England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		26/11/2007

Mr Justice Patten :

Introduction

1. This is an appeal by Westone Wholesale Limited ("Westone") from a decision of the VAT and Duties Tribunal released on 19 March 2007. It concerns a preliminary issue raised by Westone in two consolidated appeals (MAN/04/0799 and MAN/05/0497) as to the validity of an assessment to VAT for the accounting periods 12/02 and 03/03 to 08/03 inclusive in the total amount of £1,067,787.36 which was notified to Westone by the Commissioners on 5 July 2005.
2. The Appellant company carries on business as a wholesaler of confectionery, tobacco and soft drinks from premises in Telford, Shropshire. Its case is that in 2003 it purchased goods in the course of its business from a trader in Glasgow, Mr Kamran Ahmed (trading as International Trading) with a view to their onward sale and despatch to a customer in Spain, Icespana SL.
3. With the exception of one consignment of razor blades the goods were never handled or received by Westone but were delivered directly by International Trading to a transport company in St Helens, Trialout Limited, for shipment to Spain.
4. Icespana paid for the goods before shipment and Westone only paid its supplier, International Trading, once it had received payment from Icespana.
5. In its VAT returns for the relevant periods Westone claimed credit under ss. 25(2) and 26 of the VAT Act 1994 ("the 1994 Act") for input tax on the supplies of goods from International Trading on the basis that they were all to be sold on to Icespana in the course of its business. It also sought to zero-rate the supplies of the goods to Icespana. The Commissioners accept that if the goods were purchased from International Trading and exported to Spain as claimed this would be the correct tax treatment of these transactions.
6. However, during investigations in 2004 by officers of HMRC evidence was obtained from Trialout Limited to the effect that the movement records for the goods alleged to have been delivered to Icespana known as CMRs (Convention Marchandises Routiers) had not been issued by Trialout and that none of the consignments had been delivered to Spain by that company.
7. On the basis of this and other evidence, the Commissioners rejected Westone's claim to zero-rate the supplies to Icespana and on 25 November 2004 they issued and notified assessments under s.73 (1) of the 1994 Act for the accounting periods 04/03 to 09/03 in respect of unpaid tax totalling £892,141 ("the 2004 assessments").
8. Westone lodged an appeal against these assessments on 21 December 2004 which was assigned tribunal reference MAN/2004/0799. The grounds of appeal are that the goods were sold to Icespana as claimed and that the documents evidencing their despatch were verified by customs officers. This is apparently a reference to an occasion in February 2003 when Westone arranged for officers from HMRC to visit their premises with a view to satisfying themselves that the company was complying with the relevant VAT requirements in relation to the supply of goods to Spain and that HMRC had no reservations about Westone continuing to trade with Icespana.
9. During 2005 further enquiries were made including of the hauliers referred to in the CMRs and the evidence was reviewed. I am told that Mr Ahmed operated from an accommodation address in Glasgow with no warehouse premises and that he has gone missing owing VAT to the Commissioners. On the basis of this and the other evidence I have referred to, the Commissioners reached the conclusion in 2005 that the transactions were fraudulent and that apart from the one consignment of razor blades I have mentioned, none of the goods had been purchased by or supplied to Westone by International Trading. They therefore disallowed the company's claim to recover input tax on the supplies of goods from International Trading and issued the notice of assessment dated 5 July 2005 ("the 2005 assessments") under s.73 (2) of the 1994 Act for the six accounting periods in the total sum of £1,067,787.36. At the same time they re-notified to Westone the amount of the 2004 assessments.
10. The 2005 assessments were described in the letter of notification as the Preferred Assessments and the 2004 assessments as the Alternative Assessments. Westone was informed that the two sets of assessments were mutually exclusive and that they had only to pay one amount of tax. They were advised to pay the amount of the Preferred Assessments.
11. In its notice of appeal dated 19 July 2005 against the 2005 assessments Westone rely on the following grounds of appeal:

"Thus, the Commissioners have issued two different assessments in relation to exactly the same goods. Indeed, the assessments purport either to demand VAT on actual supplies by the Appellant which were not despatched from the UK or in the alternative to disallow credit for input tax because the same goods were never supplied to the Appellant. The Commissioners' actions are, therefore, contradictory and the assessments reflect an impossible set of circumstances. The issuing of such assessments is entirely without precedent or statutory authority.

It is for the Commissioners to raise assessments to best judgement. However, it is clear from these contradictory assessments that the Commissioners have no factual basis for the assessments and they are simply second-guessing the first appeal. The Commissioners' actions constitute an abuse of process."

12. The Commissioners accept that the two assessments are factually inconsistent with each other in the sense that if they establish that the goods were never supplied by International Trading to Westone it must follow that they were never supplied to anyone else by Westone so as to give rise to a liability to output tax. In that event the 2004 assessments will be set aside. But they wish to protect themselves against the possibility that on examining the evidence the Tribunal may decide that the goods were in fact supplied to Westone but were not exported to Spain. In these circumstances the claim to a credit for input tax will have to be allowed but a liability to standard rate output tax will arise. This will only be recoverable under the 2004 assessments.
13. The Commissioners' case is that whilst they believe that the more likely and correct view of the evidence is that the goods were never supplied to Westone in the first place, they are entitled to maintain the 2004 assessments in the alternative rather than to be required to discharge them as a condition of making and relying upon the 2005 assessments.
14. On 12 June 2006 the Tribunal directed that the appeals against both the 2004 and the 2005 assessments should be consolidated and heard together. At this hearing the Tribunal will determine the factual issues surrounding the alleged purchase and re-sale of the goods by Westone and will thereby resolve which (if either) of the two sets of assessments should be upheld. It is, of course, possible that the evidence will support a finding that the goods were both purchased and exported to Spain by Westone. But even if the Commissioners establish that the whole operation was a fraud, it is Westone's case (disputed by the Commissioners) that they were innocent parties and properly carried out their obligations to the Commissioners in terms of providing them with all the necessary documentation and other information required to comply with their obligations as taxpayers. The company will therefore seek to rely (at least in relation to the 2004 assessments) on the recent decision of the ECJ in Teleos & ors v CCE Case C – 409/04 [2007 ] AER 160 which established that:

"68 ….the first subparagraph of Article 28c(A)(a) of the Sixth Directive is to be interpreted as precluding the competent authorities of the Member State of supply from requiring a supplier, who acted in good faith and submitted evidence establishing, at first sight, his right to the exemption of an intra-Community supply of goods, subsequently to account for VAT on those goods where that evidence is found to be false, without, however, the supplier's involvement in the tax evasion being established, provided that the supplier took every reasonable measure in his power to ensure that the intra-Community supply he was effecting did not lead to his participation in such evasion."

15. For present purposes, however, all this lies in the future. Although I have attempted to summarise the salient issues raised by both parties to these appeals I do not intend by this judgment to express any views about what is likely to be the outcome of the substantive appeals. They raise factual issues to be determined by the Tribunal on hearing the evidence. The issue on this appeal is simply whether the Commissioners had power under s.73 (2) to raise the 2005 assessments without first withdrawing the earlier assessments of 2004. On 12 June 2006 the Tribunal ordered this to be heard as a preliminary issue. In their decision of 19 March 2007 they determined the issue against the taxpayer holding that it is open to the Commissioners both on principle and authority to issue and maintain two alternative assessments which are factually inconsistent with each other. Particular reliance was placed on the decision of the Inner House of the Court of Session in University Court of the University of Glasgow v CCE [2003] STC 495 where the Court of Session upheld two so-called "alternative assessments" covering the same period and relating to the same transaction but which proceeded upon the different legal analyses of the underlying transactions for tax purposes. The principles set out in that decision are said by the Commissioners to have equal application in this case and they relied on that decision in formulating the terms of the 2005 assessments.

The challenge to validity

16. The payment of VAT by a taxable person is governed by ss.24 – 29 of the 1994 Act. Section 25 requires such a person to account for and pay VAT on the supplies of goods and services which he makes and entitles him to a credit for so much of his input tax as is allowable under s.26: see s.25 (2). Section 26 gives effect to what is now Article 168 of EC Council Directive 2006/112 (the VAT Directive) and allows the taxable person to credit in each accounting period for so much of the input tax for that period as is attributable to supplies made by the taxable person in the course or furtherance of his business: see s.26 (2).
17. Part II of the 1994 Act sets out various reliefs and exemptions. For present purposes I need only mention s.30 which contains the provisions for zero-rating certain types of goods and services.
18. Articles 242 and 243 of the VAT Directive require every taxable person to keep proper accounts and to maintain records of goods he has despatched or transported. This is given effect to by paragraph 6 of Schedule 11 to the 1994 Act. Paragraph 2 of Schedule 11 also empowers the Commissioners to make regulations governing the keeping of accounts and the making of returns and these are contained in the Value Added Tax Regulations 1995 SI 1995/2518.
19. Article 273 of the VAT Directive also provides that:

"Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion, subject to the requirement of equal treatment for domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers."

20. The 1994 Act contains extensive provisions in ss.60 – 69B for penalising misdeclarations or under declarations of VAT whether fraudulent or negligent and breaches of the record keeping regulations. But the method prescribed for recovering undeclared VAT is by raising an assessment and s.73 contains provisions empowering the Commissioners to raise assessments of VAT both where there has been a failure to make any or any proper return (s.73(1)) and where a VAT credit or refund has been given which ought not to have been paid (s.73(2)).
21. So far as material to this appeal s.73 provides as follows:

"73 Failure to make returns etc

(1) Where a person has failed to make any returns required under this Act (or under any provision repealed by this 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) In any case where, for any prescribed accounting period, there has been paid or credited to any person—

(a)     as being a repayment or refund of VAT, or

(b)     as being due to him as a VAT credit,

an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly.

…….

(4) Where a person is assessed under subsections (1) and (2) above in respect of the same prescribed accounting period the assessments may be combined and notified to him as one assessment.

……

(6) An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following—

(a)     2 years after the end of the prescribed accounting period; or

(b)     one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge,

but (subject to that section) where further such evidence comes to the Commissioners' knowledge after the making of an assessment under subsection (1), (2) or (3) above, another assessment may be made under that subsection, in addition to any earlier assessment.

…..

(9) Where an amount has been assessed and notified to any person under subsection (1), (2), (3), (7), (7A) or (7B) above it shall, subject to the provisions of this Act as to appeals, be deemed to be an amount of VAT due from him and may be recovered accordingly, unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced."

22. The reference to appeals in s.73 (9) is a reference to s.83. Appeals against assessments made under s.73 (1) and (2) fall within s.83 (p) which creates a right of appeal to the Tribunal in respect of the assessment or the amount of any such assessment.
23. Section 84 (3) provides that an appeal against an assessment made under s.73 (1) or (2):

"…shall not be entertained unless the appellant has made all the returns which he was required to make under paragraph 2(1) of Schedule 11 and . . . has paid the amounts shown in those returns as payable by him.

(3)     Where the appeal is against a decision with respect to any of the matters mentioned in section 83(b), (n), (p)[, (q)[, (ra) or (zb)]] it shall not be entertained unless—

(a)     the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or

(b)     on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited."

24. Section 84 (8) of the 1994 Act provides that:

"   Where on an appeal it is found—

(a)     that the whole or part of any amount paid or deposited in pursuance of subsection (3) above is not due; or

(b)     that the whole or part of any VAT credit due to the appellant has not been paid,

so much of that amount as is found not to be due or not to have been paid shall be repaid (or, as the case may be, paid) with interest at such rate as the tribunal may determine; and where the appeal has been entertained notwithstanding that an amount determined by the Commissioners to be payable as VAT has not been paid or deposited and it is found on the appeal that that amount is due, the tribunal may, if it thinks fit, direct that that amount shall be paid with interest at such rate as may be specified in the direction."

25. The notice of appeal against the 2005 assessments refers in the second paragraph quoted above to the requirement for the Commissioners to raise assessments to best judgment but Mr Patchett-Joyce confirmed that his argument on this preliminary issue is not based on any allegation that the Commissioners failed to exercise best judgment when making either of the two sets of assessments. It is common ground that the 2005 assessment was issued as a result of a re-appraisal by the Respondents of the available evidence as I have described and represents their primary case. Section 73 (2) (unlike s.73 (1)) does not in fact include any express reference to the exercise of best judgment. It depends upon there having been a re-payment or credit which ought not to have been made. But these are questions of fact for the Tribunal on the hearing of the full appeal. They are not for me. Similarly, any available arguments as to a lack of best judgment would require evidence that the Commissioners have failed to make an honest and genuine attempt to assess the tax due. This is also a matter for the Tribunal on the substantive appeal: see C & E Commissioners v Pegasus Birds [2004] STC 1509.
26. The preliminary issue turns simply on the question of vires and the scope of the power contained in s.73 (2). Mr Patchett-Joyce submits that there is no statutory authority under s.73 (2) to make an assessment for a particular accounting period which is factually inconsistent with an existing assessment. The consequence (in this case) of there being two concurrent but alternative assessments is (he says) that Westone is faced with two manifestly incompatible assessments of the VAT which is said to be due and does not know what case it has to meet. On the one hand the Commissioners are asserting that the goods existed but were not exported (the 2004 assessments); on the other hand they are claiming that the goods did not exist and were not purchased at all (the 2005 assessments). This state of affairs is said to offend the EC law requirement of legal certainty and to be disproportionate and oppressive. Westone is required to meet two completely different and inconsistent cases. In addition, under s.73 (9) and s.84 (3) it has, prima facie, a liability to pay two assessments or at the very least the higher of the two alternative figures without knowing definitively what its tax liability is said to be.
27. The Tribunal rejected these arguments. They considered the position to be indistinguishable in principle from that considered by the Court of Session in the University of Glasgow case which I will come to shortly. They also considered that the principles of legal certainty and effectiveness were (to use their words) fulfilled rather than frustrated by the Tribunal having to decide at a single hearing which (if any) of the competing assessments should stand. Their conclusions are summarised in paragraph 45 as follows:

"45. In the present case, the issuing of duplicate assessments is both understandable and reasonable. There is nothing in s 73 or elsewhere in the 1994 Act to preclude alternative assessments made at different times, both allegedly to best judgment, on different appreciations of the facts which the Commissioners hold at those times respectively. As their Lordships stated in the University of Glasgow case, it would be untenable for the Commissioners to maintain by implication that alternative assessments should both be enforceable, and the law would not allow that. Fairness to the taxpayer is ensured by the Commissioners making it clear to him that he is not expected to pay them both. That was the course adopted both in the University of Glasgow case and in the present case."

28. Part of their reasoning (which they describe in paragraph 37 of their ruling as decisive of the preliminary issue) was that by the time that the 2005 assessments were issued there was already a pending appeal against the 2004 assessments. They relied on my decision in Bennett v The Commissioners of Customs & Excise (No.2) [2001] STC 137 as authority for the proposition that a successful appeal to the Tribunal against an earlier assessment under s.73 on grounds that it was not made to best judgment did not preclude the making of a later assessment for the same period that was to best judgment. The same reasoning could be applied, they said, to a situation such as the present case where there was already an appeal in progress against the first set of assessments at the time when the second set was made. The 2005 assessments were valid and the function of the tribunal was simply to decide which (if either) of the two sets of assessments was made to best judgment.
29. This line of reasoning has much less relevance to the present case following Mr Patchett-Joyce's acceptance that best judgment is not an issue on this appeal. But the decision in Bennett does call for comment in relation to the proper construction and effect of s.73 (9) which remains relevant to the Appellant's arguments. One of the issues in Bennett was whether the Commissioners had power under s.73 (1) to issue a new assessment in respect of under declared VAT when an earlier assessment for the same period had been held to be invalid as not made to best judgment and had been subsequently withdrawn. The taxpayer accepted that the Commissioners had power to withdraw an assessment and to issue a new assessment for the same period provided that they acted within the two year time limit prescribed by s.73 (6). But it was contended that it was ultra vires for them to attempt to re-assess the undeclared tax for the period in question (even within the statutory time limits) once the existing assessment had been adjudicated upon by the Tribunal. In paragraph 28 of my judgment I said this:

"28. Once it is accepted in principle that the power contained in Section 73(1) can be exercised a second time in respect of the same period once the initial assessment has been withdrawn then the validity of that second exercise must depend upon compliance with whatever conditions Section 73 or any other relevant section of the 1994 Act imposes to govern that exercise. There are no provisions in Section 73 or elsewhere in the Act which in terms govern a second or subsequent assessment for the same period. The conditions set out in Section 73 are on the face of it of general application. It is of course clear from cases such as Jeudwine v Commissioners of Customs and Excise [1977] VATTR 115 that what is now Section 73 of the 1994 Act did not permit there to be more than one assessment for any given period except where further evidence of the kind contemplated by Section 73(6) subsequently comes to light so as to entitle to Commissioners to raise an additional supplementary assessment. The restricted nature of that power was relaxed in relation to assessments made after 17th July 1996 by what is now Section 77(6) of the 1994 Act which allows the Commissioners to raise a supplementary assessment covering the same period of tax even in the absence of new evidence. That was the power exercised in relation to the 1996 supplementary assessment. But assessments of this kind are treated by Section 77(6) as made under the same power as the original assessment (that is either Section 73 or Section 75) and must therefore comply with the time limits and other conditions prescribed by those sections. Section 77 therefore throws no further light on whether the Section 73 power is in some way curtailed by an adjudication by the tribunal upon the assessments in question."

30. One obvious difficulty for the taxpayer in that case was that the rejection of the earlier assessment by the Tribunal had only been on the ground that it was not made to best judgment. There had been no determination of quantum. It was therefore difficult in principle to see why the earlier determination should be capable of preventing the Commissioners from seeking subsequently to make a proper assessment of the tax due. Questions of vires have to be begin with an examination of the statutory provisions and counsel for the taxpayer in Bennett relied upon the words "subject to the provisions of this Act as to appeals" in s.73(9) as grounding her submission that there was no power to make a new assessment for the same period once an appeal against the earlier assessment had been heard and determined.
31. In paragraphs 30 and 31 of my judgment I dealt with this argument on construction as follows:

"30. I am unable to accept these submissions so far as they relate to the construction of the 1994 Act. It seems to me that Section 73(9) is designed to restrict the taxpayers right to challenge the amount of any assessment to the appeal process set out under Sections 83 and 84 of the Act. Once that process is complete, or alternatively if no appeal is made, then the amount specified in the assessment is deemed by Section 73(9) to be the amount of VAT due and may be recovered accordingly. The taxpayer is not entitled to relitigate the issue of liability or quantum in subsequent enforcement proceedings in the ordinary courts. Those are matters reserved to the specialist tribunals appointed to determine appeals under Section 83.


31. The words subject to the provisions of this Act as to appeals cannot in my judgment be read as qualifying anything but the deeming provision I have just described. No amount of ingenious or purposive construction whether generally or under Section 3 of the Human Rights Act 1998 can make it possible to construe Section 73(9) as prohibiting the making of a new assessment under Section 73(1) following an adjudication of an earlier assessment which is subsequently withdrawn. That would require a specific and detailed provision which simply does not exist."

32. The Tribunal in the present appeal fastened on my words in paragraph 30 "once that process is complete" as supporting their view that the existence of an earlier assessment under appeal does not preclude the making of a second assessment. Mr Patchett-Joyce said that implicit in their reasoning was the view (derived from Bennett) that the effect of instituting an appeal against an assessment under s.73 (1) or (2) was to suspend the effect of the deeming provision in s.73 (9) under which the tax became due and recoverable from the date on which the assessment was notified to the taxpayer. This was not, he said, a correct view of the operation of that sub-section and was inconsistent with the decision of Lawrence Collins J in Anglo German Breweries Limited [2002] EWHC 2458 and of Evans-Lombe J in Re D & D Marketing (UK) Limited [2002] EWHC 660 who both held in the context of winding –up proceedings that the mere institution of an appeal did not suspend the obligation to pay.
33. I think that I should take this opportunity to make it clear that I did not intend in Bennett to say anything different. I was addressing an argument which did not depend on whether an appeal had a suspensive effect but rather on whether it limited the power of the Commissioners under s.73 (1) and (2) to raise new assessments. I was concerned only to make it clear that the reference to appeals in s.73 (9) did not have that effect. I was not asked or concerned to decide what other effect they might have. My reference to the process being complete was merely intended to reflect the facts in that case.
34. Both parties have therefore proceeded on the footing that the appeals against the 2004 and the 2005 assessments have not of themselves terminated or suspended the taxpayer's obligation to pay the sums assessed. Had the position been otherwise it would have provided an easy answer to Mr Patchett-Joyce's contention that the taxpayer as a consequence of the two conflicting assessments was subject to a double liability.
35. Authority apart, the starting point must, as I said earlier, be to examine the relevant provisions of the statute. The emphasis in this appeal has been on the factually inconsistent bases for the two assessments but that submission needs to be looked at with care. Both s.73 (1) and s.73 (2) are concerned with the recovery of unpaid VAT. But the circumstances in which each of the powers is exercisable are very different. Section 73 (1) provides a mechanism for assessing unpaid VAT in cases where there has either been an under declaration of turnover or perhaps none at all. In this particular case it is relevant only to the recovery of the VAT on the sale of the goods to Icespana in circumstances where a claim has been made for the supplies to be zero-rated.
36. By contrast s.73 (2) is concerned with cases where VAT has either been wrongly repaid or credited. This was the power exercised in respect of the 2005 assessments in relation to the credit for input tax on the purchase of the goods from International Trading. The 2005 assessments therefore relate to the same goods but to a quite different transaction with different tax consequences.
37. Given that the assessments were made under different powers and relate to different transactions it is not immediately obvious why they should not be permitted to co-exist. The taxpayer is not facing alternative assessments based on the same transaction and the same facts. The assessments are intended to counter claims for zero-rating and a tax credit arising from different transactions both of which are currently in dispute. The Commissioners however recognise that only one of the two sets of assessments can succeed in the sense that if the first is correct and no credit is appropriate because the goods were never purchased then no tax can arise in respect of a subsequent sale. The assessments are therefore maintained as alternatives and the taxpayer has been required to pay only the amount of the 2005 assessments. The case for Westone is that this course is not open to the Commissioners and they must choose which of the two sets of assessments to pursue and must abandon the other.
38. There are no express provisions contained in s.73 or elsewhere which deal with alternative assessments. As one would expect the powers set out in s.73 (1) and (2) are self contained and exercisable upon the factual bases specified in each of the sub-sections. For purposes of the preliminary issue the Tribunal had to assume that there was no challenge to the 2004 assessments on grounds of best judgment and that they were valid when made. The argument that their continued existence invalidates the exercise of the s.73 (2) power in respect of the making of the 2005 assessments is therefore heavily dependent upon identifying some indication in the statutory wording that Parliament did not intend this to be possible. What is relied upon by Westone are the consequences which it is said would follow under s.73 (9) from both sets of assessments being maintained.
39. The Commissioners' response to this argument is that they accept that both assessments cannot be correct but are entitled to rely upon them in the alternative. They base this submission on the decision of the Court of Session in the University of Glasgow case. This concerned the recovery of input tax by the University on the leasing of equipment. The University was given notice on the same date of two assessments for the same accounting period relating to the leasing arrangements. The first assessment (described as the preferred assessment) disallowed the recovery of input tax on the grounds that it was attributable to exempt supplies. The assessment in the sum of £111,377. The other assessment (described as the alternative assessment) challenged the insertion into the supply chain of two entities in order to avoid incurring irrecoverable VAT. The Commissioners asserted in this assessment that this constituted an abuse and should be ignored for the purposes of assessing the fiscal consequences of the leasing arrangements. On this basis the undeclared tax was assessed in the sum of £96,255.
40. In summary, therefore, both assessments related to the same transactions and the same accounting periods but proceeded on different legal analyses of the transactions for tax purposes. The University contended that the making of alternative assessments was ultra vires and that this was not cured by the Commissioners indicating as a matter of discretion that they were only looking to recover one amount of tax. Reliance was placed on s.73 (9) and on the amount due being prima facie the aggregate of both assessments. The provisions of s.73 should not, it was submitted, be construed so that a person was dependent upon initiating judicial review proceedings in order to prevent recovery of the aggregate sum. If both assessments were competent, the effect of them was to create a double liability. The argument of the taxpayer was therefore all but identical to that advanced by Westone on this appeal.
41. Lord Hamilton, giving the judgment of the Court of Session, dealt with these submissions as follows:

"13 Section 73(1) of the 1994 Act empowers the Commissioners in certain defined circumstances to assess the amount of VAT due from a taxable person to the best of their judgment. That power has been held to include power to make a "global" assessment, that is, a composite assessment in respect of more than one accounting period (S.J. Grange Limited v. Commissioners of Customs and Excise; Don Pasquale v. Customs and Excise Commissioners, per Dillon L.J. at page 562). Section 73(6) empowers the Commissioners, subject to time limits and in circumstances where further relevant evidence comes to their knowledge, to make another (additional) assessment. Section 77(6) empowers the Commissioners in certain defined circumstances to make a supplementary assessment. The concept of alternative assessments is not, any more than that of a "global" assessment, to be found in the statutory language, which accordingly does not expressly sanction such procedure; nor does that language expressly exclude it. The issue in this case is whether it is implicitly within the powers of the Commissioners, in circumstances such as the present, to make under section 73(1) alternative assessments, in the sense of distinct assessments in respect of the same transaction or series of transactions but expressed to be in the alternative. The point is apparently novel in relation to VAT. In the present case the Commissioners, for reasons which have been described, made and notified alternative assessments in respect of various periods during which, it appears, the relevant arrangements in respect of the assets in question were in place. They did so out of a concern that the making of single assessments might, having regard to certain features (including analysis, calculation and result), be open to challenge. It is unnecessary for the disposal of this appeal to decide whether or not that concern was well-founded. The only issue is the competency of the assessment procedure in fact adopted.

14 The burden of Mr. Ghosh's submission was that other provisions of the statute (in particular sections 73(9) and 84(3)) were inconsistent with the existence of a power under section 73(1) to make alternative assessments Section 73(1) involves an assessment of "the amount" (that is, a particular, specified amount) of VAT considered to be due by the taxable person. It is clear that, if distinct, albeit alternative, assessments are made and notified, each of them involves an assessment of a particular, specified amount considered to be due. The effect of section 73(9) is that, subject to the statutory provisions for appeal, each of these amounts, if looked at in isolation, is deemed to be an amount of VAT due from the assessed person. But it does not, in our view, follow that the aggregate of these amounts is so due. Where two assessments in different amounts, made and notified contemporaneously, are so made and notified expressly as being in the alternative, they are, in our view, not independent but interrelated. As such, they are mutually exclusive and not exigible in the aggregate. It is quite clear that no court would knowingly grant decree in such circumstances for the aggregate amount. Nor would it be proper for the Commissioners to institute legal proceedings for the aggregate. The vexatious and oppressive character of so acting was, in the field of direct taxes, made plain by Scott L.J. in I.R.C. v. Wilkinson at page 458, where his Lordship observed that it was a matter of regret that no apology for that oppression had ever been tendered to the taxpayer. The same impropriety would arise in respect of any proceedings instituted by the Commissioners to recover the aggregate of VAT amounts assessed by them in the alternative. Likewise, it would be improper to attempt to use diligence, whether on the dependence of any action or summarily, for the aggregate amount. It is true that a taxpayer so oppressively treated might, in order to obtain relief, require to bring the relevant circumstances to the attention of a court. But that is no different from many other cases in which an unfounded claim is made against a party. In circumstances such as these, the taxpayer is not reliant on the Commissioners exercising in his favour any statutory discretion vested in them under section 73(9) in respect of recovery of tax. The Commissioners simply have no right to recover the aggregate amount."

42. This is therefore a decision that the Commissioners are empowered under s.73 (1) to make alternative assessments of the kind under consideration in that case and that the effect of the assessments was not to make the aggregate of both of them due under s.73 (9). Aside from his points on EC law, Mr Patchett-Joyce sought to distinguish the University of Glasgow case on two grounds: (i) that it concerned assessments both of which sought to disallow credit for input tax, whereas in the present case the assessments relate to different tax issues: the disallowance of input tax and the recovery of output tax; and (ii) that it concerned assessments made at the same time whereas in this case they were consecutive.
43. The Tribunal did not consider that these distinctions were material and neither do I. The fact that the two assessments in the present case relate to different transactions and different fiscal issues, makes it more rather than less explicable that there should be separate but alternative assessments in this case. But it certainly does not introduce any factors which as a matter of logic or construction should lead to a different conclusion from that reached in the University of Glasgow case. The s.73 (9) point which is really the anchor of the taxpayer's case applies with equal force in both situations. The taxpayer in the University of Glasgow case was faced with two assessments in differing amounts relating to the same period. In the present case the position is no different.
44. The second argument about the need for alternative assessments to be made contemporaneously in order to fall within the principles set out in the University of Glasgow case is really precluded by authority. In Courts plc v C & E Commissioners [2005] STC 27 the Court of Appeal not only affirmed the correctness of the decision in University of Glasgow but also held that a subsequent assessment issued for the same period but on a different legal basis could constitute an alternative assessment within the Glasgow test: see per Jonathan Parker LJ at paragraph 111. The Tribunal was therefore correct in my judgment to reject the taxpayer's appeal on this issue.

EC Law

45. That leaves the argument based on the principles of legal certainty and proportionality. I, of course, accept that the Sixth Directive is required to be implemented by Member States in a way which fully respects the relevant principles of EC Law and that the 1994 Act has to be construed in that way. The principle of legal certainty requires tax legislation to be framed in such a way that taxable persons are, before concluding the relevant transaction, aware of the extent of their tax obligations: see Teleos at para 48. This will be an important part of the taxpayer's challenge to the 2004 assessments on the substantive appeal. But it is difficult to see how it has any real application to the issue before me. The taxpayer's argument (as I understand it) is that at the time of the sale of the goods to Spain it provided the Commissioners with all necessary documentation and other information and therefore complied with the procedures laid down for determining whether the supplies should be zero-rated. But whilst this may be a ground for challenging the 2004 assessments, it has nothing to do with the issue of whether the Commissioners have power under s.73 (2) to raise the 2005 assessments. The vires issue does not turn on whether the taxpayer has proved its entitlement to zero rating of the sales to Spain at the time of the transaction. It is simply a question of whether the Commissioners can subsequently assess the taxpayer on alternative bases. The taxpayer is under no misapprehension as to what the Commissioners are seeking to do by the alternative assessment or as to what sums it is required to pay. Appeals have been lodged against both assessments and the taxpayer is clearly aware of the issues raised under both.
46. Similarly, proportionality requires Member States to employ means which whilst effectively enabling them to recover unpaid tax and prevent fraud, do not go further than what is necessary for that purpose. This argument was employed in Teleos to defeat the contention of the UK Government that the burden of accounting for tax in a case of fraud should fall on the innocent supplier rather than the Exchequer. But the ability of the Commissioners under s.73 to raise alternative assessments does not infringe this principle. It merely permits the Commissioners to raise alternative factual contentions in support of their claim to recover the tax. It does not prevent the taxpayer from raising any of the arguments successfully deployed in Teleos as part of its own case or to deploy any other relevant arguments to challenge the assessment. The issues of construction which affect s.73 are essentially procedural in nature. They are not detrimental to the substance of the taxpayer's case.

Conclusions

47. Therefore, although my own reasons are not identical to those of the Tribunal, I am not persuaded that the making and notification of the 2005 assessments was ultra vires the Commissioners and the appeal will therefore be dismissed.