Blue Lagoon Beach Hotel & Company Ltd v Assessment Review Committee and another
| Jurisdiction | UK Non-devolved |
| Judge | Lady Rose |
| Judgment Date | 04 July 2023 |
| Neutral Citation | [2023] UKPC 24 |
| Court | Privy Council |
| Docket Number | Privy Council Appeal No 0067 of 2019 |
[2023] UKPC 24
Lord Briggs
Lord Sales
Lord Hamblen
Lady Rose
Lord Richards
Privy Council Appeal No 0067 of 2019
Privy Council
Trinity Term
From the Supreme Court of Mauritius
Appellant
Maxime Sauzier SC
Shrivan Dabee
(Instructed by AxiomStone Solicitors)
2 nd Respondent
Philip Baker KC
Imran S Afzal
(Instructed by RWK Goodman LLP (London))
Appellant
Blue Lagoon Beach Hotel & Co Ltd
Respondents
[1) Assessment Review Committee]
2) Director General, Mauritius Revenue Authority
Heard on 9 May 2023
This appeal is brought by Blue Lagoon Beach Hotel & Co Ltd (“Blue Lagoon”) which operates a hotel in Mahebourg, Mauritius. It raises the issue of the proper treatment for the purposes of the charge to Value Added Tax (“VAT”) of payments which Blue Lagoon receives from travel operators who reserve and pay for rooms at the hotel but do not in fact send along a guest to occupy that reserved room. Blue Lagoon enters into one-year contracts with travel operators under which each operator binds itself to buy a specified number of rooms for each night of the contractual period at a specified price. That price includes VAT at 15%. Every month the tour operator pays for the rooms in advance less a fraction of the amount already paid when the contract was signed. The price paid by the tour operator is for an “all-inclusive package” which comprises meals and certain other activities offered by the hotel. Blue Lagoon does not refund the operator any night which the operator has bought and has not been able to sell to a client.
Blue Lagoon accounted to the Second Respondent, the Mauritius Revenue Authority (“the MRA”) for VAT charged for accommodation where a client of the tour operator stayed at the hotel overnight and used the hotel facilities. But where no client arrived, Blue Lagoon treated the money paid by the tour operator as “special income” and as not comprising the consideration for a chargeable supply of services.
Blue Lagoon challenges two assessments to VAT issued by the MRA for the taxable periods July 2005 to December 2007 and January 2008 to June 2010. The VAT assessments were issued on the basis that there was a chargeable supply of services in those circumstances so that VAT had to be accounted for on those payments from tour operators.
Blue Lagoon sought an adjudication from the Assessment Review Committee (“the ARC”) as to whether it had made any supply of goods or services in relation to those payments. The ARC produced a Case Stated pursuant to section 21 of the Mauritius Revenue Authority Act 2004 on 24 November 2015. It stated that in making reserved rooms available to the tour operators against payment, Blue Lagoon had performed services for a consideration. That decision was upheld although on different grounds by the Supreme Court of Mauritius (The Hon A Caunhye Ag Senior Puisne Judge and the Hon G Jugessur-Manna, Puisne Judge) in its judgment of 4 June 2018.
Blue Lagoon now appeals to the Board. In its written case (dated 14 March 2023), Blue Lagoon sought to rely on an argument which had not been raised before the ARC or the Supreme Court. That argument was that if, contrary to its primary argument, there was a supply of services to the tour operators, that supply should be zero-rated in so far as the supply was to tour operators outside Mauritius at the time the services were performed. Blue Lagoon notified the Board a few days before the hearing that it intended to apply at the hearing for permission to introduce this new point. The Board acceded to the Respondent's request to determine before the hearing whether such permission should be given. The Respondent considered that they would be prejudiced by having to address this new argument on short notice and pointed out that the issue was not a pure point of law but depended on aspects of the factual background which had not been explored by the courts below. Having considered the submissions of both parties, the Board refused permission.
The sole issue in this appeal to the Board is, therefore, whether Blue Lagoon is liable to account for the VAT which it had charged to tour operators to whom it had sold nights of accommodation at its hotel in Mauritius even where the tour operator had not in fact provided a client to occupy the hotel room on the particular night.
The relevant provisions are found in the Value Added Tax Act 1998 (“ VATA”). Section 2 of VATA contains the following definitions:
(i) “services” are defined as “anything which is not goods or money”.
(ii) a “taxable supply” is defined as a supply of goods in Mauritius, or a supply of services performed or utilised in Mauritius made by a taxable person in the course or furtherance of his business; including a zero-rated supply but excluding an exempt supply.
The term “supply” is defined in section 4:
“4. Meaning of supply
(1) Subject to the other provisions of this Act, ‘supply’ means—
(a) in the case of goods, the transfer for a consideration of the right to dispose of the goods as the owner; or
(b) in the case of services, the performance of services for a consideration.
(2) Without prejudice to the provisions of the Third Schedule and to any regulations made under subsection (4) –
(a) ‘supply’ in this Act includes all forms of supply, but not anything done otherwise than for a consideration;
(b) anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services. …
(5)(a) A supply of goods incidental to the supply of services is part of the supply of the services. …”
Section 9 VATA provides:
“9. Charge to value added tax
(1) VAT shall be charged on any supply of goods or services made in Mauritius, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
(2) VAT on any taxable supply is a liability of the person making the supply and becomes due at the time of supply. …”
There is no real dispute between the parties as to the test to be applied to determine whether there has been a supply of services within the meaning of section 4. The appeal was presented by both parties on the basis that the terms of the VATA are to be construed in line with the corresponding provisions in the United Kingdom Value Added Tax Act 1994. That Act (as amended) gives effect to the Sixth Council Directive of 17 May 1977 (77/388/EEC) and since 1 January 2007, to the Principal VAT Directive (2006/112/EC). As the Board explained in Shophold (Mauritius) Ltd v The Assessment Review Committee [2016] UKPC 12, paras 17 and 18 (“ Shophold”), case law of both the United Kingdom courts and the Court of Justice of the European Union (“the CJEU”) may be relied upon when construing the provisions of VATA. One must, however, bear in mind differences in the working of Mauritian law at a detailed level. In this appeal, both parties relied on English and CJEU authorities and did not draw the Board's attention to any relevant difference between the UK and EU provisions and those of VATA as regards when there is a supply of services.
In order for there to be a chargeable supply of services, the case law of the CJEU establishes that there must be a legal relationship between the provider of the service and the recipient, pursuant to which there is reciprocal performance, the remuneration received by the provider constituting the consideration for the service supplied to the recipient: see Case C-16/93 Tolsma v Inspecteur der Omzetbelasting Leeuwarden [1994] ECR I-743, para 14. There must also be a direct link between the service provided and the consideration received: see Case 102/86 Apple and Pear Development Council v Commissioners of Customs and Excise [1988] ECR 1443, paras 11 and 12. Further, the term “supply of services” must be interpreted objectively without regard to the purpose or results of the transactions concerned and without it being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person: see Commissioners of Revenue and Customs v Newey (C-653/11) judgment of 20 June 2013 EU:C:2013:409, para 41.
Blue Lagoon argues that the supply of services here is the supply of the hotel room, meals and other services to a guest who occupies the room for which the tour operator has paid. If no guest arrives, there is no supply of services to which the payment of consideration by the tour operator to Blue Lagoon is linked, directly or at all. It asserts that Blue Lagoon can only be said to be supplying rooms once a tour operator has referred a client to it. Prior to that, the tour operator is simply given the opportunity of selling rooms to clients for a profit. Blue Lagoon relies on Esporta Ltd v Revenue and Customs Commissioners [2014] EWCA Civ 155; [2014] STC 1548 (“ Esporta”) to the effect that one must have regard to the economic realities and...
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