Marks & Spencer Plc v Commissioners of Customs and Excise (No 1, No 3 and Case C-62/00)
| Jurisdiction | England & Wales |
| Judgment Date | 14 December 1999 |
| Date | 14 December 1999 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Stuart-Smith, Ward and Schiemann LJJ.
David Milne QC and D Waelbroek of the Brussels Bar (instructed by Walker Martineau) for Marks and Spencer.
Paul Lasok, Jeremy Peacock and Peter Mantle (instructed by the Solicitor for Customs and Excise) for the Crown.
The following cases were referred to in the judgment:
Argos Distributors Ltd v C & E Commrs VAT(Case C-288/94) [1997] BVC 64; [1996] ECR I-5311
Barra v Belgian State and City of Liège (Case 309/85) [1989] CEC 392; [1988] ECR 355
Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53
Belgocodex SA v Belgium (Case C-381/97) 3 December 1998 (unreported)
BP Supergas Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion v Hellenic Republic VAT(Case C-62/93) [1995] BVC 385; [1995] ECR I-1883
Carbonari v Bologna University (Case C-121/97) [1999] ECR I-1103
Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C-343/96) 9 February 1999 (unreported)
Dori v Recreb Srl (Case C-91/92) [1995] 1 CEC 366; [1994] ECR I-3325
Fantask A/S v Industrieministeriet (Erhvervministeriet) (Case C-188/95) [1998] CEC 359; [1997] ECR I-6783
Gravier v City of Liège (Case 293/83) [1985] ECR 593
Kampelmann v Landschaftsverband Westfalen-Lippe (Joined Cases C-253/96 to C-258/96) [1997] ECR I-6907
National & Provincial Building Society v United KingdomTAX[1997] BTC 624
Norbrook Laboratories Ltd v Ministry of Agriculture, Fisheries and Food (Case C-127/95) [1998] ECR I-1531
Pressos Compania Naviera SA v Belgium HRC(1995) 21 EHRR 301
Re Kolpinghuis Nijmegen BV (Case 80/86) [1989] 1 CEC 118; [1987] ECR 3969
Stran Greek Refineries and Stratis Andreadis v Greece HRC(1994) 19 EHRR 293
Three Rivers District Council v Bank of England[1999] EuLR 211
Value added tax - Recovery of overpaid tax - Right to repayment - Standard rate wrongly paid on teacakes until 1994 - VAT wrongly paid on face value of discount vouchers from 1991 - Whether right to repayment was a right enforceable under European Community law or under domestic law - Whether Customs' refusal of repayment was discrimination in view of treatment of other traders - Whether three-year cap on repayment rendered it impossible to exercise rights conferred by Community law - Whether repayment would result in "unjust enrichment" of the taxpayer - Value Added Tax Act 1994Value Added Tax Act 1983, s. 10(3); Value Added Tax Act 1994Value Added Tax Act 1994, ss. 80(3), (4); Finance Act 1997Finance Act 1997, s. 47; Sixth Council directive (Directive 77/388) of 17 May 1977 (OJ 1977 L145/1), eu-directive 77/388 article 11(A)(1) article 12(2)art. 11(A), 12(2).
This was an appeal by Marks & Spencer plc ("M & S") from a judgment of Moses J ([1999] BVC 107) that the cap introduced by the Finance Act 1997 section 47Finance Act 1997, s. 47, preventing recovery of VAT paid in error more than three years before the making of a claim for repayment, applied to VAT paid erroneously by M & S on teacakes and discount vouchers, and that M & S would be "unjustly enriched" by any repayment of more than 10 per cent of the VAT overpaid on teacakes claimed within these years.
M & S accounted for VAT on teacakes at the standard rate until, in September 1994, Customs acknowledged that the teacakes should always have been zero-rated. On 10 March 1995 M & S claimed repayment of overpaid tax, pursuant to the Value Added Tax Act 1994 section 80Value Added Tax Act 1994, s. 80.
From 1991 M & S had sold gift vouchers at a discount to corporate customers for distribution to their staff. VAT was charged on the full face value of the vouchers, rather than on the amount actually received.
For a period in 1991 and 1992, UK legislation (the Value Added Tax Act 1994 section 19Value Added Tax Act 1983, s. 10) did not properly transpose eu-directive 77/388 article 11(A)(1)art. 11(A)(1) of the sixth Council directive (Directive 77/388) ("the sixth directive") into domestic law. During that period Customs had correctly construed the UK statute and had charged VAT on the face value of the vouchers. In 1992 Value Added Tax Act 1994 section 19s. 10 of the 1983 Act was amended in such a way as to enable it to be interpreted in accordance with the directive, but Customs continued to charge VAT on the full face value of the vouchers.
Following the decision of the ECJ in Argos Distributors Ltd v C & E Commrs (Case C-288/94) VAT[1997] BVC 64 on 24 October 1996 that eu-directive 77/388 article 11(A)(1)art. 11(A) of the sixth directive required the subjective value of the consideration for a supply to form the basis of the charge, M & S made a claim for repayment of overpaid tax.
On appeal to the VAT tribunal by M & S claiming repayment of the VAT wrongly paid, Customs relied on the "unjust enrichment" defence provided by the Value Added Tax Act 1994 section 80 subsec-or-para (3)Value Added Tax Act 1994, s. 80(3) in relation to teacakes, and on the three-year cap introduced by the Finance Act 1997 section 47Finance Act 1997, s. 47 by substitution ofValue Added Tax Act 1994 section 80 subsec-or-para (4)s. 80(4) ("the capping defence") in relation to the earlier part of the teacakes claim and the vouchers claim in so far as it related to the period after the amendment of the 1983 Act.
The VAT tribunal upheld Customs' unjust enrichment defence ([1997] BVC 2243) to the extent of 90 per cent holding that M & S were entitled to be reimbursed only as to ten per cent of the VAT which had been paid mistakenly on teacakes and upheld the capping defence ([1998] BVC 2209).
M & S contended that to give effect to the three-year cap in the present case would be to deprive it of enforceable rights under Community law: that fulfilment of the two conditions said to be essential for reliance on enforceable Community rights, namely that domestic law had not been transposed into UK law, and that the Community provision in question was unconditional and precise, were not always necessary. Moreover, those conditions in this case had been fulfilled. While accepting that the directive had been properly transposed into UK law (except in relation to the earlier part of the vouchers claim), M & S submitted that it could rely on the directive as a source of rights where, as here, the national administration had failed properly to implement the directive, for instance by misconstruction of the legislation or the directive.
With regard to the earlier part of the vouchers claim, the question was one of the effectiveness of the right to reimbursement: whether the imposition of the three-year cap rendered virtually impossible the exercise of M & S's right to demand repayment of the excess amounts paid in 1991 and 1992. M & S contended that the three-year period was introduced retrospectively at a time when the three years had elapsed. Under the old law it had six years in which to decide whether or not to litigate its right and without warning found that the right had been lost.
M & S, which was a "payment trader", whose output tax exceeded its input tax, further contended that the introduction of the three-year cap with effect from 18 July 1996 was discriminatory vis-à-vis other traders which were "repayment traders" whose input tax exceeded their output tax. The cap did not take effect for repayment traders until the coming into force of a statutory instrument on 1 May 1997.
M & S contended that it would not be unjustly enriched by repayment.
Held, dismissing the appeals, but referring one issue to the Court of Justice of the European Communities ("ECJ"):
The capping defence
1. Each of the two conditions had to be fulfilled before a claim could be made on the basis of a Community right given by a directive. The situation to be avoided was one in which Community rights could not be asserted before the national court. Where national legislation had correctly transposed the directive, that situation could not arise. The part of the teacakes claim not affected by the cap and the later vouchers claim, which were concerned with properly transposed UK legislation, failed to fulfil the first condition. Had it been necessary to decide, the teacakes claim would not have satisfied the second condition because zero-rating was maintained as a derogation from the sixth directive and was exclusively within the ambit of UK law. However, the question of the chargeable amount undereu-directive 77/388 article 11(A)(1)art. 11(A) of the directive in issue in the vouchers claim would have satisfied the second condition: Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53 followed.
2. It was not clear whether it was permissible to amend with immediate effect a limitation period so as to prevent the repayment of VAT paid by mistake. It was even less clear in this case because the amendment made by the Finance Act 1997 section 47Finance Act 1997, s. 47 had retrospective effect to July 1996. It followed that a decision of the ECJ on whether it was compatible with Community law to enforce legislation which removed with retrospective effect a right under national law to reclaim VAT, which right had existed unexercised for more than three years, was necessary to enable the Court of Appeal to give judgment on the earlier vouchers claim: Barra v Belgian State and City of Liège (Case 309/85) [1988] ECR 355 and Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C-343/96) 9 February 1999 (unreported) considered.
3. The position of repayment traders was not comparable to the position of payment traders such as M & S. In any event there was no evidence that M & S had refrained from taking proceedings earlier than it did in reliance on the continuance of the six-year rule. Accordingly it had not been shown that there had been discrimination between comparable traders in refusing the repayment.
The unjust enrichment...
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