CAAD 23/2015-T: Colored Diesel ISP Tax Liability Under CIEC Article 93(5)

ARBITRAL DECISION

I – Report

1. On 13.01.2015, the Claimant, A…, Lda, collective person number …, with registered office at …, nº …, … and …, r/c, in …, requested from CAAD the constitution of an arbitral tribunal, pursuant to article 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Respondent is the Tax and Customs Authority, with a view to annulling the assessments of ISP, CSR and compensatory interest in the total amount of 8,201.38 € determined in the A Posteriori Collection Process no. 2013/113, following an Inspection Action (ANF) carried out by the Customs Authority of ....

2. The request for constitution of the arbitral tribunal was accepted by the Honourable President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the terms and for the purposes of article 6, no. 1, of RJAT, by decision of the President of the Deontological Board, duly communicated to the parties, within the legally applicable periods, the undersigned was appointed as arbitrator, who communicated to the Deontological Board and to the Administrative Arbitration Centre the acceptance of the assignment, within the regularly applicable period.

The Arbitral Tribunal was constituted on 25.03.2015.

1. The grounds presented by the Claimant, in support of its claim, were, synthetically, the following:

a) The Claimant is a company engaged in the commercialisation of petroleum products, being the holder of several fuel supply stations, including two in the locality of … and one in ….

b) It is the official distributor of brand B… in the districts of …, … and … of diesel to homes, namely of coloured and marked diesel, road diesel and heating diesel.

c) The fixed tanks that supply the distribution tankers are installed at the supply station of … in the Zone …, namely that of coloured and marked diesel.

d) At the date of the facts, the Claimant was the holder of two computerized terminals for control of the quantities sold of coloured and marked diesel (POS) for registration of the litres sold of coloured and marked diesel, with one located in the Industrial Zone of … and another at the Supply Station of ….

e) As a general rule, the customers who request coloured and marked diesel to their homes go to … or … depending on which is closer to their residence, in order to register in the POS their respective acquisitions.

f) On 2.04.2013, an inspection control action was initiated by the Respondent against the Claimant in order to verify compliance with tax obligations regarding the commercialisation of coloured and marked diesel, at the Claimant's supply station located in the Industrial Zone of …, for the period between 1.01.2013 and 2.04.2013.

g) In this control action, it was found that in that period 90,545.35 litres of coloured and marked diesel were sold and that the POS of the Claimant's supply station located in the Industrial Zone of … only registered 63,255.00 litres in that same period, resulting in a difference of 27,300.16 litres not registered at this station.

h) And that in other customers, records were detected in the POS of 9.81 litres of coloured and marked diesel without the issuance of the corresponding invoice or equivalent document in the name of the cardholder through which it was registered.

i) In the exercise of the right to prior hearing before the final report of the inspection action, the claimant alleged, regarding the 27,300.16 litres of coloured and marked diesel, that such discounts were made at the station and POS of … and that the records in the POS of 9.81 litres not invoiced to customers were due to the customers' prepayments which after having refuelled created these small discrepancies.

j) These allegations were dismissed by the Respondent on the grounds of article 6 of Ordinance no. 361-A/2008, of 12 May, regarding the 27,300.16 litres and otherwise on the grounds of lack of communication to DGADR of typing errors, in accordance with the same Ordinance.

k) The 27,300.16 litres that the Respondent claims are missing from the POS Record were registered in the Claimant's POS of the station of … at the time of the sales.

l) The sale of coloured and marked diesel is subject, due to the tax benefit associated with the product, to a control system based on computerized registration and specific commercialisation rules, in accordance with no. 5 of article 93 of CIEC, combined with Ordinance no. 361-A/2008, of 12/5.

m) There is no legal rule that obliges companies with distribution of coloured and marked diesel to homes to use a mobile device.

n) In the concrete case, the sales are properly registered in a properly licensed POS managed by SIBS for that purpose and through cards issued by DGADR of customers benefiting from an exemption or reduction of ISP rate, therefore, the assessments in question are illegal.

1. The ATA – Tax and Customs Administration, called upon to respond, contested the Claimant's claim, defending itself, in summary, with the following grounds:

BY WAY OF EXCEPTION,

a) The request for arbitral pronouncement was made following the notification to the Claimant to pay a debt of ISP, CSR and compensatory interest in the total amount of 8,201.38 € determined in the A Posteriori Collection Process no. 2013/…, following an Inspection Action (ANF) carried out by the Customs Authority of ....

b) And, although from the content of the request presented by the Claimant it does not expressly result which tax(es) whose legality it intends to have examined in the arbitral instance, since it only refers, ultimately, in a generic manner, to the "tax act", having regard that in articles 9 and 12 of the arbitral request it equally refers to the amount of VAT determined in the ANF report, it would seem that the challenge of this tax is also at issue.

c) Thus, and despite the text of the request not yielding any legal basis supporting the challenge of the "assessment" in respect of VAT, as a precaution, it is important to clarify that, should this not be understood, the question of the unchallengeable nature of VAT should be raised.

d) In fact, as appears from the content of the notification contained in p. 56 of the Administrative Process (PA) of the Customs Authority of ..., which is hereby attached and considered reproduced for all legal purposes, A... was only notified to pay the amount of debt determined within the scope of the a posteriori collection process no. 2013/… relating to ISP, CSR, compensatory interest and the value of the assessment form.

e) Under article 2 of Decree-Law no. 10/2011, of 20 January (RJAT), the competence of arbitral tribunals includes, among others, the consideration of claims relating to "declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account" – cf. no. 1, paragraph a).

f) The Claimant herein never identifies the act of VAT assessment, and the notification to pay the tax and especially because this tax never became the subject of assessment.

g) Which, moreover, is corroborated by the value that the Claimant indicated for the present case, which corresponds to the total amount of ISP, CSR and compensatory interest, of which assessment it was notified to pay, in the amount of 8,201.38 €.

h) Thus, should it be understood that the present request also includes the declaration of illegality of VAT, the same cannot, however, in light of the law, be submitted to the present arbitral instance since the arbitral process only covers acts susceptible to judicial challenge, that is, those covered by article 2, no. 1, of RJAT.

i) It is verified, regarding VAT, that, given the absence of an assessment act, there is, consequently, no challengeable act, the exception of unchallengeable nature of the act occurring, for complete lack of subject matter.

j) And, given the aforesaid rules relating to the competence of the arbitral tribunal, there is, thus, also the existence of an exception (dilatory) embodied in the lack of material competence of the arbitral tribunal, which prevents the consideration of the claim, and, therefore, in this part, dismissal of the Respondent Entity from the instance should be determined, in view of the provisions of articles 576, no. 1 and 577, paragraph a) of the Civil Procedure Code, applicable ex vi article 29, no. 1, paragraph e) of RJAT.

BY WAY OF MERITS

k) Coloured and marked diesel is a product with conditional use, which materializes in a tax benefit with a reduced ISP rate, being thus, due to the regime currently in force, a conditioned product:

• to the equipment provided for in no. 3 of article 93 of CIEC, approved by Decree-Law no. 73/2010, of 21 June;

• to the ownership of an electronic card for its acquisition – cf. no. 5 of article 93 of CIEC, combined with no. 5 of Ordinance no. 117-A/2008, of 8 February and no. 11 of Ordinance no. 361-A/2008, of 12 May;

• to the prior recognition of the competent authorities – by force of no. 11 of Ordinance no. 361-A/2008, of 12 May, according to which, coloured and marked diesel can only be supplied to the equipment provided for in no. 3 of article 93 of CIEC after verification by the competent entity of the assumptions and conditions required under applicable legislation, determining no. 7 of Ordinance no. 117-A/2008, of 8 February, that the beneficiaries are subject, under penalty of incurring in a tax infraction, to the obligation to communicate to the competent authorities any alteration of the assumptions of the tax benefit and other relevant alterations, namely those relating to the authorized equipment;

• to the maintenance of the assumptions and conditions verified on the date of recognition of the benefit.

l) It is verified, thus, that the use of coloured and marked diesel for the purpose referred to in no. 3 of article 93 of Decree-Law no. 73/2010, of 21 June, with the last wording given by Law 51/2013, of 24 July, is not a sufficient condition for someone to be able to benefit from the reduced ISP rate, the company having to comply with the assumptions and conditions inherent to the use and sale of coloured and marked diesel, in accordance with the rules established in applicable legislation.

m) As it follows from paragraph h) of no. 2 of article 4 (Subjective Scope) of CIEC, company A… is also a taxpayer, being responsible for the payment of ISP, resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to coloured and marked diesel in relation to the quantities it sold and that were not subject to correct movement in the POS terminals.

n) As regards the road service contribution (CSR), created by Law no. 55/2007, of 31 August, which, in accordance with article 1, aims to finance the national road network in charge of C…, and equally determines the conditions of its application, this contribution constitutes the counterpart for the use of the national road network, as it is verified by fuel consumption (no. 1 of article 3).

o) And, pursuant to no. 1 and no. 2 of article 4 of Law no. 55/2007, the CSR "applies to petrol and road diesel subject to the tax on petroleum products and energy (ISP) and not exempted from it", and its value varies depending on the petroleum product used (petrol or road diesel).

p) Pursuant to no. 1 of article 5 of the same statute, the CSR is due by taxpayers of the tax on petroleum products and energy and, notwithstanding it constitutes revenue of C… (article 6), its assessment and collection is the responsibility of the General Directorate of Customs and Special Consumption Taxes (today AT), with the provisions on its assessment, collection and payment being those provided for in the Code of Special Consumption Taxes.

q) The CSR is thus a tax due by taxpayers of ISP that applies to road diesel subject to ISP not exempted.

r) The Claimant states in article 13 of the arbitral request that it presented a prior hearing alleging that the 27,300.16 litres were registered not in the POS of the Industrial Zone of … but in its POS of … ….

s) Well, it will always be said that the total determined by the Customs Authority results from the difference between the quantities inscribed in the totalizer and the quantities moved in the POS … (…), which was the subject of the ANF, in accordance with the maps contained in the final Report notified to the Claimant.

t) The Claimant is not correct when it argues, as can be deduced from its statements, that, being the holder of two POS, the sales/supplies and respective records of GCM can be registered in any of them, which, if so, would make impossible the control system legally established for the commercialisation of this product and this because the law requires that sales be mandatorily registered in POS terminals at the moment they occur, as expressly follows from no. 6 of Ordinance no. 361-A/2008.

u) In fact, as regards the company's justification for the sale of coloured and marked diesel with registrations made in terminal and moment different from that of the sale, aside from not being able to be accepted as it is contrary to current legislation, it further demonstrates an abusive use of communications made to DGADR for manual regularization of terminal records, since selling coloured and marked diesel without proceeding to the corresponding registration in the TPA/POS terminal, and making registrations in the terminal at a moment and quantity different from that of the sale, constitutes a clear breach of the provisions of no. 6 of Ordinance no. 361-A/2008, of 12 May, which cannot, in any way, be regularized a posteriori through written communication to DGADR.

v) On this matter, no. 12 of Ordinance no. 361-A/2008, of 12 May, establishes that "In case of typing errors or other anomalies verified in the use of POS terminals, the same should be immediately communicated, in writing, preferably by electronic mail, to DGADR, in order that the respective corrections be made."

w) And the situations detected do not fall within the above referred to, since they do not constitute typing errors, nor other anomalies related to the use of the POS terminal.

x) Furthermore, each fuel supply station for coloured and marked diesel, as well as each distribution company, is equipped with a computerized terminal for registration of all transactions of that product, being able only those (supply stations and distribution companies) to sell the coloured and marked diesel to holders of electronic card, making therein, duly, the registration of the quantity supplied.

y) Resting therefore the control of the quantities of coloured and marked diesel sold at the supply stations on the mandatory computerized registration of all transactions of the product at the moment they occur and therefore, regarding the situations where it is not possible to carry out the supplies at the location of the station, the law provides for the use of mobile POS terminals, for compliance with the obligation to register in the act and place of the respective supply, as established in no. 7 of the same Ordinance no. 361-A/2008, since only through the registrations made with the card at the time of the sale of said product is it possible to know whether the purchaser is the holder of a card issued for that purpose, valid, as required by no. 5 of article 93 of CIEC.

z) In fact, as determined by no. 5 of article 93 of CIEC, this product can only be acquired by holders of the electronic card established for the purposes of control of its use for the destinations referred to in no. 3 of the same article, further requiring, additionally, as mentioned, no. 6 of Ordinance no. 361-A/2008, that the sales of coloured and marked diesel be mandatorily registered in POS terminals at the moment they occur, an obligation that A... did not comply with.

aa) The Claimant understands, thus, that, notwithstanding having made registrations in the POS of ..., the sales are properly registered by having been registered in a properly licensed POS, managed by SIBS and through cards issued by DGADR.

bb) But, on this argument, it is reiterated that the mandatory nature of the registration of the quantity sold being simultaneous to the moment of sale follows from the law, and non-compliance with this legal provision makes the tax exigible in accordance with the combined provisions of paragraph h) of no. 2 of article 4 and no. 5 of article 93, both of CIEC.

cc) The responsibility provided for in no. 5 of article 93 of CIEC occurs whenever that sale is not "properly" registered, as article 93 provides, and as the already cited Ordinance no. 361-A/2008 (which establishes the rules of commercialisation of coloured and marked diesel and the respective control mechanisms) provides in its no. 6 "The sales referred to in the preceding number are mandatorily registered in POS terminals at the moment they occur."

dd) Therefore, the grounds of the Claimant to attack the assessment act under discussion in the present request for arbitral pronouncement do not hold and that the same, being legal, should, therefore, remain in the legal order.

1. By order of 13.05.2015, under article 16, paragraph c), of RJAT, it was determined that the Claimant be notified to, within a period of ten days, pronounce itself, if it so wishes, on the exception raised by the Respondent, with the holding of the arbitral hearing provided for in article 18 of RJAT being waived.

It was further determined that an arbitral hearing be held on 9 June at 14:30 hours, for the examination of witnesses indicated by the Claimant.

1. The arbitral hearing for examination of witnesses was held on the scheduled date, with the parties producing oral arguments.

2. The tribunal is materially competent and is regularly constituted in accordance with RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

The process does not suffer from defects that invalidate it.

1. The following questions must be resolved:

a) Whether the dilatory exceptions raised by the Respondent occur.

b) Whether the assessments in question are illegal, by reason of violation of law.

II – The relevant factual matter

1. The Tribunal considers the following facts proven:

2. The Claimant is a company engaged in the commercialisation of petroleum products, being the holder of several fuel supply stations, among which two in the locality of … and one in ….

3. It is the official distributor of brand B… in the districts of …, … and … of diesel to homes, namely of coloured and marked diesel, road diesel and heating diesel.

4. The fixed tanks that supply the distribution tankers are installed at the supply station of … in the Zone …, namely that of coloured and marked diesel.

5. At the date of the facts, the Claimant was the holder of 2 computerized terminals for control of the quantities sold of coloured and marked diesel (POS) for registration of the litres sold of coloured and marked diesel, with one located in the Industrial Zone of … and another at the Supply Station of ….

6. As a general rule, the customers who request coloured and marked diesel to their homes go to … or … depending on which is closer to their residence, in order to register in the POS their respective acquisitions.

7. On 2.04.2013 an inspection control action was initiated by the Respondent against the Claimant in order to verify compliance with tax obligations regarding the commercialisation of coloured and marked diesel, at the Claimant's supply station located in the Industrial Zone of …, for the period between 1.01.2013 and 2.04.2013.

8. In this control action, it was found that in that period 90,545.35 litres of coloured and marked diesel were sold and that the POS of the Claimant's supply station located in the Industrial Zone of Estremoz only registered 63,255.00 litres in that same period, resulting in a difference of 27,300.16 litres not registered at this station.

9. And that in other customers, records were detected in the POS of 9.81 litres of coloured and marked diesel, without the issuance of the corresponding invoice or equivalent document in the name of the cardholder through which it was registered.

10. In the exercise of the right to prior hearing before the final report of the inspection action, the claimant alleged the following:

"1. Regarding point 4.3 of the draft conclusions in which the sale of 27,300.16 litres more of coloured and marked diesel than those registered in the POS is mentioned, we come to inform that such discounts were made in our station and POS of ... because they are customers who work in that area and thus prevent them from going to …. POS … – …. Attached we enclose copies of the transactions.

1. Regarding point no. 4.4 of the draft conclusions in which it is mentioned that 9.81 litres were detected in the POS records and were not invoiced to customers, everything is related to initially discounting the litres in the POS and then supplying, which can create these minimal discrepancies between the invoiced and the discounted since sometimes to prevent customers from being able to refuel and afterwards not have litres to discount".

2. In the final report of the inspection action it contains the following:

[Content omitted in original]

1. As a consequence, the Claimant was notified by the Customs Authority of ... to proceed with the payment of the assessed debt of ISP, CSR and compensatory interest in the total amount of 8,201.38 €.

2. The 27,300.16 litres that the Respondent claims are missing from the POS Record were registered in the Claimant's POS of the station of ..., having been sold to customers with valid electronic card/microchip.

3. Facts not proven

That the registrations corresponding to the supplies identified in point 12 of the factual matter were made at the moment of the sales.

1. Reasoning for the decision on the factual matter

The decision on the factual matter was based essentially on the documentary evidence submitted by the Claimant and contained in the administrative process, which was not challenged by the parties and also on the testimony of the witnesses listed by the Claimant, D… and E…, which revealed direct knowledge of the facts about which they testified.

The testimonies provided were not subject to any objection as to their verisimilitude and credibility, notwithstanding the employment relationship existing between them and the Claimant, and the same further proved to be consistent with the documents contained in the records.

On the other hand, it should be noted that the factual matter given as proven was not the subject of disagreement between the parties, since the disagreement is confined, essentially, to the matter of law.

Regarding the fact given as not proven, such decision results from the absence of evidence as to the same, from inferences of the facts given as proven and also from the set of evidence produced, namely from the testimony of the witnesses indicated above.

-III- The applicable law

1. The Respondent raises the question of the unchallengeable nature of the taxation in respect of Value Added Tax, further invoking the lack of competence of the Arbitral Tribunal, because there is not, in respect of that tax, an act covered by article 2, no. 1, of RJAT.

It does so as a precaution, considering that "and although from the text of the request it does not result any legal basis supporting the challenge of the "assessment" in respect of VAT, as a precaution, it is important to clarify that, should this not be understood, the question of the unchallengeable nature of VAT should be raised." And it argues that "as appears from the content of the notification contained in p. 56 of the Administrative Process (PA) of the Customs Authority of ..., which is hereby attached and considered reproduced for all legal purposes, A... was only notified to pay the amount of debt determined within the scope of the a posteriori collection process no. 2013/113 relating to ISP, CSR, compensatory interest and the value of the assessment form."

1. Although the identification of the tax acts sub judice was not made in a particularly felicitous manner, still, analysing the text of the request for arbitral pronouncement, in conjunction with the notification of the assessment that was made to it, contained in the records, it does not appear that there are doubts that the tax acts challenged are only and solely the ISP and the CSR, the only tax assessment acts that were notified to it, in addition to which it is precisely the sum of the value of the assessments of these taxes that constitutes the value of the process indicated by the Claimant.

This is, moreover, observed, pertinently by the Respondent when it states that "For, in truth, the Claimant herein never identifies the act of VAT assessment, and the notification to pay the tax and especially because this tax never became the subject of assessment." And further that "Which, moreover, is corroborated by the value that the Claimant indicated for the present case, which corresponds to the total amount of ISP, CSR and compensatory interest, of which assessment it was notified to pay, in the amount of 8,201.38 €."

Thus, it is understood that the acts challenged are the assessments of ISP and CSR, the raised dilatory exceptions relating to the taxation in respect of VAT being unfounded, since no challenge was made in respect of this tax.

1. It is therefore necessary to assess the substantive question of the legality of the assessments in respect of ISP, CSR and compensatory interest, of which assessment the Claimant was notified to pay, in the amount of 8,201.38 €.

Article 93 of the Code of Special Consumption Taxes (CIEC), approved by Decree-Law no. 73/2010, of 21 June, provides as follows:

"Article 93

Reduced rates

(Wording given by Law no. 64-B/2011, of 30 December)

1 — Coloured and marked diesel, heating diesel and petroleum are taxed with reduced rates with the additives defined by ordinance of the member of the Government responsible for the area of finances.

2 — Coloured and marked petroleum can only be used for heating, lighting and in the uses provided for in no. 3.

3 — Coloured and marked diesel can only be consumed by:

a) Stationary engines used for irrigation;

b) Vessels referred to in paragraphs c) and h) of no. 1 of article 89;

c) (Wording given by Law no. 83-C/2013, of 31 December) Agricultural tractors, combine harvesters, cultivators, motorized hoes, motor reapers, motorized potato harvesters, pea harvesters, silage forage harvesters, tomato harvesters, conditioner-sickles, grape harvesting vibratos, trunk vibrators for harvesting olives and other fruits, as well as other equipment, including those used for aquaculture activities, approved by ordinance of the members of the Government responsible for the areas of finances, agriculture and the sea;

d) Railway passenger and goods transport vehicles;

e) Fixed engines;

f) Autonomous refrigeration engines, installed in heavy vehicles for transport of perishable goods, fed by separate fuel tanks, and which have ATP certification (Agreement on Transport of Perishable Goods), in the terms to be defined in ordinance of the members of the Government responsible for the areas of finances, agriculture and transport.

4 — Heating diesel can only be used as a fuel for industrial, commercial or domestic heating.

5 — Coloured and marked diesel can only be acquired by holders of the electronic card established for the purposes of control of its use for the destinations referred to in no. 3, and the owner or the legal responsible for the operation of the stations authorized for sale to the public is responsible for payment of the amount of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to coloured and marked diesel, in relation to the quantities that they sell and that are not properly registered in the electronic control system.

6 — The sale, acquisition or consumption of the products referred to in no. 1 in violation of the provisions of nos. 2 to 5 are subject to the sanctions provided for in the General Regime of Tax Infractions and in special legislation.

7 — For the purposes of this article, fixed engines are understood to be engines intended for the production of energy and which, cumulatively, are installed on immovable platforms.

8 — While technical conditions do not exist for the implementation of heating diesel with the characteristics provided for in Annex VI of Decree-Law no. 89/2008, of 30 May, coloured and marked diesel, classified by the NC codes 2710 19 41, 2710 19 45 and 2710 19 49, may be used in the Autonomous Region of Madeira.

9 — In the acquisition of coloured and marked diesel in the Autonomous Region of Madeira, the use of the electronic card is dispensed with, while the technical conditions described in the preceding number do not exist."

These rules are complemented by rules of a regulatory nature, namely those contained in Ordinances nos. 117-A/2008, of 8 February, and 361-A/2008, of 12 May, both approved still during the validity of the previous Code of Special Consumption Taxes, and having as enabling reference its article 74, but kept in force at the time of approval of the new CIEC, by force of article 5 of Decree-Law no. 73/2010, which approved the latter Code.

Ordinance no. 117-A/2008 provides as follows:

"1. The present ordinance regulates the formalities and procedures applicable to the recognition and control of exemptions and reduced rates of the tax on petroleum products and energy (ISP) provided for, respectively, in no. 1 of article 71 and in article 74 of the Code of Special Consumption Taxes, approved by Decree-Law no. 566/99, of 22 December, briefly referred to as CIEC.

1. May benefit from exemption or the application of a reduced rate of tax the natural or legal persons who, demonstrably, use petroleum and energy products subject to ISP in the activities or equipment provided for in the legal provisions referred to in the preceding number, provided that they comply with the following conditions:

a) That activity is duly declared, under applicable tax legislation, except where dispensed by law or by the nature of the exemption;

b) Have their tax and contributory situation regularized;

c) Have complied with their declarative obligations in respect of income taxes and value added tax.

1. The competence for the act of recognition and subsequent control and re-evaluation of the assumptions and conditions of tax benefits is defined in nos. 17, 32, 36, 38, 39, 41, 46, 50, 56, 60, 61 and 64 of the present ordinance.

2. Requests for exemption or reduction of the tax rate must be accompanied by photocopy of the following three documents, without prejudice to other documentation considered necessary:

a) Tax identification card;

b) Document of licensing of the activity carried out, when required.

1. Tax benefits made through the use of coloured and marked diesel are carried out mandatorily through the use of a microchip card, provided for in no. 5 of article 74 of CIEC, which is issued by the Directorate-General of Agriculture and Rural Development (DGADR) and sent to the applicants by the competent entity for the recognition of the tax benefit in question.

2. The cards referred to in the preceding number are personal and non-transferable, with the respective holders being responsible for their regular use.

3. The beneficiaries are subject, under penalty of incurring in a tax infraction, to the following obligations:

a) Communicate to the competent authorities any alteration of the assumptions of the tax benefit;

b) Communicate other relevant alterations, namely alteration of location of the authorized facilities or equipment, transfer of property of the equipment as well as the assignment or replacement thereof;

c) Cooperate with the competent authorities in the carrying out of the controls that come to be determined, in order to prove the effective use of the products for the destinations or uses with tax benefit and provide all elements of information requested.

1. The beneficiaries who are holders of a microchip card, for the supply of coloured and marked diesel, are further obliged to:

a) Return the microchip card in case of cessation of the assumptions of the benefit, within a maximum period of five working days;

b) Communicate any situation of loss or anomaly in the microchip card assigned.

1. The communications referred to in the present ordinance must be made in writing, preferably by electronic mail, within a maximum period of five working days.

2. The tax benefits referred to in the present ordinance are subject to periodic re-evaluation by the competent authorities, in order to determine whether the maintenance of the respective assumptions and compliance with the other conditions required under applicable legislation.

3. Constitute grounds for revocation of the authorization of the tax benefit, without prejudice to the institution of a process for tax infraction under the terms provided in the General Regime of Tax Infractions, the violation of the assumptions of the benefit as well as the non-observance attributable to the beneficiary of the conditions required in no. 2.

4. In case of violation of the assumptions of the tax benefit, the tax that shows itself to be due is further assessed.

5. For the purposes of the preceding number, it is considered that there is violation of the assumptions of the tax benefit, namely, in case of:

a) Use of products, without prior recognition of the tax benefit;

b) Use of the authorized products for a purpose different from the declared;

c) Use of products in unauthorized equipment.

(…)"

Ordinance no. 361-A/2008, of 12 May, establishes the rules of commercialisation of GCM and the respective control mechanisms, the following rules being relevant for the case at hand:

"(…)5. Coloured and marked diesel can only be sold at supply stations to beneficiaries of an exemption or reduction of ISP rate who are holders of microchip cards issued for that purpose by DGADR, through which all transactions of coloured and marked diesel are registered in the computerized system managed by the Interbank Services Company (SIBS).

1. The sales referred to in the preceding number are mandatorily registered in POS terminals at the moment they occur.

2. The supplies to equipment authorized to consume coloured and marked diesel that cannot be made at the location of the supply station, namely some agricultural and forestry equipment and fixed engines, may be registered in a mobile POS terminal, in the act and place of the respective supply.

3. The registration in the computerized system, through the POS terminals, of each supply made, does not dispense with the issuance of the respective invoice or equivalent document, issued in the name of the holder of the respective microchip card.

4. The registrations of the transactions referred to in no. 5 are sent in computerized form by SIBS to DGADR, which, in addition to the national coordination functions that are incumbent on it, manages the database relating to coloured and marked diesel and is responsible for the issuance, suspension or cancellation of the cards.

(…)

1. Coloured and marked diesel can only be supplied to the equipment provided for in no. 3 of article 74 of CIEC, after verification, by the competent entity, of the assumptions and conditions required under applicable legislation and the attribution to the respective beneficiaries of the card referred to in no. 5.

(…)"

For its part, the Legal Regime of Tax Infractions provides in article 109 (Irregular Introduction into Consumption) the following:

"1 - The facts described in article 96, which do not constitute a crime due to the value of the tax payment or of the goods subject to the infraction, or, independently of these values, whenever they are committed with negligence, are punishable with a fine of € 150 to € 150,000. (Wording given by article 224 of Law no. 66-B/2012, of 31 December)

2 – The same fine is applicable to whoever:

p) Introduces into consumption, holds or commercializes products in violation of the rules of sealing, packaging, holding or commercialisation, namely the quantitative limits, established by the Code of Special Consumption Taxes and in complementary legislation;

q) Acquires or consumes coloured and marked diesel without being the holder of a card with microchip.

6- The maximum amount of the fine is aggravated to double in the cases provided for in paragraph p) of no. 2".

As regards the road service contribution (CSR), created by Law no. 55/2007, of 31 August, which, in accordance with article 1, aims to finance the national road network in charge of C…, and equally determines the conditions of its application, this contribution constitutes the counterpart for the use of the national road network, as it is verified by fuel consumption (no. 1 of article 3).

And, pursuant to no. 1 and no. 2 of article 4 of Law no. 55/2007, the CSR "applies to petrol and road diesel subject to the tax on petroleum products and energy (ISP) and not exempted from it", and its value varies depending on the petroleum product used (petrol or road diesel).

Pursuant to no. 1 of article 5 of the same statute, the CSR is due by taxpayers of the tax on petroleum products and energy and, notwithstanding it constitutes revenue of C… (article 6), its assessment and collection is the responsibility of the General Directorate of Customs and Special Consumption Taxes (today AT), with the provisions on its assessment, collection and payment being those provided for in the Code of Special Consumption Taxes.

The CSR is thus a tax due by taxpayers of ISP that applies to road diesel subject to ISP not exempted.

1. The Claimant understands that there is no "legal provision that obliges companies with distribution of coloured and marked diesel to homes to have to use a mobile device".

For its part, the Respondent sustains that, given that Ordinance no. 361-A/2008, of 12 May, provides that sales are mandatorily registered in POS terminals at the moment they occur and that such implies that, if this does not occur, there is place for the responsibility provided for in article 93, no. 5, of CIEC, even if the registrations are made in the company's POS terminal, at a moment different from that of the sale.

1. The Ordinance in question, by determining in its no. 6 that "The sales referred to in the preceding number are mandatorily registered in POS terminals at the moment they occur" and in its no. 7 that "The supplies to equipment authorized to consume coloured and marked diesel that cannot be made at the location of the supply station, namely some agricultural and forestry equipment and fixed engines, may be registered in a mobile POS terminal, in the act and place of the respective supply." establishes, implicitly, for this type of supply, the mandatory nature of the use of mobile POS terminal.

Non-observance of the Ordinance may, from the outset, cause its author to incur in administrative penalty responsibility, under article 109, no. 2, paragraph p) of the General Regime of Tax Infractions, for violation of commercialisation rules.

1. A different question, however, is whether the aforementioned violation of the rules of Ordinance no. 361-A/2008, of 12 May, further causes its author to incur in the Responsibility provided for in article 93, no. 5 of CIEC, in the case of the registration of the sale in question having been made at a moment different from that of the sale.

The Respondent understands that yes, considering that the situation falls within the expression "quantity that they sell and that are not properly registered in the computerized system underlying the assigned electronic cards".

In the Respondent's understanding, a supply made to a cardholder that is registered in the computerized system underlying the assigned electronic card, but in which the registration is not made at the moment of the supply, is not properly registered in the computerized system.

1. In the case at hand, it was proven that all supplies in question were made to cardholders and that the same were all registered in the computerized system underlying the assigned electronic card. This factual matter is not even challenged by the Respondent.

It does not result from the proven factual matter that the registrations were made at the moment of the supply. This, moreover, could only have been done if the Claimant had a mobile device, which was not the case.

It is necessary to decide whether the situation at hand falls within article 93, no. 5 of CIEC.

1. First and foremost, it should be noted as a preliminary matter that the possible tax responsibility in question lacks legal basis, in accordance with the principle of tax legality, under articles 165, no. 1, paragraph i) and 103, no. 2, of the Constitution of the Portuguese Republic and, therefore, cannot have its source in Ordinance no. 361-A/2008, of 12 May.

The "Gordian knot" of the question is in the interpretation of article 93, no. 5 of CIEC. The issue is whether the expression "are properly registered in the computerized system" requires that such registration be made at the moment of the supply, as expressed in no. 6 of the Ordinance.

The answer to this question does not appear to us to result unequivocally from the expression "properly", manifestly an indeterminate concept.

Dealing with the criteria of legal determination of semantics and referring to the criterion of hierarchy, David Duarte tells us that "(…) the meaning of the symbol that contains the uncertainty, when it appears at a lower hierarchical level, should be that which is closest to giving the lower rule content compatible with the content of the rule at the upper level" [1]

Thus, the interpretation of the rule cannot fail to be made in accordance with the criteria of article 9 of the Civil Code and in light of the applicable constitutional principles, having in mind the principle of interpretation in conformity with the constitution, since, as Jorge Miranda writes "(…) each rule must not only be grasped in the set of rules of the same law and in the set of the legal order; it must also be considered in the context of the constitutional order; and this all the more so given that the sphere of action thereof has been expanded as the center of dynamizing energies of the other rules of the positive legal order" [2]

The teleological element points to the intent being to avoid situations of supply of coloured and marked diesel by persons not holding the electronic card established for the purposes of control of the use of the product for the destinations provided for in article 93, no. 3 of CIEC [3]

In the case at hand, as well as in all cases where supplies have been registered in the computerized system in accordance with the reality of the facts, although not at the moment of the supply, the purpose of article 93, no. 5 of CIEC is achieved.

In accordance with the above, it appears to us that the interpretation of the rule should also be made in light of the constitution, and from the outset, it must be observed that the taxpaying capacity, a prerequisite of taxation (article 4, no. 1, of the General Tax Law) is not manifested in the seller of the fuel but rather in the purchaser of the same.

On the other hand, taking into account the burdensome duties of cooperation imposed on owners or those legally responsible for the operation of the stations authorized for sale to the public of coloured and marked diesel, which aims to relieve the State of its management [4] and the serious consequences provided for non-compliance therewith, there is a need to invoke the principle of proportionality, among us provided for in articles 18, no. 2, and 266, no. 2 of the Constitution.

As Jorge Bacelar Gouveia writes, the configuration of this principle "is based on an internal material limitation to the legal and public action of a discretionary nature, containing the excessive effects that may be presented in the issuance of public power measures of an ablative nature for their respective recipients" (Manual of Constitutional Law, Almedina, 4th Ed., Vol. II, pages 839-840).

The same author further tells us that "although the idea of proportionality immediately induces the sense of the prohibition of excessive legal and public action, it unfolds in three fundamental aspects by which that general concept is decomposed:

        - adequacy (Geeignetheit);

        - necessity (Erforderlichkeit); and

        - rationality or proportionality in the strict sense (Proportionalität)

(…)

"The aspect of necessity shows how, before a measure that is already considered adequate, there is an imperative to make a judgment as to its indispensability in the range of measures that, likewise, are equivalently considered apt to obtain the intended result: the measure is necessary if there is no other that is, from the point of view of its lesivity, less burdensome". (op. cit. page 842).

In the words of Diogo Freitas do Amaral "The center of concerns moves to the idea of comparison: the central operation to be performed is the comparison between an apt measure and other measures also apt. The objective of such comparison will be the choice of the apt measure that is least burdensome" (Course of Administrative Law, Almedina, Vol. II, 2011, 2nd Edition, page 143).

In the case at hand, to achieve the purposes underlying article 93, no. 5 of CIEC, it is sufficient to demonstrate that the coloured and marked diesel was sold to holders of the electronic card established for the purposes of control of its use, which is unequivocally the case when the supply is registered in the computerized system underlying it, even if such registration does not occur at the moment of the supply.

Even if the interpretation sustained by the Respondent passed the "test" of necessity, it is not seen how it could fail to violate the aspect of balance, rationality or proportionality in the strict sense considering the fact that, in cases such as those at hand, there occurs no "damage" to tax revenue, having regard to the underlying materiality.

It is not acceptable that, acknowledging the Tax Authority that sales were made to cardholders and that they were registered in the computerized system underlying the assigned cards, the possibility of fraud therefore being ruled out, still the provision of the rule in question were applied, only and solely, because the registration was not made "at the moment" [5] of the supply, a requirement that does not appear in article 93, no. 5, but rather in Ordinance no. 361-A/2008, of 12 May.

It is thus considered that, apart from the general criteria of interpretation already pointed to pointing in that direction, the principle of proportionality imposes that, in an interpretation in conformity with the constitution, the segment of the rule in question should be understood as being satisfied by the registration in the computerized system underlying the assigned electronic cards of the supplies made. This interpretation is further reinforced by consideration of the principle of taxpaying capacity, still with applicability in consumption taxation, in accordance with no. 1 of article 4 of the General Tax Law.

1. Even if it were not so, another line of considerations would lead to the procedence of the claimant's challenge.

In the provision of no. 5 of article 93 of CIEC, the legislator uses the expression "responsible" (for payment), as a consequence of the verification of the facts contained in the normative provision.

As can be read in the decision of the Constitutional Court no. 176/2010 [6] on the legal nature of the responsibility in question [7] "the responsibility of owners of supply stations for the payment of that difference, is a subsequent responsibility, derived from the non-compliance with the rules established for the sale of coloured and marked diesel".

On this expression, Inocêncio Galvão Telles tells us that "If the debtor becomes obliged to indemnify the creditor, it is said that they are responsible.

We know that this responsibility, according to the most adequate terminology, should be called obligational, because it comes from the violation of an obligation, born from a contract or another source; and that it is distinguished from extra-obligational responsibility, in which one incurs before a person of whom one is not a debtor, and whose scope is determined by exclusion of parts" [8]

The same author tells us, further, that "Civil responsibility consists of the obligation to repair the damages suffered by someone. It is about indemnifying the losses of which someone was the victim. One speaks of indemnifying because one seeks to make the injured party whole from the losses or damages, reconstructing the situation that would exist if the event causing these had not occurred (article 562)" [9]

Also in tax law, cases of tax responsibility of a person different from the one who manifested the taxpaying capacity prerequisite of the tax [10], aim at compensation for damage consisting of the tax revenue that ceased to be collected (Cf. Articles 24 to 28 of the General Tax Law).

Article 93, no. 5 of CIEC in specifying the measure of responsibility in "the difference between the level of taxation applicable to road diesel and the rate applicable to coloured and marked diesel" confirms this idea of compensation that is in line with article 566, no. 2, which provides "(…) compensation in money has as its measure the difference between the patrimonial situation of the injured party, on the most recent date that may be attended to by the Court, and that which would have existed on that date if there were no damages." This rule is a materialization of article 562 of the Civil Code "Whoever is obliged to repair a damage must reconstruct the situation that would exist, if the event that obligates to repair had not occurred" [11]

In the case at hand, there is the absence of any damage to tax revenue, to the extent that all sales of coloured and marked diesel were made to passive subjects with the right to acquire it (and registered in the computerized system underlying the assigned electronic cards).

There was no damage to tax revenue, although there may have been, in view of Ordinance no. 361-A/2008, of 12 May, an unlawful act, punishable as an administrative violation.

Having not occurred damage, there is no corresponding duty of indemnification.

To that extent and also on this ground, there is the absence of the prerequisites on which the tax responsibility in question depends [12]

1. Regarding the 9.81 litres of coloured and marked diesel without the issuance of the corresponding invoice or equivalent document in the name of the cardholder through which it was registered, the Claimant alleges that this fact was due to customers' prepayments that after having refuelled created these small discrepancies.

On this matter, the Respondent alleged that no. 12 of Ordinance no. 361-A/2008, of 12 May, establishes that "In case of typing errors or other anomalies verified in the use of POS terminals, the same should be immediately communicated, in writing, preferably by electronic mail, to DGADR, in order that the respective corrections be made" and that the situations detected do not fall within the above referred to, since they do not constitute typing errors, nor other anomalies related to the use of the POS terminal.

It so happens that, from article 93, no. 5, of CIEC, does not result the responsibility in respect of IEC for the lack of issuance of an invoice or equivalent document but, as has been seen, for the absence of registration in the electronic control system. Not being at issue coloured and marked diesel that has not been registered in the computerized system referred to in article 93, no. 5, of the Code, the tax responsibility provided for in this article does not occur.

Thus, without prejudice to the possible verification of legal consequences elsewhere, also in this part the challenge cannot fail to be procedent.

-IV- Decision

Thus, the arbitral tribunal decides:

a) To find the dilatory exceptions raised by the Respondent unfounded.

b) To find the challenge entirely procedent, declaring the illegality and consequent annulment of the tax acts challenged.

Value of the action: 8,201.38 € (eight thousand two hundred and one euros and thirty-eight cents), in accordance with the provisions of article 306, no. 2, of CPC and 97-A, no. 1, paragraph a), of CPPT and 3, no. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs against the Respondent in the amount of 918 € (nine hundred and eighteen euros) in accordance with no. 4 of article 22 of RJAT.

Let notice be given.

Lisbon, CAAD, 14 July 2015

The Arbitrator

Marcolino Pisão Pedreiro

[1] The norm of procedural legality Administrative, Almedina, Collection Theses, 2006, page 226.

[2] Manual of Constitutional Law, Coimbra Editor, 6th edition, 2007, Tome II, page 312.

[3] Write A. Brigas Afonso-M. Teixeira Fernandes in annotation to article 93 of the code of IEC, that the "new wording given to no. 5 comes to create special responsibilities for owners or those legally responsible for the operation of supply stations, regarding compliance with the regulatory provisions provided for the supply of coloured and marked diesel, being directly responsible for the payment of the difference of ISP in cases where they make supplies without complying with the regulatory provisions that oblige the mandatory use of electronic cards in all supplies made. It is intended with this measure to avoid situations of supply of coloured and marked diesel by persons who legally could not make such supplies, through the abusive use of the aforementioned microchip cards."

[4] Write António Brigas Afonso-Sérgio Brigas Afonso: "Being the IEC monophasic taxes on consumption, it would be logical that the passive subjects were the consumers, who would be obliged to present the tax declarations of the consumptions made. However, the management of a tax with this structure would be practically impossible and very burdensome for the State" (Special Consumption Taxes, in lessons of Tax Law, Coord. João Ricardo Catarino – Vasco Branco Guimarães, 4th Ed., Vol. I, 2015, page 453).

[5] To be observed that, strictly speaking, the registration at best is made immediately before the supply or immediately after, never "at the moment". It is evident that the expression "at the moment" cannot fail to be interpreted "cum grano salis".

[6] www.constitucional.court.pt.

[7] Also in view of no. 7 of Ordinance no. 234/97, of 4 April.

[8] Rights of Obligations, Coimbra Editor, 7th Edition, 1997, page 329, emphasis ours.

[9] Op. cit. page 208.

[10] Revealed through income or its use and assets, in accordance with article 4, no. 1, of the General Tax Law.
In the concrete case, it is unequivocal that the prerequisite of taxation is verified in the buyer of the coloured and marked diesel and not in the company selling the same.

[11] Apart from what is set forth above, we would understand that it would always be constitutionally problematic a possible thesis sustaining the punitive nature of the rule, as would be at issue the principle of ne bis in idem, since the taxpayer is expressly sanctioned by the rule contained in article 109, no. 2, paragraph p) and no. 6 of RGIT).
As is written in the decision of the Arbitral Tribunal of 20.09.2012, process no. 7/2011-T (Rapporteur: Professor Doctor Ana Paula Dourado), on the subject of the regime of undocumented expenses in CIRC "It can be admitted also, with the jurisprudence of the Constitutional Court and the STA, that autonomous taxation has punitive purposes (and hence it departs from the characteristics of the tax). As results from the above set forth, this regime is not similar to the Italian one, since this provides for sanctions applicable to the attempt at deduction of costs related to illegal and willful activities. But for us to be before a sanction, the legal consequence results from the violation of a duty (an unlawful act) and must have purposes of reprehension (the sanction). Admitting that our autonomous taxation is the consequence of a violation of a duty (the duty that the expenses be documented according to the rules required in CIRC), and has a purpose of reprehension (and not exclusively of collection of revenue), we will also be before a sanction. If we reach this conclusion, we raise another complex problem, which is to know if there does not result from the autonomous taxation of undocumented expenses a violation of the principle ne bis in idem. In fact, article 117 of the RGIT already contains an administrative infraction that concerns the non-compliance with the duty of delivery, exhibition or presentation of documented expenses (ie., lack or delay in the presentation or exhibition of documents or declarations)" (emphasis ours).

[12] The Central Administrative Court-South, in a decision of 22-09-2009, rendered in process 02977/09, considered that:
"therefore, it is incumbent on the challenger to prove that the 58,026.70 litres of difference determined were sold to beneficiaries of microchip card holders. And it is not enough to merely identify microchip card holders, it is further necessary to prove that those holders were effectively in 2003 clients of the challenger and that they acquired from it those quantities determined by the tax administration that are missing, and not others, which quantities each of the holders acquired, and on which dates.

    As can be foreseen, such proof is not easy to be made through testimonial evidence, considering that the challenger itself admits that they are not registered in the POS, and, in fact, we understand that such burden of proof was not fulfilled by the challenger.
    
    In fact, from the documents submitted by the challenger, only results that these are microchip card holders. On the other hand, from the testimonies of the witnesses, it does not result sufficient proof for the challenger to comply with its burden of proof, and therefore, regarding the 58,026.70 litres of coloured and marked diesel, it can benefit from the reduced rate provided for in article 74 of CIEC".