Kalev to appeal resolution on surplus stock

On 29.03.2007, the Northern Regional Tax Centre of the Estonian Tax and Customs
Board (hereinafter Northern RTC) passed a resolution establishing AS Kalev's
surplus sugar stock at 15.6 thousand tons. A similar resolution passed on
17.06.2005 was annulled by the Northern RTC at the beginning of last November,
with the basis for the resolution on establishment of surplus stock declared
unlawful. No tax notice was issued after the passing of the resolution on
establishment of surplus stock—the administrative court suspended, on the basis
of the corresponding petition filed by AS Kalev, the validity of the resolution
until the end of the court dispute. The Tallinn Administrative Court terminated
the proceedings with its corresponding resolution, ordering the Tax and Customs
Board to pay AS Kalev's procedure expenses. 

With its resolution of 29.03.2007, the Northern RTC imposed on AS Kalev a
135.6-million-kroon surplus stock charge. The term of payment was set to 30
days from delivery. Once again, AS Kalev will apply for suspension of the
validity of the notice of assessment from the Tallinn Administrative Court on
the same basis. 

AS Kalev will contest the resolution of the Northern RTC from 29.03.2007 on
establishment of surplus sugar stock and imposition of a surplus stock charge. 

Oliver Kruuda, General Manager of AS Kalev:

“The actions of Northern RTC make no sense—to all intents and purposes, they
have passed the same resolution which was once annulled by themselves, as the
basis for the resolution was declared unlawful. There have been no changes with
respect to the surplus sugar stock established for AS Kalev. I was expecting
the administrative court judgment to settle the matter once and for all. But it
seems that the Tax and Customs Board is set to repeat its mistakes.” 

AS Kalev still believes that the company correctly declared its sugar stock in
accordance with the provisions of the Surplus Stock Charges Act (SSCA), and
that, as of 01.05.2004, the company was not the owner or possessor of 15.6
thousand tons of sugar stock assessed as surplus stock by the Northern RTC. 

The Surplus Stock Charges Act was published on 27.04.2004 and entered into
force  four days later, i.e. on 01.05.2004. This Act established retroactive
sanctions for surplus sugar stock, even though the sugar stock was completely
legal at the time of its purchase. Entrepreneurs could act with legal certainty
that no sanctions would be imposed on them as long as they did not violate the
published and enforced law. With the resolution No. 3-3-1-33-06 of the Supreme
Court from 05.10.2006, subsections 6 (1), (7) and (10) were deemed
inapplicable. The parliament passed the SSCA Amendment Act on 25.01.2007. 

AS Kalev believes that the amendment act, too, is inapplicable due to its
contradiction with the constitution and European law, and that the amendment
act failed to eliminate the shortcomings due to which the earlier wording of
the act was deemed inapplicable by the Supreme Court. 

AS Kalev believes the notice of assessment to be unjustified even if the SSCA
is applicable. 

AS Kalev transferred the 15.4 thousand tons of sugar owned by the company
before entry into force of the SSCA. The right of ownership of the sugar was
transferred by the seller to the buyer at the moment of the conclusion of the
contract. With the signing of the contract, AS Kalev was no longer the owner of
the sugar. The obligations of both the seller and the buyer arising from the
contract of sale have been fulfilled, and the contract of sale has incurred
actual legal and factual economic consequences which correspond to the contents
of the contract. The mere fact that the Tax and Customs Board doubts the
ordinary business transaction does not provide any basis for issuing the notice
of assessment. 

AS Kalev believes the claims and conclusions brought out in the resolution of
the Northern RTC from 29.03.2007 to be erroneous and unjustified, that
substantive law has been applied incorrectly, and that procedural provisions as
well as general legal principles have been violated. 


Allan Viirma
Head of Legal Service
607 7831