EO00916
Excise duty:  Rebated heavy oil (Red Diesel): Vehicle found on testing to have obvious contamination with Red Diesel:  Vehicle forfeited under S141 CEMA:  Restoration offered at value of penalties for fuelling and using vehicle with Red Diesel namely £500:  “reasonable excuse” defence available:  Appellant believed the Red Diesel he put in the vehicle on private premises for purposes of jumpstart would all be used:  Contamination found to be 33%:  Decision of HMRC reviewing officer to uphold restoration fee of £500 reasonable.  Appeal refused.

EDINBURGH TRIBUNAL CENTRE

	JAMES REAP	Appellant

	- and -

	HM REVENUE & CUSTOMS	       Respondents

			Tribunal:	 (Chairman):  Mrs G Pritchard, BL., MBA., WS
					 (Member):	  James D Crerar, WS., NP

Sitting in Edinburgh on Tuesday 20 September 2005

for the Appellant		Mr James Reap

for the Respondents	Mr Andrew Scott, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2005.

DECISION

This is an appeal against a decision of HMRC reviewing officer Ian Sked dated 12 May 2005 upholding the restoration fee of £500 in respect of the seizure of motor car JRT 11V (a Fiesta) belonging to the Appellant.  The right of appeal is contained in S16(4) Finance Act 1994.

The Appellant appeared and gave evidence.  HMRC was represented by Mr Andrew Scott, Solicitor, Shepherd & Wedderburn.  Mr Ian Sked gave evidence and was credible.  Written evidence was contained in an agreed bundle of documents.  Where reference is made to any tab of said bundle, it shall be treated as repeated here.  

From the evidence the full facts were undisputed and are as follows:

1.	On 9 March 2005 the Appellant had the Fiesta parked at his place of work so as to clean it.  He worked as an HGV mechanic manager in a freight yard and has been involved in freight transport all his working life.  The yard is in Larbert.
2.	Two officers of HMRC called at the yard for the purpose of vehicle testing and tested his Fiesta.
3.	The Appellant had had little use for the Fiesta as he drove a company van.  He had kept the vehicle off road unlicensed in May 2004 and again in November 2004.  During the period of “off-road” status he had fuelled the Fiesta on his own premises at home with red diesel for the purpose of jump starting another vehicle he owns.  He also has a dumper truck which he uses on his own premises which he is entitled to fuel with red diesel which he keeps at home.  His reason for fuelling the Fiesta with red diesel was that it was empty of fuel and he wanted to jump start the other car.  He admitted fuelling the Fiesta.  This is not permitted by virtue of S12(2) of Hydrocarbon Oil Duties Act 1979 (HODA).  The penalty for so doing is £250 under S9 Finance Act 1994(FA) but this may be relieved if there is a reasonable excuse.  He duly used the Fiesta having let the engine run at ¼ throttle for an hour or more, to jump start the other car.
4.	The Appellant thereafter licensed the vehicle in December for the purpose of Christmas shopping.  He believed the red diesel to have been used up as his fuel gauge showed almost no fuel in the Fiesta, put £15 of white diesel in and used the car a few times over Christmas.  The next occasion he used the car was on 9 March 2005 when he drove the car to the yard to clean it as he intended driving North for the weekend.  He therefore had driven the Fiesta on a public road which is not permitted by virtue of S12(2) HODA.  This also attracts a penalty of £250.
5.	When tested he was aware and admitted to the HMRC officers the tank had red diesel in it but he believed it would be so insignificant as to result in no penalty.  This was not so.  He was advised the red diesel was very obvious.  He asked the likely percentage and was told possibly 70%.  He found this hard to believe.  He was penalised for the fuelling and road use of the Fiesta and the Fiesta was seized in terms of S141 Customs & Excise Management Act 1979 (CEMA).
6.	He was offered immediate restoration for a restoration fee of £500 in terms of S152 CEMA.  It is Government policy that such a fee shall double the penalty.  He paid.
7.	However on reflection he considered the restoration fee too high and asked that some reconsideration be made.  He quoted the 70% contamination to Mr Sked the reviewing officer in his letter of appeal.  He explained about the refuelling.  He also explained he considered he was innocently involved as he had intended only to use the car as a “battery charger”.
8.	Mr Sked looked at the whole circumstances but, given the admission of knowledge, the restoration policy in his view required the restoration fee be applied as provided without exception.  However he could look at reasonable excuse.
Having offered restoration the preferred method of calculating a restoration fee is a sum equal to two civil penalties namely £500.
At this point in his decision letter of 12 May 2005 (TAB 8) he expressed the view that no reasonable excuse had been offered.

Findings on disputed matters
9.	He then went on to calculate the likely amount of red diesel used by the Appellant who had claimed to have used 1-1½  gallons, if the percentage of contamination was at the level of 70% as suggested to him by the Appellant and the Fiesta had been run as stated.  These calculations led Mr Sked to the view the Appellant had been untruthful as at least 8.8 gallons would have been required if £15 of white diesel was bought.  The true percentage after testing was however 33% which Mr Sked still considers a very high rate of contamination.  He maintained his view that no exceptional circumstances applied to allow deviation from the policy.  He was still of the view that the Appellant had used more red diesel than claimed.  The Tribunal found the rate of contamination to be 33%.

Submissions
Mr Scott submitted that Mr Sked’s decision was reasonable which is the test set out in S16(4) FA.  There were no exceptional circumstances which would found a reasonable excuse.  He had considered the law, government policy and the state of knowledge of the Appellant and admission of the Appellant of fuelling the Fiesta, and driving it on the public road contaminated with red diesel.

He noted the penalties had been properly applied under S13(1) HODA.

He noted the application of the forfeiture of the vehicle under SS 139, 141 and 152 of CEMA and Government Policy on restoration.  Mr Sked had carried out all the duties incumbent upon him.  His decision was reasonable in all the circumstances.

Mr Reap the Appellant submitted that he still considered that his belief at the time of the offences that he had most likely used up all the red diesel should be considered, that he had no intention of driving on the road with red diesel and his willingness to cooperate were all matters the Tribunal should take into account.

Decision
The appeal is refused.

Reasons
We were not satisfied that the Appellant was wholly credible.  He accepted using red diesel in the Fiesta which he intended eventually using on the road.  He must have used more red diesel to fuel the Fiesta than he told us at the Tribunal (namely a max of 2.2 gallons) or suggested to the HMRC officers (1-1½ gallons).  It was interesting he had said to the officers at TAB 1 that he used a 4 gallon can though only claiming to have had 1 gallon in it, to fuel the car when using red diesel.

We made no finding on the size of the can as we do not have sufficient evidence of its size.  What is clear is that the Appellant had got something wrong somewhere about how much red diesel was in his tank.  It was shown to be a 33% contamination level of the fuel in his tank on 9 March 2005.  His confusion about quantities and cans seemed at odds with his professional skills with motor cars, engines and fuel which were part of his job.  We therefore believed it was something he believed he would not be caught doing.  However he was caught with red diesel in the Fiesta.  He took a risk which was just too high.  There is a penalty for his conduct which was correctly applied. 

We did not consider the first error with the “ball park figure” of 70% was either significant or more importantly relevant.

Mr Sked appeared to us to have given the Appellant’s letter of appeal due and proper consideration and for the miscalculation to have been induced by information obtained as hearsay from the Appellant.  Neither of the officers who conducted the test had provided a figure to Mr Sked.  They had advised the colour of the fuel being used.  The Appellant admitted it was red diesel, and admitted knowing he had committed an offence.  Had the figure not been provided by the Appellant Mr Sked would have awaited the Government Chemist report and the issue would not have arisen.  At 33% his decision would have been the same.  We are satisfied he applied the law and policy correctly.  We were satisfied his decision was reasonable in all the circumstances.

Expenses
No expenses due to or by either party.

MRS G PRITCHARD, BL., MBA., WS
CHAIRMAN

RELEASE:  29 SEPTEMBER 2005 

EDN/05/8003