Constitutional Court confirms VAT law provision ruling

The Constitutional Court has confirmed a 2003 judgment maintaining that the imposition of the obligation of payment of 25 per cent of the value added tax in dispute constituted a violation of the right to access to the administration of justice.

The judgment was delivered following a constitutional application filed by Vincent Cilia against the VAT commissioner and the director of Customs and excise.

The First Hall of the Civil Court had declared that the matter had already been raised by the Constitutional Court in November 2001 when it had found that the provision of the law was unfair and anti-juridical. This was because once the law provided for the right to appeal, such right ought to be accessible to all parties in a reasonable manner without discrimination.

Cilia filed his constitutional application in 1998 against the Prime Minister, the Attorney General, the VAT commissioner and the director of Customs and excise but later withdrew his suit in respect of the first two.

He submitted that in December 1996 he had received a bill from the VAT Department in terms of which he was asked to pay Lm10,336.88 by way of VAT due for the years 1995 and 1996.

The department had, on March 10, 1997, issued a judicial letter against Cilia as a result of which it could enforce its claim against him. Cilia claimed that although he was entitled to appeal in terms of the 1994 legislation introducing VAT, the law provided that an appeal could only be filed if all the tax not in dispute was settled by the taxpayer and if at least 25 per cent of the tax in dispute was settled.

Cilia claimed he did not have the financial means to pay such large amounts of money and that the provision of law was in violation of his fundamental human rights.

He added that his right to freedom of enjoyment of property and to a fair hearing had been violated and submitted that his right to freedom from inhuman and degrading treatment had also been violated.

The First Hall of the Civil Court had referred to a judgment delivered by the Constitutional Court in November 2001 which had declared that the article of law complained of by Cilia in his suit was in violation of the provisions of the Constitution and the European Convention of Human Rights.

The 2001 case, the court noted, was based on facts which were very similar to those claimed by Cilia in his constitutional application.

The Constitutional Court had ruled that the imposition of the obligation of payment of 25 per cent of the tax in dispute constituted a violation of the right to access to the administration of justice.

This provision of the law had been described by the Constitutional Court as being unfair and anti-juridical for once the law provided for the right to appeal, such right ought to be accessible to all parties in a reasonable manner without discrimination.

The VAT Department ought to have dealt with Cilia in the manner outlined by the Constitutional Court, the First Hall of the Civil Court ruled, for the Constitutional Court had already declared that provision of the law to be null and void.

It was imperative that the rights of the individual were protected by all those concerned.

The Civil Court concluded by upholding Cilia's application and declaring that the limitations of his right to appeal by the VAT legislation were null and void.

Cilia was to be given the opportunity of contesting and objecting to the ex officio assessment raised by the VAT Department without any limitation.

The commissioner for VAT and the Controller of Customs both lodged an appeal from this judgment to the Constitutional Court.

The appellate court ruled that it was not bound to follow blindly the jurisprudence of the European Court of Human Rights for the judgments of the European Court had a persuasive value but were not binding.

As a result, both the First Hall of the Civil Court and the Constitutional Court were not precluded from applying their own interpretation to the provisions of the European Convention of Human Rights which might not be in conformity with the interpretation given by the Strasbourg court.

In this case the Constitutional Court, composed of Chief Justice Vincent Degaetano, Mr Justice Joseph D. Camilleri and Mr Justice Joseph A. Filletti, examined another judgment delivered by the European Court in the names Ferrazzini vs. Italy and ruled that it was not going to overturn the conclusions reached by the local courts in the 2001 constitutional case.

The Constitutional Court added that it agreed with the principle that tax disputes fell outside the scope of civil rights and obligations.

This meant that the courts were not entitled to review the imposition of taxes or the manner in which payment was exacted from the citizen, provided that such imposition or exaction was regulated by law.

If however the state granted the citizen the right to contest the imposition of a tax or its exaction before an independent tribunal, then such right of access to the tribunal could not be denied in an unreasonable manner.

The Constitutional Court therefore dismissed the authorities' appeal and confirmed the judgment of the First Hall of the Civil Court.

Cilia was authorised to object and to lodge his appeal to the VAT Appeals Board without the necessity of depositing 25 per cent of the tax in dispute.