United Kingdom VAT & Duties Tribunals (Excise) Decisions

Solvent Resource Management Ltd v Customs and Excise [2002] UKVAT(Excise) E00371 (20 November 2002)

E00371

EXCISE DUTY — liquid made from waste solvents and containing hydrocarbon oil — used for firing cement kilns — whether oil used as heating fuel — Hydrocarbon Oil Duties Act 1979, ss. 6(1) , 9(1), (2) — appeal dismissed.

MANCHESTER TRIBUNAL CENTRE SOLVENT RESOURCE MANAGEMENT LTD Appellant - and - THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents Tribunal: Mr David Demack (Chairman) Mr G Pratt Mr C B H Gill

Sitting in public in Manchester on the 9^th & 10^th October 2002

Mr J F Doyle director for the Appellant

Mr Rupert Anderson of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2002

DECISION
1. In 1997, Solrec Ltd ("Solrec") appealed against a decision of the Commissioners of Customs and Excise that the hydrocarbon content of the company's product Cemfuel was liable to excise duty under s. 6 of the Hydrocarbon Oil Duties Act 1979. The tribunal, Mr Simpson, dismissed its appeal (1997) Decision No.E00058 for he found that Cemfuel, a substitute liquid fuel produced from waste solvents, was used as a heating fuel in the process of making cement, and that fact disqualified it from duty relief (see s. 9(2)(b) of the 1979 Act).
2. Solrec was taken over by the Heidelberger Zement Group in 2000 and was merged with another group company, CMR Ltd, to form the appellant company, Solvent Resource Management Ltd ("SRM"). SRM continues to produce Cemfuel, but to a slightly different specification from that considered by Mr Simpson, but it nevertheless continues to be used as a heating fuel by Castle Cement. It also continues to qualify as a light oil by virtue of its passing the test contained in s. 1(3)(b) of the 1979 Act, namely that it "gives off an inflammable vapour at a temperature of less than 23°C when tested in the manner prescribed by the Acts relating to petroleum".
3. Mr Doyle, in presenting the case for SRM, maintained that, although a hydrocarbon oil, Cemfuel did not qualify as a light oil as the basic product did not pass the s. 1(3)(b) test, but admitted that it did so when methanol was added to it. However, as he accepted that methanol was an essential ingredient of the product, being required to liquidise it for transportation, we indicated that we could only conclude that the complete product was a light oil. He then most reluctantly accepted the logic of our decision.
4. The principal method of disposal of Cemfuel is to a cement works or lime kiln as heating fuel; to a lesser extent it is burned as waste in incinerators. But the disposal to cement works is the more expensive process for SRM has to pay the receiving cement works for taking it. Yet Cemfuel has a number of environmental advantages over coal as a fuel. Its use reduces the consumption of fossil fuels, and the waste from which it is produced is consumed instead of being consigned to landfill or incinerated as a means only of disposal.
5. SRM's main customer for Cemfuel is Castle Cement Ltd, another company in the Heidelberger Zement Group. In 2000 the Environment Agency issued variations in respect of the Works Integrated Pollution Control authorisations issued under the Environmental Protection Act 1990 purporting to apply the Hazardous Waste Incineration Directive given by the Secretary of State to each of Castle's works. The Agency only had power to issue those variations if Cemfuel was waste. In 2001 Castle brought judicial review proceedings to determine whether the burning of Cemfuel in the cement kilns was part, in fact the end, of the recovery process so that it remained waste until it was burnt. The High Court held that it did remain waste.
6. Mr Doyle made two points on the Castle Cement judgment, which is unreported. First, he sought to persuade us that, in the first paragraph of his judgment, the learned judge Stanley Burnton J had indicated that the burning of Cemfuel was the burning of hazardous waste, and not burning as a fuel.

What the learned judge said was this:

"This application raises the issue whether the burning of Cemfuel as a fuel in the Ribblesdale and Keltron Cement Works operated by the Applicant (Castle) amounts to the burning of "hazardous waste", as the Environment Agency has concluded, or to the burning of a non-waste fuel, as Castle contends."

7. We are unable to interpret that paragraph as Mr Doyle would have us do. Burning Cemfuel as waste did not prevent its also being burned as fuel.
8. The other paragraph of the judgment to which Mr Doyle drew our attention was para. 49. So far as relevant it reads:

"49. I also reject Castle's submissions that:

…

Neither the supplier, SRM, nor Castle, have any intention of "discarding" Cemfuel. Both intend that it be used by Castle as a fuel."

9. As we understood him, Mr Doyle read that extract as indicating that the learned judge rejected the claim that SRM intended to use Cemfuel as a fuel. Read correctly, it merely gives the reason the learned judge found that neither SRM nor Castle had any intention of discarding Cemfuel.
10. Having rejected Mr Doyle's submissions, it follows that we hold that Cemfuel is a light oil which, whilst consisting of hazardous waste, is a heating fuel. Consequently, it is liable to duty under the 1979 Act, and we must dismiss its appeal.
11. We find it unnecessary to give detailed reasons for our decision, for they are identical to those set out in Mr Simpson's 1997 decision.
12. At the outset, the Commissioners claimed that SRM was liable to duty on all Cemfuel. Earlier this year they modified their position, and now accept that it is liable to duty only on its hydrocarbon content. To that very limited extent, it could be said that the appeal has been successful.
13. We have great sympathy for SRM for its seems to us, as Mr Doyle explained, that it is being penalised for dealing with hazardous waste in both an environmentally friendly way and one which conserves fossil fuels.
DAVID DEMACK CHAIRMAN RELEASE DATE: 20 November 2002

MAN/01/8093