United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2006] UKVAT(Excise) E00951, [2006] UKVAT(Excise) E951

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David Madden v Revenue & Customs [2006] UKVAT(Excise) E00951 (21 April 2006)

EO00951

EXCISE — use on the road of rebated fuel — when did such use begin — calculation of assessment — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

DAVID MADDEN Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Chairman)

Robert Grice

Sitting in public in Birmingham on 8th March 2006

The Appellant appeared in person

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

© CROWN COPYRIGHT 2006


 


DECISION

1. The decision under appeal was that of the Respondents, taken on review and notified by letter dated 12 May 2005, to uphold an assessment issued to the Appellant, Mr David Madden, pursuant to section 13(1)(A) Hydrocarbon Oil Duties Act 1979 ("HODA") in the amended sum of £1,597.00. The assessment had been raised to recover the rebate on fuel which the Respondents believed had been misused by Mr Madden. We heard oral evidence from Mr Madden and on behalf of the Respondents from Mr Neil Margetts and Miss Frances Manley.

The Law

2. Section 11 HODA permits a rebate on heavy oil delivered for home use.

Section 12(2) HODA provides as follows:

(2) No heavy oil on whose delivery for home use rebate has been allowed [(whether under [section 11] above or 13AA(1) below)] shall –

(a) be used as fuel for a road vehicle; or

(b) be taken into a road vehicle as fuel,

unless an amount equal to the amount for the time being allowable in respect of rebate on like oil has been paid to the Commissioners in accordance with regulations made under section 24{1) below for the purposes of this section.

Section 13(1A) HODA provides:

[(1A) Where oil is used, or is taken into a road vehicle, in contravention of section 12(2) above, the Commissioners 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 used the oil or was liable for the oil being taken into the road vehicle, a nd

(b) notify him or his representative accordingly.]

3. Sections 14(1)(ba) and 14(2) Finance Act 1994 give a person so assessed the right to apply for a review of the decision to assess, such review to be carried out in accordance with the procedure laid out in section 15 Finance Act. Section 16 gives a right of appeal to the Tribunal against the result of such a review. It was accepted by Mr Cannan that the matter in issue here was not an ancillary matter as defined and as such the Tribunal has a full appellate jurisdiction. The burden of proof lies upon the appellant "to show that the grounds on which any such appeal is brought have been established" (section 16(6) Finance Act).

The Chronology

4. Mr Madden was the owner and operator of a private hire vehicle. On 6 November 2004, Mr R Spotwood of the Respondents' Road Fuel Testing Unit intercepted Mr Madden at the premises of Lester Brothers in Acocks Green, Birmingham. He tested the fuel in the tank of the private hire vehicle and detected the presence of red diesel. Mr Spotwood carried out a short interview with Mr Madden in the vehicle prior to seizing it. Mr Spotwood told Mr Madden the vehicle would be restored on payment of a fee which he estimated would be £1,200.00. Mr Madden could only raise £1,000.00 which Mr Spotwood subsequently accepted as the restoration fee, the breakdown of this fee being as follows:

A £500.00 – equivalent to 2 penalties of £250.00 each for (a) using and (b) fuelling the vehicle with red diesel.

B £210.00 – recovery and storage.

C £290.00 – estimate of arrears of duty pending audit.

The vehicle was then restored to Mr Madden.

5. The Respondents then proceeded to carry out an audit of Mr Madden's fuel consumption, a calculation carried out by Mr Margetts. In interview Mr Madden admitted he had been fuelling his vehicle with red (rebated) diesel for some 4-6 months. He said he had purchased the vehicle in February 2003 and he provided MOT certificates which provided the Respondents with a record of mileage. Mr Madden was asked for his receipts for fuel purchases from the date of purchase to the date of interception and these he provided. None of the receipts were from Lester Brothers and it was assumed by Mr Margetts that the receipts all represented the purchase of legitimate diesel. The majority of the receipts did not show the quantity of fuel purchased and for each receipt Mr Madden therefore calculated the number of litres purchased by applying an average price per litre figure taken from the DTI website.
6. Using figures obtained from the MOT certificates and the odometer reading on interception, Mr Margetts was able to calculate the total mileage covered by the vehicle from 4 February 2003 to 6 November 2004 to be 45,934 miles. Using statistics taken from "whatcar.com" for the model of vehicle in question (these figures being more favourable to Mr Madden than Mr Madden's own estimate of mileage per litre) Mr Margetts calculated that Mr Madden would have been expected to purchase 4,057.8 litres to fuel his mileage of 45,934. Compared with the receipts, this would produce a shortfall of 3,325.13 litres, a shortfall which Mr Margetts believed was covered by the purchase of illegal rebated red diesel. Mr Margetts then calculated the difference in duty between legitimate and rebated fuel to be £1,616.00 and raised an assessment accordingly covering the period 4 February 2003 to 6 November 2004.
7. By letter dated 26 January 2005, Mr Margetts sent a draft of his calculation and schedules to Mr Madden, asking Mr Madden to let him know and to have any supporting evidence if the calculation was incorrect and that if he had heard nothing by 7 February he would raise the assessment. Nothing was heard and the assessment was raised accordingly.
8. Through solicitors, Mr Madden sought a review of the decision to assess. Again it was pointed out that Mr Madden had not begun to use red diesel until April 2004. The review was carried out by Miss Manley who upheld the assessment subject to a reduction of £18.95 to take account of the fact that the vehicle was not purchased until 8 February 2003 rather than 4 February.
9. Mr Madden then appealed to the Tribunal, his grounds of appeal being that he did not use, and there was no evidence to suggest that he did, rebated diesel prior to April 2004.

Mr Madden's evidence

10. In his oral evidence, Mr Madden told us that although he had for a number of years been aware of the existence of red diesel and that it was substantially cheaper, he had not known where he could buy it. It was not until April 2004 that he had learned from a fellow driver that he could get it from Lester Brothers and it was therefore only since then that he had been buying it. He only used red diesel for business mileage, buying from a local dealer for social use. Nine times out of ten he did not get a receipt from Lester Brothers as it would not be worth the paper it was written on. Mr Madden told us that he only worked two days a week Fridays and Saturdays, eight hours each day. Approximately twice a year he would swop those days. Initially in his evidence in chief, Mr Madden told us that he purchased roughly equal amounts of fuel for business and private use, his mileage between the two being roughly 50/50 or marginally more private use. He would purchase fuel for his business on Thursday night or Friday morning and his accounting method was to keep only the business receipts, discarding any which related to private use of the vehicle. The receipts which he had handed to the Respondents therefore did not represent his total legitimate purchase of fuel but only that used for the business. Occasionally if there was some "business fuel" left in the tank after the Saturday, he would use that up privately and replace it without claiming it for tax purposes and for such a refill there would therefore be no receipt available.
11. In the light of this evidence, whilst the Tribunal was sitting, Miss Manley carried out an analysis of the dates on the receipts provided to Mr Margetts. As, according to Mr Madden, these receipts all related to business purchases which were made on Thursdays or Fridays, all the receipts should have borne Thursday or Friday dates. However out of the 47 receipts provided only 21 related to Thursday or Friday purchases. Mr Madden could offer no explanation for this.
12. It was Mr Madden's evidence that the receipts provided to the Respondents related only to business as he did not keep private receipts and that they represented the totality of his business fuel purchases. Three points arose out of this evidence which Mr Cannan put to Mr Madden in cross-examination. First, in the 12 months from April 2003 to April 2004, there were long periods not covered by receipts or odd months when there was only one receipt. For example, there was only one receipt in May 2003, only two in June and one in July. Mr Madden's only response to this was that there may have been the odd day when he did no private mileage. Equally it would appear that there were no business purchases, there being no receipts, between 22 November 2003 and 13 February 2004 and none in March 2004. The response of Mr Madden was that he had possibly not been working.
13. Secondly, using the rate of 11.3 miles per litre and 723 litres being purchased (the total of the receipts), business mileage over the entire period would be approximately 8,184 miles as against a total mileage of 45,934. This represented, Mr Cannan put to Mr Madden, 5 out of every 6 miles being private mileage, far from the 50/50 estimate originally put forward by Mr Madden. Mr Madden accepted that Mr Cannan's figure was the more likely.
14. Thirdly, if the figure of 8,184 miles was correct and Mr Madden accepted that it was "feasible and about right", it would equate to only 90 business miles per week which Mr Madden again agreed was about right.

Conclusions

15. It was Mr Madden's case that he had not purchased rebated fuel before April 2004. He admitted purchasing rebated fuel from then on so there was therefore a tacit acceptance that some assessment was justified but the issue before us was whether the assessment as notified was excessive and specifically should it have been limited to post-April 2004 and therefore reduced insofar as it pre-dated April.
16. Mr Madden produced no evidence in support of his contention and we therefore have to judge it from his oral evidence and also to see if any corroboration can be found in the documents and figures put before us.
17. At least in part, Mr Madden's evidence is demonstrably incorrect or inconsistent and in part is not entirely credible. His claim that the receipts provided relate only to business user cannot be correct if his evidence that he made such purchases only on Thursdays and Fridays is correct. We have carried out a further analysis of the non-Thursday/Friday receipts because it did occur to us, although this was not part of Mr Madden's case, that he might have refilled for business use on a Saturday, which was one of his two working days. Of the 26 such receipts however, only 9 related to Saturday purchases, the rest being spread over all remaining days of the week. The receipts produced therefore cannot relate only to business purchases and they must include purchases for private use of the vehicle. His evidence of a roughly equal split between business and private use was also incorrect, as indeed he accepted in cross-examination. We also find it very difficult to accept that in 16 working hours per week he only covered 90 miles, especially in the light of his own evidence that Fridays and Saturdays were "hugely busy". But this was the figure produced from the receipts and again accepted by Mr Madden as being "about right". We also have some reservation about the answer which Mr Madden gave to Mr Cannan to explain the gaps in pre-April 2004 receipts. To explain the absence from November to February, he said he possibly had not been working. If indeed Mr Madden had been off work for some 3 months, including the Christmas and New Year periods, surely he would have remembered.
18. Most compelling, in our view, however is to test Mr Madden's contention against the receipts produced. His evidence was that he only purchased rebated fuel for business purposes and only after April 2004. One would therefore expect the receipts to reflect a correspondingly larger quantity of legitimate purchases before April than thereafter when his fuel needs were supplemented by the illegal purchases. Not only is this however not borne out but quite the reverse. For the 12 months April to March 2004 his legitimate purchases are recorded as 390 litres and yet in only the 6 months April to September, he purchased legitimately 333 litres. This is not consistent with a purchase of legitimate fuel only prior to April 2004.
19. For all these reasons we have to find that Mr Madden has not discharged the burden of proof which is upon him and he has not demonstrated to us on a balance of probability that his purchase of rebated fuel did not begin until April 2004. The Respondents are therefore in order to backdate the assessment to February 2003.
20. Mr Madden at no time (and neither did his solicitors who applied for the review and put in his notice of appeal) challenged the methodology of the quantification of the assessment or the calculation itself. However, we have one reservation arising out of an answer which Mr Madden gave in cross-examination. Mr Madden's evidence was that the receipts represented the totality of his business purchases but in response to Mr Cannan's question as to why there were none before 8 April 2003, he replied that that was because it had been the previous financial year. If, despite his evidence that he had produced all his receipts, he actually still does have some for February/March 2003 which he didn't produce, then he should be given the opportunity to produce these because they would affect the calculation of the assessment. They would not, we must emphasise, affect the principle of our decision. We therefore direct that if Mr Madden does have any receipts for February/March 2003, he should produce them to the Respondents within 21 days of the release of our decision and the Respondents should recalculate the assessment accordingly. Otherwise and in the absence of any further receipts, the assessment stands as calculated in the amended sum of £1,597.00.
21. Subject to the above possible adjustment to the calculation, the appeal is dismissed. Mr Cannan made no application for costs and we make no order.

LADY MITTING

CHAIRMAN
Release Date: 21 April 12006

MAN/05/8027