Commissioners of Customs and Excise v C. & A. Modes
| Jurisdiction | England & Wales |
| Judgment Date | 16 March 1979 |
| Date | 16 March 1979 |
| Court | Queen's Bench Division |
Queen's Bench Division.
Mr. S. Bates Q.C., Mr. H. Woolf and Mr. S. Brown (instructed by the Solicitor for Customs & Excise) for the Crown.
Mr. J. Gardner and Mr. R. Fitzgerald (instructed by Messrs. Slaughter & May) for the taxpayers.
Before: Drake J.
Value added tax - Purchase tax paid goods held in stock on 1 April 1973 - Purchase Tax deducted as input tax - Whether purchase tax "charged" at the time of delivery of goods by wholesaler to retailer when wholesaler was not intending to account for or pay purchase tax - section 4 subsec-or-para (1)Finance Act 1973 sec. 4(1).
This was an appeal by the Crown from a decision by the London Value Added Tax Tribunal allowing an appeal by C. & A. Modes ("the taxpayers") from a decision by the Commissioners that Purchase Tax had been charged on goods held in stock by the taxpayers on 31 March 1973.
The taxpayers, who were retailers of clothing, claimed to deduct input tax under section 4 subsec-or-para (1)Finance Act 1973, sec. 4(1) in respect of Purchase Tax claimed to have been charged on goods which they held in stock on 31 March 1973. The Commissioners rejected the claim contending that there was no evidence that Purchase Tax had in fact been charged on the goods in question. The taxpayers appealed and the Commissioners took the preliminary point that a Tribunal had no jurisdiction under section 40 subsec-or-para (1)Finance Act 1972, sec. 40(1)(d) to consider an appeal against the Commissioners' decision. The grounds for the Commissioners' objection was that they had exercised their discretion under section 40 subsec-or-para (1)Finance Act 1973, sec. 40(1) that they were not satisfied that Purchase Tax had been charged on the goods in question and the Tribunal could not substitute its own discretion for that of the Commissioners. On 12 March 1978 the Tribunal decided that it had jurisdiction to hear the appeal and, with the agreement of the parties, proceeded with the hearing. On 8 June 1978 the Tribunal allowed the appeal holding that Purchase Tax was "charged" in respect of goods if a claimant could establish that the goods were bought by and delivered to it in circumstances which rendered the supplier liable to the Purchase Tax on the goods and that it was immaterial whether the supplier intended to account for or pay the Purchase Tax in question. On 3 July 1978 the Crown appealed by notice of motion against the decisions of 12 March and 8 June contending that the decision of 12 March was wrong in law because the Tribunal had no jurisdiction to entertain the appeal and that the decision of 8 June was incorrect because Purchase Tax was "charged" only in respect of goods which were bought and delivered under a chargeable transaction where the price included a sum in respect of the Purchase Tax which the supplier intended to account and pay for. At the hearing of the appeal the taxpayers took the preliminary point that the notice of motion was out of time in relation to the appeal against the decision of 12 March.
Held, dismissing the Crown's appeal and dismissing the taxpayers' preliminary point:
1. The Commissioners' notice of motion was out of time in relation to the appeal against the decision given on 12 March because it was a separate decision from the decision given by the Tribunal on 8 June. However, justice would be done by the court exercising its discretion under RSC Lrd.3, Rule 5(1) to extend the time for appealing. Both parties had agreed to proceed with the appeal after the decision of 12 March and if the Crown had, at that stage, sought to appeal against the preliminary ruling on jurisdiction it was clear that both parties would have applied for the substantive hearing of the appeal to be postponed.
2. Finance Act 1972, section 40 subsec-or-para (1)sec. 40(1)(d) gave an express right of appeal where the Commissioners refused relief under section 4 subsec-or-para (1)Finance Act 1973, sec. 4(1). Accordingly the Tribunal was correct in its decision that it had jurisdiction to hear the appeal.
3. When section 4 subsec-or-para (1)Finance Act 1973, sec. 4(1) was read in conjunction with section 9 subsec-or-para (1) section 9 subsec-or-para (4)sec. 9(1) and (4) of the Purchase Tax Act 1963 it was clear that Purchase Tax was "charged" on goods when the goods were delivered under a transaction chargeable to Purchase Tax even though the supplier had no intention of accounting for or paying the Purchase Tax in question. From this it followed that the decision of the Tribunal given on 8 June was correct.
Drake J.: This is an Appeal by the C. & E. Commrs. against two decisions of the London VAT Tribunal given on 12 March 1978, and 8 June 1978, respectively.
The matters in dispute between the parties arise from a claim made by the respondents, who are the well-known retailers, C. & A. Modes, to be entitled to relief from paying VAT which they would otherwise be liable to pay. In very general terms the background to that claim is as follows. When VAT was first introduced with effect from 1 April 1973, it superseded Purchase Tax. Purchase Tax had been payable by wholesalers and manufacturers who then usually passed on the cost represented by the Purchase Tax they had paid, or for which they were liable, to those to whom they sold the goods. This was in contrast to VAT in respect of which the tax is payable by every purchaser along the chain of transactions from the time the goods are sold by the wholesaler until they are ultimately bought by the consumer. When VAT came into effect on 1 April 1973, it meant that a retailer, such as C. & A. Modes, would be compelled to charge VAT on the sale of any part of the stock of goods it then held, despite the fact that it had already been charged in respect of those goods a sum representing the Purchase Tax paid or payable by the wholesaler.
To avoid what would otherwise have amounted to a form of double taxation, section 4sec. 4 of the Finance Act1973, provided that in certain circumstances relief could be claimed in respect of the Purchase Tax which had been charged on or in respect of goods held on 31 March 1973. On 27 April 1973, C. & A. submitted such a claim, under provisions which had been introduced in the Budget and later enacted as section 4sec. 4 of theFinance Act 1973. The claim was in the sum of £695,538. They claimed that Purchase Tax to that amount had been charged on goods they held in stock on 31 March 1973: and that accordingly they should be permitted to treat that amount as deductible input tax. That is to say, they claimed to deduct that sum from whatever VAT they would otherwise pay to the Commissioners. The appellants in fact did deduct that sum from the payment they made to the Commissioners shortly thereafter. The C. & E. Commrs. in due course investigated the claim. They were not satisfied that Purchase Tax had in fact been charged on the goods in question. So on 26 November 1973, they rejected the claim. They did so on one of their forms designed for that very purpose. The form is headed "Rebate Scheme for Tax Paid Stocks" and is in the form of a printed letter with a space for writing in the reasons for the rejection of the claim. The parts material to this appeal read as follows:
Dear Sirs,
My visit in respect of your claim dated 27th April, 1973, for £695,538 has shown that for the following reasons" (and then follows the part written in) "unsatisfactory evidence that Purchase Tax has been charged" (and then the printed form continues) the Commissioners of Customs and Excise cannot accept the above amount as deductible input tax.
There then follows on the printed form instructions as to what should be done if, as in this case, the amount had already been deducted before the claim was investigated and verified; and the printed form part of the letter ended: "You have the right of appeal to a Value Added Tax Tribunal against this decision." It concluded with a reference to the procedure for making an appeal and ended "Yours faithfully" with a signature by an official of the Commissioners.
The latter statement that the appellants had the right of appeal to a VAT Tribunal is of interest because the appellants did in fact appeal successfully to the London Tribunal. But before that appeal was heard the Commissioners objected to the hearing on the ground that there was in fact no right of appeal to the Tribunal, so that the Tribunal lacked jurisdiction.
That objection was heard as a preliminary point and was rejected by the Tribunal in a unanimous decision given orally on 9 March but given in writing on 12 March 1978. Following the oral decision the parties agreed that the appeal should be heard by the Tribunal without prejudice to the Commissioners' right to challenge the Tribunal's jurisdiction by appeal to the High Court of Justice. The decision of the Tribunal on the appeal was given on 8 June and was in favour of C. & A. Modes. The Commissioners then, by Notice of Motion dated 3 July 1978, appealed to this Court against both decisions. When this hearing...
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