Solutions Center Ltd and 05028035 Ltd (formerly Teknocom Ltd)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 June 2015 |
| Date | 15 June 2015 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge Anne Scott, Member: Gill Hunter
Nicholas Chapman of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – MTIC – Appeal withdrawn – Costs – Old rules – Discretion – Costs awarded.
[1] The appellants Solutions Center Limited (“Solutions Center”) and 05028035 Limited (formerly known as Teknocom Limited) (“Teknocom”) are separate corporate entities.
[2] It was not in dispute that both appellants were at the material time, and in respect of all relevant matters, under the control of Mr Rajbinder Singh Hunjan (“Mr Hunjan”). Mr Hunjan was the sole director of Solutions Center and a co-director of Teknocom.
[3] The appeals were listed to be heard together over three weeks starting on 15 July 2013.
[4] Solutions Center's appeal was against a decision of the respondents (“HMRC” which expression is used for convenience to include HMRC's predecessor, HM Customs & Excise), dated 17 July 2008 denying Solutions Center the right to deduct input tax claimed on the VAT returns for the periods 06/06 and 12/06. The total sum refused is £2,179,747.50.
[5] Teknocom's appeal was against a decision of HMRC dated 13 February 2008 denying Teknocom the right to deduct input tax claimed on the VAT returns for the periods 04/06, 07/06 and 10/06. The total sum refused is £1,147,510.
[6] In respect of both appellants, HMRC decided to deny the right to deduct input tax on the basis that the transactions giving rise to the claims for credit for input tax were connected with the fraudulent evasion of VAT and that both appellants knew or should have known of that fact.
[7] This appeal relates to 14 wholesale transactions entered into by the appellants between April and December 2006 inclusive. HMRC argued that eight deals could be traced directly, through a series of interceding (or “buffer”) traders, to one of a pool of four fraudulent defaulting traders and thus to fraudulent tax loss and the remaining six deals could be traced to one of two “contra-traders” and thus to fraudulent tax loss.
[8] Mr Hunjan contended that he was an honest trader in mobile phones and did not accept that the relevant transactions were connected with fraudulent evasion of VAT. Further, even if they were, he did not know and could not have known of this fact.
[9] In summary this was an MTIC appeal.
[10] By application notice dated 26 June 2013, filed by Imran Khan & Partners (“IKP”), the appellants applied for an adjournment of the three week hearing listed for 15 July 2013 on the basis that the appellants' previous representatives, who were on a conditional fee arrangement, had withdrawn. Following a hearing on 12 July 2013, Judge Berner allowed the application and the appellants were ordered to pay HMRC their wasted costs.
[11] The appeals were listed for hearing over eight days commencing on Monday 18 May 2015.
[12] Both parties lodged Skeleton Arguments.
[13] By email timed 12.13 pm on Thursday 14 May 2015, IKP forwarded to HMRC a letter sent to the Tribunal one minute previously which read as follows:
We write to inform you that the Appellant in the above matter is no longer pursuing the appeal listed for hearing on Monday 18th May 2015
(sic).
[14] No explanation was offered.
[15] On 15 May 2015, HMRC requested that the listing session remain, as they would be making an application for costs. In response, on the same day, IKP wrote stating:
We write further to our letter of yesterday's date to confirm, in the event that the tribunal sits on Monday morning, we regret that we will not be attending. We make it clear that no discourtesy or disrespect is intended but we have no instructions to attend and nor are we in funds to do so.
[16] Very late on 15 May 2015, HMRC made a formal application for orders for costs including wasted costs from IKP.
[17] The costs hearing was listed for 20 May 2015.
[18] On 18 May 2015, IKP wrote a detailed and lengthy letter to HMRC, the salient details in regard to this hearing being as follows:
We make it clear that the appellant played an active part … both in terms of providing instructions and receiving advice throughout, most notably and recently in the preparation of the Appellant's (sic) Opening Submissions (on 5 May 2015).
As for your query as to the “circumstances surrounding this”, namely why the Appellant (sic) chose to withdraw the appeal and the timing of it, these are matters which should be directed to and explored with the Appellant and, no doubt will be in the application for costs against it that you have made. Whilst we have sought authority from the Appellant to release such information as might assist in connection with your application for wasted costs against us, we have not been given it. Had such authority been given we would have been in a better position to deal with your queries and indeed, the application.
[19] On 19 May 2015, HMRC responded confirming that they withdrew their application for wasted costs against IKP but that they maintained the Application for Costs against the appellants, being the costs payable pursuant to rule 29 of the old Tribunal Rules. They stated that, for the avoidance of doubt, they intended indicating to the Tribunal that the appellants should be directed to pay the costs on the ordinary basis being that costs follow the event.
[20] On 18 May, HMCTS had written to the appellants formally intimating the Hearing listing and enclosing a copy of the Application for Costs.
[21] The following day, IKP wrote to the Tribunal enclosing a witness statement, stating that Mr Hunjan had asked that it be forwarded for “consideration in relation to the hearing relating to costs tomorrow.”
[22] The first issue for the Tribunal was that only HMRC attended the hearing. We had due regard to rules 2 and 33 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”).
[23] Rule 2 reads:
2. – Overriding objective and parties' obligations to co-operate with the tribunal
(1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly.
(2) Dealing with a case fairly and justly includes–
a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;
b) avoiding unnecessary formality and seeking flexibility in the proceedings;
c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;
d) using any special expertise of the Tribunal effectively; and
e) avoiding delay, so far as compatible with proper...
To continue reading
Request your trial