Akbar and Others t/a Mumtaz Paan House
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 December 1997 |
| Date | 05 December 1997 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
C & E Commrs v Evans (t/a The Grape Escape Wine Bar) VAT(1981) 1 BVC 455
C & E Commrs v Glassborow VAT(1974) 1 BVC 4
Johnson v Blackpool General Commrs TAX[1996] BTC 501
Meekins v Henson UNK[1962] 1 All ER 899
Santi Bag Restaurant VAT(MAN/93/1177) No. 13,114; [1996] BVC 4073
The Bengal Brasserie VAT(LON/90/604) No. 5925; [1991] BVC 1363
Civil penalty - Partnership - Whether a penalty assessment for dishonest evasion must be made against each partner severally - Value Added Tax Act 1994 section 45 section 60 subsec-or-para (1) section 76 subsec-or-para (1)Value Added Tax Act 1994, ss. 45, 60(1) and 76(1); section 10 section 12Partnership Act 1890, ss. 10 and 12.
The issue was whether an assessment under Value Added Tax Act 1994 section 76 subsec-or-para (1)s. 76(1) of the Value Added Tax Act 1994 of a penalty under Value Added Tax Act 1994 section 60s. 60 of that Act could be made against a firm, that is to say, against partners together, as opposed to each member of the firm.
The commissioners issued an assessment against the Mumtaz Paan House together with a penalty assessment of £194,327. The appellants contended that the commissioners had no power to make an assessment under Value Added Tax Act 1994 section 60s. 60 against a partnership, that the assessment embodied in or notified by the penalty notice purported to be such an assessment, and that it was therefore invalid. In their statement of case, the commissioners alleged dishonest conduct on the part of the appellants, but only named one of them, G. The appellant submitted that as the statement of case stood it expressly led to dishonest conduct on the part of the appellants and not on the part of G alone. The appellants relied on Glidewell J's statement in C & E Commrs v Evans (t/a The Grape Escape Wine Bar) VAT(1981) 1 BVC 455 that a partnership was no more than a group of taxable persons trading jointly and was not a person within the meaning of the Act. It followed that although the penalty notice might have been served on the appellants, the penalty assessment, if it was to be valid, must have been made against each of the appellants as an individual and that, since the assessment was made against the appellants together, it was invalid. In Value Added Tax Act 1994 section 61s. 61, which dealt with imposing liabilities for dishonest evasion committed by a body corporate on a named officer of that body, the named officer could not be made liable unless he had been personally dishonest and the position ought to be the same with regard to "innocent" partners. A penalty assessment could not be made on persons collectively, particularly if it included persons against whom no dishonest conduct was alleged.
Held, that the penalty assessment was valid because:
1. The words "I consider that … the partnership has rendered itself liable to a penalty" in para. 2 of the penalty notice referred to the firm. Although there was a distinction between "the partnership" which strictly referred to a relationship, and "the firm" which referred to the persons between whom the relationship existed the words "the partnership" in the penalty notice referred to the persons to whom the notice was addressed, namely the two men and three women who were registered under the name of "Mumtaz Paan House", in other words the appellants. Accordingly the assessment was made against them.
2. As the case stood, dishonest conduct was alleged against all the appellants, but the only person against whom specific acts of dishonest conduct were alleged was G. However, since all the dishonest conduct alleged occurred in the ordinary course of the business of the firm, the appellants were jointly liable and each of them was severally liable for the dishonest conduct on the part of one or more of them by virtue of s. 10 and 12 of the Partnership Act 1890.
3. On a true construction of Value Added Tax Act 1994 section 76 subsec-or-para (1)s. 76(1) of the Value Added Tax Act 1994, a penalty assessment under Value Added Tax Act 1994 section 60s. 60 could be validly made against several persons together, whether the dishonest conduct alleged was alleged to have been that of all of them together or was alleged to have been that of one or more of them in circumstances where the liability for the penalty was imposed on all of them.
4. For the reasons given, the application was dismissed and the substantive hearing of the appeal could proceed.
[The tribunal set out the facts summarised above and continued as follows.]
8. Mr Barlow's submission [for the appellants] was that the commissioners had no power to make an assessment underValue Added Tax Act 1994 section 60s. 60 of the 1994 Act [the Value Added Tax Act 1994] against a partnership, that the assessment embodied in or notified by the penalty notice purported to be such an assessment, and that it was therefore invalid.
9. The first questions are, what are the terms of the penalty assessment and against whom was it made? It is well settled that an assessment and its notification are two distinct processes. Sometimes a notice of assessment is expressed to be notice of an assessment already made; sometimes the assessment is expressed to be made by the notice of assessment. In the instant case the penalty notice contains no express words such as either "the commissioners have made the following assessment" or, on the other hand, "the sum of £[ ] is hereby assessed on you." Paragraph 5 of the penalty notice ("The penalty assessment has been made as shown in the attached schedule") might refer to a previous act or to the earlier part of the penalty notice. In my judgment in its context it refers to the earlier part of the penalty notice, which thus constitutes the penalty assessment as well as its notification. If I am wrong in that view, in my judgment in the absence of evidence to the contrary the terms of penalty assessment are to be taken to be as they are stated in the penalty notice.
10. On either basis in my judgment it is the five registered persons (the appellants) against whom the assessment has been made. In my judgment the words "I consider that … the partnership has rendered itself liable to a...
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