United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2006] UKVAT(Excise) E01000, [2006] UKVAT(Excise) E1000

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Neil Lynch v Revenue & Customs [2006] UKVAT(Excise) E01000 (09 November 2006)

E01000

EXCISE DUTY – assessment to duty allegedly evaded by Appellant as result of his having fuelled his diesel van with rebated fuel for use on public roads – evidence adduced by Appellant of use of duty paid fuel rejected – appeal dismissed

MANCHESTER TRIBUNAL CENTRE

NEIL LYNCH Appellant

-and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Chairman)

Mrs Mary Ainsworth (Member)

Sitting in Manchester on 19 October 2006

Mr A Houghton for the Appellant

Stefan Lewinsky, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. As a result of Her Majesty's Commissioners for Revenue and Customs ("HMRC") having found the diesel van of the appellant, Mr Neil Lynch, to be unlawfully fuelled with rebated oil whilst being used on a public road, they assessed him to excise duty of £3,473.12 for the period between 7 March 2003 and 20 June 2005 inclusive. He required them to review the assessments, but on review they were upheld. Mr Lynch appeals against the decision on review, given on 2 March 2006.
2. In his Notice of Appeal, given on 31 March 2006, Mr Lynch gave his reasons for appealing as:

"I have provided reasonable explanations, yet all I have received both from my appeal is a totally biased judgment. Nothing is based on fact, everything is 'in my view' or 'my best judgment', none of which would receive any credibility in a court of law. That's 'in my view' of course."

3. For the benefit of Mr Lynch, who was represented by his friend, Mr A Houghton, we should explain that our jurisdiction in appeals of this nature is limited. We may allow his appeal only if he can show that HMRC "had acted in a way in which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight" (per Lord Lane C J in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1980] STC 231 at page 239).
4. The burden of proving that HMRC acted unreasonably, took account of something they should have ignored, or disregarded something to which they should have given weight, falls on Mr Lynch. The standard of proof is the civil one; that of the balance of probabilities, i.e. that something is more likely than not.
5. Both Mr Lynch and Mr Houghton gave oral evidence to us, and we were presented with a bundle of copy documents by Mr Stefan Lewinsky, counsel for HMRC. From that evidence, we find the following facts to have been established.
6. On 20 June 2005, as he was driving his Ford Escort diesel van W499 NBR along the A57 road at Mottram, Cheshire, transporting goods for Sameday Solutions Ltd., Mr Lynch was stopped by a Road Fuel Testing Unit forming part of a multi-agency team. An HMRC officer forming part of the Unit took a sample of the fuel from the van's fuel tank, and observed that it was red in colour. Mr Lynch admitted that the van was fuelled with red diesel, i.e. rebated fuel. Subsequent analysis of the fuel sample showed it to consist exclusively of rebated fuel. We find that the van was fuelled exclusively with rebated fuel. The odometer showed the van's mileage as 76,022.
7. Mr Lynch was invited to and agreed to be interviewed under caution by the officers. He gave his address, admitted to ownership of the van, disclosed that he had owned it for two years and had no other vehicle, and claimed that he was a self-employed driver and was VAT registered. At that point, Mr Lynch terminated the interview and left. HMRC found a delivery note in the van bearing his name which appeared to confirm that he was self-employed. (The van was later restored to Mr Lynch on his paying HMRC penalties of £500 and costs of £290).
8. When later asked to produce documents relating to his ownership of the van and purchases of duty paid fuel used in it, Mr Lynch, having initially said he had no fuel purchase invoices, produced a limited number of them, an MOT Test Certificate dated 14 February 2005 showing the vehicle's recorded mileage at that date as 64,533, and the UK Registration Certificate for the van showing that he acquired it on 7 March 2003.
9. The information disclosed in the Test Certificate, the Registration Certificate and the fuel receipts was passed to Mr Michael Gilmore of HMRC's Oils Assurance Team, who proceeded to use it to calculate the duty assessed on Mr Lynch as follows:

"Period 14/2/05 – 20.6/05

I have analysed the mileage for vehicle W499 NBR to calculate the total miles performed by the vehicle. Between the period 14/2/05 (date of MOT) and 20/6/05 (date of seizure) the vehicle performed 11489 miles. Based on an average mpg figure of 46.4, the vehicle would have required 1125.65 litres of diesel to perform these miles. During that period you only have fuel receipts for 23.1 litres of diesel. This therefore leaves a discrepancy of 1102.55 litres.

Period 07/3/03 – 13/2/05

I have estimated that during the period 07/3/03 (the date the vehicle was registered to you) and 13/2/05 (the day prior to the MOT), the vehicle would have completed 64226.6 miles. This is based on an average daily mileage figure of 90.46 miles. From this, I have calculated the number of miles completed, the amount of fuel used and the amount of fuel purchased for this period – broken down into sub periods to coincide with the changes in duty rates. From this analysis there is a discrepancy between fuel used and fuel purchased which equates to 6067.61 litres.

I have taken into consideration your comments in your letter dated 27/7/05. You state that you have not kept fuel receipts yet you have some receipts going back 2 years. You also state that you do not keep records as you have no business. This contradicts your statement to officer M Wilson when you confirmed under caution that you were self employed and VAT registered. It also contradicts the fact that you have worked for Sameday Solutions Ltd on a number of occasions in the past month (including on the day you were stopped) and advertise your driving services in the local newspaper.** I therefore do not accept the explanations offered in your letter.

Potential Discrepancy

A total discrepancy exists of 7170.16 litres between the fuel used by your vehicle and the analysis of your fuel records (see attached spreadsheets).

Conclusion

In light of the shortfall of legitimate fuel purchased to fuel used and the fact that when tested by the RFTU your vehicle W499 NBR was found to be running on 100% marked rebated gas oil (red diesel). It is my view that controlled oil has been used as road fuel in your vehicle in contravention of Hydrocarbon Oils Duties Act 1979 section 12(2)."

Based on those findings, Mr Gilmore proceeded to assess Mr Lynch to excise duty calculated on the following basis:

 

ACTUAL	ACTUAL	ACTUAL	ACTUAL	ACTUAL	ACTUAL	ACTUAL	ACTUAL
Start Date	Mileage	Finish Date	Mileage	Miles Completed	MPG	Fuel Used (Litres)	Average Miles per day
14.2.05	64533	20.6.05	76022	11489	46.4	1125.65	90.46

 

Heavy Oil Duty rate	Gas Oil Rebate	Rebate	Rebate Payable
£0.5327	£0.0522	£0.4805	£529.78

 

ESTIMATED	ESTIMATED	ESTIMATED	ESTIMATED	ESTIMATED	ESTIMATED
Start Date	Finish Date	No.of Days	Av. Miles per day	Miles Completed	MPG*
a) 7.3.03	30.9.03	208	90.46	18815.68	46.4
b) 1.10.03	2.12.04	429	90.46	38807.34	46.4
c) 3.12.04	13.2.05	73	90.46	6603.58	46.4
			TOTALS	64226.6

 

Fuel Used (Litres)	Fuel Purchased	Difference	Heavy Oil Duty Rate	Gas Oil Rate	Rebate	Rebate Payable
a) 1843.49	26.35	1817.14	£0.5182	£0.0422	£0.4760	£ 864.96
b) 3802.19	198.71	3603.48	£0.5327	£0.0422	£0.4905	£ 310.88
c) 646.99	0	646.99	£0.5327	£0.0522	£0.4805	£2943.34
Totals:	Totals:	Totals:	Totals:	Totals:	Totals:	Totals:
6292.67	225.06	6067.61

Summary: Actual rebate payable : £ 529.78

Estimated rebate payable £2943.34

Total: £3473.12

* The MPG was calculated using a standard table based on road tests as reported in the publication "Commercial Motor"

(** We find that Mr Lynch did not advertise his driving services in a local newspaper. It was Sameday Solutions Ltd which advertised for drivers in that way).

10. That assessment was made against the legislative background of sections 12 and 13 of the Hydrocarbon Oils Duties Act 1979. The relevant parts of those sections read as follows:

12(2) No heavy oil on whose delivery for home use rebate shall –

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

(b) (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.

13(1A) Where oil is used, or is taken into a road vehicle, in contravention of Section 12(2) above, the Commissioners may –

(a) (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 from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b) notify him or his representative accordingly.

11. Mr Gilmore's calculation was, of course, based on the assumption that throughout the van's ownership by Mr Lynch he used only rebated fuel. Mr Lynch challenged that assumption, and his evidence and that of Mr Houghton was to the following effect. Mr Lynch accepted that he purchased the van on 7 March 2003. He claimed to have purchased a second vehicle, a petrol driven Peugeot 307, in April 2004 which he used for private purposes. He maintained that he did not work as a delivery driver, and his income consisted of a pension and disability benefit. (He admitted that had he worked his entitlement to that benefit would have ceased). He used the van in connection with his hobby of flying model gliders. He explained the 11 fuel receipts for white, ie duty paid, diesel oil covering the period 10 September 2003 to 17 June 2005 which he produced to HMRC as having been found about his house; he insisted that they were his own documents and had not been provided by other persons.
12. Of the red diesel found in the van, Mr Lynch maintained that it formed part of a consignment he had some months earlier bought from a lorry driver for £45 in the belief that it was white diesel, it having been siphoned by the lorry driver from his lorry's fuel tank. Having bought it, Mr Lynch further claimed that when he had removed it to his house in 3 x 5 gallon drums, he had initially used one drum of it, but had never used any part of the remainder until 20 June 2005, when of necessity he filled the van from the second drum.
13. Mr Houghton explained how that 'necessity' arose. He maintained that he and Mr Lynch had entered into an agreement whereby he, Mr Houghton, would purchase the van for £1,200 to be paid by instalments of £20 or £25 per week as he, being unemployed, could afford. Mr Houghton explained that he needed the van to make weekly trips to his sick and aged mother in Clacton-on-Sea, Essex, and it was those trips, that had commenced in December 2004, coupled with two visits to his daughter in Plymouth, which accounted for the majority of the mileage covered by the van between February and June 2005. Mr Houghton claimed to have fuelled the van to make those trips, and never to have used anything other than duty paid fuel. And on every occasion but one, he contended that he had returned the van to Mr Lynch with a quarter-full tank of oil. Yet on three or four occasions when he had collected the van, he said he had found its fuel tank to be empty. Consequently, to teach Mr Lynch a lesson, on the last occasion he had used the van prior to 20 June 2005, he had left the tank almost empty.
14. The consequence of Mr Houghton's having so behaved was, according to Mr Lynch, that he, Mr Lynch, had been unable to start the van on 20 June so that he had had to resort to the second drum of red diesel to fill the fuel tank.
15. We found neither Mr Lynch nor Mr Houghton a credible witness, so that we are unable to accept their evidence as the truth. The series of coincidences which they claimed to have occurred is, in our judgment, most unlikely to have taken place in fact. Coupled with that unlikelihood, it is plain that a number of statements Mr Lynch made to HMRC were untrue, and that he wrongly claimed state benefits whilst working. It will be recalled that in interview he claimed to be a self-employed driver and to be VAT registered. On HMRC carrying out appropriate checks, they found that he was not and never had been VAT registered. Before us, he claimed not to work as a self-employed driver. In interview he claimed to have owned no vehicle other than the van, yet in evidence he said he had purchased a Peugeot 307 car in April 2004.
16. We are unable to accept Mr Lynch's claim that, having bought 3 x 5 gallon drums of red diesel in the most dubious of circumstances, he used only one drum prior to 20 June 2005. Duty paid diesel retailed for about 90p per litre in 2005: that equates to £3.40 per gallon (1 gallon = 3.785 litres). Mr Lynch claimed to have paid £45 for 15 gallons, i.e. some 40p per gallon below the retail price. Even assuming the price he claimed to have paid to have been the true one, which we gravely doubt, it must have been obvious to him that the transaction was unlawful, if not illegal.
17. We do not accept his claim to have believed his purchase to have been of white diesel. That a person whose only income was a pension and state benefits would expend money on purchasing a substantial amount of fuel on the black market and then proceed not to use it, we consider improbable in the extreme.
18. Mr Houghton, unemployed and making no claim to savings or to income other than state benefits, would have us believe that each week he made round trips of over 400 miles in the van to visit relatives. Had he done so, adopting the figure of 46.4 mpg used by Mr Gilmore, it would have cost him in excess of £40 per week in fuel alone. In addition, if we are to accept his evidence, he was paying the purchase instalments on the van of £20 or £25 per week. On that basis he had commitments of at least £60 per week before housing costs and living expenses. Since his income would not have permitted him to maintain that expenditure, we do not accept that he made the trips he claimed to have made. And since that claim is the sole explanation offered by Mr Lynch for the van having travelled 11,489 miles in the four months from February to June 2005 – a clearly established fact – we must look elsewhere for the true explanation; and the only one seemingly available is that Mr Lynch himself carried out work for individuals and companies like Sameday Solutions Ltd.
19. Despite the events giving rise to the appeal having occurred over 15 months ago, until the day of the hearing Mr Lynch made no claim that Mr Houghton had used the van, or that he had agreed to sell it to him. Mr Lynch had every opportunity to explain Mr Houghton's claimed involvement in events to HMRC, yet failed to avail himself of it. That failure leads us to believe, and we conclude, that Mr Houghton's part in events, if any, was minimal, and was certainly not that advanced in evidence.
20. Having considered most carefully all the evidence before us, and particularly the calculations of Mr Gilmore, since no evidence was adduced by Mr Lynch to indicate that anything other than red diesel was used in the van during the assessment period, we conclude that the assessment to duty made by HMRC was made to best judgment, and that the quantum thereof should not be disturbed: it was not unreasonable. Everything that should have been taken into account in making the assessment was so taken, and no irrelevant matter was given weight. We dismiss the appeal.

DAVID DEMACK

CHAIRMAN

Release Date: 9 November 2006

MAN/2006/8012