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Storm in a Teacake over tax refund
 M&S wants a £35 million refund for VAT it has paid on the Teacakes since 1973. YOUR E-MAIL ALERTSLONDON, England -- Marks and Spencer's decade-long battle for a refund on purchase tax paid on its chocolate-covered marshmallow Teacakes has again been sent to the European Court of Justice. The British retailer is at odds with UK tax authorities over whether it is entitled to a £35 million ($58 million) refund for Value Added Tax (VAT) it has paid on the items. The company says it was wrongly charged VAT on the Teacakes, which retail for about six pence (10 cents) a piece, over a 20-year period. Five Lords in London "reluctantly" sent the case back to Europe on Friday to be reconsidered, Britain's Press Association reported. The House of Lords held that an earlier decision by the ECJ did not clarify sufficiently European Law, making it impossible for them to make a judgment about whether M&S was entitled to the refund. Lord Hoffman said in his summary of the case that, according to EU law, the supply of food was in general zero-rated for VAT, but there were exceptions and confectionery was one of these. The confusion about the Teacakes was whether they were considered confectionery because they are covered in chocolate. "But there is an exception to that exception: cakes or biscuits are in general also zero-rated. There is, however, an exception to that exception to the exception, namely biscuits wholly or partly covered with chocolate. They are standard-rated," he said. In 1973 when VAT was introduced, the Commissioners of Customs and Excise described the Teacakes as biscuits, which made them standard-rated, and on that basis, M&S accounted for VAT. But in 1994, VAT authorities did a U-Turn, saying authorities had wrongly classified the Teacakes and that they should have been zero-rated. This was because the "biscuits" were actually cakes. M&S has so far been unable to prove it is entitled to the £35 million repayment, calculated from of all the VAT it had wrongly accounted for on the Teacakes since 1973. The company has passed 90 percent of this cost on to customers, and European law is not clear on whether this means M&S would be entitled to a refund. The Court of Appeal previously asked ECJ for guidance on this. Lord Walker said the law lords were "naturally very reluctant" to add further delay and expense by a second reference to the ECJ. He said that they remained in doubt about relevant principles about European law in the ECJ's earlier judgments and there was no alternative but to send the case back. Lords Nicholls, Steyn, Hoffmann and Scott agreed. 
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