The Constitutional Court found No. 54 / 2009 Coll.
The Constitutional Court's finding of 9 December 2008 on the application to declare unconstitutional the provision of § 105 paragraph 1 of the third sentence of Act No. 235 / 2004 Coll., on Value Added Tax, as amended by Act No. 296 / 2007 Coll.
Valid
The Constitutional Tribunal found
54
FIND
The Constitutional Court
On behalf of the Republic
The Constitutional Court decided on 9 December 2008 in plenary in the composition of Stanislav Balík, František Duchoň, Vlasta Formánková, Vojen Güttler, Ivana Janů, Vladimir Kórka, Dagmar Lastovecká, Jiří Mucha, Jan Musil, Jiří Nykodém, Pavel Rychetský, Miloslav Excellent, Eliška Wagner and Michaela Židlická on the proposal of the Municipal Court in Prague, submitted pursuant to Article 95 (2) of the Constitution of the Czech Republic on the declaration of Inconstitutional Law No. 235 / 2004 Coll., on Value Added Tax, as amended by Act No. 296 / 2007 Coll.,
as follows:
Paragraph 105 (1) of the third sentence of Act No. 235 / 2004 Coll., on Value Added Tax, as amended by Act No. 296 / 2007 Coll., the text "The declaration of bankruptcy does not interrupt the tax procedure and, after the declaration of bankruptcy, the payer will return the excessive deduction calculated if he does not have tax arrears arising before and after the declaration of bankruptcy 'was contrary to Article 11 (1) of the Charter of Fundamental Rights and Freedoms.
Reasons
Definition and recap of the proposal
1. The Constitutional Court was served on 19 June 2006 with the proposal of the Municipal Court in Prague to abolish the provisions of § 105 (1) of the third sentence of Act No. 235 / 2004 Coll., on value added tax, as amended, the text "The declaration of bankruptcy does not interrupt the tax procedure and after the declaration of bankruptcy, the payer will return the excessive deduction calculated if he does not have tax arrears arising both before and after the declaration of bankruptcy '(hereinafter referred to as" the contested provision').
2. The appellant did so after having concluded, in accordance with Article 95 (2) of the Constitution of the Czech Republic (hereinafter referred to as "the Constitution '), that the provisions of § 105 (1), third sentence, of Act No. 235 / 2004 Coll., on Value Added Tax, as amended, to be applied in the resolution of sp. zn. 11 Ca 253 / 2005 are contrary to Article 11 of the Charter of Fundamental Rights and Freedoms (hereinafter referred to as" the Charter').
3. In the present case, sp. zn. 11 Ca 253 / 2005, the Municipal Court in Prague is decided on the application by JUDr. J. L., the trustee of the bankruptcy of the insolvency of O.S.A., spol. s r. o., against the decision of the Finance Office for Prague 7 of 9.8.2005 No 76204 / 05 / 007914 / 3347, by which the applicant rejected the claim against its decision of 18.7.2005 No 69719 / 05 / 007914 / 347. By this decision, the Financial Office for Prague 7 decided to transfer the overpayment of the bankruptcy O.S.A., spol. s r. o., to value added tax (hereinafter referred to as "VAT") of CZK 3 668, declared on 18.7.2005, to pay the underpayment of the company concerned on the income tax of individuals from the dependent activity and functional benefits declared on 18.7.2005, at CZK 1 825 711. The applicant contends in the submitted application that the overpayment of the tax which arose after the bankruptcy declaration is the asset value belonging to the bankruptcy nature and the tax authorities are required to comply with the provisions of Section 14 of Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, (hereinafter referred to as "the Act on bankruptcy and settlement 'or" the ZKV') and to respect the fact that netting on the assets belonging to the bankruptcy nature is not possible.
4. The City Court in Prague took the view that the provisions of § 105 (1) of the third sentence of Act No. 235 / 2004 Coll., on Value Added Tax, as amended, were not interrupted by the following text: "The declaration of bankruptcy does not interrupt the tax procedure and, after the declaration of bankruptcy, the payer will return the excess deduction calculated if he does not have tax arrears arising before and after the declaration of bankruptcy." The application of which is made in the present case is contrary to the constitutional order of the Czech Republic, namely Article 11 of the Charter and therefore submitted a proposal for the annulment of that provision under Article 95 (2) of the Constitution, since it is subject to this provision.
5. In the preamble to its proposal, the Municipal Court in Prague argues that the finding of the Constitutional Court, sp. zn. I. ÚS 544 / 02 [the finding of 7.4.2005 (N 76 / 37 SbNU 75)] *, from which it is concluded that if the General Court acted in breach of the mandatory standard [§ 14 (1) (i) of the bankruptcy and settlement law] and thus did not respect the objective of the Act, it unjustifiably favoured one of the creditors, i.e. the State represented by the financial authorities. At the same time, the appellant recalls that the relationship between the trustee and the tax administrator in the tax proceedings is a public relationship. Therefore, the question whether or not the liquidator has a right to a refund of the overpayment or how it is to be dealt with in a refundable overpayment can only be assessed and decided from the point of view and under public law, and not on the basis of those governing private relations. Also the excess tax within the meaning of the provisions of Section 64 of Act No. 337 / 1992 Coll., on the Administration of Taxes and Fees, as amended, hereinafter referred to as the "Taxes and Fees Administration Act ', is a legal term of public law. At the end of the proposal, the Municipal Court in Prague summarises with reference to the constant decision-making practice of the Constitutional Court that the incorrect application of the standard of simple law, which, in the case under consideration, allows an unjustified advantage to the State as one of the creditors, would be in breach of the constitutional law guaranteed (Article 11 of the Charter) and therefore proposes that the Constitutional Court should abolish the contested provision on the date set out in the decision.
6. In the course of the proceedings, the Municipal Court in Prague proposed, within the meaning of the provisions of § 63 of Act No. 182 / 1993 Coll., on the Constitutional Court, and § 95 (1) of Act No. 99 / 1963 Coll., as amended, the amendment of the original proposal, that the Constitutional Court should state that the provisions of § 105 (1) of the Third Act No. 235 / 2004 Coll., on value added tax, as amended, as amended, as amended, as amended by Act No. 296 / 2007 Coll., (hereinafter referred to as "Act No. 235 / 2004 Coll. 'or" VAT Act'), were contrary to Article 11 (1) of the Charter. His proposal by the Municipal Court in Prague was justified by the fact that the contested provision was Act No. 296 / 2007 Coll., amending Act No. 182 / 2006 Coll., on the bankruptcy and methods of its resolution (insolvency law), as amended, and certain laws in connection with its adoption ("Act No. 296 / 2007 Coll. '), however, its annulment does not change the fact that the contested provision must continue to be applied to legal relations arising during its period of validity and scope.
Recital of the essential parts of the observations of the parties
7. Pursuant to Article 42 (4) and Article 69 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, (hereinafter referred to as "the Law on the Constitutional Court '), the Constitutional Court sent the present application to the parties - the Chamber of Deputies and the Senate of the Parliament of the Czech Republic.
8. In its observations of 13 June 2007, the President of the Chamber of Deputies of the Parliament of the Czech Republic Ing. Miloslav Vlček states that the legislation on the refund of excess deduction in § 105 of the VAT Act was taken into the law from the previous Act No. 588 / 1992 Coll., on value added tax, as also stated in the explanatory report on the law. In approving the contested provision, the legislator based itself on the fact that the tax procedure is the exercise of the rights and obligations of the tax body vis-à-vis the State represented by the tax administrator. The relationship between the tax body and the tax administrator, which regulates the rules on tax management, is then based on inequality, with the aim of tax rules being to collect the tax so that the revenues of the State are not reduced. Excessive deduction of value added tax if it exceeds the deduction of output tax is designed as payment of tax which is used by the tax administrator to pay tax obligations under Paragraph 59 (5) of the Tax Administration Act or to pay any arrears on another tax or, where applicable, by another tax administrator under the conditions laid down. The legislature, which approved Act No. 235 / 2004 Coll., acted in the belief that the law adopted was in accordance with the Constitution, the constitutional order and our legal order. It is up to the Constitutional Court to examine the constitutionality of that provision in the context of the application for annulment of Article 105 (1) of Law No 235 / 2004 Coll. and to give the relevant decision.
9. In the opinion of the Senate of the Parliament of the Czech Republic of 14 June 2007, the President of MUDr. It further submits that the appellant's argument, based solely on the earlier decision of the Constitutional Court, sp. zn. I. ÚS 544 / 02 (see above), does not appear to be convincing, since Section 105 of the VAT Act already explicitly, contrary to the legal situation in force until 30 April 2004, for which the abovementioned decision was issued, contains essentially an exception to the bankruptcy and compensation arrangements. The amendment to the Act on bankruptcy and settlement No 27 / 2000 Coll., effective from 1 May 2000, made it clear to the legislature that the State would no longer be privileged in respect of its claims to the bankruptcy, while the privileged status of the State lasted for almost a decade and concerned not only tax claims (the fees, duties and social security contributions, if they arose no more than three years before the declaration of bankruptcy and during the bankruptcy), but by adopting a new VAT Act, it seemed to revise this position and agreed with the new law that, in the event of an excessive deduction of value added tax, the State would not "divide itself with other creditors'. It is up to the Constitutional Court to consider whether the derogation provided for in the third sentence of Paragraph 105 (1) of the Third VAT Act, which provides the State with" higher claims' for fiscal reasons to satisfy its claims than other creditors involved in bankruptcy, is the one which the Constitutional Court, within the meaning of the decision sp. zn.
Dedication of the contested legal provision
10. Paragraph 105 (1) of the third sentence of Act No. 235 / 2004 Coll., on Value Added Tax, as amended before 1 January 2008, i.e. before the amendment made by Act No. 296 / 2007 Coll., reads: "The declaration of bankruptcy shall not interrupt the tax procedure and, after the declaration of bankruptcy, the payer shall return the excess deduction calculated if he does not have tax arrears arising before and after the declaration of bankruptcy."
11. The amendment by Act No. 296 / 2007 Coll. was repealed with effect from 1 January 2008.
Assessment of the law from the point of view of its adoption and publication in a constitutional manner
12. The Constitutional Court, in accordance with the provisions of Paragraph 68 (2) of the Law on the Constitutional Court, first assessed whether a law in respect of which the unconstitutional nature of the contested provision is objected (as in force on the date of the application of the contested decision of the Tax Office, i.e. on 9.8.2005) was adopted and issued within the limits of the Constitution laid down by competence and by the constitutional procedure.
13. The Constitutional Court verified that Act No. 235 / 2004 Coll. was approved by the Chamber of Deputies on 26 February 2004 at the 27th meeting when 94 Members voted for it from 187 Members present and 93 opposed it. On 12 March 2004, a bill was passed to the Senate, which was approved by the Senate on 1 April 2004 at its 14th session, when 37 senators voted for it out of 73 senators present and 31 opposed. The President did not sign the law and returned it to the Chamber of Deputies, which voted on it at its 30th meeting on 22 April 2004. Of the 184 Members present, 101 voted in favour, 83. The Act was published in the Collection of Laws under No 235 / 2004 Coll. on 23 April 2004, its effectiveness took place on 1 May 2004.
14. The Constitutional Court therefore finds that the law has been properly adopted and issued within the limits of the Constitution laid down by competence and in a constitutional manner.
Assessment of the jurisdiction of the Constitutional Court to discuss the application and the applicant's active legitimacy
15. The Constitutional Court had first to answer the question whether it was responsible for dealing with the proposal formically when the relevant provision of the VAT Act, whose annulment and subsequently amendment of the draft declaration of illegality were annulled by the appellant, was amended by Law No 296 / 2007 Coll. with effect from 1 January 2008. However, the contested provision, as it was before the amendment made by Act No. 296 / 2007 Coll. was applied in the present case, i.e. the application of that provision will have to be examined by the appellant.
16. According to Article 67 (1) of the Law on the Constitutional Court, there is a reason for the termination of proceedings if the law, other legislation or individual provisions of which the annulment is proposed expire before the end of the proceedings before the Constitutional Court. However, as already stated by the Constitutional Court in the finding of sp. zn. The Constitution shall examine the constitutionality of the contested provision as a matter of principle, even if it has already been repealed (amended), on condition that the public authority and not the private law body are the addressee of the alleged reason for the unconstitutionality. Since the public authority is the addressee of the alleged reason for unconstitutionality in the present case, in the context of the opinion expressed in sp. zn.
17. The appellant has now fulfilled the conditions of Article 95 (2) of the Constitution, as it seeks to declare the non-constitutionality of the provisions of Article 105 (1) of the Third VAT Act relating to its decision-making activities and therefore the Court is a legitimate appellant pursuant to Article 95 (2) of the Constitution.
Oral proceedings
18. According to the provisions of Paragraph 44 (2) of the Law on the Constitutional Court, the Constitutional Court may, with the consent of the parties, refrain from oral proceedings if it cannot expect further clarification of the case. Since the appellant in the letter of 29 May 2008, the President of the Chamber of Deputies of the Parliament of the Czech Republic, in his observations of 13 June 2007 and the President of the Senate of the Parliament of the Czech Republic, in the letter of 22 May 2008, expressed their consent to the abandonment of the oral hearing, and given that the Constitutional Court considers that further clarification of the case cannot be expected from the hearing, the oral hearing in the case was abandoned.
The present case law of the Constitutional Court relating to the issue under examination
19. The Constitutional Court has already dealt with the issue of the admissibility of tax overpayments on value added tax to pay tax arrears in the event that the tax body is a bankrupt person whose assets were declared bankrupt, in a number of Senate findings, such as those in sp. zn. I. ÚS 544 / 02 (see above), sp. zn. II. ÚS 35 / 05 [Findings of 20.12.2005 (N 232 / 39 SbNU 457)], sp. zn. III. ÚS 648 / 04 [Findings of 28.7.2005 (N 145 / 38 SbNU 135)], sp. zn. III. ÚS 41 / 05 [Findings of 18.1.2006 (N 19 / 40 SbNU 147)], sp. On the proposal of the Supreme Administrative Court for the annulment of the provisions of § 37a of Act No. 588 / 1992 Coll., on Value Added Tax, as amended, (hereinafter referred to as "Act No. 588 / 1992 Coll. '), § 105 (1) of the Third Act No. 235 / 2004 Coll. and § 64 (2) of the Act on Tax Administration and Charges, the Constitutional Court dealt extensively with the issue at issue in the sp. zl. ÚS 12 / 06 [Found of 2. 7. 2008 (published under No. 342 / 2008 Coll., also available at http: / nalus.ujud.cz)]. The conclusions reached by the Constitutional Court in the above mentioned findings can also be drawn on the present case.
20. The Constitutional Court stated, first of all, that Article 11 of the Charter does not give rise to any interpretation of the increased protection of the rights of the State as owner in tax matters represented by the tax administrator, which would, in the cases of bankruptcy, give him an advantage and grant him a privileged position vis-à-vis other insolvency creditors in connection with the charging of the tax excess to cover the tax arrears.
21. The question of the possibility of offsetting a private and public-law claim, i.e. whether the provisions of Paragraph 14 (1) (i) of the bankruptcy and settlement law may, as a provision of the private-law regulation, lay the inadmissibility of such offsetting in addition to private-law claims, as well as those of public-law claims, raised by the appellant in the present case, the Constitutional Court has dealt in detail in the above mentioned finding, sp. zn. III. ÚS 648 / 04 (see above). As the Constitutional Court states in this finding, it is not possible to draw a generalisation from the existing case law of the Constitutional Court in this regard concerning the exclusion of the possibility of netting between private and public claims. The assessment of the admissibility of such netting depends on specific positive rules, and in this context reference can be made to the legal opinion contained in the decision of the Supreme Administrative Court of the Czech Republic of 14 October 1932 No 15.605 (Boh. A 10072 / 32), according to which "a special law is required for a legal institution of compensation established in private law to be used in the field of public law." On the question of whether such a special law containing the inadmissibility of compensation can be considered not only by private law but also by private law and public law claims, the provisions of Paragraph 14 (1) (i) of the ZKV have come out of the conclusion that, in the event of a conflict between two provisions of the simple law of the same degree of legal force, which are not in relation to inclusion but also to overlap, the determination of the general regulation and which is special is the subject of the procedure (as defined in the procedural proposal). The general rule is therefore that, from the point of view of the law of a simple prima facie, the proposed subject matter of the proceedings is regulated.
22. In that finding, the III ÚS 648 / 04, as well as in the Plenary found, Pl ÚS 12 / 06 (both see above), the Constitutional Court, based on the principle of the principle of the constitutional conformal interpretation of simple law, concluded that the provision of Paragraph 14 (1) (i) of the ZKV is a special law establishing the inadmissibility of compensation not only by private law but also by private law and public law. As such, the provisions of Paragraph 14 (1) (i) of the ZKV, as a special scheme, have priority over those contained in the general provisions of Sections 59 (3) (e), 40 (11) and 64 (2) of the Act on the Administration of Taxes and Fees, with the constitutional interpretation of those provisions fulfilling the purpose and objectives of the bankruptcy and compensation law.
Content compliance of the contested legal provision with the constitutional order
23. Following the recap of the existing case-law, the Constitutional Court has made an assessment of the content of the contested provision in view of its compliance with the constitutional order of the Czech Republic [Article 87 (1) (a) of the Constitution].
24. The above-mentioned Senate findings and the plenary finding of the Constitutional Court to set aside tax overpayments for value added tax assessed the issue of the protection of the property rights of bankruptcy creditors against the preferential protection of the rights of the State as owner in the position of bankruptcy creditor in respect of the former value added tax legislation provided for by Act No 588 / 1992 Coll. The proposal now under consideration relates to the value added tax legislation laid down by the subsequent Act No. 235 / 2004 Coll. effective from 1 May 2004. In the third sentence of Paragraph 105 (1) of the Third VAT Act, the later legislation in question expressly stated that "a declaration of bankruptcy does not interrupt the tax procedure and after a declaration of bankruptcy, the payer will recover the excessive deduction calculated if he does not have tax arrears incurred before and after the declaration of bankruptcy '. Thus, for the period from 1.5.2004 to 31.12.2007 (i.e. until the amendment made by Act No. 296 / 2007 Coll.), the legislature adjusted the deduction of the tax excess for the payment of the tax arrears by a mandatory standard which does not leave the tax administrator any other possible procedure of secundum et intra legem than the one imposed by the contested provision, i.e. the obligation of the tax administrator to return the excess deduction to the payer after the bankruptcy declaration, only if it does not have tax arrears arising before and after the bankruptcy declaration.
25. The contested provision was repealed by the legislator with effect from 1 January 2008 in the context of the adoption of Act No. 296 / 2007 Coll., which also amended the Insolvency Act, the Tax Administration Act and certain other laws in addition to the VAT Act. In the explanatory memorandum to the Government Bill No. 296 / 2007 Coll., the amendment to the VAT Act states that it follows the changes reflected in the text of the draft amendment to the Tax and Fees Administration Act, which characterises the need to define tax arrears for insolvency proceedings. The annulment of the contested provision of the VAT Act by Act No. 296 / 2007 Coll. is an explicit expression of the legislator's intention with effect for futuro. In the context of this annulment of the contested provision, which took place only after the submission of the proposed proposal to the Constitutional Court, the Municipal Court in Prague amended its original proposal and proposed the declaration of the unconstitutionality of the now degraded provision in question.
26. In essence, the appellant's claim is that, in view of its compliance with the law and hence with the contested provision, it cannot, for the period of validity and application of the provision in question, protect the property rights of bankruptcy creditors in view of the State's favourable position as one of the insolvency creditors and therefore finds the contested provision contrary to Article 11 (1) of the Charter.
27. In relation to the appellant alleged by the non-constitutionality of the contested provision, the provision in question must be dealt with in its reciprocal relation to the provisions of Paragraph 14 (1) (i) of the ZKV, as is apparent from the appellant's belief that the inconstitutionality of the contested provision lies in its application to the insolvency case of the appellant under the bankruptcy and settlement law. The Constitutional Court, when assessing the relationship between the above legal provisions, is based primarily on constitutionally enshrined fundamental rights, in accordance with the requirement of respect for the rights and freedoms of man and citizen, as the basis of the rule of law (Article 1 (1) of the Constitution). The primacy of the individual before the State (Article 1 of the Charter) should also be respected in the conflict of fundamental rights with the general interest of the State.
28. The property right as a fundamental right, the protection of which is affected by the contested provision, is protected by Article 11 of the Charter. According to the sentence of the first and second paragraphs of that Article of the Charter, each person has the right to own the property and the right of ownership of all owners has the same legal content and protection. From that provision of the Charter, no interpretation can be made of the increased protection of the rights of the State as owner. However, in the present case, the application of the contested provision necessarily confers such an unjustified advantage on the State and thus the provision in question conferred a privileged position on the State, represented in tax matters by the tax administrator, over other insolvency creditors. On the other hand, the deregulation of the contested provision, to which the legislature acceded by Act No. 296 / 2007 Coll., did not put the State at a disadvantage, since, provided that its claims were properly applied under the provisions of § 20 of the ZKV, there was no significant damage, or no greater harm, than the other insolvency creditors. The Constitutional Court in this conclusion agrees with its earlier conclusions in the above mentioned findings, which it refers to for the sake of concise reasoning.
29. The Constitutional Court finds no reason to deviate from its conclusions adopted in those findings, nor, as regards the appellant, the view expressed that the question of repayment of the value added tax overpayment can be assessed and decided only from the point of view and under public law. In the above-mentioned finding, sp. zn. III. ÚS 648 / 04 (see above), the Constitutional Court concluded that the provision of Paragraph 14 (1) (i) of the ZKV is a special law in relation to the provisions of the Tax Administration and Charges Act which imposes the inadmissibility of compensation not only of private law, but also of private law and public law, and therefore, as a special regulation, it takes precedence over the general regulation contained in those provisions of the Tax Administration and Charges Act (see the previous recapitalisation of existing case law). That argument can also be reached in the present case with regard to the relationship between the provisions of § 14 (1) (i) of the ZKV and the contested provision of § 105 (1) of the Third VAT Act.
30. The Constitutional Court, in its settled case-law, repeatedly emphasises the preference of a constitutionally conformal interpretation of the law or of its individual provision to its abolition. In the proposal under examination, the contested provision § 105 (1) of the third sentence of the VAT Act constitutes a cogent provision which cannot be bridged by a constitutionally conformal interpretation, since its categorical character does not allow the addressee (tax administrator) to derogate from that provision without acting contra legem.
31. On the basis of the above arguments, the Constitutional Court concluded in the present case that the provisions of Paragraph 105 (1) of the third sentence of Act No. 235 / 2004 Coll., on value added tax, as amended by Act No. 296 / 2007 Coll., did not allow the General Court to comply with its obligations in the protection of the fundamental rights and freedoms of bankruptcy creditors when reviewing the decision of the tax administrator to set off the tax excess to cover the tax arrears in the administrative justice, which constitutes a failure to respect the principles enshrined in Article 11 (1) of the Charter. The Constitutional Court therefore considers that the appellant's application under Article 95 (2) The Constitution has complied with Article 89 (2) The consequences of the unconstitutionality found by the public authorities are required to be reflected in their decision-making practice, i.e. not applying the provision when dealing with specific cases.
President of the Constitutional Court:
JUDr. Rychetský v. r.
* NB: Collection of finds and resolutions of the Constitutional Court, Volume 37, Found No. 76, p. 75
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Regulation Information
| Citation | The Constitutional Court found no 54 / 2009 Coll., in the case of an application to declare unconstitutional the provision of § 105 paragraph 1 of the third sentence of Act No. 235 / 2004 Coll., on Value Added Tax, as amended by Act No. 296 / 2007 Coll. |
|---|---|
| Regulation Type | The Constitutional Tribunal found |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 26.02.2009 |
|---|---|
| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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