First-tier Tribunal (Tax)

[2009] UKFTT 301 (TC)

TC00245

Appeal number:  EDN September 8003

Excise duty:  vehicles containing rebated fuel – whether one occasion only – Appellant not credible - Hydrocarbon Oil Duties Act 1979, s12(2) and 13 -Appeal dismissed.

FIRST-TIER TRIBUNAL

TAX

                                       DAVID KIRKALDY                       Appellant

                                                         - and -

                              THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (EXCISE DUTY)                                                    Respondents

                                        TRIBUNAL JUDGE: JOHN M BARTON, WS

                                        (Member):             IAN M P CONDIE, CA

Sitting in public in Edinburgh on Wednesday 2 September 2009

David Kirkaldy, for the Appellant

Kim Tilling, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

Preliminary

1.  The Appeal was set down for hearing at 126 George Street, Edinburgh on 19 August 2009.   The Appellant did not appear and was not represented.   The Respondents were represented by Bernard Haley.   The Tribunal was informed that earlier that morning, the Appellant had telephoned explaining that for family reasons, one of his witnesses was unable to attend and that for this reason, he would also not be attending.    Mr Haley indicated that he had no objection to an adjournment; and in the interests of natural justice, the Hearing was adjourned to 2 September 2009.

2.  The Appeal was heard on 2 September 2009.    The Appellant appeared on his own behalf and the Respondents were represented by Ms Kim Tilling.

3.       The subject matter of the Appeal was an amended assessment dated 29 January 2009 for Excise Duty of £2,845 in respect of the use of rebated oil in a Ford Escort van number W519 CJN and a Suzuki Vitara M2 BMK over the period from 1 August 2005 to 28 November 2007.

4.  The question before the Tribunal was to determine whether the Commissioners’ assessment of the amount of rebated oil which had been used by the Appellant in these vehicles, and the rebated duty on the same, had been calculated reasonably.

5.  The parties had agreed that the Respondents should lead.

The Law

 6.  Section 12(2) of the Hydrocarbon Oil and Duties Act 1979 (HODA) provides:

"(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 has been paid to the Commissioners in accordance with regulations made under section 24(1) below for the purposes of this section."

7.  Section 13 of HODA provides:

"(1A) Where oil is used, or is taken into a road vehicle, in contravention of section 12(2) above, the Commissioners may­

(a) assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excise duty from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b) notify him or his representative accordingly."

The Facts

8.The following documents were produced by the Respondents –

Letter from Appellant to Respondents dated 24 September 2008.

Letter from Respondents to Appellant dated 29 January 2009.

Notice of Appeal dated 27 March 2009.

Respondents’ Statement of Case.

Witness Statement of Louise Christine Martin.

Witness Statement of Michael Roddie with the following items attached

Two Test notes

Extracts from Departmental Notebook of Clare Devanney.

9.  The Appellant produced a letter addressed to him from Macnabs dated 11 August 2009.

10.  The Respondents led the evidence of Ms Martin, Ewan Villiers and Douglas Abercrombie; and the Appellant gave evidence on his own behalf.                                                                                           

11.  Ms Martin explained that the Respondents’ enquiries had originally related to four vehicles, but that at an early stage, it was established that one vehicle had been “off road” and that another was in the possession of a sub-contractor.  She confirmed that the remaining two vehicles, a Ford Escort W519 CJN and a Suzuki Vitara M2 BMK were registered in the name of the Appellant.    Ms Martin and Mr Villiers separately explained the calculation of the rebated oil which was used for each vehicle.   The Appellant had produced the MOT Certificates for each vehicle.   The MOT Certificate for the Ford Escort showed a mileage of 13,463 miles from 25 October 06 to 26 October 07, equivalent to an annual mileage of 13,390 miles.   The MOT Certificate for the Suzuki Vitara had shown a reading in 2006 which was greater than the corresponding reading in 2007, and in these circumstances, the average annual commercial mileage of 20,000 had been adopted.   An estimate was made of the fuel consumption for each vehicle.   The initial assessments had covered a period from 15 March 2005 (being three years back from the Notice of Assessments) to 28 November 2007 (being the date of detection), but as the Appellant’s name had been mis-spelt, a revised assessment had to be issued.   For the Suzuki Vitara, this covered the period from 1 August 2005.   It had been ascertained that the Appellant had only acquired the Ford Escort on 22 November 2006 and the calculation was made from that date.    The Appellant had produced some receipts for duty-paid fuel and the amount of that fuel had been discounted before a calculation had been made of the outstanding Excise Duty.   The Appellant did not cross-examine Ms Martin.    Mr Villiers, in answer to questions from the Appellant, confirmed that the computation for the Ford Escort had only been from the date of purchase, that the fuel consumption of each vehicle had been estimated and that Mr Villiars had no information regarding where the Appellant had acquired the rebated fuel.   In particular, the Appellant did not challenge the estimates which had been made in computing the loss of Duty.

12. Mr Abercrombie informed the Tribunal that he had accompanied Clare Devanney and Michael Roddie in taking a Roadside Mobile Testing Laboratory to Auchterarder on 28 November 2007.  He observed Mr Roddie, in the presence of a Police Constable, taking a sample of the fuel in the Ford Escort and the Suzuki Vitara, which were both parked on the public road, and he referred to the Test Notes which are attached to Mr Roddie’s Witness Statement.    Both samples showed 100% rebated fuel.   The fuel in the Ford Escort was of standard tractor fuel whereas the fuel in the Suzuki Vitara was of a higher specific gravity, such as is used in marine engines.    The Appellant was subsequently interviewed.     In cross-examination, the Appellant suggested that the Police had only attended immediately before he was interviewed.    Mr Abercrombie adhered to his account that the Police Constable had been present when the samples were taken, explaining that although HMRC  have the authority to examine any vehicle without the owner’s consent, it is not their practice to do this except in the presence of a Police Constable.

13.  The Appellant gave evidence on his own behalf, explaining that he had the (rebated) fuel and that he was waiting for money to reach him for work that he had done.  He had no knowledge of any boat to explain the marine fuel.    On being cross-examined, the Appellant admitted that he used both the Ford Escort and the Suzuki Vitara.  He claimed that the (rebated) fuel had come from a friend’s father, a Mr McNamara, who deals in scrap cars.    The fuel was to have been used for a JCB.   The Appellant had the use of this JCB to dig foundations and he wished to return the JCB with a full tank. He had received five containers each of five gallons from Mr McNamara.   He had put the contents of three of the containers in the JCB and the remainder into the two cars.    The Appellant said that he had put a drum of (rebated) fuel in each vehicle as he had been short of cash.  He also referred to the letter from Macnabs, a firm of solicitors, in which the Appellant was being pressed for payment for the hire of a JCB; and the Appellant explained that he had only used the JCB for three days.   The Appellant claimed that he never purchased red diesel(rebated fuel).

14.  The Tribunal accepted the evidence of Ms Martin, Ewan Villiers and Douglas Abercrombie in full.     The Tribunal did not find the Appellant to be a credible witness and in particular, the Tribunal did not accept his explanation that only on one occasion had he put five gallons of rebated oil into each vehicle.

Findings-in-Fact

1  The Appellant was engaged in business activities involving fencing. He operated from an address at 64 Feus, Auchterarder, PH3 I DG.

2.  The Appellant was responsible for the fuel which was put into two vehicles owned by him, namely, a Ford Escort bearing the registration W519 CJN and a Suzuki Vitara bearing the registration M2 BMK. Both vehicles were diesel powered.  On 28 November 2007, the two vehicles were challenged by the Respondents.  The fuel in both vehicles running tanks was found to contain 100% red diesel (rebated fuel). The 100% contamination indicated to the Respondents that the vehicles had been running on this type of fuel for some time. The Appellant owned two other vehicles, also diesel powered, which were initially assessed but subsequently it was accepted that these should not have been assessed.

3. The Appellant was invited to provide evidence of white diesel purchases and some receipts were provided.   The following was taken into account when calculating the amount of fuel the two vehicles had consumed: for the Ford Escort a mileage of 13,390 per annum and a miles per gallon rate of 40.8; and for the Suzuki Vitara a mileage of 20,000 per annum and a miles per gallon rate of 36.0. An allowance of £682 was made for receipts of white diesel that the Appellant provided.

4. The initial assessment covered a period from 15 March 2005 (being three years back from the issue of the Notice of Assessments) to 28 November 2007 (being the date of detection). The assessment was subsequently amended and the amended Notice of Assessment dated 29 January 2009 covered the period from 1 August 2005 (being the earliest period within the time limits) to 28 November 2007 (being the date of detection).

5.  The details of the amended assessment were as follows –

The assessment figure rounded down to £2845.

6. In his Notice of Appeal, the Appellant stated that his grounds of appeal were: "I only used agricultural fuel once as I was short of money. The fuel was left over from a job I had just finished. It was a 5 gallon drum. Could you please reconsider your assessment, thank you."

Decision

15.  The Appellant accepted that he was responsible for the fuel which was put into the Ford Escort and Suzuki Vitara vehicles.  He also admitted using rebated oil in these vehicles immediately prior to 28 November 2007, in contravention of s12(2) of HODA..  Section 13 of HODA provides:

“(1A) Where oil is used, or is taken into a road vehicle, in contravention of 12(2) above, the Commissioners may-

(a)  assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excise duty from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b)  notify him or his representative accordingly.”

16.  The Tribunal accepted the evidence adduced for the Respondents and in particular that on 28 November 2007, the running tanks in each of the said vehicles contained 100% rebated fuel.  In the absence of credible evidence to the contrary, the Tribunal considers that it is reasonable to infer that the Appellant had been using rebated fuel in the Ford Escort since 22 November 2006 (when it was acquired) and in the Suzuki Vitara since 1 August 2005. 

17.  The Appellant did not challenge the finding that the mileage of the Ford Escort was 13,390 miles per annum and that its consumption was 40.8 miles per gallon, and that the mileage of the Suzuki Vitara was 20,000 miles per annum and that its consumption was 36 miles per gallon; and that an allowance of £682 should be made for diesel purchased in respect of which excise duty had been paid.  On the basis of the foregoing, it had reasonably been calculated that the amount of rebated oil which has been used by the Appellant in these vehicles over the period from 1 August 2005 to 28 November 2007 was 6,043.16 litres and that the rebated duty on the same was £2,845.   In the absence of evidence to the contrary, the Tribunal considers these findings to be reasonable, and accordingly dismisses the appeal.

MR JOHN M BARTON, WS

TRIBUNAL JUDGE

RELEASE DATE:  10 NOVEMBER 2009