Regarding: Appeal of the decision of the State Tax Inspection regarding application of the fine (financial) sanctions
Ppartner:  Anatoly Menshikov
Court: Commercial Court of Autonomous Republic of Crimea; Sevastopol Administrative Appeal Court
Date:  September 2008; May 2009
 

Commentary:

State Tax Inspection, making the decision regarding the sanctions, erred in the type of the conducted commercial transaction; a return of the goods was considered to be an installment.   

During the accounting period that was under the examination, the entity did not have a license.  A court of the first level did not take into consideration the plaintiff’s arguments and not having understood the situation denied the suit, affirming the decision of the State Tax Inspection regarding the fine sanction.   

On the appeal, Appellant focused on the connection between the commercial transaction with the criminal case, which was pending during the accountant period that was subject to examination.  In the course of the criminal case, the goods were confiscated and passed to the state enterprise for storage as material evidence.

In connection with a fact that seizured goods are not a final product of manufacturing and could not be stored long period of time without impairment of its merchantable qualities, the case investigator produced a decree which allowed full realization (selling) of the material evidence in case of transferring ownership rights to the goods to the state enterprise.  

Eventually the appeal court decided that in the given circumstances the enterprise was fulfilling the investigator’s decree (order). The enterprise was in essence returning the material evidence seizure in the course of the criminal investigation, i.e., that it was not a wholesale trade.

The Appeal Court justifiably noted that the defendant, State Tax Inspection, did not prove the legitimacy of its decision; concurrently the claims of the Plaintiff were reasonable, were in the line with current legislation, therefore, should be satisfied.