OPINION OF ADVOCATE GENERAL
BOT
delivered on 4 June 2015 (1)
Case C‑306/14
Direktor na Agentsia ‘Mitnitsi’
v
Biovet AD
(Request for a preliminary ruling
from the Varhoven administrativen sad (Bulgaria))
(Directive 92/83/EEC – Harmonisation of the structures of excise duties on alcohol and alcoholic beverages — Article 27(1)(d) — Article 27(2)(d) — Exemption from harmonised excise — Ethyl alcohol — Use for the manufacture of medicinal products — Cleaning and disinfection)
1.        This request for a preliminary ruling concerns the interpretation of Article 27(2)(d) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages. (2)
2.        This reference has been made in the context of proceedings between the Direktor na Agentsia ‘Mitnitsi’ (Director of the Customs Agency; ‘the Director’) and Biovet AD (‘Biovet’) in relation to the harmonised excise charged on ethyl alcohol used by Biovet for the cleaning and disinfection of technical equipment, production facilities, sterile rooms and work surfaces in the course of its business manufacturing medicinal products.
I –        Legal context
A –          EU law
3.        The nineteenth and the twentieth recitals in the preamble to Directive 92/83 are worded as follows:
‘Whereas it is necessary to lay down at Community level the exemptions which apply to goods which are transported between Member States;
Whereas, however, it is possible to permit Member States an option to apply exemptions tied to end-uses within their territory.’
4.        Under Article 19(1) of that directive, Member States shall apply an exemption to ethyl alcohol.
5.        Section VII of the directive, headed ‘Exemptions’, provides for a mandatory exemptions regime (Article 27(1)) and an optional exemptions regime (Article 27(2)).
6.        In relation to the mandatory exemptions regime, Article 27(1)(d) of Directive 92/83 provides as follows:
‘Member States shall exempt the products covered by this Directive from the harmonised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:
…
(d)      when used for the production of medicines defined by Directive 65/65/EEC.’ (3)
7.        In relation to the optional exemptions regime, Article 27(2)(d) of Directive 92/83 is worded as follows:
‘Member States may exempt the products covered by this Directive from the harmonised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse, when used:
…
(d)      in a manufacturing process provided that the final product does not contain alcohol.’
B –          Bulgarian law
8.        Under Article 22(4)(4) of the Bulgarian Law on excise duties and tax warehouses (Zakon za aktsizite i danachnite skladove), (4) in the version applicable at the time of the facts in the main proceedings, (5) excise duty paid on alcohol and alcoholic beverages shall be refunded if they are used in a manufacturing process and the final product does not contain any alcohol.
9.        Article 22(7) ZADS states that, for the purposes of Article 22(3) and Article 22(4)(4), alcohol and alcoholic beverages which are used as cleaning materials are deemed not to have been used in a manufacturing process.
II –        The dispute in the main proceedings and the questions referred for a preliminary ruling
10.      Biovet manufactures medicinal products and markets veterinary medicinal products, agricultural products and medicinal products for human use.
11.      In the course of its business, Biovet uses ethyl alcohol, in the form of a 70% water-based solution of ethanol, to clean and disinfect technical equipment, production facilities and work rooms and surfaces.
12.      On 14 September 2012, Biovet applied for a refund of excise duty paid on 271 litres of ethyl alcohol which had been used in the period from 1 August 2012 to 31 August 2012.
13.      By decision of the Nachalnik na Mitnitsa ‘Plovdiv’ (Head of the Plovdiv Customs Office), a refund was refused. That decision was challenged by administrative appeal and was confirmed by decision of the Director.
14.      Biovet challenged the decision of the Director by way of judicial proceedings before the Administrativen sad Sofia-grad (Administrative Court of Sofia, Bulgaria, ‘ASSG’).
15.      The ASSG commissioned an expert report which found that Biovet uses, inter alia, a 70% water-based solution of ethanol in order to disinfect its rooms, machines and facilities. According to the expert report, disinfection is designed to kill all microorganisms remaining after washing, and in particular pathogenic microorganisms, the presence of which is not permitted under requirements regarding the germ content of medicinal products. The report states that operations carried out by Biovet comply with the requirements of good practice in the manufacture of medicinal products; in addition, 70% ethyl alcohol is a preferred disinfectant in the manufacture of medicinal products, because, among other reasons, it is toxicologically the least damaging and disinfects more rapidly than other products.
16.      The ASSG held that cleaning and disinfection constitute different processes or activities forming part of the manufacturing process for a final product which does not contain any alcohol, with the result that the excise duty paid on the acquisition of the alcohol used for disinfectant purposes should be refunded pursuant to Article 22(4) ZADS and was not covered by Article 22(7) ZADS.
17.      An appeal against the decision of the ASSG was brought by the Director before the referring court.
18.      In those circumstances, the Varhoven administrativen sad (Administrative Supreme Court, Bulgaria) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)      What is the meaning of the term ‘manufacturing process’ in Article 27(2)(d) of Directive 92/83 and does that term include cleaning and/or disinfection as processes for achieving specific degrees of cleanliness which are prescribed by good practice in the manufacture of medicinal products?
(2)      Does Article 27(2)(d) of Directive 92/83 permit the enactment of a legal provision under which, after the Member States have introduced legislation exempting alcohol from harmonised excise duty on condition that the alcohol is used in a manufacturing process and that the end product does not contain any alcohol, alcohol used for cleaning is deemed, for the purposes of the application of that exemption, not to have been used in a manufacturing process?
(3)      Having regard to the principles of legal certainty and the protection of legitimate expectations, is it permissible for a deeming provision such as that in Article 22(7) ZADS to be enacted with immediate effect (that is to say, without providing any reasonable period for market participants to adjust their behaviour) if it restricts refunds of excise duty on alcohol used as a cleaning material in the case where the exemption from excise duty has been enacted by the Member State within the scope of its discretion?’
III –        My analysis
19.      By its first question, the referring court is essentially asking the Court to rule on the question of whether or not the exemption at issue in the main proceedings falls within the optional exemptions regime under Article 27(2)(d) of Directive 92/83, which relates to ethyl alcohol used in a manufacturing process provided that the final product does not contain alcohol.
20.      As the European Commission comments in its written observations, neither the referring court nor the parties to the main proceedings dispute the fact that undenatured alcohol used for cleaning and disinfecting equipment used in the manufacture of medicinal products is not covered by the mandatory exemptions regime under Article 27(1)(d) of Directive 92/83, which was transposed into national law by Article 22(3)(2) ZADS.
21.      By way of reminder, Article 27(1)(d) of Directive 92/83 provides a mandatory exemption for ethyl alcohol used ‘for the production of medicines defined by Directive 65/65’.
22.      As the Commission observes, the question of an optional exemption would not arise if the exemption at issue in the main proceedings were mandatory under Article 27(1)(d) of Directive 92/83.
23.      The Commission considers that a restrictive interpretation must be placed on the mandatory exemption under Article 27(1)(d), which should apply to cases where alcohol is used directly for the ‘production of medicines’, by way of a constituent in the preparation of the medicine, which is not the case with alcohol used to clean machines.
24.      In support of that interpretation, the Commission relies on one of its own working documents. (6) The Commission also bases its argument on the general scheme of Article 27(1) of Directive 92/83, commenting that point (d) of that provision should be read in the context of points (c) and (e). In that regard, the Commission refers to Article 27(1)(c) which provides an exemption for alcohol used ‘for the production of vinegar falling within CN code 2209’ and observes that alcohol, including wine, is directly involved in the production of vinegar. In addition, in connection with Article 27(1)(e), which provides an exemption for alcohol used when used ‘for the production of flavours for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% vol.’, the Commission states that the alcohol is, in principle, being used as a solvent.
25.      Finally, according to the Commission, such an interpretation complies with the objective of the exemptions contained in Directive 92/83 which is, according to the Court’s case-law, ‘in particular, to neutralise the impact of excise duties on alcohol used as an intermediate product in other commercial or industrial products’. (7)
26.      I am not convinced by the interpretation advanced by the Commission. In my view, it is indeed in the light of Article 27(1)(d) of Directive 92/83 that the present case must be examined, for the following reasons.
27.      First, Article 27(1)(d) is worded in very general terms. The requirement for the alcohol to be used ‘for the production of medicines’ does not of itself express a need for the alcohol to be used as a constituent of the medicine. If the EU legislature had wished to express that notion, it would have specified that the exemption was to apply in cases where the alcohol was used ‘in the composition of medicines’ or ‘as a constituent in the preparation of medicines’.
28.      Secondly, I am not persuaded by the argument based on the general scheme of Article 27(1) of Directive 92/83. Even if points (c), (e) and (f) of that provision deal with situations where alcohol is present in the composition of a final product, that is not the case with points (a) and (b). In any event, point (d) could very well be the only point within Article 27(1) of Directive 92/83 to cover the situation where alcohol is used for the manufacture of a product without the alcohol necessarily being found in the composition of that product.
29.      Furthermore, it seems to me to be an error to regard the system established by the EU legislature as containing a clear division between, on the one hand, a mandatory exemptions regime concerned only with alcohol forming a constituent of a final product, and, on the other, an optional exemptions regime covering only those cases where alcohol is not a constituent of a final product. In that regard, one has only to refer, for example, to Article 27(2)(c) of Directive 92/83 which provides an optional exemption for alcohol used ‘for medical purposes in hospitals and pharmacies’. Such a situation could cover not only alcohol used within a pharmacy to disinfect equipment or for the general maintenance of the pharmacy rooms but also alcohol used as a constituent of magistral or officinal formulae.
30.      Thirdly, the objective of the exemptions contained in Directive 92/83, as expressed by the Court, (8) serves, in my view, to confirm that the exemptions under the directive do not relate to alcohol only in terms of an intermediate product in other commercial or industrial products. The use of the phrase ‘in particular’ in that context is significant. It expresses the notion, as formulated by the Court in its judgment in Italy v Commission, (9) that ‘Directive 92/83 provides for certain exemptions inspired in most cases by the wish to neutralise the impact of excise duties on alcohol used as an intermediate product in other commercial or industrial products’. (10)
31.      It seems to me that, as a consequence of this case-law, the objective of the exemptions set out in Directive 92/83, under both Article 27(1) and Article 27(2), is to neutralise the impact of excise duties not only on alcohol used as an intermediate product in other commercial or industrial products, but also on alcohol used for other purposes, as listed in those two provisions.
32.      It therefore seems to me correct to interpret Article 27(1)(d) of Directive 92/83 as seeking to neutralise the impact of harmonised excise duties on alcohol used for the production of medicines, whether the alcohol forms a constituent of the medicines or whether it is needed in order to produce the medicines.
33.      It is of course the case that, as exceptions to the principle of harmonised excise, the exemptions should be interpreted restrictively. However, the issue seems to me to be different in the present case. It is necessary to decide whether the case referred by the referring court falls within the mandatory exemptions regime or within the optional exemptions regime. If there is any uncertainty about this, the requirement for EU law to be applied uniformly should, in my view, lead to the Court prioritising the regime for mandatory exemptions which are defined at EU level, especially given that those mandatory exemptions expressly cover the category of products at issue in the main proceedings, namely medicines. Article 27(1)(d) of Directive 92/83 is therefore a lex specialis compared with Article 27(2)(d) of that directive. In addition, it must be borne in mind that the Court has several times had occasion to emphasise that ‘the exemption of products covered by Article 27(1) of Directive 92/83 is the rule and refusal is the exception’. (11)
34.      In view of all these factors, I regard the facts of the dispute in the main proceedings to fall within the scope of Article 27(1)(d), rather than that of Article 27(2)(d), of Directive 92/83.
35.      In order to provide a useful answer to the referring court so as to resolve the dispute in the main proceedings, it should be recalled that the fact that a national court has, formally speaking, worded a question referred for a preliminary ruling with reference to certain provisions of EU law does not prevent the Court from providing that court with all the guidance on points of interpretation which may be of assistance in adjudicating on the case pending before it, whether or not it has referred to those points in its questions. It is, in this context, for the Court to extract from all the information provided by the national court, in particular from the grounds of the decision referring the questions, the points of EU law which require interpretation, regard being had to the subject-matter of the dispute. (12)
36.      I propose that the Court should rule that Article 27(1)(d) of Directive 92/83 should be interpreted as meaning that ethyl alcohol used to disinfect the facilities and equipment that enable an undertaking to produce medicines is deemed to be used ‘for the production of medicines’ within the meaning of that provision.
37.      It is clear from the order for reference that it is within the context of its business producing medicines that Biovet is claiming a refund of the excise paid on the ethyl alcohol used to disinfect its facilities and equipment.
38.      It appears from the order for reference that the disinfection process takes place using chemical preparations including ethyl alcohol in order to reduce the number of microorganisms to a minimum which poses no risk to the quality and non-toxicity of the medicines produced.
39.      Disinfection of working rooms and surfaces using ethyl alcohol is therefore an indispensable stage in the process of the manufacture of the medicines, without which it would be impossible to guarantee the absence of unwanted pathogenic microorganisms in those medicines.
40.      In other words, it is impossible to envisage medicine production operations being carried out without the associated disinfection of facilities and equipment. Since disinfection is inherent to the process of medicine production, the ethyl alcohol used for that purpose must necessarily be deemed to be used ‘for the production of medicines’ within the meaning of Article 27(1)(d) of Directive 92/83.
41.      Consequently, the referring court must apply the national provision transposing Article 27(1)(d) of Directive 92/83 and must interpret it in a way to guarantee the effective application of the mandatory exemption for the ethyl alcohol used by Biovet to disinfect its facilities and equipment within its medicine production operations.
42.      Another situation was alluded to at the hearing which, in my opinion, supports the solution which I am proposing to the Court. This is the hypothetical situation where ethyl alcohol is used to extract an active ingredient. In such a situation, as the Commission itself admitted, there would be no doubt that the alcohol was being used for the preparation of the medicine containing the active ingredient. That alcohol should also be deemed to be used ‘for the production of medicines’ within the meaning of Article 27(1)(d) of Directive 92/83, even though it is not a constituent of the medicine in question.
IV –  Conclusion
43.      In light of all the foregoing considerations, I propose that the Court give the following answer to the Varhoven administrativen sad:
Article 27(1)(d) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages must be interpreted as meaning that ethyl alcohol used to disinfect the facilities and equipment that enable an undertaking to produce medicines is deemed to be used ‘for the production of medicines’ within the meaning of that provision.
1      Original language: French.
2 OJ 1992 L 316, p. 21.
3      Council Directive 65/65/EEC of 26 January 1965 on the approximation of provisions laid down by Law, Regulation or Administrative Action relating to proprietary medicinal products (OJ 1965, L 22, p. 369).
4 DV No 91, of 15 November 2005.
5 DV No 54, of 17 July 2012 (‘ZADS’).
6      Document CED No 283 (XXI/1968/98).
7 See, in particular, judgment in Repertoire Culinaire (C‑163/09, EU:C:2010:752, paragraph 48 and the case-law cited).
8 See point 25 of this Opinion.
9 C‑482/98, EU:C:2000:672.
10 Paragraph 4. My italics.
11 Judgment in Repertoire Culinaire (C‑163/09, EU:C:2010:752, paragraph 51 and the case-law cited).
12      See, in particular, judgment in Essent Energie Productie (C‑91/13, EU:C:2014:2206, paragraph 36 and the case-law cited).