landfill tax had been explained to the Appellant. Despite being advised on numerous occasions both orally and in correspondence that he was liable to account for landfill tax, the Appellant continually submitted nil returns. By his letter dated 4 March 1999 the Appellant had accepted that landfill tax was due for a nominal amount of topsoil imported to complete the restoration, however he did not account for it. Furthermore he tried to reclaim the amount of the assessment and penalty in subsequent returns, despite not having paid those amounts and despite the ongoing appeal.

On 1 September 1999 the Appellant admitted in interview that the tax was due, that he knew this and that he had dishonestly failed to pay.

The Appellant at no time sought legal advice, and only spoke to a planning consultant ten days before the second interview. This was reckless. In the event it was submitted that the penalty should be upheld in full.

The Appellant's case

It was submitted that the Appellant had had planning permission to build up to the road level by 1996 and this is what he had done. He had then taken more waste for temporary storage only and for capping-off. The waste taken in was recorded in his books, but it had been deposited elsewhere. The increase in height after 1996 was due in part to the redistribution of waste which had been deposited before the introduction of landfill tax. No landfill tax was due on the temporary deposit of waste.

It was generally contended on the Appellant's behalf that:

(a) He owed no landfill tax, the assessment should be reduced to zero.

(b) No penalty was due and/or it should be reduced to zero.

(c) The decision not to reduce the assessment to zero was flawed.

With regard to whether the assessment was made to best judgment, it was acknowledged that the Appellant had a high hurdle in this respect. Nonetheless the Appellant had given details to the officers of tipping elsewhere. Mr Mordecai-Lamerton had never followed that up. Mr Mordecai-Lamerton had taken either no or an inadequate account of this matter. Furthermore the Appellant had offered to take Mr Mordecai-Lamerton to a site where it was claimed tipping had taken place, but this offer was not accepted, or was arguably wilfully refused, despite the fact that the offer to visit the farm was taken up. It was therefore submitted that this was a case where the Commissioners were acting capriciously or wholly unreasonably in assessing without investigating the Appellant's contention that he had been tipping elsewhere. This tipping related to some 50% of the assessment.

It was further submitted that the Appellant's evidence that he had had to re-distribute the waste to comply with the planning because he had to concrete over a certain area was confirmed by Mr Reece in his evidence. Mr Reece's evidence was that 8000 tons of spoil was shifted to accommodate the concrete. He used a 2 tons per cubic metre conversion rate, which was the same as Mr Mordecai-Lamerton had used. This supported the Appellant's evidence that the material was deposited before landfill tax was due on the site.

Mr Mordecai-Lamerton's evidence that the assessment was based on the records in the books was inconsistent with what he had said in interview. 8000 tons should be excluded from the assessment because that amount of waste had simply been moved from one part of the site to another and this had caused the increase in height.

What was recorded in books was waste deposited both at this and at another site. The balance of the waste was stockpiled and used for capping-off, it was not made by way of landfill at the landfill site since it was:

(i) In breach of planning consent and waste management licence

(ii) Soil for "capping-off" not "waste"

(iii) Temporary disposal only. It was effectively held on behalf of the exempt site. Temporary storage is permitted for up to twelve months in a "tax-free" area. No mention of this had been made to the Appellant until March 1999.

(iv) Credit for waste removed to another landfill site was due.

"Deposit" was not defined in the Act. The Appellant relied on the case of Leigh (supra) which related to the Control of Pollution Act, the Act previously relevant to the present circumstances. As in that case, the landfill tax was also directed to where there was a final disposal, not for an intermediate process and under regulation 21 temporary disposals were given credit.

The evidence showed that the Appellant intended to move the waste because he was getting a licence for the next door site.

It was not accepted that to be temporary it had to be held for less than 12 months, where, as here, it was not the final resting place of the waste. There was no deposit so there was no landfill tax due, irrespective of the credit mechanism under the regulations. In the present case the Appellant had held a waste management licence under the Environmental Protection Act 1990. At the time the Landfill Tax Act came into force, whilst it was a landfill site, the waste was not disposed of by way of landfill because at the time the canal site was full and therefore landfill was not permitted. At the time the Appellant was in breach of his planning permission and so everything that was deposited on the site since the coming into operation of the Act was in breach of this planning permission. Because he was in breach this rendered the licence invalid, and therefore the material was not subject to the Act.

With regard to the penalty, it was argued that as no tax was due, therefore no penalty was due. Alternatively, if the tax was due there had been no dishonest evasion.

The Appellant did not deny that he had written on the return that the canal site had been closed. However, following that he had telephoned the Commissioners to try to sort out the misunderstanding because he had genuinely belief that the site was to be closed. There was no reason to doubt his evidence that this believe was based on his discussions with the inspectors. It had clearly not been seen as important by Customs and Excise at the time, as Mr Dumper had not followed up the matter.

The fact that the Appellant had failed to declare landfill tax was consistent with his position that he thought none was due.

It was the Appellant's evidence that he had told the officers that he was stockpiling, and not said that he was only capping the site. The Appellant was consistent in his evidence that he wanted planning permission and an exemption from landfill tax. Yet it had taken longer than he had thought to get the permission to transfer the waste to the adjacent site. It was unlikely that he would want to put the spoil on a licensed site when he had an exempt site next door. He had not been seeking to mislead the officers.

The law was not straightforward. The case of Leigh and the case of the London Waste Regulation Authority which take differing views show this. It was an open question whether "deposit" included temporary deposits or only permanent ones. It was a highly technical matter and it was not to be expected that either Customs and Excise officers or the Appellant would be conversant with the proper legal definition. To suggest that the Appellant was "recklessly dishonest" not to accept the Customs and Excise position was wrong.

Regulations 20 and 21 of the Landfill Tax Regulations allowed for a credit where there was a temporary deposit. The Appellant believed there was no tax for temporarily stored deposits. It was not dishonest of him to persist in such an assertion.

The Appellant had never passed landfill tax on to his customers, this supported the fact that he did not believe the tax was due. As for his attempt to reclaim tax which he had not paid, he had said that this was simply a way of ridiculing the system and an attempt to get things sorted out.

The Tribunal was referred to the case of R v Ghosh (1992) QB 1053 for the fact that dishonesty was a straightforward jury question and that there was a twofold test. The Tribunal must first of all decide whether according to the ordinary standards of reasonable and honest people what was done by the Appellant was dishonest, and secondly the Tribunal then must consider whether the Appellant must have realised that what he was doing was by those standards dishonest.

With regard to the particulars relied on by the Commissioners, it was clear from his evidence that the Appellant had an honestly held and mistaken belief that the site would be closed when he had written as he did on his first landfill tax return.

Secondly the Appellant had claimed that the soil deposited at the site was not only for capping-off, but also it had been on his site before landfill tax was introduced, and had been redistributed across the site, thirdly it was also deposited at the Lydney estate and at his farm, and not on his site, fourthly duty was not due on stockpiled waste and that used for capping only. His view as to this had been consistent throughout.

With regard to the interviews, a distinction should be made between the July interview when no admissions were made and the September interview when the Appellant did make admissions.

A dishonest evasion penalty was now accepted as a "criminal" matter for purposes of the Human Rights Act and article 6 of the ECHR.

The second interview should be excluded under article 6 of the ECHR for the following reasons:

No caution had been administered

Admissions were made

No legal adviser was present

Had there been a caution the Appellant would have said `no comment'

The admissions made were highly prejudicial

There was no requirement for a second interview for the purposes of issuing the assessment

It is clear from the interview that substantial pressure was put on the Appellant, the Appellant said he was badgered

The Appellant had no genuine understanding of what he was saying, he was simply answering "yes" to all the questions

It was not necessary to get an admission of dishonesty

The Appellant relied on the reasons set out in the case of Murrell (supra) and the Tribunal was also referred to the case of Keith Motors (supra), where in that case as in the present case the prejudice was very high and it outweighed the probative value since admissions of dishonesty were irrelevant to a reduction of the penalty. The Tribunal was also referred to the case of Patel (supra).

The September interview had been carried out solely to obtain admissions. Whilst Mr Pass had alleged that dishonesty arose from the Appellant's continual denial that tax was due, yet he did not assess for a penalty until after he had had the admissions in the September interview. He thereby recognised that the particulars in the statement of claim that the Appellant had falsely claimed that the site had been closed by the environment agency, that he had falsely claimed that the soil deposited at the site was for "capping" only and the Appellant's submission of nil returns when he had been advised that he was liable to account for landfill tax were insufficient to warrant a penalty for dishonest evasion.

It was further submitted that the interview should be excluded for the following reasons:

(i) Admission that the tax was due was not per se acceptance of dishonesty. It must be seen in context and it was only made to avoid or reduce the penalty The Appellant's position at the hearing that he did not owe the tax was consistent with his position at all times prior to the interview on 1 September 1999.

(ii) Admissions of dishonesty were inadmissible on the basis of the case of Murrell (supra). There had been no caution against self-incrimination which was a fundamental Convention right as per Sir Martin Nourse in Han &Yau. The Tribunal was also referred to the case of Mu (supra) on the right for an appellant not to self-incriminate.

(iii) No caution was given as to the implications of admitting dishonesty (see Patel). The questions were pressed time and again to ensure there was "no misunderstanding". This was improper pressure.

(iv) A dangerous precedent would be set if the Commissioners could question on dishonesty without any protection for the taxpayer.

(v) The Appellant's acceptance of arrears was not inherently dishonest. It was up to the Tribunal to judge dishonesty.

(vi) Reece had no legal training, issues of dishonesty should have only be discussed after a caution and in the presence of a lawyer.

(vii) There was no reason for extracting admissions of dishonesty, the penalty was not reduced by the admissions.

In the alternative it was submitted that if the interview were deemed admissible, then it should be given little weight because the interview itself was unnecessary, it was carried out in the presence of Mr Reece who had no legal qualifications to advise on that particular aspect, improper pressure was applied.

Other factors which showed the Appellant was not dishonest were that he had passed the tax on to the consumer, he genuinely did not think he had acted dishonestly nor that people would have thought he had acted dishonestly.

If the interview was admitted, it was submitted that it should be given little weight.

Reasons for decision

With regard to the admissibility of the second interview, we have given this matter very careful consideration. It appears to us that Mr Pass misunderstood the circumstances in which mitigation of a penalty could be allowed. He appears to have believed that it was necessary for a taxpayer to admit dishonesty to obtain a substantial mitigation. This is not the case as is clear from the content of Notice 730.

There is conflicting evidence as to who suggested the second interview. We do not find that the Appellant is the sort of character who would easily succumb to pressure, being a strong character with many years' business experience behind him, and we think it highly improbable that he would have agreed to anything simply on the basis of pressure being put on him, but we do think that he would have agreed to a second interview had he thought that it were in his financial interest so to do. We note that he did not take issue with the letter of 23 August 1999 in which Mr Pass had referred to his (Mr Bendall's) request for a second interview.

Given that Mr Pass misunderstood the necessity of obtaining an admission of dishonesty from the Appellant, and given the frequency with which throughout the interview he extracted admissions from the Appellant, we believe that Mr Pass attempted to persuade the Appellant to attend the second interview, but we also find both that the Appellant is not the sort of person who would be persuaded to do something which he regarded as being against his own interest, and that he positively wanted more time to consider his position.

We find that the Appellant did in fact regard it as being in his own interest to have a second interview in order to achieve greater mitigation of the penalty which it was already in the Respondents' mind to impose, as is shown by the fact that a section 730 notice had previously been issued to the Appellant. We do not find that the entirety of the second interview was conducted in breach of the Appellant's article 6 rights. Nonetheless we find that the repeated questions by Mr Pass relating to whether or not the Appellant accepted that he had evaded payment of landfill tax, and that by doing so he was dishonest, are not admissible. The Appellant did not have a lawyer present and Mr Reece had no proper understanding of the proceedings, and the repeated questions amounted to excessive pressure on the Appellant to incriminate himself. There had been no warning to the Appellant as to the consequences of any admission beyond being told that he would thereby achieve mitigation of any penalty, albeit he had been told that criminal proceedings would not be taken. In the circumstances we exclude the second interview as from page 83, the second question from Mr Pass, to the end of the interview at page 85, thereby excluding all admissions made by the Appellant at that interview.

With regard to the assessment, we find that it was made to best judgment. We do not accept the Appellant's arguments that Mr Mordecai-Lamerton was wrong never to follow up his statement of 50% of the waste was tipped elsewhere. Mr Mordecai-Lamerton had been willing to follow up the suggestion that some of the waste had been tipped elsewhere, but the Appellant refused to give him the address. When finally the farm address was given, Mr Mordecai-Lamerton did go to inspect it. Despite lack of documentary evidence pertaining to the site he nonetheless was prepared to give the Appellant the benefit of the doubt with regard to it and reduced his assessment in the light of that visit. We do not accept the submission that he wilfully refused to take up an offer to visit the other site. We accept that he would have needed to know the proper address and to have made enquiries before undertaking any visit as to the status of that property.

The assessment was made on the basis of the books and records, not on the basis of the overall increase of one metre at the site. This was clear from Mr Mordecai-Lamerton's evidence, and we accept that the importance of the visual inspection, and his understanding that it had been raised in height by one metre was that the amount which roughly corresponded to an overall increase of one metre, was approximately the same as the amount which the books and records showed had been deposited at the site.

With regard to the Appellant's contention that waste had been deposited at the Lydney estate, which was not a landfill site, we have no evidence as to this other than the Appellant's own word. We did not find the Appellant to be a witness of truth, we find that he continually changed his account when dealing with the officers of Customs and Excise, and he did this in order to avoid any liability to landfill tax. There is no independent evidence before us to support either his contention that waste was deposited elsewhere, nor as to the amount of such deposit.

With regard to the Appellant's contention late in the day that the waste deposited on the site was moved around and thereby the height of the deposit on the site was increased in certain areas, which was in part supported by Mr Reece, since the basis for the assessment was the records, and not the visual inspection, it matters not whether or not this was the case. We do not accept Mr Popplewell's submission that the waste deposited could not be classified as landfill since it was deposited in breach of the planning consent and the waste management licence.

In all areas where there is a conflict between the evidence of the officers and that of the Appellant we prefer the evidence of the officers. The Appellant has shown that he was prepared to act in breach of planning consents; to make statements that were not true, for example his writing on his landfill tax return that the site had been closed, when he knew it had not been; he was prepared to attempt to reclaim a large quantity of landfill tax when he knew he had paid none for reasons which were nothing other than childish and he continually changed his account of the reason for, and nature of, the deposits.

We do not accept that the Appellant genuinely believed that landfill tax was not due. He made no attempt to get legal advice at any stage prior to the issuing of the assessment and the penalty. He was advised by Mr Reece that landfill tax was due and yet he still did not pay it. He himself acknowledged at the hearing that he had no understanding of landfill tax, so it was inappropriate for argument to be advanced on his behalf that it was reasonable for him to believe that a temporary disposal was not liable to tax.

However, since this appeal was heard, the Court of Appeal has decided the case of Parkwood Landfill Ltd [2002] STC 1536. In that case it was held that the natural meaning of section 40(2) of the Finance Act 1996 required a disposal which was a taxable disposal to satisfy the conditions in subsections (a) to (d) at the same time. The use of the word 'it' to refer back to the 'disposal' in those subsections suggested that the disposal had to be made at a landfill site by way of landfill and also to be a disposal of material as waste. Parliament could not have intended to impose a landfill tax on recycled material with the necessity that the history of the material had to be checked to ascertain whether anybody had the required intention. Moreover, the purpose of the legislation was to tax waste material deposited at landfill sites and not to tax deposits at landfill sites of useful material produced from waste material. It therefore seems to us that the submission made on behalf of the Commissioners that if the waste producer intended to discard the material as landfill, the disposal was liable to landfill tax, the situation not being changed because the landfill site operator intended a different result was incorrect. It was similarly wrong to submit that the Appellant's intention was not relevant. We therefore distinguish the tribunal's decisions MSR Ltd, ICI Chemicals & Polymers Ltd and F L Gamble & Sons Ltd which were relied on by the Respondents.

The consequence of the Parkwood decision is that we find that in respect of the material used to make a hard standing for his scrap and other business at the canal site the Appellant is not liable to landfill tax. There is independent evidence that material was used in this way, namely the evidence of Mr Reece, and we therefore allow the Appellant's against the quantum of the assessment to the extent that it should be reduced to allow for the 8000 tonnes of material which was used as a base. We note that Mr Reece had used the same conversion rate as Mr Mordecai-Lamerton, namely 2 tonnes per cubic metre, and hold that this is the appropriate rate in the circumstances.

Whilst any material held by the Appellant which was subsequently used on the industrial site might well in other circumstances not properly give rise to a charge to landfill tax, there is not sufficient evidence of the quantum of this material, the burden of proof in this regard is upon the Appellant; nor of when, or if, it was removed. It would have been open to the Appellant to have applied for a temporary licence with regard to this material which he did not do at the relevant time. In the circumstances therefore we make no allowance in respect of this material.

With regard to the penalty, in respect of which the burden of proof is upon the Respondents, and the standard a high degree of probability, we accept the Respondents' submissions that there is sufficient evidence of dishonesty in the present case without the admissions in the second interview for the penalty to be applicable. The Appellant had made absolutely no attempt to get proper advice as to whether or not tax was due, and whilst at the relevant time the law with regard to Landfill tax was not entirely clear, as is shown by the decision in Parkwood, that was all the more reason for him to have obtained advice. The fact that, had he been properly advised he would in all probability have been able to have taken steps to reduce his liability to the tax, does not alter the fact that he acted in a deliberately untruthful, obstructive and evasive way over a considerable period in order to avoid paying such tax as was properly due. We do not find it was reasonable for the Appellant to continue to maintain in the face of information from several different officers, and even from Mr Reece, that he was liable to landfill tax, that he was not so liable particularly since he said he knew nothing of landfill tax. We do not accept Mr Popplewell's submission that by conducting a second interview Mr Pass was acknowledging that the particulars in the statement of claim were insufficient to warrant a penalty for dishonest evasion.

In all the circumstances the appeal against the assessment is allowed in part. The appeal against the penalty is dismissed, save insofar as it is reduced pro rata with the reduction in the assessment.

No order for costs. Liberty to both parties apply within 14 days of the date of release of this decision with regard to the impact on this case of the decision in Parkwood.

MISS J C GORT

CHAIRMAN

RELEASED:

LON/00/1305

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	United Kingdom VAT & Duties Tribunals (Landfill Tax) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Landfill Tax) Decisions >> H G Bendall v Customs and Excise [2003] UKVAT(Landfill) L00020 (28 February 2003) URL: http://www.bailii.org/uk/cases/UKVAT/Landfill/2003/L00020.html Cite as: [2003] UKVAT(Landfill) L00020, [2003] UKVAT(Landfill) L20