Mac Carthaigh v Cablelink Ltd

• Jurisdiction: Ireland
• Judgment Date: 19 December 2003
• Date: 19 December 2003
• Docket Number: [S.C. No. 155 of 2003]
• Court: Supreme Court

Mac Cárthaigh v. Cablelink Ltd.

D.A. Mac Cárthaigh, Inspector of Taxes

Appellant

and

Cablelink Limited, Cablelink Waterford Limited and Galway Cable Vision

Respondents

[S.C. No. 155 of 2003]

Supreme Court

Revenue - Value-added tax - Payment of value-added tax at single rate by respondents - Claim by respondents that supply of two different services involved - Second service taxable at lower rate - Claim for repayment of difference in two rates - Test for determining whether more than one service provided by supplier - Whether two distinct services provided - Value-Added Tax Act 1972 (No. 22), sch.6.

Revenue - Practice - Appeal Commissioners - Case stated - Function of court on case stated - Whether question in case stated one of law or fact - Income Tax Act 1967 (No. 6), s. 428 - Value-Added Tax Act 1972 (No. 22), s. 25(2).

The respondents were suppliers of cable television and radio services, charging the customer seperately for the connection of the service and the service itself. Having paid value-added tax at a uniform rate in respect of the service provided, the respondents claimed that they provided two separate and distinct services to the customer, namely the television and radio service itself and the connection of that service. It was submitted that the latter service constituted"services consisting of the development of immovable goods, and the maintenance and repair of immovable goods …" within the meaning of para. (iii) of sch. 6 to the Value-added Tax Act 1972, or, alternatively, "services consisting of work on immovable goods other than …" services specified in paragraph (iii) within the meaning of para (xii)(b) of sch. 6 of the Value-Added Tax Act 1972. Both of the latter services attracted value-added tax at a lower rate and the respondents sought repayment of the difference between either of those rates and the rate actually paid.

The Appeal Commissioners, having found that the act of connecting the service was capable of constituting work on immovable goods within the meaning of para. (xii)(b) of sch. 6 and having made certain additional findings of fact, found that two separate services were supplied by the respondents; as they had contended. The appellant took issue with that latter finding and at his request, the Appeal Commissioners stated a case for the determination of the High Court pursuant to s. 428 of the Income Tax Act 1967 (as applied to value-added tax by s. 25 of the Value-Added Tax Act 1972). The case stated sought the opinion of the High Court as to whether the Appeal Commissioners were correct in finding that there were two separate services involved incurring two separate value-added tax rates.

The High Court (Lavan J.), upheld the decision of the Appeal Commissioners, holding that the question of the proper tax treatment of the respondents' services was a question of law and that the respondents supplied two separate services as contended for. The appellant appealed to the Supreme Court.

Held by the Supreme Court (McGuinness, Geoghegan and Fennelly JJ.), in dismissing the appeal, 1, that the conclusion of the Appeal Commissioners on the issue of whether there were one or two supplies of a service was one of law and not of fact, although the court hearing the case stated should give full effect to the findings of fact made by the Appeal Commissioners which had been based on the evidence they had heard.

Mara v. Hummingbird Ltd. [1982] I.L.R.M. 421 andÓ Culachain ó culachain v. McMullan Brothers Ltd.[1995] 2 I.R. 217 considered.

2. That, in determining whether there was more than one service involved, particular weight should be attached to the economic character of the supply of services. Whilst a single price might not be decisive, it could be indicative of a single service, whereas separate prices might suggest separate supplies.

Card Protection Plan Ltd. v. Commissioners of Customs & Excise (Case C-349/96) [1999] E.C.R. I-973 followed; British Airways plc v. Customs & Excise Commissioners [1990] S.T.C. 643 andCustoms & Excise Commissioners v. United Biscuits (UK) Ltd. [1992] S.T.C. 325 distinguished.

3. That in this case, the work of connecting the service was physically and temporally distinguishable from the actual delivery of the signal, was capable of being separately costed, the extent to which the connection might be required would vary from customer to customer and it was hypothetically possible that the connection could be performed by an independent company. All these factors warranted treating the connection service as a distinct supply of a service.

Cases mentioned in this report:-

British Airways plc v. Customs & Excise Commissioners [1990] S.T.C. 643.

British Railways Board v. Customs & Excise Commissioners [1977] 1 W.L.R. 588; [1877] 2 All E.R. 873; [1977] S.T.C. 221.

Card Protection Plan Ltd. v. Commissioners of Customs & Excise (Case C-349/96) [1999] E.C.R. I-973; [1999] 2 C.M.L.R. 743.

Commissioners of Customs & Excise v. Madgett and Baldwin (Joined Cases C-308/96 and C-94/97) [1998] E.C.R. I-6229; [1999] 2 C.M.L.R. 392.

Customs & Excise Commissioners v. United Biscuits (UK) Limited [1992] S.T.C. 325.

Faaborg-Gelting Linien A./S v. Finanzamt Flensburg (Case C-231/94) [1996] E.C.R. I-2395; [1996] 3 C.M.L.R. 535.

Hay v. O'Grady [1992] 1 I.R. 210; [1992] I.L.R.M. 689.

Mara v. Hummingbird Ltd. [1982] I.L.R.M. 421.

Ó Culachain ó culachain v. McMullan Brothers Ltd. [1995] 2 I.R. 217; [1995] 2 I.L.R.M. 498.

Appeal from the High Court.

The facts are summarised in the headnote and are more fully set out in the judgment of Fennelly J., infra.

By appeal by way of case stated pursuant to s. 428 of the Income Tax Act 1967, dated the 27th May, 2002, the opinion of the High Court was sought as to whether the supply of cable services by the respondents constituted two distinct services attracting different rates of value-added tax.

The matter came on for hearing before the High Court ( Lavan J.) on the 19th and 20th December, 2002. In a judgment dated the 14th February, 2003, the decision of the Appeal Commissioners was upheld and the appeal was dismissed. By notice of appeal dated the 23rd April, 2003, the appellant appealed to the Supreme Court. The appeal came before the Supreme Court (McGuinness, Geoghegan and Fennelly JJ.) on the 24th November, 2003.

Cur. adv. vult.

McGuinness J. 19th December, 2003

I agree with the judgment to be delivered by Fennelly J.

Geoghegan J.

I also agree with the judgment to be delivered by Fennelly J.

Fennelly J.

This is an appeal from the judgment and order of the High Court (Lavan J.) in which he answered a case stated from the Appeal Commissioners by ruling in favour of a claim for repayment of value-added tax.

Where a supplier provides a package of services, questions occasionally arise as to whether there has been a single supply or the supply of two or more distinct services. This matters for the purposes of value-added tax, where one element is either exempt from value-added tax or taxable at a lower rate. Sometimes, the taxpayer treats a package of services as a single supply. On other occasions, as here, the taxpayer claims that two or more distinct services are involved. Sometimes, it is the Revenue Commissioners who mount a challenge to the designation of transactions as adopted by the parties. Two such cases were cited in the argument.

The respondents are, or were at the material time, suppliers of cable television and radio services, providing multi-channel viewing or listening. They charged under separate headings for the connection of the service and the service itself. The present appeal arises from a claim for a repayment of the value-added tax paid in respect of the former type of service. The respondents claim that they should have been charged at a lower rate applicable if such services were considered independently, whereas they were, in fact, charged at a higher rate on the basis that there was a single supply of a television or radio receiving service.

The respondents made claims for the repayment of value-added tax paid in respect of two periods, March/April, 1989 and September/October, 1991. The appellant rejected the claim. The respondents appealed to the Appeal Commissioners, who conducted hearings in 1994. The Appeal Commissioners had to decide whether "the fee received by the respondents in respect of the connection/reconnection of the customer to their cable television or MMDS (Multi-Channel Microwave Distribution) for the purposes of receiving communication signals was in respect of …" the supply of a distinct and separable service, falling under one of a number of statutory descriptions or, in reality formed an inseparable part of the supply of the television cable service.

The statutory...