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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 >> Mullan v Revenue & Customs [2009] UKVAT(Excise) E01165 (21 January 2009)
URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2009/E01165.html
Cite as: [2009] UKVAT(Excise) E01165, [2009] UKVAT(Excise) E1165
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- This Appeal arises from the decision of the Respondents, on review, not to restore a seized vehicle, which was seized and forfeited when found to have rebated heavy oil or red diesel in its running tank. A review letter was issued by the Respondents to the Appellant on the 6th April 2007.
- The Hydrocarbon Oil Duties Act 1979 (HODA) provides:
- 1 Hydrocarbon Oil
- 6 Excise duty on hydrocarbon oil
- 11 Rebate on heavy oil
- 12 Rebate not allowed on fuel for road vehicles
- 13 Penalties for misuse of rebated heavy oil
- The Customs and Excise Management Act 1979 provides:
- On the 7th February 2007 officers of the Respondents challenged a JCB Fastback, registration W997 HPV ("the Vehicle") at Slaght Corner, Ballymena. The vehicle had a tipper trailer attached and was observed to be tipping a load of earthworks at a roadworks site. On that occasion it was found to contain marked gas oil or red diesel in its running tank. The driver, Mr. David Faith, an employee of the Appellant was questioned and, shortly afterwards, the Appellant arrived at the site and was also interviewed. The Vehicle was taxed as an agricultural tractor, but clearly was not being used as such. The Appellant, it was acknowledged, had two previous offences of a similar type:
- As for the incident in question, on the 7th February 2007, when the Vehicle was detected the Respondent firstly interviewed the driver, Mr. David Faith, who was a part-time employee of the Appellant. Mr. Faith, under caution, indicated that he had collected soil at a site at Gracehill and was in the process of tipping it at the side of the road when the Vehicle was detained. Prior to that the Vehicle had been on that site for approximately one week. He also indicated that he did not himself fuel the Vehicle, but that he was aware that it contained red diesel.
- The Appellant, when he arrived on site, also gave an interview under caution. The following is a summary of it:
- At the conclusion of the interview, the Officer of the Respondents was satisfied that the Vehicle was not being used as a tractor (as specified in Schedule 1, paragraph 2 of HODA) as it was not being used solely for agriculture and therefore not entitled to use red diesel. Accordingly it was seized and a Form C156 (Seizure Information Notice) was issued to the Appellant.
- The Appellant wrote to the Respondents on the 8th February 2007 requesting restoration of the Vehicle, citing the following justification for its return:
- That letter was followed on the 28th March 2007 by a letter from the Appellant's solicitors. The solicitor's letter acknowledged the default that had occurred, and put the following points in mitigation:
- That correspondence was treated as an application for a review and a review was accordingly carried out by Ms. Cathy O'Hara, a Review Officer of the Respondents, based in Belfast.
- In her review letter of the 7th April 2008, Ms. O'Hara cited the Respondent's Restoration Policy:
- The grounds of the appeal advanced to the Tribunal were that the Respondent's actions have been unreasonable or, to the extent that they have not acted unreasonably, that the penalty is disproportionate to the offence which has been committed.
- In support of his position the Appellant gave sworn evidence. He appeared to the Tribunal to be a credible witness and fully accepted the wrongs which he had committed.
- In cross-examination he was asked why he had committed a third offence during a period of approximately eight months, given that he had previously been warned of the seriousness of using red diesel for a non-exempt purpose. The excuse he advanced was that he had received a call at 8pm the evening before the discovery asking for some work to be carried out urgently in preparation for a fencing contractor. The Appellant, faced with the urgency and the lateness of the hour, accepted that he took a chance. When the Vehicle was left at the site the Appellant said that it was not his intention that it be used to transport soil, but he did accept that he did not take the time to drain the Vehicle and that he had taken a chance in firstly fuelling it with red diesel for the trip to the site and then allowing it to be used for transporting soil from Gracehill to the site where its use in the Vehicle was ultimately detected.
- Equally, he accepted that arising out of the second incident, when he had been asked to produce fuel records to permit a fuel audit to be undertaken, he still had not, by the third time he was stopped, actually delivered to the Respondents the information which would have allowed them to carry out that audit.
- Based on the evidence before it, the Tribunal found that the Appellant, given the history of two previous offences, had acted recklessly and, to use his words, had "taken a chance". The Tribunal did, however, in spite of that find him to be a frank, truthful and penitent witness.
- Ms. O'Hara appeared before the Tribunal and gave evidence as to the matters that she took into account in her Review Decision. In her evidence in chief, she indicated that she had taken into account, as part of the review process, the following factors:
- The Policy includes the following additional provisions:
- it would be disproportionate not to restore the vehicle;
- it would be inhuman not to restore."
- When questioned in cross-examination on the application of the Policy, Ms. O'Hara accepted that under the terms of that Policy, even where there was a third offence, and seizure was recommended, that she still retained a discretion to restore, which appeared to the Tribunal to be the correct approach.
- As to the question, however, of the factors that might be taken into account, she was cross examined on her understanding of the potential financial hardship to the Appellant that would have resulted from her determination not to restore. She indicated that she accepted "to some degree" that the decision would have resulted in financial hardship, but she did not consider, on all the facts, that the loss of the Vehicle caused sufficient damage to the Appellant's business to cause her to deviate from the Policy.
- Equally, Ms. O'Hara accepted that the Appellant's age was a factor in her determination but "not a major factor".
- Accordingly, although she took into account the hardship that would result from her decision to restore the loss, she felt it did not justify deviation from the Policy itself.
- In support of its case, the Respondent summed up as follows:
- In support of this contention, the Respondents cited the tribunal case of Vehicle Salvage Group Limited –v- Customs & Excise [2004] UK VAT (Excise) E00604 (7th January 2004). On the facts of that case, the Tribunal upheld the Departmental Policy and found that the non-restoration of the vehicles in question was a proportionate response to the contraventions of the Hydorcarbon Oil Duties Act 1979. The facts of that case were, however, more extreme than the present case and involved a series of criminality arising out of a fuel laundering operation, and the Chairman in that case found that "a lesser sanction under the Respondent's Policy was not justified because of the nature of the contravention, the links with the wider unlawful enterprise, and the previous offence of one of the Appellant's directors."
- The function of the Tribunal in a case such as this is to determine whether the Respondent's decision not to restore the Vehicle to the Appellant was a decision at which no reasonable body of Commissioners could have arrived. In order for the decision to have been reasonable, the decision maker (in this case the Review Officer, Ms. O'Hara) must properly consider all relevant matters, and must not have taken into account irrelevant matters.
- In the present case, we find the following facts:
- As regards the decision not to restore, however, whilst the Tribunal accepts entirely that the Respondents are entitled to maintain a Policy, the Policy itself is for guidance only and must be interpreted in light of the individual factual circumstances to which it is applied. Indeed the paragraphs cited above at paragraph 17 implicitly acknowledge that even in the most severe cases (eg. those involving smuggling) or where there is a vehicle purchased on a finance arrangement that it might, in certain circumstances, be appropriate to restore a seized vehicle and that the final decision must be proportionate.
- In the present instance:
- Accordingly, the Tribunal directs that the case be referred back to the Respondents for a re-consideration and that that reconsideration be undertaken in light of the finding of fact contained in this decision.
- No order as to costs.
E01165
Excise Duty – unlawful use of rebated heavy oil in a vehicle – persistent offender – restoration and application of policy - Appeal Allowed
MANCHESTER TRIBUNAL CENTRE Man/07/8048
GARETH MULLAN Appellant
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Sitting in public in Belfast on 2nd September 2008
Mr. Conor Maguire of Counsel for the Appellant and
Mr. James Puzey of Counsel for the Respondents
The Appeal
Relevant Legislation
(I) Subsections (2) to (6) below define the various descriptions of oil referred to in this Act.
(2) 'Hydrocarbon oil' means petroleum oil, coal tar and oil produced from coal, shale, peat or other bituminous substance, and all liquid hydrocarbons, but does not include such hydrocarbons or bituminous or asphaltic substances as are—
(a) solid or semi-solid at a temperature of 1°C, or
(b) gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars.
(1) Subject to subsections (2) and (3) below, there shall be charged on hydrocarbon oil—
(a) imported into the United Kingdom; or
(b) produced in the United Kingdom and delivered for home use from a refinery or from other premises used for the production of hydrocarbon oil or from any bonded storage for hydrocarbon oil, not being hydrocarbon oil chargeable with duty under paragraph (a) above,
a duty of excise at the rates specified in subsection (IA) below.
(I) Subject to sections 12 13, 13AA and I3AB below, where heavy oil charged with the excise duty on hydrocarbon oil is delivered for home use, there shall be allowed on the oil at the time of delivery a rebate...
(1) If, on the delivery of heavy oil for home use, it is intended to use the oil as fuel for a road vehicle, a declaration shall be made to that effect in the entry for home use and thereupon no rebate shall be allowed in respect of that oil.
(2) No heavy oil on whose delivery for home use rebate has been allowed whether under section 11(1) above or section I3AA(l) 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.
(3) For the purpose 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; and
(b) heavy oil shall be deemed to be taken into a road vehicle as fuel if, but only if, it is taken into it as part of that supply.
(6) Any heavy oil—
(a) taken into a road vehicle as mentioned in section 12(2) above or supplied as mentioned in subsection (2) or (3) above...
shall be liable to forfeiture.
(7). For the purposes of this section, a person is liable for heavy oil being taken into a road vehicle in contravention of section 12(2) above if he is at the time the person having the charge of the vehicle or is its owner, except that if a person other than the owner is, or is for the time being, entitled to possession of it, that person and not the owner is liable."
139 Provisions as to detention, seizure and condemnation of goods, etc
(1) Any thing liable to forfeiture under the Customs and Excise Acts may be seized or detained by any officer or constable or any members of Her Majesty's armed forces or coastguard
141 Forfeiture of ships, etc used in connection with goods liable to forfeiture
(I) Without prejudice to any other provision of the Customs and Excise Acts 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 thing so liable, shall also be liable to forfeiture.
152 Powers of Commissioners to mitigate penalties etc.
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.
Facts
(a) the first was on the 3rd July 2006 when the same Vehicle was tested in a car park in Portrush and was found to be running on red diesel; and
(b) the second, on the 5th December 2006 when the Vehicle was detected being used for the general haulage of stones / rubble in Main Street, Broughshane.
On both occasions the Vehicle was seized by the Respondents but was returned after payment of a penalty. It was accepted that after both incidents the Appellant was warned of the gravity of the offences and, on the latter occasion was warned that if further misuse was detected, the Vehicle would be seized and not restored.
The Tribunal was not given copies of those warning letters, but the Appellant did not attempt to argue that he had not been aware of the severity of the issue.
(a) he gave an indication that he spent about 40% of his time working as a grounds work contractor, undertaking mainly site work on building sites and occasional roadworks and the balance of this time working on the family farm;
(b) he confirmed that the Vehicle was both used for contracting and on his father's farm;
(c) he confirmed that the Vehicle was bought in May 2006 for £18,000 with the assistance of an Ulster Bank Business Loan of approximately £12,000.
When asked how the Vehicle came to be on site, the Appellant indicated that he had taken it down the evening before at short notice. This was in slight contradiction to the information which Mr. Faith gave in his interview but, nonetheless, in the evidence which the Appellant gave to the Tribunal, he repeated that he had taken the Vehicle down at short notice the evening before and had not had time to drain the Vehicle and re-fill it with derv. At the time of interview the two prior offences were put to the Appellant and he acknowledged that they had happened and that he was aware that it was an offence to fuel a vehicle with red diesel when using it for a non-exempt purpose.
(a) that the Vehicle was used on his father's farm;
(b) that its loss prevented the feeding of livestock on an out farm;
(c) that the Vehicle was required in order to spread slurry and that, effectively, the farm could not run adequately without the Vehicle in question, and that animal hardship would otherwise result.
(a) the age of the Appellant;
(b) his home and family situation;
(c) the severe financial impact upon him;
(d) the attendant stress of the seizure and related investigation;
(e) his mature approach at interview to the matters put to him;
(f) his realisation of the import of non-payment of duty and the unlawful use of red diesel;
(g) his assurance that such an event would not occur again; and
(h) the huge discrepancy between any duty owed to the Respondents and the value of the Vehicle seized.
"Where a person is found to be misusing fuel, civil penalties may be imposed and restoration may be offered. It is Departmental Policy to seize and not restore the vehicle on the third occasion where a person has been found misusing rebated fuel ….."
and continued
"I do not consider there to be any exceptional circumstances for deviating from the general policy and uphold the decision not to restore the Vehicle".
It is that refusal to restore the Vehicle which is the subject of the present appeal.
Grounds of the Appeal
The Review Decision
(a) the detailed letter in which she had received from the Appellant's solicitors;
(b) the fact that her decision not to restore would result in financial hardship on the Appellant and both his business and possibly that of the family farm;
(c) the internal guidance given by Revenue as to the Department's restoration Policy. A copy of the Policy was presented to the Tribunal and, under its terms, it has the following graduated structure:
(i) for the first offence, the recommended penalty is 100% of the revenue evaded, together with storage costs and the provision of a warning letter;
(ii) for the second offence, the recommended policy is for the restoration of a vehicle on payment of a penalty equal to 200% of the revenue evaded, together with storage costs and a final warning letter outlining the sanctions that would be applied on the occurrence of a third offence;
(iii) for the third offence, Customs recommendation is that the vehicle be seized and not restored.
"Smuggling
Where a vehicle is detected smuggling road fuel, then in exceptional circumstances that the vehicle is to be seized and not restored, unless it is owned by a finance company"
And the following section:
"Proportionality
Issues of proportionality and human rights should always be considered on all occasions where a detection is made. It is also important where non-restoration would normally be the case. There may be instances where seizing officers taking into account the issues of proportionality and human rights decide that restoration is appropriate. The decision to restore should be because:
[Emphasis added]
The Respondent's Submissions
(a) it cited the course of the Appellant's conduct over a comparatively short period of eight months as illustrative of a complete disregard on his part for the legalities around fuel use;
(b) on each of the three occasions when the Vehicle in question was stopped, it was found to be using red diesel illegally;
(c) on the previous (ie. second) occasion the Appellant was warned that any subsequent offence would result in the Vehicle being seized and forfeited, and not offered for restoration;
(d) that whilst there was some degree of hardship, it was not exceptional – certainly not sufficiently exceptional to justify deviation from the Respondent's Policy – a Policy which was created to deter fuel misuse.
Decision
(a) the Appellant was responsible for the Vehicle, registration number W997 HPV;
(b) that Vehicle was not an agricultural tractor, because it was not used solely for purposes relating to agriculture as required by Section 1 Paragraph 2 of HODA;
(c) that as a result, the misused red diesel became liable for forfeiture pursuant to Section 13(6) of HODA;
(d) that as a consequence of that finding, the Vehicle itself became liable for forfeiture pursuant to the powers granted to the Respondents under Section 141(1A) of CEMA, and that it was therefore correctly seized under Section 139(1) of that Act.
(a) there is no doubt that this was the third occasion on which the Appellant had been caught using red diesel;
(b) as the Appellant himself admitted, he had "taken a chance" and, to the extent he did so in spite of having two previous offences behind him, he certainly acted recklessly, but the Tribunal did not consider the Appellant to be in the category of an unrepentant criminal offender embroiled in a career of fuel duty evasion. The Appellant appeared to the Tribunal to be a young man who, although he had acted recklessly, perhaps learned his lesson and should be given a chance to correct his future actions and grow his business;
(c) it did appear to the Tribunal that Ms. O'Hara had taken into account all of the mitigating factors which had been presented to her but, on the evidence before the Tribunal, and having heard Ms. O'Hara, it did seem to the Tribunal that she gave insufficient weight to the financial hardship that would result for the Appellant on her decision not to restore the Vehicle and the disproportionate effect that strict application of the Departmental Policy might have in this case;
(d) the Vehicle had been acquired by the Appellant with the aid of the business loan. Whilst the Tribunal accepted that its ultimate loss did not cause the cessation of the Appellant's business (he had since acquired an alterative vehicle), nonetheless it was clear from the oral evidence given to the Tribunal that financial hardship had resulted;
(e) the Departmental Policy itself emphasised the importance of proportionality – acknowledging that its application might even countenance the restoration of a vehicle which was detected smuggling road fuel;
(f) that determination of proportionality must have regard to the gravity of the offence; the risk of re-offending and the impact of the loss of the vehicle and weight them against the other penalties that it was open to the Respondents to levy;
(g) the Tribunal felt that Ms. O'Hara, in adopting the Departmental Policy literally, had restricted, at too early a stage, the options available to her and had not fully considered a more proportionate penalty, such as the imposition of a more severe fine, that would equally have acted as a sufficient deterrent against further defaults by the Appellant;
(h) to that extent, the Tribunal found that she had failed to take into account something which she properly should have considered, which might have resulted in a more proportionate response, on the facts of this particular case.