E01170

EXCISE DUTY – RED DIESEL – ASSESSMENT & PENALTY –   Appellant using a tractor fuelled by red diesel and licensed under the Vehicle Excise and Registration Act 1994 on a construction site off  public road – whether an excepted vehicle – no – satisfied no grounds for a reasonable excuse – Appeal dismissed. 

MANCHESTER TRIBUNAL CENTRE

	ADDISON PLANT LIMITED   	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      ELIZABETH POLLARD            (Member)	  

Sitting in public in North Shields on 5 November 2008 adjourned for additional submissions until 21 January 2009

William Alan Addison, managing director, appeared for the Appellant

Richard Chapman counsel instructed by the Solicitor’s office of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION
The Appeal
1.	The Appellant was appealing against the Respondents’ decision on review dated 23 May 2007 upholding an assessment of £791 and a penalty of £250 for the unlawful use of rebated fuel (red diesel) in the fuel tank of the Appellant’s tractor vehicle  (registration number: S73 LHN).
2.	The Appeal was adjourned part heard on 5 November 2008 for the Respondents to carry out an investigation of the legal provisions relating to the dispute. The Tribunal issued the following directions:
(1)	 The Respondents lodge with the Tribunal and the Appellant written submissions on the construction of schedule 1 of the Hydrocarbon Oil Duties Act 1979 (hereinafter 1979 Act) with specific reference to paragraph 2 entitled Tractors and the implementation date of SI 2007/93 by no later than 4pm on 17 December 2008.
(2)	The Appellant shall have a right of reply to be served on the Tribunal and the Respondents by no later than 4pm on 7 January 2009.
(3)	The Tribunal shall advise the parties by no later than 4pm on 21 January 2009 whether it will determine the Appeal without a further hearing.
3.	The Respondents made their additional submissions on time. The Appellant did not exercise its right of reply. The Tribunal advised the parties that it would determine the Appeal without a further hearing.
The Evidence
4.	We heard evidence from William Alan Addison, the managing director for the Appellant. David Allinson, Duncan Bryce and Geoff Cuthbert testified on behalf of the Respondents. An agreed bundle of documents was received in evidence.
The Dispute
5.	The parties were agreed on the essential facts of the Appeal. The Appellant alleged that the Respondents had misdirected it on the use of red diesel in the tractor. The other issue related to whether the tractor was an excepted vehicle within the meaning of schedule 1 of the 1979 Act. 
The Facts
6.	The Appellant’s principal business activity was civil engineering and plant hire, operating from business premises in Stockton-on-Tees.
7.	On 7 December 2006 the Respondents detected red diesel in the fuel tank of a tractor (S73 LHN) owned by the Appellant. At the time of the detection the tractor was driven by Andrew Brown, an employee of the Appellant, for the purpose of hauling rock and muck which had been excavated from the construction site of the Southern radial route between Sunderland and Ryhope.
8.	The tractor had been used with red diesel on the said construction site from June 2006 for four to five hours each day. The Appellant transported the tractor on a trailer to the construction site. The tractor had not been driven on public roads. 
9.	The tractor was taxed as an agricultural tractor with a current tax disc displayed. The tractor had not been used for purposes connected with agriculture.
10.	The Respondents carried out a road fuel audit on the fuel usage of the tractor from 6 June 2006 to 7 December 2006. The audit took into account:
(1)	The number of days the tractor was operating on site each week.
(2)	The number of weeks the tractor was on site.
(3)	The number of hours each day it was in operation.
(4)	An average time in percentage terms that the tractor was laid idle whilst in operation.
(5)	The average number of litres of fuel used per hour.
11.	The outcome of the audit demonstrated that the amount of red diesel used by the Appellant in the tractor was 1,701 litres, which produced an assessment for duty due of £796.58 on the red diesel used by the Appellant during the period of assessment.
12.	On 19 February 2007 the Respondents issued an assessment in the sum of £796.58 and a penalty of £250.
13.	The Respondents had previously assessed the Appellant in the sum of £191 on 30 March 2004 for unlawful use of red diesel in the same tractor.  The circumstances involved the tractor hauling spoil and rubble on public roads from a building site to a landfill site in the Middlesbrough area.
14.	 On 19 April 2004 Mr Allinson, HM Revenue and Customs Officer, visited the Appellant’s office and discussed with Mr William Addison the use of red diesel in a tractor. According to Mr Allinson, he explained to Mr Addison that an agricultural tractor could only be fuelled with red diesel when used solely for purposes relating to agriculture, horticulture or forestry, which corresponded with the contents of his letter addressed to the Appellant dated 19 December 2003. Mr Addison asserted that Mr Allison also told him that so long as the Appellant transported the tractor on a wagon on public roads to the construction site, the tractor could be used on site with red diesel. Mr Allinson had no record of making the alleged statement, however, he accepted that he could not now fully recall his conversation with Mr Addison.
Reasons
15.	Section 13 of the 1979 Act authorises the Respondents to raise an assessment for excise duty on the unlawful use of red diesel equivalent to the rebate on red diesel. Section 9 of Finance Act 1994 (1994 Act) enables the Respondents to impose a penalty of £250 for such unlawful use subject to a reasonable excuse. The Appellant did not challenge the quantum of the assessment.  The Appellant contested the assessment and penalty on two grounds: whether the tractor was an excepted vehicle; and that it had been misdirected by Mr Allinson at the 19 April 2004 meeting.
16.	The provisions of section 13 of the 1979 Act and section 9 of  the 1994 Act apply to a road vehicle which is defined by section 27 (1) of the 1979 Act as a vehicle constructed or adapted for use on roads but does not include any vehicle which is an excepted vehicle within the meaning given by schedule 1 to  the Act.
17.	 Paragraph 1 of schedule 1 to the 1979 Act provides that a vehicle is an excepted vehicle while it is not used on a public road and no licence under the Vehicle Excise and Registration Act 1994 is in force.
18.	Paragraph 2(1)(a) of schedule 1 to the 1979 Act as was in force at the time of the assessment provides that an agricultural tractor is an excepted vehicle. Paragraph 2(2) defines an agricultural tractor as a tractor used on public roads solely for the purposes relating to agriculture, horticulture, forestry or activities of cutting verges, hedges or trees bordering public roads.   
19.	The analysis of paragraphs 1 and 2(1)(a) when applied to the facts of this Appeal demonstrates that the tractor used by the Appellant with red diesel was not an excepted vehicle. Paragraph 1 did not apply because the tractor was licensed under the Vehicle and Registration Act 1994. Under paragraph 2(2) the tractor did not fulfil the requirements of an agricultural tractor in that it was not used on public roads for purposes relating to agriculture.
20.	As a general rule the Tribunal has no jurisdiction to decide issues of misdirection on the part of the Respondents. The Tribunal is required to determine the Appeal on the basis of the statutory provisions. Thus the issue of misdirection has no bearing upon the validity of the assessment. It may, however, under certain circumstances constitute a reasonable excuse for avoiding the penalty of £250 imposed under section 9 of the 1994 Act. 
21.	We found the Appellant’s evidence of the alleged conversation with Mr Allison on 19 April 2004 unconvincing. Mr Addison’s recall of the event was understandably hazy due to the passage of time. Mr Addison was unsure of the date of when the meeting took place, recording a date of October 2003 in his letter of 14 February 2007. There was no contemporaneous note of the meeting. We favour Mr Allinson’s account of the conversation, which was supported by the contents of his letter of 19 December 2003 predating the April meeting.  We, therefore, find that there was no substance to the Appellant’s allegation of misdirection. The Appellant offered no other reasons as a reasonable excuse.
Decision
22.	We find for the reasons above that
(1)	The tractor, S73 LHN, was not an excepted vehicle within the meaning of schedule 1 of the 1979 Act.
(2)	The Appellant used red diesel as fuel for the tractor in contravention of section 12(2) of the 1979 Act.
(3)	The Appellant did not challenge the quantum of the assessment issued on 19 February 2007.
(4)	 There was no substance to the Appellant’s allegation of misdirection. The Appellant offered no other reasons as a reasonable excuse.
23.	We, therefore, uphold the assessment in the sum of £791 and a penalty of £250. We dismiss the Appeal and make no order for costs.

                                

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 3 March 2009

MAN/