United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E1030, [2007] UKVAT(Excise) E01030

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Jason Smith v Revenue & Customs [2007] UKVAT(Excise) E01030 (08 March 2007)

E01030

EXCISE DUTY — RED DIESEL — Customs found red diesel in the Appellant's vehicle — Respondents unimpressed with Appellant's explanation — vehicle restored on payment of £940 — Crown Court dismissed the Appellant's appeal against condemnation but found the Appellant to be a truthful witness — Crown Court requested its finding on the Appellant's credibility to be communicated to the Tribunal — Appellants failed to attend the Tribunal hearing — Respondents contend that the Tribunal should disregard Crown Court finding — Respondents posed the wrong question — not whether the Tribunal was bound by the finding of the Crown Court — correct question was whether reasonable body of commissioners would give weight to the Crown Court finding — yes — review unreasonable to the extent that it failed to have regard to Crown Court finding — Appeal allowed

MANCHESTER TRIBUNAL CENTRE

JASON SMITH Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

Sitting in public in Birmingham on 8 January 2007

The Appellant did not appear

Marc Brown, counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The Appeal

The Appellant was appealing against the Respondents' decision on review dated 27 June 2006 restoring a Nissan Terrano registration number K370 KRB, (known as "the vehicle") subject to the payment of a fee in the sum of £940.

The Appellant's grounds of Appeal as set out in his Notice of Appeal dated 29 July 2006 were as follows:

"I do not agree I knew/used Nissan Terrano K370 KRB on road using rebated fuel. Due to time of ownership did not have chance to change documents at DVLA. I disagree with amount Customs want to change. They caused a lot of delay by not doing their job properly".

The Hearing

The Appellant did not attend the hearing. I granted the Respondents' application to proceed in the absence of the Appellant pursuant to rule 26 of Tribunal Rules 1986. After hearing the Respondents' case I directed the Respondents to supply a transcript of the decision of the Crown Court at Warwick in the condemnation appeal heard on 15 December 2006 and further written submissions on the effect of the comments made by the Crown Court on the restoration appeal. The Respondents supplied the Tribunal with their submissions and transcript on 15 February 2007.

Background

On 7 February 2006 Customs Officers found red diesel in the running tank of the vehicle which was parked in a resident's only car park in Leamington Spa. The Appellant turned down the offer to attend when the fuel sample was taken. However, he subsequently attended the scene and was offered a fuel sample which he declined. The Customs Officers seized the vehicle.

On 23 February 2006 Customs Officers interviewed the Appellant and his brother, Adrian Smith. The Appellant stated that he purchased the vehicle from his brother for £1,000, 24 hours before it was seized by the Officers. The Appellant did not receive a receipt for the vehicle from his brother. The Appellant was unemployed and did not hold a driving licence. The Appellant denied that he fuelled the vehicle with red diesel. He used it once off the road. The Appellant did not notify DVLA of change of ownership. He believed the vehicle registration documents and MOT were in the vehicle.

The Appellant's brother confirmed in interview that he did not give his brother a receipt for the vehicle. The brother owned the vehicle for about one month which he used to tow other vehicles. The brother denied putting red diesel in the fuel tank of the vehicle. He suggested that the vehicle may have been spiked when the vehicle had been impounded by the police on a previous occasion.

On 11 May 2006 the Respondents offered to restore the vehicle to the Appellant on payment of a fee of £940 which comprised two civil penalties of £250 each for the offences of using red diesel in a road vehicle and fuelling the vehicle with red diesel plus £440 for recovery and storage charges.

On 27 June 2006 Mr Wood confirmed the decision to restore the vehicle on a payment of a fee of £940.

On 15 December 2006 the Crown Court heard the Appellant's appeal against the condemnation order imposed by Leamington Spa magistrates on 6 July 2006. The Crown Court dismissed the Appellant's appeal but requested the Respondents to bring to the attention of the Tribunal its finding that

"We unanimously found Mr Smith to be a truthful witness and that his account was correct to the extent that he was ignorant of the position as to the presence of red diesel in the vehicle and that he had not himself taxed or used the vehicle".

The Issue

The issue was whether Mr Wood's decision confirming restoration of the vehicle subject to payment of £940 was a decision which no reasonable body of Commissioners could have arrived at. In order for the decision to have been reasonable Mr Wood must have considered all relevant matters and must not have taken into consideration irrelevant matters.

The Appellant considered the decision unreasonable because he had not used or fuelled the vehicle with red diesel. The Respondents doubted the truthfulness of the Appellant's version of events which contained significant inconsistencies. Further the Respondents considered that the finding of the Crown Court on the Appellant's credibility was not binding upon the Tribunal. In all the circumstances the Respondents submitted that Mr Wood's decision on review was reasonable.

The Review Decision of 27 June 2006

Mr Wood considered the following matters in reaching his decision to confirm the restoration on terms:

(1) The implausibility of the brother's suggestion that the vehicle was spiked with red diesel during the impounding of the vehicle by the police. Mr Wood opined that it was stretching the bounds of credulity beyond acceptable limits to ask anyone to believe that a vehicle would be taken into police custody without red diesel in the tank and then be returned by the Police having been fuelled with red diesel.

(2) Mr Wood doubted the Appellant's explanation that the vehicle was about to be declared off road with DVLA. The vehicle was still being shown with an extant tax disc on DVLA records. It was in a parking space in a residential area. Thus Mr Wood believed on the balance of probabilities that the vehicle had been used on the public highway whilst fuelled with red diesel.

(3) Mr Wood considered there were no grounds for finding a reasonable excuse for the civil penalties of £250 each.

(4) Mr Wood did not consider that the Appellant's unemployed status and his inability to pay the restoration fee constituted exceptional hardship.

Mr Wood concluded that

"A vehicle owned by you was found to be running on duty rebated fuel (red diesel). It was detected in the presence of two police officers. You have offered no credible explanation for how it came to be in the vehicle which was previously owned by your brother. I am therefore of the opinion that the application of the Commissioners' policy in this case treats you no more harshly or leniently than anyone else in similar circumstances, and I can find no reason to vary the Commissioners' policy in this case"

Mr Wood confirmed at the hearing that he did not consider the Appellant's explanation credible. His conclusion about the Appellant's credibility underpinned his decision to confirm the restoration on terms.

The Appellant's Version of Events

The Appellant's version was set out in correspondence with the Respondents. Essentially he denied knowing about the existence of red diesel in the vehicle or putting red diesel in the tank. He held no driving licence or insurance for the vehicle and did not use or keep the vehicle on a public highway. He queried the level of charges for removing the vehicle, particularly as the removal firm, "Malen Rescue" was located no more than 500 yards from where the vehicle was parked in the residents' parking area. The Appellant was unemployed and could not afford the restoration fee. He had done nothing wrong and saw no reason why he had to pay the fee.

The Appellant eventually produced a receipt from his brother for the sale of the vehicle. The receipt recorded the sale at 10 pm on 6 February 2006 for £1,000.

Respondents' counsel at the hearing pointed out that the Appellant in interview denied receiving a receipt from his brother for the vehicle. Also the timing of the receipt contradicted the account given in interview by the Appellant and his brother that he bought the car 24 hours before it was seized by Customs Officers on 7 February 2007. If the Appellant's version was correct the receipt should have been timed at 8am on 6 February not 10pm. Counsel referred to the accounts of the Appellant and his brother about the tax for the vehicle. The Appellant's brother stated that the vehicle was taxed but he returned the tax disc to DVLA for reimbursement of tax. The Appellant admitted that he had not bought another tax disc because the vehicle had only just been transferred to him. Counsel considered these accounts to be in conflict with DVLA records which still showed the vehicle as taxed.

The Crown Court Hearing on 15 December 2006

On 15 December 2006 the Crown Court dismissed the Appellant's appeal against the order of Leamington Spa magistrates condemning the vehicle as forfeited imposed on 6 July 2006. Recorder Eyre in dismissing the Appeal stated that

"I will shortly state the reasons for dismissal. We took the view that we need to address the following questions. Firstly the fuel that was found in Mr Smith's car was liable to forfeiture and that turned on the questions firstly of whether it was rebated fuel and the presence of the marker was conclusive evidence under section 24(3) of the Hydro Carbon Oils Act that it was. Secondly we had to address the question of whether it was being misused and that turned on whether it was being in a road vehicle. Now we took account of the definition of road vehicle within the Act and also of the exception and to determine that it was not an accepted vehicle and therefore it was in a road vehicle.

It follows from that that the fuel was itself liable for forfeiture under section 13(6) of the Act. If the fuel was in a road vehicle then the vehicle itself liable for forfeiture under section 41(1) of the Customs and Excise Management Act and that follows. We then consider the question of proportionality and took the view that forfeiture was proportionate in this case. For these reasons we dismiss the Appeal. However we do record this, that we unanimously found Mr Smith to be a truthful witness and that his account was correct to the extent that he was ignorant of the position as to the presence of red diesel in this vehicle and that he had not himself taxed or used the vehicle. We make no direction to this effect but we do invite those representing the Revenue and Customs to refer those comments to any panel that deals with any contested review of the restoration".

The Jurisdiction of the Tribunal

The Respondents' power regarding restoration of goods and vehicles which have been forfeited or seized is set out under section 152(b) of the Customs and Excise Management Act 1979. Once the power is exercised whether in the form of a positive decision to restore on terms or a refusal to restore, the person affected has a right of appeal to the Tribunal. The powers of the Tribunal are limited in the terms set out in section 16(4) of Finance Act 1994 which provides that:

"confined to a power, where the Tribunal are satisfied that the Commissioners or other person making the decision could not reasonably have arrived at it, to do one or more of the following, that is to say –

a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the Tribunal may direct;

b) to require the Commissioners to conduct, in accordance with the directions of the Tribunal, a further review of the original decision;

c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare that decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of unreasonableness do not occur when comparable circumstances arise in future".

The precondition to the Tribunal's exercise of one or more of its three powers, namely, that the person making a decision could not reasonably have arrived at it, falls within the guidance given by Lord Lane in the decision in Customs and Excise v JH Corbitt (Numismatists) Ltd [1980] STC 231 at page 239:

"…..if it were shown the Commissioners 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".

In Gora and others v Customs and Excise Commissioners [2003] EWCA Civ 525, the Court of Appeal decided that the Tribunal had a comprehensive fact finding jurisdiction in restoration Appeals:

"[The Tribunal] satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules of the tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals.'

Strictly speaking, it appears that under s 16(4) of the 1994 Act, the Tribunal would be limited to considering whether there was sufficient evidence to support the Commissioners' finding of blameworthiness. However, in practice, given the power of the Tribunal to carry out a fact-finding exercise, the Tribunal could decide for itself this primary fact. The Tribunal should then go on to decide whether, in the light of its findings of fact, the decision on restoration was reasonable. The Commissioners would not challenge such an approach and would conduct a further review in accordance with the findings of the Tribunal" (paragraph 39).

Reasons for my decision

The central issue in this Appeal is the weight that I should attach, if any, to the finding of the Crown Court that the Appellant was a truthful witness, namely, that he did not use the vehicle and ignorant of the red diesel in the fuel tank. I was unable to assess first hand the credibility of Mr Smith because he did not attend the Tribunal hearing. However, I have no power under the Tribunal Rules 1986 to dismiss the Appeal for non-attendance of the Appellant. I granted the Respondents' application to proceed in the Appellant's absence in which case I am obliged to determine the Appeal on the evidence as allowed under rule 28 of the Tribunal Rules 1986.

Counsel for the Respondents submitted that I was not bound by the comments of the Crown Court for the following reasons:

(1) The Tribunal was bound to accept the determinations of the Crown Court that were within its jurisdiction, namely the lawfulness of the forfeiture and the underlying facts necessary to come to that conclusion.

(2) All of the evidence relevant to the decision to be made by the Tribunal was not put before the Crown Court, as it was not relevant to the decision being taken by that Court.

(3) Notwithstanding any comments made by the Crown Court, the Tribunal would have been free to adjudge Mr Smith's credibility if he had attended the hearing. The situation cannot be different simply because Mr Smith absented himself from the hearing.

(4) Therefore the Tribunal was not bound to accept any comments or determinations of the Crown Court that were not determinations of the lawfulness of the forfeiture or the underlying facts necessary to come to that conclusion.

Counsel stated that the Appellant's interview with the Customs Officers was not put before the Crown Court, and if it had been, the Crown Court may have come to a different conclusion.

I consider that Counsel posed the wrong question. I accept that I would not be bound by the finding of the Crown Court on the Appellant's credibility if I had full jurisdiction to determine the restoration appeal, in the sense that I could substitute my own decision for that of the Respondents. However, my appellate jurisdiction on restoration appeals is circumscribed by the wording of section 16(4) of the Finance Act 1994 which requires me to consider the reasonableness of Mr Wood's decision confirming restoration on terms. The method for assessing reasonableness is that set out by Lord Lane in the Corbitt decision. Thus the correct question is whether a reasonable panel of commissioners would give weight to the finding of the Crown Court on the Appellant's credibility in deciding the restoration of the Appellant's vehicle.

The question whether a reasonable panel of commissioners would give weight to the finding of the Crown Court requires examination of the following issues. First, am I restricted to considering the facts known to Mr Wood when he made the decision on 27 June 2006? Second, is the finding of the Crown Court a relevant matter for the restoration decision?

In Customs and Excise Commissioners v Peachtree Enterprises Ltd [1994] STC 747 Dyson J held that

"The tribunal's jurisdiction in cases where the exercise of discretionary powers by the commissioners was challenged was supervisory; the tribunal could not substitute its own discretion for that of the commissioners. In the exercise of its supervisory jurisdiction the tribunal had to limit itself to considering facts and matters which were known when the disputed decision was made. Accordingly, as an appeal to the tribunal lay only against a specific identifiable decision, it was the matters and facts which were in existence at the date of the specific identifiable decision in dispute to which the tribunal had to have regard in assessing whether the decision was reasonable. In the instant case the specific identifiable decision in dispute was the commissioners' decision to require a security and in determining whether that decision was reasonable the tribunal should only have taken into account matters known to the commissioners at 30 April 1991 and 20 June 1991 respectively."

The Respondents have on occasions sought to extend the principle established in Peachtree to restoration appeals. They suggest that the Tribunal should limit its examination of reasonableness to the facts known to the review officer when he made his decision. Thus in this Appeal the finding of the Crown Court was not known to Mr Wood when he made his decision on 27 June 2006, and should, therefore, be disregarded by the Tribunal. I consider that this proposition derived from Peachtree is misconceived for this Appeal.

In John Dee Ltd v Customs and Excise Commissioners [1995] STC 941 which was a decision of the Court of Appeal decided after Peachtree. The Court of Appeal cautioned against the application of the Wednesbury principles in appeals before the Tribunal since it had no inherent supervisory jurisdiction. The Tribunal's Appellate jurisdiction was derived entirely from statute. The function and powers of a tribunal would depend upon the nature of the decision appealed against and any special statutory provisions.

"Counsel for the company was clearly right to emphasise that the function of the tribunal is an appellate function. Section 40(1) of the 1983 Act makes provision for an appeal. Furthermore, I agree that references in this context to Wednesbury principles are capable of being a source of confusion" at 953.

" ……other than to say that in my view the function and powers of a tribunal in each case will depend in large measure on the nature of the decision appealed against and of course on any special statutory provisions" at 953.

Under section 14 of the Finance Act 1994, a person who wishes to challenge the Respondents' decision on restoration must request a review of that decision by the Respondents before Appealing to the Tribunal. Under section 14(5) of the 1994 Act a person is entitled to give notice requiring a decision to be reviewed a subsequent or second time if new matters arise. In practice the Respondents will often conduct a second review without formal notice if new information emerges after the notice of Appeal to the Tribunal but before the Appeal is heard. This suggests that the Respondents perceive their responsibility under section 14 as a continuing one until the dispute is resolved.

In the circumstances of this Appeal I am satisfied that I am not prevented from taking into account the finding of the Crown Court about the Appellant's credibility merely because it emerged after Mr Wood's decision. The decision was known to the Respondents prior to the Appeal hearing. The decision was a matter, subject to the issue of relevance, upon which the Respondents may have carried out a second review either at the request of the Appellant or under their perceived responsibility of keeping live decisions under review. In any event the finding of the Crown Court did not introduce, as such, new facts that were unknown to Mr Wood at the time he made his decision on 27 June 2006. The Crown Court placed a different interpretation on the facts known to Mr Wood from the one he adopted.

The key issue is whether the finding of the Crown Court was a relevant matter which a reasonable panel of commissioners would take account of when deciding whether to restore the vehicle to the Appellant. Counsel for the Respondents says not, because a finding of fact by the Crown Court which goes beyond its forfeiture jurisdiction is not binding upon me. As explained earlier I consider Counsel's proposition is not capturing the disputed issue. I am not in this instance deciding whether I agree with the finding of the Crown Court about the Appellant's credibility. Instead I am deciding whether the finding was a relevant matter which a reasonable panel of commissioners would consider when deciding whether to restore the Appellant's vehicle.

I am satisfied that the finding of the Crown Court was a relevant matter because:

(1) The finding on the Appellant's credibility was derived from hearing the Appellant in person which I presume was on oath and subject to cross-examination. In contrast Mr Wood's conclusion about the Appellant's credibility was based on his assessment of the information contained in the various documents relating to the Appeal.

(2) The actual finding of the Crown Court that the Appellant was ignorant of the red diesel in the fuel tank and that he did not use the vehicle was in sharp contrast to Mr Wood's conclusion that he disbelieved the Appellant's explanation.

(3) The actual findings of ignorance and no use by the Crown Court were pertinent to the issue of whether the Appellant held a reasonable excuse for the offences of using red diesel and putting it in a vehicle. In Barbagello [2004] Excise Decision Number E00833, the Tribunal decided that as the restoration fee was computed by reference to the scale of civil penalties under section 9 of the Finance Act 1994, it was proportionate to consider the defence of reasonable excuse to section 9 charges in the context of a restoration appeal. If the Appellant had no knowledge of the red diesel in the tank it might constitute a reasonable excuse. Mr Wood rejected the issue of reasonable excuse in his consideration which appeared to be on the basis the Appellant knew or should have known about the red diesel in the fuel tank.

Counsel for the Respondents contended that the outcome of the Appeal should not depend upon the attendance of the Appellant. In this Appeal the Appellant chose not to attend which according to Counsel deprived me of the opportunity to make my own finding on the Appellant's credibility. However, the existence of the fact that the Crown Court made a finding about the Appellant's credibility was not dependent upon the Appellant proving it. My task was to decide whether a reasonable body of commissioners would give weight to the finding of the Crown Court.

Counsel suggested that the Crown Court may have come to a different conclusion if it had considered the contents of the Appellant's interview with Customs Officers. I was not provided with the notes of evidence at the Crown Court to enable me to form a view about this. This is a matter which is best dealt with under the review procedure where the Respondents can assess the precise weight to be attached to the finding of the Crown Court having regard to all the circumstances including the proceedings at the Crown Court. If they decide after carrying out a further review to confirm the decision to restore on terms, it would then be up to the Appellant to decide whether to accept the outcome of the further review or mount a fresh appeal to the Tribunal. However, at the fresh appeal he would not be able to rely on the fact that the Respondents had not considered the finding of the Crown Court in their review.

I, therefore, hold that

(1) On 15 December 2006 the Crown Court found that the Appellant was a truthful witness and that his account was correct to the extent that he was ignorant of the position as to the presence of red diesel in this vehicle and that he had not himself taxed or used the vehicle.

(2) The finding of the Crown Court did not introduce, as such, new facts that were unknown to Mr Wood at the time he made his decision on 27 June 2006

(3) The finding of the Crown Court was a relevant matter which a reasonable panel of commissioners would consider when deciding whether to restore the Appellant's vehicle.

(4) A reasonable panel of commissioners would give weight to the finding of the Crown Court about the Appellant's credibility.

My Decision

I decide that Mr Wood's decision of 27 June 2006 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994 insofar as a reasonable panel of Commissioners would give weight to the finding of the Crown Court about the Appellant's credibility. The precise weight to be attached would be a matter for the Commissioners having regard to all the facts including the proceedings at the Crown Court. I, therefore, allow the Appeal.

The Orders

Orders

I make the following orders pursuant to the decision to allow the Appeal and in accordance with section 16(4) of the Finance Act 1994:

a. The decision to restore the Appellant's vehicle on payment of a restoration fee shall cease to have effect from the date of release of this decision.

b. The Commissioners shall conduct a further review of the decision to restore the vehicle on payment of the restoration fee and serve the same on both the Appellant and the Tribunal within 30 days of release of this Decision.

c. An Officer not previously involved with the case shall conduct the further review.

d. The further review shall have regard to the findings which are summarised at paragraphs 36 and 37 of this decision.

e. The Review Officer shall take account of any further material or representations made by the Appellant within 14 days from release of this decision. The representations shall be made to HM Revenue and Customs Review Team, Detection South Region, Crownhill Court, Tailyour Road, Crownhill, Plymouth, PL6 5 BZ.

f. The Appellant will have a further right of appeal to the Tribunal if dissatisfied with the outcome of the further review.

I make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 8 March 2007

MAN/06/8033