CAAD Case 72/2018-T: IABA Alcohol Tax Double Taxation in Fiscal Warehouse Dispute

Arbitral Decision

I – REPORT

A... SA, taxpayer no. ..., with registered office at Rua ..., no. ..., ...–..., Porto, hereinafter designated as "Claimant", filed a request for constitution of an Arbitral Tribunal, pursuant to Article 2, no. 1, paragraph a) and Article 10 of Decree-Law no. 10/2011, of 20 January (RJAT), to challenge the Decision dismissing the hierarchical appeal filed against the act dismissing the gracious complaint regarding the assessment of tax on alcohol and alcoholic beverages (IABA) no. 2016..., of 23/11/2016, in the total amount of €11,625.22, only in the part relating to the taxation of brandy held by the Claimant outside the fiscal warehouse, in the amount of €6,102.04.

The request for constitution of the Arbitral Tribunal was filed by the Claimant on 26-02-2018, was accepted by the Illustrious President of CAAD and notified to the AT on 27-02-2018, in accordance with the legally provided terms and effects. The Claimant opted not to appoint an arbitrator; therefore, pursuant to paragraph a) of no. 2 of Article 6 and paragraph b) of no. 1 of Article 11 of RJAT, in the wording introduced by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council designated, on 13-04-2018, the undersigned as arbitrator of the arbitral tribunal to be constituted, who communicated her acceptance within the applicable time limit. The singular arbitral tribunal was constituted on 07-05-2018. On the same date an arbitral dispatch was issued to the Tax and Customs Authority (AT) to submit a reply within the legal time limit, in accordance with the terms and effects of nos. 1 and 2 of Article 17 of RJAT. The Respondent submitted her reply and the respective Administrative Process (PA) on 07-06-2018, the contents of which are deemed to be fully reproduced herein.

Given the positions of the parties evidenced in the pleadings, considering the witness evidence indicated by the Claimant, an arbitral dispatch was issued on 31/07/2018, notifying the Claimant to appear and indicate the matters of fact to be examined and fixing 21/09/2018 as the date for the meeting provided for in Article 18 of RJAT, including the examination of the witnesses listed. On 17/09/2018 the Claimant appeared to indicate the matters of fact for examination of the witnesses and further requested the postponement of the hearing to a date after 8-10-2018, arguing the harvest period in the region of ... and the impossibility of the witnesses attending the examination given their functions in the region. On 18/09/2018 an arbitral dispatch was issued granting the request and fixing 18/10/2018 as the date for the hearing.

On 18/10/2018 the meeting provided for in Article 18 took place. At the beginning of the meeting, the Claimant requested the floor to request the setting of a time limit for submission of the expert report requested from IV..., relating to the comparison of the control bulletins attached to the process with the description of the analyzed product. The AT raised no objection to the request, without prejudice to the inspection time limit. The tribunal granted the request, fixed a time limit of fifteen days for submission of the document, plus an additional five days after submission for inspection by the Respondent.

Only witness B..., duly identified in the process, Official Customs Agent, appeared for examination, who answered the questions posed by the parties and the tribunal, as well documented in the minutes of the meeting attached to the process, which is deemed to be fully reproduced herein. The Claimant dispensed with the remaining witnesses.

Following the examination, the tribunal fixed a time limit of ten days, equal and successive, for the parties to submit their written arguments. The time limit for arguments would begin to run after submission of the aforementioned document and after the five-day inspection period granted to the AT. Taking into account the fixed time limits, the fact that judicial vacation had occurred, the time limit for final decision was extended by two months, pursuant to the provisions of Article 21, nos. 1 and 2 of RJAT.

The Claimant submitted a document containing the opinion of IV... on 05-11-2018, after which the aforementioned time limits for inspection and arguments by the parties elapsed. The Claimant submitted her arguments on 22-11-2018 and the Respondent on 7/12/2018. Given the described time limits, the judicial vacation period that had meanwhile elapsed, and the need for deliberation and preparation of the final decision, a dispatch was issued on 10-01-2019 extending the time limit for final decision by a further 30 days.

B) THE CLAIMS FORMULATED AND THE POSITION OF THE CLAIMANT

In summary, the Claimant bases her arbitral request on the allegation that the IABA assessment in question constitutes an illegal double taxation and, consequently, petitions for partial annulment of the assessment, with respect to the taxation levied on the wine brandy existing in the "Cellar" belonging to the Claimant.

C – THE RESPONDENT'S REPLY

In her reply the AT petitions for the legality of the assessment acts, particularly with respect to the taxation of the wine brandy. She reiterates all the arguments contained in the Tax Inspection Report (RIT), which is deemed to be fully reproduced herein. From the AT's perspective, the alleged double taxation does not occur as it considers that the Claimant has not proven that the wine brandy referenced in the discrepancy detected in the count is the same as that found stored in the Cellar. Accordingly, she petitions for the maintenance of the challenged assessment act.

II - PROCEDURAL REQUIREMENTS

The Arbitral Tribunal is duly constituted. The Parties have legal personality and capacity, are legitimate and are legally represented (cf. Articles 4 and 10 no. 2 of RJAT and Article 1 of Ordinance no. 112/2011, of 22 March).

The process is not tainted by defects that would invalidate it.

It remains to decide.

III – DECISION ON MATTERS OF FACT

Proven Facts

1. As material facts relevant to the decision, this Tribunal considers the following facts to be established:

• The Claimant A..., S.A. is a company dedicated to the production and trade of common and fortified wines, in particular Port wine.

• It is an operator in the field of Excise Duties (IEC), with NIEC PT..., holder of the status of authorized depositary, which, pursuant to the Excise Duties Code, permits it, among other operations, to produce products in suspension of excise duty (IEC), in this case subject to Tax on Alcohol and Alcoholic Beverages (IABA).

• The Claimant holds Fiscal Warehouse no. PT..., located in ..., in the demarcated region of ..., within the jurisdiction of the Customs Delegation of ... .

• The Claimant also holds a "Cellar" where it proceeded to process products held in the Warehouse, located at ..., no...., ...-..., approximately 6 kilometers from the authorized Fiscal Warehouse.

• In mid-2016, the fiscal warehouse in question (Warehouse) was subject to customs inspection procedure no. OI2016..., covering the period from 12.02.2013 to 14.07.2016.

• Controls were carried out both on physical inventory and on the accounting of the warehouse, with these realities being compared against customs documents and administrative records.

• The results of the count of Warehouse inventory were as follows:

• From what appears on pages 5 to 15 of the Inspection Report attached to the PA, in addition to the count, the various current accounts for products held by the Claimant in the inspected Warehouse were also reconstructed, through comparison of their balance with the count results, revealing a difference, less than, between inventory recorded in the accounts and that verified in the physical count, of 527.654 liters of wine brandy and 424.250 liters of fortified wine.

• According to statements of the legal representative of the claimant, appearing in the RIT, the "Cellar" for processing was always considered by the Claimant as an extension of the Fiscal Warehouse, therefore it always recorded in the accounts of the warehouse the products existing there.

• Considering the discrepancies found during the count and inspection, the AT proceeded to assess alcohol tax (IABA) on the aforementioned products and quantities detected.

• The Claimant requested the inspection team to visit the said Cellar, where 595 liters of wine brandy were found, reflected in the accounts of the Warehouse.

• The brandy held by the Claimant in the Cellar was reflected in the accounts of the warehouse and corresponds only to that appearing in Invoice no. 5137, issued by supplier C..., Lda, attached to the file as document no. 5, in an annex to the PA.

• Documents nos. 7 and 8, attached to the file by the Claimant, show some divergent characteristics resulting from laboratory analysis carried out on the wine brandy found in the "Cellar" and the description contained in the Quality Control Certificate relating to the (single) batch of wine brandy purchased by the Claimant.

• At the request of the Claimant, for clarification of these differences, the laboratory service of the Institute of Wines of ... and ... (IV...), issued an opinion of 02-11-2018 stating "that the product designated as Brandy for amelioration and blending, acquired by the entity A... – Wines SA corresponds to the Quality Control Certificate no. 2015..., and analyzed in the laboratory of IV..., may be considered identical at the physical-chemical and isotopic level with the sample of brandy, sent by the same entity and also analyzed in the laboratory of IV..., IP and relating to the Quality Control Certificate no. 2017... ." (Document attached to file on 05-11-2018).

• Taking into account the discrepancies found, the AT effected the assessment now in dispute, in the total amount of € 11,625.22, which breaks down into two components:

• One relating to the discrepancy between inventory recorded in the accounts of the Warehouse and that verified in the physical count, of 527.654 liters of wine brandy and 424.250 liters of fortified wine: € 5,521.38 (of which € 5,404.44 relates to brandy and € 116.94 relates to fortified wine) – pursuant to no. 1 of Article 8 and paragraph a) of no. 1 of Article 9, both of the Excise Duties Code;

• Another relating to 592.918 liters of wine brandy that were in the Cellar, in the amount of € 6,102.04 – pursuant to paragraph e) of no. 2 of Article 4, no. 1 of Article 8, and paragraph b) of no. 1 of Article 9 of the Excise Duties Code.

• The Claimant was notified of the draft report to comment and exercise her right to be heard.

• As no new evidence capable of altering the conclusions of the report was presented, the Claimant was notified of its final content, in accordance with dispatch no. ... of 23.11.2016 (at pp. 105 et seq. of the PA).

• Within the framework of the coercive collection process no. .../2016 the total amount of tax on Alcohol and Alcoholic Beverages of 11,625.22 euros was assessed, as per assessment record no. ..., of 23.11.2016, at pp. 114 et seq. of the PA.

• Notified, in accordance with law, by dispatch no. ..., of 23.11.2016 (at p. 116 of the PA), to pay, the taxpayer made the voluntary payment (p. 121 of the PA) and filed a Gracious Complaint on 10.04.2017 (from pp. 128 to 132 of the PA).

• By dispatch (no. ...), of 13.06.2017, from the Customs House of ... (cf. pp. 139 and 140 of the PA), the claimant was notified of the draft dismissal of the Gracious Complaint for purposes of prior hearing in accordance with paragraph b) of no. 1 of Article 60 of the LGT, not having exercised such right (at pp. 139 et seq. of the PA).

• By dispatch issued on 12.07.2017 by the Director of the Customs House of Braga, recorded in the Service Information no. .../..., (at pp. 141 et seq. of the PA), the Claimant was notified of the dismissal of the Gracious Complaint, in accordance with and based on the grounds contained in that information.

• On 13.07.2017, the Claimant and her legal representative were notified, by dispatch nos. ... and ..., of the dismissal decision.

• On 11.08.2017 the Claimant filed a Hierarchical Appeal of the act dismissing the Gracious Complaint, which was analyzed by the Directorate of Services for Excise Duties and Vehicle Tax (DSIECIV), having been notified of the draft dismissal of the hierarchical appeal, for purposes of prior hearing, in compliance with Article 60 of the LGT, in accordance with dispatch no. ..., of 19.10.2017.

• By dispatch of the Deputy Director-General of the customs management area - IEC, of 28.11.2017, the Hierarchical Appeal was dismissed, recorded in the service information no. DIABA/.../..., of 24.11.2017, of the DSIECIV, in accordance with and based on the grounds contained in Information no. DIABA/.../..., of 12.10.2017, of the DSIECIV (see pp. 177 to 179 et seq. of the PA).

• The dismissal decision of the Hierarchical Appeal was notified to the Claimant by dispatch no. ..., of 28.11.2017, of the DSIECIV, which was received on 04.12.2017.

• Notified in the aforementioned manner, the Claimant proceeded to file the present arbitral request on 26-02-2018, petitioning the partial annulment of the IABA assessment, in the part corresponding to the taxation of brandy held outside the fiscal warehouse, in the amount of €6,102.04.

Unproven Facts

1. There are no other facts relevant to the decision that should be considered as unproven.

Justification for the Proven Facts

1. The Tribunal need not rule on all details of the matters of fact alleged by the parties; it is its duty to select the facts relevant to the decision and to distinguish the matters it considers proven and to declare those it considers unproven (cf. Article 123, no. 2, of CPPT and Article 607, no. 3 of CPC, applicable pursuant to Article 29, no. 1, paragraphs a) and e), of RJAT). In this manner, the facts pertinent to the judgment of the case are selected and shaped according to their legal relevance, which is established in light of the various solutions for the object of the dispute in applicable law (Article 596, no. 1 of CPC, applicable pursuant to Article 29, no. 1, paragraph e), of RJAT).

Taking into account the positions assumed by the parties, in light of Article 110, no. 7 of CPPT, the documentary evidence submitted to the file by the Claimant and that contained in the Administrative Process itself, as well as the witness evidence produced, the facts listed above were considered proven, being relevant to the decision. With respect to witness B..., an official customs agent established in ... since 1994, the Tribunal considers his detailed knowledge of the sector and the activity developed by the Claimant to be particularly relevant.

IV – DECISION ON MATTERS OF LAW

The present request for arbitral pronouncement has as its object only the assessment relating to 592.918 liters of wine brandy that were in the Cellar, in the amount of €6,102.04, pursuant to paragraph e) of no. 2 of Article 4, no. 1 of Article 8, and paragraph b) of no. 1 of Article 9 of the Excise Duties Code. It follows from the arbitral request and the content of the gracious complaint and hierarchical appeal filed that the Claimant accepted responsibility for the irregularities detected and accepted the tax assessment in the part relating to discrepancies detected by the count. This fact is particularly relevant for the delimitation of the object under discussion in the present proceedings.

Accordingly, the only question truly to be decided is whether, with respect to the brandy found in the "Cellar", there is or is not double taxation, since, according to the Claimant, this is the same brandy detected in the count and which gives rise to the accounting discrepancy that resulted in the assessment. Thus, it is evident that there is no disagreement between the parties on any other fact, nor even on the legal regime applicable to the case. The disagreement consists only in knowing whether the brandy existing in the "Cellar" is or is not the same as the one the operator removed from the fiscal warehouse and which appears in the discrepancy detected, because, if so, we are dealing with illegal double taxation.

Let us therefore see if the Claimant's position is justified.

From the proven facts it follows that, following the inspection carried out, considering the discrepancies found in the count, the AT proceeded to assess IABA in the total amount of € 11,625.22, which breaks down into two components:

a. one relating to the discrepancy between inventory recorded in the accounts of the Warehouse and that verified in the physical count, of 527.654 liters of wine brandy and 424.250 liters of fortified wine, in the amount of €5,521.38 (of which €5,404.44 relates to brandy and €116.94 relates to fortified wine), pursuant to no. 1 of Article 8 and paragraph a) of no. 1 of Article 9, both of the Excise Duties Code;

b. another relating to 592.918 liters of wine brandy that were in the Cellar, in the amount of € 6,102.04 – pursuant to paragraph e) of no. 2 of Article 4, no. 1 of Article 8, and paragraph b) of no. 1 of Article 9 of the Excise Duties Code.

The Claimant accepts the first part of the assessment, but not the second, on the grounds that this is the same brandy verified in the physical count and already taxed in the first part, that is, by the imposition on the values of the discrepancies detected in the Fiscal Warehouse.

This assessment was based on the provisions of Article 8 and paragraph a) of no. 1 of Article 9, both of the Excise Duties Code, insofar as the product in question would allegedly have left, irregularly, the tax suspension regime, for introduction into consumption.

The essential justification for the assessment in dispute stems from the Tax Inspection Report (RIT), which at pp. 79 to 88 of the PA contains the following conclusions: "(…) The inventory accounts of the fiscal warehouse must be organized in a permanent inventory system, so as to match, at any time, its balance with the situation of goods/products existing in the warehouse for all categories/subcategories authorized in the EFP; The DA presented the inventory accounts of the EFP no. ..., after notification, but it contained errors and omissions, contrary to the provisions of paragraph b) of no. 3 of Article 22 of CIEC (…) A.2 It was noted that some of the reservoirs existing in the EFP no. P... were not properly calibrated and equipped with their respective graduated scales or other similar equipment, as shown in table no. 2. This fact contradicts the provisions of paragraph b) of no. 2 of Article 83 of CIEC (…) The DA added some containers to the EFP, as shown in table no. 3, increasing its storage capacity, without making the communication referred to in the last part of paragraph e) of no. 3 of Article 22 of CIEC, and without such fact receiving the necessary authorization from the Illustrious Director of the Customs House of ... . (…) It was found that the DA removed from the EFP 527.654 liters of wine brandy, 160.500 liters of fortified wine, 51,703.51 liters of red table wine and 6,077.739 liters of white table wine, without compliance with the legally required formalities, becoming, subject to tax on alcohol and alcoholic beverages (IABA), by force of the provisions of no. 1 of Article 4 of CIEC. Acting in the manner described, it violated what is defined in Article 8, paragraph a) of no. 1 of Article 9, no. 3 of Article 10 and no. 3 of Article 11, all of CIEC. (…) The DA did not comply with the time limit of 5 (five) business days for sending, by electronic data transmission, the reception report of the products listed in table 11 - Chapter IV, after its receipt, violating what is defined in no. 1 of Article 43 of CIEC. (…) The production, transformation and storage of products subject to excise duties, in tax suspension regime, can only be carried out in a fiscal warehouse with authorization and under the control of the competent customs authority, as defined in no. 1 of Article 21 of CIEC. The holding outside the tax suspension regime of IABA, of 34,150,000 liters of red table wine and 595,000 liters of wine brandy, without the due tax having been assessed, is characterized as irregular introduction into consumption, pursuant to paragraphs b) and c) of no. 1 of Article 9 of CIEC.(…)"

Thus, there is no doubt that part of the assessment is based on the discrepancy found between the inventory recorded in the accounts of the Warehouse and the physical count thereof, and, simultaneously, on the brandy deposited in the Cellar.

It remains to be determined whether the wine brandy missing from the fiscal warehouse is or is not the same as that found in the Cellar by the inspection. The AT issued the challenged assessment based on the assumption that the wine brandy and fortified wine detected as missing in the FW would have been introduced into consumption. As for the wine brandy detected in the Cellar, it proceeded from the assumption that this was another brandy and not the same that, according to the Claimant, would have been withdrawn from the FW and stored in the Cellar for processing and production.

Now, Article 7, no. 1 of CIEC provides that alcohol and alcoholic beverages are subject to tax from their production, with the tax becoming due at the moment of introduction into consumption or verification of losses that must be taxed in accordance with the Code, pursuant to the provisions of no. 1 of Article 8.

In light of the provisions of Article 9 of CIEC, introduction into consumption is deemed to occur, among other situations, when:

"a) The removal, even irregular, of these products from the tax suspension regime;

b) The holding outside the tax suspension regime of these products without the due tax having been assessed;

c) The production of these products outside the tax suspension regime without the due tax having been assessed;"

(…)

Once the taxable event is verified (introduction into consumption), the assessment of the due tax must be made, as clearly follows from Articles 11 and 12 of CIEC.

In the case at hand, the question to be decided is reduced to whether the Claimant can be subject to double taxation for the brandy missing from the warehouse and that held outside it, which hinges on the identity of the product. In effect, if it is the same product, it can only be introduced into consumption once; therefore, it could only be taxed once and not twice. This is equivalent to saying that it can only be taxed upon verification of the discrepancy between the physical stock of wine brandy of the Claimant and that recorded in its accounts.

For the Respondent AT, this is not the same product, as it argues that from the content of the descriptive bulletins of the characteristics of the product upon entry to the FW and what was detected in the Cellar, it is concluded that the values indicated are different, therefore the Claimant has not proven that the product is the same.

Now, from the audit conducted, the inspectors concluded that there was a discrepancy between the quantities of product acquired and recorded in the accounts of the Claimant and the quantities found in the FW, considering all movements evidenced by the accounts. Thus, there is no doubt that the inspection itself considered the accounts of the Claimant to be reliable, for if this were not the case, it would not have reached the determination of discrepancies it did.

Having arrived here, it is concluded that the accounts of the Claimant were the starting point for the determination of the taxable base that led to the assessment of the missing products. Accordingly, it must be considered, in the same manner, as the reliable starting point for the analysis of all remaining matter relevant to the decision of the case. Thus, it follows from the analysis of the RIT itself that no doubt was cast on the acquisitions nor the sales made by the Claimant. Therefore, if in the accounts of the Claimant there is only a record of acquisition of that batch of brandy (see Invoice no. 5 attached to the file in annex to the PA), everything suggests that the brandy missing from the FW is, precisely, the same as was found stored in the said "Cellar". It could not be otherwise, since in the accounts of the Claimant no other purchase of brandy was detected beyond that documented in the Invoice attached to the file.

Furthermore, the characteristics (quality and quantity) of the product acquired and detected as missing in the FW are, in fact, very similar to the characteristics of what was found in the Cellar. One must not forget that the transfer of the product, its transport or change of storage location, entails the loss of certain qualities, as well as the passage of time and the type of container for storing the product. Therefore, faced with some discrepancies in values resulting from the respective bulletins, the Claimant requested from IV... an additional clarification, which gave rise to the document attached to the file on 05/11/2018. In the said document IV... came to attest that: "attest that the product designated as Brandy for amelioration and blending, acquired by the entity B... SA corresponds to the Quality Control Certificate no. 2015/..., and analyzed in the laboratory of IV..., may be considered identical at the physical-chemical and isotopic level with the sample of brandy, sent by the same entity and also analyzed in the laboratory of IV..., IP and relating to the Quality Control Certificate no. 2017...." (See Document attached to file on 05-11-2018).

Also, document no. 7 attached in annex to the PA, allows one to infer that the Claimant demonstrated complete good faith throughout the proceedings and did everything to clarify the said discrepancies in values referenced in the respective bulletins. In fact, as the supplier well explains, the movement of the product, the container, humidity conditions and others can interfere with and alter some of the indices, both of quality and quantity, that characterize the product.

To this exposition is added the credible testimony of witness B..., examined at the meeting of 18-10-2018. His deposition demonstrated a degree of knowledge about the process, from a technical and legal point of view, as well as of the activity developed by the Claimant, the A... installations and the vicissitudes of the process, having attested that the brandy could only be the same, having added that the fact that it is the same wine brandy is provable, in that the Claimant, in the period in question, only acquired the batch of brandy recorded in the accounts.

Furthermore, it should be noted that, as the accounts of the Claimant have not been discredited, having indeed served as the basis for the determination of the product discrepancies and respective tax assessment, they benefit from the presumption of truthfulness conferred on them by no. 1 of Article 75 of the LGT. Therefore, given what has been expounded, this tribunal concludes that the wine brandy missing from the FW is the same as was found in the Cellar, on pain of there being no correspondence between the accounts of the Claimant and the results of the inspection. Now the tribunal can only decide based on the factual elements brought into the file, and, as has been said, these clearly indicate that the product is the same.

Having arrived here, it must be considered that the Claimant is correct when she alleges that only the discrepancy, less than, between the accounting and physical inventory of the Warehouse should be taxed, insofar as the accounts should reflect the removal from the Warehouse of the brandy in question (whereas what happened was that it left without compliance with the applicable formalities), thus correcting the account for brandy of the Warehouse, and, furthermore, the introduction into consumption – the taxable event – of the product in question occurs, precisely, with its removal from the warehouse. It is thus determined that the brandy held in the Cellar should not be taxed, inasmuch as the discrepancy, less than, between the accounting and physical inventory in the warehouse has already been taxed and this is, precisely, the same product. It is so because, in our view, what conforms to the reality of the facts is not to tax the brandy for the fact of being held in the cellar, but rather for having left the warehouse, thus taxing the discrepancy, less than, between the physical and accounting stocks, adjusting the balance of the current account for wine brandy of the Warehouse, subjecting to tax only the quantity of brandy held in the Cellar, for having left the tax suspension regime without compliance with the respective formalities and without having also paid the respective IEC. In effect, insofar as this is the SAME PRODUCT, it is inconceivable that the Claimant can be subject to double taxation for the same. And let it not be said, finally, that it should not be thus, because the volume of brandy that was in the Cellar is greater than the discrepancies found between the accounts of the Warehouse and the respective physical inventory. In effect, the discrepancy found, in the amount of 527.654 liters of wine brandy, only has that value due to the application of the tolerance provided for in Article 48, no. 1, paragraph a), of the Excise Duties Code, in the total amount of 122.346 liters. Therefore, the total discrepancy between the product recorded in the accounts and the stocks of the Claimant was 650 liters: a quantity exceeding the 592.918 liters of wine brandy held by it in the Cellar.

Finally, note Article 100, no. 1 of CPPT which provides: "Whenever proof produced results in grounded doubt regarding the existence and quantification of the taxable fact, the challenged act should be annulled."

Now, in the case at hand, the circumstances demonstrated are, as has been seen, apt to allow conclusion that the brandy existing in the Cellar is, precisely, the one that was missing from the FW; but, even if this were not so, in the event of grounded doubt that the same product would be subject to double taxation, this would require, without further ado, the annulment of the respective tax act.

Thus, without need for further development, it is concluded that in also taxing the wine brandy found in the Cellar, the AT proceeded from an incorrect factual premise which resulted in illegal double taxation, and as such, is subject to annulment.

In this manner and for the grounds exposed, the arbitral request formulated in this part should be granted, annulling the tax acts dismissing the hierarchical appeal and gracious complaint challenged, which are the object of the present arbitral request, as well as the assessment of IABA in the part relating to the taxation of the wine brandy held by the Claimant outside the fiscal warehouse, in the amount of €6,102.04.

Regarding the request for indemnity interest:

The Claimants paid the entire amount of the assessment issued which is now partially annulled. Thus, they have the right to be reimbursed the amount paid.

The Claimant further petitions for indemnity interest. Now, in accordance with the provisions of paragraph b) of Article 24 of RJAT, the arbitral decision on the merits of the claim, from which no remedy lies, binds the Tax Administration from the end of the time limit provided for remedy, and the latter must, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the time limit provided for the spontaneous execution of decisions of tax court judgments, restore the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for such purpose", which is in accordance with the provisions of Article 100 of the LGT [applicable by force of the provisions of paragraph a) of no. 1 of Article 29 of RJAT] which provides that "the tax administration is obliged, in case of total or partial success of a complaint, judicial challenge or remedy in favor of the taxpayer, to immediately and fully restore the legality of the act or situation subject to dispute, including the payment of indemnity interest, if applicable, from the end of the time limit for execution of the decision. Although Article 2, no. 1, paragraphs a) and b), of RJAT uses the expression "declaration of illegality" to define the competence of arbitral tribunals operating in CAAD, making no reference to condemning decisions, it should be understood that the competencies of those tribunals include the powers which, in judicial challenge proceedings, are attributed to tax courts, this being the interpretation that is in line with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which is proclaimed, as the first directive, that "the tax arbitral process should constitute an alternative procedural means to judicial challenge proceedings and the action for recognition of a right or legitimate interest in tax matters."

The judicial challenge process, despite being essentially a process of annulment of tax acts, admits condemnation of the Tax Administration for the payment of indemnity interest, as can be inferred from Article 43, no. 1, of the LGT, which provides that "indemnity interest is due when it is determined, in a gracious complaint or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding that legally due" and from Article 61, no. 4, of CPPT (as amended by Law no. 55-A/2010, of 31 December, corresponding to no. 2 in its original wording), which provides that "if the decision recognizing the right to indemnity interest is judicial, the time limit for payment is counted from the beginning of the time limit for its spontaneous execution."

Thus, no. 5 of Article 24 of RJAT, in stating that payment of interest is due, regardless of its nature, in accordance with the terms provided in the general tax law and in the Tax Procedure and Process Code, should be understood as allowing recognition of the right to indemnity interest in the arbitral process.

On the other hand, since the right to indemnity interest depends on the existence of the right to claim reimbursement, from this competence to decide on the right to indemnity interest, it can be inferred that it extends to the assessment of the right to reimbursement. In the case at hand, the acts challenged and now annulled, in the part relating to the taxation of the brandy held outside the FW and stored in the Cellar, are tainted with the defect of violation of law, due to error attributable to the AT which performed the acts now annulled.

Thus, the Claimant has the right to indemnity interest, pursuant to no. 1 of Article 43 of the LGT and Article 61 of CPPT. Indemnity interest is due at the legal supplementary rate, pursuant to Articles 43, no. 4, and 35, no. 10, of the LGT, Article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April, from 28-02-2018 until reimbursement of the amounts paid.

V. Decision

In conformity with the foregoing, this Arbitral Tribunal decides:

1. To adjudge all requests formulated in the request for arbitral pronouncement as having merit;

2. To condemn the Respondent to reimburse the Claimant in the amount of €6,102.04 unduly paid, plus accrued interest from the date of payment until the date of complete reimbursement of the amount owed.

3. To condemn the Respondent for payment of the arbitral costs incurred.

VI. VALUE OF THE PROCEEDINGS

The value of the proceedings is fixed at € 6,102.04 pursuant to Article 97-A, no. 1, a), of CPPT, applicable by force of paragraphs a) and b) of no. 1 of Article 29 of RJAT and no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VII. COSTS

The amount of the arbitration fee is fixed at €612.00, pursuant to Table II of the Regulation of Costs in Tax Arbitration Proceedings, in accordance with Articles 12, no. 2, and 22, no. 4, both of RJAT, and Article 5 of the said Regulation, to be paid by the unsuccessful party.

Let notification be made.

Lisbon, 11-02-2019

The Singular Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] On this matter, see SÉRGIO VASQUES and TÂNIA CARVALHAIS PEREIRA, "The Excise Duties", 2016, Almedina, Coimbra, p. 285).