United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E713, [2004] UKVAT(Excise) E00713

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Harpur Industrial Estates Ltd v Customs and Excise [2004] UKVAT(Excise) E00713 (29 April 2004)

Restoration of Vehicle excise duty red diesel — hired vehicle reasonableness of decision not to restore to owner — appeal allowed

MANCHESTER TRIBUNAL CENTRE

HARPUR HILL INDUSTRIAL ESTATES LTD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Miss J Warburton (Chairman)

Mr J P M Denny (Member)

Sitting in public in Manchester on 1 April 2004

Mrs J Shatwell, director, for the Appellant

Mr C Middleton of counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

DECISION

This is an appeal by Harpur Hill Industrial Estates Ltd against a decision to refuse to restore a Seddon Atkinson Strato Artic lorry, registration number M278 VPT ("the vehicle"). The vehicle was seized on 28 August 2002 after it had been stopped on 25 August 2002 and rebated fuel gas oil ("red diesel") had been detected in the vehicle's fuel.

The Commissioners were represented by Mr C Middleton of counsel instructed by the Solicitor for the Customs and Excise. The Commissioners put in a bundle of copy documents. The Appellant was represented by Mrs J Shatwell, director, who put in a copy letter dated 4 June 2001.

The original confirmation by the Commissioners of refusal to restore the vehicle was in a letter dated 10 October 2002. A letter from the Appellant dated 11 November 2002 was treated as a request to review that decision. A review was not completed within the time laid down and by section 15(2) of the Finance Act 1994 the original decision was deemed to be confirmed. This appeal therefore was against the decision dated 10 October 2002.

We heard evidence on oath from Mrs J Shatwell and from Miss J Logan an officer of Customs and Excise. There was also an agreed witness statement from Mr P Hill, an officer of Customs and Excise. From the oral and written evidence, including the documents submitted, we find the facts to be as follows.

The Facts

The vehicle was purchased by the Appellant on 14 February 2002 from Ian R Goodwin for £2,500. On 1 March 2003 the vehicle was hired to Moss Rake Calcite Ltd ("Moss Rake") for 12 months at a rent of £1,000 a month. The hire contract was a pro forma one, not one specifically prepared for the Appellant's business. Clause 4(d) of the contract makes the hirer liable for the loss of the vehicle. The vehicle was used in Moss Rake's quarrying business.

The Appellants' main business is real estate management. The company had a small business in hiring out vehicles. In August 2002 it had 3 vehicles and they were all hired out to Moss Rake together with plant. Mrs Shatwell became a director of the Appellant in October 2002. Her stepdaughter Norma was also a director. Her stepdaughter Gail had been a director of both the Appellant and Moss Rake until 31 May 2002. Mr Julian Cartwright, Mrs Shatwell's son, had been a director of the Appellant until 31 May 1999 and a director of Moss Rake until 31 May 2001. Mr Graham Shatwell, Mrs Shatwell's husband, was secretary of the Appellant until 8 September 1998. Richard Salt, the partner of Gail Shatwell, was the operations manager of Moss Rake in 2002 and had been secretary of the Appellant from 1998 to 1999. In 2002 the Appellant and Moss Rake had office premises in the same building.

On 20 August 1999 a vehicle in the possession of Moss Rake and driven by Mr G Shatwell was seized because red diesel was detected. On 9 May 2001 two further vehicles in the possession of Moss Rake were seized because red diesel was detected. All three vehicles were restored on payment of penalties. One agreement in the return of the property seized on 9 May 2001 is addressed to the Appellant.

On 25 August 2002 three vehicles were stopped; the vehicle subject of this appeal, F558 STP belonging to Moss Rake and K1 GLS driven by Richard Salt. An assessment was issued on 25 September 2002 jointly to Moss Rake, Richard Salt and Gail Shatwell regarding duty evaded of £7196 and penalties imposed of £1,500. The Notice of Seizure had been sent to Richard Salt on 28 August 2002 but the Notice contained a direction to pass the form to the owner if the vehicle did not belong to the recipient.

The Evidence

Mrs Shatwell stated that although directors of the Appellant and Moss Rake were related and there was an informal relationship, these were two separate companies. Even if the documentation relating to the hire of the vehicle looked informal, it was a serious hire contract. She was not aware of the extent to which knowledge of the previous seizures passed between the two companies but it did cause family difficulties. When the vehicle was hired out in February 2002, Mrs Shatwell stated that there was a strong verbal agreement that seizure for use of red diesel was not to happen again.

Mrs Shatwell stated that Moss Rake was not sued for the value of the vehicle as it went into liquidation. The Appellant would have hired out the vehicle after advertising. The resale value of the vehicle was not low in a quarrying area. The Appellant had not received Notice of Seizure of the vehicle but was told verbally by Mr Salt.

Miss Logan is a review officer with H. M Customs and Excise. She stated that the policy of the Commissioners when a vehicle was found to be using red diesel was to restore with increasing penalties on the first and second occasions but to refuse restoration on the third occasion. The reason for this policy is to deter the illegal activity of using red diesel in commercial road vehicles. The original decision not to restore had been confirmed by Mr M Gallagher. She had not had time to carry out a review following the Appellant's request on 14 November 2002. Miss Logan also gave evidence of the factors that would have been taken into account in determining not to restore the vehicle. We have attached no weight to this evidence as the actual decision was made by Mr Gallagher.

The letter from Mr M Gallagher of 10 October 2002 is addressed to Moss Rake, not to the Appellants. It simply states – "I can also confirm that vehicles M278 VPT and K1 GLS will not be restored". No reasons are given for that decision. The original decision not to restore, and the imposition of penalties, was set out in a letter from Mr Gallagher to Moss Rake dated 25 September 2002. That letter refers to the third occasion Moss Rake had had vehicles seized and sets out Custom and Excise's view that the Appellants' are not innocent third parties.

The Law

Section 12(2) of the Hydrocarbon Oil Duties Act 1979 (HODA) provides that fuel oil on which rebate of duty has been allowed shall not be taken into a road vehicle. Section 13(1) of HODA imposes a penalty for breach of section 12(2) and section 13(1A) permits the Commissioners to make an assessment of an amount equal to the rebate on the fuel content.

By section 13(6) of HODA such fuel oil is liable to forfeiture. By section 139 of the Customs and Excise Management Act 1979, the Commissioners are empowered to seize and detain goods liable to forfeiture. Further, by the section 141(1) of the 1979 Act a vehicle used to carry goods liable to forfeiture is itself liable to forfeiture. Such powers, must however, be exercised with due regard to proportionality as they involve the deprivation of a person's property. In the case of a vehicle owned by a third party the degree of knowledge is important in relation to proportionality – see Customs and Excise Commissioners v Alzitrans SL [2003] EWHC 75 (Ch) para 41 et seq.

Section 152(b) of the 1979 Act allows the Commissioners as they think fit to restore any vehicle which has been seized. A review and appeal procedure from decisions of the Commissioners is set out in section 15 and 16 of the Finance Act 1994. A vehicle owner may appeal against a review decision of the Commissioners taken under section 15 to the Tribunal. The Tribunal's powers on appeal are, however, limited by Section 16(4) to directing that the Commissioners' decision shall cease to have effect, to directing that a further review to be carried out or, if the latter is no longer possible, declaring the decision to have been unreasonable. On appeal it is for the Tribunal to consider that the response is proportionate in any case – see Regina (Hoverspeed Limited) v Customs and Excise Commissioners [2002] 3 WLR 1219 at para 130(10) and 196. It is not for the Tribunal to consider whether the goods are properly forfeit – see Gora v Commissioners of Customs and Excise [2003] 3 WLR 160.

Submissions

The Appellant submitted that the vehicle belonged to the Appellant and should be restored. Moss Rake was a separate company which had been involved with use of red diesel. The Appellant had not received any Notices of Seizure or fuel samples. The vehicle had value to the Appellant.

Mr Middleton for the Commissioners submitted that all questions as to delivery of Notices and samples went to forfeiture which was not a matter for the Tribunal relying on the Gora case. He submitted that the decision not to restore was reasonable. There was very close connection between the Appellant and Moss Rake so that there was no genuine hire agreement. The Appellant must have known about the previous seizures and the reasons for those seizures. Mr Middleton further submitted that the Appellant had suffered very little financial loss from the seizure of the vehicle.

Reasons for decision

The Tribunal's jurisdiction under section 16(4) of the Finance Act 1994 is not one to try again the original decision to forfeit but to consider whether the decision on the review not to restore goods is one that the Commissioners could not reasonably have come to. The Tribunal has no jurisdiction to award compensation.

It is generally accepted that the test of reasonableness requires the Tribunal to ask:

Is this a decision which no reasonable panel of Commissioners could have come to?

Has some irrelevant matter been taken into account?

Has some matter which should have been taken unto account been ignored?

Has there been some error of law?

(see Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1980] STC 231; Associated Provincial House Ltd v Wednesbury Corporation [1948] 1KB 233)

The decision is contained in the letter dated 10 October 2002. The letter is not addressed to the Appellant but to Moss Rake. There are no reasons set out in that letter for confirming the refusal to restore the vehicle to the Appellant. The letter contains no evidence as to the factors as which were or were not considered by Mr Gallagher in reaching that decision. Nor is there any evidence that proportionality of refusal to restore the vehicle was considered. Accordingly we find that the decision contained in the letter of 10 October 2002 is not a reasonable one and allow the appeal.

Under the power in section 16(4) (b) of the Finance Act 1994 we direct that the Commissioners conduct a further review of the decision to refuse restoration of the vehicle and serve the same on the Appellant and the Tribunal within 45 days of the release of this Direction.

There is no direction as to costs.

MISS J WARBURTON

CHAIRMAN

MAN/03/8047