Recognition of illegal actions of the tax authority for the compulsory collection of fines under resolutions on the imposition of administrative penalties

The person who has issued a resolution imposing an administrative penalty shall terminate the execution of the resolution and release it from administrative punishment in cases of repeal of the law or its individual provisions establishing administrative liability. LLP "P" (hereinafter referred to as the Partnership, LLP) applied to the court to declare illegal the actions of the tax authority to enforce fines under administrative penalties dated August 6, 2012 No. 003329, No. 003330. The decision of the specialized interdistrict Economic Court of Pavlodar region dated March 26, 2014 denied the application. By the decision of the appellate and cassation judicial boards of the Pavlodar Regional Court, the decision of the court of first instance remained unchanged.

After discussing the arguments set out in the LLP's complaint, the Supervisory Judicial Board for Civil and Administrative Cases of the Supreme Court of the Republic of Kazakhstan canceled the judicial acts in the case with a new decision, as the local courts committed a significant violation of substantive law, which led to the issuance of an illegal judicial act. It follows from the case file that on August 6, 2012, the Partnership was brought to administrative responsibility by the tax authority: - by Resolution No. 003329 – under part 7 of Article 206 of the Code of Administrative Offences of the Republic of Kazakhstan, introduced by the Law of the Republic of Kazakhstan dated January 30, 2001 No. 156-II (hereinafter referred to as the Administrative Code), with the imposition of administrative a fine of 150 monthly calculation indices in the amount of 242,700 tenge; - Resolution No. 003330 – on part 1 of Article 206 of the Administrative Code with the imposition of an administrative fine in the amount of 45 monthly calculation indices in the amount of 72,810 tenge. Prior to the implementation of these resolutions, the Law of the Republic of Kazakhstan dated December 26, 2012 No. 61-V "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Taxation" (hereinafter referred to as the Law of December 26, 2012) excluded Part 7 from Article 206 of the Administrative Code, and Part 1 was set out in a new wording, the sanction which contains only a warning. In this regard, the Partnership applied to the tax authority with a request to terminate the execution of resolutions No. 003329 and No. 003330 and to be exempted from administrative penalties on the basis of paragraph 1) of Article 702 of the Administrative Code, since certain parts of the law establishing administrative liability have been repealed (letters No. 39 dated May 27, 2013, No. 4 dated July 9, 2013 year). The tax authority refused to satisfy the LLP's request, arguing that administrative responsibility for the offenses committed has not been abolished, part 1 of Article 206 of the Administrative Code as amended by the Law of December 26, 2012 covers the offences provided for in parts 1 and 7 of Article 206 of the Administrative Code as amended on the date of the rulings on the imposition of a fine on the LLP. The total amount of fines of KZT 315,510 was recovered from the Partnership by collection order of the tax authority No. 132279 dated November 8, 2013.The courts have recognized as lawful the action of the tax authority on the execution of decisions on the imposition of an administrative fine. According to the local courts, the literal interpretation of paragraph 1) of Article 702 of the Administrative Code allows us to conclude that this norm can be applied only in case of cancellation of an administrative penalty.; The Law of December 26, 2012 introduced amendments mitigating administrative liability under Part 1 of Article 206 of the Administrative Code, but not abolishing liability for an offense; the exclusion of part 7 of Article 206 of the Administrative Code does not mean the abolition of administrative liability for an offense committed by a Partnership, since the offense previously provided for in Part 7 of Article 206 of the Administrative Code is covered by the disposition of part 1 of Article 206 The new version of the Administrative Code.  The position of the courts does not correspond to the law and the circumstances relevant to the case. As of the date of Resolutions No. 003329 and No. 003330, administrative liability for offenses committed by the Partnership was regulated by various norms: part 1 of Article 206 of the Administrative Code and Part 7 of Article 206 of the Administrative Code, which included a fine. By the Law of December 26, 2012, the dispositions of both norms were combined and set out in a new version of part 1 of Article 206 of the Administrative Code. In this regard, indeed, administrative liability for offenses committed by the Partnership has not been abolished. However, the new version of part 1 of Article 206 of the Administrative Code provides as a sanction only a warning, which, by virtue of paragraph 1) of part 1 of Article 45 of the Administrative Code, is one of the types of administrative penalties. Consequently, the sanction providing for the imposition of a fine as an administrative penalty has been lifted. The sanction is an integral element of the norm establishing administrative responsibility. Paragraph 1) of Article 702 of the Administrative Code explicitly provides that the body (official) that issued the decision to impose an administrative penalty shall terminate the execution of the decision and release from administrative punishment in cases of repeal of the law or its individual provisions establishing administrative liability.

In the case under consideration, the sanction in the form of a fine has been lifted, which was a separate provision of part 1 of Article 206 of the Administrative Code before this provision was redefined according to the Law of December 26, 2012. Consequently, the tax authority had to terminate the enforcement of Resolutions No. 003329 and No. 003330 and exempt the partnership from administrative penalties. Under the circumstances described, the judicial acts that took place in the case were annulled with the issuance of a new decision on the satisfaction of the claim, since the courts incorrectly applied the norms of the administrative law in resolving the dispute. 

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