In March, we informed you about the ruling of the Constitutional Court, which sided with a company in a dispute over interest on illegally collected customs duties against the customs office. The dispute thus returned to the decision of the Supreme Administrative Court (“SAC”), which reacted very quickly and favourably for the company.
Facts of the case
The customs office assessed the company’s import duty and penalty due to the inclusion of imported goods in an incorrect item of the Combined Nomenclature with a lower duty rate. The company paid the additionally assessed duty, but the additional payment assessments were later changed, or some of them were cancelled, and the unjustifiably collected customs duty was returned to the company. Subsequently, the company demanded payment of interest on the unlawfully collected customs duty at the customs office.
First decision of the SAC
At first, the SAC did not find the right to interest on the unlawfully collected customs duty on the grounds that the Tax Code is not a national regulation that would impose an obligation on the Czech Republic to pay interest on the repaid customs duty within the meaning of the EU Customs Code beyond the scope of EU legislation. In the event that the complainant suffered damage due to the unlawful procedure of the customs office, the SAC referred the company to a civil action under the Act on State Liability for Damage.
The second decision of the SAC
After the Constitutional Court stated that the reasoning of the SAC’s first decision was not in conformity with the Constitution and annulled the decision, the SAC dealt with the case again. In its second decision, the SAC relied on the Constitutional Court’s conclusion that individuals are generally entitled to the payment of interest for the period during which they were prevented from disposing of sums of money, in breach of EU law. If EU law does not contain rules on compensation, it is up to the Member State to set the rules itself. However, national rules cannot effectively prevent a company from enforcing its claim.
The SAC concluded that proceedings under the Act on State Liability for Damage are not primarily intended to pay interest on an unjustifiably withheld amount, as required by EU case law, but to compensate for damage caused by an unlawful decision. The possibility of an individual to claim the payment of interest in proceedings for damages is rather theoretical and highly uncertain for the party to the customs proceedings. According to EU case law, an individual should be entitled to interest almost automatically, or rather, a straightforward path should lead to its successful application, which does not require demanding proof that would disproportionately burden the company. Therefore, the SAC does not consider the procedure under the Act on State Liability for Damage to be an appropriate way to claim interest on unlawfully collected customs guaranteed by EU case law.
According to the SAC, the requirements for compensation for the value of missing money over time are much better met by the tax institute of interest on unlawfully assessed tax, regulated by the Tax Code. Therefore, if the customs office has unlawfully determined and collected customs duty, it is obliged to compensate the company for this fact by interest on the unlawfully assessed tax, the annual rate of which corresponds to the CNB’s repo rate increased by 8 percentage points. However, the right to interest arises only if the unlawful determination of customs duties is due to an infringement of EU law, for example due to an incorrect tariff classification of goods by the customs office.
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