Commissioners of Customs and Excise v Corbitt (J. H.) (Numismatists) Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Simon of Glaisdale,Lord Salmon,Lord Scarman,Lord Lane
Judgment Date01 April 1980
Judgment citation (vLex)[1980] UKHL J0401-1
Date01 April 1980

[1980] UKHL J0401-1

House of Lords

Lord Diplock

Lord Simon of Glaisdale

Lord Salmon

Lord Scarman

Lord Lane

Commissioners of Customs and Excise
J. H. Corbitt (Numismatists) Limited
Lord Diplock

My Lords,


I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Lane. I agree with it and for the reasons which he gives I, too, would allow this appeal.

Lord Simon of Glaisdale

My Lords,


I have had the privilege of reading in draft the speech about to be delivered by my noble and learned friend, Lord Lane. I agree with it; and for the reasons which he gives I would allow the appeal.


I only wish to add, my Lords, that this does not mean that the Commissioners of Customs and Excise have an unquestionable discretion whether to permit the operation of the "margin" scheme or that the taxpayer is without remedy in the face of an assessment by the Commissioners under section 31 of the Finance Act 1972. Parliament has expressly given the Commissioners, in effect, the power to lay down the conditions which must be fulfilled if the taxpayer is of right to take advantage of the margin scheme. It has also, in effect, given the Commissioners a discretion to allow the taxpayer to take advantage of the margin scheme notwithstanding that those conditions have not been satisfied, provided that his records are, in the opinion of the Commissioners, "sufficient".


The taxpayer can appeal to the VAT tribunal against an assessment under section 31 on the ground that he has, contrary to the conclusion of the Commissioners, in fact complied with the stipulated conditions; and, in my view, this would extend to a contention that any deviation from those conditions was de minimis. Moreover, he can, in my judgment, invoke the jurisdiction of the High Court against the exercise of the Commissioners' discretion refusing to "recognise" his records as "sufficient"—on the ground, for example, that no reasonable body of Commissioners could so exercise their discretion (or that the discretion was otherwise improperly exercised): this is the normal judicial review, within the strict limits which are inherent in such a jurisdiction, of the exercise of a legal discretion by any body whether judicial, quasi-judicial or administrative.


It was part of the argument on behalf of the respondent that not only was the exercise of the discretion which was given expressly to the Commissioners by the last words of Article 3(5) of the 1972 Order appealable to the V.A.T. tribunal, but also that the tribunal was entitled on review to substitute its own discretion for that of the Commissioners. The decisions establishing that this is not the correct approach to the review of a discretion and that the jurisdiction is far more limited are so numerous and authoritative that it is not necessary to refer to more than Charles Osenton & Co. v. Johnston [1942] A.C. 130, 138 and Blunt v. Blunt [1943] A.C. 517, 526, 527; see also Shiloh Spinners Ltd. v. Harding [1973] A.C. 691 [1973] A.C. 691, 727, 728. It would require clear words to abrogate such a well-established rule of law: Maxwell on Interpretation of Statutes 12th ed. (1969) pp.116ff and cases there cited. There are no such words in section 40(1) of the Finance Act 1972, which in any case gives the V.A.T. tribunal a delimited, not a general, appellate jurisdiction. For this reason also I would allow the appeal.

Lord Salmon

My Lords,


I have the very greatest respect for the speech of my noble and learned friend Lord Lane. I have the misfortune, however, to be unable to agree as all your Lordships have done, with the conclusion that, in the circumstances of this case, the Value Added Tax Tribunal ("the Tribunal") had no jurisdiction to entertain the appeal brought by J. H. Corbitt (Numismatists) Ltd. (which I shall call "the taxpayer") against an assessment made by the Commissioners of Customs and Excise. In the ordinary class of case trader A buys goods from trader B who is liable to pay V.A.T. A would have to pay B the price of those goods plus the V.A.T. for which B is liable. The goods are then resold by A to his customer C. In such a case A is liable to pay V.A.T. on the price he obtains for the goods on their resale to C, the price and the V.A.T. being charged by A against C. A is, however, then allowed to set off against the amount of that V.A.T., the V.A.T. which had been charged against B and paid by A. In the not uncommon class of case, however, in which trader A buys from a non-taxable person, A would be at a serious disadvantage when he sold the goods which he had purchased. He would be liable to pay V.A.T. with no opportunity to set off against it the V.A.T. paid by the person from whom he had bought the goods since that person, being untaxable, would have paid no V.A.T. Parliament recognised that it would be unfair that a trader who had bought goods from an untaxable person should be in a worse financial position than a trader who had bought goods from a supplier who was liable to pay V.A.T. Accordingly Parliament sought to overcome this anomaly by section 14(1) of the Finance Act 1972 which reads as follows:—

"The Treasury may by order make provision for securing a reduction of the tax chargeable on the supply of goods of such descriptions as may be specified in the order in cases where no tax was chargeable on a previous supply of the goods and such other conditions are satisfied as may be specified in the order or as may be imposed by the Commissioners in pursuance of the order."


The order made under this section is S.I. 1972 No. 1971, which I shall refer to as the 1972 Order. That order introduced what is known as the "margin "scheme" by Article 4(1) which reads as follows:—

"Where this Article applies to a supply of goods by any person, tax shall be chargeable as if the supply were for a consideration equal to the excess of—

(a) the consideration for which the goods are supplied by him; over

(b) the consideration for which the goods were acquired by him; and accordingly shall not be charged unless there is such an excess."

"Article 4 does not apply to any supply by a person unless he keeps such records and accounts as the Commissioners may specify in a notice published by them for the purposes of this Order or may recognise as sufficient for those purposes."

Article 3(5) of the 1972 Order reads as follows:—

In my view, although Article 3(5) is in two parts which no doubt may be examined separately, it may and indeed should also be looked at as a whole to ascertain its object. Its object, in my opinion, is to ensure that the taxpayer should keep proper records and accounts for the purposes of this order, e.g. to show that the goods which the taxpayer bought and then sold were bought from a person who was not liable to pay any V.A.T.


I think that the first part of Article 3(5) means that if the taxpayer keeps such records and accounts as the Commissioners may specify in a notice, it could not be argued against him that his records and accounts were inadequate. This, however, could not prevent the point being taken against the taxpayer that his entries in those records and accounts were inaccurate and wrong. Undoubtedly the Commissioners did specify, in great detail by Notice 712 the records and accounts which should be kept. It is common ground that this notice was not complied with by the taxpayer. It seems to me that the first part of Article 3(5) may well benefit the taxpayer. If he complies with it by keeping the records and accounts specified in the notice to which it refers and makes the entries in his books accurately and honestly, Article 3(5) will operate in his favour. With very great respect, I think it incredible that any taxpayer would ever ask the tribunal to review the requirements of the Commissioners in respect of the records and accounts referred to in the first part of section 3(5), particularly as the tribunal has no jurisdiction to do so. It seems obvious that no sensible taxpayer, should he appeal against an assessment for V.A.T., would seek to rely on the first part of Article 3(5), when, as in the present case, it would be useless to do so, whilst his appeal might well succeed under the second part of that article. I do not think that there is any magic in the word "recognise". In my view, the last eight words in Article 3(5) mean the same as "or may decide is sufficient for those purposes." This is, in reality, a decision on a matter of fact. The question which the Commissioners had to decide under the second part of Article 3(5) was a question of fact—were the taxpayer's records and accounts sufficient for the purposes of the order? The Commissioners decided that they were not. The taxpayer contended that they were. If the Commissioners were wrong, their assessment against which the taxpayer appeals could not survive. Section 40(1) gives the taxpayer an absolute right to appeal "… against the decision of the Commissioners with respect to … (b) an assessment under section 31 of this Act or the amount of such an assessment."


A decision of fact, although it may depend to some extent upon an exercise of discretion, is still a decision of fact. If discretion played any part in the decision of the Commissioners, which I am prepared to assume without deciding the point, the tribunal would, on an appeal, no doubt ask themselves the question—could any reasonable panel of Commissioners have arrived at such a decision. For myself, I do not agree that such a case calls for what is sometimes referred to as supervisory jurisdiction in the High Court. The jurisdiction of an appellate court or tribunal is to decide whether the judgment or decision appealed from is right or wrong. The principles to be applied when a question arises as to the exercise of discretion are well established but do not alter the...

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