Process: 272/2014-T

Date: November 28, 2014

Tax Type: ISP

Source: Original CAAD Decision

Summary

This arbitral decision (Process 272/2014-T) addresses a dispute concerning ISP (Tax on Petroleum Products) related to colored and marked diesel oil. The claimant company challenged a decision dismissing their gracious complaint (reclamação graciosa) regarding ISP assessment No. 9...-... issued by the Leixões Customs Office. The core issue involves alleged improper use of colored and marked diesel oil (CMDO), which benefits from reduced tax rates when used for authorized purposes such as electricity generation. The Tax Authority assessed additional ISP based on presumed diversion of use, totaling €1,466.09 in tax plus €100.86 in compensatory interest. The claimant argued procedural violations, specifically that their legal representative was never notified of a prior hearing letter dated May 20, 2013, preventing them from responding before the complaint was dismissed. The claimant contended that a generator counter malfunction during a two-month period caused discrepancies, not any diversion of diesel use. The Tax Authority raised three preliminary exceptions: (1) clarification of the claim value limiting it to the diversion of use portion; (2) lack of material jurisdiction of the arbitral tribunal under Article 2 of the LRAT, arguing the claim primarily seeks annulment of the dismissal decision based on notification defects rather than challenging the tax assessment itself; and (3) lapse of the right of action (caducidade). The tribunal was constituted on May 28, 2014, following appointment of a single arbitrator. The case highlights critical procedural requirements in Portuguese tax arbitration, including proper notification of legal representatives, material jurisdiction boundaries of CAAD tribunals, and statutory deadlines for challenging tax decisions involving specialized excise taxes like ISP.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 272/2014 – T

Subject: ISP – Tax on Petroleum Products

I - REPORT

A - PARTIES

"A"..., LDA, Legal Entity No. ..., with registered address at ... Street, Shop 1..., ... ...-..., hereinafter referred to as "Claimant", filed a request for constitution of an arbitral tribunal, pursuant to paragraph a) of No. 1 of Article 2 and Articles 10 et seq. of Decree-Law No. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as "LRAT"), with a view to the consideration of the following claim against the Tax and Customs Authority (which succeeded, inter alia, the General Directorate of Taxes) hereinafter referred to as "Respondent" or "TA".

B - REQUEST

1 - The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 20 March 2014 and notified to the TA on 26 March 2014.

2 - The Claimant did not proceed with the appointment of an arbitrator, so, pursuant to the provisions of No. 1 of Article 6 of the LRAT, the undersigned, on 13-05-2014, was appointed by the Ethics Council of the Administrative Arbitration Centre as arbitrator of a Single Arbitral Tribunal, and accepted in accordance with legally established terms.

3 - The Parties were, on 13-05-2014, duly notified of this appointment, and did not manifest any intention to refuse it, in accordance with the combined provisions of paragraphs a) and b) of No. 1 of Article 11 and Articles 6 and 7 of the Code of Ethics.

4 - In these circumstances, in accordance with the provisions of paragraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was regularly constituted on 28/05/2014.

5 - On 21 November 2014, the meeting referred to in Article 18 of the LRAT was held with the Parties, minutes of which are attached to the case file, and the TA clarified the meaning and grounds of the exceptions of lack of jurisdiction of the arbitral tribunal ratione materiae and of lapse of the right of action, which it had raised in its Reply, reaffirming their merit, exceptions which the representative of the Claimant considers to be unfounded, understanding, consequently, that the same are without merit.

6 - The present Claimant requests that the present Arbitral Tribunal:

  • Declare the revocation of the decision dismissing the gracious complaint, relating to the ISP assessment No. 9...-..., issued by the Director of the Leixões Customs Office, within the framework of the ANF .../2012 process.

C - CAUSE OF ACTION

7 - The Claimant, in the substantiation of its request for arbitral decision, asserts, in summary, the following:

8 - That it was notified, through its legal representative, of the decision dismissing the gracious complaint concerning the ISP assessment No. 9...-..., issued by the Leixões Customs Office, within the framework of the ANF .../2012.

9 - That, in the notification of the decision dismissing the gracious complaint mentioned above, it only states that "the grounds for the decision dismissing the complaint are those contained in the letter No. ..., dated 2013-05-20, which, given the failure to submit a response in the course of prior hearing, were made final".

10 - That, based on the content of the decision dismissing the gracious complaint, it is clear that its grounds are limited to the failure to submit a response in the course of prior hearing.

11 - That, although the Claimant had a legal representative appointed, the same was never notified of the aforementioned letter No. ..., dated 2013-05-20, and consequently could not respond in the course of prior hearing.

12 - That, being expressly stated that "the grounds for the decision dismissing the complaint are those contained in the letter No. ..., dated 2013-05-20, (received on 2013-05-31), which, given the failure to submit a response in the course of prior hearing, were made final", and, because there was no notification to the representative, which, given the provisions of Article 40, No. 1 of the CPPT, should have occurred, such decision should be revoked. (underlined by the party)

13 - That the TA only now (10-12-2013) notified the Claimant's legal representative, but only of the decision dismissing the gracious complaint and not of the letter No. ..., dated 20-05-2013, so that a response could have been submitted in the course of prior hearing, aimed at modifying the grounds and the intention of the aforesaid dismissal.

14 - That, taking into account the testimony given by the witnesses, as well as the testimony of the legal representative of the Claimant, the TA could not have dismissed the gracious complaint, with no reference in the grounds of that decision to the witness evidence produced.

15 - That, from the combination of all the evidence produced, it appears that the Claimant used Coloured and Marked Diesel Oil (CMDO) in its generator intended to produce energy, and no diversion of use was ever attributed to it, it only happening that, given that the aforementioned generator suffered a fault in its counter during a period of two months, the hours marked at the beginning of that period coincided with the hours marked at the end.

16 - That the TA proceeded with the assessment of the ISP in question, on the basis of mere presumptions that a diversion of use of the CMDO occurred, without having any legal support for doing so, so the gracious complaint should have, in its entirety, succeeded.

17 - That, in view of the aforesaid, the decision dismissing the gracious complaint associated with the ISP assessment No. 9...-... issued by the Leixões Customs Office, within the framework of the ANF .../2012, should be revoked.

D - REPLY OF THE RESPONDENT

18 - The Respondent, Tax and Customs Authority, (hereinafter referred to as TA), submitted its Reply and attached a copy of the Tax Administrative Process on 26-06-2014.

19 - In the said Reply, the TA, in addition to raising, as a preliminary question, the value of the claim relating to the request for arbitral decision, raises, on the other hand, the exception of lack of material jurisdiction of the Arbitral Tribunal and of lapse of the right to submit the request for arbitral decision, and defends that the ISP assessment act being challenged does not suffer from any illegalities, which, in summary and essentially, is substantiated in the following:

ON THE VALUE OF THE REQUEST FOR ARBITRAL DECISION

20 - In this regard, it considers that the value of the request for arbitral decision, underlying the present process, should "[…] be limited to situations of diversion of use (which resulted in taxation at the normal rate applicable to CMO), which, according to the table contained in the final report of the ANF, at p. 24 of the administrative process, resulted in tax in the amount of € 1,466.09 and compensatory interest in favour of the State in the amount of € 100.86, in a total of € 1,566.95". (See No. 4 of the Reply)

ON THE EXCEPTIONS

Regarding the Lack of Jurisdiction of the Arbitral Tribunal Ratione Materiae

21 - The Respondent understands that arbitral tribunals, given the provisions of No. 1 of Article 2 of the LRAT, are competent to hear the following claims: a) The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account, as well as b) The declaration of illegality of acts of determination of taxable matter, acts of determination of taxable income and acts of fixing patrimonial values.

22 - It adds that the claim, as formulated by the Claimant, does not fall within the aforementioned No. 1 of Article 2 of the LRAT, given that what is intended in that claim is, in the first place, the annulment of the decision dismissing the gracious complaint, on the grounds of defects in the notification of the said decision.

23 - It further considers that the invoked defects in notification and the alleged impossibility of participation in the formation of the decision, resulting from a faulty notification for the exercise of the right of prior hearing, do not relate to the legality of the assessment act, constituting matter that is excluded from the material jurisdiction of arbitral tribunals.

24 - The Respondent, finally, understands that, regarding matters related to defects in the decision dismissing the gracious complaint, there is an exception of absolute lack of jurisdiction of the arbitral tribunal, given the provisions of paragraph a), Article 96 of the CPC, and that, consequently, in accordance with No. 1 of Article 99 of the CPC, it should be absolved of the instance.

Regarding the Lapse of the Right of Action

25 - In this regard, the TA considers that the assessment whose annulment is sought, which was the subject of dismissal by order of 18-06-2013, of the Director of the Leixões Customs Office, of which, on 10-12-2013, the legal representative appointed by the taxpayer was notified, by post with acknowledgement of receipt.

26 - The Respondent also considers that, given the provisions of Article 10, No. 1, paragraph a), of the LRAT, in conjunction with No. 2 of Article 102 of the CPPT, the deadline for submission of the request for constitution of the arbitral tribunal was 90 days, counted from the notification of the decision dismissing the gracious complaint.

27 - It further states that the said 90-day period, provided for in Article 10, No. 1, paragraph a) of the LRAT, is subject to the rules of counting contained in the norms of subsidiary law, in this case, of the CPPT, and that is what results from the provisions of Article 3-A of the LRAT, in the wording introduced by Law No. 66-B/2012, of 31 December.

28 - It finally understands that, given the provisions of Article 20, No. 1 of the CPPT, applicable by force of the provisions of Article 29 of the LRAT, the deadline for submission of the request for arbitral decision is governed by the rules of counting of deadlines provided for in Article 279 of the CC, which means that the said deadline, given the date of notification of the dismissal of the gracious complaint, ended on 10-03-2014.

BY IMPUGNATION

29 - The TA also understands that, even if the said exceptions are not substantiated, the request for arbitral decision in question should be judged entirely without merit, defending, in summary:

30 - That the equipment eligible for purposes of CMDO was the emergency generator, used to remedy the various power cuts on the public grid, namely those related to the lighting and operation of machines, freezing units, refrigerators and other electrical equipment of the restaurant operated by the Claimant.

31 - That the hour meter of the emergency generator indicated on 19-07-2012 exactly the same hour reading as it indicated on 18-09-2012, thus no change in consumption being verified during the space of two months.

32 - That the emergency generator in question could not have consumed all quantities of CMDO purchased by the Claimant and, as such, recorded with the microchip cards of which it is the holder.

33 - That, in the course of an ANF (Tax Inspection Action) the use of CMDO in a boiler intended for heating water and the environment of the restaurant operated by the Claimant was ascertained, equipment which is not eligible for purposes of use of CMDO.

34 - That, after the exercise of the right of prior hearing, within the framework of the procedure of the said ANF, the initially ascertained amounts in debt were corrected, coming to be situated at 50% of the quantity initially ascertained.

35 - That, in these circumstances, the assessment under registration number (B) No. 9...-..., of 12-12-2012, of the quantities of CMDO in diversion of use in the amount of € 1,523.58, relating to ISP, increased by € 101.51, relating to compensatory interest and € 1.80 concerning stamp duty, totalling a total debt of € 1,626.89, was made.

36 - That the Claimant was notified of the said assessment, for payment of the ascertained amount of € 1,626.89, which was not made within the period of voluntary payment, and in that context, a certificate of debt for coercive collection was issued.

37 - That the Claimant, on 11-04-2013, submitted a gracious complaint against the aforementioned assessment, and on 20-05-2013, was notified of the draft decision dismissing the said complaint, with a view to the exercise of the right of prior hearing.

38 - That, as the right of prior hearing was not exercised, the said gracious complaint was the subject of a decision dismissing it, by order of 18-06-2013, of the Director of the Leixões Customs Office, which decision was initially, on 02-07-2013, notified to the Claimant, and later, on 10-12-2013, was notified to the legal representative of the Claimant.

39 - That CMDO is a product that benefits from taxation, under Tax on Petroleum and Energy Products (ISP), at a reduced rate, verified that are the legally required conditions and presuppositions, and can only be acquired by holders of a microchip card.

40 - That the purpose or allocation of CMDO constitute the presupposition of its reduced taxation in ISP, so that whenever such product is acquired by microchip card holders, but is not used in equipment eligible for that purpose, there is, by law, occasion for the restoration of the normal taxation, which corresponds to the taxation of that product at the normal rate applicable to automotive diesel.

41 - That the Claimant failed, as was incumbent upon it, to prove that the quantities of CMDO, acquired by it, were actually used in the emergency generator, so the assessment in question was made by the TA, not on the basis of any presumption, but, in compliance with the law, by the application of the normal rate to the quantities of diesel consumed in diversion of use, that is, consumed in the water and space heating boiler and not in the aforementioned emergency generator.

E - ISSUES TO BE DECIDED

42 - It is necessary, therefore, to appreciate and decide.

43 - In view of the foregoing, relating to the positions of the Parties and the arguments presented, it is necessary to appreciate and decide on:

a) The exception of lack of material jurisdiction of the Arbitral Tribunal;

b) The exception of lapse of the right of action;

c) The legality of the ISP assessment, based on the diversion of use of CMDO.

F - PROCEDURAL PRESUPPOSITIONS

44 - The Arbitral Tribunal is regularly constituted and is materially competent, in accordance with paragraph a) of No. 1 of Article 2 of Decree-Law No. 10/2011, of 20 January.

45 - The Parties enjoy legal personality and capacity, are legitimate and are legally represented (see Article 4 and No. 2 of Article 10 of Decree-Law No. 10/2011 and Article 1 of Ministerial Order No. 112/2011, of 22 March).

46 - The process does not suffer from defects that would invalidate it.

47 - Taking into account the tax administrative process, a copy of which was sent by the TA, and the documentary evidence attached to the case file, it is now necessary to present the factual matter relevant to the understanding of the decision, which is established in the following terms.

G - ON THE VALUE OF THE REQUEST FOR ARBITRAL DECISION AND THE RAISED EXCEPTIONS

On the Value of the Request for Arbitral Decision

48 - It appears from the various documents comprising the case file, namely those relating to the consideration by the Leixões Customs Office of the gracious complaint, that the diversion of use of 5,100 litres of CMDO generated a debt of € 1,523.58, by way of ISP, increased by € 101.51 of compensatory interest and € 1.80 concerning stamp duty, which total the amount of € 1,626.89, the assessment of which was, on 27-12-2012, notified to the Claimant, and which constitute the object of the gracious complaint, as expressly stated in the referred documents, when there it is mentioned that "The gracious complaint being analysed in which the firm "A" -, Lda, is the complainant, has as its object the tax assessment made by this Customs Office, relating to the debt of ISP in the total amount of € 1,626.89 (R.L. No. 9...-..., of 2012.12.12)".

49 - The economic value of the present process/value of the case is, therefore, taken as corresponding to the sum of € 1,626.89, relating to the debt of ISP notified to the Claimant, and not to the value of € 1,566.95, as is the understanding of the TA, which, it should be said, has no legal relevance, or of any other nature, in the case.

On the Raised Exceptions

50 - Taking into account, both the provisions of Article 13 of the Code of Administrative Court Procedure (CPTA), and what is established in No. 1 of Article 608 of the CPC, applicable here by force of Article 29, No. 1, paragraphs c) and e) of the LRAT, respectively, the said exceptions of lack of jurisdiction of the arbitral tribunal ratione materiae and of lapse of the right to submit the request for arbitral decision should be heard first, since, given the provisions of the said norms, their hearing precedes that of any other matters.

On the Exception of Lack of Jurisdiction of the Arbitral Tribunal Ratione Materiae

51 - The Respondent, as already referred to above, bases the mentioned exception on the circumstance that the request for arbitral decision aims at the annulment of the decision dismissing the gracious complaint, on the grounds of defects in the notification of the said decision, which does not fall within No. 1 of Article 2 of the LRAT, pointing out that,

52 - Arbitral tribunals, given the provisions of No. 1 of Article 2 of the LRAT, are competent to hear the following claims: a) The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account, as well as b) The declaration of illegality of acts of determination of taxable matter, acts of determination of taxable income and acts of fixing patrimonial values, the request of the Claimant not falling, in the terms in which it is formulated, within the provision of the mentioned norm.

Let us see if it is right.

53 - In the course of a Tax Inspection Action carried out by the Leixões Customs Office, near the Claimant, the corresponding report was prepared, whose draft conclusions, within the framework of prior hearing, were notified to the Claimant.

54 - Inscribed in the exercise of the right of prior hearing were, as appears in the case file, taken into account the response and understanding of the Claimant regarding the irregular consumptions of CMDO, and in that extent, the amount of the initially projected tax debt was recalculated.

55 - In these circumstances, the diversion of use of 5,100.00 litres of CMDO was considered, in so far as, having been acquired for use in a generator, it was, in fact and finally, used in a boiler intended for heating water and the environment in the restaurant operated by the Claimant.

56 - Accordingly, in accordance with the provisions of No. 5 of Article 93 of the CIEC, published as an annex to Decree-Law No. 73/2010, of 21 June, the tax on petroleum and energy products (ISP), based on the difference between the level of taxation applicable to automotive diesel and the rate applicable to coloured and marked diesel oil, was assessed.

57 - The Claimant was, in this context, notified to proceed with the payment of the tax, from which the assessment resulted in the amount of € 1,626.89, of which € 1,523.58 related to ISP and € 101.51 to compensatory interest, assessment which subsequently became the subject of a Gracious Complaint aiming at its annulment.

58 - The mentioned Gracious Complaint, entered in the Leixões Customs Office on 11-04-2013, aimed at the annulment of the aforementioned ISP assessment, on the grounds that the same had been made on the basis of the presumption that a diversion of use of the CMDO was realized.

59 - The Gracious Complaint, after being substantially analysed, in the Leixões Customs Office, that is, after the legality of the assessment act targeted having been reassessed, culminated in a draft decision, supporting its dismissal and the consequent maintenance of the ISP assessment, as it was recalculated, with the grounds that had already been enunciated in the prior hearing, draft which was brought to the knowledge of the Claimant, granting it a period of 15 days to inform what it considered appropriate about the matter.

60 - After the said period of 15 days, granted for the purpose of the exercise of prior hearing, without any response having occurred, the Gracious Complaint was dismissed on the basis of the grounds enunciated in the aforementioned draft decision.

61 - The order dismissing the Gracious Complaint, issued on 18-06-2013, by the Director of the Leixões Customs Office, was not only notified to the Claimant, but also to its legal representative, who, on 10-12-2013, became aware of it, by registered letter with acknowledgement of receipt, as appears in the process.

62 - Being this the factual picture in the case file, it is now important to take into account the legal norms pertaining to the jurisdiction of arbitral tribunals.

63 - It results, clearly and explicitly, from the provisions of paragraph a) of No. 1 of Article 2 of the LRAT (Decree-Law No. 10/2011, of 20 January), that arbitral tribunals are competent to hear claims which aim at "The declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account."

64 - On the other hand, although the said legal provision only refers, with express precision, to the […] declaration of illegality of acts of tax assessment […], one cannot fail to take into account the provision of paragraph a) of No. 1 of Article 10 of the said LRAT, in so far as the references made there to the facts provided for in Article 102 of the CPPT, relating to acts susceptible of autonomous challenge, particularly those referred to in its No. 1 and 2.

65 - The dismissal of a gracious complaint embodies, within the framework of judicial challenge, the case provided for in No. 2 of Article 102 of the CPPT, raising the question of whether, given the jurisdictions legally conferred on arbitral tribunals, they will be competent to, in any circumstances, hear acts dismissing gracious complaints.

66 - Being the jurisdiction of arbitral tribunals, which function alongside the CAAD, circumscribed and limited, as already referred to above, to the declaration of illegality of acts of tax assessment, self-assessment, withholding at source and payment on account, the consideration of acts dismissing gracious complaints, by the said tribunals, must be conditioned by the effective knowledge that such acts had of the legality of the assessment acts to which they are related.

67 - The decision dismissing the gracious complaint, issued in the aforementioned circumstances, reaffirms the legality of the assessment act in question and reconfirms it, as it was initially configured.

68 - The dismissal of the gracious complaint is a harmful act susceptible of challenge by the interested party, which, in so far as it proceeds to the reaffirmation of the primary assessment act underlying and which is inseparable from it, cannot fail to have its consideration entrusted to arbitral tribunals, which, as already referred to, have their jurisdictions fundamentally centred on the declaration of illegality of acts of tax assessment.

69 - In this regard, it is worth noting what Jorge Lopes de Sousa tells us, in Commentary on the Legal Regime of Tax Arbitration, integrated in the Guide to Tax Arbitration, Almedina, March, 2013, p. 121, when he states that "Although in paragraph a) of Article 2 of the LRAT only reference is made to the competence of arbitral tribunals to declare the illegality of assessment acts […] this competence extends also to second and third-degree acts (gracious complaint and hierarchical appeal, respectively) that assess the legality of those primary acts (acts of tax assessment)".

70 - The understanding of the mentioned author should also be referred to, ibidem, p. 123, when he considers that "Limiting the competence of arbitral tribunals that function at the CAAD, as far as assessment acts […] to the declaration of their illegality and consequences, only the acts dismissing gracious complaints or hierarchical appeals will be included in that competence […] in cases in which these second-degree acts […] had effective knowledge of the legality of assessment acts […] and not also when those acts refrained from such knowledge, because it was understood there was some obstacle to that (such as, for example, lateness or lack of standing, or lack of jurisdiction)." Adding that,

71 - "In cases in which the second-degree act or third-degree act has knowledge of the legality of the assessment act, the dismissal of the gracious complaint or hierarchical appeal which confirms that act makes its own the respective illegalities, so that from the consideration of the illegality of the second or third-degree act follows the illegality of the assessment act".

72 - In view of what has been set out, the tribunal cannot follow the understanding of the Respondent, concluding, therefore, in the sense that the constituted arbitral tribunal is competent, ratione materiae, to hear the request for arbitral decision in question, the exception of lack of jurisdiction of the arbitral tribunal ratione materiae raised by the Respondent not being substantiated.

On the Exception of Lapse of the Right of Action

73 - As already referred to above, the Respondent considers that the deadline for submission of the request for constitution of the arbitral tribunal was 90 days, counted from the notification of the decision dismissing the gracious complaint, a deadline that was not observed, given that the legal representative appointed by the taxpayer was notified of the said decision on 10-12-2013, by post with acknowledgement of receipt, and the request for arbitral decision was presented, by electronic transmission, on 20-03-2014.

74 - The Respondent further states that the said 90-day period, provided for in Article 10, No. 1, paragraph a) of the LRAT, is subject to the rules of counting contained in the norms of subsidiary law, and that is what results from the provisions of Article 3-A of the LRAT, in the wording introduced by Law No. 66-B/2012, of 31 December, so that, given the provisions of Article 20, No. 1 of the CPPT, applicable by force of the provisions of Article 29 of the LRAT, the deadline for submission of the request for arbitral decision is governed by the rules of counting of deadlines provided for in Article 279 of the CC, so the deadline for deduction of the request for constitution of the arbitral tribunal ended on 10-03-2014.

Let us see.

75 - Before anything else, it is important to note that, given the elements recorded in the Electronic System of Procedural Management (SGP), the request for constitution of the arbitral tribunal was submitted to the CAAD on 20-03-2014.

76 - On the other hand, it must be taken into account that, as appears in the case file, the decision dismissing the gracious complaint, issued on 18-06-2013, by the Director of the Leixões Customs Office, was the subject of notification to the legal representative of the Claimant on 10-12-2013, who, on that date, became aware of it, by registered letter with acknowledgement of receipt (See Article 36, No. 1, Article 38, No. 1 and Article 39, No. 3, all of the CPPT). Being these the facts to which, in this context, it is important to give attention, let us see the applicable law.

77 - The 90-day deadline for submission of the request for constitution of the arbitral tribunal, provided for in paragraph a) of No. 1 of Article 10 of the LRAT, in so far as it does not constitute, nor a procedural deadline, nor a judicial one to which refer, respectively, No. 1 and 2 of Article 3-A of the said LRAT, added by Law No. 66-B/2012, of 31 December, is governed by the provisions of the CPPT. In fact,

78 - It results explicitly from the mentioned Article 3-A, No. 1 and 2 that deadlines relating to the arbitral procedure are subject to the Code of Administrative Procedure and, to deadlines of a procedural or judicial nature, inscribed within the framework of the tax process, the Civil Procedure Code applies, not being, therefore, such norms applicable to the counting of the deadline relating to the submission of the request for constitution of the arbitral tribunal. In truth,

79 - The deadline for submission of the request for constitution of the arbitral tribunal relates to a moment prior to the existence of the process, situating itself outside and before the procedure and, necessarily, the arbitral process, whose beginning occurs, given the provisions of Article 15 of the LRAT, on the date of constitution of the arbitral tribunal.

80 - No. 1 of Article 20 of the CPPT, applicable subsidiarily to the tax arbitral process by force of the provisions of paragraph a) of No. 1 of Article 29 of the LRAT, provides that "The deadlines of the tax procedure and of judicial challenge are counted in accordance with Article 279 of the Civil Code".

81 - In this regard, it is worth noting what Jorge Lopes de Sousa writes, in Commentary on the Legal Regime of Tax Arbitration, integrated in the Guide to Tax Arbitration, Almedina, March, 2013, p. 174, when he states that "As far as the deadline for submission of the request for constitution of the arbitral tribunal, provided for in Article 10, being prior to the procedure, this Article 3-A (of the LRAT) will not apply, but rather, the regime of Article 279 of the Civil Code, by referral of Article 29, No. 1, paragraph a) of the LRAT and Article 20, No. 1, of the CPPT".

82 - It should be noted, however, that, as is settled and reiterated jurisprudence of the Supreme Administrative Court, and can be seen, among others, in the Decisions of the SAC of 14-01-2004, Proc. 01208/03, of 30-01-2013, Proc. 0951/12 and of 15-01-2014, Proc. 01534/13, available at www.dgsi.pt, the deadline for lodging an appeal is a deadline of lapse, of a substantive nature, continuous, integral to the material legal relationship itself and counted in accordance with the rules of Article 279 of the Civil Code (CC) and Article 20, No. 1 of the Code of Tax Procedure and Process (CPPT). It is, in effect, a peremptory deadline, whose expiration extinguishes the right to perform the act, in this case, the request for constitution and decision of this arbitral tribunal.

83 - In accordance with the provisions of paragraph a) of No. 1 of Article 10 of the LRAT and No. 2 of Article 102 of the CPPT, judicial challenge of the decision of gracious complaint must be lodged within a period of 90 days, counted from the day following the notification of the said decision, which, in the case of the files, relates to the day 11-12-2013. (See Article 279, paragraph b) of the Civil Code)

84 - The request for constitution of the arbitral tribunal, in these circumstances, had to be submitted by the day 10-03-2014, which did not happen, in so far as such request had its submission to the CAAD on 20-03-2014, that is, after the expiration of the aforementioned 90-day period, legally established for that purpose.

85 - In these circumstances, it is concluded by the lateness of the request for constitution of the arbitral tribunal, substantiating, therefore, the exception of lapse ([i]) of the right of action, raised by the Respondent, which constitutes a dilatory exception, so that, consequently, the Respondent is absolved of the instance.

Conclusion

86 - Within the circumstantial framework that has been referred to, and preparing the decision, it is concluded, taking into account the provisions of No. 2 of Article 576 of the CPC, in the sense of the substantiation of the exception of lapse of the right of action raised by the Respondent, being considered, therefore, in accordance with the provisions of Article 608, No. 2 of the CPC, moot the consideration of the remaining issues raised either by the Claimant, or by the Respondent.

II - DECISION

87 - Accordingly, having regard to all the foregoing, this Arbitral Tribunal decides:

  • To judge the exception of lack of jurisdiction of the arbitral tribunal ratione materiae without merit.

  • To judge the exception of lapse of the right of action substantiated, refraining from hearing the claim, deciding, in consequence and in accordance with the provisions of Article 278, No. 1, paragraph e), of the Civil Procedure Code, applicable by force of Article 29, No. 1, paragraph e), of the LRAT, to absolve the Tax and Customs Authority of the instance.

  • To condemn the Claimant to pay the costs of the present process.

Value of the Process

In accordance with the provisions of Articles 306, No. 2 of the CPC (formerly 315, No. 2) and 97-A, No. 1 of the CPPT and Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the process is set at € 1,626.89.

COSTS

In accordance with the provisions of Article 12, No. 2, at the end, and Article 22, No. 4, both of the LRAT, and Article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I, which is attached to it, the total amount of costs is set at € 306.00.

Let notification be made.

Lisbon, 28 November 2014

The Arbitrator

António Correia Valente

Text prepared by computer, in accordance with No. 5 of Article 131 of the CPC, applicable by referral of paragraph e) of No. 1 of Article 29 of Decree-Law No. 10/2011, of 20/01.

The wording of the present decision is governed by the old spelling rules.

([i]) It is not settled, in tax litigation, whether the lapse of the right of challenge or the right to request the constitution of the arbitral tribunal constitutes a dilatory or peremptory exception, determining, respectively, the absolution of the instance or of the claim. In cases such as the one at hand, we consider it appropriate to frame the lapse of the right to have the claim assessed by an arbitral tribunal within the scope of dilatory exceptions, because the legality of the assessment act is not analysed or evaluated, there being, therefore, the possibility of future assessment of that act, namely, by means of its revision, as is foreseen in Article 78 of the LGT.

Frequently Asked Questions

Automatically Created

What is ISP tax on colored and marked diesel (gasóleo colorido e marcado) in Portugal?
ISP (Imposto sobre Produtos Petrolíferos) is Portugal's tax on petroleum products. Colored and marked diesel (gasóleo colorido e marcado) is diesel fuel that has been dyed and chemically marked to benefit from reduced tax rates when used for specific authorized purposes, such as agricultural machinery, heating, or electricity generation. This reduced taxation is contingent upon proper use; any diversion to unauthorized uses (such as road vehicle fuel) results in assessment of the standard, higher ISP rate. The Tax Authority monitors compliance through inspections and counter readings, and can assess additional tax plus compensatory interest when diversion of use is detected or presumed based on inconsistencies in consumption records.
Can the CAAD Arbitral Tribunal rule on ISP petroleum products tax disputes?
Yes, CAAD (Centro de Arbitragem Administrativa) arbitral tribunals have jurisdiction to rule on ISP disputes, but within specific limits defined by Article 2 of Decree-Law No. 10/2011 (LRAT). Tribunals are competent to declare illegality of tax assessment acts, self-assessment acts, and acts determining taxable matter. However, the Tax Authority in this case argued that the tribunal lacked material jurisdiction because the claimant's primary request was annulment of the decision dismissing the gracious complaint based on procedural notification defects, rather than directly challenging the substantive legality of the ISP assessment itself. This distinction between procedural challenges to administrative decisions versus substantive challenges to tax assessments is critical in determining arbitral jurisdiction.
What are the grounds for challenging the material competence of a tax arbitral tribunal in ISP cases?
The grounds for challenging material competence of a tax arbitral tribunal in ISP cases center on whether the claim falls within Article 2(1) of the LRAT. The Tax Authority may argue lack of jurisdiction when: (a) the claim primarily seeks annulment of administrative decisions (like dismissal of complaints) based on procedural defects rather than challenging the tax assessment's substantive legality; (b) the claim involves matters outside the tribunal's competence, such as purely procedural issues regarding notification defects; or (c) the claim does not directly contest acts of assessment, self-assessment, determination of taxable matter, or patrimonial value fixing. The tribunal must determine whether the claim, even if formally requesting revocation of a dismissal decision, substantially concerns the legality of the underlying tax assessment act, which would fall within its jurisdiction.
What is the deadline to file an arbitral claim before the right of action expires (caducidade) in Portuguese tax law?
The deadline to file an arbitral claim before caducidade (lapse of the right of action) occurs depends on the administrative act being challenged. For challenging hierarchical review decisions or decisions on gracious complaints, Portuguese tax law generally establishes a 90-day deadline from notification of the decision (Article 10 of the LRAT, referencing Article 102(1)(a) of the CPPT). In this case, the Tax Authority raised the caducidade exception, suggesting the claimant may have exceeded the statutory deadline for filing the arbitral request after being notified of the decision dismissing the gracious complaint on December 10, 2013. The arbitral request was accepted on March 20, 2014, and the timing calculation would be critical to determining whether the right of action had lapsed.
How can a taxpayer contest the rejection of a reclamação graciosa related to ISP tax assessments?
To contest the rejection of a reclamação graciosa related to ISP tax assessments, a taxpayer has several options: (1) file a hierarchical appeal (recurso hierárquico) to the superior administrative authority within the Tax and Customs Authority; (2) request arbitration before CAAD within 90 days of notification of the dismissal decision, pursuant to Article 2(1)(a) and Article 10 of Decree-Law No. 10/2011; or (3) file judicial appeal to the administrative and tax courts. The choice depends on the amounts involved, urgency, and strategic considerations. In arbitration, the taxpayer must ensure the claim directly challenges the legality of the tax assessment act itself and not merely procedural aspects of the dismissal decision, to avoid jurisdictional challenges. Proper notification of legal representatives and compliance with statutory deadlines are essential to preserve appeal rights.