United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E00451, [2003] UKVAT(Excise) E451

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Clinghan v Customs & Excise [2003] UKVAT(Excise) E00451 (17 July 2003)

Evasion of tax – Haulier – Conduct involving dishonesty – Rebated oil – Use in a road vehicle – Hydrocarbon Oil Duties Act 1979 s.12(2)

BELFAST TRIBUNAL CENTRE

JOHN CLINGAN Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: HIS HONOUR JOHN McKEE QC (Chairman)

MR G BURNISON OBE

Sitting in public in Belfast on 2 July 2003

The Appellant appeared in person

Mr Puzey of Counsel, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

At all relevant times the Appellant carried on business as a road haulier but, on his arrival at the Tribunal hearing, he produced an Order of the High Court to the effect that he was adjudged a bankrupt in May 2002 on the application of the Respondents.

In 1997 and 1998 the Appellant was engaged in working on construction sites in South Wales. Mr Michael Davies said, in the course of his evidence to this Tribunal, that he was on duty at a Police Road Check in the Coedcernew area of Newport on the 20th October 1998 when the police stopped a Volvo tipper lorry registered number E 400 XVS. He took a sample from the tank of that lorry which, on laboratory analysis, proved to contain traces of Quinizarin and Solvent Red 24. These elements are deliberately put in diesel oil to identify it as rebated fuel on which full excise duty has not been paid. The vehicle was seized by the police on the grounds that it had been reported stolen, though the police subsequently accepted that the Appellant had bought it in good faith.

Mr Davies further gave evidence that, on the 11^th November 1998, he attended at a yard at the rear of South Cornelly Service Station with another Customs Officer then named Miss C Nicklin, since married. He there took a sample of fuel from a Volvo tipper lorry, registered number D 581 MHS. Later he took another sample from another Volvo tipper lorry, registered number D 526 KKO parked in an adjacent yard. Both these samples were subjected to laboratory tests and both were found to contain traces of Quinizarin and Solvent Red 24. Mr Davies seized the two lorries from which he took samples on the 11^th November even though the road tests which he then applied were negative. He found each of the samples contained engine oil which he suspected had been added to disguise the fact that this was rebated diesel oil.

The copy laboratory certificates for the tests on all three lorries were before this Tribunal.

Miss Carole Hickson, nee Nicklin, gave evidence confirming Mr Davies' evidence of his visit and sampling on the 11^th November. She also took a sample on that occasion which was from a storage tank in the site. This also was submitted to laboratory tests which disclosed the presence of Quinizarin and Solvent Red 24. She added that she was involved in the calculation of the duty alleged to be owed by the Appellant on the basis of invoices for the period from March 1998 to September 1998 which invoices were secured by Customs Officers from suppliers. She confirmed that the total amount calculated on this basis came to £23,274.72.

This Tribunal was furnished with 76 pages of verbatim interview notes compiled from tapes on which the interviews were recorded at the time. Miss Hickson was able to confirm the accuracy of the notes taken at the first taped interview which she attended. This interview was conducted in two stages and Miss Hickson was present throughout both stages. At an early stage in this first interview conducted at Swansea on the 17^th November 1998 between 12.05 and 13.13 the Appellant acknowledged that he was the owner of each of the three lorries identified. A second interview was held on the 25^th March 1999. The Appellant accepted the verbatim notes of that interview as correct. Again the Appellant agreed that he was the owner of each of thee three lorries. These admissions proved to be of importance because, in an undated letter written on behalf of the Appellant (who claimed that he could neither read nor write) after the 26^th October 1999 it was suggested that one of the lorries was sold to "Lavery Plant". An invoice dated the 1^st October 1997 was produced by the Appellant in the course of this hearing purporting to evidence this sale though the lorry in question is not identified by its registered number or in any other conclusive way. With this invoice from "J C Contracts", being the Appellant's firm, was a second invoice submitted apparently to indicate the work which "Lavery Plant" had undertaken with this lorry. Again no lorry is identified in this invoice. In the course of this hearing the Appellant again asserted, because he did not give evidence, that he was not the owner of the Volvo tipper lorry registered number D581 MHS as not belonging to him.

On the 11^th November while Mr Davies was engaged in the sampling procedure his evidence was that the Appellant arrived at the yard of the South Cornelly Service Station and disputed Mr Davies power to seize the lorry D581 MHS. Mr Davies referred the Tribunal to a letter dated the 26^th October 1999 in which it was recorded that:-

"On 18^th November 1998 vehicle registered number D581 MHS was delivered up to you on payment of £5,000."

Mr Davies confirmed that this money was paid by the Appellant and that this lorry was thereupon delivered to the Appellant because the Respondents appreciated that, by seizing the two lorries, they had, in effect, put the Appellant out of business. The Respondents had, however, retained the other lorry registered number D526 KKO. This lorry was stored and necessarily attracted storage charges at the rate of £12 per day. As far as Mr Davies knew the charges eventually exceeded the value of the lorry and it could not be set against the computation of the duty outstanding.

In the course of the second interview held at Belfast Customs House on 25^th March 1999 the Appellant again confirmed that he was the owner of each of the three lorries under investigation and, indeed, other additional vehicles. He was asked by Customs Officer L Anthony:-

"It doesn't seem practical to put this oil in your diesel. Where I'm trying to come from, isn't it the fact that you've put the waste oil in there to disguise the red that was in there?"

To which the Appellant replied "I well, I suppose that's the case."

Later in the same interview the Appellant agreed that he operated and bought diesel under the name "J C Contracts" and had accounts in that name with Owen Fuels and with Holwells Oils. The Appellant claimed to be unable to produce any invoices or records because these had been destroyed in a fire on the 6^th August 1998. The basis of the calculation of duty owed was put to the Appellant and he accepted that he had "misused" 56,670 litres. Invoices collected by Customs Officers from Owen and from Howells were shown to him and he accepted them as accurate. From these invoices it was calculated that the sum of £23,274 duty was owed by the Appellant from which £5,000 was to be deducted as having been paid already. This left a balance of £18,274 outstanding.

On behalf of the Respondents Mr Puzey directed the attention of this Tribunal to the provisions of the Hydrocarbon Oils Duty Act 1979, Section 1 for the definition of "heavy oil", which includes red diesel, and section 12(2) for the circumstances surrounding the prohibition of the use of heavy oil in a road vehicle. Section 13(6) of the Act provides authority for the forfeiture of oil and section 141 of the Customs and Excise Management Act 1979 was the authority on which he relied to ground the forfeiture of the lorries.

The Chairman raised the question for the Appellant to consider as to why he thought it appropriate to pay £5,000 to recover the lorry registered number D581 MHS, that being the lorry which he claimed in the hearing did not belong to him. The Appellant offered no answer to this question.

The Appellant did not give evidence though all his representations were given careful attention by the Tribunal. The Tribunal unanimously found that the Appellant did in fact own each of the three lorries seized by the Respondents but that, the Appellant having paid £5,000 in or about the month of November 1998, the sum of £18,274.00 represented the correct assessment of duty due to the Respondents on the detection of the Appellant's illegal use of heavy oil as detected by the Respondent's Officers. The Appeal is allowed to this extent only.

The Tribunal makes no Order as to costs.

HIS HONOUR JOHN McKEE QC

CHAIRMAN

RELEASED:

LON/00/8010