LANDFILL TAX - Waste deposited on registered site - Whether deposited temporarily within the law - Whether material recorded in Appellant's books in fact deposited elsewhere - Whether assessment to best judgment - Whether amount should be reduced - Parkwood considered
CIVIL PENALTY - Admissibility of interview - Whether conduct dishonest
LONDON TRIBUNAL CENTRE
H G BENDALL Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MISS J C GORT (Chairman)
MISS A WEST FCA
Sitting in public in Bristol on 18 and 19 July and in London on 28 November 2002
Mr N Popplewell, solicitor of Burges Salmon, for the Appellant
Mr Christopher Mellor of counsel, for the Respondents
© CROWN COPYRIGHT 2002
DECISION
Background
The law
(1) Tax shall be charged on a taxable disposal.
(2) A disposal is a taxable disposal if -
(a) it is a disposal of material as waste,
(b) it is made by way of landfill,
(c) it is made at a landfill site, and
(d) it is made on or after 1 October 1996.
(1) A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material.
(2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant.
(1) There is a disposal of material by way of landfill if -
(a) it is deposited on the surface of the land or on a structure set into the surface, or
(b) it is deposited under the surface of land.
(2) …
(3) Sub-section (1)(b) above applies whether the material -
(a) is covered with earth after it is deposited, or …
(1) For the purposes of this Part, regulations may make provisions under this section in relation to a disposal which is a taxable disposal (or would be apart from the regulations).
…
(7) The regulations may only provide that a disposal is to be treated as not being a taxable disposal if or to the extent that -
(a) the disposal is a temporary one pending the incineration or recycling of the material concerned, or pending the removal of the material for use elsewhere, or pending the sorting of the material with a view to its removal elsewhere or its eventual disposal, and
(b) the temporary disposal is made in an area designated for the purpose by an authorised person.
This part applies to a disposal where -
(a) …
(b) …
(c) the disposal is a temporary one pending all of the material being put to a qualifying use within the relevant period; and
…
(1) An entitlement to credit arises under this Part where -
(a) a registered person has accounted for an amount of tax and, except where the removal by virtue of which sub-paragraph (b) below is satisfied takes place in the accounting period in which credit arising under this Part is claimed in accordance with Part IV of these regulations, he has paid that tax; and
(b) in relation to the disposal on which that tax was charged, either -
(i) the re-use condition has been satisfied; or
(ii) the enforced removal condition has been satisfied.
(2) The re-use condition is satisfied where -
(a) the disposal has been made with the intention that the material comprised in it -
…
(b) removed for use (other than by way of a further disposal) at a place other than a relevant site.
(c) that material, or some of it, has been recycled, incinerated or permanently removed from the landfill site, as the case may be, in accordance with that intention.
Paragraph 18 of Schedule 5 to the Act provides:
(1) Where -
(a) for the purpose of evading tax, a registrable person does any act or omits to take any action, and
(b) his conduct involves dishonesty (whether or not it is such as to give rise to criminal liability)
he is liable to a penalty equal to the amount of tax evaded, or (as the case may be) sought to be evaded, by his conduct; but this is subject to sub-paragraph (7) below.
Paragraph 25 provides for mitigation of the penalties.
The evidence
(1) Admissibility of the second interview
The Tribunal was referred to the case of Customs and Excise Commissioners v Han & Yau [2001] STC 1188 at paragraphs 80-84, where Potter LJ approaches the question that the Commissioners may be vulnerable to the Tribunal excluding as inadmissible evidence obtained during an interview, or subsequently, as a result of supplying to the taxpayer a statement of practice in Customs and Excise Notice 730. He continued:
"If such rulings were to become widespread it would significantly affect the ability of the Commissioners successfully to defend appeals and would threaten at the basis of the whole of the civil evasion penalty régime. Arguments have apparently already been `flagged' to the effect that the inducement procedure may amount to a breach of the right to silence and the right against self-incrimination. Whether this is correct has not been argued before us. However, I would only observe that the fears of the Commissioners seemed to me likely to prove unfounded in this respect.
It appears that the inducement procedure, at least as refined in December 2000, makes explicit to the taxpayer, in addition to the information supplied in Customs and Excise Notice 730, that the civil evasion investigation is not being conducted with a view to prosecuting the trader for VAT evasion, that the trader is not obliged to co-operate in the Customs investigation, and it is entirely a decision for the trader to decide whether or not to speak to the investigating officer or assist generally in the investigation. It must be remembered that the requirement of art 6(1) in relation to a third trial, together with what has been held to be the implicit recognition of a right to silence and a privilege against self-incrimination, are of a general nature and are not prescriptive of the precise means or procedural rules by which domestic law recognises and protects such rights.
It by no means follows from a conclusion that art 6 applies that civil penalty proceedings are, for other domestic purposes, to be regarded as criminal and, therefore, subject to those provisions of the Police and Criminal Evidence Act 1984 and/or the codes produced thereunder, which relate to the investigation of crime and the conduct of criminal proceedings as defined by English law. … I would merely add my view that, if matters are made clear to the taxpayer on the lines indicated in [77] above at the time when the nature and effect of the inducement procedure are also made clear to him (whether by Customs and Excise Notice 730 or otherwise), it is difficult to see that there would be any breach art 6. It also seems to me that, even if the Police and Criminal Evidence Act 1984 were applicable, it is most unlikely that a court or tribunal would rule inadmissible under section 76 or section 78 any statements made or documents produced as a result, at any rate in the absence of exceptional circumstances. On the other hand it follows from this decision that a person made subject to a civil penalty under section 60(1) of the Value Added Tax Act 1994 will be entitled to the minimum rights specifically provided for in art 6(3)."
"The Convention contains no express guarantee or privilege against self-incrimination thus the right we have to consider in this case is an implied right. While it cannot be doubted that a right must be implied, there is no treaty provision which expressly governs the effect or extent of what is to be implied."
"It is clear from the decision of the Privy Council in Brown v Stott [2001] 2 WLR 817 that the right not to incriminate oneself and the right to silence both of which are implied in art 6 of the European Convention on Human rights are not absolute, but they are closely related and that they arise from the right to a fair trial and the presumption of innocence. In that case a compulsory provision of a sample for a blood alcohol test was held not to be incompatible with the right against self-incrimination. In Saunders v United Kingdom (1996) EHRR 313 the obligation to answer the inspectors' questions was held incompatible. Mr Thomas stressed the absence of compulsion in this case we accept his submission that the use of the Notice 730 procedure does not breach article 6 but we note that the observations of Potter LJ in Han & Yau are qualified in that his Lordship referred to the nature and effect of the procedure being made and to "the absence of exceptional circumstances."
"At interview an early and truthful admission of the extent of the arrears and why they arose will attract a considerable reduction."
(2) The assessment
(a) There was a disposal of material (soil) as waste within the meaning of section 64. This was evidenced by the invoices. If the waste producer intended to discard or throw away the material by disposing of it as landfill , that disposal will be liable to landfill tax and the position does not change simply because the landfill site operator, or another party, makes use of the material. It is the intention of the person making the disposal which is paramount. The Appellant's intention was irrelevant in the present case (see NSR Ltd v Commissioners of Customs and Excise (L00007), ICI Chemicals & Polymers Ltd v Commissioners of Customs and Excise [1998] V&DR 310 and F L Gamble & Sons Ltd v Commissioners of Customs and Excise (L00004). The Appellant claimed to have bought some of soil that had been deposited on the site, but he had produced no invoices in respect of these purchases, nor had he provided the names and addresses of the suppliers. He had produced records showing charges he had invoiced for tipping on the site.
(b) The material was clearly deposited on land within the meaning of section 65
(c) The land in question was a landfill site within the meaning of section 66; there was a Waste Disposal Management Licence extant at all material times.
(d) The disposals to which the assessment relates were made after 1 October 1996.
"I would, for my part, entirely agree that the meaning of `deposit' takes it colour from the context in which the word is used. This statute is concerned primarily at least, with the manner in which waste is disposed of. Its provisions, and the conditions in the licence, are directed towards the mode of final disposal and not to the intermediate processes. For the purposes of this Act, waste is, in my view, to be regarded as deposited when it is dumped on the site with no realistic prospect of further examination or inspection to reject goods of which deposit is not allowed under the licence."
(i) No document was produced to support tipping elsewhere, all the invoices were made out to the canal site.
(ii) The farm deposits were taken into consideration.
(iii) There was no evidence to produced from (a) to show that he had been dumping on the Lydney estate. On the basis of the Appellant's own evidence it would be illegal. The burden of proof in any event was upon the Appellant.
(iv) The assessment was based on the Appellant's own records and invoices, and all on the face relate to the one site.
(iv) It was clear that the Appellant had accepted material on the canal site after 1 October 1996. The redistribution claim by the Appellant was not relevant since it was not the basis on which the assessment was calculated. It would not affect the records.
(3) The penalty
" In most of these cases the sort of analysis of the term `dishonesty' that one finds in Ghosh is unnecessary. Dishonesty is an ordinary English word, and in most cases it is a straightforward jury question whether there has been dishonesty."
The judge then went on to refer to the tribunal's decision and states:
"What the tribunal is saying is that an intelligent person like him, with his background, would have known with `a moment's thought' that it was an inherently dishonest system. …
It does use the word `recklessness', and I readily accept that recklessness by itself is not dishonesty. But it may be evidence of dishonesty."
(a) The Appellant made a false statement when he wrote on his first landfill tax return that the site had been "closed by environment agency".
(b) It was not accepted that the environment agency had told the Appellant that the site would be closed because they actually gave planning permission on 13 May 1997 in respect of the site.
(c) The Appellant had not produced any relevant contravention notices which it might be expected would be sent out before any threat of closure was made.
(d) In the course of the first interview the Appellant said "no comment" when asked to expand on the note he had made on the return.
(e) Even if the Appellant had thought the site was to be closed, he had still failed to declare that he was accepting disposals of material onto the site.
5/7/96 The Appellant said he was accepting waste to level off
27/11/97 The Appellant said he was covering the site off
1/5/98 The Appellant again said he was cover the site off
27/5/98 The Appellant said he was restoring the site
19/10/98 Again he said he was restoring the site
On 14 December 1998 there is the first mention of stockpiling
16/7/02 (the Appellant's witness statement) he first mention that the soil was being redistributed.
The Appellant's case
(a) He owed no landfill tax, the assessment should be reduced to zero.
(b) No penalty was due and/or it should be reduced to zero.
(c) The decision not to reduce the assessment to zero was flawed.
(i) In breach of planning consent and waste management licence
(ii) Soil for "capping-off" not "waste"
(iii) Temporary disposal only. It was effectively held on behalf of the exempt site. Temporary storage is permitted for up to twelve months in a "tax-free" area. No mention of this had been made to the Appellant until March 1999.
(iv) Credit for waste removed to another landfill site was due.
- No caution had been administered
- Admissions were made
- No legal adviser was present
- Had there been a caution the Appellant would have said `no comment'
- The admissions made were highly prejudicial
- There was no requirement for a second interview for the purposes of issuing the assessment
- It is clear from the interview that substantial pressure was put on the Appellant, the Appellant said he was badgered
- The Appellant had no genuine understanding of what he was saying, he was simply answering "yes" to all the questions
- It was not necessary to get an admission of dishonesty
(i) Admission that the tax was due was not per se acceptance of dishonesty. It must be seen in context and it was only made to avoid or reduce the penalty The Appellant's position at the hearing that he did not owe the tax was consistent with his position at all times prior to the interview on 1 September 1999.
(ii) Admissions of dishonesty were inadmissible on the basis of the case of Murrell (supra). There had been no caution against self-incrimination which was a fundamental Convention right as per Sir Martin Nourse in Han &Yau. The Tribunal was also referred to the case of Mu (supra) on the right for an appellant not to self-incriminate.
(iii) No caution was given as to the implications of admitting dishonesty (see Patel). The questions were pressed time and again to ensure there was "no misunderstanding". This was improper pressure.
(iv) A dangerous precedent would be set if the Commissioners could question on dishonesty without any protection for the taxpayer.
(v) The Appellant's acceptance of arrears was not inherently dishonest. It was up to the Tribunal to judge dishonesty.
(vi) Reece had no legal training, issues of dishonesty should have only be discussed after a caution and in the presence of a lawyer.
(vii) There was no reason for extracting admissions of dishonesty, the penalty was not reduced by the admissions.
Reasons for decision
MISS J C GORT
CHAIRMAN
RELEASED:
LON/00/1305