THIRD SECTION
Application no. 15485/09
CHAP LTD
against Armenia
lodged on 13 March 2009
STATEMENT OF FACTS
The applicant, Chap Ltd, is a private Armenian company that was set up in 1999 and has its registered office in Gyumri. The applicant company is represented before the Court by Mr K. Tumanyan and Mr E. Marukyan, lawyers practising in Vanadzor.
A. The circumstances of the case
The facts of the case, as submitted by the applicant company, may be summarised as follows.
In 2005 the applicant company established a regional television channel, Gala TV, with the intention of broadcasting in the region. On 23 February 2005 the applicant company was granted a licence by the National Television and Radio Commission permitting it to broadcast in Gyumri, the second largest town in Armenia, and surrounding villages. The licence was granted for a period of 7 years. Gala TV was one of four TV stations operating in Gyumri and, according to the applicant company, was widely recognised as one of the few independent voices in television broadcasting in Armenia.
From 29 October to 12 November 2007 the State Revenue Service (the SRS) conducted an inspection of the applicant company’s accounts. As a result of this inspection, on 12 November 2007 the SRS issued a report indicating that the applicant company had a high tax liability for the years 2005 to 2007 and ordered it to pay 25,665,100 Armenian drams (AMD), including surcharges and fines prescribed by the relevant tax laws. The report was detailed and over 10 pages long.
The SRS established that the company had underreported its tax liability by hiding the income earned from advertising. It was also disclosed that the applicant company had failed to include the prices of provided services in its invoices and failed to keep a record book as required by the Television and Radio Broadcasting Act. Furthermore, it was alleged that the applicant company had manufactured fireworks without a government licence in 2001.
The report of the SRS was based, inter alia, on:
(a) the documents requested from, and subsequently submitted by, the National Television and Radio Commission (“the NTRC”), which was entrusted with regulating the licensing and monitoring the activities of private television and radio companies;
(b) the statements of the heads of companies and private entrepreneurs that placed advertisements on Gala TV, to the effect that they had not received any documents acknowledging the payments made to the applicant company for placing their advertisement on Gala TV.
The applicant objected to the allegations of tax evasion as fabricated and politically motivated, since socially-oriented and home-made advertisements that Gala TV had broadcast for free had been taken into account by the authorities in calculating the applicant company’s tax arrears.
On an unspecified date the SRS instituted criminal proceedings against the executive of the applicant company, K.H., for tax evasion. The investigating authorities discontinued the proceedings only after the required amount had been paid.
On 26 November 2007 the SRS lodged a claim with the Commercial Court seeking to oblige the applicant company to pay 25,212,800 AMD and to freeze its bank accounts and other assets in the amount of the alleged tax shortfall.
On 27 November 2007 the Commercial Court admitted the case to its proceedings and, at the same time, dismissed the motion on freezing the applicant company’s bank accounts.
On 3 December 2007 the Commercial Court decided to freeze the applicant company’s assets as security for the claim.
On 17 December 2007 the applicant company lodged a counter-claim against the SRS, challenging the results of the tax inspection.
Following the reform of the court system introduced in Armenia in 2007 which brought about the establishment of the Administrative Court, on 24 December 2007 the applicant company’s case was transferred for examination by that court.
On 29 January 2008 the Administrative Court admitted the case to its proceedings.
On 7 February 2008 the applicant company’s lawyer lodged two written motions seeking to obtain and examine tax deeds of the companies that advertised on Gala TV, as well as to call and question the heads of those companies and private entrepreneurs, namely A.J., S.A., S.M., H.P., G.S., G.A. and H.M.
By the same motion he asked to summon and examine the head of the NTRC, G. A.
All these motions were dismissed by the Administrative Court.
On 19 March 2008 the Administrative Court decided to levy on the applicant company a total of AMD 25,212,700 in tax arrears, including profit tax arrears of AMD 4,769,800 plus a surcharge of AMD 2,384,900, Value Added Tax (VAT) arrears of AMD 8,326,600 plus a surcharge of AMD 3,051,600 and a fine of AMD 4,163,300. In imposing the surcharges and fines, the Administrative Court referred to Article 43 of the Law on Value Added Tax and Articles 23 and 27 of the Law on Taxes. The amount of the court fee to be paid by the applicant company was calculated at AMD 502,334.
By the same judgment the Administrative Court partly annulled the SRS’s report in respect of the amount of 96,000 AMD imposed on the applicant company.
On 18 June 2008 the applicant company lodged an appeal on points of law against the judgment of the Administrative Court.
On 4 August 2008 the Court of Cassation returned the applicant company’s cassation appeal on the ground that it had failed to pay a State fee in a prescribed amount and set a deadline for resubmission of the appeal.
On 3 September 2007 having paid the prescribed amount for the State fee, the applicant company resubmitted its appeal. On 18 September 2008 the Court of Cassation dismissed the applicant’s appeal as unsubstantiated.
B. Relevant domestic law
The Code of Administrative Procedure (in force from 1 January 2008)
According to Article 29, a party that lodged a motion to summon a witness shall indicate the fact in respect of which the witness must be examined.
COMPLAINT
The applicant company complains under Article 6 § 3 (d) that its lawyer was unable to question the witnesses against it since all the motions to summon and examine witnesses A. J., S.A., S.M., H.P., G.S., G.A., H.M. and G. A. were dismissed by the trial courts.
QUESTIONS TO THE PARTIES
Does Article 6 apply under its criminal head to the tax proceedings at issue? If so, did the applicant have a fair hearing, in accordance with Article 6 § 1 of the Convention? Was the applicant company’s representative able to examine witnesses against it, as required by Article 6 § 3 (d) of the Convention? In particular, was the representative able to call and examine witnesses A.J., S.A., S.M., H.P., G.S., G.A., H.M. and G.A. and the expert who conducted the forensic accounting examination?
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