Dollond & Aitchison Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 February 2004 |
| Date | 02 February 2004 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
"Au blé vert"(Case 229/83) [1985] ECR 1
Card Protection Plan Ltd v C & E Commrs VAT(Case C-349/96) [1999] BVC 155
C & E Commrs v Leightons Ltd VAT[1995] BVC 192
Daihatsu (UK) [1996] V & DR 192
Hans Sommer GmbH & Co KG v Hauptzollamt Bremen (Case C-15/99) [2000] ECR I-8989
Hauptzollamt Schweinfurt v Mainfrucht Obstverwertung GmbH (Case 290/84) [1985] ECR 3909
Kharalambos Dounias v Ipourgos Ikonomikon (Minister for Economic Affairs) (Case C-228/98) [2000] ECR I-577
Leightons Ltd; Eye-Tech Opticians VATNo. 17,498; [2002] BVC 2027
Malt GmbH v Hauptzollamt Düsseldorf (Case 219/88) [1990] ECR I-1481
Procureur de la Republique v Chatain (Case 65/79) [1980] ECR 1345
Richard Meyer-Uetze KG v Hauptzollamt Bad Reichenhall (Case 84/79) [1980] ECR 291
Supply - Optician - Importation of disposable contact lenses from Jersey - Whether appellant's supplies of lenses and solutions, and dispensing and aftercare those of a package of goods or separate supplies of goods and services.Customs Code -Whether for purposes of art. 29(3)(a) of EC Council Regulation 2913/92, the Customs Code, assuming part payment by patient for services, nevertheless that part to be included in total payment for goods so as to be part of price paid or payable for those goods - In event of services not being included in price paid or to be paid for goods, whether amount of payment for specified goods may be calculated under art. 29 or should be calculated under constructed value-method of art. 30.Value - Whether art. 27 of EC Council Regulation 918/83 applies so that intrinsic value of goods to be valued thus excluding packing, postage and any VAT from price.
The issues were whether the commissioners were correct in their decisions firstly, that a member of the appellant's VAT group made single supplies of goods, rather than supplies of goods and services, when it dispensed contact lenses from Jersey to customers in the UK and secondly, that the true value of a consignment under art. 29 of the Customs Code included all amounts payable as a condition of the sale, that is its full price.
The appellant was the representative member of a VAT group, which also contained Dollond & Aitchison Lenses Direct Ltd (DALD), a company incorporated in Jersey. In 1998, the appellant initiated an arrangement for supplying customers with disposable lenses called "Contact Lenses By Post" under which, for an advance payment made by monthly direct debit, it delivered lenses, together with solutions and soaking cases, by post direct to the homes of its patients. The appellant claimed that the service also included an initial examination or consultation, an annual check-up and any required professional aftercare. In July 1999, the warehousing operation was relocated to Jersey and from that time DALD made the contracted supplies to the UK patients, the professional services being provided by the appellant or its franchisees. The appellant continued to account for VAT under the previously agreed method whereby for an undivided consideration patients were regarded as receiving taxable lenses and an exempt right to receive professional services as and when required. These supplies were apportioned accordingly. The commissioners ruled that DALD made single supplies of goods rather than supplies of goods and services.
The appellant identified four issues for determination. The first was whether DALD made solely a supply of goods to a patient or made a supply of goods together with the supply of the right to receive professional services. It found surprising the commissioners' contention that the total payment made by a patient to DALD did not include any payment for the supply of services. This surprise was occasioned by the fact that in respect of supplies made by the appellant in the UK, following the decision of the High Court in C & E Commrs v Leightons Ltd [1995] BVC 192, two supplies, one taxable and one exempt, were made and it was necessary to apportion the undivided consideration between them. The second issue was whether, assuming that part of the payment by a patient to DALD was for a supply of services, the total payment was, nonetheless, made for the imported goods for the purposes of art. 29(3)(a) of the Customs Code. The appellant submitted that payment for a service that was not supplied in relation to the goods themselves could not sensibly be regarded as payment for the imported goods. The third issue concerned the application of art. 27 of EC Council Regulation 918/83, which exempted from duty any consignment of goods of "negligible value", while art. 22 of EC Council Directive 83/181 exempted from VAT imports of goods of "negligible value". The monetary limit in each case was the same and the appellant observed that it might have been expected that the Community legislation would have intended the concept of "negligible value" to be the same, whether the exemption was from duty or VAT. The application of different concepts seemed to the appellant to be idiosyncratic. The final issue identified by the appellant for determination related to its customs declarations. It had been compelled under protest to make customs declarations on the basis of the value favoured by the commissioners and the purpose of the present proceedings was to determine which party was correct.
The appellant's case on the basis of the identified issues was: (1) that DALD made a supply of both goods and professional services; (2) that insofar as a payment made by a patient related to professional services, it did not fall within the customs value for the imported goods; (3) that the value of the goods was the "intrinsic value", as identified in EC Council Regulation 918/83, excluding the cost of charge for postage, packaging and VAT, if any, included in the price of the goods; and (4) that there was no obstacle to DA amending its customs declaration to reflect the correct customs value of the goods in the light of the tribunal's conclusions.
The commissioners contended that the appellant was wrong to compare itself with a domestic supplier of contact lenses. Rather, it should compare itself with third countries importing into the Community in respect of which there must be parity of treatment. The appellant was seeking to avail itself of the benefits of being a third country for the purposes of the VAT Exemptions Directive, but at the same time to take advantage of UK and European Community case law which was only applicable to domestic supplies made by members of the VAT Union. The commissioners submitted that the specified goods fell to be valued under art. 29 of the Customs Code, which provided that the customs value was the transaction value, that being the price paid or payable for the goods when sold for export to the customs territory of the Community. Under art. 29(3)(a), the price paid or payable was the total payment made or to be made by DALD's patients to it or for its benefit for the imported goods. The commissioners maintained that DALD had waived the cost of the contact lens consultation and observed that its promotional literature stated that it would provide "free" aftercare to patients. The total payment made or to be made to DALD could not, therefore, have included an element of payment for either of those services. The commissioners observed that under art. 29(3)(a), the price actually paid or to be paid included all payments made or to be made as a condition of sale of imported goods to satisfy an obligation of DALD and, in that context, the optical care legislation and professional codes imposed an obligation on sellers of contact lenses to provide certain optical healthcare. However, the commissioners submitted that if the tribunal were to accept the appellant's contention that part of the price paid or payable by the patient was in respect of the specified services, since such payments were made as a condition of sale to satisfy an obligation of DALD they should be included in the customs value for the purposes of art. 29; the lenses could not lawfully be sold without the associated healthcare. The commissioners further submitted that since Jersey was part of the Customs Union, art. 27 was irrelevant to the issues in the appeal. Further, SI 1995/2518 regulation 120reg. 120 of the Value Added Tax Regulations 1995 (SI 1995/2518) excepted Council Regulation 918/83 from the Community legislation applicable in relation to any VAT chargeable on the importation of goods from places outside the member states. Therefore, in the commissioners' view, approaching the question of valuation by reference to the concept of intrinsic value was wrong. The commissioners conceded that if art. 27 were relevant, any payments made in respect of VAT and postage and packaging must be excluded from any valuation based on intrinsic value. The commissioners' final submission was that since the customs-value declaration made by the appellant reflected the price actually charged to its patients, it was not permitted to correct that declaration after the release of the goods into free circulation.
Held, referring the questions to the European Court of Justice for a preliminary ruling:
1. Notwithstanding that the contact lens examination and aftercare provided by the appellant were not, as the tribunal had found, free supplies of services, it did not follow that they constituted a separate supply from the specified goods for VAT purposes. The fact that Jersey is part of the Community customs union, but not part of the VAT Union, raised the question of whether the principles established by the European Court in Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] BVC 155 applied in this case to determine whether there was a single supply or separate supplies. In the absence of definitive case law on the subject, the question would be referred to the European Court for...
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