[2011] UKFTT 310 (TC)

TC01171

Appeal number: MAN/2008/9501

AGGREGATES LEVY — resumption of appeal for determination of levy after unsuccessful appeal to High Court — challenge to assessment unsupported by evidence — no reduction permissible — appeal dismissed

FIRST-TIER tribunal

tax chamber

MMC MIDLANDS LIMITED (in liquidation) Appellant

- and –

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

Tribunal:   Judge Colin Bishopp

Miss Sandi O’Neill

Sitting in public in London on 11 April 2011

Mr Michael Merriman, former director of the appellant, for the appellant

Mr James Puzey, counsel, instructed by their solicitor’s office, for the respondents

© CROWN COPYRIGHT 2011

DECISION

1.            This is the continuation of an appeal which first came before the VAT and Duties Tribunal (“the first tribunal”) in April 2008, and was then decided substantially in the Commissioners’ favour: see (2008) Decision A0003, [2008] V & DR 176. The first tribunal’s decision was upheld on appeal to the High Court: see [2009] STC 1969. Although the appeal was, in part, against assessments to aggregates levy the first tribunal did not determine the correct amount of the levy, but decided only issues of principle, leaving the parties to agree the figures between themselves. They have, however, been unable to do so and the appeal has therefore come to this tribunal, as the successor of the first tribunal, for the dispute to be resolved.

2.           Between the High Court appeal and this hearing the appellant ceased trading and went into liquidation. It was represented before us by a former director, Michael Merriman, with the authority of the liquidator. The respondents were represented by James Puzey of counsel.

3.           We shall not repeat the detail of the case, which may be gleaned from a perusal of the two decisions to which we have referred. A short summary will suffice.

4.           The appellant carried on what the first tribunal found was essentially limestone quarrying, in the process finding and exploiting relatively small quantities of fluorspar and barytes. The principal issue in the appeal was whether aggregates levy was payable on any of the limestone. The appellant’s case was that the limestone was to be regarded as the spoil of the process of extracting fluorspar (only very small quantities of barytes were found, and they can be left out of account for present purposes) and that by operation of ss 17 and 18 of the Finance Act 2001 all of the limestone commercially exploited—meaning sold—by the appellant from the two relevant sites was exempt from the levy. The tribunal rejected that argument, determining that only so much of the limestone as was separated from the fluorspar by the breaking of a mechanical or chemical bond could be exempt, that mere sorting or segregation was not enough, and that some (probably most) of the limestone was subject to the levy. Those conclusions were all upheld by the High Court.

5.           As the tribunal found, some of the fluorspar was identified and segregated by hand or by mechanical diggers, or by a coning process, but much of the limestone extracted by the appellant, together with any minerals it contained, was placed on a machine called a “grizzly screen”, whose purpose was to grade the material by size, and to feed the larger pieces to a crusher which broke them down to a size suitable for use as aggregate. We heard no evidence at this hearing but Mr Merriman told us that a large majority, by volume, of all the material extracted by the appellant by blasting was subjected to this process. The assessing officer, Mr David Constantine, who had seen the appellant’s operations at the time, told us he accepted this was the case.

6.           It is trite law that an appellant wishing to challenge a tax assessment, including an assessment to this levy, must produce credible evidence from which the tribunal can determine the correct amount of tax or levy. Mr Merriman produced the appellant’s blasting records for the period from August 2003 (when its operations began) to November 2007, which showed that about 62% of the limestone extracted by the appellant from the site to which the records related contained some fluorspar. He said that, in common with other operators in its field, it did not keep more detailed records, in particular any showing the extent to which the grizzly screen broke a mechanical bond between fluorspar and its host rock. He emphasised that, as the first tribunal found, the grizzly screen was capable of breaking such a bond and, he said, we should proceed upon the basis that it in fact did so.

7.           We do not think the blasting records take us very far. Even if one accepts that 62% of the blasts yielded some material containing fluorspar, they say nothing about the quantity of fluorspar so found. As the first tribunal’s decision records, barely one quarter of one per cent of the material sold by the appellant in the relevant period was fluorspar. We recognise that there were some extraneous factors at the time which, according to the evidence available then, reduced the marketability of fluorspar but we were told (and Mr Merriman did not demur) that the total quantity of fluorspar sold, even after the resolution of those extraneous factors, still represents much less than 1% of the appellant’s total sales. We should add that the Commissioners accept that all of the fluorspar (which is not sold in a pure state, but still with host rock attached) is exempt, and none of that material has been included in the calculation of the assessments.

8.           Mr Merriman’s second point also seems to us to be of limited value. It appears from what he told us that the fluorspar removed from the grizzly screen consisted principally of fine material which passed out of the machine as part of the process of segregating rock fragments by size. It is possible that some of the fluorspar so segregated had been separated, mechanically, from host rock by the movements of the machine, but we have no information at all from which we might determine what proportion of the remaining limestone might be regarded as the spoil from any such process of separation. It is equally possible that the machine did no more than segregate the rock placed onto it into the fine particles which contained fluorspar, and the larger particles which were usable as limestone aggregate. We cannot accept Mr Merriman’s argument that, because the grizzly screen was capable of breaking a bond, it must be assumed to have done so. Even if we did make that assumption we have no evidence of the extent to which it occurred.

9.           Mr Puzey was very critical of the appellant’s failure to produce any relevant evidence, and we think he was right to criticise. This appeal has been proceeding for a long time, and the nature of the residual dispute between the parties has been known since at least April 2009, when judgment in the appeal to the High Court was given. In October 2009 the appellant was directed by this tribunal to produce the evidence on which it intended to rely, but in response it produced no more than the blasting records to which we have referred. We do not understand why the appellant did not obtain some evidence of the output of its grizzly screen in the period between the High Court judgment, or better still the first tribunal’s decision, and its ceasing to trade, or any similar evidence from others in its field.

10.        As it is, we have none of the credible evidence we need if we are to make an adjustment to the assessments. Any adjustment we did make would amount to nothing more than a guess, and a guess is not open to us. It follows that there is to be no adjustment, and the appeal is accordingly dismissed.