First-tier Tribunal (Tax)

[2010] UKFTT 190 (TC)

TC00492

Appeal number: TC/2009/11805

Sections 12 and 13 Hydrocarbon Oil Duties Act 1979; “red diesel”; rebate payable in respect of road going railway track maintenance vehicle; definition of “road vehicle” under section 27 and Schedule 1 paragraph 2 of HODA.

FIRST-TIER TRIBUNAL

TAX CHAMBER (Excise duty)

                                          GBL & SONS LIMITED                         Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

                        TRIBUNAL: CHRISTOPHER HACKING (Judge)

                                                PETER WHITEHEAD                                                                                                        

Sitting in public in Manchester on 8^th April 2010

Mr Geoffrey Brown a director for and on behalf of the Appellant.

Mr Jonathon Cannon of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       This was an appeal by the Appellant company against an assessment raised under section 116 Customs & Excise Management Act 1979 in respect of excise duty charged for diesel oil under section 13(1)(A) Hydrocarbon Oils Duties Act 1979 (“the Act”). The charge to duty arose following the discovery by the Respondent of the use by the Appellant of “red diesel” in a road going vehicle.

2.       Section 12 (2) of the Act prohibits the use of heavy oil in respect of which a rebate for delivery for home use has been allowed (red diesel) for use as a fuel for a road going vehicle. As a separate matter the taking into a road vehicle of such fuel is also prohibited. These prohibitions do not apply where a sum equal to the rebate has been paid to the Revenue. No such payment had been made by the Appellant. Section 13 of the Act states that where oil is used or taken into a road vehicle in contravention of section 12 (2) of the Act the Commissioners may assess the amount equal to the rebate on like oil at the rate in force at the time of the contravention as excise duty.

3.       The question which arises in this appeal is whether the Appellant’s vehicle which, it is admitted, used red diesel for its motive power whilst on a road, was properly to be considered a “road vehicle” within the meaning of the Act.

4.       A “road vehicle is defined by section 27 of the Act as “........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”

5.       The Appellant’s vehicle was said to be of a unique configuration. It was used for rail track maintenance and comprised two sections. The lead or forward section which provided the motive power was a “Unimog” tractor unit which unusually featured both road going wheels and tyres as well as separate wheels suitable for use on a railway track, such wheels being so disposed alongside the road going wheels and operable so as to be readily capable of being deployed for track maintenance duties. A second (rear) towed unit known as a “Vactor” (although it is noted that the Unimog tractorunit and the Vactor are together known as the “Vactor Combination Unit”) employs a powerful pump used in the cleaning of culverts, ducting, ballast channels and drains. The Vactor also includes a side shift hose and, importantly, a mobile track mounting capability together with conventional wheels and tyres for use when being towed on a road. The combination additionally features its own tanked water supply for use in track maintenance operations. The whole of the combination is of substantial weight and length. It is, the Appellant stated, the only road going mobile track maintenance vehicle of its kind, its competitor vehicles being based on a rail vehicle and thus being able only to access working locations when rail traffic allows.

6.       It had, until the hearing of this appeal, been the Appellant’s case that its vehicle was a special vehicle for which the legislation made no provision as regards the use of red diesel and that in all the circumstances its use from time to time on the road using red diesel was justified. At the hearing of the appeal that contention was not pursued. The Appellant accepted that the proper approach to the question whether its vehicle was or was not a “road vehicle” and thus liable to the duty was to consider whether it fell within any of the specific exceptions set out in Schedule 1 paragraph 2 of the Act. Both the Revenue and the Appellant had reviewed the categories of vehicles set out in the schedule and it had been conceded by the Appellant and agreed by the Revenue that none could fairly be said to include the Appellant’s vehicle which was by any standards an unusual one.

7.       Various suggestions had been advanced by the Revenue which accepted that the vehicle could use red diesel without payment of an amount equal to the rebate whilst engaged on track operations. These included the possibility of draining the red diesel, on the conclusion of track based operations, cleaning out the fuel tank and refilling it with diesel on which the full rate of duty had been charged for use on the road. Alternatively the Vactor Combination Unit might be taken to and from track locations by a low loader. Mr Brown regretted that neither of these suggestions were practicable. Mr Cannon on behalf of the Revenue accepted that the Appellant had throughout the matter acted in good faith and in the belief that its use of red diesel whilst the unit was on the road was permitted. Accordingly it had agreed to waive the penalty payment originally charged.

8.       It is the tribunal’s finding that the Appellant’s Unimog/Vactor combination unit is not an excepted vehicle under Schedule 1 paragraph 2 of the Act and that accordingly the Revenue’s assessment was properly made. The Appellant does not dispute the calculation of the rebate in the sum of £1,277 which sum, if not already paid, is now payable.

9.       This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

CHRISTOPHER HACKING

                                      TRIBUNAL JUDGE

                                      RELEASE DATE:  26 April 2010