Adv. Gill Nadel, Moran Shmilovich
The refund of import taxes (tariffs, purchase taxes, etc) that have been overpaid is subject to the importer's proving that he did not roll the tax over to the purchaser or that he did not sell the goods, as established in paragraph 6 to the Law of Indirect Taxes (Taxes Over- or Under-paid. 1968).
As we have noted in the past, in the year 2008 two important decisions of the District Court of Tel Aviv were issued relating to this subject. One is stringent and the other more lenient.
In the decision on the Shechori case (civil appeal 1512/05, decision given 13.4.08), the action of the importer of batteries for cellular phones for refund of overpaid tax was dismissed. The court ruled that the extended period during which the importer continued to import the batteries proves that the import was profitable for him and that he rolled the tax over to the buyers, since there is no business that is willing to accumulate losses for a long period of time. The court also analyzed the raw profit of the importer and reached the conclusion that the profit rate he gained from the sale of the batteries was double from the profit rate he gained on other products, unlike what would be expected from a situation in which the tax was not rolled over onto the client, in which case the profitability would been diminished. The court also ruled that even though the importer showed losses for the length of this period, this only indicates failure to roll over prima facie, since it is possible for there to be a case in which the importer rolled the tax over and losses were caused by a decrease in the scope of sales.
In the decision on the Rap case (civil appeal 1723/06) issued only one month after the Shechori case, the District Court of Tel Aviv, with a different panel, issued a decision which expressed a most friendly and liberal approach to the importer.
Firstly, the court emphasized the starting point in refund of overpaid taxes, which is- the rule is that sums collected unlawfully should be returned to the importer, and only when the importer suffered no financial loss (and this is the exception) are the taxes not returned.
Further, the court found that it is improper to place an unreasonable or unprovable burden of proof upon the importer suing for refund of taxes. It was also ruled that the law grants the importer many varied means of proof in order to win the refund of the excess levied upon him, and that one special, specific sort of proof should not be demanded of. The importer must meet the regular burden of proof (tilting the balance of probabilities in his favor) and has no duty to provide complete certainty on the issue.
The court also ruled that there is an assumption that under the developed market conditions, what generally determines price is the competitions between importers, and the importer must set the price of his products accordingly, even when this will lead to a significant decrease in its profits. In addition, the court ruled that if the importer succeeds in proving that its profits on the relevant product were lower than the profits from the sale of the rest of its products- this is enough. In this case, the operational profit of the importer is significant, not just the raw profit.
Very recently an additional decision was issued by the District Court of Tel Aviv, which once again related to the question of roll-over of the tax. That case involved an importer of equipment for the recording of television broadcasts via satellite, that imported frequency amplifiers and noise dampeners. The importer claimed that these were charged taxes in excess and it had the right to their refund. The first instance accepted the claim of the importer regarding the classification of the goods, but rejected the action for their refund, in light of the failure to meet the burden of proof resting upon it to prove that the excess payments were not "rolled over" onto the consumers. The District Court rejected the appeal and upheld the decision of the Magistrate's Court.
The court was aware of the liberal decision on the Rap case, and was even willing to accept, on the fundamental level, the liberal stance, but found no place to apply such a stance to the present case since, in the opinion of the court, the scope of evidence presented in the case was not sufficient.
The court ruled that the opinion of the accountant presented did not deal at all in the question of whether the overpaid tax was included in the price of the dampeners, but rather brought only a sample examination of data relating to purchases, sales, and raw profit percentages on the dampeners. further more, accountant testified that he could not make a statement on the question of whether the overpaid tax was included in the sale price of the dampeners.
The court noted that the importer's manager testified that the sale price was set according to the norm in the market, through constant competition with other importers, but the appellant did not bring any data regarding competitors in the Israeli market: the importers in Israel and their sales data and a comparison of prices compared to other importer who were known not to have paid the tax.
The court also noted that no evidence was brought on the question of how the price of the dampeners was determined when it became clear that the importer had, in effect, raw profit from the sales (which was hidden by the load of expenses that grew from year to year) and even operational profit during some of the years.
Accordingly, the court ruled that "even under the assumption that the burden resting upon the plaintiff to prove failure to roll-over the tax should be lightened, under the specific factual circumstances of this case, and considering the factual findings as they were ruled by the lower court, the application of the legal precedents to the specific factual circumstances of this case surely leads to the result to which the lower court arrived, and therefore this appeal should be dismissed."
At the same time, the court suggested a solution that will more concretely ensure the public good and the refund of monies to the community that paid the price in the form of those monies from which the state profited. The court suggested, for example, that a fund be established in to which would be placed any overpayments made and not refunded due to failure to meet the burden of proof of paragraph 6 to the Law of Indirect Taxes and that this fund be used for specific purposes for the benefit of the community of consumers.
Will such a fund be set up? It is not known, but this is certainly an interesting direction, since leaving the money in the hands of the state is not justified, even when the tax has been rolled over.
civil appeal 3507/07 Be-Set Ltd. v. State of Israel, Customs and VAT Department, for the appellant- Adv. Dorot, for the State- Adv. Tofef.
עדכוני מכס ורגולציה
