Lord Advocate v Glasgow Corporation
| Jurisdiction | Scotland |
| Judgment Date | 23 October 1957 |
| Docket Number | No. 3. |
| Date | 23 October 1957 |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
Lord Hill Watson.
Revenue—Purchase tax—Motor vehicle—Chargeable process—Construction by local authority on motor chassis of van body designed for use of public service Department—Whether a chargeable process applied in the course of or for the purposes of a business—"Business"—Finance Act, 1946 (9 and 10 Geo. VI, cap. 64), sec. 18 (1).
The Finance Act, 1946, enacts, by sec. 16 (1), that for the purposes of purchase tax a person shall be deemed to apply a chargeable process if he applies any process of manufacture which results in chargeable goods of specified classes. By sec. 17 (1), where any person who is required to be registered under the Act applies any chargeable process, purchase tax shall be chargeable on the wholesale value of the resulting goods. Sec. 18 (1) enacts:—"… 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 …"
A local authority purchased a motor chassis and cab, on which they constructed a van body in their own workshops. The completed van was intended for the use of the authority's street lighting department. It was conceded that the work done to the van constituted a chargeable process. The Commissioners of Customs and Excise sought to recover purchase tax on the wholesale value of the completed vehicle on the ground that the local authority had applied the chargeable process "in the course of or for the purposes of their business," within the meaning of sec. 18 (1).
Held (1) that "business" in the context of sec. 18 (1) must relate to some gainful or commercial rather than to a purely public service activity; (2) that the local authority were not engaging in a "business" by carrying out their statutory duty of providing, repairing and maintaining public street lighting; and accordingly (3) that, in constructing a motor van for use by their lighting department, the local authority were not applying a chargeable process "in the course of or for the purposes of their business," and were not liable to pay the tax claimed.
Revenue—Purchase tax—Motor vehicle—Exemption—Specialised vehicles used in public service—"Similar vehicles"—Whether van used by street lighting inspector a similar vehicle—Finance Act, 1948 (11 and 12 Geo. VI, cap. 49), Eighth Sched.—Purchase Tax (No. 5) Order, 1949 (S. I. 1949, No. 2358), sec. 2.
The Finance Act, 1948, in par. (c) of group 35 in Part I of the Eighth Sched., as amended by the Purchase Tax (No. 5) Order, 1949, sec. 2, lists certain motor vehicles which are exempt from purchase tax, including "vehicles of the following descriptions in which the accommodation for carrying passengers is only incidental to the use of the vehicle for other purposes … tower wagons, road construction, road cleansing, road watering, refuse collecting and similar vehicles."
An action was brought on behalf of the Commissioners of Customs and Excise for the recovery of purchase tax on a van used by the lighting department of a local authority. The accommodation for carrying passengers was incidental to the use of the van for other purposes, and, in particular, to its use for the inspection and servicing of street lighting. It was contended for the local authority that the van was a "similar vehicle" to the public service vehicles specified in par. (c) of group 35.
Opinions that "similar vehicles" meant vehicles similar in character and description to those specified and did not refer to any similarity in the use to which the vehicles might be put, and that, as the vehicles specified were all of the nature of mobile machines, the van was not a "similar vehicle" and would not fall to be exempted in terms of par. (c) of group 35.
The Lord Advocate, acting on behalf of the Commissioners of Customs and Excise, brought an action against the Corporation of the City of Glasgow for payment of additional purchase tax on a motor van belonging to the Corporation. The chassis and cab of the van had been purchased by the Corporation in order that a body designed to the special requirements of the Corporation's lighting department might be constructed and fitted thereto in the Corporation's workshops. Purchase tax of £74, 9s. 3d. had been paid in respect of the chassis and cab as originally purchased. The Commissioners of Customs and Excise sought to recover additional purchase tax of £160, 13s. 5d., which, with the sum already paid, represented tax at the rate of 66 2/3 per cent on the calculated wholesale value of the completed vehicle. In the course of a Debate Roll hearing before the Lord Ordinary, it was conceded that, in constructing a body for the van, the Corporation had applied a chargeable process, as defined in the Finance Act, 1946.1
The following narrative of the facts, which were not in dispute, is taken from the opinion of the Lord President:—"The defenders in October 1951 purchased for use by their lighting department a Ford 10 cwt. van chassis and cab. They thereafter constructed for the chassis, and fitted to it, a van body having to the rear of the driver's seat roofed accommodation with two side windows on each side. The completed van was then brought into use by their lighting department. The van was intended to be used, and has been used, exclusively in connexion with the public street lighting, its principal use being for the inspection of street lamp standards and the fitting of new lamps on the smaller type of standard by employees of the defenders. The chassis and cab were purchased, and the body was constructed and fitted thereto, by the defenders, so that the completed vehicle could be used for that purpose. The windows in the sides of the van are small and placed close behind the driver's seat, and serve the purpose of affording a larger field of vision to the defenders” lighting inspector, who normally travels in the seat next to the driver's. The body of the van is not fitted with seating accommodation nor used for the carriage of passengers. It is used only for carrying certain lighting plant, such as spare bulbs, &c. The
sum sued for represents the tax at the rate of 66 2/3 per cent on the estimated wholesale value of the completed vehicle, less the purchase tax already paid on the chassis and cab as originally purchased."
The pursuer pleaded, inter alia:—"(1) The defences, being irrelevant, should be repelled."
The defenders pleaded, inter alia:—"(1) The pursuer's averments being irrelevant and insufficient in law to support the conclusions of the summons, this action should be dismissed."
On 20th June 1957, after the Debate Roll hearing, the Lord Ordinary (Hill Watson) repelled the first plea in law for the pursuer, sustained the first plea in law for the defenders, and dismissed the action.
LORD PRESIDENT (Clyde).—This is an action for payment of purchase tax brought by the Lord Advocate, acting on behalf of Her Majesty's Commissioners of Customs and Excise, against Glasgow Corporation, and the question raised in the case is whether purchase tax is payable by the defenders as a result of certain operations carried out by them on a Ford motor chassis which had been purchased by them, and which, as so altered, they used in connexion with the repair and
maintenance of the public street lighting in Glasgow. The determination of this question depends upon the solution of two separate issues, which were argued to us by the parties to the action.The first of these two questions is whether the defenders carried out the operations on the chassis "in the course of and for the purposes of their business" within the meaning of section 18 (1) of the Finance Act, 1946.29 If they did not, it is agreed that liability cannot be affirmed against them. In the second place, even if this first question is answered in the affirmative, the remaining question is whether the vehicle was exempted from purchase tax by the provisions of the Eighth Schedule to the Finance Act, 1948,30 as amended by the Purchase Tax (No. 5) Order, 1949.31
The facts are not in dispute between the parties, and the Lord Ordinary, after a hearing in the Debate Roll, held that section 18 (1) of the 1946 Act32 did not apply and he therefore dismissed the action. He went on to consider the second question and expressed the opinion that the defenders were not entitled to invoke the exemption provision, as the vehicle in question did not fall within it. Both these matters have been argued before us, and, properly to deal with them, it is necessary to consider in some detail the facts and the statutory provisions.
[His Lordship gave the narrative of the facts quoted supra, and continued]—Purchase tax itself was introduced under Part 5 of the Finance (No. 2) Act, 1940.33 As its name indicates, it was, originally at least, intended to be a tax on purchases. The purchases which were made chargeable to this tax were (see section 18 (2) of the Act34 as amended by section 10 of the Finance Act, 194435) purchases from a wholesale merchant or a manufacturer selling by wholesale. In the case of non-imported goods, the seller was made accountable for the tax—see section 22 (1) (a). To facilitate the collection of the tax, provision was made in section 23 of the Act of 194036 for the registration of wholesale merchants and also of manufacturers whose business included the selling of any chargeable goods. In addition to these main provisions, section 25 (1) of the 1940 Act37 required that certain appropriations of chargeable goods by a registered wholesale merchant or by a registered manufacturer were to be treated in certain circumstances as if they were chargeable purchases. Both manufacturers and wholesale merchants are defined in this Act.38 In section 41 (1) manufacturer is defined as "a person who carries on in the United Kingdom a...
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