MMC Midlands Ltd v HM Revenue & Customs

For the exemption from aggregates levy, the specified mineral and the other rock must have been extracted or won together before the relevant separation process occurs. “Separated” requires physical disunion, such as the breaking of a mechanical or chemical bond; sorting, grading or coning is insufficient. “Spoil” means material produced by mining or mineral extraction which is not the primary target of the operation. Whether material is spoil may therefore depend on the nature and main purpose of the business. An operator cannot obtain exemption by treating the primary product of an aggregate quarry as spoil merely because another mineral is recovered incidentally. The statutory exemption does not apply to digging or blasting undertaken in the course of extracting or winning the minerals, but may apply to later physical separation.

MMC extracted fluorspar and limestone from sites in Derbyshire. The VAT and Duties Tribunal held that MMC was principally conducting limestone quarrying, that the limestone was not generally exempt spoil, and that only limestone physically separated from fluorspar to which it was mechanically or chemically bound could qualify for exemption under section 17(3)(f) of the Finance Act 2001. MMC appealed on questions of law, challenging the interpretation of “extracted or won”, “spoil” and “separated”, and alleging that the Tribunal had impermissibly re-opened factual findings. The central issues were the scope of the statutory exemption and whether the Tribunal had made an error of law.

1. Appeal dismissed. The appeal was confined to questions of law. Under [1956] AC 14, the High Court could intervene if the Tribunal applied bad law or if its factual findings were such that no properly instructed tribunal could have reached the decision.
2. Section 17(3)(f) of the Finance Act 2001 required the fluorspar and limestone to have been extracted or won together before the separation process. Limestone removed as host rock to gain access to fluorspar was not extracted or won “with” the fluorspar. The reasoning in Secretary of State for Communities & Local Government v Bleaklow Industries Ltd, [2009] EWCA Civ 206, reinforced that conclusion.
3. “Spoil” had to be understood in the context of mining and mineral extraction. It meant material produced by those operations which was not the primary target. The nature and main purpose of the operator’s business were therefore relevant. The Tribunal was entitled to find, on the disparity in output, quality, duration of sales and financial viability, that limestone quarrying was the principal operation and fluorspar sales were incidental.
4. “Separated from other rock” required physical separation involving the breaking of a mechanical or chemical bond. The Tribunal was entitled to reject sorting by excavator or coning as insufficient, while accepting that crushing and a grizzly screen could qualify if they broke such a bond. Legislative purpose and the concept of spoil supported that contextual construction.
5. Digging and blasting did not qualify because they occurred while the limestone or fluorspar was being extracted or won, rather than afterwards. The Tribunal had made no error of law and its findings were not open to re-investigation on appeal.

The judgment was an appeal from a decision of the VAT and Duties Tribunal. The Tribunal held that MMC was subject to compulsory registration and that only limestone physically separated from bound fluorspar could be exempt from aggregates levy. The High Court dismissed MMC’s appeal.