[2011] UKFTT 495 (TC)
TC01342
Appeal number: TC/2011/08153
EXCISE
DUTIES – 8% red diesel in Ford Transit van – appellant denied taking and using
red diesel – existence of red diesel in tank accepted – reviewing officer did
not consider all matters which she should have – case referred for further
review.
FIRST-TIER TRIBUNAL
TAX
JULIAN
PORTEOUS Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
DAVID S PORTER (TRIBUNAL JUDGE)
ROLAND
PRESHO (MEMBER)
Sitting in public at King’s
Court, North Shields on 14 June 2011
The Appellant in person
Mr Josh Shields, of counsel,
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. Julian
Porteous (Mr Porteous) appeals the Commissioner’s (HMRC) review decision dated
20 September 2010 refusing to restore a Ford Transit Van, registration YR 05
DHE (the vehicle) on payment of £250. The vehicle was seized on 2 August 2010
and Mr Porteous says that he did not put red diesel in the vehicle. The
restoration fee had been reduced from £500 to £250 even though Mr David Allen
Robinson (Mr Robinson), the inspecting Officer, had said that Mr Porteous
appeared honest and genuine and he was concerned as to the condition of the
vehicle. Mrs Maria Finelli (Mrs Fenelli), the Reviewing Officer, had indicated in
the review letter that the restoration fee had been reduced because of Mr
Porteous’ financial situation. Mr Porteous’ financial position had never been
revealed. HMRC say that as there was red diesel in the vehicle it must have
been put there by Mr Porteous and the vehicle had been properly seized and
restored.
2. Mr Sheilds
appeared for HMRC and called Mr Robinson, who gave evidence under oath. He also
produced a bundle for the tribunal. Mr Porteous appeared in person and gave
evidence under oath.
3. The Law
·
Section 6 of the Hydrocarbon Oils Duties Act 1979 ( “HODA”)
provides for the levy of excise duty on hydrocarbon oil delivered for home use
and by virtue of section 11 a rebate of duty is allowed at the time of
delivery.
·
Under section 23 where such heavy oil is used in or taken into a
road vehicle in circumstances where that person knew or has reasonable cause to
believe that the excise duty under section 8 has not been paid his use of the
road fuel gas or, as the case may be, his taking it as fuel into the vehicle
shall attract a penalty under section 9 of the Finance Act 1994 (civil
penalties) and any goods in respect of which a person contravenes this section
shall liable to forfeiture.
·
Section 139(6) and Schedule 3 of the Customs and Excise
Management Act 1979 (CEMA)provides:
(1) Any thing liable to forfeiture under the customs and
excise Acts may be seized or detained by any officer or constable or any member
of Her Majesty’s armed forces or
coastguard.
·
Section 141 CEMA provides as follows-
(1)…where any thing
has become liable to forfeiture under the Customs and Excise Acts –
(a) any ship, aircraft,
vehicle…which has been used for the carriage handling ,deposit….of the thing so
liable for forfeiture…and
(b) ..any other thing mixed,
packed or found with the thing so liable shall also be liable to forfeiture.
- Section 152(b) CEMA 1979 provides that the Commissioners may
as they see fit , restore, subject to such conditions (if any) as they
think proper, any thing forfeited or seized.
3. We were
also referred to the case of Anthony Barbagello v The Commissioners of
Customs and Excise [2004] UKVAT (excise) E00833 by Mrs Fenelli in her
review letter. In that case:-
“Mrs Neenan, the counsel in
that case, pointed out that if the penalty for taking in and using rebate fuel
had been imposed under section 9 of the Finance Act 1994 it would have been
open to Mr Barbagello to satisfy the Tribunal that there was a reasonable
excuse for his conduct and so avoid the penalty (section 10 Finance Act 1994). Judge
Walters noted that section 10 is in similar terms to the provisions for the
mitigation of penalties under the VAT regime in section 70 Value Added Tax Act
1994, the predecessor provisions of which were considered by the Court of
Appeal in Customs and Excise Commissioners v Steptoe [1992] STC 757 in
which Lord Donaldson held that where the insufficiency of funds arose through
no fault on the part of Mr Steptoe he had a reasonable excuse for the same.
Applying that approach to Mr Barbagello’s circumstances Judge Walters
considered that Mr Barbagello had a reasonable excuse for driving the vehicle
with rebated fuel in it as he had been unaware of its existence. As the
restoration fee was not dissimilar from a civil penalty under section of the
Finance Act 1994, it was considered in that case that Mr Barbagello would have
been able to show a reasonable excuse within section 10 of the Finance Act
1994, which would have avoided the penalty. Judge Walters decided that the
principle of proportionality required the restoration fee ought to be waived
altogether and decided that the review was therefore unreasonable”.
The Facts
4. Officer D
Ferguson checked Mr Porteous’ vehicle for rebated fuel on 2 August 2010 at a
check point in Redcar. The initial sample had not immediately changed colour to
pink or red which is indicative of the presence of red diesel, but after being
vigorously shaken for sometime the sample did change colour. It was confirmed,
at that point, that the fuel did not contain the usual ‘markers’ indicative of
red diesel. The officer thought that there might be kerosene in the fuel
because it had changed colour. The Officer then referred Mr Porteous to Mr
Robinson, who took a statement from Mr Porteous. Mr Porteous confirmed that he
had just fuelled up the vehicle at the Great Ayton Garage and produced a
receipt for £12.05. He had not put any red diesel or kerosene in the vehicle and
he alleged that it must have been put in by the Great Ayrton Garage. He had
given Mr Robinson several receipts from other garages where he had previously
purchased fuel. Mr Robinson raised a penalty of £125 for taking in the fuel and
£125 for using a vehicle with rebated fuel in it, making a total penalty of
£250. Mr Robinson confirmed under oath that he had reduced the restoration fee,
which should have been £500, to £250 solely based on the condition of the
vehicle. He told us that the milometer was showing over 130,000 miles and that the
vehicle was in an average condition. He also said that HMRC was under pressure,
for logistical reasons, not to retain vehicles and that they were anxious to restore
them to their owners on payment of a restoration fee. Mr Robinson also told us
that HMRC did not have the facility to check all the service stations evidenced
by the receipts but that he had personally checked the Great Ayton Garage and
there had been no evidence of any contamination. He told us that the department.
Mr Porteous had had to borrow £250 from a friend and returned within the hour
to recover the vehicle as Mr Robinson was scheduled to go elsewhere. Mr
Porteous signed a restoration agreement when paying the £250 in which he stated
that he had read Notice 12 A. The form then states that he understood that
signing the agreement did not affect his rights to appeal against the seizure
or terms of restoration. Mr Porteous pointed out that the Restoration Agreement
did not contain a receipt for the £250 as the receipt space was left blank.
5. Mr
Robinson was asked by Mr Porteous, in cross-examination, whether he had said
that Mr Porteous appeared honest and genuine. Mr Robinson indicated that he
could not remember, but he did not deny it. Mr Porteous told us that he had
purchased the vehicle some 17 months before the incident. He had been diagnosed
with cancer in November 2009 and had attended at hospital for treatment for the
seven months up to 1 July 2010. Mr Porteous asserted that during that time he
had used the vehicle to visit his family in Gateshead and to attend hospital
for treatment for cancer. He had only been able to put a small amount of diesel
in the vehicle on each occasion as he did not have very much money being unable
to work due to his illness. He was still attending at the hospital in August
and for the following months. At the beginning of July he had agreed to adapt a
loft for a friend and he was starting work for the first time after his
illness. He had lent the vehicle to two friends, one a solicitor and the other
a psychiatric nurse. He was sure that they would not have put red diesel in
the vehicle as they had both only borrowed it for a very short period of time.
6. Mr
Porteous confirmed that Mr Robinson had given him Notice 1, a warning letter
and Notice 12A. He also confirmed that he had read Notice 12 A but had not
really understood that he needed to apply to the Magistrates’ Court with in one
month of the incident. He said that he had been told that the sample would be
checked and that it would take six weeks. As the sample had not readily changed
colour as expected, he thought that the forensic evidence might have been that
there was no red diesel in the sample and that the restoration fee would be repaid.
He therefore believed that he did not need to apply to the Magistrates Court
until after he had received a full report from the Commissioners. He confirmed
under cross-examination that he had written to the Commissioners the day after the
incident asking for the vehicle to be restored. He also confirmed that he had
been given a sample of the fuel, but an enquiry on the internet had indicated
that it would cost him a minimum of £200 to have the sample tested. As the
restoration fee had only been £250 it had not been worth his while to have his
sample tested. Mr Porteous said that he had used cooking oil in the vehicle
from a wholesale cash and carry called Costco sometime earlier but had not used
it again because it smelt like a chip shop. Mr Robinson produced the original
certificate for the testing, which had revealed 8% of red diesel and it
confirmed that there was no vegetable oil content. We are satisfied that the
vehicle had sufficient red diesel in it to be significant.
7. In her
review letter dated 20 September 2010, Mrs Minelli explained that the
Commissioner’s policy for the restoration of a vehicle was designed to provide
increasingly severe restoration terms for the first two detections, with a
strict non-restoration policy on a third detection.
· On
a first offence a charge of 100% of the revenue evaded and any storage and/or
removal costs or the value of the vehicle which ever is the lower.
· On
a second offence a charge of 200% of the revenue evaded and any storage and/or
removal costs or the value of the vehicle which ever is the lower.
· On
the third offence – seizure of the vehicle and non-restoration.
Mrs Minelli confirmed that she had examined all the
representations and material both before and after the decision. She had not
consider the legality of the seizure as Mr Porteous had had a chance to raise
that before the magistrates and as he had failed to do so the vehicle was
deemed forfeited. She was therefore only concerned with the restoration fees
and not a civil penalty. She had also considered the implications of the case
of Anthony Barbagello referred to above, and had decided that the
restoration fee was proportional. She stated in the letter, from the evidence
with which she had been provided, that Mr Porteous appeared honest and genuine
and that was one of the reasons why the restoration fee had been reduced. She
indicated in her letter that she had contacted Mr Robinson and that he had
confirmed that his decision to charge £250 was based on Mr Porteous’ ability to
pay and the condition of the vehicle. Mr Robinson stated at the Tribunal that
he had never asked about Mr Porteous’ ability to pay. It is unclear as to
where Mrs Minelli obtained that information. She had not, however, accepted
that Mr Porteous had supplied any explanation of how the rebated fuel found its
way into the vehicle and on that basis she upheld the original decision.
Submissions
8. Mr Shields
submitted that as Mr Porteous had not challenged the seizure in the
Magistrates’ Court, he could not now challenge the forfeiture. Mr Porteous had
acknowledged receipt of Notice 1, the warning letter, and Notice 12A when the
vehicle was seized. He had been offered restoration by the Commissioners and he
accepted that there was something in the sample sufficient for the vehicle to
be seized. He had failed to apply to the Magistrates’ Court to contest the
seizure. The only matter before the Tribunalwas whether Mrs Minelli’s had
acted reasonably when producing the review letter. It matters not that the
restoration fee was reduced as there was red diesel in the vehicle. There were
only four possible reasons for that:-
1.
The red diesel had been put in the vehicle by a third party. As the
vehicle had been in Mr Porteous’ sole possession for 17 months this was
unlikely.
2.
His two friends had fuelled the vehicle with red diesel. Mr Porteous
indicated that he did not believe that that had happened both because of the
sort of people they were and because they had only had the vehicle for a short
time.
3.
The red diesel had been obtained from a service station when Mr Porteous
last fuelled the vehicle. Mr Robinson had checked the tanks at the last station
used and they had been clear of any contamination
4.
Mr Porteous had put the red diesel in the vehicle. In the absence of any
other explanation this was the most likely circumstance.
9. It was not
reasonable to expect Mr Robinson to check all the receipts given to him by Mr
Porteous, He had, in any event, checked the last garage used by Mr Porteous.
Mrs Minelli had exercised her discretion reasonably. She had taken into account
everything she should have and had not left out any matter that she should not
have. In the circumstances the restoration fee should remain.
10. In summary Mr Porteous was
adamant that he had not put the red diesel in the vehicle. Due to his illness
he had only been able to put a little fuel into the vehicle at any one time. He
had not queried the legality of the seizure but was concerned at the way in
which the vehicle had been seized and returned to him. Mr Robinsion had said
that Mr Porteous appeared honest and genuine and that Mr Robinson had reduced
the restoration fee because of the condition of the vehicle. However, Mrs
Minelli, although referring to Mr Porteous’ honesty indicated that the
restoration fee had been reduced because of Mr Porteous’ financial position. He
had never discussed his financial position with anyone. He maintained that he
had been supplied with conflicting information. The Officers had at first
indicated that red diesel had been detected but later asserted that that was
not the case as the fuel did not contain the usual ‘markers’ indicative of red
diesel. It was only after the sample had been properly examined that the
existence of red diesel was confirmed Mr Porteous submitted. If, as was
suggested, he was honest and genuine and the reduction in the restoration fee
was because of the condition of his vehicle, but subsequently because of his
financial position, the process was far from satisfactory and the matter should
be reviewed again.
The decision
11. We have considered the law
and the facts and have decided that Mrs Minelli has not exercised her
discretion reasonably and that the case should be reviewed again by a different
officer. We agree that Mr Porteous received Notice 12A and that he could not
therefore contest the legality of the seizure. We would, however, reiterate yet
again, that the terms of Notice 12A are far from clear even to members of the
legal profession, never mind the general public. If HMRC (now the Border
Agency) are going to insist, as they are rightly able to do, that the failure
to attend at the Magistrates’ Court to defend a seizure will result in forfeiture,
then, at the very least, Notice 12A should clearly say so in layman’s terms. We
are concerned, however, that Mr Robinson appears to have been under considerable
pressure, due to the lack of staff, and dealt with the matter somewhat
perfunctorily. It is inconsistent to state that Mr Porteous appeared to be
honest and genuine and then to penalise him for different reasons than those
identified in the review letter. Mrs Minelli does not appear to have considered
whether Mr Porteous’ treatment for cancer had any bearing on the case. Further
there is no evidence as to Mr Porteous financial position and it could not
therefore from any part of her decision. She has addressed her mind to the
case of Anthony Barbagello v The Commissioners of Customs and Excise [2004]
UKVAT (excise) E00833 although Mr Shields has not addressed us on that issue.
It appears to us that her decision in that regards was correct. It is unclear from
the decision how long Mr Barbagello had had the vehicle but it would appear
that it was not for very long. The Tribunal was content to indicate that Mr
Barbagello was unaware that the red diesel was in his vehicle and that the Steptoe
defence was available to him. That was because Mr Barbagello was not
responsible for the red diesel being in his vehicle. Mr Porteous has had the
vehicle for over 17 months and apart from denying that he put the red diesel in
the vehicle, has not produced a cogent reason why the red diesel was in it.
Furthermore, in view of the fact that Mr Porteous could have raised a
‘reasonable excuse’ defence in the Magistrates Court, we are not satisfied that
section 10 of the Finance Act 1994 is relevant. Mr Porteous has also taken exception
to the omission of the restoration fee in the Restoration Agreement. We agree
with Mr Shields that this is not material in itself but HMRC should carry out
the procedures correctly. In the present circumstances it is evidence of the
haste and potential lack of care which surrounds this case. We do not have the
power to order the waiver of the restoration fee, but we allow the appeal and
direct (pursuant to Section 16 94) (b) Finance Act 1994) that HMRC conduct a
further review of the original decision taking into account our concerns with
regard to those matters which need to be considered.
12. 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.
TRIBUNAL JUDGE
RELEASE DATE: 25 July 2011
