Communicated on 14 January 2018
FOURTH SECTION
Application no. 61022/10
S.C. TOTALGAZ INDUSTRIE S.R.L.
against Romania
lodged on 15 October 2010
STATEMENT OF FACTS
The applicant company, S.C. Totalgaz Industrie S.R.L., is a Romanian company, with its registered headquarters in Iași. It is represented before the Court by Ms I. Raihel-Arnăutu, a lawyer practising in Iași.
The facts of the case, as submitted by the applicant company, may be summarised as follows.
In September 2003 the applicant company imported industrial equipment and several compact discs (“CDs”) containing instructions on the handling and functioning of the equipment (described as “technology” and “know‑how” in the sale contract).
The applicant company submitted all relevant documents (including the invoices, the sale contract and all correspondence with the vendor company concerning the imported goods) to the customs authorities and completed the appropriate customs declarations. The applicant company paid the customs duties and VAT due in respect of the equipment and the CDs.
Between 27 November 2007 and 30 January 2008 the Iași customs authority carried out a review of the above-mentioned import operation. It checked the two customs declarations submitted by the applicant company on 10 and 16 September 2003 respectively.
The customs authority informed the applicant company that the VAT paid in connection with the CDs had not been correctly calculated. It noted that the applicant company had erroneously paid customs duty on know‑how, whereas it should have paid customs duties on software programs, as the information recorded on the imported CDs contained instructions essential for the functioning of the imported equipment.
By a decision of 15 February 2008 the Iași customs authority ordered the applicant company to pay 317,684 Romanian Lei (RON) in unpaid VAT, interest and late-payment penalties.
The applicant company challenged that decision with the Iași Regional Department for Excises and Customs Operations. It contended that the reason for the recalculation of the VAT payable in respect of the imported CDs had been the lack of clarity in the existing legislation with regard to the nature of the information recorded on the CDs – namely whether such information should have been considered to constitute know-how or a software program and whether the importation of CDs had constituted an importation of assets or an importation of services. The applicant company also argued that the customs authorities had based the recalculation of the VAT on the provisions of the Fiscal Code (and the regulations governing its implementation), which had not been in force in September 2003. Moreover, the regulations which categorised the software programs as assets had entered in force only on 1 January 2007. The applicant also pointed out that the information recorded on the imported CDs had been referred to by the parties in the sale contract as know-how and technology.
By a decision of 24 April 2008 Iași General Finance Department (Administratia Finantelor Publice Iași) set aside the decision of 15 February 2008 and ordered a new review of the import operations, to be conducted according to the law applicable at the time of the importation in question.
Following a new review of the import operations the Iași Regional Department for Excises and Customs Operations decided on 20 May 2008 that the applicant company should pay an even higher sum – namely RON 652,042 – by way of regularising its import operations.
The applicant company again challenged the way in which its customs obligations had been established. It pointed out that the customs authorities performing the new review of its import operations had infringed the non reformatio in peius principle.
The Iași General Finance Department set aside the decision of 20 May 2008 and ordered a new review of the applicant company’s import operations.
Following that new review the Iași Regional Department for Excises and Customs Operations issued a new decision on 18 July 2008 by which it ordered the applicant company to pay 317,684 Romanian Lei (RON) (approximately 88,000 euros) representing unpaid VAT (RON 132,122) (approximately 36,000 euros) and interest and delay penalties (RON 185,562) (approximately 52,000 euros).
In calculating the applicant company’s customs duties Iași General Finance Department applied decision no. 7 of the Ministry of Public Finance’s Fiscal Central Commission.
The Iași General Finance Department dismissed the applicant company’s new challenge on 18 September 2008. It held that for the purposes of calculating VAT, the importation of software should be considered as the importation of assets, in line with decision no. 7/2006 (which had been issued on 17 November 2006, and approved by an order of the same Commission on 19 December 2006). It noted that in the light of the fact that this decision set out the correct interpretation of Government Ordinance no. 17/2000 concerning VAT and the regulations for its implementation, it could be applied in respect of situations provided for by the ordinance in force in 2000 without fear of it being seen as being retroactively applied.
The applicant company lodged a complaint with the Iași County Court seeking the annulment of the decision taken on 18 September 2008. It noted that fiscal authorities interpreted in a different way the nature of information stored on imported CDs: some of them considered it to constitute technology and know-how while others considered it to constitute a software program. It also pointed out that it was not clear to the fiscal authorities whether the importation of CDs should be considered to constitute an importation of assets or an importation of services.
It further submitted that: (i) the value of the data and instructions recorded on the CDs should have been calculated according to decision no. 368/1998 (of 16 June 1998); (ii) decision no. 7/2006 (applied by the Iași Customs Authority) had only been adopted after the importation carried out in 2003 and was, moreover, only applicable to software programs and not to know‑how; (iii) the information recorded on the imported CDs had constituted know-how and was not indispensable for the functioning of the equipment in question – therefore, the sale contract concluded with the export company had categorised the information on CDs as know-how; (iv) under the regulations governing the calculation of VAT at the time of the importation of the CDs the transmission of know-how had constituted the delivery of services and not the delivery of assets –accordingly, the applicant company had been under no obligation to pay VAT in respect of the importation of CDs.
The Iași County Court ordered a report from a fiscal expert, the main objective of which was to establish whether the charges that the applicant company had had to pay had been correctly calculated. The report, which was submitted on 2 June 2009, stated that the applicant company had not tried to avoid the payment of customs duties and VAT in respect of the imported goods as it had submitted all relevant documents, including the invoices and the sale contract, and had completed customs declarations. The report further stated that the legal basis for the establishment of the applicant company’s fiscal obligations at the relevant time had been decision no. 368/1998. It concluded that the applicant company had met all its fiscal duties in 2003.
On 27 October 2009 the Iași County Court allowed the applicant company’s complaint and set aside the fiscal authorities’ decision of 18 July 2008 on the ground that it had not been issued in accordance with the law applicable at the time of import – namely decision no. 368/1998. It noted that decision no. 368/1998 had been in force until 15 April 2006, when it had been repealed by an order issued by the national fiscal authority, ANAF (Administrația Națională a Finanțelor Publice). The County Court further pointed out that decision no. 7/2006 – could not be applied without infringing the principle stipulated by the Romanian Constitution that laws could not be applied retroactively. Moreover, the County Court based its findings on the conclusions of the expert report of 2 June 2009.
The fiscal authorities lodged an appeal on points of law against that judgment. They claimed that the CDs contained a software program that was absolutely necessary for the functioning of the imported equipment and that decision no. 368/1998 was therefore not applicable, as it concerned know‑how and technology.
On 19 April 2010 the Iași Court of Appeal allowed the appeal, set aside the judgment of 27 October 2009 and dismissed the applicant company’s complaint. It held that under Law no. 345/2002 the importation of CDs carried out by the applicant company in 2003 had in fact constituted the importation of assets and that the applicant company should accordingly have paid VAT on the value (as stipulated in the sale contract) of those CDs.
COMPLAINTS
1. Relying on Article 1 of Protocol No.1 to the Convention, the applicant company complains of the lack of foreseeable legislation applicable to customs duties in respect of the importation of know-how; despite the fact that at the time of the importation in question the only applicable law was decision no. 368/1998, the customs authorities calculated the customs duties according to decision no. 7/2006, while the Iași Court of Appeal applied Law no. 345/2002.
2. Moreover, it claimed that the fiscal authorities had imposed a disproportionate sanction by asking it to pay delay and interest penalties for the period between 2003 and 2008.
QUESTIONS TO THE PARTIES
1. Which were the legal provisions applicable to the assessment of the applicant company’s fiscal obligations concerning the importing of CDs and industrial equipment carried out in 2003?
2. Has there been an interference with the applicant’s peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1?
3. If so, was the decision to recalculate the applicant company’s fiscal obligations and to impose tax surcharges in breach of its right to peaceful enjoyment of its possessions, as guaranteed by Article 1 of Protocol No. 1 to the Convention?
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