Editor's Note: In practice, in the case where the relative only sues on the tax penalty decision, due to the high degree of consistency between the tax penalty decision and the tax processing decision, there are different views in the judicial trial as to whether the court should review the facts identified in the penalty decision, and there are views that the two should be heard at the same time and make a judgment, and there are also views that the facts underlying the tax penalty decision are the facts identified in the tax processing decision, and the court should no longer review the facts identified in the penalty decision. There are also views that the facts on which the tax penalty decision is based are the facts determined by the tax processing decision, and the court should not review the facts determined by the penalty decision. In this paper, the tax processing decision and tax penalty decision are two separate administrative acts, the court shall review the facts of the violation of law determined by the penalty decision, briefly analyzed as follows.

First, the relationship between the tax treatment decision and the tax penalty decision: different views in judicial practice

(I) The integration of levy and penalty: the facts determined by the tax processing decision and the tax penalty decision shall be the same.

This point of view that the tax treatment decision and tax penalty decision has the relevance, the court in the same case can be recognized by the two illegal facts at the same time for trial and judgment. In Guizhou Certain Beer Company Limited v. Anshun City State Taxation Bureau Inspection Bureau Taxation Administrative Penalty, the court of second instance held that “the tax processing decision is the basic and relevant administrative act of the sued An Guo Shui Ji Jian [2015] No. 17 Decision on Taxation Administrative Penalty in this case, and the amount of value-added tax and consumption tax underpaid by Certain Beer Company as determined by the tax processing decision at the same time became the factual basis of the appealed tax penalty decision in this case. ...... In order to handle the whole case properly, reduce the parties' burden of litigation and achieve good legal and social effects, the amount of VAT and consumption tax evasion of a certain beer company determined by the tax processing decision should also be changed in this case by a single judgment. ...... ”

(ii) Convergence of levy and penalty: the fact recognized by the tax processing decision is the factual basis of the tax penalty decision

This point of view that the tax penalty decision is made on the basis of the tax processing decision, the facts on which the tax penalty decision is based are the facts of the violation of the law determined by the tax processing decision, and the court will not review the facts determined by the tax penalty decision separately. Ltd. v. State Administration of Taxation, Hainan Provincial Inspection Bureau of Taxation Administrative Punishment, the Court of Review held that: “Although a company objected to the Second Inspection Bureau of the Provincial Taxation Bureau's determination of tax evasion, it did not file an administrative reconsideration and litigation against the No. 3 processing decision, and the No. 1 decision on penalties is based on the facts determined by the No. 3 processing decision, and the No. 3 processing decision has become legally effective. Processing Decision No. 3 has become legally effective, and there is no need for a company to review the content of it if it objects to it again.”

(iii) The parallelism of levy and penalty: the facts found in the tax processing decision are not binding on the tax penalty decision.

This point of view that the tax processing decision and the tax penalty decision are two completely different specific administrative acts, the court should be on the tax penalty decision to review the facts of the violation of law. In the case of Shaoxing Sand and Gravel Factory v. State Administration of Taxation Shaoxing Municipal Inspection Bureau of Taxation Administrative Punishment, the court of first instance adopted the view of convergence of levy and punishment, i.e., the tax processing decision is the administrative act underlying the tax penalty decision, because the tax processing decision has already entered into force, and therefore, the court recognized the illegal facts identified in the tax penalty decision, whereas the court of second instance held that: “The tax processing decision and the tax penalty decision are two different administrative acts, and the tax penalty decision is not binding. The court of second instance held that “the tax processing decision and the tax penalty decision are two different administrative acts, and the laws and regulations do not stipulate that the administrative reconsideration is the necessary procedure for filing a lawsuit of administrative penalty. For the administrative penalty, the legality should be comprehensively examined in accordance with the provisions of Article 6 of the Administrative Procedure Law of the People's Republic of China.”

Second, only on the tax penalty decision to sue, the court should be its determination of the facts of the violation of the law to carry out a comprehensive review

(i) The court has the duty to conduct a comprehensive review in administrative litigation

According to the provisions of the Administrative Litigation Law, the people's court hearing administrative cases shall review whether the administrative act is lawful. The so-called lawful review includes whether the facts on which the specific administrative act is based are clear, whether the evidence is sufficient, whether the applicable laws and regulations are correct, whether there is any violation of the legal procedures, exceeding the powers and authority of the situation, and whether the penalties imposed are appropriate and so on. That is to say, it is necessary to conduct a comprehensive review of the legality and reasonableness of the decision on tax penalties, which not only includes a review of the procedural aspects, but also includes a review of the substantive aspects. Therefore, the review of the illegal facts found in the tax penalty decision is the duty of the court to conduct a comprehensive review of the administrative acts made by the tax authorities. There is a view that the court only reviews the procedural legality and legal application of the tax penalty decision in the administrative litigation, and does not review the substantive facts of the violation of law determined by the administrative organ, which is aimed at preventing the taxpayer from changing the tax processing decision indirectly by suing the tax penalty decision, thus circumventing the requirement of the Tax Administration Law on the prior procedure of tax payment or guarantee. However, according to the legislative purpose established in Article 1 of the Administrative Litigation Law, the administrative litigation system has a dual function: to supervise the administration of administrative organs in accordance with the law, and to adequately safeguard the lawful rights and interests of the administrative relative. If the court's right to review the facts of the case is unilaterally restricted, it will be difficult to ensure the substantive justice of the outcome of the decision, and may also lead to the taxpayer's right to relief in the procedural value of the realization of the level of the entity have been impaired.

(ii) Decision on Tax Penalty and Decision on Tax Treatment are two independent administrative acts.

According to Article 42 of the Provisions on Procedures for Handling Tax Audit Cases, if a tax authority finds that there is a tax violation after hearing and should make a decision on tax treatment, it shall make a decision on tax treatment; if it should make a decision on tax administrative penalty, it shall make a decision on tax administrative penalty. The tax treatment decision aims to require the taxpayer to fulfill the obligation to pay back the tax, while the tax penalty decision is to impose additional punishment for failure to fulfill the obligation in accordance with the law, which belongs to two independent administrative acts. There is a view that the tax penalty decision is subordinate to the tax processing decision and is based on the facts determined by the latter, and according to Article 88 of the Law of the People's Republic of China on Administration of Tax Collection, the relator has not initiated a reconsideration procedure against the tax processing decision, and therefore the court should not review the facts of the tax processing decision. On the one hand, this view ignores the integrity and independence of the tax penalty decision as an administrative act, and treats the penalty decision as a subsidiary act of the processing decision. Even if there is a factual connection between the penalty decision and the processing decision, the administrative organ still needs to prove the penalty behavior separately, which means that the penalty decision is not a simple extension of the processing decision, but an administrative behavior with independent procedural requirements and proof standards. On the other hand, if it is mandatory for the taxpayer to review the tax processing decision before challenging the factual basis of the tax penalty decision, it is not only inconsistent with the relevant provisions of the law, but also may cause the relative to fall into a situation where the relief is not available due to the expiration of the deadline for review of the processing decision.

(iii) the facts recognized by the tax processing decision does not ipso facto have the power of legal proof

From the point of view of legal effect, the tax processing decision, once served in accordance with the law that is the formal effect, but this is not the same as its determination of the facts automatically have the “legal force”. The court in the review of tax penalties, still need to re-verify the facts of the violation, requiring the tax authorities to provide a complete chain of evidence. Because the tax processing decision of the illegal facts do not belong to the “Supreme People's Court on the administrative litigation evidence of a number of issues of the provisions of Article 68” “has been proved in accordance with the law, the court can be directly recognized, the parties have evidence to the contrary is sufficient to overthrow the exception of” “the court can be directly recognized”, and does not belong to “the facts”. Facts”, also does not belong to the provisions of article 70 of the ‘effective people's court decision or arbitration institution ruling instrument confirms the fact’. This point of view is also in shaoxing a gravel factory v. State Administration of Taxation, shaoxing city inspection bureau tax administrative penalty case, the court of second instance clearly put forward the facts in the processing decision is not a judicial confirmation of the conclusion, nor is exempted from the facts, can not be directly as a punishment of the legitimacy of the support. Therefore, the court must conduct an independent review of the factual basis of the penalty decision to ensure that each penalty is supported by sufficient facts and evidence, and to avoid lowering the standard of judicial review due to the mixing of administrative procedures.

III. Summary

In the case of administrative litigation filed by the relative only on the tax penalty decision, the court shall review the facts found in the tax penalty decision. From the point of view of the court's duties, this is in line with the legal provisions of the comprehensive trial, and can ensure that the people's court independently exercise the right of judicial review, but also conducive to the protection of the legitimate rights and interests of the relative. In terms of the relationship between the tax processing decision and the tax penalty decision, both are independent administrative acts, and the penalty decision is not a simple extension of the processing decision, but an administrative act with independent procedural requirements and standards of proof. In terms of the effectiveness of the tax processing decision itself, the tax processing decision itself is not an exempted fact and cannot be used as a support for the legality of the tax penalty decision. Therefore, the court must conduct an independent review of the factual basis of the tax penalty decision to ensure that each penalty is supported by sufficient facts and evidence, and to avoid lowering the standard of judicial review due to the mixing of administrative procedures.

In practice, there are also cases where the relative files an administrative reconsideration of the tax processing decision and at the same time files an administrative lawsuit against the tax penalty decision. In such cases, the defendant in the administrative litigation may argue that the administrative litigation procedure should be suspended on the grounds that “the trial of the case shall be based on the results of the relevant civil, criminal or other administrative cases, which have not yet been concluded”, and that the administrative litigation procedure shall be suspended until the results of the reconsideration are finalized and then the trial shall continue. As mentioned above, the decision on tax treatment and the decision on tax penalties are two separate administrative acts, and the outcome of the review of the decision on tax treatment is not a necessary basis for the trial of the decision on tax penalties, which should not be suspended even if the outcome of the review of the decision on tax treatment is not yet finalized.