Dispit Ltd v Customs & Excise [2004] UKVAT(Landfill) L00019 (25 February 2004)

	LANDFILL TAX  — whether operations amounting to “restoration” — FA 1996 s 43C —railway cutting — planning consent envisaging sequential filling followed by restoration — operations becoming economically impossible — tipping as envisaged by planning consent abandoned — subsoil and topsoil deposited to bring cutting to level of surrounding land — whether “restoration” — no — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	DISPIT LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Colin Bishopp (Chairman)

						

Sitting in public in Manchester on 15 and 16 December 2003

Denise Loney, solicitor, of Semple Fraser WS, for the Appellant 
James Puzey of counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	Dispit Limited, the appellant, has for many years been an operator of landfill sites.  It registered as such with the Commissioners, in compliance with section 47 of the Finance Act 1996, when landfill tax was introduced, and it has remained registered ever since.  It is based in West Ella, East Yorkshire.
2.	The site with which I am concerned in this appeal is known as Little Weighton Railway Cutting (“the cutting”).  As the name suggests, it was formerly a railway cutting, carrying the line from Hull to Barnsley, which was closed some years ago.  Although it is referred to as a cutting, the former railway line ran through undulating ground and parts of it were carried on a raised embankment.  However, the greater part of the appellant’s land is indeed a cutting, and it is of course this fact which gives the land its value as a landfill site.  The site is between three and four kilometres in length but only 55 metres wide.
3.	The cutting runs in an approximate north-west to south-east direction.  At its north-western end lies another site owned by the appellant, Little Weighton Quarry (“the quarry”) and, at the other, a third of the appellant’s sites, Great Gutter Lane Landfill.  Quarrying operations at the former were discontinued some time before 1986, and it became available for use as a landfill site.  The Great Gutter Lane site had formerly accommodated part of the railway line and some sidings, and had been extended by the appellant into adjoining land which it first quarried for chalk before the whole site became available for landfill, in about 1969.
4.	It appears that in 1981 the cutting was owned by Hoveringham Group Limited which in July 1981 obtained planning consent from Humberside County Council for “the tipping of builders’ waste and non-hazardous industrial waste”.  One condition of the consent was that tipping should take place in three stages.  The cutting was divided into three roughly equal parts, and the requirement was that the north-western part should be completed first, the middle section next and the south-easterly section last.  This approach was necessary for reasons of access, which was to be obtained from the Great Gutter Lane site at the south-easterly end of the cutting.  Another condition, critical to this appeal, read (so far as material) as follows:
“Within three months of the completion of each stage of tipping the tipped area shall be covered with a minimum of 30 cms of topsoil and graded into adjoining land levels and brought into a state suitable for agriculture …”
5.	By August 1986 the quarry, the cutting and another part of the same disused railway line, known as Riplingham Railway Cutting, had come into the ownership of Stoneledge Plant & Transport Limited (“Stoneledge”), a company then owned equally by the Landau family, who were and are the controlling shareholders of Dispit Limited, and another family.  In August 1986 Stoneledge entered into an agreement with Humberside County Council pursuant to section 52 of the Town and Country Planning Act 1971.  The agreement was designed to enlarge upon and reinforce the first of the conditions which I have mentioned of the 1981 planning consent.  It does not, however, do so in a way which is material to this appeal and I propose to focus on the planning consent.
6.	Not long after they had entered into the section 52 agreement, the two families who owned Stoneledge decided to separate their interests, and some of the sites hitherto owned by Stoneledge were transferred to Dispit.  As I understood it, the Landau family’s shareholding in Stoneledge was relinquished in return for those properties, and the other family was then left with all the shares in Stoneledge and, with them, the properties which remained in Stoneledge’s ownership.  Although nothing was said in the evidence, it appeared to me from later events that relations between the two companies were not cordial.  
7.	Among the sites transferred to Dispit were the quarry and the cutting.  Dispit took them with the benefit of the planning permission, but it was of course bound by the conditions of that permission and by the section 52 agreement.  It also had the benefit of planning permission authorising the use of the quarry for landfill purposes.  That permission, too, imposed a sequencing condition: filling of the quarry was to be completed before work on filling the cutting began.  Both planning consents remain in force but I understand that the section 52 agreement was recently rescinded.  In 1988 Dispit was granted a waste management licence for the cutting in accordance with the Control of Pollution Act 1974.
8.	Dispit began filling the quarry, an operation which took about nine years (including a period when tipping was suspended while access along the cutting was improved). Although filling operations at the quarry were not then entirely complete, a small quantity of waste was tipped into the cutting so as to satisfy the standard condition, imposed on all planning consents  by what was then section 41 of the Town and Country Planning Act 1971, that work must begin within five years; if that had not been done, the planning permission would have ceased to be effective.  Dispit’s intention at that time was to complete operations at the quarry and then immediately start commercial tipping operations in the cutting, proceeding from one section to the next as the planning permission and the section 52 agreement required.
9.	In 1995, however, the Environment Agency (which by then had taken over responsibility for waste disposal operations from local authorities) modified the conditions of the waste management licence which related to the cutting.  These amendments, as further modified in 1997 (in each case pursuant to section 37 of the Environmental Protection Act 1990), required the appellant to submit a leachate control scheme to the Environment Agency for approval, and prohibited it from tipping any biodegradable waste until the scheme had been approved.  The only practicable way of controlling leachate was to line the cutting, so forming a barrier to contain the leachates, and to undertake careful capping of the waste, in order that rainwater would run off rather than accumulate.  That would have been prohibitively expensive, because the shape of the cutting was such that a very large amount of lining would be required; and the lining would itself significantly reduce the volume of the void remaining available for infilling.
10.	This development coincided approximately with the introduction of landfill tax in 1996.  One effect of its introduction, I was told, was that the quantity of inert waste offered for disposal at licensed and registered sites was reduced dramatically.  Such waste – for the most part soil and similar material excavated by the construction industry – was now diverted to unlicensed sites, such as farmers’ fields and golf courses, where it was not subject to the tax.  The waste offered to the appellant and other registered sites was largely made up of material which could not be disposed of in that way, and it was biodegradable or for some other reason not inert.
11.	The appellant made two attempts to have the planning consent relating to the cutting modified, with the objective of reducing the impact of, first, the leachate control requirement and, thereafter, landfill tax but neither attempt was successful and in 1999 or 2000 Dispit concluded that the disposal of non-inert waste in the cutting could not be undertaken if it was not to incur an unsustainable loss.  There remained, however, the obligation imposed by the 1981 planning consent to restore the land for agricultural use.
12.	At about the same time Dispit learnt that inert material (which it could have used to infill the cutting without the need to devise a leachate control scheme) was being taken at Riplingham Cutting, which was still in the ownership of Stoneledge, and that Stoneledge had procured an exemption from landfill tax for that site.  It was very similar to the appellant’s cutting – it formed part of the same disused railway line and it was also adjacent to a quarry.  Dispit concluded that if Stoneledge was entitled to exemption in respect of that site, it too would be entitled to exemption of the work necessary to comply with the planning permission, that is restoration of the site.  It therefore gave notice to the Commissioners of its intention to commence restoration, as required by section 43C(1)(b) of the 1996 Act, and began to accept inert waste, which was deposited in the cutting, without charging or accounting for landfill tax on that waste.
13.	I take the foregoing findings of fact, none of which was disputed in any material way, from the evidence of Paul Landau, Dispit’s managing director, and David Brook, its operations director, from a statement of agreed facts and from the various documents produced by Denise Loney, the solicitor who represented Dispit and by James Puzey, counsel for the Commissioners.  I also heard evidence from Colin Airey, the Customs officer who took the view that Dispit’s operations in the cutting were not exempt from landfill tax and who issued an assessment, dated 12 March 2002, by which he sought to recover the tax he considered due, by that time amounting to £78,748.  I shall deal with Mr Airey’s evidence later in this decision.
14.	A good deal of effort was devoted, in the correspondence between the parties and at the hearing itself, to the question whether Stoneledge was entitled to exemption and to the appellant’s perception that the Commissioners’ treating its operations as exempt while demanding tax from the appellant, carrying on what it considered to be equivalent operations, was unfair.  Whether or not that perception is justified, it is not within this tribunal’s jurisdiction to deal with contentions that the Commissioners’ treatment of different taxpayers is not even-handed.  Although Dispit’s directors deduced that Stoneledge had been granted the same exemption as it claimed for itself (that is, for site restoration) it later became clear that Stoneledge was benefiting from what can conveniently be referred to as the quarrying exemption (see section 44A of the 1996 Act).  Even if it were within my jurisdiction to do so, I do not have the material to determine whether Stoneledge was entitled to that exemption; nor is Stoneledge before the tribunal and able to put its own case.  Moreover, it is not within this tribunal’s power (nor, I think, within the power of any tribunal or court) to direct the Commissioners, because they have mistakenly or otherwise treated one taxpayer incorrectly, to treat another taxpayer equally incorrectly.  I confine myself therefore to considering whether Mr Airey’s assessment, which is the subject of the appeal, is correct which, in turn, requires me to determine the simple question, whether or not the appellant is entitled to the benefit of an exemption.
15.	I must, however, first deal with another subsidiary issue.  Mr Landau wrote to the Commissioners’ office at Newcastle upon Tyne on 25 July 2000, in order to submit the appellant’s notification of its intention to commence restoration, and to give some additional information.  A copy of the planning permission was attached to the letter, which drew attention to the condition, which I have already set out, requiring restoration of the site at the conclusion of tipping operations.  Mr Landau’s letter did not mention exemption specifically, but it is inherent in the notification that the person giving it is doing so for the purpose of seeking the exemption conferred by section 43C of the 1996 Act, whose details I shall consider in due course.  Mr Landau had previously spoken to a Customs officer in order to outline the appellant’s intentions.
16.	There was an immediate reply from the Commissioners’ Newcastle office, but it merely indicated that Mr Landau’s letter had been sent to another office at Leeds.  On 31 July 2000 a Mr Gray of that office, who described himself as a landfill tax officer (he was not the officer to whom Mr Landau had spoken), wrote in these terms: -
“I write in response to your letter of 25 July 2000 advising the proposed restoration of your landfill site known as Little Weighton Railway Cutting.  The area to be restored being as set out in your letter and accompanying site drawing. 
The restoration exemption only applies to qualifying materials used for restoration of the areas designated to be restored per your letter/accompanying site drawing which was submitted with your notification.  The exemption does not extend to waste which is used for any other purpose such as site engineering, daily cover or haul roads.
It is your responsibility to ensure that records are maintained that show how the qualifying waste was used.  These records will be examined subsequently as part of the normal cycle of inspections to verify that the waste was put to a qualifying use and the exemption correctly applied.”
17.	Mr Landau and Dr Brook told me that they took that letter as the Commissioners’ confirmation that their proposed work was exempt from landfill tax.  I am satisfied that that was their belief, and that it was honestly held.  It was, as I also accept, on the strength of Mr Gray’s letter and what they believed it to say that Dispit began, in March 2001 (after it had undertaken various other formalities), to accept inert waste at the cutting.  It did not charge or account for landfill tax on that waste.  It continued to accept waste on that basis until Mr Airey visited the site on 5 February 2002; his was the first visit by a landfill tax officer since the work had begun.  He concluded immediately that the work did not qualify for exemption, and so informed Dr Brook.  
18.	Ms Loney contended that Mr Gray’s letter conveyed a decision, binding on the Commissioners and on which the appellant was entitled to rely, that the works were exempt, and that the Commissioners could not go back on it so as to assess the appellant for tax on the material which had been deposited.  Their doing so, she said, offended the appellant’s legitimate expectations which the tribunal should protect.
19.	Mr Puzey, correctly, pointed out that the tribunal’s jurisdiction in this area is, to put it no higher, in doubt: see, for example GUS Merchandise Corporation v Commissioners of Customs and Excise [1978] VATTR 28 and Farm Facilities (Fork Lift) Ltd v Commissioners of Customs and Excise [1987] VATTR 98.  He also made the point that, in any event, whatever Mr Gray’s letter purported to be, it was not and could not be a grant of exemption since there is no provision of the 1996 Act or any other enactment which confers on the Commissioners the power to grant an exemption.  Their duty is to collect the tax which is due and, although they must respect and apply exemptions, the extent of the exemptions is prescribed by statute and not by the Commissioners.  Against that, it was conceded that an exemption had been “granted” in respect of Riplingham Cutting; Dispit had received a letter in which the Customs offer who wrote it so stated.
20.	Despite those doubts about the tribunal’s jurisdiction in this area, I propose to deal with the matter.  I heard evidence and argument about it and it seems to me that I should make findings which, if nothing else, will avoid the need for the appeal to be remitted to the tribunal if I should elsewhere be found to have fallen into error.
21.	As I have indicated, I do not doubt that Mr Landau and Dr Brook honestly believed that the appellant had been granted exemption, and acted accordingly; I recognise that they had been led to believe that Stoneledge had been “granted” an exemption; and I do not lightly discard the view of Mr Landau, who is, as well as Dispit’s managing director, a solicitor.  Nevertheless, I do not consider that Mr Gray’s letter is capable of bearing the meaning he and Dr Brook ascribed to it.  In my view, the letter means no more than that the notification has been received and accepted as such – that is, as a notification – by the Commissioners.  Though it can be argued (and Mr Airey conceded as much) that the wording of the letter may have been ill-considered, its second and third paragraphs are in my view intended to, and do, carry the warning that the terms of the statutory exemption and the record-keeping requirements must be complied with.  I do not read this letter as the purported grant of an exemption – I say “purported” because I agree with Mr Puzey that it was not within the Commissioners’ power to make such a grant – but as an acknowledgement.
22.	Mr Airey’s evidence – which, again, was not materially disputed on this point – was that when he made his inspection on 5 February 2002 very little tipping had taken place, all of it at the quarry end of the cutting.  Even there, the level of the infilling material was still several metres below the top of the sides of the cutting.  Elsewhere in the cutting there was evidence that work had been undertaken to create a reasonable means of access for lorries, but the remainder of the cutting was overgrown in the manner one might expect of land which had seen no activity for several years.  Mr Airey formed the view that none of the work carried out so far in the cutting amounted to restoration and that it was all taxable infilling.  He told Dr Brook, who was on site at the time, of his view and arranged a further visit on 26 February in order that he could see both Dr Brook and Mr Landau.  By the time of that meeting, he had prepared a draft assessment (the appellant’s tipping records had been made available to him).  Although some adjustments were made to it at the second meeting, Mr Airey remained of the view that tax was payable on the material which had been deposited in the cutting.  While the appellant challenges the underlying liability it does not dispute Mr Airey’s calculation of the amount of tax assuming that it is liable to pay it at all.
23.	Landfill tax is charged, by sections 39 to 42 of the 1996 Act, on taxable disposals of waste, made by way of landfill at a landfill site on or after 1 October 1996.  The person liable for payment of the tax is the landfill site operator.  The standard rate of the tax is (currently) £14 per tonne, but there is a reduced rate of £2 per tonne for “qualifying material”, which is defined by the Landfill Tax (Qualifying Material) Order 1996 (SI 1996/1528).  Pausing there, it was common ground that the appellant had made “taxable disposals” of “waste” at a “landfill site” of which it was the “operator” (as all these terms are defined by the Act) and that (ignoring some undisputed items also included in the assessment) the waste was “qualifying material” as defined by the Order.  Since there was no dispute about their application, I do not propose to examine these terms further.  Thus, if there is no applicable exemption, the appellant is liable for the tax.
24.	The background to the introduction of exemptions (by, in this case, the Landfill Tax (Site Restoration and Quarries) Order 1999 (SI/1999/2075)) is well summarised in the one decision of this tribunal to which I was referred, Harley v Commissioners of Customs & Excise (2001, Decision L00013) and I need not set it out again here.  The section which, the appellant says, applies to its case is section 43C, which came into force on 1 October 1999 and, if it applies at all, governs all of the disposals with which I am concerned.  It reads as follows:-

“43C Site Restoration
(1)	A disposal is not a taxable disposal for the purposes of this Part if –
(a)	the disposal is of material all of which is treated for the purposes of section 42 above as qualifying material,
(b)	before the disposal the operator of the landfill site notifies the Commissioners in writing that he is commencing the restoration of all or a part of the site and provides such other written information as the Commissioners may require generally or in the particular case, and
(c)	the material is deposited on and used in the restoration of the site or part specified in the notification under paragraph (b) above.
(2)	  In this section “restoration” means work, other than capping waste, which is required by a relevant instrument to be carried out to restore a landfill site to use on completion of waste disposal operations.
(3)	The following are relevant instruments –
(a)	A planning consent;
(b)	A waste management licence;
(c)	A resolution authorising the disposal of waste on or in land.”
25.	The Commissioners accept that qualifying material has been used by the appellant, that its notice (given by Mr Landau with his letter of 25 July 2000) complied with subsection (1)(b) and that the 1981 planning permission, a “relevant instrument” within the meaning of subsection (3)(a) “required” restoration work to be carried out, within the meaning of subsection (2).  Their case is that “restoration” means no more than the planning permission requires, that is the placing of a layer of topsoil 30 cm thick, graded into the adjoining land levels.  What the appellant has done, and (but for the current dispute) would have continued to do, they say, goes far beyond that.  Mr Airey’s evidence was that he expected, when he first attended the site, to see a cutting almost completely filled with waste and that the operations then being carried out would be limited to a covering layer.  What he saw, he said, was a cutting almost all of which had had no waste deposited in it at all.  It could not be said, Mr Puzey argued, that what the appellant was doing was restoration after the conclusion of waste disposal operations; waste disposal had barely begun.  In addition, the appellant was not depositing only topsoil (the material identified by the planning consent) but topsoil and subsoil.  It would (I understand) have been prohibitively expensive to use only topsoil and, in any event, Mr Airey told me, it would be unstable without subsoil beneath it.
26.	The appellant’s case is that the circumstances in which waste disposal operations ceased is immaterial.  It was envisaged by the planning consent – and by the appellant when it acquired the cutting – that waste would be deposited and that restoration operations of the extent required by the planning consent would be undertaken.  A modest quantity of waste had been deposited, and disposal operations had now ceased because of the combined effect of the requirement that a leachate management scheme be implemented and of the introduction of landfill tax.  The appellant had been compelled, on practical and economic grounds, to cease waste disposal operations, which were therefore complete.  It was nevertheless left with the obligation to restore the site and that was what it was doing.  The planning consent imposed a minimum requirement of 30 cm of topsoil, but it did not impose any maximum, or restrict the restoration material to topsoil alone - it merely demanded that minimum amount; and it was not possible to grade the restored cutting into the adjoining land without first bringing its level up to that of the adjoining land.  Thus, these were restoration works.
27.	The only previous decision of the tribunal to which I was referred was Harley v Commissioners of Customs & Excise, which I have already mentioned.  There, Mr Harley claimed that section 43C applied to work he undertook of filling in a deep hollow on his farmland in order to make it fit for use as farmland; in its natural state the hollow had sides too steep for the safe use of agricultural machinery.  He had first stripped off and stored the topsoil from the affected area; that topsoil was to be replaced when the hollow had been filled.  There was no dispute that the topsoil there was not waste; the question was whether the material used to fill the hollow came within the exemption.  At paragraph 25 of its decision, the tribunal said this:
“… the only issue for us is whether those operations now amount solely to the restoration of his landfill site on completion of waste disposal operations.  Relevant for present purposes, “restoration” in its ordinary sense does not mean improvement (although an improvement will normally be the result), but connotes bringing something back to a previous, original, or normal condition or something like it.  Moreover, one may not look at that term in isolation but at its meaning in the phrase as a whole in which it is used.  What the section presupposes is a landfill site on which there have been disposals of waste on the completion of which deposits of what would otherwise be taxable disposals of waste are required to bring the site back to its original condition by the terms of the planning consent or a waste management or disposal licence.  Here the site was at the beginning arable land.  Even if one were to take as one’s starting point that land after it had been stripped of its topsoil, in our judgment it just does not make sense of the statutory words to say that all of the tipped material from outside sources is waste deposited, as required, to restore the landfill site (which by definition is the consequence of those operations) to its original use.”
28.	There is an obvious difference between Mr Harley’s case and this.  There, he was altering land from its natural condition to something which it had never been, that is a largely level area suitable for modern agricultural use.  Here the cutting does not represent the natural lie of the land, but a man-made alteration of it and the planning consent requires the appellant to restore the land through which the cutting runs to what, at least in a general sense, was its condition before the cutting was created.  In my view, Harley is to be distinguished since the purpose and nature of the work undertaken there was quite different.  I do not derive any real guidance from that case about the meaning of “restoration” in the circumstances which pertain here.
29.	It seems to me that it is not sufficient to direct attention only at the restoration condition of the planning consent, but to consider the consent as a whole.  What it authorised was “the tipping of builders’ waste and non-hazardous industrial waste”.  Against that background, it is plain that what was envisaged was the deposit of such materials until the cutting was filled to its useful capacity.  Only at that point was the restoration requirement triggered.  I agree with Mr Puzey that the consent distinguished between the tipping of waste and the restoration and that the latter, even though a minimum but not a maximum depth was specified, was intended to encompass no more material than was reasonably required in order to make grading possible and to render the land suitable for agriculture after the tipping which was authorised was completed.  In other words, even if what the appellant has done could be described as restoration within the wider meaning of that word, it is not the restoration contemplated and required by the planning consent.
30.	It follows that the deposits which the appellant has made do not satisfy subsection 43C(2), since they are not “required” by the planning consent.
31.	I add for completeness Ms Loney’s argument that the legislation must be construed purposively: see Customs & Excise Commissioners v Parkwood Landfill Ltd [2002] STC 1536, particularly paragraph 28.  I accept the validity of the proposition but it cannot be ignored that the legislation has two purposes: to exempt some operations, but to tax others.  It may well be that the legislation, despite the 1999 amendments, does not strike the correct balance between these two purposes, but that is a matter for Parliament and not this tribunal.  In my view the exemption can be construed no more widely than I have done, and resort to perceived purpose is of no assistance.
32.	I was not, of course, referred by the parties to Commissioners of Customs & Excise v Ebbcliff Ltd [2003] EWHC 3181 (Ch), a decision of Etherton J, handed down on 19 December 2003, after this appeal had been heard. The circumstances of that case were dissimilar to the circumstances of this, but it was held that “restoration”, within section 43C, is to be construed in the narrow sense which I have applied here.  I am, naturally, required to follow that decision, but it coincides in any event with my own conclusion.
33.	I have a great deal of sympathy for the appellant, which finds itself with an unexpected burden.  However, I am satisfied that its appeal must be dismissed.  Mr Puzey did not seek a direction for costs in the Commissioners’ favour.

COLIN BISHOPP
CHAIRMAN
Release date:
MAN/02/9500