A0003
 AGGREGATES LEVY  exemptions — FA 2001 ss 17(3)(f), 18 — Appellant extracting fluorspar and limestone — whether limestone subject to any “process” — whether limestone “spoil” from extraction of fluorspar — assessments made on basis that limestone taxable aggregate — whether assessments correct — yes, in principle, but spoil the result of breaking of mechanical or chemical bond exempt — appeal against compulsory registration dismissed, assessments to be adjusted as necessary, appeal against penalties allowed

MANCHESTER TRIBUNAL CENTRE

	MMC MIDLANDS LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR			HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal:	Colin Bishopp (Chairman)
			David Wenn FRICS
						
Sitting in public in Manchester on 8 to 11 April 2008

Craig Howell Williams and Richard Honey, counsel, instructed by Eversheds LLP, for the Appellant
James Puzey, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION
 Introduction
1.	The Appellant, MMC Midlands Limited (“MMC”) carries on the business of fluorspar mining at two neighbouring sites in Derbyshire, within the Peak District National Park: Backdale (over which it has a lease) and Wagers Flat (over which it has a licence). It has the benefit of planning permission granted in 1952, covering both sites, which authorises “the winning and working of fluorspar and barytes and … the working of lead and any other minerals which are won in the course of working these minerals”. The grantee of the permission was Bleaklow Industries Limited (“Bleaklow”), then and now the owner of the sites. MMC has itself been in occupation of Backdale since 2003 and of Wagers Flat since 2006; other companies had undertaken mining operations on Backdale but, it appears, not on Wagers Flat before then. MMC has extracted fluorspar and limestone from both sites. The parties are agreed that the fluorspar which it has extracted and sold is exempt from aggregates levy; the essence of the issue we must determine in this appeal is whether and to what extent the limestone, which has also been sold, is exempt or is subject to the levy.
2.	Formally, there are several consolidated appeals before us, against:
(a)	A decision by the Commissioners to register MMC compulsorily for the purposes of the levy, with effect from 20 August 2003; 
(b)	Various assessments to aggregates levy, totalling £848,904 plus interest; and
(c)	Misdeclaration penalties.
The decision, the assessments and the penalties were all upheld on review. It is not necessary for us to deal with the arithmetical details of the assessments or the penalties; we are asked only for determinations in principle.
3.	Aggregates levy was introduced by the Finance Act 2001 which, as amended, remains the relevant legislation. Section 16 imposes the charge: 
“(1)	A levy, to be known as aggregates levy, shall be charged in accordance with this Part on aggregate subjected to commercial exploitation.
(2)	The charge to the levy shall arise whenever a quantity of taxable aggregate is subjected, on or after the commencement date, to commercial exploitation in the United Kingdom.
(3)	The person charged with the levy arising on any occasion on a quantity of aggregate subjected to commercial exploitation shall be the person responsible for its being so subjected on that occasion …”
4.	“Subjected to exploitation” is defined by section 19 to include removal from the originating site; it is agreed that the limestone has been so removed, that MMC was responsible for its removal and consequently for its commercial exploitation, and that none of the exceptions and qualifications set out in section 19 arises in this case. Other relevant provisions appear in section 17:
“(1)	In this Part ‘aggregate’ means (subject to section 18 below) any rock, gravel or sand, together with whatever substances are for the time being incorporated in the rock, gravel or sand or naturally occur mixed with it.
(2)	For the purposes of this Part any quantity of aggregate is, in relation to any occasion on which it is subjected to commercial exploitation, a quantity of taxable aggregate except to the extent that—
(a)	it is exempt under this section …
(3)	For the purposes of this Part aggregate is exempt under this section if— …
 (f)	it consists wholly of the spoil from any process by which—
(i)	…
(ii)	a substance listed in section 18(3) below,
has been separated from other rock after being extracted or won with that other rock …”
5.	Section 18 is entitled “Exempt processes”:
“(1)	In this Part references to aggregate—
(a) 	include references to the spoil, waste, off-cuts and other by-products resulting from the application of any exempt process to any aggregate; but
(b)	do not include references to anything else resulting from the application of any such process to any aggregate.
(2)	In this Part ‘exempt process’ means— …
(b)	any process by which a relevant substance is extracted or otherwise separated (whether as part of the process of winning it from any land or otherwise) from any aggregate; …
(3)	In this section ‘relevant substance’ means any of the following— …
(i) fluorspar …”.
6.	The registration requirements are to be found in section 24 of the Act, of which the material parts are:
“(2)	A person is required to be registered for the purposes of aggregates levy if he—
(a)	carries out taxable activities, and
(b)	is not exempted from registration by regulations under subsection (4) below.
(3)	For the purposes of subsection (2) above a person carries out a taxable activity if a quantity of aggregate is subjected to commercial exploitation in the United Kingdom in circumstances in which he is responsible for its being so subjected.
(4)	The Commissioners may by regulations provide for persons carrying out taxable activities to be, to such extent and subject to such conditions or restrictions as may be prescribed, either—
(a)	exempt from the requirement of registration; or

(b)	exempt from such obligations or liabilities imposed by or under this Part on persons required to be registered for the purposes of aggregates levy as may be prescribed.”
7.	The Regulations made in accordance with subsection (4) are the Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001 (SI 2001/4027). The only regulation relevant in this case is regulation 3, which was replaced by the Aggregates Levy (Registration and Miscellaneous Provisions) (Amendment) Regulations 2003 (SI 2003/465). In the form in which it was in force throughout the period with which we are concerned the regulation read:
“(1)	Where the only taxable activities that a person carries out or intends to carry out are relevant taxable activities, that person shall be exempt from the requirement of registration and all consequent obligations and liabilities.
(2)	For the purposes of this regulation, a ‘relevant taxable activity’ is the commercial exploitation of aggregate which is exempt under section 17(3)(b), (c), (d), (e) or (f) or section 17(4)(a), (c), (d), (e) or (f) of the Act.
(3)	Where at least one of the relevant taxable activities which such a person carries out is the commercial exploitation of aggregate which is exempt under section 17(3)(e) or (f) or section 17(4)(a) of the Act or clay (exempt under section 17(4)(f) of the Act), that person shall notify the Commissioners (notification under paragraph 1A of Schedule 4 to the Act) of this fact in writing in such a manner and providing such information as may be directed by the Commissioners or stipulated by them in a published notice …
(5)	In this regulation—
‘aggregate’ has the meaning given in section 17(1) of the Act;
‘commercial exploitation’ has the meaning given in section 19 of the Act;
‘published notice’ refers to a notice published by the Commissioners and not withdrawn or replaced by a further notice.”
8.	In summary, therefore, rock, gravel or sand removed from its site is taxable aggregate, and subject to the levy, unless it is exempt by reason of its being the “spoil” of a “process” by which one or more prescribed minerals (of which fluorspar is one) have been separated from it; and a person responsible for the removal is liable to register and account for the levy. MMC accepts that if any of the limestone it has sold was taxable, it should have registered and accounted for the levy on that limestone, and the Commissioners accept that if all the limestone was exempt, neither registration nor accounting for the levy was required. All depends on the status of the limestone. It was agreed between the parties that its status depends on the answers to the two fundamental questions before us: whether limestone sold by MMC has been subject to any process within the meaning of the Act; and whether the limestone sold by MMC consists of the spoil from that process. If we answer those questions in MMC’s favour the consequence is that the limestone is regarded as exempt aggregate, MMC is not liable to register, the levy assessed is not due and the penalties must be discharged.
9.	Before us, MMC was represented by Craig Howell Williams and Richard Honey, both of counsel, and the Commissioners by James Puzey, also of counsel. 
The agreed facts
10.	The parties had agreed some of the relevant facts. We set them out in the summary form in which they were agreed, even though some will require further explanation. As agreed, slightly paraphrased and shorn of some repetition, they are: 
•	that the fluorspar sold by MMC is exempt from the levy; 
•	that the limestone won or extracted by MMC is potentially capable of falling within section 17(3)(f) of the 2001 Act; 
•	that some of the limestone sold by MMC is in fact exempt; 
•	that the extent to which the remainder is exempt depends on whether it consists of spoil from any process by which a “relevant substance” (in this case we are concerned only with fluorspar) has been separated from other rock extracted or won with it; 
•	that limestone sold by MMC which consists of the spoil from which fluorspar has been separated by a process is exempt; 
•	that rock is “won” when the overburden is removed, and “extracted” when it is taken out of the land; 
•	that MMC extracts by direct digging or by blasting;
•	that the exemption in section 17(3)(f) is capable in principle of applying to the spoil of any fluorspar separation process applied to rock at any time after the overburden is removed;
•	that MMC undertakes on its sites the actions or operations of direct digging, blasting, picking out of rock piles, “coning” of rock piles and passing of rock material over a screen;
•	that all the limestone sold by MMC is subject to at least one of those actions or operations;
•	that the proportion of fluorspar within the extracted rock can vary considerably from one location to another, that veins differ greatly in width and mineralogy, and that fluorspar varies in its physical characteristics and quality;
•	that Glebe Mines Limited (“Glebe”—MMC’s only customer for fluorspar) set a target of 30 per cent and minimum of 20 per cent fluorspar content for the material it accepted; and
•	that MMC has blended fluorspar extracted from both Backdale and Wagers Flat and sold it to Glebe between August and November 2006 [in fact, sales continued until February 2007].
11.	We had also some technical documentation relating to fluorspar, produced by the Office of the Deputy Prime Minister. It is the material from which fluorine is produced, a chemical which has several industrial uses. There are important deposits within the Peak District National Park without which the United Kingdom would be dependent on imports. Chemical grade fluorspar (to which the material produced by MMC was suitable to be converted) contains not less than 97 per cent fluorite (properly, calcium fluoride, or CaF2). The term “fluorspar”, or “fluorite” (we had some evidence that the words are synonymous, though Mr Howell Williams disputed it—certainly they are used interchangeably), is sometimes used to mean the mineral itself, but more often the ore, that is the fluorspar and the rock to which it is attached. The ore is most commonly found within limestone, often together with other minerals such as barytes. Fluorspar ore is found in differing levels of purity varying from about 5 per cent (below which it is of little value since the cost of recovery of the mineral is too great) to as much as 60 per cent and occasionally more.
12.	One feature of the case, on which the Commissioners placed a good deal of emphasis, is that much more limestone than fluorspar has been sold: from Backdale, 700,000 tonnes of limestone to 250 tonnes of fluorspar, and from Wagers Flat 132,000 tonnes of limestone to 2,000 tonnes of fluorspar. The Respondents’ case, in essence, is that MMC is undertaking limestone quarrying which it claims, in order to escape the levy, is a fluorspar operation, and in Mr Puzey’s skeleton argument it was contended that MMC had undertaken “indiscriminate blasting operations”, meaning that no attempt had been made to blast only where fluorspar was likely to be found, and that the finding of fluorspar was no more than incidental to the true operation. Mr Howell Williams objected to the comment, and the argument it was designed to advance, on the grounds that it was in conflict with the agreed facts, was not a matter advanced by the Respondents in the statement of case, and was not supported by the disclosed statements of the witnesses relied on by them. Mr Puzey conceded that an allegation of indiscriminate blasting had not previously been made in those terms, but argued that the proposition was implicit in what had been said by the Respondents from the outset, and that the comment in his skeleton argument was the same point put in different words.
13.	Mr Howell Williams raised his objection at the beginning of the hearing, and we dealt with it immediately, before we had heard any evidence. We concluded that the Respondents had been arguing, since at least the date when the decision letter which gave rise to the first of the appeals was written, that MMC was in reality undertaking limestone quarrying, and that they should be permitted to maintain that argument, but that the acceptance by the Respondents in the agreed statement of facts that the limestone extracted by MMC was “potentially capable of giving rise to exempt material” was inconsistent with an allegation of indiscriminate blasting, carrying with it the implicit contention that the majority, or at least a substantial proportion, of the limestone could never be exempt. We accordingly concluded that it would be inappropriate to allow the Respondents to pursue an argument based on that allegation.
The evidence
14.	We heard evidence from Michael Merriman, MMC’s managing director; from Paul Taylor, its operations manager; from two experts: Peter Doyle, a geological consultant who is also Visiting Professor in geology at University College, London, and Dr Alan Cobb, also a geological consultant; and from David Constantine, the Commissioners’ officer responsible for the decisions and the assessments. Professor Doyle and Dr Cobb were both called by the Respondents. We had statements from all of the witnesses, which stood as their evidence in chief. 
15.	MMC has been in business since 1998, and is a joint venture between two mining and quarrying companies. Mr Merriman has worked in the mining and quarrying industry since graduating in 1978 and has, correspondingly, extensive experience of the industry although we understand his experience did not include fluorspar mining. MMC was formed in order to process minerals, aggregates and sands.
16.	In early 2003 Mr Merriman learnt that Bleaklow was looking for a company to operate the site at Backdale. The previous operator (which had ceased operations, Mr Merriman told us, as a tactical device designed to support efforts by the industry to persuade the government not to introduce the levy) had sold limestone on the open market and fluorspar to Glebe, which was the only United Kingdom processor of the type of fluorspar to be found on the site. He made enquiries of Bleaklow, and satisfied himself that the existing planning permission and other operating conditions were acceptable, but did not arrange a site survey, including an assessment of the fluorspar reserves, and, we think, took a good deal of what he was told on trust. He was aware that there had been negotiations between Bleaklow and the Peak District National Park Authority (PDNPA), the local planning authority, pursuant to a Government scheme for the review of mining permissions (“the ROMP scheme”) which had been difficult but which, he believed, had reached an acceptable conclusion, in the form of an agreement upon the manner in which the 1952 permission could be used in the future, a manner which would allow MMC to operate the site as it wished.
17.	The Respondents make much of the fact that although (as Mr Merriman agreed) MMC took care to ensure that it would have a market for the limestone which it expected to extract from the site it did not approach Glebe before taking the lease in order to satisfy itself that Glebe would be willing to accept the fluorspar which was produced, and to negotiate a price. Mr Merriman explained that he did not want it to become known that MMC was about to take a lease, for fear of competition. He recognised that there was some risk, but MMC was willing to take it. The lease was taken in July 2003 and MMC’s operations at Backdale began in that month.
18.	Although there were some unmined veins at Backdale, much of the site had already been the subject of workings and some of the fluorspar MMC was able to extract was poor quality material which previous operators of the site had discarded as not worth processing. Advances in processing techniques made such poor quality material capable of use, provided it was blended with better material in order to bring the overall fluorspar concentration within the ore above 20 per cent and, ideally, close to Glebe’s optimum level of 30 per cent. Comparatively little of the Backdale material, even from the unmined veins, reached that standard (though some of the deposits were of better quality) and the fluorspar was therefore separated from the limestone host and stockpiled. The site had several veins running in different directions and the only practical means of working them, Mr Merriman said, was to excavate virtually the whole site. Safety, too, dictated extensive working; many of the exposed faces had been left in a dangerous condition and when MMC took over the site it was necessary to work them in order to make them safe.
19.	MMC’s operations at Wagers Flat began in July 2006. Here, the site had only one known vein of fluorspar and it was possible to use the slot method of extraction, that is to expose and remove the vein by opencast digging, the width and depth of the excavation being little greater than those of the vein itself. The quality of the fluorspar at Wagers Flat was, as the parties agreed, conspicuously better than that at Backdale. Despite MMC’s ability to adopt a slot mining approach, it was still necessary to provide for access to the site of digging machinery and lorries, and to provide space for sorting and storage of extracted material, and a large quantity of limestone had been removed for those reasons. Some of the excavation, at both sites, was designed to provide for future access to adjoining sites in respect of which MMC hoped to obtain the mining rights.
20.	Although MMC realised when it began its operations that it would be obliged at first to sell the fluorspar it extracted to Glebe, there being no other customer, Mr Merriman’s evidence was that it intended to install its own processing plant in order that it could itself sell the fluorspar to chemical producers, and not be dependent on a competitor, as Glebe was: Glebe, too, carried on extensive fluorspar mining operations in the neighbourhood. The reason why MMC’s processing plant had not actually been installed, Mr Merriman said, was that the uncertainty about the application of the levy made the financial viability of the whole operation doubtful. Our own view is that the quantity of fluorspar on the two sites was unlikely ever to have made it financially attractive to MMC to install its own plant, though if it was able to expand into adjoining sites the position might well have been different.
21.	The overall quality of the Backdale material was below the standard acceptable to Glebe but once operations had begun at Wagers Flat it was possible to blend ore from the two sites and sell the blended material. Sales began in late July 2006, soon after workings at Wagers Flat began, and continued until February 2007, when Glebe refused to accept any more fluorspar from MMC. The reason why it did so was the subject of some controversy. We had evidence, in the form of a letter from Glebe to the PDNPA, that it considered the quality of the material which MMC was able to supply to be too low. There was also evidence available to us about the quality of the material Glebe accepted for processing from various sources, some its own and others, like MMC, independent of it. It is clear from that evidence that MMC’s material was, on the whole, at the poorer end of the scale, often below the target of 30 per cent though above the minimum of 20 per cent fluorspar content which Glebe set. Mr Merriman’s evidence was that supposed poor quality was not the true reason for Glebe’s refusal to accept MMC’s fluorspar, since no load sent by MMC to Glebe had ever been rejected on that ground, and that in reality Glebe’s decision was political: it was unhappy that MMC had released some information it considered commercially sensitive in the context of a planning application, and it was trying also to protect its own position in relation to the PDNPA. 
22.	It was clear to us from other evidence that there were indeed political overtones in this case. The PDNPA, as the local planning authority, is responsible for the monitoring of mining and quarrying operations in the Park. It is the successor for this purpose to the Ministry of Housing and Local Government which, in 1952, granted the planning consent pursuant to which MMC was carrying on mining operations on the two sites. It was also, as planning authority, closely involved in the ROMP scheme negotiations. Although we heard no evidence directed to the point, and we do not need to deal with this issue in any detail, it seemed to us a reasonable inference that the PDNPA is trying to restrict mining and quarrying within the Park as far as possible; so much is in any event apparent from the judgment of Sullivan J in R (Bleaklow Industries Ltd) v Secretary of State for Communities and Local Government and PDNPA [2008] EWHC 606 (Admin), an action in which MMC participated as interested party. Glebe, therefore, was understandably cautious in its dealings with PDNPA and its suppliers. MMC, too, had to take care as the PDNPA served enforcement and stop notices alleging breaches of the 1952 planning consent at Backdale in May 2006 (prompting the move to Wagers Flat) and further notices, asserting the same grounds, at Wagers Flat in May 2007. MMC has appealed against the notices. We are willing to accept that there was more to Glebe’s refusal to purchase fluorspar from MMC than its dissatisfaction with the quality of the material. Nevertheless, the fact remains that the fluorspar recovered was indeed of relatively poor quality.
23.	Mr Merriman accepted that the 1952 planning consent, as varied in accordance with the ROMP scheme, authorised the extraction of fluorspar and allowed only incidental extraction of other material, and insisted that fluorspar extraction was and always had been the principal objective of MMC’s operations. Nevertheless he agreed, though somewhat reluctantly, that without the substantial limestone sales which MMC had made its workings would be uneconomic. 
24.	Before work on the sites started, MMC notified HMRC of its intended activities, representing that the operations would be exempt from the levy. Mr Merriman said that, hearing nothing from the Commissioners in response to the notification, he believed they had accepted that notification and that MMC need not account for the levy. Accordingly it did not do so. Later, he discovered that HMRC had inspected the site at Backdale (in November 2003) and had come to the contrary view. Following that visit there was extensive correspondence between the parties and several meetings took place, but their respective positions remained essentially unchanged. We do not need to deal with the correspondence and meetings, save to record Mr Merriman’s complaint that HMRC seemed at times unsure of the legal basis of their position.
25.	Mr Taylor’s evidence related to the nature of fluorspar (which we have summarised above) and to MMC’s working methods. Some of his more detailed evidence, though we found it interesting, is of no relevance to the issues we must decide and we shall not set it out. He told us that MMC works the fluorspar in the manner commonly used in the industry—open cast mining—which (as the material produced by the Office of the Deputy Prime Minister confirms and as the Respondents do not dispute) necessarily results in the disturbance of the host rock, almost always limestone. He also made the point that at Backdale, partly because of the nature of the site and the manner in which the fluorspar deposits were located, and partly because of the legacy of previous workings, extensive excavations were necessary whereas at Wagers Flat the workings were more confined, although considerations of safety and access meant that it was not possible to excavate only the veins, at both the sites, and, as we have already mentioned, digging and blasting had been carried out quite widely, more so at Backdale than at Wagers Flat. Surveys were carried out at Wagers Flat in order to ascertain the extent of the vein before work began, and testing was carried out on a regular basis at Backdale. 
26.	At Backdale some fluorspar could be extracted by digging with an excavator, but for the most part it was necessary to liberate the material by blasting. MMC’s records showed that 68 per cent of the blasts led to the recovery of some fluorspar, while the remaining 32 per cent did not, although those blasts were necessary, Mr Taylor said, to enable MMC to extract further fluorspar. For that reason he considered the limestone recovered by this means and later sold to be exempt aggregate. The blasting MMC undertook, he maintained, could not be considered indiscriminate: it was all necessary for the recovery of fluorspar. MMC was conscious of the terms of the 1952 permission and of the vigilance of the PDNPA in enforcing it, in particular by ensuring that no more limestone than was necessary was extracted. At Wagers Flat a greater proportion of the fluorspar was accessible by digging machines, and consequently less blasting was necessary than at Backdale, but with that exception the working methods at both sites were similar.
27.	Once material had been extracted it was sorted. Some fluorspar (that is, ore) could be easily separated from the limestone by an excavator, and that material was put on the fluorspar stockpile. Other material was “coned”, that is heaped up in a cone shape. The coarser material tends to gravitate to the outside of the cone, and the finer material (in which fluorspar is found) to the centre. Coned material was then separated and added to the stockpiles. Further separation was carried out mechanically, using a crusher with what is termed a “grizzly screen”. Fluorspar recovered by these means was also added to the stockpile, awaiting blending and sale, and the limestone from which it had been separated was crushed. The crushed limestone was then sorted according to the different sizes of the resulting fragments, and sold.
28.	There was some disagreement between Mr Taylor and Dr Cobb about the quantity of fluorspar in the stockpiles on site (the stockpiles were at Backdale since, when Dr Cobb visited in 2004 and 2005, work had not yet begun at Wagers Flat—and when it did the Wagers Flat fluorspar was transferred to Backdale for blending). Dr Cobb was to tell us that he saw very little; Mr Taylor’s evidence was that there was a good deal more, and that Dr Cobb had plainly not observed it, perhaps because the stockpiles were not identified, by a sign or in some other way. Mr Taylor agreed, however, that at the time, before Wagers Flat material was added, the quantity of fluorspar in the stockpiles was estimated visually, and not calculated by weighing.
29.	Mr Taylor’s view—and, as he is an experienced mining engineer, it is a view we take into account—was that the limestone was properly regarded as the spoil from the process of recovering fluorspar since it was generated as the inevitable consequence of extracting and separating out the fluorspar. It was, he said, impossible to recover the fluorspar without producing the limestone, all of which had been subjected to one or more of the processes he had described in order to separate the fluorspar from it. Mechanical separation, coning and screening were not undertaken in limestone quarries, but only where minerals were available to be recovered. He too agreed, however, that without the limestone sales, MMC’s operations would not be financially sustainable.
30.	Professor Doyle and Dr Cobb both gave evidence about the quality and quantity of fluorspar extracted by MMC. There was some overlap between them, and it is convenient to deal with their evidence together, and in summary form since (without meaning any disrespect to either witness) we found much of what they said, and particular the finer detail, irrelevant to the issues we must decide. Dr Cobb had also been a witness in a planning enquiry relating to the enforcement notice of May 2006 to which we have referred, and he gave evidence to Sullivan J in the Bleaklow Industries case. He was very familiar with the nature of MMC’s operations. The essence of the evidence both witnesses gave was that far more limestone than fluorspar, by both value and volume, had been extracted and sold—which is not disputed—and that MMC’s fluorspar was of poor quality, not only when compared with material produced by its competitors, but in absolute terms. Mr Taylor disagreed with that evidence, and with Professor Doyle’s recollection of a conversation with him in which, Professor Doyle said, Mr Taylor expressed the opinion that a fluorspar content of 20 per cent was the minimum viable amount. Mr Taylor maintained that he had not made that comment.
31.	We do not doubt that the two witnesses were doing their best to recall truthfully events from some time ago, and think the most likely explanation of the conflict is that they have differing recollections of what, at least to Mr Taylor, seemed a casual conversation at the time. The point does not, however, seem to us to have any significance since, as the agreed facts we have set out record, Glebe set a target of 30 per cent content, and a minimum acceptable content of 20 per cent and, consequently, it is undisputed that measured against what the monopoly purchaser would accept, 20 per cent was indeed the minimum viable content. Even then, some of what Glebe accepted from MMC was below that figure, though only marginally so. It is also clear to us that the thrust of Dr Cobb’s and Professor Doyle’s evidence is correct: MMC sold, or had available for sale, small quantities of fluorspar (small, that is, by comparison with the total volume of material extracted) and it was of poorer quality than most, though not all, of the material sold to Glebe by MMC’s competitors, or extracted by Glebe from its own workings (we were shown details provided by Glebe of the material it had accepted, during the relevant period, at its processing plant). The fluorspar sold by MMC was, however, a blend of material extracted at Backdale and Wagers Flat and, as Backdale material was generally poorer, so Wagers Flat material was better than the overall quality of the material sold. Mr Taylor was able to produce figures showing that some fluorspar recovered at Wagers Flat was of high quality, and neither Dr Cobb nor Professor Doyle disputed that evidence.
32.	Both Professor Doyle and Dr Cobb have extensive experience in the mining industry. They both told us that, in the light of that experience and of their observations, particularly of the quantity and quality of MMC’s fluorspar (even allowing for the better material obtained at Wagers Flat), they were of the view that both sites were limestone quarries to which the extraction of fluorspar was merely incidental.
33.	Mr Constantine’s evidence was limited to his discussions with Mr Merriman, which included some negotiations about a possible settlement of this appeal, a matter we did not explore since it is not appropriate for us to deal with it, and his making of the various decisions under appeal. Since his reasons for so doing were absorbed in Mr Puzey’s arguments, we do not need to elaborate on them. We should, however, add, in the light of Mr Merriman’s complaint which we mentioned in the context of his own evidence, that although there is some evidence to support Mr Merriman’s view that the Commissioners were unsure of their position, the uncertainty was, in our view, mainly attributable to their wishing to consider all of MMC’s arguments rather than reject them summarily. In other words, we do not think there is much merit in Mr Merriman’s complaint (and even if there were, it is not a matter for this tribunal).
Conclusions
34.	We were referred to what Sullivan J said in the Bleaklow Industries case at [31]:
“Since fluorspar is a vein mineral and the host rock within which the vein (rakes) and stratabound deposits (flats) are contained is limestone, which itself is overlain by shales, it is clear that a planning permission for winning and working fluorspar also grants permission, by necessary implication, to remove—ie, to win and work, applying the definitions in English Clays [Lovering Pochin Ltd v Plymouth Corporation [1974] 27 P & CR 447]—so much of the host rock as is necessary to win and work the fluorspar. While limestone may not be won and worked as an end in itself, it may be removed (won and worked, see English Clays) to the extent that it is reasonably necessary to do so in order to win and work the fluorspar.”
35.	Later in his judgment, at [39], he said:
“This approach to the interpretation of the condition [of the 1952 planning permission] does not mean that the appellant and the interested party have, in effect, a permission to win and work limestone. Whether the limestone has been won and worked as an end in itself or as a means to an end—to enable the winning and working of fluorspar pursuant to the permission—will, in the absence of any relevant limitation or condition, necessarily be a question of fact and degree.”
36.	At [45] he expanded on those comments:
“When deciding whether—as a matter of fact and degree—the operator is working limestone as an end in itself or as a means to an end (in order to win and work fluorspar) all of the relevant circumstances would need to be considered. They would certainly include the factors mentioned by the appellant: economics, practicality and safety. They would also include the absolute and relative quantities of limestone and fluorspar worked. But save perhaps in an extreme case … (1 million tons of limestone worked and sold to 1 ton of fluorspar), this factor alone could not be determinative given the geological characteristics of fluorspar …”
37.	Those comments were made in the context of a planning appeal and we sound the note of caution that the matters in issue in such cases differ from those in issue here; we are not concerned with the lawfulness of MMC’s operations, but with their taxation consequences. Nevertheless they offer helpful guidance on the approach to be adopted in determining what is the essential characteristic of an operation such as that carried on by MMC.
38.	We do not accept Mr Puzey’s argument that this is such an extreme case as that mentioned by Sullivan J, though the quantities of limestone and fluorspar extracted at Backdale come very close. We also make it clear, in case there should be any lingering doubt despite the ruling we made at the beginning of the hearing, that we do not accept that MMC has dug and blasted indiscriminately: we are satisfied that MMC has set out to exploit the fluorspar it has found, and that it has done so not merely as a means of securing exemption from the levy. We take into account, too, that it has suffered the disadvantage of having only one possible customer for its fluorspar. At the same time we do not accept Mr Howell Williams’ argument that, having rejected the allegation of indiscriminate blasting, it is not open to us to find that this is anything other than a fluorspar mining business. The mere fact that care has been taken to exploit such fluorspar as is available does not transform a limestone quarry, if that is what it is, into a fluorspar mine.
39.	Taking all those factors into consideration, there does not seem to us to be any real room for doubt that MMC is in truth carrying on the business of limestone quarrying. In that we accept the contentions of the Commissioners and the opinions of Professor Doyle and Dr Cobb, and reject Mr Taylor’s view to the contrary. The enormous disparity between the volumes of limestone and fluorspar which have been sold, even if not as extreme as the example given by Sullivan J, the fact that the available fluorspar is, overall, of fairly poor quality and was sold for only about seven months while the operations were carried on for, altogether, nearly four years and the admitted fact that without the limestone sales the fluorspar operation was not financially viable (while the reverse was not the case) can lead only to that conclusion. It would be possible to take a different view only if fluorspar fetched several times more per tonne than limestone, but the value of fluorspar, as was not disputed, has at best been approximately the same as that of limestone, and often much less. The notion that this is a fluorspar mining business supported by incidental sales of a limestone by-product does not reflect the reality. The operation at Wagers Flat comes closer to fluorspar mining than that at Backdale, but even there the extensive nature of the excavations and the balance between saleable fluorspar and saleable limestone can lead only to the conclusion that it is fluorspar sales which are incidental to the main purpose. We should perhaps add for completeness that although he was considering MMC’s operations at Backdale and Wagers Flat Sullivan J did not decide this issue; the question before him was whether a planning inspector had approached a rather different matter correctly.
40.	However, that finding is not determinative: we agree with Mr Howell Williams that one does not discover whether aggregate is taxable or exempt by looking at the nature of the overall operation, but by applying the statutory provisions to the material. The Act says nothing about the respective volumes or values of the mineral and the aggregate with which it is found. While it may be (and Mr Puzey urged us to the view that it was) Parliament’s intention to subject the great bulk of the limestone sold by MMC to the levy, one nevertheless has to determine whether it has succeeded in that supposed intention by analysing the words actually used, determining their meaning and then applying them to the facts as we find them.
41.	In our view much of the difficulty in this case—and, we imagine, any true indecision by HMRC officers—stems from the rather imprecise way the Act goes about defining what is exempt. Section 17 provides that aggregate is exempt if it consists wholly of the “spoil” from any “process” by which any prescribed mineral, of which, by virtue of section 18(3), fluorspar is one, “has been separated from other rock after being extracted or won with that other rock”. The Act makes no attempt to define either “spoil” or “process” which should therefore, by the application of the conventional principles of statutory interpretation, be given their ordinary meanings. Resort to dictionaries is of little help, in respect of either word.
42.	Although section 18 is of no direct relevance in this case, save for the incorporation by section 17(3)(f)(ii) of the list of minerals in section 18(3) (the purpose of subsections (1) and (2) is to ensure that some materials, such as dressed stone and minerals within subsection (3), which might otherwise be regarded as aggregate are not so treated), we have considered it in case it illuminates the interpretation of section 17. An “exempt process” is defined by section 18 as “any process by which a relevant substance is extracted or otherwise separated (whether as part of the process of winning it from any land or otherwise) from any aggregate”, differing from a “process” within the meaning of section 17 in that, whereas a “process” can be carried out only after the mineral and the rock from which it is to be separated have been extracted or won, an “exempt process” may be carried out in the course of the winning. Section 18 unfortunately throws no greater direct light than section 17 on what a “process”, whether or not exempt, entails. There are, as a result, some difficulties in differentiating between the taxable and the exempt which the draftsman has not wholly overcome. Nevertheless, two conclusions can, we think, be drawn from an examination of sections 17 and 18.
43.	First, each uses the term “process” in relation to the separation of the listed mineral from the “other rock” (in section 17) or “aggregate” (in section 18). Mr Howell Williams’ argument was that “process” implied no more than sorting or segregation; thus, provided some fluorspar was present, and it was segregated, after extraction from the ground, from the limestone with which it had been extracted a sufficient process had been applied and the exemption was available. Mr Puzey’s response was twofold: that merely segregating modest quantities of fluorspar from the much larger quantities of host rock with which it was found could not transform a limestone quarrying operation into one whose principal purpose was the generation of small amounts of a not particularly valuable mineral but which incidentally threw up substantial amounts of supposedly exempt aggregate; and that sorting was not sufficient to amount to a “process” since what the legislation envisaged was the process of separating the fluorspar from the rock to which it was bound, and not simply segregating it from the other material with which it happened to be found, but to which it was not bound in some way.
44.	The first of Mr Puzey’s points is, we think, the argument that this is truly a limestone quarrying operation put in a different way, but on the latter point, we think he is right. Although we were invited to focus on the word “process” it is in our view necessary to consider the context in which it appears, and the phrasing of the provision. As we have indicated, the draftsman has referred to the separation of the mineral from the rock or aggregate. While “separated” can, depending on the context, mean no more than “segregated” or “sorted from”, in the sense that the fluorspar and the other rock are merely put in different piles, we are satisfied from the language used that the draftsman did not intend such a wide meaning in this context. That is more clear when the wording of section 18(1)(a) is considered; despite the difference between that provision and section 17(3)(f) it must, we think, be assumed that the draftsman intended (since there is no indication to the contrary) that “process” was to have the same meaning in both cases. In our judgment, Mr Puzey is right that the word is used to connote physical separation, that is the breaking of a mechanical or chemical bond; “separated from other rock” implies the application of a degree of force. Sorting by excavator or coning is not, in our view, enough. By contrast, separation by means of a “grizzly screen” and crusher, if that breaks a bond, would be sufficient.
45.	That conclusion seems to us all the more compelling when the word “spoil” is brought into the equation. Though it, too, is a word whose meaning may be dependent on its context, it is difficult to imagine that the draftsman intended it to include material which had been put in one pile rather than another, after nothing more than sorting by visual inspection or by gravitation, as in coning. Again, we are satisfied that what is meant is the residue after the breaking of a bond. Any other interpretation would make it all too easy to avoid the imposition of the levy by “dressing up” an aggregate quarrying operation and would give those selling large quantities of limestone and small quantities of minerals, as MMC does, a competitive advantage over those doing essentially the same thing, that is selling aggregate, but without the benefit of sales of small quantities of minerals.
46.	Second, even if we are wrong in our first conclusion, the difference between the two sections in their approach to the timing of the “process” seems to us to make it impossible to argue, as Mr Howell Williams did, that the limestone without any fluorspar present in it which was removed—the 32 per cent we have mentioned—could be exempt. At best it was subject to inspection to confirm the absence of recoverable fluorspar, but to no process properly so called at all. It may be, as Mr Taylor insisted, that its removal was necessary in order to allow MMC access to further deposits of fluorspar, but separation from that fluorspar, if the action of removing it for that purpose can be regarded as separation, was carried out in the course of working the limestone, and not afterwards. We mention in passing that we were puzzled that section 17 uses the phrase “extracted or won” whereas the conventional understanding is that minerals must be won before they can be extracted: see English Clays, referred to above; but came to the conclusion that the oddity is probably of no direct significance in this case. What is in our view clear is that limestone so recovered cannot be regarded as the “spoil” of any process or operation.
47.	It follows that some at least (we suspect the substantial majority) of the limestone sold by MMC is subject to the levy, and the appeal against the decision that it be compulsorily registered must fail. We were not asked to deal with the detail of the assessments, and do not know whether, on the basis of our conclusions, any adjustment might be required. In particular, we do not know whether and if so to what extent the Commissioners have accepted that the limestone recovered after use of the “grizzly screen” is exempt. Our conclusion is that only so much of it as has been physically separated by that process from fluorspar to which it was bound, on extraction, can be regarded as exempt. If the parties are unable to agree on the extent to which the assessments should be adjusted, we direct that the appeal may be continued, on the application of either party, in order that the correct amount of levy due may be determined by the tribunal. We do not think it necessary to reserve any such determination to ourselves.
48.	Mr Howell Williams argued that the penalties should be discharged (assuming levy was payable and the penalties were properly imposed at all) on the grounds that MMC had a reasonable excuse for not registering and for not accounting for the levy. We take into account that it did notify the Commissioners of its intended operations before they began, and that some time elapsed before the Commissioners themselves decided that it should be registered, albeit there were continuing discussions between the parties. We accept, too, Mr Howell Williams’ argument that this was a genuine dispute about the correct interpretation of previously untested and, to some extent, unclear legislation. In those circumstances we do find a reasonable excuse, and the penalties will be discharged.
49.	Both parties asked for a direction in respect of their costs. Although we have allowed the appeal in part, the central issue in the case has been determined in the Commissioners’ favour and in our view it is appropriate that MMC should pay their costs. If they cannot be agreed they are to be the subject of detailed assessment on the standard basis by a costs judge of the High Court.

COLIN BISHOPP
CHAIRMAN
Release Date: 1 July 2008

MAN/05/9501