A WEST of Ireland supermarket chain yesterday failed in its High Court challenge to a Revenue claim of a VAT underpayment by the company of £420,495.
The company, D.H. Burke and Sons Ltd, with registered offices at Shop Street, Tuam, Co Galway, and an annual turnover of £10 million, has 10 retail outlets. The Revenue's revision of VAT returns had been in respect of drink sales returns at seven outlets.
The company sought a declaration that it had properly paid £2,872,473 in VAT returns for the period January 1988 to December 1992 and claimed the additional demand for £420,495 was excessive, unreasonable and had no legal effect
The company applied to the High Court for a judicial review of the Revenue's decision. It asked for a declaration that it had lawfully applied the Revenue's "VAT Scheme for Retailers" in respect of drink sales returns at the seven outlets for the five-year period.
Mr Justice McCracken, in a reserved-judgment yesterday, said the particular VAT scheme appeared to be a practical one in most circumstances. Unfortunately, as in many general schemes, there might be exceptional circumstances in which the scheme became very difficult to apply, which was so in the present case.
Among the items sold by Burkes were alcoholic drinks. Some retailers, including Burkes, bought such goods while they were in bond, therefore only paying VAT on the value of the goods themselves. When the retailer took the goods out of bond, he paid the excise duty.
Burkes argued that as there was no VAT payable on excise duty, the only heading under which it could be entered was zero rate of tax. The Revenue argued that the zero rate was applicable only to specific items in the sixth schedule of the VAT Act 1972 and did not refer to excise duty. They claimed tax was chargeable at the top rate if it was not chargeable at any other specified rates.
Mr Justice McCracken, holding in favour of the Revenue, said the alcoholic drinks in this case were liable to VAT at the top rate when sold by Burkes. The only question was whether the amount entered in the calculation was limited to the price paid by Burkes to the wholesalers or whether it included the excise duty paid by the company.
In the judge's view the calculations made by Burkes ought to have been based on the inclusion of both the purchase price and excise duty in the top rate of tax.
