On 28 July 2015 the Commercial Court of Moscow rendered a decision in case No. А40-102787/2016-33-887 under the claim of Sodruzhestvo LLC (the “Company”) against the Central Excise Customs Authority (“CECA”) to invalidate a CECA departmental control decision cancelling a Vladimir Excise Post decision on release of goods.
It follows from the court decision that the Company had placed a motor vehicle under the customs procedure of outward processing to perform warranty repair using the declaration for goods as a document on the conditions for processing the goods (in accordance with Article 253 of the Customs Union Customs Code, processing permission is not required in this instance). Actually, though, in addition to undergoing warranty repair outside of the customs territory the vehicle was also armored and received several upgrades (a fire alarm was installed, the tires were changed, etc.).
When the vehicle was returned to the customs territory of the Eurasian Economic Union the Company placed it under the customs procedure of release for domestic consumption, having calculated and paid the customs payments based on the value of the work done under the regime of outward processing. The vehicle was released for domestic consumption by an official of the Vladimir Excise Post.
Following departmental control done by the CECA, it was declared that the decision to release the goods did not comply with the effective customs legislation.
In the CECA’s opinion, the work done to the vehicle (armoring, upgrade/change of features) was not repair work and could have been done only with duly issued permission to process the goods.
As, pursuant to Article 252(2) of the Customs Union Customs Code, goods placed under the customs procedure of outward processing and actually exported lose the status of Customs Union goods, and the extra work done to the vehicle without the customs authority’s permission violates the terms of the declared customs procedure and means that the returned vehicle cannot be considered as a product of processing, therefore, Mercedes Benz vehicle placed under the customs procedure of release for domestic consumption should be considered as a foreign goods and the customs duty and value added tax should be paid not on the value of the work to process the goods, but on the full value of the imported vehicle.
The court supported the CECA’s arguments and dismissed the Company’s claims, holding that they were inconsistent with the effective legislation of the Eurasian Economic Union and Russian Federation customs laws.
The court decision in this case emphasizes once again that the issue of applying customs procedures other than the well-known procedures of release for domestic consumption and export should be considered carefully.