I thought I'd throw in my tuppence worth here.... I happen to be an enforcement officer, for a different Council but still, and I do deal with these issues on a day to day basis.
With regards to smoking in the vehicle, yes it's an offence - but only if the vehicle is used by more than once person. If you own the vehicle, and nobody ever rides with you, or drives your vehicle, then you can smoke in it. The law was designed to protect the people around the smoker, not the smoker him/herself. (not that I necessarily agree with the law).
From what I can make out, the fine here was for littering. It's a low level amount, designed to discharge your liability from a prosecution for the offence. The way I look at it is it's a slap on the wrist. DO NOT do this again. (Again, I know there will be a lot of people who thin that chucking a cig end on the ground is no biggie, but when everyone does this.... different debate

)
Now, I have fined people who have been sitting in their cars, and chuck the litter out, (all sorts from discarded food, to sweet wraps, to chewing gum and cig ends.) Now people can make mistakes, however, you can not mistake watching visibly an item thrown from a vehicle and falling to the ground. If the enforcement officer was that far away, that he could not see the object clearly fall, the the fine was issued in error. However, my inclination is that the driver is probably trying to get out paying the fine, and has got obstinate about it. I have know a lot of people who will go to extraordinary lengths to pretend that they are innocent of something, even low level offences.
If the enforcement officer wanted to make up his numbers for giving out tickets, all he would have to do is go and sit at a busy bus shelter for an hour. I guarantee he would be going back with 10 or more tickets. I know this because I have done this...