Case No. 11/04
THE CONSTITUTIONAL COURT OF THE REPUBLIC OF
LITHUANIA
RULING
ON THE COMPLIANCE OF ITEM 21.1 (WORDING OF 27 JUNE 2002)
OF THE PROCEDURE OF THE TEMPORARY IMPORT OF GOODS TO THE
REPUBLIC OF LITHUANIA FOR PROCESSING, APPROVED BY GOVERNMENT OF
THE REPUBLIC OF LITHUANIA RESOLUTION NO. 898 "ON THE APPROVAL
OF THE PROCEDURE OF THE TEMPORARY IMPORT OF GOODS TO THE
REPUBLIC OF LITHUANIA FOR PROCESSING" OF 11 AUGUST 1997 WITH
THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA
24 January 2006
Vilnius
The Constitutional Court of the Republic of Lithuania,
composed of the Justices of the Constitutional Court Armanas
Abramavičius, Toma Birmontienė, Egidijus Kūris, Kęstutis
Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Vytautas
Sinkevičius, Stasys Stačiokas, and Romualdas Kęstutis Urbaitis,
with the secretary of the hearing-Daiva Pitrėnaitė,
in the presence of the representatives of the Government
of the Republic of Lithuania, the party concerned, who were
Paulius Majauskas, the Head of the Tax Administration Division
of Tax Department of the Ministry of Finance of the Republic of
Lithuania, and Valentina Lemežienė, the Chief of the Legal
Division of the Customs Department under the Ministry of
Finance of the Republic of Lithuania,
pursuant to Articles 102 and 105 of the Constitution of
the Republic of Lithuania and Article 1 of the Law on the
Constitutional Court of the Republic of Lithuania, in its
public hearing on 17 January 2006 heard case No. 11/04
subsequent to the petition of the Klaipėda Regional
Administrative Court, the petitioner, requesting to investigate
whether Item 21.1 of the Procedure of the Temporary Import of
Goods to the Republic of Lithuania for Processing, approved by
Government of the Republic of Lithuania Resolution No. 898 "On
the Approval of the Procedure of the Temporary Import of Goods
to the Republic of Lithuania for Processing" of 11 August 1997
with Item 15 of Article 67 and Paragraph 3 of Article 127 of
the Constitution of the Republic of Lithuania.
The Constitutional Court
has established:
I
The Klaipėda Regional Administrative Court, the
petitioner, was investigating an administrative case. By its
ruling, the court suspended the consideration of the case and
applied to the Constitutional Court with a petition requesting
to investigate whether Item 21.1 of the Procedure of the
Temporary Import of Goods to the Republic of Lithuania for
Processing (hereinafter also referred to as the Procedure),
approved by Government of the Republic of Lithuania Resolution
No. 898 "On the Approval of the Procedure of the Temporary
Import of Goods to the Republic of Lithuania for Processing" of
11 August 1997 with Item 15 of Article 67 and Paragraph 3 of
Article 127 of the Constitution of the Republic of Lithuania.
II
The petitioner grounds his petition on the fact that, in
his opinion, the duty of the taxpayer to pay not only the
import taxes, but also the fines while issuing the main
compensatory products into free circulation is established in
Item 21.1 of the Procedure of the Temporary Import of Goods to
the Republic of Lithuania for Processing, approved by
Government Resolution No. 898 "On the Approval of the Procedure
of the Temporary Import of Goods to the Republic of Lithuania
for Processing" of 11 August 1997. In the opinion of the
petitioner, these fines are to be assessed as an element of the
tax and have to be established not by a Government resolution,
but by a law. However, according to the petitioner, such fines
are provided for neither in the Customs Code of the Republic of
Lithuania, nor the Republic of Lithuania Law on Value Added
Tax, nor the Republic of Lithuania Law on Tax Administration.
III
In the course of the preparation of the case for the
Constitutional Court hearing, written explanations from the
representatives of the Government, the party concerned, who
were P. Majauskas and V. Lemežienė, were received in which it
is stated that Item 21.1 of the Procedure is not in conflict
with the Constitution. The position of the petitioner is
grounded on the following arguments.
1. According to P. Majauskas, in the relations of tax
administration fines are not only the measure to ensure the
implementation of tax obligation, but it also performs the
compensatory function. They are entrenched in the laws adopted
by the Seimas-the Customs Code, the Law on Tax Administration
and the Republic of Lithuania Law on Customs Tariffs. In Item
21.1 of the Procedure not some new taxes are established, but
the calculation procedure for already established taxes-the one
which ensures that the legal interests of other business
subjects, for whom the paying of taxes is not postponed (the
goods are issued into free circulation immediately) after they
import goods will be protected. It is in line with the
constitutional principles of equal rights of persons and fair
competition.
2. According to V. Lemežienė, under Article 18 of the Law
on Customs Tariffs, the Customs has the right to calculate
fines to persons who have not paid the customs duties or have
not paid them in time, and the size of such duties as well as
the calculation and payment procedure are established by the
Minister of Finance. In the Procedure not a new element of the
tax or its size was established, but it just mentioned the
right and duty of the customs to calculate and exact fines
established in the Law on Customs Tariffs. Even in the case
that there were no provisions on calculation of fines in the
Procedure, under Article 18 of the Law on Customs Tariffs and
Chapter XVII of the Customs Code the customs would have the
right to calculate the debt (inter alia fines) for the customs.
IV
In the course of the preparation of the case for the
Constitutional Court hearing, written explanations from A.
Butkevičius, Minister of Finance of the Republic of Lithuania,
P. Čėsna, Minister of Economy of the Republic of Lithuania, G.
Švedas, Vice-minister of Justice of the Republic of Lithuania,
D. Kriaučiūnas, Acting Director General of the European Law
Department under the Government of the Republic of Lithuania
and R. Klevečka, Director of the Customs Department under the
Ministry of Finance of the Republic of Lithuania were received.
V
At the hearing of the Constitutional Court, P. Majauskas
and V. Lemežienė, the representatives of the Government, the
party concerned, virtually repeated the arguments set forth in
the written explanations.
P. Majauskas also noted that the fines provided for in the
Procedure are virtually the compensatory interest.
The Constitutional Court
holds that:
I
1. On 11 August 1997 Government adopted Resolution No. 898
"On the Approval of the Procedure of the Temporary Import of
Goods to the Republic of Lithuania for Processing", whose Item
1 approved the Procedure of the Temporary Import of Goods to
the Republic of Lithuania for Processing. This Government
resolution came into force on 1 September 1997.
The Procedure was amended by Government Resolution No.
1077 "On the Procedure for Returning of Precious Metals and
their Products, Temporarily Imported to the Republic of
Lithuania for Processing by the Subjects of Foreign Economy to
Abroad, and on the Tariffs of Assay and Lettering of Precious
Metals and Stones and Other Services" of 3 September 1998,
Government Resolution No. 1093 "On Partial Amending of
Government Resolution No. 898 'On the Approval of the Procedure
of the Temporary Import of Goods to the Republic of Lithuania
for Processing' of 11 August 1997" of 4 October 1999,
Government Resolution No. 432 "On Partial Amending of
Government Resolution No. 898 'On the Approval of the Procedure
of the Temporary Import of Goods to the Republic of Lithuania
for Processing' of 11 August 1997" of 18 April 2001, and
Government Resolution No. 1003 "On Amending Government
Resolution No. 898 'On the Approval of the Procedure of the
Temporary Import of Goods to the Republic of Lithuania for
Processing' of 11 August 1997 and Government Resolution No. 719
'On the Approval of the Procedure of the Temporary Import of
Goods to the Republic of Lithuania' of 14 June 2001".
On 28 April 2004, the Government adopted Resolution No.
508 "On the Recognition of Certain Republic of Lithuania
Resolutions that Have Economic Impact on the Questions of
Customs Procedures as no Longer Valid" whose Item 1 recognised
inter alia Government Resolution No. 898 "On the Approval of
the Procedure of the Temporary Import of Goods to the Republic
of Lithuania for Processing" of 11 August 1997 and the
Government resolutions amending it as no longer valid.
Government Resolution No. 508 "On the Recognition of Certain
Republic of Lithuania Resolutions that Have Economic Impact on
the Questions of Customs Procedures as no Longer Valid" of 28
April 2004 came into force on 1 May 2004.
2. The petitioner requests to investigate whether Item
21.1 of the Procedure is not in conflict with Item 15 of
Article 67 and Paragraph 3 of Article 127 of the Constitution.
3. It is obvious from the arguments of the petition that
the petitioner had doubts on the compliance of Item 21 (wording
of 27 June 2002, Official Gazette Valstybės žinios, 2002, No.
66-2723) of the Procedure with the Constitution, in which it is
inter alia established:
"Import duties and/or taxes for compensatory products and
goods, temporarily imported for processing but not processed,
that are issued into free circulation, are calculated as
follows:
21.1 When the main compensatory products are issued into
free circulation, the import duties and/or taxes are calculated
on the custom's value of the part of the goods, temporarily
imported for processing, used for producing the said products,
and by deducting damages and adding fines that are calculated
on the gross amount of the calculated customs duties and/or
taxes for each day, starting from customs procedure
formalisation of temporary import for processing till customs
procedure formalisation of issuing them into free circulation.
The tariff of the fines is equal to the tariff of the fines for
import duties and/or taxes not paid in time, which is valid on
the day of the acceptance of the customs declaration for
temporary import of goods for processing for formalisation of
customs procedure."
It is obvious from the arguments of the petition that the
petitioner had doubts not on the compliance of the whole quoted
legal regulation with the Constitution but only on the
compliance of the provision "while issuing the main
compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure with the
Constitution and on whether this provision is not in conflict
with the Constitution to the extent that, according to the
petitioner, the mentioned fines should be established not by a
Government resolution, but by a law.
4. Subsequent to the petition of the petitioner, the
Constitutional Court will investigate whether the legal
regulation established in Item 21.1 (wording of 27 June 2002)
of the Procedure was not in conflict with Item 15 of Article 67
and Paragraph 3 of Article 127 of the Constitution only to the
extent and in the aspect specified by the petitioner.
II
1. Taxes, other contributions to the budgets and levies
shall be established by the laws of the Republic of Lithuania
(Paragraph 3 of Article 127 of the Constitution). State taxes
and other obligatory payments shall be established by the
Seimas (Item 15 of Article 67 of the Constitution).
2. Taxes and other obligatory payments are obligatory and
gratuitous payments, established by the law, of respective
amount by legal and natural persons at the set time to the
state (municipal) budget. In its acts the Constitutional Court
has more than once held that such essential elements of the tax
as the object of the tax, subjects of tax relations, their
rights and duties, sizes (tariffs) of the tax, payment terms,
exceptions and concessions, penalties and fines must be
provided for by the law and that this constitutional
requirement is an important guarantee of the protection of the
rights of the person.
In its decision of 20 September 2005 the Constitutional
Court held that the constitutional imperative to establish
state taxes and other payments by a law must be observed
mutatis mutandis also when one establishes other property
obligations to persons, and the latter must also be grounded on
the law.
3. The duty to pay taxes is a constitutional duty. It is
not sufficient merely to establish a tax as an obligation to
the state so that taxes would be properly paid and collected,
but it is also necessary to establish the procedure for their
payment (including inter alia procedures of tax administration,
their calculation, etc). The Constitutional Court has held that
it is not required in the Constitution to establish the
procedure of implementation of tax laws, as well as the
procedure of calculation of particular payable tax established
by a law may be established not only by a law, but also by a
substatutory act (Constitutional Court rulings of 15 March
2000, 17 November 2003 and 2 September 2004).
According to the Constitution, the legal regulation must
be established which would ensure the proper tax paying and
that the taxes are paid in time; for that reason, when paying
heed to the Constitution (inter alia the constitutional
principles of justice, proportionality, legal certainty and
clarity), various measures may be chosen such as penalties,
fines, interest, etc.
It is also to be noted that while deciding whether the
Government resolution (i.e. substatutory legal act)
establishing a certain measure ensuring the paying of taxes, is
not in conflict with the Constitution (inter alia Item 15 of
Article 67 and Paragraph 3 of Article 127 thereof), it is
necessary in every case to find out whether a corresponding
measure established by the Government resolution, ensuring the
paying of taxes, is not grounded on the law; if the mentioned
measure ensuring the paying of taxes is grounded on the law, in
itself the mere fact that this measure is regulated in more
detail in the substatutory legal act but not in the law is not
the grounds to hold that such legal regulation established by
the Government resolution is not in line with the Constitution.
4. In the context of the constitutional justice case at
issue it is to be noted that the official constitutional
doctrine of taxes and other obligatory payments, to which it is
referred in this Constitutional Court ruling, was formulated
while investigating whether the legal acts (parts thereof),
adopted till 14 August 2004, i.e. before the Constitutional Act
of the Republic of Lithuania "On Membership of the Republic of
Lithuania in the European Union", adopted by the Seimas on 13
July 2004, came into effect, which under Article 150 of the
Constitution is a constituent part of the Constitution, were
not in conflict with the Constitution. In the context of the
constitutional justice case at issue it is also to be noted
that in this constitutional justice case it is also being
investigated whether the legal regulation established by the
Government resolution that was no longer valid at the time when
the said amendment to the Constitution came into effect, was
not in conflict with the Constitution.
It is to be emphasised that after the Constitutional Act
of the Republic of Lithuania "On Membership of the Republic of
Lithuania in the European Union", adopted by the Seimas on 13
July 2004 came into force, the official constitutional doctrine
of taxes and other obligatory payments, formulated in the
former constitutional justice cases has to be elaborated by
taking account of the said amendment to the Constitution.
Since, under the Constitution only the Constitutional Court has
powers, in each case, after an amendment to the Constitution
has gone into effect, to hold whether it is still possible (and
to which extent) to refer to the official constitutional
doctrine formulated by the Constitutional Court on the grounds
of the former provisions of the Constitution (Constitutional
Court ruling of 13 May 2004).
III
On the compliance of the provision "while issuing the main
compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure with Item 15 of
Article 67 and Paragraph 3 of Article 127 of the Constitution.
1. It was mentioned that provision "while issuing the main
compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" was entrenched
in Item 21.1 (wording of 27 June 2002) of the Procedure.
2. It is to be noted that the disputed provision of Item
21.1 (wording of 27 June 2002) of the Procedure was meant to
regulate the relationships related to temporary import of goods
into the Republic of Lithuania for processing, i.e. with such
procedure of the customs that virtually differs from other
procedures of the customs, inter alia from such import of goods
into the Republic of Lithuania, when they are issued into free
circulation in this country after the established formalities
are completed.
In the context of the constitutional justice case at issue
it is to be noted that the temporary import of goods to the
Republic of Lithuania for processing inter alia differs from
such import of goods to the Republic of Lithuania when they are
issued into free circulation in the country after the
established formalities are completed in a way that a person,
who temporary imports the goods to the Republic of Lithuania
for processing, has no duty to pay import duties and/ or
corresponding taxes at the time when the goods are being
temporarily imported to the Republic of Lithuania.
3. The disputed provision of Item 21.1 (wording of 27 June
2002) of the Procedure, as well as other provisions of this
item, regulated precisely such relations and was designated
precisely for such legal situations when after the temporarily
imported goods to the Republic of Lithuania for processing have
been processed, the corresponding main compensatory products
were for some reason not exported from the Republic of
Lithuania, but issued into free circulation in this country.
Thus, the disputed legal regulation was designated for such
legal situations when the started customs procedure for
temporary import of goods to the Republic of Lithuania for
processing had to be finished as another procedure-as such
import of goods to the Republic of Lithuania, when
corresponding main compensatory products would be issued into
free circulation in the country.
Thus, a person, who temporarily imported goods to the
Republic of Lithuania for processing and without paying import
duties and/or taxes at the time when the goods were temporarily
imported to the Republic of Lithuania, for a certain period of
time-until the corresponding main compensatory products are
issued into free circulation in this country-used certain funds
that he would have paid as the import duty and/or certain tax,
if he had immediately declared that the goods were imported to
the Republic of Lithuania not for processing but for free
circulation in the country.
Consequently, the purpose of the "fines" specified in Item
21.1 (wording of 27 June 2002) of the Procedure is to
compensate for the State such funds which would not have been
lost if one had immediately declared that the goods were
imported to the Republic of Lithuania not for processing but
for free circulation in the country, and after having performed
the specified formalities, import duty and/or certain tax would
have been paid, as well as not to allow that the competition
between entities of economy who import goods to the Republic of
Lithuania would be distorted.
4. In the disputed provision of Item 21.1 (wording of 27
June 2002) of the Procedure the notion "fines" is used. The
legal content of this notion is to be disclosed by construing
it not only in a formal or isolated way, but also in the
context of the legal regulation specified in this item.
In tax law fines are treated as a sanction that can be
applied to a person who has not fulfilled the duty to pay taxes
in time or properly.
According to Item 21.1 (wording of 27 June 2002) of the
Procedure, in such legal situation when after the temporarily
imported goods to the Republic of Lithuania for processing have
been processed, the corresponding main compensatory products
were for some reason not exported from the Republic of
Lithuania, but issued into free circulation in this country,
the person is not imposed any sanction (or its equal measure)
for the fact that he has not fulfilled the duty to pay the
import duty and/or corresponding tax at the established time or
fulfilled it inappropriately because the said person had no
such duty at all before the said legal situation occurred; it
was mentioned that the purpose of the fines specified in Item
21.1 (wording of 27 June 2002) of the Procedure is to
compensate for the state such funds which would have not been
lost if one had immediately declared that the goods were
imported to the Republic of Lithuania not for processing but
for free circulation in this country, and after having
performed the specified formalities, import duty and/or certain
tax would have been paid, as well as not to allow that the
competition between subjects of economy who import goods to the
Republic of Lithuania would be distorted.
Thus, the notion "fines" used in the disputed provision of
Item 21.1 (wording of 27 June 2002) of the Procedure has a
different content than the one that is specific for it in the
tax law: taking account to the context of the legal regulation,
it is to be held that the notion "fines" used in Item 21.1
(wording of 27 June 2002) of the Procedure was granted the
content of a different notion of the text law, i.e.
"compensatory interest".
It is to be noted that in legal acts the notions have to
be used without deviating from the meaning which is typical of
them, and in case that they are granted a specific content, it
must be especially discussed in the corresponding legal act.
It is to be held that in the provision of Item 21.1
(wording of 27 June 2002) of the Procedure the notion "fines"
was used legally incorrectly, because it was granted the
content of another notion, i.e. "compensatory interest".
However, the said incorrectness is not in itself the grounds to
recognise the said provision to be in conflict with the
Constitution.
5. While deciding whether the provision "while issuing the
main compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure was not in conflict
with Item 15 of Article 67 and Paragraph 3 of Article 127 of
the Constitution, it is to be noted that:
- in the then Customs Code also such a legal situation was
provided where non-Lithuanian goods, temporarily imported to
Lithuania for processing, were conditionally not imposed any
import duties or taxes (Item 3 (wording of 18 April 1996) of
Paragraph 1 of Article 82);
- the notion of "compensatory products" was used in Item 4
(wording of 18 April 1996) of Paragraph 2 of Article 111 of the
then Customs Code; according to the definition of the notion
"compensatory products" provided in the said item, compensatory
products shall mean the products that are received after the
processing operations are performed;
- according to Article 117 (wording of 18 April 1996) of
the then Customs Code, the cases and conditions, under which
the temporarily imported goods for processing or compensatory
products could be issued into free circulation or considered as
such, had to be established by the legal acts regulating the
application of this code;
- under Article 234 (wording of 18 April 1996) of the then
Customs Code it was established that the legal acts regulating
the application of this code shall be approved by the
Government or its authorised state institution;
- under Item 1 (wording of 4 December 2001) of Paragraph 1
of Article 185 of the then Customs Code, the import debt to the
Customs used to appear when the goods for which import duties
and/or taxes were established were issued into free
circulation;
- in Paragraph 1 (wording of 4 December 2001) of Article
118 of the then Customs Code it was established that in case
that there appears a debt for the Customs, the size of this
debt while importing goods is established by taking account of
inter alia the norms of import duties and taxes and the
calculation rules that were applied on the day when the customs
declaration of import for the procedure of temporary import for
processing was adopted.
It is to be noted that the provision stating that payment
of customs duties is regulated not only by the Customs Code,
but also by other legal acts, was also entrenched in Paragraph
1 (wording of 19 February 1998) of Article 15 of the then Law
on Customs Tariffs.
6. Thus, while assessing the provision "while issuing the
main compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure in the context of
the then legal regulation established in laws, there are no
grounds to hold that this provision was not grounded on the
law.
7. In this ruling of the Constitutional Court it was held
that if by the Government resolution a certain measure ensuring
the paying of taxes is established, which is grounded on the
law, in itself the mere fact that this measure is regulated in
more detail in the substatutory legal act but not in a law is
not the grounds to hold that such legal regulation established
by a Government resolution is not in line with the
Constitution.
8. Taking account of the arguments set forth, a conclusion
is to be drawn that the provision "while issuing the main
compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure was not in conflict
with Item 15 of Article 67 and Paragraph 3 of Article 127 of
the Constitution.
Conforming to Articles 102 and 105 of the Constitution of
the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of
the Law on the Constitutional Court of the Republic of
Lithuania, the Constitutional Court of the Republic of
Lithuania has passed the following
ruling:
To recognise that the provision "while issuing the main
compensatory products into free circulation, import duties
and/or taxes are calculated <...> adding fines" of Item 21.1
(wording of 27 June 2002) of the Procedure of the Temporary
Import of Goods to the Republic of Lithuania for Processing,
approved by Government of the Republic of Lithuania Resolution
No. 898 "On the Approval of the Procedure of the Temporary
Import of Goods to the Republic of Lithuania for Processing" of
11 August 1997, was not in conflict with Item 15 of Article 67
and Paragraph 3 of Article 127 of the Constitution of the
Republic of Lithuania.
This ruling of the Constitutional Court is final and not
subject to appeal.
The ruling is promulgated in the name of the Republic of
Lithuania.
Justices of the Constitutional Court: Armanas Abramavičius
Toma Birmontienė
Egidijus Kūris
Kęstutis Lapinskas
Zenonas Namavičius
Ramutė Ruškytė
Vytautas Sinkevičius
Stasys Stačiokas
Romualdas Kęstutis Urbaitis