United Kingdom VAT & Duties Tribunals (Excise) Decisions

E01005

EXCISE DUTY – use of 'red diesel' – methodology for calculating duty due under assessment – no allowance for days apparently not worked – commissioners to enquire from suppliers the amount of fuel purchased no - mileage and amount of fuel to the gallon known – methodology correct appeal dismissed

MANCHESTER TRIBUNAL CENTRE

KENNETH JOHN BAILEY Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: DAVID S PORTER (Chairman)

ALBAN HOLDEN (Member)

Sitting in public in Manchester on 1 November 2006

John Routledge an accountant appeared for the Appellant

Nigel Poole of counsel instructed by the acting solicitor for the Commissioners for H M Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006
 
DECISION
1. Kenneth John Bailey ("the Appellant") appeals against an assessment in the sum of £9376.26 issued on 1 July 2004 in respect of rebated excise duty confirmed on a review contained in a letter dated 1September 2004 . The assessment had been amended to £9219.98 at the time of the hearing. The Appellant alleges that the methodology used to calculate the rebate was incorrect and as a result had, prior to the hearing, offered £650 in full and final settlement of the liability. The Commissioners consider that the methodology was correct and the full amount of the assessment (as amended) is due.
2. Nigel Poole of counsel appeared on behalf of Her Majesty's Revenue and Customs and produced a bundle of documents for the tribunal. John Routledge an accountant appeared on behalf of the Appellant, who did not attend. No reason was given to the tribunal for his non-attendance.

The Facts

We found the following facts:

3. The Appellant carries on the business of a haulier from premises at 40, Ruscoe Avenue Sandbach Cheshire CW11 3HG and is registered for VAT under registration number 762 6676 94 with effect from 1 July 2000.
4. The Appellant had been banned from driving on 29 April 2002 due to an excess of alcohol, he commenced driving again in April 2003. He drives an ERF tractor unit with trailer registration number J 500 BCD. He was stopped on 23 March 2004 by officers of the H M Customs and Excise (as it then was) Road Fuel Testing Unit, who took a sample of fuel from the fuel tank. The sample gave a positive result to Quinizarin, a marker for rebated gas oil.,.
5. The Appellant conceded in his interview that:

he was the owner of the vehicle and responsible for fuelling it

he was the only driver

He had used 'red diesel' from six 45 gallon drums, which were at the site he had acquired on rental some two and a half weeks earlier.

at the time of the delivery he was delivering Ferric Chloride Acid

the vehicle, when being used with the trailer, averaged 8 miles to the gallon

The receipts for all the fuel that he used in the business were held by Sharon, his accountant.

6. He had supplied to the Commissioners a list of receipts showing 5876.86 litres of fuel purchased between 12 May 2003 and 12 December 2003
7. ,John Routledge produced to the tribunal copies of a selection of tachograph readings and suggested that there were at least 270 days missing. He alleged that as the Commissioners had identified that there were 323 days for the period 6 May 2003 to 23 March 2004 they should amend their calculation to allow for the 270 days. There was no satisfactory reason given for the missing tachographs. The tachographs, which he did produce, revealed that three other people had driven the Tractor Unit. Further, as will appear from the evidence given by Cathryn Senior, the number of days were used to apportion the rebate, which was altered in October 2003. We failed to see the relevance of the tachograph evidence and have not taken it into account in our decision other than as evidence of the mileage of the tractor unit as at 6 May 2003
8. John Routledge also contended that as the Commissioners had details of the suppliers it was for them to make further enquiry and as they had failed to do so they could not have raised the assessment to best judgement. We consider that it is for the Appellant to produce this evidence as he is the only person with access to the names of his fuel suppliers. As no further evidence was forthcoming, in spite of requests for such evidence, we have only accepted the amounts from those invoices which were supplied.
9. Cathryn Senior, who was the officer who raised the assessment, gave evidence under oath as to her methodology. She had taken the mileage of the Tractor Unit from the tachograph for 6 May 2003 which showed 817814 kilometres. She had also used the Road Fuel Testing Unit's mileage figure of 889,521 as at 23 March 2004. She had then deducted the one from the other which produced 71700 kilometres or 44557.88 miles. She had used and agreed the Appellant's mileage figure of 8 miles to the gallon, which produced a figure of 5,569.735 gallons or 25,320.52 litres. She accepted, from the receipts, that the Appellant had purchased 5,938.66 litres legitimately and deducted that figure from the total consumption leaving 19,381.86 litres subject to the assessment. She had rounded the amount down to 19,380 litres and apportioned that as to 8,940 for the period 6 May 2003 to 1 October 2003 at a rebate rate of 0.476, which produced a liability of £4,255.44. The balance of 10,440 litres, she assessed for the period 2 October 2003 to 23 March 2004 at a rebated rate of 0.4905 which produced a liability of £5,120.82 and a total assessment of £9,376.26. She conceded at the tribunal that she had missed three receipts and the assessment had therefore been reduced for the purpose of the appeal to £9,219.98. She had only identified the number of days in order to make the appropriate apportionments.

The Law

•    Section 6 of the Hydrocarbon Oils Duties Act 1979 ( "HODA") provides for the levy of excise duty on hydrocarbon oil delivered for home use and by virtue of section 11 a rebate of duty is allowed at the time of delivery.

•    Section 12 of HODA prohibits the taking in or use of that heavy oil in road vehicles.

•    Under section 13 where such heavy oil is taken into or used in a road vehicle with the intent of contravening section 12A the Commissioners may assess an amount equal to the rebate on like oil at the rate in force at the time of contravention as being excise duty due from any person who used the oil or is liable for it being taken into the road vehicle.

•    An assessment is issued pursuant to the provisions of section 12A.

Summing up

11. .Nigel Poole prior to his summing up advised the tribunal that the Appellant had been stopped again on 11 August 2006 and had confirmed that he had been using 'red diesel' for some four weeks from tanks in his yard. John Routledge confirmed that that was correct.
12. Nigel Poole submitted on behalf of the Commissioners that as the Appellant had not attended, the tribunal could only rely on the evidence from the interview. In that interview the Appellant had confirmed that he was the owner of the vehicle and the only driver. John Routledge had produced evidence to the effect that there were three other drivers. If that was so then at the very least the evidence given at the interview by the Appellant was misleading. The Appellant was registered for VAT and would, in those circumstances be required to produce evidence of the fuel used in his business. No other receipts had been forthcoming. If the Appellant had lost some of the receipts he would have been able to obtain copies form his suppliers. He had chosen not to do so.
13. The Appellant had agreed that he had no legitimate reason for the use of the 'red diesel', and when he had been stopped in August he had used the same excuse, namely that the 'red diesel' had come from the tanks on the site he had recently acquired.
14. There could be no doubt as to the mileage and Cathryn Senior had used the Appellant's figure of 8 miles to the gallon. John Routledge had tried to suggest that when the tractor unit was not attached to is trailer the vehicle would have done more than 8 miles to the gallon. John Routledge had not suggested any other figure and it was not realistic to suggest that the Appellant would have used the vehicle without the trailer, not least because the Appellant would have to return for the trailer before he could use the vehicle profitably again.
15. The number of days was irrelevant other than to calculate the rebate to allow for the change in rate. In the circumstances the assessment had been raised to best judgement and should stand.
16. John Routledge submitted that the methodology for calculating the rebate was flawed because:

It was clear that the number of days involved had to be wrong. There were 270 days missing on the sample of the tachograph. No account had been taken of weekends, holidays, days off and the maintenance of the vehicle.

Any average of 60 litres per day had to be wrong because there were clearly many days not accounted for.

The discrepancy of 19,381 cold be accounted for by:

(i) 270 days at 60 litres = 16,200 litres

(ii) 33 days when he vehicle was not in use = 1980 litres

The Commissioners had not made any enquiry as to the fuel purchased by the Appellant and having failed to do so could not have calculated the assessment to best judgment as they had not been able to prove how much of the fuel purchased represented 'red diesel'.

No allowance had been made for the periods when the Tractor Unit had been used on its own

In all the circumstances the assessment was not to best judgment and the appeal should be allowed.

The decision

16. We have considered all the facts and the law and have decided that the assessment is to best judgment. We can find no fault with the methodology. There is no obligation for the Commissioners to check that the receipts were correct and indeed whether there were any more receipts available to the Appellant. The Appellant is the relevant person to produce that evidence and in spite of being asked to so he has failed.
17. The number of days was only relevant to apportion the rebate to take account of the change of rate. Something which the Appellant had not sought to do in any event. Nor is it relevant that there were three other drivers. John Routledge has not sought to establish that the Appellant had not been responsible for the use, and the taking in, of the 'red diesel' when they were driving. As he has not sought to do that we must assume that as the owner the responsibility remained with him
18. Most importantly the Appellant has not only chosen not to attend to day , without any excuse being given , but we are told that he has offended again using the same story. In the circumstances we have decided that the assessment is to best judgment and must stand. We therefore dismiss the appeal and award no costs against the Appellant as none were requested.
David S Porter
CHAIRMAN RELEASE DATE:29 November 2006

MAN/04/8097