(i) Recognition of the Defence

The defence of passing on has been recognized in some jurisdictions. For example, it was at one time recognized by the Supreme Court of Canada in Air Canada v British Columbia4 and it has also been recognized by the European Court of Justice. In Ammi- nistazione delle Finanze dello Stato v SpA San Giorgio5 it was held that Community law does not prevent Member States from ‘disallowing repayment of charges which have been unduly levied where to do so would entail unjust enrichment of the recipients’, as would occur where, for example, unduly levied charges have been incorporated into the price of goods and passed on to purchasers. However, the effect of Community law is that it simply ‘does not prevent’ Member States from adopting a passing-on defence. The San Giorgio case is not authority for the proposition that Member States must adopt such a defence.6 Nevertheless, subsequent developments in EU law have recognized the defence as being available as regards claims for the recovery of overpaid tax paid in breach of EU law.7

The defence has been acknowledged in England as well. In Marks and Spencer plc v Commissioners of Customs and Excise8 Lord Walker recognized that passing on is a possible defence to any restitutionary claim, although his Lordship cited Roxborough v Rothmans of Pall Mall Australia Ltd9 in support of this conclusion, even though that decision expressly rejected the passing-on defence in Australia. Consequently, this dictum cannot be considered to be authoritative. Certain statutory provisions relating to the recovery of overpaid VAT and Car Tax effectively recognize the defence. For example, recovery of overpaid VAT is denied if repayment would unjustly enrich the person who paid the VAT.10 This encompasses a defence of passing on, which would be applicable where, for example, the taxpayer had passed on the burden of the VAT to its customers.11

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