Invalidation of the registration of information on the change of the head and the change of location,

On April 12, 2022, the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan, consisting of: Chairman - Chairman of the board N.K., judges M. and K., with the participation of a representative of the plaintiff, S.N., having considered in open court via mobile videoconference a civil case on the claim of the Republican State Institution (hereinafter – RSU) "State Revenue Department of the State Revenue Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan" against the Limited Liability Partnership (hereinafter – LLP) "K", A.P., E.K., RSU "Department of Justice", a non-profit joint-stock company (hereinafter - NAO) "Government for Citizens State Corporation" on invalidation of registration of information on the change of head and change of location,

received at the request of the RSU "State Revenue Department of the State Revenue Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan"

on the revision of the ruling of the specialized interdistrict Economic Court dated May 28, 2021 and the ruling of the judicial board for civil Cases of the regional court dated July 1, 2021,

The State Revenue Administration of the State Revenue Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan (hereinafter referred to as the Department, the tax authority) filed a lawsuit against the aforementioned defendants to invalidate the registration of information on the change of the head of K LLP (hereinafter referred to as the Partnership) and the change of the location of this legal entity.

By the ruling of the specialized interdistrict Economic Court dated May 28, 2021, the proceedings were terminated on the basis of subparagraph 1) of Article 277 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter referred to as the CPC).

By the ruling of the judicial board for civil cases of the regional court dated July 1, 2021, the court's ruling remained unchanged.

In the petition, the representative of the tax authority raises the issue of canceling these judicial acts and sending the case for a new hearing on the merits to the court of first instance, since the contested rulings do not comply with the principles of civil procedure, local courts have violated the norms of procedural law, and the subject's right to unhindered access to justice is unlawfully restricted.

After listening to the representative of the tax authority who supported the arguments of the petition, having studied the case materials and discussed the arguments of the petition, the judicial board believes that the contested rulings are subject to cancellation with the referral of the case for a new hearing to the court of first instance on the following grounds.

In accordance with Part 5 of Article 438 of the CPC, the grounds for cassation review of judicial acts that have entered into force are significant violations of substantive and procedural law that led to the issuance of an unlawful judicial act.

Such violations were committed during the consideration of the case.

It follows from the case file that the LLP was registered as a legal entity on January 16, 2018 through the Egov e-government web portal.kz based on the 17th order. The sole founder and head was E.K. The type of activity is wholesale of a wide range of goods without any specification.

Subsequently, the Partnership was registered with the Department of Justice.:

- On June 12, 2018, to provide information on the change of the head with the appointment of J.M.

- On September 5, 2018, to provide information on the change of the head with the appointment of A.P.

- On April 12, 2019, to provide information on the change of location from the address: city of O, M. Street, 4 to the address: city of O, S. Street, 2.

At the same time, the tax authority established that A.P. has nothing to do with the activities of the Partnership, was formally appointed to the position of head, did not register with the authorized bodies, did not engage in financial and economic activities on behalf of the Partnership, did not receive an electronic digital signature, did not sign documents.

A.P. gave similar explanations during the consideration of the civil case in the court of first instance and asked to satisfy the claims.

In addition, the tax authority presented other evidence in support of the arguments of the claim, and also drew attention to the fact that during the period of A.P.'s tenure as head of the LLP, the state suffered estimated damage in the amount of 202.9 million tenge, including corporate income tax - 126.8 million tenge, value added tax – 76.1 million tenge.tenge.

The Court of first instance, terminating the proceedings in the case, indicated that the method of protection in the form of challenging the change of legal address and its head is not provided for by tax legislation, this issue can be resolved with the available tax administration tools.

The appellate instance agreed with the conclusions of the court of first instance and the adopted procedural decision on the case. At the same time, she pointed out that the change of the head is not a state registration (re-registration), is made at the request of a legal entity, and is of an appearance nature, therefore, the specified requirements of the tax authority are not subject to consideration in civil proceedings.

However, this position does not comply with the current legislation.

In accordance with Article 4 of the CPC, the tasks of civil proceedings are to protect and restore violated or disputed rights, freedoms and legitimate interests of legal entities, respect for the rule of law in civil turnover and public law relations, ensure full and timely consideration of the case, promote the peaceful settlement of disputes, prevent offenses and form a respectful attitude towards the law and the court in society..

The right of a tax authority to file claims is provided for in subparagraph 10) of paragraph 1 of Article 19 of the Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget" (Tax Code) and is consistent with the provisions of paragraph 1 of Article 18 of the said Code.

The contested definitions infringe on the Management's right to file a lawsuit in court and hinder the implementation of the tasks of the state revenue authorities in terms of ensuring the economic security of the state and ensuring compliance with tax legislation within the limits of their powers.

According to subparagraph 1) of Article 277 of the CPC, the court terminates the proceedings if the case is not subject to consideration in civil proceedings.

The termination of the proceedings takes place in the absence of the plaintiff's right to judicial protection.

According to part 2 of Article 278 of the CPC, in the event of termination of the proceedings, a second appeal to the court on a dispute between the same parties, on the same subject and on the same grounds is not allowed.

The court's reference to subparagraph 1) of Article 277 of the CPC is unfounded, since the termination of the proceedings excludes the possibility of a second initiation of such a claim in court, and therefore violates the plaintiff's right to judicial protection.

In accordance with paragraph 1 of Article 68 of the Tax Code, tax administration is a system (set) of measures and methods carried out by tax authorities and other authorized state bodies to collect taxes and payments to the budget, including tax control, the use of methods to ensure the fulfillment of unpaid tax obligations and measures compulsory collection of tax debts, as well as the provision of public services and other forms of tax administration established by this Code.

Under the established circumstances, the arguments of the tax authority that it is impossible to resolve this issue within the framework of tax administration are noteworthy, since in order to take tax administration measures, a court decision that has entered into legal force is necessary, reflecting the non-involvement of the head in the state registration (re-registration) and (or) the implementation of financial and economic activities of a legal entity. If the court finds that the head is not involved in the financial and economic activities of the enterprise, then on the basis of a judicial act that has entered into force, the state revenue authority is obliged to take appropriate measures within the framework of the tax legislation of the Republic of Kazakhstan, in particular, desk control measures.

In view of the above, the contested judicial acts are subject to cancellation with the referral of the case for consideration on the merits to the court of first instance, in a different composition.

Guided by subparagraph 5) of part 2 of Article 451 of the CPC, the judicial board DECIDED:  

The ruling of the specialized interdistrict economic court of May 28, 2021 and the ruling of the judicial board for civil cases of the regional court of July 1, 2021 in this case should be canceled.

The case should be referred for a new hearing to a specialized interdistrict economic court with a different composition.

To satisfy the petition of the Russian State Institution "State Revenue Department of the State Revenue Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan".

 

 

 

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