HM Revenue and Customs v Premier Foods (Holdings) Ltd
| Jurisdiction | England & Wales |
| Judge | THE CHANCELLOR |
| Judgment Date | 24 October 2007 |
| Neutral Citation | [2007] EWHC 3134 (Ch) |
| Docket Number | Case No: CH2007/APP/0278 |
| Court | Chancery Division |
| Date | 24 October 2007 |
[2007] EWHC 3134 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
THE CHANCELLOR OF THE HIGH COURT
Case No: CH2007/APP/0278
Ms E Mitrophanous appeared on behalf of the Claimant
Mr Angiolini appeared on behalf of the Defendant
1. This is the appeal of the Commissioner for Her Majesty's Revenue and Customs from the decision of the VAT and Duties Tribunal (Messrs Theodore Wallace and John Robinson) released on 16 March 2007. That decision allowed the appeal of Premier Food Holdings Ltd from assessments to VAT in the sum of £192,723 for the periods 02/04 to 07/06 in respect of supplies of Hartley's Fruit Bars. The issue, in summary, is whether such bars are confectionery for the purposes of the VAT Act 1994, Schedule 8, Part 2, Group 1, excepted Item 2 having regard to the contents of Note 5.
2. HMRC considered they were, and in a decision letter dated 17 October 2005, decided to raise the assessment to VAT. On the appeal of Premier to the VAT and Duties Tribunal, pursuant to a notice dated 3 July 2006 following a two-day hearing on 22 and 23 February 2007, the Tribunal disagreed. They considered that such bars were not confectionery with the result that they are zero-rated. HMRC contend that the Tribunal erred in law in arriving at that conclusion.
3. It is convenient to start with a reference to the relevant legislation. Zero-rating of goods or service is permitted by Article 28(2)(a) of the Sixth Directive, 77/388/EEC, now Article 110 of VAT Directive 2006/112/EEC. The VAT Act 1994, Section 30, subsection 2, provides for the zero-rating of the supply of goods or services:
“If the goods or services are of a description for the time being specified in Schedule 8.”
4. Schedule 8, Part 2, Group 1, relates to:
“The supply of anything comprised in the general items set out below except (a) [which I omit as irrelevant] and (b) a supply of anything comprised in any of the excepted items set out below which relates to that excepted item.”
The general items include:
“(1) Food of a kind used for human consumption.”
The excepted items include:
“Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.”
The notes include the following:
“(5) … and for the purposes of Item 2 of the excepted items, confectionery includes chocolates, sweets and biscuits; drained, glace or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.”
5. Premier produced three types of fruit bar between June 2005 and March 2006 namely apple and strawberry, apple and blackcurrant and mango and passion fruit. The Tribunal heard evidence from two witnesses for Premier. They saw and tasted some of the fruit bars. They considered analyses of their ingredients and method of production. They examined their wrapping, packaging and advertising. The facts as found by the Tribunal are set out in paragraphs 6 to 16 both inclusive of their decision. It is sufficient to refer only to some of them. I start with paragraphs 6 and 7 which state the following:
“The bars were 8 centimetres long by 2.2 centimetres wide by 8 millimetres thick. Each bar was in an orange airtight sleeve. The bars were sold in boxes of five; the boxes also being orange. Both bars and boxes were marked “Hartley's” with the type of bar and pictures of the fruits. Both were marked “one fruit portion” with a black circle; the boxes had “x5”. Both bars and boxes had nutrition information and ingredients. Both stated that there was no added sugar and no artificial colours or flavours and less than the stated amount of fat (3 per cent in the case of mango and passion fruit and 1 per cent, apple and strawberry and 1 per cent, apple and blackberry).
(7) The boxes had on the bottom, “Hartley's is on a mission to get everyone to be as passionate about eating fruit as we are …! Hartley's offers a range of pressed fruit bars that are packed full of real fruit goodness, which contribute one fruit portion to your recommended five a day”. They were also marked “ ideal for lunchboxes v Fruit On-The-Go!!!”
6. In paragraphs 8, 9, 10 and 11, the Tribunal set out the percentage of the various ingredients of the particular bars in question. It is not necessary for me to refer to them further. In paragraphs 12 to 14, they found the following:
“(12) The manufacturing process for all types of bar involved the use of a Hobart mixer at ambient temperature to mix the dried fruits to create a viscous fibrous mass. The date paste was produced by passing dried dates through a sieve. The concentrated fruit juice, starch and nature identical flavours were heated to 90°C to pasteurise to prevent microbiological growth. These comprised under 10 per cent of the product. The dried fruits were not heated.
(13) The thickened liquid mix was then combined with the dried fruits and maltodextrin in the Hobart mixer and mixed until homogenous. The maltodextrin, an easily digestible carbohydrate made from natural cornstarch which comprised around 7.5 per cent, had a nil sugar content and was to reduce water activity and act as a drying, bulking and binding agent. The mixture was loaded into trays and passed through rollers to produce slabs which were then passed through knives to form the bars.
‘ (14) The bars were targeted at mothers purchasing food for school lunchboxes for their children. The individual bars provided one of the five portions of fruit a day recommended by the government. The labelling and marking on the bars and the boxes was designed to comply with Trading Standards and Food Standards Agency requirements. The bars were stocked by Tesco and Sainsbury being placed next to cereal products and dried fruit. The bars were launched in June 2005 and ceased to be produced for the UK market in February or March 2006.”
7. I turn now to the decision of the Tribunal. After setting out the arguments of counsel and referring to a number of previous decisions of the Tribunal itself, their conclusions in this case were set out in paragraphs 22 to 29. They included, as far as is relevant, the following. First, the issue depended on whether the fruit bars are confectionery for the purposes of excepted Item 2. Second, there being no statutory definition of the word “confectionery” and applying the decision of the Court of Appeal in the Commissioners of Customs and Excise v Ferraro UK Limited [1997] STC 881, the relevant question would be what view would be taken by the man in the street, informed as the Tribunal had been; but that would not help as such a man would ask what the questioner meant by “confectionery”. Third, the last part of Note 5 had been taken from the judgment of Mr Justice Lawton in Commissioners of Custom and Excise v Popcorn House Ltd [1968] 3 All ER 782 in relation to Group 34 for purchase tax purposes in the Purchase Tax Act 1963 but neither the Act nor any dictionary afforded much help.
8. In paragraphs 26 and 27, they said:
“Mr Singh was entirely correct in pointing out that the meaning of words could alter, however, we do not consider the essentials of the concept of confectionery have altered since the judgment of Lawton J in Popcorn House. There is no doubt confectionery is normally eaten with the fingers. Products which are regarded as confectionery is made with a cooking process and do include a substantial amount of sweetening matter. A cooking process clearly involves heating. The derivation of the word “confectionery” involves the concept of putting together or mixing and confectionery is invariably sweet. In our view, the normal use of confectionery involves the ingredients being sweeter than their natural state.
(27) On the evidence in this case the primary ingredients namely the fruits were intrinsically sweet and were not sweetened in any way. Furthermore, the only part subjected to any heating process were the juice concentrates, starch and fruit flavours which were pasteurised before being added to the other ingredients and only account for a small proportion of the whole.”
They then commented that counsel had referred them to various dictionaries, none of which they found of any particular help, and concluded in paragraph 29:
“Turning to the criteria mentioned in Quaker Oats Limited, we do not consider that the ingredients are...
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