CELEX: 62019CJ0044
Reference for a preliminary ruling
Directive 2003/96/EC
Taxation of energy products and electricity
Article 21(3)
Absence of chargeable event giving rise to taxation
Consumption of energy products within the curtilage of an establishment in which they were produced for the production of final energy products from which non-energy products are also inevitably produced

This request for a preliminary ruling concerns the interpretation of Article 21(3) of Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (
OJ 2003 L 283, p. 51
).
The request has been made in proceedings between Repsol Petróleo SA (‘Repsol’) and the Administracíon General del Estado (General State Administration, Spain) concerning the latter’s decision to impose excise duties on mineral oils on the consumption, for the purposes of production, of mineral oils which Repsol has itself produced, in so far as that production has generated residual products other than energy products.
Legal context
European Union law
Directive 92/81/EEC
Article 4(3) of Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils (
OJ 1992 L 316, p. 12
) provides:
‘The consumption of mineral oils within the curtilage of an establishment producing mineral oils shall not be considered a chargeable event giving rise to excise duty as long as the consumption is for the purpose of such production.
However, where such consumption is for purposes not related to that production and in particular for the propulsion of vehicles, this shall be considered a chargeable event giving rise to excise duty.’
Directive 2003/96
Recitals 3 to 5 of Directive 2003/96 state:
‘(3)
The proper functioning of the internal market and the achievement of the objectives of other Community policies require minimum levels of taxation to be laid down at Community level for most energy products, including electricity, natural gas and coal.
(4)
Appreciable differences in the national levels of energy taxation applied by Member States could prove detrimental to the proper functioning of the internal market.
(5)
The establishment of appropriate Community minimum levels of taxation may enable existing differences in the national levels of taxation to be reduced.’
Article 1 of that directive provides:
‘Member States shall impose taxation on energy products and electricity in accordance with this directive.’
For the purposes of the application of Directive 2003/96, Article 2(1) thereof sets out the products which are considered as being ‘energy products’.
In accordance with Article 2(4)(b), first indent, of Directive 2003/96, that directive does not apply to the use of energy products for purposes other than use as motor fuels or as heating fuels.
Article 21(3) of that directive is worded as follows:
‘The consumption of energy products within the curtilage of an establishment producing energy products shall not be considered as a chargeable event giving rise to taxation, if the consumption consists of energy products produced within the curtilage of the establishment. Member States may also consider the consumption of electricity and other energy products not produced within the curtilage of such an establishment and the consumption of energy products and electricity within the curtilage of an establishment producing fuels to be used for generation of electricity as not giving rise to a chargeable event. Where the consumption is for purposes not related to the production of energy products and in particular for the propulsion of vehicles, this shall be considered a chargeable event, giving rise to taxation.’
Spanish law
Article 47 of the Ley 38/1992 Impuestos Especiales (Law 38/1992 on excise duties) of 28 December 1992 (BOE No 312, of 29 December 1992, p. 44305), in the version applicable to the case in the main proceedings (the ‘LIE’), entitled ‘Exemptions’, provides, in paragraph 1(b):
‘Self-consumption, including:
…
b)
the use of mineral oils as fuel in the process of producing mineral oils under an excise duty suspension arrangement
shall not be subject to taxation.’
The dispute in the main proceedings and the question referred for a preliminary ruling
Repsol, a company incorporated under Spanish law, engages, inter alia, in the production of energy products by the process of refining crude oil. Aside from energy products, the refinement process generates other products which are sold and used in the chemical industry and are partly reused in the production process.
On 2 April 2012, following an inspection carried out in 2011, the Spanish tax administration issued a tax notice ordering Repsol to pay the excise duty on mineral oils, for the 2007 and 2008 tax years, on the mineral oils which that undertaking has produced itself and subsequently used in its own facilities for the purposes of production, in so far as that production has generated residual products other than energy products such as, inter alia, sulphur and carbon dioxide.
According to the Spanish tax administration, that self-consumption does not give rise to the exemption from the excise duty on mineral oils, laid down in Article 47(1)(b) of the LIE, for the portion of that self-consumption leading to the production of products which are not mineral oils.
On 25 April 2012, Repsol brought an action against that notice before the Tribunal Económico-Administrativo Central (Central Tax Tribunal, Spain) claiming, in particular, that that self-consumption is exempt from the excise duty on mineral oils, including the portion of that self-consumption leading to the production of products which are not mineral oils.
On 6 November 2015, following the dismissal of that action, Repsol lodged an administrative appeal before the Audiencia Nacional (National High Court, Spain), by which it claimed that, in the context of the process of producing mineral oils, products which cannot be categorised as energy products, such as sulphur, are obtained in a residual and inevitable manner. The production of sulphur results from the process consisting of extracting that product from mineral oils, and the objective of that process is to meet the technical specifications applicable to mineral oils, which set maximum levels of sulphur content.
By a decision of 12 December 2016, the Audiencia Nacional (National High Court) dismissed Repsol’s appeal in that it sought to challenge the taxation of self-consumption of mineral oils having generated non-energy products.
On 10 July 2017, Repsol lodged an appeal on a point of law against that decision before the referring court, the Tribunal Supremo (Supreme Court, Spain). Before that court, Repsol argued that the objective of Article 21(3) of Directive 2003/96/EC is to submit to taxation only energy products released for consumption, excluding those intended for self-consumption, that is to say those used for the production of other energy products, even if, as a result of that production process, non-energy residual products are inevitably obtained. Accordingly, Repsol argues, the Spanish tax administration’s practice of submitting to taxation the portion of self-consumption having generated those residual products is contrary to the objective of Directive 2003/96.
According to Repsol, that practice could have been justified under Article 4(3) of Directive 92/81, which exempted from taxation the consumption of mineral oils carried out for the purposes of producing mineral oils. In contrast, Directive 2003/96, which repealed Directive 92/81, provides only, in Article 21(3), that the consumption of energy products is exempt from taxation where that consumption takes place within the curtilage of an establishment producing energy products.
According to the referring court, the question arises whether the removal of the words ‘for the purpose of such production’, which appear in Article 4(3) of Directive 92/81, from the wording of Article 21(3) of Directive 2003/96, must be regarded as a legislative amendment meaning that the consumption of energy products within the curtilage of an establishment in which they have been produced for the purposes of the production of final energy products, whereby non-energy products are inevitably produced, is also exempt from excise duty.
In those circumstances, the Tribunal Supremo (Supreme Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Must Article 21(3) of Directive 2003/96 be interpreted as meaning that it permits the self-consumption of energy products within the curtilage of the producer to be made subject to the excise duty on mineral oils in the proportion in which non-energy products are obtained?
Or, on the contrary, does the purpose of that provision, which is to exclude from taxation the use of energy products that is deemed necessary for obtaining final energy products, preclude the taxation of that self-consumption in so far as it results in the production of other non-energy products, even when such production is residual and occurs inevitably as a result of the production process itself?’
Consideration of the question referred
By the two parts of its question referred for a preliminary ruling, the referring court asks, in essence, whether the first sentence of Article 21(3) of Directive 2003/96 must be interpreted as meaning that, where an establishment producing energy products intended to be used as motor fuel or as heating fuel consumes energy products that it has itself produced, and that, by that process, also inevitably obtains non-energy products, the portion of the consumption leading to the production of such non-energy products falls within the exemption concerning the chargeable event giving rise to the taxation of energy products provided for in that provision.
As a preliminary point, it must be recalled that the objective of Directive 2003/96 is, as is apparent from recitals 3 to 5 and Article 1 thereof, to create a system of harmonised taxation for energy products and electricity, within the framework of which taxation is the rule, in accordance with the conditions set out in that directive.
In accordance with the first sentence of Article 21(3) of Directive 2003/96, the consumption of energy products within the curtilage of an establishment producing energy products is not considered as a chargeable event giving rise to taxation on energy products if the consumption consists of energy products produced within the curtilage of the establishment. The third sentence of that paragraph stipulates that, where the consumption of energy products is for purposes not related to the production of energy products, it is considered to be a chargeable event giving rise to taxation.
The wording of Article 21(3) of Directive 2003/96 does not explicitly state to what extent the consumption of energy products for the purposes of a production process in which energy products and non-energy products are simultaneously obtained must or must not be regarded as a chargeable event giving rise to taxation on energy products.
By stipulating that the consumption of energy products within the curtilage of the establishment in which they were produced is not, under certain conditions, considered to be a chargeable event giving rise to that taxation, the first sentence of Article 21(3) of that directive constitutes an exemption provision within that tax system which must be interpreted strictly (see, to that effect, judgment of 7 November 2019, Petrotel-Lukoil,
C‑68/18
,
EU:C:2019:933
, paragraph
).
In that regard, it should be noted, first, that the consumption of energy products within the curtilage of an establishment in which they were produced falls within the exemption concerning events giving rise to taxation, under the first sentence of Article 21(3) of that directive, only if they are used for the purpose of producing energy products which themselves fall within the system of harmonised taxation established by Directive 2003/96, as a result of their use as motor fuel or as heating fuel (see, to that effect, judgment of 6 June 2018, Koppers Denmark,
C‑49/17
,
EU:C:2018:395
, paragraphs
and
).
In the present case, it does not appear to be in dispute that the energy products obtained, in the case in the main proceedings, are intended to be used as motor fuel or as heating fuel, which is, however, for the referring court to determine. Furthermore, it is apparent from the order for reference that the non-energy products obtained in the case in the main proceedings are valued by Repsol, via their commercialisation or reuse in the production process. It is on the basis of those considerations that the question referred must be answered.
Second, the Court has already established that, where multiple products are produced by an establishment, in order to assess whether or not the consumption of energy products is capable of falling within the scope of the exemption laid down in the first sentence of Article 21(3) of Directive 2003/96, it is necessary to focus on the various purposes of such consumption (see, to that effect, judgment of 7 November 2019, Petrotel-Lukoil,
C‑68/18
,
EU:C:2019:933
, paragraph
).
In relation to that consumption, it is important to distinguish the portions of energy products consumed in accordance with their uses for the purpose of their treatment with regard to excise duty. Only the consumption of the portion of energy products for the production of energy products intended for use as motor fuel or as heating fuel falls within the scope of the exemption concerning the chargeable event giving rise to taxation, laid down in the first sentence of Article 21(3) of that directive (see, to that effect, judgment of 7 November 2019, Petrotel-Lukoil,
C‑68/18
,
EU:C:2019:933
, paragraphs
and
).
In contrast, the consumption of the portion of those energy products which result in the production of non-energy products or of energy products not intended for use as motor fuel or as heating fuel cannot benefit from such an exemption. Accordingly, the Court has held that neither energy products consumed in order to produce heat used to heat the premises of an establishment, nor those needed in order to generate electricity, can benefit from such an exemption (see, to that effect, judgment of 7 November 2019, Petrotel-Lukoil,
C‑68/18
,
EU:C:2019:933
, paragraphs
and
).
It follows that where both energy products intended for use as motor fuel or as heating fuel and non-energy products are obtained by a production process, it must be considered, in principle, that the portion of energy products consumed in the process to produce other energy products intended for use as motor fuel or as heating fuel falls within the exemption laid down in the first sentence of Article 21(3) of Directive 2003/96, whereas the consumption of the other portion for the production of non-energy products must be considered as a chargeable event giving rise to the tax on energy products.
That being so, it is necessary to examine whether that is also the case where, as here, obtaining non-energy products is not the aim of the production process, but a residual and inevitable consequence of that process or where their production is imposed by legislation aimed at protecting the environment and where those non-energy products have economic value.
Admittedly, the Court has held, in paragraph 30 of the judgment of 7 November 2019, Petrotel-Lukoil (
C‑68/18
,
EU:C:2019:933
) that it can be inferred from the negative wording of the third sentence of Article 21(3) of Directive 2003/96 that it is only designed to exclude from benefiting from the exemption concerning the chargeable event giving rise to the tax on energy products the consumption of energy products which have no link with the production of energy products.
However, that case concerned the application of Article 21(3) of Directive 2003/96 to energy products used for the production of steam, which, in turn, was used for the manufacture of energy products. The self-consumption thus aimed to produce energy products by generating the thermal energy necessary for the technological process of producing those products.
In that context, that finding sought to preclude an interpretation whereby the production of energy products, which is carried out by means of producing an intermediate product, such as steam, renders the exemption concerning the chargeable event giving rise to taxation laid down by that directive inapplicable solely due to that intermediary. The Court has made clear in that regard that the consumption of energy products cannot, solely on account of its form, be deprived of the benefit of that exemption, provided that it contributes to the technological process of producing energy products (see, to that effect, judgment of 7 November 2019, Petrotel-Lukoil,
C‑68/18
,
EU:C:2019:933
, paragraphs
and
).
However, in contrast to the case which gave rise to that judgment, the case in the main proceedings does not concern self-consumption which, through the production of an intermediary product, is used for the production of energy products. This case concerns self-consumption which simultaneously leads to the production of energy products and to the production of non-energy products that have economic value.
It should be noted that Repsol has, with regard to that economic value, made the choice to put on the market the subsequent non-energy products or to use them in the production process. In that context, as the Advocate General stated in point 40 of his Opinion, it is irrelevant that the production of products which are not energy products is, as in the case in the main proceedings, residual and inevitable, in the sense that it is a necessary consequence of the production process, or that that production is required by legislation seeking to protect the environment.
An interpretation according to which, whereas economic value is derived from the non-energy products thus generated, the entirety of the consumption of energy products in the production process would benefit – counter to the principles recalled in paragraph 30 of the present judgment – from the exemption concerning the chargeable event giving rise to the tax would be such as to undermine attaining the objective of Directive 2003/96. In that respect, it should be recalled that, by laying down a system of harmonised taxation of energy products and electricity, that directive seeks, as is clear from recitals 3 to 5 thereof, to promote the proper functioning of the internal market in the energy sector, in particular by avoiding distortions of competition (see, to that effect, judgment of 30 January 2020, Autoservizi Giordano,
C‑513/18
,
EU:C:2020:59
, paragraph
and the case-law cited).
As the Advocate General stated in points 26 to 28 of his Opinion, the lack of taxation of energy products used in the production process, where the products obtained are not energy products, would create a gap in the system of taxation created by Directive 2003/96, avoiding the taxation of energy products which are, in principle, subject to such taxation. The consumption of that portion of energy products, although it should be subject to taxation, would benefit from the exemption concerning the chargeable event giving rise to the tax provided in the first sentence of Article 21(3) of that directive. Furthermore, the lack of taxation of the consumption of that portion of energy products would not be offset by the subsequent taxation of final products obtained from those products, in so far as the final products resulting from that consumption are either not energy products, within the meaning of Article 2(1) of Directive 2003/96, or are not intended for use as motor fuel or as heating fuel, under Article 2(4)(b), first subparagraph, of that directive (see, to that effect, judgments of 12 February 2015, Oil Trading Poland,
C‑349/13
,
EU:C:2015:84
, paragraph
, and of 6 June 2018, Koppers Denmark,
C‑49/17
,
EU:C:2018:395
, paragraph
and the case-law cited).
Consequently, to hold that the exemption provided in the first sentence of Article 21(3) of that directive is applicable, in a situation such as that at issue in the main proceedings, to the consumption of the entirety of the energy products would be liable to have an adverse effect on the proper functioning of the internal market in the energy sector which, as noted in paragraph 37 of the present judgment, is one of the aims pursued by the establishment of such a system (see, to that effect, judgment of 6 June 2018, Koppers Denmark,
C‑49/17
,
EU:C:2018:395
, paragraph
).
The integrity of the system of harmonised taxation of energy products laid down by Directive 2003/96 necessitates, therefore, that where the consumption of energy products within the curtilage of an establishment in which they were produced leads to the simultaneous production of energy products intended for use as motor fuel or as heating fuel, and of non-energy products that are economically valued, the application of the exemption concerning the chargeable event giving rise to taxation provided in the first sentence of Article 21(3) of that directive is limited to the proportion of energy products consumed corresponding to the portion of energy products intended for use as motor fuel or as heating fuel obtained from that production process. In the absence of precision in Directive 2003/96 in that regard, it is for the Member States to determine the details for assessing the quantity of energy products necessary to produce a given quantity of another energy product intended for use as motor fuel or as heating fuel (see, by analogy, judgment of 7 March 2018, Cristal Union,
C‑31/17
,
EU:C:2018:168
, paragraph
).
Finally, the argument put forward by Repsol that being unable to benefit from the exemption concerning the chargeable event giving rise to the tax provided in the first sentence of Article 21(3) of that directive would lead to a situation of double taxation must be rejected. In so far as the consumption of energy products within the curtilage of an establishment in which they were produced is carried out for the production of energy products intended for use as motor fuel or as heating fuel, that exemption is fully applicable to the portion of products consumed to that end.
In the light of the foregoing considerations, the answer to the question referred is that the first sentence of Article 21(3) of Directive 2003/96 must be interpreted as meaning that, where an establishment producing energy products intended for use as motor fuel or as heating fuel consumes energy products which it has itself produced and that, by that process, also inevitably obtains non-energy products from which economic value is derived, the portion of the consumption leading to the production of such non-energy products does not fall within the exemption concerning the chargeable event giving rise to the taxation of energy products provided for in that provision.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fifth Chamber) hereby rules:

The first sentence of Article 21(3) of Council Directive 2003/93/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity must be interpreted as meaning that, where an establishment producing energy products intended for use as motor fuel or as heating fuel consumes energy products which it has itself produced and that, by that process, also inevitably obtains non-energy products from which economic value is derived, the portion of the consumption leading to the production of such non-energy products does not fall within the exemption concerning the chargeable event giving rise to the taxation of energy products provided for in that provision.

[Signatures]
(
*1
)	Language of the case: Spanish.