The Commissioners for HM Revenue and Customs v Behzad Fuels (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Green LJ,Hamblen LJ |
| Judgment Date | 04 March 2019 |
| Neutral Citation | [2019] EWCA Civ 319 |
| Docket Number | Case No: A3/2017/2718 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 March 2019 |
[2019] EWCA Civ 319
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
[2017] UKUT 0321 (TCC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Hamblen
Lord Justice Henderson
and
Lord Justice Green
Case No: A3/2017/2718
Mr Jonathan Kinnear QC and Mr Matthew Donmall (instructed by the General Counsel and Solicitor to HMRC) for the Appellants
Mr Michael Patchett-Joyce and Mr Oliver Powell (instructed by Imran Khan & Partners) for the Respondent
Hearing date: 4 December 2018
Approved Judgment
Introduction
Diesel fuel supplied for use in road vehicles (“white diesel”) is subject to excise duty at much higher rates than the materially identical product supplied for use by tractors and other agricultural vehicles, or for other forms of “home use” excepted under the Hydrocarbon Oil Duties Act 1979 (“HODA 1979”). The relief from the full rate of duty is allowed by way of a rebate when “heavy oil” (which includes diesel fuel) is delivered for home use: section 11(1) of HODA 1979. By virtue of section 12(2), no heavy oil on which rebate has been allowed shall be used as fuel for a road vehicle, or taken into a road vehicle as fuel, unless an amount equal to the rebate has been paid to the Commissioners for Her Majesty's Revenue and Customs (“HMRC”).
Because of the obvious opportunities for fraud inherent in such a system, regulations made under enabling powers in HODA 1979 require diesel oil delivered for home use to be dyed red (hence its colloquial description as “red diesel”) and to contain specified chemical markers which can be detected by chemical analysis: see the Hydrocarbon Oil (Marking) Regulations 2002, SI 2002 No.1773. In addition, HMRC have wide powers to forfeit heavy oil taken into a road vehicle in contravention of section 12(2) of HODA 1979, as well as any “… vehicle… container… or any thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture”: see sections 139 and 141(1) of the Customs and Excise Management Act 1979 (“CEMA 1979”).
Section 152 of CEMA 1979 provides that:
“The Commissioners may, as they see fit –
…
(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under ( the customs and excise) Acts; …”
Section 139(6) and schedule 3 to CEMA 1979 contain important provisions which apply when goods are liable to forfeiture. The general effect of paragraphs 3 and 5 of schedule 3 is that a person who wishes to challenge a forfeiture on the ground that the thing seized was not so liable must give written notice of his claim to HMRC within one month of the date of the seizure, and if no such notice has been given by the expiry of that period “the thing in question shall be deemed to have been duly condemned as forfeited”. As this court explained in Revenue & Customs Commissioners v Jones [2011] EWCA Civ 824, [2012] Ch 414, the result of this statutory deeming is that, on any subsequent appeal under section 16 of the Finance Act 1994 against a refusal to restore the seized goods under section 152(b) of CEMA 1979, the validity of the forfeiture is no longer open to question and may not be revisited by the First-tier Tribunal (“the FTT”): see in particular the conclusions of Mummery LJ (with whom Moore-Bick and Jackson LJJ agreed) at [71] (4), (5) and (10). Accordingly, as Mummery LJ said in sub-paragraph 71(5):
“The FTT's jurisdiction is limited to hearing an appeal against a discretionary decision by HMRC not to restore the seized goods to the owners.”
It must also be appreciated that the jurisdiction of the FTT on an appeal against a decision by HMRC not to restore forfeited goods is, in other respects too, unusually circumscribed. The effect of the relevant provisions was concisely stated by Mummery LJ in Jones at [42] to [43]:
“42. The Finance Act 1994 provides that there is an appeal procedure against a decision on restoration, which proceeds via a request for a review under section 14 and the carrying out of a review under the procedure in section 15 to an appeal under section 16 against the review decision to the FTT.
43. The appeal tribunal on an appeal is confined to a power, where the tribunal are satisfied that the HMRC could not have reasonably arrived at the decision it did, to require HMRC to conduct a further review of the original decision: section 16(4)(b).”
In view of the importance of those provisions in the present case, I will set out the relevant provisions of sections 15 and 16 of the 1994 Act:
“15. Review procedure
(1) Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either –
(a) confirm the decision; or
(b) withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate.
…
16. Appeals to a tribunal
(1) Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say –
(a) any decision by the Commissioners on a review under section 15 above…
…
(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say –
(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.
(5) In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.
(6) On an appeal under this section the burden of proof as to [ various matters relating to penalties] shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.
…”
It is common ground that a decision made by HMRC under section 152(b) of CEMA 1979 is an “ancillary matter” for the purposes of section 16, from which it follows that the powers conferred on the FTT on an appeal from the relevant review decision are confined to those set out in subsection (4), and are also dependent upon the FTT being satisfied that the decision is one which HMRC “could not reasonably have arrived at”. The apparent strictness of this approach has, however, been significantly alleviated by the decision of this court in Gora v Customs and Excise Commissioners [2003] EWCA Civ 525, [2004] QB 93, where Pill LJ accepted the submission of counsel for HMRC (Mr Kenneth Parker QC, as he then was) that the provisions of section 16 do not oust the power of the FTT to conduct a fact-finding exercise, with the consequence that it is open to the FTT on an appeal from a review decision to decide the primary facts and then determine whether, in the light of the facts it has found, the decision was one which could not reasonably have been reached: see the judgment of Pill LJ at [38] to [39]. The correctness of this approach has not been challenged before us, and in Jones Mummery LJ said at [71](6) that he “completely agree[d] with the analysis of the domestic law jurisdiction position by Pill LJ in Gora's case”.
Registered Dealers in Controlled Oil
Under further powers conferred by sections 100G and 100H of CEMA 1979, and regulations made thereunder (the Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002, SI 2002 No.3057), HMRC have at all material times operated a scheme whereby dealers in “controlled oils” (which include red diesel) must, subject to immaterial exceptions, apply to HMRC to be registered as a Registered Dealer in Controlled Oil (or “RDCO”). As the Upper Tribunal explained in the decision under appeal at [8]:
“The scheme requires suppliers of controlled oils to register with HMRC and submit monthly returns showing how much they have supplied to customers. These returns are analysed and help HMRC target its response to the misuse of rebated fuels and fuel fraud in the supply chain. Registered suppliers are required to take every reasonable precaution to make sure that their supplies of controlled oil are made only to persons who use that oil as permitted by law and to put in place appropriate “know your customer” procedures. Failure to meet the requirements of the RDCO scheme can result in a registered supplier having its registration revoked by HMRC.”
The power to revoke the registration of an RDCO is conferred by section 100G(5), which provides that:
“The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section.”
A decision by HMRC to revoke the RDCO status of a supplier is subject to the same restricted provisions for review and appeal as those which I have already set out in relation to the restoration...
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