Georgiou and Another (t/a Marios Chippery) v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 19 October 1995 |
| Date | 19 October 1995 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Sir Louis Blom-Cooper QC, sitting as a deputy judge of the High Court.
Marion Lonsdale (instructed by Salusbury's, Leicester) for the taxpayers.
Richard L Barlow (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Associated Provincial Picture Houses Ltd v Wednesbury CorpELR[1948] 1 KB 223
C & E Commrs v JH Corbitt (Numismatists) Ltd ELRVAT[1981] AC 22; (1980) 1 BVC 330
C & E Commrs v John Dee Ltd VAT[1995] BVC 361 (CA); [1995] 125 (QB)
Dollar Land (Feltham) Ltd v C & E Commrs VAT [1995] BVC 115
Farnocchia v C & E Commrs VAT [1994] BVC 235
Mountview Court Properties Ltd v Devlin (1970) 21 PC & R 689
Save Britain's Heritage v Secretary of State for the Environment and Number 1 Poultry Ltd and City Index Property Trust LtdWLR[1991] 1 WLR 153
Schlumberger Inland Services Inc v C & E Commrs VAT(1986) 2 BVC 200,276
Seto v C & E Commrs VAT(1980) 1 BVC 363
Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378
Value added tax - Appeal to VAT tribunal - "Best of judgment" assessment - Function of tribunal Whether, exercising proper function, the tribunal was entitled to find that assessment was made to Customs' "best of judgment" - Value Added Tax Act 1983, s. 40(1), Sch. 7, para. 4(1) (Value Added Tax Act 1994 section 83 subsec-or-para (p) section 73 subsec-or-para (1)Value Added Tax Act 1994, s. 83(p), 73(1)).
This was an appeal against a decision of a tribunal ((MAN/90/1115) No. 12,141; [1995] BVC 961). The taxpayers asked for a preliminary ruling to determine whether the tribunal had been entitled to find that Customs' decision to make a "best of judgment" assessment was justified.
The taxpayers ran a fish and chip shop business in Leicester from 1976, when they were registered for VAT. In May 1988, on a routine control visit, an officer of Customs noticed that the taxpayers did not keep till-rolls and instructed them to do so. In August 1989 the taxpayers acquired a new till with a memory facility.
In October 1989 Customs conducted covert observations of the fish and chip shop from premises opposite over a period of five days which were accepted to have produced no reliable basis for assessment.
Assessments were made under the Value Added Tax Act 1983, Sch. 7, para. 4(1) (best of judgment assessments) for 16 prescribed accounting periods from November 1985 to October 1989. The taxpayers admitted that their takings had been under-declared, but appealed to the VAT tribunal pursuant to s. 40(1)(m) of the 1983 Act against the amount assessed. The assessments were based on figures taken from till-rolls during the September 1989 to January 1990 trial period. The tribunal upheld the assessments in a reduced amount.
On the taxpayers' appeal against the tribunal's decision the court was asked to rule on a preliminary point of law confined to the question whether the tribunal erred in law in the manner in which it carried out its function. If the taxpayers were successful on that point the appeal would fall to be allowed.
The tribunal had been satisfied that the assessments were made to the best of Customs' judgment and added that all the information which had been obtained by Customs (including the covert observations) was relevant to the making of the assessment. However, the tribunal also found as a fact that the assessment was not based on the observations. It rejected the taxpayers' argument that since the observations were flawed and the evidence of the till-rolls produced the same result, the basis of the assessment was also suspect.
In the High Court the taxpayers contended, inter alia, that the tribunal had misdirected itself in arriving at a decision which was inconsistent with its findings and that inadequate reasons had been given.
Held, dismissing the taxpayers' appeal:
1. In making a "best of judgment" assessment pursuant to the Value Added Tax Act 1983, Sch. 7, para. 4(1), Customs were not required to investigate a case, but they were required to base the assessment on material sufficient to make an assessment. However, irrelevant material could be disregarded. "Best judgment" was to be viewed objectively by the VAT tribunal in two stages. It had to be decided what information before Customs at the time of the assessment was relied on and then make a value judgment and then, at that stage, having discerned how Customs had arrived at their assessment, make a value judgment to a reasonable standard, whether Customs had assessed to the best of their judgment. C & E Commrs v John Dee LtdVAT[1995] BVC 361, Schlumberger Inland Services Inc v C & E Commrs VAT(1986) 2 BVC 200,276and Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378 considered.
2. Flawed though the covert observations were in this case, they did not form part of the exercise of "best of judgment". They were simply irrelevant. The tribunal as fact-finder on the issue of best of judgment had not misdirected itself. There was accordingly no point of law raised for the court to intervene.
3. Even if the tribunal had failed to give proper reasons for its decision, the taxpayers had not established that the decision had been reached by an erroneous process of legal reasoning. Mountview Court Properties Ltd v Devlin (1970) 21 PC & R 689 applied.
Sir Louis Blom-Cooper QC: This is an appeal under s. 11(1) of the Tribunals and Inquiries Act 1992 against a decision of the Manchester VAT tribunal, sitting at Birmingham (Mr A W Simpson TD, chairman, and Mr F Hazledine) dated 28 April 1994. The tribunal allowed, in part, an appeal against an assessment on 21 May 1990 of the tax due for 16 periods from November 1985 to October 1989 made under s. 40(1)(m)(i), (o) and (p) of the Value Added Tax Act 1983. The taxpayers were assessed at £56,444 (reviewed downwards on 20 November 1990 from £61,902) which the tribunal varied to £29,964.30, subject to the consequential adjustment of the penalty to £22,473.22, being a reduction of the penalty assessment to 75 per cent of the tax due.
The appeal is brought because the taxpayers, Mr Marios Georgiou and Mrs Androulla Georgiou (trading as Marios Chippery at 31 Braunstone Gate, Leicester) are dissatisfied in point of law with the decision of the VAT tribunal of 28 April 1994. The taxpayers seek an order that that decision be set aside and that the assessment to VAT dated 20 November 1990 (the revised assessment) and interest thereon be also set aside, on the grounds that it was void, or that the assessment was excessive and should be reduced. They also seek an order that the assessment to penalty, made on 14 December 1990, be allowed on similar grounds.
The focus of the appeal is the statutory power of Customs to assess tax due under the Value Added Tax Act 1983. Such power exists in para. 4(1) of Sch. 7 to the 1983 Act (now re-enacted in Value Added Tax Act 1994 section 73 subsec-or-para (1)s. 73(1) of theValue Added Tax Act 1994). It provides:
4(1) Where a person has failed to make any returns required under this Act or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect they may assess the amount of tax due from him to the best of their judgment and notify it to him.
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4(2) In any case where, for any prescribed accounting period, there has been paid or credited to any person -
(a) as being a repayment or refund or tax, or
(b) as being due to him under section 14(5) of this Act,
an amount which ought not to have been so paid or credited or which would not have been so paid or credited had the facts been known or been as they later turn out to be the Commissioners may assess that amount as being tax due from him for that period and notify him accordingly.
(Assessment for a prescribed accounting period may be combined as one assessment: para. 4(3) of Sch. 7.)
Assessment of the amount of tax due arrived at "to the best of their [Customs'] judgment" lies at the heart of this appeal. Stripped of much elaborate argument and of inessential detail, the thrust of the taxpayers' case is that the duty of Customs is akin to a duty of care, in circumstances described in the leading case on "best judgment", of Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378. That decision, it is submitted, places an obligation upon Customs to obtain sufficient, relevant information to enable them to make an assessment, and in raising that assessment fairly to consider all the material which they have acquired, and on all that material to come to a conclusion which is reasonable as the amount of VAT exigible, and in so doing act honestly and bona fide. The taxpayers further submit that the "best judgment" exercise imports an objective standard which takes no account (or excludes from consideration) the behaviour of the taxpayer. The taxpayer's conduct in relation to the liability to pay VAT may, however, be relevant to any specific issue of fact upon which the Customs officers are engaged in their investigation of the case.
It has been admitted throughout these proceedings that the taxpayers had deceived Customs by deliberately suppressing the takings from their trading; as to how much suppression was involved formed a good deal of the evidence in the appeal to the tribunal. But it was agreed by counsel on both sides that the fact of admitted fraud could not, and did not, have any impact upon the manner in which Customs officers generally went about their performance of the exercise under para. 4 of Sch. 7. But it could and did, quite properly, operate as a factor in the customs officers coming to a conclusion on any factual issue.
This means that the pre-conditions to the assessment according to "best judgment", namely the taxpayer's failure to make the requisite returns for VAT, or to keep documents and afford facilities necessary to...
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