British Steel Plc v Her Majesty’s Commissioners for Customs and Excise: CA 20 Dec 1996

The claimant company paid excise duty on hydrocarbon oil used in its blast furnaces, whilst consistently contending that it was entitled to relief under section 9(1) of that Act on the ground that the oil was not used as fuel. The Commissioners rejected that contention. The claimant brought an action against the Commissioners claiming restitution of the excise duty which it had paid on the basis that it qualified for relief, and that the Commissioners’ demands for payment of the duty had accordingly been unlawful.
Held: ‘So there are, in my opinion, two points for decision on this appeal. First, if relief from duty under section 9(1) was unlawfully refused, does it follow that the demands for duty under section 6 were unlawful? Second, if the demands for duty were unlawful, can a common law action for restitution be brought or is the payer restricted to such repayment remedy as may be available under section 9(4)?’ and ‘If the demands by the commissioners for excise duty to be paid on the hydrocarbon oil to be delivered to British Steel’s blast furnaces were unlawful demands, it would follow, in my opinion, from the decision of the House of Lords in [Woolwich] that whoever paid the duty would have a common law restitutionary right to repayment. . . In the present case, it is contended that the commissioners’ demand for excise duties was unlawful because the commissioners had made an error in deciding that the use of the oil in the British Steel blast furnaces was not a ‘qualifying use’ and, consequently, had wrongly refused to grant relief from duty under s 9(1). I have yet to examine whether that premise justifies a conclusion that the demands were unlawful; but, if it does, I can see no reason why the principle expressed by Lord Goff should not apply. . . An unlawful demand for duty must, in a sense, always be an ultra vires demand. Whether the demand is based on ultra vires regulations, or on a mistaken view of the legal effect of valid regulations, or on a mistaken view of the facts of the case, it will, as it seems to me, be bound to be a demand outside the taxing power conferred by the empowering legislation. If, for any of these reasons, a demand for tax is an unlawful demand, it seems to me to follow from the speeches of the majority in [Woolwich] that the taxpayer would, prima facie, become entitled, on making payment pursuant to the unlawful demand, to a common law restitutionary right to repayment. The empowering legislation in question, or other legislation, might remove the taxpayer’s common law right to repayment. That would depend on the construction of the Act or Acts in question. . . In the present case, if the demands for excise duty were unlawful, the payer would, in my judgment, have a prima facie common law right to repayment. . . I would not construe s 9(4) as removing that common law right. First, the common law right is not expressly removed. Second, s 9(4) does not purport to constitute a comprehensive statutory scheme for recovery of excise duty paid but not due. If duty were demanded and paid on oil that did not correspond to the description of ‘hydrocarbon oil’ in ss 1 and 2, s 9(4) would not enable recovery to be claimed. The common law claim would be the appropriate means of redress. If prospective relief under s 9(1) had been granted but, unlawfully, duty had none the less been demanded and, perforce, paid, s 9(4) would not apply. The common law claim for restitution would be the means of redress. Third, s 9(4) assumes, implicitly, that the excise duty has been paid pursuant to a lawful demand. It is expressed to deal with a situation in which prospective relief could have been given under s 9(1) but, for some reason or other, has not been given. Prima facie, if prospective relief has not been given under s 9(1), duty will have been properly demanded under s 6. . . . For these reasons, if British Steel has an arguable case that the demands for payment of excise duty were unlawful demands, I would not be willing to strike out its action on the ground that s 9(4) had removed the common law right of recovery.’
Millett LJ: ‘What the appellants have done is to seek to obtain retrospective relief by bringing private law proceedings in restitution to recover duty unlawfully demanded of them by a public authority. They can do this if (i) the demand for payment of the duty was unlawful and (ii) the private law remedy is not excluded by the statutory regime: see [Woolwich]. They have no difficulty with the second of these requirements: the statutory regime established by s 9(1) and (4) is not comprehensive; it is limited to persons who possessed the necessary approval at the relevant time, and the appellants did not. But while this enables the appellants to satisfy the second requirement, it creates an insuperable obstacle in the shape of the first. The commissioners’ demand for duty was not unlawful: they were authorised to demand the duty by the combined effect of s 6 of the 1979 Act and s 43(1) of the Customs and Excise Management Act 1979. Section 9(1) of the former Act authorised them to permit the release of oil from bond to an approved person, but they had no power to permit its release to the appellants, even if they were intending to put it to an intended use, unless they could show that they had been approved.’
Sir Richard Scott VC, Saville LJ, Millett LJ
[1996] EWCA Civ 1272, [1997] 2 All ER 366
Hydrocarbon Oil Duties Act 1979 6(1)
England and Wales
Cited by:
CitedInland Revenue and Another v Deutsche Morgan Grenfell Group Plc CA 4-Feb-2005
The company sought repayment of excess advance corporation tax payments made under a mistake of law. The question was the extent of the effect of the ruling in Klienwort Benson, in particular whether it covered sums paid as taxation, and how the law . .

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Updated: 19 April 2021; Ref: scu.141140