The High Court dismissed an appeal by the taxpayer against the standard rating of its fruit/vegetable product for VAT purposes where the taxpayer had failed to prove that the product was not a beverage within VATA 1994, Sch. 8, Grp. 1, excepted item 4.

Facts

The taxpayer operated retail outlets selling various blends of fresh raw fruits and vegetables not unlike cold soup in consistency and sold in takeaway cups. Orders were blended for customers on the spot using a machine resembling a large metal liquidiser into which the fruit and/or vegetables were fed one by one and pulped by the machine. The process discarded any parts of the fruit or vegetable that were unsuitable to be liquefied for consumption, leaving a thick drink containing not only the juice but also the rest of the fruit or vegetable itself in drinkable form. Customs classified the product as a beverage which was excluded from zero-rating by VATA 1994, Sch. 8, Grp. 1. The taxpayer appealed to the VAT tribunal argued that the product was a soft form of food within the meaning of Grp. 1, item 1. That was distinct from a beverage as it was a product suited to eating, like a cold soup, despite its liquid consistency. The tribunal dismissed the taxpayer's appeal, concluding that the taxpayer had failed to discharge the burden of proof to show that the product was not a beverage. On the evidence, the product came within Sch. 8, Grp. 1, excepted item 4 and was standard-rated for VAT purposes ([2007] BVC 4,016; Decision No. 19,738). The taxpayer appealed contending that the tribunal had failed to apply the proper test to determine whether the product was a beverage: had it done so it could only have concluded that it was not; and, even if it had identified the correct test, it had failed to apply it correctly.

Issue

Whether the products supplied by the taxpayer constituted ‘ beverages (including fruit juices and bottled waters) and syrups, concentrates, essences, powders, crystals and other products for the preparation of beverages’ within Sch. 8, Grp. 1, excepted item 4.

Decision

Warren J (dismissing the appeal) said that it was for the tribunal to determine whether the product was a beverage or not applying the ordinary meaning of that word as a matter of the English language unless the context of the VAT legislation required a special meaning to be attributed to it. In the present case, there was nothing to indicate that ‘beverage’ was to be given a special meaning in Grp. 1 different from its meaning as a matter of ordinary language. It was clear, without detailed analysis, that a product either was or was not a beverage. Where there was a product which had the characteristics of two products, as long as it had sufficient of the characteristics of the product to which the tribunal was going to classify it, it could be placed in the category to which it was more akin) (C & E Commrs v Ferrero UK Ltd [1997] BTC 5,294 applied).

The tribunal had not applied an incorrect approach to the burden of proof. They were entitled to conclude that they were not satisfied that the taxpayer had met the burden of proof on it to show that the products were not beverages. Further the taxpayer could not bring this case within the principles of Edwards v Bairstow to establish that no tribunal, properly directed, and acting in accordance with its proper functions, could have reached the conclusion that the burden of proof was not satisfied. Even if those conclusions were wrong, the court would not remit the matter to the tribunal since there were sufficient findings of fact for the court, on appeal, to decide whether or not the products were beverages. Taking all the relevant factors into account, the products in question were beverages.

Chancery Division.
Judgment delivered 30 March 2007.