Order no. 14908/2022 of the Italian Supreme Court: customs penalties and proportionality principle

Prepared by Lorenzo Ontano, Marta Marrapodi e Jessica Falcone

With the Order no. 14908 dated April 13, 2022, filed on May 11, 2022, the Italian Supreme Court ruled that customs penalties, imposed by the Customs Authorities, must be proportionate, in other words commensurate with the gravity of the infringement committed by the taxpayer and not exceeding the limits of what is strictly functional to pursue the legislative intent.

The above-mentioned Order is part of a line of jurisprudence relating to the proportionality of tax penalties, marked by the sentences of both the Italian Supreme Court and the European Court of Justice.

The present case originated from the amendment, by the Customs Authorities, of the customs classification applied by the company to a product being imported, which resulted in the application of a higher customs duty rate, and, therefore, in higher customs duties amounting at 9,098.62 euro.

With reference to this assessment, the Customs Authorities imposed, pursuant to article 303 of the Presidential Decree no. 43/1973 (i.e. TULD), an administrative penalty of €33,000 (€30,000 is the minimum penalty provided for by article 303 of the Presidential Decree no. 43/1973, increased by 10% in consideration of the company’s tax background).

As a result, the company appealed against the penalty notice, which resulted in a partial acceptance, after which the Regional Tax Court of Liguria, considering the penalty excessive and disrespectful of the European principle of proportionality, as set forth in article 42 of the UCC (i.e. EU Regulation no. 952/2013), reduced the penalty to an amount equal to the evaded duty.

The second instance judgment, in turn, gave rise to the appeal to the Supreme Court by the Customs Agency, which complained of infringement and false application of article 303 of the TULD.

The Supreme Court, referring to various rulings of the same Court and of the European Court of Justice as grounds for its reasoning, held that the ground of appeal was unfounded and consequently rejected the appeal.

First of all it must be noted  that the EU Court of Justice, affirming the need for penalties to be proportionate to the infringement, has made it clear on numerous occasions that it is for the national Court to assess the proportionality of the penalties themselves and, where appropriate, to redetermine them by reducing their amount; secondly, it is necessary to mention that also the Supreme Court, in previous judgments, has specified that the courts on the merits must concretely ascertain whether the quantum of the sanction complies with the principle of proportionality and therefore whether it is appropriate to the infringement committed, without limiting themselves to generically stating the need to comply with EU law.

Based on those reasons, the Court aligns itself with the redetermination of the penalty made at second instance, with a ruling that leaves no room for doubt: the system of penalties, provided for by the above-mentioned provision, does not allow the penalty to be adjusted to the specific nature of the case in question. Indeed, the rigidity of the minimums provided for and the automatism that emerges result in unreasonably high penalties that are clearly at odds with the European principle.

In the light of this ruling, the role attributed to the principle of proportionality is clear: as a criterion aimed at balancing opposing interests, it assumes a limiting role on the power of the tax authorities, with the aim of avoiding disproportionality and inconsistencies in the penalty system.

Let’s Talk

For a deeper discussion, please contact:

Lorenzo Ontano

Tax Director

Email: lorenzo.ontano@pwc.com


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