The judgment of ADC 49/RN and the modulation of effects by the STF

In an article published on the Legal Consultant website, lawyers Marcos Correia Piqueira Maia, Michel Hernane Noronha and Thales Maciel Roliz, partners at Maneira Advogados, discuss the recent decision of the Federal Supreme Court that determined, in ADC 49/RN, the modulation of the effects of the declaration of unconstitutionality of the complementary law provisions that provided for the incidence of ICMS on transfers of goods between branches of the same company.

The judgment of ADC 49/RN and the modulation of effects by the STF

May 2, 2023

By Marcos Correia Piqueira Maia, Michel Hernane Noronha and Thales Maciel Roliz

In a session held on 4/19/23, the STF Plenary proclaimed the long-awaited result of the motions for declaration filed in ADC No. 49/RN, in which the relevance and extent of the modulation of the effects of the declaration of unconstitutionality of the provisions of Complementary Law No. 87/96 that provided for the incidence of ICMS on transfers of goods between branches were assessed. from the same company.

The Supreme Court, in view of the partial acceptance of the motions for clarification, modulated the effects of the declaration of unconstitutionality, in accordance with the vote of Minister Edson Fachin, so that the decision will only become effective in 2024, except for the administrative and judicial processes that were pending conclusion until the date of publication of the trial minutes of the ruling that analyzed the merits of the issue (4/5/2021). It was also determined that once the deadline has expired without states regulating the transfer of ICMS credits between establishments with the same owner, the right of taxpayers to transfer such credits is recognized [1].

There are many consequences of the judgment, especially with regard to the use and transfer of credits, which will even be the subject of debate within the National Congress [2] (or even in second embargoes for declaration to be opposed in ADC nº 49/RN).

In this brief article, we will only address one negative effect that the aforementioned decision appears to have generated by leaving unprotected precisely the group of taxpayers who trusted in the peaceful jurisprudence of the STF and the STJ on the subject and, as a result, decided to interrupt the emphasis of ICMS on transactions involving the transfer of goods between branches (internal and interstate), without prior legal action.

The jurisprudential history up to the judgment on the merits of ADC nº 49/RN by the Plenary of the STF
As we know, transfers of goods between establishments of the same taxpayer should not be taxed by ICMS, given that the mere physical movement of materials does not constitute the taxable event.

The topic has been the subject of debate for decades, with the STJ, in August 1996, publishing Precedent No. 166 to pacify the issue.

Shortly after the publication of Precedent No. 166/STJ, the publication of Complementary Law No. 87/96 occurred, which, in its article 12, I, provided that the tax-generating event would occur at the time of departure of the goods, ““even if to another establishment owned by the same owner”, which gave rise to a certain oscillation in jurisprudence regarding applicability from Precedent No. 166/STJ to the triggering events subsequent to LC No. 87/96.

It turns out that, in August 2010, the STJ once again consolidated its position on the matter. In fact, already under the aegis of LC No. 87/96, the 1st Section of the STJ assessed Special Appeal No. 1,125,133/SP — submitted to the repetitive appeals system — and confirmed the guidance contained in Precedent No. 166/STJ.

This is also the historical understanding of the STF which, in the judgment of AI 682.680 AgR, ARE 769.582 AgR, ARE 764.196 AgR, for example, recognized the unconstitutionality of the ICMS requirement in simple transfers of goods between branches (whether internal or interstate).

The reiterated jurisprudence of the STF, in fact, was confirmed by the Plenary of the court with general repercussion, in the judgment of ARE nº 1,255,885, on 8/15/2020 (Topic nº 1,099/STF [3]).

Few tax issues have such a peaceful jurisprudential line as this one. Nevertheless, ADC No. 49/RN, proposed by the governor of Rio Grande do Norte, entered the scene as the “final card” of the states in an attempt to reverse the Supreme Court’s position. The merits of the case were assessed by the STF in April 2021 and, as expected, the previous understanding was endorsed. The direct action was, therefore, unanimously dismissed.

It so happens that the state of Rio Grande do Norte, upon envisioning the possible impacts that a declaration of unconstitutionality with effects ex tunc could have on all transfer operations carried out in recent years, decided to file an embargo for declaration to request the modulation of the decisum.

The request for modulation of effects was accepted and, after almost two years of debates, the STF promulgated the result of the trial.

The modulation of effects in ADC nº 49/RN
According to the reasoning extracted from Minister Edson Fachin's vote, two were the primary reasons that justified the modulation of effects:

a) Protection for a certain group of taxpayers who, in their opinion, would be harmed by the decision made in ADC No. 49/RN, especially those who received goods in taxed interstate transfers, as well as those who enjoy tax benefits that also presuppose the ICMS deduction on transfers between branches [4]; and

b) Avoid the so-called “macrolitigation”, since the Judiciary would be flooded with legal actions seeking to review the countless transfer operations carried out in recent years [5], which could generate great damage to the Public Treasury.

Based on these considerations, Minister Edson Fachin proposed modulating the effects of the judgment on the merits of ADC nº 49/RN, in the following terms:

“In the scenario of seeking legal certainty in taxation and balancing fiscal federalism, I consider the present embargoes to be valid to modulate the effects of the decision so that it has pro-future effectiveness from the 2024 financial year, with the exception of administrative and judicial processes pending conclusion until the date of publication of the minutes of the decision on the merits. The deadline has expired without the States regulate the transfer of ICMS credits between establishments with the same owner, the right of taxpayers to transfer such credits is recognized.”

It is commendable that the Federal Supreme Court was concerned about the consequences of its decision. It seems to us, however, that the modulation carried out is incomplete.

This is because, by proposing the pro-future effectiveness of the decisum from the 2024 financial year, safeguarding the administrative and judicial processes pending until the date of publication of the trial minutes of the decision on the merits, and guaranteeing the transfer of accumulated credits, the Supreme Court:

a) Protected taxpayers who regularly highlighted ICMS in their transfers between branches, especially those of an interstate nature, in order to prevent states from glossing over the credits of establishments that received the taxed goods;

b) Shielded taxpayers against any attempt to disallow ICMS credits recorded by establishments that sent goods to other branches [6]. After all, at the time when the STF stated, in ADC nº 49/RN, that transfer operations are not taxed, the states could understand that it would be up to them to disallow the credits taken during the acquisition of the assets that were the subject of subsequent transfer operations, in accordance with the provisions of art. 155, §2º, II, “b”, of the Constitution;

c) Guaranteed that taxpayers with previous legal measures would not be subject to the incidence of tax on transfer operations; in the same way, it guaranteed the refund of the undue debt for taxpayers who had already formulated the request until the publication of the minutes of judgment on the merits of ADC/49/RN, whether in the judicial or administrative sphere; finally, it protected state entities against refund requests not yet presented (in line with the “macro-litigation” scenario mentioned by Minister Fachin), aiming to preserve public accounts.

In view of these considerations, it can be seen, within the list of taxpayers who were “protected” by the modulation of effects, that a single group was not covered by it, namely: those who trusted in the historical jurisprudence of the STF — whose maximum point was the judgment of ARE nº 1,255,885 in the general repercussion system (Topic nº 1,099/STF) — and that, as a result, they stopped highlighting the ICMS in the invoices that covered the transfers of goods between their branches, internally and interstate, without the filing of prior legal action.

In other words, agents who did not highlight ICMS on their transfer operations and did not have a judicial measure filed before April 2021, are now, due to the modulation of effects, subject to collection of the tax, plus late payment fines and interest. There is no doubt that the omission contained in the modulation of effects has a perverse effect on this group of taxpayers.

It is ironic to see that the aforementioned modulation, on the one hand, protected states that openly disregarded jurisprudence and demanded payment of undue ICMS, and, on the other, left those taxpayers who followed the court's guidance subject to future charges by these same state entities.

The situation is delicate, given that such taxpayers could never be subjected to such a vulnerable situation; This is said because the interruption of the emphasis on ICMS in transfer operations, without prior judicial measure, resulted precisely from the command issued by the Plenary of the STF in ARE nº 1,255,885, which, as already mentioned, was judged with general repercussions.

This is the fundamental point: since the judgment of Theme nº 1,099, the Constitutional Court has put an end to the discussion, since the judgment took place under the system of general repercussion, which, since it was established by EC nº 45/04, has been stimulating the phenomenon of the so-called “abstractivization” of the diffuse control of constitutionality, a fact that was recognized by the STF itself in the judgment of RE nº 955.227 (Theme 885 [7]) and RE No. 949.297 (Theme 881).

In the aforementioned judgments, the STF made it clear that the content of the judgment carried out under this regime constitutes a true legal norm, capable, even, of automatically ceasing the effectiveness of res judicata that involves ongoing legal-tax relations (according to the position of Minister Fachin in RE No. 949.297, “the effects of the decision given in general repercussion are equivalent to that given in the context of abstract control: erga effectiveness omnes e binding“).

Therefore, there should be no more doubts regarding the tax treatment that would need to be given to transfers of goods, which was respected by many market agents.

Therefore, it is clear that there is a clear violation of legal certainty in the situation reported here, so that it would be vitally important for the STF to revisit the terms of the modulation of effects to ensure that this group of taxpayers is not now faced with multiple ICMS requirements. If the idea is to avoid tax “macro-litigation”, the direction of this case needs to be promptly adjusted.

Notes:

[1] Given the multiple votes that were presented during the trial, it is possible that the result will still be questioned through new embargoes for clarification.

[2] Dealing with the matter, in the Federal Senate, PLS nº 332/18; is being processed in the Chamber of Deputies, PLP nº 148/21.

[3] “ICMS is not charged on the movement of goods from one establishment to another owned by the same taxpayer located in different states, as there is no transfer of ownership or the performance of an act of trade.” (ARE nº 1,255,885)

[4] “Finally, regarding the request for modulation of the temporal effects of the decision, I consider that there are reasons of legal security and social interest (art. 27, of Law no. 9,868/1999) that justify the pro-future effectiveness of the decision, preserving the operations carried out and business structures designed by taxpayers, especially those beneficiaries of ICMS tax incentives within the scope of the operations interstate.“

[5] “Furthermore, we must also consider, as highlighted by the embargoed federative unit itself, the ‘risk of reviewing countless transfer operations carried out and not contested in the five-year period preceding the delivery of the embargoed decision’; which would give rise to an undesirable scenario of fiscal macro-litigation.”

[6] This specific issue, in fact, was the subject of the motions for clarification filed in ADC No. 49/RN, when the states made it clear that, as a result of the declaration of unconstitutionality of the ICMS on transfers between branches, they would begin to demand the reversal of the credits arising from the entry of the goods into the branch of origin, while the states of destination would demand the full ICMS on subsequent departures, without the right to credit. See the following excerpt from the declarations filed by the State of Rio Grande do Norte:

“If there is no contrary determination in the legislation — and there is not —, the decision rendered herein authorizes the State of origin to demand the reversal of credits from operations prior to the one not subject to the tax, authorizing the State of destination, in the same way, to demand the full ICMS (without credit) on internal merchandise exit operations“.

[7] “1. Decisions of the STF in incidental control of constitutionality, prior to the institution of the general repercussion regime, do not automatically impact the res judicata that has been formed, even in tax legal relationships of successive treatment. 2. Decisions rendered in direct action or in the context of general repercussion automatically interrupt the temporal effects of final and unappealable decisions in said relationships, respecting the non-retroactivity, annual and nineteen or nineagesimal anteriority, depending on the nature of the tax.”

Marcos Correia Piqueira Maia is a PhD student in Tax Law at the Complutense University of Madrid and partner at Maneira Advogados.

Michel Hernane Noronha has a master's degree in Civil Procedural Law from PUC-SP and partner at Maneira Advogados.

Thales Maciel Roliz is a Master's student in Tax Law at IBDT-SP and partner at Maneira Advogados.

Legal Consultant Magazine, May 2, 2023

https://www.conjur.com.br/2023-mai-02/opiniao-julgamento-adc-49rn-modulacao-efeitos