Court supported position of tax officials regarding legality of applying a fine for violation of retail fuel sale

Cassation court supported the controlling body’s position regarding legality of applying financial sanction to business entity in the form of a fine for violating provisions of current legislation regarding carrying out retail fuel sale.

Part 20 of Article 15 of the Law of Ukraine "On state regulation of production and turnover of ethyl, cognac, and fruit alcohol, alcoholic beverages, tobacco products and fuel" (in edition at the time disputed legal relationship arose) stipulates that retail sale of alcoholic beverages, tobacco products or fuel may be carried out by business entities of all ownership forms, including their manufacturers, if they have licenses for retail sale.

In case that a person carries out sale and storage of fuel for other persons, such person is obliged to:

1. a) register all excise warehouses in the electronic administration system for fuel and ethyl alcohol sale;
2. b) equip excise warehouses, on the territory of which fuel is stored and sold, with flow meters-counters at each point of dispensing fuel in bulk from excise warehouse located in the excise warehouse, and with level meters-counters of level of such goods (products) in the tank, registering in the Unified state registers of flow meters-counters and level meters-counters of fuel level in the tank.

Conducted audit established that on 17.03.2021 at 11 hours 30 minutes fuel in the amount of 65 liters at a cost of 23.50 UAH per liter was sold directly into the tank of a car with diesel engine and settlement operation in the amount of 1500 UAH was carried out at the object of actual audit: storage place of fuel belonging to individual-entrepreneur PERSON_1, at the address: ADDRESS_1, which is not equipped with level meter- counter. In addition, individual-entrepreneur PERSON_1 did not register excise warehouse in the electronic administration system for fuel ethyl alcohol sale, and also did not generate data on the actual fuel balance at the beginning and end of reporting day on a daily basis.  

Plaintiff's argumentations boil down to the fact that release of petroleum products took place without his knowledge (position in the court of first instance), and already during appeal proceedings, the latter pointed to the illegal disposal of disputed petroleum products from his property due to illegal actions of PERSON_3.

Assessing such argumentations, the appellate court rightly rejected such argumentations of FOP PERSON_1, because: being the owner of excise warehouse, the plaintiff must prevent access of outsiders to the tank with petroleum products; the plaintiff provided written explanations dated 17.03.2021, in which he actually confirmed sale of diesel fuel to a third party on the territory of excise warehouse; appropriate law enforcement agency received a request from PERSON_4 about presence of illegal gas station at the address: ADDRESS_1, where PERSON_3 was found, who sold oil products; witness PERSON_3 confirmed in written explanations dated 17.03.2021 and in his testimony in the court the above-specified fact of sale of petroleum products; individual-entrepreneur PERSON_1, as the owner of fuel, did not provide evidence of appeal to the law enforcement agencies regarding the theft of his property and/or evidence of receiving from PERSON_3 compensation for damages caused to him.

Therefore, based on factual circumstances of the case, having evaluated evidence gathered in the case to confirm circumstances of the subject of evidence, as well the norms of current legislation that regulate disputed legal relations, the courts of previous instances reached correct conclusion that the defendant proved the fact of selling fuel on the territory of excise warehouse, which is located at the address: ADDRESS_1, and belongs to the business entity individual-entrepreneur PERSON_1, and therefore about the lack of grounds for satisfying these claims.

Regarding the plaintiff's argumentations about imposition of a fine in larger amount than established by the law, the Cassation court notes that according to Part 2 of Article 17 of the Law of Ukraine "On state regulation of production and turnover of ethyl, cognac, and fruit alcohol, alcoholic beverages, tobacco products and fuel " financial sanctions in the form of fines are applied, in particular, for provision of fuel storage services to other business entities and/or sale of fuel to other persons on the basis of license for fuel storage, obtained on the basis of application exclusively for the needs of own consumption or industrial processing according to Article 15 of this Law, 500 thousand UAH.

Cassation administrative court as a part of the Supreme Court on 16.04.2024 in case № 380/7245/21 dismissed the plaintiff's cassation appeal; decision of Lviv district administrative court as of 04.04.2022 and decision of Eighth administrative court of appeal as of 12.10.2022 were left unchanged.