Fergus Byrne v Revenue Commissioners

JurisdictionIreland
JudgeMr. Justice Twomey
Judgment Date13 April 2021
Neutral Citation[2021] IEHC 262
Docket Number[2020 No. 88 R]
CourtHigh Court
Date13 April 2021
Between
Fergus Byrne
Applicant
and
Revenue Commissioners
Respondent

[2021] IEHC 262

[2020 No. 88 R]

THE HIGH COURT

Case stated – Questions of law – Fraudulent evasion of VAT – Tax Appeal Commissioner seeking the opinion of the High Court on questions of law – Whether there was sufficient objective evidence before the Commissioner to support her determination that there was a transaction connected with the fraudulent evasion of VAT

Facts: The applicant, Mr Byrne, commenced his service-station business in 2000. In April 2013, he was subject to a Revenue audit and his business records for the years 2010, 2011 and 2012 were examined. Following this audit, the respondent, the Revenue Commissioners, raised assessments whereby it disallowed VAT input credits on invoices on the basis that those invoices were fake and that they represented transactions connected with the fraudulent evasion of VAT. Mr Byrne appealed those assessments on the grounds, inter alia, that he was not aware of any evasion of VAT in the supply chain and ought not to have known that he was taking part in a transaction connected with fraudulent evasion of VAT. That appeal was heard by a Tax Appeal Commissioner over two days, on 29th June, 2016, and on 17th January, 2017. The Commissioner issued her determination on 31st December, 2019 in which she upheld the notices of assessment totalling €451,770. By notice dated 21st January, 2020, Mr Byrne requested the Commissioner to state and sign a case for the opinion of the High Court pursuant to s. 949AQ of the Taxes Consolidation Act 1997 (as amended). On 17th April, 2020 the Commissioner set out three questions of law for the opinion of the Court as follows: (i) “Whether there was sufficient objective evidence before me to support my determination that there was a transaction connected with the fraudulent evasion of VAT”; (ii) “Whether there was sufficient objective evidence before me to support my determination that [Mr Byrne] should have known that he was participating in a transaction connected with the fraudulent evasion of VAT and that the only reasonable explanation for the purchases was that the purchases were connected to the fraudulent evasion of VAT”; (iii) “Whether, upon the facts proved or admitted, I was correct in law in my determination that based on the evidence and the objective factors (as set out in the determination) [Mr Byrne] should have known that he was participating in a transaction connected with the fraudulent evasion of VAT and that the only reasonable explanation for the purchases was that the purchases were connected to the fraudulent evasion of VAT”.

Held by Twomey J that Mr Byrne had failed to establish an error on a point of law on the part of the Commissioner. Twomey J held that this was not a case where there was no evidence whatever to support the findings on primary fact by the Commissioner, which is required by Mara v Hummingbird Ltd [1982] I.L.R.M. 421 for the determination to be set aside.

Twomey J answered the questions raised by the Commissioner in the affirmative and the appeal on a point of law by way of Case Stated was rejected.

Questions contained in the Case Stated answered in the affirmative.

JUDGMENT of Mr. Justice Twomey delivered on the 13th day of April, 2021

SUMMARY
1

The applicant (“Mr. Byrne”) is the owner of two filling stations in County Offaly. Over a period of three years, he bought fuel for approximately €2.5 million (on which he paid VAT of €451,770) from three different companies, McCarthy Oil, John Kelly Fuels and FQ Services. Evidence was provided to a Tax Appeal Commissioner (the “Commissioner”) that no VAT was ever accounted for by these companies to the Revenue Commissioners (“Revenue”) in relation to the relevant invoices. Revenue also refused to allow Mr. Byrne to offset the VAT he had paid on the fuel.

2

On appeal, the Commissioner determined that Mr. Byrne was not entitled to set-off the VAT, as she determined that Mr. Byrne should have known that the purchases of fuel which he made from these suppliers were connected to the fraudulent evasion of VAT. Mr. Byrne claims that the Commissioner made an error on a point of law in reaching her determination.

3

The case before this Court concerns an appeal by way of Case Stated by Mr. Byrne concerning Revenue's refusal to allow him, pursuant to s. 59 of the Value-Added Tax Consolidation Act 2010, to set-off against his VAT bill, the VAT of €451,770 paid by him on the purchase of fuel from various suppliers.

4

As a preliminary matter, Revenue asserted what appeared to be a novel point, namely that the High Court should not have regard to the transcript of the hearing before the Commissioner, since it claimed that the High Court should not review evidence which is not set out in the Case Stated signed by the Commissioner, it being the responsibility of the Commissioner to draft the Case Stated pursuant to s. 949AQ(2) of the Taxes Consolidation Act, 1997 (as amended). For the reasons set out below, this Court rejected this claim.

5

As a further preliminary matter, Revenue also asserted that as the parties were in agreement that the Commissioner applied the correct legal test in determining the appeal, there could be no ‘ error on a point of law’, which is necessary to engage the jurisdiction of the High Court on a Case Stated. This Court rejected Revenue's analysis on the grounds that conclusions or inferences from findings on primary fact (as made by the Commissioner in this case) amount to conclusions on mixed questions of fact and law and, as such, could amount to an error on a point of law (if those conclusions are ones which no reasonable commissioner could draw).

6

However, on this substantive point, of whether no reasonable commissioner could have drawn the same conclusion as the Commissioner (that Mr. Byrne should have known about the VAT fraud), this Court concluded that this was not the case. This is because of the cumulative effect of all the evidence before the Commissioner, including, but not limited to, the triangular payment arrangement (whereby Mr. Byrne received fuel from McCarthy Oil, yet he discharged the invoice which he received from McCarthy Oil by making payments to John Kelly Fuels) and the fact that Mr. Byrne was sufficiently concerned about the diesel to have it checked for laundering. Accordingly, this Court refuses to set aside the decision of the Commissioner.

BACKGROUND
7

Mr. Byrne commenced his service-station business in 2000. He operated his business for a number of years seemingly without any controversy. In April 2013, Mr. Byrne was subject to a Revenue audit and his business records for the years 2010, 2011 and 2012 were examined. Following this audit, Revenue raised assessments whereby it disallowed VAT input credits on the following invoices on the basis that those invoices were fake (see Revenue's letter of 27th November, 2013 at para. 101 below) and that they represented transactions connected with the fraudulent evasion of VAT:

2010

FQ Services

€12,432

2011

McCarthy Oil

€190,356

2012

John Kelly Fuels (Ireland)

€248,982

€451,770

8

Mr. Byrne appealed these assessments on the grounds, inter alia, that he was not aware of any evasion of VAT in the supply chain and ought not to have known that he was taking part in a transaction connected with fraudulent evasion of VAT. This appeal was heard by the Commissioner over two days, on 29th June, 2016, and on 17th January, 2017. The Commissioner issued her determination (the “Determination”) on 31st December, 2019 in which she upheld the notices of assessment totalling €451,770.

9

By notice dated 21st January, 2020, Mr. Byrne requested the Commissioner to state and sign a case for the opinion of the High Court pursuant to s. 949AQ of the Taxes Consolidation Act, 1997 (as amended). On 17th April, 2020 the Commissioner set out three questions of law for the opinion of the Court as follows:

  • I. “Whether there was sufficient objective evidence before me to support my determination that there was a transaction connected with the fraudulent evasion of VAT.

  • II. Whether there was sufficient objective evidence before me to support my determination that [Mr. Byrne] should have known that he was participating in a transaction connected with the fraudulent evasion of VAT and that the only reasonable explanation for the purchases was that the purchases were connected to the fraudulent evasion of VAT.

  • III. Whether, upon the facts proved or admitted, I was correct in law in my determination that based on the evidence and the objective factors (as set out in the determination) [Mr. Byrne] should have known that he was participating in a transaction connected with the fraudulent evasion of VAT and that the only reasonable explanation for the purchases was that the purchases were connected to the fraudulent evasion of VAT.”

Evidence before the Commissioner
10

In the Determination, the Commissioner summarised the evidence given by and on behalf of Mr. Byrne. A summary is also provided in the Determination of the evidence given by two officers within Revenue.

11

Mr. Byrne gave evidence that he commenced his business in 2000 and expanded it in 2005, opening a second service station. He gave evidence that he used a number of suppliers for his business and was not tied to any one agreement.

12

In 2010 a Mr. Aidan Kelly called to one of Mr. Byrne's premises and represented himself as an agent of McCarthy Oil. He informed Mr. Byrne that McCarthy Oil had an agreement with John Kelly Fuels so as to obtain lower prices for fuel. Mr. Byrne was told that the arrangement would operate in the following way. Invoices would be issued to Mr. Byrne from McCarthy Oil, however Mr. Byrne would make payments for the fuel directly to John Kelly Fuels. Mr. Byrne gave evidence that he knew of John Kelly Fuels, as it was part of...

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