On 5 June, the Department of Administrative Cases of the Supreme Court suspended proceedings in the case regarding application of “Latvijas propāna gāze” Ltd. on abolishment of the decision of the State Revenue Service in part, which imposes an obligation to “Latvijas propāna gāze” Ltd. to pay tax payment to the state budget.

In period between 20 March 2009 and 15 January 2010, the applicant “Latvijas propāna gāze” Ltd., imported liquefied oil gas from Russia to Latvia, and performed classification of goods in accordance with code 2711 19 00 of the Combined Nomenclature of the European Union, applying  import duty rate of 0% from customs value of goods.

The State Revenue Service, when carrying out applicant’s tax audit for unified administrative documents submitted in the foregoing period, recognised that propane and butane were dominating substances in imported goods, and thus, it conforms to codes 2711 12 97 or 2711 13 97. The conclusion of the Service regarding classification of goods in accordance with the Combined Nomenclature was prepared, having verified information provided in importer’s documents. Observing the above mentioned, the State Revenue Service calculated import duty, value added tax and overdue fee and penalty to be paid by the applicant.

The dispute in the case concerns code of the Combined Nomenclature applicable to goods declared by the applicant, namely, liquefied oil gas.

When reviewing the case, the Administrative regional court referred to the conclusion established in the case-law of the Court of Justice of the European Union, which states that, in order to make tariff classification of goods, it must be determined what material goods consist of is the one, which provides fundamental characteristics to the goods. It may be assessed, when asking a question whether goods, which do not contain any of these components, would preserve characteristic features. Fundamental characteristics of goods, depending on type of goods, may follow from material or essence of components, or amount, quantity, weight or value of goods, or significance of material in use of these goods. Having applied this conclusion in case being reviewed, the regional court concluded that the State Revenue Service has not justified, what fundamental characteristics of goods are, and why exactly propane or butane is considered to be substance, which determines fundamental characteristics of goods. The court found that passport of quality of goods does not contain indication of quantity of propane or butane separately. The court also observed statement of Riga Technical University that it is impossible to determine that any substance liquefied oil gas consists of could singly determine fundamental characteristics of liquefied oil gas. Moreover, having reviewed passport of quality filed by the applicant to liquefied gas, which, in other case, was purchased from Lithuania, the court concluded that cases, when there is more propylene than propane in composition of gas.  

Having summarised the foregoing information, the Supreme Court decided to suspend proceedings in the case and to ask the Court of Justice of the European Union preliminary questions, inter alia, whether the code of the Combined Nomenclature of the European Union applied by the declarant in this case, or the code applied by the State Revenue Service is applicable to gas, which consists of 0.32 % of sum of methane, ethane and ethylene, 58.32 % is sum of propane and propylene, and sum of butane and butylene does not exceed 39.99 %, if a declarant of goods has not precisely indicated percentage amount of major substances within composition of the gas.

Information prepared by Baiba Kataja, the Press secretary of the Supreme Court
Telephone: 67020396; e-mail: baiba.kataja@at.gov.lv