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United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2005] UKVAT(Excise) E00893

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Chestnutt (t/a Chestnutt Animal Feeds) v Revenue & Customs [2005] UKVAT(Excise) E00893 (12 July 2005)

    EXCISE DUTY -- assessment -- Hydrocarbon Oil Duties Act 1979 s 6 commercial vehicle -- importation of fuel from Republic of Ireland -- Travellers' Relief [Fuel and Lubricants] Order 1995 -- commercial vehicle fitted with non standard tank -- transfer of purchased and imported fuel from one vehicle to another -- whether assessment made to best judgment -- yes -- whether adjustment to be provided in respect of purchases of fuel where no transfer likely to take place -- yes -- adjustment undertaken -- appeal allowed


    Tribunal: ALISTAIR DEVLIN (Chairman)

    Sitting in public in Belfast on 15 and 17 December 2004

    Seamus Lannon of counsel, instructed by James O'Brien & Co, solicitors, for the Appellant

    James Puzey of counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents



    The appeal

  1. The Appellant trades as a manufacturer, retailer and wholesaler of animal feedstuffs under the style of 'Chestnutt Animal Feeds' from premises situate at 55, Main Street, Stranocum, Ballymoney, County Antrim. The Appellant appeals against the decision of the Commissioners upon formal departmental review to uphold an assessment for 77,691, as previously issued to the Appellant on 30 December 2002 pursuant to section 12 of the Finance Act 1994 and representing arrears of excise duty for the period 1 February 2000 to 19 December 2001.
  2. In his Notice of Appeal dated 21 March 2003 the Appellant contended that the decision to assess the duty was wrong in law and on the merits. The Notice of Appeal also alleged that the factual basis of the evidence used in reaching the decision in question had been flawed.
  3. The essential facts

  4. The Tribunal found the essential facts relating to this appeal to be as follows. On 19 December 2001 at Maydown, County Londonderry, officers of the Commissioners stopped a commercial vehicle the property of the Appellant. The vehicle in question was a Volvo Arctic, Registration No. ODZ 9089. The officers upon inspecting the vehicle observed that it was fitted with two large fuel tanks. The officers spoke with the driver of the vehicle in question, and established that his identity was that of a Mr Michael Simpson, an employee of the Appellant. Mr Simpson informed the officers that he had been travelling from Muff in the Republic of Ireland, through Londonderry, and that he was on his way back to the Appellant's premises in Stranocum. Whilst in the Republic of Ireland, Mr Simpson informed the officers, he had purchased a total of 1253 litres of diesel fuel by means of two separate fuel cards: one which was held in respect of the particular vehicle which he had been driving at the time of being stopped, the Volvo Arctic ODZ 9089, and the other which was held in respect of a Mercedes goods vehicle MIW 1113.
  5. On being further questioned by the Commissioners officers, Mr Simpson informed them that he always drove the Volvo, that he regularly purchased fuel in the Republic of Ireland perhaps as frequently as once or twice a week, that these purchases were effected by means of fuel cards which he and the other drivers employed by the Appellant held, that the purchase of fuel from the Republic was carried out on the instructions of the Appellant's manager, Mr Norman Maconaghie, and that at nighttime diesel fuel was decanted by means of a hand pump into other vehicles within the Appellant's fleet. Mr Simpson also stated that the large fuel tanks had been fitted to the Volvo some eighteen months or two years previously.
  6. These various statements were recorded by the Commissioners' officers in a notebook, which Mr Simpson was subsequently asked to sign and did sign. The vehicle driven by Mr Simpson was initially seized, but was subsequently restored.
  7. By letter dated 7 January 2001 the Commissioners wrote to the Appellant requesting from him production of the Appellant's books and records so as to enable the Appellant's liability to excise duty to be assessed. This letter was provided by the Appellant to his solicitors, and correspondence subsequently passed between the Commissioners and the Appellant's solicitors, culminating in a letter from the Appellant's solicitors to the Commissioners dated 30 September 2002 in which they stated that their client, the Appellant, did not intend to produce the information requested in the letter dated 7 January 2002, and in which they advised that the Commissioners should take such action as they should think fit.
  8. The Commissioners subsequently instituted inquiries with their Irish counterparts, the Revenue Commissioners based at Ennis in the Republic of Ireland, and as a result produced a schedule of fuel invoices issued to the Appellant in respect of fuel purchases made in the Republic of Ireland by the Appellant and covering the period between 10 February 2000 and 26 October 2001. No invoices were available for either November or December 2001, with the result that the assessing officer calculated the Appellant's liability to excise duty for those months using the average of monthly purchases worked out in respect of the immediately preceding twelve months. The Appellant did not dispute the accuracy of any of the information contained within the schedule of fuel invoices produced.
  9. On the basis of the schedule of fuel invoices produced, the assessing officer calculated the Appellant's total liability to excise duty to be in the sum of 77,691, and issued an assessment in that amount. By letter dated 7 January 2003 the Appellant's solicitors formally requested a review of the assessment arrived at. In the Formal Departmental Review decision dated 14 March 2002 which followed, the Reviewing Officer concluded that in the making of her assessment, the assessing officer adhered to relevant legislation, and that in the absence of the requested records the assessing officer had acted as required to the best of her judgment. The assessment was accordingly upheld on review.
  10. The evidence

  11. On behalf of the Appellant, the Tribunal heard evidence from the Appellant himself, and from his driver, Mr Michael Simpson, and from his manager, Mr Norman Maconaghie. On behalf of the Commissioners, the Tribunal heard evidence from Mr John Nixon, a customs officer from Detection Branch, and from Ms Mary Cox an Audit Officer who carried out the assessment exercise.
  12. In his evidence, Mr Chestnutt explained to the Tribunal how his family business had been in operation for fifty years past, his own involvement extending over twenty four years. He told the Tribunal that during the relevant period, the business had operated a total of five lorries, the fleet consisting of two bulk lorries, a Scania, the Volvo and a Mercedes. The Appellant accepted that the fuel specified on the schedule of fuel invoices produced by the Commissioners had been purchased by his drivers in the Republic of Ireland, the vast bulk of it from one particular service station at Muff, just across the border between Northern Ireland and the Republic of Ireland. Such purchases the Appellant indicated first began in June 1999 or thereabouts. The Appellant accepted that the purchases had been effected by means of fuel cards which his business had requested and obtained in advance from Morgan Fuels, who in turn had an agreement with the operators of the Muff station. The cards he explained were used much as a credit card would be used. The driver would present the card at the time of purchase for swiping, and subsequently at specified intervals the business would be invoiced by Morgans Fuels in respect of the fuel purchased. Five cards had been obtained it was claimed, one in respect of each of the five vehicles operated, although no particular card it was claimed was only used in connection with a particular vehicle. The cards, the Appellant claimed were not always kept in the lorries. In his evidence, the Appellant claimed that not only the Volvo, but all the other vehicles regularly throughout the period in question crossed the border to fill up their tanks with fuel: in winter he claimed approximately once a week, in summer perhaps once a fortnight. The Appellant claimed that the practice was that whenever the lorries would have been delivering close to the border, such as to Lisahally, they would cross the border and fill up their tanks at Muff, before returning to Stranocum. The Appellant rejected any suggestion made to him that the Volvo, which had been stopped on 19 December 2001 was at that time or indeed at other times had been sued as a feeder lorry. Whilst he accepted that on a few isolated occasions, fuel might have been moved by hand pump form out of the tanks on the Volvo into some of the other vehicles, this would have been rare, and would have only been so as to enable such a vehicle to have enough fuel in its tanks to travel to Muff for refuelling. The Appellant denied that any secretive or concealed transfer of fuel ever took place from the Volvo to any of the other vehicles. The Appellant claimed that so far as he was aware, all of the tanks fitted to the Volvo were running tanks. When asked about the capacities of the fuel tanks fitted to the various vehicles forming part of his fleet, Mr Chestnutt stated that the Volvo vehicle had the largest capacity of all of the vehicles in the fleet, amounting to a total fuel capacity of approximately 1500 litres as between its two fuel tanks. The other vehicles in the fleet had a maximum fuel capacity of between 400 and 500 litres per vehicle. He also stated that he drove a jeep type vehicle, and his wife a BMW car, for which the fuel cards were also used on occasions.
  13. In his evidence to the Tribunal, Mr Simpson although he accepted what had been put to him and recorded in the question and answer session carried out by the customs officer interviewing him, and although he accepted his signature on the notes of that question and answer session, denied that he had ever seen the decanting of fuel from one vehicle to another vehicle taking place at night. The only decanting he claimed that ever took place was so as to enable a lorry to travel from Stranocum to Muff. When asked as to why in connection with the purchase as effected by him on 19 December 2001 he had used two fuel cards as opposed to only one card, Mr Simpson claimed that this was simply so as to speed up the exercise of filling up the tanks and paying for them. He denied that the use of two or more cards had ever been intended to disguise the widespread bulk purchase of fuel by the Appellant's business.
  14. In his evidence to the Tribunal, Mr Maconaghie explained how Morgans Fuels had issued the Appellant with a number of fuel cards, five in total. Whilst on the face of each card, he claimed, each card applied to a particular vehicle, there was never any requirement imposed by Morgans Fuels that a particular card or cards had to be used in connection with a particular vehicle or particular vehicles. He told the Tribunal that the five cards were all kept in a box, and never in the vehicles. Whenever fuel was being purchased from the Republic of Ireland, his evidence was that he would hand the driver a card or cards so as to enable the purchase to be effected and recorded. When referred to the detailed schedule of purchases and invoices as prepared by the Commissioners, Mr Maconaghie denied that any particular purchase could be linked in to any particular vehicle or combination of vehicles. All of the cards, he claimed, were fully interchangeable both as between drivers and also as between vehicles. Inspite of suggestions to the contrary, Mr Maconaghie sought to suggest that whilst most of the Appellant's deliveries would have been confined to a 20 or 25 mile radius around Stranocum, and whilst only on relatively few occasions would the larger bulk carriers have ever been required to travel as far as Lisahally, it nevertheless was economic for those other vehicles to travel across the border to fill up with fuel at Muff, in addition to the Volvo which Mr Simpson had been driving at the time of its interception and seizure on 19 December 2001.
  15. For the Commissioners, Mr Nixon formally proved the facts and circumstances of his interception and stopping of the Volvo vehicle as driven by Mr Simpson, together with the details of the question and answer session conducted by him with Mr Simpson after caution, as recorded in his contemporaneously prepared notebook. Mr Nixon readily accepted that Mr Simpson had fully cooperated with him after being stopped. The officer explained how his attention had been drawn to what appeared to be an additional large fuel tank fitted to the Volvo. This he explained had not been a manufacturers tank, but was one fitted subsequently to the vehicle. The additional tank was accessed not from the outside, but rather from the cargo area. Mr Nixon was not in a position to deny that the additional tank may well have been a running tank.
  16. Finally, for the Commissioners, Ms Cox explained the course of her investigations and inquiries. She explained in her evidence how she had written to the Appellant as long ago as 7 January 2002 requesting the provision of relevant documentation. She had then spoken to the Appellant on the telephone on 28 January 2002 and had offered to personally collect the records concerned. This offer was declined. This witness also dealt with the various steps as had been put in hand by her after the letter dated 30 September 2002 had been received from, the Appellant's solicitors, declining to afford the Commissioners access to the documentation and records requested by them. Ms Cox stressed that due to the refusal on the part of the Appellant to provide the documentation sought, or indeed any of it, in carrying out her assessment exercise, she had access to no documentary information other than which she had managed to obtain from the Revenue Commissioners in the Republic.
  17. Additional facts found by the Tribunal

  18. From the evidence adduced before it, the Tribunal found the following additional facts to be established. The Tribunal is satisfied that the additional tank found on 19 December 2001 to have been fitted to the Volvo vehicle driven by Mr Simpson on that date was not a standard tank installed or fitted to the vehicle by its manufacturer at the date of the vehicle's construction, but was subsequently added to the vehicle by way of a modification approximately eighteen months or two years prior to December 2001. The Tribunal is also satisfied that the Volvo vehicle was the principal method whereby additional supplies of fuel were brought from the Republic of Ireland into Northern Ireland for use in the Appellant's business. There may certainly have been occasions upon which one or more of the Appellant's other vehicles crossed the border in order to refuel at Muff or Castlefin, but the Tribunal is satisfied that during the period in question, this would have been very much the exception rather than the rule. In the assessment of the Tribunal, during the period in question, the bulk of additional fuel supplies purchased from the Republic of Ireland were transported from the Republic into Northern Ireland via the Volvo vehicle ODZ 9089 and specifically by means of the large fuel tanks attached to that vehicle. Once back at the Appellant's premises at Stranocum, the Tribunal is satisfied that the normal procedure adopted would have been for the quantities of the imported fuel to then have been transferred by means of a hand pump from the tanks of the Volvo, to the tanks of one or more of the Appellant's other vehicles.
  19. The legal framework

  20. Section 6 of the Hydrocarbon Oil Duties Act 1979 provides that excise duty shall be chargeable upon hydrocarbon oil which is imported into the United Kingdom, at the rate of duty specified in the 1979 Act itself. The Travellers' Relief [Fuel and Lubricants] Order 1995 ["the 1995 Order"] however makes provision for certain reliefs which are available to persons entering the United Kingdom from another Member State. Article 3 [1] of the 1995 Order provides as follows:
  21. " 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 "

    Article 3[2] of the 1995 Order goes on to provide:

    " 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"

    Submissions of the parties

  22. The Commissioners submitted that the assessment arrived at by Ms Cox the assessing officer satisfied all of the requirements of best judgment. Substantial reliance upon was placed upon the fact that as a result of the decision on the part of the Appellant not to make available the documentary information requested, the assessing officer inevitable had a strictly limited amount of information available to her, and it was submitted she had done her level best with what was made available to her. It was submitted on behalf of the Commissioners that this was a classic case of best judgment, in which the assessing officer had at all times wholly in accordance with the method of approach described by Mr. Justice Woolf, as he then was, in Van Boeckel -v- Customs and Excise Commissioners[1981] STC 290. The burden was upon the Appellant to establish that the assessment had not been carried out to best judgment, and this had not been discharged. Whilst it might well be that some of the fuel purchases as detailed in the schedule of invoices obtained by the Commissioners through the Irish Revenue Commissioners were wholly legitimate purchases, which would have been entitled to qualify for the reliefs made available to importers of hydrocarbon fuel oils by virtue of the 1995 Order, it somewhat ill behoves the Appellant now to seek to place substantial reliance upon that fact, due to the relevant specific facts and information in this regard being likely to be in the possession of the Appellant, and such information still not having been made available either to the Commissioners or to the Tribunal.
  23. For the Appellant, it was argued that the assessment and the liability to excise duty which it incorporated had inevitably to be excessive, in particular due to the fact that it failed to make any allowance whatsoever for those purchases of fuel oil as set out in the schedule which would have qualified for the reliefs available under the 1995 Order.
  24. Conclusions

  25. For the reasons set out below, the Tribunal is satisfied that this assessment should be adjusted. In approaching the task set before it, the Tribunal is mindful of the guidelines set out in the judgment of Carnwath L J in Pegasus Birds -v- Customs and Excise Commissioners [2004] EWCA Civ 1015:
  26. " The Tribunal should remember that its primary task is to find the correct amount of tax, so far as possible on the material properly available to it, the burden resting on the taxpayer. In all but very exceptional cases, that should be the focus of the hearing, and the Tribunal should not allow it to be diverted into an attack on the Commissioners' exercise of judgment at the time of assessment ."

  27. Close scrutiny of the schedule of invoices, as obtained by the Commissioners from their counterparts in the Irish Republic reveals a clear pattern of purchases. Most, indeed the bulk of the purchases of fuel made throughout the period in question are multiple purchases. These are purchases all recorded as having been made on the same day, but where a variety of different fuel cards appears to have been used. In connection with these multiple purchases, two and on occasions three different fuel cards are habitually employed. In terms of the quantities of fuel purchased during these multiple purchases, again a clear pattern emerges from a close scrutiny of the contents of the schedule of invoices. The amounts purchased, whether on foot of two fuel cards or three never exceeded 1500 litres; the most common total amount being purchased during a multiple purchase exercise being anywhere between approximately 1200 or 1400 litres of fuel. The Tribunal is satisfied on the evidence placed before it that in either all of alternatively almost all of these multiple purchase instances, the vehicle carrying out the refuelling exercise is likely to have been the same Volvo ODZ 9089 which was subsequently stopped on 19 December 2001. Indeed, it is clear from the evidence that only the Volvo amongst all of the vehicles in the Appellant's fleet would have had the tank capacity to take on board such a load as was being collected in these instances. The Tribunal is also satisfied that on all or almost all of these multiple purchase occasions, the purpose of the exercise in filling up the large and non standard tanks of the Volvo was so as to enable excess fuel at some stage thereafter to be transferred by means of a hand pump from the tanks of the Volvo into the tanks of another vehicle or other vehicles within the Appellant's fleet. It seems to us that none of the fuel purchased during the course of any of these multiple purchase exercises would qualify for relief under the 1995 Order, at least insofar as the fuel purchased was intended not for use within the engine of the Volvo itself, but was intended for transfer into another vehicle or other vehicles.
  28. Further scrutiny of the schedule of invoices produced shows alongside the multiple purchases a much smaller number of what we will describe as single purchases. These are relatively modest purchases of fuel by commercial vehicle standards, never of more than 450 litters at a time, and frequently of much less. All of these single purchases could have been collected by any of the other vehicles within the Appellant's fleet, apart that is from the Volvo, or by the Appellant's jeep or his wife's car. There is in our view no evidence at all before us to suggest that any fuel purchased in any vehicle other than the Volvo was ever decanted from any such vehicle into another vehicle, and we are satisfied on the balance of probabilities that this would not have been done. Nor is there any evidence to suggest that any vehicle other than the Volvo was ever fitted with a non standard tank. Fuel purchased during these single purchases, stored within the standard tank of a vehicle, and intended for use and used only within the engine of the collecting vehicle in our view would qualify for relief under the 1995 Order.
  29. So far as how, if at all, the Tribunal should set about the task of adjusting or modifying the assessment is concerned, we heard in submissions both from the Appellant and also from the Commissioners various suggestions as to how this could be approached and effected. Our approach is to analyse the schedule of invoices, and in particular the litreage of fuel purchased by way of multiple purchases as opposed to single purchases during the course of a given month, during the entirety of the period in question. We propose to notionally allow relief in respect of that percentage of the fuel purchased during the course of a given month by way of single purchases, but to allow no notional relief to the remaining percentage purchased by way of multiple purchases. Over the various months comprised in the subject period from 1 February 2000 to 19 December 2001 the percentages of fuel purchased by way of single as opposed to multiple purchases varies enormously. In some months, which are clearly not representative, no single fuel purchases were made at all during the course of the entire month. In other months, equally non representative, fairly substantial amounts of single purchases of fuel were made. Doing the best that we can on the figures presented to us, we assess the single purchases on average to have been likely to have amounted in total to somewhere between 10 and 15 per cent of the total purchases of fuel during the relevant period. Above and beyond this, it seems to us, the Appellant is entitled to a further reduction in the assessment figure, to take account of that amount of fuel which, although purchased during the course of a multiple purchase, was nevertheless never intended for decanting, nor was in fact ever decanted into another vehicle or vehicles, but was only intended for use and was only indeed ever used in the engine of the Volvo itself, for travelling to and from the Republic of Ireland, and in undertaking the other non fuel collecting journeys required of that vehicle during the normal course of its weekly routine. Taking all of the above into account, as best we can on the basis of the evidence and figures presented before us, we are of the view that the appropriate percentage by which to adjust downwards the assessment figure in all the circumstances would be 25 per cent. We therefore allow the appeal but only to the extent that we adjust the assessment downwards by 25 per cent from 77,691 to 58,268.
  30. We are not prepared to award any costs to the Appellant. The Tribunal is unanimously of the view that the type of analysis and adjustment outlined above is more then likely to have been possible to have been achieved in 2002 had the Appellant been prepared to provide to the Commissioners upon request the documentation and details being sought by them at that time. To refuse to provide the documentation and details sought was in our view a serious error of judgment on he part of the Appellant, which the Appellant by his counsel rightly recognised and accepted during the course of the hearing before the Tribunal. There will in the circumstances be no order as to costs.
    RELEASE DATE: 12 July 2005


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