Calltel Telecom Ltd & Anor v HM Revenue and Customs, Court of Appeal - Chancery Division, May 21, 2009, [2009] EWHC 1081 (Ch)
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Calltel Telecom Ltd & Anor v HM Revenue and Customs, Court of Appeal - Chancery Division, May 21, 2009, [2009] EWHC 1081 (Ch)
Neutral Citation Number: [2009] EWHC 1081 (Ch)Case No: CH 2007 APP 0599IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONON APPEAL FROM THE VAT AND DUTIES TRIBUNAL Royal Courts of JusticeStrand, London, WC2A 2LLDate: 21/05/2009Before :THE HON MR JUSTICE FLOYD- - - - - - - - - - - - - - - - - - - - -Between :- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -Mr Roderick Cordara QC and Mr Jern-Fei Ng (instructed by Jeffrey Green Russell) for the AppellantsMr Mark Cunningham QC Mr Philip Moser and Ms Fiona Banks (instructed by The Solicitor for HM Revenue and Customs) for the RespondentsHearing dates: March 17th, 18th, 20th and 23rd 2009- - - - - - - - - - - - - - - - - - - - -JudgmentMr Justice Floyd: 1. This is an appeal from a decision of the VAT and Duties Tribunal (Colin Bishopp, Chairman and Cyril Shaw FCA) dated 20th July 2007. The appeal is against decisions by HMRC to refuse repayment of input tax in respect of claims made for that purpose by the appellants Calltel Telecom Limited (``Calltel'') and Opto Telelinks (Europe) Limited (``Opto'') in the period January to March 2006. The ground on which the repayment of input tax was refused was that the Appellants knew or had the means of knowing that their dealings in the goods in question were connected with a fraud elsewhere in their chain of supply.2. The Appellants are related companies under the common ownership of Mohammad Safdar Gohir. 3. The appeals are concerned with Missing Trader Intra Community (``MTIC'') fraud. The nature of this type of fraud has been described in a number of judgments, see for example the judgment of Lewison J in Livewire & Olympia [2009] EWHC 15 (Ch) at [1]. In its simplest form, the fraud involves a trader who imports goods into the UK and then sells them on within the UK whilst dishonestly failing to account for the output tax on the onward sale. A fraud on the revenue is complete at that point. In more complex forms of the fraud, other traders are involved as well. For example in a ``carousel'' fraud, the goods are passed through a number of intermediate traders, so-called ``buffers'', re-exported and may make further circuits through the UK. Carousel trading is not alleged in this case. The present case is mainly concerned with chains of transactions starting with an importation by a defaulter, followed by a set of intermediate transactions through buffers, followed by a sale to, and export by one of the Appellants.4. ``Contra-trading'' is a device designed to mask or conceal the sort of MTIC fraud I have thus far described. It is also explained in Livewire and Olympia at [1] (iii). This case also involves an allegation of contra-trading.5. Once goods the subject of an ordinary MTIC fraud are on the market in the UK they may come into the hands of innocent traders who have the right to offset the input tax which they pay on their purchases from the output tax on their sales. After setting off the input tax against the output tax such traders account for any balance to HMRC. As the Tribunal in the present case clearly recognised, innocent traders have an unanswerable right to do this. However, if the trader knows or has the means of knowing that its transactions are involved with the fraud of others it can lose its right to deduct the input tax which it has paid. The leading case in this field is the decision of the ECJ in Joined Cases C-439/04 and C-440/04 Axel Kittel v Belgium; Belgium v Recolta Recycling [2006] ECR 1-6161; [2008] STC 1537 (hereafter "Kittel"). At [51]-[61], the Court states that "51. In the light of the foregoing, it is apparent that traders who take every precaution which could reasonably be required of them to ensure that their transactions are not connected with fraud, be it the fraudulent evasion of VAT or other fraud, must be able to rely on the legality of those transactions without the risk of losing their right to deduct the input VAT (see, to that effect, Case C-384/04 Federation o...See the full content of this document
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