United Kingdom VAT & Duties Tribunals (Excise) Decisions

Penfro Peche Ltd v Revenue & Customs [2005] UKVAT(Excise) E00895 (13 July 2005)

E00895

EXCISE DUTY – Whether fuel imported in breach of Travellers Reliefs (Fuels and Lubricants) Order 1995 – Whether tanks in trailers standard tanks within Article 8a of Council Directive 92/81 EEC – Implementing Order considered – Tanks originally fitted by manufacturer subsequently altered – quantum of assessment also considered - Appeal dismissed

LONDON TRIBUNAL CENTRE

PENFRO PECHE LTD Appellant

and –

HER MAJESTY'S REVENUE AND CUSTOMS Respondents Tribunal: MISS J C GORT (Chairman) MR RAY BATTERSBY

Sitting in public in London on 7 and 8 March 2005

Miss Nicola Shaw of counsel, for the Appellant

Mr Nigel Poole of counsel, for the Respondents

© CROWN COPYRIGHT 2005 DECISION
1. This is an appeal against an assessment made pursuant to section 12 of the Finance Act 1994 in the sum of £37,474 in respect of unpaid duty on 72,680 litres of fuel imported on various occasions in breach of the Travellers Reliefs (Fuels and Lubricants) Order 1995 ("the Order").
2. The decision was upheld on review and was communicated to the Appellant by a letter dated 24 February 2003. The Appellant appealed the decision on review which was made under section 14(1)(b) of the Finance Act. The powers of the Tribunal are set out at section 16(5) of the Finance Act and include the power to quash or vary the decision and the power to substitute its own decision for any decision quashed on appeal.
3. The assessment relates to amounts of fuel imported from other Member States into the UK in the fuel tanks fixed to the trailers of two articulated lorries, registration numbers P3 CHE and P33 CHE. The issue for determination by the Tribunal is whether the fuel imported by the Appellant in the tanks of the trailers propelled by the tractors attracted relief from duty under the Order. There was no issue with regard to the fuel in the tanks of the tractors
4. There is a further issue as to the quantum of the assessment: the Appellant contends that in any event relief should be given for fuel in the tanks actually used to power the refrigeration systems as opposed to powering the engines on the tractor units.

The background

5. The Appellant is a haulier specialising in the transportation of fish which it has been doing since 1991. The fish is transported in the refrigerated trailers of articulated lorries. The articulated lorries consist of two-axle tractors which tow six-axle trailers. Lorry registration P3 CHE pulls trailer PP02 and P33 CHE pulls trailer PP01.
6. On 9 September 2001 the Commissioner stopped and examined vehicle P3 CHE and trailer PP02. They determined that the tractor and trailer did not comply with the statutory provisions and seized them pursuant to section 139 of Customs and Excise Management Act 1970 ("CEMA"). Following representations made on behalf of the Appellant, the tractor and trailer were both returned to the Appellant without charge or penalty.

The law

7. European Community law provides for such reliefs from excise duty on the importation of fuel into UK from other Member States: Article 8a of Council Directive 92/81/EEC provides:

"1. Mineral oils released for consumption in a Member State, contained in the standard tanks of commercial motor vehicles and intended to be used as fuel by those same vehicles as well as in special containers and intended to be used for the operation, during the course of transport, of the systems equipping those same containers shall not be subject to excise duty in any other Member State.

8. For the purposes of this Article –

"Standard tanks" shall mean –

- The tanks permanently fixed by the manufacturer to all motor vehicles of the same type as the vehicle in question and whose permanent fitting enables fuel to be used directly, both for the purpose of propulsion and, where appropriate the operation, during transport, of refrigeration systems and other systems.

…

- Tanks permanently fixed by the manufacturer to all containers of the same type as the container in question and whose permanent fitting enables fuel to be used directly for the operation, during transport, of the refrigeration systems and other systems with which special containers are equipped.

- "Special container" shall mean any container fitted with specially designed apparatus for refrigeration systems, oxygenation systems, thermal insulation systems or other systems."

9. The Directive has been implemented into the UK domestic law by the Order:

"2. Interpretation

In this Order:-

"Commercial vehicle" means any road vehicle that-

(a) by its type of construction and equipment, is designed for and capable of transporting goods, or more than nine persons, including the driver; …

"Standard tanks" has the meaning given in Article 8a of Council Directive 92/81/EEC.

3. Relief for fuel and lubricants contained in a commercial vehicle

(1) Subject to the provisions of this Order, a person who has travelled from another Member State shall on entering the United Kingdom be relieved from payment of excise duty on the fuel and lubricant contained in a commercial vehicle that he has with him.

(2) The reliefs afforded by this Order apply only to fuel that –

(a) is contained in the vehicle's standard tanks; and

(b) is being used or is intended for use by that vehicle.

(3) The reliefs afforded by this Order apply only to fuel on which –

(a) excise duty has been paid in the Member State in which the fuel was acquired at a rate that is appropriate to the use to which the fuel is being or is intended to be put; and

(b) the excise duty paid on that fuel has not been remitted, repaid or drawn back.

(4) The reliefs afforded by this Order apply only to fuel and lubricants that were taken into the vehicle within the European Union and are of a type and quantity necessary for the normal operation of the vehicle during its journey..

4. Conditions

(1) The reliefs afforded by this Order are subject to the following conditions; and if any condition is not complied with the fuel and the lubricants shall, unless that non-compliance was sanctioned by the Commissioners, be liable to forfeiture.

(2) The fuel and lubricants are used only in the vehicle and are not removed from the vehicle except –

(a) temporarily, to facilitate repair; or

(b) permanently, to be destroyed.

(3) Fuel and lubricants are used only for purposes appropriate to a rate and excise duty paid in the Member State in which the fuel was acquired.

(4) The excise duty paid on the fuel and lubricants is not remitted, repaid or drawn back.

10. The ADR International Carriage of Dangerous Goods by Road (United Nations 2002) Regulations "the ADR Regulations", by Annex A, Article 1.1.3.3 lay down as follows:

Exemptions related to the carriage of liquid fuels

The provisions laid down in ADR do not apply to the carriage of:

Fuel contained in the tanks of a vehicle performing a transport operation and destined for its propulsion or for the operation of any of its equipment.

The fuel may be carried in fixed fuel tanks, directly connected to the vehicle's engine and/or auxiliary equipment, which comply with the pertinent legal provisions, or may be carried in portable fuel containers …

The total capacity of the fixed tanks shall not exceed 1,500 litres per transport unit and the capacity of a tank fitted to a trailer shall not exceed 500 litres. …

11. The Hydrocarbon Oil Duties Act 1979 provides:

"12. Rebate not allowed on fuel for road vehicles

…

(3) For the purposes of this section and section 13 below –

(a) heavy oil shall be deemed to be used as fuel for a road vehicle if, but only if, it is used as fuel for the engine provided for propelling the vehicle or for an engine which draws fuel from the same supply as that engine; …

The evidence

12. Mr Juan Vincente Couceiro Millor, known as John Vincent, a director of the Appellant company, gave evidence on its behalf. Mr Douglas Thomas Abercrombie, a VAT officer from Dundee, gave evidence on behalf of the Commissioners, as did Mr Stephen John Hopkins, a specialist in fuels and oils and a senior policy adviser to the Commissioners. An agreed bundle of documents was provided.
13. We find the following facts. At the start of the business the Appellant hired lorries to do the transportation of the fish from Scotland through France to Spain and also transported fruit and various other items from Spain back to the UK. On the return journey the lorries would sometimes have to travel to the North of Scotland, sometimes they would go to Milford Haven or elsewhere in the United Kingdom. In 1997 the Appellant decided to buy its own vehicles and to this end Mr Vincent consulted Gray & Adams, manufacturers of trailers and Scania, tractor manufacturers. Mr Vincent was anxious to get the maximum benefit from the lower fuel prices in Spain, diesel being as much as 40p a litre cheaper there than in the UK, and also wished to benefit from the lower price in France where diesel was some 20p a litre cheaper than in the UK. Whilst many hauliers in the United Kingdom operated with five axles on the trailer unit, Mr Vincent preferred to have six axles in order to spread the load. The consequence of the Appellant wanting to have the extra axle on the trailer unit was that it reduced the amount of fuel he was able to carry in the trailer because the space normally available for the fuel was taken up by the extra axle.
14. Gray & Adams informed Mr Vincent that the largest tank that could be used on the trailer was 700 litres because the tractor unit was already carrying 780 litres between its two tanks and there was a 1,500 litre combined limit for the unit. Scania through its agent Reliable Vehicles Limited, said that they could modify the tractor unit so that there was a switch in the tractor engine which when thrown would enable the driver to use fuel from the tank in the trailer to power the tractor unit as well as to power the refrigeration system in the trailer. The fuel from the trailer could be conducted to the tractor via a solenoid through a suzi connection. A 'suzi' is the coiled cable which transmits various matters such as air, electric power etc. between the tractor and the trailer. A 'solenoid' is a small box which in this case was used to control the drawing of the fuel from either the tractor unit or the trailer to the engine. It was understood by the Appellant that it was possible to obtain a fuel solenoid and suzi cable. When the lorry arrived it did not function properly, and the Appellant was informed that this was because an air solenoid had been fitted rather than a fuel solenoid. In fact the Tribunal heard from Mr Hopkins that there is no such thing as a fuel solenoid: the suzi cables connected to the solenoids come in different colours so that it can easily be determined whether they are conducting air, water, or electric power, when a cable is used to conduct fuel it is usual to use a heavy duty black material, although this practice is considered dangerous and not approved by the Commissioners for reasons which are set out below.
15. The first tractor and trailer modified by the Appellant were tractor registration P3 CHE and trailer PP02. After some six weeks the Appellant discovered that the problem in obtaining fuel from the trailer unit to the tractor unit was not caused by the cable, but by the fact that the pipe siphoning the fuel from the trailer unit had been positioned flush with the bottom of the trailer tank, and therefore it was not possible to draw fuel through it. Once that pipe was changed and shortened, then it became possible to draw the fuel from the trailer tank into the tractor tank. This modification was not carried out by Reliable Vehicles Limited. The Appellant itself dismantled the air solenoid which had been fitted by them and put in the new solenoid and suzi cable which had come from David Brown. Gray & Adams who had discovered the problem with the length of the pipe, shortened it. The capacity of the tank fitted in trailer PPO2 was 700 litres.
16. The trailer PP01 which as coupled with the tractor P33 CHE was manufactured by Chereau and purchased from them. The tractor unit P33 CHE was the first tractor unit purchased by the Appellant in 1997 from Reliable Vehicle Ltd in Cardiff. It originally had a 550 litre tank, but in April 2000 the unit was replaced with a 780 litre tank. The trailer unit originally had a 190 litre tank. In or about September 1999 the tractor and trailer were involved in an accident in Spain. The tractor unit was not damaged but the trailer and its fuel tank were. The damage to the tank was not immediately realised, but once it was, in about August 2000, it was decided to replace the whole tank. The Chereau agents who had built the trailer originally had been bought out by another company that was no longer an agent for Chereau. In the circumstances the Appellant went to Malcolm E Taylor in Blackburn. It was decided to fit a tank which was double the size of the original one and also to fit it with connectors and cables so that the same system could be used to convey fuel from the trailer to the tractor unit as on P3 CHE and PP02. These modifications were carried out: Malcolm E. Taylor fitted the new tank and Reliable Vehicles Ltd fitted the tractor P33 CHE with a switch and cables from the solenoid to the engine in the same way as they had done for P3 CHE.
17. Both vehicles were regularly serviced on approximately a six-week basis. In the course of that service, which was carried by the mechanics at Reliable Vehicles Ltd, all the air lines between the trailer and the unit would be disconnected. It was not disputed by the Commissioner that the particular tractors were only ever used with their own trailers other than their own except on very specific and rare occasions such as when there had been a breakdown. There was no general intention to use the tractors with other trailers.
18. Vehicle P3 CHE and trailer PP02 were mainly used for the Scottish run, as they had a greater fuel-bearing capacity than vehicle P33 CHE and trailer PP01. The driver would fill up with fuel in Spain and would top up again in France on the return journey to the United Kingdom. The fuel from the trailer would only be used to power the tractor on the longer journeys in the United Kingdom to Scotland. The trailer used the equivalent of 325 miles per gallon to power the refrigeration unit. To power the tractor unit it used 8.55 miles per gallon. The fuel in the trailer would still be employed to power the refrigeration unit at the same time as the fuel was taken by a different pipe to the tractor to power the tractor unit. There was an average of 80,000 litres fuel used per vehicle for the total journey. When buying white diesel fuel in Spain there was a saving of £16,600 to the Appellant, when buying fuel in France there was a saving of £12,500 as compared with the United Kingdom. The two lorries between them made between 14 and 44 journeys per year. The tanks were designed in such a way as to ensure that the refrigeration unit could not run out of fuel. The Appellant at no time used red diesel, only white diesel. Neither vehicle had ever been challenged by either the French or the UK Customs authorities.
19. Vehicles P3 CHE and PP02 undertook 99 of the 121 trips to Scotland that took place between the purchase of that vehicle and trailer and its detention by Customs in September 2001. The journey to Lochinver in Scotland was said by Mr Vincent to involve use of the fuel from the trailer tank for approximately 97 miles only when in the United Kingdom. Thus it would have used 100 to 150 litres of fuel per journey, making a total of 17,650 litres for all the journeys. Vehicle P33 CHE and PP01 undertook 33 journeys in the United Kingdom during the period of assessment, of those 33 journeys, the trailer tank was either not full or not used on several occasions. Mr Vincent estimated that 405 litres of fuel from the trailer tank was used within the UK to fuel the tractor unit.
20. On 31 May 2001 Mr Stewart Massie, sales administrator of Gray & Adams Ltd, had written to a Mr Brian McCann of HM Customs and Excise, Glasgow, asking inter alia: "Can a refrigerated trailer be fitted with two fuel tanks with one fuel tank feeding the refrigeration unit and the other tank acting as a supplementary tank feeding the tractor unit?" and: "Is it permissible to have a single fuel tank on the trailer feeding both fridge unit and tractor unit?" Mr McCann replied to this letter in June stating in answer to the relevant questions as follows: "Two tanks can be fitted on the vehicle – one feeding the tractor unit and the other feeding the refrigeration unit" and "It is not permissible to have one tank feeding both refrigeration and tractor unit. This is because a refrigeration unit can be fed with rebated fuel."
21. Mr Abercrombie had been one of the officers who had inspected the vehicle P3 CHE and trailer PP02 on the 9 September 2001. He had become concerned when he spotted the auxiliary suzi line which was used to transfer the fuel from the trailer forward to the tractor unit. He detained the vehicles which were subsequently released to the Appellant. Part of Mr Abercrombie's concern had been that red diesel fuel might be being used, which was not in fact the case. Mr Abercrombie himself was not able to carry out later inspections on the vehicles, which were carried out by another officer. However he took a number of photographs which show the tractor, the trailer and the connecting cables to be in good order. Mr Abercrombie was an experienced officer and he considered it rare for fuel to be run via a suzi cable to the tractor unit, and since 1978 he had only detected about a dozen similar cases. He had spoken to Gray & Adams who make approximately 3,000 trailers per annum, and they informed him they had only built 70 systems in total similar to that operated by the Appellant. He was concerned that the system by which the suzi cables were connected were not safe as they could easily be pulled off. The cables and connectors were not designed to carry fuel because of the likelihood of leakage, and also the fact that if the vehicles were involved in an accident there could be a serious danger resulting from fuel spillage. The valves present on the Appellant's vehicles were not sufficient to prevent leakage.

The ADR Regulations are general provisions concerning dangerous substances, and are not directly enforceable in the United Kingdom, but together with the Directive give guidelines. The Commissioners directed their officers to challenge drivers where there was a capacity of over 500 litres on a trailer, but it was not the responsibility of the Commissioners to enforce the limits. There were very few officers with the relevant knowledge available for such work. The main concern of the ADR Regulations was health and safety, and manufacturers would be approached where a tank was oversized and the manufacturer would be asked to show that it was in fact standard. However the manufacturers informed the Commissioners that they would not fit tanks above the limit in the ADR Regulations, which was why it was used by the Commissioners as a test.

22. It was Mr Hopkin's opinion that fuel-sharing systems were outside the definition of standard tanks because, apart from the health and safety aspect, an advantage would be given to someone operating the system abroad which was not open to other United Kingdom hauliers.
23. Mr Hopkins was concerned about the system used by the Appellant because there was a spring valve system in operation which could be pulled off. Furthermore any dirt which got into the system would cause it to leak, and whilst the black cables were made of heavy duty polypropylene, they were hard wearing but were adversely affected by hydrocarbon oil which would turn the cable brittle, but this would not be detectable by eye. Mr Hopkins accepted that Mr Massie of Gray & Adams had been given the wrong advice by Mr McCann in his letter of 31 May 2001. It was only where there was a fixed tractor unit was it permissible for the fuel feeding the refrigeration unit also to be used to fuel the tractor.

The Respondents' case

24. Mr Poole's principle submissions were that (1) the tanks were not standard tanks because the diversion of fuel to the tractor unit took them outside the definition within Article 8a of the Directive and (2) the tanks were modified in such a way that they were not of a kind permanently fixed by the manufacturer to all containers of the same type, and thus were outside the definition in Article 8a.
25. The Commissioners pointed to a clear distinction in the Directive both in Article 8a(1) and (2) as between motor vehicles and special containers: fuel contained in standard tanks on, and for use by, commercial motor vehicles shall not be subject to duty; and fuel contained in tanks on, and for use by, a special container, shall not be subject to duty. There are separate definitions of standard tanks on motor vehicles and standard tanks on special containers.
26. To implement the Directive the Order introduces a definition of `commercial vehicle' in Article 2 which blurs the distinction in the Directive. Under the Order a tractor unit by itself could not be a commercial vehicle because it was not capable of transporting goods. The trailer unit by itself was equally not capable of transporting goods, it was therefore only by taking the tractor and the trailer together that goods could be transported therefore a `commercial vehicle' must be a combination of tractor and trailer. It was accepted that the Order did not accurately implement the Directive, and it was conceded that it was open to the Appellant to say that the Directive was of direct effect in the circumstances.
27. In the Order relief is afforded, subject to conditions, in respect of fuel contained in the standard tanks on a "commercial vehicle". It was submitted that the Directive made a distinction between on the one hand "commercial motor vehicles" or "motor vehicles" i.e. tractor units or single axle goods vehicles, and, on the other hand, "special containers", being particular trailer units. The Order did not make that distinction, but applied relief to fuel contained in the standard tanks of "commercial vehicles". For the purposes of this appeal the Commissioners conceded that the fuel in issue was contained in two "commercial vehicles" (each being a tractor and trailer together) for the purposes of the Order.
28. It was the Commissioners' case that the additional use in the second definition, i.e. that it was fitted to a special container, is material because it indicates that the additional use that the tank on the trailer has in the present case takes it outside the definition of standard tank. There is no reference in the second definition to the propulsion of the vehicle. In the present case the tanks in the vehicles in question were capable of propelling the vehicle; where the fuel in the tank was capable of propelling the vehicle, the definition in Article 8a required a permanent connection. It was submitted that the issue of the additional cables, suzi connections and solenoids was relevant, and was contained within the phrase "whose permanent fitting". In the present case the connection of the trailer to the tractor was not permanent, it was designed to be disconnected and therefore did not come within the Article. It was accepted by the Commissioners that the connection from the tank to the refrigerating unit itself was permanent.
29. Mr Poole further submitted that the definitions themselves included no reference to intent, and an objective approach was required. The fact that in the present case the set-up was such that the fuel could be decanted to another vehicle was a clear indication that the tanks were not standard. The purpose of the legislation was to prevent fuel in the trailer being used for another vehicle. In the present case the modifications of themselves took the tanks outside the definition; also the modifications were not done by the manufacturer to all containers of the same type. On P3 CHE the final modifications was done by the Appellant himself. On P33 CHE they were done by Mr Taylor.
30. It was submitted that "the manufacturer" meant the manufacturer of the container, not the tank. In any event the manufacturer of the tank did not in the present case fit the whole system. It was unquestionable that Mr Taylor did not manufacture the container, and there was no evidence what Chereau would have done to the trailer, but in any event they would not have worked on its connections to the tractor because they were only manufacturers of trailers.
31. The Order provides that "standard tanks" within the Order has the meaning given in Article 8a. The Article makes a clear distinction between tractor units ("motor vehicles") and trailers ("special containers"). Standard tanks in the tractor units are defined by the Directive by reference to their enabling fuel to be used directly "both for the purpose of propulsion and, where appropriate, for the operation, during transport of refrigeration systems …" By contrast standard tanks on trailers are defined by reference only to their enabling fuel to be used "directly for the operation, during transport, or for refrigeration systems and other systems with which special containers are equipped." The definition of standard tanks on trailers restricts the use of the fuel to the operation of systems with which the trailer is equipped. It does not encompass use of the fuel in the tank for propulsion.
32. Article 8a(1) clearly states that relief from excise duty should be given to oil in standard tanks in "special containers and intended to be used for the operation, during the course of transport, of the systems equipping those same containers". If the oil was in a tank in a special container intended to be used for the propulsion of the tractor unit engine, then it would not attract relief under the Directive. The definition of "standard tanks" should be read in this context. If fuel is to be diverted away from the container, and is not intended to be used for the operation of the refrigeration system on the container, then the tank is not a "standard tank".
33. The reasons why a tank on a trailer from which fuel could be diverted to propel the tractor unit should not be considered a "standard tank" are as follows:

(i) A modification to divert fuel from the trailer tank to the tractor engine is potentially dangerous. Upon the suzi cable being uncoupled there would be a potential for leakage of diesel;

(ii) the modification gave the Appellant a competitive advantage. A large tank on the trailer could be filled and then could be used to fuel the engine on the tractor; and

(iii) if rebated red diesel were contained within the trailer tank, it could be unlawfully diverted to the tractor engine without it being easily detected.

34. It was accepted that the tanks themselves on the trailers were permanently fixed or fitted. The Commissioners relied on the adaptation to divert the fuel to the tractor. For the purposes of this appeal the Commissioners conceded that the 380 litre tank fitted to trailer PP01 was, before modification, of a type which the manufacturer would have supplied. Similarly the 700 litre tank on trailer PP02, it was conceded, would normally be considered standard, however it was a breach of the ADR Regulation to have a tank on a trailer of over 500 litres and the Commissioners contended that a tank which exceeded the limit set by the ADR Regulations could not by definition be standard.
35. Mr Poole submitted that the definition of standard tank must be read in the context of Article 8a as a whole. If fuel in a tank on a special container used for the propulsion of the tractor unit (which under Article 8a is another, distinct vehicle) does not attract relief from duty under the Directive, then it would be odd if the same arrangement of tanks and cables could attract relief from duty under the Order. Consistency can only be achieved by interpreting the definition of a standard tank on a special container as excluding tanks which are modified to divert fuel away from the container and to the propulsion of the tractor unit. In the present case the tank is not such as is fixed to all containers of the same type as the container in question but is a modification peculiar to this container; and/or the permanent fitting of the tank does not enable fuel to be used directly for the operation of the refrigeration system and other systems; but enables fuel to be used both for the operation of the refrigeration system, and, when desired, the propulsion of what is, under the Directive, another vehicle, of the tractor unit.
36. It was the Commissioners' case that the whole of the fuel in the trailer tanks was subject to duty in circumstances where the tanks were not found to be standard.

The Appellant's case

37. On behalf of the Appellant it was submitted that the fuel imported by it into the UK in the trailers' tanks was contained in the "standard tanks" of the trailers and therefore qualified for relief from excise duty under the terms of the Order.
38. Under the Order and Article 8a of the Directive both tractors and trailers can have "standard tanks". The Article referred to the standard tanks of "commercial motor vehicles" and "special containers" and Article 2 of the Order referred to "commercial vehicles designed for transporting goods" (thus the "commercial vehicle" referred to in the Order must be the tractor and the trailer as those two component parts were necessary to satisfy the definition). In the present case the trailers were containers fitted with specially designed refrigerated systems and were thus "special containers".
39. The tank fitted to PP02 was permanently fitted by the trailer manufacturer, Gray & Adams. Given that the trailer was made to the specifications requested by the Appellant, it was submitted that the tank is of a type which would be fitted to other such trailers of that type. In relation to PP01, it was conceded by the Commissioners that the 380 litre tank fitted by Mr Taylor was, before modification, of a type which the manufacturer would have supplied.
40. It was the Appellant's case that the trailer tanks were permanently fitted. The fuel sharing system did not render the tanks anything other than permanent. The fitting of the fuel-sharing equipment was itself permanent, and the fact that the system was capable of being disconnected was irrelevant. It was the permanence of the tank fitting which was critical for the purposes of Article 8a not the permanence of the pipes facilitating the fuel sharing system.
41. The fuel sharing system did nothing to remove the trailer tanks from the definition of "standard tanks", the trailer tanks enabled the fuel to be used for the purposes of the refrigeration system. The fact that the fuel may also be used by the tractors' engines was neither here nor there; it still enabled fuel to be used for the purposes of the trailers' refrigeration system and that was sufficient. It was therefore submitted that the trailer tanks, like the tractor tanks, fell squarely within the definition of "standard tanks". There was nothing within the Directive or the Order which either expressly or impliedly prohibited the fuel sharing system established by the Appellant.
42. The question of fitting the fuel-sharing system was quite irrelevant to whether the tanks were standard tanks within the definition. The definition did not prohibit the additional use made by the Appellant by means of flicking a switch in the tractor unit. Article 8a(1) did not prohibit the use of fuel in the tractor unit. The requisite intention that the fuel should be used to power the refrigeration unit is satisfied in the present case. The permanent connection between the refrigeration unit and the fuel tank complied fully with Article 8a(1); the additional piping was part of the fuel-sharing system, not part of the tank. The modification was permitted by Article (a)(2) because it was put in by people treated by the Respondents as being manufacturers of the tanks. The fuel-sharing system provided an additional not an alternative function so the definition was always satisfied. Once the requirements of the definition were satisfied, it was not relevant if there were an additional facility or option. The Tribunal was invited to be flexible in looking at the tanks, and to accept that they met the required statutory definition. It was submitted that the connections between the tractor and the trailer were as a matter of fact permanent.
43. With regard to the ADR Regulations, it was submitted that as the combined total fuel bearing capacity of P3 CHE and PP02 was 1,480 litres, this was below the 1,500 litre maximum limit allowed by the EC Health and Safety Directive limits. The Appellant did not therefore accept that the 700 litre tank of PP02 exceeded the limit in the ADR Regulations. Furthermore, it was not accepted that if the tank exceeded that limit that made it no longer standard. The ADR Regulations were not relevant because they were concerned with something entirely different, their only impact of the ADR was that special safety rules applied.
44. With regard to the quantum of the assessment, if it were held that the fuel sharing system was prohibited, the Appellant relied on the fact that the trailer tanks were hardly ever used to fill the tractor engines within the UK. To the extent that the tanks were used to fuel the refrigeration system, there could be no complaint by the Commissioners. Fuel imported in the trailer tanks for that purpose should qualify for relief in the same way as fuel imported in any other trailer tanks which do not have such a fuel-sharing system. The assessment should be reduced to reflect the limited amount of fuel used within the UK for such purposes.

Reasons for decision

45. Under the Directive the relief from excise duty applies only where the fuel is contained in the standard tanks of commercial vehicles (of which there is no definition in Article 8), and that fuel is intended to be used by both the commercial vehicle itself as well as in special containers (which, under the definition in the Article, means any container fitted with specially designed apparatus for refrigeration systems), and intended for using during transport of the refrigeration system. Article 8 therefore makes a distinction between the commercial motor vehicle and the special container. With regard to the special container, the exemption applies only to the fuel used in respect of the refrigeration system, there is no exemption in respect of fuel used to propel the special container itself. In the present case the fuel contained in the special container is, on occasion, used by Appellant to propel that special container, and this, in our view is not a use sanctioned by the Directive.
46. The Appellant is not saved by the definition of "standard tanks" in the Directive which, whilst the first definition of standard tanks allows for fuel in those tanks used directly both for the purpose of propulsion and for the operation during transport of refrigeration systems, this duel use does not apply to tanks in containers. The second definition under standard tanks applies only to fuel used directly for the operation during transport of refrigeration system in the special container.
47. Whilst the Order does define "commercial vehicle", this definition does not make the clear distinction that exists in the Directive. That definition requires that the vehicle be designed for and capable of transporting goods, or more than nine persons including the driver. The trailer in the present case is not capable by itself of transporting goods and does not have a driver. Equally the tractor unit, whilst including a driver, was not capable of transporting goods, I accept the Respondent's argument that it is only by taking the tractor and trailer together that goods could be transported and therefore it is the combination of tracker and trailer in the present case which constitutes a "commercial vehicle". No argument was put forward on behalf of the Appellant that the Order did not properly implement the Directive, but this, in our judgment, is the case.
48. There is an extra provision under the Order in Article 3(4) which states that relief under the Order applies only to fuel taken into the vehicle of a quantity necessary for the "normal operation of the vehicle during its journey." It was quite clear from the evidence in this case that the fuel taken from the trailer unit to power the tractor is only used in abnormal circumstances, not in normal circumstances. For this reason alone I find that the Appellant is not entitled to relief from duty. I therefore find that the Appellant is unable to bring himself either within the Directive or the Order before even considering the question of the meaning of "standard tanks", "permanence" and the question of who was the manufacturer. However, in case I am wrong in the above conclusions, it is necessary to consider them. We are only concerned here with the second definition of "standard tanks". In the Article there is an uncertainty as to whether the manufacturer means the manufacturer of the tanks or the manufacturer of the special container. Whilst it is to be expected that the manufacturer of the container would also be the manufacturer of the tank, this was not the case with regard to trailer PP01.
49. The Commissioners have conceded in respect of both trailers that the tanks can be considered as standard, but only to the extent that they were fitted by the manufacturers of the containers. The issue therefore is whether the modifications to both tanks, which were not done by the manufacturers of the containers, being done in the one case by the Appellant itself and the other by Mr Taylor, which involved the incorporation into the tanks of an additional line to draw the fuel to the tractor unit takes them outside the definition of "standard", and whether, in the case of trailer PPO2, the fact that the 700 litre tank exceeded the ADR Regulations meant that it could not be considered standard despite being fitted by the manufacturer.
50. It is accepted that in both cases the tanks themselves were permanently fixed, and were fitted by the manufacturer. It is also the case that the tanks in both trailers allowed for the operation during transport of their refrigeration systems. However, there is no provision in the Directive for the exclusion from duty where, as here, there has been the fitting of an extra, non-standard, pipe leading from the tank to the tractor unit via a suzi cable and solenoid in order to allow the propulsion of the tractor. I do not accept the Appellant's argument that, because there is no specific reference to the type of situation here, and no specific clause banning it, that therefore, given that the tanks themselves comply, the Appellant should be entitled to the exemption from excise duty. In order to qualify the exemption the Appellant has bring himself within the provisions of the Directive.
51. I accept the Appellant's argument that the Directive requires that the tanks themselves be permanently fixed, and the fuel sharing system is not contemplated by the Directive, I find that the fact that the tanks had been altered to permit the insertion of the pipe was not such as would be done by the manufacturer of either the tank or the trailer as a matter of standard practice. The fact that Gray and Adams have only fitted 70 systems similar to the Appellants over many years, and have fitted very many tanks, shows that the tank was not standard in that it was not of a type which would normally be fitted by the manufacturer. In my judgment the modifications take the tanks in the present case outside both the Directive and the Order.
52. I do not accept the Appellant's argument that the fuel-sharing system was permanently fitted. Something that is disconnected every six weeks cannot in this context be considered 'permanent'. The evidence of Mr Abercrombie was very clear that the system put in place by the Appellant was dangerous in that the fuel could leak from the connections between the tractor and the trailer. Whilst I accept that no such leak was detected, and that the Appellant regularly maintained his vehicles, there would be an obvious danger were the vehicles to be involved in an accident, as had in fact happened on one previous occasion before the present system was installed in the P3 CHE, and there would be a danger of fuel spillage. Furthermore, this points to the unlikelihood of manufacturers fitting tanks as a standard tanks which are adapted as in the present case. I accept Mr Abercrombie's evidence as to the rarity of the systems here being used.
53. I find that part of the purpose of the legislation is to prevent the fuel in the trailer from being used by another vehicle, and in my judgment, the legislation achieves this purpose. It is not defeated by the fact that in the present case the fuel in the trailer can also at all times power the refrigeration unit.
54. Although the evidence was that the Commissioners had no power to enforce the ADR Regulations, nonetheless I accept the Respondents' argument that the 700 litre tank on trailer PO2 was in breach of the ADR Regulations which limited the size of the tank on a trailer to 500 litres. This is therefore an additional reason why this tank cannot be considered standard.
55. With regard to any reduction of the assessment, given that I find that the tank in neither vehicle is standard, it cannot be the case that the fact that the Appellant only used a limited quantity of fuel from the trailer to propel the tractor entitles it to a reduction in the assessment. It is only fuel contained in a standard tank which is exempt from the duty; it is not a question that the exemption is dependent upon of the use to which that fuel is put.
56. Under the provisions of paragraph 5(2) of Schedule 12 of the Value Added Tax Act 1994 the Chairman of the Tribunal has the casting vote. In this case the member, Mr Battersby dissented from my decision to dismiss the appeal. He gave the following reasons for his dissent:

"The ADR Regulations are a Convention and are not enforced by governments. These recommendations are framed for safety purposes, but there is not any suggestion that the transport fleet was being operated in other than an appropriate safe manner. Nor was any evidence provided that the fuel piping and valves were leaking or subject to such a condition before servicing.

"In my view, this is not a case whereby the trader imported 72,680 litres illegally into the United Kingdom, and his activities were totally pursuant within the objectives of Council Directive 92/81/EEC. The problem whether the tanks were standard within the meaning of [Article] 8a is a technical, not a legal issue, and certainly not sufficient to dismiss the appeal against such an appellant. If the trader was purely a haulier, that would be a different situation."

57. This appeal is dismissed. No order for costs.
MISS J C GORT CHAIRMAN RELEASED: 13 July 2005

LON/04/8042