FIRST SECTION
DECISION
Application no. 57718/15
FIN FER S.P.A.
against Italy
The European Court of Human Rights (First Section), sitting on 5 September 2024 as a Committee composed of:
Péter Paczolay, President,
Gilberto Felici,
Raffaele Sabato, judges,
and Liv Tigerstedt, Deputy Section Registrar,
Having regard to:
the application (no. 57718/15) against the Italian Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 9 November 2015 by Fin Fer S.p.A., a company incorporated under Italian law in 1984, dealing in the wholesale of metal ores and ferrous metals (“the applicant company”), and which was represented by Mr G. Romano, a lawyer practising in Rome;
the decision to give notice of the application to the Italian Government (“the Government”), represented by their Agent, Mr L. D’Ascia, Avvocato dello Stato;
the parties’ observations;
the fact that on 24 May 2023 the applicant company informed the Court that it had changed its legal form and was in liquidation. Accordingly, the current name of the applicant company is “Fin Fer S.r.l. in liquidazione”. However, the Court will continue processing the application under the case name of Fin Fer S.p.A. v. Italy. This corresponds to the applicant company’s name as referred to in the domestic court proceedings as well as in its application lodged with the Court;
Having deliberated, decides as follows:
SUBJECT MATTER OF THE CASE
1. The case concerns the issue of whether the legal prohibition of witness evidence in judicial proceedings before the tax courts, provided for by Article 7 § 4 of Legislative Decree no. 546 of 31 December 1992 (“Decree no. 546/1992”) as in force at the material time, entailed a breach of the right to have witnesses examined, guaranteed by Article 6 §§ 1 and 3 (d) of the Convention, and whether it affected the overall fairness of proceedings in which the applicant company’s tax liability was established and tax surcharges imposed on the company.
2. On 17 December 2009 the Avellino Tax Authority (Agenzia delle Entrate) instituted a substantive audit against the applicant company with the aim of verifying compliance with tax legislation in the tax year 2005.
3. In September 2010 the applicant company was notified of the summary of the investigations undertaken by the Avellino Revenue Police (Guardia di Finanza). The shareholders and members of the board of directors of the applicant company were invited to provide clarifications regarding several banking transactions identified in their personal bank accounts.
4. On 20 October 2010 they provided some documentation.
5. On 5 November 2010 the Revenue Police issued a tax audit report (processo verbale di contestazione) against the applicant company. It observed, inter alia, that one of the applicant company’s shareholders, Mr A.F., had made transactions in his personal bank account that appeared in significant disproportion to his declared income. The investigative authorities observed that, in the light of the relevant domestic law as consistently interpreted in the case-law, unjustified transactions in the bank accounts of shareholders and administrators of small companies, who were also close relatives, were presumed to be undeclared revenues of the company. Once this presumption had been established, the burden was on the company to produce evidence capable of demonstrating that the transactions were not attributable to the company. In their view, the applicant company had failed to rebut the presumption.
6. The report also indicated, as elements capable of indirectly confirming such presumption, some information obtained from third parties, the representatives of companies X and Y. The latter’s representatives had declared to the investigating authorities that they had dealt exclusively with Mr A.F. but that all the payments made to him concerned business transactions with the applicant company. Therefore, according to the investigating authorities, those statements confirmed the conclusions drawn from the presumption.
7. The Revenue Police concluded that the applicant company had failed to declare revenue to a total amount of 6,521,291.85 euros (EUR).
8. On 13 January 2011 the applicant company was notified by the Tax Authority of a tax assessment notice (avviso di accertamento del tributo) which endorsed the conclusions reached by the investigating authorities and found the applicant company liable to pay taxes for the revenue it had not declared. In addition, tax surcharges for a total amount of EUR 3,228,040.50 were imposed.
9. On 18 March 2011 the applicant company challenged the tax assessment and the imposition of the surcharges before the Avellino Provincial Tax Commission (Commissione Tributaria Provinciale, “CTP”), complaining of the alleged lack of reasoning of the tax assessment, as the Tax Authority had not indicated, in its view, the transactions on the basis of which its tax liability had been established.
10. By a judgment of 21 March 2012 the CTP dismissed the applicant company’s claims, observing that it had failed to provide evidence capable of justifying the transactions in the shareholders’ bank accounts, and that the presumption was confirmed by the statement issued by the third parties heard by the investigating authorities.
11. On 8 November 2012 the applicant company lodged an appeal before the Naples Regional Tax Commission (Commissione Tributaria Regionale, “CTR”), Section of Salerno, arguing that the judgment lacked reasoning.
12. On 18 February 2013 the applicant filed an additional brief arguing, inter alia, that the relevant witness statements, issued outside the judicial proceedings, had been misinterpreted and manipulated when summarised by the investigating authorities and assessed by the Tax Authority (see paragraph 6 above).
13. By a judgment of 29 April 2013, the CTR partially granted the applicant company’s appeal, observing that it had demonstrated that some of the transactions identified in Mr A.F.’s bank account were not attributable to the company. It therefore reduced the amount of tax surcharges imposed. However, it observed that the applicant company had failed to rebut the presumption with regard to the other transactions.
14. The applicant company lodged an appeal on points of law with the Court of Cassation complaining, inter alia, of the application of the presumption applied to its case.
15. By judgment no. 9974 of 15 May 2015, the Court of Cassation dismissed the applicant company’s appeal on points of law. It confirmed that the close family relationship between the shareholders and the narrow composition of the company were sufficient to justify the presumption that the transactions identified in the bank accounts of such individuals related to the economic activity of the company. Consequently, the applicant company had the burden of proving that those transactions were not attributable to it but had not done so with regard to all the relevant transactions.
16. The applicant company complained that its tax liability had been established on the basis of presumptions which were confirmed by “witness” statements. Under Article 7 § 4 of Decree no. 546/1992, which established at the material time a legal prohibition of witness evidence in judicial proceedings before tax courts, the applicant company could not cross‑examine those “witnesses” before the courts. It therefore complained of a breach of the right to have witnesses examined, as provided in Article 6 §§ 1 and 3 (d) of the Convention.
THE COURT’S ASSESSMENT
17. The Court, referring to the general principles summarised in Vegotex International S.A. v. Belgium ([GC], no. 49812/09, §§ 67-76, 3 November 2022), observes that substantial penalties were imposed on the applicant company, notably tax surcharges amounting to more than 100% of the tax due (see paragraphs 8 and 13 above). It follows that the criminal limb of Article 6 of the Convention is applicable in the present case.
18. As regards the right to examine or have examined witnesses, guaranteed by Article 6 §§ 1 and 3 (d), the Court refers to the general principles summarised in Al-Khawaja and Tahery v. the United Kingdom ([GC], nos. 26766/05 and 22228/06, ECHR 2011) and Schatschaschwili v. Germany ([GC], no. 9154/10, § 100, ECHR 2015). In the case of Chap Ltd v. Armenia (no. 15485/09, 4 May 2017), the Court applied such right to tax surcharge proceedings, reiterating that the term “witness” has an “autonomous” meaning in the Convention system, and that the guarantees provided by Article 6 §§ 1 and 3 (d) of the Convention apply to a deposition which may serve to a material degree as the basis for a conviction (ibid., § 47).
19. In the present case, the Court will not address the question of whether the right to examine or have examined witnesses applies with full stringency to tax surcharge proceedings, in particular in the light of the fact that tax surcharges differ from the hard core of criminal law, and that therefore the guarantees of Article 6 do not necessarily apply with their full stringency (see Vegotex International S.A., cited above, § 76, with further references), since the application is in any event inadmissible on the following grounds.
20. The Court notes that the depositions at stake were oral statements issued to the investigating authorities (see paragraph 6 above) which were subsequently used by the Tax Authority in order to confirm the applicant company’s tax liability (see paragraph 8 above).
21. The Court further notes that, in the report submitted by the Revenue Police, the relevant statements had been presented as “indirect” elements capable of confirming the conclusions, drawn on the basis of the presumption – pursuant to which unjustified transactions in the bank accounts of shareholders and administrators of small companies, who were also close relatives, were presumed to be undeclared revenues of the company – on which the applicant company’s tax liability had been based (see paragraph 6 above). The Tax Authority endorsed the conclusions of the investigating authorities (see paragraph 8 above). The statements were therefore used in order merely to corroborate the conclusions that could be drawn on the basis of a presumption established under the relevant domestic law, as consistently interpreted and applied in the administrative practice (see Circular no. 32 of 19 October 2006 of the Tax Authority) and in the domestic case-law (see, among many others, Court of Cassation, judgments no. 13391 of 12 September 2003; no. 4357 of 26 February 2007, no. 19362 of 15 July 2008, no. 6595 of 15 March 2013, no. 30098 of 21 November 2018 and no. 27154 of 15 September 2022).
22. The CTP, for its part, dismissed the applicant company’s claim, observing that it had failed to rebut the presumption. The CTP referred to those statements as a mere corroboration of the conclusions drawn on the basis of the above presumption (see paragraph 10 above).
23. By contrast, no reference to those statements can be found in the appeal judgment of the CTR (see paragraph 13 above) or in the judgment of the Court of Cassation (see paragraph 15 above), which relied entirely on the presumption and on the failure on the part of the applicant company to produce evidence capable of rebutting it.
24. Accordingly, it cannot be said that any deposition of those at stake was employed in the present case as a “witness” statement within the autonomous meaning of this notion in the Convention system, as these did not serve to a material degree as a basis for the applicant’s “conviction” (see paragraph 18 above).
25. As regards the applicant company’s complaint concerning the use of presumptions, the Court reiterates that presumptions of fact or of law operate in every legal system and that the Convention does not prohibit them in principle. However, it has required States to confine them within reasonable limits to take into account the importance of what was at stake and maintain the rights of the defence (see Krebs v. Germany, no. 68556/13, § 47, 20 February 2020, and Kangers v. Latvia, no. 35726/10, § 47, 14 March 2019).
26. The Court notes that the applicant company did not argue before the domestic courts, nor before the Court, that the presumption was excessively difficult to rebut or that it otherwise unduly affected the rights of the defence.
27. On the contrary, the Court observes that some statements issued by third parties before the investigating authorities were actually considered in the applicant company’s favour and resorted to in order to rebut the presumption in respect of some of the relevant transactions and accordingly reduce the amount of tax surcharges imposed (see paragraph 13 above).
28. In the light of the above, the Court concludes that the present application is manifestly ill-founded and must be dismissed in accordance with Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 26 September 2024.
Liv Tigerstedt Péter Paczolay
Deputy Registrar President