E00963

Hydrocarbon Oils Duties Act 1979 sections 12, 13, 27 and Schedule 1; rebated gas oil; “red diesel”; whether local authority tractor used on public road solely for purposes relating to horticulture; yes.

EDINBURGH TRIBUNAL CENTRE

	RENFREWSHIRE COUNCIL	Appellant

	- and -

	THE COMMISSIONERS FOR 
	HER MAJESTY’S REVENUE & CUSTOMS	       Respondents

			Tribunal:	 (Chairman):  J Gordon Reid, QC., F.C.I.Arb.,
					 (Member): 	 James D Crerar, WS., NP

Sitting in Edinburgh on Monday 15 May 2006

for the Appellant		William O’Brien

for the Respondents	Julie Strachan, Shepherd & Wedderburn WS

© CROWN COPYRIGHT 2006.

DECISION

Introduction
This is an appeal by a local authority against the imposition by a public authority, the Commissioners of Her Majesty’s Revenue and Customs, (“Customs”) of a civil penalty of £250 arising out of the use of a tractor fuelled by rebated gas oil (“red diesel”).  The case is said to be of some importance although we find that surprising given the obscurity of the factual background.

William O’Brien, a solicitor employed by the Appellants appeared on their behalf, and Julie Strachan, solicitor, Shepherd & Wedderburn, Edinburgh, appeared on behalf of Customs.  Neither party led evidence.  A Statement by Ian Sked, the Customs Officer carrying out the Departmental Review referred to below, was lodged and intimated in accordance with the Tribunal’s Rules and no objection was taken to it.  Both parties produced documents to which reference was made during the course of submissions.  The authenticity of these documents did not appear to be in dispute.

We were not favoured with a careful analysis of the facts or the law or with clear legal argument from the Appellants.  If this case is truly of importance we would have expected evidence to be led or a detailed statement of agreed facts to be produced.  A Joint Minute was lodged in the following terms:-

“Local government in Scotland was reorganised on 1 April 1996 the Local Government etc (Scotland) Act 1994.  The former system of Regional Councils and District Councils (established by the Local Government (Scotland) Act 1973) was replaced on that date by the system of unitary Councils (Section 1 of and Schedule 1 to the 1994 Act).  The Appellants (Renfrewshire Council) are such a unitary Council and came into existence on 1 April 1996.  Under the previous system of local government, there were two local authorities for the area which is now covered by the Appellants (Renfrewshire Council) – Strathclyde Regional Council and Renfrew District Council.  Both Councils had a variety of functions, and both Councils had fleets of vehicles.  Some of these vehicles used rebated fuel, some did not”.

Apart from the latter half of the penultimate sentence, and the last sentence, this simply states the legal position which can be ascertained from the relevant statutory enactments.

Factual Background
Our analysis is taken from the documents put before us.  There are a number of gaps, some of which may be important.  We asked various questions of the parties about the factual background but received little further assistance.  At one stage, Mr O’Brien, in the course of his submissions, sought an adjournment of the hearing to enable him to make further investigations and to lead evidence.  This application was opposed.  We refused the application.  No explanation was given as to why these investigations had not been carried out at an earlier stage.  Given the sum involved and our doubt as to the importance of this appeal, we considered that it would be an even greater waste of public money to postpone the remainder of the hearing to another day.  Although we are not entirely confident, the following seems to be the more important aspects of the factual background:-

1.	On 13 September 2005, Customs Officers Flockhart and Roddie observed a Kubota Tractor registered number M605 GGE (“the tractor”) driving on a public road.  The tractor was said to be licensed as an “agricultural machine”.  It was towing a trailer.  The tractor was being driven by Stephen Frew, an employee of the Appellants acting in the course of his employment with them.  It was owned by the Appellants.
2.	Within or on the trailer were the following items, namely a pedestrian lawnmower, grass cuttings, a pushchair, a divan bed, and two mattresses.
3.	Stephen Frew drove the vehicle into a field.  He was challenged by Officers Flockhart and Roddie.  He stated that he was clearing up some fly tipping.  A fuel sample was taken which established that the tractor was fuelled by rebated gas oil (“red diesel”).
4.	The tractor was formally seized and offered for immediate restoration.  The Customs Officers subsequently made further investigations.  They spoke to a David Byrne of the Appellants who stated that the tractor was being used for horticultural purposes; and that fly tipping had to be removed in order to complete the grass cutting operations.
5.	On 27th September 2005, Gordon McNeil, an employee of Renfrewshire Council Environmental Services Department was interviewed under caution by Customs Officers Flockhart and Roddie.  He is or was the or a supervisor of the Appellants’ grounds maintenance section.  Mr O’Brien, who presented the Appellants’ case to us, was also present at the interview.  Production R/4 is a transcript of that interview.  It is riddled with typing errors and has plainly not been checked.  However, at the Hearing before us, it appeared that both parties were content that  it accurately recorded the substance of what was said.  The reader should note that “Carborter” should be Kubota; “Renfordshire” should be “Renfrewshire”.
6.	The interview established inter alia, that the tractor was owned and operated by the Appellants and taxed as an agricultural machine [pages 2-3]; that it was fuelled by red diesel; that it is very little used on a public road, about 99% of its time being spent on maintenance of “the pitches at the race course” [page 4], that a different section, Environmental Services, Cleansing, uplifted items from residents [page 6].  Presumably this is intended to refer to large unwanted household items.
7.	Mr McNeil was asked a series of detailed questions about the Appellants’ fleet of vehicles, mileage and fuel consumption and related administrative matters [pages 6-13], which he was quite understandably unable to answer fully.  He was eventually asked to explain what the tractor was doing on the day in question when it was stopped [page 14].  He explained that he had spoken to the driver of the tractor.  After an explanation of the functions of two different types of grass cutting machines he is recorded as having said this:-
8.	“However on this site, I believe that there were major obstacles or rubbish, debris whatever you want to call it, that was lying away over towards a fence line and I think it was a, a single bed, frame, the mattress and I believe there was a pushchair as well.  So for us to achieve the cutting of the grass and completion of that job, we have to remove that from the site, so we interpret that as work relating to horticulture because we cant complete that task until that’s lifted”.
9.	He then referred to risk assessment procedures and forms [page 15].  The forms mentioned or similar were produced to us [A/1-3].  Each contains a statement to the effect that the area to be cut must be checked and cleared of stones, litter and surface debris before cutting begins.  The interview continues with a discussion about haulage [page 15].  Mr McNeil then states:-
10.	“It wasn’t actually doing haulage work, it was never any intention that that machine and it never ever does do what you could term haulage work.  There are no goods, no hire and award there’s nothing like that involved, its solely for the purposes of getting the grass cut and carrying out our horticultural practices”.
11.	Thereafter, there is discussion of previous offences by the “council” in 1987 and 1992 [page 16].  Mr McNeil also stated that “it is not a weekly occurrence that we remove whether it be obstacles …” [page 17].
12.	Towards the end of the interview Mr McNeil returns to the purpose for which the tractor was being used and says this:- “we had to lift that so that we can get the grass cut so as far as we are concerned, that’s relating to what we’re trying to achieve” [page 19].  A little later on he continues in the same theme by saying “But surely if he’s round there lifting whatever rubbish has been dropped on that site to get rid of it, it’s part of the process relating to horticulture work, so we have to remove it” [page 19].
13.	In response to the suggestion that any sort of van could have been used, he replied “Well no we couldn’t because how would we get it onto the site for a start?  See what we do is that’s, that’s part and parcel of what we do if someone had phoned in to Underwood Road [sc the Appellants address for Environmental Services] and said somebody has dumped a bed or a shed or bags and bags of rubbish, we wouldn’t have gone out and used a tractor and a trailer, that would have been our cleansing colleagues on the special uplift team who’d have gone…”  He continued “but we would not do that as a matter of routine, we would only do it when it’s part and parcel of our horticultural work on site, we wouldn’t specifically go out of our way to lift fly tipping after its been it’s phoned in, that would be a vehicle that runs on derv that would come and do that”.  The interview then came to an end.
14.	Customs were not satisfied that the tractor was entitled to be fuelled with rebated gas oil and issued a civil penalty in the sum of £250 [R/5 & 6].  
15.	By letter to Customs dated 1/10/05 [R/7], the Appellants, per Mr O’Brien, requested a formal review of the decision to impose a penalty and set forth various arguments on the basis of which they contended that the tractor fell to be treated as an “excepted vehicle” and that in any event the Appellants had a reasonable excuse for operating as they did. 
16.	Officer Ian Sked was the reviewing officer.  By letter dated 18/11/05 [R/3], he confirmed the decision.  All he appears to have done is to review documents presented to him.  He does not appear to have sought clarification of any matters.  On page three of his letter he states inter alia “However, the vehicle itself was being used for agricultural or horticultural purposes – it was simply being used to transport machinery and this must be classified as haulage.  This is not a purpose which falls within Schedule 1…If the Kubota tractor were to engage in an agricultural or horticultural activity while at the site (eg if it were involved in the actual grass cutting activity by having a mowing machine attachment appended to it) it would qualify to be fuelled with gas oil but in this case it was not being used in this way.  It was used only to transport machinery and debris.”  The word “not” seems to have been omitted before “being used” otherwise the passage is not only bare assertion but nonsensical bare assertion.  It can be noted that the test adopted in this passage is use for agricultural or horticultural purposes rather than use solely for purposes relating to horticulture (or agriculture).
17.	Mr Sked also took the view that there was no reasonable excuse for the Appellants’ conduct.

We note that there is no material from which it can be ascertained (i) what the nature of the terrain was where the grass cutting operation was being carried out, except that it was unsuitable for any sort of a van (ii) where within the site the fly tipping items were (iii) why the tractor turned into the field or (iv) what its purpose in doing so was.  Nor can we make a finding that (a) the tractor was being used partly for the purposes of the cleansing section of the Environmental Services Department, (b) the Appellants, through one of its departments or officials, knew in advance of the grass cutting operations in relation to which the tractor was engaged that fly tipping materials had to be removed before the grass cutting operations could be carried out and completed or (c) the fly tipping items were being taken directly to a landfill site. 

Statutory Background
We have, as Miss Strachan pointed out, in the course of her concise submission, full jurisdiction by virtue of the Finance Act 1994 sections 9(1), (2), 14(1)(c), 14(2)(a), 15(1), 16(1)(a), (4) & (5).  The appeal is against the decision made on review and contained in the letter dated 18/11/05 [R/3] by Ian Sked, Customs Officer.  It was not disputed that the Appellants owned the Kubota tractor.  It was common ground that the fuel was gas oil within the meaning of section 1(5) of the Hydrocarbon Oil Duties Act 1979 and thus heavy oil within the meaning of section 1(4).  Sections 12(2), 13(1A) of, and Schedule 1 paragraphs 2(1) & (2) to the 1979 Act provides as follows:-

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)] shall–
(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 as being 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

By section 13 of the said Act sub-section 1 it is provided:

(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)] …

27 Interpretation

(1) In this Act-
“road vehicle” means a vehicle constructed or adapted for use on roads, but does not include any vehicle [which is an excepted vehicle within the meaning given by Schedule 1 to this Act”

Schedule 1 – Excepted Vehicles
Unlicensed vehicles not used on public roads

Tractors
2-(1) A vehicle is an excepted vehicle if it is-
	(a)  an agricultural tractor …
	(b)  …

(2)	In sub-paragraph (1) above “agricultural tractor” means a tractor used on public roads solely for purposes relating to agriculture, horticulture, forestry or activities falling within sub-paragraph (3) below.
(3)	The activities falling within this sub-paragraph are-
(a)	cutting verges bordering public roads;
(b)	cutting hedges or trees bordering public roads or bordering verges which border public roads.
(c)	

Section 9 of the Finance Act 1994 provides inter alia as follows:-

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.

Submissions
The essence of the Appellants’ submissions are contained in their grounds of appeal and their letter of 10/10/05 [R/7].  They relied on the phrase relating to; and suggested that there was ambiguity in the statutory language which should be construed in favour of the Appellants.  Parliament was recognising that some plant had to be taken to site and removed therefrom.  Mr O’Brien referred to some work being “incidental” or “preliminary”.  The word solely allowed for a de minimis exception.  Parliament was not to be presumed to have enacted an absurdity.  We regret we did not fully understand this submission.  He appeared to be arguing that two tasks were being performed, namely clearing the ground and cutting the grass.  On the factual background, he drew a distinction between the Environmental Services Department and the Planning and Transport Department, and the two sections within the former department namely grounds maintenance and cleansing.  He referred to various passages in the transcript of Mr McNeil’s interview and submitted that (i) haulage work was a very small part of the overall task of grass cutting (ii) everything that the “workers did related to a horticultural purpose” (iii) the tractor was capable of grass cutting, although it was used for haulage on the day in question, (iv) the tractor was carrying debris to facilitate the work of cutting the grass.  He questioned whether the Appellants should have the inconvenience of abandoning the use of rebated fuel on the off chance they might occasionally stray outside the exception.  We had difficulty following this line of argument.  He referred to Andrew Clark t/a Andrew Clark Plant Hire 15/7/05 EO 00913 (Chairman TG Coutts Q.C.).  He sought to distinguish another case R v C&CE ex parte England Environmental Ltd 28/2/95 on the basis that the facts there involved two purposes, whereas here there was only one purpose which was a horticultural one.

In relation to the question of reasonable excuse, Mr O’Brien submitted that Officer Sked had misdirected himself by taking into account the earlier incidents in 1987 and 1992.  It could not be said they were analogous and in any event the Appellants only came into existence in 1996.  A change in practice by the Appellants to accommodate Customs would be inconsistent with the Appellants’ statutory duty to secure best value under the Local Government in Scotland Act 2003.  

Miss Strachan helpfully took us through the relevant statutory provisions under the Finance Act 1994 and the 1979 Act.  She invited us to make a few short findings of fact, the substance of which we have incorporated into our narrative of the factual background.  She submitted that dealing with fly tipping was a distinct task.  When the tractor left the depot its sole purpose was horticultural, but that changed when it carried out fly tipping operations.  Two purposes were being fulfilled.  She referred to Bryan & Thomas E00875 3/3/05 (Chairman David S Porter), paragraphs 10-14 and 16(d)&(e), and to Andrew Clark.  She submitted that there was no case law on the question of de minimis use in this context.  The fact that debris had to be removed was not sufficient to make the activity horticultural.

She submitted that the Appellants’ argument based on absurdity was unsound; there was no need to go beyond the language of the statute which had been interpreted clearly in the past.  On the question of reasonable excuse, the “best value” argument was wrong because it meant best value within the law.

Discussion
There are three elements which require to be considered in this case.  The first is to establish whether the Kubota vehicle is a tractor.  Of that the parties appear to be in agreement.  It is a tractor.  The second element is whether it was being used on a public road.  Again, there is no doubt that it was although precisely where is not clear (cf the transcript of the interview [R/4] page 18).

The third element is whether the tractor was being used on the public road solely for purposes relating to horticulture.  On the material presented to us and our analysis of that material, we are of the view that the tractor was plainly being used on a public road for a purpose or purposes relating to horticulture.  The key phrase is purposes relating to.  That is plainly broader than horticultural purpose or agricultural purpose.  The use and purpose must have a relationship or connection with a horticulture.  It was common ground between the parties that grass cutting was a horticultural activity.  It is obvious from the factual background in this appeal that the removal of the fly tipping materials was part and parcel of the grass cutting operation.  There was no material on which we can hold or which Customs could reasonably have believed at the time that, when the tractor was using the pubic road towing the contents of the trailer, the purpose of its use was transformed to a purpose normally fulfilled by a different section of the Appellants’ Environmental Services Department.  The removal of the various items and the grass cutting were, to use Mr McNeil’s words, part and parcel of the same operation.  Each component part of the operation, however one dissects it, was fulfilling the same purpose namely carrying out and completing the grass cutting operation.  That was the reason tractor was being used.  That was the object to be attained.  To attain that object fly tipping materials had to be removed.  The fact that the trailer contained grass cuttings and a mower as well as fly tipping materials is eloquent of that conclusion.  The sole purpose of uplifting and removing these items related to the activity of grass cutting which is accepted in this appeal to be a horticultural activity.  Plainly, the mower has to be taken to and from the site in question.  The site was not suitable for a van.  The grass cuttings are obviously the product of cutting grass.  The fly tipping materials had to be uplifted and removed to enable that grass cutting to be carried out and completed.  It is absurd to suggest that, as soon as the tractor and trailer left the site, the fly tipping materials had to be deposited at the side of the road to await a vehicle from the Appellants’ Cleansing Section to uplift them again.  One could equally argue that the mowing machine had to be deposited too because the actual grass cutting was finished.  That, too, would be a nonsense.  

What was actually done after the tractor turned into the field, or even why it did so, is, of course, unknown.  This is but one of the unsatisfactory aspects of this appeal.

It seems to us that it does not matter how many purposes into which the use of the tractor on a public road can be dissected provided that they all relate to horticulture, agriculture and/or forestry as the case may be.  Here, they all relate to the horticultural activity of grass cutting.  When a tractor is being used on a public road, it plainly cannot perform an agricultural activity such as ploughing or harrowing.  It must either be travelling on its way to a site to perform some such activity or its use on the road must have some relationship or connection with such an activity.  How close or direct that relationship must be will be determined by the facts and circumstances of each case.  (It is therefore futile to speculate on which side of the line various examples will lie).  That follows from the use of the broad phrase solely for purposes relating to agriculture etc.  If the use also has a purpose which has no such relationship with purposes relating to agriculture etc., then that will not be use by an excepted vehicle.  Use for purposes solely relating to agriculture etc. will not have been established.

In Clark the facts were entirely different.  The Tribunal held that the transporting of a digging machine from A to B was for purposes relating to agriculture (digging drains and laying pipes), and was not haulage.  In England, the applicants in what appears to have been judicial review proceedings, were waste management specialists.  They contracted with a company to dispose of that company’s paper effluent sludge cake by transporting it to the company’s waste disposal facility, and from there to various farms.  The applicants used their own tractors to do so.  The tractors towed trailers of sludge to the farms.  The farmers did not pay anything for the sludge.  It was not clear whether they paid anything for the service of having it spread over their land.  The sludge was transferred to spreaders.  Sometimes the applicants’ tractors were used in the spreading operation.  It was argued that the tractors were involved in the transportation and application of nutrients to improve the fertility of the land.  The haulage part of the operation related to agriculture.  It was held that the primary purpose of the use of the tractors was to collect, transport and dispose of waste pursuant to a commercial contract.  The tractors were being used for more than one purpose.  The statutory test of sole use could not be satisfied.  This case is clearly distinguishable on its facts.  The user of the tractor was a waste disposal contractor.  Two distinct uses one of which was not for a purpose relating to agriculture, could readily be identified.  Thus the statutory test was not met.

In Bryan, the Appellants were agricultural contractors engaged as sub-contractors by haulage contractors who in turn had entered into a contract to remove waste product from a creamery and to spread it on agricultural land belonging to a number of farmers.  The farmers were paid to accept the slurry.  The Appellants used tractors to collect the slurry from the creamery; it was loaded into tanks there and taken to the farms; the Appellants spread the slurry on the fields.  The Tribunal expressed the view that the operation carried out was primarily waste disposal and not solely agricultural; they stated that “the activity must be “solely” agricultural” [par16(d)].  With respect to that Tribunal that formulation is not the statutory test.  The Tribunal placed reliance on the necessity to remove the waste and the payment to the farmers to persuade them to take the slurry [para 16].  These are factors unrelated to the question “Is the tractor being used on a public road solely for purposes relating to agriculture”.  The answer to that question surely is (a) the tractor is being used to (i) take fertiliser to a farm and (ii) spread it on agricultural land, (b) that is the only purpose for which the tractor is being used, and (c) the purpose of that use relates to agriculture and nothing else.  It does not matter who the contracting parties are or what is being paid to whom for what.  In England the applicants were waste disposal specialists; that perhaps influenced the conclusion that the primary purpose was held to be waste disposal.  However one analyses Bryan, the facts are distinguishable and it provides little assistance in determining the present appeal.

In the light of our decision, it is unnecessary to express a view on whether the word “solely” excludes the principle de minimis non curat lex.  Nor is it necessary to consider the question of reasonable excuse.  However, we should indicate that we could detect nothing of substance in the Appellants’ argument based on the Local Government in Scotland Act 2003.  Even if Mr Sked’s reference to previous incidents in 1987 and 1992 could be elevated to a misdirection in law, there was nothing else founded upon by Mr O’Brien which seemed to us to constitute a reasonable excuse.

Result
We allow the appeal.  We appoint parties to make written submissions on the question of expenses within 28 days of the date of the release of this decision.  Alternatively, parties should, within the same period, inform the Tribunal of any agreement reached on the question of expenses.

J GORDON REID, QC., F.C.I.Arb.,

CHAIRMAN

RELEASE:    16   JUNE 2006

EDN/06/8000

££Renfrewshire Council v Revenue & Customs [2006] UKVAT(Excise) E00963 (16 June 2006)