The Constitutional Court recognized imposition of penalty for tax avoidance in respect to contraband goods as constitutional
On 18 October 2012, the Constitutional Court has adopted a decision in the case No. 2012-02-0106 “On Compliance of the Words “and a fine in accordance with the Law On Taxes and Fees” of Section 33 (5) and (7) of the Law “On Excise Duties” with the Second Sentence of Article 92 of the Satversme and Article 4 of Protocol No. 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms”.
The principle of prohibition of double punishment (ne bisi n idem) is not breached if circumstances for application of both fines are inseparable in time and space.
Contested Norms (in bold)
Section 33 of the Law “On Excise Duties”:
„(5) Confiscation of excisable goods for violations of this Law or other regulatory enactments or application of other regulatory enactments in respect of violations in the circulation of excisable goods shall not exempt the specific person from liability to pay duty in accordance with this Law and a fine in accordance with the Law On Taxes and Fees. The State Revenue Service shall not calculate the duty and fee for confiscated excisable goods that do not exceed the following amounts:
1) alcoholic beverages:
a) intermediate products and other alcoholic beverages – 5 litres,
b) beer, wine and fermented beverages – 30 litres;
2) tobacco products:
a) cigarettes – 300 cigarettes,
b) cigars or cigarillos – 900 cigars or cigarillos,
c) smoking tobacco – 500 grams;
3) mineral oil products – 40 litres;
4) non-alcoholic beverages – 500 litres;
5) coffee – 20 kilograms.
(7) If a person performs any operation with excisable goods without complying with the provisions of this Law (including undeclared or other importation in the State of excisable goods without complying with the importation procedures specified in regulatory enactments or without fulfilling the relevant customs procedures, performs unregistered or other production of excisable goods without complying with the procedures specified in regulatory enactments for the production of excisable goods, performs any other activities with excisable goods for which duty has not been paid or security provided for by this Law has not been submitted or which have not been labelled with excise duty stamps in accordance with this Law), the State Revenue Service shall collect by uncontested procedures into the State budget in accordance with the duty rates specified in this Law, the unpaid amounts of the duty and a fine in accordance with the Law On Taxes and Fees.”
Legal Norms of a Higher Legal Force
Article 92 of the Satversme: Everyone has the right to defend his or her rights and lawful interests in a fair court. Everyone shall be presumed innocent until his or her guilt has been established in accordance with law. Everyone, where his or her rights are violated without basis, has a right to commensurate compensation. Everyone has a right to the assistance of counsel.
Article 4 of Protocol No. 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter – the Convention):
- No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.
- The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case.
- No derogation from this Article shall be made under Article 15 of the Convention.
The Facts
The Administrative District Court [Administratīvā rajona tiesa] of the Republic of Latvia reviews a case, in the frameworks of which a natural person has contested a decision of the Director General of the State Revenue Service [Valsts ieņēmumu dienests], by means of which a person has been imposed an excise duty, a fine and a delay penalty payment for tobacco products.
Previously the person has been held administratively liable for contraband of tobacco products, for which he has been imposed a fine, whilst the products were confiscated. The natural person applied to the Administrative District Court because he holds that he has been punished twice for one and the same offence.
The Applicant, the Administrative District Court holds that penalty payments established in legal norms of the Republic of Latvia pertain to the criminal law. Pursuant to case-law of the European Court of Human Rights, cases that are not regarded as criminal cases in a particular country can be recognized as criminal cases in the meaning of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
Application of an administrative penalty in an administrative offence matter and establishment of a tax penalty payment shall be regarded as a punishment in a criminal case. Consequently, the Court concludes that the Contested Norms permits double criminal punishment of a person.
However, the Saeima indicates that it is necessary to distinguish between an administrative punishment that is applicable in case of contraband, from penalty payment that is applicable in case of avoidance from excise duty. Although, in both norms, punishment is established as legal consequence of an offence, it should be applicable for two different kinds of offences – contraband and avoidance from excise duty. Consequently, the Contested Norm does not violate the principle of prohibition of double punishment.
The majority of summoned persons other agree with the opinion of the Saeima. The Ministry of Finance also indicates that along with an administrative offence (namely, contraband), a person is committed to payment of duty of excise goods.
Court Findings and the Ruling
On content of the principle ne bis in idem and its place in the constitutional law system
The Constitutional Court has recognized that the purpose of the principle of prohibition of double taxation is to prevent a recurrent punishment of a person in cases when a non-appealable decision on guilt of a person comes into effect or when a person is recognized as innocent. [10].
The right of a person to protect his or her rights and legal interests in a fair court are enshrined in the first sentence of Article 92 of the Satversme. The notion of a fair court includes two aspects, namely, “a fair court” as an independent judicial institution that reviews a case, and “a fair trial” as a due procedure of case examination that complies with all principles of a law-governed state. [11]
A fair court as a due court procedure of a law-governed State includes several mutually related rights, for instance, the right to access a court, the principle of equality and competition of parties, the right to a motivated court decision and the right to appeal. The principle of prohibition of double punishment is one of the most specific guarantees that are related with the right to examination of a case by a fair court. Consequently, the principle of prohibition of double punishment follows from the first sentence of Article 92 of the Satversme. [11]
On Application of the principle of prohibition of double punishment
The Constitutional Court concluded that the principle of prohibition of double punishment establishes the right not to be prosecuted and punished recurrently. The norm prohibits initiation of recurrent proceedings for one and the same offence. However, it is important to establish its application in case when, by committing one single offence, a person has committed several mutually related criminal delinquencies. The principle of prohibition of double punishment does not prohibit adjudication of different offences in different proceedings even if case if they follow from a single unlawful action. [14]
When applying the principle of prohibition of double punishment, the decisive role is played by factual circumstances, on which application of both punishments is based. Consequently, out of all elements of a criminal delinquency, the greatest attention should be paid to the objective aspect of the offence in particular, i.e. manifestations of person’s behaviour. [15.2]
Factual circumstances that are taken into account when inflicting an administrative punishment for contraband is the way how unlawful activity of a person was manifested when trying to transport goods across the national border. These circumstances can be established at the particular moment, namely, the moment when the persons transfers or tries to transfer goods across a national border. [15.2]
However, when smuggling in excise goods, a person has the duty to pay the excise duty for them irrespective of the fact whether the transportation has taken place in a legal or illegal way. The State Revenue Service has indicated that, in the frameworks of administrative proceedings, when a person is punished for contraband, it is informed on the duty to pay the excise duty, as well as the procedure of calculation of delay penalty payment. Consequently, the fact that is taken into account when applying the penalty established in Section 32 of the Law “On Taxes and Fees” is that a person has failed to fulfil its tax commitments in front of the State up to the date of launching tax audit. [15.2]
Consequently, the Court recognized that the Contested Norms do not cause any infringement of the principle of prohibition of double punishment because circumstances, on which application of both punishments is based, are distinguishable in time and space. [16]
The Constitutional Court recognized the words “and a fine in accordance with the Law On Taxes and Fees” of Section 33 (5) and (7) of the Law “On Excise Duties” as compliant with the Second Sentence of Article 92 of the Satversme and Article 4 of Protocol No. 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
The judgment of the Constitutional Court is final and not subject to appeal, it shall come into force on the date of publishing it.
Linked case: 2012-02-0106