United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2007/E01046.html
Cite as: [2007] UKVAT(Excise) E1046, [2007] UKVAT(Excise) E01046

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F McGleenan (t/a FMG Fuels v Revenue & Customs [2007] UKVAT(Excise) E01046 (27 June 2007)

E01046

EXCISE DUTY – Registered dealer in controlled oil – Removal of approval – Whether reasonable – Yes – HODA 1979 ss 23A, 23B and 24AA – CEMA 1979 s 100G(5)

BELFAST TRIBUNAL CENTRE

F McGLEENAN T/A F M G FUELS Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: SIR STEPHEN OLIVER QC (Chairman)

JOHN ADRAIN FCA ANTHONY HENNESSEY FCA

Sitting in public in Belfast on 26 and 27 April 2007

Andrew Young, counsel, instructed by Hanman Associates, solicitors, for the Appellant

Ben Collins, counsel, instructed by the solicitor for Her Majesty's Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007


 


DECISION

1. Francis McGleenan appeals against a review decision given pursuant to section 15 of the Finance Act 1994. The review decision of Ms Angela Cook of 1 December 2006 confirmed an earlier decision of the Customs of 17 October 2006 to revoke Mr McGleenan's approval to trade as a Registered Dealer in Controlled Oils ("RDCO") under "the RDCO Scheme".

Legislative background

2. The legislation is contained in section 100G of Customs and Excise Management Act 1979 (CEMA) as amended. Sections 100G and 100H(1) of CEMA and the relevant provisions and regulations produced under the Hydrocarbon Oil Duties Act 1979 ("HODA") are contained in the Appendix to this Decision.
3. Section 23 A of HODA provides that the buying or selling of controlled oil by a revenue trader who is not a registered excise dealer and shipper will attract penalties and/or forfeiture.
4. The Customs have issued public guidance in Notice 192 as to the obligations of a RDCO and the sanctions and penalties for non-compliance. Briefly stated, the obligations include taking reasonable steps to ensure that the controlled oils are only supplied to entitled end-users; making returns containing specified information about supplies; and keeping records.
5. The effect of those statutory provisions is that:

(i) A trader may only deal in controlled oil if he has been approved as a RDCO;

(ii) Customs may approve any trader according to such requirements as they think fit to impose and

(iii) Customs may revoke approval at any time, provided that they have reasonable cause to do so.

6. An appeal to this Tribunal lies against a decision under section 100G by virtue of sections 14(1)(d) and 16(4) and paragraph 2(b) of Schedule 5 to Finance Act 1994. We have to be satisfied that the Appellant in question has shown that Customs could not reasonably have arrived at the decision to revoke approval.

The facts

7. Mr McGleenan, trading as FMG Fuels was approved as a RDCO on 7 April 2003. His Certificate of Approval stated that the approval was subject to compliance with the requirements of Notice 192 and the conditions enclosed with the Registration Certificate. The Certificate contains a warning notice which reads as follows:

"Failure to comply with the provisions of the notice or the enclosed conditions may result in cancellation of this approval."

The enclosed conditions were, first, the provision of monthly returns and, second, an obligation to check regularly that customers were properly entitled to receive the oil in accordance with Notice 192.

8. Mr McGleenan gave evidence. Trading as FMG Fuels he had been carrying on business from three venues:

(i) Armagh Road, Keedy;

(ii) Creamery Road, Crossmaglen and

(iii) Keedy Food Fare, a convenience store with fuel pumps ("KFF").

9. By early 2004 the business owned three tankers which made bulk deliveries to customers.
10. We heard no particular evidence about the Armagh Road outlet. The Creamery Road Yard is managed by Mr Justin McKee who gave evidence. Mr McKee has worked there for some three years and has worked for Mr McGleenan as a tanker driver. Yard sales are of heating oil.
11. KFF, sometimes known as McGleenan Centra, is a "forecourt convenience store". The forecourt sells unleaded and diesel fuel. There has also been a "gas oil" pump on the forecourt which has been operated in much the same way as the petrol and diesel pumps.
12. The FMG Fuels business operates as a RDCO from all three sites. And, as already noted, the Certificate of Approval was issued on 7 April 2003. (The relevant parts of the evidence of Mr McGleenan and Mr McKee are identified later in this Decision when we analyse the facts in relation to the review decision.)
13. Notice 192 was released in March 2003. It contains the RDCO Scheme. "Controlled Oils" are oils subject to a rebated rate of duty under sections 11 and 13 of HODA. They include marked rebated gas oil ("RED Diesel") and marked rebated kerosenes (paraffin, burning oil etc). The RDCO Scheme requires dealers such as Mr McGleenan to take reasonable steps to ensure that the controlled oils are supplied only to entitled end-users. It requires the dealer to make returns and to keep records. These requirements are presumably imposed to prevent unauthorised consumers from getting hold of and using oils that have the benefit of the rebated rate of duty. They are designed to contain the risk of loss to the Revenue because of an unauthorised consumption of such oils. For this purpose the terms of the Scheme place rigorous restrictions on the dealer.
14. The dealer, e.g. Mr McGleenan trading as FMG Fuels, is required to take reasonable steps to ensure that its customers are properly entitled to receive the oil that is being supplied. Section 5 of Notice 192 has the force of law. So far as is relevant at this appeal it provides:

(i) that supplies "made in pre-packed containers" not exceeding 20 litres require no additional records beyond those required for the purposes of the business (i.e. those required of VAT registered traders);

(ii) that supplies made to domestic end-users (of e.g. kerosene for use in heating their dwellings) require a record to be kept of the customer's name and delivery address, of the quantity supplied and of information to identify that the customer is domestic;

(iii) the ex-yard supplies by the RDCO not in excess of 100 litres require no additional records beyond those required for the purpose of the business but,

(iv) ex-yard sales exceeding 100 litres require records detailing the name and address of the customer and the customer's stated use as well as the quantity of oil supplied and the terms of payment. Also if appropriate the customer's VAT number and his vehicle registration number must be recorded;

(v) all other bulk supplies require a record of the name and address (including postcode) of the customer, the invoice address, the customer's VAT number, the terms of payment, the quantity of fuel and the customer's stated use.

15. Speaking of the Creamery Road Yard sales, Mr McKee said that as many as 30 customers could come in a day, some with bowsers holding 300 gallons and some with 20 gallon drums. Many were paying £300-£400 and payments were in cash. He took their money before loading their bowsers and drums. He said that many of the customers were reluctant to give their vehicle numbers and he did not insist on postcodes before supplying the fuel.

Returns

16. Returns (on form HO5), says section 6 of Notice 912, are to be submitted monthly and by the end of the 21^st day of the following month. Separate entries relating to rebated gas oil and kerosene are to be made for domestic supplies, for pump supplies, for supplies to other RDCOs and for bulk and commercial supplies. The last of those entries require details of the customer's VAT number, trading name and postcode and the stated use for the oil being delivered.

The visits

17. About a year after registration Mr McGleenan was visited (on 22 March 2004) by a Customs officer, Ms J Best. During this visit a number of issues were (according to her note of the visit, the accuracy of which was not challenged) discussed. These were primarily concerned with the completion of monthly return forms. In particular the discussion focused on supplies made to commercial customers and how they should be recorded on the HO5 form. Following her visit Ms Best wrote to Mr McGleenan on 2 April 2005 highlighting several areas of concern. The first was "Supplies made to Building Contractors" where Mr McGleenan was recording the invoice address as opposed to the delivery address of these supplies. She emphasised that it was imperative that the delivery address be on the HO5.
18. The next item specifically mentioned in Ms Best's letter was "Pump sales exceeding 100 litres". Up until the time of the visit Mr McGleenan had only been recording the name of the customer and the "town land" where the customer resided. Ms Best pointed out that an RDCO had obligations to carry out certain checks and to retain certain information and referred Mr McGleenan to section 5 of Notice 192 which states "This section has the force of law" and section 5.10 that states "Your obligations are not discharged by just recording the information … this means that you will have to carry out some checks to satisfy yourself that the customer, and stated use of the oil, is legitimate". Ms Best requested that Mr McGleenan ensured this information was recorded for all future sales.
19. Finally in that letter Ms Best referred to "postcodes" and advised that Mr McGleenan should obtain the postcode for delivery address for all supplies to commercial customers but where this was not possible he should complete the postcode box for such a supply using the dummy code M60 9LA (the Customs' Ralli Quays address).
20. Asked about the requirements contained in Notice 192, Mr McGleenan said that he had not been aware of the Notice until Ms Best's visit.
21. Eighteen months later, on 30 November 2005, a visit to the FMG Fuels premises was made by a Mr P Cunningham, another Customs officer (who gave evidence). A check of HO5 returns showed that the returns for February 2004 and April 2005 were missing. Errors in returns between October 2004 and October 2005 were identified: for example various sales to another retailer had been entered in the wrong boxes and incorrect codes had been used to categorize the end-use of rebated oil.
22. A letter from Mr Cunningham to Mr McGleenan records a number of apparent record-keeping deficiencies. It made the following among other points. There was no apparent control over the rebated fuel sold. Mr McGleenan had asserted that for personal safety reasons the required level of customer information in respect of yard and pump sales had not been accurately recorded. No checks had been undertaken to confirm whether the stated use of the fuel sold was eligible. Primary records in respect for yard sales had not been retained. A large percentage of commercial supplies had no details of the relevant customer VAT number.
23. Mr Cunningham's letter made two other points. It appeared that Mr McGleenan had continued to use the RDCO approval number of the previous owner of KFF when making supplies. That, the letter said, must cease. Second, the letter required Mr McGleenan to have signs attach at all forecourt and yard gas oil pumps confirming that that fuel was not for road use.
24. The next visit was carried out on 25 July 2006 by Mr Cunningham. He noted that the RDCO return for June 2006 had not been submitted. (That return, Mr McGleenan explained, had been "in the post".) It was also noted that Mr McGleenan had received a previous warning letter in respect of his March 2006 return which had also been submitted late. As far as we could ascertain, five of the 2004 returns had been submitted late.
25. Mr Cunningham's visit of 25 July 2006 showed up a number of failures. These included the failure to maintain proper records, to obtain full postal addresses in respect of ex-yard sales, to record vehicle registration details in respect of ex-yard sales and to have records relating to supplies of gas oil from the forecourt pumps at KFF (which had not been entered on the RDCO returns). Mr Cunningham noted that a supply of rebated gas oil had been made in March 2006 to an individual whose RDCO approval had been revoked in June 2005. (Mr McGleenan admitted that this had been an unfortunate error.)
26. Following that visit Mr Cunningham wrote to Mr McGleenan on 1 August 2006 to highlight the areas where the RDCO approval conditions continued to be breached. He advised at the end of the letter that he would be forwarding details of the continued failures to comply with the conditions of RDCO approval to "MORC" (a Customs department) and advised that such failures could lead to the imposition of financial penalties or revocation of the RDCO approval.

A fixed penalty

27. On 2 August 2006, Mr Cunningham issued a penalty of £250 for seven breaches of the Hydrocarbon Oils (Registered Dealers in Controlled Oil) Regulations 2002, in particular Regulations 8(2) and Regulation 9. Despite the issue of this penalty Mr McGleenan failed to submit his July return by the due date of 21 August: it was not received until 28 August 2006.

Withdrawal of Approval

28. Mr Cunningham forwarded details of Mr McGleenan's breaches of the RDCO regulations to MORC and after considering all the information passed to them and whether Mr McGleenan's human rights might be violated, MORC decided to withdraw his approval as an RDCO. This was advised to Mr McGleenan in a letter of 17 October 2007 which stated that approval would be revoked with effect from 20 October 2006 by virtue of section 100G of CEMA. The letter specified as Mr McGleenan's failures to fulfil his obligations under the Scheme, his failure to maintain and produce adequate business records for rebated fuels as detailed in the Customs' letters of 2 April 2004, 1 December 2005, 25 January 2006 and 31 July 2006. It identified his failure to ensure that checks had been made on customers despite reminders in those letters. It also specified Mr McGleenan's failure to render complete and accurate returns by the due dates despite the reminder issued on 1 December 2005.

Review of decision to withdraw approval

29. The review decision of Ms A Cook was given by letter of 1 December 2005. The letter concludes as follows:

"Mr McGleenan has clearly failed to comply with regulations 8 and 9 of the Hydrocarbon Oil (RDCO) Regulations 2002 and the specific conditions of approval as shown on the Certificate of Approval issued on 7 April 2003.

The Specific Conditions of Approval advise that the general conditions of the RDCO Scheme are to be found in paragraph 2.6 of Notice 192 and also refer to the Notice again with regard to checks to be made on customers. The conditions also include a requirement that a completed and signed HO5 return be submitted to MORC by the 21^st of the month following the end of the return period.

Mr McGleenan has been directed to the various sections of Notice 192 a number of times and the need to obtain and keep specific information from his customers has been explained. He has also been reminded several times about the importance of completing the HO5 returns accurately and submitting them on time but has failed to heed any of these directions."

Our jurisdiction

30. The decision of the Customs is "an ancillary matter" under section 16(8) of FA 1994 and Schedule 5 paragraph 2(1)(q). Our powers are given by section 16(4) which provides as follows:

"(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be 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 …".

In determining whether the decision was unreasonable we have to be satisfied that the Customs have acted in a way in which no reasonable panel of Commissioners could have acted; we have to be satisfied that they did not take into account some irrelevant matter or have not disregarded something to which they should have given weight. In this regard we have to bear in mind that a decision will be unreasonable if it is disproportionate.

The case for Mr McGleenan

31. Mr McGleenan challenges the review decision on the grounds that the deciding officer had not acted proportionately. There had been a failure to adopt the more appropriate response of either imposing a larger fine or of requiring a guarantee from Mr McGleenan. The course Customs had actually taken had been to impose a fine and had then revoked Mr McGleenan's approval as a RDCO; both of those had been based on the same shortcomings without any new feature to justify the revocation. Instead, the Customs should have gone through the stages in the escalating scale of action referred to in section 8.1 of Notice 192. The scale starts with educational visits, goes on to warning letters then to civil penalties and finally to withdrawal of approval. The Customs' failure to act proportionately flawed the decision-making process.
32. Mr McGleenan further contended that, while there were concerns about his returns, these had caused no loss to the revenue, nor had the absence of signage on the forecourts, nor had sales to customers from the South of Ireland. Moreover, as Customs had never explained to Mr McGleenan what was meant by "primary records", they could not complain that he had not kept them. Nor could Customs complain of Mr McGleenan's use of "town lands" as addresses rather than the full postcode addresses. Mr McGleenan's business was very close to the border and town land addresses were as good as could have been given in the circumstances.

Conclusions

33. To set the scene we make two points. First, the opportunities for misuse of rebated oils are self-evidently so great that a tough compliance regíme is essential. The principle has to be that any one dealing in controlled oil will be operating lawfully only if he complies to the letter with the terms of the RDCO Scheme. RDCO Scheme is regulatory in nature and the Customs are the regulator. The regulatory framework is contained in HODA, as amended by FA 2002 and in CEMA section 100G and the RDCO Regulations. No issue of construction arises on these provisions, but the relevant parts are set out in the Appendix to this Decision. It will be noted from, for example, subsections (4) and (5) of section 100G that the Customs as regulators are empowered to approve and regulate a person on such terms as they may think fit and they may "at any time for reasonable cause revoke or vary the terms of approval".
34. Second, Finance Act 1994 sections 8 and 9 introduce civil penalties covering contraventions of the whole range of statutory requirements relating to Customs and Excise duties. The £250 penalty was imposed under section 9(2)(b).
35. The penalty power is one of the tools given to the Customs as regulator. But it use cannot displace or restrict the Customs' wider responsibility to ensure that the RDCO Scheme is properly regulated and that only suitable persons are approved dealers. Withdrawal of approval, unlike a penalty, is not a punishment. We agree with the argument for Customs that withdrawal of approval is a means of protecting the revenue by ensuring that non-compliant dealers are not permitted to continue to trade. The Customs' power to approve a dealer is restricted to approval of those who appear to them to satisfy the criteria for approval. Correspondingly the Customs would be failing to carry out their regulatory duties if they were to allow a dealer to continue to trade in circumstances where it was clear that his non-compliance presented a continuing risk to the revenue. The fact that a penalty for non-compliance with particular regulatory requirements has been imposed on a dealer cannot be a bar to the Customs' revocation of approval on grounds that the dealer's non-compliance with those requirements presents a risk to the revenue.
36. It is correct, as is pointed out for Mr McGleenan, that the Customs have a range of regulatory tools available to them to deal with non-compliant dealers. They can impose fines, they can seek financial guarantees and they can withdraw approval. The question for us is whether, in all the circumstances, the Customs' decision to withdraw approval was one that they could not reasonably have arrived at.
37. We now turn to analyse the appeal in the light of the facts. In this connection Customs pointed out that at no time prior to the hearing had Mr McGleenan or his advisers sought to challenge the Customs' version of the facts, despite a series of letters sent by Customs after each visit itemising the various shortcomings noticed by Customs. And even when invited by the review officer to provide information and put formal evidence in support of the case for Mr McGleenan that approval should not be withdrawn, he and his advisers did not do so; we refer to letters from the review officer of 6 and 14 November 2006.
38. The starting point for the analysis of the appeal is that the Certificate of Approval for Mr McGleenan states specifically that approval is granted subject to compliance with, first, the requirements of Notice 192, second, the submission of returns by the 21^st of each month and, third, regular checks being made that customers were entitled to receive oil (in accordance with Notice 192). Mr McGleenan, we note, admitted that he had not read Notice 192 properly when he started trading and only did so after the Customs officers had expressed concerns. The records show that returns were consistently late and on occasion very late indeed. Further, Mr McGleenan acknowledged that proper checks had not been made: a full address had not been asked for and, we note, Mr McKee had stated that he would not ask even for registration numbers if he felt that customers would be reluctant to provide the information. The impression given by those factors is that Mr McGleenan's attitude to compliance has been reckless. It necessarily presents a risk to the revenue. This is because rebated fuel may be consumed by users who should have paid full duties. The risk arises where records are not kept or where records are not accurate; it also arises where records are not supplied to the Customs and where checks are not made. It is only through making proper checks and keeping proper records and providing those records to the Customs that they can ensure that fuel is not being misused.
39. We turn on now to certain specific factual issues.
40. We summarised the effect of section 5 of Notice 192 in paragraph 14. Providing the customer's address is a mandatory requirement of section 5. The suggestion that a "town land" is an address does not in any way convince us. In some cases, not even a town land was given but the county, e.g. "County Monaghan", according to Mr Cunningham's visit note
41. The notes of advice in Ms Best's visit report show that she had explicitly pointed out the requirements of Notice 192. Mr Cunningham had made the same points on three subsequent occasions. The suggestion that any kind of approval was given to the practice of ignoring Notice 192 (as is suggested by Mr McGleenan) and recording only "town land" is unacceptable. It is contradicted by all the visit reports and correspondence. It would be directly contrary to the Customs' published policy in Notice 192 as summarised above.
42. Mr McKee accepted that he was never instructed even to ask for the address; he also accepted that a refusal by a customer to provide information would never lead to a refusal to sell. If the information was not provided fuel would be sold anyway.
43. Accordingly we are satisfied that no proper records were kept. Mr McGleenan persistently refused to change his practice in the face of repeated visits and advice.
44. We were provided at the hearing with "spreadsheets". These were not completed at all prior to 1 March 2006. These, Mr McGleenan explained, had been compiled by him the following day, using the sheets of paper used by Mr McKee on the previous day at the point of sale. The contents of the spreadsheets show the deficiencies identified above. They show that no addresses were taken and that in many cases the vehicle registration number was not taken either. They also suggest that all Mr McGleenan's customers were from the Republic of Ireland. That is not what Mr McGleenan had said in the early stage of his evidence. At that early stage he had explained that there was no postcoding system in the Republic of Ireland; and "I have quite a few customers from the Republic of Ireland". We doubt the accuracy of the information contained in the spreadsheets. Customs could, we think, reasonably disregard their accuracy too.
45. One particular matter of note arises from the spreadsheets. This was adverted to by Mr Cunningham when he gave evidence. Red diesel is recorded as having been supplied to customers from the Republic of Ireland (the majority of sales are of kerosene). It is illegal to take red diesel into the Republic of Ireland. Were customers wishing to buy red diesel to have given an address in the Republic, that should have alerted Mr McGleenan to the possibility that the fuel might be misused. It does not appear that he made any checks in the light of this.
46. We turn now to the "primary records".
47. Mr McGleenan's evidence was that he had not known what "primary records" had meant and he indicated that he had not been told. We cannot accept this. Mr Cunningham had made it clear that he had told Mr McGleenan what records he needed to keep. We note that in the course of re-examination Mr McGleenan had been asked what he understood was meant by "primary" and at that stage confirmed Mr Cunningham's account saying that he had understood of what Mr Cunningham meant by primary records was the "handwritten dirty bits of paper from the yard".
48. Mr McKee's evidence, in which he said he was expected to make a note on a piece of paper taken from his vehicle, strongly suggests that in reality there was no proper system at all. We see no good reason why proper records could not have been maintained from the outset nor why the paper notes produced by Mr McKee could not have been kept, irrespective of how neat or clear they may have been. All revenue traders are required to keep business records. Mr McGleenan was repeatedly advised to keep his paper records and he failed to do so.
49. So far as sales from KFF are concerned, Mr McGleenan maintained that he only ever sold from 20 litre drums. Mr Cunningham's evidence, supported by the notes, is that pre-packed fuel was not even mentioned at the first visit and was later only discussed as a possibility. That of course would be consistent with Mr McGleenan's evidence that he had not read Notice 192 properly prior to the visit and that the lack of pre-packed fuel was not in his mind when Mr Cunningham first attended. In evidence Mr McGleenan maintained that Mr Cunningham had never visited KFF.
50. The reality is borne out by the contemporaneous note in Mr Cunningham's visit notes: "Keedy FF – MGO through pump". "No checks/question re end-use". We think that fuel was simply dispensed from the pump, with no check on its use and no restriction on the use of 20 litre drums. Mr McGleenan's account that all KFF sales were of pre-packed 20 litre drums is, we think, something that he chose to present, long after the event, as his defence. It would be reasonable for the Customs to proceed on the same conclusion that we have reached.
51. In this connection we note the point taken for Mr McGleenan that the KFF sales were of pre-packed fuel. But even if fuel had been pumped into 20 litre drums and even if payment had taken place after the pumping, such transaction could not possibly be described as a pre-packed sale. Finally, in this connection, even if pre-packed sales were taking place, this did not relieve Mr McGleenan of the obligation to keep records.
52. In the course of the visits a number of failures to comply had taken place. Mr McGleenan accepted his errors but offered the justification that the problems had not recurred. Customs rely on the extent of these failures and the fact that they were spread over the period from March 2004 until July 2006. The particular defaults include:

(i) Failure to record delivery addresses on commercial deliveries.

(ii) Using the previous RDCO number of KFF.

(iii) Failing to fix signs stating "not for road use". This is a legal requirement pursuant to regulation 12 of the Hydrocarbon Oil (Marking) Regulations 2002.

(iv) Entering information in the wrong box in the return.

(v) Using the wrong code on the return.

(vi) The incorrect use of the "dummy postcode".

(vii) Failing to make delivery dockets "not to be used as road fuel". This is a legal requirement pursuant to regulation 13 of the Hydrocarbon Oil (Marking) Regulations 2002.

(viii) Supplying to another RDCO whose approval number was no longer valid. Failure to check the number was in contravention of Notice 192.

In the light of so many different failures, it cannot excuse the dealer to say of any particular failure that it was not repeated. Nor, we think, is it a defence to say that no loss to the revenue has been identified. It is only by the dealer's making proper checks, keeping proper records and filing proper returns that the Customs can maintain any control over the use of rebated fuels.

53. We turn now to the decision to revoke approval. It will be recalled that the conditions of approval required compliance with the requirements of Notice 192, the submission of returns by the 21^st day of each month and the making of regular checks that customers were entitled to receive oil in accordance with Notice 192. None of those conditions was, as we have observed, met. In the circumstances revocation of approval cannot possibly be said to be unreasonable.
54. In this connection we note the suggestion made on Mr McGleenan's part that the terms of section 8.1 of Notice 192 mean that some further facts have to emerge after the giving of a financial penalty in order to make it reasonable to withdraw approval. We cannot accept this. In the first place section 8.1 states that there will be an escalating scale, "In the majority of cases" and "Depending on the circumstances". It cannot therefore be right to suggest that withdrawal cannot take place merely because no (or only a very recent) civil penalty has been levied. In the present case Mr Cunningham would have been perfectly entitled to issue a civil penalty in January 2006. That Mr McGleenan was not penalised at that stage cannot prevent withdrawal where he continued to default over the next six months. In any event, we note, Mr McGleenan has never appealed against the penalty. In the second place, as we have already noted, withdrawal of approval is not intended as a punishment. It is a means of protecting the revenue.
55. Turning finally to the question of whether Customs acted unreasonably, in the sense of disproportionately, by not imposing a further penalty or requiring a financial guarantee, we do not agree. There is no prescribed regíme. The Customs are simply required to take such action as is reasonable. In fact they went through stages 1 to 4 in section 8.1. We agree with the contention of Mr Ben Collins for the Customs that the reality is that where, as here, the trader failed to read Notice 192 at the outset and therefore had no clear idea of his responsibilities and did not subsequently do what the notice told him to do and did not do what the officers advised and had been warned of the risks to his approval if he did not do so, he cannot reasonably complain when approval is withdrawn.
56. In view of all the features identified above, we think that Ms Cook, the review officer, could reasonably have come to the decision that she did. We therefore dismiss the appeal.

SIR STEPHEN OLIVER QC

CHAIRMAN

RELEASED: 27 June 2007

LON 2006/1384

APPENDIX

Legislative provisions

Hydrocardon Oil Duties Act 1979, as amended by Finance Act 2002, provides as follows (insofar as is material);

23A Regulation of traders in controlled oil

(1) If a revenue trader who is not a registered excise dealer and shipper –

(a) buys or sells controlled oil in the course of a trade or business or

(b) in the course of a trade or business deals in controlled oil,

his buying or selling, or dealing in, the oil shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties).

…

(4) Where a revenue trader who is not a registered excise dealer and shipper is entitled to the possession of any controlled oil, the oil is liable to forfeiture.

(7) Where oil is liable to forfeiture by virtue of subsection (4) above –

(a) anything mixed with the oil,

(b) any container in which the oil (and anything mixed with it) is kept, and

(c) any equipment kept for dispensing the contents of any such container, is liable to forfeiture.

23B Power to provide for exceptions to section 23A

(1) The Commissioners may by regulations make provision for –

(a) exceptions to section 23A(1) …

(b) exceptions to section 243A(4) …

(c) exceptions to section 23A(7)

(2) Regulations under subsection (1) above may provide for exceptions allowed by such regulations to have effect subject to conditions –

(a) specified by such regulations;

(b) specified by the Commissioners under such regulations.

24AA Registered excise dealers and shippers regulations: special provision for traders in controlled oil.

(1) For the purposes of section 100H (1)(p) of the Management Act (registered excise dealers and shippers regulations may, in particular, make provision authorised by this section), this section authorises provision –

(a) requiring traders in controlled oil to notify prescribed information;

(b) requiring traders in controlled oil to make prescribed returns;

(c) authorising a trader in controlled oil to carry out or arrange for the carrying out of any prescribed activity falling within section 100H(1)(b) of the Management Act in relation to controlled oil, but subject to prescribed conditions or restrictions;

(d) requiring a trader in controlled oil to give security by prescribed means for amounts that may become due from him by way of repayment of rebate;

(e) for taking into account, in determining whether a trader in controlled oil has –

(i) contravened any provision of registered excise dealers and shippers regulations, or

(ii) failed to comply with any prescribed condition, restriction or requirement,

the extent to which the trader has followed guidance issued by the Commissioners (including guidance issued after the making of provision under this paragraph referring to it).

(2) In this section –

"prescribed" has the meaning given by section 100H(3) of the Management Act;

"trader in controlled oil" means a registered excise dealer and shipper carrying on a trade or business that consists of or includes the dealing in, buying or selling of controlled oil.

Section 27, Interpretation

(1) In this Act –

'controlled oil' means hydrocarbon oil in respect of which a rebate has been allowed under section 11(1)(b), (ba) or (c) or 13AA;

Customs and Excise Management Act 1979 provides as follows (so far as material):

100H Registered excise dealers and shippers

(1) For the purpose of administering, collecting or protecting the revenues derived from duties of excise, the Commissioners may by regulations under this section (in this Act referred to as "registered excise dealers and shippers regulations") –

(a) confer or impose such powers, duties, privileges and liabilities as may be prescribed in the regulations upon any person who is or has been a registered excise dealer and shipper; and

(b) impose on persons other than registered excise dealers and shippers, or in respect of any goods of a class or description specified in the regulations, such requirements or restrictions as may by or under the regulations be prescribed with respect to registered excise dealers and shippers or any activities carried on by them.

(2) The Commissioners may approve, and enter in a register maintained by them for the purpose, any revenue trader who applies for registration under this section and who appears to them to satisfy such requirements for registration as they may think fit to impose.

(3) In the Customs and Excise Acts 'registered excise dealer and shipper' means a revenue trader approved and registered by the Commissioners under this section.

(4) The Commissioners may approve and register a person under this section for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under the regulations prescribe.

(5) The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section.

(6) The regulations may make provision for treating revenue traders as approved and registered under this section in cases where they are members of a group of companies (within the meaning of the regulations) which is approved and registered in accordance with the regulations.

100H Registered excise dealers and shippers regulations.

(1) Without prejudice to the generality of section 100G above, registered excise dealers and shippers regulations may, in particular, make provision –

(p) authorised by section 24AA of the Hydrocarbon Oil Duties Act 1979 (regulation of traders in controlled oil).

Registered Dealers in Controlled Oil Regulations provide as follows (in so far as presently material):

Interpretation

In these Regulations –

'the Oil Act' means the Hydrocarbon Oil Duties Act 1979;

'prescribe' means prescribe in a notice published by the Commissioners and not withdrawn by another notice;

'registered dealer in controlled oil' has the meaning given in regulation 4 below.

Registered dealers in controlled oil

(1) For the purposes of section 100G of the Management Act, the Commissioners may approve any person who intends to buy, sell, or deal in controlled oil and register him as a registered excise dealer and shipper in accordance with section 100G(2) of that Act.

(2) A person who has been so approved and registered shall be known as a registered dealer in controlled oil.

Conditions of approval and registration

(1) A registered dealer in controlled oil must give notice to the Commissioners of any change, or prospective change, in the information that he was required to furnish in his application for registration.

(2) A notice given under paragraph (1) above must be given –

(a) without delay, but in any event within 30 days of the change, and

(b) in such form and manner as the Commissioners may require.

(3) The approval and registration of registered dealers in controlled oil shall, in addition in any conditions or restrictions imposed on them by the Commissioners under section 100G(4) of the Management Act, be subject to such conditions as the Commissioners may prescribe.

Privileges, conditions and restrictions

(1) A registered dealer in controlled oil is entitled to carry on a trade or business that consists of or includes the dealing in, buying or selling of controlled oil to which section 23A(1) of the Oil Act applies.

(2) When buying, selling, loading, unloading, delivering, moving or holding controlled oil a registered dealer in controlled oil must comply with any conditions or restrictions that the Commissioners may prescribed.