E00767
EXCISE DUTY HYDROCARBON OIL – approval of appellant as a Registered Dealer in Controlled Oil refused – manager of the appellant company previously bankrupt but discharged at relevant time – manager convicted of offence of fraudulent evasion of excise duty – confiscation order in sum of £112,500 made against him – sentence of 12 months imprisonment suspended for two years – Tribunal's jurisdiction under 16(4) of Finance Act 1994 – appeal dismissed
LONDON TRIBUNAL CENTRE
JACKSON PETROLEUM LIMITED Appellant
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MISS J C GORT (Chairman)
MR L G WILKINSON FCIB
Sitting in public in London on 8 June 2004
Mr C Thompson, consultant, for the Appellant
Mr James Maxwell-Scott of counsel, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
- On 27 January 2003 the Appellant applied to be approved as a Registered Dealer in Controlled Oil. By a letter dated 28 March 2003 the Commissioners refused that application and this appeal is against the confirmation of that decision on review by the Commissioners contained in a letter dated 22 May 2003.
The facts
- The Appellant is a limited company registered for value added tax with effect from 19 August 1993. It operates as a fuel retailer from premises in Rainham in Essex. The business has been run since its inception in 1993 by Mr Michael Fawsitt, the sole director being his wife Mrs Gillian Fawsitt. The company secretary is the couple's daughter, Miss Gemma Fawsitt and various other relatives work for the business.
- On 25 January 1991 Mr Michael Fawsitt was declared bankrupt and barred thereby from holding any company directorships. Because of this Mrs Fawsitt rather than Mr Fawsitt was appointed director of the company at its inception but she has never been actively involved in the business itself. Mr Fawsitt's bankruptcy was discharged on 25 January 1994.
- In 1999 the Appellant was the subject of a seizure by the Road Fuel Testing Unit and a penalty of £2,600 was issued against it in consequence for misuse of kerosene. It was the only recorded instance of any penalty being issued against the Appellant.
- In October 2001 Mr Michael Fawsitt was interviewed in connection with a criminal investigation which resulted in his being charged on 3 October 2001 with offences of fraudulent evasion of excise duty under section 170(2) of the Customs and Excise Management Act 1979 and with supplying oil for improper use under section 13(3)(b) of the Hydrocarbon Oils Duty Act 1979. On 16 May 2003 he was convicted, having pleaded not guilty at his trial.
- Following the trial there was an investigation by the Crown into Mr Fawsitt's financial affairs in order to determine whether he had benefited from his criminal conduct, and the value of any such benefit, as well as to determine the amount which should be recovered. The amount which at trial he was said to have benefited from his criminal conduct amounted to £450,034.18. On 12 September 2003 he was sentenced to twelve months' imprisonment suspended for two years and a confiscation order was made under section 71 of Criminal Justice Act 1988 in the sum of £112,500. This sentence was imposed following the consideration of his assets.
- In a statement of facts prepared by the Commissioners in respect of the application to become a registered dealer it is stated that excise duty of over £2 million was alleged to have been evaded. We were told by Mr Thompson that in court the sum alleged was £1½m. However we have no record on the papers before us as to the specific amount alleged by the Crown in the case. Mr Fawsitt was tried together with a Mr Anthony Rooney who was subsequently acquitted.
- Prior to trial the prosecution had calculated an underpayment of duty and VAT totalling £1,787,820. This sum was challenged at trial by the Defence who produced their own figures. When the figures were recalculated by a senior forensic accountant for the purpose of sentencing it was calculated that the total excise evaded had been £1,404,294.90. However the figures were also recalculated on the basis of the assertions made by Mr Thompson on behalf of Mr Fawsitt and the figure arrived at was £450,034.18. In the interest of fairness to the defendant the prosecution decided to allege the lower benefit figure for the purpose of calculating the benefit to Mr Fawsitt.
- The Commissioners' initial decision of 28 March 2003 was based on the Commissioners' conclusion that the Appellant was not a fit and proper person to be approved and registered under the controlled oil scheme because the company was run by Mr Michael Fawsitt who was an undischarged bankrupt. Furthermore Mr Fawsitt had admitted to buying and selling oil without regard to its provenance.
- Following a letter from solicitors acting on behalf of the Appellant in which it was denied that Mr Fawsitt was an undischarged bankrupt and that he had not admitted buying and selling oil without regard to its provenance at any stage, a reconsideration of the decision was requested, and this letter was followed by a letter signed by Mrs Fawsitt on behalf of the appellant company formally requesting a review of the decision.
- A formal departmental review was carried out by Mr M. Farmer and the matters taken into consideration were inter alia the fact that the company had been penalised in 1999 following a seizure by officers of Customs and Excise, the fact that the company currently had an outstanding VAT debt of £258,463.25, in respect of which a final demand had been issued on 6 September 2002, and finally because Mr Fawsitt had been found guilty of the charges which had been brought against him. Mr Farmer stated that: "… the Commissioners would be failing in their duty if they did not take cognisance of the criminal charges brought against Mr Fawsitt, given the significant role that he plays within the company and the potential risk to the revenue this poses, when considering the company's application for approval. It is not necessary for the Commissioners to have secured a criminal conviction to justify refusal of the application, but to determine that on the balance of probabilities that there would be a risk to the revenue by granting approval in this case."
- It was accepted by the Commissioners at the hearing of the appeal that the assessment arose directly out of the same facts as were the subject of the criminal charges against Mr Fawsitt, and that there was no VAT debt by the Appellant. The assessment was withdrawn.
- We have seen a full transcript of an interview with Mr Fawsitt on 2 October 2001 in which on several occasions he said that he would buy from anybody depending on the price and that he would sell to anybody effectively without asking any questions. In particular when asked if the sellers had had to pay UK duty on the fuel when they imported it he replied "I don't know. That wouldn't concern me, would it? I ain't bringing it in." He subsequently said in answer to the question "So they don't tell you they've paid the duty?" "I don't ask. It don't concern me."
- In her letter of 19 May 2003 signed on behalf of the Appellant by Mrs Fawsitt, it was stated that Mr Fawsitt had left the company. This was not borne out by Mr Fawsitt in his evidence to the Tribunal.
- Since the initial refusal on 28 March 2003 the company has continued to trade in white fuel but has not been allowed to sell controlled oils and Mr Fawsitt had continued to act for the company.
- In March 2003 a document was issued setting out the Registered Dealers in Controlled Oil approval policy. That policy states inter alia that officers had to consider whether the applicant was a "fit and proper person". The key test was said to be whether the applicant was likely to create a real risk to the revenue "such that the public interest in removing that risk outweighed the private interest of the applicant in being approved." A list of five indicators were given which were to be considered in reaching that judgment:
1. Unspent criminal conviction for a relevant offence
2. Significant civil contravention(s)/penalty(ies) in the recent past
3. Evidence of involvement in laundering (with or without guilt in knowledge)
4. Evidence of a reckless attitude to the basic duty of care/tax responsibilities
5. Evidence of a history of significant non-compliance
Officers were given the option of imposing conditions on any approval. It was stated that if for example evidence of involvement in laundering activities suggested the involvement was marginal or may have been innocent then the imposition of conditions might be appropriate.
The law
- Section 100G(1) provides that:
"For the purpose of administering, collecting or protecting the revenues derived from duties of excise" the Commissioners may make regulations for the approval and registration of revenue traders as excise dealers".
Subsection (2) provides that they may make such approval to any applicant "who appears to them to satisfy such requirements for registration as they may think fit to impose.
- Section 24 of the Hydrocarbon Oils Duty Act 1979 provides that the Commissioners may make regulations for various purposes, including delivery of oil without payment of duty and obtaining rebates.
- The Hydrocarbon Oils (Registered Dealers in Controlled Oil) Regulations 2002 are made under section 100G of CEMA and section 24 of the Hydrocarbon Oils Duty Act 1979 and provides for such a regime to operate in the case of dealers in controlled oil.
- Excise Notice 192 issued in March 2003 sets out the conditions for approval and registration and the obligations of Registered Dealers in Controlled Oils. Paragraph 2.6 sets out the conditions of the scheme. Paragraph 4.2 provides that suitability checks will include checks on previous history including any previous convictions. Paragraph 4.4 provides that the Commissioners have the power if they are not satisfied with the application to refuse to grant approval. Such a refusal would be based on evidence that could be put before a tribunal. The reasons for refusal will be set out in a letter which is an appealable matter.
- The jurisdiction of the Tribunal is laid down in subsection 16(4) of the Finance Act 1994 and is confined to circumstances where the Tribunal is satisfied that the Commissioners "could not reasonably have arrived at the decision". Its powers are limited to ordering a further review of the decision.
The Appellant's case
- On behalf of the Appellant it was submitted that the initial refusal was based on completely inaccurate information. The review decision was similarly based in part on inaccurate information. The Respondents had not taken account of the fact that the appellant company had had a 100% compliance over the previous nine years of trading. Mr Fawsitt had been the manager there for those nine years and the company had had a £1 million turnover. The company of his alleged co-conspirators had been closed down within three months whereas the appellant company had been allowed to continue trading. The Commissioners had based their decision on the assumption that £2 million worth of excise duty had been evaded whereas there was no evidence of this. Ultimately the figure of £450,000 was accepted of which Mr Fawsitt had only been held liable for £112,500. This was only some 5% of the original figure alleged.
- The Commissioners had not taken account of the fact that the Appellant had an appeal pending against his conviction, that he had a suspended sentence and that the amount was marginal. They had failed to act reasonably in that they had not considered the possibility of allowing the company to continue to trade in rebated fuel but subject to conditions.
The Respondents' case
- The Respondents' case was that, although the initial decision and the review decision contained factual inaccuracies, namely reference to Mr Fawsitt being an undischarged bankrupt and the reference to an outstanding value added tax debt, these were both minor matters. The most important factor was the indisputable fact that Mr Fawsitt had a criminal conviction and a confiscation order had been made against him in the sum of £112,500. The allegation of laundering fuel had been accepted by the jury, and this fact alone was sufficient to justify the decision.
Reasons for decision
- We do not find that the Commissioners have acted unreasonably or arrived at a conclusion at which no reasonable body of commissioners could properly have arrived.
- The fact that the Appellant was sentenced on the basis of that the total excise duty evaded was £450,000 as opposed to £2 million does not render his offence marginal. It is clear from his answers to questions at interview that Mr Fawsitt takes a very cavalier attitude to both people from whom he purchases oil and those to whom he sells it. The Commissioners have a duty to protect the revenue and they would not be carrying out that duty if they failed to take account of Mr Fawsitt's conviction and the fact that he is responsible for running the appellant company. The fact that Mr Fawsitt is appealing his conviction is not relevant.
- This appeal is dismissed.
- No order for costs.
MISS J C GORT
CHAIRMAN
RELEASED:16/07/2004
LON/03/8147
