Process: 265/2018-T

Date: February 6, 2019

Tax Type: ISP

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 265/2018-T) involves a challenge to an additional ISP (Excise Tax on Petroleum Products) assessment of €5,403.06 related to colored and marked diesel (gasóleo colorido e marcado - GCM). The Claimant, a fuel distributor, contested the assessment on multiple procedural grounds, arguing incurable nullities in the inspection process. Key arguments included: (1) substantial alterations between the draft and final inspection reports regarding inventory restitution values without proper justification, violating Article 63 of RCPITA; (2) failure to describe the reasons that triggered the inspection action as required by Article 62(3)(e) of RCPITA; and (3) substantive issues regarding sales of GCM through automatic payment terminals where the Tax Authority alleged sales to non-authorized holders. The Claimant argued that the customer in question was a managing partner of the consuming entity using a valid access card, operating on credit terms where invoicing occurred separately from fuel supply. The case demonstrates important procedural safeguards in tax inspection procedures, particularly regarding modifications between draft and final reports. The arbitral tribunal scheduled two hearings under Article 18 of LFTA after the Claimant failed to attend the first, demonstrating the tribunal's commitment to allowing full evidence production despite procedural failures. The case subsidiarily requested revision of the final debt determination if annulment was not granted.

Full Decision

ARBITRAL DECISION

I - Report

  1. A..., Lda., legal entity no. ..., with registered office at Rua ... no. ..., ...-... ... (hereinafter referred to as "Claimant"), filed, on 28-05-2018, a request for arbitral determination, pursuant to article 2, no. 1, subparagraph a) and article 10, nos. 1 and 2 of the Legal Framework for Tax Arbitration, provided for in Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter abbreviated as "LFTA") and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March.

  2. The Claimant seeks an arbitral determination to declare the annulment of the additional assessment of Excise Tax (ISP) no. ... in the amount of €5,403.06 (five thousand four hundred and three euros and six cents) with the inherent legal consequences and alternatively requests the revision of the final determination of the debt.

  3. The Respondent is the Tax and Customs Authority (hereinafter referred to as "Respondent").

  4. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority, on 28-05-2018.

  5. Pursuant to subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of the LFTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council of CAAD appointed as arbitrator of the singular arbitral tribunal His Excellency Dr. Olívio Mota Amador who, within the applicable time limit, communicated acceptance of the appointment.

  6. The parties were notified, on 16-07-2018, of the arbitrator's appointment and did not manifest any desire to refuse the appointment, pursuant to the combined provisions of article 11, no. 1, subparagraphs a) and b) of the LFTA and articles 6 and 7 of the CAAD Deontological Code.

  7. In accordance with the provisions of article 11, no. 1, subparagraph c) of the LFTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Arbitral Tribunal was constituted on 06-08-2018.

  8. The Respondent, duly notified through the arbitral order of 23-08-2018, filed, on 02-10-2018, its Response and on the previous day submitted the Administrative File to the Arbitral Tribunal.

  9. The Arbitral Tribunal, by order of 04-10-2018, notified the Claimant to indicate the facts regarding which it requested the examination of the witness and to identify the managing partner for purposes of examination in the proceedings.

  10. On 15-10-2018, the Claimant indicated the facts regarding which it intended to examine the witness and identified the managing partner.

  11. The Arbitral Tribunal, by order of 22-10-2018, scheduled for 7 November at 11 a.m. the meeting provided for in article 18 of the LFTA, and on that date the witness and the managing partner of the Claimant were heard. On the scheduled date and time, only the Respondent appeared; the Claimant did not attend the hearing.

  12. The Arbitral Tribunal, by order of 07-11-2018, notified the Claimant to present justification, if it so wished, within five days, for its failure to attend the meeting provided for in article 18 of the LFTA, scheduled through the arbitral order of 22-10-2018.

  13. The Claimant, on 13-11-2018, stated that it had not been notified of the date of the meeting provided for in article 18 of the LFTA and requested the scheduling of a new date for holding said meeting.

  14. The Arbitral Tribunal, by order of 16-11-2018, determined: (i) As appears from the file, the arbitral order of 22 October was validly notified to the Representative of the Claimant. Thus, the justification for the failure to attend the meeting, for purposes of article 18 of the LFTA, presented by the Representative of the Claimant is devoid of foundation; (ii) Notwithstanding the foregoing, the Arbitral Tribunal does not intend to limit the production of evidence presented by the Claimant. Accordingly, taking into account the provisions of article 19, no. 2 of the LFTA, the date of 17 December at 11 a.m. is designated as the new date for holding the meeting provided for in article 18 of the LFTA; (iii) At the meeting referred to in the preceding paragraph, witness B... and the managing partner of the Claimant, C..., shall be examined; (iv) The request for notification of the managing partner at the company's registered office is dismissed.

  15. The Arbitral Tribunal, on 17-12-2018, proceeded to examine witness B... and the managing partner of the Claimant, C..., pursuant to the minutes that appear in the present arbitral proceedings and which are hereby, for all purposes, deemed fully reproduced. The Tribunal also notified the Claimant and the Respondent to present their written submissions in that order and successively, within 15 days. The date of 06-02-2019 was designated as the date for rendering the arbitral decision.

  16. The submissions were presented by the Claimant on 02-01-2019 and by the Respondent on 22-01-2019.

  17. The position of the Claimant, in accordance with the provisions of the request for constitution of the Arbitral Tribunal and in the submissions, is, in summary, as follows:

17.1. Since table no. 19 of the draft inspection report (see doc. 1) referred to the restitution of inventories from the year 2015, which resulted in the value of €463.72, and table no. 19 of the final inspection report presents the restitution of inventories of coloured and marked diesel ("GCM" — gasóleo colorido e marcado) for the dates from 01-01-2015 to 24-07-2017, resulting in a value of "-€485.68" (see doc. 2). There is a substantial alteration of facts in the process pursuant to article 60 of the Supplementary Regime of Tax and Customs Inspection Procedure (RCPITA) (articles 60/63, no. 1 subparagraph c) and article 3, b) of the General Regime of Tax Infractions (RGIT), article 41 of Decree-Law no. 433/82, of 27 October and articles 118 et seq. and article 359 of the Code of Criminal Procedure).

17.2. We are inevitably facing an incurable nullity pursuant to the articles aforementioned above. The Tax Administration violated the provisions of article 63 of the RCPITA, since no justification whatsoever for the said difference between the draft decision and the final report had been presented.

17.3. The Respondent does not justify the fact that gave rise to this inspection action. Thus, there is a clear violation of article 62, no. 3, subparagraph e) of the RCPITA, according to which the report must contain "(…) Description of the reasons that gave rise to the procedure, with an indication of the number of the work order or the order that motivated it"

17.4. The now Claimant is accused of the existence of sales of GCM through the PAC (automatic payment terminal) without the corresponding registration in the TPA (automatic payment terminal), carried out to non-holders of electronic cards without registration in the TPA. However, the customer in question is a managing partner of the consuming entity. We are in the presence of a customer "on credit" to whom invoicing is performed at a moment different from the actual supply, with a credit slip being delivered at the time of fueling that will give rise to the invoice at a later date. This slip identifies the consumer solely by name, with no mention of tax identification number (NIF) or business identification number (NIPC), making it impossible to detect any anomaly between the customer who used the access card and the recipient of GCM.

17.5. It is not unreasonable for the Claimant to presume that the buyer is effectively the end consumer, since the respective access card was presented and there was no need to verify a second time, given that this is a recurring customer to whom the Claimant extends the trust that is due to him.

17.6. The end consumer identified in the draft decision had closed the individual credit account and opened a new one in the name of the company without ever making any mention of the GCM beneficiary number. It was his responsibility to provide that information, never the Claimant's. Thus, the Claimant presumed that the sale was being made to the holder of the access card used, since it is only its obligation to verify whether the buyer actually holds or does not hold that same access card.

17.7. More importantly, these credit slips or delivery notes are certified by the Tax Administration. The Claimant issued an invoice in the name of the presumed holder, to whom it normally provides services and who appeared to be no different this time.

17.8. Although it is legally provided that it is up to the Tax Administration itself to provide proof of the accusation pursuant to article 74 no. 1 of the General Tax Law (LGT). Which it did not do. The Tax Administration continues to require conduct, obligations and responsibilities in forms and means that are not legally required of the Claimant. Thus violating the principles stipulated in articles 58, 59, 63, 72, 74, 77, 87 and 88 of the LGT, articles 266 and 268 of the Portuguese Constitution (CRP), articles 2, 5, 6, 7 and 9 of the RCPITA.

17.9. The Claimant is accused of sales of GCM through the PAC, without the corresponding registration in the TPA, namely sales to non-holders of electronic cards without registration in the TPA. This irregularity resulted from willful and fraudulent conduct by a worker in its service, who allegedly "sold" fuel to third parties. The Labor Code expressly provides protection for employing entities in such cases (see no. 1 of article 323 of the Labor Code).

17.10. The Claimant is also accused of allegedly having sales to holders of electronic cards without registration in the TPA. First, it is important to note that during the inspection it is possible to identify an error on the part of the Tax Administration services, as with regard to "invoice FA/22830," indicated by the Tax Administration as having been issued on the same day to two different entities (D..., Lda and E...). However, the quantities indicated in the respective fields can never be taken into account since the evaluation in this specific case suffers from technical irregularities on the part of the Tax Administration.

17.11. The Claimant considers it important to take into account the following documents: (i) FC..., in the name of F... in relation to the Company G..., Lda., (see table 18 of the Inspection Report); (ii) FC ... F ... and FC ... in relation to his father H... (see table 18 of the Inspection Report).

17.12. As to the first situation, the credit account is in the name of the customer even though the electronic card is in the name of the company of which he is a managing partner (company G..., Lda.).

17.13. The second situation is similar, since the customer I... has the credit account in his name and is also a holder of an electronic card. In both supplies, the customer used his father H...'s card.

17.14. The credit slip does not have a field for inclusion of the business identification number (NIPC). Therefore, upon delivery of the card and respective payment, the Claimant cannot identify who is the card holder. Hence, it always issues the respective invoice in the name of the customer holding the credit account.

17.15. And as already mentioned, the obligation to communicate a change in the holder of the access card to the competent entities rests with the end customer, never with the Claimant. Responsibilities for the conduct or failures of third parties can never be attributed to the Claimant.

17.16. The Claimant is further accused of carrying out sales of GCM without valid tax identification number and without registration in the POS, more specifically regarding the analysis of table no. 15 (see docs. 1 and 2). Note that in this case there is the document V... which appears both in table 15 which refers to sales of GCM without valid tax identification number and without registration in the POS, as well as in table 17 which in turn refers to sales of GCM without valid tax identification number and with registration in the POS (see docs. 1 and 2). In these two situations, the customer chose not to associate the name with the invoice issued.

17.17. Note that payment is only made after the supply and fueling of fuel, so the Claimant does not have the means to obtain the tax identification number of these customers.

17.18. But because the Claimant always issues the respective invoice for its services, it understood that the best solution to practice would be to issue them under the name of "End Consumer."

17.19. It is also important to mention the situation relating to "J... – Agricultural Company." In this case, what happened was an offsetting of accounts between the Claimant and the consumer, which occurred within the legally stipulated time period for that purpose. Thus, the Claimant opted to proceed with a correction of two fueling transactions in the following 60 days instead of communicating the write-off of 1000 liters of GCM, which appears in table 19. This procedure is provided for in article 58 of the RCPITA. The Claimant does not understand how, once again, the Tax Administration made an error in the inspection, since this is easily verified through the analysis of invoices "..." and "..."

17.20. The Respondent thus violated the assessment in question, namely, and furthermore, articles 58, 59, 63, 72, 74, 77, 87 and 88 of the LGT, articles 266 and 268 of the CRP, articles 2, 5, 6, 7 and 9 of the RCPITA. Making it clear that the inspection report suffers from numerous defects that translate into the illegality of the procedure in question. There is thus a violation of the principle of tax legality pursuant to article 8 of the LGT.

  1. The position of the Respondent, expressed in the response and in the submissions, may be summarized as follows:

18.1. Analyzed, within the scope of the inspection action, the records and sales invoices of the Claimant, it was found that only terminal 450673 was used to register GCM sales based on microchip/electronic cards, and the following was determined, in accordance with information extracted from Table no. 9 of the action report: (i) the quantities of GCM sales recorded in accounting and those recorded in the terminal, in the year 2015, result in a difference of 1,447.72 liters; (ii) in 2016, according to the same calculation method, there results a difference of -1,016.91 liters; (iii) With reference to the year 2017, there is a difference of 85.87 liters

18.2. The facts referred to in the preceding paragraph, taking into account the applicable legal provisions, contained in the Code of Excise Duties on Energy Products (CIEC) and Ordinance no. 361-A/2008, of 12 May, constitute a violation of the GCM commercialization regime.

18.3. According to the Inspection Report the following irregularities were identified: (i) Sales of GCM to non-holders of electronic cards; (ii) Sales of GCM that were not subject to registration in the TPA/POS; (iii) Sales of GCM with invoices without identification of the electronic card holder (without tax identification number); (iv) Sales of GCM without issuance of an invoice in the name of the electronic card holder; (v) Sales of GCM without sales support (resulting from the reconstitution of inventories).

18.4. The legislator intended that the tax benefit of the application of reduced rates to GCM be subject to the following requirements: (i) GCM can only be supplied or sold by holders of properly licensed fueling stations that are holders of automatic payment terminals — point of sale, TPA-POS (TPA Terminals); (ii) GCM can only be sold at fueling stations to beneficiaries of an exemption or reduction of the ISP tax rate who are holders of microchip/electronic cards, which are personal and non-transferable and through which all colored and marked diesel transactions are recorded in the computer system managed by Interbank Services Company (SIBS); (iii) Such electronic cards were instituted for purposes of controlling the allocation of GCM to legally provided destinations; (iv) Such sales are mandatorily recorded in the computer system, through TPA Terminals, at the moment they occur; (v) Registration in the computer system, through TPA Terminals, of each supply carried out 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; (vi) In case of typing errors or other anomalies verified in the use of TPA Terminals, these must be immediately communicated; (vii) The owner or the person legally responsible for operating the stations authorized for the sale of GCM is responsible for payment of the amount of tax resulting from the difference between the taxation level applicable to road diesel and the rate applicable to GCM: (a) In relation to quantities they sell that are not duly recorded in the electronic control system; (b) In relation to quantities for which the corresponding invoices are not issued in the name of the card holder.

18.5. As regards the reference to the General Regime of Tax Infractions (RGIT) and the possible prejudice that would result for the Claimant due to the fact that in table no. 19 in the final report, for the dates 01.01.2015 to 24.07.2017, the value of € 485.68 appears as inventories, in contrast to € 463.72 for the year 2015, such conclusion is also not understood given that, in the context of an infraction procedure, for purposes of qualifying the conduct as a misdemeanor or crime (articles 96, no. 1 and 109 of the RGIT), the value of the tax amount that is determinative for such qualification is € 15,000, a value much higher than that at issue in the present action (€ 5,403.06). This is because criminal or administrative responsibility in the sphere of tax and customs infractions, on one hand, and subjective incidence and tax responsibility (and respective tax debt exigibility) in the sphere of ISP, on the other, obey different requirements, and are governed by rules of different national (legal and constitutional) and community sources, and in case of irregularities, the facts may give rise to criminal or administrative responsibility, with or without constitution of a tax debt, in the same way that a tax debt may be constituted without the requirements of criminal or administrative responsibility being met in the sphere of the debtors, and these must be analyzed independently.

18.6. It is thus found that, given the reasons, both factual and legal, contained in the final inspection report that support the ISP assessment, which is the object of the present dispute, the Report is properly substantiated, being perfectly clear for the normal recipient.

18.7. Notwithstanding the fact that it has already been stated previously that the Report complies with the provisions of article 62 of the RCPITA, insisting the Claimant on the existence of a violation of subparagraph e) of no. 3 of article 62, reference is made to Part II of the Report relating to "Objectives, Scope and Extent of the Inspection Action" which refers to the "Credentials and period in which the action took place."

18.8. The regulation of GCM commercialization by fueling stations is established in Ordinance no. 361-A/2008, of 5/12, and its obligations are of general knowledge and mandatory compliance. In particular, it results from article 5 of Ordinance no. 361-A/2008 that "Colored and marked diesel can only be sold at fueling stations to beneficiaries of an exemption or reduction of the ISP tax rate who are holders of microchip cards" and it follows from article 11 of the same ordinance that "Colored and marked diesel can only be supplied (…) after verification (…) of the requirements and conditions required under applicable legislation and the assignment to the respective beneficiaries of the card referred to in no. 5". A card which, pursuant to article 6 of Ordinance no. 117-A/2008, is personal and non-transferable. Thus, it results from articles 5 and 11 of Ordinance no. 361-A/2008 that the sale of GCM presupposes prior verification of the use of a valid electronic card by the respective beneficiary of the electronic card, and the holder of a GCM fueling station cannot disclaim compliance with such obligation by alleging deficiencies and/or difficulties in internal control, for which he alone is responsible.

18.9. Indeed, the Claimant had at its disposal all the elements that would allow it to detect the irregularities given that at the time of fueling it issued two documents relating to the same operation (credit slip and POS registration slip), with both documents or a copy thereof remaining in its possession until the time of invoicing, so it could and should have verified the regularity of the operation. Furthermore, since the purchaser is a legal entity and the beneficiary is a private taxpayer, the margin for non-detection of such irregularity is even more reduced, and likewise, the alleged error and/or negligence on the part of the purchaser of GCM is not acceptable.

18.10. No. 5 of article 93 of the CIEC clearly establishes the level of responsibility of the owners or persons legally responsible for operating fueling stations, as well as the situations in which such responsibility arises. Indeed, that provision creates "special responsibilities for the owners or persons legally responsible for operating fueling stations, regarding compliance with the regulatory provisions provided for the supply of colored and marked diesel, being directly responsible for payment of the difference in ISP in cases where they carry out supplies without complying with the regulatory provisions that require mandatory use of electronic cards in all supplies carried out," as stated by A. BRIGAS AFONSO/MANUEL T. FERNANDES, in Code of Excise Duties anotated and updated, 3rd edition, Coimbra Editora 2011, p. 201.

18.11. As for the sales of GCM to non-holders of microchip cards included in Section IV, point B.8.2.1. (and Table 11) of the Report, corresponding to the sale of 370.01 liters of GCM to a non-holder of electronic card without the corresponding registration in the TPA/POS, the argumentation of the Appellant lacks legal foundation, given that, as follows from the above-mentioned, no. 5 of article 93 of the CIEC, establishes the objective tax responsibility of the owner or person legally responsible for operating the stations authorized for public sale, in relation to the quantities they sell in disregard of the GCM commercialization rules.

18.12. The jurisprudence has pronounced itself in the same sense, namely the arbitral jurisprudence, in CAAD Process no. 483/2014-T.

18.13. During the inspection, the sale of 1,886.80 liters of GCM was also identified without the corresponding registration in the TPA/POS, which contradicts the provisions of articles 5 and 6 of Ordinance 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC. In this type of irregularity are included the situations described in Section IV, point B.8.2.2. of the Report (and Table no. 12).

18.14. Now, regarding the alleged error in the report relating to invoice FA/22830 of 09-03-2015, there was indeed an error which was handled and corrected during the prior hearing, and the quantity corresponding to that invoice was eliminated from the table of the determined debt.

18.15. However, as for the sale of 65 liters of GCM to the company "D..., Lda", a sales document was issued with no. DOC... of 09-03-2015 and not invoice FA/22830, and this transaction was not duly registered in the TPA/POS, so as to this situation, it was not eliminated from the debt table.

18.16. As for the other situations identified of sales of GCM without the corresponding registration in the TPA/POS, taking into account the obligations arising from articles 5 and 6 of Ordinance no. 361-A/2008, the holder of a GCM fueling station cannot disclaim compliance with such obligation by alleging deficiencies and/or difficulties in internal control, nor the error and/or negligence of third parties. Also, as to these transactions, the objective tax responsibility of the owner or person legally responsible for operating the stations authorized for public sale is verified, in relation to quantities they sell that are not duly recorded in the electronic control system, provided for in no. 5 of article 93 of the CIEC.

18.17. The sale of 4,670.77 liters of GCM was identified, invoiced without the identification of the electronic card holder, which contradicts the provisions of article 8 of Ordinance 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC. Included in this type of irregularity are the situations described in Section IV, point B.8.5., B.9. and B.9.1. (and Tables 15, 16 and 17) of the Report, corresponding to the sale of 864.91 liters of GCM without valid tax identification number (and without registration in the TPA/POS), and to the sale of 3,805.86 liters of GCM without valid tax identification number and with registration in the TPA/POS.

18.18. The obligation to issue invoices arises in general terms from the Code of Value Added Tax (CIVA) approved by Decree-Law no. 394-B/84, of 18/12, article 29, no. 1, subparagraph a) combined with article 36, and in the case of the sale of GCM there is a special obligation to issue invoices in the name of the beneficiary holding the access card to that product, arising from article 8 of Ordinance 361-A/2008. The requirement of issuing an invoice in the name of the card holder, introduced by Law no. 82-B/2014 (State Budget Law for 2015) in no. 5 of article 93 of the CIEC, constitutes in itself a cause for responsibility for payment of the relevant IEC, in relation to quantities for which the corresponding invoices are not issued in the name of the holder. So in the case of GCM transmissions, the argument that the customer does not wish to associate the name with the invoice does not hold, as this is not a legally valid option.

18.19. During the inspection, undocumented sales of GCM were also identified, which contradicts the provisions of article 8 of Ordinance 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC. Included in this type of irregularity are the following situations: 1.) Those described in Section IV, point B.10. (and Table 18) of the report, relating to the sale of 3,927 liters of GCM without issuance of the respective accounting document (invoice), which results from the identification of supply records (in the TPA/POS) for which no sales invoice could be matched; and 2.) The sale of 485.58 liters of GCM (which results from the reconstitution of inventories in the period under analysis (from 01-01-2015 to 24-07-2017)), for which the respective sales support (invoice) could not be identified (Table 19 of the Report).

18.20. With regard to sales of GCM without issuance of invoices, the Appellant only particularizes one matter, as appears from articles 161 to 169 of the PI, which has already been adequately dealt with in the report, to which reference is made. It is thus concluded that, in light of the provisions of no. 5 of article 93 of the CIEC and no. 8 of Ordinance no. 361-A/2008, the owner or person legally responsible for the fueling station authorized for public sale is fiscally responsible for quantities for which corresponding invoices have not been issued, and therefore the ISP is due on the quantities determined.

II - Clarification

  1. The parties have legal capacity and standing, are properly represented and duly legitimated (articles 4 and 10, no. 2 of the LFTA and article 1 of Ordinance no. 112-A/2011, of 22 March).

The tribunal is competent and properly constituted.

The proceedings do not suffer from any nullities.

No exceptions were raised.

There are no other circumstances preventing the tribunal from deciding the merits of the case.

Under these circumstances, the Arbitral Tribunal is properly constituted to examine and decide the object of the proceedings.

III - Merits

III.1. Factual Matters

20. Proven Facts

20.1. With relevance for the examination and decision of the questions raised, the following facts are established and proven:

  • The Claimant is a company with Principal CAE 47300 (retail trade in fuel for motor vehicles) that operates a fuel supply station, located at Rua ... no. ... ...-... ..., where it sells colored and marked diesel (GCM);

  • The Claimant was subject to an inspection action (OI 2017...) conducted between 24-07-2017 and 04-09-2017 by the Delegation of ... of the Customs of Braga, included in the Local Program of Inspection Actions, with the main objective of assessing the level of compliance with the tax regime applicable to petroleum products and, more specifically, to colored and marked diesel (GCM) and the records made in the POS (Point of Sales) terminals installed at the fueling station, in the period between 01-01-2015 and 12:30 hours on 24-07-2017.

  • On 04-09-2017, the Claimant was notified of the draft Inspection Report to exercise the right to prior hearing, pursuant to article 60, no. 1 of the RCPITA, having exercised such right on 19-09-2017.

  • The Claimant was notified of the Final Inspection Report, through official letter no. ... of the Customs Delegation of ..., dated 09-10-2017.

  • The Final Inspection Report, which is hereby, for all legal purposes, deemed fully reproduced, states:

"I.3 The sale of 8,419.02 liters of GCM (table no. 10 and no. 11) was found, such that at the date of the supplies the customers were not holders of electronic cards, which contradicts the provisions of point 6 of Ordinance no. 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC, and constitutes an infraction provided for and punishable under subparagraph q) of no. 2 of article 109 of the General Regime of Tax Infractions (RGIT), approved by Law no. 15/2001, of 05 June;

I.4 The sale of 1,886.80 liters of GCM (table no. 12) was detected, without the corresponding registration in the TPA/POS, which contradicts the provisions of points 5 and 6 of Ordinance no. 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC, and constitutes an infraction provided for and punishable under subparagraph p) of no. 2 of article 109 of the RGIT;

I.5 The issuance of invoices without the corresponding tax identification number was identified, in the quantity of 4,670.77 liters of GCM (table no. 15, no. 16 and no. 17), which contradicts the provisions of point 8 of Ordinance no. 361-A/2008, of 12 May and no. 5 of article 93 of the CIEC, since, notwithstanding the registration of supplies in the TPA/POS, the issuance of the respective invoice in the name of the electronic card holder is mandatory and constitutes an infraction provided for and punishable under subparagraph p) of no. 2 of article 109 of the RGIT;

I.6 From comparative analysis between the registrations in the TPA/POS and the invoices, registrations of supplies were identified for which no corresponding invoice was found, totaling 3,927 liters of GCM (table no. 18), which contradicts the provisions of point 8 of Ordinance no. 361-A/2008, of 12 May and constitutes an infraction provided for and punishable under subparagraph p) of no. 2 of article 109 of the RGIT;

I.7 With the elements relating to the total of sales and purchases, making the reconstitution of inventories in the period under analysis (01-01-2015 to 24-07-2017) based on initial inventory, purchases and documented sales and regularizations, reflected in tables no. 7 and no. 19, the final accounting inventory (theoretical) of 11,285.65 liters of GCM was determined so that, when comparing this value with the measured at retail (10,800.00), there was less GCM than would be expected, with 485.68 liters having been sold for which no corresponding sales support was identified;

I.8 The debt was determined in the total amount of € 5,124.47 (five thousand one hundred and twenty-four euros and forty-eight cents), corresponding to this value to € 3,408.15 of Tax on Petroleum and Energy Products (ISPPE) and € 1,716.32 of Road Tax Contribution (CSR) as demonstrated in table 21;

I.9 To the amount of the debt determined, compensatory interest accrues, under the terms of article 35 of the General Tax Law (LGT) approved by Decree-Law no. 398/98, of 17 December."

  • By order of the Head of the Customs Delegation of ... of 13-10-2017, the Claimant was notified to proceed, under the terms of no. 2 of article 12 of the CIEC, with the payment to the Treasury of the Customs Delegation of ... of the amount of € 5,403.06 (five thousand four hundred and three euros and six cents) assessed in the context of the debt collection process no. .../2017.

  • The Claimant filed, on 14-11-2017, a request for administrative reconsideration against the tax act (subsequent debt collection process no. .../2017) arising from the inspection action identified in subparagraph B) above.

  • By official letter no. ..., of 25-01-2018, the Claimant was notified to exercise its right to prior hearing with respect to the request for administrative reconsideration identified in the preceding paragraph, having done so.

  • The Director of the Customs of Braga, by order of 23-02-2018, dismissed the request for administrative reconsideration, which was notified to the Claimant through official letter no. ..., of 27-02-2018.

20.2. Unproven Facts

There are no other facts with relevance for the examination of the merits of the case that have not been proved.

20.3. Justification of the Factual Matters

With respect to the factual matters, taking into account the provisions of article 123, no. 2 of the Code of Tax Procedure (CPPT) and article 607, no. 3 of the Code of Civil Procedure (CPC), applicable by virtue of article 29, no. 1, subparagraphs a) and e) of the LFTA, the Tribunal does not have to pronounce on everything that was alleged by the parties; it is incumbent upon the Tribunal to select the facts that matter for the decision and to distinguish the proven matters from the unproven matters.

Thus, in accordance with the provisions of article 596 of the Code of Civil Procedure (CPC), applicable by virtue of article 29, no. 1, subparagraph e) of the LFTA, the facts pertinent to the judgment of the case were selected and delimited according to their legal relevance, which was established taking into account the legal questions raised.

As to the factual matters deemed proven, the conviction of the Arbitral Tribunal was based on the free evaluation of the documentary evidence submitted to the file, whose authenticity was not questioned, as well as on the analysis of the administrative file submitted by the Respondent and on the testimony of witness B... and the managing partner of the Claimant C..., who appeared impartial in their testimony and demonstrated knowledge of the facts they reported.

Having considered the positions taken by the parties, in light of article 110, no. 7 of the CPPT, the documentary evidence and the Administrative File submitted to the file, and the testimony mentioned above, the facts listed above were considered proven, with relevance for the decision.

III.2. Legal Matters

  1. The questions to be decided in the present proceedings are two. The first consists of determining whether the defects of the Customs Inspection Report, alleged by the Claimant, determine the annulment of the act of additional assessment of ISP in question. In the second, it is a matter of investigating the legality of the additional assessment of ISP arising from the Claimant's practices in the commercialization of GCM identified in the Customs Inspection Report.

It is necessary to examine these.

  1. Diesel intended to be used in agricultural activities, fishing, rail transport and other uses expressly provided for by law is subject to transmission at a reduced rate. Hence, this diesel has a specific coloring and fiscal mark, being called colored and marked diesel (GCM). The existence of this fiscal benefit implies the creation of mechanisms designed to prevent fraud and evasion and to ensure that the use of this fuel is intended only for the purposes established in law.

  2. The subject matter addressed in the present arbitral proceedings needs to be previously examined within the applicable legal framework, which is composed of several legal and regulatory standards.

23.1. The fiscal regime relating to GCM is provided for in the Code of Excise Duties on Energy Products (CIEC), approved by Decree-Law no. 73/2010, of 21 June, which in article 93, as amended by Law no. 64-B/2011, of 30 December applicable to the case, establishes the following:

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

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

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

a) Stationary motors used in irrigation;

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

c) (As amended by article 211 of Law no. 42/2016, of 28 December) Agricultural tractors, combine harvesters, rotary tillers, walking tillers, motor reapers, self-propelled potato harvesters, pea harvesters, silage forage harvesters, tomato harvesters, mower conditioners, grape harvesters, trunk vibrators for harvesting olives and other fruits, as well as other equipment, including those used for aquaculture activities and fishing with artisanal nets, approved by ordinance of the members of the Government responsible for the areas of finances, agriculture and the sea;

d) Rail passenger and freight transport vehicles;

e) Fixed motors;

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

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

5 — Colored and marked diesel can only be acquired by holders of the electronic card instituted for purposes of controlling its allocation to the destinations referred to in no. 3, and the owner or person legally responsible for operating the stations authorized for public sale is responsible for payment of the amount of tax resulting from the difference between the taxation level applicable to road diesel and the rate applicable to colored and marked diesel, in relation to quantities they sell that are not duly recorded in the electronic control system, as well as in relation to quantities for which the corresponding invoices are not issued in the name of the card holder (as amended by Law no. 82-B/2014, of 31 December).

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 purposes of this article, fixed motors are understood to be motors intended for energy production and that, cumulatively, are installed on immovable platforms.

8 — Until the technical conditions exist for the implementation of heating diesel with the characteristics provided for in Annex VI of Decree-Law no. 89/2008, of 30 May, colored 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 colored 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."

23.2. Under the terms of article 5 of Decree-Law no. 73/2010, of 21 June, which approved the CIEC "The regulatory provisions of the Code of Excise Duties on Energy Products, approved by Decree-Law no. 566/99, of 22 December, contained in ordinance or ministerial order remain in force until the entry into force of the regulation provided for in the CIEC." As a result of this rule, it is necessary to consider the provisions of Ordinance no. 117-A/2008, of 8 February, and Ordinance no. 361-A/2008, of 12 May, both approved during the validity of the previous Code of Excise Duties on Energy Products.

23.3. Ordinance no. 117-A/2008, of 8 February, amended by Ordinances no. 762/2010 of 20 August and no. 206/2014 of 8 October, regulates the formalities and procedures applicable to the recognition and control of exemptions and reduced rates of the tax on petroleum and energy products (ISP), provided for in no. 1 of article 71 and article 74 of the previous CIEC, and which are currently provided for in no. 1 of article 89 and article 93 of the CIEC. Article 2 establishes:

"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 paragraph may benefit from exemption or the application of a reduced tax rate, provided that they comply with the following conditions:

a) Such activity is properly declared, under the terms of applicable tax legislation, except when dispensed by law or by the nature of the exemption;

b) Their tax and social security situation is regularized;

c) They have complied with their declarative obligations in income tax and value added tax."

Regarding the use of a microchip card to achieve the tax benefit, article 5 provides the following:

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

The referred microchip cards, under the terms of article 6, are "(…) personal and non-transferable, with their respective holders being responsible for their proper use." The obligations of the beneficiaries are, in accordance with article 7, the following:

"Beneficiaries are subject, under penalty of incurring a tax infraction, to the following obligations:

a) Inform the competent authorities of any change in the requirements of the tax benefit;

b) Inform other relevant changes, namely change of location of authorized installations or equipment, transfer of ownership of equipment as well as the assignment or replacement of these;

c) Cooperate with the competent authorities in conducting any controls that may be determined, in order to prove the effective allocation of products to the destinations or uses with tax benefit and provide all information elements requested."

Article 8 further establishes the following obligations for beneficiaries who are holders of a microchip card:

"Beneficiaries who are holders of a microchip card for the supply of colored and marked diesel, are further obliged to:

a) Return the microchip card in case of cessation of the requirements of the benefit, within a maximum of five business days;

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

Articles 11 to 13 define the regime of revocation of the tax benefit as follows:

"Article 11

The violation of the requirements of the tax benefit constitutes grounds for revocation of the authorization of the tax benefit, without prejudice to instituting proceedings for tax infraction under the terms provided for in the General Regime of Tax Infractions, as well as non-compliance by the beneficiary with the conditions required in no. 2.

Article 12

In case of violation of the requirements of the tax benefit, the tax that is shown to be owed is further assessed.

Article 13

For purposes of the preceding article, a violation of the requirements of the tax benefit is considered to exist, namely, in case of:

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

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

c) Use of products in unauthorized equipment.

(…)"

As regards the reduced ISP rates for use in agricultural and forestry equipment, article 55 states: "The application of a reduced ISP rate to the equipment provided for in subparagraphs a) and c) of no. 3 of article 93 of the CIEC covers the uses that, for the purposes of this ordinance, are referred to as agricultural, aquaculture and forestry equipment." Articles 56 to 62 define the regime as follows:

"Article 56

The requests for tax benefit are, in the case of agricultural and forestry equipment, submitted to the regional directorates of agriculture and fisheries, which proceed with their instruction, or, in the case of aquaculture equipment, submitted to the DGRM or the ICNF, I. P., according to the areas of their respective competences, which proceed with their instruction.

Article 57

Without prejudice to the provisions of subparagraph a) of article 2, the exercise of a declared activity may be dispensed for beneficiaries whose annual indicative or reference ceilings do not exceed 3,600 liters.

Article 57-A

The provisions of the preceding paragraph do not apply to equipment used in aquaculture activity.

Article 58

Tax benefit requests, in addition to the documents provided for in no. 4, must further be accompanied by a manifest, containing the identification of the equipment intended to be supplied with colored and marked diesel, as well as proof of their respective ownership or legitimate possession.

Article 59

The verification of ownership or legitimate possession of the equipment manifested must take into account, in particular, the following criteria:

a) In the case of wheeled agricultural tractors, the respective log book and title of property registration or single document must be presented;

b) For the remaining equipment, the respective acquisition document or declaration issued by the local parish council of the candidate's area must be presented, attesting its legitimate possession;

c) In case the equipment constitutes the property of third parties, a statement of assignment must be presented in conformity;

d) For areas irrigated by diesel-driven pumping, proof of the respective ownership must be presented, namely property record, lease contract or assignment statement.

Article 60

Once the instruction of the request is completed, the DGADR, the DGRM and the ICNF, I. P., in the areas of their respective competences, send weekly to the Tax Administration a list on computer media, with proposed decision of the requests received, respectively, by the regional directorates of agriculture and fisheries, by the DGRM or by the ICNF, I. P., for purposes of recognition of the tax benefit.

Article 61

The competent authorities for the re-evaluation of the requirements of the tax benefit, as well as for purposes of compliance with the provisions of nos. 7 and 8, are the DGADR, the DGRM and the ICNF, I. P., in the areas of their respective competences, with all situations that entail being communicated to the Tax Administration:

a) Recognition of a new tax benefit;

b) Revocation of a tax benefit.

Article 62

For purposes of the preceding article, beneficiaries must inform, at the regional directorates of agriculture and fisheries competent, of the DGRM, the ICNF, I. P., or of the institutions properly accredited for this purpose by these, of any change in the requirements of the tax benefit, namely the cessation of activity, or other relevant changes, such as changes in the authorized equipment, transfer of ownership of equipment, assignment or replacement of these, or changes in areas irrigated by diesel-driven pumping."

23.4. Ordinance no. 361-A/2008, of 12 May, establishes the rules for commercialization of GCM and respective control mechanisms to ensure the correct allocation of the product only to the destinations that benefit from the exemption or application of reduced tax rates. From article 3, it is important to highlight nos. 2 to 12, which have the following content:

"2. Colored and marked diesel is a product of conditional sale, whose availability in the national market can only be carried out by petroleum companies that have entered into a contract with the State, represented by the Directorate-General of Agriculture and Rural Development (DGADR), for this purpose, in which they undertake to make available the public sale of colored and marked diesel, in the proportion of at least one fueling station for every 600,000 liters sold.

  1. Colored and marked diesel can only be supplied or sold by holders of properly licensed fueling stations who are holders of point of sale terminals (POS).

  2. The provision of the preceding paragraph applies to distributors, provided they also have POS terminals.

  3. Colored and marked diesel can only be sold at fueling stations to beneficiaries of an exemption or reduced ISP rate who are holders of microchip cards issued for this purpose by the DGADR, through which all colored and marked diesel transactions are recorded in the computer system managed by the Interbank Services Company (SIBS).

  4. The sales referred to in the preceding paragraph are mandatorily recorded in the POS terminals at the moment they occur.

  5. Supplies to equipment authorized to consume colored and marked diesel that cannot be made at the location of the fueling station, namely some agricultural and forestry equipment and fixed motors, may be recorded in a mobile POS terminal, at the time and place of the respective supply.

  6. The recording in the computer system, through the POS terminals, of each supply carried out 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.

  7. The records of the transactions referred to in no. 5 are sent on computer media by SIBS to the DGADR, which, in addition to the national coordination functions incumbent upon it, manages the database relating to colored and marked diesel and is responsible for issuing, suspending or canceling the cards.

  8. The installation of POS terminals, as well as any change in their location, must be communicated by the petroleum companies to the DGADR and to the Directorate-General of Customs and Special Consumption Taxes (DGAIEC), mandatorily, within a maximum of five business days.

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

  10. In case of typing errors or other anomalies verified in the use of POS terminals, these must be immediately notified, in writing, preferably by electronic mail, to the DGADR, in order to carry out the respective corrections."

23.5. From the legal framework, contained in the preceding numbers, it follows that the application of reduced ISP rates to the consumption of GCM is subject to cumulative verification of various requirements, such as, GCM being acquired by electronic card holders, GCM being sold at fueling stations to beneficiaries who are holders of cards through which all GCM transactions are recorded, with sales being mandatorily recorded in POS terminals at the moment they occur.

23.6. The reduced ISP rates, provided for in article 93 of the CIEC, constitute tax benefits, under the terms of the provisions of article 2, nos. 1 and 2 of the Tax Benefits Status (EBF). Now, in accordance with the provisions of articles 7 and 12 of the EBF, the right to tax benefits depends on the meeting of the respective requirements, that is, the verification of the factual conditions on which their attribution depends. Thus, the GCM commercialization rules, with their formalities and procedures, aim at the correct allocation of the product to the destinations that benefit from the application of reduced ISP rates, that is, enjoy the tax benefit.

23.7. The lack of requirements of a tax benefit determines the inapplicability of the corresponding regime and the application of the normal regime. In the situation being examined in the present proceedings, taking into account the provisions of article 88 of the CIEC, if the GCM regime is not applicable, the normal regime applicable to road diesel will be applied.

23.8. In accordance with the provisions of article 93, no. 5, of the CIEC, the owner or person legally responsible for operating the stations authorized for public sale is "(…) responsible for payment of the amount of tax resulting from the difference between the taxation level applicable to road diesel and the rate applicable to colored and marked diesel, in relation to quantities they sell that are not duly recorded in the electronic control system." Thus, the owner or person legally responsible for operating the station authorized for public sale of GCM has the tax responsibility for payment of the amount of tax resulting from the difference between the taxation level applicable to road diesel and the rate applicable to GCM as regards quantities of the product sold by them that are not duly recorded, from the microchip cards, in the electronic control system.

23.9. The situation of irregularity in GCM commercialization affects the achievement of the tax benefit, with the owner or manager of the fueling station being a taxpayer subject to IEC-ISP. It is important to note that, under the terms of the provisions of article 24, no. 2, subparagraph h) of the CIEC, taxpayers are "natural or legal persons who introduce into consumption, sell or use products subject to tax, in the other situations of irregularity." Thus, non-compliance with GCM commercialization rules determines the inapplicability of the exceptional nature regime of the tax benefit of the reduced ISP rate and the consequent application of the normal road diesel regime with the responsibility for payment thereof falling on the owner or operator of the fueling station. Indeed, under the terms of no. 12 of Ordinance no. 117-A/2008, of 8 February, in case of violation of the requirements of the tax benefit, the tax that is shown to be owed is further assessed. There is also administrative responsibility, under the terms of the provisions of article 109, no. 2, subparagraph p) of the General Regime of Tax Infractions (RGIT).

  1. With respect to the first question to be decided, the Claimant points out several defects in the Final Customs Inspection Report that allegedly prejudice its defense and determine the nullity of said report due to failure to comply with legal formalities (see 17.1 to 17.3 above).

  2. Considering the facts that are the object of the present arbitral proceedings (see subparagraphs C), D) and G) of no. 20.1 above), it is found that the Claimant was notified of the draft Customs Inspection Report, under the terms of article 60 of the RCPITA, and that it exercised its right to a defense. Subsequently, the Claimant was notified of the Final Customs Inspection Report, under the terms of article 62 of the RCPITA.

Under these circumstances, it appears that the Tax and Customs Authority ensured the right to participate of the now Claimant. The fact that the Final Report may contain differences from the draft Report, namely through the correction of errors and oversights, does not call into question the validity of the inspection procedure and its respective report.

It follows from the present proceedings that the inspection procedure complied with the provisions of the RCPITA, particularly as regards the duty to provide grounds. Indeed, the objectives, scope and extent of the inspection action, as well as the description of the controls carried out and their respective results, are clear and understandable and, to such an extent are they so, that the Claimant always exercised its respective contradictory right.

Thus, it is concluded that the Inspection Report does not suffer from the defects alleged by the Claimant.

  1. As to the second question to be decided, that is, investigating the legality of the additional ISP assessment arising from the Claimant's practices in GCM commercialization identified in the Customs Inspection Report, it is important to note that in said Report the following facts are proven:

26.1. Sale of 8,419.02 liters of GCM to customers not holding microchip cards, in violation of article 5 of Ordinance no. 361-A/2008, of 12 May, and article 93 of the CIEC (see Tables nos. 10 and 11 of the Inspection Report at pages 40 of the Administrative File)

26.2. Sale of 1,886.80 liters of GCM without registration in the TPA/POS, in violation of articles 5 and 6 of Ordinance no. 361-A/2008, of 12 May and article 93, no. 5 of the CIEC (see Table no. 12 of the Inspection Report at page 41 of the Administrative File).

26.3. Sale of 4,670.77 liters of GCM without identification of the electronic card holder, in violation of article 8 of Ordinance no. 361-A/2008, of 12 May and article 93, no. 5 of the CIEC (see Tables nos. 15, 16 and 17 of the Inspection Report at pages 41 and 42 of the Administrative File).

26.4. Sale of 3,927 liters of GCM without issuance of the respective accounting document (invoice), in violation of article 8 of Ordinance no. 361-A/2008, of 12 May and article 93, no. 5 of the CIEC (see Table no. 18 of the Inspection Report at page 44 of the Administrative File).

26.5. Sale of 485.58 liters of GCM for which the respective sales support (invoice) could not be identified, in violation of article 8 of Ordinance no. 361-A/2008, of 12 May and article 93, no. 5 of the CIEC (see Table no. 19 of the Inspection Report at page 45 of the Administrative File).

  1. The Customs Inspection Report demonstrates that the Claimant did not observe the determined formalities required by the legislation in force for the commercialization of GCM. Now, not having complied with certain legally imposed conditions for the commercialization of GCM, the requirements necessary for the achievement of the tax benefit are not met, which determines in accordance with article 93, no. 5 of the CIEC the responsibility of the Claimant (see 23.8 and 23.9 above).

  2. The Claimant presents several justifications for the practices it carried out in GCM commercialization (see nos. 17.4 to 17.19 above). The said justifications may even have some reasonableness, but in light of the existing legal framework do not constitute legally valid justifying causes for excluding the application of the legal standards in question (see no. 26 above) and in particular do not exclude the objective tax responsibility of the owner or person responsible for operating the fueling stations.

  3. Given the foregoing, the allegations by the Claimant regarding the illegality of the additional ISP assessment arising from the Inspection Report are found to be without merit.

IV – Decision

In light of the foregoing, the Arbitral Tribunal decides to dismiss the request for arbitral determination and, in consequence, to absolve the Respondent of the claim, with the due legal consequences.

V - Value of the Proceedings

Taking into account the provisions of articles 32 of the Code of Administrative Procedure (CPTA), 306, no. 2 of the Code of Civil Procedure and 97-A of the Code of Tax Procedure (CPPT), applicable by virtue of the provisions of article 29, no. 1, subparagraphs a) and b) of the LFTA, and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT), the value of the proceedings is fixed at €5,403.06 (five thousand four hundred and three euros and six cents).

VI - Costs

The amount of costs is fixed at € 612.00 (six hundred and twelve euros) to be borne by the Claimant, under the terms of Table I of the RCPAT, in compliance with the provisions of articles 12, no. 2 and 22, no. 4, both of the LFTA, as well as the provisions of article 4, no. 4 of the RCPAT.

Notify accordingly.

Lisbon, Center for Administrative Arbitration, 6 February 2019

The Arbitrator

Olívio Mota Amador

Frequently Asked Questions

Automatically Created

What is ISP (Imposto sobre os Produtos Petrolíferos) and how does it apply to colored diesel (gasóleo colorido) in Portugal?
ISP (Imposto sobre os Produtos Petrolíferos) is Portugal's Excise Tax on Petroleum Products, governed by the Código dos Impostos Especiais de Consumo. Colored diesel (gasóleo colorido e marcado - GCM) is diesel fuel dyed and chemically marked for identification, benefiting from reduced ISP rates when used for authorized purposes such as agriculture, fishing, or industrial activities. Only entities holding specific authorization and registered beneficiaries with electronic cards can legally purchase GCM. The reduced taxation aims to support specific economic sectors while preventing tax fraud through misuse in unauthorized applications like road vehicles.
Can taxpayers challenge additional ISP tax assessments through CAAD arbitration proceedings?
Yes, taxpayers can challenge additional ISP assessments through CAAD (Centro de Arbitragem Administrativa) under the Legal Framework for Tax Arbitration (LFTA - Decree-Law 10/2011). Article 2(1)(a) and Article 10 of LFTA establish jurisdiction for arbitral tribunals to review tax assessments, including excise taxes like ISP. The arbitration process provides an alternative to judicial courts, offering faster resolution of tax disputes. Claimants must file their request within the legal deadlines, and CAAD's Deontological Council appoints qualified arbitrators. The procedure follows specific rules including evidence production, hearings under Article 18 of LFTA, and written submissions, with decisions having the same enforceability as court judgments.
What are the legal grounds for requesting annulment of an ISP additional tax assessment in Portugal?
Legal grounds for annulling ISP assessments in Portugal include: (1) Procedural violations under RCPITA (Tax Inspection Procedural Regime), particularly Articles 60, 62, and 63 regarding inspection reports and taxpayer rights to comment on draft findings; (2) Substantial modifications between draft and final reports without proper justification, constituting incurable nullities; (3) Failure to describe reasons triggering the inspection as required by Article 62(3)(e); (4) Violations of fundamental procedural guarantees and rights of defense; (5) Substantive errors in fact determination or legal qualification; (6) Lack of proper evidence supporting the assessment; and (7) Non-compliance with formal requirements for tax liquidation acts under the General Tax Law (LGT) and Tax Procedure Code (CPPT).
How does the CAAD arbitral tribunal handle cases where the requesting party fails to attend scheduled hearings?
When a requesting party fails to attend scheduled CAAD hearings, the tribunal follows specific procedures to ensure fairness while maintaining procedural efficiency. In this case, after the Claimant missed the first hearing scheduled under Article 18 of LFTA, the tribunal issued an order requiring justification for the absence within five days. Upon receiving the explanation (even though deemed unfounded, as the party had been validly notified), the tribunal exercised discretion under Article 19(2) of LFTA to schedule a second hearing, prioritizing the production of evidence over strict procedural compliance. This approach balances procedural rules with the principle that parties should have adequate opportunity to present their case, particularly regarding witness testimony and examination of company representatives critical to establishing facts.
What is the procedure for subsidiarily requesting a review of the final debt calculation in ISP arbitration cases?
Under CAAD arbitration procedures, parties can present subsidiary (alternative) requests alongside principal claims. When requesting annulment of an ISP assessment as the primary relief, taxpayers may subsidiarily request revision of the final debt calculation if annulment grounds are not accepted. This procedural mechanism, recognized in arbitral practice, allows the tribunal to examine: (1) whether the assessment should be entirely annulled due to substantive or procedural defects; or (2) if annulment is not warranted, whether calculation errors, incorrect application of rates, or factual mistakes justify reducing the assessed amount. The subsidiary request must be clearly stated in the initial arbitration petition and allows comprehensive resolution of the dispute without requiring separate proceedings if the principal annulment claim fails.