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The SACL asks the CJEU whether there is really no need to pay taxes for forfeited smuggled goods?

The SACL asks the CJEU whether there is really no need to pay taxes for forfeited smuggled goods?
2020-10-15

By judgement of 30 September 2020, the Supreme Administrative Court of Lithuania (SACL) decided to apply to the Court of Justice of the European Union (CJEU) for a preliminary ruling in an administrative case in which the tax dispute in question has arisen due to the payment of excise duty and import value added tax (VAT) on illegally imported cigarettes.

There was established in the case that the applicant organised and, together with other persons, imported excisable goods (cigarettes) from Belarus to Lithuania outside the border post. While the goods were already in Lithuania, they were seized by officials. The applicant and his accomplices were found guilty by the court of the criminal act and the smuggled goods were forfeited and ordered to be destroyed.

Upon the receipt of the information, the customs authorities exempted the applicant from the obligation to pay the customs duty after the determination that the forfeit of the illegally imported goods was one of the grounds for extinguishing the customs debt provided for in the Union Customs Code, but they calculated excise duty and import VAT on the smuggled goods.

The applicant denied such amounts, emphasizing that the obligation to pay excise duty and import VAT is extinguished on the same grounds as the obligation to pay customs duties when interpreting the provisions of the Community Customs Code previously in force in accordance with the case law of the CJEU. He also pointed out that, even in accordance with the amendments to the Law on Excise Duties and the Law on Value Added Tax, which entered into force a few months after the cigarettes were seized, the extinguishment of the obligation to pay customs duties means that excise duty and import VAT are no longer payable.

However, after analysing the provisions of the legal acts of the European Union and assessing the current jurisprudence of the CJEU, the panel of judges of the SACL had doubts as to whether the forfeit of the smuggled goods after they had been illegally imported and released for consumption in Lithuania extinguishes the above tax obligations. Therefore, taking into account, inter alia, the fact that the legislator takes a fundamentally different position in the Lithuanian national law, the panel of judges of the SACL decided to apply to the CJEU for a preliminary ruling on the following issues relevant to the case:

1) does Regulation (EU) of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code have to be interpreted as meaning that a customs debt is extinguished where, in a case such as the present, the smuggled goods were seized and subsequently forfeited after they have already been unlawfully imported into the customs territory of the European Union (released for consumption);

2) if the answer to question 1 is affirmative, it is asked, do the Council Directive of 16 December 2008 concerning the general arrangements for excise duty and the Council Directive of 28 November 2006 on the common system of value added tax have to be interpreted as meaning that the obligation to pay excise duty and / or VAT is not extinguished where, in a case such as the present, the smuggled goods are seized and subsequently forfeited after they have already been unlawfully imported into the customs territory of the European Union (released for consumption), even if a customs debt has been extinguished on the basis of Regulation (EU).

This case pending before the SACL has been suspended until the receipt of a preliminary ruling of the CJEU. Administrative case No A-830-442/2020.

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