Grunwick Processing Laboratories Ltd v The Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE LLOYD,LORD JUSTICE STOCKER |
| Judgment Date | 18 March 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J0318-4 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 87/0256 |
| Date | 18 March 1987 |
[1987] EWCA Civ J0318-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
DIVISIONAL COURT
(MR JUSTICE MacPHERSON)
Royal Courts of Justice,
Lord Justice Fox
Lord Justice Lloyd
Lord Justice Stocker
87/0256
Case No. 1874/86
MR NEVILLE THOMAS, Q.C. and MR R. MATHEW (instructed by Messrs. Durrant Piesse) appeared on behalf of the Appellant.
MR JOHN LAWS (instructed by the Solicitor, H.M. Customs & Excise) appeared on behalf of the Respondents.
I will ask Lord Justice Lloyd to give the first judgment.
This is an application by Grunwick Processing Laboratories Limited for leave to appeal from a decision of MacPherson J., whereby he dismissed the company's appeal from a decision of the Value Added Tax Tribunal given on 20th December 1985 in favour of the Commissioners of Customs and Excise. Lord Granchester, the Chairman of the Tribunal, found that the company had not discharged the onus of showing, on a balance of probabilities, that the Commissioners' assessment to Value Added Tax should be reduced.
I take the basic facts gratefully from the decision of the Tribunal: The company carries on the business of developing and printing films. In the course of such business the liquids through which films are passed acquire a high silver content, and that silver can later be extracted as sludge or flake. In 1982 the Commissioners became aware that sales were being effected of scrap silver extracted from the liquids used by the company, but that no tax on such sales was being accounted for by the company in its returns of tax. They instituted enquiries, and in December 1982 directors of the company made statements admitting that sales of scrap silver had taken place.
On 6th December 1983, the Commissioners made an assessment of the tax due for the period between 1st August 1980 and 31st January 1983. There was a point that that assessment was never properly served on the company as required by Section 38 and Schedule VII of the Value Added Tax Act 1983; but that point was rejected, both by the Tribunal and by the learned Judge, and has not been pursued before us.
The assessment was originally in the sum of £86,584, but was subsequently reduced to £75,291, based on sales of 4,024 kilogrammes of scrap silver to two companies, Sandway Alloys and Jaton Metals, who purchased the silver during the period up to January 1981, and a third company called Rutland Metals, who purchased the silver during the period from January 1981 to January 1983. The value of those sales was put at £577,232. The company, on the other hand, says that the value of the sales could not have exceeded £260,000 on which the tax would have been £39,000. They have paid that sum. It has been accepted by the Commissioners on account. The dispute in these proceedings relates to the balance.
The Commissioners' case at the hearing before the Tribunal was based on a series of 130 purchase notes produced in evidence by a Mr Fanning, who was a director of Rutland Metals. Those notes bore the initials "ER" showing (according to Mr Fanning's evidence) that the silver had been purchased from a Mr Rivolta—one of two middlemen in these dishonest transactions. For dishonest they were. The other middleman was his partner, a Mr Gerard. The sales were Put through a company called Seric Steel.
The total quantity represented by those purchase notes amounted to 4,024 kilos—the quantity, as I have already said, on which the assessment was based.
The company's case before the Tribunal was that the amount of silver recovered from the films processed during the period October 1980 to December 1982 could not have exceeded 2,629 kilos and that the amount sold must have been less than that—for 937 kilos were still in stock at the end of the relevant period. So, according to the company's case, the amount sold could not have exceeded the difference of 1,692 kilos. Some of the purchase notes produced by Mr Fanning must therefore have represented silver, purchased admittedly from Mr Rivolta, but coming ultimately from sources other than the company.
Lord Grantchester went into the matter very carefully. He accepted as accurate the figure of 2,629 kilos based, as it was, on the scientific evidence of a Mr Mason. He also accepted that some of the silver sold by Mr Rivolta to Rutland could have come from sources other than the company. But, nevertheless, he held that the company had failed to disprove the prima facie evidence to be derived from the purchase notes. This could only have been done by calling Mr Rivolta himself.
Lord Grantchester said this at page 153 of the bundle:
"Mr Rivolta should have been called as a witness. Mr Peters states that Mr Rivolta was on holiday and out of the United Kingdom at the time of this hearing and was not called by him as a consequence. Mr Mathew protested at his absence but, in the final analysis, the burden of showing that any particular purchase note or notes should be excluded from the computation of the assessment falls on him, and only Mr Rivolta is in a position to state which of the purchase notes bearing his initials relate to materials purchased by the company, and which do not".
Then later he said this:
"Having gone through all the purchase notes on a similar basis against the background of the oral evidence of Mr Fanning and Mr Gerard, I am unable to state that, on the balance of probabilities, any particular invoices included in the assessment do not relate to silver-bearing materials derived from the film processing work carried on by the company....
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