Getting councillors and/or your local MP on your side would at least make the Council parking team sweat a bit and think twice before doing this again, if not actually forcing an apology and refund.
As posted by Incandescent, this has nothing to do with the council.
You did not comply with a statutory requirement and the state, in the form of the DVLA, took action as they're entitled to do. OP, as you said earlier and from what I've read in the legislation- have you gone into the link given in the receipt - the issue here is one of not registering your car, not failing to pay £0. It appears that the DVLA use the list of cars registered for VED(at whatever rate) as the database for comparing with the insurance industry database i.e. vehicles registered for tax should equal those insured + SORNs.
Is the receipt all you were given at the pound, I read that you should be advised of your right to appeal - very limited grounds, but it's there? If you go into the regs made under VERA (the Act governing the issue) then be careful because it's only in its original form on the 'legislation' database, you have to look at the subsequent amendments, one of which if I recall deals with the issue of immobilisation time periods.
