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Cite as: [2007] UKVAT(Excise) E01032

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Morris Young (Perth) Ltd v Revenue & Customs [2007] UKVAT(Excise) E01032 (12 March 2007)


    Hydrocarbon Oil Duties – competence of assessment – whether ultra vires – single assessment for an extended period, part of which precedes commencement date of charging provision – competence of amending basis for assessment – Hydrocarbon Oil Duties Act 1979, Sections 13(1) and (1A) – Appeal Allowed.



    - and -



    Tribunal: (Chairman): Mr Kenneth Mure, QC

    Sitting in Edinburgh on Thursday 1 February 2007

    for the Appellant Miss Valentina Sloane, Barrister

    for the Respondents Julian Ghosh Esq, QC

    Miss Elizabeth Wilson, Barrister



    A preliminary question arises as to the validity of the assessment in this case. The assessment which is dated 26 March 2002 bears to have been raised in terms of Section 13(1A) of the Hydrocarbon Oil Duties Act 1979 (HODA). It is in "global" form in as much as one sum, viz £381,499, is assessed in respect of an extended period from 30 September 1999 to 2 September 2002. (This now has been purportedly restricted to date from 1 May 2000 for the reduced sum of £234,185). However, Section 13(1A) was in force only from 1 May 2000. Accordingly, the Appellant argues, the assessment is ultra vires.

    The Respondents, in acknowledgement of the date of introduction of Section 13(1A), purport to reduce the original assessment by excluding that part relating to the period before 1 May 2000. In response the Appellant's stance is that the entire assessment in its original form must fall and, if timeous, a corrected assessment raised. The original assessment cannot be saved by amendment.

    The Facts

    So far as material at this stage the circumstances giving rise to the assessment were that certain samples of fuel taken from the Appellant's road vehicles were shown to be "rebated", ie on which excise duty had not been paid. Two suppliers of such fuel were identified, and the assessment was calculated by reference to the total supplies made by them to the Appellant during the relative period.

    The Law

    Section 13(1A) HODA was introduced by FA 2000 and provides –

    "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 excise duty due from any person who used the oil or was liable for the oil being taken into the road vehicle, …"

    It has effect in relation to liability arising on or after 1 May 2000 (FA 2000, Section 8(4)).

    Prior to amendment by FA 2000 Section 13(1) HODA provided–

    "Where any person –
    (a) uses heavy oil in contravention of section 12(2) above; or
    (b) is liable for heavy oil being taken into a road vehicle in contravention of that subsection,

    his use of the oil or, as the case may be, his becoming so liable shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties); and the Commissioners may recover from him an amount equal to the rebate on like oil at the rate in force at the time of the contravention".

    The time of contravention is not the purchase or delivery of the rebated fuel but rather when it is used or consumed or when it is taken into the vehicle. Section 12(2) provides–

    "No heavy oil on whose delivery for home use rebate has been allowed … 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".

    The contravention may thus be linked to a specific road vehicle.

    Counsel referred also to the following cases in particular –

    International Language Centres Limited [1983] STC 394

    Don Pasquale [1990] STC 206
    Jeffrey Herbert Barber (decision of 21 January 1992, Chairman, Colin Bishopp)
    Lord Advocate v Shanks [1992] STC 928
    Le Rififi [1993] STC 725
    CEC v Le Rififi [1995] STC 103 (CA)
    Bjellica [1995] STC 329
    MK Hassan (decision of 17 September 2002, Chairman, Miss Gort)
    Keyes Transport Limited (decision of 5 May 2005, Chairman, Dr Kameel Khan)
    Ridgeons Bulk [1994] STC 427
    AG Axton (VAT & Duties Tribunal decision E00127 of 13 September 1999)
    BUPA Purchasing Ltd and Others [2006] STC 388
    Pegasus Birds Ltd v C&E [2004] EWCA Civ 1015
    Judicial Review by Lord Clyde and Professor Edwards, ch 15
    Parties' Submissions

    Both parties have lodged Skeleton Arguments and, indeed, the Appellant has lodged Supplementary Submissions, to all of which I refer.

    By way of introduction to her argument Miss Sloane, for the Appellant, noted the terms of certain of the documents lodged. Document 1 (pages 38-41) refers to only Section 13(1A) and not to Section 13(1), which is the provision relating to dates preceding May 2000. It refers to an assessment. In the relative Schedule, while there are references to dates of purchase and the two particular suppliers, there is no reference to specific contraventions and their dates or to particular road vehicles.

    In effect, she argued, one global amount has been assessed for the period from 30 September 1999 to 2 September 2001. Moreover, the Respondents in the original Statement of Case made reference only to Section 13(1A), and not also to Section 13(1). Further, in the Statement of Agreed Facts (as at October 2003) the provision noted was Section 13(1A) alone. (See para 11). In the Departmental Review (page 45 et seq) it was clear that only Section 13(1A) was founded on and not the previous charging provision. In her final remarks Miss Sloane reiterated that there was no evidence whatsoever to suggest that Section 13(1), before amendment by FA 2000, had been used or considered when the assessment was made. (Note BUPA Purchasing Limited para 56). Had both provisions been considered two assessments would have been raised. Calculation of duty was on a global basis without reference to individual contraventions or specific vehicles. The references were to an assessment, in the singular.

    It appeared from the documents (at page 52), Miss Sloane argued, that Section 13(1) was considered by the Respondents only in about November 2004, some two and a half years after the date of the assessment. Also, it appeared that the Respondents acknowledged the assessment as being "global" and that the statutory basis for it was incorrect. Only thereafter was the assessment reduced, with the pre-May 2000 portion being excluded (see page 57).

    There was helpful case law in the context of VAT, Miss Sloane submitted, which supported her argument that a global assessment cannot be partly valid and partly not. Lord Woolf in International Language Centres Limited, and the Court of Appeal in Le Rififi and Bjellica indicate that where a VAT assessment was made on a global basis it was not severable and in the context of time-bar, part could not be preserved. If, however, there were severable parts, say distinct assessments for individual accounting periods, then these could be considered individually. She founded also on the decision of the Tribunal in J H Barber in which considerations of "best judgement" in calculating the assessment were raised. There it was held that a global assessment not made on "best judgement" could not be saved by eliminating the incorrect elements. The proper course was to withdraw the invalid assessment and raise instead a corrected one. Similarly in M K Hassan (especially paras 40-42) a global assessment not to "best judgement" was considered to be "incapable of being broken down" into valid and invalid parts.

    Recently in Keyes Transport Limited the Tribunal viewed a global assessment to excise duty as an entirety and indivisible following the principles set out supra. In summary Miss Sloane submitted that the assessment was ultra vires, raised under only Section 13(1A) of HODA. The pre-May 2000 provision, ie Section 13(1), had not been relied on according to the documentation. There was no evidence to the contrary. The assessment was global and indivisible and a valid portion could not now be severed. Individual excise points (cf purchase dates) were not identified. The availability of Section 13(1) at the material time is irrelevant, where (as here) it was not relied upon. The absence of any prejudice to the taxpayer, were an amendment to the assessment allowed, is not a relevant consideration. (See Ridgeons Bulk Ltd at p440 and BUPA Purchasing Ltd, para 56).

    In reply Mr Ghosh submitted firstly that this was not a "global" assessment. This term was not statutory but one derived from case-law. It was not apt where duty could be attributed to the unit of assessment eg an accounting period or excise points. The Schedule relative to the assessment in the present case did attribute the duty assessed to contraventions, thus removing the assessment from the "global" category. While Mr Ghosh accepted that in a strict sense purchase and delivery were not the exact excise points ie. use or filling the vehicle's tank, the determination of these other times was impracticable for the Respondents' officers. The Schedule showed the methodology of the calculation of the duty and that by reference to different times. The essence of a global assessment was absent in the present case in as much as it was possible to break down the calculation of the total duty, and that had been done in terms of the Schedule.

    The second stage of the Respondents' argument was that as they had vires to assess pre-May 2000 duty, the assessment (whether or not viewed as "global") as reduced was valid. There was no universal principle that a global assessment should stand or fall in entirety. Here, while there were two charging provisions in force for different parts of the period of assessment, viz Section 13(1) and post FA 2000, Section 13(1A), they were similar grounds for assessment purposes. No reference to vires was necessary in the assessment. Had no reference been made to any charging provision, the assessment would still be enforceable. The circumstances in the present case were different from Axton (see para 15) in which the differing charging provisions related to differing grounds and circumstances.

    Finally, there would be no prejudice suffered by the taxpayer here if the amended assessment were upheld. The absence of any reference to Section 13(1) was not so material that the original assessment should fall in its entirety. The assessment was now restricted to the period falling after 1 May 2000, when Section 13(1A) was in force.


    I consider that the Appellant's stance is well-founded and accordingly that the assessment should be set aside.

    Firstly, in my view the original assessment was a global one and accordingly not severable into distinct parts, and in particular into pre and post 1 May 2000 segments. This distinction is a question of fact and in the present case depends on the proper interpretation of the relative documentation (Documents nos 3-6) provided with the assessment. While it may set out the methodology of the calculation of the assessment, it cannot crucially be broken up and the pieces attributed to tax or excise "points". Here, the statutory provisions indicate as excise "points" the driving of the vehicle or its tank being filled (Section 12(2)(a) and (b)). The purchase of the fuel, founded on here, is not an excise "point". The supply is not even apportioned between specified vehicles. The documentation to which the Tribunal was referred indicates one assessment as a unum quid and indivisible. It follows that it cannot be cured by reduction, by severing and cancelling that part referable to the period before 1 May 2000.

    The judgment of Neill LJ in Bjellica is helpful here on the possibility of severance (p338 c-d)-

    "It seems to me therefore that the questions which arise in this appeal include: … (3) whether if the failure related to only one part of the period, the notice of assessment is capable of severance.

    It will be convenient to start by dealing with the third of these questions. It appears to have been conceded by the Commissioners in Don Pasquale (a firm) v C&E [1990] STC 556 that an assessment by the Commissioners constitutes a single decision and that severance is not possible. It follows therefore that if part of the assessment made in this case relates to a period when Mr Bjellica was not required by law to make a return, then, even if a single assessment for a period of over 12 years were otherwise valid, the assessment would fall".

    By contrast in Le Rififi (p110 h-j) a series of separate assessments was upheld on the basis of an examination of the relevant forms –

    "The next question is whether each of the forms constituted notice of a single assessment or of several assessments. This is easily answered by an examination of the form. The rubric at the head of the form notifies the taxpayer that the Commissioners of Customs and Excise 'have made the following assessment(s) of tax for the period(s) shown'. The form is plainly designed to be used for a single assessment for a single period or for several assessments for different periods. The obvious inference from the layout of the form is that each of the ten lines represents a separate assessment, so that if only one line is filled in there is one assessment, and if several lines are filled in there are several".

    I rely also on the decision of Lord Woolf in International Language Centres Ltd in its concluding paragraphs and on the Tribunal decisions in J H Barber and Keyes Transport Ltd.

    Secondly, I consider that the stance of the Respondents is undermined also on the view that the assessment was ultra vires. It bears to have proceeded in terms of Section 13(1A) and that stance was confirmed on review. Given the operative date of that provision, viz 1 May 2000, the assessment for a period preceding that date is ex facie invalid. A different conclusion might have been open to me if it had been apportioned into pre and post 1 May 2000 parts. It does not seem from the documentary records that any mistake was made by the Respondents' officials when the assessment was issued or when reviewed. Reliance apparently was placed on only Section 13(1A). By their purported reduction of the assessment to cover the period from only 1 May 2000 the Respondents, it might be inferred, have acknowledged the vires argument.

    Emphasis on the correct identification of powers used in making an assessment was laid by the Tribunal in Axton (para 15). In general terms this emphasis is supported in the commentary on "Judicial Review" by Lord Clyde and Professor Edwards at ch 15-06 and 07.

    Finally, I do not consider that the Respondents can rely on the absence of prejudice to the Appellant. That as a general proposition was considered and rejected in Ridgeons Bulk Ltd (p427/8) and in BUPA Purchasing Ltd (paras 41, 55 and 56), to which Miss Sloane referred. The ability of the Tribunal to review the calculation of an assessment following on Pegasus Birds does not relieve the need for the assessment to be fundamentally valid. (Para 29 per Carnwath LJ). The invalidity of the assessment on a fundamental technical basis cannot be cured simply because some fortuitous benefit results to the Appellant. The nature of Section 13(1A) as superseding Section 13(1) for assessment purposes does not alter this in my view.


    Miss Sloane sought expenses in the event of the Appellant's being successful. Accordingly I award expenses in favour of the Appellant to be assessed, failing agreement, in terms of Regulation 29(3).

    Finally I would like to express my thanks to Counsel who appeared for both their oral and written submissions.


    RELEASE: 12 MARCH 2007


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