United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2008] UKVAT(Excise) E01109, [2008] UKVAT(Excise) E1109

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Raymond Murphy v Revenue & Customs [2008] UKVAT(Excise) E01109 (24 April 2008)

E01109

Excise Duty – assessment to best judgement under section 13 HODA – reasonableness of assessment – appeal dismissed

MANCHESTER TRIBUNAL CENTRE MAN/07/8062

RAYMOND MURPHY Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Ian Huddleston, Chairman

A.W. Hennessey

Sitting in public in Belfast on 22nd February 2008

The Appellant did not appear and was not represented.

Kim Tilling of the Solicitors' office of HM Revenue & Customs for the Respondents

DECISION

The Appeal

This Appeal is against the disputed decision of the Respondent contained in a review decision which was notified to the Appellant by way of a letter dated the 30^th November 2006, upholding a decision to assess the Appellant pursuant to section 13(1A) of the Hydrocarbon Oils Duties Act 1978 ("HODA") in the total sum of £1,960. The original assessment was dated the 31^st August 2006.

The Appellant did not appear and was not represented, but the Tribunal decided to proceed pursuant to Rule 26(2) of the Tribunal Rules.

Factual Background

The Tribunal was advised that Mr. Raymond Murphy ("the Appellant") is the sole proprietor of a business which trades under the name "RGM Contracts" which is involved in air conditioning installation. The business trades from premises at 10 Riverdale Park, Ballyclare, County Antrim, BT39 9DG and was registered for the purposes of value added tax ("VAT") with effect from the 19^th January 2004 under registration number 832 2757 30.

On the 4^th July 2006, Officers of the Respondents stopped the Appellant's business vehicle, a diesel Renault van, outside Loughbrickland and as part of a routine test detected rebated fuel (red diesel) in the fuel tank. The Officers interviewed the Appellant under caution and evidence was given to the Tribunal that the following points were established:

(a) the Appellant had purchased the vehicle in question from new approximately two years previously;

(b) the Appellant had last refuelled the vehicle two days previously with approximately eight gallons of free fuel from a family friend, but the Appellant was not prepared to disclose the identity of or information about that friend, other than the fact that he was a farmer;

(c) that the Appellant had filled his vehicle from drums holding approximately eight to ten gallons of fuel on between ten to twelve previous occasions. On each occasion the supplier of fuel had been the same family friend or another local supplier;

(d) the Appellant indicated that he did not hold any fuel accounts and paid for such fuel as he bought using cash, credit card or cheque.

(e) the Appellant confirmed that he held a current road fund licence for the vehicle

(f) the Appellant confirmed on that occasion that he knew it was an offence to run a licensed road vehicle on red diesel.

After the interview the Officers were satisfied that the Appellant was not legally entitled to use rebated fuel in the vehicle and accordingly issued a Notice of Seizure of the Vehicle and further required him to surrender records pertaining to its ownership and use of all business vehicles in the last three years, so that the Respondents could undertake a full road fuel audit. The vehicle in question was returned on payment of £500 plus £15 arrears of duty, all of which was collected at the scene.

Under cover of a letter dated 17^th July 2006 (a copy of which was produced to the Tribunal) the Appellant produced documentation enabling the road fuel audit to be undertaken. In that letter the Appellant:

(a) enclosed some fuel purchase receipts;

(b) in terms of the Renault van, he indicated that he had purchased it in April 2004;

(c) whilst giving an indication that the miles per gallon varied, he gave an estimate of fuel usage at 45 miles per gallon;

(d) confirmed that the fuel tank capacity was 70/80 litres;

(e) confirmed that he had no additional fuel tanks, just mobile drums;

(f) indicated that the odometer reading was 52,000 miles;

(g) confirmed that there were no tachographs in the vehicle;

(h) indicated that the vehicle log book was not available at that moment because it was with DVLNI / insurers;

(i) indicated that he had no additional storage facilities for fuel, but that he did have two additional mobile generators.

That appears to be the only information which the Appellant has ever provided to the Respondents and it was, accordingly, based on that information that the Respondents undertook their audit.

Evidence was adduced to the Tribunal that the Respondents undertook the audit on the following basis:

(a) they limited the period of the audit to the period of ownership of the vehicle, MKZ 5236, namely from the 11^th June 2004 (being the date of acquisition) to the date of detection being the 4^th July 2006;

(b) at the date of detection the odometer reading was recorded at 57,858 miles as opposed to that which the Appellant asserted in his letter of the 17^th July 2006;

(c) the Respondents considered the relevant trade information available for the vehicle in question which disclosed an average of 38mpg on a combined urban / extra urban cycle, and on that basis conducted the audit based on an average of 40 miles per gallon;

(d) in relation to the invoices which the Appellant had produced, these were scheduled and examined. Some of the invoices were allowed and the Appellant given "credit" for them and others discounted (for reasons which will be dealt with below).

The result of the audit was that a total sum of duty assessed on the Appellant for the period was £1,906 and under cover of a letter dated the 31^st August 2006 an assessment for that amount (together with a schedule of calculations relating to it) was despatched to the Appellant.

By a letter dated the 19^th October 2006 the Appellant requested a review of the assessment on the basis of quantum.

By a letter dated the 30^th November 2006 the Respondents issued the review decision, advising that the issuing officer's earlier decision to assess the Appellant had been upheld in full. It is that review decision against which the Appellant has appealed.

Legislation

The relevant legislation is as follows:

Section 12 of HODA states:

"(2) No heavy oil on whose delivery for home use rebate has been allowed [(whether under [section 11] above or 13AA(1) below)] shall –

(a) be used as fuel for a road vehicle; or

(b) be taken into a road vehicle as fuel,

unless an amount equal to the amount for the time being allowable in respect of rebate on like oil has been paid to the Commissioners in accordance with regulations made under section 24(1) below for the purposes of this section."

Section 13 of HODA states:

"[(1A) Where oil is used, or is taken into a road vehicle, in contravention of section 12(2) above, the Commissioners may –

(a) assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excess duty due from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b) notify him or his representative accordingly.]"

Section 27 of HODA defines a road vehicle as meaning:

"a vehicle constructed or adapted for use on roads, but does not include any vehicle [which is an excepted vehicle within the meaning given by Schedule 1 to this Act.]"

On the basis of that legislation the Respondents contended that:

(a) Section 12(2) of HODA is relevant to determine the Appeal in that rebated fuel was detected in the vehicle MK75236 whilst on a public road and the Appellant had not paid an amount equal to the amount allowable in respect of rebate required by that section; and

(b) Section 13(1A) of HODA is relevant to determine the Appeal in that rebated oil had been detected in the vehicle which thereby resulted in the Commissioners having the power to assess the Appellant on the amount equal to the rebate on similar oil at the rate enforced at the time of the contravention.

Appellant's Case

Given that the Appellant did not appear, the Appellant's case as set in the Notice of Appeal was considered by the Tribunal. The grounds set out in the Notice of Appeal are as follows:

"- my original appeal letter dated 12^th October 2006 stated that you had not taken into account all the receipts which I forwarded to you and I has asked for review of said receipts. On receiving your most recent correspondence I would reiterate that all the receipts which I forwarded have not been considered. I frequently use local garages, few of which are itemised on your schedule;

- furthermore, travelling to and from the Republic of Ireland it is possible that receipts may have been mislaid or misplaced It can not be possible to account for every litre of fuel purchased. Similarly, if my vehicle was used for private use, fuel receipts would not be available;

- in relation to the above point, travelling long distances to and from ROI would result in lower fuel consumption and it is evidence from the receipts that significant long distance travelling is involved;

- my main client often provides fuel for business use which again would not be receipted."

Evidence

The Respondents called Mr. Colin David Tunnah, the initial assessing officer, to give evidence. Mr. Tunnah gave evidence that in response to the request for fuel receipts the Appellant had provided two packets of fuel receipts. Mr. Tunnah then explained to the Tribunal that on the basis of the fuel receipts which he had accepted as evidence of the purchase of legitimate fuel, he had compiled a schedule which was produced to the Tribunal. Other invoices he had excluded on the following basis:

(a) some invoices had no date on them and, at that point, those which fell into that category were produced to the Tribunal, where it was apparent that the bottom or date section of the relevant invoice had been cut off;

(b) some of the receipts related to purchases other than for diesel and had been excluded on that basis;

(c) other "receipts" were no more than credit card receipts and did not have sufficient detail to be able to assess whether they were for fuel purchases or not;

(d) other invoices had been excluded on the basis that they related to a period before the purchase of the van and, indeed, on the schedule which Mr. Tunnah produced, there were invoices listed from the 12^th January 2004 to the 1^st June 2004, all of which he had excluded;

For the benefit of the Tribunal Mr. Tunnah formally identified those invoices which he had taken into account, and those which he had excluded.

The Respondents also called Mr. Charles Dunn, the reviewing officer in this case. Mr. Dunn gave evidence that he had examined the following information as part of that review process:

(a) the notebooks of Officers Lawell and Lindsey in which the sworn statement of the Appellant was taken on the 4^th July 2006 when the vehicle, MKZ5236 was originally stopped (and which the Appellant subsequently acknowledged as true and signed);

(b) the letter requesting records and information to allow a fuel audit to be undertaken (which was given to the Appellant on the occasion that he was stopped) and the Appellant's response and supporting information as submitted in his letter of the 17^th July 2006;

(c) the information which Officer Tunnah undertook in relation to the raising of the initial assessment, which included the following:

(i) the date of purchase of the vehicle;

(ii) the recorded mileage of the vehicle as noted on the date of seizure;

(iii) the amount of fuel required to cover this mileage – for which he referred to published trade data giving the average fuel consumption of the vehicle;

(iv) the amount of un-rebated fuel purchased by reference to receipts provided by the Appellant and allowed by Mr. Tunnah.

Based on the discrepancy between the amount of fuel required to cover the total mileage and the amount of fuel for which valid receipts have been given, Mr. Tunnah and then Mr. Dunn had concluded that the shortfall was attributable to the use of red diesel. Duty was subsequently charged on this amount and Mr. Dunn then gave evidence as the Appellant had offered no further evidence to support his grounds for dispute, he had upheld the initial assessing Officer's assessment.

Conclusion

This Tribunal finds as a fact that the basis upon which the Respondents assessed the Appellant (as outlined above and in the absence of further evidence produced by the Appellant) appeared to be reasonable. In making that calculation, the inputs which they had used were entirely objective, namely:

(a) the mileage abstracted from the odometer reading on the date of seizure;

(b) the average mileage per gallon of 40mpg based on the empirical evidence and manufacturer's information on the van that was available;

(c) the calculation of the total diesel that would have been required to cover the mileage recorded;

(d) the deduction of the fuel for which valid and accepted invoices had been adduced;

(e) the discounting of other invoices (on the basis outlined at paragraph 14 above).

The Appellant's grounds of appeal concentrated on the fact that a larger number of invoices had been furnished by him than those upon which the assessment was based. Whilst that might be true, the Appellant equally was aware that not all of the receipts had been accepted and he did not produce any other evidence to support his argument as to why those invoices should be taken into account, nor indeed did he appear at the Appeal itself to give evidence to that effect.

In terms of the other grounds cited on the Appeal Notice the Appellant had:

(a) indicated that when travelling long distances to and from the Republic of Ireland, he would have been able to achieve greater economy in terms of fuel usage but, again, no evidence on that was adduced;

(b) suggested that his "main client often provides fuel for business use which again would not be receipted." Again, that assertion without supporting evidence could not be accepted by the Tribunal.

In short, the burden of proof in relation to the matters alleged in the Notice of Appeal rested with the Appellant, and he had not discharged it. The Respondents, on the other hand, had demonstrated to the Tribunal a reasonable and methodical approach to the assessment which they had undertaken and this Tribunal, in the absence of further evidence from the Appellant, can see no reason to disturb that assessment.

Accordingly this Appeal is DIMISSED.

Costs

The Respondents made an application for costs which the Tribunal grants. Costs are awarded against the Appellant in the sum of £1,430, inclusive of travel and accommodation costs.

Note – under Rule 26(3) of the Value Added Tax Rules 1986 (as amended) the Tribunal may set aside any decision or direction given in the absence of a party on such terms as it thinks just, on the application of that party, or of any other person interested, served at the appropriate Tribunal Centre within fourteen days after the date when the decision or direction of the Tribunal was released.

IAN HUDDLESTON

CHAIRMAN
Release Date: 24 April 2008

MAN/07/8062