The respondent, Waste Recycling Group Ltd (“WRG”), is, pursuant to s.59 Finance Act 1996, the representative member of a group of companies which provides waste management services. It operates 60 landfill sites across the UK in accordance with the terms of its waste management site licences under Part II Environmental Protection Act 1990 and is liable to pay and has paid landfill tax charged in respect of taxable disposals of waste at its landfill sites. As long ago as 30th December 2002 it sought from the appellant (“HMRC”) a refund of landfill tax paid in respect of inert materials it had used in the period 1st October 1996 to 30th September 2002 either to provide the daily cover for active waste required by the terms of its licence or in the construction of roads on its sites. It contended that such use of inert material could not give rise to a taxable disposal for the purposes of landfill tax and sought a refund of £2,120,552 because the relevant materials had not been disposed of “as waste”.

The claim of WRG was refused by the Commissioners on 26th March 2004 and, after review, again on 16th September 2004. WRG appealed to the VAT and Duties Tribunal (Colin Bishopp Esq). By his decision released on 8th March 2007 the Tribunal rejected the appeal of WRG. WRG then appealed to the High Court. By his order made on 20th December 2007 Barling J allowed the appeal and set aside the order of the Tribunal. HMRC now appeals from the order of Barling J with the permission of Sir John Chadwick given on 20th February 2008. WRG has issued a respondent’s notice seeking to uphold the judgment of Barling J on other grounds.

Landfill tax was introduced by the Finance Act 1996 Part III. The charge is imposed by s.40 in the following terms:

Liability to pay the tax is imposed on the landfill site operator by s.41. S.42 prescribes the amount of the tax per tonne of waste disposed of. The rate for what is known as active waste was £24 per tonne at the time of the Appeal to the High Court but for inactive or inert waste is only £2 per tonne. Ss.43 to 45 confer exemptions in relation to material removed from water, contaminated land, site restoration, mining and quarrying and pet cemeteries. Ss.47 to 57 concern the administration and collection of landfill tax. Ss.58 to 63 contain various miscellaneous provisions. Ss.64 to 70 are included under the rubric “interpretation” and are important to the issues in this appeal.

S.64 amplifies the condition of a chargeable disposal set out in s.40(2)(a). It provides:

S.65 performs the same function in respect of the condition for a chargeable disposal set out in s.40(2)(b). So far as material it provides:

Ss.66 to 69 deal with the identification of landfill sites and their operators, ascertaining the weight of material disposed of and the definition of taxable activities. S.70 provides, so far as material:

Before referring to either the facts of this case or the decisions of the Tribunal and Barling J it is convenient to refer to two authorities with which each of them dealt at some length. They are the decisions of Moses J in Commissioners of Customs & Excise v Darfish Ltd [2000] All ER (D) 361 and of the Court of Appeal in Commissioners of Customs & Excise v Parkwood Landfill Ltd [2002] STC 1536.

In Darfish its wholly-owned subsidiary, DNS, removed quantities of earth from two sites being developed by unassociated companies and deposited it on the landfill site owned and operated by Darfish for use by Darfish in site engineering. The Commissioners claimed that Darfish was liable for landfill tax because, they contended, all the conditions for a taxable disposal as defined by s.40 Finance Act 1996 were satisfied. The Tribunal had decided that the relevant deposit, which occurred after 1st October 1996, was made by DNS on behalf of Darfish and that as Darfish did not intend to discard the material but to make use of it in its site engineering works it was not disposed of “as waste”. The Commissioners appealed and Moses J allowed the appeal.

Moses J set out the relevant parts of the decision of the Tribunal and referred to the submission for the Commissioners that the disposal had not been made on behalf of Darfish but on behalf of the two independent developers who had intended to discard the material disposed of. He noted [8 and 18] that the Act did not define the word “disposal” but that it obviously included a “deposit”. He considered the meaning of the word ‘disposal’ as used in the Act in these terms [19]:

Moses J considered [20] that the transfer of the relevant material to the site operator, which must occur at some stage in every case, was of no assistance in ascertaining the person on whose behalf the disposal was made. He held [21] that the disposal had been made by DNS on behalf of the two independent developers because they had requested the removal of the material. Accordingly it was their intention not that of Darfish which mattered. He considered that those conclusions were required by s.64(3) and (4). He continued [22]:

In Parkwood the eponymous company operated a landfill site and its subsidiary, Recycling, carried on the business of recycling waste. The relevant waste had been delivered by the local authority to Recycling. Recycling had separated it into recyclable material and waste. The recyclable material was processed into aggregates and fines. Parkwood bought some of the aggregates and fines from Recycling for use at its landfill site for road-making and landscaping purposes to and for which it transported it and then used it. Parkwood was assessed to landfill tax on the aggregates and fines. It appealed successfully to the Tribunal. The Commissioners appealed and I allowed their appeal. Parkwood then appealed to the Court of Appeal. The appeal was allowed for the reasons explained by Aldous LJ with which Jonathan Parker LJ and Aikens J agreed.

The issue before the Court of Appeal was whether in the circumstances of that case the condition set out in s.40(2)(a), namely a disposal ‘as waste’, had been satisfied. Aldous LJ referred to the decision of Moses J in Darfish. He then quoted from my judgment at first instance in which I had said [36]:

The conclusion of Aldous LJ is contained in the following paragraphs of his judgment:

Aldous LJ then considered certain submissions of counsel for the Commissioners. He concluded [26] that Parliament could not have intended to impose a tax on recycled material so that the history of the material had to be checked to ascertain whether any of its previous possessors had had the requisite intention. He described [27] the argument for the Commissioners that material once discarded as waste could not be recycled so as to cease to be waste as contrary to common sense and reaffirmed [28] that:

The relevant facts, as found by the Tribunal, are set out in paragraph 5 of the judgment of Barling J. It is sufficient for present purposes to extract paragraphs 3 to 5, 8 and 12 of the Tribunal’s decision. They are as follows:

The categories to which Mr Bishopp referred were introduced in paragraphs 9 and 10 of his decision because WRG and HMRC then considered that it would shorten the hearing before the Tribunal and facilitate the resolution of the issues to be determined if 11 categories of transaction, lettered (a) to (k), were considered. They were considered in some detail by both the Tribunal and by Barling J. For my part I do not think that the introduction or consideration of these categories is either appropriate or helpful in determining the proper construction of the relevant legislation or the application of that legislation to the facts of this case. In addition consideration of categories based on some specified facts may be misleading in that all cases depend on all their own relevant facts, not just those specified in relation to an individual category.

After setting out the material facts, the terms of the legislation and the arguments of counsel Mr Bishopp set out his reasoning and conclusion. In paragraph 27 he concluded that the principle of the decision of Moses J in Darfish had not been overruled by the Court of Appeal in Parkwood. He agreed with the judgment of Moses J and continued [27]:

In his judgment Barling J set out the facts as found by the Tribunal [7]-[10] and the material parts of Finance Act 1996 [11]. He then considered the judgment of Aldous LJ in Parkwood and of Moses J in Darfish at some length [12]-[26] before turning to the decision of the Tribunal [27]. He considered the arguments of counsel on the respective grounds of appeal and gave his conclusion on that ground before moving on to the next.

The first ground related to the identity of the disposer. Counsel for WRG had submitted that the identity of the disposer was to be ascertained at the moment of time when the material was deposited on or in the landfill site. As by then title in the material will have passed to the site operator he had to be the disposer and his intention will govern whether the deposit is “a disposal of material as waste”. In respect of this submission Barling J held [30]:

The second ground of appeal concerned what constituted recycling of waste and its relevance. Barling J considered that the Tribunal had failed to give proper effect to the decision in Parkwood. He concluded [34] that by that decision the Court of Appeal had equated recycling with production (by whatever means including separating or sorting but not mere re-use) of useful material from waste material. In that context he considered some of the 11 categories and a statement of HMRC entitled “Recycled Material”.

The third ground of appeal was to the effect that the reliance of the Tribunal on the decision of Moses J in Darfish was misplaced because it had been overruled by the Court of Appeal in Parkwood. He rejected this submission for the reasons he elaborated in paragraph 43 of his judgment. The fourth ground of appeal dealt with the position if the intention to be ascertained was not that of the site operator but of another. In that respect Barling J considered [48] that all the circumstances must be considered to see whether events have occurred which shift the governing intention from the waste producer to an intermediary or the site operator.

Barling J then turned to the paragraphs in the decision of the Tribunal [28] and [29] in which they considered the relevance of the financial terms on which inert material was supplied or disposed of in one or more of the 11 categories. He concluded [50] that they were not excluded from consideration by s.64(2). It followed that in respect of some categories in which the Tribunal had excluded such terms from consideration Mr Bishopp had misdirected himself. Barling J then considered other categories in some detail and concluded that the appeal should be allowed. By his order he gave the parties until 20th March 2008 to agree the correct tax treatment of the disposals in the 10 categories still in contention and in default of agreement remitted the matter to the Tribunal for a hearing on the facts.

Counsel for HMRC submits that Barling J was wrong to have considered that processes of recycling, such as sorting and separating, precluded the material earlier discarded by the producer from being disposed of as waste at the later stage when it is deposited on the surface of the landfill site so as to be disposed of by way of landfill. He also submitted that the judge was wrong to have considered that the intention of the original producer of the material to dispose of it as waste could be subsumed in or replaced by the site operator’s use of the material on the landfill site.

Counsel for HMRC pointed out correctly that there is no exemption for recycled waste. He relied on the provisions of s.43C(2) by which ‘capping waste’ is excepted from the definition of restoration for the purposes of the exemption for site restoration. He submitted that this amounts to a legislative recognition that capping waste by the application of ‘daily cover’ is included in a taxable disposal. He relied on paragraph 19 of the judgment of Moses J in Darfish, with which the Court of Appeal did not disagree in Parkwood, as demonstrating that a disposal is a process in which the identity of the disposer and his intention remains constant.

Counsel for HMRC accepted that all the circumstances of a disposal must be regarded in order to determine whether it is a taxable disposal. He agreed that those circumstances include the economic circumstances surrounding the disposal. However he challenged the judge’s application of that principle to the assumed facts in some of the categories. As I consider that it is inappropriate to consider the specific categories, rather than the circumstances of the instant case, I do not think it necessary to consider this aspect of the case for HMRC any further.

Counsel for WRG supported the decision of the judge save in respect of his conclusions in paragraphs [30] and [42] in relation to the relevance of the passing of title in the waste material. She submitted that in the circumstances of this case the disposal of the material at the landfill site was, perforce, a disposal by WRG as the site operator and owner of the material. She suggested that the absence from the legislation of an exemption for recycled materials demonstrates a legislative recognition of the point, emphasised by Aldous LJ in Parkwood, that the tax is a tax on waste not on material recycled from waste. She pointed out that s.43C, on which counsel for HMRC relied, refers to ‘works’ not ‘materials’. She argued that they are inapplicable to the normal working of a landfill site and unnecessary in that respect given the conclusions of the Court of Appeal in Parkwood. I agree with her submissions in relation to s.43C.

By her respondent’s notice counsel for WRG also contended that the passing of title in the material to WRG shows that the disposal at the landfill site is not performed on behalf of the producer of the material so that s.64(3) does not apply. Accordingly the disposer of the material was WRG. At the moment of disposal at the landfill site it was not the intention of WRG to discard the material but to use it for the purposes of daily cover and road construction. This she submits is the only possible conclusion consistent with the decision of the Court of Appeal in Parkwood. Further it is the only possible conclusion consistent with the legislative purpose described by Aldous LJ in Parkwood, namely the taxation of waste not recycled materials.

Whether or not there is a liability to landfill tax in respect of the materials to which this appeal relates depends on the proper interpretation and application of the provisions of Part III of Finance Act 1996. We are bound by the decision of this court in Parkwood in respect of the aspects of interpretation with which it dealt. But we are not concerned with the applicability to the facts of this case of the judgment of this court in Parkwood or of Moses J in Darfish. In my view the decisions of both the Tribunal and Barling J are open to the criticism that too much time was taken up with the application of those judgments to the 11 categories which I have mentioned and not enough to the application of the legislation to the facts of this case.

The question is whether there was a taxable disposal of the materials used by WRG for daily cover and road construction. That depends on whether there was a disposal which satisfied all four conditions laid down in s.40(2). The decision of this court in Parkwood establishes that all four conditions must be satisfied at the same time. Though elements of the taxable disposal may occur sequentially, and to that extent the decision of Moses J in Darfish is consistent with the decision of this court in Parkwood, the four conditions for liability specified in s.40(2) must be satisfied at the same time. That moment must be the time at which the last of them is satisfied. That is likely to be the moment when the material is disposed of as landfill in accordance with the provisions of s.65.

WRG concedes that the material with which this appeal is concerned was disposed of by way of landfill as defined in s.65 because the provisions of subsection (1) were literally complied with. Whether that concession is rightly made I leave to another case. For my part I entertain some doubt because although the definition in subsection (1) is, in terms, exhaustive and unqualified it is coloured by the qualification introduced into the defined term itself by the words “by way of landfill”, see, for example, Delaney v Staples [1992] 1 AC 687, 692 and Halsbury’s Laws of England 4th Ed. Reissue Vol.44(1) para 1389. Indeed subsection (4), though primarily dealing with timing, might be thought to draw a distinction between the material deposited as waste and the earth or other inert material with which it was covered so as to exclude the latter from being deposited by way of landfill. If that is so then why should material used for daily cover be regarded as disposed of by way of landfill, particularly if so used more than once? Material used in road building might be regarded as more obviously not disposed of by way of landfill notwithstanding that it is necessarily deposited on the surface of the landfill site.

Plainly the condition imposed by s.40(2)(d) is satisfied. The conditions imposed by subsection (2)(b) and (c) can only be satisfied at the end of the process. It is at that time, therefore, that the condition imposed by subsection (2)(a) must be satisfied. There may well be some cases in which the deposit by way of landfill is effected by the producer of the waste tipping it on to the landfill site with the consent of the site operator. There may be others in which the site operator deposits the material on to the landfill site as agent for or at the request of the producer of the materials. But on the findings of the Tribunal in this case the materials with which we are concerned were deposited on the landfill site by WRG at a time when the property in them had passed to WRG.

In those circumstances, in my view, it is clear that, assuming there to have been a disposal at all, the disposal relevant for the purposes of s.40(2)(a) was made by WRG on its own behalf. So the question posed by s.64(1) is whether WRG then intended to discard the materials. The word ‘discard’ appears to me to be used in its ordinary meaning of ‘cast aside’, ‘reject’ or ‘abandon’ and does not comprehend the retention and use of the material for the purposes of the owner of it. I agree with counsel for WRG that s.64(2) does not apply in such circumstances because there is, at the relevant time, either no disposal or no disposal with the intention of discarding the material.

It follows from this conclusion that the relevant intention may well not be that of the original producer of the materials. There is no principle that material once labelled as ‘waste’ is always ‘waste’ just because the original producer of it threw it away. That is not the relevant time at which the satisfaction of the conditions imposed by s.40(2) is to be considered. Recycling may indicate a change in the relevant intention but is not an essential prerequisite; re-use by the owner of the material for the time being may do likewise. Thus although the passing of title is not conclusive, it is, in my view, of greater relevance than Moses J, the Tribunal or Barling J were prepared to attribute to it.

It may be that the economic circumstances surrounding the acquisition of the materials in question by the ultimate disposer of them will cast light on his intention at the relevant time. They cannot, as I see it, affect the decision on this appeal because the use of the relevant materials by WRG is clear and such use is conclusive of its intention at the relevant time by whatever means and on whatever terms WRG acquired them.

In my view, the materials used by WRG for daily cover and building roads were not the subject matter of a taxable disposal as defined in s.40(2). It follows that, in my view, Barling J was, in principle, right in the conclusion to which he came, but wrong to remit to the Tribunal further consideration of any of the 11 categories. Accordingly I would dismiss this appeal but vary the order of Barling J by deleting paragraph 2 thereof.

I agree with the judgment of the Chancellor. I express no view on the correctness or otherwise of the concession by WRG that the deposit of the recycled waste was a deposit by way of landfill within s 65 of the Finance Act 1996.

I agree with the judgment of the Chancellor.