Process: 346/2018-T

Date: March 20, 2019

Tax Type: ISP

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 346/2018-T) addresses the additional assessment of ISP (Tax on Petroleum and Energy Products) on colored and marked diesel. A fuel station operator challenged a €4,017.85 ISP assessment based on alleged irregularities in selling 7,853.07 liters of colored diesel without proper documentation. The Tax Authority's assessment derived from an inspection by the Tobacco Garden Customs Authority comparing physical inventory across two dates (23/07/2015: 13,800 liters; 10/05/2017: 4,700 liters) against purchases (83,470 liters) and documented sales (84,716.93 liters). The taxpayer argued the actual discrepancy was only 233.50 liters, falling within allowable storage losses under Article 48 CIEC. However, the tribunal validated the Tax Authority's methodology, giving probative weight to the formal Inventory Verification Record signed by the taxpayer's representative. The decision illustrates how Portuguese excise tax authorities calculate stock discrepancies for colored diesel, the evidentiary standards in tax inspections, and limitations on storage loss exemptions. The taxpayer filed administrative review (reclamação graciosa) on 20/12/2017, which remained undecided, triggering deemed rejection and enabling CAAD arbitration access. This case demonstrates the importance of accurate fuel inventory controls and the documentary evidence required to challenge ISP assessments in Portuguese tax arbitration proceedings.

Full Decision

ARBITRAL DECISION

REPORT

A..., L.da., with registered office at ..., no. ..., ..., holder of the unique registration and identification number for legal persons ..., hereinafter simply referred to as the Claimant, filed a request for constitution of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of Articles 2 no. 1 a) and 10 no. 1 a), both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter abbreviated as LRAT), petitioning for a declaration of partial illegality and consequent partial annulment of the additional assessment of Tax on Petroleum and Energy Products (ISP) and compensatory interest covered by assessment record no. 2017/..., of 11/08/2017, in the total amount of € 4,017.85, regarding the sale of 7,853.07 litres of dyed and marked gas oil without the issuance of a commercial sales document.

To substantiate its request, it alleges, in summary:

  • The Claimant was notified of the additional ISP assessment and compensatory interest covered by assessment record no. 2017/..., of 11/08/2017, in the amount of € 4,017.85;

  • Such assessment originated from the final report of the inspection action carried out by the Tobacco Garden Customs Authority;

  • This report concluded that the Claimant had committed various infractions at the fuel filling station it operates in ..., relating to the sale of dyed and marked gas oil;

  • The discrepancy between the accounting records of dyed and marked gas oil as of 10/05/2017 (4,933.50) and the physical inventory (4,700) amounts to 233.50 litres and not to the claimed 7,853.07 litres, whereby the Tax Authority could never have concluded that the Claimant sold 7,853.07 litres of dyed and marked gas oil without the corresponding commercial sales document;

  • The discrepancy verified is within the limits defined as storage losses, and therefore is not subject to taxation;

  • On 20/12/2017, the Claimant filed an administrative review of the additional assessment made;

  • Until the date of presentation of the request for constitution of the arbitral tribunal and pronouncement, no decision had been issued regarding the administrative review filed, whereby its rejection is presumed;

  • There is an erroneous classification and quantification of the values of dyed and marked gas oil determined, whereby the ISP assessment act here challenged is illegal.

The Claimant attached seven documents and called two witnesses.

In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator, whereby, pursuant to Article 6 no. 1 of the LRAT, the undersigned was appointed by the Deontological Council of the Centre for Administrative Arbitration, the appointment having been accepted as legally provided for.

The arbitral tribunal was constituted on 26 September 2018.

Notified in accordance with and for the purposes of Article 17 of the LRAT, the Respondent filed a reply, invoking, in summary, the following:

  • At 12:00 on 23/07/2015, the tank of the Claimant's filling station held an inventory of 13,800 litres of dyed and marked gas oil, as evidenced by the "Inventory Verification Record" drawn up and signed by the parties involved in the measurement;

  • The "Inventory Verification Record" was drawn up on 23/07/2015, immediately after the measurement carried out by a technician of the Claimant and in the presence of the Claimant's representative, and cannot now be questioned by the Claimant;

  • From the analysis of SAFT files – Invoicing, it appears that, in the period between 23/07/2015 and 10/05/2017, the Claimant sold 84,716.93 litres of dyed and marked gas oil;

  • Therefore, no erroneous quantification of the number of litres of dyed and marked gas oil sold by the Claimant existed;

  • The limits defined in Article 48 of the CIEC as storage losses do not apply to the Claimant.

The Respondent attached no documents and called no witnesses, having attached the administrative file to the proceedings.

The meeting referred to in Article 18 of the LRAT as well as the presentation of arguments was dispensed with, without opposition from the parties.

ISSUES TO BE DECIDED

In the present proceedings, the issues to be decided are:

  • To ascertain whether there was erroneous quantification of the litres of dyed and marked gas oil determined by the Tax Authority that gave rise to the assessment challenged;

  • To ascertain whether the Claimant may benefit from the non-taxation regime defined in Article 48 of the CIEC for storage losses.

MATTER OF FACT

Facts Proven

With relevance for the decision to be rendered in the present proceedings, the following facts were found to be proven:

  • The Claimant operates a fuel filling station in ...;

  • On 10/05/2017, the Tobacco Garden Customs Authority initiated an inspection action against the Claimant, aimed at verifying the regular commercialisation of dyed and marked gas oil and the records made in the TPA/POS terminals nos. ... and ..., installed at the fuel filling station operated by the Claimant, in the period between 23/07/2015 and 10/05/2017;

  • As of 23/07/2015, the tank of the Claimant's fuel filling station held a physical inventory of 13,800 litres of dyed and marked gas oil;

  • As of 10/05/2017, the tank of the Claimant's fuel filling station held a physical inventory of 4,700 litres of dyed and marked gas oil;

  • In the period between 23/07/2015 and 10/05/2017, the Claimant purchased 83,470 litres of dyed and marked gas oil;

  • And sold 84,716.93 litres of dyed and marked gas oil;

  • The fuel filling station operated by the Claimant does not constitute a fiscal warehouse for storage.

  • By letter dated 11/07/2017, the Claimant was notified of the draft conclusions of the inspection action report and invited to exercise the right of prior hearing if it so wished;

  • By letter dated 11/08/2017, the Claimant was notified of the final report of the inspection action and of assessment no. 2017/..., in the total amount of € 4,017.85;

  • On 20/12/2017, the Claimant filed an administrative review;

  • The request for constitution of the arbitral tribunal and pronouncement was filed on 18/07/2018.

Facts Not Proven

With interest in the proceedings, there are no facts that remain unproven.

Justification of the Matter of Fact

The conviction regarding the facts found to be proven was based on documentary evidence attached by the Claimant, indicated in relation to each point, whose authenticity and adherence to reality was not questioned by the Respondent, as well as on the administrative file attached to the proceedings.

With regard to point 3 of the proven matter of fact, the same was found to be proven in light of the content of the "Inventory Verification Record" dated 23/07/2015, which shows an inventory of 13,800 litres of dyed and marked gas oil.

Such record was drawn up after the physical measurement of the quantity of dyed and marked gas oil existing in the tank of the filling station operated by the Claimant and signed at the same moment by a representative of the Claimant and two customs officials.

The Claimant did not bring to the proceedings any fact capable of calling into question the truthfulness of this record nor did it challenge the signature of its representative or its legitimacy to bind the company.

Moreover, the probative force of the documents attached to the proceedings by the Claimant with a view to demonstrating the existence of error in the measurement of the number of litres of dyed and marked gas oil on 23/07/2015 must necessarily yield to the probative force of a formal document, drawn up immediately following the measurement carried out and signed by a representative of the Claimant.

For which reason the Tribunal found it proven that, as of 23/07/2015, the tank of the Claimant's filling station held a physical inventory of 13,800 litres of dyed and marked gas oil.

As to points 4, 5 and 6 of the proven matter of fact, it was verified that, indeed, as the Claimant invokes, the final "Inventory Verification Record" was drawn up on 10/05/2017 and not on 11/05/2017, as stated in the final report of the inspection action, which, moreover, is admitted by the Respondent.

The indication contained on page 3 of the final report of the inspection action was due to a mere mistake, the inspection period being 23/07/2015 to 10/05/2017, the reference period for determining the purchases and sales made by the Claimant of dyed and marked gas oil.

On the other hand, to demonstrate the number of litres of dyed and marked gas oil sold in the period between 23/07/2015 and 10/05/2017, the Claimant attached to the proceedings copies of the monthly financial reports for the respective period.

The values contained in the said monthly financial reports show no discrepancy with the values contained in the SAFT files – Invoicing, with the exception of the values relating to the month of February 2017.

In fact, in that period, the financial report shows the sale of 1,942.18 litres of dyed and marked gas oil, whereas in the SAFT file - Invoicing made available to the Tax Authority, 2,602 litres are recorded as sold.

Now, the said SAFT file - Invoicing made available to the Tax Authority is computer software duly certified by the Tax Authority, pursuant to Article 123 of the CIRC and its respective regulation, whereby its probative force must necessarily be superior to that of the monthly financial report prepared by the Claimant.

Thus, it was the Claimant itself that, regarding the month of February 2017, declared having sold 2,602 litres of dyed and marked gas oil, whereby it cannot now take back such statement and invoke having sold another quantity.

All the more so since the Claimant does not in the least demonstrate the existence of any error in the indication contained in the SAFT – Invoicing file made available to the Tax Authority, which, in this case, would always entail the need to cancel one or more invoices issued in that period.

For which reason the Tribunal found the fact contained in point 6 of the proven matter of fact to be proven.

Finally, with regard to point 7 of the proven matter of fact, it should be noted that, pursuant to paragraph 1 of Article 21 of the CIEC, the storage of products subject to special excise duties, under a suspension of duty regime, may only be carried out in a fiscal warehouse with authorisation and under the supervision of the competent customs authority.

It being certain that obtaining the status of authorised warehousekeeper is subject to restrictive rules, provided for in Articles 22 and following of the CIEC.

Now, the Claimant, despite claiming to benefit from the regime provided for in Article 48 of the CIEC, has not in the least demonstrated that it holds the status of authorised warehousekeeper nor that the fuel filling station it operates constitutes a fiscal storage warehouse.

Hence the inclusion of the matter contained in point 7 among the proven matter of fact.

CASE MANAGEMENT

The Arbitral Tribunal is duly constituted and materially competent.

The parties have legal capacity and capacity to sue, are properly interested and are regularly represented.

The proceedings do not suffer from defects affecting their validity, there being no exceptions or preliminary issues preventing the consideration of the merits and of which it is necessary to take official notice.

ON THE LAW

Having delimited the issues to be decided and the proven matter of fact, let us consider the applicable law.

The first issue presented to the tribunal concerns ascertaining whether there was erroneous quantification of the litres of dyed and marked gas oil determined by the Tax Authority that gave rise to the assessment challenged, which would determine the annulment, even if partial, of the ISP assessment now in issue.

To that end, the Claimant invokes, on the one hand, that there was an error in the quantity of dyed and marked gas oil existing in the tanks of the fuel filling station it operates on 23/07/2015, which it claims to be 5,520.61 litres and not 13,800 litres, as stated in the "Inventory Verification Record".

And, on the other hand, that in the period between 23/07/2015 and 10/05/2017, the quantity of dyed and marked gas oil sold was 84,057.11 litres and not 84,716.93 litres, as invoked by the Tax Authority.

Therefore, according to the Claimant, subtracting from the sum of the initial inventory (5,520.61) and the quantity of litres purchased (83,470) the quantity of litres sold (84,057.11), a discrepancy of only 233.50 litres is verified and not the 7,853.07 litres that were at the origin of the issuance of the assessment challenged.

The Tax Authority, in turn, invokes that there was no error, the initial inventory of dyed and marked gas oil as of 23/07/2015 resulting from measurement carried out on that date and stated in the "Inventory Verification Record" prepared on that date, and the quantity of dyed and marked gas oil sold by the Claimant between 23/07/2015 and 10/05/2017 from the information contained in the SAFT – Invoicing file made available by the Claimant.

Therefore, according to the Tax Authority, subtracting from the sum of the initial inventory (13,800) and the quantity of litres purchased (83,470) the quantity of litres sold (84,716.93), a discrepancy of 7,853.07 litres is verified, a discrepancy corresponding to the number of litres sold by the Claimant without the issuance of the corresponding commercial sales document.

Now, having analysed the evidence brought to the proceedings, that which was invoked by the Tax Authority was precisely proven – cf. points 3 and 6 of the proven matter of fact.

In fact, the initial inventory of dyed and marked gas oil as of 23/07/2015 results from the "Inventory Verification Record" prepared on that date, from which an amount of 13,800 litres is stated.

The discrepancy invoked by the Claimant cannot be invoked in this context, all the more so as, at the time of the measurement and the preparation of the respective record, a representative of the Claimant was present, who appended their signature to the record and raised no reservations regarding the quantity of litres stated therein.

Whereby it appears that no error existed in the initial quantification of the dyed and marked gas oil existing in the tanks of the Claimant – 13,800 litres.

Similarly, although the monthly financial report shows the quantity of dyed and marked gas oil sold by the Claimant in the period between 23/07/2015 and 10/05/2017 as invoked by the Claimant, the truth is that such quantity does not correspond to the elements contained in the SAFT – Invoicing files made available by the Claimant to the Tax Authority.

From the said files it appears that, in the indicated period, the Claimant sold 84,716.93 litres and not the 84,057.11 alleged by the Claimant.

Thus, accounts settled, a discrepancy is verified between the physical inventory as of 10/05/2017 (4,700 litres) and the number of litres which, in accordance with the Claimant's invoicing, should exist (12,553.07) in the order of 7,853.07 litres.

Whereby it is concluded that no erroneous quantification of the values determined by the Tax Authority existed, as the Claimant invokes.

Having reached this point, it is now important to ascertain whether the Claimant may benefit from the non-taxation regime defined in Article 48 of the CIEC for storage losses.

Now, in this regard, the Claimant merely invokes that the discrepancy verified lies within the limits provided for in Article 48 of the CIEC relating to storage losses, and therefore is not subject to taxation.

The Tax Authority alleging, in turn, that the regime provided for in Article 48 of the CIEC applies exclusively to products subject to special excise duties that are in a suspension of duty regime in a fiscal warehouse, and that the Claimant does not hold the fiscal status that would allow it to hold products subject to excise duty in a suspension of duty regime nor does the fuel filling station it operates constitute a fiscal storage warehouse.

In this we believe the Respondent is correct.

In fact, as already stated (see justification of matter of fact), the storage of products subject to special excise duties under a suspension of duty regime may only be carried out in a fiscal warehouse with authorisation and under the supervision of the competent customs authority.

It being certain that obtaining the status of authorised warehousekeeper is subject to the rules provided for in Articles 22 and following of the CIEC.

Now, the Claimant has not in the least demonstrated that it holds the status of authorised warehousekeeper nor that the fuel filling station it operates constitutes a fiscal storage warehouse, it being for the Claimant to bear such burden of proof.

Therefore, as the Claimant does not hold the fiscal status necessary for this purpose, nor does the fuel filling station it operates constitute a fiscal storage warehouse, it cannot, as is evident, benefit from the regime applicable to storage losses provided for in Article 48 of the CIEC.

In any event, even if the Claimant could benefit from this regime, which, as we have seen, is not the case, it would always be said that, the discrepancy determined – 7,853.07 litres – exceeding the maximum limit of 0.4% provided for in the cited Article 48 of the CIEC, the difference determined could not benefit from the exemption regime provided for storage losses.

Whereby it appears that the assessment in issue, in the part challenged, does not suffer from any illegality and therefore cannot be annulled, even if partially, as the Claimant requests.

OPERATIVE PART

In light of the foregoing, it is decided to dismiss the request for a declaration of partial illegality of the additional assessment of Tax on Petroleum and Energy Products (ISP) and compensatory interest covered by assessment record no. 2017/..., of 11/08/2017, in the total amount of € 4,017.85.

The value of the case is fixed at € 4,017.85, pursuant to subparagraph a) of paragraph 1 of Article 97-A of the Tax Procedure and Process Code, applicable by virtue of subparagraphs a) and b) of paragraph 1 of Article 29 of the LRAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is fixed at € 612.00, pursuant to Table I of the Table Annexed to the Regulation of Costs in Tax Arbitration Proceedings, as well as to the provisions of paragraph 2 of Article 12 and paragraph 4 of Article 22, both of the LRAT, and paragraph 1 of Article 4 of the cited Regulation, to be paid by the Claimant as the unsuccessful party.

Register and notify.

Lisbon, 20 March 2019.

The Arbitrator,

Alberto Amorim Pereira

Frequently Asked Questions

Automatically Created

What is the ISP (Imposto sobre os Produtos Petrolíferos e Energéticos) tax on colored and marked diesel in Portugal?
ISP (Imposto sobre os Produtos Petrolíferos e Energéticos) is Portugal's excise tax on petroleum and energy products. Colored and marked diesel (gasóleo colorido e marcado) benefits from reduced ISP rates when sold for authorized purposes, primarily agricultural and industrial use. The coloring and marking serve as control mechanisms to prevent diversion to unauthorized uses subject to higher taxation. Commercial transactions must be properly documented, and unauthorized sales or stock discrepancies trigger additional ISP assessments at standard rates plus compensatory interest.
Can the Portuguese Tax Authority issue an additional ISP assessment based on discrepancies between physical and accounting stock of colored diesel?
Yes, the Portuguese Tax Authority can issue additional ISP assessments based on physical versus accounting stock discrepancies. The methodology involves comparing physical inventories at two inspection dates against documented purchases and sales during the intervening period. Any unexplained shortage is presumed to constitute undocumented sales subject to ISP. The Tax Authority creates formal Inventory Verification Records (Autos de Verificação de Inventário) signed by taxpayer representatives and customs officials, which carry significant probative weight in subsequent litigation. Taxpayers bear the burden of demonstrating calculation errors or qualifying for exemptions like storage losses.
What are the allowable storage losses for colored and marked diesel under Portuguese IEC (Excise Tax) rules?
Portuguese CIEC (Código dos Impostos Especiais de Consumo - Excise Tax Code) Article 48 establishes storage loss limits exempt from excise taxation. However, these provisions apply primarily to fiscal warehouses (entrepostos fiscais) for authorized storage operations. Standard fuel retail stations not constituting fiscal warehouses cannot automatically benefit from storage loss exemptions. The applicable tolerance percentages depend on facility type, storage duration, and product characteristics. Taxpayers must demonstrate their facility qualifies as a fiscal warehouse and that losses remain within regulatory limits, supported by proper measurement protocols and documentation.
How can taxpayers challenge an additional ISP liquidation through CAAD arbitration proceedings in Portugal?
Taxpayers can challenge ISP assessments through CAAD (Centro de Arbitragem Administrativa) under Decree-Law 10/2011 (RJAT - Legal Regime for Tax Arbitration). Prerequisites include filing administrative review (reclamação graciosa) and either receiving an unfavorable decision or waiting for deemed rejection through administrative silence. In this case, the taxpayer filed gracious complaint on 20/12/2017, and by 18/07/2018 no decision issued, enabling arbitration access. The request must specify legal grounds, attach supporting documentation, and optionally appoint an arbitrator (otherwise CAAD's Deontological Council appoints one). Arbitration offers faster resolution than judicial courts while maintaining full adversarial procedures including evidence presentation and witness testimony.
What happens when a gracious complaint (reclamação graciosa) against an ISP assessment is not decided within the legal deadline?
When a reclamação graciosa against an ISP assessment remains undecided beyond the legal deadline, Portuguese law applies the principle of deemed rejection (indeferimento tácito). This legal fiction treats administrative silence as an unfavorable decision, preserving taxpayer rights to judicial or arbitration review. The deadline for administrative decision varies by tax type but generally ranges from 90 to 120 days. Deemed rejection enables taxpayers to access CAAD arbitration or judicial courts without indefinite waiting. However, taxpayers must file subsequent challenges within applicable limitation periods from deemed rejection. This mechanism prevents administrative inaction from blocking taxpayer access to independent review forums.