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United Kingdom VAT & Duties Tribunals (Excise) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Excise) Decisions >> Smyth & Anor (t/a Smyth Haulage) v Customs & Excise [2005] UKVAT(Excise) E00940 (13 July 2005)
URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2005/E00940.html
Cite as: [2005] UKVAT(Excise) E940, [2005] UKVAT(Excise) E00940
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- This is an appeal by the appellants against the respondents' review decision dated 17 June 2004 by which they upheld their earlier decision not to restore to the appellants a tractor and trailer articulated lorry which had been seized on 30 January 2004. The appellants had requested restoration on 29 March 2004 which had been refused on 5 April 2004 and the review was carried out in response to a request dated 10 May 2004. It was therefore an in time review following an in time request.
- We will refer to the tractor unit KLZ 4836 and the trailer unit SMY 10 as the tractor and the trailer and to the two units collectively as the vehicle.
- We heard evidence from Gary Smyth on behalf of the partnership. Mrs Smyth plays little part in the business. Customs and Excise called as witnesses Geoffrey Whitley, traffic examiner and authorised inspecting officer of the Vehicle and Operator Services Agency (VOSA), and officers Deborah Gillespie, Elizabeth Morris and William Fenton. Statements of Andrew Burgoyne and Peter Turner, officers, and Neil Thomas of the Department of Transport were read by agreement. We also ruled that we would have regard to a report prepared by Graham Doughty of Transport Management Consultants Limited which had been prepared on behalf of the appellants after the first two days of the hearing. We did so despite Mr Singh's objection because, although Mr Doughty was not called to give evidence, his report was in rebuttal of evidence given by Mr Whitley which had not been disclosed in his witness statement, or at least had not been fully disclosed and we considered it only fair to give such weight as we think appropriate to that report. In fact we have found it very helpful.
- We also had photographs and a plan showing the locations of certain features of the vehicle as well as the bundle of documents.
- Some of the facts are not in dispute.
- The appellants are husband and wife and trade in partnership in the haulage business. They are based in Northern Ireland.
- On 30 January 2004 the vehicle was en route from Holland to the Republic of Ireland carrying a load of food in the trailer, which is refrigerated. It was being driven in Anglesey by a Mr Laverty when Mr Whitley stopped it for a routine inspection at about 9.30 pm and found that it was overloaded. He exercised his powers to issue a prohibition notice and the vehicle was transferred to VOSA's premises where he carried out a further inspection during which he formed the suspicion that couplings fitted to the headboard of the tractor and the trailer could have been used to transfer fuel from the belly tank on the trailer to the tractor. The belly tank is a fuel tank under the trailer one purpose of which is to run the refrigeration equipment. It is not unusual for trailers to have such tanks and a connection between that tank and the tank or even the engine of the tractor unit is not unusual and certainly not illegal as such. However, if the belly tank is to be used to fuel the tractor engine, whether directly or through the tractor tank, it would have to be filled with duty paid diesel fuel not rebated or duty free oil.
- The vehicle was detained at VOSA's premises and Mr Laverty requested to be allowed to remain on the vehicle as he would not be able to find accommodation. Mr Whitley left the site at 2.30 am and closed it up. The site is secure in the sense that vehicles cannot leave or enter because of a barrier but persons can enter and leave even after the site is secured.
- In fact when Mr Whitley returned the next morning at 10.00 am Mr Laverty had gone and a Mr Feighin was with the vehicle.
- Mr Whitley had contacted the Customs and Excise Road Fuel Testing Unit (RFTU) and he understood that he had been authorised under section 8 of the Customs and Excise Management Act to seize the vehicle. In fact a formal seizure was only carried out on 2 February after the vehicle had been transferred to the respondents' Holyhead premises but nothing really turns on whether Mr Whitley was so authorised or did seize the vehicle on 30 January because this case is concerned with the question of restoration and the actual date of seizure does not affect any issue that arises.
- On 31 January the RFTU attended the VOSA site and carried out tests and examination of the vehicle.
- It is necessary to begin by describing some of the physical characteristics of the vehicle. The trailer and the tractor both have couplings to which pipelines of various types can be attached so as to connect the two units. For example, a coupling marked emergency line is used to connect the braking system by providing air under pressure between the tractor and the trailer so that if, for any reason, the pressure line is broken the trailer brakes will automatically engage.
- Each of the two units has three couplings in line adjacent to each other and Mr Whitley claimed that by connecting the airline for the braking system, just described, to another coupling called the blue line it would be possible to pressurise the belly tank in the trailer to make fuel flow from it to a hydraulic coupling (not one of the three mentioned above) on the trailer headboard through a pipeline to a similar hydraulic coupling on the tractor unit to run the engine. Once the pressure had started to force the oil through the pipe it would continue to flow and the air line would be re-connected to restore the braking system.
- When the vehicle was examined a suitable pipeline for the purpose of connecting the two hydraulic couplings was not found but Mr Whitley said that the driver of the vehicle had not been in his sight for the whole of the period from when he first stopped it to the time when he examined it at the VOSA site. He also said that the driver had spoken to another driver and implied that he thought Mr Laverty could have given that other driver the pipeline. We regard that evidence as being insufficient to conclude that Mr Laverty did that.
- The evidence about the hydraulic couplings was challenged by Mr Smyth through the expert report of Mr Doughty. Mr Smyth himself made no claim to know whether Mr Whitley's suggestion was correct about the use of the air line to force oil from the belly tank and to make oil flow from the belly tank to the tractor unit. It was unclear to the tribunal how forcing air into the pipe leading to the tank would not cause an airlock in the system somewhere. We raised that issue at the hearing on the first two days and Mr Doughty dealt with this in his report, which we had on the third day. He said that fuel tanks are designed to sustain the normal pressures caused by holding oil and that to force air into them would be likely to lead to rupture or splitting. He described more elaborate equipment that would be needed to avoid an air blockage travelling through the system to the engine and stopping it working if those systems were not in place. There is no reason to think that that equipment was installed in this vehicle.
- Our findings about this aspect of the evidence are, on a balance of probabilities and having heard evidence form both parties, as follows. We find that the hydraulic couplings had not been used to transfer rebated oil from the belly tank to the tractor engine.
- Mr Whitley also said that when the vehicle was inspected more closely at the VOSA site the couplings (i.e. the hydraulic couplings) were wet and he thought they had been recently used. He pressed the non-return valves on each hydraulic coupling and a red coloured oily substance trickled from each, which he believed to be rebated fuel. Mr Doughty's evidence on this was that oil would remain in the pipes behind the couplings for years if they had ever been used to move it from the belly tank to the tractor. It may seem contradictory for him to speculate that oil might have been moved from the belly tank in the past when his evidence is that the oil had not been transferred in the way that Mr Whitley claimed. However, we have heard evidence, which was not disputed indeed Mr Whitley agreed that it is true, that oil from belly tanks can be moved from the trailer to the tank in the tractor rather than, as he claimed was the case here, to the engine. In that case, as we understood the evidence, that could be done without the same problems arising as had led Mr Doughty to deny that oil could have been used in the way contended for by Mr Whitley.
- At most therefore we conclude that the evidence proves that oil had been transferred between the tanks through these couplings and two issues then remain relevant. Firstly, was the oil that was transferred in that way rebated or duty free oil and, if so, was the appellant responsible for it happening.
- Mr Whitley said that the small quantity of oily liquid that trickled from the hydraulic couplings when he pressed the non-return valves on them was red in colour. The quantity was too small to carry out tests to determine whether it contained any of the markers that are added to rebated oil. However in the tractor there was a pipe leading from the hydraulic valve to a "black box" (which we will consider in a moment) and that pipe had a U shaped bend in it which contained a larger quantity of oil but still insufficient for it to be worth sending it to the Government Chemist for analysis. That oil was red in colour. There is therefore evidence that red coloured oil had flowed from the headboard of the trailer through a pipe that was not found and into the tractor unit as far as the black box. There is no conclusive evidence that the oil was rebated oil, as that would have required testing, but we are satisfied that the oil was rebated oil because we accept the evidence that it was red in colour and draw the only reasonable inference from that; that it was rebated.
- It is next necessary to consider whether that rebated oil had been used in the engine of the tractor and, if so, when.
- The apparatus that was referred to as the black box was a solenoid switching apparatus that Mr Whitley said was connected up in such a way that the oil supply to the engine of the tractor could be switched from the tractor's own tank to that of the pipe leading to the headboard of the tractor and thence through the two hydraulic couplings, already described, to the belly tank of the trailer. We accept Mr Whitley's evidence that the black box was created to serve that function. As we have already noted it was not in dispute that a system for drawing fuel from a belly tank in a trailer was not unusual in itself and for very long journeys to countries where supplies might be difficult or expensive UK hauliers quite legitimately use such a system; though they would have to use duty paid oil in the belly tank to do so legally.
- Whether the black box was in working condition was in doubt. The only evidence suggesting it was working was that, on examination and before it was removed from the vehicle as evidence; it made a clicking sound when the switch was operated. In the review decision Customs and Excise acknowledged that the switching system was not connected to the engine. In the review decision it was contended that a mechanic had said that the switching system could have been "up and running within a day". Mr Whitley said that assuming the black box itself was working it could be connected up to form the supply to the engine within one hour. On the balance of probabilities we find that the switching mechanism could have been put into usable state but that it would have taken a significant amount of time to do so and was therefore certainly not in use at the time the vehicle was stopped. The driver could not have disconnected it between the time the vehicle was stopped and the time when Mr Whitley began his examination.
- The engine filters of the tractor engine were taken off the vehicle. These filters were used to filter fuel as it entered the engine and testing the oil in them would therefore show what type of oil was being used in the engine at the time it was stopped. Both filters contained clear or white oil.
- The results of the analysis by the Government Chemist of the rear filter were that it contained no coumarin (the marker that shows the presence of rebated kerosene) and no quinizarin (the marker that shows the presence of rebated diesel). It contained 0.04 kilograms per million litres of solvent red 24 and 0.12 kilograms per million litres of solvent yellow 124. The solvent yellow 124 is the euromarker that is added to oil to provide a test for rebated oil and based on that result the Government Chemist concluded that 2% of the fuel tested was rebated; though it was not explained why the tests for coumarin and quinizarin were, in that case, negative. The Government Chemist concluded that the sample showed no evidence of laundered diesel either red (UK) or green (Irish). The test note states that unmarked kerosene had been detected but gives no indication of how much.
- The results of analysis of the front filter showed traces of quinizarin, solvent red 24 and solvent yellow 124. The Government Chemist concluded that there was no rebated kerosene, red diesel or green diesel in the sample but that there was evidence of red diesel that had been laundered (presumably because of the presence of another marker referred to) but the percentage of laundered diesel was left blank on the test note and, in the absence of further explanation of what that means, we are obliged to proceed on the basis that the sample showed only a trace of laundered diesel. That test also stated that unmarked kerosene had been detected but gives no indication of how much.
- Mr Smyth stated in evidence that the part of Northern Ireland where he lives is subject to a great deal of illegal activity involving rebated fuels and that when his vehicles fill up in the Irish Republic the same applies; so that traces of illegal oil can easily turn up even when bought from legitimate sources. In fact, in the absence of evidence about the significance of the Government Chemist's findings we are not prepared to assume that the results reveal any more than accidental contamination that may well have entirely innocent explanations.
- Our finding is therefore that the oil being used in the tractor engine at the time the vehicle was stopped and examined was legitimate duty paid oil. That refutes the suggestion by Mr Whitley that the engine was drawing fuel from the belly tank. He expressed himself as being amazed when it was put to him that the filter tests were as described and it was clear that he recognised that his hypothesis had been refuted.
- After the vehicle was taken to the VOSA site Mr Whitley found the belly tank to be half full and Mr Doughty's evidence was that that would probably represent 325 litres of fuel. However, between 2.30 am when Mr Whitley left and 10 am when he returned Mr Laverty had left and Mr Feighin had arrived and the belly tank had apparently been emptied leaving some spillage on the ground round the vehicle. The oil had not simply been discharged onto the ground as, in that quantity, it would have run into a collection system designed to prevent spilled oil running away from the site and none was found.
- It is possible to hypothesise that someone must therefore have taken the oil away by carrying drums of it off the site (we have already explained that a vehicle could not have entered or left the site). There was also some contested evidence that the pipes in the trailer had been tampered with to sever the connections between the belly tank and the trailer headboard. That is certainly the hypothesis put forward by Customs and Excise. Clearly that evidence is highly suspicious. On the other hand it seems barely possible that Mr Smyth could have arranged for those steps to be taken in the time available. His explanation for Mr Feighin's presence was that Mr Laverty told him he could not stay with the vehicle but Mr Smyth knew Mr Feighin was travelling to Wales that night on the ferry and managed to contact him and ask him to look after the vehicle.
- Mr Feighin is apparently a musician and we see no reason to think he would have sufficient mechanical knowledge to carry out the necessary steps to remove the oil and sever the connections.
- We have decided that we are unable to resolve exactly what happened so far as this part of the evidence is concerned.
- Although there therefore remains a suspicion that someone tampered with the vehicle we do not regard that as refuting our conclusion that the evidence viewed objectively shows that the vehicle was not being run on rebated fuel at the time it was examined and that the system by which it could have been run on rebated fuel was not immediately usable.
- Mr Smyth's evidence was that he had never operated the system and indeed that he did not know about it. This last point was said by Customs and Excise to be suspicious and, although we agree that it would be unusual for a driver not to know what the controls in the cab were for even if they were not all used, Mr Smyth is not a mechanic and did not drive the vehicle.
- Mr Smyth gave evidence and was cross examined in detail. He had some difficulty reading his own statement and we formed the view that he is not a very sophisticated person (which we do not mean to be a criticism) but his evidence was consistent and given sensibly without exaggeration or prevarication and we found him to be a truthful witness. We find that he had not used the system of switching oil from the belly tank into the vehicle at any time since he bought it and that he did not intend to do so.
- This is an appeal in respect of a review of a decision in relation to an ancillary matter as defined by section 16(9) of the Finance Act 1994 and so our powers are limited to those contained in section 16(4). Before allowing an appeal we therefore have to be "satisfied that the Commissioners or other person making [the] decision could not reasonably have arrived at it".
- It is now well established that in approaching the answer to that question the tribunal is obliged to make its own findings of fact and is not limited to the view of the facts taken by the Commissioners or the reviewing officer.
- The correctness of the seizure is not something about which it is within the tribunal's power to make a binding decision.
- The issue before the tribunal is whether the Commissioners could reasonably have refused to restore the vehicle but that should now be judged in the light of our findings of fact.
- Mr Singh very fairly recognised that the extent if any of Mr Smyth's blameworthiness would be relevant to our decision. We agree. That is because it would be irrational for the Commissioners to refuse to restore the vehicle if the owner is entirely blameless because in such a case it does not further the correct enforcement of the law to penalise the innocent; as only the guilty will be deterred form their actions by the thought of forfeiture of their goods. Those entirely innocent of wrongdoing can do no more to comply with the law than their innocence already shows them to have done. If the goods of the entirely innocent are taken on purely technical grounds the application of the law becomes arbitrary and that would also amount to an unconscionable unfairness that it would be unreasonable to enforce.
- It follows from our findings that we hold this case to be one where the appellants are wholly innocent of wrongdoing and accordingly the appeal will be allowed and we direct a further review.
- Section 16(4) empowers us to direct that the review decision shall cease to have effect and we do so.
- We are also empowered to order that a further review of the original decision should be conducted in accordance with our directions. We direct that the further review should take into account and be based upon our findings of fact as set out in this Decision and upon our holding that it would be irrational and unconscionably unfair for the Commissioners to refuse to restore the vehicle
- We direct that the respondents should pay the appellants' costs to be assessed by a chairman of the tribunal sitting alone if not agreed between the parties.
EO00940
EXCISE DUTY – non-restoration of vehicle – whether rebated fuel used – appeal allowed.
LONDON TRIBUNAL CENTRE
Appellants
Respondents
Tribunal: Mr Richard Barlow (Chairman)
Mrs Shahwar Sadeque
Sitting in public in London 24 and 25 January and 18 February 2005.
Mr Tim Nesbitt of counsel instructed by Messrs Aaron and Partners, solicitors, for the appellants.
Mr Sarabjit Singh of counsel instructed by the Solicitor for the Customs and Excise for the respondents.
Introduction.
Undisputed facts.
The contentious facts.
The law.
Conclusion.
RICHARD BARLOW
CHAIRMAN
RELEASED: 13 July 2005
LON/04/8057