A fuel distribution company has lost its challenge against a tax bill of more than €1.3 million from Revenue over its failure to keep proper records of sales of large volumes of marked diesel to a customer suspected of involvement in fuel laundering.

The Tax Appeals Commission (TAC) has ruled that the unnamed company is liable to pay a demand for €1,350,507 following an extended Revenue audit into its affairs between April 1st, 2012 and December 31st, 2014.

The sum was based on the difference between the excise duty charged at the standard rate and discount rate for agricultural diesel.

Records

A hearing of the TAC was informed that the company kept no records of the address of a customer or his vehicle registration number to whom it had sold over 3.7 million litres of low sulphur gas oil (LSGO) – otherwise known as “green diesel” – over a two-year period up to March 31st, 2013. LSGO is a marked fuel which means it is illegal if used as a fuel for road vehicles.

The TAC heard that this customer purchased about 36,000 litres of the fuel each week for which he would pay €30,000 in cash.

The company director said he did not believe these transactions were unusual as the firm was lodging €150,000 in cash sales each week on average.

Revenue claimed the company facilitated the LSGO being used for fuel laundering by failing to comply with Mineral Oil Tax Regulations which required it to keep the name and vehicle registration of its customers.

As a consequence the true identity of the customer suspected of fuel laundering remained concealed from Revenue.

The TAC heard that during an audit in 2013, Revenue officials were dissatisfied with sales to one individual customer as they did not believe such a customer existed.

The company’s director described the customer as a man in his early 50s who drove “an old white trailer” but only recorded his address as “Dublin”.

Under cross-examination, the director said he was aware of the illicit fuel trade using green diesel. He did not believe there was need to put down a full address for the customer on the invoices as they did not deliver fuel to him or offer him credit.

Asked what business he thought the customer was engaged in, the director said he assumed he was a trader buying different products.

Assessment

A Revenue official told the TAC that the tax authorities had a problem with laundered fuel at the time and they were faced with a situation where they did not know who had bought 3.74 million litres of LSGO or where it had gone. He said the cash sales for this fuel would have raised “red flags” within Revenue in relation to fuel laundering.

The official said the name of the individual was not recorded on Revenue’s files

Revenue said the tax assessment would not have arisen if the company had complied with its obligations under the legislation. It claimed the company had no ability whatsoever to identify the customer to whom it sold the fuel because of a “flagrant breach” of the regulations.

Revenue pointed out the difference between the standard and reduced excise duty was €403.35 per 1,000 litres.

“An old white articulated lorry with no logo, collected 36,000 litres of LSGO from [the company] more than once a week over the two-year period,” said Revenue, pointing out the individual accounted for more than 5 per cent of the company’s sales, even though it had 20,000 customers.

It noted he was charged 5 cent more a litre than the company’s only other buyer of LSGO even though he had to travel about 160km from Dublin to collect the fuel, while it was delivered to the other customer.

Revenue said the customer would have generated a profit of €180,000 for the fuel firm in 2013

Business with the individual ceased around the time new requirements were introduced by Revenue in 2013.

Loss

Lawyers for Revenue noted how the company had never attempted to contact such a significant customer after he allegedly stopped purchasing its fuel for no reason. They claimed the fuel was laundered after leaving the company’s premises which resulted in a significant loss of revenue for the State.

Revenue said the company would surely have made efforts to trace the customer to give evidence on its behalf if they had been bona fide sales but it had not done so. The tax authorities stressed that no allegations were being made that the company was involved in fraud or abuse.

The TAC commissioner, Conor Kennedy, ruled the company was obliged to obtain the name, address and vehicle registration of customers under the Mineral Oil Tax Regulations but had failed to do so. He said the company had attempted to abdicate its responsibility to record crucial information on a significant customer.

He claimed the evidence of witnesses on behalf of the company were “unreliable”.