Constitutional Court

KI227/19, Applicant: N.T. “Spahia Petrol”, Constitutional review of Judgment ARJ. UZVP. No. 94/2019 of the Supreme Court of Kosovo, of 1 August 2019

KI227/19, Judgment of 10 December 2020, published on 29 December 2020

Keywords: Individual referral, administrative procedure, tax revaluation, unreasoned decision

 The circumstances of the present case are related to a business, which in 2014, as a result of criminal investigations, had its financial documentation seized by the Kosovo Police. Subsequently, there was an audit by the Tax Administration of Kosovo, which by the Notice of Reassessments, among other things, determined the additional tax and value added tax for the respective periods. The Applicant challenged this Reassessment Notice to the Tax Administration of Kosovo, and the latter assessed the Applicant’s complaint as partially grounded. The rejecting part of the TAX Decision was mainly related to the transactions which the Applicant had concluded with the company “S”, and which the Applicant did not manage to prove. The Applicant addressed the State Prosecutor’s Office and the Basic Court in Mitrovica with a request for the return of financial documentation, in order to be able to prove his transactions in the appeal procedure in the Tax Administration and in the regular courts. Based on the case file, the latter had never received a response to this request. In the meantime, the proceedings before the regular courts resulted in the rejection of the lawsuit, the appeal and the request for extraordinary review of the Applicant’s court decision submitted to the Basic Court, the Court of Appeals and the Supreme Court, respectively. Prior to the latter, the Applicant repeatedly stated, inter alia, that the lack of financial documentation made it impossible to prove the disputed transactions, alleging a violation of (i) Article 9 (Publication of acts) of Law No. 02/L-28 on Administrative Procedure, according to which, among other things, the public body must guarantee the right of the party to access the file and its documents; (ii) paragraph 6 of Article 14 (Access to books, records, computers and similar record storage devices) of Law No. 03/L-222 on the Tax Administration, according to which, inter alia, the Director General or an authorized officer who removes and retains records under this Article shall make a copy of the record and return the original in the shortest time practicable; and (iii) a violation of his right to fair and impartial trial and of the right to an effective legal remedy guaranteed by Article 31 [Right to Fair and Impartial Trial] and 32 [Right to Legal Remedies] of the Constitution.

The Supreme Court, deciding as the highest court instance in this case, by the challenged Judgment, rejected the Applicant’s allegations, upholding the Judgments of the Basic Court and of the Court of Appeals. The Supreme Court reasoned its position, based on (i) Article 22 (Transactions Over Five-Hundred Euros) of Administrative Instruction No. 15/2010 on the Implementation of Law no. 03/L-222 on Tax Administration and Procedures, according to which, “all persons, who make transactions in the course of their economic activity in respect of the supply of goods or services between persons in excess of 500 (Five Hundred) Euro must make payment in respect of such transactions through a bank transfer”, consequently stating that all necessary evidence could be obtained through the relevant bank from the Applicant; and (ii) in Article 23 (Cancellation of Tax Documents) of the Law on Tax Administration and Articles 13 (De-Activation of a Business), 14 (Cancellation of Documents Including Fiscal Number) and 16 (Publication of Taxpayers Names and Numbers) of Administrative Instruction No. 15/2010.

Before the Court, the Applicant challenged the findings of the Supreme Court, raising allegations related to (i) Article 31 of the Constitution, with regard to the lack of a reasoned court decision and violation of the principle of equality of arms; and (ii) Article 32 of the Constitution, in respect of the impossibility of exercising his right to an effective legal remedy, because in the absence of financial documentation, the Applicant could not effectively challenge either the Decision of the KTA, and subsequently, neither the decisions of the regular courts. The Court first examined the Applicant’s allegations regarding the lack of a reasoned court decision, a review in which the Court initially (i) elaborated on the general principles; and subsequently, (ii) applied the latter to the circumstances of the present case.

During this assessment, the Court found that the Judgment of the Supreme Court, namely the Judgment [ARJ. UZVP. No. 94/2019] of 1 August 2019, was rendered in violation of the Applicant’s right to a reasoned court decision, as an integral part of the right to a fair and impartial trial guaranteed by Article 31 of the Constitution in conjunction with Article 6 (Right to a fair trial) of the European Convention on Human Rights, because the Supreme Court failed to address the Applicant’s substantive allegations with regard to (i) the violation of the applicable law, namely Article 9 of the LAP- and paragraph 6 of Article 14 of the Law on Tax Administration; and (ii) the violation of the Constitution, namely Articles 31 and 32 thereof, as a result of the alleged violation of the equality of arms in the procedure and the inability to effectively exercise the available legal remedies. Furthermore, the Supreme Court based its final finding regarding the unfounded announcement of the request for extraordinary review of the court decision, on the provisions of the Law on Tax Administration and Administrative Instruction No. 15/2010, and which, were not related in any way to the circumstances of the present case.

In this context, the Court also clarified that despite the fact that when the courts with appellate jurisdiction uphold the decisions of lower courts, they are not obliged to reason every argument, they are nevertheless obliged to show sufficient consideration in reviewing the decision of the lowest instance, even in light of the allegations raised before it. In the circumstances of the present case, the Court, based on all the explanations given in this Judgment, considered that this is not the case, because, not only the Supreme Court did not address the substantive allegations of the Applicant, but it also based its final finding, on the provisions, which had nothing to do with the circumstances of the present case, taking the latter from the decisions of the lower courts, without sufficient review and consideration in the case before it.

Therefore, the Court found that the abovementioned Judgment of the Supreme Court is not compatible with the guarantees embodied in Article 31 of the Constitution in conjunction with Article 6 of the European Convention on Human Rights, due to the lack of a reasoned court decision, and consequently must be declared invalid, and remanded for retrial to the Supreme Court. The Court also emphasized the fact that its finding of a violation of Article 31 of the Constitution in conjunction with Article 6 of the European Convention on Human Rights, in the circumstances of the present case, relates exclusively to the lack of reasoning for the court decision, and does not in any way correlate with nor prejudice the outcome of the case merits.