United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2004/E00833.html
Cite as: [2004] UKVAT(Excise) E833, [2004] UKVAT(Excise) E00833

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Barbagello v Customs and Excise [2004] UKVAT(Excise) E00833 (08 December 2004)

E00833

EXCISE DUTIES – Rebated heavy oil – vehicle found on testing to have traces of "red diesel" in its tank – vehicle forfeited pursuant to s.141(1) CEMA by reference to s.13(6) HODA – Restoration fee of £500 (reduced to £250 on review) demanded under s.152(b) CEMA – Appeal against the restoration fee under s.16 FA 1994 – Forfeiture and restoration an alternative procedure to charging a civil penalty under s.9 FA 1994 by virtue of s.13(1) HODA – a "reasonable excuse" defence available to a s.9 FA 1994 penalty under s.10 FA 1994 – Customs and Excise Commissioners v Steptoe [1992] STC 757 considered – Held on the facts the Appellant would have had a reasonable excuse within s.10 FA 1994 if a penalty had been charged under s.9 FA 1994 – In such circumstances it was disproportionate and unreasonable to make a restoration fee under s.152(b) CEMA – Appeal allowed – Further review directed

LONDON TRIBUNAL CENTRE

ANTHONY BARBAGELLO Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: JOHN WALTERS, Q.C. (Chairman)

ANGELA WEST, F.C.A.

Sitting in public in Plymouth on 30 September 2004

The Appellant in person

Caroline Neenan, of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

DECISION

This is an appeal under section 16 of the Finance Act 1994 with respect to a decision on review of a decision to restore to the Appellant a seized vehicle registration number J260 PFJ on payment of a restoration fee of £500. The review decision (communicated by a letter to the Appellant dated 14^th June 2002) was to require payment of a restoration fee of £250, not £500.

The decision to restore the vehicle subject to the condition that a restoration fee is paid is a decision within s.152(b) Customs and Excise Management Act 1979 ("CEMA"), namely a decision to restore "any thing forfeited or seized under the" customs and excise Acts. The vehicle was liable to forfeiture pursuant to section 141(1) CEMA as being a vehicle which has been used for the carriage, handling, deposit or concealment of heavy oil taken into a road vehicle as mentioned in section 12(2) Hydrocarbon Oil Duties Act 1979 ("HODA") – see: section 13(6) HODA.

The procedure that has been employed by the Commissioners in this case is an alternative procedure to charging a civil penalty under section 9, Finance Act 1994. That procedure is provided by section 13(1) HODA which makes the use of heavy oil in contravention of section 12(2) HODA and liability for heavy oil being taken into a road vehicle in contravention of section 12(2) HODA (or, where a person's conduct includes both, each of them) liable to a penalty under section 9, Finance Act 1994. Section 9 relevantly provides for a penalty of £250.

The facts

In this case, officers of a Road Fuel Testing Unit of the Commissioners visited a building site at Redruth on 3^rd April 2002. A fuel sample was drawn from a red Astramax van registration number J260 PFJ and the sample appeared to be orange/pink in colour. The sample was tested and this indicated the presence of quinzarin, which is a marker indicating that the fuel was a rebated oil commonly called "red diesel". The Appellant, Anthony Barbagello, was the owner of the van.

The Appellant told an officer that he had never put "red diesel" in the vehicle and that it must have been put in by the person who sold the vehicle to him. The van was then blocked in on the site by a JCB digger on the instructions of the Appellant. The Police were called by the Customs officers. The van was seized from the Appellant and released upon payment of £500 by credit card. The amount of £500 was calculated by reference to two penalties of £250 each, one for using rebated fuel in a road vehicle, and the other for fuelling a vehicle with rebated fuel (compare section 13(1)(a) and 13(1)(b) HODA).

The Appellant gave the officers details of where he had bought the vehicle and the officers visited the premised indicated and tested all other diesel-fuelled vehicles found there. None of those vehicles contained "red diesel". The owner of the premises told the officers that the sale of the van had been a private transaction by his son. The owner's son would not co-operate with the officers.

The Appellant wrote to the Commissioners an undated letter which was received by them on 18^th April 2002. That letter was treated as a request to review the penalties imposed. In the letter the Appellant again stated that he had not put "red diesel" into the van and supplied copy documentation and details of fuel he had bought, together with details of mileage covered since he had become the keeper of the van, and also details of a fuel filter change that had been carried out.

The review decision referred to above was the result. The review officer (Mr. P.A. Devlin) accepted the Appellant's explanation that he had not filled the van with "red diesel" and remitted £250 of the restoration fee which was referable to his having taken heavy oil into a road vehicle in contravention of section 12(2) HODA. There remained a restoration fee of £250 which was referable to his having used heavy oil in contravention of section 12(2) HODA, by driving the van on the public road with "red diesel" in it. This fee was confirmed.

The review officer, Mr. Devlin, gave evidence before us. He said that the Commissioners' policy was to deal with the matter of the restoration fee on the same basis as the civil penalty under section 9, Finance Act 1994. Because he accepted the Appellant's explanation that he had not introduced "red diesel" into the vehicle, he reduced the restoration fee from £500 to £250. However he maintained that the resultant fee of £250 was appropriate to recognise that the Appellant had driven the vehicle with "red diesel" in it on the public roads. He was not sure that the Appellant had had no idea that there was "red diesel" in the car before it was tested, because he maintained that on the change of the fuel filter shortly after the Appellant bought the vehicle, the "red diesel" would have been noticed.

The Appellant disputed this observation and maintained that a mechanic changing the filter would not have noticed the colour of the diesel because it was pale (having been diluted by ordinary "white" diesel), and the conditions in which filters were changed were ordinarily so dirty that any slight colour variation would not have been noticeable. Mr. Devlin accepted that his view (maintaining that a fee of £250 should be maintained) would have been the same even if there had been no change of filter.

Submissions

The Appellant submitted that the resultant fee of £250 was disproportionate in relation to what he had done, namely driven a vehicle on the public roads when, unbeknown to him, it had a quantity of "red diesel" in the tank.

Miss Neenan submitted that the proportionality of the fee was indicated by Parliament's decision to impose a penalty of £250 under section 9, Finance Act 1994

She cited the Manchester VAT and Duties Tribunal's decision in Gail Shatwell (2004).

She pointed out that if the penalty had been imposed under section 9, Finance Act 1994 it would have been open to the Appellant to satisfy the Tribunal that there had been a reasonable excuse for his conduct and so avoid the penalty (see section 10 Finance Act 1994).

Decision

We noted that section 10 Finance Act 1994 is in similar terms to the provisions for the mitigation of penalties under the VAT regime in section 70, VAT Act 1994, whose predecessor provisions were considered by the Court of Appeal in Customs and Excise Commissioners v Steptoe [1992] STC 757. In that case the statutory concept of reasonable excuse was explained by Lord Donaldson of Lymington MR as follows:

"[I]f the exercise of reasonable foresight and of due diligence and a proper regard for the fact that the tax would become due on a particular date would not have avoided the insufficiency of funds which led to the default, then the taxpayer may well have a reasonable excuse for non-payment, but that excuse will be exhausted by the date on which such foresight, diligence and regard would have overcome the insufficiency of funds."

Applying that approach in the context of a reasonable excuse for driving on the public road with "red diesel" in the tank, it appears to us that an appellant would show a reasonable excuse if the exercise of reasonable foresight and due diligence and a proper regard for the fact that it is unlawful to drive with "red diesel" in the tank would not have avoided the conduct complained of, but the excuse would be exhausted by the date on which such foresight, diligence and regard would have alerted him to the fact that he was committing the conduct complained of.

On this basis we hold that the Appellant had a reasonable excuse for such driving as he did in the van with "red diesel" in the tank, as we find that he reasonably had no knowledge of the presence of "red diesel" in the van's tank before the testing by the officers.

As the restoration fee is charged by analogy to the position if a civil penalty under section 9 FA 1994 had been charged, and we consider that in that case the Appellant would have been able to show a reasonable excuse within section 10 FA 1994, which would have avoided the penalty, we decided that the principle of proportionality required that the restoration fee ought to be waived altogether. The review decision was therefore unreasonable.

We do not have the power to order the waiver of the restoration fee, however. We therefore allow the appeal and direct (pursuant to section 16(4)(b) FA 1994) that the Commissioners conduct a further review of the original decision taking into account our finding that the Appellant would have been able to show a reasonable excuse which would have avoided a penalty under section 9 FA 1994 if the Commissioners had charged him with such a penalty instead of applying their alternative procedure of requiring a restoration fee. We announced this decision at the conclusion of the appeal hearing

Costs

Miss Neenan was on instructions able to help the Tribunal by indicating that the Commissioners would regard a costs award in the Appellant's favour in the sum of £100 as reasonable. We therefore direct pursuant to rule 29(1)(a) of the VAT Tribunals Rules 1986 that the Commissioners pay the Appellant £100 on account of his costs within 28 days of the release date of this Decision.

JOHN WALTERS, Q.C.

CHAIRMAN

RELEASED: 8 December 2004

LON/02/8259