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FIRST DIVISION, INNER HOUSE, COURT OF SESSION
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Lord President
Lord Eassie
Lord Brodie
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[2007] CSIH 63
XA113/06
OPINION OF THE COURT
delivered by THE LORD
PRESIDENT
in
APPEAL
under section 11 of the
Tribunals and Inquiries Act 1992
by
ANGUS BRAIDWOOD & SONS
LIMITED
Appellant;
against
COMMISSIONERS OF H.M.
REVENUE AND CUSTOMS
Respondents:
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Act: A Young; Lindsays,
W.S.
Alt: Artis; Shepherd & Wedderburn, LLP
26 July 2007
The circumstances
[1] The appellant
company carries on business as a scrap metal merchant and processor. As part of that processing it crushes scrap
metal into bales on various sites by means of wheeled baling machines. The appellant operates ten such machines. There are ten others in the United Kingdom.
Each machine (a Compactor AL5000 of Italian manufacture) is a single
unit comprising a crane for lifting scrap (cars or other metal waste) and a
baler which crushes the scrap into bales.
As illustrated in the literature and photographs produced before the VAT
and Duties Tribunal, it has six principal wheels, all situated towards the
rear, with retractable supports to front and rear to provide stability when in
operation. The machine is moved both
between sites and on site by a tractor unit to which it is coupled for that
purpose. The appellant has eight such
tractor units. The original coupling was
by a standard 2 inch "fifth wheel" coupling. In 2001 the coupling arrangement was modified
by the appellant, heavy duty 3.5 inch couplings being substituted on each
machine and compatible 3.5 inch king-pins being substituted on each tractor
unit. Separate fuel tanks supply the
engines which power the machines and the tractor units. No issue arises in relation to the duty
payable on the fuel which is supplied to the machines. The issue for determination is whether the
appellant is entitled to rebate on the excise duty on hydrocarbon oil
chargeable on the fuel supplied to the tractor units.
The legislation
[2] The
Hydrocarbon Oil Duties Act 1979 (as amended) provides:
"11(1) Subject to sections 12 ... below, where heavy
oil charged with the excise duty on hydrocarbon oil is delivered for home use,
there shall be allowed on the oil at the time of delivery a rebate of duty at
[certain rates]".
"12(2) No heavy oil on whose delivery for home use
rebate has been allowed ... under section 11 above ... 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 has been paid to the
Commissioners in accordance with [certain regulations].
(3) For the purposes of this
section ... -
(a) heavy oil shall be deemed to be used as fuel for a road vehicle
if, but
only if, it is used as fuel for the
engine provided for propelling the vehicle or for an engine which draws its
fuel from the same supply as that engine; and
(b) heavy oil shall be deemed to be taken into a road vehicle as
fuel if, but
only if, it is taken into it as part of
that supply."
"27(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 to the Act (entitled "Excepted Vehicles")
specifies in paragraph 9:
"(1) A mobile crane is an excepted vehicle.
(2) In
subparagraph (1) above 'mobile crane' means a vehicle which is designed and
constructed as a mobile crane and which -
(a) is used on public roads only as a crane in connection with
work carried
on at a site in the immediate vicinity
or for the purpose of proceeding to and from a place where it is to be or has
been used as a crane; and
(b) when so proceeding does not carry any load except such as is
necessary for its propulsion or equipment."
It is not disputed that the fuel taken into the tractors as
fuel is "heavy oil" chargeable to hydrocarbon oil duty and that it is delivered
"for home use" (that is, for use in the United Kingdom).
The Tribunal's
treatment
[3] The Tribunal
found that the machine was used as a crane about 50% of the time and as a crane
in conjunction with the baler in the remaining 50%. It found that in these circumstances the
preponderance of its use was as a crane.
That finding is not challenged.
The Tribunal also accepted evidence from an engineer who testified for
the appellant that the modification to the coupling arrangement -
"did render
the tractor unit unsuitable for use with ordinary trailers. In addition the capacity of the tractor unit
would not be adequate for use with the heavier type of trailer normally
associated with such a coupling and pin.
Accordingly the Appellant did render it extremely unlikely that the
tractor unit and trailer would ever be separated apart from servicing of the
vehicle. However, it would be possible
to utilise any of the tractor units with any of the baler units and indeed one
tractor unit could substitute for another if, for example, there was a
breakdown in the tractor unit, by attending upon and removing the crane and
baler to another site where it could operate.
However the use of the combined tractor and trailer normally was that
they were not separate so that the tractor and trailer could readily be manoeuvred
on the site according to the location of scrap."
[4] The Tribunal
summarised the appellant's contention before it as follows:
"The trailer and tractor unit were
designed and constructed as a mobile crane and that the modifications to the
vehicles produced new single units and therefore became one vehicle".
[5] Having noted
the argument for the respondents it stated, under the heading "Decision", the
following:
"The only issue which remained after
hearing the facts for the Tribunal was whether the trailer mounted crane could
qualify as a vehicle. 'Vehicle' is not
defined in the Act. They came to the
view that it could not. The design and construction
of the whole apparatus was not simply of a mobile crane it was of an
articulated tractor unit attached to a mobile crane. The fuel which would be the subject to rebate
was entirely consumed by the tractor unit and accordingly unless it could be
regarded as one vehicle with the trailer by virtue of the modification of the
king-pin rebate was not permissible.
The fact that a crane can be moved
does not make it a 'mobile crane'. The
Tribunal considers that it is of the essence of the exemption that the rebated
fuel requires to be used by the crane to move itself on a road. Since this is not the case here the appeal
must fail, the rebated fuel is not so used.
The appeal is accordingly dismissed ... "
The submissions of
parties
[6] Mr. Young for
the appellant submitted that the Tribunal had completely failed to deal with
the main contention advanced by the appellant before it. While noting that contention, it had not
discussed the implication for it of its findings - particularly those in
relation to the practical consequences of the modification to the coupling
arrangement. The configuration of the
two parts of the coupling had the effect, for all practical purposes, of there
being a single vehicle;
that vehicle was a mobile crane.
In British Oxygen Co. v Board of Trade [1969] 2 Ch. 174, the Court of Appeal had considered,
for the purposes of the Industrial Development Act 1966, three classes of
vehicle, the second being of a large articulated tanker assembly very similar
in its arrangement to the present tractor and half-trailer. That composite arrangement was held to be a
"vehicle". Reference was made in particular
to Karminski L.J. at pages 196-7.
Although the decision had been appealed to the House of Lords ([1971] AC 610), there was no discussion pertinent to the present issue there. Reference was also made to DPP v Evans [1988] RTR 409, especially per Parker L.J. at pages
414-5. Moreover, the Tribunal had been
wrong to conclude that it was "of the essence of the exemption that the rebated
fuel required to be used by the crane to move itself on the road". There was no warrant for supposing that the
engine which provided propulsion had to be built in as part of the crane. The provisions of the legislation pointed the
other way. Reference was made to
Schedule 1, para 9(2)(b); that envisaged that an engine which provided
propulsion could be added to the crane as part of its excepted load. Section 13(3)(a)
envisaged the possibility that the propelling machine might be otherwise than a
fixed part of the vehicle in question.
Schedule 9 listed exempt vehicles of very precise types, sometimes by
reference to their description, sometimes by reference to the type of work they
did. None of the exemptions were defined
by reference to such features as the location of the engine or the fuel tank. A mobile crane within the meaning of
paragraph 9 was accordingly not one restricted to one which was constructed as self-propelling. If the trailer element was to be treated as
otherwise than a "vehicle", serious problems could
arise about enforcement - for example, by limiting the plant which might be
forfeit to the Commissioners.
[7] Mr. Artis for
the respondents pointed to the structure of the legislation. A rebate was allowed for heavy oil, otherwise
subject to duty, delivered for home use.
An exception to the allowance of a rebate applied in the case of oil
supplied as fuel for a road vehicle.
There was then an exception to the exception in the case of the
"excepted vehicles" specified in Schedule 1. Accordingly, to come within the category of
an excepted vehicle under Schedule 1, para 9, it was first necessary that
the item in question should be a "road vehicle". It was also necessary to bear in mind that
section 12(2) was directed not only against the use of the oil as fuel but also
against its being taken into the road vehicle as fuel. The Tribunal had, on its primary findings,
been entitled to conclude that the whole apparatus was not a single road
vehicle but two items coupled together.
Neither item could be regarded as a mobile crane within the meaning of
para 9. The Tribunal's conclusion from
the primary facts was itself a finding of fact which should not be
disturbed. Reference was made to Clark v Perks
[2001] STC 1254, especially per Carnwarth J. at paras [24] - [28], where
citation from earlier familiar authorities was made. In any event on a sound construction of the
primary facts the proper inference was that there was no single road vehicle
which was a mobile crane. Even with the
modified coupling it was possible to use any trailer unit with any baler unit and
with any other trailer which had the heavier duty coupling. A coupling designed and constructed for such
generalised use could not fall within the exception. In any event, subsequent modification from
the original design of the coupling (which had even wider possible use) could
not be taken into account when considering whether the relevant item had been
"designed and constructed as a mobile crane".
Reference was made to Clifbreakers
Limited v Commissioners of Customs
and Excise (Excise Duties Case/E00157; 2001 V & DR 20, especially at para
13). The circumstance that the
crane/baler machine could be moved (by being drawn by a tractor unit) did not
make it a "mobile crane" within the meaning of Schedule 1, para 9. British
Oxygen Co. v Board of Trade was
decided under different legislation and addressed a different issue. In DPP v
Evans the connection was such that
the "contraption" as a whole was one vehicle.
As to para 9(2)(b), the load there envisaged as
being necessary for propulsion was a source of power - such as coal or
electrical batteries. The trailer here
was not a load used for the propulsion of the tractor unit.
Discussion
[8] Despite Mr.
Artis's attempts to support it we do not find the reasoning of the Tribunal to
be satisfactory. The critical issue
before it (as focused by the appellant's contention as noted) was whether, on
the facts found by it, the tractor and the crane/baler were to be regarded, for
the purposes of this legislation, as a single unit. The facts relevant to that issue were the
modification of the coupling arrangement and the consequences of that for the
use (or the restriction in use) of the tractor units, the contention being, in
essence, that the modification made it unlikely that the tractor unit would
ever be used by the appellant other than in conjunction with the crane/baler. The Tribunal does not refer in its reasoning
to these facts nor, while apparently recognising that rebate would be allowable
if "[the tractor] could be regarded as one vehicle with the trailer by virtue
of the modification to the king-pin", does it explain what it made of them in
coming to its decision. The critical
issue is not addressed. In these
circumstances we are of opinion that this court is free itself to address the
primary facts and to reach a view as to whether, on those facts, the appellant
is entitled to rebate on the oil used as fuel for the engine situated within
each tractor unit.
[9] The
resolution of that issue turns, as we have said, upon whether, for the purposes
of this legislation, a tractor and a crane/baler should be regarded as a single
unit. If they cannot be so regarded,
then the fuel here in issue cannot qualify for rebate: the tractor which uses the fuel for
propulsion cannot, on any view, be regarded, in isolation, as a mobile crane,
while the fuel consumed by the crane/baler cannot be regarded as used for the
propulsion of the crane/baler, again regarded in isolation. Mr. Artis in his response submitted that the
coupling arrangement as modified could not be brought into account on the
ground that the relative vehicle, having been delivered from the manufacturer
without such modification, could not be one "designed and constructed" as a
mobile crane. It is at least doubtful
whether any such argument was presented to the Tribunal. Nor was any notice of it given in the
respondents' answers to the appeal to this court. Mr Young protested at the lack of notice
and did not make a detailed submission on this aspect. In the absence of full argument we are
reluctant to express any concluded view on this submission. In the event it is unnecessary for us to do
so. Accordingly, for the purposes of
this appeal, we treat the modified coupling arrangement as if it had existed in
both tractor and crane/baler from the outset.
[10] It is plain
from the Tribunal's findings that all the tractors and crane/balers operated by
the appellant were similarly modified - that is, that any of the tractors can
be coupled up to any of the crane/balers.
No coupling is unique to a particular tractor and crane/baler. The Tribunal found that the "modification did
render the tractor unit unsuitable for use with ordinary trailers" - presumably
because such trailers would have the standard 2 inch king-pins. The Tribunal also found that "the capacity of
the tractor unit would not be adequate for use with the heavier type of trailer
normally associated with such a coupling and pin". Although the implications of this finding are
not wholly clear, we are prepared to proceed upon the basis that the engine
capacity of the tractor is inadequate for the purposes of drawing a fully laden
trailer of the kind normally fitted with the heavy duty coupling. It is not wholly clear whether that engine
capacity would be inadequate for the purpose of drawing such a trailer if
un-laden or only partially laden.
However, we proceed on the basis that the tractor is not designed and
constructed with engine power adequate to draw such a trailer when in normal
use.
[11] The Tribunal
also found that
" ... the use of the combined tractor and
trailer normally was that they were not separate so that the tractor and
trailer could readily be manoeuvred on the site according to the location of
scrap".
That, however, is a use which the appellant finds normally
convenient to adopt rather than a feature which arises from the design and
construction of the tractors and crane/balers themselves. The fact remains that in terms of design and
construction any trailer can be used with any crane/baler. Does this interchangeability impact upon the
critical question, namely, whether, for the purposes of this legislation, there
exist single units, each comprising a tractor and
crane/baler combined? In our view, it
does. Although it may be that as a
matter of practice in the appellant's operations a particular tractor may generally
be associated with a particular crane/baler and that at a particular point of
time they are working in conjunction, it cannot be said, given the facility for
interchange, that in terms of construction and design there is a number of
identifiable single combined units of tractor and crane/baler. Quite apart from the interchangeability, the
larger number of crane/balers than tractors employed by the appellant tells
against such identification. That being so, it cannot be said that there exists in the appellant's
fleet a (combined) "vehicle which is designed and constructed as a mobile
crane" within the meaning of para 9 of Schedule 1. For these reasons this appeal must, in our
view, fail.
[12] Reliance was
placed by Mr. Young on DPP v Evans.
But there the issue was whether there was a breach of the Motor Vehicles
(Construction and Use) Regulations 1978 in relation to excessive weight. One question which arose was whether the
"contraption" was, as used, a single entire vehicle or a drawing vehicle and
trailer. The nature of the arrangement
by which the two parts were connected (which included the crane being supported
by the front part and its jib being bolted to the rear part) led to the
conclusion that the former description was to be preferred. That conclusion is, in our view, unsurprising
but it does not assist in resolving the present issue. In British
Oxygen Co. v Board of Trade the
issue was whether certain gas transporters were excluded from being "machinery
or plant" because they were "vehicles". Excepted
from "vehicle" as defined was "a vehicle constructed or adapted for the
conveyance of a machine incorporated in or permanently attached to it ... ". It was held that
they were non-excepted vehicles. One of
those classes was that of articulated tanker.
Incidentally, it was accepted in argument that a mobile crane would
qualify as "machinery or plant" (see page 196D) - presumably because the mobile
crane envisaged was an excepted vehicle.
The circumstance that for that purpose it was appropriate to regard the
articulated tanker as a single vehicle rather than as two distinct parts does
not, in our view, assist in resolving the present issue.
[13] Mr. Young also
sought to rely on particular aspects of the surrounding statutory language, but
that submission was directed to an observation by the Tribunal which, while possibly
ambiguous, is not critical to the necessary analysis. Paragraph 9(2)(b)
is designed to exclude from a "mobile crane" any vehicle which, when proceeding
on a public road, carries any load otherwise than such as is necessary for its
propulsion or equipment - that is, a load which is necessarily incidental to
such propulsion or equipment; the
(remote) possibility that a source of propulsion might be a "load" does not
assist in determining whether the tractor and crane/baler are designed and
constructed as a single unit. Nor does
the restrictive provision in section 12(3)(a) as to
when heavy oil is to be deemed to be used as fuel for a road vehicle assist in
determining that question.
Disposal
[14] For these
reasons we refuse this appeal.
