Practice of Imposing Monetary Penalties

The grounds for applying a procedural coercive measure in the form of a monetary penalty are governed by Article 127 of the Administrative Procedural and Process-Related Code of the Republic of Kazakhstan (hereinafter referred to as the APPC).

Courts have imposed monetary penalties on administrative bodies, their heads and representatives, including: the State Institution “Department of Investments and Entrepreneurship Development of Astana”; JSC “Electronic Finance Centre”; the Deputy Head of the State Revenue Department of Turkestan Region; the Head of the Post-Clearance Customs Control Department of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan; the Republican State Institution “Main Dispatch Directorate of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan” (3 cases); the Head of the Post-Release Customs Control Department of the State Revenue Department for Almaty under the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan; as well as legal entities, namely LLP “M” and LLP “T”.

In 2023, one ruling was appealed under the appellate procedure (No. 7194-23-00-4/1108).

As follows from judicial practice, in customs disputes, courts have primarily applied this type of procedural coercive measure for the late submission of documents requested by the court, which resulted in the adjournment of hearings and delays in proceedings (Nos. 7194-24-00-4/1108, 7194-24-00-4/1217), as well as for failure to comply with the court's requests and instructions (Nos. 7199-21-00-4/239, 7194-23-00-4/321, 7194-24-00-4/1217).

Furthermore, there has been a case in which a monetary penalty was imposed for the improper execution by a state body of a separate court ruling. In particular, in proceedings concerning the claim filed by JSC “T” against the Republican State Institution “State Revenue Department for Aktobe Region” seeking recognition of an order as unlawful and its annulment, the court imposed a monetary penalty of 20 monthly calculation indices (MCI) on the Vice-Minister of Finance for failing to take measures in response to the court's separate ruling and for adopting a formalistic approach to its consideration (No. 7194-23-00-4/3922).

All rulings imposing monetary penalties have been enforced, and the amounts recovered have been paid into the state budget.

The shortcomings in the activities of customs authorities consist in the adoption of administrative acts by state bodies authorised in this field in violation of fundamental procedural requirements. Specifically, administrative acts fail to comply with the requirements of special legislation; violate the principles of the primacy of rights, protection of the right to legitimate expectations, and the prohibition of abuse of formal requirements (Articles 7, 8, 12, 13 and 14 of the APPC); and fail to meet the requirements of Articles 79 and 80 of the APPC.

Furthermore, customs authorities engage in formalistic examination of documents and information submitted in customs declarations for the purpose of confirming customs value. Inspections are also conducted in the absence of the lawful grounds exhaustively specified in Article 66 of the Customs Code of the Eurasian Economic Union (EAEU CC).

Upon identifying such violations, courts duly adopt appropriate judicial response measures in the form of separate rulings and monetary penalties. This subsequently has a positive impact on the activities of administrative bodies and helps prevent similar procedural violations from recurring.

In Case No. 3194-23-00-4/828, LLP “E” was registered in Almaty. A desk customs audit of this company was conducted by the State Revenue Department for Zhambyl Region.

When challenging the notification on the results of the audit, the claimant cited, among other grounds for the unlawfulness of the contested administrative act, the respondent's failure to comply with the principle of territorial jurisdiction.

Part 4 of Article 416 of the Customs Code provides that desk customs audits may be conducted without any restrictions on the frequency of their conduct.

The legislation prohibits only the conduct of a repeated desk customs audit by the same customs authority in respect of matters that have already been subject to a desk customs audit by that authority.

The Order of the Minister of Finance of the Republic of Kazakhstan dated 14 June 2016 No. 306 “On Approval of the Regulations on the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan” merely stipulates that the Department is a territorial body of the State Revenue Committee, which was instructed to appoint a desk customs audit in respect of the claimant.

The absence of a legislatively established right of the authorised body — the State Revenue Committee — to instruct customs authorities to conduct audits of entities operating outside the territory of their registration constitutes grounds for challenging administrative acts.

2. Consideration of Amendments to the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan “On Certain Issues of the Application of Customs Legislation by Courts”

It is proposed to consider the possibility of introducing amendments concerning the validity of the customs authority's application of the fallback method and the court's examination of the reliability of evidence submitted by the customs authority regarding the impossibility of applying the preceding methods of determining the value of goods.

This proposal is justified by the following considerations.

The customs value of goods imported into the customs territory of the Eurasian Economic Union is determined by applying the following methods:

1. The transaction value method;
2. The transaction value of identical goods method;
3. The transaction value of similar goods method;
4. The deductive value method;
5. The computed value method;
6. The fallback method (Articles 66–72 of the Customs Code).

The primary method for determining the customs value of goods is the transaction value method.

Where the primary method cannot be applied, each of the listed methods shall be applied consecutively. Each subsequent method may be used only where the customs value of the goods cannot be determined using the preceding method. At the declarant's request, the deductive and computed value methods may be applied in reverse order.

For example, the customs authority rejects the customs value declared by the declarant. The declarant applies to the court seeking recognition of the notification issued following a customs audit as unlawful and its annulment, arguing that all necessary documents confirming the customs value of certain goods imported into the territory of the Republic of Kazakhstan have been submitted. However, the respondent decides to adjust the customs value of the goods using the fallback method.

As a rule, customs authorities limit their justification to stating that their databases contain no information necessary for applying the preceding methods. In other words, they refer to the absence of information on the value of identical and similar goods imported into the customs territory of the Customs Union, as well as the absence of information on amounts subject to deduction or addition.

Paragraph 11 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan “On Certain Issues of the Application of Customs Legislation by Courts” provides that, when resolving disputes relating to the determination of the customs value of goods, courts must establish which indicators of an inaccurate declaration of customs value were identified by the state revenue authority and subsequently confirmed during customs control, taking into account, inter alia, documents and information collected by the customs authority and additionally submitted by the declarant.

When considering disputes relating to the determination of the customs value of goods, courts should pay particular attention to the clarifications provided in Paragraph 11 of the aforementioned Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan.

According to this provision, courts must establish which indicators of an inaccurate declaration of customs value were identified by the state revenue authority and confirmed during customs control, taking into account documents and information collected by the customs authority, as well as those additionally submitted by the declarant.

The declarant's failure to submit additional documents (information) substantiating the declared customs value of the goods does not, in itself, constitute grounds for the customs authority to decide to amend (supplement) the information declared in the customs declaration, provided that the declarant faced objective obstacles preventing the submission of the requested documents (information) and provided the customs authority with relevant explanations.

When considering cases, it should be borne in mind that Chapter 13 of the Entrepreneurial Code does not apply to state control in the field of customs affairs, except for paragraphs 1, 2, 3 and 4 of Article 131 and Article 131-1 of the Entrepreneurial Code. Consequently, the activities of customs authorities concerning the appointment and conduct of audits must comply with the provisions of the Customs Code.

Regulatory Framework

1. Constitution of the Republic of Kazakhstan dated 30 August 1995;
2. Administrative Procedural and Process-Related Code of the Republic of Kazakhstan (hereinafter referred to as the APPC);
3. Code of the Republic of Kazakhstan “On Customs Regulation in the Republic of Kazakhstan” (hereinafter referred to as the Customs Code);
4. Customs Code of the Eurasian Economic Union, ratified by the Law of the Republic of Kazakhstan dated 13 December 2017 No. 115-VI (hereinafter referred to as the EAEU CC);
5. Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated 29 November 2019 No. 7 “On Certain Issues of the Application of Customs Legislation by Courts”;
6. Code of the Republic of Kazakhstan “On Taxes and Other Mandatory Payments to the Budget” (Tax Code);
7. Entrepreneurial Code of the Republic of Kazakhstan (hereinafter referred to as the Entrepreneurial Code);
8. Code of the Republic of Kazakhstan on Administrative Offences (hereinafter referred to as the CAO);
9. Civil Procedure Code of the Republic of Kazakhstan (hereinafter referred to as the CPC);
10. Treaty on the Eurasian Economic Union dated 29 May 2014 (hereinafter referred to as the EAEU Treaty);
11. Acts constituting the law of the Eurasian Economic Union (hereinafter referred to as international treaties and acts in the field of customs regulation);
12. Decision of the Board of the Eurasian Economic Commission No. 42 dated 27 March 2018 “On the Specifics of Conducting Customs Control of the Customs Value of Goods Imported into the Customs Territory of the Eurasian Economic Union”.

List of Abbreviations

SCAD SC – Judicial Collegium for Administrative Cases of the Supreme Court of the Republic of Kazakhstan;

SCAD – Judicial Collegiums for Administrative Cases of regional courts and courts equated thereto;

IAC – Interdistrict Administrative Courts of the regions of the country;

SI – State Institution;

RSI – Republican State Institution;

SRC – State Revenue Committee;

SRD – State Revenue Department;

SRD Office – State Revenue Office;

LLP – Limited Liability Partnership;

IE – Individual Entrepreneur.

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