First-tier Tribunal (Tax)

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Cite as: [2011] UKFTT 197 (TC)

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Janet Esther Herron v Revenue & Customs [2011] UKFTT 197 (TC) (22 March 2011)
EXCISE DUTY HYDROCARBON OIL - (See also EXCISE RESTORATION OF VEHICLE)
Assessment

[2011] UKFTT 197 (TC)

TC01066

Appeal reference: TC/2009/11113

Hydrocarbon oil – excise duty point – importation into United Kingdom – transport company- vehicle detected – driven by husband of Appellant – fuel pod containing diesel in rear of vehicle – diesel imported from Republic of Ireland into Northern Ireland – non payment of excise duty upon Importation – Notice of Seizure – records requested to enable fuel audit to be carried out – only limited provision of records – assessments – request for formal departmental review – decision to uphold assessments – appeal – whether assessments made to best judgment – adjustment allowed

FIRST-TIER TRIBUNAL

TAX CHAMBER

JANET ESTHER HERRON Appellant

T/A HERRON TRANSPORT

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS Respondents

Tribunal: Alistair F W Devlin (Judge)

John B Adrain (Member)

Sitting in public in Belfast on 23 September 2010

Mr. Ronan Lavery of counsel for the Appellant

Ms Kim Tilling for the Respondents

DECISION

Introduction

1. This is an appeal brought by Janet Ester Herron [“the Appellant”] against a decision taken on review to uphold in full the earlier decision to assess the Appellant in the sums of £1,823 under reference EXB519/08 dated 13 October 2008, and £13,024 under reference EXB511/08 dated 13 October 2008. The decision on review from which the Appellant appeals to this Tribunal was duly notified to her by letter dated 14 May 2009.

The factual background

2. The Appellant has at all material times carried on in business under the name or style of ‘Herron Transport’. The Appellant’s principal place of business was at 258, Ballygowan Road, Dromore, County Down, from where the Appellant carried on in business as a road haulier.

3. On the afternoon of 25 November 2007 officers of the Respondent stopped a Ford Transit van registration number WJI 5720 on the main road running between Belfast and Dublin, known as the A1. The vehicle was at the time being driven by the Appellant’s husband, David Herron. The vehicle had been heading northwards. On inspection of the vehicle the Respondent’s officers noticed that in the rear of the Ford Transit was a large plastic cube, set inside in a reinforcing metal case, known as a ‘pod’, which appeared to contain hydrocarbon fuel. Considering that they had at that time sufficient grounds to arrest David Herron in connection with the alleged unlawful smuggling of hydrocarbon fuel from the Republic of Ireland into Northern Ireland, the Respondent’s officers proceeded to arrest him. Subsequently, David Herron was formally interviewed under caution at Banbridge police station.

4. Upon being interviewed under caution, David Herron informed the Respondent’s officers that before being stopped he had been travelling home from Dundalk in the Republic of Ireland, and that the main purpose of his journey had been to fill up with DERV the pod which had been located in the rear of the Ford Transit. He told the officers that he had made payment for that fuel on this occasion by means of a Fuelways fuel card, and that the business operated other fuel cards such as Morgan and DCI. David Herron then went on to inform the officers that the business had three lorries at that time, namely a Volvo lorry, which he said had a 600 litre tank [‘NDZ 1811’], together with two others, a Scania and another Volvo, each of which he said were fitted with 400 litre tanks [‘M374 PCP’ and ‘L777 JDS’]. The business he went on to say also owned a Range Rover, a white liveried Astra van, a small vintage tractor, and two diggers. The tractor and the diggers he explained ran on red diesel. David Herron also claimed that the Ford Transit was a vehicle which he used to attend site visits, and also to deliver workmen to sites. He said that the business had no facilities at its premises in which to store fuel, and that as a result he would take lorries across the border into the Republic, usually two or three times a week, for refuelling operations. If a lorry or lorries were to be already in the Republic, they would be refuelled whilst there. Whenever necessary he said that he also bought fuel in Northern Ireland. The business he explained kept records of all fuel purchases made. David Herron claimed that he had never decanted fuel from one vehicle into another, nor he said had he ever decanted fuel from one vehicle into a storage tank. As regards the cube, David Herron said that the fuel in the cube had been intended to be used to fill up lorries, but that it had only been in the back of the vehicle for one day, and that it had never been used by him before. He however accepted that the fuel in the cube or ‘pod’ was going to be used by him to fuel the vehicles.

5. Inside the vehicle the Respondent’s officers found a number of fuel receipts, one of which was dated 21 November 2007 and which showed a single purchase of 1000 litres of diesel made in the Republic. Upon being questioned in respect of this, David Herron replied that on that occasion the three lorries had been working at the border, and had attended for refuelling across the border at the same time. Mr Herron also stated that the reason the business had been purchasing fuel in the Republic was by reason of it being less expensive there than in the United Kingdom. Upon being asked how he would get the fuel from the pod into the vehicles, David Herron said that he would ‘normally use a hose you know five gallon drums and run it into them as I need you know’.

6. David Herron also said during the course of this interview that he understood that United Kingdom fuel duty had not been paid on the fuel which he had carried in the pod, and further accepted that in bringing the filled cube containing diesel over the border he was intending to evade such fuel duty.

7. The Respondent’s officers, upon conclusion of the interview, being satisfied that the diesel contained within the cube had not been legally imported into the United Kingdom, issued the Appellant with a Seizure Notice in respect of the 1000 litres of DERV contained in the cube and also in respect of the vehicle WJI 5720. This Notice of Seizure, handed personally to David Herron advised inter alia that specified records relating to the ownership and operation of all vehicles of the business over the previous three years were being requested, so as to enable a road fuel audit to be undertaken, and that any failure to produce such records could lead to further penalties being levied. David Herron had been asked to sign to confirm receipt of this Notice of Seizure, and he did so sign. Amongst the records specifically sought were:

‘2. Details of all vehicles operated within the business to include:

a. Date of purchase, sale and hire or lease

b. Average weekly mileages, & Average miles per gallon

c. Vehicle fuel tank capacities

d. Details of any additional fuel tanks fitted

e Period of inactivity

f Current odometer readings for each vehicle.

3. Tachographs for all commercial vehicles.

4. Vehicle logbooks/Maintenance Records

5. …………….

6. ………………………………………..’.

The Notice of Seizure went on to specify as follows:

‘We require records for the last 3 years. Please note that this case cannot be resolved until the audit is resolved. Please note that any failure to produce these records may result in penalties being levied’.

The Appellant accepted that this Notice of Seizure which she described as ‘some sort of paperwork’ had been handed to her by her husband, David Herron. She stated that this notice had in turn, about one week later, been handed by her over to her solicitors, and that she had also handed over to her solicitors all documentation which her solicitors had asked her to provide. However, whilst certain fuel receipts do certainly appear to have been obtained directly from David Herron and also from a search of the interior of the vehicle which he had been driving at the time of the original detection, and certain additional fuel invoices may well have been provided to the Respondent’s officers on or about the day after the detection, it was common case that apart from these invoices, no further or additional records at all had subsequently been produced by the Appellant. In particular, no vehicle logbooks, maintenance records, commercial vehicle tachographs or other vehicle details were ever provided.

8. The Respondent’s officers subsequently made further requests for production of all tachograph documentation held by the Appellant in relation to any lorries owned by the Appellant during the period of three years immediately prior to 25 November 2007 being the date of detection. These records were still not produced.

9. The Respondent’s officers proceeded to have a reverse vehicle check carried out so as to search for vehicles registered to either the Appellant, or to her husband David Herron, or to Herron Transport. This check appeared on the face of it to suggest that significantly more than the three lorries referred to by David Herron on 25 November 2007 may have been registered to the Appellant, or to David Herron, or to Herron Transport at different times during the course of the three year period between November 2004 and November 2007. The information obtained as a result of the reverse vehicle check was however clearly incomplete. In mid January 2008 the Respondent’s officers then visited the premises of the Appellant. In March and April 2008 fuel invoices relied upon by the Appellant when making 8^th Directive claims for the refunding of fuel purchased in the Republic of Ireland were then sought and obtained by the Respondent’s officers from the Republic of Ireland’s Revenue Commissioners. These invoices were sought by the Respondents on 10 March 2008 and duly provided on 7 April 2008.

10. The Respondents subsequently issued a Notice of Assessment in form EX601 in the sum of £1,823 under reference EXB519/08 dated 13 October 2008. The Respondents also issued on the same date a further Notice of Assessment in form EX601 in the sum of £13,024 under reference EXB511/08. In each instance, a covering letter bearing the same date was also issued by the Respondents to the Appellant, enclosing a copy of the schedule of calculations relied upon by them.

11. By letter dated 18 November 2008 the Appellant’s solicitors wrote to the Respondents on behalf of their client indicating that their client disagreed with the decision in both assessments, and requesting that their correspondence should be treated as a request for a formal departmental review of both assessments. By further letter dated 9 December 2008 the Appellant’s solicitors wrote again to the Respondents in the following terms:

‘………..Our client is in the process of obtaining statements from various parties which he hopes will show that at the various times and dates sighted [sic] by revenue and customs more then one of his vehicles were involved in filling up with diesel.

Without prejudice our client takes issue with the Revenues [sic] assertion that the one vehicle was used in purchasing diesel on the dates listed. Herron Transport says that on each of the dates in question, more than one of these Vehicles were obtaining a fill of diesel.

Herron Transport are in the process of obtaining statements from both their drivers and the fuel station, to this effect and we will forward there for your consideration as soon as they are received.’

By further letter dated 15 January 2009 the Appellant’s solicitors provided the Respondents with a statement from Four Counties Oil Co. Limited of Dundalk, and with statements signed, it was claimed, by four drivers.

12. By means of a review letter dated 14 May 2009 a Review Officer of the Respondents concluded that the decisions as to the two assessments as notified to the Appellant by letter dated 13 October 2008 should be upheld. The Review Officer stated that her reasons were because the Appellant had been found to be smuggling UK duty unpaid fuel from the Republic of Ireland and to be decanting this fuel. The Review Officer stated that she had additionally considered the additional material submitted on behalf of the Appellant, and in particular the statements referred to above.

13. By means of a Notice of Appeal dated 11 June 2009 the Appellant appeals to this Tribunal against that review decision.

Grounds of appeal

14. The grounds of appeal were stated in the Notice of Appeal to be as follows:

‘HMRC have failed to take account of the way this business is run. Vehicles could have travelled together for purposes of obtaining fuel, especially when one fuel card only exists.

HMRC have failed to take proper consideration of statements from staff at Four Counties Oil Co. Ltd.

The decision by HMRC would effectively mean this company pays tax on fuel twice, in two different EU countries. This surely is not right or equitable.’

At the outset of the hearing, counsel for the Appellant advised the Tribunal that the third of these three grounds of appeal was not being proceeded with, and could be regarded as having been withdrawn.

Evidence and additional findings of fact

15. On behalf of the Appellant, the Tribunal heard evidence from Janet Ester Herron herself, and also from David Herron. On behalf of the Respondent, the Tribunal heard oral evidence from Leona McArdle On the basis of the evidence adduced before it, the Tribunal makes the following additional findings of fact.

16. The Tribunal is satisfied that the business was that of the Appellant. We also find that in addition to owning the business, it was the Appellant who looked after the accounts, wages and everything to do with the running of the office. The Appellant herself also looked after payments. The business was a transport business; it had started up concentrating on heavy haulage, and later had moved on to using eight wheeled tipper vehicles. During the period covered by the assessments, the business purchased diesel by means of fuel cards. Various accounts were held at different times, with fuel card operators such as Fuelwise, Morgans and DCI. The way in which the fuel cards operated was so as to enable the business to make use of them at a variety of retail fuel outlets, located both in Northern Ireland and in the Republic. The cards were generally held in the office and given to drivers as and when required, rather than being let out for drivers to hold onto; sometimes however individual drivers would have been given a fuel card to hold onto, but this practice had been a rarity only essentially being confined to one particularly trusted driver who had left some four years previously. Diesel fuel was on occasions purchased in the Republic of Ireland by means of the fuel cards. Drivers would on occasions have gone together to the Republic in order to purchase diesel.

17. As to how often and in what precise manner the Appellant’s drivers business had purchased diesel fuel for its lorries in the Republic of Ireland for subsequent importation into Northern Ireland, the evidence adduced on behalf of the Appellant was mutually inconsistent. The Appellant began by stating that the drivers, as she put it, ‘sometimes’ would go together to the Republic of Ireland to buy fuel. Under cross examination, she readily accepted that the drivers would not have always have travelled together to buy fuel in the Republic; doing the best that she could her best estimate was that more than half the time, or then she stated perhaps two thirds of the time, the drivers would have travelled together in order to purchase fuel in the Republic.

18. In support of this, the Appellant at the hearing sought to rely upon the contents of a number of ‘statements’ which had been supplied to the Respondents by the Appellant’s solicitors, under cover of a letter dated 15 January 2009. The provision of these documents accordingly post-dated the issue and notification of the two assessments, but was provided to the Respondents in advance of the review having been undertaken. These documents consisted of: firstly, a letter dated 12 January 2009 on notepaper headed ‘Four Counties Oil Co. Ltd., purporting to come from a John Quigley, but signed by one Mary Connolly, in which it was stated that the practice of David Herron over ‘approximately five or six years’ would have been, on what was described as ‘numerous occasions’, to arrive with two lorries, fill both and hand us his fuel card, both fills going through as one transaction using one registration only. Neither John Quigley nor Mary Connolly attended or gave evidence before the Tribunal; nor was the Tribunal informed as who these persons were, or purported to be, nor what, if any, authority they may have had to sign this document on behalf of Four Counties Oil Co. Ltd. In addition, the Tribunal was presented with three undated statements from what appeared to be drivers of the Appellant stating that on numerous occasions they would each have followed David Herron in a lorry and filled up with diesel. None of these persons appeared or gave evidence before the Tribunal, nor was it ascertained in respect of what period or periods these statements extended or purported to extend. The Tribunal found itself unable to make any findings of fact in reliance upon any of this documentation.

19. Contrary to what David Herron had told the Respondent’s officers on 25 November 2007, the business did have some storage facilities at its premises. These had been observed by the Respondent’s officers during the course of a visit to the premises on 17 January 2008. These facilities however consisted only of two domestic oil tanks for home heating oil, and a third tank for red diesel. David Herron had however claimed that there were none.

20. As to the cube or ‘pod’, the circumstances in which it had first come to be acquired, and its previous user in the period prior to 25 November 2007, the evidence of David Herron was as follows. He claimed that whereas the cube had been acquired by him some three months in advance of 25 November 2007 the day of the interception was the first occasion upon which the same had been made use of. David Herron claimed that he had not purchased the cube, but rather had been offered it free of charge at the site of a demolition job near Lurgan with which the firm had had a connection. He said that there had been quite a number of these cubes at the site, which the firm had been clearing, perhaps six or seven of them in total. He claimed to have taken one of these cubes off the site, and to have acquired it three months in advance of 25 November 2007. Between the date of its acquisition, and 25 November 2007, David Herron claimed that he had only used the cube to store red diesel one of the two diggers. He claimed never to have used it to transport diesel across the border with the Republic of Ireland, which he said he knew to be unlawful.

21. The Tribunal has had the opportunity to observe David Herron give evidence before it, to consider his demeanour as a witness, and to consider the credibility of his evidence in chief, together with the answers which he gave in cross-examination. The Tribunal found him to be a most unconvincing and unsatisfactory witness. The Tribunal finds his evidence as to how, when, where and in what facts and circumstances the pod or cube came to be acquired thoroughly unconvincing. Neither in evidence or under cross examination did Mr Herron clearly identify or particularise precisely where or from whom the pod had been acquired. Nor had any of these particulars been disclosed to the Respondent’s officers at the time of the original detection and interview under caution. No documentary evidence at all relating to or referring to the supposed acquisition of the pod was produced either to the Respondents officers, nor to the Tribunal; not even a letter or statement from the owner of the site confirming that the site had, as alleged, previously contained a number of such pods, nor from any person or body from whom permission would presumably have had to have been obtained, to substantiate the assertion that David Herron had been permitted to remove one such pod from the site. Even more strangely, the Appellant herself said in her evidence that for her part, she had known nothing at all about the existence or use of the pod until 25 November 2007, being the date of the detection. That assertion, it seems to us, sits particularly uneasily with David Herron’s assertion that for a full three months in advance of November 2007 the pod had openly been in use as a storage facility within the Appellant’s premises containing red diesel for the diggers. For that to have been the case, the Appellant herself would unquestionably know both of the pod and of its user, and we find that on the balance of probabilities, she had no such knowledge The Tribunal is wholly satisfied that whatever may have been the true date upon which, and true facts and circumstances in which, the cube or fuel pod may have come to have been acquired by David Herron, the Tribunal was not hearing from him the full story as to precisely how, why, when or from whom the cube had in reality come into his possession.

22. Nor does the Tribunal believe that 25 November 2007 is likely to have been the first occasion upon which David Herron made use of the pod in order to transport diesel fuel across the border from the Republic of Ireland into Northern Ireland. The Tribunal finds that the pod is likely to have made some use of by David Herron in advance of 25 November 2007. As to just how much use David Herron is likely to have made of the cube in advance of 25 November 2007, it would be idle to speculate. Suffice it to say that the Tribunal was not at all satisfied that it was being told the full story as to how, when, why, where or from whom the cube had been acquired, nor as to what use it had been put to in the period between the date of its acquisition and 25 November 2007. The Tribunal considers that on the balance of probabilities any user of the pod by David Herron or otherwise in connection with the Appellant’s business in advance of 25 November 2007 is likely to have been relatively modest, and to have taken place at most on a few relatively isolated occasions. That is simply because of the extreme paucity in the schedule of total fuel purchases in excess or even substantially in excess of 1,000 litres, which we consider widespread use of a fully filled cube by or on behalf of the Appellant’s business is likely to have almost inevitably produced. The pod may however have been made use of to illegally import fuel into Northern Ireland whenever only partly as opposed to fully filled.

23. The commercial vehicles owned and operated by the Appellant which David Herron admitted after caution to were a Volvo tractor unit NDZ 1811, and two eight wheeled tipper lorries namely L777 JDS and M374 PCP, together also with the Transit van which David Herron had been driving at the time of the detection, a Mitsubishi Shogun and from May 2006 onwards a Range Rover Sport. In his evidence to the Tribunal however, David Herron sought to establish that the Volvo had in fact a different tank capacity, namely of 1100 litres, rather than 600 litres, which was of course what he had originally told the Respondent’s officers. He claimed that this Volvo tractor unit, with a tank capacity of 1100 litres, had been originally acquired by the business in late August 2004 and had then been disposed of in 2006. The reverse vehicle check carried out by the Respondent’s officers in January 2008 suggested that the Appellant’s business had subsequently operated either this same vehicle or another vehicle under the same registration number also from February 2007 onwards. The Tribunal makes it clear that it finds David Herron’s assertions regarding the alleged tankage capacity of this vehicle not to be satisfactorily made out in the evidence. At the time of the original detection, after caution, David Herron informed the Respondent’s officers that this vehicle had a tank capacity of 600 litres; that admission was never disputed by him. On the evidence adduced before us during the course of the hearing, we are not remotely satisfied that it has been established on the balance of probabilities that the alleged revised tank capacity of 1100 litres was ever held either by this vehicle, or indeed by any vehicle owned or operated by the Appellant at any material time.

The assessments

24. Evidence on behalf of the Respondents was given by Leona McArdle, a member of the Respondents Excise Oils Team as to how the two assessments the subject matter of this appeal had been calculated, and the sums which they contained had been arrived at. It was Ms McArdle who on 7 January 2008 had requested that the reverse vehicle check be carried out. The results of this check had confirmed that the Appellant’s business owned more vehicles than the three which David Herron had referred to during the course of his interview under caution. The reverse vehicle check suggested that during the period of the subsequent assessments, a further two lorries had been owned by the business.

25. Ms McArdle then proceeded to schedule the fuel invoices which had been obtained from the Revenue Commissioners in the Republic of Ireland, alongside those which had been obtained from David Herron at the time of the original detection. The invoices were arranged into a date and time sequence. The detailed schedule produced as a result covered the period between 22 December 2005 and 31 March 2007.

26. The schedule thus obtained contained a number of fuel purchases which were larger than what David Herron had said had been the maximum fuel capacity of any vehicle operated as part of the Appellant’s business, namely 600 litres.

27. In respect of each assessment produced by her Ms McArdle’s methodology for calculation and assessment was as follows. In respect of the period between 16 October 2005 and 30 September 2007 she observed that the schedule prepared containing the empirical data as obtained from David Herron, and from the Revenue Commissioners, suggested that on 7 separate occasions three vehicles, namely the Volvo tractor unit NDZ 1811, and also M867LPG and X563EKL had apparently returned to purchase additional fuel later on at the same retail fuel outlet, where on the face of it those vehicles were recorded in the records as having themselves already refuelled, earlier during the course of that same day. Considering that in the absence of some illegal storage, transportation and/or decanting of fuel having taken place, it would be extremely unlikely that such a pattern of same day refuelling could otherwise have emerged, Ms McArdle allowed to the Appellant in full the first purchase of fuel for each vehicle and on each occasion. The officer then however proceeded to assess the Appellant in respect of each purchase of fuel made on the second occasion upon each of these same day purchases. The total amount of fuel purchased on the 7 same day purchase occasions was 7,504.6 litres. Allowing in each instance the first purchase as being a legitimate purchase produced an allowance of 3,664.55 litres. Deducting this amount of 3,664.55 litres from the figure of 7,504.6 litres left a balance of 3,840.05 litres, which Ms McArdle then assessed in respect of unpaid duty in the sum of £1,823.00. This methodology formed the basis of the assessment EXB519/08.

28. In respect of the period between 24 October 2005 and 24 October 2007 Ms McArdle identified from the schedule all those purchases of fuel which appeared to have been larger that the maximum fuel tank capacity of the Appellant’s largest vehicle, as had been disclosed to the Respondent’s representatives by David Herron, namely 600 litres. In respect of all of these larger purchases above and beyond 600 litres, which turned out to be 62 in number, Ms McArdle then gave the Appellant a full allowance in respect of the first 600 litres purchased. Above and beyond these first 600 litres however, the Appellant was not given any further allowance, and the excess of the purchase above and beyond 600 litres was assessed. The total amount of fuel purchased by means of these 62 purchases was 64,434.93 litres. Allowing 600 litres in respect of each of the 62 purchases amounted to an allowance of 37,200 litres. Deducting this allowance from the total fuel purchase figure of 64,434.93 litres produced a balance of 27,234.93 litres, which Ms McArdle proceeded to assess as smuggled fuel. On this basis, unpaid duty in the sum of £13,024.00 formed the basis of the assessment EXB511/08.

The legal framework

29. Section 12[1] [2] and [3] of the Finance Act 1994 provide:

‘Assessments to excise duty

[1] Subject to subsection [4] below, where it appears to the Commissioners –

[a] that any person is a person from whom any amount has become due in respect of any duty or excise; and

[b] that there has been a default falling within subsection [2] below, the Commissioners may assess the amount of duty due from that person to the best of their judgment and notify that amount to that person or his representative.

[2] The defaults falling within this subsection are –

[a] any failure by any person to make, keep, preserve or produce as required or directed by or under any enactment any returns, accounts, books, records or other documents;

[b] any omission from or inaccuracy in returns, accounts, books, records or other documents which any person is required or directed by or under any enactment to make, keep, preserve or produce;

………….

[3] Where an amount has been assessed as due from any person and notified in accordance with this section, it shall, subject to any appeal under section 16 below, be deemed to be an amount of the duty in question due from that person and may be recovered accordingly, unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced.’

30. Section 6 of the Hydrocarbon Oil Duties Act 1979 provides that excise duty shall be charged on the importation of hydrocarbon oil into the United Kingdom. As to the excise duty point, Regulation 4 of the Excise Goods [Holding, Movement, Warehousing and REDS] Regulations 1992 [‘the 1992 Regulations’] provides that, except for a series of specified exceptions, none of which here apply, the excise duty point in relation to any Community excise goods shall be the time when the goods are charged with duty at importation. Regulation 5 of the 1992 Regulations goes on to provide that the person liable to pay the duty in the case of importation of excise goods from one Member State into another shall be the importer of the excise goods.

31. These provisions are however, in the case of commercial vehicles, subject to the provisions for relief set out in section 3 of the Travellers’ Reliefs [Fuel and Lubricants] Order 1995 which provides as follows:

[1] Subject to the provisions of this Order, a person who has travelled from another Member State shall on entering the United Kingdom be relieved from payment of excise duty on the fuel and lubricants contained in a commercial vehicle that he has with him.

[2] The reliefs afforded by this Order apply only to fuel that –

[a] is contained in the vehicle’s standard tanks; and

[b] is being used or is intended for use by that vehicle.

[3] The reliefs afforded by this order apply only to fuel on which –

[a] excise duty has been paid in the member State in which the fuel was acquired at a rate that is appropriate to the use to which that fuel is being used or intended to be put; and

[b] the excise duty paid on that fuel has not been remitted, repaid or drawn back’.

Submissions of the parties

32. It was submitted on behalf of the Respondents that each of the two assessments relied upon had been made to best judgment. The first of the two assessments was described on behalf of the Respondents as having arisen in connection with a decanting operation; the second it was submitted arose out of fuel smuggling. Reliance was placed upon the facts and circumstances of the original detection as it had taken place on 25 November 2007, of the evidence obtained as a result of that detection, and of the various admissions made by David Herron on that date. Reliance was placed in particular upon the fact that on the very same date as the detection, David Herron had been handed the Notice of Seizure specifying the additional information and documentation which the Respondents required in order to carry out a fuel audit. The Appellant had accepted that she had received this Notice from her husband, and said that she had passed it on to her solicitors, claiming also that she had disclosed all documentation which her solicitors had requested. Reliance was placed upon the fact that in spite of the Appellant’s implicit suggestions to the contrary, very little of the extensive additional documentation and information specified in the Notice had ever been provided, rendering the amount of information available to the Respondents very limited. The Appellant had been given every opportunity by means of the sending and contents of the Notice of Seizure to provide the information sought, and had failed to do so.

33. The Respondents also drew attention to the fact that David Herron had already admitted smuggling fuel into the United Kingdom, and that he accepted that he had fully appreciated that what he was doing was unlawful. It was also submitted that his assertions about there being no fuel storage facilities at the business premises occupied by the Appellant and her business had been shown to be false.

34. It was submitted that the reverse vehicle check had appeared to indicate that during the period of the assessments, the Appellant’s business may well have operated with the benefit of some additional vehicles above and beyond to those which David Herron had been prepared to admit to at the time of the original detection on 25 November 2007. However, where, as here, the Appellant had been asked in the Notice of Seizure to provide full details and supporting documentation in respect of any of the commercial vehicles operated by her business over the previous three year period, and had failed so to do, it was neither surprising nor unreasonable for the Respondents to have relied upon what David Herron had been prepared to admit to, both in terms of the vehicles themselves, and also as regards the maximum capacities of their fuel tanks.

35. It was submitted on behalf of the Appellant that the Notice of Seizure request had been little more than a routine request, in that, as it was put, the Appellant had only been asked for what everyone else would be asked for. It was also submitted that she, through the provision of fuel invoices, had fully cooperated with the Respondent’s investigation. The tachographs, it was claimed, had been gathered up and had been made ready for collection, but were never collected.

36. Mr Lavery sought to describe the first assessment as having been based upon a presumption, namely that the second vehicle recorded as having refuelled on each of the seven day occasions referred to in the assessment is likely to have been the same vehicle which had already refuelled earlier that same day. He submitted that there was no proper basis for that presumption. That presumption had in turn led to the Respondents applying a further presumption, namely that decanting of fuel could be the only plausible explanation for what had taken place. However, it was submitted that all of these same day refuelling operations could equally be explained on the basis of there having been, on each occasion, two different vehicles refuelling at the same time, but with the two vehicles using one card, and with a single registration number having simply been recorded for convenience at the filling station, even though there were in fact two vehicles being separately if successively refuelled. It was submitted that the only real attack on the suggestion that two vehicles could and would refuel at the same time was on the basis of this not being, so the Respondents had claimed, a normal business practice. Yet, it was submitted, the Respondents had seen a letter from Four Counties Oil and statements from the drivers exactly to that effect, and had chosen not to investigate any of these matters further.

37. In respect of the second assessment, Mr Lavery sought to undermine it and its assessment on the basis so it was submitted that the evidence was such as to suggest that it was likely that there would have been numerous occasions upon which the purchases in excess of 600 litres will have been obtained as a result of two vehicles arriving together to refuel at the same time. Additionally, he suggested that the approach of the Respondents was to suggest that each and every purchase of fuel above 600 litres is likely to have consisted of the filling up of a vehicle’s standard tank, together with the filling up of the cube. That, he submitted, is not what the figures in the schedule suggested. To combine the filling up of any of the vehicles’ standard tank, with the filling up of the 1,000 litre cube, would have resulted in the total fuel purchase substantially exceeding 1,000 litres in amount, and the Respondent’s own schedule contained remarkably few such purchases.

Conclusions

38. In determining upon the outcome of this appeal, we are mindful of the first of the principles of guidance put forward by the Court of Appeal in Pegasus Birds Ltd.v Customs and Excise Commissioners [2000] STC 290 for the assistance of tribunals in future cases involving issues of best judgment. As Carnwath LJ observed at paragraph 38:

‘The Tribunal should remember that its primary task is to find the correct amount of tax, so far as possible on the material properly available to it, the burden resting on the taxpayer. In all but very exceptional cases, that should be the focus of the hearing, and the Tribunal should not allow it to be diverted into an attack on the Commissioners' exercise of judgment at the time of the assessment.’

In the present case, in our assessment, the provision by the Respondent’s officers to the Appellant of the Notice of Seizure, and the Appellant’s response or more accurately the lack of proper response thereto is absolutely fundamental to a proper understanding of the context in which each of the two assessments now the subject matter of this appeal came to be arrived at. By means of the contents of the Notice of Seizure, the Appellant was put on notice right from the outset of the importance of her providing to the Respondents the detailed information, details and documentation which the Notice referred to. The Appellant admitted not only that she had duly received this Notice from her husband, but also that she had very shortly thereafter passed it on to her solicitors. In spite of this however, we are wholly satisfied only a tiny proportion of the detailed information, details and documentation which the Notice referred to was ever provided. The only material provided were certain fuel receipts obtained directly from David Herron and also from a search of the interior of the vehicle which he had been driving at the time of the original detection together with some additional fuel invoices apparently provided to the Respondent’s officers on or about the day after the detection.

39. We completely reject the assertion made to the Tribunal on behalf of the Appellant that tachograph records in particular had been made ready and were available for collection by the Respondent’s officers. We reject that contention, and find no factual basis to support it. Having regard to the terms of the Notice of Seizure, and also to the fact that not only the Appellant but also her solicitors had been involved by her in this matter at a very early stage, we are quite satisfied that if the tachographs sought by the Respondents had ever been obtained and made ready by the Appellant for collection, which we are satisfied they were not, that fact would certainly have been brought either by the Appellant or her solicitors to the attention of the Respondents without fail.

40. The Appellant is not, we find, in the facts and circumstances of this case to consider herself to be at liberty simply to fail to produce the vast bulk of the detailed information, details and documentation properly and reasonably sought by the Respondents, and then subsequently to set out to attack the very assessments which the Respondents have been forced to arrive at on the basis of the very limited information which they have either held, been provided with, or been able themselves to obtain access to.

41. Each of the two assessments requires to be considered separately and in turn. So far as the first assessment in form EX601 and in the sum of £1,823 under reference EXB519/08 is concerned, we reject the Appellant’s criticism of the methodology by which this assessment was arrived at. Having heard from both the Appellant herself and from David Herron as to how the business operated, we think it highly unlikely that any of the twin refueling operations specified in the schedule of Same Day Purchases will have involved a different vehicle. These various same day purchases were each made a number of hours apart; the vast bulk of them were made in or about two hours or slightly more than two hours apart; a time fully consistent with the approximate time it would take for a vehicle to drive from Dundalk or its environs back to the Appellant’s premises in Dromore, decant off its fuel and then return to Dundalk for a further fill. Additionally, in each instance, the second fills in terms of the amount of fuel purchased were all very closely similar to each other same day second fill purchase cited: the various litreages being: 520.54, 500, 510, 508, 518, 516.01, and 512. Each second fill same day purchase is recorded against the same registration number of the vehicle involved in the first fill some hours earlier that same day, and also in each instance the same number of fuel card is recorded as having been used both for the first fill and for the second fill. Additionally, we did not receive from the Appellant or from David Herron any cogent or convincing explanation as to how they said the same day purchases would or could have occurred, involving the same vehicle registration number and the same fuel card number. It would be idle and futile for the Tribunal to speculate as to how these various same day purchases may have been procured. Use might have been made of the pod albeit with it only partly filled; alternatively, use might have been made of the five gallon drums which David Herron clearly held and had previously made use of, and which he had referred to during the course of his interview after caution. It was David Herron who after caution, when asked how he would get the fuel from the pod into the vehicles, had told the Respondent’s officers that he would ‘normally use a hose you know five gallon drums and run it into them as I need you know’. Alternatively, either David Herron or one or more of the drivers acting under his control might well have employed some other means or mechanism not disclosed to the Tribunal. However, since the Tribunal had concluded that neither we nor the Respondent’s officers had been told the full truth of the matter, were fully satisfied on the facts that the method of assessment carried out in this instance by the Respondent’s officers was neither inappropriate nor unreasonable, and indeed having regard to the facts and circumstances as they were known to and/or disclosed to them at the time of the assessment exercise, this was an assessment was made to best judgment.

42. We decline to afford any significant weight to the additional evidence which the Appellant sought to introduce before the Tribunal concerning the vehicle registration number NDZ 1811 and/or its alleged tank capacity of 1100 litres. This ‘evidence’ could easily have produced to the Respondents in response to the contents of the Notice of Seizure, at any time from as long ago as late November 2007 onwards. It was not produced at that stage, nor at the review stage, nor indeed at any time up to the morning of the hearing, when it was sought to be adduced before the Tribunal. We also attach very little weight to the ‘statements’ supplied to the Respondents by the Appellant’s solicitors, under cover of a letter dated 15 January 2009. The provision of these documents post-dated the issue and notification of the two assessments, but had certainly been provided to the Respondents in advance of the review having been undertaken. The letter dated 12 January 2009 on notepaper headed ‘Four Counties Oil Co. Ltd., however whilst purporting to come from a John Quigley, was clearly signed by one Mary Connolly. The letter purported to state that the practice of David Herron over ‘approximately five or six years’ would have been, on what was described as ‘numerous occasions’, to arrive with two lorries, fill both and hand us his fuel card, both fills going through as one transaction using one registration only. However, neither John Quigley nor Mary Connolly attended or gave evidence before the Tribunal; nor was the Tribunal afforded any explanation as to why they did not or could not attend; nor was the Tribunal informed as who these persons were, or purported to be, nor what, if any, authority they may have had to sign this document on behalf of Four Counties Oil Co. Ltd. In addition, the Tribunal was presented with three undated statements from what appeared to be drivers of the Appellant stating that on numerous occasions they would each have followed David Herron in a lorry and filled up with diesel. Similarly, none of these persons appeared or gave evidence before the Tribunal, nor was it ascertained in respect of what period or periods these statements extended or purported to extend. All of this material we consider to be of very little if any real probative value. In addition, we know of no reason as to why it could not have been placed before the Respondent’s officers in advance of the making of the two assessments in question. We therefore uphold the first assessment in form EX601 in the sum of £1,823 under reference EXB519/08.

43. We turn then to the second assessment in form EX601 and in the sum of £13,024 under reference EXB511/08. The concerns we have already expressed about the serious failure on the part of the Appellant to ever produce the vast bulk of the detailed information, details and documentation sought by the Respondents equally apply here, as do the various observations, conclusions and reasons already set out at paragraphs 41 and 42 above. The focus of the attack made by the Appellant upon this assessment was the failure of the methodology behind it to address or take into account whether adequately or at all the contention advanced on behalf of the Appellant to the effect that a significant proportion of the fuel purchases appearing on the face of the relevant schedule were likely to have been purchased by multiple lorries filling up at the same time, and yet discharging payment by means of a single fuel card. It is certainly correct that right from the time of his interview after caution, David Herron was seeking to make out this assertion. He did claim that ‘normally the three lorries would be up you know at the border so the boys would run into the Four Counties in Dundalk and fill you know in the one hose before they go home you know’. David Herron sought in his evidence to assert that this would have been the normal pattern underlying and explaining all those fuel purchases in excess of 600 litres which had been made in the Republic of Ireland, and which had formed the subject matter of the second assessment. However, the Tribunal considers this extremely unlikely. From what we were told by David Herron of the business and the manner in which it operated, we find it extremely difficult to understand how the business and its work could ever realistically be organized in such a way as to permit or enable either two or alternatively three of the Appellant’s commercial vehicles to either travel together to Dundalk or alternatively to meet up there in order to purchase fuel together at the same time and on foot of the same fuel card. If all that the vehicles were ever in reality doing was to legitimately fill up their own respective standard running tanks before returning from the Republic of Ireland back into Northern Ireland, and if as we were told there was never a shortage of fuel cards available to the Appellant’s business, we fail to see or understand from the evidence adduced before us why it would ever have been considered either necessary or desirable for more than one vehicle to either travel down together to Dundalk, or alternatively meet there with another vehicle or vehicles so as to fill up their respective tanks at a filling station, before returning home. The suggestion that it could be feasible for a relatively small transport business such as that of the Appellant to be regularly conducted on a daily basis in such a manner we find wholly unconvincing, and not to be satisfactorily made out on the basis of the evidence adduced before us. The further suggestion that this alleged practice of traveling down and/or meeting up at a filling station or filling stations in the Republic was somehow necessary because of a need to prevent the fuel cards falling into the hands of a driver or drivers who might abuse them we similarly find unconvincing and not made out on the evidence. It is also we consider significant that in her evidence the Appellant was not prepared to accept David Herron’s assertion that the normal pattern and practice was for the various lorries to travel down together or to meet up together in the Republic prior to refueling. Her evidence was that this did not certainly happen all the time; when pressed the most that she was prepared to say that the lorries would have gone together more then half the time, or maybe she then said two thirds of the time.

44. Having heard and considered the evidence, the Tribunal is however prepared to accept that there may well on the balance of probabilities have been a relatively small number of occasions upon which two or more of the Appellant’s vehicles may have refueled together in the Republic at the same time thus producing a total fuel purchase in excess of 600 litres, with the transactions in question having been recorded together as if one transaction, and on foot of a single fuel card. Having heard evidence from the Appellant and David Herron as to how the business operated, we also consider that in respect of these relatively few occasions some adjustment in the amount of the second assessment is accordingly warranted, and this adjustment we assess at 25%. On that basis, we are therefore prepared to allow the appeal in respect of the second assessment in form EX601 and in the sum of £13,024, but only that is to the strictly limited extent that this assessment will be reduced by 25%, from £13,024 to £9,768.

45. The appeal in respect of the first assessment is therefore dismissed. The appeal in respect of the second assessment is allowed, but only to the extent of a downwards adjustment of 25% from £13,024 to £9,768.

46. In the circumstances, we also think it appropriate in the exercise of our discretion to make no order as to costs.

47. 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.

ALISTAIR F W DEVLIN

TRIBUNAL JUDGE

Release Date: 22 March 2011