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DZP Tax Practice wins a Precedential Dispute Over Excise Duty


Artur Nowak

Experts from DZP Tax Practice successfully represented Messer Polska Sp. z o.o. (a leading manufacturer and distributor of technical, medical, specialty and food gases) before the Supreme Administrative Court (“SAC”) in a case over excise duty charged on acetylene. These final instance appeal proceedings were of a precedential nature due to both the legal issues involved and the potential financial consequences.

Our experts won the case for the client. The SAC overturned the judgement of the Voivodship Administrative Court in Gliwice, which was disadvantageous to the company, in its judgement of 7 March 2013. The case was crucial for our client’s further existence. If the company had lost the case before the SAC, it could have been required to pay excise duty of several billion zloty due for almost five years.

The dispute boiled down to whether excise duty applied to a gas, i.e. acetylene, under regulations on excise duty which were in force between May 2004 and February 2009. They provided that the tax base for inter alia acyclic hydrocarbons (which include acetylene) should be set as the product quantity expressed in litres, while the quantity of acetylene is specified in commercial transactions in kilograms. However, generally applicable laws did not include any standards for conversion of kilograms into litres.  Accordingly, the company believed that it was impossible to establish the excise duty base for acetylene and thus to establish the amount of the duty. Consequently, acetylene was not subject to excise duty at all under the then applicable law. However, tax authorities as well as the Voivodship Administrative Court in Gliwice were of a different opinion. They held that the excise duty base for acetylene could be established by converting the quantity of the product from kilograms into litres based on data on the average density of acetylene under “normal” conditions, included in an opinion issued by an external research centre.

The SAC fully accepted the argumentation of the company’s attorneys to the effect that the method adopted by tax authorities (and accepted by the first instance court) for calculation of the excise duty base for acetylene was unacceptable.

The SAC held in the verbal reasons for the judgment that if a statutory act and secondary legislation did not specify the methods and rates to be used in converting a quantity of the product in gas form into volume units, tax authorities could not use for such purposes data taken from an expert opinion and concerning average gas density under conditions described as “normal” because constitutive elements of duty cannot derive from extra-normative sources. The court observed that if “external” data had been used for such purposes,  this would have lead to the situation where the duty base and, consequently, the amount of the duty on the same quantity of the same product could have been different (depending on conversion rates used), which is inadmissible under the Constitution. The SAC also emphasized that it would have been absurd to apply the duty if the method proposed by the tax authorities had been used. The excise duty rate would have been more than one hundred times higher than the value of the product.

Messer Polska Sp. z o.o. was represented before the SAC by experts from our Tax Practice: Artur Nowak and Katarzyna MaćkowskaMagdalena Dobrowiecka was also involved in the case.

Messer Polska Sp. z o.o., a member company of the global group Messer Group GmbH, has been operating in Poland since 1992. It manufactures and distributes technical, specialty, food and medical gases and provides comprehensive support related to gas storage and distribution systems.

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