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Shanghai Huixing Industry Co., Ltd. v.
Shanghai Pujiang Customs
(Case on Administrative Compensation)
Plaintiff: Shanghai Huixing Industry Co., Ltd., domiciled on
Huihe Road, Shanghai
Legal Representative: Dou Xiangyang, general manager of the
Industry Co., Ltd.
Defendant: Shanghai Pujiang Customs of the People’s Republic
of China, domiciled on Taiping Road, Shanghai
Legal Representative: Ma Yan, principal of the Customs
Shanghai Huixing Industry Co., Ltd. (hereinafter referred to
as Huixing) had a dispute over administrative compensation
with Shanghai Pujiang Customs of the People’s Republic of
China (hereinafter referred to as the Customs) and therefore
filed an action on administrative compensation with the No.
2 Intermediate People’s Court of Shanghai Municipality. The
No. 2 Intermediate People’s Court of Shanghai Municipality
accepted the present case on May 6, 2003.
Huixing alleged that: On November 13, 2001, the Customs
levied the import tariff as well as the value-added tax
(VAT) on the artificial grassland as imported by Huixing. On
October 22, 2002, the Customs levied, in addition, 47, 509.
34 yuan of import tariff as well as VAT on the artificial
grassland sold by Huixing. The tax amount as additionally
levied was incremental cost, which led to a decrease of
Huixing’s proceeds as generated from its sale of artificial
grassland and therefore let to direct losses thereto.
Huixing, hence, pleaded with the court to adjudicate that
the first levy of tariff as conducted by the Customs is
illegal and that the Customs shall compensate Huixing 47,
509. 34 yuan of economic losses.
The evidences as provided by the plaintiff are as follows:
1. A Sales Contract as concluded between Huixing and
Hangzhou Jingfang Middle School on September 20, 2001,
stipulating a sales unit price of 180 yuan/square meters for
grassland;
2. An Engineering Contract on the Artificial Grassland for
Football Field as concluded between Huixing and Fudan
University on September 26, 2001, stipulating a sales unit
price of 215 yuan/square meters for grassland;
3. An Agreement as concluded between Huixing and Shanghai
Shixian Industry & Development Co., Ltd. on September 30,
2001, stipulating a sales unit price of 102. 5641 yuan/square
meters for grassland;
4. A remittance credence relating to the business operation
between Huixing and Guangdong Huajin Sports Field Article
Co., Ltd.;
5. An Engineering Contract on the Artificial Grassland for
Sports Field as concluded on March 25, 2002 between Huixing
and the Scientific and Technical Kindergarten of Yangpu
District, Shanghai, stipulating a sales unit price of 150
yuan/square meters for grassland;
6. An Engineering Contract on the Artificial Grassland for
Sports Field as concluded in August, 2002 between Huixing
and Shanghai Shenhong Construction Co., Ltd. for Zhongzhoulu
Primary School and Chifenglu Primary School, stipulating a
sales unit price of 140 yuan/square meters for grassland;
and
7. A Construction Contract on the Artificial Grassland as
concluded on September 3, 2002 between Huixing and
Administrative Station of Educational Capital Construction
for School Assets, Shenhong District, Shanghai
Hydro-electricity Middle School and the No. 2 Middle School
of Liang Cheng, Shanghai, stipulating a sales unit price of
135 yuan/square meters for grassland, as well as the
relevant bank cheques and invoices.
The foregoing evidences are all applied in proving that the
artificial grassland as imported by the plaintiff has been
sold out before the relevant tax return is required to be
made up;
When the relevant evidences are exchanged before the
hearing, the Customs confirmed that the application of law
in the tax levy as conducted on November 13, 2001 was wrong
and therefore, Huixing disclaimed its request for confirming
the illegality of the levy.
The defendant argued that: Huixing entrusted another party
to declare to the Customs its imported artificial grassland
by wrong serial number of goods, which was then overlooked
by the relevant functionary and therefore the corresponding
tax return was under-collected. The requirement of the
Customs for making up tax return was based on legal ground.
Huixing’s claim of compensating for the tax return as made
up has neither factual evidences nor legal ground. The
Customs pleaded with the court to revoke the plaintiff’s
claim.
The No. 2 Intermediate People’s Court of Shanghai
Municipality found through hearing that:
Huixing declared to the Customs on November 13, 2001 through
an agent, Shanghai Xietong (Group) Co., Ltd., for its
imported artificial grassland of 8, 491. 2 square meters.
The Customs let it pass after collecting 101, 515. 8 yuan of
tariff as well as 132, 308. 96 yuan of VAT on the same day.
Later, the Customs found out the mistake in the serial
number of goods in Huixing’s declaration of its artificial
grassland, according to which the relevant functionary put
it under wrong classification of tariffs and thus incurred
an under-collection. The Customs therefore requested Huixing
to make up 47, 509. 34 yuan of tariff and VAT on October 22,
2002 (hereinafter referred to as the supplement levy of
taxes). After Huixing made up its taxes, it applied on
January 20, 2003 for an administrative compensation with the
Customs on the ground that the supplement levy of taxes as
conducted by the Customs on November 13, 2001is illegal
(hereinafter referred to as the original tax levy). On March
21, 2003, the Customs made a decision on not making an
administrative compensation and deemed its levy of taxes as
legal and that Huixing’s claim for compensation failed to
meet the requirements for compensation as prescribed in
Articles 2 and 4 of the State Compensation Law of the
People’s Republic of China (hereinafter referred to as the
Compensation Law):
The No. 2 Intermediate People’s Court of Shanghai
Municipality held that:
Article 62 of the Customs Law of the People’s Republic of
China (hereinafter referred to as the Customs Law)
prescribes that: “Where the Customs finds that the duties
are short-levied or not levied on a consignment of import or
export goods or on an inward or outward article after its
release, the Customs shall collect the money payable from
the obligatory customs duty payer within one year of the
previous duty payment or the release of the item.”
Article 2 of the State Compensation Law prescribes that:
“Where State organs or State functionaries, in violation of
the law, abuse their functions and powers by infringing upon
the lawful rights and interests of the citizens, legal
persons and other organizations, thereby causing damage to
them, the victims shall have the right to acquire state
compensation in accordance with this Law.”
Article 33 of the Provisions of the Supreme People’s Court
on Several Issues regarding the Hearing of Cases Involving
Administrative Compensation prescribes that: “Where a
specific administrative act conducted by the defendant is
unlawful but has not incurred any injury on the plaintiff’s
legitimate rights and interests, or in the case of no legal
ground for the plaintiff’s claim, the people’s court shall
revoke the plaintiff’s litigious claim.”
Huixing entrusts another party to declare to the Customs its
imported artificial grassland by wrong serial number of
goods and the Customs failed to carry out a strict
examination thereon, which led to an under-collection of
taxes from Huixing. It was not improper for the Customs,
after finding out the problem of under-collection, to
request Huixing to make up its tax return according to the
provisions of the Customs Law. Although Huixing has a right
to claim for state compensation on the ground that the
original tax levy has incurred losses thereto, however, the
unit price, as stipulated in the contract on project
construction and provided by Huixing, including the relevant
auxiliary materials for laying the artificial grassland as
well as the expenses for laboring, has no causal
relationship with its claim for compensation on the legal
ground and Huixing failed to prove the actual aftermath of
injury. Therefore, its claim shall not be sustained.
Therefore, the No. 2 Intermediate People’s Court of Shanghai
Municipality adjudicated on July 14, 2003 that:
Huixing’s claim shall be rejected.
After the judgment of the first instance was announced,
Huixing was dissatisfied with it and filed an appeal with
the Higher People’s Court of Shanghai Municipality.
Huixing alleged that: (1) The Customs had mistakes in the
classification of tariffs in the original tax levy, which
has violated the provisions of the Measures for the
Administration on Tax Levy by the Customs that the Customs
shall carry out tax levy according to correct classification
of tariffs. Therefore, it is an unlawful administrative act.
(2) As the unlawful tax levy led to a supplement tax levy,
which consequently incurred additional costs on the import
of artificial grass. The relevant artificial grass as
involved in the tax levy has been sold out before the
supplement tax levy. The additional cost on artificial grass
could not be transferred in the already-done sale but only
offset the proceeds as generated from the sale. The
additional cost could have been realized in the price.
Huixing suffered a decrease of income as a result of
additional costs, which is a true fact of injury. (3)
Huixing determined its price in the contract according to
the relevant classification of tariffs and tax rate in the
original tax levy. The Customs levied taxes before Huixing
determined its cost accordingly so that the transfer of
taxes as levied into cost is a key factor in the pricing of
grassland. The original tax levy, which is unlawful, is an
indirect cause leading to the aftermath of injury. There is
no such provision in the State Compensation Law that an
administrative tort as indirectly incurred may not be
subject to the liabilities of compensation. Huixing
therefore pleaded with the court to revoke the judgment of
the first instance.
The Customs argued: (1) An action on administrative
compensation shall be based on the prerequisite that a
specific administrative act is illegal, which shall be
clarified by law. That the Customs made a decision on
supplement tax levy is not tantamount to admitting that its
original tax levy is unlawful. (2) The term “injury” as
mentioned in the State Compensation Law is an injury on
legitimate rights and interests. Tax return is a legitimate
obligation of Huixing, therefore, the tax amount as
under-collected is unjustifiable interest and thus shall be
refunded. There is no injury as incurred on Huixing. (3) The
enterprise pricing is mainly up to market factors. The level
of tariffs is not the only factor as decisive in pricing.
The floating margin of unit price in the evidences as
provided by Huixing is comparatively large whereas if the
tax amount as made up is contributed to all the imported
grassland in the same amount, it was iota as compared with
the floating margin of unit prices. The Customs pleaded with
the court to sustain the original judgment and reject the
appeal.
Both parties in this case had no different opinion on the
contents and proceeding of the original tax levy as well as
the supplement tax levy. The Higher People’s Court of
Shanghai Municipality found through hearing that the facts
as confirmed in the original instance are clear and thus
accepted them.
The Higher People’s Court of Shanghai Municipality believed
that the focuses of this case are: (1) whether the original
tax levy is illegal; (2) whether the original tax levy has
incurred direct losses to Huixing.
According to the provisions of Article 21 of the Provisions
of the Supreme People’s Court on the Hearing of Cases
Involving Administrative Compensation that: “A compensation
claimer that files alone an action on administrative
compensation shall meet the following requirements.” Item
(4) thereof prescribes that “Where an act of injury is a
specific administrative act, it shall be confirmed as
illegal.” Whether a specific administrative act is illegal
shall be determined by the people’s court. Huixing’s claim
for compensation arises directly from the Custom’s original
tax levy. As the Customs made a decision on supplement tax
levy, it indicated in itself that there is a mistake in the
classification of tariffs as well as the computation of tax
amount. Furthermore, both parties concerned in this case had
no different opinion on the illegality of the original tax
levy. Thus it shall be deemed that the illegality of the
original tax levy against which the claim of compensation is
filed has been confirmed. Huixing has the right to file an
action on administrative compensation alone according to the
State Compensation Law.
Item (7) of Article 28 of the State Compensation Law
prescribes that “Where any other injury is incurred to the
right of property, compensation shall be made according to
the direct losses.” According to the relevant provisions of
the Customs Law on supplement tax levy, the tariffs in the
original tax levy as well as the supplement levy are both
due obligation that shall be borne by Huixing, regardless of
whether its grassland has been sold out. Where the Customs
confirms that the tariff is under-collected according to
law, Huixing shall make up its tax return according to the
provisions of the Customs Law. The under-collected part is
unjustifiable interest and thus shall be turned over.
Therefore, whether Huixing suffered a direct loss when
making up its tax return is a prerequisite to determine
whether the Customs shall be subject to the liabilities of
compensation. According to the provisions of the State
Compensation Law, where Huixing deems that the Customs has
incurred a direct loss to it, it shall bear the liabilities
of presenting the relevant evidences to support its claim
for compensation. Such evidences as sales contracts,
agreements as well as remittance credence as presented by
Huixing may prove that its grassland as imported has been
sold before the supplement tax levy is conducted by the
Customs, however, the sales unit price of grassland as sold
by Huixing ranges from 102 yuan to 180 yuan per square
meter, the proceeds margin is comparatively large and
therefore, the tax amount as levied by the Customs is not a
major factor in pricing. The claim of contract pricing being
largely determined by the market situation is well
established. Huixing’s claim of decrease in sales income
relies on the prerequisite of making profits by a
comparatively high sales price. However, a comparatively
large profit is determined by many uncertain factors in the
real situation of supply and demand, and is therefore an
uncertain interest. There is in fact no direct loss. As the
evidences as provided by Huixing fail to prove that the
original tax levy has incurred direct losses thereto, its
claim for administrative compensation is not well
established. The court of the original instance was correct
in rejecting Huixing’s claim.
Therefore, the Higher People’s Court of Shanghai
Municipality adjudicated on October 10, 2003 according to
the provisions of Item (1) of Article 61 of the
Administrative Litigation Law of the People’s Republic of
China that:
The appeal shall be rejected and the judgment of the
original instance shall be sustained. |
