1.<\/p>\n
Unfortunately, the application of verdict or report of interrogation of the director of supplier, where he denies his involvement into the activity of enterprise-supplier as an \u201cunconditional evidence\u201d in tax dispute, is established practice. Despite mass contradiction and resistance of legal community and courts from lower instances to HACU2<\/a><\/sup> such approach is invasively widespread \u201cby the merit\u201d of old Supreme Court of Ukraine1<\/a><\/sup> (hereinafter referred to as the SCU)when considering the appropriate category of cases.<\/p>\n Given the typical nature, number of such cases and more like rejection by the majority of lawyers as a motivated position of old Supreme Court, the approach of new Supreme Court to this issue is expectedly considered as one of benchmark whether we have new quality of judicial authority on the highest level or not.<\/p>\n However, the new decision in cases, where the art. 205 of the Criminal Code3<\/a><\/sup> \u201csham business\u201d with regard to counterparts was spotted made rather contrary impression to taxpayers and business to the one they expected.<\/p>\n 2.<\/p>\n In order to avoid being unsubstantiated, let\u2019s stop more detailed, for instance, on one of such decisions \u2013 the Decision of Supreme Court as of 23.01.2018 in case \u041a\/9901\/1608\/18 (No. 2a-1870\/5800\/12 in the court of first instance and court of appeal)4<\/a><\/sup>.<\/p>\n 2.1<\/p>\n Cited decision in case was made with participation of the prosecutor, as directly indicated in the Decision.<\/p>\n The participation of the prosecutor in case, where according to the law he is not a party of prosecution indicates more like on passing of judicial decision with violation of principles of legal proceeding on equality of parties. Such judgement was made by European court of Human rights in many decisions (Borgers v. Belgium<\/a>5<\/a><\/sup>, Vermeulen v. Belgium<\/a>6<\/a><\/sup>, Lobo Machado v. Portugal<\/a>7<\/a><\/sup>, Menchinskaya v. Russia<\/a>8<\/a><\/sup> for instance) with qualification of violation of right to a fair trial, granted by a Convention on Human rights.<\/p>\n For better understanding of legal stance available on this issue we provide an extract from explanations in one of the case regarding it in an Annex as an example9<\/a><\/sup>.<\/p>\n That is the fact of adoption of decision with a participation of prosecution authorities may be a reason for statement on violation of the right to a fair trial by court and international guarantees and obligations by Ukraine. As a result, even without the assessment of legitimacy of conclusions as a matter of fact, it could be potentially the ground for initiation of legal action in European court on Human rights.<\/p>\n Unfortunately, the SCU pass up the participation of prosecutor\u2019s office in case regarding which the position of the E\u0421HR known.<\/p>\n 2.2<\/p>\n The enforcement of law in this and other similar court decisions10<\/a><\/sup> also arises huge questions.<\/p>\n In particular, the ground of this and more 4 other mentioned decisions11<\/a><\/sup> of the Supreme Court constitutes verdicts, which were delivered half a year later the date of disputed tax notice-decisions (hereinafter referred as TND)<\/p>\n Nevertheless, the SCU in the Decision in case No. K\/9901\/1608\/18 states that disputed TND were delivered on 09.02<\/strong>.2010, but as the basis for position of the Supreme Court where accepted the decision of Holosiyivskyi district court of the city of Kiev as of 07.06<\/strong>.2019 and Zarichnyi district court of the city of Sumy as of 21.12<\/strong>.2010.<\/p>\n However, paragraph 2 of p. 2 of art. 88 of the new Code of administrative procedure (hereinafter referred as the CAPU) in the effective edition restricts reference to evidences, which were not the basis of the disputed decision, except cases, where the authority proves that he had taken all possible measures for the obtainment of such evidences before the delivering of disputed decision, but they were not obtained due to the reasons beyond its control. And provision envisaged in paragraph 2 of p. 2 of art. 77 of the CAPU is not just a \u201cletter\u201d of law, but a reflection of its spirit.<\/p>\n Obviously, in the case under consideration there were no mentioned decisions of district courts as of the time of delivering of disputed TND. However, such decisions are in the fact the only grounds, on which the position of the SCU is based on, and the SCU herewith doesn\u2019t substantiate its adoptions as manner of proving.<\/p>\n Herewith, according to art. 341 of the CAPU the cassation court review judicial decisions within the arguments of cassation claim. And the arguments of cassation claim on the decision under consideration of the SCU according to the defendant (tax authority) are improper assessment of evidences<\/strong><\/em> by the appeal court (which delivered decision in favor of taxpayer) in violation of art. 86 of the CAPU (in the effective to that date edition)12<\/a><\/sup>.<\/p>\n Now art. 86 of the CAPU in previous edition corresponds to art. 90, which was slightly changed in comparison with previous edition of the CAPU.<\/p>\n In particular, article is supplemented by p.4 which establish:<\/p>\n So, a special demand on assessment of evidences is introduced to the CAPU.<\/p>\n So, if defendant claims the improper assessment of evidences available in case by appeal court as an argument (which cassation claim should consider), the cassation claim should dwell on the issue of evidences assessment as the keystone issue<\/em>.<\/p>\n But in fact one can\u2019t see it. In fact there is no assessment of evidences from the view of relevance, admissibility, reasoning of deviation or consideration of each evidence (group of evidences). Thus, the decision lack reasoning with regard to this issue, what may be another ground for reference to the ECHR.<\/p>\n 3.<\/p>\n Information, provided in previous section is rather specific for certain decision (except for the issue on admissibility of use of verdicts in criminal cases, effected after the delivering of disputed decision as the means\u2019 of proof).<\/p>\n However one should admit as a key factor the erroneousness of \u201cmantra\u201d which the courts continue to repeat with certain variations in such cases. In the case under consideration it is cited as following.<\/p>\n \u201c\u2026the fictitiousness of creation of Company from the moment of its state registration is proven by the absence of legally foreseen purpose of creation of a business entity, and as a result the business operations of the plaintiff with its counterpart could not be legalized even after formal confirmation by accounting documents. \u2026<\/p>\n System and literal analysis of provisions vouches on the accusation of a person who signs primary documentation on behalf of the company counterpart in the commission of crimes, related to the fictitious enterprise, even subject to the application of amnesty to such a person (plea agreements grounded on non-rehabilitating reasons) excludes the relevance of such documents to the established by law requirements and makes it impossible to accept them for the purpose of tax accounting\u201d.<\/p>\n<\/div>\n So, the justification with reference to particular provisions of particular laws, from which one may make such a conclusion, is not provided. We should note, that it wasn\u2019t present in the past in similar decisions. Provided \u201cjustification\u201d sounds like an expanded universal \u201caccording to effective [applicable] legislation\u201d.<\/p>\n Therefore, the position of the SCU in this respect on such category of cases remains, rather without appropriate reasoning.<\/p>\n Provided above questions to the decisions of new Supreme Court are quite sharply placed to the agenda of compliance of the Supreme Court with the provisions of Constitutions and laws of Ukraine as highest judicial instance. Therefore, we are looking forward that so far the Supreme Court has not dealt with the possibility of stepping aside from obligatory to him positions of the old SCU on the issue under consideration, and in the nearest future it will realize such opportunity, because the delay in such issue will lead to accumulating of more and more questions to the activity of the Supreme Court.<\/p>\n The above commentary present the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.<\/strong><\/em><\/p>\n <\/p>\n \u2014\u2014\u2014\u2014\u2014\u2014\u2013 (cited only as an example!)<\/p>\n ADDITIONAL EXPLANATIONS<\/strong><\/p>\n on the participation of prosecutions authorities in case<\/strong><\/p>\n 1. The Prosecutor\u2019s Office is involved for participation in this case. The Plaintiff considers it groundless and illegal with regard to the following.<\/p>\n A. Participation of prosecutor\u2019s office in noncriminal judicial proceeding is violation of the right for fair trial and principle of equality of the parties (ECHR practice).<\/strong><\/p>\n 2. Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms envisages the right of person for fair tria<\/strong>l.<\/p>\n 3. According to article 17 of the Law of Ukraine \u201cOn execution of decisions and use of the practice of European Court of Human Rights\u201d the decisions of European court of Human Rights (hereinafter referred to as the ECHR<\/strong>) is used as a source of Law in Ukraine.<\/p>\n 4. As for the participation of prosecutor in noncriminal judicial proceedings, the ECHR expressed on the violation of right of equality of parties. In particular, the position of the ECHR is when the prosecutor takes part in case, he in this or another way becomes an ally or opponent to the parties. Thereof, even visible appearance of the prosecutor in judicial proceeding allows to strengthen the position of this or another party<\/strong> (see decisions in cases Borgers v. Belgium , Vermeulen v. Belgium , Lobo Machado v. Portugal)<\/p>\n 5. All mentioned may call a feeling of inequality of the parties and results in violation of p. 1 of art. 6 of the Convention<\/strong> (see decision F.W. v. France).<\/p>\n 6. The ECHR underlined herewith that the presence of violation of right for a fair trial does not depend on the form of participation of prosecutor\u2019s office in case.<\/strong> Given that the ECHR stated in abovementioned decision in case F.W. v. France and in case Martinie v. France that it will be the violation of art. 6 of the Convention regardless of the role the prosecutor choose in judicial proceeding \u2013 active or passive. That\u2019s why the fact that the prosecutor acted as a protector of public interests can\u2019t be treated as granting of independent and impartial participator status to him as indicated by the ECHR in decision in case Zlinsat, spool. S r o, v. Bulgaria.<\/p>\n 7. The ECHR specifically confirmed cited above summary on violation of right for fair trial resulted from the participation of prosecutor in noncriminal proceeding for instances of administrative proceeding. However, the cited position is reflected in decision in case Kress v. France.<\/p>\n 8. Thus, by entrance into the judicial process of administrative proceeding bodies of the prosecutor\u2019s office obviously violates the principle of equality of the parties and envisaged by the Convention the right for fair trial in general. The participation of the prosecutor in case by his presence creates and effect of strengthening of position of defendant in case<\/strong>.<\/p>\n 9. There is a set of decisions where the ECHR during the finding of violation, envisaged by art. 6 of the Convention the right for fair trial referred to the absence of appropriate conditions, which determines the participation of bodies of prosecutor\u2019s office in judicial proceeding. In particular, in Decision in case Menchinskaya v. Russia the ECHR stated, that without the presence of appropriation grounds for entrance into the case the participation of the prosecutor in support of one of the party in judicial proceeding will be nothing else than undermining of the principles of a fair trial and equality of the parties<\/strong>. After all, the party can represent it self in a court in a proper way. The ECHR came to similar conclusions in case Korolev v. Russia.<\/p>\n B. Right of Prosecutor\u2019s office for participation in administrative process is not absolute, it arises in case of unavailability of protects of state interests by specially authorized state authority (Mindohodiv).<\/strong><\/p>\n 10. The participation of Prosecutor\u2019s Office in administrative process is regulated by the provisions of p.2 of art. 60 of the Code of administrative procedure of Ukraine:<\/p>\n 11.<\/p>\n 12. So the Prosecutor\u2019s office joins the administrative process exclusively in a manner, envisaged by the law when the case affects state interests<\/em>.<\/p>\n 13. The definition of \u201cstate interests\u201d was expounded by Constitutional Court of Ukraine in Decision No. 3-\u0440\u043f\/99 as of 08.04.1999:<\/p>\n 14.<\/p>\n 15. So the Constitutional court of Ukraine only approved that the right of Prosecutor\u2019s office is not absolute, and arises only in case of justification of its reference, indication of body in whose interests the reference is done and why such body is unavailable to protect the state interests.<\/p>\n 16. As a matter of fact, today the only state body, authorized for protection of state interests in taxation field \u2013 is specifically created body Ministry of revenue and duties of Ukraine (along with its territorial bodies). Such bodies are separator parties in case with full set of rights and obligations.<\/strong><\/p>\n 17. That\u2019s why even if the reference of prosecutor\u2019s office was in the interest of abovementioned bodies, such bodies are sole participators in the case and are entitled to all legal authorities for protection of its own rights and interests. Thus, such body may protect its rights and interests independently.<\/p>\n 18. In the view of aforesaid, the Plaintiff deems, that the participation of Prosecutor\u2019s Office in this case with regard to the protection of interest of tax authority is groundless.<\/p>\n Footnotes:<\/em><\/p>\n 1<\/a><\/sup>See Decision of the SCU as of 01.12.2015 case No. 826\/15034\/14 (available in USRCD by reference) and others https:\/\/reyestr.court.gov.ua\/Review\/67721341<\/a>, https:\/\/reyestr.court.gov.ua\/Review\/65537637<\/a>, https:\/\/reyestr.court.gov.ua\/Review\/55476548<\/a>, http:\/\/reyestr.court.gov.ua\/Review\/52418672<\/a>, http:\/\/reyestr.court.gov.ua\/Review\/54004960<\/a>, https:\/\/reyestr.court.gov.ua\/Review\/54688653<\/a>, http:\/\/reyestr.court.gov.ua\/Review\/54688725<\/a>.<\/em><\/p>\n 2<\/a><\/sup>The information on the cancellation by the HACU was already set out in our infoletters \u201cReview of court practice on tax issues for January-May 2016<\/a>\u201d and \u201cReview of practice of the Higher Administrative Court of Ukraine on tax issues for the second half of 2015<\/a>\u201d.<\/em><\/p>\n 3<\/a><\/sup>See our infoletter \u201cThe first working results of the new Supreme Court: have the expectations of taxpayers been fulfilled<\/a>\u201d.<\/em><\/p>\n 4<\/a><\/sup>Decision of the Supreme Court as of 23.01.2018 No. K\/9901\/1608\/18 (No. 2a-1870\/5800\/12 in court of first instance and in court of appeal), available in USRCD by reference<\/a>.<\/em><\/p>\n 5<\/a><\/sup>See Decision of the European Court of Human Rights \u00abBorgers v. Belgium\u00bb by reference<\/a>.<\/em><\/p>\n 6<\/a><\/sup>See Decision of the European Court of Human Rights \u00abVermeulen v. Belgium\u00bb by reference<\/a>.<\/em><\/p>\n 7<\/a><\/sup>See Decision of the European Court of Human Rights \u00abLobo Machado v. Portugal\u00bb by reference<\/a>.<\/em><\/p>\n 8<\/a><\/sup>Decision of the European Court of Human Rights \u00abMenchinskaya v. Russia\u00bb by reference<\/a>.<\/em><\/p>\n 9<\/a><\/sup>See Annex 1.<\/em><\/p>\n 10<\/a><\/sup>See infoletters \u201cThe first working results of the new Supreme Court: have the expectations of taxpayers been fulfilled<\/a>\u201d and \u201cReview of practice of the Supreme Court on important (problematic) issues related to taxation for 2018<\/a>\u201d.<\/em><\/p>\n 11<\/a><\/sup>Decision of the Supreme Court as of 23.01.2018 in case No. K\/9901\/1608\/18 (No. 2a-1870\/5800\/12 in court of first instance and in court of appeal), available in USRCD by reference<\/a>; as of 23.01.2018 in case No. K\/9901\/436\/18 (No. 826\/7047\/13-a in court of first instance and in court of appeal), available in USRCD by reference<\/a>; as of 06\/02\/2018 in case K\/9901\/3681\/18 (No. 826\/6986\/14 in court of first instance and in court of appeal), available in USRCD by reference<\/a>; as of 07\/02\/2018 in case No. K\/9901\/3208\/18 (No. 826\/6315\/14 in court of first instance and in court of appeal), available in USRCD by reference<\/a>.<\/em><\/p>\n
\nAnnex 1<\/p>\n