61980CJ0046_EN
Parties
Subject of the case
Grounds
Decision on costs
Operative part
Parties
IN CASE 46/80
REFERENCE TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY BY THE PRETURA CIVILE ( CIVIL COURT ), CASTEGGIO, FOR A PRELIMINARY RULING IN THE ACTION PENDING BEFORE THAT COURT BETWEEN
SPA VINAL, HAVING ITS REGISTERED OFFICE IN CASTEGGIO, PAVIA,
AND
SPA ORBAT, HAVING ITS REGISTERED OFFICE IN MILAN,
Subject of the case
ON THE INTERPRETATION OF ARTICLE 95 OF THE EEC TREATY IN RELATION TO ITALIAN LEGISLATION CONCERNING A SPECIAL REVENUE CHARGE ON DENATURED ALCOHOL,
Grounds
1 BY AN ORDER OF 30 JANUARY 1980 WHICH WAS RECEIVED AT THE COURT ON 4 FEBRUARY 1980 THE PRETURA CIVILE ( CIVIL COURT ), CASTEGGIO, REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY THREE QUESTIONS ON THE INTERPRETATION OF ARTICLE 95 OF THE EEC TREATY IN ORDER TO MAKE IT POSSIBLE TO ASSESS WHETHER THE SYSTEM OF DIFFERENTIAL TAXATION APPLIED BY VIRTUE OF DECREE-LAW NO 1200 OF 6 OCTOBER 1948, AS AMENDED BY DECREE-LAW NO 836 OF 16 SEPTEMBER 1955, AND ARTICLE 3 OF LAW NO 506 OF
18 AUGUST 1978 TO DENATURED SYNTHETIC ETHYL ALCOHOL AND DENATURED ETHYL ALCOHOL OBTAINED BY FERMENTATION IS COMPATIBLE WITH THE REQUIREMENTS OF THE TREATY .
2 THESE QUESTIONS HAVE BEEN SUBMITTED IN THE CONTEXT OF CIVIL PROCEEDINGS CONCERNING THE PERFORMANCE OF A CONTRACT CONCLUDED IN JANUARY 1980 BETWEEN THE PLAINTIFF IN THE MAIN ACTION, SPA VINAL, A PRODUCER AND IMPORTER OF ALCOHOL, AND SPA ORBAT, RELATING TO THE SUPPLY OF A CONSIGNMENT OF DENATURED SYNTHETIC ALCOHOL FROM FRANCE .
3 THE ORDER MAKING THE REFERENCE FOR A PRELIMINARY RULING SHOWS THAT SPA ORBAT, THE DEFENDANT IN THE MAIN ACTION, DOES NOT DISPUTE THAT IT IS BOUND TO PAY THE AGREED PRICE BUT CHALLENGES THE IMPOSITION IN THIS CASE OF THE SPECIAL REVENUE CHARGE OF LIT 12 000 PER HECTOLITRE OF PURE ALCOHOL, STATING THAT IT IS PREPARED TO REIMBURSE THE PLAINTIFF ONLY THE SPECIAL CHARGE OF LIT 1 000 PER HECTOLITRE APPLICABLE TO DENATURED ALCOHOL OBTAINED BY FERMENTATION . THE DEFENDANT CLAIMS IN FACT THAT THE LEVYING OF THE SAID REVENUE CHARGE OF LIT 12 000 PER HECTOLITRE OF DENATURED SYNTHETIC ALCOHOL IS UNLAWFUL BY VIRTUE OF ARTICLE 95 OF THE EEC TREATY SINCE IT CONSTITUTES TAX DISCRIMINATION WHICH IS PROHIBITED BY THAT PROVISION .
4 IN ORDER TO DECIDE THIS DISPUTE THE PRETURA SUBMITTED THE FOLLOWING QUESTIONS TO THE COURT FOR A PRELIMINARY RULING :
( A ) MUST THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY OF ROME BE INTERPRETED AS MEANING THAT TWO PRODUCTS DERIVED FROM DIFFERENT RAW MATERIALS BUT CAPABLE OF BEING PUT TO THE SAME USES AND HAVING THE SAME PRACTICAL APPLICATION MUST BE CONSIDERED TO BE ' ' SIMILAR ' ' ?
( B)IF THE REPLY TO QUESTION 1 IS IN THE AFFIRMATIVE :
MUST THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY OF ROME BE INTERPRETED AS MEANING THAT IT MUST BE CONSIDERED TO BE PROHIBITED TO IMPOSE CHARGES WHICH, WHILST APPEARING TO PLACE AN IDENTICAL BURDEN ON THE COMMUNITY PRODUCT AND THE SIMILAR DOMESTIC PRODUCT, IN FACT AMOUNT TO DISCRIMINATION IN TAX MATTERS TO THE DETRIMENT OF SIMILAR PRODUCTS FROM OTHER MEMBER STATES IN THAT THE PRODUCTS SUBJECT TO HEAVIER TAXATION ARE EXCLUSIVELY IMPORTED AND THE PRODUCTS SUBJECT TO LIGHTER TAXATION ARE PRINCIPALLY DOMESTIC?
( C)IF THE REPLY TO EITHER OF THE FOREGOING QUESTIONS IS IN THE NEGATIVE :
MUST THE SECOND PARAGRAPH OF ARTICLE 95 BE INTERPRETED, IN RELATION TO THE FACTS OF THIS CASE, AS MEANING THAT THAT PROVISION PROHIBITS THE IMPOSITION OF HEAVIER TAXATION ON A PRODUCT WHICH PRINCIPALLY COMES FROM OTHER MEMBER STATES, THEREBY AFFORDING PROTECTION TO COMPETING NATIONAL PRODUCTION?
THE JURISDICTION OF THE COURT
5 THE ITALIAN GOVERNMENT HAS PUT IN ISSUE THE ADMISSIBILITY OF THE REQUEST FOR A PRELIMINARY RULING SUBMITTED BY THE PRETURA, CASTEGGIO . IT RAISES THE QUESTION WHETHER THE ACTION BROUGHT BEFORE THE NATIONAL COURT IS NOT REALLY A FICTITIOUS DISPUTE AND WHETHER THE PROCEDURE UNDER ARTICLE 177 HAS NOT BEEN EMPLOYED IN THIS CASE TO IMPEACH THE ITALIAN STATE IN THE ABSENCE OF ANY ACTUAL DISPUTE GIVING RISE TO QUESTIONS OF COMMUNITY LAW AS BETWEEN THE PARTIES . IN THESE CIRCUMSTANCES THE ITALIAN GOVERNMENT ASKS WHETHER THE SITUATION SHOULD NOT BE COMPARED TO THAT WHICH FORMED THE SUBJECT-MATTER OF THE JUDGMENT OF THE COURT OF 11 MARCH 1980 IN CASE 104/79 FOGLIA V NOVELLO ( 1980 ) ECR 745 IN WHICH THE COURT HELD THAT IT HAD NO JURISDICTION TO GIVE A RULING ON THE QUESTIONS PUT BY THE NATIONAL COURT .
6 IN VIEW OF THAT CONTENTION, WHICH THE ITALIAN GOVERNMENT SET OUT IN ITS WRITTEN OBSERVATIONS, THE COURT REQUESTED THE PARTIES TO SUPPLY IT WITH ADDITIONAL INFORMATION .
7 HAVING STUDIED THE REPLIES GIVEN TO THOSE QUESTIONS THE COURT CONSIDERS THAT IN THIS CASE IT IS POSSIBLE TO SET ASIDE THE DOUBTS EXPRESSED BY THE ITALIAN GOVERNMENT AND TO BROACH THE SUBSTANCE OF THE CASE .
SUBSTANCE
8 IT APPEARS FROM THE ORDER MAKING THE REFERENCE FOR A PRELIMINARY RULING THAT THE DEFENDANT IN THE MAIN ACTION CONTENDS THAT THE ITALIAN TAX ARRANGEMENTS ARE INCOMPATIBLE WITH ARTICLE 95 OF THE TREATY IN RELIANCE ON TWO FACTS . IT IS
MAINTAINED, FIRST, THAT DENATURED SYNTHETIC ALCOHOL SHOULD BE CONSIDERED AS SIMILAR OR INDEED IDENTICAL TO DENATURED ALCOHOL OBTAINED BY FERMENTATION AND, SECONDLY, THAT SYNTHETIC ALCOHOL IS ONLY IMPORTED INTO ITALY WHEREAS THE DENATURED ALCOHOL OBTAINED BY FERMENTATION WHICH IS MARKETED IN ITALY COMES EXCLUSIVELY FROM DOMESTIC PRODUCTION . THUS DESPITE THE FORMAL IDENTITY OF TAX TREATMENT A SIMILAR PRODUCT FROM OTHER MEMBER STATES IS IN FACT TAXED MORE HEAVILY THAN THE DOMESTIC PRODUCT .
9 THAT POSITION IS SUPPORTED IN PRINCIPLE BY THE COMMISSION WHICH HAS EXPRESSED THE OPINION THAT, DESPITE THE DIFFERENT ORIGINS OF THE TWO PRODUCTS IN QUESTION - NAMELY SYNTHETIC ALCOHOL, WHICH IS DERIVED IN PARTICULAR FROM PETROLEUM, AND ALCOHOL OBTAINED BY FERMENTATION, WHICH IS PRODUCED BY DISTILLING PRODUCTS OF THE SOIL ( CEREALS, WINE, FRUIT, POTATOES, BEET AND MOLASSES ) - THE TWO KINDS OF ALCOHOL IN QUESTION ARE CHEMICALLY IDENTICAL AND FULLY INTERCHANGEABLE IN THEIR USES . THERE IS THUS NOT ONLY SIMILARITY BETWEEN THESE TWO PRODUCTS BUT ACTUAL IDENTITY IN REGARD TO THE NEEDS WHICH THE TWO PRODUCTS ARE CALLED UPON TO FULFIL . FURTHERMORE, THE TWO KINDS OF ALCOHOL FALL WITHIN THE SAME TARIFF SUBHEADING, 22.08 A, UNDER THE DESCRIPTION ' ' DENATURED SPIRITS ( INCLUDING ETHYL ALCOHOL AND NEUTRAL SPIRITS ) OF ANY STRENGTH ' ' . IN THE ABSENCE OF PRODUCTION OF SYNTHETIC ALCOHOL IN ITALY, THE DIFFERENCE IN THE RATE OF TAX PRESCRIBED BY ITALIAN LAW FOR DENATURED SYNTHETIC ALCOHOL ON THE ONE HAND AND DENATURED ALCOHOL OBTAINED BY FERMENTATION ON THE OTHER HAS THE RESULT OF PREVENTING PRACTICALLY ALL IMPORTS OF SYNTHETIC ALCOHOL FROM OTHER MEMBER STATES AND OF DIRECTLY FAVOURING NATIONAL PRODUCTION OF ALCOHOL BY FERMENTATION . THE COMMISSION THUS CONSIDERS THAT, BEING A PRODUCT SIMILAR TO DENATURED ALCOHOL OBTAINED BY FERMENTATION, DENATURED SYNTHETIC ALCOHOL IMPORTED FROM OTHER MEMBER STATES SHOULD QUALIFY FOR THE SAME RATE OF TAX AS THE FORMER .
10 THE PLAINTIFF IN THE MAIN ACTION ON THE OTHER HAND CLAIMS THAT THE ITALIAN SYSTEM OF TAXES IS COMPATIBLE WITH THE REQUIREMENTS OF ARTICLE 95 . IT POINTS OUT THAT ITALY HAS A CONSIDERABLE PRODUCTION OF ETHYLENE, A PETROLEUM DERIVATIVE WHICH IS USED IN THE MANUFACTURE OF SYNTHETIC ALCOHOL .
IT IS ACCORDINGLY IMPOSSIBLE TO ACCEPT THAT THERE IS DISCRIMINATION AGAINST IMPORTED SYNTHETIC ALCOHOL WHEN THERE IS AT LEAST A POTENTIAL FOR PRODUCTION OF THE SAME PRODUCT IN ITALY . WITH REGARD TO ALCOHOL OBTAINED BY FERMENTATION, SPA VINAL IS CONCERNED TO SHOW THAT THERE IS NO TAX DISCRIMINATION BETWEEN ALCOHOL PRODUCED IN ITALY AND IMPORTED ALCOHOL . THUS IT APPEARS THAT THE ITALIAN SYSTEM OF TAXES IS APPLIED ON THE BASIS OF OBJECTIVE CONDITIONS WHICH ARE APPLICABLE WITHOUT DISTINCTION TO ITALIAN PRODUCTS AND TO THE PRODUCTS OF OTHER MEMBER STATES . IN THIS CASE THERE IS A SPECIFIC JUSTIFICATION FOR THESE DIFFERING TAX ARRANGEMENTS IN THAT THEY ARE INTENDED TO PROMOTE TYPES OF PRODUCTION DESERVING OF PARTICULAR PROTECTION, NAMELY THE PROCESSING
OF A NUMBER OF AGRICULTURAL PRODUCTS, AND TO REDUCE CORRESPONDINGLY THE CONSUMPTION OF PETROLEUM PRODUCTS .
11 THE ARGUMENT ADVANCED BY SPA VINAL WAS FURTHER DEVELOPED BY THE ITALIAN GOVERNMENT . IT RECALLS THAT IN A NUMBER OF JUDGMENTS THE COURT HAS RECOGNIZED THAT THE MEMBER STATES MAY LAY DOWN DIFFERING TAX ARRANGEMENTS, EVEN FOR IDENTICAL PRODUCTS, ON THE BASIS OF OBJECTIVE CRITERIA SUCH AS THE CONDITIONS OF PRODUCTION AND THE RAW MATERIALS USED ( JUDGMENT OF 22 JUNE 1976 IN CASE 127/75 BOBIE ( 1976 ) ECR 1079 ; JUDGMENT OF 10 OCTOBER 1978 IN CASE 148/77 HANSEN ( 1978 ) ECR 1787 ; JUDGMENT OF 8 JANUARY 1980 IN CASE 21/79 COMMISSION V ITALY ( 1980 ) ECR 1 ). ACCORDING TO THE COURT, SUCH ARRANGEMENTS ARE COMPATIBLE WITH THE TREATY IF THEY ARE LAID DOWN ON THE BASIS OF OBJECTIVE FACTORS AND ARE NOT DISCRIMINATORY OR PROTECTIVE IN THEIR NATURE .
12 THE ARRANGEMENTS CHALLENGED BEFORE THE NATIONAL COURT MEET THESE REQUIREMENTS . IN FACT THE DIFFERENT TAXATION OF SYNTHETIC ALCOHOL AND OF ALCOHOL PRODUCED BY FERMENTATION IN ITALY IS THE RESULT OF AN ECONOMIC POLICY DECISION TO FAVOUR THE MANUFACTURE OF ALCOHOL FROM AGRICULTURAL PRODUCTS AND, CORRESPONDINGLY, TO RESTRAIN THE PROCESSING INTO ALCOHOL OF ETHYLENE, A DERIVATIVE OF PETROLEUM, IN ORDER TO RESERVE THAT RAW MATERIAL FOR OTHER MORE IMPORTANT ECONOMIC USES . IT ACCORDINGLY CONSTITUTES A LEGITIMATE CHOICE OF ECONOMIC POLICY TO WHICH EFFECT IS GIVEN BY FISCAL MEANS . THE IMPLEMENTATION OF THAT POLICY DOES NOT LEAD TO ANY DISCRIMINATION SINCE ALTHOUGH IT RESULTS IN DISCOURAGING IMPORTS OF SYNTHETIC ALCOHOL INTO ITALY, IT ALSO HAS THE CONSEQUENCE OF HAMPERING THE DEVELOPMENT IN ITALY ITSELF OF PRODUCTION OF ALCOHOL FROM ETHYLENE, THAT PRODUCTION BEING TECHNICALLY PERFECTLY POSSIBLE .
13 AS THE COURT HAS STATED ON MANY OCCASIONS, PARTICULARLY IN THE JUDGMENTS CITED BY THE ITALIAN GOVERNMENT, IN ITS PRESENT STAGE OF DEVELOPMENT COMMUNITY LAW DOES NOT RESTRICT THE FREEDOM OF EACH MEMBER STATE TO LAY DOWN TAX ARRANGEMENTS WHICH DIFFERENTIATE BETWEEN CERTAIN PRODUCTS ON THE BASIS OF OBJECTIVE CRITERIA, SUCH AS THE NATURE OF THE RAW MATERIALS USED OR THE PRODUCTION PROCESSES EMPLOYED . SUCH DIFFERENTIATION IS COMPATIBLE WITH COMMUNITY LAW IF IT PURSUES ECONOMIC POLICY OBJECTIVES WHICH ARE THEMSELVES COMPATIBLE WITH THE REQUIREMENTS OF THE TREATY AND ITS SECONDARY LAW AND IF THE DETAILED RULES ARE SUCH AS TO AVOID ANY FORM OF DISCRIMINATION, DIRECT OR INDIRECT, IN REGARD TO IMPORTS FROM OTHER MEMBER STATES OR ANY FORM OF PROTECTION OF COMPETING DOMESTIC PRODUCTS .
14 DIFFERENTIAL TAXATION SUCH AS THAT WHICH EXISTS IN ITALY FOR DENATURED SYNTHETIC ALCOHOL ON THE ONE HAND AND DENATURED ALCOHOL OBTAINED BY FERMENTATION ON THE OTHER SATISFIES THESE REQUIREMENTS . IT APPEARS IN FACT THAT THAT SYSTEM OF TAXATION PURSUES AN OBJECTIVE OF LEGITIMATE INDUSTRIAL POLICY IN THAT IT IS SUCH AS TO PROMOTE THE DISTILLATION OF AGRICULTURAL PRODUCTS AS AGAINST THE MANUFACTURE OF ALCOHOL FROM PETROLEUM DERIVATIVES . THAT CHOICE DOES NOT CONFLICT WITH THE RULES OF COMMUNITY LAW OR THE REQUIREMENTS OF A POLICY DECIDED WITHIN THE FRAMEWORK OF THE COMMUNITY .
15 THE DETAILED PROVISIONS OF THE LEGISLATION AT ISSUE BEFORE THE NATIONAL COURT CANNOT BE CONSIDERED AS DISCRIMINATORY SINCE, ON THE ONE HAND, IT IS NOT DISPUTED THAT IMPORTS FROM OTHER MEMBER STATES OF ALCOHOL OBTAINED BY FERMENTATION QUALIFY FOR THE SAME TAX TREATMENT AS ITALIAN ALCOHOL PRODUCED BY FERMENTATION AND, ON THE OTHER HAND, ALTHOUGH THE RATE OF TAX PRESCRIBED FOR SYNTHETIC ALCOHOL RESULTS IN RESTRAINING THE IMPORTATION OF SYNTHETIC ALCOHOL ORIGINATING IN OTHER MEMBER STATES, IT HAS AN EQUIVALENT ECONOMIC EFFECT IN THE NATIONAL TERRITORY IN THAT IT ALSO HAMPERS THE ESTABLISHMENT OF PROFITABLE PRODUCTION OF THE SAME PRODUCT BY ITALIAN INDUSTRY .
16 HAVING REGARD TO THE FOREGOING, THE QUESTIONS SUBMITTED BY THE PRETURA, CASTEGGIO, SHOULD BE ANSWERED AS FOLLOWS .
17 WITH REGARD TO THE FIRST AND SECOND QUESTIONS, TAKEN TOGETHER, THE REPLY SHOULD BE THAT TAX ARRANGEMENTS WHICH IMPOSE HEAVIER CHARGES ON DENATURED SYNTHETIC ALCOHOL THAN ON DENATURED ALCOHOL OBTAINED BY FERMENTATION ON THE BASIS OF THE RAW MATERIALS AND THE MANUFACTURING PROCESSES EMPLOYED FOR THE TWO PRODUCTS ARE NOT AT VARIANCE WITH THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY IF THEY ARE APPLIED IDENTICALLY TO THE TWO CATEGORIES OF ALCOHOL ORIGINATING IN OTHER MEMBER STATES . SUCH TAX ARRANGEMENTS ARE JUSTIFIED EVEN THOUGH THE PRODUCTS IN QUESTION, WHILST DERIVED FROM DIFFERENT RAW MATERIALS, ARE CAPABLE OF BEING PUT TO THE SAME USES AND HAVE THE SAME PRACTICAL APPLICATION .
18 WITH REGARD TO THE THIRD QUESTION THE REPLY SHOULD BE THAT WHERE, BY REASON OF THE TAXATION OF SYNTHETIC ALCOHOL, IT HAS BEEN IMPOSSIBLE TO DEVELOP PROFIT-
ABLE PRODUCTION OF THAT TYPE OF ALCOHOL ON NATIONAL TERRITORY, THE APPLICATION OF SUCH TAX ARRANGEMENTS CANNOT BE CONSIDERED AS CONSTITUTING INDIRECT PROTECTION OF NATIONAL PRODUCTION OF ALCOHOL OBTAINED BY FERMENTATION WITHIN THE MEANING OF THE SECOND PARAGRAPH OF ARTICLE 95 ON THE SOLE GROUND THAT
THEIR CONSEQUENCE IS THAT THE PRODUCT SUBJECT TO THE HEAVIER TAXATION IS IN FACT A PRODUCT WHICH IS EXCLUSIVELY IMPORTED FROM OTHER MEMBER STATES OF THE COMMUNITY .
Decision on costs
19 THE COSTS INCURRED BY THE GOVERNMENT OF THE ITALIAN REPUBLIC AND BY THE COMMISSION OF THE EUROPEAN COMMUNITIES, WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT, ARE NOT RECOVERABLE . AS THE PROCEEDINGS ARE, IN SO FAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED, IN THE NATURE OF A STEP IN THE ACTION PENDING BEFORE THE NATIONAL COURT THE DECISION ON COSTS IS A MATTER FOR THAT COURT .
Operative part
ON THOSE GROUNDS,
THE COURT,
IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE PRETURA, CASTEGGIO, BY ORDER OF 30 JANUARY 1980, HEREBY RULES :
1 . TAX ARRANGEMENTS WHICH IMPOSE HEAVIER CHARGES ON DENATURED SYNTHETIC ALCOHOL THAN ON DENATURED ALCOHOL OBTAINED BY FERMENTATION ON THE BASIS OF THE RAW MATERIALS AND THE MANUFACTURING PROCESSES EMPLOYED FOR THE TWO PRODUCTS ARE NOT AT VARIANCE WITH THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY IF THEY ARE APPLIED IDENTICALLY TO THE TWO CATEGORIES OF ALCOHOL ORIGINATING IN OTHER MEMBER STATES . SUCH TAX ARRANGEMENTS ARE JUSTIFIED EVEN THOUGH THE PRODUCTS IN QUESTION, WHILST DERIVED FROM DIFFERENT RAW MATERIALS, ARE CAPABLE OF BEING PUT TO THE SAME USES AND HAVE THE SAME PRACTICAL APPLICATION .
2 . WHERE, BY REASON OF THE TAXATION OF SYNTHETIC ALCOHOL, IT HAS BEEN IMPOSSIBLE TO DEVELOP PROFITABLE PRODUCTION OF THAT TYPE OF ALCOHOL ON NATIONAL TERRITORY, THE APPLICATION OF SUCH TAX ARRANGEMENTS CANNOT BE CONSIDERED AS CONSTITUTING INDIRECT PROTECTION OF NATIONAL PRODUCTION OF ALCOHOL OBTAINED BY FERMENTATION WITHIN THE MEANING OF THE SECOND
PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY ON THE SOLE GROUND THAT THEIR CONSEQUENCE IS THAT THE PRODUCT SUBJECT TO THE HEAVIER TAXATION IS IN FACT A PRODUCT WHICH IS EXCLUSIVELY IMPORTED FROM OTHER MEMBER STATES OF THE COMMUNITY .