MMC Midlands Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR. JUSTICE LEWISON |
| Judgment Date | 03 April 2009 |
| Neutral Citation | [2009] EWHC 683 (Ch) |
| Docket Number | Case No: CH/2008/APP/0606 |
| Court | Chancery Division |
| Date | 03 April 2009 |
[2009] EWHC 683 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
ON APPEAL FROM THE VAT AND DUTIES TRIBUNAL
Before: THE HONOURABLE MR. JUSTICE LEWISON
Case No: CH/2008/APP/0606
Mr C Howell Williams QC and Mr Richard Honey (instructed by Eversheds LLP) for the Appellant.
Mr James Puzey (instructed by HM Revenue & Customs) for the Respondents.
Hearing dates: 11, 12 March 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Lewison:
Introduction
Fluorspar is the material from which fluorine is produced. It is a chemical which has several industrial uses. There are important deposits within the Peak District National Park without which the United Kingdom would be dependent on imports. Chemical grade fluorspar contains not less than 97 per cent fluorite (properly, calcium fluoride, or CaF2). The term “fluorspar”, or “fluorite” is sometimes used to mean the mineral itself, but more often the ore, that is the fluorspar and the rock to which it is attached. The ore is most commonly found within limestone, often together with other minerals such as barytes. Fluorspar ore is found in differing levels of purity varying from about 5 per cent (below which it is of little value since the cost of recovery of the mineral is too great) to as much as 60 per cent and occasionally more.
MMC Midlands Limited (“MMC”) has extracted fluorspar and limestone from two sites in Derbyshire, within the Peak District National Park: Backdale (over which it has a lease) and Wagers Flat (over which it has a licence). The issue before the VAT & Duties Tribunal (Chairman Mr Colin Bishopp) was the extent to which the extracted limestone was subject to aggregates levy. The Tribunal concluded that only limestone which had been physically separated from rock to which it was bound by a breaking of a mechanical or chemical bond was exempt from the levy; and that MMC was subject to compulsory registration. MMC appeal against that decision. The appeal is restricted to a question of law. Since some of the criticisms of the Tribunal involve challenges to what are, on the face of them, findings of fact, it is worth repeating Lord Radcliffe's familiar explanation in Edwards v Bairstow [1956] AC 14 of what counts as an error of law:
“If the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that, this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination.”
There is no need to resort to the principles of judicial review. There are four main grounds of appeal; but I will deal with them in a rather different order from that in which they were presented.
The facts
The Tribunal found the following relevant facts:
i) MMC has been in business since 1998, and is a joint venture between two mining and quarrying companies.
ii) MMC extracts by direct digging or by blasting (§ 10). At Backdale some fluorspar could be extracted by digging with an excavator, but for the most part it was necessary to liberate the material by blasting. MMC's records showed that 68 per cent of the blasts led to the recovery of some fluorspar, while the remaining 32 per cent did not (§ 26).
iii) MMC undertakes on its sites the actions or operations of direct digging, blasting, picking out of rock piles, “coning” of rock piles and passing of rock material over a screen (§ 10). Once material had been extracted it was sorted. Some fluorspar (that is, ore) could be easily separated from the limestone by an excavator, and that material was put on the fluorspar stockpile. Other material was “coned”, that is heaped up in a cone shape. The coarser material tends to gravitate to the outside of the cone, and the finer material (in which fluorspar is found) to the centre. Coned material was then separated and added to the stockpiles. Further separation was carried out mechanically, using a crusher with what is called a “grizzly screen”. A grizzly screen is a series of bars which act rather like a sieve. Fluorspar recovered by these means was also added to the stockpile, awaiting blending and sale, and the limestone from which it had been separated was crushed. The crushed limestone was then sorted according to the different sizes of the resulting fragments, and sold (§ 27).
iv) All the limestone sold by MMC is subject to at least one of those actions or operations (§ 10).
v) The proportion of fluorspar within the extracted rock can vary considerably from one location to another; veins differ greatly in width and mineralogy, and fluorspar varies in its physical characteristics and quality (§ 10).
vi) Glebe Mines Limited (“Glebe”—MMC's only customer for fluorspar) set a target of 30 per cent and minimum of 20 per cent fluorspar content for the material it accepted (§ 10).
vii) MMC has blended fluorspar extracted from both Backdale and Wagers Flat and sold it to Glebe between August 2006 and February 2007 (§ 10).
viii) Much more limestone than fluorspar has been sold: from Backdale, 700,000 tonnes of limestone to 250 tonnes of fluorspar, and from Wagers Flat 132,000 tonnes of limestone to 2,000 tonnes of fluorspar (§ 12). MMC sold, or had available for sale, small quantities of fluorspar (small, that is, by comparison with the total volume of material extracted) and it was of poorer quality than most, though not all, of the material sold to Glebe by MMC's competitors, or extracted by Glebe from its own workings (§ 31).
ix) Without the substantial limestone sales which MMC had made its workings would be uneconomic (§ 23).
x) However, MMC set out to exploit the fluorspar it had found, and it did not do so merely as a means of securing exemption from the levy (§ 38).
The Tribunal heard evidence from Mr Taylor, MMC's operations manager. He expressed the view that that the limestone was properly regarded as the spoil from the process of recovering fluorspar since it was generated as the inevitable consequence of extracting and separating out the fluorspar. It was, he said, impossible to recover the fluorspar without producing the limestone, all of which had been subjected to one or more of the processes he had described in order to separate the fluorspar from it. Mechanical separation, coning and screening were not undertaken in limestone quarries, but only where minerals were available to be recovered (§ 29). They also heard evidence from two experts: Professor Doyle and Dr Cobb. These two gentlemen expressed the view that in the light of their experience and of their observations, particularly of the quantity and quality of MMC's fluorspar (even allowing for the better material obtained at Wagers Flat), both sites were limestone quarries to which the extraction of fluorspar was merely incidental (§ 32). The Tribunal preferred the evidence of Professor Doyle and Dr Cobb to that of Mr Taylor. It expressed its conclusion as follows (§ 39):
“… there does not seem to us to be any real room for doubt that MMC is in truth carrying on the business of limestone quarrying. In that we accept the contentions of the Commissioners and the opinions of Professor Doyle and Dr Cobb, and reject Mr Taylor's view to the contrary. The enormous disparity between the volumes of limestone and fluorspar which have been sold, … the fact that the available fluorspar is, overall, of fairly poor quality and was sold for only about seven months while the operations were carried on for, altogether, nearly four years and the admitted fact that without the limestone sales the fluorspar operation was not financially viable (while the reverse was not the case) can lead only to that conclusion. It would be possible to take a different view only if fluorspar fetched several times more per tonne than limestone, but the value of fluorspar, as was not disputed, has at best been approximately the same as that of limestone, and often much less. The notion that this is a fluorspar mining business supported by incidental sales of a limestone by-product does not reflect the reality. The operation at Wagers Flat comes closer to fluorspar mining than that at Backdale, but even there the extensive nature of the excavations and the balance between saleable fluorspar and saleable limestone can lead only to the conclusion that it is fluorspar sales which are incidental to the main purpose.”
The legislation
Aggregates levy was introduced by the Finance Act 2001 which, as amended, remains the relevant legislation. Section 16 imposes the charge:
“(1) A levy, to be known as aggregates levy, shall be charged in accordance with this Part on aggregate subjected to commercial exploitation.
(2) The charge to the levy shall arise whenever a quantity of taxable aggregate is subjected, on or after the commencement date, to commercial exploitation in the United Kingdom.
(3) The person charged with the...
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