The High Court remitted a case to a differently constituted VAT tribunal for rehearing where the original tribunal (see [2007] BVC 4,079) had failed to apply the correct test when considering whether fruit bars supplied by the taxpayer were ‘confectionery’ for VAT purposes.

Facts

A dispute arose concerning the liability to VAT of Hartley's Fruit Bars, a product manufactured by the taxpayer. The bars were sold in boxes of five and were marketed as ‘one fruit portion’ and ‘ideal for lunch-boxes’. Customs ruled that the bars were confectionery and, therefore, were excluded from zero- rating for purposes of VAT. The taxpayer contended that the fruit bars were not confectionery since the ingredients had not been cooked in any normal sense and had not been sweetened because they were inherently sweet. The taxpayer submitted that the bars were not typical of confectionery in content or appearance and were more likely to be displayed by retailers with cereal products and dried fruits. Customs submitted that the fruit bars were confectionery within the meaning of excepted VATA 1994, Sch. 8, Grp. 1, item 2 and were not eligible for zero-rating. Note 5 provided that, for the purposes of item 2 of the excepted items ‘confectionery’ included chocolates, sweets and biscuits; drained, glace or crystallised fruits; and any item of sweetened prepared food which was normally eaten with the fingers.

The VAT tribunal allowed the taxpayer's appeal, holding that the primary ingredients of the fruit bars were intrinsically sweet and were not sweetened in any way. In accordance with C & E Commrs v Quaker Oats Ltd [1987] BTC 5,097, the tribunal did not consider the ingredients to be those normally associated with confectionery. The production process was not typical of that required for confectionery; in particular the product was not cooked. The bars looked dissimilar to typical sweets or chocolates and their content was mainly pulped dried fruit and fruit purees, both of which were intrinsically sweet. The taste of the bars was not what would be expected of confectionery. Furthermore, the tribunal considered a dictum of Lawton J in C & E Commrs v Popcorn House Ltd [1968] 3 All ER 782, a case dealing with different legislation, which stated that confectionery was normally eaten with the fingers, was made with a cooking process and contained sweetening matter. For those reasons, the tribunal concluded that the Hartley's Fruit Bar was not confectionery and was not excluded from zero-rating ([2007] BVC 4,079; Decision No. 20,072). Revenue and Customs appealed to the High Court contending that, in reaching its conclusion the tribunal had applied the wrong test by concerning itself with looking for features which would make the bars identical to chocolates or sweets.

Issue

Whether the tribunal had erred in law.

Decision

Sir Andrew Morritt C (allowing the appeal) said that the issue was as to the meaning of the word ‘confectionery’ in item 2, having regard to note 5, which was a question of law. The meaning of a word within an act of Parliament was a question of legal interpretation. In the present case, since the tribunal had applied dicta which had been directed to a different statute, it had made an error of law. That error of law had given rise to two further mistakes in that the tribunal had directed themselves that, in order for a product to be treated as confectionery it had to be cooked and there had to be the additional extra element of sweetness. It was not a necessary condition for a product to be confectionery that it should be subjected to any particular process. Furthermore, sweetness might be inherent in the ingredients themselves so that there was no requirement for any additional sweetener, i.e. barley sugar did not require any additional sweetener but it would be considered as confectionery by any ordinary person (C & E Commrs v Popcorn House Ltd [1968] 3 All ER 782 distinguished). Accordingly, the matter would be remitted for rehearing before a differently constituted tribunal.

Chancery Division.
Judgment delivered 24 October 2007.