Moti Mahal Indian Restaurant
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 November 1992 |
| Date | 19 November 1992 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Council of Civil Service Unions v Minister for the Civil ServiceELR[1985] AC 374
Food Engineering Ltd VAT(LON/91/1522) No. 7787; [1992] BVC 1523
Gandhi Tandoori Restaurant VAT(1989) VATTR 39; (1989) 4 BVC 535
GUS Merchandising Corporation Ltd v C & E CommrsVAT[1992] BVC 135
Steptoe; C & E Commrs v VAT[1992] BVC 142
Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378
Tax evasion - Conduct involving dishonesty - Civil penalty - Whether tribunal had jurisdiction to consider whether assessment defective - Assessment irrational - Appeal allowed -Finance Act 1985 section 13 subsec-or-para (1) section 1321 section 27Finance Act 1985, sec. 13(1), 21 and 27.Assessment - Assessment on Indian restaurant - Schedule accompanying assessment conflicted with log of observations - Whether made to officer's best judgment - Appeal allowed -Value Added Tax Act 1983 schedule 7 subsec-or-para 4Value Added Tax Act 1983, Sch. 7, para. 4(1).Tribunal - Practice - List of documents - Log of observations central to assessment and notebooks used to refresh witnesses' memories to be included in list of documents and produced at hearing -SI 1986/590 section 20 subsec-or-para (1)Value Added Tax Tribunals Rules 1986 (SI 1986/590), r. 20(1).Tribunal - Practice - Evidence - Original documents to be produced wherever reasonably practical.
The issues were (1) whether Customs had assessed the amount of tax due from the taxpayer to the best of their judgment, (2) whether the tribunal had jurisdiction to consider as a separate issue if a penalty assessment for tax evasion could be challenged before the tribunal on the basis that the commissioners had failed to exercise properly the powers conferred upon them and (3) whether, in the present case, the taxpayer had shown that the assessment was defective on those grounds.
The appellant was a partnership which carried on a business as an Indian restaurant in Chelsea. Customs officers had, on five separate days from 6 September 1989 to 14 June 1990, carried out observations both inside and outside the restaurant and had concluded that the takings were being suppressed, with a consequent underdeclaration of tax. On the days in question Customs noted that a total of 198 customers ate meals in the restaurant and 57 took meals away, whereas examination of the appellant's records showed that only 107 meals and 35 takeaways were recorded and declared. Based on these figures, an assessment for £69,579 was raised. Customs imposed a separate civil penalty for dishonest evasion based on the same tax but reduced by ten per cent on account of co-operation by the appellant.
During the hearing, at which the officers' notebooks and logs of observations were not produced and prior to which had not been included in the list of documents, it became apparent that whereas 152 people had been estimated to have eaten in the restaurant over the four days, 198 appeared in the schedule forming the basis of the assessment. This had been calculated on a method which extrapolated from the four days to a period of four and a half years.
Held, allowing the taxpayer's appeals:
1. The taxpayer was entitled to challenge the penalty assessment imposed for tax evasion before the tribunal on the basis that the commissioners had failed to exercise properly the powers conferred upon them.
2. In this case the assessment was unreasonable in the light of the material which the officers had collected and was not made to the commissioners' best judgment.
3. For reasons which were not apparent, the assessment was substantially at odds with the material collected by the commissioners and was irrational and therefore defective.
4. As a matter of practice, if a notebook was to be used by a witness to refresh his memory it had to be produced to the tribunal and evidence given as to when, and in what circumstances, it was made.
5. Where notebooks were essential to the evidence and consequently had to be produced at the hearing they had to be included in the list of documents served on the tribunal by the commissioners.
6. Although the tribunal could not refuse evidence tendered to it on the ground that it would have been inadmissible in a court of law, wherever reasonably...
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