United Kingdom VAT & Duties Tribunals (Excise) Decisions

E00881

HYDROCARBON OILS — taxi using kerosene — initial failure by Appellant to produce invoices and accounts — alleged only bought kerosene once — circumstances of purchase and invoices not credible — partial allowance for invoices produced — assessed to £4,634.50 s 13(1A) Hydrocarbon Oils Act 1979 — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

MOHAMMED SHAFIQ Appellant

- and -

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David S Porter (Chairman)

Rayna Dean FCA

Sitting in public in Manchester on 14 March 2005

Nigel Gibbon, solicitor, for the Appellant

Jonathan Cannan, of counsel, of the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1. Mohammed Shafiq (the Appellant) appeals against an assessment contained in a letter of 30 April 2004 in the sum of £6,467.88. This represented the rebate of duty arising on his use of kerosene for the period 01 May 2001 to 19 February 2004. The assessment was reduced to £4,634.79 after the Appellant produced invoices for the purchase of diesel. The Appellant accepts that he was using kerosene purchased the previous day on the 19 February 2004 when his taxi was stopped and seized by Customs and Excise but he does not accept that he has purchased it on any other occasion. Her Majesty's Revenue and Customs ("HMRC"), the Respondents, have assessed him for the whole period in which he has been operating his taxi apart from those periods where he can produce evidence of his purchase of diesel.
2. Mr Cannan appeared for the Respondents and produced a bundle of documents. Mr Gibbon appeared for the Appellant and called the Appellant and Jaffar Ali to give evidence
3. We found the following facts. In his witness statement, which was not agreed by the Respondents, the Appellant states that he dropped off a customer at Hornby Street Bury the day before he was stopped by Customs and Excise. He noticed a girl and two boys sitting in a car. One of the boys came over to him and asked if he wanted to buy some fuel. He was told the fuel was "all right" and he paid 60 pence per litre for about 10 to 15 litres. Under cross-examination he changed his story when it was suggested to him that 10 to 15 litres would only have saved him £1.92 pence in total per litre. He could not remember whether he had dropped off a customer or he was leaving form home to go to work. We are not persuaded as to the circumstances surrounding the alleged purchase of the kerosene. We find it hardly credible that he would risk damaging his vehicle by using a fuel from such an unreliable source. We are not satisfied that the Appellant has bought kerosene only on this one occasion.
4. On the 19 February 2004 the day following the purchase of the kerosene officers from Customs and Excise tested a sample of fuel from the Taxi's fuel tank, which showed positive traces of kerosene. The vehicle was seized but returned to the Appellant on the payment of £720. The Appellant refused to attend an interview.
5. The Respondents wrote to the Appellant asking for copies of his documents and fuel receipts for the period 12 March 2001 to 19 February 2004. In a letter dated 22 March 2002 addressed to the Respondents the Appellant stated that he did not keep fuel receipts and, as the Taxi was serviced by a private mechanic, he had no service records. The Respondents were able to calculate the mileage that he had undertaken by using the records from the Licensing and Enforcement Office at Bury Town Hall. This revealed that 22127 miles had been travelled between 20.05.03 to 19.02.04 a period of 276 days. This equated to 80.1 miles per day. There are 1044 days from 12 April 2001 to 19 February 2004, which means that 83,624.4 miles were travelled during the period, which would require 12,671.88 litres of diesel. The rebated oil rate was 48.69 pence per litre, which produces an assessment of £6,169.93. Philip Rayner of Portcullis VAT Consultancy was instructed to act for the Appellant who at Mr Rayner's insistence was able to produced 128 sample receipts for fuel ostensibly supplied to the Appellant. As a result the Respondents accepted those receipts at their face value, deducted that value and reduced the assessment to £4,634.79. Both parties agreed that there was an arithmetical error in the figures, which would in fact have produced an assessment of £5,330.60. But the Respondents were content to leave the assessment as calculated.
6. The 128 fuel receipts were produced to the tribunal as evidence that the Appellant had used ordinary diesel most of the time. The Appellant confirmed that he operated during the day in the week and day and night at the weekends. He purchased much of his fuel at the Shell Bury Rock Garage Rochdale Road, Bury and the times of his purchases were spread evenly during the weekdays. Mr Ali, who works there as a cashier at the above petrol station, gave evidence at the tribunal and confirmed that he recalled serving the Appellant from time to time, mostly when he was working the evening shift from 3.0pm until 11.00 pm. Mr Ali was not very specific about the actual purchases of diesel by the Appellant, but we are satisfied that he did see the Appellant occasionally at the petrol station. We suspect, however, that it was not as frequently as the two or three times each week, during the afternoon or evening that he alleged.
7. Several of the receipts referred to the purchase of different types of chewing gum and Berkley Cigarettes. The Appellant, who does not smoke, alleged that he bought the cigarettes for his uncle, who is also a taxi driver.
8. We are not convinced that the receipts belong to the Appellant for several reasons.

•    The Appellant wrote to the Respondents saying that he did not keep receipts. He subsequently said in a telephone call that he had given receipts to his accountant. These were not forthcoming. In his evidence the Appellant said he did not provide receipts to his accountant, even after he had been specifically asked to do so. He failed to find any receipts in March 2004. After being told by his representative how important the receipts were, he managed to find 128 in August 2004.

•     The accounts to 30 November 2002 show £2,924 as the cost of fuel and oil. If the fuel cost 75 pence per litre then he would have purchased 3899 litres. On the Respondents calculation of 80.1 mile per day travelled and a consumption of 30 mpg he should have used 4904 litres. This is a discrepancy of 25%. Either the accounts are incorrect or the difference arises from fuel bought without paying any duty.

•    A careful examination of the receipts for the periods 8.0 pm to 6.0 am reveals 42 such receipts. For the period Friday Saturday and Sunday (a weekend) there are 26 purchases as against 16 during the week. The Appellant gave evidence that he did not work at night during the week. If that is the case it is inconsistent that 38% of these purchases are during the week, unless the receipts related to fuel purchased by another person.

•    This is further endorsed by the fact that the Appellant gave unsatisfactory explanations under cross-examination as to the different purchases of goods, that he had ostensibly made. Not least amongst these were the cigarettes he said he bought for his uncle. The Appellant admitted that he did not smoke and we are not satisfied as to the reason for purchasing cigarettes for his uncle, who, as a taxi driver himself, would buy fuel as frequently as the Appellant and would have ample time to purchase his own cigarettes. We do not believe the receipts belong to the Appellant.

9. Section 12 The Hydrocarbon Oils Act 1979 ( HODA) indicates that no oil on which a rebate has been allowed pursuant to section 11 of HODA shall be used as a fuel for a road vehicle or taken into a road vehicle as fuel, unless an amount equal to the rebate has first been paid to the Respondents:

Section 27 defines a road vehicle as " a vehicle constructed or adapted for use on the roads….

Section 13(1) (A) provides, " where oil is used ….in contravention of section 12(2) the Respondents may:-

(a) assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excise duty due from any person who uses the oil or is liable for the oil to be taken into the road vehicle."

10. Mr Cannan submitted that the tribunal had wide powers with respect to the assessment. They could reduce, agree, or increase the amount as they thought appropriate. The burden of proof rests with the Appellant to show that he had only purchased the kerosene on the one occasion. The Appellant had refused initially to produce any documentation. It was only when his advisers insisted that he should do so that he produced the receipts and his accounts. Mr Harris, the assessing officer, had accepted the receipts at their face value and has allowed a reduction in the assessment accordingly. The receipts were, however, hardly credible. The Appellant had not been able to explain why some of the receipts had other purchases, cigarettes and different brands of chewing gum. The purchase of the goods appeared to be random. His explanation of the purchase of the kerosene was inherently improbable.
11. It has been established that the Appellant's account of his activities is inconsistent and he admits using kerosene on one occasion. He has not satisfied the tribunal on a balance of probabilities that he had not purchased kerosene on other occasions. Mr Harris had made a reasonable allowance for the receipts and his assessment is otherwise correct and should be upheld.
12. Mr Gibbon submitted that although the burden of proof was on the Appellant to show, on a balance of probabilities that he had not been using kerosene on a regular basis, the burden was on the Respondents to prove the occasions when he had been using it. Section 13(1) (A) states that the Respondents "may assess". It was inherent in that section that they must act reasonably. They had not produced any evidence at all of any other occasion on which the Appellant had used kerosene. Under cross-examination the Appellant had not been able to give complete explanations. It was perhaps improbable that he would be stopped the day after he had first bought kerosene. However, coincidences do happen.
13. Mr Ali confirmed that when he was working as a cashier at the Shell Petrol Station he remembered the Appellant being served during the afternoon and early evening when Mr Ali was working as a cashier at the Shell petrol station. The receipts show purchases in the late afternoon and early evening, which are consistent with Mr Ali's evidence.
14. The Appellant had been to Pakistan immediately after the taxi had been seized and he had failed to pay much attention to the request from the Respondents for the receipts. It was only on his return that he appreciated the importance of the requests and he made a concerted effort to produce the receipts.
15. The Appellant has admitted to being ashamed at his dishonesty in purchasing the kerosene in the way that he did, but that dishonesty is not enough to conclude that he has lied to the Respondents and the tribunal as to his use of ordinary diesel. the Respondents have only circumstantial evidence to suggest that he was using rebated oil all the time and that is not acceptable. Unless the tribunal considers that the Appellant has lied they should find against the Respondents and allow the appeal.
16. My colleague and I have considered the evidence and dismiss the appeal. We are satisfied that the Respondents have acted reasonably in assessing the Appellant in the sum of £4,634.50. There are too many discrepancies of time and type of goods purchased in the receipts for them to belong to the Appellant. A significant proportion of the receipts represent purchases in weekday evenings when the Appellant stated that he did not work. It is not credible that he would buy cigarettes for his uncle, who is also a taxi driver and would have adequate time to buy his own. The Appellant could not explain the assorted purchases of other goods appearing on numerous of the fuel receipts. The accounts reveal a substantial discrepancy in the purchase of fuel. We suspect that the accountant never saw any receipts and merely relied on the statement as to the expenditure produced by the Appellant. That in turn bears no relation to his actual expenditure.
17. We are satisfied that the Appellant must have bought kerosene on previous occasions under circumstances when there was little risk of detection and damage to his engine. We are unable to say how frequently that occurred. He certainly did not buy it as described in his witness statement and to the tribunal. We believe that Mr Ali remembers the Appellant purchasing diesel from the Shell garage but we are satisfied that it was unlikely to be as frequently as he alleges. We do not believe that the receipts identify diesel purchased by the Appellant but as the Respondents are minded to allow that the receipts are his, and as we believe that the reduction is generous, we find that the assessment of £4,634.50 is reasonable in all the circumstances and we confirm it accordingly.
18. The Respondents have not asked for any costs and we award none.

DAVID S PORTER

CHAIRMAN
Release Date: 11 May 2005

MAN/04/8106