United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2008/E01087.html
Cite as: [2008] UKVAT(Excise) E01087, [2008] UKVAT(Excise) E1087

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Carlos Caeiro (Amexa De Carril) v Revenue & Customs [2008] UKVAT(Excise) E01087 (15 February 2008)

E01087

EXCISE – Restoration – Seizure of trailer fitted with concealed non-standard tank – Decision not to restore trailer to Appellant – Other trailer owned by Appellant seized subsequently had been restored on condition that non-standard tank removed – Whether reviewing officer took into account all relevant matters – Proportionality – Appeal dismissed

LONDON TRIBUNAL CENTRE

CARLOS CAEIRO (AMEXA DE CARRIL) Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: Nicholas Aleksander (Chairman)

P D Davda FCA

Sitting in public in London on 30 January 2008

Laura Garcia Navarrete of Girasol Services for the Appellant

Fiona Darroch instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

1. This is an appeal against a review decision contained in a letter dated 20 June 2007 in which the Commissioners of HM Revenue & Customs ("Customs") notified the Appellant that their decision not to restore a refrigerated trailer (registration number PO 01006R) was upheld..
2. The background 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 law

3. The relevant legal provisions are set out below.
4. Council directive 2003.96/EC article 24:

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.

For the purposes of this Article,

"standard tanks" shall mean:

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.

"Special container" shall mean any container fitted with specially designed apparatus for refrigeration systems oxygenation systems, thermal insulation systems or other systems.

5. 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.

6. 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.

7. 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.

8. Section 88 of the Customs & Excise Management Act 1979 ("CEMA") provides that:

Where –

(c) a vehicle is or has been within the limits of any port or at any aerodrome ....

while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods, that ship, aircraft or vehicle shall be liable to forfeiture.

9. 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.

10. 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.

11. 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].

12. Sections 15 and 16 of the Finance Act 1994 provide that:

15(1) 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.

…

16(1) Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say—

(a) any decision by the Commissioners on a review under section 15 above (including a deemed confirmation under subsection (2) of that section);

…

(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 that 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; and

(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 the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.

13. Section 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.

14. 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 issues

15. As this appeal is from a review decision not to restore a trailer, what we have to decide is whether we are satisfied that the review officer could not reasonably have arrived at his decision. If he could not, then we have to go on to decide what action we should take under section 16(4) of the Finance Act 1994. Section 16(4) restricts the power of the Tribunal on an appeal. The Tribunal, of course, may dismiss an appeal but cannot simply allow it. The Tribunal may only do one or more of the three things mentioned in section 16(4) and then only if they are satisfied that the review officer could not reasonably have arrived at the review decision. The three things are: (a) to direct that the disputed decision ceases to have effect; (b) to require the Respondents to conduct another review in accordance with the directions of the Tribunal; and (c) to declare the decision to have been unreasonable.
16. 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 evidence

17. No evidence was given on behalf of the Appellant. A bundle of documents was produced by Customs, which included a witness statement dated 10 August 2007 by Mr David Cawthraw, the reviewing officer. Mr Cawthraw also gave oral evidence.

The facts

18. From the evidence before us we find the following facts.
19. The Appellant imports fresh Scottish shellfish into Spain.  On 17 March 2007 Customs at Portsmouth Continental Ferry Terminal stopped the Appellant's vehicle, registration 6165FBM, with its refrigerated trailer, registration number PO 01006R, driven by a Francisco Rodriquez Romay. The vehicle and trailer were empty and on their way to Scotland to collect a cargo of shellfish.  Officers inspecting and scanning the vehicle and trailer noticed that the bulkhead of the trailer appeared to have been adapted. The driver showed the officers what appeared to be a small electrical box located at the top of a ladder attached to the outside of the front of the trailer adjacent to the fridge motor. Opening the door of the box revealed a circuit board with circuit breakers, switches and wires. In fact the board was not in use and the wiring was not connected to anything, The board could be unscrewed and removed. Behind the board was a filler cap through which fuel could be pumped into a storage tank located in the bulkhead, which had been adapted for this purpose. The dimensions of the tank in the bulkhead were measured by the Customs officers, and they estimated that the tank contained between 700 litres and 1000 litres of diesel. The tank on the trailer was connected to the vehicle by a "suszi line" which allowed diesel to flow from the bulkhead tank to the vehicle. The bulkhead tank was in addition to the two tanks on the vehicle (which had a combined capacity of 1310 litres) and a tank underneath the trailer (used to supply the refrigeration equipment in the trailer).
20. The Officer was satisfied that the trailer had been adapted and was liable to forfeiture under section 88(c) Customs and Excise Management Act 1979 ("CEMA") and the vehicle was seized under section 139(1) CEMA as liable to forfeiture under section 141(1)(a) CEMA because it was used for the carriage of the trailer which was liable to forfeiture. The vehicle was restored free of charge.
21. The Appellant subsequently requested that Customs restore the trailer, and made representations as to the use of the fuel stored inside the bulkhead tank. However by a letter dated 25 April 2007, restoration was refused. A request was made by the Appellants representatives in a letter dated 14 May 2007 for a review of the decision to refuse restoration.
22. The review was conducted by Mr Cawthraw. The Appellant's submitted that the bulkhead tank had been installed to provide fuel to the auxiliary equipment that was required to keep the shellfish in good condition. The Appellant imported live shellfish, and these need to be kept in tanks that are both oxygenated and refrigerated. These systems consume large amounts of diesel fuel. If the trailer runs out of fuel and these auxiliary systems stop - even for a short time - the shellfish must be destroyed as they could constitute a health risk. The Appellant mentioned that on previous occasions their lorries had been stranded in adverse weather conditions, and had been unable to reach filling stations. The reason for the construction of the bulkhead was to isolate the fuel tank from the shellfish by using one piece panels that would not leak. The Appellant stressed that there had been no intention to conceal the tanks.
23. The Appellant noted that their other vehicle and trailer had been stopped and seized on 5 May 2007 at Poole. However Customs in that case restored the vehicle and trailer on the condition that the bulkhead tank was removed. The Appellant requested similar treatment in this case.
24. Mr Cawthraw wrote to the Appellant on 20 June 2007 setting out his conclusions. He considered that the adaptation of the trailer to install the additional bulkhead tank was sophisticated and would have cost a considerable sum. If the purpose of the bulkhead tank was merely to ensure that the vehicle did not run out of fuel, then there would have been no need to conceal the filler cap in an electrical box behind a false electrical board. Mr Cawthraw considered that the main incentive to disguise the bulkhead tank was probably to take advantage of the differential in the duty on diesel fuel between Spain and the UK. The cost of diesel in Spain is approximately £0.62 per litre, whereas it is approximately £0.96 per litre in the UK. The savings are significant, and based on the 700 litres to 1000 litres of fuel in the bulkhead tank, this could amount to £238 to £340 per run. The records available to Mr Cawthraw showed that the vehicle and trailer had made approximately 26 trips to the UK in the 18 months prior to its seizure. The total duty saved over these trips would amount to between £6188 and £8840.
25. Mr Cawthraw acknowledged that from time to time adverse weather conditions would cause difficulty, but these could be addressed by careful planning, ensuring that the fuel in the vehicle was topped up regularly. Even if a separate and additional tank was required, this would not explain the nature of the adaptation or concealment.
26. Mr Cawthraw also acknowledged that the seizure would cause the Appellant hardship, as it would affect the running of the business and cause financial difficulties. However the policy of Customs was only to restore a vehicle adapted for smuggling in cases of exceptional hardship. Mr Cawthraw did not consider that the inconvenience or expense arising from the seizure of the trailer as causing exceptional hardship. For these reasons, he confirmed the original decision that the trailer should not be restored.
27. In giving his oral evidence, Mr Cawthraw expanded upon the matters expressed in his letter of 20 June 2007.
28. First, there had been some question as to whether Notice 12A or Notice 1 had been issued to the driver, Mr Rodrigez, at the time of the seizure. Mr Cawthraw drew our attention to the copy of the Seizure Information Notice in the bundle, which included signed confirmation by Officer Willimore that he had issued these documents. This was supported by the notebook of Officer Wright (who spoke Spanish) and who spoke to Mr Rodrigez in Spanish about the issue of papers which explain the seizure and which should be given to his boss. In the absence of any evidence to the contrary, we find that these notices had been issued to Mr Rodrigez.
29. Secondly, Mr Cawthraw noted that as regards the second vehicle and trailer that had been seized by Officer Tulley in Poole, the bulkhead tank had been empty. Mr Tulley had been told that there was a consignment of shellfish in Scotland awaiting collection, which would spoil if not collected immediately. For these reasons, Mr Tulley decided to restore the vehicle and trailer on condition that the bulkhead tank was removed. We also note that the letter from Customs setting out the original decision not to restore the trailer was dated 24 April 2007 and was sent to the Appellant by fax. This clearly states that the reason for the seizure was because the trailer had been adapted to conceal goods.
30. Thirdly, Mr Cawthraw had considered the amount of fuel that would be consumed by the vehicle on a trip from the Channel ports to Mallaig (which was the stated destination of the vehicle and trailer). The distance from Dover to Mallaig is 639 miles, and assuming fuel consumption of 8 miles/gallon, this journey would consume 79 gallons. The "standard tanks" on the vehicle had a capacity of 1310 litres, which corresponds to 288 gallons. Assuming the vehicle refuelled before embarking on the ferry, on any basis (taking account of variations in the miles per gallon and the distance from Portsmouth as compared with Dover), there would be ample fuel in the standard tanks for the journey to Mallaig and back.

Reasons for decision

31. What we have to decide is whether Mr Cawthraw could not reasonably have arrived at his decision.
32. The Appellant's case was that the adaptation of the trailer to include the bulkhead tank was merely to ensure that there was adequate fuel to keep shellfish oxygenated and refrigerated on their journey from Scotland to Spain - even if the vehicle and trailer were for some reason stuck due to adverse weather conditions or required breakdown assistance.
33. Secondly, the Appellant was under the impression that the problem with the bulkhead tank was to do with the duty payable on fuel contained within it, rather than because the tank was concealed. It was for this reason that their second vehicle had travelled with its bulkhead tank empty since the original seizure. It was only when that second vehicle was seized at Poole that the Appellant appreciated that the issue was concealment. The Appellant noted that Officer Tulley at Poole was prepared to restore the trailer and vehicle upon an undertaking that the bulkhead tank be removed, and requested similar treatment in this case.
34. Finally the Appellant considered that the refusal to restore the trailer was unreasonable, was disproportionate and was in breach of the United Kingdom's international obligations under human rights legislation. In particular, the effect of the seizure was to reduce the capacity of the Appellant to process shellfish, and would put in danger the jobs of its workers. Under Section 23(1) of the Universal Declaration of Human Rights every person has a right to work and a right to be protected against unemployment and Section 30 of the Universal Declaration states that "Nothing in this Declaration may be interpreted as implying for any State … any right to engage in any activity or to perform any act aimed at the destruction of any rights and freedoms set forth here in". By refusing to restore the trailer, Customs endanger the rights of the Appellant's employees to work and their right to be protected against unemployment. The Appellant considered that if they had to trade with only one trailer for Spring/Summer 2008 they would need to make 10 employees redundant.
35. It was Customs' case that Mr Cawthraw's decision not to restore the vehicles was reasonable and proportionate.  The trailer had been adapted in a complex manner which concealed the bulkhead tank. No good reason was given for the sophisticated concealment of the filler cap in an electrical box, requiring the removal of a dummy circuit board with a screwdriver to gain access. The appellant merely alleged that the fuel in the bulkhead tank was needed to ensure the safety of the cargo of shellfish on its trip from Scotland to Spain. Customs did not regard this as a credible argument, as a prudent driver could ensure that the vehicle and trailer did not run out of fuel, for example by refuelling in Glasgow.
36. Customs considered that the decision not to restore the trailer was proportionate. Under s88 both the vehicle and the trailer were seized. However the vehicle (which was more valuable than the trailer) was restored. The trailer was worth around £1000, which was less than the amount of duty lost to the exchequer as a result of the bulkhead tank. It was Customs' policy to restore the trailer if exceptional hardship had been suffered by the Appellant. However exceptional hardship had not been suffered in this case – indeed Customs understood that the Appellant had purchased another trailer (which the Appellant's representative confirmed to the tribunal), so had two trailers in current use and continued to employ all of its staff.
37. As regards the Appellant's arguments on human rights, the United Nations' Universal Declaration of Human Rights was not directly enforceable through the domestic courts of the United Kingdom. Many of the principles expressed in the Universal Declaration have however been brought into force in UK domestic law through the Human Rights Act 1998 and the European Convention. We were referred to Lord Phillip's survey of the obligations imposed on Customs by the Convention and its protocols in Lindsay v Commissioners of Customs & Excise [2002] EWCA Civ 267 at 40. In summary, by observing the principle of proportionality, Customs will satisfy their obligations under Article 1 of the First Protocol.

Reasons for decision

38. We have to decide whether we are satisfied that Mr Cawthraw, who made the review decision under appeal, could not reasonably have arrived at that decision.
39. The Appellant provided no evidence to the Tribunal to support any of its arguments. In particular there was no evidence to support the Appellant's assertions that fuel was not readily available in Scotland, that it had suffered in the past with vehicles stranded in Scotland due to inclement weather, or that the fuel in the bulkhead tank was used exclusively by the refrigeration and oxygenation equipment in the trailer (and was not used to fuel the engine in the vehicle).
40. We note that the filler cap for the bulkhead tank was located in an electrical box at the top of a ladder, hidden behind a dummy circuit board, which had to be removed with a screwdriver. We also note that the tank was constructed within a bulkhead, rather than installing a more conventional "belly tank" on the vehicle. In the absence of any evidence to the contrary, we consider that the reason for this elaborate arrangement must have been to conceal the tank.
41. There was also no evidence that the employment of the Appellant's staff was placed at risk in consequence of the seizure. To the contrary the Appellant's representative confirmed that the Appellant had acquired another trailer since the seizure had taken place. The assertion by Customs that all of the Appellant's staff remain in employment was not refuted. The Appellant has continued in business with its second trailer operating without the bulkhead tank.
42. We note that the Appellant's second trailer had been seized but subsequently restored on the removal of the bulkhead tank. However we consider the facts relating to that seizure (particularly the fact that the bulkhead tank was empty and unused) was a sufficient factor to distinguish the two cases.
43. On the evidence before us, we therefore consider that Mr Cawthraw's decision not to restore the trailer was reasonable.

Decision

44. Our decision on the issue for determination in the appeal is that we are satisfied that the person making the decision on review (Mr Cawthraw) could reasonably have arrived at it.
45. The appeal is, therefore, dismissed.

Nicholas Aleksander

CHAIRMAN

RELEASE DATE: 15 February 2008

LON/2007/7054