ISP Official Tax Assessment Challenged at CAAD: Petroleum Products Tax Arbitration Decision 752/2016-T

ARBITRAL DECISION

The arbitrators Dr. José Pedro Carvalho (presiding arbitrator), Professor Doctor Glória Teixeira and Dr. Álvaro Caneira, appointed by the Deontological Council of Administrative Arbitration to form the Arbitral Tribunal, constituted on 27-02-2017, agree as follows:

I. REPORT

1. On 22-12-2016, "A…, S. A.", legal entity no. …, with registered office at …, …-… …, filed, pursuant to the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, paragraph a), of Decree-Law no. 10/2011, of 20/01, which approved the Legal Framework for Tax Arbitration (RJAT), and articles 1 and 2 of Administrative Order no. 112-A/2011, of 22/03, a request for constitution of an Arbitral Tribunal, in which the TAX AND CUSTOMS AUTHORITY (AT) appears as the Respondent.

2. The Claimant challenges the ex officio assessment of Tax on Petroleum and Energy Products (ISP), Road Service Contribution (CSR) and Compensatory Interest, in the total amount of €72,853.93, requesting that the Tribunal declare the illegality of the said assessment with all legal effects, in particular condemning the AT to reimburse the unduly collected amounts, plus the corresponding indemnificatory interest.

3. The Claimant opted for non-appointment of an arbitrator.

4. The request for constitution of the arbitral tribunal was accepted by the President of the CAAD on 23-12-2016 and automatically notified to the Tax and Customs Authority (AT) on 29-12-2016.

5. Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council appointed as arbitrators of the collective arbitral tribunal Dr. José Pedro Carvalho, Professor Doctor Glória Teixeira and Dr. Álvaro Caneira, who communicated acceptance of the appointment within the applicable period.

6. On 10-02-2017, the Parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrators, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.

7. Therefore, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the collective arbitral tribunal was constituted on 27-02-2017.

8. The Respondent (AT) replied raising the exception of expiry of the right of action and, on the merits, expressed itself in the sense of the lack of merit of the present request for arbitral pronouncement, expressing the view that the impugned tax act should remain in the legal order and, accordingly, that the tribunal should rule for the dismissal of the respondent entity.

9. The Claimant replied in writing to the exception invoked by the Respondent.

10. Notwithstanding not agreeing with the assessment against which it was targeted and having opted to proceed with timely payment thereof, the Claimant understands that "(…) contrary to what the AT alleged in the inspection report, there was not, at the time, any discrepancy between the Claimant's physical inventory and that recorded in its accounting, not covered by the tolerance, that would justify any assessment".

11. The Claimant supports this understanding on two grounds, which it lists in the following terms:

12. On one hand, because for the performance of the calculations in question, the AT took into consideration values that do not correspond to the real ones, both with regard to the production of biodiesel by the Claimant during the period of 2016 (the value referred to in the report is 3,375.09 m³), and as regards the physical count of inventory in the warehouse (the report contains the value of 1,797.97 m³);

13. And, on the other hand, and as a merely subsidiary argument, because the AT did not correctly calculate the tolerance provided for in paragraph b), of no. 1, of article 48 of the Code of Special Excise Duties, having performed the calculation thereof on an annual basis and not, as should have been done, on a global basis for the entire inspected period."

14. Therefore, in the Claimant's view, the assessment of ISP and CSR whose evaluation is requested herein is manifestly illegal.

15. Regarding the first ground, the Claimant sustains that, as emerges from the inspection report that supports the impugned assessment, the calculations performed by the AT, from which resulted the mentioned difference, take as their basis values that do not correspond to the real ones.

16. This, because, in its view, "49. (…) regarding PRODUCTION OF BIODIESEL by the Claimant for the period of 2016 (until the date and time of the stock-taking), the real value thereof, provided by it to the inspection team, was 3,289.13 m³, that is, 85.96 m³ less biodiesel than that considered by the AT in the report (3,375.09 m³).

17. This difference in values stems from the fact that the inspection services counted not only the production relating to the period from 08:00 to 11:00 (37.7 tonnes, corresponding to 42.73 m³) of 13.01.2016 – but also, incorrectly, the production of the whole of that same day, from 08:00 to 14:00 (75.5 tonnes, corresponding to 85.96 m³), thus existing an erroneous accounting of production on that day, in the precise amount of 85.96 m³).

18. In fact, the AT, instead of simply counting the production of the period from 08:00 to 11:00 (since stock-taking began at 11:00), counted, in addition to this, the total production of that same day, thus unduly duplicating the production from 08:00 to 11:00 and also incorrectly adding the rest of the production of that day, that is, from 11:00 to 14:00 hours.

19. As for this divergence – embodied in the erroneous accounting of the entire production of the stock-taking day beyond that existing until the respective hour – it is also important to note that the same could only have resulted from an error on the part of the AT in interpreting the information provided to it by the Claimant in an email, of 14.06.2016 (page 72 of Volume I of the inspection proceedings), an email that is expressly referred to in the final inspection report (see page 14 of the report already attached as Document no. 3 as well as the respective email, already attached as Document no. 10)."

20. As to the volume of biodiesel considered in the physical count, the Claimant considers that the report contains a value lower than that which it effectively held in its facilities at the time of the stock-taking performed, with such difference being related to the fact that the AT failed to take into account:

a) the quantity of product contained in tanks B01, B02 and C04 of the warehouse;

b) the volume of biodiesel existing in the pipelines running from the factory to the loading points, as well as in the pipelines connecting tanks B01 and B02 to the expedition tanks (C01, C02, C03 and C04); and

c) the quantity of biodiesel already existing in a truck destined for a customer, corresponding to the shipment covered by the delivery note GRC-…/….

1. With regard to the quantities of product in tanks B01, B02 and C04, the AT, in measuring the physical inventory present in the warehouse, did not consider the quantities of 22.599 m³, 30.029 m³, and 43.518 m³, respectively, in a total of 96.146 m³. Such discrepancies stem essentially from the fact that the tanks presented a gauge reading of "zero" even though they "always contain product at the bottom thereof, at a height that is not measurable, because they have a baffle plate (sounding plate) that prevents the gauge from reaching its bottom, with such plate being fixed to the first ring (first of the cylindrical plates that compose it)."

2. As regards the volume of biodiesel existing in the pipelines, the Claimant alleges, in summary, that "As to this, the AT never considered it for the preparation of the calculations that presided over the determination of the difference between the physical count of inventory and the respective accounting balance and which resulted in the assessment here under examination, having summarily ignored the fact that the product produced by the Claimant would never be found only in the respective tanks, but also in the various pipelines that connect them, as well as between these and the loading points."

3. Similarly, according to the Claimant, the AT also did not consider the product existing in the pipelines connecting the factory to the loading points (both road and rail), due to ongoing loadings.

4. Therefore, concludes the Claimant, "… with regard to the product existing in the pipelines, the AT did not take into consideration, for its calculations, the total of 7.795 m³ (2.309 m³ + 5.486 m³) of biodiesel that were in the Claimant's facilities."

5. Referring further to omissions in the measurement of the product, the Claimant alleges that "… the AT also did not consider the volume of biodiesel already deposited in a truck destined for a customer whose filling began immediately before the beginning of stock-taking, corresponding to shipment GRC-…/…, in the amount of 4.3 m³."

6. From the aforementioned elements the Claimant extracts, as conclusion, that "there is no amount of ISPPE to assess, as no shortfall exists (not covered by the tolerance) between the stocks recorded in the Claimant's accounting and the respective physical inventory." Therefore it is "manifestly illegal, due to error as to the factual premises, the assessment of ISPPE and CSR now under examination."

7. In addition to the alleged error in the measurement of physical inventory, the Claimant considers that the AT also erred with regard to the calculation of the tolerance for losses provided for in paragraph b), of no. 1, of article 48 of the Code of Special Excise Duties.

8. According to the Claimant's understanding, "from the literal tenor of the aforementioned norm it results that the reference value on which the "rate" of 0.4% should be applied for the calculation of the tolerance is that resulting from the sum of the quantities of product existing in the warehouse (on the date of the last stock-taking) with the quantities entered therein (after the date of the last stock-taking)." That is, "… it results from the cited norm that the value of the tolerance in question should be determined globally, for the entire period from the date of a given physical count of inventory, until that of the subsequent physical count, with specific years that elapsed from one count to the other being irrelevant for these purposes."

9. Continuing, the Claimant states that "However, in the inspection report communicated to the Claimant, the AT did not proceed to determine a global tolerance for the period under analysis (2013 to 2016), having instead performed the calculation thereof by reference to the various years comprising the same, separately."… As can be seen, in the report of the inspection action performed, the tolerance was not calculated in accordance with the legal norm under analysis (that is, globally for the entire period in question), but rather separately for each of the years comprised in the period in question, with losses also being calculated separately for each of the years under analysis."

10. After detailed analysis of the legal norm in question, the Claimant concludes that, from the method used by the AT to determine the tolerance for the period of 2013 to 2016, it results that being this calculated year by year, the losses determined in the prior year were not deducted from the opening inventory of the following year. Therefore "had the tolerance been determined globally for all the periods in question, its value would be 829 m³ of biodiesel, with the entirety of the differences verified in all periods (312.44 m³ of biodiesel) being absorbed by it."

11. Notified of the present request for arbitral pronouncement, the Respondent replied by exception, defending its lack of timeliness and, by impugnation, alleging the lack of merit of the request for arbitral pronouncement.

II. DETERMINATION OF ADMISSIBILITY

1. The Arbitral Tribunal is properly constituted and is materially competent, pursuant to paragraph a) of no. 1 of article 2 of Decree-Law no. 10/2011, of 20/01.

2. The Parties enjoy legal personality and capacity, are legitimate and are legally represented (cf. article 4 and no. 2 of article 10 of Decree-Law no. 10/2011 and article 1 of Administrative Order no. 112/2011, of 22/03).

3. The proceedings do not suffer from defects that would render it invalid.

III. FACTUAL MATTER

1. Based on the documentary elements comprising the present proceedings, in particular the administrative proceedings, and the testimony of the witnesses summoned by the Claimant – B… and C… – and by the Respondent – D…, E… and F… -, this Tribunal formed conviction regarding the following factual elements which, not being contested by the Parties, are considered fully proven:

31.1. The Claimant, with registered office at …, …-… …, is a company whose activity comprises the production and marketing of biofuels, as well as the respective industrial by-products and also the industrial utilization and trade of oilseeds, their derivatives and by-products.

31.2. Taking into account the activity it performs, the Claimant holds the status of authorized depositary, granted under the Code of Special Excise Duties, being holder of both a Type A customs warehouse for storage of raw materials (soya and rapeseed), and the production tax warehouse no. EF PT…, located in the "jurisdiction" of …, and the storage tax warehouse no. EF PT…, located in …, located in the "jurisdiction" area of the Customs of ….

31.3. In the course of 2016, the Tax and Customs Authority (AT) developed an inspection action against the Claimant, initiated on 13-01-2016 and concluded on 23-06-2016, which had as its scope the control of the tax warehouse for production, transformation and storage of biofuels no. EF PT…, held by the Claimant, for the period of 01-01-2013 to 13-01-2016.

31.4. The said inspection action began with a physical inventory of the holdings of the mentioned tax warehouse, with the objective of confirming the raw materials and biodiesel existing in the deposits thereof.

31.5. According to the inspection report, from the reconstitution of inventory from 01-01-2013 to 13-01-2016 it resulted that, for the period between the aforementioned dates, there is a shortfall of 182.76 m³ of biodiesel between the physical count performed and the accounting inventory, after applying the tolerance of 14.33 m², pursuant to paragraph b) of no. 1, of article 48 of the Code of Special Excise Duties (CESD) (cf. Doc. 3 attached with the petition).

31.6. In the said inspection report, it is concluded that "From the controls performed and the elements analyzed within the scope of this procedure, the following irregular situations were detected:

• From the analysis of accounting records it was verified that Shipping Guides for Customers (GRC) were issued that are mentioned in the e-DAs and that are not of biodiesel, but of cereals. It was also verified that other Shipping Guides relating to biodiesel were incorrectly indicated in the e-DAs.

The situations described translate to 29 situations of errors committed in declarations, constituting a Customs Misdemeanor prosecuted under article 111-A of the General Tax Offenses Regime (RGIT) approved by Law no. 15/2001, of 5 June.

• Through analysis of accounting and production records, a reconstitution of inventory from 01/01/2013 to 13/01/2016 was performed. From this analysis it resulted that for the period between 01/01/2016 and 13/01/2016 there is a shortfall of 197.09 m³.

The tolerance having been calculated, pursuant to paragraph b) of no. 1 of article 48 of the CESD, in the amount of 14.33 m³, there is verified the existence of a difference of 182.76 m³, not covered by the same, translating warehouse withdrawals that are not documented.

For that quantity, a debt is constituted under ISP, in the total amount of €71,169.26, corresponding to €50,882.71 to ISP and €20,286.56 to CSR, pursuant to the combined provisions of nos. 1 and 2 of article 8, 1-a) of article 9 and 1-a) and c) of article 88 of the CESD…"

31.7. Based on the elements determined, the competent assessment of ISP and CSR was made, and the Claimant was then notified, by official letter no. …, of the Customs of …, of 31-08-2016, of the assessment of ISPPE, CSR and respective compensatory interest, from which is extracted "in accordance with the grounds contained in the Final Report of the action mentioned above, and in the exercise of the powers conferred upon it, by the order of 16 August 2016, from the Head of the Southern Operational Division (DOS), as well as by my order of 31 August 2016, in substitution of the Director of the Customs of …, was ex officio assessed the debt determined in the total amount of 72,855.73 (seventy-two thousand eight hundred and fifty-five euros and seventy-three cents), of which 50,882.71 (fifty thousand eight hundred and eighty-five euros and seventy-one cents) relate to Tax on Petroleum and Energy Products (ISPPE), and 20,286.56 (twenty thousand two hundred and eighty-six euros and fifty-six cents) relating to Road Service Contribution (CSR), 1,684.66 (one thousand six hundred and eighty-four euros and sixty-six cents) relating to compensatory interest and 1.80 (one euro and eighty cents) relating to printed matter.

This official letter serves to notify that, within the period of 15 (fifteen) days, imposed by no. 2 of article 12 of the Code of Special Excise Duties (CESD), approved by Decree-Law no. 73/2010, of 21 June, you must proceed to payment of the amount of €72,855.73, mentioned above.

The compensatory interest was calculated in accordance with the provisions of article 35 of the General Tax Law (LGT), approved by Decree-Law no. 398/98, of 17 December, combined with no. 3 of article 11 of the CESD, counted from the date of verification until the date of remedying the deficiency (no. 4 of article 35 of the LGT). The rate applied is 4%, as per Administrative Order no. 291/2003, of 08/04 (calculation table attached – no. of daysratedebt/365)." (cf. Doc. 3 attached with the petition)

31.8. The said assessment was notified to the Claimant, by mail addressed to its registered office, by registered mail with acknowledgment of receipt "RM … PT", deposited with the postal service on 05-09-2016, with the acknowledgment being returned to the AT duly signed by G…, with identification document no. …, with indication of having been received on 07-09-2016.

31.9. In the Postal Service Record relating to this acknowledgment by which the notification of the assessment here in question was performed (Record RM…PT) the following appears:

Object No. Product Date Time Status

RM…PT Registered National Mail 2016/09/08 08:00 Object delivered

31.10. By email, on 08.09.2016, Engineer B…, employee of the Claimant, sent the notification to the Claimant's representative stating: "we received today by mail the notification for payment of the debt determined following the final inspection report above identified" referring to official letter no. …, dated 31.08.2016, which constitutes the payment notification here in question.

31.11. On 21-09-2016, the Claimant made payment of the assessed tax and interest (cf. Doc. 4 attached with the petition).

31.10. The request for constitution of the Arbitral Tribunal to pronounce on the legality of the assessment acts here in question was filed with the CAAD on 22-12-2016.

IV. LEGAL MATTER

On the exception of expiry of the right of action

1. Having the Respondent invoked the expiry of the right of action, it is necessary, pursuant to article 608, no. 1, of the Code of Civil Procedure, to determine the matter of exception immediately.

2. The Respondent bases the invoked exception of lack of timeliness of the petition on the following grounds:

"5. – The petition for pronouncement was preceded by an external inspection procedure, which, following the identification of irregularities contained in the respective report, gave rise to the assessment act performed by the Customs of …, whose annulment is sought (Vol. II of the Administrative Proceedings)

1. – The assessment in question was notified to the taxpayer, now Claimant, by registered mail, with acknowledgment of receipt, on 07.09.2016 (cf. copy of the acknowledgment of receipt, contained in Vol. II of the Administrative Proceedings)

2. – As provided in no. 3 of article 39 of the Code of Tax Procedure and Process "where there is an acknowledgment of receipt, notification is deemed effected on the date on which it is signed and is considered effected with the person being notified, even when the acknowledgment of receipt has been signed by a third party present at the taxpayer's domicile, there being in this case presumption that the letter was timely delivered to the addressee."

3. – For its part, pursuant to article 10, no. 1, paragraph a) of the Tax Arbitration Regime, in conjunction with no. 2 of article 102 of the Code of Tax Procedure and Process, the period for presentation of the request for constitution of the arbitral tribunal was 90 days counted from the end of the period for payment of the tax obligation.

4. – Given the absence, in the Tax Arbitration Regime, of a provision that determines the rules for counting periods, it will be necessary to resort to subsidiary law, as provided in article 29, no. 1, of the same regime, in particular pursuant to paragraph a) of the same provision, to the provisions of the Code of Tax Procedure and Process applicable to the filing of judicial impugnation, since tax arbitration constitutes a procedural means of an alternative nature in relation to judicial impugnation (see in that sense the preamble of Decree-Law no. 210/2011, which approved the Regime, as well as no. 2 of article 124 of Law no. 3-B/2010, of 28 April, which authorized the Government to institute tax arbitration.

5. – Article 20, no. 1, of the Code of Tax Procedure and Process provides that the provisions of article 279 of the Civil Code apply to the filing of judicial impugnation.

6. – Thus, being the period for filing a request for constitution of the arbitral tribunal a continuous period, which does not suffer any suspension or interruption by virtue of judicial holidays, in the present case, the same ended on 21.12.2016.

7. – Now, the request for constitution of the arbitral tribunal was only submitted by the Claimant, by electronic data transmission, on 22.12.2016, whereby the same is manifestly out of time, the exception of expiry of the right of action thus being verified."

8. Notified of the reply submitted by the Respondent, as well as of an order issued by the Presiding Arbitrator of the Collective Tribunal to the effect that, if it so wished, to pronounce itself, within the period of 10 days, on the matter of the exception contained therein, the Claimant came to sustain that the same lacks manifest lack of foundation and should be rejected.

9. The Claimant's position is based on the following grounds:

"8. – It is an established fact between the parties that the present arbitral petition was indeed filed on 22.12.2016.

1. – What the Claimant does not accept, with due respect, is that the period of 90 days, counted from the end of the period for voluntary payment of the assessed tax (15 days), ended one day before, that is, 21.12.2016.

2. – The Respondent alleges that notification was made on 07.09.2017, attaching for this purpose an acknowledgment of receipt, in which such date appears – it not being known, however, who placed it there or even whether there was not a mistake in its placement –

3. – However, the truth is that, contrary to what the Respondent alleges, the same was not received on 07.09.2016 but rather on 08.09.2016 – a fact that is evidenced by the Postal Service Record relating to this acknowledgment by which the notification of the assessment here in question was performed (Record RM…PT) and which is attached to the proceedings with DOC 1 and which here, so that there remain no doubts, is reproduced:

• Results

Object No. Product Date Time Status

RM…PT Registered National Mail 2016/09/08 08:00 Object delivered

1. – A fact also evidenced by the sending of an email which is here attached and is given as fully reproduced as DOC 1 by which Engineer B… remits, on 08.09.2016, the notification to the Claimant's representative hereby informing that "we received today by mail the notification for payment of the debt determined following the final inspection report above identified" referring to official letter no. …, dated 31.08.2016, which constitutes, precisely, the payment notification here in question.

2. – In such terms the aforementioned date of 07.09.2016 – which, it is repeated, we do not even know if it was placed by whoever signed the acknowledgment or, having been, there was no mistake in its placement – does not correspond to the date on which the Claimant was actually notified.

3. – The date on which the Claimant was notified was 08.09.2016, whereby, the arbitral petition having been filed on 22.09.2016 (that is, within 105 days, corresponding to the 15 of the voluntary payment period and the 90 of the legal period for presentation of the arbitral petition), the invoked lack of timeliness and, consequently, expiry of the right of action, suffers from manifest lack of foundation."

4. Further adds the Claimant the following:

"15. – Even if it were understood that notification had been received on the date contained in the acknowledgment, that is, on such day 07.09.2016 – which, given the above stated is not conceded and is only here considered as a matter of procedural obligation – still, the presentation of the arbitral petition on 22.09.2016 would always have to be considered timely.

1. – In effect, although the Respondent invoked "no. 3 of article 39 of the CTPP to attempt to justify that notification should be considered made on the day on which the acknowledgment was signed (supposedly on the alleged day 07.09.2016) and thus, considering that the period would have ended on 21.12.2016, defend that having the arbitral petition been filed on 22.12.2016 – one day later – would then be out of time,

2. – It forgot, however, the rules contained in both no. 3 of article 38 and no. 1 of article 39 of the CTPP, which establish that:

"3. Notifications not covered by no. 1, as well as those relating to assessments of taxes resulting from declarations by taxpayers or corrections to the taxable matter that have been subject to notification for purposes of prior hearing, are effected by registered mail." – Article 38, no. 3, of the CTPP (emphasis ours)

"1. Notifications effected pursuant to no. 3 of the previous article are presumed made on the 3rd day following the date of registration or on the 1st business day following that, when that day is not a business day."

1. – Now, being at issue an assessment resulting from a correction for which – as is expressly affirmed by the Respondent – the Taxpayer was notified to exercise prior hearing, there is no doubt that the notification should have been made, only and solely, by registered mail.

2. – If the Respondent (that is, the AT) chose to perform it with greater diligence than that which the law imposes on it, having proceeded to send it by registered mail with acknowledgment of receipt, it does not serve to preclude the invocation of the presumption established in no. 1 of the aforementioned article 39.

3. – For clarity, see what the Supreme Administrative Court concluded in this regard, in its judgment rendered on 20 January 2016, in the context of appeal no. 01680/15, whereby, although relating to notifications between representatives, it was quite clear in stating that:

"In the situation under analysis, the Tax Administration decided to use registered mail, but with acknowledgment of receipt, resorting to a formality not provided for in the law for this situation and which could even more efficiently ensure that the notification was brought to the knowledge of the respective representative, given that this type of letter obtains redoubled support from the postal services. Thus, no inconvenience or nullity could result from the use of greater formality in sending the letter, provided that only this formality had been carried out, without deriving therefrom consequences, unfavorable to the taxpayer, not provided for in the law" to conclude that "being a notification to a representative, the Court was prevented from taking into account the date that appeared in the acknowledgment of receipt, as the Public Treasury was prevented from invoking such date in its favor."

1. – Applying the same reasoning to the present case – given that the underlying logic is the same – we then have to conclude that notwithstanding the Respondent having proceeded to send the notification of the assessment by registered mail with AR – when the law only imposed the obligation to send by registered mail – it cannot invoke this fact to set aside the presumption contained in no. 1 of article 39.

2. – This constitutes a right of the taxpayer that as such must be assured.

3. – Now, there being no doubt as to the use of the "registration presumption" by the Claimant, let us see, then and concretely, the timeliness of the presentation of the request for arbitral pronouncement:

• Registration of postal object: 05 September 2016;

• Presumption of registration: 08 September 2016;

• Period for voluntary payment: 23 September 2016 (Saturday)

• 1st day of period: 24 September 2016

• 90th day of period: 22 December 2016 (which being the 1st day of judicial holidays, should then be transferred to 04 January 2017)

1. Now, having the arbitral petition been filed on 22 December 2016 (1st day of judicial holidays), there is thus no lack of timeliness in the presentation of the present petition, and consequently, the exception should be dismissed, with the action continuing its legal processing."

2. The positions of the Respondent and the Claimant regarding the invoked exception of expiry of the right of action are thus well differentiated.

3. According to the AT "The assessment in question was notified to the taxpayer (now Claimant) by registered mail with acknowledgment of receipt on 07-09-2016 (date and signature affixed to the AR);

"The period for presentation of the request for constitution of the arbitral tribunal was 90 days, counted from the end of the period for payment of the tax obligation (15 days), a period which ended on 21-12-2016 (a Wednesday);

"Now, the request for constitution of the arbitral tribunal was only submitted on 22-12-2016, whereby the expiry of the right of action was verified.

1. According to the Claimant (in summary), the petition is timely, with the 90-day period being counted from the end of the period for voluntary payment of the assessed tax:

(i) either from the date on which the letter was actually delivered to the addressee (according to the "Postal Service Record") (08-09-2016);

(ii) or if that 90-day continuous period is considered counted after the end of the voluntary payment period, from the 3rd day after the date of registration (05-09-2016, point 23 of the Claimant's reply to the exception), insofar as notification with AR (general rule of article 39, 1, of the CTPP), does not preclude the invocation of the presumption established in no. 3 of the same legal provision. In this particular, it recalls the doctrine expressed in the judgment of the SAC no. 01680/15, on notifications to representatives, to assert that the AT cannot invoke the fact of the date and signature contained in the AR to set aside the presumption contained in no. 3 of article 39 of the CTPP.

1. Having evidenced, in essence, the positions of the Parties on the lack of timeliness of the request for arbitral pronouncement, there stands out from the outset the question of whether the AT, in cases (such as in the present proceedings) provided for in article 38, no. 3, of the CTPP, may or should notify by mere registered mail.

2. It is necessary, prior to the consideration of this question, to know whether the act notified is susceptible to altering the tax situation of the Claimant. We are certain that it is, being settled in the case law of the superior courts that acts of assessment of taxes such as those here being challenged, are susceptible to altering the tax situation of the taxpayer (in this sense, among others: SAC, cases 0423/05, 0412/06, 01145/12: AAC, cases 0479/09, 02625/08).

3. Now, pursuant to no. 1 of article 38, notifications relating to "acts or decisions susceptible to altering the tax situation of taxpayers" must necessarily be effected by registered mail with acknowledgment of receipt.

4. However, the assessment act notified sub judice, is equally covered by the provisions of no. 3 of the same article which provides that "Notifications not covered by no. 1, as well as those relating to assessments of taxes resulting from declarations by taxpayers or corrections to the taxable matter that have been subject to notification for purposes of prior hearing, are effected by registered mail."

5. One may then ask: does the new wording of this provision introduced by Law no. 55-B/2004 of 30/12 imply that the "exception" now provided in no. 3 of article 38 of the CTPP prevails over the "general rule" of no. 1, or, on the contrary, should it be understood that the AT maintains (always) the possibility, if it so wishes, of notifying the taxpayer in accordance with that "general rule", more secure and more certain?

6. It is necessary first to ascertain the objective of notifications and the regime underlying the presumptions provided for in article 39 of the CTPP.

7. We understand here that we should follow closely the doctrine explained in the judgment of the 2nd Section of the SAC of 29-05-2013, rendered in case 0472/13, which we transcribe, with our underlining:

"Notification has the objective of giving personal knowledge to the interested parties of the administrative acts susceptible to affecting their legal sphere, as a requirement of the constitutional guarantee enshrined in no. 3 of article 268 of the Constitution, according to which it is incumbent on the Administration to give knowledge to the administered of the acts that concern them. In this sense, no. 1 of article 36 of the CTPP states that "acts in tax matters that affect the rights and legitimate interests of taxpayers only produce effects in relation to them when they are validly notified to them".

And although the Constitution relegates to the constitutional freedom of ordinary legislation the task of determining the formalities of notifications, the truth is that such formalism should prove to be constitutionally adequate and observe the constitutional principle of prohibition of denial of procedural rights (cf. the judgment of the Constitutional Court no. 130/2002, of 14/3/2002, case 607/01.).

More concretely, according to the case law of the Constitutional Court, the duty of notification incumbent on the Tax Administration "has a mandatory content, requiring that certain essential requirements be met, namely, personality and effective cognoscibility of the act to the notified party" (judgment of 11/2/2009, case no. 916/2007).

And also as was established, in the Judgment of the Constitutional Court no. 130/02, of 14 March 2002 (case law reiterated, among others, in the judgment of the Constitutional Court no. 439/2012, case no. 279/12.), "(…) the question of the sufficiency of postal citations or notifications is not exhausted in the existence and accessibility of a domicile by the services, becoming indispensable that the formalities of postal notification offer minimum and reasonable guarantees of security and reliability which, in particular, do not make it practically impossible for the notified party to rebut the presumption of effective receipt of notification, defending it against the possibility of occasional absences, without creating for it the heavy burden of proof of a negative fact such as demonstrating that a certain letter was not received nor deposited, at a particular moment, in the postal receptacle."

There are, therefore, two requirements to which the case law of the Constitutional Court subordinates the constitutional adequacy of notification mechanisms:

(i) that the system offers guarantees of ensuring that the act of communication was placed in the area of cognoscibility of its recipient; (ii) that the presumptions of receipt of the communication are surrounded by the necessary precautions so that the non-rebuttal of the presumption does not become an impossible burden to satisfy.

(…)"

1. In the situation here in question, we are certain that notification effected by postal means had the objective of bringing to the personal knowledge of the Claimant the assessment act, producing effects in relation to it when this communication validly reached its recipient.

2. It is now necessary to determine the moment from which such effects are produced: (i) in accordance with the provision in no. 3 of article 39 of the CTPP, counted from the date affixed to the acknowledgment of receipt or from the date contained in the electronic record of the postal service; or (ii) rather, independent of that date, through the presumption provided for in no. 1 of article 39, combined with no. 3 of article 38 of the CTPP?

3. As to the first question, it is considered that what is relevant is the date of signature of the acknowledgment of receipt (and not that of the record of delivery contained on the website of the postal service, in the "Tool" that allows "locating and tracking deliveries"), as expressly provided in no. 3 of article 39 of the CTPP: "3 – Where there is an acknowledgment of receipt, notification is deemed effected on the date on which it is signed and is considered effected with the person being notified, even when the acknowledgment of receipt has been signed by a third party present at the taxpayer's domicile, there being in this case presumption that the letter was timely delivered to the addressee."

4. Indeed, the question has already been addressed by the superior courts, in particular by the AAPC in a judgment of 12-11-2015, case 00011/10.8BEMDL – where the similarity of situations is evident – concluding for the irrelevance of the electronic record on its own.

5. As was written in the judgment of the SAC no. 0105/13, of 26-11-2014, "It is incumbent on the AT to demonstrate that it effected notification in the correct form, complying with the formalities required by the applicable procedural norms." In effect, being, in the case, the lack of timeliness of the action a dilatory exception, the burden of demonstration of its premises falls on the defendant, and article 344/1 of the Civil Code provides that "The rules of the preceding articles are reversed, when there is a legal presumption".

6. One is faced, in the case, with a legal presumption, that of the acknowledgment of receipt having been received on the date on which it was signed, by force of the aforementioned article 39/3 of the CTPP, whereby it will be incumbent on the Claimant to rebut the presumption, with non liquet being resolved against it.

7. In the case, it is considered that the Claimant failed to make the proof incumbent on it, limiting itself in points 10 and 13 of its reply to the matter of exception, to the mere assertion of doubt as to who placed the date in the acknowledgment, or whether there would not have been a mistake in its placement, referring this Tribunal to the date contained in the Postal Service "Tool" that allows locating and tracking shipments and postal records, where it reads as the delivery time 08:00 on 2016/09/08, which in our view is not credible. (Indeed, does anyone recall having received registered mail before 8:00 AM, which is the time recorded in the electronic record?), thus remaining, at least the doubt as to whether the time is that of delivery or, rather, and as will be more likely, the time of recording the delivery in the electronic system of the postal service.

8. The same applies to the other "doubts" raised by the Claimant, about not knowing who placed the date in the AR, whether there was not a mistake in its placement, or whether the date was placed by whoever signed the acknowledgment, as well as the circumstance that there is an email from an employee of the Respondent to the Claimant's representative, informing that the letter was received on a date different from that affixed to the AR.

9. Indeed, faced with the presumption that benefits the Respondent, it will not suffice for the Claimant to raise doubts, but rather to demonstrate, beyond any reasonable doubt, that the date which appears in the AR, and on which the said presumption rests, is wrong, which, moreover, is fully justified in the light of a criterion of normality, given that the letter was sent to the Claimant's facilities, and was effectively received by it, and the AR contains a perfectly legible signature and the number, also legible, of an identification document, whereby the Claimant, it is repeated, in the light of a criterion of normality, would have every opportunity to reconstitute the entire journey of the letter from the moment it arrived at its facilities, identify the person who, within those, received it and signed the AR, and, from there demonstrate the falsity or error of the date affixed thereto, beyond any reasonable doubt.

10. This not having occurred, responding to the first of the questions formulated, the date contained in the AR must be considered relevant, for the purposes of the provision in no. 3 of article 39 of the CTPP.

11. As to the second of the aforementioned questions, the Claimant not having succeeded in rebutting the legal presumption contained in no. 3 of article 39 of the CTPP, it is now necessary to ascertain whether the AT was in any way prevented from effecting the notification in question pursuant to no. 1 of article 38 of the same diploma or, in any case, whether even if sent with acknowledgment of receipt, the notification would only produce effects pursuant to no. 1 of article 39 of the same diploma. We advance from the outset that the Claimant is not correct.

12. In this regard, we immediately note that the doctrine of the judgment of the SAC no. 01680/15 invoked by the Claimant – relating to notification to a representative in the context of a judicial proceeding (tax execution), where the regime of judicial notifications assumes a special and particular nature – does not have the relevance that it advances in the case under consideration, since the notification of the assessment here in question relates to a proceeding of an administrative nature and, therefore, absolutely outside the factual circumstances underlying the said judgment.

13. It is also noteworthy the provision in no. 5 of article 38 of the CTPP, which provides that: "Notifications shall be personal in cases provided for in the law or when the entity proceeding with them considers it necessary", and it will be reasonable to understand that such necessity may arise from greater celerity, in keeping with "the duty of the Tax Administration to pursue the public interest of collecting the tax revenue due, in the shortest possible time" (cf. Judgment of the SAC no. 01340/15, of 31-03-2016), and, concomitantly, in keeping with the taxpayer's interest, of having as soon as possible knowledge of the assessment that has been made to it, which, moreover, will make it possible to reduce the days to be counted for the purposes of interest that may become due.

14. As emerges from the judgment partially transcribed above at point 43, the system of legal presumptions relating to postal notifications aims above all to ensure that "the act of communication was placed in the area of cognoscibility of its recipient" and that "the presumptions of receipt of the communication are surrounded by the necessary precautions so that the non-rebuttal of the presumption does not become an impossible burden to satisfy".

15. Indeed, as has been uniformly decided by the superior courts, in this matter of notifications by postal means, what is relevant for the purpose of guarantees of defense of the taxpayer is knowledge of the act and not the form in which it is notified, unless from the less solemn notification results a diminution of such guarantees.

16. That is, the provisions enshrined in article 39 of the CTPP only aim to establish the terms in which it is legally presumed that postal notifications reach the knowledge of the recipient, and the conditions under which such presumptions may be rebutted, but only in the case that this has not happened, that is, such notifications have not eventually reached the knowledge of their recipient.

17. Therefore, had the Claimant been notified by registered mail without acknowledgment of receipt, it could rebut the presumption of receipt of that notification by proving that the same would never have reached its knowledge or that it would only reach after the 3rd working day after the date of registration, by force of the provisions in nos. 1 and 2 of article 39 of the CTPP.

18. However, in the case sub judice, postal notification was effected with acknowledgment of receipt, whereby there is no need to resort to another legal presumption than that stipulated in no. 3 of article 39 of the CTPP: 3 – Where there is an acknowledgment of receipt, notification is deemed effected on the date on which it is signed and is considered effected with the person being notified, even when the acknowledgment of receipt has been signed by a third party present at the taxpayer's domicile, there being in this case presumption that the letter was timely delivered to the addressee."

19. Indeed, having the Claimant been notified by registered mail with acknowledgment of receipt, it makes no sense to pretend that the presumption of no. 1 of the cited article 39 of the CTPP is applicable to it. In this sense, see the judgment of the AAPC of 28-01-2016 rendered in case 01171/11.6BEPRT.

20. Moreover, no ground is perceived in the text of article 38 of the CTPP that in any way prevents the AT from notifying taxpayers by postal means that provide greater guarantees that postal notifications reach the knowledge of the recipient – registered mail with acknowledgment of receipt – even if the legislator foresees less demanding forms – registered mail without acknowledgment of receipt. As stated above, what is relevant for the purpose of guarantees of defense of the taxpayer is knowledge of the act and not the form in which it is notified. The means of defense and respective legal periods conferred on the Claimant were in no way affected or reduced by the use of notification by registered mail with acknowledgment of receipt. What the Claimant cannot do is "extend" those periods through a presumption applicable to another "model of notification" than the one that brought the act to its personal knowledge.

21. On the other hand, article 40/3 of the CTPP, applied by the judgment of the SAC no. 01680/15 invoked by the Claimant, concerns notification to a representative, which is not the case, admitting that the specificities proper to that profession underlie the decision there, expressly recognizing there that "We are faced with notification to a judicially appointed representative governed by the rules of tax procedure which are nothing other than a copy of their counterparts in Civil Procedure", where notification of a representative by registered mail with AR is not provided for in any situation, and that "the rules of interpretation of law, and the (…) necessary unity of the legal system which imposes that tax procedure only departs from the rules of civil procedure applicable here subsidiarily and from the unanimous interpretation that has been given to them over the years by doctrine and case law, when tax law, or the particularities of the legal tax relationship in question, so impose it", considerations which will only be applicable to tax judicial proceedings, and not to the procedure, where the present case orbits, the decision in question emphasizing that "the rules of notifications to taxpayers (…) in the Code of Tax Procedure and Process, are distinguished from the rules applicable to notifications to appointed representatives in tax procedure or proceedings."

22. Add further to the foregoing, in the sense of the relevance of the distinction of the regime of notifications depending on whether the question concerns procedure or tax proceedings, and whether or not it concerns notification to a representative. Being the expiry of the right to assess – a situation typical of tax procedure – the application of the doctrine of the Judgment cited by the Claimant to the procedure would result in it being precluded the possibility of the AT, pursuant to article 38/5, proceeding with personal notifications to prevent expiry of the right to assess, in cases where the law was satisfied/prescribed notification by simple registered mail, and that, in cases of notifications to representatives, the provision itself in no. 3 of article 40 expressly foresees the possibility of notification by personal contact, concomitantly with that of notification by simple registered mail.

23. Closer to the case sub iudice is, thus, what was decided in the judgment of the SAC no. 01145/12, of 14-02-2013, where it can be read that "Although article 67 no. 3 of the CPT established that notifications to representatives "shall be made by letter or registered notice, addressed to the domicile or office of the notified party" the same did not prohibit that they could be notified by letter with AR.", since, although applying norms of the CPT, these are analogous, to what matters for the case, to those of the CTPP, in addition to being there, as here, at issue a notification in the context of tax procedure (and not tax proceedings, as happens in judgment no. 01680/15).

24. Also in the judgment of the SAC no. 01137/12, of 14-02-2013, it can be read that: "It will be argued that the Tax Administration erred in excess of formalism in sending to the Appellant a registered letter with acknowledgment of receipt, when, as has been said, according to applicable law, simple registration would suffice. However, such excess of formalism does not entail (…) invalidity".

25. In view of what has been written and having been proven to this Tribunal that notification was received on 07-09-2016, as per the date affixed to the acknowledgment of receipt, the end of the period for voluntary payment occurred on 22-09-2016, whereby the present request for arbitral pronouncement filed with the CAAD on 22-12-2016 was presented after the 90-day period provided for in no. 1 of article 10 of the Tax Arbitration Regime had elapsed.

26. Thus, we judge the exception of expiry of the right of action raised by the Respondent to be well-founded and, without need to consider the merits of the petition, we dismiss the Respondent from the claim.

V. DECISION

On these grounds, and with the grounds exposed, the Arbitral Tribunal decides:

a) To judge the request for arbitral pronouncement out of time, dismissing the Respondent from the claim:

b) To condemn the Claimant in the costs of the proceedings.

Value of the proceedings: The value of the proceedings is fixed at €72,853.93, pursuant to article 97-A, no. 1, paragraph a) of the CTPP, applicable by referral of article 29, no. 1, paragraphs a) and b), of the RJAT and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

Costs: Under article 22, no. 4, of the RJAT, and pursuant to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €2,448.00, charged to the Claimant.

Let notification be made, including to the judicial officer holding the inquiry proceedings no. …/…AFLSB, which runs its course in the Public Prosecutor's Office – Section of Vila Franca de Xira.

Lisbon, 18 December 2017

The arbitrators, Dr. José Pedro Carvalho (presiding arbitrator), Professor Doctor Glória Teixeira and Dr. Álvaro Caneira (reporting arbitrator).