Self-defence following an appeal does not prevent an order to pay costs

The company contested the notices, pointing out that it had already paid the disputed flat-rate charge.

Following the lodging of the appeal, the office carried out the necessary checks and verified that the tax had in fact been paid. Consequently, both the payment notice and the subsequent penalty notice were annulled by way of administrative review, by means of a decision adopted before the administration appeared in court.

The Tax Court of First Instance declared the case to be no longer in dispute pursuant to Article 46 of Legislative Decree 546/1992, but nevertheless ordered the office to pay the costs of the proceedings.

Consequently, the administration lodged an appeal limited to that ruling, arguing that the prompt annulment of the documents and the purely executive role it had played in relation to the requests from the Registry of the Court of Cassation should have led to the costs being shared.

The Court of Campania dismissed the appeal, ruling that the judges at first instance had correctly applied Article 46 of Legislative Decree 546/1992 and Article 92 of the Code of Civil Procedure.

Referring to the established case-law of the Court of Cassation (including, amongst others, judgments 21380/2006 and 1230/2007, as well as order 22231/2011), the Court points out that, in cases where the subject-matter of the dispute ceases to exist following the annulment of the contested act, there can be no automatic provision for the apportionment of costs. Such a solution would, in fact, end up granting the administration preferential treatment that is incompatible with the principles of reasonableness, equality of the parties and due process.

Instead, it is necessary to ascertain what the outcome of the dispute would have been had the case been decided on its merits. It is precisely this prognostic assessment that characterises a ‘virtual defeat’.

In the case in question, according to the judges, there was no doubt that the taxpayer would have secured the annulment of the decisions, as it had been demonstrated that the required flat-rate fee had been duly paid. The annulment by way of self-redress, in fact, took place only after the dispute had been brought before the courts.

The Court in Campania, whilst acknowledging that the office, upon receiving the appeal, acted diligently and proceeded to annul, at the earliest opportunity, all the recovery notices previously served, considers, nevertheless, that this circumstance is not sufficient to exempt it from being ordered to pay the costs. The decisive factor remains, in fact, that the taxpayer had to bring legal proceedings in order to have their case upheld.

The fact that the error was attributable to a report from the Registry of the Court of Cassation was likewise deemed irrelevant. According to the Court, any malfunctions or erroneous communications in dealings between public offices relate exclusively to the internal organisation of the administration and cannot result in prejudice to the taxpayer.

Self-remedy taken after the commencement of legal proceedings, whilst constituting diligent conduct on the part of the administration, does not negate the effects of a de facto defeat when the taxpayer’s legal action proves to be the only means of securing the withdrawal of an unlawful claim. From this perspective, errors and inefficiencies within the public administration cannot affect the winning party’s right to be reimbursed for the costs incurred in its defence.