Cloburn Quarry Company Limited For Judicial Review Of A Decision Of Hm Revenue And Customs
| Jurisdiction | Scotland |
| Judge | Lord Burns |
| Neutral Citation | [2013] CSOH 203 |
| Year | 2013 |
| Published date | 27 December 2013 |
| Date | 27 December 2013 |
| Court | Court of Session |
| Docket Number | P666/13 |
| OUTER HOUSE, COURT OF SESSION | |
| [2013] CSOH 203 | |
| P666/13 | OPINION OF LORD BURNS in the cause CLOBURN QUARRY COMPANY LIMITED Petitioner; For Judicial Review of a decision of HM Revenue and Customs ________________ |
Petitioner: Wolffe QC; Lindsays
Respondents: Stewart QC, Maciver; Office of the Advocate General
27 December 2013
Background
[1] This petition called before me for interim orders on 3 and 4 December 2013. The petitioners, who are engaged in the commercial extraction and exploitation of aggregates, were represented by Mr Wolffe QC and the respondent by Mr Stewart QC and Mr Maciver, advocate. The respondent is the Advocate General representing Her Majesty's Revenue and Customs (HMRC) who are responsible for the collection inter alia of the Aggregates Levy (AGL) which is a tax introduced by the Finance Act 2001 (the 2001 Act) on the commercial exploitation of certain aggregates.
[2] Mr Wolffe moved the court to grant the order sought in paragraph 3(e) of the petition, namely suspension and interdict against HMRC from applying to Lanark Sheriff Court for a summary warrant and for interim interdict.
[3] AGL has a somewhat turbulent history. It was brought into force on 1 April 2002 by the Finance Act 2001 (the 2001 Act) and is payable on some aggregates. Certain types of aggregate are exempt. Those exemptions are set out in sections 17 and 18 of the 2001 Act. In September 2001 the European Commission (the Commission) received a formal complaint from two undertakings contending that certain of the exemptions constituted state aid contrary to articles 107 and 108 of the Treaty for the Furtherance of European Union (TFEU). In February 2002 the British Aggregates Association (BAA) brought an action for judicial review before the Queen's Bench Division in England against certain of those exemptions. That action was dismissed by Mr Justice Moses on 19 April of 2002 who decided that the AGL was not state aid. Leave to appeal to the Court of Appeal was granted.
[4] Meanwhile, on 24 April 2002, the Commission decided not to uphold the complaint against the AGL on the basis that it did not comprise any elements of state aid and was justified by the logic and nature of the tax system. On 12 July 2002 the BAA lodged an application before the European Court for annulment of that decision. On 7 March 2012, the General Court confirmed the Commission's decision. That judgement was itself appealed to the Court of Justice which, on 22 December 2008, set aside the decision of the General Court and referred the matter back for reconsideration. On 7 March 20012 the General Court annulled the decision of the Commission. In essence, the General Court found that the Commission had erred in its assessment of the AGL and the disputed exemptions thereto and had misconstrued the concept of state aid within the meaning of the TFEU.
[5] As a result of that decision, the Commission issued a letter dated 31 July 2013 to the Secretary of State for Foreign Affairs intimating that, following the judgment of the General Court, there were:
"objective reasons for the Commission to have doubts as to whether certain tax exemptions are in line with the logic and nature of the Aggregates Levy. The reasoning followed by the General Court also shows that those doubts exist for certain exemptions but not for all of them and do not put into question the Aggregates Levy in its entirety."
[6] Prior to the decision of the General Court the petitioners had paid AGL but under protest. Since that decision, the petitioners have filed the required statutory returns but withheld payment on the basis that it contends that the AGL itself, and not simply the exemptions thereto, constitute state aid contrary to the above provisions of TFEU. They have, however, offered to place the disputed sums on joint deposit.
[7] In terms of section 128(6) of the Finance Act 2008, HMRC are empowered to seek a summary warrant from the sheriff in order to obtain payment of AGL. HMRC duly proceeded to seek a summary warrant from the sheriff at Lanark and, because the sheriff has no discretion under the Act, that warrant was duly granted on 25 June 2013 in respect of AGL due in respect of three periods in 2012. The petitioners were not afforded any right to make representations to the sheriff at that stage. Further thereto, on 4 July 2013 a charge for payment of the sum of £749,350.13 was served upon the petitioners by sheriff officers constituting sums due in respect of AGL for three periods in 2012. The petitioners proceeded to lodge a note of objections under the Debtors (Scotland) Act 1987 and the sheriff was subsequently invited by HMRC to sist those proceedings pending the hearing by the Court of Appeal in England against the decision dismissing the petitioner for judicial review referred to above which had been stayed pending the legal proceeding in Europe. The sum of £749,350.13 is now being held in a neutral account.
[8] In July 2013 the petitioners presented the current petition in this court seeking, inter alia, declarator that HMRC's decisions and actings in seeking the summary warrant were unlawful as a matter of European Union law, by reason of incompatibility with the petitioner's rights under the European Convention on Human Rights and at common law. They seek an order reducing that summary warrant and the charge. At a hearing on 17 July 2013, the petition called before Lord Boyd of Duncansby for interim orders in the Vacation Court. Having heard argument for both the petitioners and the respondent, Lord Boyd refused interim orders and granted leave to reclaim.
[9] Thereafter, as narrated above, on 31 July 2013 the Commission announced its decision in the light of the General Court's judgment of 7 March 2012. That decision initiated the procedure laid down in article 108(2) of the TFEU which was referred to as a "phase two investigation" in relation to certain of the exemptions, exclusions and tax reliefs from the AGL. As a consequence of that step, it is agreed that HMRC require to suspend the application of those elements of the AGL which form the subject matter of the investigation. That follows from the terms of article 108(3) of TFEU. Her Majesty's government has made a formal announcement to the effect that it proposes to take steps by primary legislation to suspend the application of those exemptions which form the subject matter of the phase two investigation. It accepts that it is obliged to do so under article 108(3) of TFEU. This obligation was referred to as "the standstill obligation". Her Majesty's government intends to make those disputed exemptions taxable from 1 April 2014. Accordingly, while HMRC accept that the disputed exemptions should be suspended pending the results of the phase two investigation, they take the view that the standstill obligation does not affect the levy as a whole and points out that the investigation relates only to certain of the exemptions to the AGL.
[10] Since the application by HMRC for a summary warrant in respect of the levy which is said to be due and payable for certain of the periods in 2012, they have taken further steps in respect of the levy due for further periods. HMRC has intimated its intention to seek recovery by summary warrant of the sum of £388,078.10 being for the periods ended March and June 2013 (the new summary warrant). It is the procedure in respect of this sum which was the focus of the debate before me.
The petitioners' submissions
[11] The debate before me was confined to a motion in terms of paragraph 3(e) of the petition to suspend and interdict HMRC from applying to the sheriff court for the new summary warrant. Mr Wolffe pointed out that his motion was focussed in that way because the proceedings under the Debtors (Scotland) Act 1987 for the previous sums allegedly due had been sisted. His motion was directed only at the procedure available to HMRC in Scotland (but not in England) by summary warrant. HMRC would remain entitled to raise proceedings by ordinary action for recovery of the disputed sum of £388,078.10 in the sheriff court.
[12] Mr Wolffe submitted that a material change of circumstances had taken place since the decision of Lord Boyd of Duncansby to refuse interim measures. The Commission had announced on 31 July 2013 its decision to instigate the phase two investigation into the various disputed exemptions. That had the effect of triggering the standstill obligation which HMRC accepted required Parliament to suspend the application of the disputed exemptions pending the result of the investigation.
[13] The reclaiming motion against decision of Lord Boyd had called before the Inner House by order on 5 November 2013. I was informed that the court allowed the reclaiming motion to the extent that it recalled the award of expenses made by Lord Boyd. The court, however, accepted that the decision of the Commission intimated on 31 July 2013 to open a phase two investigation constituted a material change of circumstances since Lord Boyd's decision. That much was agreed by Mr Stewart.
[14] Mr Wolffe presented his argument under three main heads which are set out in the petition itself. At the forefront of those submissions was the proposition that, while the decision of the Commission to open the phase two investigation related only to certain of the exemptions to AGL, the levy itself constituted state aid and, as a consequence, steps to recover the AGL by summary warrant were unlawful pending the results of the phase two investigation. That was because the government was in breach of the standstill obligation. The disputed exemptions would not be removed until at least April 2014 when the necessary legislation was to be brought into force. Accordingly, during the time that those disputed exemptions are still being allowed, the AGL itself constituted state aid for reasons which Mr Wolffe subsequently developed. The interim remedies...
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