Glasgow Corporation v Lord Advocate
| Jurisdiction | Scotland |
| Judgment Date | 20 March 1959 |
| Date | 20 March 1959 |
| Docket Number | No. 21. |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
Lord Wheatley.
RevenuePurchase taxAppropriation of chargeable goods by manufacturerManufacture of stationery by local authority for use by its trading departments and its public service departmentsWhether appropriations for such uses subject to purchase taxFinance (No. 2) Act, 1940 (3 and 4 Geo. VI, cap. 48), secs. 23 (1) and 25 (1)Finance Act, 1946 (9 and 10 Geo. VI, cap. 64), sec. 18 (1).
The Finance (No. 2) Act, 1940, enacts, by sec. 23 (1), that every manufacturer whose business includes the selling of any chargeable goods shall be registered for the purposes of purchase tax. "Manufacturer" is defined by sec. 41 (1) as " a person who carries on a business of making goods or of applying any process in the course of the making of goods " Sec. 25 (1) enacts:"Where a manufacturer who is required by this Act to be registered appropriates or applies any chargeable goods which have been made by him or which are the result of a process applied by him, either(a) to the purposes of any business carried on by him of selling chargeable goods by retail or (c) to any other purpose not being a sale of the goods under a purchase which is a chargeable purchase or a sale of the goods to a registered wholesale merchant as stock for his business or to a registered manufacturer as materials, the appropriation or application shall be treated as if it were a chargeable purchase, he shall be accountable for the tax chargeable in respect of the goods, and the tax shall become due at the time of the appropriation or application."
Sec. 18 (1) of the Finance Act, 1946, enacts, inter alia:" every person who, in the course of or for the purposes of his business, applies a chargeable process shall, whether or not he would otherwise be so treated, be treated as a manufacturer for all the purposes of the enactments relating to purchase tax, and be treated for the purposes of subsection (1) of section twenty-three of the Finance (No. 2) Act, 1940 (which relates to registration) as a manufacturer whose business includes the selling of chargeable goods "
Glasgow Corporation sued the Commissioners of Customs and Excise for declarator that purchase tax was not exigible on stationery manufactured by their printing and stationery department, and for repayment of purchase tax which had been paid in respect of such stationery between 1951 and 1957. The Commissioners counter claimed for purchase tax which they contended was due for the period after 1957. The manufacture of stationery is a chargeable process, and stationery manufactured by the Corporation was used by them in their trading departments and in their public service departments. A small quantity was also sold to outside bodies. The Corporation contended that they were not liable for tax because they did not manufacture stationery in the course of or for the purposes of a business.
Held (diss. Lord Russell) that the Corporation were not liable to pay purchase tax on stationery manufactured by them and used in their public service departments, but (per curiam) that they were liable to pay tax on stationery manufactured by them and used in their trading departments, as well as on any stationery sold to outside bodies.
Condictio indebitiError of lawWhether tax paid under an erroneous interpretation of taxing statutes recoverable.
The pursuers paid tax for a number of years under the erroneous belief that they were liable to such tax in terms of the provisions of various Finance Acts. The Court of Session then decided a case on the interpretation of these provisions in a way which indicated that the pursuers had not been liable to pay the tax in question. The pursuers sought to recover the tax so paid under the condictio indebiti.
Held that the condictio indebiti did not lie to recover money paid under an erroneous interpretation of a public statute; and action dismissed so far as directed to such recovery.
Authorities on condictio indebiti in cases of error of lawreviewed.
The Corporation of the City of Glasgow raised an action against the Lord Advocate as representing the Commissioners of Customs and Excise in which they concluded:"(1) For declarator that the pursuers are not, and since 12th February 1951 have not been, liable to pay purchase tax on stationery and office requisites, including school exercise books, manufactured by their printing and stationery department and supplied by that department for use by the pursuers or any of their departments. (2) For payment by the defender to the pursuers of the sum of One hundred and sixty-three thousand, one hundred and eighty pounds, eleven shillings and two pence (163,180, 11s. 2d) sterling, with interest thereon at the rate of 5 per cent per annum from the date of citation hereon until payment." The defender counter-claimed for payment of 24,534, 8s. 5d.
The pursuers averred, inter alia:(Cond. 2) "In or about 1937 the pursuers established a new department known as the printing and stationery department, for the manufacture and supply of stationery and other office requisites for use by all the departments of the pursuers, and for the manufacture and supply of school exercise books and other school requisites of the pursuers' Education Department. Since that year the said printing and stationery department has continued to carry out all those functions, subject to the limitation that it does not carry out the manufacture of paper " (Cond. 3) "Under the provisions of the Purchase Tax (No. 1) Order, 1951 (S. R. & O. 60, of 1951) which came into operation on 12th February 1951, stationery and office requisites consisting of, or wholly or partly made from paper, paperboard or similar materials, were classed as goods chargeable to purchase tax, if they were produced as the result of the application of a chargeable process within the meaning of section 17 of the Finance Act, 1946. The work of manufacture carried on in the pursuers' printing and stationery department is a chargeable process within the meaning of the said section. In 1951 the said Commissioners of Customs and Excise required the said department to be registered in terms of section 18 (1) of the said Act The pursuers obeyed said instruction for registration and since registration they have been called upon by the said Commissioners to pay" judge=" and have paid, purchase tax on the goods manufactured by their printing and stationery department. The amounts of purchase tax so paid by them up to and including the second quarter of 1957 total 163, 180, 11s. 2d. With reference to the defender's averments in answer denied that the pursuers have paid said tax voluntarily. In February 1951 the pursuers represented unsuccessfully both to the said Commissioners and to the Secretary of State for Scotland that as a non-profit making concern they should be exempted from paying the said tax. The said representations were made to the Commissioners by letters dated 7th and 8th February 1951. Copies thereof are produced. Representations were made to the Secretary of State through the agency of local government group organisation, as defender well knew. Admitted that the pursuers have refused to pay tax in respect of stationery manufactured by the said department for the quarter ended 30th September 1957. Quoad ultra the averments in answer are denied except in so far as coinciding herewith and under reference to the answers to said counter claim." (Cond. 4) "In October 1951 the pursuers purchased for use by their Lighting Department a van chassis and applied thereto a chargeable process by constructing for, and fitting to, it a van body. The said Commissioners claimed purchase tax on the completed vehicle, which the pursuers refused to pay. On 27th July 1956 the present defender raised an action in the Court of Session for payment of the said purchase tax, and, by interlocutor dated 23rd October 1957, the First Division of the Court of Session dismissed the action as irrelevant, on the ground that the present pursuers had not applied a chargeable process in the course of or for the purposes of their business, within the meaning of section 18 (1) of the said Act of 1946. The pursuers believe and aver that the ratio of that decision applies to the operations carried out by them through their printing and stationery department and accordingly that purchase tax is not, and never has been, chargeable on the goods manufactured by the said department. In these circumstances they seek declarator in terms of the first conclusion of the summons. The averments in answer are denied except in so far as coinciding herewith." (Cond. 5) "The said payments of purchase tax made by the pursuers in respect of the said goods since 1951 were made under essential error as to the meaning and construction of section 18 (1) of the said Act of 1946. Until the raising of the said action by the present defender in 1956 the pursuers understood that they required to be registered in terms of the said section if they applied a process of manufacture resulting in chargeable goods, and nothing said or done by the said Commissioners led them to believe otherwise. Moreover, a failure to pay or account for purchase tax would have made the pursuers or their members or officials liable to penalties as set out in the relevant Acts. The said decision of the First Division has finally exposed the error of that belief. The said Commissioners are accordingly bound to repay the said sum of 163,180, 11s. 2d. representing the said sums in name of purchase tax paid in error by the pursuers, which is the sum sued for in the second conclusion of the summons. The said Commissioners had and have no right or title to withhold said tax which has been exacted by them illegally and without justification. The Commissioners have been requested to make repayment thereof, but they refuse or delay to do so. The present action is accordingly necessary. The averments in answer are denied...
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Analysis
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