Marks and Spencer Plc v Commissioners of Customs and Excise the Tribunals and Inquiries Act 1992 and Others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MOSES,JUSTICE MOSES |
| Judgment Date | 21 December 1998 |
| Judgment citation (vLex) | [1998] EWHC J1221-2 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CO/1013/97 |
| Date | 21 December 1998 |
[1998] EWHC J1221-2
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(CROWN OFFICE LIST)
Mr Justice Moses
CO/1013/97
CO/4113/97, CO/1608/97
MR D VAUGHAN QC, MR D WAELBROECK and MS J STRATFORD (Instructed by Messrs Dibb Lupton Alsop, London EC4R 2SS) appeared on behalf of the Applicant.
MR P LASOK QC, MR J PEACOCK and MR P MANTLE (Instructed by the Solicitor for the Commissioners of Customs & Excise) appeared on behalf of the Respondent.
Monday, 21st December 1998
Introduction
There are before me two appeals and one judicial review application. The appeals are against:�
(1) The Tribunal's decision, released 30 January 1997, dismissing Marks and Spencer's appeal against a decision of the Commissioners that repayment of VAT overpaid in respect of teacakes would unjustly enrich Marks and Spencer ("the unjust enrichment decision");
(2)(A) An appeal against the decision of the Tribunal, released on 22 December 1997, in which the Tribunal declined jurisdiction save to the extent that Marks and Spencer asserted enforceable Community law rights ("the jurisdiction decision");
(2)(B) The decision of the Tribunal, released on 22 April 1998, that Marks and Spencer had no enforceable Community rights in relation to its claim to repayment save in respect of the period 1991 to 31 July 1992 but that during that period those rights had not been infringed ("the three year cap decision").
The proceedings seeking judicial review are designed to include those issues not dealt with in the appeals. The appeal in the unjust enrichment case concerns chocolate teacakes: a dome-shaped confection covered in chocolate with a cake-like substance underneath supporting a mound of marshmallow. From 1973 Marks and Spencer accounted to the Commissioners for VAT at the standard rate. In September 1994 the Commissioners acknowledged that the teacakes should have been zero-rated. On 10 March 1995 Marks and Spencer claimed repayment of all the VAT it had accounted for (some �3.5 million) pursuant to section 80 of the VAT Act 1994 which replaced section 24 of the Finance Act 1989. The Commissioners invoked the defence provided by section 80(3) of the 1994 Act namely that repayment would unjustly enrich Marks and Spencer save for 10% of the claim, which was accepted subject to the three year limit for retrospective refund claims.
On 18 July 1996 the Paymaster General announced the Government's intention to introduce a three year limit for retrospective refund claims to come into effect from that date, subject to Parliamentary approval. On 30 October 1996 Marks and Spencer made a claim for some �2.6 million. This claim related to gift vouchers. From 1991 Marks and Spencer had charged VAT on the full face value of gift vouchers rather than on the cash actually received in exchange for vouchers i.e. the subjective value of the vouchers. The European Court of Justice had decided on 24 October 1996 in Argos Distributors Ltd v. Customs and Excise Commissioners ( Case C-288/94) [1996] ECR 1�5311 that Article 11A of the Sixth VAT Directive (Council Directive 77/388)required the subjective value to form the basis of the VAT charge. On 4 December 1996 Parliament made a resolution pursuant to the Provisional Collection of Taxes Act 1968 that the three year cap should be imposed with effect from 18 July 1996. Legislation imposing that cap was enacted in the Finance Act 1997 on 19 March 1997. Accordingly the Commissioners applied the cap to 10% of Marks and Spencer's claim in relation to teacakes and the whole of the gift vouchers claim. The appeal against the Tribunal's three year cap decision concerns both teacakes and gift vouchers.
In relation to the claim in respect of gift vouchers in the period 1991 to 31 July 1992, it is accepted that Marks and Spencer has enforceable rights under Community law; the only issue is to the extent to which they were infringed by the application of the three year cap. In relation to the claim for repayment in respect of VAT paid on teacakes and in relation to the remaining period of the claim in respect of gift vouchers the crucial question is whether Marks and Spencer has any rights under Community law which it can assert and the nature of those rights.
Has Marks and Spencer Enforceable Community law rights in Relation to Their Claim to Repayment?
Marks and Spencer contend that the Commissioners' rejection of its claim for repayment of Value Added Tax, save insofar as it related to tax paid within three years of the claim, infringes its enforceable Community rights in three ways:�
1. the three year cap violates the principle against retroactivity;
2. it breaches the principle of equivalence, and
3. it breaches the principle of effectiveness.
It is, thus, essential to Marks and Spencer's claim to repayment of VAT overpaid in respect of tea cakes and its claim to repayment of overpayments of VAT in respect of vouchers (save for the period between 1991 and 1 August 1992) that it can assert enforceable Community law rights. Marks and Spencer can only rely upon breaches of the Community law principles upon which it bases its case if it can identify the breach of an enforceable Community law right. The Commissioners contend and the Tribunal held that the right to recovery of overpayments of VAT is purely a matter of domestic law in which no Community law principles are engaged.
Community law does not expressly confer any right to recover overpayments of VAT. There are no provisions within Council Directive 77/388 as amended by Council Directive 92/77 of 19 October 1992 ("the Sixth Directive") for repayment of VAT (see BP Supergas Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v. Greek State case C-62/93 [1995] ECR 1�1883). However, if an amount of tax is charged by a Member State in breach of the rules of Community law there is a right to obtain a refund of the amounts charged.
That right was described by the European Court of Justice as:�
"the consequence and compliment of the rights conferred on individuals by the Community provisions as interpreted by the Court" (see paragraph 40 of BP Supergas).
Thus there are cases where Member States had imposed taxes in breach of Community law in which individuals were held to be entitled to invoke a Community law right to repayment which carried with it Community law principles (the imposition of health inspection charges in Amministrazione delle Finanze dello Stato v. Sp A San Giorgio Case C-199/82 [1983] ECR 1�3595, the imposition of taxation on various alcoholic products to protect domestic aquavit production in Hans Just v. Danish Ministry for Fiscal Affairs Case 68/79 [1980]ECR 1�501, the imposition of dock dues in Societe Comateb v. Directeur general des douanes et droits indirects Case C/192/95 [1997] ECR 1�165, the levy of parafiscal charges on sales of finished petroleum in Les Fils de Jules Bianco SA v. Directeur G�n�ral des douanes et droits indirects [1988] ECR 1�1099, and the application of VAT calculated on the basis of a price at the first marketing stage contrary to Article 11 of the Sixth Directive in BP Supergas itself). In all those cases the taxpayer was entitled to assert breaches of Community law principles (in particular of equivalence and effectiveness) for the very reason that the imposition of the tax in question was itself a breach of a right conferred on the tax payer by a Community provision.
Accordingly, Marks and Spencer seeks to identify the breach of a community law right conferred on it by Community provisions. In the claim in relation to tea cakes Marks and Spencer assert a right to pay no more than the correct rate of VAT. If it can establish that right as a Community law right then the overpayments were in breach of that right; it can rely upon a Community law right to repayment in accordance with Community law principles as a consequence of that breach.
Marks and Spencer seek to establish the right to pay no more than the correct rate as a right conferred by Community law in two ways:�
1. in reliance upon the direct effect of the Sixth Directive; and
2. by contending that, even if it cannot rely upon a directly effective right, Community law applies because the imposition of a zero rate is within the ambit of Community law.
A Directly Effective Right
It is, to use the argot of the European Court of Justice, settled law that an individual may assert an enforceable Community law right on the basis of a Directive only where:�
1. The Member State has failed to transpose or has failed properly to transpose the Directive into domestic legislation. In such circumstances, a Member State is estopped from pleading against individuals its own failure to perform its obligations (see Ursula Becker v. Finanzamt M�nster-Innenstadt ( Case 8/81) [1982] ECR 1�53 paragraph 24).
2. The provision of the Directive upon which reliance is placed must be unconditional and sufficiently precise (see Becker paragraph 25 page 71).
In relation to employers' obligations under the social policy Directive 91/533 in Helmut Kampelmann and Others v. Landschaftsverband Westfalen-Lippe and Others [1997] ECR 1�6907 the Court recently said:�
"Since the date on which it was transposed, individuals can no longer rely on those provisions unless the national...
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