The High Court has rejected Menolly Homes Limited’s attempt to cross-examine a Revenue tax inspector over a VAT assessment of just under €20 million arising from sales of new homes.
Revenue raised the assessment in May 2004 after disputing arrangements involving Menolly Homes and related companies under which the developer claimed VAT exemptions connected with leases and subsequent property sales. Menolly denied that the assessed VAT, or anything close to it, was payable and appealed to the Appeal Commissioners.
The appeal hearing ran for about 16 days over a two-year period beginning in May 2007. In May 2009, Menolly sought to call and cross-examine the inspector who had made the original assessment.
The company argued that questioning him was necessary to establish whether, when he acted in 2004, he genuinely had the statutory “reason to believe” that VAT was due. Revenue opposed that course, and the Appeal Commissioners refused the request.
Mr Justice Charleton upheld that decision.
The central distinction, the court held, was between challenging the amount of a VAT assessment and challenging the legality of the decision to raise it. Under the legislation governing this particular VAT appeal, the Appeal Commissioners could reduce the assessment, eliminate it, leave it unchanged or increase it. Their jurisdiction did not extend to reviewing whether the inspector had improperly exercised the statutory power to issue the assessment.
A claim that an inspector acted capriciously, unreasonably or in bad faith could instead be brought by judicial review in the High Court.
Charleton J. also held that the Appeal Commissioner had acted within jurisdiction in refusing cross-examination, having found no indication that the original assessment had been capricious or unsupported by a reasoned belief.
The court added that even if Menolly’s substantive arguments had otherwise succeeded, it would have refused relief on discretionary grounds because the explicit request to examine the inspector came about five years after the assessment was raised.