Background
Enor Boneh HaGalil Ltd., a construction contractor, applied through Israel’s “Israel Invoices” system for allocation numbers for tax invoices issued in March and April 2026. Such numbers permit recipients of qualifying invoices to deduct input VAT. The system initially issued the numbers, but the Israel Tax Authority later said that a system-wide technical malfunction had caused numbers to be issued to invoices that were not eligible. The Authority stated that there was a reasonable basis to suspect that the company’s invoices had been issued unlawfully and treated its June 2, 2026 notice as a preliminary refusal to allocate numbers.
The notice gave the company 14 days to select among the statutory options available under Section 47 of the Value Added Tax Law. Although the company responded within that period, it mistakenly sent its response to a different email address from the designated one. The Authority therefore treated the company as having waived its allocation request. The company commenced an appeal in the Nazareth–Nof HaGalil District Court and later petitioned the High Court of Justice, arguing that Section 47 authorizes the Authority to allocate or refuse a number but not to revoke one already issued.
The Court’s Holding
The Supreme Court dismissed the petition at the threshold because the company had an adequate alternative remedy in the District Court. Section 47 establishes a staged procedure comprising a preliminary decision, a hearing, a post-hearing decision, an objection, and an appeal from the objection decision to the District Court. When legislation provides a specific review route, a litigant ordinarily may not bypass it by petitioning the High Court of Justice.
The Court rejected the argument that alleging an ultra vires revocation removed the dispute from the statutory appeal process. A District Court reviewing a VAT decision may examine every aspect of the decision, including its legality and the Authority’s power to make it; otherwise, merely labeling a decision unauthorized would defeat the statutory scheme. The District Court was also better positioned to hear evidence about whether the system event produced a true revocation or a refusal concerning numbers issued by mistake. Because the company had already invoked the statutory procedure and was litigating related arguments in the District Court, it could not pursue a parallel High Court proceeding. The Court did not decide whether the Tax Authority actually possessed authority to revoke an allocation number and ordered the company to pay the Authority NIS 3,000 in costs.
Key Takeaways
- A challenge to a VAT allocation-number decision must ordinarily proceed through the objection and District Court appeal process prescribed by Section 47.
- Claiming that a tax authority acted without statutory power does not, by itself, permit a taxpayer to bypass an available statutory appeal.
- The Supreme Court left unresolved the merits of whether the Tax Authority may revoke allocation numbers already issued.
Why It Matters
The decision reinforces the High Court of Justice’s alternative-remedy doctrine in Israeli tax disputes. Even challenges framed as attacks on the agency’s jurisdiction generally belong in the specialist statutory review channel when that forum can consider legality and authority.
For businesses using the Israel Invoices system, the ruling also underscores the need to follow the prescribed hearing and objection procedures precisely. Factual disputes about automated issuance errors and later agency action are likely to require evidence-taking in the District Court rather than direct review by the Supreme Court.