Rahman (trading as Khayam Restaurant) v Commissioners of Customs and Excise (No 2)
| Jurisdiction | England & Wales |
| Judgment Date | 25 October 2001 |
| Date | 25 October 2001 |
| Court | Chancery Division |
Chancery Division.
Lawrence Collins J.
Marion Lonsdale (instructed by Salusburys, Leicester) for the taxpayer.
Richard Barlow (instructed by the Solicitor for Customs and Excise) for Customs.
The following cases were referred to in the judgment:
Elias Gale Racing v C & E Commrs VAT[1999] BVC 68
Georgiou (t/a Marios Chippery) v C & E CommrsVATVAT[1996] BVC 84; [1996] BVC 236 (CA)
Henderson (t/a Tony's Fish and Chip Shop) v C & E CommrsVAT[2001] BVC 444
John Dee Ltd v C & E Commrs VAT[1995] BVC 361
Koca v C & E Commrs VAT[1996] BVC 35
McNicholas Construction Co Ltd v C & E CommrsVAT[2000] BVC 255
Murat v C & E Commrs VAT[1998] BVC 343
Rahman (t/a Khayam Restaurant) v C & E CommrsVAT[1998] BVC 323
Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378
Value added tax - Assessment - Best judgment - Taxpayer operating restaurant business - Customs suspecting underdeclarations of output tax - Investigation by Customs officers - Customs making assessments on basis of visits and routine checks - Some admitted errors in calculation - Whether assessments made to best of their judgment - Value Added Tax Act 1994, s. 73(1).
This was an appeal against a decision of a tribunal (No. 17,135;[2001] BVC 2266) that the commissioners had assessed a taxpayer to their best judgment.
The taxpayer owned and operated a restaurant called the Khayam restaurant. He was registered for VAT. An assessment had been made in relation to another business he ran previously which was not challenged. In November 1994 Customs officers visited the Khayam after they learnt that VAT had not been paid in respect of the other business. They performed routine checks in respect of the business of the Khayam and made an assessment of £17,249 (plus interest). The taxpayer appealed and by the time of the hearing before the tribunal Customs conceded that there were some errors in the calculation, with the result that only a total of £7,683 remained in dispute. The VAT tribunal upheld the assessment in that amount on the basis that the assessment had been made to the commissioners' best judgment. The taxpayer appealed to the High Court, one of the principal grounds of appeal being that the discrepancy in the figures as a result of the concession showed that the original assessment could not have been made to the best of the judgment of the officers.
Held, dismissing the taxpayer's appeal:
1. An assessment which turned out on the evidence to be substantially correct could not normally be attacked as being contrary to best judgment, and the fact that it turned out to be substantially incorrect did not mean that it was contrary to best judgment. To show, on an appeal to the tribunal, that an assessment had not been made to best judgment the taxpayer had to show that the assessment was wrong in a material respect, and that the mistake was such that the only inference was that the assessment was arbitrary, or dishonest, vindictive, or capricious, or based on a spurious estimate or guess, or was wholly unreasonable. If the assessment was wrong in a material respect but the taxpayer failed to show that it was not made to best judgment the tribunal should deal with it on the quantum aspect of the appeal. (Van Boeckel v C & E Commrs VAT(1980) 1 BVC 378, Rahman (t/a Khayam Restaurant) v C & E CommrsVAT[1998] BVC 323 and McNicholas Construction Co Ltd v C & E Commrs VAT[2000] BVC 255 applied.)
2. In the present case, the tribunal had correctly directed itself on the best judgment issue and there was no ground for deciding that it could not have reasonably come to the conclusion that the officers had exercised best judgment. In particular the fact that the tribunal considered that the assessment should be reduced as a result of the accepted errors, even though it was a reduction of more than half the assessment, did not operate to require the discharge of the assessment as being not to best judgment. The errors were explained, and the reasons given for the errors fell far short of the standard required to find that best judgment had not been exercised. There appeared to have been no evidence on which the tribunal could reasonably have come to the conclusion that the officers had not exercised best judgment. There was material to show that Customs had used their judgment in the light of the information available and no serious evidence to the contrary.
Lawrence Collins J: I. Introduction
1. This is an appeal from a decision of the VAT tribunal (Mr M S Johnson, chairman) dated 15 March 2001 ([2001] BVC 2266) in which the tribunal confirmed an assessment made by the commissioners pursuant to Value Added Tax Act 1994 section 73s. 73 of the Value Added Tax Act 1994 ("the 1994 Act"). Section 73(1) provides that where a person has failed to make any returns required under the 1994 Act or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the commissioners that such returns are incomplete or incorrect, "they may assess the amount of VAT due from him to the best of their judgment and notify it to him".
2. The appellant owned and operated a restaurant called the Khayam Restaurant (the "Khayam") at Evesham. He was registered for VAT. An assessment had been made in relation to a business previously run by him in Cheltenham, Robi's Indian Take-away, which was not challenged. On 16 November 1994 Mrs Stark and Mrs Green, officers of Customs, visited the premises of the Khayam because they had learned that VAT had not been paid in respect of Robi's. They performed routine checks in respect of the business of the Khayam, and made an assessment of £17,249 (plus interest) on 25 January 1995 (there was also a smaller assessment for Robi's but this is not material on this appeal). By the time of the hearing before the tribunal (an earlier decision of a tribunal was set aside because one of the members of the tribunal, having dissented on the question whether the Customs officers had exercised best judgment, did not participate in the decision on quantum: Rahman (t/a Khayam Restaurant) v C & E CommrsVAT[1998] BVC 323 ("Rahman (No. 1)") it was conceded by the commissioners that there were some errors in the calculation, with the result that only a total of £7,683 (the appellant says that the figure in dispute was actually £7,312 but nothing turns on this) remained in dispute. The tribunal upheld the assessment in that amount. One of the principal grounds of this appeal is that the discrepancy in the figures as a result of the concession shows that the original assessment cannot have been made to the best of the judgment of the officers.
3. In order to check whether proper returns had been made for the Khayam what the officers did was this: they called for production of the invoices for drinks supplied to the Khayam, and then endeavoured to come to the selling price of the drinks to customers, which they estimated at £23,410 (exclusive of VAT) in the year 1993-94.
4. The method used to arrive at that result was as follows:
(a) the officers took the purchases for the year of wine; lager/beer; and Indian lager and spirits;
(b) they reduced the amount of the wine purchases (£2,177) by amounts given away of six bottles per week, and then applied a mark-up of 116 per cent to the balance, making a total of £3,051;
(c) for lager/beer they took the purchases for the year (£9,305), and reduced the figure by five pints per week as amounts given away, and five per cent wastage, and then applied a mark-up of 115 per cent to the balance, making a total of £18,609;
(d) for Indian lager and spirits they applied a mark-up of 100 per cent to the total of £874, making a total of...
To continue reading
Request your trial
-
Rahman (trading as Khayam Restaurant) v Commissioners of Customs and Excise (No 2)
...to the High Court for a second time. That appeal was heard by Mr Justice Lawrence Collins in July 2001. His judgment is reported at [2002] STC 73. 25 The judge considered the many authorities cited to him—including, in particular, Van Boeckel v Commissioners of Customs and Excise [1981] STC......
-
Commissioners of Customs and Excise v Pegasus Birds Ltd
...have most recently been considered by the Court of Appeal in the case of Rahman v Customs and Excise Commissioners (No 2) [2002] EWCA Civ 1881; [2003] STC 150. Following an investigation by Customs officers it was calculated that there was an under-declaration of takings by the trader, amo......
-
Ali (trading as Vakas Balti) v HM Revenue and Customs
... ... Claimant/Appellant and The Commissioners of Revenue & Customs Defendant/Respondent ... were raised in respect of the business of restaurant and takeaway carried on by the taxable person, Mr Liquat ... observations which had been made by the Customs and Excise officers on 15 May 1998, and which are referred to in ... Added Tax 1994 have been explained by this court in Rahman (No. 2) v Customs and Excise Commissioners [2002] EWCA Civ ... ...
-
Commissioners of Customs and Excise v Pegasus Birds Ltd
...Excise Commissioners [1998] STC 826, at page 835, and of Mr Justice Lawrence Collins in Rahman v Customs and Excise Commissioners (No 2) [2002] STC 73, at paragraph [20]. At paragraph 85 of their judgment the Tribunal directed themselves that: "Although the Commissioners are required to 'fa......