[2010] UKFTT 11 (TC)

TC00330
 EXCISE DUTY – Non-Restoration of a vehicle which had been adapted to run on red diesel by installing a second tank concealed from view – Appellant contended that he used the red diesel solely for heating the vehicle and running a compressor – Tribunal satisfied that the Appellant was using the red diesel to propel the vehicle – No exceptional hardship – Review decision reasonable– Appeal dismissed. 

FIRST TIER TRIBUNAL TAX

DECISION NOTICE 
Rule 35(2) The Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 

	ADAM PAUL MITCHELL	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

Tribunal: 	MICHAEL TILDESLEY OBE	 (Judge)
WARREN SNOWDON JP		 (Member)

Sitting in public at North Shields on 11 November 2009

Appellant appeared in person

James Puzey counsel instructed by the Solicitor’s office of HM Revenue & Customs, for HMRC

© CROWN COPYRIGHT 2010

DECISION
The Appeal

1.	The Appellant was appealing against HMRC decision on review dated 4 December 2008 refusing restoration of a Mercedes campervan registration number R554 NTV (hereinafter known as the vehicle).
2.	On 14 September 2008 HMRC Officers attended the Appellant’s home and took a sample of fuel from the running tank of the vehicle. The sample was found to be contaminated with rebated fuel (red diesel) which resulted in HMRC removing the vehicle for further inspection. HMRC discovered a secondary fuel tank concealed in the rear of the vehicle containing red diesel. HMRC seized the vehicle, and imposed civil penalties totalling £500 against the Appellant for taking in and using red diesel in a road vehicle.
3.	The Appellant did not appeal against the seizure of the vehicle and the civil penalties. The Appellant requested restoration of the vehicle on the grounds that red diesel was only used for off-road activities, namely fuelling the compressor and the heater, and that he and his family have suffered extreme hardship from not having the campervan available. HMRC contended that the Appellant drove the vehicle on red diesel, and that any hardship caused by the seizure of the vehicle was not exceptional. HMRC considered that the Appellant’s contravention of deliberately adapting his vehicle for the misuse of rebated fuel justified the decision of non-restoration.
4.	The Tribunal’s jurisdiction in this Appeal is limited to deciding whether Officer Wiggs’ refusal to restore the vehicle was reasonable. In order for the decision to have been reasonable Officer Wiggs must have considered all relevant matters and must not have taken into consideration irrelevant matters. The Tribunal cannot substitute its own view for that of Officer Wiggs. If the Tribunal considers the decision unreasonable it can only refer the matter back to HMRC for another review conducted by a different Officer.
5.	 The Tribunal heard evidence from the Appellant.  Ms Lucy Tobin and Mrs Julie Wiggs testified for HMRC. Officer Tobin was a member of HMRC’s Road Fuel Testing Unit. Officer Tobin gave evidence on the inspection of the vehicle, and her conversation and interview with the Appellant. Officer Wiggs conducted the review of HMRC decision not to restore the vehicle. A bundle of documents was presented in evidence. 
The Review Decision
6.	Officer Wiggs decided that the Appellant’s circumstances did not justify a departure from HMRC restoration policy for vehicles misusing duty rebated fuel. Essentially the policy advocated the seizure and non-restoration of all vehicles adapted for the misuse of controlled oils, which was the case with the Appellant’s vehicle in having a concealed second fuel tank. Officer Wiggs concluded that the Appellant had purposely adapted his vehicle to enable it to be run on red diesel. In reaching her decision Officer Wiggs took account of the following facts:
(1)	The Appellant was purposely vague about how much red diesel he put in the concealed tank, and changed his answer when the Officer doubted the accuracy of his first response. Similarly the Appellant only admitted the existence of the concealed tank when confronted by the Officer about her suspicion of a second tank.
(2)	The second tank was so well concealed that trained HMRC Officers could not locate it on their initial search. The Appellant had developed a switch which could supply fuel from either tank to the engine. The Appellant was able to operate the switch from the driver’s seat.
(3)	The Appellant bought most of his fuel in drums from unconventional suppliers, and held no fuel receipts.
(4)	The Appellant’s explanation of using the red diesel for the compressor and heating was unrealistic. The Officers found no night heaters on the vehicle. Red diesel was more costly than gas bottles which originally provided the heating. His statement that he kept the heater on at night lacked credibility.
(5)	The standard fuel tank contained oxidised white diesel which suggested that it had been standing in the fuel tank for several months. The age of the fuel questioned the credibility of the Appellant’s claims that he recently filled up the tank with £40 - £50 worth of white diesel and that he was using legitimate fuel to propel the vehicle.
(6)	The Appellant did not suffer exceptional hardship arising from the seizure of the vehicle.
Facts Found
7.	The Appellant purchased the vehicle about five years prior to it being seized.  He paid £37,000 which was financed by a remortgage on the marital home. The Appellant estimated that the vehicle was now worth around £30,000.
8.	 The Appellant adapted the rear of the vehicle into a workshop with room to carry several motorbikes. The Appellant principally used the vehicle for attending race meetings involving motorbikes which were normally held at the weekends during Spring and Summer.  The Appellant’s family would accompany him on his trips. Since February 2008 the Appellant had driven the vehicle approximately 1,000 miles. The vehicle did approximately 17 miles to the gallon.
9.	In February 2008 the Appellant modified the water tank at the rear of the vehicle into a second fuel tank, which was hidden from view by a metal bench and shelves. The filler to the tank was on top of the bench with no access on the outside of the vehicle. The tank was well concealed, and could not be found by HMRC Officers on their first inspection. The Appellant accepted that he filled the concealed tank with red diesel. 
10.	The Appellant had installed a device at the side of the driver’s chair in the cab which he said enabled him to switch between the red diesel in the concealed tank and the white diesel in the original fuel tank. HMRC discovered that red diesel still flowed into the engine even when the switch had apparently closed the fuel line from the concealed tank.
11.	When Officer Tobin first spoke to the Appellant informing him that the fuel in his standard running tank showed a contamination of red diesel, the Appellant did not volunteer information about the concealed tank.  He only mentioned the concealed tank when Officer Tobin told him that the fuel taken from the fuel filter was red in colour. The Appellant stated that he was not deliberately misleading Officer Tobin about the concealed tank. In his view he was attempting to give a considered and correct answer to the question asked. Further the Appellant did not explain straightaway about the second tank because he could not understand why the fuel in the first tank was contaminated.
12.	The Appellant accepted that he bought the majority of his fuel from unconventional sources, generally from people selling fuel in plastic drums for cash on the roadside or visiting the scrap yard where the Appellant worked. The Appellant held no receipts for the fuel purchased. 
13.	The Appellant stated that he purchased white diesel to the value of £50 for the original tank about three weekends prior to the seizure of the vehicle. The fuel found in the original tank was oxidised and coloured dark brown. This suggested that the fuel had been standing in the tank for some time, and contradicted the Appellants’ assertion that he had been driving the vehicle on white diesel. The Appellant offered no satisfactory explanation for the brown colour of the fuel.
14.	The Appellant supplied contradictory accounts of the amount of red diesel bought for the concealed tank. Initially in interview he stated that ten gallons had been bought, which rose to fifty gallons at the end of the interview and one hundred and fifty gallons in cross examination. 
15.	The Appellant accepted that he installed the concealed tank with a view to reducing his costs in respect of the vehicle. He insisted that he only used the red diesel for off  road activities which included heating the vehicle and running the compressor. The Appellant acknowledged, however, that he had a gas bottle which powered the fire heater and the hot water in the vehicle. 
16.	The Appellant pointed out that he was a hard working family man who had not been in trouble with Customs before. He put in his life earnings and remortgaged his family home to purchase the vehicle. The Appellant would be paying for the vehicle for another 20 years. He purchased the vehicle to enable him to have his weekends away with his family and pursue his hobby of racing motorcycles. His wife provided a supporting letter emphasising the importance of the vehicle to the family, which played a role in keeping the family together during the last eighteen months.
Reasons
17.	The Tribunal was satisfied on the facts found that the Appellant was using red diesel to propel the vehicle. The Tribunal considered that the high degree of concealment of the second fuel tank coupled with the age of the white diesel in the first tank and the unconventional sources of the Appellant’s fuel purchases strongly pointed to an unlawful use of the red diesel.  Further the Appellant’s contradictory responses to the Officer’s questions about the quantities of red diesel purchased and his unwillingness to volunteer information about the second tank indicated that he had something to hide. The Appellant’s assertions of using the red diesel solely for off road activities were implausible. His vehicle had a separate source of power, a gas bottle, for keeping the vehicle warm, which was cheaper to run than the purchase of red diesel. The Appellant’s reason for installing the concealed tank and using red diesel was to save money, which could only realistically be achieved by driving the vehicle on red diesel. 
18.	In this respect the Tribunal concurs with Officer Wiggs’ conclusion that the Appellant purposely adapted the vehicle so that it could be used on red diesel. The Tribunal considers that Mrs Wiggs took account of all relevant matters and disregarded irrelevant matters in reaching her conclusion about the Appellant’s unlawful use of red diesel.
19.	The Tribunal finds HMRC policy of seizing and not restoring vehicles adapted for the misuse of controlled oils, and that its application to the Appellant’s case proportionate.  The Appellant had taken active and sophisticated steps to conceal his use of red diesel which by its very nature make the detection of unlawful use of controlled oils extremely difficult. In those circumstances HMRC need to have effective sanctions to deter others from contravening the law relating to controlled oils.
20.	The severe sanction of non-restoration of a vehicle for a deliberate contravention can be avoided and a lesser penalty substituted if exceptional hardship is made out on behalf of the aggrieved person. In this Appeal Officer Wiggs decided that the Appellant had not demonstrated exceptional hardship from the loss of the vehicle. Officer Wiggs’ findings on exceptional hardship in her review letter of 4 December 2008 were not as thorough as her findings on unlawful use. The narrative in her letter followed the standard wording on exceptional hardship found in many review decisions seen by the Tribunal. Officer Wiggs in her testimony elaborated upon her reasons for deciding against exceptional hardship. She considered that the Appellant had not demonstrated that the financial hardship suffered was exceptional. Further the fact that the vehicle had a high resale value was not relevant for exceptional hardship. It appeared that Officer Wiggs placed no weight on the importance of the vehicle for the Appellant’s family life. The Tribunal was mindful of its limited jurisdiction in this area of the law. The Tribunal was not entitled to substitute its own view for that of HMRC. The Tribunal was restricted to assessing whether Officer Wiggs’ decision was reasonable against the facts found by it. The Tribunal considers the Appellant’s evidence on exceptional hardship insufficient to justify a finding that Officer Wiggs’ decision was unreasonable. He did not make out a strong case of the adverse effects of the loss of the vehicle on his family and his financial situation. 
Decision
21.	The Tribunal is satisfied for the reasons set out above that HMRC decision on review dated 4 December 2008 refusing restoration of a Mercedes campervan registration number R554 NTV was reasonably arrived at within the meaning of section 16(4) of the Finance Act 1994. 
22.	The Tribunal, therefore, dismiss the Appeal. 

                                

MICHAEL TILDESLEY OBE
   TRIBUNAL JUDGE 
    RELEASE DATE: 8 January 2010

MAN/2009/8007

Notes

1.	A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making   an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.