CAAD 483/2014-T: ISP Tax on Colored Marked Diesel – Petroleum Products Tax Arbitration

ARBITRAL DECISION

I. Report[1]

1. A, SA, legal entity no. …, with registered office in …, Salvaterra de Magos (hereinafter referred to as the Applicant), submitted on 11.07.2014, in accordance with articles 2.º, no. 1, paragraph a) and 10.º of Decree-Law no. 10/2011 of 20 January, as subsequently amended (hereinafter the Legal Framework for Tax Arbitration or RJAT), a request for arbitral pronouncement with a view to declaring illegal the tax act, executed by the Director of the Customs House of …, dated 28 April 2014, for the retroactive assessment of Tax on Petroleum and Energy Products (ISP), in the amount of €35,292.64, Road Service Contribution (CSR), in the amount of €15,655.95, and compensatory interest in the amount of €167.50, all totalling the global value of €51,116.09, wherein the Tax and Customs Authority (hereinafter, Respondent or AT) is named as defendant.

a) Constitution of the Arbitral Tribunal

1. In accordance with articles 5.º, no. 2, paragraph a), 6.º, no. 1 and 11.º, no. 1, paragraph a) of the RJAT, the Ethics Council of this Administrative Arbitration Centre (CAAD) appointed the undersigned as sole arbitrator, who accepted the appointment.

2. Pursuant to the provisions of paragraph c) of no. 1 and no. 8 of article 11.º of the RJAT, as communicated by the Chairman of the Ethics Council of CAAD, the Sole Arbitral Tribunal was constituted on 16.09.2014.

b) Procedural history

1. In the request for arbitral pronouncement (hereinafter initial petition or IP), the Applicant petitions for the partial annulment of the aforementioned tax act dated 28 April 2014, executed by the Director of the Customs House of … in proc. no. …, for the assessment of ISP, CSR and compensatory interest, in the total amount of €51,116.09, and condemnation of the Respondent "to payment and refund of the sum of EUR 49,756.30, of which EUR 33,886.34 corresponding to ISP on diesel oil; EUR 15,655.95 concerning Road Service Contribution; EUR 214.01 of compensatory interest [sic]; all unduly assessed, further accrued with default interest from 21 May 2014 and until effective and full payment, calculated on the aforementioned amount (EUR 49,756.30)".

2. To sustain the petitioned request, the Applicant alleges, in essence, the following in its IP:

i) The Applicant resold, from 1.1.2013 to 5.12.2013, a total of 519,298.47 litres of colored and marked diesel (CMD) to its shareholders, of which 343,625.80 litres were subject to movement in the respective POS on 29.8.2013 and 175,672.67 litres were subject to communication on 16.1.2014 to the National Coordination for Agricultural Diesel of DGADR, which proceeded to move the litres supplied in the name of the identified shareholders (see articles 17.º, 18.º, 20.º, 21.º, 27.º, 28.º and 29.º).

ii) The movements processed on 29.8.2013, "concerning all supplies made since January 2013, although not carried out simultaneously with the supply, were validly accepted, considered and granted by the Respondent", but "in an ostensibly incoherent manner" "no longer accepted the movements of records that were made in relation to the transactions listed in tables 14 and 16 of the tax act under pronouncement" justified on 16.1.2014, whereby there exists "a clear and notorious contradiction between the grounds and the decision in the exact measure that, based precisely on the same grounds, it positively distinguishes the records made on 29 August 2013 to which corresponds table 15 of the act under pronouncement and negatively distinguishes the records made on 16 January 2014" (see articles 19.º, 31.º, 32.º, 36.º, 37.º, 38.º, 39.º, 40.º and 54.º).

iii) "[T]here occurred the regularization of the tax obligation in question through registration with DGADR of all sales made in the fiscal period", registration that DGADR considered and carried out, whereby "all sales were subject to registration" (see articles 34.º, 35.º, 41.º).

iv) What is merely in question is "a matter of form" as to whether "the carrying out of registration at a moment different from that of the sale inevitably entails the responsibility in question" – now, as, "[a]lthough having done so at a different moment, the taxpayer complied with its respective obligations to which it is bound in its capacity as operator of the authorized station", and "there was no advantage whatsoever to the taxpayer, nor did it cause any prejudice to the respondent, namely the loss of tax revenue by virtue of A not having registered the supplies it made in favor of its associates simultaneously with the sales", "it is evident that a decision to hold the taxpayer responsible for the payment of the tax due as if it were the sale of road diesel, merely because the sale occurred at a moment different from its registration without this translating into any gain or advantage for the seller or even any prejudice or loss of tax revenue for the respondent, is an absolutely unjust and aberrant solution" (see articles 42.º, 43.º, 50.º to 53.º and 55.º).

v) The responsibility provided for in no. 5 of article 93.º of the Special Consumption Tax Code "only takes place when there is a violation of the rules intended to ensure the correct allocation of the use of CMD, that is, only operates when the sale of CMD has occurred to someone who is not the holder of an electronic card" and "the registration of the sale at a moment different from and not simultaneous to the transaction does not fall within the hypothesis provided for in no. 5 of article 93.º of the SCIC – consequently, if this reality does not subsume to the norm, it is not subject to the sanction prescribed therein"; "the law condemns the sale to non-holders of micro-circuit cards with the sanction provided in no. 5 of article 93.º of the SCIC but it does not provide identical sanction for the different situation of the sales having been made to holders of valid electronic cards and who merely have not been registered at the moment of the transaction" (see articles 62.º to 69.º, 73.º to 81.º).

vi) "if the applicant violated a procedural obligation (of simultaneous registration of the sale at the moment of supply), such is only punishable in the context of administrative offense liability according to the combined provisions of articles 6.º and 19.º of Ordinance no. 361-A/2008, of 12 May and paragraph p) of no. 2 and no. 6 of article 109.º of the GTIR" (article 82.º).

vii) The interpretation of the provisions of no. 5 of article 93.º of the SCIC "in the sense of encompassing therein situations where sales are made in favor of entities entitled to acquire CMD and holders of valid electronic cards but where merely registration did not occur simultaneously to the transaction constitutes (...) an analogical interpretation that conflicts with the tax law reserve and the provisions of no. 2 of article 103.º and paragraph i) of no. 1 of article 165.º, both of the Portuguese Constitutional Republic" (article 89º).

viii) "it is not appropriate that on account of all other sales listed and made to entities legally entitled to acquire CMD and holders of valid electronic cards, merely because registered at a moment different from the moment of the transaction, the monetary sanction provided in no. 5 of article 93.º of the SCIC apply, this with the measure of the ISP that was not lost", since "situations that are absolutely distinct would be treated in the same way and with the same penalty", which "would translate a flagrant violation of the principles of legality, equality and fiscal proportionality, which the Portuguese Constitutional Republic clearly repudiates" (see articles 97.º to 99.º).

ix) "the provisions of no. 5 of article 93.º of the SCIC cannot be applied in the context of CSR, since that normative provision provides for and regulates solely with respect to ISP and says or refers nothing regarding CSR", whereby "the assessment of CSR lacks prior legal provision in fiscal matters, in accordance with the tax law reserve, pursuant to paragraph i) of no. 1 of article 165.º and no. 2 of article 103.º of the Portuguese Constitutional Republic" (see articles 106.º to 113.º and 121.º to 123.º).

1. The AT submitted a response in which it petitions that the request for arbitral pronouncement be ruled wholly unfounded and the assessment act maintained, sustaining, in essence, the following (as per the conclusions of the respective procedural document which are transcribed):

"I – CMD is a product that benefits from ISP/ISPPE taxation at a reduced rate, and its sale is conditional, as it can only be acquired by holders of micro-circuit/electronic cards, with the objective of controlling the allocation or use of said product for the purposes provided in the law;

II – The reading, or registration, of such card on terminals connected to the computer system created for purposes of controlling the acquisition and allocation of CMD is mandatory at the moment of supply, the law establishing the tax liability of owners or persons responsible for the operation of public retail sales points for CMD, whenever supplies are made without such registration/reading;

III – The Applicant's argument that CMD sales/supplies not registered in the TPA/POS terminal do not give rise to any taxes because they were made to micro-circuit card holders is unfounded. In effect, from the outset, the fact that someone is the holder of a micro-circuit/electronic card at a particular time prior or subsequent to the date of a given CMD supply proves nothing regarding their holding at any other time (specifically at the relevant moment which is that of the supply). In any case, even if such proof were made, it would be useless since the mere holding of a micro-circuit card by the buyer is not sufficient to prevent taxation at the normal rate of the fuel supplied, if there has been no actual reading thereof in the TPA/POS terminals at the moment of supply, as imposed by law;

IV – Likewise, the justification presented by the Applicant of the alleged reading of micro-circuit cards on a date subsequent to that of the supply does not hold, as the law unequivocally requires the reading of the card at the time of supply, to such an extent that it even provides for the possibility of using mobile TPA/POS. As for the error of the Tax and Customs Authority in accepting justified sales prior to 29/08/2013 with registration on that date, it does not render legal the remaining irregular introductions into the consumption of CMD made by the applicant".

1. By order of 22.10.2014, the Sole Arbitral Tribunal, pursuant to the provisions of paragraph c) of article 16.º of the RJAT, decided, without opposition from the parties, that it was not necessary to convene the meeting referred to in article 18.º of the RJAT, as the circumstances provided for in the various paragraphs of no. 1 of this provision were not present. It further decided, in accordance with no. 2 of article 18.º of the RJAT, that oral arguments were not necessary, as the positions of the parties were fully set forth in their respective pleadings.

The date for pronouncement of the arbitral decision was subsequently set for 29 January 2015.

1. The Tribunal was regularly constituted and is competent to hear the issues raised (article 2.º, no. 1, paragraph a) of the RJAT), the parties have legal personality and capacity, have standing (articles 4.º and 10.º, no. 2 of the RJAT and article 1.º of Ordinance no. 112-A/2011, of 22 March) and are duly represented, with no nullities or preliminary issues arising that require consideration, whereby nothing prevents judgment on the merits.

c) Object of the proceedings and issues to be decided

1. The object of the present arbitral proceedings consists of, in light of that petitioned in the IP, the aforementioned decision of the Director of the Customs House of …, of 28 April 2014, adopted pursuant to no. 3 of article 11.º of the Special Consumption Tax Code (SCIC), approved by Decree-Law no. 73/2010, of 21.6 (as subsequently amended), for the assessment of Tax on Petroleum and Energy Products, in the amount of €35,292.64, Road Service Contribution, in the amount of €15,655.95, and compensatory interest in the amount of €167.50, in the global amount of €51,116.09.

The amount whose annulment is sought in relation to the aforementioned assessment, as cited above (no. 4), concerns only the amount of €49,756.30, of which €33,886.34 corresponds to ISP, €15,655.95 to CSR and €214.01 to interest (compensatory and default), as the Applicant, in articles 22.º to 25.º, 70.º to 72.º, 87.º, 94.º and 126.º of the IP, accepts that the movements of the sales cannot be granted in a total of 7,000 litres to the company B-Agricultural Services Provision, Ltd because it was an entity that was not legally entitled at the date to acquire CMD, constituting €1,406.30 the value of the corresponding missing ISP.

1. The matter to be decided, as it emerges from the positions assumed and the grounds alleged in the IP of the Applicant and in the response of the Respondent, indicated above (nos. 5 and 6), concerns the invoked illegality of the impugned act for having applied the provisions of no. 5 of article 93.º of the Special Consumption Tax Code in relation to CMD sales made to holders of active micro-circuit cards due to such sales having been subject to communication/registration at a moment different from the transaction, and for having understood, within the scope of the application of the aforementioned legal provision, the CSR.

It is therefore necessary to examine and decide.

II. Decision on the factual matter and its motivation

1. Having examined the allegations contained in the procedural documents presented, the documentary evidence produced and the administrative process (AP) attached, the Tribunal finds proven, with relevance for the decision of the case, the following facts:

I. The Applicant is a commercial limited company that has the following corporate purpose: "The commercialization of rice produced by its shareholders, promoting its concentration and preparation for sale. Supporting the production of its shareholders in technical, sanitary and environmental terms and promoting price regularization at the production stage. Making available to shareholder producers the appropriate technical means for packaging, transport and commercialization of products. Joint purchase of production factors and equipment intended for rice farming operations of its shareholders. Promoting the application of integrated protection and integrated production techniques. Promoting and conducting training activities in integrated protection and production of crops. Leasing, subleasing and taking on lease of rural properties for agricultural exploitation of any crop, namely rice production and seed multiplication. The production of electricity from wind, geothermal and solar sources" (see the permanent certificate attached as doc. no. 3 to the IP).

II. The Applicant contracted with C the installation of the equipment necessary for the supply of colored and marked diesel (CMD or "agricultural diesel") and the regular provision of the same fuel (allegation not impugned subject of articles 12.º and 13.º of the IP and Action Report dated 11.2.2014 of ff. 1 to 20 of the AP, f. 4).

III. The Applicant thus possesses, for the sale of CMD fuel, the TPA terminal (automatic payment terminal), also called POS (Point of Sale)[2], no. … (see Action Report at f. 3 of the AP).

IV. The Applicant, from 1 January 2013 to 5 December 2013, sold 519,298.47 litres of CMD, as per the following table (see factuality acknowledged in article 17.º of the IP and Action Report at f. 4 of the AP):

V. The CMD sales were made in their entirety exclusively to shareholders of the Applicant (allegation not impugned subject of articles 14.º, 15.º and 16.º of the IP).

VI. According to the listing of colored and marked diesel movements of the Applicant, collected in the computer application of the Directorate-General for Agriculture and Rural Development (DGADR), the following are the data referring to colored and marked diesel movements from the beginning of January 2013 to 05 December 2013 (see Action Report at f. 5 of the AP):

VII. There thus occurred a difference of 175,672.67 litres of colored and marked diesel that was sold by the company and that was not subject to movement, in the period in question, in the respective POS terminal no. … placed at the supply station, as only 343,625.80 litres of colored and marked diesel was moved during the period in question, more specifically on 29.08.2013 (see factuality acknowledged in articles 18.º to 20.º of the IP and Action Report at ff. 5 and 9 to 13 of the AP).

VIII. The situations detected in relation to the differences between the sales of colored and marked diesel and the movement of the POS terminal in the period in question consist of the following: i) sales of colored and marked diesel to which no registration in the POS terminal corresponds; ii) sales of colored and marked diesel to those not entitled to make them; iii) registrations in the POS terminal made at a moment different from that of the sale; iv) registrations in the POS terminal made in a quantity different from that of the sales document (see Action Report at ff. 5 et seq. of the AP).

IX. On 5.12.2013 the services of the Customs House of … conducted control action no. … on the commercialization of colored and marked diesel of the Applicant, at …, in Salvaterra de Magos, where the POS no. … is placed, with a view to controlling the quantities of colored and marked diesel sold at the supply station (see Report of the Action at ff. 1 to 20 of the AP).

X. The supplies identified in the tables contained in nos. 14 (175,535.36 litres) and 16 (137.22 litres) of the assessment act (see below no. XII) were subject to communication to the National Coordination for Agricultural Diesel of DGADR on 16 January 2014, by reference to the date of each of the transactions (allegation not impugned subject of articles 27.º and 28.º of the IP and documents contained in doc. no. 6 attached to the IP).

XI. In exercising the right to be heard, as per document of 14.4.2014 of ff. 64 to 66 of the AP, the Applicant declared, in particular, the following:

• "The situation that occurred results solely and exclusively from a gross and unconscious error of an employee";

• The employee "was responsible for the entire operation related to the process of supply, communication and validation of fuel cards on the POS …, as well as making the communication to DGADR, indication for billing at the moment of sale and inventory control. This employee, without the supervisory staff becoming aware, was manipulating and purloining the truth and the state of compliance of the entire operation inherent to the management of agricultural diesel that had been assigned to her";

• The employee "received clear and evident instructions from C and was aware of the legislation affecting this operation. A never realized that the employee was carrying out registration tasks with a wrong Modus Operandi, procedure which the supervisors had no knowledge of, as they asked several times if the operation was in compliance with what was always answered affirmatively by the employee and that everything was in order.

We request that Your Excellencies consider this procedural failure as a gross error and understand it as such (...)".

XII. On 28 April 2014, by decision of the Director of the Customs House of … adopted in proc. no. …, notified to the Applicant on 29.4.2014 by Official Letter no. …(as per doc. no. 1 attached to the IP and Official Letter at ff. 87 to 108 of the AP, which is reproduced herein), the Applicant was assessed Tax on Petroleum and Energy Products, in the amount of €35,292.64, Road Service Contribution, in the amount of €15,655.95, and compensatory interest, in the amount of €167.50, in the global amount of €51,116.09, based on the following grounds which are transcribed:

"7. During the period comprised between 01/01/2013 to 05/12/2013, the company A sold, according to the list of sales presented, 519,298.47 litres of colored and marked diesel, as indicated in the following table:

1. The quantities sold were taken from the 'Sales Analysis' maps (with dvc and dva) issued per customer of colored and marked diesel, collected at company 'A' and from the 'Consumption Analysis' map sent via email, with registration no. … of 09/01/2014.

2. For compliance with the provisions of no. 15 of Ordinance no. 361-A/2008, of 12 May, the listing of colored and marked diesel movements of the company was collected, in the DGADR computer application, from the beginning of January 2013 to 05 December 2013.

3. In the analysis made of the accounting documents presented, for the period from January 2013 to 05 December 2013, the following data were determined regarding the movement of colored and marked diesel:

1. According to the information extracted from the DGADR application, the POS no. … placed at the supply station, operated by company 'A', moved during the same period, 343,625.80 litres of colored and marked diesel.

2. Thus, a difference of 175,672.67 litres of colored and marked diesel that was sold and was not subject to movement in the POS terminal of the company in question was determined.

3. Analyzing the CMD sales and the POS terminal movement case by case, the following situations were detected:

a. sales of colored and marked diesel to which no registration in the POS terminal corresponds;

b. sales of colored and marked diesel to those not entitled to make them;

c. registrations in the POS terminal made at a moment different from that of the sale;

d. registrations in the POS terminal made in a quantity different from that of the sales document;

as can be verified through the following tables:

1. Sales to which no registration in the POS terminal corresponds: [tables omitted]

2. Registrations in the POS terminals made at a moment different from that of the sale: [tables omitted]

3. Registrations in the POS terminal made in a quantity different from that of the sales document: [tables omitted]

(...)

1. Colored and marked diesel is a product of conditional use, through which, in the case at hand, a tax benefit of the reduced ISP rate is materialized.

2. It is therefore a conditional product:

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

• subject to the holding of an electronic card for its acquisition - see no. 5 of article 93.° of the SCIC, combined with no. 5 of Ordinance no. 117-A/2008, of 8 February and no. 11 of Ordinance no. 361-A/2008, of 12 May;

• to prior recognition by the competent authorities - no. 11 of Ordinance no. 361-A/2008 of 12 May stipulates that colored and marked diesel can only be supplied to the equipment provided for in no. 3 of article 93.° of the SCIC, after verification by the competent entity of the presuppositions and conditions required under the applicable legislation. No. 7 of Ordinance no. 117-A/2008 of 8 February determines that beneficiaries are subject, under penalty of incurring a tax offense, to the obligation to communicate to the competent authorities any change in the presuppositions of the tax benefit and to communicate other changes or authorized equipment;

• to the maintenance of the presuppositions and conditions verified at the date of recognition of the benefit.

1. The consumption of colored and marked diesel without compliance with one of the conditions indicated in the previous point constitutes irregular consumption, pursuant to no. 6 of article 93.° of the SCIC, subjecting the offender to the sanctions provided for in the General Regime of Tax Offenses (RGIT) approved by Law no. 15/2001, of 5 June.

2. Thus it is verified that the use of colored and marked diesel "... for the purpose alluded to in no. 3 of article 93.° of Decree-Law no. 73/2010 of 21 June, with the last wording given by Law 51/2013 of 24 July" is not a sufficient condition for someone to benefit from the reduced ISP rate, falling to the company to sell colored and marked diesel in accordance with the rules typified in the applicable legislation.

3. As for the justification of the company for sales of colored and marked diesel to which no registration in the POS terminal corresponds, for registrations in the POS terminal made at a moment and quantity different from the sale, besides not being able to be accepted as they are shown to be contrary to the provisions in force, it further demonstrates an abusive use of the communications made to DGADR for manual regularization of registrations in the POS terminals.

4. Selling colored and marked diesel without proceeding with the corresponding registration in the POS terminal and making registrations in the POS terminal at a moment and quantity different from the sale constitutes a clear breach of the provisions of no. 6 of Ordinance no. 361-A/2008 of 12 May, which cannot, in any way, be regularized retroactively through written communication to DGADR.

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

6. The situations detected do not fall within the description in the previous point, as they are not typing errors, nor anomalies in the use of the POS terminal.

7. Each colored and marked diesel supply point, as well as each distributing company, is equipped with a computer terminal for registration of all transactions of that product. Supply points and distributing companies can only sell colored and marked diesel to holders of electronic cards, and must effect therein the registration of the quantity supplied.

8. The control of the quantities of colored and marked diesel sold at supply points is therefore based on the mandatory computer registration of all transactions of the product.

9. It was verified that the company sold colored and marked diesel to those not entitled to do so, however only through registrations made with the card, at the moment of sale of said product, is it possible to know whether the purchaser is the holder of a card issued for that purpose, valid, thus complying with what is stipulated in no. 5 of article 93.° of the SCIC approved by Decree-Law no. 73/2010, of 21 June.

10. As determined in no. 5 of article 93.° of the SCIC, approved by Decree-Law no. 73/2010, of 21 June, this product can only be acquired by holders of the electronic card instituted for purposes of controlling its allocation to the destinations referred to in the same article.

11. Ordinance no. 361-A/2008, of 12 May provides that sales of colored and marked diesel are mandatorily registered in POS terminals at the moment they occur, an obligation that 'A' did not comply with.

(...)

1. In accordance with the provisions of no. 6 of Ordinance no. 361-A/2008, of 12 May, sales of colored and marked diesel are mandatorily registered at the moment they occur.

2. As determined in no. 5 of article 93.° of the SCIC, approved by Decree-Law no. 73/2010, of 21 June, "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, with the owner or the person legally responsible for the operation of authorized posts responsible for payment of the tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, in relation to the quantities they sell and which are not properly registered in the computer system underlying the electronic cards assigned.

3. In these terms, and as provided in paragraph h) of no. 2 of article 4.º of the SCIC, approved by Decree-Law no. 73/2010, of 21 June, company 'A' will be responsible for payment of the ISP and respective VAT, resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel in relation to quantities it sold that were not subject to movement, or proper movement, in the POS terminals.

4. According to the provisions of nos. 1 and 2 of article 88.° of the SCIC, approved by Decree-Law no. 73/2010, of 21 June, subject to tax on Petroleum and Energy Products (ISP) are road diesel and colored and marked diesel.

5. Law no. 55/2007, of 31 August, creates the road service contribution, which aims to finance the national road network in charge of EP - Roads of Portugal, E.P.E., and determines the conditions for its application.

6. Pursuant to no. 1 of article 3.° of Law no. 55/2007, of 31 August, the road service contribution (CSR) constitutes the consideration for the use of the national road network, as is verified by the consumption of fuels.

7. In accordance with the provisions of nos. 1 and 2 of article 4.° of Law no. 55/2007, of 31 August, the CSR applies to gasoline and road diesel subject to tax on petroleum and energy products (ISP).

8. For this purpose, the rates in force at the date of the commission of the offenses were considered. These calculations are detailed in the following tables, as well as the calculation of the debt to be assessed.

9. From the above, it can be concluded that the sales of colored and marked diesel from company 'A' do not correspond with the movements made in the POS that it possesses, and it is verified that 175,672.67 litres of colored and marked diesel were sold without the corresponding movement in the respective POS terminal, so the calculation of the tax considered in debt must be made (ISP, CSR, VAT and compensatory interest).

10. Thus, the amount of €50,948.59 (fifty thousand nine hundred and forty-eight euros and fifty-nine cents) should be charged retroactively as title of ISP and CSR, to which the respective compensatory interest and the respective VAT are added.

11. Company 'A' sold colored and marked diesel without the corresponding movement in the POS terminal no. …, part of the quantity of colored and marked diesel sold was registered in the POS terminal on a date different from the moment of sale and in a quantity different from that of the sales document, and further sold colored and marked diesel to those not entitled to acquire that product, thus violating the provisions of Ordinance no. 361-A/2008, of 12 May, as well as article 93.° of the SCIC, approved by Decree-Law no. 73/2010, of 21 June".

XIII. The Applicant paid on 21.5.2014 the sum of €51,162.60, corresponding to €51,162.60 for the assessment of ISP, CSR and compensatory interest, as referred to in II, and €46.51 to default interest accrued from the date of the decision until the date of payment (see doc. no. 2 attached to the IP and document of ff. 113 to 118 of the AP, which is reproduced herein).

1. There is no other factual matter relevant to the merits decision in light of the possible legal solutions that merit consideration as not proven.

2. The Tribunal's conviction regarding the factual matter given as proven resulted from the examination of the unimpugned documents provided by the Applicant, the Report of the inspection action and the other documents included in the tax administrative process, and from the acknowledgment of facts resulting from allegations in the IP, all as specified in the points of the evidence set forth above. The factual matter articulated is, moreover, not the subject of any dispute between the parties.

III. On the Law

a) The ISP regime applicable to the commercialization of colored and marked diesel

1. The first issue to be clarified, for purposes of assessing the illegality of the disputed assessment (see above no. 10), concerns the determination, in light of the applicable legal provisions, whether the failure to carry out the registration/reading of the micro-circuit card in the electronic control system at the moment of the transaction/supply of CMD determines the tax liability of the owner or person responsible for the operation of the POS pursuant to the terms resulting from no. 5 of article 93.º of the Special Consumption Tax Code.

To resolve this issue, it is naturally important to keep in mind the content of the rules that are at issue.

1. The tax regime relating to colored and marked diesel (CMD) that is applicable to the case is found in the Special Consumption Tax Code (SCIC), approved by Decree-Law no. 73/2010, of 21.6 (as subsequently amended[3]).

Let us begin by invoking the provision of paragraph h) of no. 2 of article 4º of the SCIC according to which persons subject to special consumption taxes (SEC) are: "Natural or legal persons who introduce into consumption, sell or use products subject to tax, in other situations of irregularity".

It is then critically relevant the article 93.º of the SCIC, on "Reduced rates", which provides, insofar as it matters here, the following:

1 - Diesel oil, heating oil and petroleum colored and marked with the additives defined by ordinance of the government member responsible for the area of finances are taxed at reduced rates.

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

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

a) Stationary engines used for irrigation;

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

c) Agricultural tractors, combine harvesters, cultivators, motor hoes, motor reapers, self-propelled potato harvesters, pea harvesters, forage harvesters for silage, tomato harvesters, mowers-conditioners, wine harvest machines, trunk vibrators for harvesting olives and other fruits, as well as other equipment approved by ordinance of the government members responsible for the areas of finances and agriculture;

d) Vehicles for transport of passengers and goods by railways;

e) Fixed engines;

f) Autonomous refrigeration engines installed in heavy goods vehicles for the transport of perishable goods, powered by separate fuel tanks, and possessing ATP (Agreement on the Transport of Perishable Foodstuffs) certification, as to be defined in ordinance of the government members responsible for the areas of finances, agriculture and transport.

(...)

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, with the owner or the person legally responsible for the operation of authorized posts for public sale responsible for payment of the tax amount resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, in relation to the quantities they sell and which do not remain properly registered in the electronic control system.

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

Pursuant to article 5.º of Decree-Law no. 73/2010, which approved the SCIC, "The regulatory provisions of the Special Consumption Tax Code, approved by Decree-Law no. 566/99, of 22 December, contained in ordinances or ministerial orders remain in force until the entry into force of the regulation provided for in the SCIC".

Consequently, it is necessary to take into account the regulations contained in Ordinances nos. 117-A/2008, of 8 February, and 361-A/2008, of 12 May, approved during the validity of the previous Special Consumption Tax Code, pursuant to its article 106.º.

Ordinance no. 117-A/2008, of 8 February (amended by Ordinance no. 762/2010, of 20 August) regulates the formalities and procedures applicable to the recognition and control of exemptions and reduced rates of tax on petroleum and energy products, currently provided for in no. 1 of article 89.º and article 93.º of the Special Consumption Tax Code. It is important to highlight here the regulatory provisions contained in nos. 2.º, 5.º, 6.º, 11.º, 12.º and 13.º:

"2.º 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 previous number [no. 1 of article 71.º and article 74.º of the SCIC, approved by Decree-Law no. 566/99, of 22.12, current no. 1 of article 89.º and article 93.º of the SCIC, approved by Decree-Law no. 73/2010, of 21.6], may benefit from exemption or the application of a reduced tax rate, provided they comply with the following conditions:

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

b) They have their tax and social contribution status regularized;

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

"5.º The tax benefits materialized through the use of colored and marked diesel are effected mandatorily through the use of a micro-circuit card, provided for in no. 5 of article 74.º of the SCIC, which is issued by the Directorate-General for Agriculture and Rural Development (DGADR) and sent to the applicants by the entity competent for the recognition of the relevant tax benefit";

"6.º The cards referred to in the previous number are personal and non-transferable, with the respective holders responsible for their regular use".

"11.º Constitute grounds for revocation of the authorization of the tax benefit, without prejudice to initiation of proceedings for tax offense under the terms provided for in the General Regime of Tax Offenses, violation of the presuppositions of the benefit as well as non-compliance attributable to the beneficiary of the conditions required in no. 2.º";

"12.º In case of violation of the presuppositions of the tax benefit, the tax that is shown to be due is furthermore assessed";

"13.º For purposes of the provision in the previous number, violation of the presuppositions of the tax benefit is considered to exist, in particular, in case of:

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

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

c) Use of products in non-authorized equipment".

For its part, Ordinance no. 361-A/2008, of 12 May, establishes the rules for commercialization of colored and marked diesel and the respective control mechanisms, with a view to the correct allocation of the product to the destinations that benefit from exemption or the application of reduced rates of tax on petroleum and energy products as provided for in the SCIC (see its respective no. 1). Relevant for the case are the regulatory provisions contained in nos. 3.º, 5.º, 6.º, 8.º, 9.º, 11.º and 12.º:

"3.º Colored and marked diesel can only be supplied or sold to holders of properly licensed supply posts that are holders of point of sale (POS) terminals";

"5.º Colored and marked diesel can only be sold at supply points to beneficiaries of an exemption or reduced ISP rate who are holders of micro-circuit cards issued for that purpose by DGADR, through which all transactions of colored and marked diesel are registered in the computer system managed by Interbank Services Company (SIBS)";

"6.º The sales referred to in the previous number are mandatorily registered in POS terminals at the moment they occur";

"8.º The registration in the computer system, via POS terminals, of each supply effected does not exempt the issuance of the respective invoice or equivalent document, issued in the name of the holder of the respective micro-circuit card";

"9.º The registrations of the transactions referred to in no. 5.º are sent on computer media by SIBS to DGADR, which, in addition to the national coordination functions that fall to it, manages the database relating to colored and marked diesel and is responsible for the issuance, suspension or cancellation of cards";

"11.º Colored and marked diesel can only be supplied to the equipment provided for in no. 3 of article 74.º of the SCIC, after verification, by the competent entity, of the presuppositions and conditions required under the applicable legislation and the attribution to the respective beneficiaries of the card referred to in no. 5.º";

"12.º In case of typing errors or other anomalies found in the use of POS terminals, the same must be immediately communicated, in writing, preferably by electronic mail, to DGADR, in order for the respective corrections to be made".

1. In light of these normative statements, it is incumbent to conclude, in light of the relevant hermeneutical canons, that the application of reduced rates, pursuant to article 93.º of the SCIC, with respect to CMD consumption, is subject, insofar as it matters here, to the following requirements:

• that colored and marked diesel be acquired by holders of the electronic card instituted for purposes of controlling its allocation to the legally foreseen destinations (first part of no. 5 of article 93.º of the SCIC, no. 5.º of Ordinance no. 117-A/2008 and no. 5 of Ordinance no. 361-A/2008);

• that colored and marked diesel be sold at supply points to beneficiaries who are holders of micro-circuit cards through which all transactions of colored and marked diesel are registered in the computer system managed by SIBS (no. 5 of Ordinance no. 361-A/2008);

• that sales be mandatorily registered in POS terminals at the moment they occur (no. 6 of Ordinance no. 361-A/2008).

Such requirements relate to rules for commercialization of colored and marked diesel and respective control mechanisms, with a view to the correct allocation of the product to the destinations that benefit from the application of reduced ISP rates (to cite no. 1 of Ordinance no. 361-A/2008), representing formalities and procedures applicable to the recognition and control of reduced ISP rates (to cite, now, no. 1 of Ordinance no. 117-A/2008). As such, the requirements thus imposed integrate the "presuppositions of the tax benefit" (see no. 12 of Ordinance no. 117-A/2008).

In truth, the reduced ISP rates provided for in article 93.º of the SCIC constitute tax benefits (see article 2.º, nos. 1 and 2 of the Tax Benefits Statute – TBS), whereby, in accordance with elementary principles applicable in this field (see articles 7.º and 12.º of the TBS), the right to tax benefits depends on the meeting of their respective presuppositions, that is, the verification of the circumstances and factual conditions upon which their attribution depends. That is why it is well understood that in the Preamble of Ordinance no. 117-A/2008 there is expressed reference to the fact that: "Exemptions and the application of reduced rates of tax on petroleum and energy products (ISP) provided for (...) depend on the recognition of the presuppositions and conditions provided for in the law for the materialization of the right to the tax benefit".

1. Now, in light of the exhaustive tenor of the provisions of nos. 5 and 6 of Ordinance no. 361-A/2008, it is unquestionable the establishment of a duty to register, at the moment of the transaction, CMD sales – pursuant to the provisions of that no. 6, as well as no. 5 of that Ordinance, sales of colored and marked diesel at supply points to beneficiaries who are holders of micro-circuit cards, through which all transactions of colored and marked diesel are registered in the computer system, are mandatorily registered in POS terminals at the moment they occur.

Thus, when sales are not registered in POS terminals at the moment they occur, a condition is not met upon which depends the materialization of the right to the tax benefit, whereby a presupposition for the rate reduction provided for in article 93.º of the SCIC is lacking.

This condition is explained in light of the need to verify immediately through registrations made in POS terminals with the micro-circuit card at the moment of CMD sale that the purchaser then has a valid and effective card. The POS system automatically identifies the number of the micro-circuit card and its holder, as well as the date and quantity of the supply, data which allow to verify immediately whether colored and marked diesel was sold to persons who met the requirements required for its acquisition and that no deviation of the purposes envisaged with CMD occurred.

Thus, the condition established of the mandatory nature of sales being registered in POS terminals at the moment they occur is intended to ensure immediate control of the quantities sold of CMD to the respective beneficiaries through POS terminal data, control of the destination of agricultural diesel that the legislator did not wish to leave for a later moment, but to ensure ab initio, precisely because, as expressly stated in the Preamble of Ordinance no. 361-A/2008, it intended to strengthen "the control mechanisms, aiming at greater effectiveness in preventing tax fraud".

In these terms, contrary to what is alleged by the Applicant (see no. 5, paragraph v)), it is not enough that CMD be commercialized to someone who is the holder of an electronic card, but it is further required, cumulatively, that each supply be subject to immediate registration in POS terminals at the moment it occurs ("mandatorily registered" is the significant formulation adopted in no. 6 of Ordinance no. 361-A/2008). So essential is this element of immediate registration of sales in the POS that no. 12 of Ordinance no. 361-A/2008, as cited above, determines that "typing errors or other anomalies found in the use of POS terminals" must be "immediately communicated, in writing, preferably by electronic mail, to DGADR, in order for the respective corrections to be made" (as well as it was provided in no. 7 of this same Ordinance that: "Supplies to equipment authorized to consume colored and marked diesel that cannot be made at the location of the supply post, in particular some agricultural and forestry equipment and fixed engines, can be registered in a mobile POS terminal, at the time and place of the respective supply").

If it were sufficient for the holding of a micro-circuit card without the need for immediate registration in the POS terminal, it would be impossible to control and prevent the making of CMD supplies to those who, at the moment of sale, do not hold a valid card – as occurred in the case regarding the sale of 7,000 litres to company B, Ltd (see above no. 9). The Respondent is therefore correct when it points out that "only through registrations made with the card at the moment of sale of said product is it possible to know whether the purchaser is the holder of a valid electronic/micro-circuit card, and likewise to control the caps of colored and marked diesel assigned to the various beneficiaries, thus complying with what is established in article 93.º of the SCIC and no. 6 of Ordinance no. 361-A/2008, of 12 May" (article 62.º of the response).

Moreover, as is evident, the existence of an electronic micro-circuit card for purposes of acquiring CMD has no other objective than its use for control of transactions through reading or registration in POS terminals at the moment of sale. To impose the holding of an electronic card and not consider required its use through registration in the POS computer terminal at the moment of sale lacks, absolutely, any justification or reasonableness. And it is precisely for this reason that the legislator, in no. 5 of article 93.º of the SCIC, after referring to the fact that "colored and marked diesel can only be acquired by holders of the electronic card instituted for purposes of controlling its allocation", determines, subsequently, the responsibility of the owner or the person legally responsible for the operation of the authorized supply post for payment of the tax resulting from the level of taxation of road diesel "in relation to the quantities they sell and which do not remain properly registered in the electronic control system" – electronic cards exist, naturally, to be used by their respective holders through the registration of quantities acquired in the electronic control system at the time of supply at the owner or the person responsible for the operation of the post.

1. The operation of immediate registration of the supply made in the computer control system through the use of the electronic card constitutes, thus, an essential formality whose non-observance affects the enjoyment of the benefit.

Let us cite, in this regard, what was written in the judgment of the Supreme Administrative Court of 30.5.2007, proc. no. 0243/07[4] (regarding a previous provision with content less exigent than the rule now contained in no. 5 of article 93.º of the SCIC[5]):

"to consider verified the tax benefit, [there is required] that the buyer be the holder of a micro-circuit card and this condition cannot be dispensed with nor, likewise, substituted for another.

Which is well understood, given the intention of the legislator to prevent tax fraud.

That holding then constitutes a substantial formality which is characterized by being 'absolutely unsuitable for replacement by any other kind of proof', and 'its lack is wholly irremediable': if the buyer is not the holder of said card, the benefit enjoyed by colored and marked diesel lapses and the rule-regime of diesel taxation applies. (...).

And, although on a secondary level compared to the requirement of the holding of a micro-circuit card, the same is said, mutatis mutandis, regarding the obligation (general) of transactions being documented in the accounting of the post".

In light of the applicable regulation, it is understood, therefore, attending to the applicable hermeneutical criteria (article 11.º, no. 1 of the General Tax Law and 9.º of the Civil Code) that contemporaneous registration of sales in the computer control system of agricultural diesel constitutes an essential formality upon which the materialization of the tax benefit depends.

Let it be insisted, indeed, that without the immediate materialization of the registration of transactions in the POS terminal, the control mechanism for the sale of agricultural diesel based on the mandatory use of the micro-circuit card in all supplies is put at risk, which thus requires that supplies be bound to the use of a valid and effective micro-circuit card.

Well then, the untimely registration of transactions means only that supplies of agricultural diesel were made without the use of the micro-circuit card in the POS terminal through competent computer registration. Therefore, what is observed in that circumstance is the making of acts of sale of CMD without the use of the micro-circuit card, whose holding was imposed by the legislator to determine the beneficiaries of the reduced rate.

In truth, as results from the legal and regulatory provisions cited above, the legislator, in order to prevent tax fraud, determined, precisely, that the making of any supply of CMD involve the immediate use of the micro-circuit card by the respective holders, which entails, precisely, its registration in the computer terminal. As such, it represents manifest irregularity and omission of an essential formality necessary for the application of the tax benefit, the provision, at the authorized supply points, of colored and marked diesel, without use, by the buyer, of the micro-circuit card, as is revealed by the non-registration, at the time of provision, of the sale in the electronic system underlying such cards.

In conclusion, contemporaneous registration of sales in the POS computer terminal constitutes, under the terms prescribed by the applicable regulation, an indispensable condition for the enjoyment of the tax benefit of the rate reduction provided for in article 93.º of the SCIC.

1. When the presuppositions of a tax benefit are not met, since tax benefits consist of derogations from the rule tax regime (see the concept contained in no. 1 of article 2.º of the TBS), it follows, naturally, the inapplicability of the corresponding privileged tax regime and, thus, the application of the rule-regime. In the case, that rule-regime is the taxation applicable to road diesel (see, from the outset, article 88.º of the SCIC), and the obligation of payment of the normal level of taxation must thus be satisfied.

In relation to the situation sub judice, it is important to take into account the specificity of the provisions of the second part of no. 5 of article 93.º of the SCIC, pursuant to which, as cited above, the "owner or the person legally responsible for the operation of authorized posts for public sale is responsible for payment of the tax amount resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, in relation to the quantities they sell and which do not remain properly registered in the electronic control system".

By force of this normative segment, there is established against the owner or the person legally responsible for the operation of the authorized post for public sale of CMD a tax liability for payment of the tax amount resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel as to the quantities of the product they sell and which do not remain properly registered, through the micro-circuit cards, in the computer control system. That is why A. BRIGAS AFONSO/MANUEL T. FERNANDES, Special Consumption Tax Code annotated and updated, 3rd ed., Coimbra, Coimbra Editor, 2011, p. 201 point out that this provision creates "special responsibilities for owners or persons legally responsible for the operation of supply posts, regarding compliance with the regulatory provisions provided for for the supply of colored and marked diesel, leaving them directly responsible for payment of the ISP difference in cases where they make supplies without complying with the regulatory provisions that require the mandatory use of electronic cards in all supplies made".

Now, in light of the tenor of that normative segment, in particular in light of the reference to "quantities they sell and which do not remain properly registered in the electronic control system", it is clear that are not properly registered in the electronic control system, given the requirement contained in the regulatory provision of no. 6 of Ordinance no. 361-A/2008 that sales be mandatorily registered in POS terminals at the moment they occur, the quantities of the product that are subject to registration or communication on a date not coinciding with the supplies.

Thus, it is to be understood that, even though the sale has been made to holders of the electronic card, the quantities of CMD commercialized that have not been subject to the necessary and timely registration in the electronic control system, subsume to the legal formula "quantities they sell and which do not remain properly registered in the electronic control system" contained in no. 5 of article 93.º of the SCIC. CMD sales thus made are, therefore, irregular, given that they were made without compliance with the control procedures underlying the use of the card with micro-circuit.

This situation of irregularity in the commercialization of the product affects the enjoyment of the tax benefit and determines the application of the rule-taxation, whereby its non-occurrence in such circumstance represents, clearly, contrary to what is sustained by the Applicant (see above no. 5, paragraph iv)), a loss of tax revenue. The owner or the person responsible for the operation of the POS who proceeded to sell the products in these irregular terms thus assumes the quality of person subject to SEC-ISP in conformity with the determination of paragraph h) of no. 2 of article 4.º of the SCIC which considers as such "natural or legal persons who introduce into consumption, sell or use products subject to tax, in other situations of irregularity".

Thus, by force of the provisions of no. 5 of article 93.º and paragraph h) of no. 2 of article 4.º of the SCIC, non-compliance with the rules for commercialization of CMD and the corresponding conditions for application of the reduced ISP rate does not limit itself to constituting a possible administrative offense liability, in conformity with the provisions of article 109.º, no. 2, paragraph p) of the General Regime of Tax Offenses ("Introduce into consumption, dispatch, hold or commercialize products in violation of the rules of sealing, packaging, holding or commercialization, in particular the quantitative limits, established by the Special Consumption Tax Code and in complementary legislation"), but involves the non-observance of a requirement of the privileged taxation regime, which entails its inapplicability and the consequent application of the normal regime, with attribution of liability for payment of the taxation due according to the normal regime of road diesel to the owner or operator of the supply post. This itself, moreover, results expressly from no. 3 of article 11.º of the SCIC which determines that "in case of error, omission, failure or any other irregularity with implication on the amount of tax to be charged, the competent customs authority must proceed to assess the tax and compensatory interest that is due" (see also no. 12 of Ordinance no. 117-A/2008: "In case of violation of the presuppositions of the tax benefit, the tax that is shown to be due is furthermore assessed"). Thus, when the owner or the person responsible for the operation of the POS and seller of CMD does not ensure, cumulatively, sale to a holder of an electronic card and the registration, in the prescribed terms, in the electronic control system through the use of the card, they become responsible, by force of no. 5 of article 93.º of the SCIC, for the taxation corresponding to the difference between the level of taxation applicable to road diesel and the rate of the tax applicable to CMD.

In conclusion, the tax obligation to bear the value resulting from the difference between the taxation applicable to road diesel and the rate applicable to colored and marked diesel, in relation to the quantities sold that do not remain properly registered in the computer system underlying the micro-circuit cards that results from no. 5 of article 93.º of the SCIC, applies, not only when the sale is made to someone who is not the holder of an electronic card, but equally when the registration of the sale, through the use of the electronic card, at the moment the transaction/supply was concretized did not take place.

1. The understanding advocated by the Applicant cannot be accepted, for these reasons, that the responsibility instituted in no. 5 of article 93.º of the SCIC only takes place "when the sale of CMD has occurred to someone who is not the holder of an electronic card", but "does not provide identical sanction for the different situation of sales having been made to holders of valid electronic cards and who merely have not been registered at the moment of the transaction", nor does the consequent conclusion proceed that the interpretation of the provisions of article 93.º of the SCIC "in the sense of encompassing therein situations where sales are realized in favor of entities entitled to acquire CMD and holders of valid electronic cards but where merely registration did not occur simultaneously to the transaction constitutes (...) an analogical interpretation that conflicts with the tax law reserve and the provisions of no. 2 of article 103.º and paragraph i) of no. 1 of article 165.º, both of the Portuguese Constitutional Republic" (see above no. 5, paragraphs v) and vii)).

As results from the above, the normative dimension in question of no. 5 of article 93.º of the SCIC encompasses, either in light of the letter of the law or in light of its spirit, the situation where CMD sales are made without the registration in the computer control system of the quantities sold through the use of the micro-circuit card taking place in that act, which violates the provisions of nos. 5 and 6 of Ordinance no. 361-A/2008. In this way, it is not a matter here of any analogical integration – to be understood, in classical terms, as the application to a case not provided for in the law of a solution established for a similar case –, nor does there occur, consequently, a violation of the constitutional principle of the tax law reserve (paragraph i) of no. 1 of article 165.º and no. 2 of article 103.º of the CRP), since, precisely, the case at hand of CMD sale unaccompanied by concomitant registration in the POS computer terminal subsumes directly to the legal provision of no. 5 of article 93.º of the SCIC, within the exact limits of the semantic content of the words of the law (see article 9.º nos. 1 and 2 of the Civil Code and article 11.º, no. 1 of the LGT). In a quite different manner, it is thought that what is at issue in the position of the Applicant, if we analyze it well, is, simply, the defense of a restrictive interpretation of no. 5 of article 93.º, seeking to limit the scope of the norm only to the hypothesis of non-compliance with the legal requirements that consists in the sale of CMD to someone who is not the holder of a micro-circuit card, a position which, as results from the above, is judged not to possess foundation.

Nor can the Applicant's allegation (see above no. 5, viii)) that two different situations are thus being treated in the same way be accepted, for what is at issue and founds what is established by no. 5 of article 93.º of the SCIC is the global phenomenon, consubstantiated by various modes, of the making of CMD sales in irregular terms by not being conformable to the legal requirements that were established in order to establish a control mechanism that effectively prevents tax fraud.

On the other hand, as is simply at issue the application of the rule-taxation regime of road diesel, by non-verification of the presuppositions required for the materialization of the tax benefit, it is manifest that there does not occur, in light of the Fundamental Law, any violation of the principles of legality, equality or proportionality (see above no. 5, viii)), since the solution applicable is that required by law and the one adequate to the facts, it itself in conformity with the principle of equality, already as its affliction emerges primarily from the tax benefit itself, instituted in the name of extra-fiscal objectives considered superior to those of taxation itself (article 2.º, no. 1 of the TBS), and not from the rule-taxation regime.

It is reiterated, therefore, that it results from no. 3 of article 95.º of the SCIC the responsibility of owners or persons responsible for the operation of supply posts before non-compliance with the rules established for the sale of colored and marked diesel, which, for assumed control reasons, prescribe that this sale can only be made to holders of micro-circuit cards instituted for that purpose and that it remain properly registered in the computer system underlying said cards.

1. It is proven (see points VI, VII and VIII of the evidence) that the Applicant did not observe the requirement that CMD sales be mandatorily registered in POS terminals at the moment they occur, as it effectively sold the quantities of colored and marked diesel indicated (175,672.67 litres) without immediately registering them in the computer control system underlying the micro-circuit cards assigned.

As the application of the reduced ISP rate was dependent on compliance with this condition, this not having been observed, the presuppositions required for the tax benefit of rate reduction applicable to CMD consumption are not shown to be met.

The Applicant invokes, however, in this regard (see above no. 5, paragraph ii)), that, as results from the table that is the object of no. 15 of the impugned decision (see above point XI of the evidence), other CMD sales it made that were processed and registered on a date different from the respective supply that were not subject to assessment of tax in the same terms, as the impugned decision only took into account 175,672.67 litres and not the quantity of 343,625.80 litres that were moved in the POS on 29.8.2013, reason for which it considers to be faced with "ostensibly incoherent" action of the Respondent.

Let it be said, to this regard, that such matter, although mentioned in the impugned decision, does not integrate the object of the tax act whose legality is the subject of these proceedings, as the assessment was concerned only with the quantity of 175,672.67 litres. It is not thus incumbent upon this Tribunal to pronounce itself on an assessment that, so far as can be known (see article 54.º of the response), did not take place, and that, according to is concluded from the response of the Respondent (article 46.º), appears to have been due to the fact that the communications made in January 2014 were outside the period of the inspection action differently from what occurred with the registrations made on 29.08.2013. Be that as it may, the elementary principle must be remembered that it is not incumbent to invoke arguments of equality in relation to illegal actions, as that would entail the subversion of the principle of legality.

In sum, with respect to what is legally established by the impugned tax act, it is demonstrated that the Applicant did not observe the essential formalities required for the commercialization of CMD, whereby, not having complied with the conditions normatively imposed, the presuppositions necessary for the materialization of the tax benefit are not shown to be met, which determines, in conformity with no. 5 of article 93.º of the SCIC, the responsibility of the Applicant, as the entity responsible for the operation of the POS, for payment of the tax amount resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel relating to quantities of 175,672.67 litres that were sold without being properly registered in the electronic control syst...

[End of translation]