A court has ruled against the charging of high interest rates on VAT while the outstanding amount was being contested before the VAT Board of Appeal, saying this was tantamount to depriving an individual of access to the courts.

Mr Justice Giannino Caruana Demajo delivered the judgement following a constitutional application by Clayton Communications Co Ltd against the Prime Minister, the Attorney General, the Commissioner for VAT and the VAT Appeals Board.

The company pleaded that it had a dispute with the Commissioner of VAT and had lodged an appeal that was pending before the Appeals Board. However interest was charged on the outstanding amount in dispute while the case was pending.

Clayton Communications said that the imposition of interest at the rate of one per cent per month on unpaid tax was intimidatory and was counter to the principle of equality of arms. The imposition of interest pending an appeal had the effect of discouraging an individual from appealing to the Appeals Board.

Mr Justice Caruana Demajo ruled that the company was not contesting the imposition of interest. The company was contesting the fact that interest was running due to the lapse of time until the Appeals Board appointed its appeal for hearing. Consequently, the company would be charged interest due to the delays on the part of the Board and not through any delay on the company's part.

The court found in favour of the company after noting that the interest rate was higher than that charged on debts of a private nature, and that it was of a punitive nature.

Furthermore, the State, which comprised the Appeals Board, could benefit from the failure to act on the part of the Board. In conclusion the court found that there was a violation of the company's right to access to a court.

The court ordered that the rate of interest which the company was bound to pay could not exceed the normal legal limit established by the general laws of the land.