Olpmpia Technology Ltd v Revenue & Customs [2006] UKVAT V19984 (21 December 2006)

19984

APPEAL – Decision – Strike out application on ground that no decision yet made – Whether decision necessary under VATA 1994 s.83(c) – Yes – Whether on analysis a decision in this case – No – Application allowed – Trib Rules, r.18

LONDON TRIBUNAL CENTRE

OLYMPIA TECHNOLOGY LTD	           Appellant

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

Tribunal:	THEODORE WALLACE (Chairman)

Sitting in public in London on 23 November 2006

Jern-Fei Hg, instructed by Vantis plc, for the Appellant 

Richard Smith, instructed by the Acting Solicitor for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This was an application by Customs to strike out an appeal served by the Appellant on 17 October 2006 on the grounds that there has been no appealable decision.

2.	The notice of appeal as amended appealed against letters dated 9 June, 14 September and 5 October 2006 stating that Customs were continuing to verify repayment returns for periods 04/06 and 05/06.  The letter of 9 June said that Customs were duty bound to verify the returns before large sums are repaid.  The letter of 5 October stated that the verification continues.  The notice of appeal gave the sum in dispute as £1,632,352 and the grounds as, “The Commissioners have wrongly withheld repayment of the input tax claimed by Olympia Technology in periods 04/06 and 05/06”. 

3.	The repayment claims relate to input tax on 18 purchases of mobile telephones, all of which were exported to Spain. The only output tax shown on the returns was £7.25 for 05/06.

4.	Repayments amounting to around 1 per cent have been made for overhead expenses and transport and inspection. There has been no suggestion that the mobile telephones were not bought and exported. The inquiries concern the issue of whether the purchases were part of chains involving missing traders and VAT fraud of which the Appellant should have known. There has been no suggestion that the Appellant was a party to a fraud or had actual knowledge of a fraud.

5.	The application involves two separate issues. The first is whether in order to appeal under section 83(c) of the VAT Act 1994 the Appellant must identify a decision with respect to input tax. The second issue is whether if a decision is a prerequisite there were appealable decisions in the present case. The first issue is simply one of statutory interpretation. The second depends on the facts of the case given that the letters identified by the Appellant were not expressed as giving decisions.

Whether a decision is necessary

6.	Section 83 of the VAT Act 1994 provides as follows in relation to input tax,

“83.	Subject to section 84, an appeal shall lie to a tribunal with respect to any of the following matters –
…
( c)	the amount of any input tax which may be credited to any person;
…”

7.	Mr Hg relied on the absence of any reference to “decision” either in the introductory words of section 83 or in paragraph (c), contrasting paragraph (c) with other paragraphs of section 83 where the appeal is expressed as being with respect to a decision.  He stressed the width of the phrase “with respect to”, citing Huddersfield Corporation v Great Northern Railway Co (1881) 50 LJQB 587 at 593.

8.	He submitted that there is no basis for reading the word “decision” into section 83(c).  He said that the words are plain and that the existence of any anomalies could not limit their meaning see Stock v Frank Jones (Tipton) Ltd [1978] 1 WLR 231 per Viscount Dilhorne at page 235E and Lord Scarman at p. 238F-H.

9.	Mr Hg relied on the recent Tribunal decision in Mobilx Ltd v Customs and Excise Commissioners (2006) No 19966 emphasising the similarity of  the facts in the present case.

10.	Mr Smith submitted that Mobilx Ltd was wrongly decided.  He said that although the word decision does not appear in the opening words of section 83 or in paragraph (c), the need for a decision is implicit.   He said that the decisions in Touchwood v Revenue and Customs Commissioners (2006) Decision No.19532, Cotswold Computer Ltd v Revenue and Customs Commissioners (2006) Decision No. 19833 and PNC Telecom plc v Revenue and Customs Commissioners (2006) Decision No.19754 were all correctly decided and should be followed.  Tricell v Customs and excise Commissioners (2003) Decision No. 18127 should be distinguished because in that case Customs had formed a view on the law and were merely seeking evidence, whereas here they had formed no view.

11.	I have no hesitation in holding that a decision is necessary before there can be an appeal.  It is difficult to understand why the word decision which appeared in the opening words of section 40(1) of the VAT Act 1983 were omitted from the 1994 Act, however that does not in my view alter the need for some determination against which to appeal.  The Tribunal is not in the position of an umpire in a game of cricket to whom a bowler appeals for a catch.  The Tribunal exists to adjudicate on a dispute following a ruling or determination by Customs. This may take a variety of forms varying from assessments, directions and refusals of applications to a variety of other determinations. It is important to note that section 83 is subject to section 84.  A whole series of subsections of section 84 refer to an appeal against a decision in respect of matters where the word decision does not appear in the relevant paragraph of section 83: section 84(3) refers to an appeal against a decision with respect to the VAT chargeable on a supply of goods or services under section 83(b); section 84(4)(a) refers to an appeal against a decision as to input tax on entertainment expenditure which can only come under section 84(c); section 84(5), (7), (7A) and (10) all refer to an appeal against a decision.  Section 85(1) which provides for settling appeals by agreement refers to “the decision under appeal.”.

12.	In my judgment in order for the Tribunal to have jurisdiction there must be an issue between the parties which has been sufficiently crystallised to constitute a decision falling within one of the paragraphs of section 83. Such decision will normally be in writing and be clearly expressed as a decision subject to appeal whether or not the word decision is used. Where a determination is not expressed as an appealable decision it may nevertheless constitute such a decision in the light of its contents and the surrounding circumstances. There may on analysis be a clear determination although there is no mention of the right of appeal. On the other hand a letter by the Commissioners may clearly be intended not to give rise to a right of appeal as with the letters in this case.  I adhere to the view which I expressed in Colaingrove Ltd v Customs and Excise Commissioners (2000) Decision No.16981 that in some circumstances the failure to give a decision or the refusal to give a decision may amount to a decision. However I consider that the refusal to give a decision will only be a decision if, on a proper analysis, it amounts to a determination of the issue which is in dispute. The deferral of a decision for enquiries is in my view only capable of constituting an appealable matter if the reason for the deferral is not genuine. There must however be some communication constituting a decision in order to found an appeal.

Was there on a correct analysis an appealable decision?

13.	I turn, therefore, to consider whether there was a determination in this case constituting an appealable decision.

14.	The letters on which the Appellant relied were dated 9 June, 14 September and 5 October 2006.  The notice of appeal dated 16 October identified the decision date as 9 June, although including the later letters, but did not apply for an extension of time to appeal.  I concentrate therefore on the October letter.

15.	That letter referred to a letter from the Appellant dated 25 September and Customs’ response of 14 September.  Walter Watt, the writer, stated that verification into period 04/06 started on 17 May and into period 05/06 started on 19 June.  The letter continued,

“Point 3 – I reiterate the point in Mr Walker’s letter that one of the mutations of the fraud is the setting off of repayments to which the trader might not be entitled.  One of the consequences of this is that the nature of fraudulent supply chains, become more and more complex.  This in turn means that it can take HMRC Officers much longer to verify supply chains that may be tainted by fraud and satisfy themselves that they do not form part of an overall scheme to use the VAT System to steal money from the Exchequer.  I therefore continue to verify the deals that have not yet been traced back to a VAT loss.

Point 4 – The fact that the goods relating to Invoices 1562, 1563 and 1564 have not been previously scanned by HMRC is only one part of the verification process and therefore the verification continues.

Point 5 – I have already contacted the officers for the Freight Forwarder and the Transport Company and I am awaiting a response.

Point 6 – The comment that OTL’s verification is “no different to any other” refers to the fact that the verification is being conducted for the same reasons, being HMRC’s duty to protect the revenue, with the recent increase in MTIC fraud activity.  Verifications of repayment claims are not commenced with any pre-determined outcome in mind.  The aim from the beginning of the verifications is to establish the facts and the nature of the transactions.  It is only when this has been established that HMRC can then determine the validity of the claims.

Point 7 – I can confirm that I have no knowledge of OTL having purchased from a ‘Missing Trader’. However as already stated, is only one of the aspects of the verification process and therefore the verification continues.

Point 8 – I have arranged for Repayment of the expenses relating to freight forwarders and inspection companies. Our records show that repayment was made on 28 September 2006.

I refer to my previous letter dated 18 September 2006 when I advised that I would be completing an update on the facts collated concerning OTL’s April and May verifications.  The report was completed and I have now been advised to get more information from HMRC Officers who had previously dealt with OTL.  I have requested this information and I am currently awaiting responses.”

Mr Walker’s letter was the letter of 14 September 2006 was a standard form letter regarding the process of verification of VAT repayment claims.  It contained nothing specific to the Appellant’s claim.

16.	The letter of 9 June 2006 by Mr Watt which does not concern the 05/06 claim which had not then been lodged stated that the aim was to establish the facts and the true nature of the transactions; only when this had been established could HMRC test the validity of the claim and decide what course of action to take.  Mr Watt continued,

“We have already explained why HMRC officers are verifying repayment claims and that this will continue.  We have already written to you on 17 May 2006 advising you that a verification will be undertaken regarding the April 2006 VAT Return and will endeavour to ensure that you are kept informed of any developments.  This is the date our verification commenced.  As each case will vary according to its own facts and features we cannot however sensibly give any timescales for verifying a claim, finding a tax loss, frequency of updates and so on.

In relation to the actual verifications of the supply chains I can advise you that certain suppliers within the chains have not as yet provided the records of the company to Officers of HMRC to enable the transaction chains to be completed.  You should appreciate that this delay is wholly outside our control.  For our part we will continue with our actions to obtain the required records from the companies concerned and will endeavour to complete our enquiries as soon as possible once this critical information has been obtained.

In the interim however, and without prejudice to any further action HMRC may wish to take, I am willing to repay any VAT incurred in your expenses.”

17.	On 16 June Mr Watt wrote that four deals in transactions chains had led to VAT losses; this clearly referred to chains of which the Appellant’s transactions formed part.

18.	A letter of 22 June included this,

“The fact is that my verification of your deal chains have led to some businesses which are not co-operating as fully as yourself with … Customs by supplying all information/records regarding trading completed by them.”

19.	Mr Ng told me on instructions that there was a whole day visit to the Appellant including an interview however he did not lead any evidence as to what transpired apart from the fact that the repayments were not made.

20.	He pointed to the notice of application by Customs where it was stated that sales and purchase invoices, bank statements and CMRs for period 04/06 were received by Customs on 26 May and IMEI numbers, allocations and releases by 31 May.  He said that there had been no complaints by Customs as to the material provided by the Appellant and the Appellant had no more material to provide.  He criticised the assertion by another officer in a letter dated 12 July that,

“Our verification has to encompass the whole of the supply chain to determine the overall nature of the transactions involved.”

He submitted that the law had been misapplied and that the facts had been sufficiently ascertained for Customs to give a conclusion.

Conclusion

21.	It is clear beyond doubt that Mr Watt did not intend to give an appealable decision either in the letter of 5 October or in that of 9 June; the letter of 14 September was not specifically directed to the Appellant’s claims.  The letter of 5 October is clearly inconsistent with a decision having been made.

22.	That would not be conclusive if there was clear evidence that the letters misrepresented the position of Customs.  Such a finding would be a serious matter not to be made lightly. If the Appellant had led such evidence perhaps of telephone conversations and e-mails, Mr Watt might have been expected to be called to refute the suggestion that his letters misrepresented the true position.

23.	However no such evidence was led by the Appellant and Mr Hg very properly made no allegation of bad faith.

24.	I can find nothing whatsoever on the material before me to suggest that Mr Watt was not continuing to conduct genuine inquiries on 5 October 2006.

25.	I must make it clear that the issue is not whether Customs had sufficient material to give decisions, or whether the enquiries went further than necessary. If there is unnecessary delay the remedy is judicial review.

26.	The only issue for the Tribunal is whether there were on analysis decisions by 5 October 2006 to refuse the repayment claims in whole or in part in spite of the terms of the letters.  I find that there were no such appealable decisions. Accordingly the Application by Customs to strike out the appeal is allowed.

THEODORE WALLACE
CHAIRMAN

RELEASED: 21 December 2006

LON/06/1092