Arderin Distillery Ltd v The Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Ms. Justice Siobhán Phelan
• Judgment Date: 10 May 2022
• Neutral Citation: [2022] IEHC 267
• Court: High Court
• Docket Number: [Record No.2020/589 JR]

Between:

Arderin Distillery Limited

Applicant

and

The Revenue Commissioners

Respondent

[2022] IEHC 267

[Record No.2020/589 JR]

THE HIGH COURT

JUDGMENT of Ms. Justice Siobhán Phelan delivered on the 10 ^th day of May, 2022.

INTRODUCTION

1 . The Applicant is involved in the distillation of spirits (gin). Alcohol is subject to excise duty in the form of Alcohol Products Tax (“APT”). APT is normally paid when alcohol or alcohol products are released for consumption. In certain circumstances, Relief may be obtained from APT in circumstances where the alcohol is used in certain ways or for certain alcohol related products. Provision is made to permit the release of alcohol products without payment of APT if it is intended to be used for or has been used for medicinal purposes or for medical purposes in hospitals and pharmacies.

2 . At the onset of the COVID-19 pandemic in March, 2020, at a time of national crisis, the Applicant was approached by a hospital with a request that it supply hand-sanitizer. The Applicant made contact with the Respondent (“the Revenue”) to make a claim for exemption from excise duty in respect of hand-sanitizer that the Applicant wished to produce. The Applicant also successfully applied to be registered with the Department of Agriculture, Food and the Marine (the “DAFM”).

3 . Thereafter, joining in the national endeavour to respond to the COVID-19 health crisis, the Applicant proceeded to produce hand-sanitizer, for supply to the health services. The Applicant did so on the now disputed basis that it had been granted due authorisation by the Revenue and was lawfully entitled to release hand-sanitizer to market without a charge to excise duty arising.

4 . Hand-sanitizer was produced by the Applicant during the period between April-May, 2020, by which time the crisis in supply had passed. The Applicant ceased production as the demand for hand-sanitizer was met. It was only then, in June, 2020, the acute shortage of hand-sanitizer having passed, that the Applicant was contacted by the Revenue. Unaware that production had already ceased, the Revenue directed the Applicant to cease production.

5 . The Applicant's fundamental position in these proceedings is that it had verbal confirmation from Revenue that its production of hand-sanitizer was approved as exempt from excise duty and that had approval not been provided, the Applicant would not have used alcohol to make hand-sanitizer. At current rates excise duty on spirits is fixed at €42.57 per litre of alcohol. The potential exposure to liability on excise duty on the quantity of alcohol used in the production of hand sanitizer is as high as approximately €2.1 million – a sum which far exceeds the revenue generated by the sale of hand-sanitizer.

6 . Revenue neither dispute nor accept for the purpose of these proceedings that the alcohol in question was for medicinal purposes in the production of hand-sanitizer. Neither do they dispute or accept that the Applicant is qualified for relief from excise duty. Revenue's position is simply that the question of entitlement to relief remains under consideration. They say that no decision has been made. Revenue maintains this position despite the fact that some two years had passed by the date of hearing and notwithstanding the urgency with which the need for hand-sanitizer presented in March, 2020. They justify this delay by reference to the existence of these proceedings in which the relief sought includes an order of prohibition. The Applicant has approached other distilleries who have confirmed to him that they provided assistance in the same manner as the Applicant by producing hand sanitizer. However, in the case of other distilleries cited by the Applicant, confirmation that they were not liable for Excise was obtained without delay and whilst the requirement for urgent supply of hand-sanitizer subsisted. There is no direct affidavit evidence from any third-party distiller in this case.

FACTUAL BACKGROUND

7 . The Applicant is a limited liability company, concerned in the distillation of spirits (gin) at Tullamore, County Offaly. As a manufacturer of distilled spirits, it is required to hold an excise licence. An excise licence is not required in respect of the manufacture of hand sanitizer.

8 . On the 4 ^th of November, 2016, the Applicant received a Tax Warehouse/Warehousekeeper (Proprietor) Approval Order [hereinafter “the warehousekeeper approval”) pursuant to s. 109(2) of the Finance Act, 2001. The Order was said to be effective from the 12 ^th of October, 2016 and the premises approved were the Applicant's premises at Cloncollig Business Park, Church Road, Tullamore in the County of Offaly. This Order was produced on my request and exhibited in a late affidavit.

9 . The warehousekeeper approval was subject to acceptance in writing and compliance with specified conditions. Conditions specified in the Applicant's case included that the Applicant was subject to a €20,000 penalty bond. The bond was specified as security for the duty on the goods removed to, deposited in or removed from the warehouse under duty suspension arrangements. The Applicant was required to enter into a deferred payment direct debit arrangement with Revenue in respect of duty liabilities. The parties confirm that warehousekeeper approval issued based on a then projected annual turnover of 5,000 litres of gin and an average stock on hands of 1,250 litres, however, documentation confirming this was not produced. The warehousekeeper approval does not on its face refer to projected turnover or levels of stock on hand, albeit it is stated that the Revenue may determine a higher bond “ from time to time”.

10 . During March, 2020 at the beginning of the COVID-19 pandemic the Applicant received an email with an urgent request from Our Lady's Hospital for Sick Children Crumlin that the Applicant produce an ethanol based hand-sanitizer for supply to the HSE for use in the hospital in light of the COVID-19 pandemic. This email included details as to the necessary steps for distillers to take before producing a hand-sanitizer which included engaging with their Revenue Officer and registering with the DAFM (Pesticide Registration and Control Division) and obtaining a PCS number. The email asserted with regard to the approach of Revenue that:

“ in most cases so far I've been told that they are providing time limited approval [duration of the crisis] to produce alcohol hand sanitizers.”

11 . With regard to the approach of the DAFM, it is stated:

“ DAFM/PRCD have said that all hand sanitizer applications are the number one priority for PCD at this time so there will be no delay in processing on our end…”

12 . In an effort to assist the hospital in a time of crisis the appellant urgently contacted the Revenue via email on the 18 ^th of March 2020 requesting approval for the Applicant to produce and sell ethanol hand-sanitizer without being liable for Excise. The email read:

“Hey Noreen, In light of the current situation, we've been asked to produce hand sanitizer from Ethanol. The email is below. I just need a mail from you that we have approval to produce alcohol hand sanitizer without duty.”

13 . The Revenue official dealing with this correspondence (one Noreen Gilligan) was working from home due to the COVID-19 crisis. The Applicant spoke with her and was advised by her to complete and submit a Form No. APT1 to Revenue.

14 . On Friday, the 20 ^th of March, 2020, the Applicant sought authorisation to process 80,000 litres of 96%-strength ethanol, with a holding stock of 10,000 litres by submitting a completed Form No. APT1.

15 . The Applicant asserts that in a phone call on the 24 ^th of March, 2020, Revenue Control Officer, Noreen Gilligan, confirmed verbally that Revenue was satisfied that the Applicant intended to use alcohol for “ relieved purposes” and it had approval from Revenue to use up to 80,000 litres of ethanol to produce hand sanitizer, subject to the condition that approval was obtained from the DAFM. The Applicant relies on the approval claimed to have been communicated during this telephone conversation.

16 . The Applicant proceeded on the basis that it had obtained approval from the Respondents to use up to 80,000 litres of ethanol to produce hand-sanitizer subject to the condition that approval was obtained from the DAFM.

17 . The Revenue denies any such conversation and denies the grant of any approval. The Revenue has no note of a call on the 24 ^th of March, 2020 but has a note of a telephone call on the 25 ^th of March, 2020 wherein it is recorded that the Applicant then intimated a perceived need for an additional 400,000 litres of ethanol to meet anticipated demand and was consequently advised to submit a new Form No. APT1. It appears that there was a phone call on that date because the Applicant emailed Ms. Gilligan at 10.06 a.m. asking her to give him a call as “ am looking for ethanol producers in the area, do you know anyone?”

18 . Ms. Gilligan prepared a file note in respect of her call back to the Applicant in which she states:

“I told him that I could not provide him with that information even if I had it. He said that he was unable to source the ethanol from the UK but now he thinks he will be able to source it from Poland. He has orders for hand sanitizer from 14 Dublin Hospitals, Tullamore Hospital and Testing Centre, Tullamore. He reckons he will now need 400,000 litres of ethanol to supply all of these places. I told him to submit a new Form APT1”.

19 . The Applicant contends that during his conversation with Noreen Gilligan when he referred to a need for more ethanol to meet demands, she made no indication that there was any difficulties with the earlier application for approval pursuant to s. 77 of the Finance Act 2003 (as amended by s. 43 of the Finance Act 2004) and Parts 7 and 8 of the Alcohol...