Taxation

VAT and duties tribunal finding customs having no arguable case and allowing taxpayer's appeal in default of customs' compliance with direction - customs on appeal advancing case not presented to tribunal - court not entitled to substitute own discretion for tribunal's to protect public revenue from misconceived claimCustoms and Excise Commissioners v A & D Goddard (a firm): ChD (Mr Justice Lightman): 20 March 2001The taxpayer sought a refund of the input tax paid on the purchase of a consignment of mobile telephones on which no output tax was due because they had been sold on to a third party outside the UK.

Customs refused the refund on the basis that the whole mobile telephone scheme was fraudulent.

The taxpayer appealed to the VAT and duties tribunal.

At a hearing on 3 July 2000 customs withdrew the fraud allegation and the tribunal directed that the appeal be allowed unless customs produced a pleaded case not dependent upon fraud by 1 August.

On 31 July customs applied for a direction allowing the earlier pleading of fraud to stand.

In September the tribunal allowed the appeal on account of customs' non-compliance with the direction of 3 July.

Customs appealed on the grounds, among other things, that: (i) the supplies were not taxable supplies made by a taxable person because the original invoices were issued by a company not registered at Companies House but bore the VAT number of a registered company with a similar name; (ii) the supplies, if they went to the taxpayer, were not supplies of goods to be used by the taxpayer 'for the purpose of any business' carried on by it; (iii) those contentions should have been allowed to stand either as pleaded or by way of amendment; (iv) any failure to comply with the direction had been a first breach and should not debar customs from defending the appeal; and (v) having regard to the grounds relied on against a claim to over 500,000 of public money, customs' case should be considered.Jonathan Peacock (instructed by Solicitor of Customs & Excise, Salford) for customs.

Michael Conlon (instructed by England Palmer) for the taxpayer.Held, dismissing the appeal, that grounds (i) and (ii) had never been part of customs' case before the tribunal, either pleaded or unpleaded but arguable, the case having been left on the basis of customs' application for the earlier pleaded case on fraud to stand notwithstanding the direction of 3 July; that the tribunal was entitled to proceed on the basis of the case presented by customs at the hearing and could not be expected to conjure up the new contentions which had only revealed themselves after the hearing; that while the availability of alternative remedies for non-compliance was highly relevant on an application for judgment in default, there could be no alternative remedy where customs persisted in pleading an untenable case and revealed no grounds on which the tribunal could believe that they had any arguable case; and that the court could not, on appeal, substitute its discretion for the tribunal's merely because it thought that a decision different from that reached below would better promote justice or the public interest in the protection of the public revenue from misconceived claims.