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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 >> Boxton Ltd (t/a John Hogan Transport) v Revenue & Customs [2007] UKVAT(Excise) E01038 (18 April 2007)
URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2007/E01038.html
Cite as: [2007] UKVAT(Excise) E01038, [2007] UKVAT(Excise) E1038
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- This is an appeal against a review decision contained in a letter dated 3 July 2006 in which the Commissioners notified the Appellant that their decision not to restore two vehicles, registration VE02 VPC and FNZ 46, was upheld.
- The facts of the case are not disputed, nor is there any dispute as to the interpretation of the legislation, the Appellant however does challenge the reasonableness of the refusal to offer restoration.
- The Appellant is a haulage company. On 15 April 2006 Customs at Dover Eastern Docks stopped two vehicles, registration VE02 VPC, driven by a Mr Gordon Hay, and FNZ 46 driven by a Mr Adam Hobbs. The tanks of vehicle VE02 VPC were found to have a capacity of 1,672 litres. Mr Hay was interviewed under caution and stated that the purpose of his visit to Belgium had been to buy fuel, he was not a full-time employee of the Appellant, but made journeys at the weekend to purchase fuel for the Appellant. He had made approximately twenty trips in the previous nine months, and had been paid for none of them, but on each occasion he had taken the opportunity to buy cheap alcohol and cigarettes.
- Mr Hay stated that on this occasion he had bought close to 1,500 litres of fuel. He understood that the legal limit to the amount of fuel that could be bought for his vehicle was 1,500 litres, and he thought the tanks on the vehicle were standard, with a capacity of 1,500 litres.
- The tanks of the vehicle FNZ 46 were also measured. Their capacity was 1,659 litres. The driver, Mr Hobbs, stated that he had bought 761.68 litres of fuel for one tank, for which he had a receipt, and 700 litres for the other tank. He worked for the Appellant four to five days per week, and made trips to the continent to buy fuel approximately once or twice per fortnight. He understood that there was a tank capacity limit of 1,500 litres, and said he believed the capacity of each tank was 750 litres. He was aware that Customs officers had stopped other vehicles belonging to the Appellant in the past.
- Both vehicles were seized under section 139(1) of CEMA 1979 as liable to forfeiture under section 141(1)(b) of the Customs and Excise Management Act 1979 ("CEMA 1979").
- The relevant legal provisions are as follows:
- the tanks permanently fixed by the manufacturer to all motor vehicles of the same type as the vehicle in question and whose permanent fitting enables fuel to be used directly, both for the purpose of propulsion and, where appropriate, for the operation, during transport, of refrigeration systems and other systems. Gas tanks fitted to motor vehicles designed for the direct use of gas as a fuel and tanks fitted to the other systems with which the vehicle may be equipped shall also be considered to be standard tanks;
- the tanks permanently fixed by the manufacturer to all containers of the same type as the container in question and whose permanent fitting enables fuel to be used directly for the operation, during transport, of the refrigeration systems and other systems with which special containers are equipped.
- The Appellant did not appeal the seizure in the Magistrates' Court, but did seek a review of the decision not to restore the vehicle under sections 14 and 15 of the Finance Act 1994.
- The review officer was a Mr David Harris. He had information available to him that on 15 October 2005 two other of the Appellant's vehicles, registration numbers FHZ 4163 and S548 UCL, had been seized, and that another vehicle, registration KG1388, owned by another haulage company but driven by the same Mr Hay as had been stopped on 15 April 2006, was also seized and restored for a fee. The earlier seizures were made because the vehicles were running non-standard size fuel tanks. Mr Hay on that occasion was found to have receipts for fuel worth 1,606.66 litres which he had bought on that trip. The notes of the officer who had interviewed the other driver on that occasion - a Mr Rushworth who was an employee of the Appellant - show that he spoke by telephone to a Mr Collins, the Transport Manager of the Appellant company. The note ends: "Tank sizes faxed to Mr Collins as requested."
- The Appellant's vehicles were restored on the previous occasion on the condition that their tanks were removed and that in future they would both run on a capacity of less than 1,500 litres. The Appellant paid £2,330 for the restoration of those vehicles, and £1,260 was paid for the restoration of vehicle KG 1388. HMRC had issued warning letters to the driver and to the Appellant. The letter in respect of vehicle FHZ 4163 contained, inter alia, a statement that:
- Mr Harris had available records which showed that vehicle VE02 VPC had made thirty-nine journeys to continental Europe between 2 December 2004 and its seizure on 15 April 2006, and that vehicle FNZ had made sixteen such journeys since 13 August 2005. He also had documentation from the manufacturers of the two vehicles, Scania UK, who confirmed that at the time of manufacture vehicle VE02 VPC was manufactured with two running tanks each of 700 litre capacity and that vehicle FNZ46 was manufactured with two running tanks each of 600 litre capacity. The original decision not to restore the two vehicles was contained in a letter dated 28 April 2006 and the officer on that occasion had taken account of the fact that the drivers were carrying fuel in tanks that were non-standard, and the fact that these were not the first seizures of this nature in respect of the Appellant vehicles. On review Mr Harris considered all the above facts surrounding this seizure, and also the previous seizure and the warning letters, as well as several letters sent to the Commissioners by the Appellant's solicitor. He had also taken account of the frequency of the journeys made by the vehicles.
- By a letter dated 18 April 2006 Backhouse Jones, solicitors acting on behalf of the Appellant informed HMRC that the two vehicles collectively generated a daily revenue of approximately £1,000. The Appellant was being caused a considerable financial loss whilst they were off the road. By a subsequent letter dated 20 April 2006 HMRC were informed that vehicle VE02 VPC was subject to a lease purchase agreement with Anglo Irish Asset Finance Plc.
- On 19 May 2006 Backhouse Jones wrote a full letter to HMRC repeating again the loss of the daily revenue of approximately £1,000 and stating inter alia that they were not challenging the legality of the seizure, but they did not believe that HMRC were applying the law correctly with regard to the fitting of non-standard tanks. Reference was also made to the Human Rights Act 1998, and to the need for HMRC to consider whether it was proportionate to deprive the Appellant of the vehicle and fuel where the nature of the breach was de minimis. HMRC were referred to the case of Lindsay v Customs and Excise Commissioners. The collected estimated value of the vehicles was given as £60,000, and the fuel contained in them as £2,095.35. HMRC were invited to take account of the fact that the Appellant had been deprived of the use of its vehicles since the date of the seizure on 15 April 2006 and had already incurred a significant financial loss.
- By a letter dated 3 July 2006 HMRC were informed that vehicle registration FNZ 46 had been purchased by the Appellant with the tanks which were present at the time of seizure already in place. Vehicle VE02 VPC was purchased from Scania and the tanks currently fitted to the vehicle were fitted by the Scania dealer at the time of purchase. In the letter of 3 July Backhouse Jones also referred to a telephone conversation on 27 June 2006 with Mr Harris in which he had raised the issue of the previous seizure of the Appellant vehicles, and they stated as follows:
- Mr Harris gave evidence to the Tribunal and informed us that in addition to the items listed in his witness statement as having been considered by him, he had looked at the files relating to the previous seizure. He accepted that these files were not disclosed in his list of documents, that he should have included those documents in his list and that he was incorrect not to do so.
- Included in the decision letter was a heading, in bold, "Summary of HM Revenue and Customs restoration policy for vehicles used to illegally import fuel." The policy was set out in the following terms:
- Further on in his decision letter Mr Harris considered the issue of hardship, and said that he would consider exceptional hardship as the only reason not to apply the policy not to restore the vehicle. He concluded that there was no reason to disapply the Commissioners' policy of not restoring the vehicles in all of the circumstances. When cross-examined on the issue of the policy, Mr Harris said that in his opinion the wording in Mr Hopkins' letter did not relate to the booklet which he had seen setting out the policy. He also informed the Tribunal that the policy document he had seen contained more information than Mr Hopkins had supplied. He accepted that the policy as set out by him in the decision letter was not compatible with the policy as contained in Mr Hopkins' letter. Mr Harris did agree that the phrase "exceptional hardship" was not contained in the policy, but he had referred to it in an effort to be reasonable.
- The Tribunal heard no evidence on behalf of the Appellant, Mr Harris gave evidence on behalf of HMRC. Mr Harris accepted that the condition contained in the warning letters issued previously that the tank should be reduced in capacity was consistent with the limit of 1,500 litres of fuel being either relevant to the amount of fuel or to the tank size, and that there was no official document which stated that the tank size was the relevant feature. However, he did not believe an operator could believe that the reason for the action previously taken was anything other than the size of the tanks. He accepted that in October 2005 both vehicles were carrying over 1,500 litres of petrol, but it was his view that the driver or the Appellant could have asked at the time what the offence was. Mr Harris was quite satisfied that the Appellant had proper notice that the tank size was the important factor.
- We note that the letter informing him of the information the Appellant had from the Health and Safety Executive was dated 3 July, the same date as the decision letter, and therefore it was not a matter which could have been taken into account by Mr Harris, however the letter of 3 July 2006 from Backhouse Jones refers to a telephone conversation with Mr Harris on 26 June in which Mr Harris had raised three matters to which Backhouse Jones had been invited to respond prior to his completing the review. These questions were as follows:
- In relation to the vehicle VE02 VPC, the Tribunal was told by Mr Laprell, although there was no evidence to support the assertion, that it had had an extra tank fitted at the time of purchase by Scania with a 200 litre capacity to contain hydraulic oil as it was being operated as a bulk tipper truck. When it had ceased to be used as a tipper the tank had been cleaned out, and connected to the other tanks, which were each of a 700 litre capacity, by the Appellant. This was put to Mr Harris in cross-examination, but he had been unaware of these facts, and pointed out that there was no mention on the original purchase invoice from Scania of there being a hydraulic oil tank.
- In his decision letter Mr Harris had referred in general terms to the previous warning letters issued to the Appellant. He referred to Mr Hay having been stopped on that same occasion and set out in detail what happened in relation to Mr Hay, including the fact that a warning letter was issued both to him and to the company for whom he was driving. He did not say in the decision letter that on that occasion Mr Hay was driving not for the Appellant, but for a company called LO Transport. The reference to the warning letter issued to Mr Hay and the company was in bold letters and underlined. There was no specific mention of Mr Rushworth, or Mr Weatherall, the drivers of the Appellant's two vehicles.
- Mr Harris had calculated the benefit to the Appellant by reference to the frequency of travel. He said that he had had no basis to calculate the amount of financial gain to the Appellant because he did not know what was purchased on the other journeys. He was of the view that he did not have to accept what the driver said about how much fuel he had purchased, but he had not made the calculation he could have made of working out the saving as 20p per litre on a purchase of 1,500 litres per journey which amounted to £300 per vehicle per time, about £15,000 overall, because he would have been making an assumption as to the amount of fuel purchased if he had done that. What mattered to him was the frequency in which there had been a breach of the regulations. The decision letter makes no reference to the value of the vehicles, nor to the loss to the Appellant of being without the vehicles. However reference is made to the fact that the vehicles were on a "fuel cruise" and that the Appellant was gaining an unfair trading advantage over its competitors. In evidence Mr Harris disputed that he had disregarded how the tanks came to be on the vehicle and said it was clear from the Appellant's solicitor's letter of 3 July that he was concerned about that. That being the case, it is curious that he did not wait for the answer to his questions. He told the Tribunal that his main objective was compliance, and he had considered whether it could be achieved with a lesser penalty.
- Mr Harris said that he had considered which journeys had been made after 15 October, since 30 out of the 55 journeys made predate 15 October. However in his decision letter he records the number of journeys made in total by the vehicles in respect of 1 December 2004 and the other since August 2005. There is no reference to his having taking account of the fact that over half of those journeys predated the first seizure of the Appellant's vehicle, or whether such journeys might be viewed in a different light.
- It was the Commissioners' case that Mr Harris' decision not to restore the vehicles was reasonable and proportionate. The vehicles did not have standard tanks fitted and Mr Singh pointed to the 55 occasions on which the vehicles had travelled to the continent and had illegitimately benefited from relief from payment of excise duties. HMRC were therefore entitled to impose a penalty on the Appellant to reflect the fact that the statutory provisions governing the relief from payment of excise duty had been regularly breached. The Respondents were entitled to do something both to reflect past breaches and to prevent future breaches: seizure and consequent non-restoration was the appropriate sanction. A lesser sanction would have been inappropriate given the Appellant's previous history. The Appellant had received warning letters stating that it was unlikely that the Respondents would in future restore any vehicle which was detected carrying excise goods liable to forfeiture (including fuel in non-standard tanks).
- The seizure was proportionate in that, given the Appellant's history, a lesser sanction would be inappropriate. In addition to the warning letter, the Respondents relied on the fact that a Mr Collins, the transport manager of the Appellant company had been spoken to on the occasion of previous seizures and had specifically been given the sizes of the tanks. It was therefore clear that the Appellant knew and if he did not know, he ought to have known that the tanks needed to be of a 1,500 litre capacity, and that if he continued using vehicles exceeding that capacity they would not be restored. It was incumbent on the Appellant after 15 October 2005 to ensure that the tanks of his vehicles did not exceed a capacity of 1,500 litres, as he had not done so, a harsher sanction than conditional restoration and a financial penalty was wholly appropriate. Furthermore the Respondents' decision was fully in accordance with its policy, and the review officer had properly concluded that there was no exceptional hardship which justified departing from that policy.
- With regard to the criticisms made of the review letter, it was submitted that it had been fully reasoned and it was clear why the decision was reached. The Appellant had been given a full opportunity beforehand to put all the facts before the officer, and the officer had not acted unreasonably in not including all his thought processes.
- On behalf of the Appellant Mr Laprell submitted that the reasoning in the decision was not sufficient to let the Appellant know how it had been arrived at. In particular with regard to the policy, if the writer of the decision was not clear in his own mind what criteria he was applying, his decision was bound to be fundamentally flawed. It was clear from the documents and from Mr Harris' evidence that he was confused about what principle he was applying. The procedure Mr Harris should have followed was to establish the facts, then the appropriate principle, and then the purpose of the regime. This had not been done in the present case and the policy lacked transparency. It was almost impossible to assess whether or not the position was challengeable.
- Mr Laprell did not criticise the statement of policy contained in the decision letter in itself, but he criticised it for not in fact being a statement of the Commissioners' policy. Not only was it not a statement of the policy, but it did it not represent the policy that Mr Harris was in fact applying. The letter from Hopkins of 7 July showed that there was a different policy in operation. It must be presumed that, if there was a policy, then the Commissioners would follow it. The policy as set out in the decision letter contained no presumption that a vehicle would not be restored in the circumstances of the Appellant, and it had no reference to exceptional circumstances as being relevant. The statement of policy contained in Mr Hopkins' letter was a statement of an unfair process because it contained a presumption that if a vehicle was seized, it would not be restored other than in exceptional circumstances.
- It was submitted that the Human Rights Act 1998 applied in these circumstances, which had been implicitly accepted by the Respondents by their reference to proportionality in the statement of case. There is a right to property explicitly contained in the Convention. The Respondents are an authority within the meaning of section 6 of the Human Rights Act, and the review officer was obliged to apply all the legislation in the manner which complied with the Appellant's right to property under article 1 of the First Protocol to the European Convention of Human Rights. To do this the review officer was obliged to undertake an assessment to consider whether it was proportionate to deprive the Appellant of its tractor units and fuel in the circumstances of this case, and also to consider whether the penalty being imposed (i.e. the refusal to restore) was commensurate with the mischief which the Travellers Relief (Fuel and Lubricants) Order 1995 was aimed at preventing. The Tribunal was referred to the case of Lindsay v Customs and Excise Commissioners [2002] STC 588 where Lord Phillips stated:
- Mr Laprell further submitted that the warning letters sent on the first occasion to the Appellant were inadequate in that they did not clearly set out what the Appellant had done wrong and why the vehicles had been seized. The warning letters were compatible with the offence being that of bringing into the country more than 1,500 litres of fuel; there was no warning as to what the conduct was that may not be repeated. The Respondents' position was that it was obvious from the condition that it was the size of tank that was at fault, but in fact the imposition of the condition was equally consistent with it being the excess amount of fuel being carried that had occasioned the seizure. The Respondents relied on the fact that Mr Collins had made enquiries about tank sizes, but given the information that the Appellant was given by the Health and Safety Executive, namely that there were no limits as to tank size, his knowledge was irrelevant. The Appellant was entitled to take account of what the requirements of ADR were. The Health and Safety Executive were the enforcing authority for ADR cases, and the Appellant was entitled to rely on information received from them.
- With regard to the matters which the officer had failed to address, these were, (i) the actual financial benefit to the Appellant by operating the tractor units with fuel tanks that were not fixed by the manufacturer. He did not differentiate between journeys made pre-October when the warning letters were issued and post-October journeys. (ii) He failed to take into account the proportionality between the minimal benefit of the extra fuel carried in the larger fuel tanks and the value of the seized tractor units. He failed to consider properly the mitigating factors such as how the tanks came to be in the lorries, and whether they were fitted deliberately to bring in excess fuel or otherwise. In the present occasion there had been no excess fuel carried as there had been in October 2005. (iii) Mr Harris did not ever consider any other sanction, such as a conditional return of the lorries. He did not ask himself what the purpose of the penalty was or if the desired outcome could be achieved otherwise than by non-restoration. The officer was aware that there was a significant adverse financial impact on the Appellant's business and he could have considered restoration on similar terms to previously. He did not take any account of the degree of cooperation received from the Appellant.
- Finally it was submitted that the Respondents were wrong to approach the question by looking at the result of the review, not the process. Permanent forfeiture of the vehicle added to the loss sustained by the loss of income from them was not proportionate, and was excessive. To approach it, as the Respondents had done, from the point of view that the right result obtained was not sustainable, the process itself must be capable of being understood by the Appellant.
- In this appeal it is very tempting to look at the fact that the Appellant had previously had two vehicles seized which were only restored on condition that the tanks sizes were reduced, and to consider that there must have been a deliberate flaunting of the requirements of the ADR, and therefore non-restoration is appropriate. However, the Tribunal's function is not to look at whether the decision itself is just, but to look at the process of reasoning by which the officer arrived at his decision not to restore the vehicles, as set out in his decision letter.
- We accept the Appellant's submission that the warning letter issued in October 2005 does not make clear that it is the size of tank that is the offending matter. However, Mr Hobbs, the driver of vehicle FNZ 46 who was an employee of the Appellant when interviewed, had said that he understood there was a tank capacity limit of 1,500 litres and he believed the capacity of each tank on his vehicle was 750 litres. This cannot be right because he had a receipt for 761.68 litres of fuel which he had put into one tank alone. The other driver, Mr Hay, was not a full-time employee of the Appellant, and he appeared to understand that there was a legal limit to the amount of fuel that could be bought, and that limit was 1,500 litres. He made no reference to the capacity of the tanks. However, the drivers' statements do not appear to have been a matter explicitly considered by Mr Harris, and at no time during the course of the hearing were they referred to. Nonetheless, given Mr Hobbs' knowledge, and Mr Collins' enquiries it appears likely that the Appellant did in fact know the requirement as to tank size.
- The Tribunal is concerned by the way in which Mr Harris dealt with the matter of the Commissioners' policy. He set out in his decision letter what the Appellant was entitled to believe was a proper statement of the Commissioners' policy, but then later in the same decision expresses the policy in different terms. Both statements of the policy are very different from that set out by Mr Hopkins in his letter of 7 July 2006, which is, admittedly, a letter written after the decision which was made on 3 July 2006. It is, however, only right that, if the Respondents are applying a policy with regard to this situation, that they should state clearly what that policy is, and apply it. For Mr Harris to say that he was not fettered by the policy, but had considered it, when he does not appear to be clear precisely what the policy is, we do not consider to be reasonable.
- With regard to the policy as expressed by Mr Hopkins, a vehicle detected "smuggling" road fuel is to be seized and not restored unless it is owned by a finance company. In the present case, it was not suggested that the Appellant was "smuggling" fuel, in the sense that he was bringing in fuel to sell on, but that he was bringing in marginally excessive quantities of fuel over and above that which it was deemed safe to bring in. It was accepted by the Respondents that the provisions are aimed principally at ensuring safety for road users, hence the limit on the size of the tank. The aim is not to prevent people purchasing fuel and paying the lesser duty which is obtainable in the European Union. Mr Harris does not appear to have considered that one of the vehicles was in fact owned by a finance company, although he stated that, if it were the case, it would be a reason for restoration. He therefore did not apply the policy as he himself considered it to be.
- We are concerned that Mr Harris in his evidence said he had to take an account of the matters raised by Backhouse Jones in their letter of 3 July, but we do not see how this can have been the case. The decision letter itself is dated 3 July. The letter from Backhouse Jones was not sent by fax and refers to a telephone conversation with Mr Harris on 26 June, in the course of which Mr Harris raised three enquiries and invited Backhouse Jones to respond prior to completing his review. There was evidently a subsequent telephone conversation on 27 June 2006 in which Mr Harris had mentioned that the Appellant had previously had vehicles seized on the same grounds. In their letter of 3 July Backhouse Jones set out the matters relating to the requirements of ADR about the tanks being oversized. Since Backhouse Jones' letter states: "We have now had an opportunity to obtain our client's instructions on this point", it is not possible to see how Mr Harris could have taken into account that matter when reviewing the issue of restoration. It is possible, although we were not told that this was the fact, that in the telephone conversation of 27 June the answers to Mr Harris' earlier queries had been given to him. If that is the case, it is not evident from Backhouse Jones' letter of 3 July, which sets out in detail the answers to the questions. If Mr Harris had been given these answers over the telephone, then he did not take account of the fact that he was told that the Appellant was not the original purchaser of tractor unit registration FNZ 46. If he did not receive this information until after his decision letter, which appears likely since he makes no reference to it in the decision letter, then it is curious that in his evidence before us he clearly stated that he had taken account of the matters in that letter but had chosen not to refer to them in his decision letter.
- Nowhere does Mr Harris set out the financial implications of the seizure. He makes no reference to the loss of income of £1,000 per day for the loss of the two vehicles, nor does he take account of the fact that the capacity of the tanks on the two vehicles was not greatly in excess of the legal limit. Mr Harris never consider how it was that the vehicle had tanks in excess of the standard size, or whether the Appellant himself had adapted the vehicles. He repeatedly referred to the number of trips made, and it was never disputed by the Appellant that the lorries were going over specifically to purchase cheap fuel, and not for any other commercial purpose, but he does not distinguish between journeys made pre-October 2005 and those made post-October 2005. Undoubtedly there was an advantage to the Appellant in making those journeys, but given that he was entitled to purchase 1,500 litres worth of petrol provided it was contained in standard tanks, there was not an enormous trading advantage that he was obtaining over his competitors. Mr Harris repeatedly said that he could not make the calculations of the financial benefit to the Appellant because he could not rely on what he was told by the drivers as to the amount of petrol they had purchased. It might be thought reasonable for him to have differentiated in some way between those journeys that the lorries made prior to October 2005 and those made after October 2005, given that it was his view that in October 2005 the Appellant had become fully aware of what mischief the regulations were aimed at. He should certainly have taken account of the trading loss to the Appellant of £1,000 per day occasioned by the seizure.
- In all the circumstances, particularly given the mis-statement and misapplication of the Appellant's policy, the failure properly to consider whether non-restoration was proportionate, or to take account of all these circumstances which would be relevant to that matter, we do not consider that the decision was such that the Commissioners could reasonably have arrived at. This appeal is allowed and we direct that the Commissioners conduct a further review of the original decision, properly taking account of the above matters.
Boxton Ltd (t/a John Hogan Transport) v Revenue & Customs [2007] UKVAT(Excise) E01038 (18 April 2007)
EO1038
EXCISE – Restoration – Two vehicles fitted with non-standard tanks seized – Two other vehicles owned by Appellant seized previously had been restored on condition tank sizes reduced and fine paid – Warning letters issued – Whether letters ambiguous – Whether A knew or ought to have known vehicle seized previously because tanks non-standard – HMRC policy unclear from decision letter – Whether reviewing officer took into account all relevant matters – Proportionality – Appeal allowed
BOXTON LTD T/A JOHN HOGAN TRANSPORT Appellant
Sitting in public in London on 15 February 2007
Mr M D Laprell of counsel, for the Appellant
Mr S Singh of counsel, for the Respondents
The facts of the seizure
The law
"Council directive 2003.96/EC article 24
Article 24
1. Energy products released for consumption in a Member State, contained in the standard tanks of commercial motor vehicles and intended to be used as fuel by those same vehicles, as well as in special containers, and intended to be used for the operation, during the course of transport, of the systems equipping those same containers shall not be subject to taxation in any other Member State.
2. For the purposes of this Article,
"standard tanks" shall mean:
"Special container" shall mean any container fitted with specially designed apparatus for refrigeration systems oxygenation systems, thermal insulation systems or other systems.
(i) The Travellers' Reliefs (Fuel and Lubricants) Order 1995 implements the Directive into domestic law. It states;
In this Order –
"commercial vehicle" means any road vehicle that –
(a) by its type of construction and equipment, is designed for and capable of transporting goods or more than 9 persons, including the driver; …
"standard tanks" has the meaning given in Article 8a of Council Directive 92/81/EEC
…
3. Relief for fuel and lubricants contained in a commercial vehicle
(1) Subject to the provisions of this Order, a person who has travelled from another member State shall on entering the United Kingdom be relieved from payment of excise duty on the fuel and lubricants contained in a commercial vehicle that he has with him.
(2) The reliefs afforded by this Order apply only to fuel that –
(a) is contained in the vehicle's standard tanks; and
(b) is being used or is intended for use by that vehicle.
(3) The reliefs afforded by this Order apply only to fuel on which –
(a) excise duty has been paid in the member State in which the fuel was acquired at a rate that is appropriate to the use to which that fuel is being or is intended to be put; and
(b) the excise duty paid on that fuel has not been remitted, repaid or drawn back.
(4) The reliefs afforded by this Order apply only to fuel and lubricants that were taken into the vehicle within the European Union and are of a type and quantity necessary for the normal operation of the vehicle during its journey.
4. Conditions
(1) The reliefs afforded by this Order are subject to the following conditions; and if any condition is not complied with the fuel and lubricants shall, unless that non-compliance was sanctioned by the Commissioners, be liable to forfeiture.
(2) The fuel and lubricants are used only in the vehicle and are not removed from the vehicle except –
(a) temporarily, to facilitate repaid; or
(b) permanently, to be destroyed.
(3) The fuel and lubricants are used only for purposes appropriate to the rate of excise duty paid in the member State in which the fuel was acquired.
(4) The excise duty paid on the fuel and lubricants is not remitted, repaid or drawn back.
(ii) The ADR International Carriage of Goods by Road (United Nations 2002) Regulations by Annex A, Article 1.1.3.3 state that:
The total capacity of the fixed tanks shall not exceed 1,500 litres per transport unit and the capacity of a tank fitted to a trailer shall not exceed 500 litres."
(iii) The Hydrocarbon Oil Duties Act 1979 provides that:
12 Rebate not allowed on fuel for road vehicles
(3) For the purposes of this section and section 13 below –
(a) heavy oil shall be deemed to be used as fuel for a road vehicle if, but only if, it is used as fuel for the engine provided for propelling the vehicle or for an engine which draws its fuel from the same supply as that engine;"
(iv) Section 49(1)(a)-(f) of the Customs & Excise Management Act 1979 ("CEMA") provides that:
(a) except as provided by or under the Customs & Excise Acts 1979, any imported goods, being chargeable on their importation with customs or excise duty, are, without payment of that duty –
(i) unshipped in any port,
(c) any goods, being goods chargeable with any duty or goods the importation of which is for the time being prohibited or restricted by or under any enactment, are found, whether before or after the unloading thereof, to have been concealed in any manner on board any ship or aircraft …
(d) any goods are imported concealed in a container holding goods of a different description; or
(e) any imported goods are found, whether before or after delivery, not to correspond with the entry made thereof, or
(f) any imported goods are concealed or packed in any manner appearing to be intended to deceive an Officer,
… those goods shall … be liable to forfeiture.
(v) Section 139(1) of CEMA 1979 provides that:
Any thing liable to forfeiture under the Customs and Excise Acts may be seized or detained by any officer or constable or any member of her Majesty's armed forces or coastguard.
(vi) Section 141(1) of CEMA 1979 states that:
"Without prejudice to any other provision of the Customs & Excise Act 1979, where any thing has become liable to forfeiture under the Customs and Excise Acts –
(a) any ship, aircraft, vehicle, animal, container (including any article of passengers' baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and
(b) any other thing mixed, packed or found with the things so liable,
shall also be liable to forfeiture.
(vii) Section 152(b) of CEMA 1979 establishes that:
The Commissioners may, as they see fit –
…
(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under the Customs and Excise Acts.
(viii) Finally, section 15(1) of the Finance Act 1994 provides that:
Where the Commissioners are required in accordance with this chapter to review any decision, it shall be their duty to do so and they may, on that review, either –
(a) confirm the decision; or
(b) withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate."
(ix) S.6(1) of the Human Rights Act 1998 provides:
It is unlawful for a public authority to act in a way which is incompatible with a Convention right.
(x) Article 1 of the First Protocol to the Convention on Human Rights provides:
Every national or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of the possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of the State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
The review decision
"You are advised that on any future occasion that this vehicle, or any other vehicle owned by you or driven by … (following word is illegible) is detected carrying excise goods liable to forfeiture, HM Customs are unlikely to restore the vehicle."
Handwritten at the bottom of the letter it states:
"On condition that credit card payment is honoured and that vehicles fuel tanks are reduced in capacity to 1,500 or less."
In respect of vehicle S548 UCL the warning letter carried the same statement in the body of the letter, but inserted above in handwriting it states:
"Restored on condition that vehicles running tanks are reduced to 1,500 litres or less and that credit card payment is honoured."
"We understand that the vehicles were previously seized on the basis that they did not comply with the requirements of ADR as the tanks were "oversized". Following the seizure you offered restoration and our clients attempted to make enquiries as to why the vehicles were not ADR compliant; our clients made contact with the Health and Safety Executive whom we understand are the enforcing authority for ADR cases and they indicated that there were no limits. Accordingly our clients were unsure as to the actual offence that had been committed but nevertheless took the decision not to use those vehicles on international work. Only when tractor units FNZ 46 and VE02 VPC were seized was it explained to them whey they had committed an offence."
"The Commissioners' general policy is that where tanks are found in excess of 1,500 litres then officers are to query the reasons and the use to which the non-standard tanks have been put. Where the officer is satisfied that seizure is appropriate then consideration is given as to whether restoration is appropriate in the light of any mitigating evidence and any previous offences involving the same person(s)."
Under the heading "Consideration" Mr Harris had written that he was "guided" by the Commissioners' policy but not "fettered" by it in that "I consider every case on its individual merit. I have considered the decision afresh, including the circumstances of the events of 15 April 2006 and the related evidence, so as to decide if any mitigating or exceptional circumstances exist that should be taken into account. I have examined all the representations and other material that was available to the Commissioners both before and after the time of the decision." In evidence it emerged that what is cited as being the Commissioners' policy is not in fact to be found in the Commissioners' policy document. Mr Harris had spoken to a Mr S J Hopkins, the policy manager of HMRC and together they had decided on the wording included in the decision letter. The Appellant had, upon receipt of the decision letter, asked for a copy of the policy document, which Mr Hopkins had refused to provide. However, Mr Hopkins had written to the Appellant's solicitors saying:
"Below is a copy of the policy.
Smuggling
When a vehicle is detected smuggling road fuel then, other than in the (sic) exceptional circumstances that vehicle is to be seized and not restored unless it is owned by a finance company. Seizure and non-restoration in these cases reflect not only the revenue loss but also the health and safety dangers which smuggling of road fuels poses to other maritime or road traffic, to the environment and to the travelling public.
Where a vehicle has been adapted for smuggling of fuel the vehicle is to be seized and restoration is not to be offered. If in exceptional circumstances the vehicle has to be restored then the adaptation is to be removed or destroyed and the costs of this work are to be included in the restoration fee."
No copy of the policy was made available to the Tribunal.
The evidence
"1. Why the original manufacturers fitted tanks had been replaced on the tractor units?
2. Why tractor unit registration number FNZ 46 had undertaken 16 return journeys across the channel since August 2005 without being coupled up to a trailer?
3. Why tractor unit registration number VE02 VPC had undertaken 39 return journeys across the channel since December 2004 without being coupled up to a trailer?"
These questions were answered in Backhouse Jones' letter of 3 July 2006, so it would appear that the decision letter had been written by Mr Harris without waiting for an answer to those questions, certainly he made no reference in his decision letter to the paragraph extensively quoted above about the Appellant's enquiries of the Health and Safety Executive about ADR. Mr Harris accepted that he did not have evidence to reject what was said in that letter, but he took the view that he did not have to explain all his thought processes in the decision letter. He also pointed out that he had been provided with no evidence as to what ADR had said, and so thought that it would be open to him to reject the assertion made in the letter of 3 July on that basis alone. He had taken account of the reference to Mr Collins in the officer's notebook relating to the first seizure, although he had not recorded this in his decision letter. He did not consider it reasonable to assume that the Appellant would pay several thousand pounds to have the earlier vehicles restored to them, and then only make one enquiry which seemed to indicate that Customs and Excise had been wrong, yet still take no further action. Curiously Mr Harris told the Tribunal that he did not ignore the letter of 3 July, but said it was not referred to in his decision because he rejected the assertion contained in it. Since the letter of 3 July is stamped "received 5 July 2006" and there is no indication that it was ever sent through by fax, Mr Harris cannot have received this letter at the time he made his decision.
The Respondents' case
The Appellant's case
"Since the coming into force of the Human Rights Act 1998, there could be no doubt that if the Commissioners are to arrive reasonably at a decision, their decision must comply with the Convention for the Protection of Human Rights and Fundamental Freedom 1950 … quite apart from this, the Commissioners will not arrive reasonably at a decision if they take into account irrelevant matters, or fail to take into account all relevant matters …
The Commissioners' policy involves the deprivation of people's possessions. Under article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is `to secure the payment of taxes or other contributions or penalties'. The action taken must, however, strike a fair balance between the right of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aims pursued … I would accept Mr Baker's submission that one must consider the individual case to ensure that the penalty imposed is fair. However strong the public interest it cannot justify subjecting an individual to an interference with his fundamental rights, that is unconscionable."
The policy as set out by Mr Hopkins was unreasonable, and incompatible with the Human Rights Act.
Reasons for decision
LON/2006/8073