Process: 58/2018-T

Date: September 23, 2020

Tax Type: ISP

Source: Original CAAD Decision

Summary

CAAD Case 58/2018-T addresses the constitutionality of Article 93(5) of the CIEC regarding ISP (Excise Tax on Petroleum Products) and CSR (Road Service Contribution) on colored and marked diesel. The case involved A... LDA, which faced tax assessments totaling EUR 20,181.32 for 2014-2017 related to sales of colored and marked diesel (gasóleo colorido e marcado). This diesel enjoys reduced taxation but requires specific controls: sales must be registered in an electronic control system and invoiced to authorized cardholders. The arbitral tribunal initially disapplied Article 93(5) as unconstitutional, finding it violated principles of legality, ne bis in idem, and proportionality by imposing tax liability on fuel station operators regardless of whether sales were made to entitled beneficiaries. The Constitutional Court partially upheld this view in Judgment 329/2020, declaring unconstitutional the normative segment requiring payment of the tax differential when sales to cardholders were not invoiced in the cardholder's name, but upheld the provision when sales were not properly registered in the electronic control system. The reformed decision annulled assessments worth EUR 8,797.17 plus compensatory interest related to diesel sold to cardholders but invoiced to 'end consumer,' while maintaining assessments for sales to non-cardholders and unregistered transactions. This landmark decision establishes important limits on tax authority powers and clarifies the allocation of responsibility in controlled fuel distribution systems, protecting operators from disproportionate liability when formal requirements are violated but the substantive tax benefit conditions are met.

Full Decision

ARBITRAL TAX JURISPRUDENCE

Case No. 58/2018-T

Decision Date: 2020-09-23

Subject Matter: Colored and Marked Diesel; Article 92, No. 5 of the CIEC; Unconstitutionality; Reform of Arbitral Decision (attached to decision)

Replaces the Arbitral Decision of 19 November 2018

PDF Version

REFORM OF ARBITRAL DECISION (consult complete version in PDF)

On 18.02.2018, the Claimant, A..., LDA, a commercial company with the single identification number and registration in the Commercial Register No. ..., with headquarters at Rua ..., ..., requested from CAAD the constitution of an arbitral tribunal, pursuant to Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter designated only as RJAT), in which the Tax and Customs Authority is the Respondent, with a view to the annulment of the tax assessments for Excise Tax on Petroleum and Energy Products in the amount of EUR 12,823.41, Road Service Contribution in the amount of EUR 6,684.80, relating to the years 2014, 2015, 2016 and 2017, and compensatory interest on those amounts in the amount of EUR 673.11.

The Claimant, alleging that it had paid the tax amount, also petitioned for the payment of indemnificatory interest.

In the decision handed down on 19.11.2018, the arbitral tribunal established as proven the following facts:

  1. The Respondent made the following tax assessments relating to the years 2014, 2015, 2016 and 2017 and respective compensatory interest:

i) Excise Tax on Petroleum and Energy Products (ISPPE) EUR 12,823.41.

ii) Road Service Contribution (CSR) – EUR 6,684.80.

iii) Compensatory Interest from 31-12-2014 to 05-05-2017 – EUR 128.86.

iv) Compensatory Interest from 31-12-2015 to 05-05-2017 – EUR 449.29.

v) Compensatory Interest from 31-12-2016 to 05-05-2017 – EUR 94.96.

Total: EUR 20,181.32.

  1. These assessments were based on a tax inspection report conducted on the Claimant by the Northern Operational Division of DSAFA, with the scope of the Excise Tax on Petroleum Products (ISP), covered by service order No. O12017..., for the period between 1.01.2014 and 5.05.2017, noting in the said report, in particular, the following:

  2. The Respondent was notified of the request for constitution of the Arbitral Tribunal on 26.02.2018.

  3. On 7.05.2018 the assessment object of the proceedings was reformed as follows:

i) Excise Tax on Petroleum and Energy Products (ISPPE) EUR 12,054.61

ii) Road Service Contribution (CSR) – EUR 6,191.92

iii) Compensatory Interest EUR 688.97

Total: EUR 18,935.50.

  1. The reform of the assessment resulted from the acceptance by the Respondent of the arguments invoked by the Claimant in Articles 101 et seq. of the request for arbitral pronouncement, concerning colored and marked diesel sold by the Claimant without the registration of these sales in the electronic control system.

In the arbitral decision, the arbitral tribunal disapplied Article 93, No. 5, of the CIEC, on the grounds of its unconstitutionality, as follows:

"(…) the segment of the rule derived from Article 93, No. 5, of the CIEC, in the sense of imposing on the owner or the legal responsible for the operation of the authorized points of sale to the public the payment of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel by omission of the violation of registration in the electronic control system or invoicing in the name of the cardholder, regardless of whether the sales were made to persons entitled to the tax benefit and even if made to them, is unconstitutional by violation of the principle of typicality of sanctioning types inherent in the principle of democratic rule of law, of the ne bis in idem principle and, furthermore, of the principle of prohibition of excess, wherefore, in this aspect, it cannot fail to be disapplied, pursuant to Article 204 of the Constitution of the Portuguese Republic.

As a consequence of the disapplication of the said rule, in the identified segments, the assessment in question lacks a legal basis, with respect to the corrections relating to colored and marked diesel whose sales were registered in the name of cardholders in the electronic control system but invoiced to 'end consumer', as well as sales invoiced to cardholders without the Claimant having registered those sales in the electronic control system, not violating the legal order the part of the assessments in the amount of EUR 4,639.74, and respective compensatory interest, concerning the total quantity of 14,525.94 liters of colored and marked diesel sold to non-holders of the mandatory microchip card."

And, consequently, it decided:

"a) To partially uphold the request for arbitral pronouncement, decreeing the annulment of the assessments object of the proceedings and respective compensatory interest with respect to sales concerning colored and marked diesel registered in the electronic control system in the name of cardholders but invoiced to 'end consumer', as well as sales invoiced to cardholders without the Claimant having registered those sales in the electronic control system, maintaining in the legal order the assessments in the part concerning the amount of EUR 4,639.74 and respective compensatory interest, concerning the total quantity of 14,525.94 liters of colored and marked diesel sold to non-holders of the mandatory microchip card."

From this decision, the Respondent appealed to the Constitutional Court which, by judgment of 25 June 2020 (judgment 329/2020, case No. 1147/18, 3rd Section), decided:

"a) To declare unconstitutional, by violation of Articles 18, No. 2 and 61, No. 1, of the Constitution, the normative segment of No. 5 of Article 93 of the Code of Excise Taxes on Consumption (approved by Decree-Law No. 73/2010, of 21 June, as amended by Law No. 82-B/2014, of 31 December), which determines as responsible for the payment of the amount of tax, resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, the owner or the legal responsible for the operation of authorized points of sale to the public, in relation to quantities sold to a holder of an electronic card for which the corresponding invoices are not issued in the name of the cardholder;

b) Not to declare unconstitutional No. 5 of Article 93 of the Code of Excise Taxes on Consumption (approved by Decree-Law No. 73/2010, of 21 June, as amended by Law No. 82-B/2014, of 31 December) in the interpretation according to which the payment of the amount of tax, resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, can be required from the owner or the legal responsible for the operation of authorized points of sale to the public, in relation to quantities sold to holder of an electronic card that are not duly registered in the electronic control system;

and, consequently,

c) To grant partial merit to the appeal, determining the reform of the appealed decision in accordance with the previous judgment of non-unconstitutionality."

In accordance with the learned judgment of the Constitutional Court, the arbitral tribunal reforms the decision as follows:

It partially upholds the request for arbitral pronouncement, decreeing the annulment of the assessments object of the proceedings and respective compensatory interest, with respect to sales concerning colored and marked diesel registered in the electronic control system in the name of cardholders but invoiced to 'end consumer', in the amount of EUR 8,797.17 and respective compensatory interest, maintaining in the legal order the assessments in the remaining part.

The decision to declare unfounded the request for payment of indemnificatory interest is maintained.

Consequently, the costs fixed in the amount of EUR 1,224.00 (one thousand two hundred twenty-four euros) are borne by the Claimant in the proportion of fifty-four point ninety-four percent and by the Respondent in the proportion of forty-five point zero six percent, pursuant to No. 4 of Article 22 of the RJAT.

Let notification be made.

Lisbon, CAAD, 23.09.2020

The Arbitrator

Marcolino Pisão Pedreiro

ARBITRAL DECISION

I – Report

  1. On 18.02.2018, the Claimant, A..., LDA, a commercial company with the single identification number and registration in the Commercial Register No. ..., with headquarters at Rua ..., ..., requested from CAAD the constitution of an arbitral tribunal, pursuant to Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter designated only as RJAT), in which the Tax and Customs Authority is the Respondent, with a view to the annulment of the tax assessments for Excise Tax on Petroleum and Energy Products in the amount of EUR 12,823.41, Road Service Contribution in the amount of EUR 6,684.80, relating to the years 2014, 2015, 2016 and 2017, and compensatory interest on those amounts in the amount of EUR 673.11.

The Claimant, alleging that it had constituted a bank guarantee in the context of the execution proceedings arising from the assessments and respective compensatory interest, also petitions for the condemnation of the Respondent to the payment of indemnificatory interest.

  1. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority.

Pursuant to No. 1 of Article 6 of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, the undersigned was designated as arbitrator, and communicated to the Deontological Council and to the Center for Administrative Arbitration the acceptance of the appointment within the regularly applicable time limit.

The Arbitral Tribunal was constituted on 3.05.2018.

  1. The grounds presented by the Claimant in support of its claim were, in summary, as follows:

a. The obligation on the part of authorized points to register sales in the electronic control system, as well as the obligation to issue invoices with the tax identification of the cardholder, do not constitute material or substantial requirements of the benefit, but rather elements of control or verification of the fulfillment of its requirements.

b. In the case at hand, the diesel was acquired only by electronic card holders, that is, it was acquired only by entities to whom this benefit was recognized and attributed, which fact, moreover, the AT recognizes and does not question in its Inspection Report.

c. The elements existing in the accounts are sufficient to permit the control or verification that the reduced rate was applied only to those effectively entitled to this benefit.

d. Recognizing the Tax Authority that the sales were made to cardholders and that they were registered in the computer system underlying the cards granted, the hypothesis of fraud being ruled out, therefore, it has no legitimacy to proceed with the assessment of the taxes at issue here, on the ground only that the invoice was issued with the indication of 'end consumer' and not in the name of the purchaser.

e. If the Claimant failed in the issuance of the invoice – and assumes it – then it will have to be punished in the context of administrative violation as provided for in the General Regime of Tax Violations, hereinafter RGIT, as well as provided for in No. 6 of Article 95 of the CIEC ("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 Violations and in special legislation").

f. We must necessarily conclude that there is the absence of any damage to tax revenue, to the extent that all colored and marked diesel (GCM) was sold to taxpayers entitled to its acquisition, with the said sales being duly registered in the electronic system legally required by the Respondent.

g. In this way, there may have been an unlawful act punishable as an administrative violation, but there was no damage to tax revenue, and therefore, there being no damage, there is no corresponding indemnificatory duty of the now Claimant.

h. In this measure, we conclude that there is an absence of the prerequisites on which the tax liability of the Claimant depends.

i. Moreover, if this is not the case, there will be a violation of the principle "ne bis in idem", since with its conduct the Claimant will be punished by the rule contained in Article 109, No. 2, paragraph p), of the RGIT, wherefore, considering the rule provided for in Article 93, No. 5, of the CIEC, as a sanctioning rule, we cannot have two sanctions for the same fact, under penalty of violation of one of the basic principles of our normative complex, which is also alleged for all legal purposes.

j. There is no legal reason for the issuance of the assessments at issue here, these being violative not only of the principle of legality, but also of the principle of proportionality, justice, good faith and impartiality.

k. The same shall be said with respect to the GCM sold by the Claimant without having registered these sales in the electronic control system, with the Claimant challenging the quantity of GCM determined, since there are no sales of agricultural diesel without the registration of the microchip card and, if they exist, they are from a small farmer who by oversight may have forgotten the card at the time, or made outside the fuel station, but that would never reach these quantities.

l. As for the GCM allegedly sold to non-holders of the mandatory microchip card, this GCM was sold to holders of the tax benefit, having only, by error of the female employee of the Claimant's fuel station and at the request of some consumers, been invoiced in the name of third parties not holding the benefit.

m. In cases of sales invoiced in the name of a third party, the Claimant assumes the violation of the law, as to the invoicing of GCM to a non-holder of the benefit, but not with respect to the sale itself, at least in some particular cases.

  1. The ATA – Tax and Customs Administration, called upon to express itself, contested the Claimant's claim, defending itself by opposition, in summary, with the following grounds:

a. On 05/05/2017, the Northern Operational Division of DSAFA initiated an inspection action at "A..., Lda.", now Claimant, aimed at verifying compliance with tax obligations in the context of Excise Tax on Petroleum Products (ISP), for the period between 01/01/2014 and 05/05/2017.

b. In the course of controlling the regularity of GCM sales made by this company, the information on the quantities of GCM sold, which was gathered from the Claimant, from commercial documents issued in the company's invoicing computer programs and contained in SAFT files made available by the company, was analyzed and compared with the records of GCM sales in POS No. ..., which were extracted from the Database of the Directorate-General for Agriculture and Rural Development (DGADR).

c. From such comparison and in a global analysis carried out for each year, the finding of divergences results, in the period between 01-01-2014 and 05-05-2017, between the quantities invoiced by the company and the quantities registered in the TPA/POS terminal No. ....

d. It was found that such divergences result from the operator's failure to comply with obligations relating to invoicing and registration of fuel supply in POS arising from the commercialization of GCM.

e. Thus, with respect to invoicing obligations, invoices were found to have been issued without identification of the respective customer (VAT number and/or name), in the years 2015, 2016 and 2017, concerning 27,249.27 liters of GCM, which constitutes a violation of the provisions of No. 5 of Article 93 of the Code of Excise Taxes on Consumption (CIEC), attached to Decree-Law No. 73/2010 of 21 June and from which results the liability for the corresponding tax (differential between the level of taxation of GCM and GR), due to the legislative amendment resulting from the wording given by the Budget Law 2015, in the total amount of EUR 8,797.17.

f. As for the obligations to register fuel supply in POS, the sale invoiced of 14,525.94 liters of GCM to non-holders of the beneficiary card/microchip was noted, which constitutes a violation of the provisions of No. 5 of Article 93 of the CIEC and of Point 5 of Ordinance No. 361-A/2008 of 12 May, and constitutes grounds for the liability of the tax (differential between the level of taxation of GCM and GR) in the total amount of EUR 4,639.74.

g. Finally, and also within the scope of POS registration obligations, situations were found where the customer was a holder of a GCM benefit card, but the quantity registration was made in a quantity lower than the amount supplied (invoiced).

h. The commercialization of 27,249.27 liters of GCM in the years 2015, 2016 and 2017, without the invoice that supports the sale operation identifying the purchaser (VAT number and/or name), violates the obligations arising from No. 5, in fine, of Article 93 of the CIEC, in the wording given by the 2015 Budget Law and of Article 8 of Ordinance No. 361-A/2008.

i. In fact, the requirement for the issuance of an invoice in the name of the cardholder, introduced by Law No. 82-B/2014 (2015 Budget Law) in No. 5 of Article 93 of the CIEC, does not constitute a purely formal requirement, but rather, in itself, a reason for liability for the payment of the relevant IEC, with respect to quantities for which the corresponding invoices are not issued in the name of the holder.

j. The sale invoiced of 14,525.94 liters of GCM to non-holders of the beneficiary card/microchip for its use constitutes a violation of the provisions of No. 5 of Article 93 of the CIEC and of Article 5 of Ordinance No. 361-A/2008 of 12 May.

k. With respect to these transactions, the alleged negligence or error of the female employee of the Claimant's fuel station has no validity whatsoever, since No. 5 of Article 93 of the CIEC establishes the objective tax liability of the owner or the legal responsible for the operation of authorized points of sale to the public, in relation to quantities they sell in disregard of the rules for the commercialization of GCM.

l. On the other hand, all situations of sales invoiced for GCM without the corresponding registration in the TPA Terminal violate the obligations arising from No. 5 of Article 93 of the CIEC and of Articles 5 and 6 of Ordinance No. 361-A/2008.

m. Reasons for which the Claimant has no merit, and the impugned assessments should be maintained in the legal order.

  1. No situation provided for in Article 18, No. 1, of the RJAT being found that would make necessary the arbitral meeting provided therein, the holding of the same was dispensed with, on the grounds of the prohibition of the practice of useless acts.

  2. An arbitral meeting was held for the interrogation of witnesses, enrolled by both parties.

  3. The parties, notified for such purpose, presented allegations in which, beyond the critical assessment of the evidence produced, in essence, they maintained the positions already expressed in the context of the initial petition and response.

  4. By arbitral order of 24.10.2018, taking into account that in the sale made to a person holder of the tax benefit, with pretermission of registration in the electronic control system or omission of an invoice in their name, according to law, the holder of the fuel station is subject to the administrative fine provided for in Article 93, No. 6, of the CIEC and in Article 109, No. 2, paragraph p) and No. 6) of the RGIT, €, and furthermore, to the payment of the amount of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel, pursuant to No. 5 of Article 93 of the CIEC, envisioning as possible that the tribunal would come to know the constitutionality of this rule, in those aspects, for possible violation of the principle of typicality of sanctioning types inherent in the principle of democratic rule of law, of the ne bis in idem principle and, furthermore, of the principle of prohibition of excess, and that consequently, it might refuse to apply the said rule and, as a consequence of such refusal, might declare the request for arbitral pronouncement procedurally founded, with respect to the corrections concerning the segments of the said rule, in obedience to the principle of contradictory procedure (Article 16, paragraph a) of the RJAT), in the aspect of the prohibition of surprise decisions, the parties were notified to, if they wish, express themselves on these questions, within a period of 10 days, running simultaneously for both parties, and it was further determined that the period for decision and notification to the parties be extended by a further two months pursuant to No. 2 of Article 21 of the RJAT.

The Claimant and the Respondent expressed themselves on the question raised by the Tribunal, the former sustaining the unconstitutionality of the rule in the indicated segments.

The Respondent, in summary, considers that from the inspection report that forms the basis and that supports the act of assessment impugned, it is not possible to infer that the sales that were not subject to proper registration in the electronic control system, nor that the sales invoiced to 'end consumer', were made to holders of the tax benefit.

It further sustains that No. 5 of Article 93 of the CIEC cannot be understood as a sanctioning rule, but rather as a rule of tax incidence that determines the restoration of standard taxation upon non-compliance with essential legal requirements of a privileged taxation regime.

Concluding that there is no material legal ground for the arbitral tribunal to disapply, in the specific case, No. 5 of Article 93 of the CIEC, for alleged unconstitutionality of the rule, and that instead it should apply the said rule and declare the action unfounded.

  1. The tribunal is materially competent and is regularly constituted pursuant to the RJAT.

  2. The Respondent was notified of the request for constitution of the Arbitral Tribunal on 26.02.2018 and on 7.05.2018 the assessment object of the proceedings was reformed as follows:

i) Excise Tax on Petroleum and Energy Products (ISPPE) EUR 12,054.61;

ii) Road Service Contribution (CSR) – EUR 6,191.92;

iii) Compensatory Interest EUR 688.97

Total: EUR 18,935.50.

Taking into account that the reform of the assessment was not made within the 20-day period provided for in Article 13 of the RJAT, but only after the constitution of the arbitral tribunal, the value of the action is EUR 20,181.32 (twenty thousand one hundred eighty-one euros and thirty-two cents), pursuant to Article 97-A of the Code of Tax Procedure and Process, applicable by virtue of Article 29, No. 1, paragraph c) of the Legal Regime for Tax Arbitration.

  1. The parties have legal personality and capacity, are entitled and are legally represented.

The proceedings do not suffer from defects that would invalidate it.

  1. The following questions must be resolved:

a) Illegality of the acts of assessment object of the present proceedings.

In case of declaration of illegality of the acts of assessment,

b) The Claimant's entitlement to indemnificatory interest

II – The Relevant Matter of Fact

  1. The following facts are considered proven:

  2. The Respondent made the following tax assessments relating to the years 2014, 2015, 2016 and 2017 and respective compensatory interest:

i) Excise Tax on Petroleum and Energy Products (ISPPE) EUR 12,823.41.

ii) Road Service Contribution (CSR) – EUR 6,684.80.

iii) Compensatory Interest from 31-12-2014 to 05-05-2017 – EUR 128.86.

iv) Compensatory Interest from 31-12-2015 to 05-05-2017 – EUR 449.29.

v) Compensatory Interest from 31-12-2016 to 05-05-2017 – EUR 94.96.

Total: EUR 20,181.32.

  1. These assessments were based on a tax inspection report conducted on the Claimant by the Northern Operational Division of DSAFA, with the scope of the Excise Tax on Petroleum Products (ISP), covered by service order No. O12017..., for the period between 1.01.2014 and 5.05.2017, noting in the said report, in particular, the following:

  2. The Respondent was notified of the request for constitution of the Arbitral Tribunal on 26.02.2018.

  3. On 7.05.2018 the assessment object of the proceedings was reformed as follows:

i) Excise Tax on Petroleum and Energy Products (ISPPE) EUR 12,054.61

ii) Road Service Contribution (CSR) – EUR 6,191.92

iii) Compensatory Interest EUR 688.97

Total: EUR 18,935.50.

  1. The reform of the assessment resulted from the acceptance by the Respondent of the arguments invoked by the Claimant in Articles 101 et seq. of the request for arbitral pronouncement, concerning colored and marked diesel sold by the Claimant without the registration of these sales in the electronic control system.

  2. With interest for the decision of the case, the following facts alleged by the Claimant were not proven:

  1. As to colored and marked diesel invoiced to non-holders of the mandatory microchip card, that this diesel was sold to holders of the tax benefit, having only by error of the female employee of the Claimant's fuel station and at the request of some consumers been invoiced in the name of third parties not holding the benefit.

  2. That in the majority of cases, and except for rare exceptions, it was the female employee of the Claimant's, without the knowledge or authorization of the latter, that after the sale of colored and marked diesel with proper registration in the electronic control system, invoiced the said sale to another tax identification number that was not that of the holder of the benefit.

  3. That there are no sales of agricultural diesel without the registration of the microchip card, and if they exist, they are from a small farmer who by oversight may have forgotten the card at the time, or made outside the fuel station.

  1. The Tribunal's conviction with respect to the decision on the matter of fact considered proven was based on the documents in the proceedings, as well as on the presented articles, with no disagreement between the parties on this matter.

  2. The decision with respect to the facts not proven results from the lack of evidence with respect to them.

With respect to sales invoiced to non-holders of the tax benefit, consisting of the tax inspection report the concrete sales invoiced to non-holders of the tax benefit, with their respective identification, the Claimant did not provide proof that, notwithstanding the issuance of invoices in favor of these non-holders, the actual sale was effectively made in favor of another person, holder of the benefit, rebutting the presumption of truthfulness of invoices that derives from Article 75, No. 1, of the General Tax Law. In reality, not the slightest proof was made regarding such matter, with the testimony of the witnesses heard (one female employee in charge of fuel supply, to whom the Claimant attributes the incorrect procedures and the other company employee without direct knowledge of the concrete facts at issue) having been vague and generic regarding these matters, recognizing, in essence, that it was the common practice for invoices to be issued to non-cardholders without other clarifications, in particular of the taxpayers who actually made the payment of the diesel supplies in question.

With respect to sales of agricultural diesel made to holders of the tax benefit without the respective registration in the electronic control system, with the holders of the card to which such sales relate being identified in the tax inspection report, it was incumbent on the Claimant to produce evidence that would refute the elements contained therein, which was not done, despite having announced, in Article 135 of the initial petition that it would present a document regarding such matter, which would not occur.

It should be added that, also regarding this point, the testimony of the witnesses was vague and generic, limiting itself to expressing their conviction that such a large quantity of liters was not supplied without registration, but without any specification of any concrete aspect of the sales of agricultural diesel without the respective registration in the electronic control system, with respect to each of the holders of the tax benefits in question, indicated in the tax inspection report.

In these circumstances, the Claimant's allegations cannot be considered proven.

No evidence capable of shaking the data contained in the tax inspection report was therefore made.

III – The Applicable Law

  1. Article 93 of the Code of Excise Taxes on Consumption (CIEC), approved by Decree-Law No. 73/2010, of 21 June, in the wording at the date of the relevant facts, provided as follows:

"Article 93

Reduced Rates

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

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

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

a) Stationary engines used in irrigation;

b) Vessels referred to in paragraphs c) and h) of No. 1 of Article 89;

c) (Wording given by Article 211 of Law No. 42/2016, of 28 December) Agricultural tractors, combine harvesters, cultivators, motor hoes, motor scythes, self-propelled potato harvesters, pea harvesters, forage harvesters for silage, tomato harvesters, conditioner-scythes, grape harvesting machines, trunk vibrators for harvesting olives and other fruits, as well as other equipment, including those used for aquaculture activities and fishing with the purse seine art, approved by order of the members of Government responsible for the areas of finances, agriculture and the sea;

d) Vehicles for the transport of passengers and goods by rail;

e) Fixed engines;

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

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

5 — (Wording given by Law No. 82-B/2014, of 31 December) Colored and marked diesel can only be acquired by holders of the electronic card instituted for the purposes of controlling its allocation to the destinations referred to in No. 3, and the owner or the legal responsible for the operation of authorized points of sale to the public is responsible for the payment of the amount of 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 quantities they sell and that are not duly registered in the electronic control system, as well as in relation to quantities for which the corresponding invoices are not issued in the name of the cardholder.

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 Violations and in special legislation."

With respect to the Road Service Contribution (CSR), created by Law No. 55/2007, of 31 August, which, in accordance with the provisions of Article 1, aims to finance the national road network under the responsibility of EP – Estradas de Portugal, E.P.E., and equally determines the conditions of its application, this contribution constitutes the consideration for the use of the national road network, as is verified by the consumption of fuels (No. 1 of Article 3).

And, pursuant to No. 1 and No. 2 of Article 4 of Law No. 55/2007, the CSR "applies to gasoline and road diesel subject to excise tax on petroleum and energy products (ISP) and not exempted therefrom", and its value varies according to the petroleum product used (gasoline or road diesel).

As provided in No. 1 of Article 5 of the same decree, the CSR is due by the taxpayers of the excise tax on petroleum and energy products and, although it constitutes income for EP – Estradas de Portugal (Article 6), its assessment and collection are incumbent on the Respondent, applying to its assessment, collection and payment the provisions of the Code of Excise Taxes on Consumption.

The CSR is thus a tax due by taxpayers of Excise Tax on Petroleum and Energy Products that applies to road diesel subject to Excise Tax not exempted.

  1. Given the matter of fact proven, it does not appear that the respondent, by the practice of the impugned assessment, violated No. 5 of Article 93 of the CIEC.

Unquestionably subsumed in this legal provision are sales made to those who are not holders of the tax benefit. But also, sales invoiced to holders of the tax benefit, but not registered in the electronic control system and, also, sales with respect to which the corresponding invoices are not issued in the name of the holder of the tax benefit, despite being registered in the electronic control system, situations which occur in the case at hand.

In fact, from the violation of any one of the formalities at issue, there follows, in itself, as the Respondent emphasizes, the tax liability in question. Effectively, faced with the rule in question, it is not permitted to the responsible party to escape the burden through proof that the sales were, in fact, made to persons entitled to the tax benefit. Any doubts that may exist as to the intention of the legislator were dispelled with the segment of the rule added by Law No. 82-B/2014, of 31 December, to No. 5 of Article 93 of the CIEC.

According to this legal provision, sales to holder of the tax benefit, but which are not duly registered in the electronic control system or which, having been so, have not been invoiced in the name of the holder of the tax benefit but to end consumer are, automatically, subject to the consequences provided for in the said legal provision, as was understood in the inspection report and the Respondent emphasizes in its response.

It should be noted that, in this aspect, what is at issue, as emerges from the report, is colored and marked diesel whose sales were registered in the electronic control system in the name of cardholders, but without an invoice having been issued in their names and, in another group of cases, colored and marked diesel sold by the Claimant without having registered these sales in the electronic control system but invoiced in the name of cardholders. In these cases, the Respondent, in the tax inspection report, does not claim that the purchasers of colored and marked diesel are not holders of a card that entitles them to the tax benefit, (which is indirectly already evident from registration or from the invoice) and may even be inferred from the content of the same that the Claimant assumes that such sales were made to the persons mentioned in the registration, in the first group of cases, and to the recipients of the invoices in the second group of cases, since, in both situations, it only points out to the taxpayer the omission of the formalities and not the sale to non-holders of the tax benefit, and in some cases registration was made in favor of these holders, with the invoice in favor of 'end consumer' and in others the invoice was issued in the name of cardholders, but without registration in the electronic control system. The Respondent limited itself to applying the rule which abstracts from that circumstance and determines that the consequence of the omission of the formalities at issue shall, in itself, be the holding responsible of the owner or the legal responsible for the operation of authorized points of sale to the public for the product in question "for the payment of the amount of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel".

It cannot fail to be concluded that the assessments sub judice did not violate the provisions of Article 93, No. 5, of the CIEC.

  1. Simultaneously, pursuant to No. 6 of the same article "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 Violations and in special legislation."

The Legal Regime for Tax Violations provides in Article 109 (Introduction into Irregular Consumption) as follows:

"1 - The facts described in Article 96, which do not constitute a crime by reason of the value of the tax provision or of the goods subject to the violation, or, regardless of these values, whenever committed through negligence, are punishable with a fine of EUR 150 to EUR 150,000. (Wording given by Article 224 of Law No. 66-B/2012, of 31 December)

2 – The same fine applies to whoever:

p) Introduces into consumption, possesses or commercializes products in violation of the rules of sealing, packaging, possession or commercialization, in particular the quantitative limits, established by the Code of Excise Taxes on Consumption and in complementary legislation;

6 - The maximum amount of the fine is doubled in the cases provided for in paragraph p) of No. 2".

In sum: in the sale made with pretermission of registration in the electronic control system and/or omission of an invoice in its name, in accordance with the law, the owner or the legal responsible for the operation of authorized points of sale to the public is subject to two unfavorable consequences:

a) Subjection to the fine provided for in Article 93, No. 6 of the CIEC and in Article 109, No. 2, paragraph p) and No. 6) of the RGIT, with the maximum amount of the fine being EUR 300,000. And, furthermore,

b) To the payment of the amount of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel (Article 93, No. 5 of the CIEC).

Taking into account that this latter consequence applies even if the sale has been made to a holder of the tax benefit and, consequently, from this point of view, no damage has resulted to tax revenue, the question may arise whether, in this aspect of application of the rule, we are materially faced with a sanction (punitive) to an infraction, subject of another penalization pursuant to Article 109 of the RGIT.

It is legitimate to question, however, on the one hand, whether such sanction (of Article 93, No. 5 of the CIEC) is admissible in the face of the constitutional principle of typicality of sanctioning types (J.J. Gomes Canotilho, Vital Moreira, Constitution of the Portuguese Republic Annotated, Coimbra Editora, 4th Edition, 2007, Vol. I, page 498) and, if so, whether it can coexist with the administrative violation sanction, in the face of the ne bis in idem principle, if it is understood that the application of the same to this sanctioning law is applicable.

It is furthermore to be questioned whether this legal provision is in conformity with the constitutional principle, in the face of the principle of prohibition of excess, especially in the aspect of necessity and proportionality in the strict sense.

In fact, as written by A. Brigas Afonso-M. Teixeira Fernandes in annotation to Article 93 of the Code of Excise Taxes, the "new wording given to No. 5 comes to create special responsibilities for the owners or legal responsible for the operation of refueling stations, with respect to compliance with the regulatory provisions provided for the refueling of colored and marked diesel, being directly responsible for the payment of the difference in Excise Tax in cases where they carry out refuelings without complying with the regulatory provisions that require the mandatory use of electronic cards in all refuelings carried out. It is intended with this measure to prevent situations of refueling of colored and marked diesel by persons who legally could not carry out such refuelings, through the abusive use of the said microchip cards."

Not being questioned in the tax inspection report that the sales with registration in the name of cardholders and invoice in favor of 'end consumer' and the sales with invoice issued in the name of cardholders, but without registration in the electronic control system, were made to whom the holder is of the benefit and, consequently, not being at issue situations of refueling of colored and marked diesel by persons who legally could not carry out such refuelings, it appears questionable, in the face of this constitutional principle, that the severity of ordinary law goes to the point of, alongside the administrative violation sanction, still impose as a consequence of the violation of the formalities at issue the obligation to pay a monetary amount, also with a sanctioning character since, as an "tax", in accordance with the underlying reality, it has no reason to be, since, as written by José Casalta Nabais "(…) from the purpose of taxes is necessarily excluded (…) the sanctioning purpose. In fact, if with the tax one intends to apply a sanction, we would then be faced with a fine (criminal pecuniary sanction), an administrative fine (administrative violation pecuniary sanction), a forfeiture (criminal sanction translated in the seizure and corresponding loss to favor of the State of the product obtained and the instruments used in the practice of an unlawful act), an indemnification (…) but never before a tax".

Let us then see.

  1. In the groups of cases we have been analyzing, there is unlawfulness consisting of the non-compliance with the formalities provided for the commercialization of colored and marked diesel. The liability at issue is a legal consequence arising from this non-compliance, independently of the existence of any damage to tax revenue.

It is, therefore, a sanction which, in these cases, is not reconstitutive or compensatory, since it is not intended to restore the situation that would exist without the practice of the unlawful act, nor to place the injured party in a situation equivalent to that which would occur without the legal violation, but punitive, as a normative reaction to the non-compliance with the formalities provided for the commercialization of the product.

It may be read in the judgment of the Constitutional Court No. 294/91, of 1 July 1991, that

"(…) it is arguable that the «constitutional program» relating to public sanctioning law contemplates only three types of unlawfulness (the penal, including contraventional; the disciplinary public; the administrative violation".

In this line, J.J. Gomes Canotilho-Vital Moreira write:

"Besides the unlawful acts and sanctions of a criminal nature – which are the only ones extensively regulated – the constitution also provides for the administrative violation and the disciplinary unlawfulness (cfr. Article 165-1/d). It remains to be seen whether the law can create other types of unlawfulness besides those referred to or whether the fundamental law establishes a closed list of sanctioning measures. The only answer consistent with the principle of democratic rule of law and with the function of the constitution is the typicality of sanctioning types (cf. Constitutional Court Judgment No. 294/91)."

Article 93, No. 5, of the CIEC, in the aspect we have been analyzing, thus establishes a punitive sanctioning measure that exceeds the closed list of sanctioning types provided for in the constitution, thus violating the principle of democratic rule of law.

  1. On the other hand, as can be read in the judgment of the Constitutional Court No. 244/99, of 29 April 1999:

"It is important to emphasize that No. 5 of Article 29 of the Constitution, in determining that 'no one can be tried more than once for the practice of the same crime', is aimed not only at double trial but also at double incrimination or penalization (cf. GOMES CANOTILHO/VITAL MOREIRA, Constitution of the Portuguese Republic annotated, 3rd ed., Coimbra, 1993, page 194).

In its substantive aspect (cf. GERMANO MARQUES DA SILVA, Portuguese Criminal Law, I, Lisbon, 1997, page 305, note 2), the principle 'ne bis in idem' prohibits the plural punishment of the same infraction.

(…).

The determination of such violation presupposes that the rules at issue sanction – in a double or multiple manner – substantially the same infraction.

The violation of the principle 'ne bis in idem' thus depends on the identity of the legal good protected by the competing sanctioning rules, or of the disvalue presupposed by each of them."

On this subject, Inês Ferreira Leite writes:

"(…) The ne bis in idem only incorporates an added effective constitutional value, compared to the institute of res judicata (which precedes it, in antiquity), if it is not merely recognized a scope of application limited to criminal procedure. It is only with the recognition of the material dimension of ne bis in idem that it assumes its binding force as a guarantor of the rationality of the exercise of public punitive power.

(…) when the legislator opts to sanction certain unlawful acts with 'penalties' of a nature distinct from formally criminal ones, which essentially aim at the same purposes and, at the same time, there is an overlap of unlawful acts, an autonomous reflection around ne bis in idem is required. In this sense, penalty, administrative fine, disciplinary sanction, general administrative sanction and obligation of reparation for damage have in common, among themselves, the circumstance of constituting reactions against an unlawful act. And they can both be formally distinct unlawful acts, but materially interchangeable, as mere normative reflexes of the same normative-social censure. Of course, ne bis in idem does not constitute an insuperable obstacle to the cumulative application of two or more sanctioning reactions before the same unlawful act; ne bis in idem merely prevents the cumulative application of sanctions that are essentially punitive.

(…) the only viable and safe way to recognize a quid common between sanctions – that is, an identity before which the restrictive intervention of ne bis in idem is justified – is based on the identification of the prevailing function of the sanction. Being demonstrated that two sanctions, in correlation with their respective enabling rule or legal prohibition, exercise an essentially punitive function, before the same unlawful fact, the exclusion of their cumulative application, out of respect for ne bis in idem, shall, in principle, be excluded.

Now, in the situation at hand, and according to the nature of the imposition provided for in Article 93, No. 5 of the CIEC, by the mere violation of formalities, when the buyer of Colored and Marked Diesel is a holder of the tax benefit, the plural punishment of the same infraction occurs, in violation of the ne bis in idem principle, since, as we have seen, the non-compliance with the formalities at issue is already subject to punishment as an administrative violation, and both sanctions protect the same legal good.

  1. On the other hand, taking into account the onerous duties of cooperation imposed on the owners or legal responsible for the operation of authorized points of sale to the public for colored and marked diesel, which aims to relieve the State of its management and to the serious consequences provided for its non-compliance, it is necessary to invoke the principle of proportionality, among us enshrined, namely, in Article 18, No. 2, of the Constitution.

As written by Jorge Bacelar Gouveia, the configuration of this principle "is based on an internal material limitation of the juridical-public action of a discretionary character, containing the excessive effects that may present themselves in the edition of the measures of public power of an ablative character to their respective addressees" (MANUAL OF CONSTITUTIONAL LAW, Almedina, 4th Ed., Vol. II, pages 839-840).

The same author also tells us that "although the idea of proportionality immediately induces the sense of the prohibition of an excessive juridical-public action, it unfolds into three fundamental aspects by which that general concept decomposes:

            - adequacy (Geeignetheit);

            - necessity (Erforderlichkeit); and

            - rationality or proportionality in the strict sense (Proportionalität)

(…)

"The necessity aspect shows how, faced with a measure that is already considered adequate, it is necessary to make a judgment regarding its indispensability in the range of measures that, in the same way, are equivalently considered capable of achieving the intended result: the measure is necessary if there is no other that is, from the point of view of its harmfulness, less burdensome." (op. cit. page 842).

In the words of Diogo Freitas do Amaral "The center of concerns shifts to the idea of comparison: the central operation to be performed is the comparison between an adequate measure and other adequate measures. The objective of such comparison will be the choice of the adequate measure that is least harmful" (COURSE OF ADMINISTRATIVE LAW, Almedina, Vol. II, 2011, 2nd Edition, page 143).

In the case at hand, to achieve the purposes underlying Article 93, No. 5 of the CIEC, it is sufficient to demonstrate that colored and marked diesel was sold to holders of the tax benefit, which seems to occur when the supply is registered in the electronic system underlying it or when the sale is invoiced in the name of the holder of the tax benefit (without prejudice to the applicability of the administrative violation sanction for the omission of the formalities at issue).

Even if the aspect of the rule at issue passed the "necessity test", it is not clear how it could fail to violate the aspect of balance, rationality or proportionality in the strict sense.

In fact, as written by Vitalino Canas:

"The weighing carried out in the context of the segment of proportionality in the strict sense puts the positive and negative effects of the rule in direct confrontation, with the aid of a criterion that allows establishing their relative importance.

Or, in a more complete formulation: in the sphere of the segment of proportionality in the strict sense, the positive effects relating to the satisfaction of goods, interests or values and the negative effects of the interference with goods, interests or values with those conflicting are assessed and weighed, with the mediation of a tertium comparationis that allows establishing an ordinal relationship, of more/less (or greater/lesser) or equal between the importance of those effects".

Now, in the cases subsumed to Article 93, No. 5, of the CIEC, in which despite the violation of formal obligations, the sale of colored and marked diesel is made to whom is a holder of the right to its acquisition, the positive effect of the rule in favor of tax justice, if it exists, is manifestly inferior to the negative effects.

In fact, although from a prevention perspective, the rigor of the rule may contribute to the achievement of the objective underlying it, compelling operators to comply with the formalities and in that measure contribute to an environment of rigor, conducive to the sale of the product at issue being made only to holders of the tax benefit, in these cases where the harmful event sought to be avoided does not occur, the positive effect of the rule is manifestly inferior to the negative effect, since this is translated into the payment of an amount, in appearance as a tax but which, in reality, is a punitive sanction, consequently harmful to tax justice and to the material principles of taxation, clearly exceeding the margin of free discretion of the legislator.

It further adds that the administrative violation sanction, which pursues identical purposes, will already be an element inducing compliance with the formalities, thereby reducing the effect of the rule at issue in this aspect.

It is concluded, therefore, in a weighing of the positive and negative effects of the rule, in the face of the sub-principle of rationality or proportionality in the strict sense, that the positive are manifestly inferior to the positive, wherefore, it cannot fail to be considered violated, also, the constitutional principle of prohibition of excess.

  1. Thus, the segment of the rule derived from Article 93, No. 5, of the CIEC, in the sense of imposing on the owner or the legal responsible for the operation of authorized points of sale to the public the payment of tax resulting from the difference between the level of taxation applicable to road diesel and the rate applicable to colored and marked diesel by omission of the violation of registration in the electronic control system or of invoicing in the name of the cardholder, regardless of whether the sales were made to persons entitled to the tax benefit and even if made to them, is considered unconstitutional by violation of the principle of typicality of sanctioning types inherent in the principle of democratic rule of law, of the ne bis in idem principle and, furthermore, of the principle of prohibition of excess, wherefore, in this aspect, it cannot fail to be disapplied, pursuant to Article 204 of the Constitution of the Portuguese Republic.

As a consequence of the disapplication of the said rule, in the identified segments, the assessment in question lacks a legal basis, with respect to the corrections concerning colored and marked diesel whose sales were registered in the name of cardholders in the electronic control system but invoiced to 'end consumer', as well as sales invoiced to cardholders without the Claimant having registered those sales in the electronic control system, not violating the legal order the part of the assessments in the amount of EUR 4,639.74, and respective compensatory interest, concerning the total quantity of 14,525.94 liters of colored and marked diesel sold to non-holders of the mandatory microchip card.

  1. Request for Restitution of Amounts Paid and Indemnificatory Interest.

The Claimant also came to petition for the condemnation of the Respondent to the payment of indemnificatory interest.

For this purpose, it alleged that it had constituted a bank guarantee in the context of the execution proceedings instituted following the assessments.

Pursuant to Article 53 of the General Tax Law:

"1 – The debtor who, to suspend the execution, offers a bank guarantee or equivalent shall be indemnified wholly or partially for the damages resulting from its provision, if it has maintained it for a period exceeding three years in proportion to the ruling in administrative appeal, impugnation or opposition to execution that have as object the debt guaranteed.

2 – The period referred to in the previous number does not apply when it is verified, in gracious complaint or judicial impugnation, that there was error attributable to the services in the assessment of the tax.

3-(.....)

4-(.....)".

With no period exceeding three years having elapsed, the procedural merit of this claim of the impugner depends on the occurrence of an error attributable to the services in the assessment of the tax.

As was decided in the arbitral decision handed down in case 507/2015-T:

"With respect to indemnificatory interest, being a matter of defects derived only from the application of an unconstitutional rule, it must be understood that the assessments do not suffer from any error that is attributable to the services of the Tax and Customs Authority, wherefore there is no right to indemnificatory interest, in the face of the provision of Article 43, No. 1, of the General Tax Law, as the Supreme Administrative Court has been consistently deciding, for the following reasons:

In that case, and unless the disrespect for constitutional rules directly applicable and binding, such as those referring to rights, freedoms and guarantees (cfr. Article 18, No. 1, of the Constitution), is at issue, the Tax Authority cannot refuse to apply the rule on the grounds of unconstitutionality (With interest on the question, see the opinions of the Consultative Council of the Office of the Attorney General of the Republic referred to in the Collection of Opinions of the Office of the Attorney General of the Republic, volume V, points 10, 3, 3.2 – respectively, with the headings 'Control of constitutionality', 'Successive control' and '(Non)application of unconstitutional rule (powers and duties of the Public Administration)' – whose doctrine we follow.). For the Administration in general is subject to the principle of legality, enshrined constitutionally, and the Tax Authority is also by virtue of the provision of Article 55 of the General Tax Law.

In our view, the Tax Authority should await the declaration of unconstitutionality with binding general force, to be issued by the Constitutional Court, pursuant to Article 281 of the Constitution.

For, as VIEIRA DE ANDRADE says, 'This conflict [between constitutionality and the principle of legality] cannot be resolved through the automatic prevalence of constitutional law over legal law. This is not what is at issue, because what is in question is not the constitutionality of the law, but the judgment that may be made on that constitutionality by administrative bodies. On the one hand, the Administration is not an organ of fiscal constitutionality control; on the other hand, the subjection of the Administration to the law is not aimed only at the protection of the rights of individuals, but also at the defense and pursuit of public interests [...]. The granting to the administrative power of unlimited powers for control of the unconstitutionality of the laws to apply would lead to administrative anarchy, would invert the Law-Administration relationship and would directly violate the principle of the division of powers, as it is enshrined in our Constitution' (Constitutional Law, Almedina, 1977, page 270.).

In the same sense, JOÃO CAUPERS states that 'the Administration does not have, in principle, competence to decide the non-application of rules whose constitutionality offers it doubts, contrary to the courts, to whom the diffuse and concrete control of constitutional conformity is incumbent, as is demonstrated by the differences between Articles 207 [today, 204] and 266, No. 2, of the Constitution. While the first prevents the courts from applying unconstitutional rules, the second stipulates the subordination of administrative organs and agents to the Constitution and the law.

It seems clear that the essential difference between the two provisions derives precisely from the circumstance that it was not intended to entrust the Administration with the task of controlling the constitutionality of the laws. The performance of such function, by the latter, must be viewed as exceptional' (The Fundamental Rights of Workers and the Constitution, Almedina, 1985, page 157.).

We thus conclude that in Portuguese Constitutional Law there is no possibility for the Administration to refuse to obey a rule that it considers unconstitutional, substituting itself for the organs of control of constitutionality, unless the violation of constitutionally enshrined rights, freedoms and guarantees is at issue, which is manifestly not the case when the application of a rule allegedly violating the principle of non-retroactivity of tax law is at issue."

In the same sense, it may be read in the arbitral decision handed down in case 527/2017-T:

"The Administration is subordinated to the principle of legality (Article 266, No. 2, of the Constitution), and cannot fail to comply with what is provided in the law under the pretext of its unconstitutionality, a task which, in diffuse terms, (...), is only conferred on the courts (Gomes Canotilho/Vital Moreira, Constitution of the Portuguese Republic Annotated, vol. II, 4th edition, page 800).

As the arbitral decision is based on the refusal to apply a rule on grounds of unconstitutionality, the prerequisite on which the condemnation to indemnificatory interest depends does not occur."

Following this jurisprudence, the request for the condemnation of the Respondent to the payment of indemnificatory interest is declared unfounded.

IV – Decision

Thus, the arbitral tribunal decides:

a) To partially uphold the request for arbitral pronouncement, decreeing the annulment of the assessments object of the proceedings and respective compensatory interest with respect to sales concerning colored and marked diesel registered in the electronic control system in the name of cardholders but invoiced to 'end consumer', as well as sales invoiced to cardholders without the Claimant having registered those sales in the electronic control system, maintaining in the legal order the assessments in the part concerning the amount of EUR 4,639.74 and respective compensatory interest, concerning the total quantity of 14,525.94 liters of colored and marked diesel sold to non-holders of the mandatory microchip card.

b) To declare unfounded the request for payment of indemnificatory interest.

Communication shall be made to the Office of the Attorney General of the Republic, for the purposes of Article 280, No. 5, of the Constitution.

Value of the action: EUR 20,181.32 (twenty thousand one hundred eighty-one euros and thirty-two cents), pursuant to the provisions of Article 306, No. 2, of the Code of Civil Procedure and Article 97-A, No. 1, paragraph a), of the Code of Tax Procedure and Process and Article 3, No. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs, in the amount of EUR 1,224.00 (one thousand two hundred twenty-four euros) in the proportion of twenty-three point eight percent by the Claimant and in the proportion of seventy-six point two percent by the Respondent, pursuant to No. 4 of Article 22 of the RJAT.

Let notification be made.

Lisbon, CAAD, 19 November 2018.

The Arbitrator

Marcolino Pisão Pedreiro

Frequently Asked Questions

Automatically Created

What is the ISP tax on colored and marked diesel (gasóleo colorido e marcado) under Portuguese tax law?
ISP (Imposto sobre os Produtos Petrolíferos e Energéticos) on colored and marked diesel is a reduced-rate excise tax applicable to diesel fuel designated for specific uses, primarily agricultural, forestry, and industrial activities. Under Portuguese tax law in the CIEC (Código dos Impostos Especiais de Consumo), colored and marked diesel benefits from a substantially lower tax rate compared to road diesel. The reduced taxation is conditioned on strict controls: purchasers must hold an electronic microchip card proving eligibility, sales must be registered in an electronic control system, and invoices must be issued in the cardholder's name. The tax differential between road diesel and colored diesel represents significant revenue, which is why Article 93(5) CIEC imposed strict liability on fuel station operators for any procedural violations, requiring them to pay the difference between the higher road diesel rate and the lower marked diesel rate when control requirements were not met.
Why was Article 92(5) of the CIEC (Código dos Impostos Especiais de Consumo) challenged as unconstitutional in CAAD case 58/2018-T?
Article 93(5) of the CIEC was challenged as unconstitutional in CAAD Case 58/2018-T because it imposed absolute liability on fuel station operators to pay the tax differential between road diesel and colored/marked diesel rates for any violation of registration or invoicing requirements, regardless of whether the fuel was actually sold to persons entitled to the tax benefit. The claimant argued this violated three constitutional principles: (1) the principle of typicality of sanctioning norms inherent in the rule of law, because it imposed a penalty-like obligation without proper legal definition; (2) the ne bis in idem principle, as operators could face both tax liability and administrative sanctions for the same conduct; and (3) the principle of proportionality, as the measure was excessive when sales were genuinely made to entitled beneficiaries but formal requirements were not met. The Constitutional Court partially accepted these arguments, declaring unconstitutional the segment imposing liability when diesel was sold to cardholders but invoiced incorrectly, while upholding liability for sales not properly registered in the electronic system.
What is a reform of an arbitral decision (reforma da decisão arbitral) in Portuguese tax arbitration proceedings?
A reform of an arbitral decision (reforma da decisão arbitral) in Portuguese tax arbitration proceedings is a modification or correction of a previously issued arbitral decision, typically following an appeal to the Constitutional Court (Tribunal Constitucional). Under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária), when a party appeals an arbitral decision on constitutional grounds and the Constitutional Court issues a judgment that affects the legal basis of the decision, the original arbitral tribunal must reform (modify) its decision to conform with the Constitutional Court's ruling. In Case 58/2018-T, the initial decision of November 19, 2018, was reformed on September 23, 2020, following Constitutional Court Judgment 329/2020. The reform process maintains the procedural framework and factual findings but adjusts the legal conclusions and operative parts of the decision to align with the higher court's constitutional interpretation. The reformed decision replaces the original for all legal purposes, establishing new binding obligations on the parties while preserving the integrity of the arbitration process and ensuring constitutional compliance.
How are the Road Service Contribution (CSR) and ISP calculated on petroleum products in Portugal?
The Road Service Contribution (CSR - Contribuição de Serviço Rodoviário) and ISP on petroleum products in Portugal are calculated based on specific rates per liter or volume of fuel, established annually in the State Budget Law. ISP rates vary significantly depending on the fuel type and intended use: road diesel (gasóleo rodoviário) is taxed at a higher rate, while colored and marked diesel (gasóleo colorido e marcado) for agricultural, industrial, or other authorized uses benefits from substantially reduced rates. The CSR is an additional charge applied to fuel used in road transportation, calculated similarly per liter. In Case 58/2018-T, the assessments included EUR 12,823.41 in ISP and EUR 6,684.80 in CSR, reflecting the differential between rates applicable to road diesel and the reduced rates for colored diesel that should have applied. The calculation methodology involves: (1) identifying the quantity of fuel sold; (2) determining the applicable tax rate based on the fuel classification and use; (3) applying the rate differential when improper sales are detected; and (4) adding compensatory interest for late payment. The tax authorities conduct inspections reviewing electronic control systems, invoicing records, and sales documentation to verify proper classification and tax collection.
What are the grounds for claiming compensatory interest (juros compensatórios) and indemnity interest (juros indemnizatórios) in Portuguese tax disputes?
Compensatory interest (juros compensatórios) in Portuguese tax disputes is a charge imposed on taxpayers to compensate the State for the delayed receipt of tax revenue when taxes are paid late or assessed through correction procedures. Under Article 35 of the LGT (Lei Geral Tributária), compensatory interest accrues from the date payment was originally due until actual payment, calculated at legally established rates. It is not a penalty but compensation for the time value of money. In Case 58/2018-T, EUR 673.11 in compensatory interest was charged on the ISP and CSR assessments from the original due dates (2014-2017) until the assessment date (May 2017). Indemnity interest (juros indemnizatórios), conversely, is paid by the State to taxpayers under Article 43 of the LGT when taxes are illegally collected or assessments are subsequently annulled, compensating taxpayers for improper deprivation of funds. The claimant in Case 58/2018-T requested indemnity interest on amounts paid, which was denied because payment occurred after the arbitration request was filed, not before, meaning the legal conditions for indemnity interest were not met. The distinction is crucial: compensatory interest protects the State's revenue collection; indemnity interest protects taxpayers from wrongful tax collection.