Communicated on 16 May 2018
FOURTH SECTION
Application no. 55092/16
BALTIC MASTER LTD.
against Lithuania
lodged on 15 September 2016
STATEMENT OF FACTS
The applicant, Baltic Master Ltd., is a company registered in Vilnius. It is represented before the Court by Mr A. Miškinis, a lawyer practising in Vilnius.
A. The circumstances of the case
The facts of the case, as submitted by the applicant company, may be summarised as follows.
The applicant company provides heating, cooling, ventilation and air conditioning equipment in Lithuania.
In 2013 the Vilnius territorial customs office carried out an examination of the applicant company’s accounting data, related to imported goods between 1 July 2009 and 31 August 2012. During that period, the applicant company bought some goods and declared them as air conditioning equipment, mounted in one unit, and its parts. The goods were bought from a company registered in the United States of America. The applicant company provided the Vilnius territorial customs office with twenty-nine import declarations, the value of the goods provided by the applicant company was 1,560,523.11 euros (EUR). In April 2013 the Vilnius territorial customs office found that in twenty-three import declarations the value of the goods was three to four times lower than the value of similar goods declared by other importers. Moreover, the customs office stated that the applicant company and the seller company were related because two of the logistics managers of the seller company were also employed by the applicant company. As a result, the applicant company was ordered to pay EUR 618,083 in total as customs tax, value added tax, a fine and late payment interest.
The applicant company complained about the Vilnius territorial customs office report to the Customs Department, and the latter annulled the report and ordered the customs office to carry out an additional investigation. The Customs Department held that it was not clear which of the grounds, established in Article 143 of the Commission Regulation (EEC) No. 2454/93 of 2 July 1993 laying down provisions for the implementation of the Community Customs Code (hereinafter “the Regulation No. 2454/93”), the Vilnius territorial customs office referred to when stating that the applicant company and the seller company were related. Moreover, the mere fact that the buyer and the seller companies were related, and the declared value of goods was small, was not enough to recalculate the import taxes.
In December 2013 the Vilnius territorial customs office carried out an additional investigation. It refused to approve twenty-three import declarations provided by the applicant company and calculated the value of the imported goods in accordance with the Council Regulation (EEC) No. 2913/1992 of 12 October 1992 establishing the Community Customs Code (hereinafter “the Community Customs Code”). The Vilnius territorial customs office ordered the applicant company to pay 173,005 Lithuanian litai (LTL, approximately EUR 50,106) in customs tax, LTL 1,457,978 (approximately EUR 422,260) in value added tax, LTL 437,675 (approximately EUR 126,759) of late payment interest and a fine of LTL 163,098 (approximately EUR 47,236), the total amount being EUR 646,361.
The applicant company complained against the report of the additional investigation to the Customs Department and asked to annul the report. The applicant company claimed that the refusal of the Vilnius territorial customs office to approve the value of the goods provided by the applicant company in accordance with the method of the value of agreement was unfounded, as well as the conclusion that the applicant company and the seller company had been related. Moreover, the applicant company disagreed with the late payment interest because it went up due to the protracted investigation of the Vilnius territorial customs office.
In March 2014 the Customs Department approved the Vilnius territorial customs office report of December 2013 and dismissed the applicant company’s complaint.
The applicant company appealed against that decision to the Tax Disputes Commission. The applicant company provided documents from the seller company proving that none of its employees were also employed by the applicant company. In July 2014 the Tax Disputes Commission held that the applicant company provided incomplete data which had not been able to determine the exact circumstances of the purchase agreement concluded with the seller company. Nevertheless, the Tax Disputes Commission decided to exempt the applicant company from LTL 27,118.40 (approximately EUR 7,854) of late payment interest.
The applicant company complained to the Vilnius Regional Administrative Court. It claimed that it was not clear from the regional customs office report of December 2013, on which grounds, established in Article 143 of the Regulation No. 2454/93, the regional customs office relied, holding that the applicant company and the seller had been related. The mere fact that the applicant company and the seller company had been involved in the purchase agreements was not sufficient to conclude that they were business partners. The applicant company also argued that the Vilnius territorial customs department refused to apply the transaction value method without providing any reasons. The applicant company asked the Vilnius Regional Administrative Court to request a preliminary ruling from the European Union Court of Justice (hereinafter “the CJEU”). The applicant company stated that from the linguistic interpretation of the European Union law and from the explanations provided by the CJEU it was not clear how exactly the relevant European Union customs regulations were to be interpreted.
On 22 January 2015 the Vilnius Regional Administrative Court rejected the applicant company’s complaint as unfounded. It held that there was enough information to adopt the decision in the case and no question as to the interpretation of the European Union customs law arose.
The applicant company appealed against that decision. It stated that the first-instance court misinterpreted the provisions of the Community Customs Code and the Regulation No. 2454/93. Moreover, the decision of the first-instance court lacked reasoning. Finally, the fair examination of the case was not possible without interpretation of certain regulations of the European Union, and thus the preliminary ruling was necessary.
On 22 March 2016 the Supreme Administrative Court upheld the first‑instance decision. The court referred to the case-law of the Court that Article 6 § 1 of the Convention could not be understood as requiring a detailed answer to every argument. The extent to which this duty to give reasons applied, may vary according to the nature of the decision. It was moreover necessary to take into account, inter alia, the diversity of the submissions that a litigant may bring before the courts and the differences existing in the Contracting States with regard to statutory provisions, customary rules, legal opinion and the presentation and drafting of judgments. This is why the question whether a court had failed to fulfil the obligation to state reasons, deriving from Article 6 of the Convention, could only be determined in the light of the circumstances of the case (see Hiro Balani v. Spain, 9 December 1994, § 27, Series A no. 303‑B; Ruiz Torija v. Spain, 9 December 1994, § 29, Series A no. 303‑A; Suominen v. Finland, no. 37801/97, § 34, 1 July 2003, Series A no. 303‑A). The court held that the first-instance decision had been adequately reasoned. It also held that the application of the European Union law was clear enough and there was no need to refer a question for preliminary ruling to the CJEU.
B. Relevant domestic law and European Union law
Article 4 § 3 of the Law on Administrative Proceedings provides that when applying the rules of the European Union law, the court follows the decisions of the European Union judicial bodies. In cases provided for by law the court refers the issue to the competent European Union judicial body for a preliminary ruling regarding interpretation or validity of the laws of the European Union.
Relevant parts of the Council Regulation (EEC) No. 2913/1992 of 12 October 1992 establishing the Community Customs Code provide:
Article 29
“1. The customs value of imported goods shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community, adjusted, where necessary, in accordance with Articles 32 and 33, provided:
...
(b) that the sale or price is not subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued;
...
(d) that the buyer and seller are not related, or, where the buyer and seller are related, that the transaction value is acceptable for customs purposes under paragraph 2.
2. (a) In determining whether the transaction value is acceptable for the purposes of paragraph 1, the fact that the buyer and the seller are related shall not in itself be sufficient grounds for regarding the transaction value as unacceptable. Where necessary, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted provided that the relationship did not influence the price. If, in the light of information provided by the declarant or otherwise, the customs authorities have grounds for considering that the relationship influenced the price, they shall communicate their grounds to the declarant and he shall be given a reasonable opportunity to respond. If the declarant so requests, the communication of the grounds shall be in writing.”
Article 143 of the Commission Regulation (EEC) No. 2454/93 of 2 July 1993 laying down provisions for the implementation of the Community Customs Code provides:
Article 143
“1. For the purposes of Articles 29 (1) (d) and 30 (2) (c) of the Code, persons shall bet deemed to be related only if:
(a) they are officers or directors of one another’s businesses;
(b) they are legally recognised partners in business;
(c) they are employer and employee;
(d) any person directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares of both of them;
(e) one of them directly or indirectly controls the other;
(f) both of them are directly or indirectly controlled by a third person;
(g) together they directly or indirectly control a third person; or
(h) they are members of the same family. Persons shall be deemed to be members of the same family only if they stand in any of the following relationships to one another:
- husband and wife,
- parent and child,
- brother and sister (whether by whole or half-blood),
- grandparent and grandchild,
- uncle or aunt and nephew or niece,
- parent-in-law and son-in-law or daughter-in-law,
- bother-in-law and sister-in-law.
2. For the purposes of this title, persons who are associated in business with one another in that one is the sole agent, sole distributor or sole concessionaire, however described, of the other shall be deemed to be related only if they fall within the criteria of paragraph 1.”
COMPLAINTS
The applicant company complains under Article 6 § 1 of the Convention that the domestic courts’ decision not to request a preliminary ruling from the European Union Court of Justice lacked reasoning. The applicant company also complains under Article 1 of Protocol No. 1 to the Convention that it had to pay various taxes and has been deprived of EUR 646,361.
QUESTIONS TO THE PARTIES
1. Was the refusal by the Supreme Administrative Court to request for a preliminary ruling from the European Union Court of Justice in accordance with Article 6 § 1 of the Convention requiring to adequately reason a decision (see Ullens de Schooten and Rezabek v. Belgium, nos. 3989/07 and 38353/07, §§ 59-67, 20 September 2011; Vergauwen and Others v. Belgium (dec.), no. 4832/04, §§ 89-90, 10 April 2012; and Dhahbi v. Italy, no. 17120/09, § 31, 8 April 2014)?
2. Was there a violation of Article 1 of Protocol No. 1 to the Convention with regard to the requirement to the applicant company to pay import taxes and a fine?
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