The Administrative Cassation Court Within the Supreme Court Formulated an Opinion in the Case on Acquisition of a License for the Right to Store Fuel for Own Needs

The regional Main Administration of the State Tax Service of Ukraine imposed fines of UAH 500,000 on a farm for storing fuel without an appropriate license.

The business entity appealed against the notice-decision of the supervisory body to the court, explaining that it had purchased 31,960 liters of diesel fuel exclusively for its own consumption - growing crops on leased land. It stored the fuel in rented tanks and mobile tank vehicles, which it temporarily used. The plaintiff requested that the tax authority’s actions be declared unlawful, that the notice-decision be revoked.

The positions of the courts of the previous instances diverged. The court of first instance dismissed the claim, as it came to the conclusion that the storage of fuel, even for one's own use in economic activity, in the volumes in which the plaintiff had stored it, was only permitted under license. However, the court of appeal agreed with the plaintiff’s arguments that, in the understanding of the provisions of the Law of Ukraine On State Regulation of the Production and Circulation of Ethyl Alcohol, Cognac and Fruit Alcohols, Alcoholic Beverages, Tobacco Products and Fuel (in the wording in force at the time of the disputed legal relationship), a business entity should obtain a license for the right to store fuel only for stationary tanks / containers.

The Supreme Court, composed of a panel of judges of the Administrative Cassation Court, accepted the judgment of the court of appeal, which upheld the claim, but found the reasoning to be erroneous in the light of the following.

In order to assess if there was an offence in the activity of the business entity in the form of storing fuel without obtaining the appropriate license, it is necessary to determine the place and method of its storage, the purpose of the acquisition, the technical specifications of the facilities used (equipment, containers), the volume of consumption, the purchase and the circumstances of the use of fuel.

The panel of judges of the Administrative Cassation Court within the Supreme Court noted that due to the fact that the said Law did not give a clear understanding of exactly which places should be considered fuel storage sites, for each of which the business entity is obliged to obtain a license, then in order to resolve the contentious issue in the case, one should take into account the rules of the Tax Code of Ukraine containing the definition of concepts related to the circulation of fuel, including the places of its storage.

A systematic analysis of the provisions of the Tax Code of Ukraine and the Law of Ukraine On State Regulation of the Production and Circulation of Ethyl Alcohol, Cognac and Fruit Alcohols, Alcoholic Beverages, Tobacco Products and Fuel in their interrelation provides grounds for formulating such a legal conclusion. Fuel storage is inextricably linked to the business entity's availability of facilities and / or equipment and / or containers used to store fuel on the basis of ownership or use (fuel storage sites). The existence of an obligation for a business entity to obtain a license to carry out activities on the storage of fuel, which is mediated by the acquisition and use of fuel by the business entity to meet its own production needs during its economic activity (not related to the purpose of obtaining income from the storage of fuel as an economic activity), depends precisely on the entity's availability of a place of fuel storage, which according to its features (characteristics) meets the definition of "excise warehouse" and/or "mobile excise warehouse", regardless of whether such an entity is registered as an excise tax payer, excise warehouse manager, and/or whether there are grounds for registering such a place as an excise warehouse. Accordingly, in the event that the place of storage of fuel available to a business entity meets the criteria that the Tax Code of Ukraine establishes as an exception to the definition of the concepts of “excise warehouse” and / or “mobile excise warehouse”, such an entity is not obliged to obtain a license for the right to store fuel in such a place.

According to the established circumstances in this case, the fuel storage facilities used by the plaintiff meet the criteria defined in the Tax Code of Ukraine as exceptions to the concepts of "excise warehouse" and / or "mobile excise warehouse". In these circumstances, there is no reason to believe that the plaintiff's activities meet the definition of "fuel storage", which falls under the licensing requirements within the meaning of Law No. 481/95-ВР, accordingly, the plaintiff was not obliged to obtain a license for such activities.

The text of the Resolution of the Commercial Cassation Court within the Supreme Court of 31 May, 2022 in case No.  540/4291/20 (administrative proceeding No. К/9901/34873/21) can be found at the following link - https://reyestr.court.gov.ua/Review/104548576.

This and other legal positions of the Supreme Court can be found in the Database of Legal Positions of the Supreme Court - lpd.court.gov.ua/login.