On July 3, the Department of Administrative Cases of the Supreme Court annulled the judgment of the Administrative Regional Court, by which the application of SIA “Aqua Pro” for abolition of the decision of the State Revenue Service was rejected, thus imposing an obligation on the applicant to pay customs duties and value added tax, as well as an appropriate overdue charge and fine. On the basis of the preliminary ruling by the European Court of Justice, the Supreme Court ruled that the judgment of the court of appeal should be annulled and the case should be referred to the Administrative Regional Court for re-examination.

Applicant SIA “Aqua Pro” imported into the European Union bicycles from company “Bestway Industrial Co.Ltd.” based in Cambodia for issue for free circulation. On the basis of the A certificate issued to the Cambodian exporter, the applicant did not pay any customs duties and value added tax.

On 15 February 2010, the State Revenue Service Customs Audit Department received the information from the European Commission’s European Anti-Fraud Office (OLAF) on the European Commission's mission in Cambodia with regard to validity of issuing the certificate of origin of bicycles that were exported to the European Union from the Cambodian companies “„Bestway Industrial Co.” Ltd. and “Atlantic Cycle Co.” Ltd.

Observing the established circumstances, the State Revenue Service carried out audit of customs duty and other taxes in respect of the applicant. On 3 September 2010, with the decision of the State Revenue Service, the audit was closed. It was declared that the A certificate of origin of goods was issued with no ground, the article must be applied an agreed rate of import duty, namely, 14 per cent of customs value of goods. Therefore, it is decided to impose an obligation to the applicant to pay customs duty and value-added tax as well as appropriate overdue charge and fine.

Giving response to Supreme Court’s request for a preliminary ruling, the Court of Justice of the European Union in its judgment of 16 March 2017 in the case No C-47/16 stated that Article 220 (2) (b) of the Customs Code provides for the protection of persons liable for the tax payment, and of legitimate expectations as far as all the circumstances and criteria, on which the decision on the recovery or non-recovery of customs duties is based, are well founded. An importer can invoke the principle of protection of legitimate expectations under this provision so that the importer be exempted from post-clearance recovery only if three cumulative conditions are satisfied. First, the failure to charge tax is linked to an error made by the competent authorities themselves; the error made by the competent authorities is of such a nature, that it could not be detected by the bona fide person liable for payment; lastly – the person liable for the payment should comply with all the rules laid down in the customs declaration. The Supreme Court states in the judgment that the court of appeal, when re-examining the case has to assess the fulfilment of all three cumulative conditions regarding particular import transactions.

The Supreme Court reviewed the case under the cassation procedure in connection with the applicant’s cassation regarding the judgment of the Regional Administrative Court (Case No SKA-10; A420824610).


Baiba Kataja, the Press Secretary of the Supreme Court
Tel.: +371 67020396; e-mail: baiba.kataja@at.gov.lv