Adv. Omer Wagner, Adv. Gill Nadel
As we know, when an importer seeks to file an action against the Customs Authority for tax return which was previously over paid ( in customs duties or purchase tax), there are many ways to do so, one of them by proving he did not pass on the tax at the time of selling the goods to his customers. Many court verdicts have dealt with the question of how far does an importer need to reach in terms of proof in order to get back over paid taxes, yet still a clear cut practice on this issue has yet to be formed. A recent verdict given by the Tel Aviv District Court sheds some light on the subject.
The facts of the case & claims of the parties:
Kivunim Systems and Technologies company imported vocal light equipment together with computer equipment and paid 45% percent of purchase tax under protest, according to The Customs Authority’s stance (classification in subheading 85.28-3000 and 84.71-6020). All in all the payment came to a total sum of hundreds of thousands of shekels, which led her to turn to court and claim tax refund. As mentioned, turning to court on this matter obliges the plaintiff to prove he/ she did not pass on taxes at the time of selling the goods.
The Magistrate Court rejected the company’s claim in light of the court’s decision that the company failed to prove it did not pass on taxes at the time of selling (the goods). The court did not trust the manger of the company’s testimony, according to which the company had to endure tax payment of hundreds of thousands of shekels and even though it did not pass on a dime onto its clients. In light of this the (court) rejected the experts opinions given by the company, which allegedly were based on the manger’s declaration.
An appeal was filed by the company to the District Court, which lately gave its verdict.
During the appeal, the company claimed that the question of whether or not the tax was passed on is a question for the experts, and therefore the Magistrates decision not to believe the Manger of the company is meaningless. It further claimed that that the Magistrate court should have analyzed the experts’ opinion given to it by the company, and rely on their testimony in order to determine on whether or not the tax was passed on or not from an accounting perspective.
Further on, it claimed that the fact it did not raise the prices after it started to pay the tax, shows it did not pass on the tax.
In opposition, the Customs Authority claimed that errors were found in the calculations presented by the company, since the company included various expenses which weren’t directly linked to the equipment’s import, such as general and administrative expenses, thus creating a calculationwhich showed losses or extremely low profits.
The decision on the appeal:
The District court criticized the Magistrate’s decision and ruled that simply declaring that the manger’s testimony wasn’t reliable, was not sufficient , but it was the duty of the court to examine the expert opinions given by both sides in order to determine whether or not the tax was passed on, from a professional point of view. On the matter itself, the District Court ruled that the manger’s testimony was not contradicted by other testimonies and thus it should not have been seen as unreliable.
The court ruled that the expert opinion presented by the Customs Authority, which intended to contradict the testimonies presented by the company’s, was given by a economist who was not an accountant and was not aimed at answering the controversial question or the expert opinion brought by the company, and all this strengthens the company’s claim that it did not pass on taxes.
In the end the court accepted the company’s appeal and instructed the Customs Authority not only to pay the company tax refund but also pay court expenses attorneys’ fees at a sum of 30,000 shekels.
(see C.A. (civil appeal) 3694/07 Kivunim Syestems and Technologies Ltd. Vs. The State of Israel - Customs department and VAT. Verdict given on 3.1.11, judges A.Kobo, M.Rubinstein & A.Cherniak - the parties representatives: importer- adv. L. Avigdori, Customs Authority – Adv. A.Liss from Tel Aviv Civilian District Adv.)
עדכוני מכס ורגולציה
