OP, let's help you focus.
As cp wrote some posts ago, the Permit Holders sign has NO legal effect off-street which is where this contravention is alleged to have occured by virtue of the grounds.
Pl don't fret about your grounds of representation, frankly they're not essential although desirable to help the wee unfortunates who work for the council understand what they're supposed to be looking for.
Remember, the council erected this sign pursuant to their duty* to mark restrictions with traffic signs, so is an officer of the council going to accept that they're wrong? They've made a real pig's ear of their order, but this is their concern, not yours.
PCN *******;
I refer the authority to ss 2 (Interpretation) and 17.1(Traffic Signs) of the relevant order - *******.
As you will see, s2 defines a 'traffic sign' as a sign 'prescribed or authorised under s64 Road Traffic Regulation Act' which states the following:
'traffic sign' means '..any object or device (whether fixed or portable) for conveying, to traffic on roads...warnings, information, requirements, restrictions or prohibitions of any description—
The emphasis is mine(such emphasis isn't necessary in the Act itself because its scope i.e. Road Traffic Regulation is adequate and self-explanatory).
Why the council have chosen to use 'traffic signs' on their own, which have no legal effect off-street, in an order restricting off-street parking only they would know. But the legal position is that they have no effect in conveying off-street restrictions which, as you will see from the PCN, is the alleged contravention. The PCN must be cancelled.
Whether you wish to put this under 'contravention did not occur' or 'penalty exceeded the amount applicable in the circumstances of the case' I leave to the authority. Indeed whether having cancelled my PCN officers wish to raise with their traffic/housing estate colleagues that the order is not enforceable as worded and with the descriptions of prohibitions currently used, I also leave to you.
As I have set out the detailed legal position above I should expect a response in similar fashion, should the authority believe that the PCN is enforceable and can support such a belief with legal references. Otherwise a simple 'we have cancelled your PCN' would suffice.
OP, for your info only. Pl delete the '*' in my draft.
*- Not under the Local Authorities' Traffic Order Regs(which apply to roads) but by virtue of the duty the council have placed on themselves under s17.1 of their order. (An Order has the force of law and the council is as bound by its provisions as much as anyone else).