4.

However, in Capolongo, the Court ruled as follows: ‘A duty falling within a general system of internal taxation applied systematically to national and imported products according to the same criteria can nevertheless constitute a charge having an effect equivalent to a customs duty on exports, when such duties are intended exclusively to support activities which specifically benefit the taxed domestic product’. This ruling may, prima facie, seem hardly consistent with either the distinction drawn between the different fields in which Articles 13 and 95 are applied, or with the fact, to which attention was drawn earlier, that the use to which a charge is put has no bearing on the decision whether a charge having equivalent effect to a customs duty is involved. In fact, when it is borne in mind that the said ruling is restricted to a case involving substantial fraud on the law, the extension of this concept which this judgment undoubtedly entails can be fitted quite well into the pattern built up by the development of the case-law of the Court; that is, it applies to a case where the income from the quasi-fiscal charge applied without distinction to domestic and imported products is wholly employed for the exclusive and specific benefit of the national product subject to the charge, with the result that the incidence of the levy on the latter is offset by the specific benefit which the product derives from it. As the Court declared in the judgment in Capolongo, in such circumstances, even if levied according to the same criteria on the imported product and the domestic product, the duty constitutes for the former a net supplementary tax, whilst for the latter it constitutes in reality a set-off against benefits or aids. Where these conditions apply the home product is only in appearance subject to a charge. In view of the actual incidence of the charge in terms of the economic machinery of which it forms part, it falls for all intents and purposes on the imported product alone. Even though, therefore, the charge might form part of a general system of internal taxation and were applied on the same basis to home-produced and imported products, it would, if the substance of the matter is looked at, in reality constitute a charge having equivalent effect to a customs duty. It is important to take a realistic view of the economic developments involved, looking beyond the formal position, so as to ensure that the law corresponds to the facts and that the objectives of the Treaty are at the same time succesfully pursued; on that very clear assumption, this justified exempting from the operation of Article 95 a charge which, on a strictly formal view, would fall within its ambit, in order to bring it within the ambit of the rule in Article 13 which is a better instrument of control when the real nature of the charge is viewed against the particular national intervention mechanism of which it forms an integral part. Viewed in this light, therefore, the ruling in Capolongo does not imply any change in the principles propounded in previous decisions of the Court distinguishing between the respective fields of application of Articles 13 and 95, which, as we have see, have in any case been subsequently re-affirmed in the judgment in Demag, Case 27/74. But it would be impossible to maintain that this remained consistent with the system if the principle laid down in Capolongo were to be extended to a situation other than the strictly limited one of substantial fraud on the law which, as I have pointed out already, is alone able to justify bringing within the ambit of Article 13 facts which would be normally covered by Article 95. The contention by the plaintiff in the main action that, on the basis of that principle, the home product subject to the charge and the products which benefit from it need not be necessarily be the same, must accordingly be rejected. For the same reason there can be no countenancing the suggestion, mooted by the Commission, of changing the principle in such a way as to enable it to be extended to cover a situation in which only some of a multiplicity of activities financed by means of the levy in question are for the exclusive benefit of the national products subject to it. Apart from its being incapable of being justified as a question of principle, to extend Article 13 to cover such cases might also give rise to unfairness and lead to practical difficulties which it would be impossible to ignore. Let us take the specific case of the Ente nazionale per la cellulosa e per la carta. In the Commission's view, of the activities mentioned by the national court, only that part of the expenditure involved in the financing of research in the paper industry, representing 5 % of the Ente's outgoings, could conceivably be regarded as contrary to Article 13 if the principle laid down in Capolongo were extended in the direction as proposed by the Commission. On this view, however, the outcome would be that the internal charge collected by the Ente would be prohibited in its entirety as a charge having equivalent effect and would, accordingly, have to be repaid in toto to all those who had to pay it, notwithstanding that the kind of intervention on the part of the Ente which was regarded as in conflict with the Treaty represented only an insignificant percentage of its total intervention. On the other hand, to allow that, in circumstances where an internal charge used, even only in part, for the specific benefit of national producers, must, on account if its essentially discriminatory character, be treated as incompatible with Article 95, a situation of this kind falls to be dealt with under that article, would enable the national court to relate the consequences of such incompatibility to its actual extent by declaring the charge to be inapplicable only in so far as, in terms of the use to which it is put, it constitutes an infringement of the rule (Judgment in Case 34/67 Gebrüder Lück [1968] ECR 251). This shows that the distinction between the concept of a charge having an equivalent effect to a customs duty and that of an internal tax is not of purely theoretical interest but is of great practical importance. This also emerges from the precedents established by this Court, under which the concept of charges having equivalent effect has been extended even to payments which are not discriminatory or protective in effect (Judgment in Case 24/68, Commission v Italian Republic, [1969] ECR 201; Judgment in Joined Cases 2 and 3/69 Sociaal Fonds voor de Diamant-arbeiders [1969] ECR 222); whereas a fiscal or quasi-fiscal charge which is neither discriminatory nor protective is, under Article 95, permitted. Without ignoring the importance of interpreting the Treaty rules concerned in such a way as not to weaken the safeguards provided for the free movement of goods in the common market, it is essential to be guided by the need for a clear concept of the considerations involved in the interest of legal certainty and the correct application of those rules.