Summary
Full Decision
ARBITRAL TAX JURISPRUDENCE
Case No. 533/2018-T
Date of Decision: 2019-10-25
VAT
Value of Claim: € 864,392.61
Subject Matter: VAT – Reverse Charge – Civil Construction Services – Article 2, no. 1, lit. j) of the VAT Code
ARBITRAL DECISION
The arbitrators designated to form the Arbitral Court, Dr. Alexandra Coelho Martins, arbitrator president, designated by the Ethics Council of the Administrative Arbitration Centre ("CAAD"), Prof. Doctor Vasco António Branco Guimarães, designated by the Claimant, and Dr. Emanuel Augusto Vidal Lima, designated by the Respondent, agree as follows:
I. REPORT
A..., S.A. (hereinafter "Claimant"), legal entity number ..., with registered office at ..., ..., Rua ..., no. ..., ...-... ..., Oeiras, has requested the constitution of a Collective Arbitral Court, pursuant to Articles 2, no. 1, lit. a) and 10, no. 1, lit. a) and no. 2 of the Legal Regime of Arbitration in Tax Matters ("LRAT"), approved by Decree-Law no. 10/2011, of 20 January, with subsequent amendments.
The Claimant submits a request for an arbitral pronouncement for the annulment of Value Added Tax ("VAT") assessments relating to various periods of the years 2015, 2016 and 2017 and the corresponding compensatory interest, totalling € 864,392.61, as well as the condemnation of the Tax Authority to reimburse the expenses incurred with the provision of bank guarantee, pursuant to Articles 171 of the Code of Tax Procedure and Process ("CTPP") and 53 of the General Tax Law ("GTL").
The Tax and Customs Authority is sued, hereinafter referred to as "TA" or "Respondent".
The Claimant designated as Arbitrator Prof. Doctor Vasco António Branco Guimarães, pursuant to the provisions of Article 6, no. 2, lit. b) of the LRAT.
On 30 October 2018, the request for constitution of the Arbitral Court was accepted by His Excellency the President of CAAD and followed its normal proceedings, namely with notification of the TA, on 5 November 2018.
Pursuant to the provisions of Article 6, no. 2, lit. b) and no. 3 of the LRAT, and within the deadline provided in no. 1 of Article 13 of the LRAT, the head of the TA service designated as Arbitrator Dr. Emanuel Augusto Vidal Lima.
Following the request presented by the arbitrators designated by the parties for the arbitrator-president to be designated by the Ethics Council, by order of 21 December 2018, from His Excellency the President of the Ethics Council, Dr. Alexandra Coelho Martins was designated in that capacity, pursuant to Article 6, no. 2, lit. b), second part of the LRAT.
All arbitrators communicated their acceptance of the office, and the President of CAAD informed the parties of this designation on 21 December 2018, for purposes of Article 11, no. 7 of the LRAT.
The Collective Arbitral Court was constituted on 11 January 2019.
As the ground of claim, the Claimant invokes disagreement with the qualification of "civil construction services" that the TA assigned to the services of execution of partitions in drywall, wood and glass that were provided to it by company B..., LDA. and the consequent understanding that the reverse charge should occur, in accordance with Article 2, no. 1, lit. j) of the VAT Code. For the Claimant, the aforementioned partitions are removable components without a character of permanence, not classifiable as civil construction services, whereby it considers the billing by the supplier of the VAT, which was paid and delivered to the TA, to be correct.
With regard to the service provisions carried out by the Claimant to its clients C... and D..., relating to the assembly, repair and maintenance of hydromechanical equipment and hydroelectric exploitation in Hydroelectric Power Plants and to the maintenance, certification and repair of lifting and handling equipment (namely gantry cranes or overhead travelling cranes integrated in dam buildings), also in Hydroelectric Power Plants and in the Thermal Power Plant of D..., it understands that the same constitute civil construction services, and that the VAT treatment conferred in the invoices issued by it to the said clients is correct, without taxation of this tax and with the mention "VAT due by the purchaser", as prescribed in Article 2, no. 1, lit. j) of the VAT Code.
According to the Claimant, with regard to the services provided by it, all the requirements are met on which the aforementioned rule makes the application of the "Reverse Charge" or reverse charge regime depend, as it is a VAT-registered subject with registered office in the national territory and carries out operations that confer the right to deduct this tax, and the services in question are classifiable under the categories of civil construction work provided for in Decree-Law no. 12/2004, of 9 January, and in Order no. 19/2004, of 10 January, applicable until 4 July 2015, the date on which it was succeeded by Law no. 41/2015, of 3 June, in which they are also encompassed.
The Claimant reaches an identical conclusion from the delimitation of the concept of civil construction services carried out in Circular Memo no. 30101, from the VAT Services Directorate, of 24 May 2007. In this manner, the contested VAT assessments also violate the provisions of Article 68-A of the GTL, insofar as they contradict the administrative understanding set out in this Circular Memo.
The legal regime governing civil construction activity defines the concept "civil construction operation" as being the performance of new work, the incorporation of equipment and its repair, maintenance or conservation. Within this scope, according to the Claimant, the integration of instrumental operations indispensable for the final provision should, equally, benefit from the VAT treatment applicable to the main element, thereby sharing the tax treatment of the main provision, as recommended by the jurisprudence of the Court of Justice in case C-463/16, with judgment delivered on 18 January 2018, which concludes that in a provision composed of two or more distinct elements, the VAT regime of the main element is applied.
Finally, the Claimant states that the failure to consider, by the TA, of some invoices and order(s) because they are in English language, preventing it from drawing valid conclusions, violates the principles of good faith, justice, proportionality and cooperation with individuals (Articles 7, 8, 10 and 11, all of the Code of Administrative Procedure ("CAP"), secured by Article 266 of the Constitution. It maintains that it was incumbent upon the TA, pursuant to its powers of direction of the procedure, to request a translation and other elements that it deemed necessary, which it did not do (see Articles 56, 58 and 60 of the CAP). Thus, the TA ended up basing a substantive decision on minor formal reasons (specifically, on the use of English language, moreover justified by the fact that it is a foreign client, this being a work resulting from an international public tender), in violation of one of the fundamental freedoms of the single market of the European Union.
The Claimant attached 43 documents and summoned 3 (three) witnesses.
On 13 February 2019, the Respondent filed its Reply, in which it begins by communicating the partial revocation of the tax acts object of the arbitral action and, furthermore, defends itself by exception and by objection. On the same date, it attached the administrative file ("AF").
On the matter of exception, it considers that the request for arbitral pronouncement is untimely. For the Respondent, having the objection been raised against the tax acts of VAT assessment, the deadline provided for in Article 10 of the LRAT has been exceeded, which is 90 days from the moment prescribed in Article 102 of the CTPP, that is, from the end of the voluntary payment period of the assessments.
Despite acknowledging that an administrative review was submitted for these tax acts, the Respondent considers that the fact that the Claimant did not formulate any request intended at the annulment of what was decided or was pending decision in that venue, does not allow the deadline to be counted from that procedure, for which it invokes various arbitral jurisprudence (see Arbitral Decisions in cases nos. 62/2012-T, 188/2013-T, 244/2013-T, 261/2013-T, 38/2015-T, 195/2015-T, 196/2015-T, 211/2015-T, 346/2015-T, 618/2015-T).
The Respondent maintains that, being the powers of cognition of the Arbitral Court limited by the ground of claim and the prayer for relief, the Court is prevented from appreciating and ruling on the administrative review procedure, and the request filed should be "declared groundless, as untimely".
In the defence by objection, the Respondent reiterates the arguments invoked by the Tax Inspection Services, with respect to the assessments not annulled, namely with regard to the exclusion of invoices relating to contractual penalties, which it considers excluded from the concept of civil construction services, as well as to the certification of equipment, which it qualifies as inspection, repair and maintenance services that it claims do not have underlying any civil construction work.
The Respondent pronounces that it is unnecessary to hear the witnesses and concludes that the exception of untimeliness should be upheld, or, failing that, that the claim is groundless, with the consequent absolution of the Respondent of all prayers for relief.
By order of 15 February 2019, the Claimant was notified to exercise the right to be heard on the matter of exception and on the alleged unnecessary nature of witness proof by the Respondent.
On 28 February 2019, the Claimant pronounced itself on the exception of untimeliness raised by the opposing party to the effect that the 90-day deadline for the submission of the present action is counted from the formation of the presumption of implied rejection of the administrative review submitted against the contested assessment acts, whereby the request was filed within the deadline, in accordance with the joint application of Articles 70 of the CTPP, 57 of the GTL and 102 of the CTPP.
The Claimant alleges that express reference was made to the administrative review in the request for arbitral pronouncement, right at the beginning, in section "II. Subject Matter", where it specifies that this was submitted and that an implied rejection was formed (Article 106 of the CTPP), having been attached to the record as document 42. It invokes arbitral jurisprudence from case no. 426/2017-T, which refers to various jurisprudence from the Administrative and Arbitral Courts. According to the Claimant, being an implied rejection, the illegality of the contested VAT assessment acts is the sole ground for the declaration of "illegality of implied rejection by identity of subject matter".
The Claimant maintains that, at most, we would be faced with a mere deficiency of the prayer for relief, remediable pursuant to Article 18, no. 1 of the LRAT and the Arbitral Decision rendered in CAAD case no. 592/2016-T, and that a contrary interpretation would violate the principle of trust and access to effective judicial protection (Articles 2 and 20 of the Constitution).
As to the partial annulment of the assessments, which it accepts as corresponding to the Respondent's failure, it requests condemnation for the respective costs and declares maintaining an interest in the continuation of the proceedings. It further states that the arguments for such annulment apply equally to other assessments, which reveals inconsistency by the TA, and that this authority is prevented from making new tax acts, as such procedure offends Article 13, no. 3 of the LRAT. The Claimant alleges that the substitutive corrections made in its favour do not contain reasoning, which constitutes a subsequent defect implying the illegality of the assessment acts still maintained in the legal system.
The Claimant attached 20 additional documents and stated that witness proof should not be dispensed with as it considers it relevant.
On 18 March 2019, the Claimant proceeded to attach 2 documents allegedly subsequent. The attachment was admitted, granting the TA a period to be heard, which pronounced to the effect that the document was not subsequent, requesting its removal from the record.
The Court dismissed the request by the TA, as the principles of material truth and official motion are prevailing within the tax sphere, in their primary orientation to the principle of legality (tax), the Court being required to have knowledge of all elements that may contribute to the correct resolution of the merit (cf. Article 13 of the CTPP, ex vi Article 29, no. 1 lit. a) of the LRAT) and Articles 16, lit. c) and 19 of the LRAT).
With a view to factual findings, on 5 April 2019, a meeting was held at CAAD as referred to in Article 18 of the LRAT, at which the Claimant's witnesses were heard. The Court deferred consideration of the exception for the final decision and, following an invitation for clarification, the Claimant clarified that the arbitral prayer formulated encompasses the annulment of the act of implied rejection of the administrative review on the ground of the illegality of the additional assessments now contested. The Parties were notified to submit successive written closing arguments and a date was set for delivery of the arbitral decision.
The Claimant submitted final arguments on 29 April 2019 and the Respondent on 17 May 2019. Both reiterate their respective positions stated in the initial pleadings.
By orders of 14 June and 2 September 2019, given the complexity of the issues, the deadline for delivery of the Arbitral Decision was successively extended by two months.
II. DISPOSAL. OF THE EXCEPTION OF UNTIMELINESS
The Court was regularly constituted and is competent ratione materiae to know of the VAT assessment acts and corresponding compensatory interest contested, in light of the provisions of Articles 2, no. 1, lit. a), 5, no. 3, lit. a), 6, no. 2, lit. a) and 11, no. 1, all of the LRAT.
The parties have personality and capacity to sue, have standing and are regularly represented (cf. Articles 4 and 10, no. 2 of the LRAT and Article 1 of Order no. 112-A/2011, of 22 March).
With regard to timeliness, the Respondent came to argue that the 90-day deadline for submission of the request for constitution of an Arbitral Court was exceeded, as provided for in Article 10, no. 1, lit. a) of the LRAT, calculated from the end of the voluntary payment period of the assessments, in accordance with the reference made to Article 102, no. 1 of the CTPP.
However, it appears that the exception of untimeliness is not well-founded, as the 90-day deadline must be counted from the formation of the presumption of implied rejection of the administrative review that was submitted by the Claimant, in accordance with lit. d) of the aforementioned Article 102, no. of the CTPP, a deadline that had not yet elapsed when the arbitral request was submitted that gave rise to the present action.
Indeed, as decided in the Arbitral Decision rendered in CAAD case no. 336/2018-T, on identical subject matter and which is followed below, it follows from Article 10, no. 1, lit. a) of the LRAT – by reference to Article 102, no. 1 of the CTPP – that the deadline to object, in situations where there has been administrative review or hierarchical review, in which the presumption of implied rejection was formed, is calculated from the moment that presumption was formed and not from the end of the voluntary payment period of the assessment legally notified to the taxpayer.
Pursuant to Article 57, no. 5 of the GTL, failure to comply with the four-month deadline for conclusion of the procedure provided in no. 1 of the same rule creates a presumption of its rejection, for purposes of hierarchical review, contentious review or judicial objection.
Given that the administrative review relates to the very assessment contested, the response to the decision of rejection of the administrative review takes this decision as its immediate object, but the mediate object is, necessarily, the assessment itself. In the case of implied rejection, as occurs in the instant case, there is not even an administrative decision, so, all the more so, the subject matter of the dispute cannot fail to relate to the tax act(s) in issue.
It is not unreasonable that, as a precaution, both acts are expressly contested simultaneously, the assessment act (mediately) and the rejection act (immediately). But it does not appear that this is indispensable, or even necessary, and even less so in the situation of implied rejection.
In fact, arbitral jurisdiction has competence only to assess the illegality of the assessment, not the defects of rejection of administrative reviews (and reviews, if applicable). Conversely, it is not required that the arbitral avenue should be the first form of response to the illegality of an assessment, excluding the administrative avenue; rather, the arbitral avenue is configured as an appropriate means of response to the exhaustion of the administrative avenue, on a parallel level to the jurisdictional avenue in the administrative and tax courts.
In the case of express rejection of an administrative review that maintained an assessment whose legality is contested, what is materially assessed are the defects of the assessment, in relation to which that rejection presents itself as a second-tier act. Now, when it comes to a rejection that is merely presumed, there are not even other grounds or defects to assess beyond those relating to the very tax acts (of assessment) contested, so a fortiori, there is nothing more to assess.
Furthermore, this concerns conferring effective judicial protection on the Claimant's rights (cf. Article 268, no. 4 of the Constitution), not conditioning it according to the first choice it made – namely, not prejudicing the objection to the assessment by reason of the Claimant having begun with the administrative avenue, reserving for later recourse to the arbitral avenue, in the event of failure in the administrative avenue – as it would do with recourse to the jurisdictional avenue.
The fact that the administrative review (like hierarchical review) has as its object the contested assessment is what gives it the character of a second-tier act, facing the primary act of the assessment. It is the primary act that is still intended to be contested.
Hence, an interpretation favourable to access to law (Article 7 of the Code of Procedure in the Administrative Courts "CPAC") and to effective judicial protection (Article 268, no. 4 of the Constitution) – and, therefore, to the assessment of the merit of the issues, not entangled in procedural and processual formalisms –, must include the implied or express rejection of an administrative review (or of a hierarchical review) in the subject matter of the proceeding, as an expression of a timely response to the illegality of the primary act.
To understand otherwise would force the taxpayer to an exclusive choice between the administrative and arbitral avenue, within the deadline for objection to the assessment; but this contends with the basic architecture that presided over the establishment of the arbitral avenue in the tax sphere – which nowhere places, as a condition of access, the non-existence of a preceding administrative avenue, or more specifically the non-existence of confirmatory acts that maintained, in the legal system, the primary act.
Furthermore, insofar as the arbitral courts operating at CAAD only have competence to assess the legality of assessment acts, not decisions of rejection – tacit or express – of administrative reviews or hierarchical reviews, we could arrive at the conclusion that, having there been administrative objection to assessment acts, and thereby surpassing the deadline for direct objection to the assessment, the arbitral avenue would be barred – were it not the case that Article 10, no. 1, a) of the LRAT explicitly provides, to the contrary, that the notification of the decision of rejection via the administrative avenue, or the formation of the presumption of that rejection, serve as the starting point, thereby avoiding such an understanding.
Article 10 of the LRAT does not, therefore, confer on the arbitral courts operating at CAAD competence for direct assessment of second (or third) tier acts; it is a rule that, while referring to those acts, relates exclusively to the starting point of the deadline for submission of the request for arbitral pronouncement.
Timeliness is therefore assessed in relation to those second (or third) tier acts, although the materiality of the dispute relates to an assessment which those acts merely confirmed or in which such may be presumed by the passage of time, in the legally provided terms.
Therefore, in strict terms, the Claimant does not have to separately object to the implied rejection of the Administrative Review.
This is the position adopted by the consolidated jurisprudence of the Supreme Administrative Court ("SAC"), regarding the subject matter of the action of judicial objection in the tax courts, considering that what is at issue is the assessment of the (il)legality of the tax acts that reflects on the judgment of (in)validity of the acts of second and/or third tier that ruled on those acts, as the real subject matter of the objection are those assessments, an example of which is the recent Judgment of 3 July 2019, case no. 02957/16.0BELRS 070/18, according to which "the real subject matter of the objection is the assessment act and not the act that decided the administrative review, whereby it is the defects of that act and not this order that are truly in issue".
It is worthy of note that the Claimant expressly mentioned in section "II. SUBJECT MATTER" of its request for arbitral pronouncement the submission of "Administrative Review of the tax acts referred to on 22 May 2018, which however were not subject to a decision by the TA by the end of the legal deadline, with its implied rejection being verified – art. 106 of the CTPP – DOC. 42"). And if there were any doubts, in the invitation directed to the Claimant by this Arbitral Court for better clarification, it confirmed that "the prayer formulated encompasses the annulment of the act of implied rejection of the administrative review on the ground of the illegality of the additional assessments now contested".
Thus, taking into account the date of the end of voluntary payment of the VAT and compensatory interest assessments – 1 February 2018 – and the date of the subsequent submission of the Administrative Review – 22 May 2018 – it is concluded that the implied rejection thereof was formed on 21 September 2018, so on 29 October of that year, when the arbitral request was submitted, the 90-day deadline provided for in Article 10, no. 1, lit. a) of the LRAT had not yet elapsed, which means that it is timely. The exception of untimeliness raised by the Respondent is therefore unfounded.
The joinder of prayers for relief is admissible, pursuant to Article 3, no. 1 of the LRAT, considering that, although the VAT tax acts relate to different periods (months and years), identical circumstances of fact are at issue and the same legal regime, which concerns the discipline of reverse charge established in Article 2, no. 1, lit. j) of the VAT Code.
No issues were identified that prevent consideration of the merit.
III. FACTUAL FINDINGS
1. PROVEN FACTS
The following facts are relevant for the decision:
A. A..., S.A., here Claimant, is a commercial company that commenced business on 1 August 2004 and is engaged in the performance of assembly and metalomechanical constructions, encompassing the assembly, repair and maintenance of metal structures, such as tanks for storage of petroleum or gas, transport piping (pipelines), boilers and lifting and handling equipment – cf. Tax Inspection Report ("TIR") contained in the AF also attached to the record as document 20.
B. The Claimant is taxed for the activity of "Repair and Maintenance of Metal Products (Exc. Mach. and Equipment)", under CAE 33110 and covered by the normal monthly periodicity regime for VAT – cf. TIR.
C. Following the request for VAT refund no. ... requested by the Claimant in the periodic declaration of this tax for the period of June 2017, an inspection procedure was initiated against the Claimant, determined by internal service orders nos. OI2017..., OI2017..., OI2017... and OI2017..., relating to the years 2013, 2015, 2016 and 2017 (until June), which resulted in a Draft VAT Corrections Project as to which the Claimant accepted those relating to the period of July 2013 and exercised its right to be heard as to the others – cf. TIR and document 21 attached to the record.
D. The Claimant was notified of the Final Tax Inspection Report (TIR) which maintained the corrections relating to the VAT of the services provided to it by its supplier, B..., LDA. The TA understood that such services were encompassed by the reverse charge rule, provided for in Article 2, no. 1, lit. j) of the VAT Code, making it incumbent upon the Claimant to self-assess the tax owed that was wrongly invoiced to it by the supplier, in the amount of € 2,065.40 (VAT) (taxable base € 8,980.00) – cf. TIR and document 22 attached to the record.
E. The services in question (from supplier B..., LDA.) relate to the execution, supply and installation of drywall partitions with door, in wood and glass; lighting and carpeting, so as to create an isolated open space area in the building, having been classified by the TA in the following manner – cf. TIR:
(i) Supply and installation of partitions - List I – Circular Memo no. 30101, of 24-05-2007;
(ii) Lighting – Law no. 41/2015, of 3 June, 4th category "Electrical and mechanical installations";
(iii) Application of carpeting – Law no. 41/2015, of 3 June – 5th category of the 1st – "Plaster, paints and other coatings".
F. From the TA's perspective, the fact that the Claimant, at the end of the lease contract, was obliged to remove all these goods from the leased space is not relevant to the disqualification of the situations in analysis as supply of civil construction services. "The goods in question are not movable goods because they are not moved between spaces, to remove them A... will have to resort to other services" – cf. TIR and document 23 attached to the record.
G. The TIR also maintained various VAT corrections relating to service provisions carried out by the Claimant to Portuguese clients with the mention, in the invoicing issued, of "self-assessment VAT" [VAT to be assessed by purchasers/clients]. According to the TA, these services are not classifiable as "civil construction services" and, consequently, do not benefit from the reverse charge rule that was applied by the Claimant, contained in Article 2, no. 1, lit. j) of the VAT Code – cf. TIR.
H. Within this scope, the TIR contains the following reasoning:
"Having analyzed the content of the invoices that A... [Claimant] considered encompassed by the reverse charge rule, by considering that the same related to the transmission of civil construction services, we found the following goods and services, among others: inspection services, tests, repair and maintenance of equipment, contractual penalties, supply and assembly of equipment, labor for diverse uses and training […]
[…] We consider that all the invoices related in section III.1.3.3, do not relate to the transmission of civil construction services, as they refer to services carried out on equipment, to diverse service provisions, and others, that although having been executed in a hydraulic work, on the one hand, do not relate to services that, by themselves, within the scope of Order 19/2004, of DL 12/2004 or of Law no. 41/2015, constitute civil construction services, and on the other hand, are not an integral part of any construction process. Thus, in accordance with no. 1 of art. 4, lit. a) of no. 6 of art. 6, no. 1 of art. 7 and no. 1 of art. 8, all of the VAT Code, and taxed at the normal rate, in accordance with no. 1 of art. 16 and lit. c), of no. 1 of art. 18, both of the VAT Code.
[…]
IX.3.3. – Service provisions invoiced to Portuguese clients with the mention «self-assessment VAT» (section III.1.3 of the Draft Report)
[…]
IX.3.3.5.2 – Order no. ...[...]
[…]
Date Invoice No. Description of invoice Clarifications provided by A...( as per annex no. 5 of the Corrections project)
[…] […] […] […]
30-06-2017 VNC 651 Claim for time extension Amendment to Contract for extension of approximately 9 months of the deadline for entry into industrial operation of the installation initially scheduled for 24 September/16 for reasons attributable to the Client resulting in the following nature of increased costs: Management and administration of contract, Yard activities by necessity of maintaining support teams for assembly operations, Yard infrastructures to support assembly activities. E.g. warehouses, equipment, transport etc., Commercial and financial with extension of warranties and increased risk.
IX.3.3.5.2.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Assembly of hydroelectric equipment of ... …. this type of work relates to services of assembly of hydromechanical equipment for incorporation in the power plant, in this way we can clarify that this provision of services is within the scope of the VAT reverse charge rule for civil construction – Hydraulic Works.»
IX.3.3.5.2.3 – It further attached: the order, the contract with the client, the consortium contract which includes the more detailed breakdown of the various items that make up the order, drawings and photographs. These elements constitute annex no. 4 of the exercise of the right to be heard.
IX.3.3.5.2.4 – Analyzing A...'s allegations with respect to this order and the invoices listed, we verify that:
i. The order is composed of various items always with the designation «Supply and assembly of equipment for command and control systems»,
ii. At the end of the order we find in observations the following references:
a. «Hydroelectric exploitation of ... – amendment to contract no. 5 (Claim for time extension)»;
b. «Contract for Supply of Equipment of ... . Reinforcement of bottom discharge shielding supports (Amendment to contract no. 7). FGA P1/142374»;
c. «Contract for Supply of Equipment of ... . Metal anchors to support spiral casing of G1 and G2 (Amendment to contract no. 9). FGA P1/142377.»
iii. The contract with the client indicates that it was signed between:
a. «D..., SA» (VAT ID:...), as client;
b. The consortium composed of: «E... » (VAT ID:...); «F...» (VAT ID:...); «G..., SA» (VAT ID:...) and «A... SA» (VAT ID...), as successful bidder;
c. The object of the contract is found in clause 1st and indicates «D... entrusts and the Successful Bidder accepts responsibility for the execution of the Supply of Equipment for the Hydroelectric Exploitation of ..., in accordance with the characteristics and conditions specified in the contract documents.»
d. The entire remainder of the contractual clause is not relevant for the case in question.
iv. The consortium contract indicates:
[…]
e. In the Annex to the contract it states that the services and equipment supplied by A... refer to «Assembly of turbine, regulator and hydromechanical equipment.»
f. Maps with the distribution of work by the various consortium participants are also annexed to the contract. With respect to A... we have various works on gates and grilles, all connected with the assembly of hydromechanical equipment.
v. The photos sent relate to: yard areas, civil construction works in the area of overhead cranes and, to equipment assemblies.
[…]
IX.3.3.5.2.6 – With respect to the invoices indicated below, we maintain the corrections proposed in the Draft Corrections project as they do not have underlying any civil construction work, and as such do not fall under the 3rd category – Hydraulic Works, of Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101.
Date Invoice No. Description of invoice Clarifications provided by A... ( as per annex no. 5 of the Corrections project)
[…] […] […] […]
30-06-2017 VNC 651 Claim for time extension Amendment to Contract for extension of approximately 9 months of the deadline for entry into industrial operation of the installation initially scheduled for 24 September/16 for reasons attributable to the Client resulting in the following nature of increased costs: Management and administration of contract, Yard activities by necessity of maintaining support teams for assembly operations, Yard infrastructures to support assembly activities. E.g. warehouses, equipment, transport etc., Commercial and financial with extension of warranties and increased risk.
[…]
IX.3.3.5.4 – Order no. ...
[…]
IX.3.3.5.4.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Works for repair and renewal of certification of lifting equipment of the power plants of ..., ..., ..., ..., ..., ..., ..., ... and ... . These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.4.5 – The letter of supply of services indicates, per plant, the services to be supplied by A..., of which we indicate by way of example: calibration of cells and safety devices; repair of the weighing system, repair of hoist trolley brakes; equipment inspection, load tests on equipment, disconnection of power cables, power measurement; motor repair, among others.
IX.3.3.5.4.6 – By the analysis of the services described in the letter of supply of services, of which some were indicated in the previous section by way of example, we verify that the same refer essentially to inspection services, to repair services and to equipment maintenance services, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.5 – Order no. ...
[…]
IX.3.3.5.5.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Works for supply and assembly of component for the overhead crane of the machinery room in the Power Plant ... . These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.5.4 – The order refers that it refers to «maintenance/repair of lifting and handling equipment».
IX.3.3.5.4.5 – The letter of supply of services indicates «Supply and installation of AUTEC MJ03 audio command for four speeds (crane translation, carriage translation and two lifting speeds,), for the overhead crane of the machinery room of the power plant of ... .»
IX.3.3.5.5.6 – By the analysis of the services described either in the order or in the letter of supply of services, we verify that it is a supply of goods within equipment maintenance and repair services, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.6 – Order no. ...
[…]
IX.3.3.5.6.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Works for repair and renewal of certification of lifting equipment of the power plants of Caniçada and Aguieira. These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.6.6 – By the analysis of the services described in the letter of supply of services, of which some were indicated in the previous section by way of example, we verify that the same refer essentially to inspection services, to repair services and to equipment maintenance services, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.7 – Order no....
[…]
IX.3.3.5.7.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Works for repair and renewal of certification of lifting equipment of the Lares power plant. These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.7.5 – By the analysis of the services described in the order, we verify that these are equipment maintenance and repair services, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.8 – Order no. ...
[…]
IX.3.3.5.8.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Works for repair and renewal of certification of lifting equipment in the thermal power plant [of ...]. These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.8.6 – By the analysis of the services described in the letter of supply of services, of which some were indicated in the previous section by way of example, we verify that the same refer essentially to inspection services, to repair services and to equipment maintenance services, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.9 – Order no. ...
[…]
IX.3.3.5.9.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Supply of equipment and services for repair and renewal of certification of lifting equipment of the power plants of ... and ... . These equipment are an integral part of the plants and are only removed with the dismantling of the real property. Thus these works are encompassed in other mechanical and electromechanical installations (electrical and mechanical installations) in hydraulic plants – hydraulic works.»
[…]
IX.3.3.5.9.6 – By the analysis of the services described in the letter of supply of services, of which some were indicated in the previous section by way of example, we verify that the same refer essentially to inspection services, and to supply of goods and services within equipment repair and maintenance, which do not have underlying any civil construction work, and as such do not fall within the list of services provided for in Law no. 41/2015, or in the clarifications provided in Circular Memo no. 30101, whereby we maintain the corrections proposed in the Draft Corrections project.
IX.3.3.5.10 – Order no. ...
[…]
IX.3.3.5.10.2 – In the exercise of the right to be heard, A... comes to state that this order relates to «Services of rental with operator of a lifting equipment (crane) for the construction of the dam work (hydroelectric power plant) of ... . In our view, these invoices are encompassed within the scope of the VAT reverse charge rule for civil construction, in accordance with the memo..., annex II «the reverse charge rule does not apply to mere rental or placement of equipment, for example cranes; provided they do not include an operator.»
[…]
IX.3.3.5.10.5 – The analysis of the services indicated in the letter of the client's order and, to the descriptive of the invoices, leads us to conclude that the invoices relate only to the services of the operators, and not to the rental of equipment with an operator. For this reason, these services are not considered civil construction services encompassed by the reverse charge rule, whereby we maintain the corrections proposed in the Draft Corrections project."
I. The works carried out by the Claimant in Hydroelectric Power Plants (dams) relate to hydromechanical equipment corresponding to fixed structures incorporated in the dam itself, such as Gantry Cranes and Overhead Travelling Cranes. These structures / equipment allow the movement of turbines and generators (which weigh hundreds of tons and are installed in the dam encapsulated in a kind of "cathedral" at a level much below the surface). All dams must have lifting and handling equipment integrated and supported in the concrete structure of the dam itself, without which they are inoperative – cf. testimony of the first witness.
J. The Gantry Cranes and Overhead Travelling Cranes and the equipment that comprises them are not only inserted in the structure of the dam (just as, by way of example, water pipes in homes in urban buildings are), but are only removable with the dismantling of the dam – cf. testimony of the first witness.
K. The Claimant, in addition to the services of assembly of hydroelectric and hydromechanical equipment incorporated in dams, as occurred in the Hydroelectric Power Plant of ... and in the Hydroelectric Power Plant of ..., in which it ensured the mechanical assembly of the entire structure of the dam – adduction pipelines, spiral casings and turbine, water outlet pipelines, gates (guillotine), among others –, also provided services of repair, maintenance and certification of hydromechanical lifting and handling equipment in the Hydroelectric Power Plants of ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ... and repair and maintenance services in the Thermoelectric Power Plant (at ...) of ... – cf. TIR, documents 35 to 41 attached to the record and testimony of the first and second witnesses.
L. The aforementioned services derive from the fact that a substantial portion of Portuguese Hydroelectric Power Plants date back to the 1960s and 1970s and it is indispensable that they be periodically reviewed, as determined by the "Machinery Directive" (Directive 2006/42/EC of the European Parliament and Council, of 17 May 2016), with a view to the adoption of safety standards and reduction of accidents. The Thermoelectric Power Plant of ... was built in the 1980s – cf. testimony of the first witness and information available at https://www... /copia-rotas.
M. Within this scope, D... decided to check the equipment of the Hydroelectric and Thermoelectric Power Plants and launched various tenders, which the Claimant won, to inspect and make the necessary alterations and repairs to the hydromechanical equipment of the Hydroelectric Power Plants, ensuring compliance with the safety standards of the Machinery Directive, with the respective final certification after the conclusion of the inspections and necessary repairs. For this purpose, various operations were carried out involving different specialties – electrical, mechanical and civil construction parts –, the Claimant ensuring the mechanical part, relating in particular to the conservation of the equipment and to load tests, through resistance testing of the equipment, subjecting them to pressure of various tons – cf. documents 35 to 41, 64 and 65 submitted by the Claimant and testimony of the first witness.
N. Invoice no. 651, dated 30 June 2017, issued by the Claimant in relation to services for the Hydroelectric Power Plant of ... , with the description "claim for time extension", with the value of € 1,105,441.00, refers to the additional charges incurred by the Claimant, which it passed on to its client D..., for the maintenance of the work yard for an additional period of 9 months beyond what was provided for in the initial contract, for a reason attributable to the client (the civil construction delayed in delivering work fronts, as results from the handover record from civil construction to mechanical construction). The aforementioned additional charges derive essentially from the availability of the work yard infrastructure and respective equipment (e.g. crane) and of personnel (support teams) inherent to the extension of the yard, consisting of monthly reports issued by the Claimant with the description of these costs – cf. documents 34, 64 and 65 submitted by the Claimant and testimonies of the first, second and third witnesses.
O. The aforementioned additional value of € 1,105,441.00, debited by the Claimant to D... through invoice no. 651, had underlying a contractual amendment that extended the initial duration of the supply contract for the Hydroelectric Power Plant of ... by 9 months, agreed between all Parties of the consortium "E..., G..., A...[Claimant]" and D..., resulting in additionals owed to all consortium members by client D... (for E... it amounted to € 785,521.00 and for G... to € 1,209,038.00) – cf. documents 34, 64 and 65 submitted by the Claimant and testimonies of the first, second and third witnesses.
P. Still within the scope of the work carried out at the Hydroelectric Power Plant of ..., the Claimant proceeded to rent a crane (lifting equipment) with an operator, for the construction of the work on the dam – cf. testimony of the third witness.
Q. Following the inspection action noted above, the Claimant was notified of the VAT and compensatory interest assessments listed in the table below – cf. documents 1 to 15 attached to the record (VAT assessment statements, interest assessment statements and account adjustment statements):
VAT ASSESSMENTS
ASSESSMENT AND
D. ACCOUNT ADJUSTMENT DATE TAX PERIOD AMOUNT DUE AMOUNT ASSESSED PAYMENT DEADLINE
2017...
2017 ... 19.12.2017
20.12.2017 201506 € 37,833.30 € 30,756.40 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201507 € 23,290.49 € 81,761.97 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201509 € 20,248.28 € 40,335.89 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201510 € 59,024.16 € 3,222.36 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201602 € 182,760.95 € 128,492.90 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201603 € 19,205.92 € 35,763.06 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201605 € 474.04 € 474.04 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201606 € 26,852.50 € 134,654.35 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201607 € 2,739.30 € 34,174.59 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201609 € 10,454.65 € 57,659.89 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201611 € 3,571.43 € 79,409.02 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201701 € 9,129.16 € 97,028.63 01.02.2018
2017...
2017 ... 19.12.2017
20.12.2017 201702 € 30,624.16 _ _ 01.02.2018
2017 ... 19.12.2017 201706 € 60,020.90 _ _ 01.02.2018
2017 ...
2017 ... 20.12.2017
28.12.2017 201706 € 11,317.05 € 71,337.95 07.02.2018
INTEREST ASSESSMENTS
2017 ...
2017 ... 19.12.2017
20.12.2017 201602 € 8,406.60 € 8,406.60 01.02.2018
2017 ...
2017 ... 19.12.2017
20.12.2017 201605 € 26.28 € 26.28 01.02.2018
2017 ... 19.12.2017
201706 € 920.22 _ _ 01.02.2018
2017 ...
2017 ... 20.12.2017
28.12.2017 201706 € 867.78 € 867.78 _ _
TOTAL € 804,371.71
R. The Claimant, not agreeing with the aforementioned tax acts, submitted an Administrative Review, on 22 May 2018, on which, to date, no decision has been rendered – cf. document 42 attached to the record and proved by agreement.
S. Within the scope of tax enforcement proceedings initiated against the Claimant for collection of the additional assessments in question, and with a view to their stay, the Claimant proceeded to provide a bank guarantee (H... ...), issued on 26 February 2018 – cf. document 43 attached to the record.
T. On 29 October 2018, the Claimant submitted the request for constitution of the Arbitral Court that gave rise to the present proceedings.
U. The aforementioned tax acts (at point Q), were partially annulled by the TA, which issued new VAT and compensatory interest assessment acts, substitutive of the former in the applicable part, with the corresponding account adjustment statements, as shown in the table below, which were notified to the Claimant – cf. documents 44 to 63 submitted by the Claimant and also proved by agreement:
SUBSTITUTIVE VAT AND COMPENSATORY INTEREST ASSESSMENTS AND ACCOUNT ADJUSTMENT STATEMENTS
ASSESSMENT AND
D. ACCOUNT ADJUSTMENT DATE TAX PERIOD AMOUNT DUE / TO BE REFUNDED AMOUNT ASSESSED/ ANNULLED PAYMENT DEADLINE
2019 ... 20.02.2019 201706 € 22,634.10 01.04.2019
2019 ... 20.02.2019 201706 € 0.00 --
2019 ... - VAT 19.02.2019 201506 € 0.00 € -68,589.70 --
2019 ... 20.02.2019 201506 € 0.00 --
2019 ...– VAT 19.02.2019 201507 € 0.00 € -105,052.46 --
2019 ... 20.02.2019 201507 € 0.00 --
2019...– VAT 19.02.2019 201509 € 0.00 € -60,584.17 --
2019 ... 20.02.2019 201509 € 0.00 --
2019 ... – VAT 19.02.2019 201510 € 0.00 € -62,246.52 --
2019 ... 20.02.2019 201510 € 0.00 --
2019 ...– VAT 19.02.2019 201602 € 0.00 € -54,268.05 --
2019 ... 20.02.2019 201602 € 0.00 --
2019 ... – VAT 19.02.2019 201603 € 0.00 € -54,968.98 --
2019 ... 20.02.2019 201603 € 0.00 --
2019 ... – VAT 19.02.2019 201701 € 0.00 € -100,828.23 --
2019 ... 20.02.2019 201701 € 0.00 --
2019 ... – VAT 19.02.2019 201702 € 0.00 € -17,189.86 --
2019 ... 20.02.2019 201702 € 0.00 --
2019 ... – interest c. 20.02.2019 201706 € 0.00 € 577.89 --
2019 ...– VAT 19.02.2019 201706 € 0.00 € 47,507.07
TOTAL € -475,643.01 --
2. UNPROVEN FACTS
There are no facts that should be considered unproven, as relevant to the decision.
3. MOTIVATION OF THE FACTUAL FINDINGS
The relevant facts for the judgment of the case were selected and defined according to their legal relevance, in light of the plausible solutions of the legal issues, in accordance with the joint application of Articles 123, no. 2 of the CTPP, 596, no. 1 and 607, no. 3 of the Code of Civil Procedure ("CCP"), applicable by reference from Article 29, no. 1, lits. a) and e) of the LRAT.
Allegations made by the parties and presented as facts, consisting of strictly conclusive statements, insusceptible of proof and whose validity must be assessed in relation to the specific consolidated facts, were neither deemed proven nor unproven.
Regarding the proven facts, the conviction of the arbitrators was based on the critical analysis of the documentary evidence attached to the record by both Parties, on the positions assumed by them in relation to the facts and on the testimony of the witnesses indicated by the Claimant, who revealed direct knowledge of the facts related and responded objectively, spontaneously and convincingly.
In fact, the testimony of the first witness, K..., Engineer and Director of support to the Claimant's operations, a direct participant in various works carried out in hydroelectric power plants / dams, including that of ..., was fundamental to clarify the concrete nature of the works, their specificity and the structural connection to the concrete elements in which mechanical equipment is fixed or supported. The testimony of the second witness, I..., also an employee of the Claimant, Work Yard Chief who had direct intervention in the dam of ..., clearly explained the circumstances in which the delay occurred and on what basis the amounts invoiced for "claim for time extension" were owed. The last witness examined, J..., tax consultant to the Claimant, came to corroborate what had been said by the previous witnesses with respect to the work of ... .
IV. THE LAW
1. QUESTIONS TO BE DECIDED
The fundamental issue to be resolved concerns a matter of qualification and refers to the classification in VAT, as civil construction services, and the consequent application of the reverse charge rule established in Article 2, no. 1, lit. j) of the VAT Code, of the following situations:
(a) Supply to the Claimant, by supplier B..., LDA., of the installation of partitions in drywall, with wooden and glass door, and lighting and carpeting, so as to create an isolated open space area;
(b) Provision by the Claimant of services of assembly of hydromechanical equipment in Hydroelectric Power Plants to D...;
(c) Provision by the Claimant of services of repair, maintenance and certification of hydromechanical lifting and handling equipment in the Hydroelectric Power Plants of ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ... and repair and maintenance services in the Thermoelectric Power Plant (coal-fired) of ....
Within this scope, it is important to consider the partial administrative annulment of the VAT assessment acts and compensatory interest that occurred after the constitution of this Arbitral Court and which, as a consequence, restricts its subject matter, as examined below.
Finally, the Court will pronounce itself on the request for condemnation of the Respondent to reimburse the expenses of providing the guarantee, under the provisions of Articles 53 of the GTL and 171 of the CTPP.
2. PARTIAL REVOCATION OF TAX ACTS – SUBSEQUENT LACK OF OBJECT OF THE DISPUTE (PARTIAL)
The VAT assessments and compensatory interest issued on 19 and 20 December 2017, which constitute the subject matter of the present arbitral action, were partially annulled by the TA on 19 and 20 February 2019, already after the constitution of the Collective Arbitral Court on 11 January 2019 (points Q and U of the factual findings), whereby, to that extent, there was an objective modification of the case with foundation in subsequent facts (cf. Article 20 of the LRAT).
The Respondent in its Reply begins by mentioning this "revocation" of the tax acts object of objection, which concerned the services provided to C... PORTUGAL (order no. ...), relating to the assembly of hydromechanical equipment in the Hydroelectric Power Plant of ..., and the services of assembly of equipment for hydroelectric exploitation in the dam of ..., carried out for client D... (order no. ...), in the latter case, with reservation of invoice no. 651, of 30 June 2017, in the amount of € 1,105,441.00, whose VAT correction (€ 245,251.43) was maintained.
In these circumstances, the request for annulment of the VAT assessments and compensatory interest filed herein became partially without object, as with the administrative annulment, the respective constitutive legal effects (we refer always and only to the annulled part) were destroyed with retroactive efficacy, in accordance with the provisions of Article 171, no. 3 of the Code of Administrative Procedure ("CAP"), verifying an impossibility of the dispute. As stated in the Arbitral Decision in case no. 31/2013-T, of CAAD, of 4 November 2013, "it becomes legally impossible to annul what no longer exists" (in this sense, see also the Arbitral Decision in case no. 40/2019, of 10 June 2019, of CAAD, which is followed below).
The Claimant accepts the "revocation" of the assessments, but expresses doubts about the timeliness of the administrative annulment, considering that the 30-day period had already elapsed, calculated from the knowledge of the request for constitution of the Arbitral Court, established in Article 13, no. 1 of the LRAT for the TA to proceed with "revocation, ratification, reform or conversion of the tax act whose illegality has been raised, practicing, when necessary, a substitutive tax act". At the end of this period, Article 13, no. 3 of the cited provision determines that "the tax administration is prevented from making a new tax act in relation to the same taxpayer or taxable person, tax and tax period, unless on the grounds of new facts".
As recommended in the arbitral case no. 40/2019, the provision in question should be interpreted to mean that, once the aforementioned 30-day period has elapsed, the TA is prevented from practicing a new dispositive act that regulates the tax-legal relationship (except on the grounds of new facts). However, it appears that this restriction does not occur in the case of simple administrative annulment (albeit partial) of the challenged act, unaccompanied by new regulation of the legal situation.
In fact, in this latter hypothesis, the principle of stability of the case, which appears to be underlying the legal limitations on administrative action during the course of judicial proceedings, does not merit protection, since the party simply comes to recognize that the other is correct, on material grounds under the law, and thereby permits the anticipated resolution of the dispute and consequent termination (in this case partial) of the case, with procedural and practical economy.
This interpretation was adopted by the Supreme Administrative Court ("SAC") in relation to the judicial objection process, which is governed by Article 112 of the CTPP, which establishes a discipline similar to that of Article 13, nos. 1 and 3 of the LRAT, the latter applicable to the arbitral tax action. As the arbitral tax case constitutes an alternative means to judicial objection, the manifest identity of reasons is undeniable, which is further supported by the fact that the CAP and the rules on organization and procedure in the administrative and tax courts are applicable subsidiary to the arbitral tax procedure, by reference from Article 29, no. 1, lits. c) and d) of the LRAT.
Regarding the application of the CAP regime to the "revocation" of administrative acts in tax matters, the SAC provides, in the Judgment rendered on 15 March 2017, in case no. 449/14, that:
"The legal possibility of revocation of administrative acts in tax matters is provided for in art. 79 of the GTL (revocation is an act that puts an end to or eliminates the effects of a prior act, on the grounds of its inconvenience or invalidity, being its regime provided for in arts. 138° to 146° of the CAP).
However, as the GTL nor the CTPP contain any rule defining the deadline for such revocation, it is uncontroversial that the rules contained in arts. 136 et seq. of the CAP, which directly regulate the revocation of administrative acts, should be adhered to [being that the CAP constitutes complementary and subsidiary legislation to tax law – arts. 2, lit. c), of the GTL and 2, lit. d), of the CTPP (Cf., all, the judgment of this Section of the SAC, of 15/5/2013, case no. 0566/12; as well as Leite Campos, Benjamim Rodrigues and Jorge de Sousa, Annotated and Commented General Tax Law, 4th ed., 2012, annotation 1 to art. 79, p. 724 and Lima Guerreiro, General Tax Law, annotated, Editora Rei dos Livros, p. 350, note 7.)]. […]"
In the same sense regarding the applicability of the regime of administrative invalidity to acts in tax matters, the SAC had already pronounced itself in the Judgment of 17 December 2014, relating to case no. 454/14.
It is important to note that the concept of "revocation" until the entry into force of the new CAP, on 8 April 2015, following the adoption of Decree-Law no. 4/2015, of 7 January, encompassed both revocation on grounds of illegality and revocation on grounds of opportunity and merit.
With the new CAP, the concept of administrative revocation became limited to this second modality. As provided for in the current Article 165 of the CAP, under the heading "Administrative revocation and annulment", revocation is the administrative act that determines the termination of the effects of another act, for reasons of merit, convenience or opportunity (no. 1), and administrative annulment is the administrative act that determines the destruction of the effects of another act, on the grounds of invalidity (no. 2). It is in this latter segment that the act which (partially) eliminated the VAT and compensatory interest assessments under discussion in the instant case is inserted.
In this way, the "revocation" referred to in Article 79 of the GTL and, likewise, the aforementioned Judgment, corresponds to what is now, in light of the CAP, termed "administrative annulment", whose regime is contained in Articles 163 "Annullable acts and regime of annulability" (former Articles 135 and 136); 166 "Acts not subject to revocation or administrative annulment" (former Article 139) and 168 "Conditions applicable to administrative annulment" (whose no. 2 corresponds to the former Article 141), all of the CAP.
Additionally, with respect to the annulment of acts that have been subject to judicial objection, as occurs in the instant case, Article 168, no. 3 of the CAP determines that annulment may occur until the conclusion of the discussion.
In light of the above, the conclusion is that the administrative annulment materialized in the substitutive tax acts identified at point U of the probatory findings is valid, which
Frequently Asked Questions
Automatically Created