Judgment of the Court of 8 January 1980. - Commission of the European Communities v Italian Republic. - Regenerated petroleum products. - Case 21/79.



European Court reports 1980 Page 00001

Greek special edition Page 00001

Spanish special edition Page 00001



Summary

Parties

Subject of the case

Grounds

Decision on costs

Operative part



Keywords

1 . TAX PROVISIONS - INTERNAL TAXATION - RULE THAT THERE SHOULD BE NO DISCRIMINATION - SCOPE - TAX ADVANTAGES FOR DOMESTIC PRODUCTS - EXTENSION TO PRODUCTS IMPORTED FROM OTHER MEMBER STATES

( EEC TREATY , ART . 95 )

2 . APPROXIMATION OF LAWS - DISPOSAL OF WASTE OILS - UNDERTAKINGS CONCERNED - ALLOWANCES IN THE FORM OF REDUCTION OF DOMESTIC CHARGES - ADMISSIBILITY - CONDITIONS - COMPLIANCE WITH THE RULE THAT THERE SHOULD BE NO TAX DISCRIMINATION

( EEC TREATY , ART . 95 ; COUNCIL DIRECTIVE NO 75/439/EEC , ART . 13 )

Summary

1 . IN THE ABSENCE OF ANY UNIFICATION OR HARMONIZATION OF THE RELEVANT PROVISIONS , COMMUNITY LAW DOES NOT PROHIBIT MEMBER STATES FROM GRANTING , FOR PROPER ECONOMIC AND SOCIAL REASONS , TAX ADVANTAGES , IN THE FORM OF EXEMPTION FROM OR REDUCTION OF DUTIES , TO CERTAIN PRODUCTS OR TO CERTAIN CLASSES OF PRODUCERS . THE EEC TREATY DOES NOT THEREFORE FORBID , AS FAR AS DOMESTIC TAX LAWS ARE CONCERNED , THE TAXATION AT DIFFERENTIAL RATES OF PRODUCTS WHICH MAY SERVE THE SAME ECONOMIC ENDS , ESPECIALLY IF , OBJECTIVELY SPEAKING , IT APPEARS THAT THE COST OF PRODUCTION DIFFERS CONSIDERABLY .

ON THE OTHER HAND THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY REQUIRES THAT SUCH TAX ADVANTAGES MUST ALSO BE EXTENDED WITHOUT ANY DISCRIMINATION TO SIMILAR PRODUCTS FROM THE OTHER MEMBER STATES WHICH SATISFY THE SAME CONDITIONS LAID DOWN FOR THOSE ADVANTAGES . HOWEVER THAT PROVISION DOES NOT PLACE MEMBER STATES UNDER A DUTY TO ABOLISH AS REGARDS INTERNAL TAXES ON DOMESTIC PRODUCTS DIFFERENCES WHICH ARE OBJECTIVELY JUSTIFIED AND WHICH MAY BE INTRODUCED BY DOMESTIC LEGISLATION UNLESS SUCH ABOLITION IS THE ONLY WAY OF AVOIDING DIRECT OR INDIRECT DISCRIMINATION AGAINST THE IMPORTED PRODUCTS .

2 . PURSUANT TO ARTICLE 13 OF DIRECTIVE NO 75/439 ON THE DISPOSAL OF WASTE OILS , WHEN MEMBER STATES IMPLEMENT A DIRECTIVE THEY ARE FREE EITHER TO GRANT INDEMNITIES DIRECTLY TO UNDERTAKINGS ENGAGED IN THE RECOVERY , DISPOSAL OR REGENERATION OF USED OILS OR TO ALLOW REGENERATED OILS TO BENEFIT FROM MORE FAVOURABLE TAX TREATMENT , OR EVEN TO COMBINE THE TWO SYSTEMS . NEVERTHELESS , IF IN THE EXERCISE OF THEIR DISCRETION IN THIS FIELD THEY OPT FOR A SYSTEM OF LOWER INTERNAL TAXATION , THEY MUST ACCEPT THE CONSEQUENCES OF THAT CHOICE AND ENSURE THAT THE SYSTEM CHOSEN COMPLIES WITH THE FUNDAMENTAL PRINCIPLE LAID DOWN IN ARTICLE 95 OF THE EEC TREATY THAT THERE MUST BE NO TAX DISCRIMINATION AGAINST IMPORTED PRODUCTS .

Parties

IN CASE 21/79

COMMISSION OF THE EUROPEAN COMMUNITIES , REPRESENTED BY ITS LEGAL ADVISER , ANTONINO ABATE , ACTING AS AGENT , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF ITS LEGAL ADVISER , MARIO CERVINO , JEAN MONNET BUILDING , KIRCHBERG ,

APPLICANT ,

V

ITALIAN REPUBLIC , REPRESENTED BY ITS AMBASSADOR , ADOLFO MARESCA , ACTING AS AGENT , ASSISTED BY ARTURO MARZANO , AVVOCATO DELLO STATO , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE ITALIAN EMBASSY ,

DEFENDANT ,

Subject of the case

APPLICATION FOR A DECLARATION THAT , AS FAR AS CONCERNS THE TAX RULES APPLICABLE TO REGENERATED PETROLEUM PRODUCTS , THE ITALIAN REPUBLIC FAILED TO FULFIL ITS OBLIGATIONS UNDER THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY ,

Grounds

1 BY AN APPLICATION OF 31 JANUARY 1979 THE COMMISSION BROUGHT BEFORE THE COURT AN ACTION PURSUANT TO ARTICLE 169 OF THE EEC TREATY FOR A DECLARATION THAT THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 95 OF THE EEC TREATY ' ' BY TAXING REGENERATED PETROLEUM PRODUCTS IMPORTED FROM THE OTHER MEMBER STATES , PURSUANT TO LAW NO 1852 OF 31 DECEMBER 1962 , AT A DISCRIMINATORY RATE ' ' .

GENERAL CONSIDERATIONS

2 UNDER ITALIAN LAW - IN PARTICULAR UNDER DECREE-LAW NO 334 OF 28 FEBRUARY 1939 IN THE VERSION IN FORCE IN 1978 - AN ' ' IMPOSTA INTERNA DI FABBRICAZIONE ' ' ( INTERNAL PRODUCTION TAX ), FIXED AT A CERTAIN AMOUNT OF LIRE PER QUINTAL , WHICH VARIES ACCORDING TO THE PRODUCTS , IS CHARGEABLE ON MINERAL OILS AND PROCESSED PRODUCTS DERIVED FROM THEM . A SIMILAR TAX CALLED ' ' SOVRAIMPOSTA DI CONFINE ' ' ( FRONTIER SURCHARGE ) IS CHARGEABLE ON SIMILAR FOREIGN PRODUCTS WHEN THEY CROSS THE FRONTIER .

3 WITH A VIEW TO ENCOURAGING , ON BOTH ECONOMIC AND ECOLOGICAL GROUNDS , THE RECOVERY AND RE-USE OF USED OILS ARTICLE 12 OF ITALIAN LAW NO 1852 OF 31 DECEMBER 1962 ( GAZZETTA UFFICIALE DELLA REPUBBLICA ITALIANA ( OFFICIAL JOURNAL OF THE ITALIAN REPUBLIC ) NO 26 OF 29 JANUARY 1963 , P . 458 ) INTRODUCES A SERIES OF MEASURES REGULATING THE COLLECTION , RECOVERY AND RE-USE OF PETROLEUM PRODUCTS AND GRANTING THE UNDERTAKINGS WHICH ENGAGE THEREIN ON ITALIAN TERRITORY TAX ADVANTAGES AS FAR AS THE IMPOSTA DI FABBRICAZIONE IS CONCERNED .

4 THE PROVISIONS IN QUESTION DISTINGUISH BETWEEN THE RECOVERY AND THE REGENERATION OF USED PETROLEUM PRODUCTS AND ACCORD DIFFERENT TREATMENT IN A DIFFERENT WAY , INCLUDING TREATMENT FOR TAX PURPOSES , TO THE TWO OPERATIONS .

5 THE RECOVERY OF USED OILS CONSISTS IN RECYCLING CERTAIN PETROLEUM PRODUCTS WHICH HAVE ALREADY BEEN USED ONCE , EITHER BY RE-USING THEM AS THEY ARE FOR THE SAME PURPOSES AS BEFORE OR FOR OTHER PURPOSES OR BY FIRST OF ALL CLEANING OR PURIFYING THEM INTER ALIA BY ELUTRIATION , FILTERING OR DRYING . THE LUBRICATING OILS RECOVERED IN THIS WAY ARE EXEMPT FROM THE IMPOSTA DI FABBRICAZIONE PROVIDED THAT THE RECOVERY AND RE-USE ARE CARRIED OUT ON THE SAME PREMISES AS THOSE WHERE THE OILS WERE FIRST USED ( SEVENTH PARAGRAPH OF ARTICLE 12 OF LAW NO 1852 ).

6 REGENERATION ON THE OTHER HAND IS A COMPLETE CHEMICAL PROCESS WHICH REQUIRES INDUSTRIAL INSTALLATIONS AND IN FACT RESTORES TO USED MINERAL OILS ALL THE PROPERTIES THEY HAD BEFORE THEY WERE USED . THE COMMISSION AND THE ITALIAN GOVERNMENT ARE AT ONE IN ACCEPTING THAT IT IS IMPOSSIBLE TO DISTINGUISH BETWEEN OIL WHICH HAS UNDERGONE A REGENERATING PROCESS AND OIL OF PRIMARY DISTILLATION IN ITS ORIGINAL CONDITION .

7 PURSUANT TO THE SECOND PARAGRAPH OF ARTICLE 12 OF THE ABOVE-MENTIONED ITALIAN LAW AN IMPOSTA DI FABBRICAZIONE AT 25% OF THE FULL RATE IS IMPOSED ON REGENERATED OILS . THIS REDUCED TAX IS CHARGEABLE ON REGENERATED PRODUCTS NOT ONLY IF THEY ARE OFFERED FOR SALE BUT ALSO IF THEY ARE RE-USED BY THE UNDERTAKING WHICH HAD USED THEM FIRST .

8 THE ITALIAN LAW DOES NOT ALLOW THIS REDUCED RATE TO BE APPLIED TO IMPORTED OILS WHETHER THEY BE RECOVERED OR REGENERATED OILS AND THE LATTER PAY THE SOVRAIMPOSTA DI CONFINE WHICH IS THE TAX CORRESPONDING TO THE IMPOSTA DI FABBRICAZIONE CHARGEABLE AT THE FULL RATE , ALTHOUGH IT MUST BE POINTED OUT THAT THE IMPORTATION FROM THE OTHER MEMBER STATES OF RECOVERED OILS SEEMS TO BE A THEORETICAL ASSUMPTION AND THAT EVEN INTRA-COMMUNITY TRADE IN REGENERATED OILS IS , IF NOT NON-EXISTENT , AT THE VERY LEAST VERY RESTRICTED , EVEN THOUGH IT IS LIKELY TO EXPAND HAVING REGARD TO THE TREND OF THE MARKET CONDITIONS FOR PETROLEUM PRODUCTS .

9 WHEN THE COMMISSION BY A LETTER OF 24 JUNE 1976 INFORMED THE ITALIAN REPUBLIC THAT IT REGARDED THE RULES AT ISSUE AS AN INFRINGEMENT OF THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY , THE LATTER POINTED OUT THAT , AS FAR AS RECOVERED OILS ARE CONCERNED , THE EXEMPTION , WHICH IS CONDITIONAL ON THE RECOVERY AND RE-USE BEING CARRIED OUT WITHIN THE SAME UNDERTAKING , REPRESENTS THE APPLICATION OF THE TAX RULE NON BIS IN IDEM . THE FACT THAT , BY DEFINITION , IMPORTED PRODUCTS CANNOT FULFIL THAT CONDITION DOES NOT HOWEVER IN ANY WAY PREVENT THIS EXEMPTION FROM BEING IN ACCORDANCE WITH THE TREATY . AS FAR AS REGENERATED OILS ARE CONCERNED THE MAIN ARGUMENT OF THE ITALIAN REPUBLIC WAS THAT THERE WAS NO DISCRIMINATORY TREATMENT OF FOREIGN REGENERATED OILS , BECAUSE THE ADVANTAGE OF THE REDUCED RATE , WHICH IS JUSTIFIED BY THE EXTREMELY HIGH COST OF PRODUCTION OF REGENERATED OIL COMPARED WITH THAT OF THE PRODUCT WHEN FIRST PROCESSED , IS LINKED TO STRICT SUPERVISION OF THE REGENERATION PROCESS WHICH INCLUDES ASCERTAINING THE QUANTITIES OF REGENERATED OILS TO BE PRODUCED . SINCE IT IS NOT POSSIBLE TO SUPERVISE IMPORTS IN THE SAME WAY THE DIFFERENTIAL TREATMENT DOES NOT CONTRAVENE ARTICLE 95 OF THE TREATY . THE ITALIAN GOVERNMENT ALSO DREW THE COMMISSION ' S ATTENTION TO THE FACT THAT THE TAX ADVANTAGES AT ISSUE WERE IN FACT IN KEEPING WITH THE OBJECTIVES OF COUNCIL DIRECTIVE NO 75/439/EEC OF 16 JUNE 1975 ON THE DISPOSAL OF WASTE OILS WHICH PROVIDES FOR THE INTRODUCTION BY THE MEMBER STATES OF A HARMONIZED SYSTEM OF COLLECTION , DISPOSAL OR RECYCLING OF USED OILS AND ARTICLES 13 AND 14 OF WHICH ALLOW AN INDEMNITY TO BE GIVEN TO UNDERTAKINGS ENGAGED IN THOSE OPERATIONS . THE TAX REDUCTIONS AT ISSUE WERE IN ACTUAL FACT A FORM OF SUBSIDY WHICH WAS AUTHORIZED , ESPECIALLY AS THE DIRECTIVE HAD STILL NOT BEEN IMPLEMENTED BY MOST OF THE MEMBER STATES . THE ITALIAN GOVERNMENT ADDED THAT IT WAS CONSIDERING THE POSSIBILITY OF REPLACING THE TAX ADVANTAGES BY DIRECT SUBSIDIES , THE GRANT OF WHICH IS AUTHORIZED BY THE DIRECTIVE .

10 IN ITS REASONED OPINION OF 10 JANUARY 1978 , THE COMMISSION STATED THAT ' ' THE ITALIAN GOVERNMENT DOES NOT DENY THAT THE PROVISIONS COMPLAINED OF ARE INCOMPATIBLE WITH THE FIRST PARAGRAPH OF ARTICLE 95 ' ' - THIS IS AN INCORRECT ASSESSMENT OF THE ITALIAN POSITION - AND EXPRESSED THE OPINION THAT ' ' THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY BY IMPOSING ON REGENERATED PETROLEUM PRODUCTS IMPORTED FROM OTHER MEMBER STATES THE TAX ON CONSUMPTION AT THE FULL RATE WHEREAS SIMILAR IMPORTED ( DOMESTIC IS MEANT ) PRODUCTS ARE FULLY OR PARTIALLY EXEMPTED ACCORDING TO CIRCUMSTANCES ' ' . BY EXPRESSLY MENTIONING THE DOMESTIC PRODUCTS WHICH ARE ACCORDED COMPLETE EXEMPTION THE COMMISSION WAS REFERRING TO - OR IN ANY CASE GAVE THE IMPRESSION THAT IT WAS REFERRING TO - THE TAX RULES APPLICABLE TO OILS WHICH HAVE BEEN RECOVERED AND RE-USED IN THE SAME UNDERTAKING AS WELL AS THOSE WHICH APPLY TO REGENERATED OILS . THE ITALIAN GOVERNMENT GAVE NOTICE ON 5 JULY 1978 OF ITS DECISION TO COMPLY WITH THE REASONED OPINION BY DRAWING UP FOR REGENERATED PRODUCTS A LAW WHICH REPLACES THE TAX EXEMPTIONS AT ISSUE WITH THE INDEMNITIES PROVIDED FOR BY DIRECTIVE NO 75/439 .

11 THE COMMISION , IN THE ACTION WHICH IT BROUGHT ON 31 JANUARY 1979 , REFERS ONLY TO REGENERATED PRODUCTS AND IN ITS REPLY AS WELL AS IN ITS ANSWERS TO THE QUESTIONS PUT TO IT BY THE COURT , IT STATED AND EXPRESSLY CONFIRMED THAT ITS COMPLAINTS RELATED ONLY TO THE TAX RULES LAID DOWN FOR REGENERATED PETROLEUM PRODUCTS MENTIONED IN THE SECOND PARAGRAPH OF ARTICLE 12 OF ITALIAN LAW NO 1852 .

12 THE COURT TAKES FORMAL NOTE OF THIS STATEMENT WHICH PUTS AN END TO THE AMBIGUITY BOTH IN THE OBSERVATIONS SENT TO THE ITALIAN GOVERNMENT ON 24 JUNE 1976 AND IN THE REASONED OPINION SO THAT EXAMINATION CAN BE LIMITED TO THE TAX RULES APPLICABLE TO REGENERAGED OILS .

THE TAX RULES APPLICABLE TO REGENERATED OILS

13 DURING THE ORAL PROCEDURE THE COMMISSION STRESSED THE FACT THAT REGENERATED OILS AND OILS OF PRIMARY DISTILLATION ' ' ARE NOT ONLY SIMILAR PRODUCTS WITHIN THE MEANING OF ARTICLE 95 BUT ARE ALSO INDENTICAL ' ' . THE IDENTICAL NATURE OF THE PRODUCTS IS NOT DISPUTED BY THE ITALIAN REPUBLIC . NEVERTHELESS THE COMMISION ' S OBSERVATION SEEMS TO SUGGEST THAT THE TAX RULES APPLICABLE TO IMPORTED OILS , WHETHER THEY BE OILS OF PRIMARY DISTILLATION OR REGENERATED OILS , SHOULD BE THE SAME AS THE RULES APPLICABLE TO ITALIAN REGENERATED OILS . THIS APPEARS TO EXPLAIN THE POSITION TAKEN UP AND DEVELOPED BY THE COMMISSION DURING THE ORAL PROCEDURE , NAMELY THAT THE ITALIAN GOVERNMENT , IN ORDER TO COMPLY WITH ARTICLE 95 , SHOULD ABOLISH THE TAX ADVANTAGE ACCRUING TO ITALIAN REGENERATED OILS RATHER THAN EXTEND THAT ADVANTAGE TO REGENERATED OILS IMPORTED FROM THE OTHER MEMBER STATES .

14 APART FROM THE FACT THAT THAT POINT OF VIEW WAS NOT EXPRESSED EITHER IN THE REASONED OPINION OR IN THE ACTION , BOTH OF WHICH ARE BASED ON A COMPARISON OF THE TAXATION OF DOMESTIC REGENERATED OILS AND THOSE WHICH HAVE BEEN IMPORTED FROM THE OTHER MEMBER STATES IT CANNOT BE SHARED BY THE COURT . IT IS IN FACT CLEAR FROM THE JUDGMENT OF THE COURT OF 10 OCTOBER 1978 IN CASE 148/77 ( H . HANSEN JUN . & O . C . BALLE GMBH & CO V HAUPTZOLLAMT FLENSBURG ( 1978 ) ECR 1806 ) THAT AT THE PRESENT STAGE OF THE DEVELOPMENT OF COMMUNITY LAW AND IN THE ABSENCE OF ANY UNIFICATION OR HARMONIZATION OF THE RELEVANT PROVISIONS , COMMUNITY LAW DOES NOT PROHIBIT MEMBER STATES FROM GRANTING TAX ADVANTAGES , IN THE FORM OF EXEMPTION FROM OR REDUCTION OF DUTIES , TO CERTAIN PRODUCTS OR TO CERTAIN CLASSES OF PRODUCERS . THE TREATY DOES NOT THEREFORE FORBID , AS FAR AS DOMESTIC TAX LAWS ARE CONCERNED , THE TAXATION AT DIFFERENTIAL RATES OF PRODUCTS WHICH MAY SERVE THE SAME ECONOMIC ENDS , ESPECIALLY IF , AS IN THE CASE OF REGENERATED MINERAL OILS , IT APPEARS THAT THE COST OF PRODUCTION , OBJECTIVELY SPEAKING , DIFFERS CONSIDERABLY FROM THAT OF OILS OF PRIMARY DISTILLATION .

15 ON THE OTHER HAND PURSUANT TO THE FIRST PARAGRAPH OF ARTICLE 95 THE TAX ADVANTAGES IN QUESTION MUST ALSO BE GRANTED WITHOUT ANY DISCRIMINATION TO PRODUCTS FROM THE OTHER MEMBER STATES WHICH SATISFY THE SAME CONDITIONS AS THE DOMESTIC PRODUCTS WHICH QUALIFY FOR THE EXEMPTIONS OR REDUCTIONS ALLOWED BY NATIONAL LAW . THE FIRST PARAGRAPH OF ARTICLE 95 - THE PURPOSE OF WHICH IS TO ENSURE THAT THE TREATY PROVISIONS RELATING TO THE ABOLITION OF CUSTOMS DUTIES AND CHARGES HAVING EQUIVALENT EFFECT CANNOT BE EVADED OR RENDERED NUGATORY BY THE INTRODUCTION OF INTERNAL TAXATION DISCRIMINATING AGAINST IMPORTED PRODUCTS IN COMPARISON WITH DOMESTIC PRODUCTS - IMPLEMENTS A FUNDAMENTAL PRINCIPLE OF THE COMMON MARKET . CONSEQUENTLY THE DISPARITIES PROHIBITED BY IT MUST BE ELIMINATED IN SPITE OF THE DIFFICULT PROBLEMS OF COMPARISON WHICH MAY ARISE WHEN ASSIMILATING THE IMPORTED PRODUCT TO THE VARIOUS DOMESTIC PRODUCTS ( WHICH ARE SUBJECT TO DIFFERENT TAXES ) AND TO WHICH IT MAY HAVE SOME SIMILARITY .

16 ALTHOUGH THE FIRST PARAGRAPH OF ARTICLE 95 THEREFORE PLACES MEMBER STATES UNDER AN OBLIGATION TO EXTEND THE TAX ADVANTAGES ACCRUING TO DOMESTIC PRODUCTS TO SIMILAR PRODUCTS IMPORTED FROM THE OTHER MEMBER STATES AS WELL PROVIDED THAT THE LATTER PRODUCTS SATISFY THE CONDITIONS TO WHICH A REDUCED RATE OR AN EXEMPTION HAVE BEEN MADE SUBJECT , IT DOES NOT HOWEVER IMPOSE UPON THE MEMBER STATES THE DUTY TO ABOLISH AS REGARDS INTERNAL TAXES ON DOMESTIC PRODUCTS DIFFERENCES WHICH ARE OBJECTIVELY JUSTIFIED AND WHICH MAY BE INTRODUCED BY DOMESTIC LEGISLATION UNLESS SUCH ABOLITION IS THE ONLY WAY OF AVOIDING DIRECT OR INDIRECT DISCRIMINATION AGAINST THE IMPORTED PRODUCTS .

17 IT IS ALSO NECESSARY TO REJECT THE COMMISSION ' S ARGUMENT THAT THE ABOLITION OF THE TAX ADVANTAGES AT ISSUE IS THE ONLY WAY OF APPLYING THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY CORRECTLY , HAVING REGARD TO THE FACT THAT THE ABOVE-MENTIONED COUNCIL DIRECTIVE NO 75/439/EEC PROVIDES THAT UNDERTAKINGS WHICH COLLECT , DISPOSE OF OR REGENERATE WASTE OILS MUST HAVE A LICENCE AND MAY BE GRANTED INDEMNITIES BY THE AUTHORITIES OF THE MEMBER STATES FOR THE SERVICE RENDERED , PROVIDED THAT THESE INDEMNITIES ARE NOT SUCH AS TO CAUSE ' ' ANY SIGNIFICANT DISTORTION OF COMPETITION OR TO GIVE RISE TO ARTIFICIAL PATTERNS OF TRADE IN THE PRODUCTS ' ' .

18 THE PURPOSE OF THIS DIRECTIVE , PROMPTED BY ECOLOGICAL CONSIDERATIONS AND ALSO CONSIDERATIONS RELATING TO A SUPPLY POLICY FOR FUEL , IS NOT TO HARMONIZE THE MEMBER STATES ' RULES CONCERNING EXCISE DUTIES AND OTHER FORMS OF INDIRECT TAXATION MENTIONED IN ARTICLE 99 OF THE TREATY . CONSEQUENTLY THE DIRECTIVE IN NO WAY AFFECTS THE MEMBER STATES ' POWERS IN RELATION TO INTERNAL TAXATION PROVIDED THAT THE OBLIGATIONS CONTAINED IN ARTICLES 95 TO 98 OF THE TREATY HAVE BEEN COMPLIED WITH .

19 IT IS AN ESTABLISHED FACT , WHICH THE ITALIAN REPUBLIC DOES NOT DISPUTE , THAT IMPORTED AND HOME-PRODUCED REGENERATED OILS ARE NOT ONLY LIKE PRODUCTS BUT ARE EVEN IDENTICAL SO THAT THE RELATIONSHIP BETWEEN THEM IS UNDENIABLY COVERED BY THE FIRST PARAGRAPH OF ARTICLE 95 OF THE TREATY .

20 THE GOVERNMENT OF THE ITALIAN REPUBLIC , IN ORDER TO JUSTIFY THE RETENTION OF THE RULES DISQUALIFYING IMPORTED REGENERATED OILS FROM THE BENEFIT OF THE LOWER RATES OF TAX ALLOWED ON HOME-PRODUCED REGENERATED OILS , RELIES IN SUBSTANCE ON THE FOLLOWING THREE ARGUMENTS : ( 1 ) IT IS IMPOSSIBLE TO DISTINGUISH , BY MEANS OF THE EXPERIMENTAL TESTING METHODS , REGENERATED OILS FROM OILS OF PRIMARY DISTILLATION , AND THIS WOULD BE LIKELY TO LEAD TO TAX EVASION WHEN THE PRODUCTS IN QUESTION ARE IMPORTED ; ( 2 ) THE TAX EXEMPTION IS JUSTIFIED BY THE VERY HIGH PRODUCTION COST OF REGENERATED OILS WITH THE RESULT THAT WITHOUT THE TAX REDUCTION AT ISSUE THESE OILS COULD NOT COMPETE WITH OILS OF PRIMARY DISTILLATION ; ( 3 ) THE AIMS OF THE EXEMPTION CORRESPOND TO THE AIMS OF COUNCIL DIRECTIVE NO 75/439/EEC AND THE EXEMPTION IS IN ACTUAL FACT THE INDEMNITY WHICH ARTICLES 13 AND 14 OF THE DIRECTIVE AUTHORIZE THE MEMBER STATES TO GRANT .

21 THE FIRST ARGUMENT CANNOT BE ACCEPTED AS JUSTIFICATION OF THE ALLEGED DIFFERENTIAL TREATMENT . IT IS FOR THE IMPORTERS OF MINERAL OILS FROM THE OTHER MEMBER STATES WHO WISH TO QUALIFY FOR THE REDUCED RATE TO PRODUCE EVIDENCE THAT THE OILS IMPORTED BY THEM INTO ITALY ARE REGENERATED OILS AND THE ITALIAN ADMINISTRATION , WITHOUT BEING ABLE NONETHELESS TO SET A HIGHER STANDARD OF PROOF THAN IS NECESSARY , IS ENTITLED TO REQUIRE IN PARTICULAR THAT THE EVIDENCE BE ADDUCED IN A FORM THAT REMOVES THE RISK OF TAX EVASION , FOR EXAMPLE BY PRODUCING CERTIFICATES FROM THE AUTHORITIES OR OTHER APPROPRIATE BODIES OF THE EXPORTING MEMBER STATE PERMITTING THE REGENERATED OIL TO BE IDENTIFIED AS FROM THE PREMISES WHERE IT WAS REGENERATED . THE PRACTICE IN THE COMMUNITY , ESPECIALLY IN RELATION TO THE DISCONTINUANCE OF PUBLIC HEALTH INSPECTIONS AT THE FRONTIERS BETWEEN MEMBER STATES , OFFERS NUMEROUS EXAMPLES OF SUCH FORMS OF PERMISSIBLE INSPECTION .

22 THE FOREGOING CONSIDERATIONS ALSO ANSWER THE COMMISSION ' S ARGUMENT THAT THE ALLEGED INFRINGEMENT OF THE FIRST PARAGRAPH OF ARTICLE 95 CAN BE REMEDIED ONLY BY ABOLISHING THE REDUCED RATE ON A NATIONAL LEVEL . THE ITALIAN REPUBLIC HAS THE CHOICE BETWEEN ABOLISHING THE REDUCED RATE AND RETAINING IT PROVIDED ONLY THAT , IF IT OPTS FOR THE LATTER SOLUTION , IT MUST ALLOW REGENERATED OILS FROM THE OTHER MEMBER STATES , IN RESPECT OF WHICH EVIDENCE OF REGENERATION HAS BEEN PRODUCED , TO BENEFIT FROM THE SAME REDUCED RATE SO AS TO AVOID ANY FORM OF DISCRIMINATION BETWEEN THE IMPORTED PRODUCT AND THE SIMILAR DOMESTIC PRODUCT .

23 THE SECOND AND THIRD ARGUMENTS ARE RELATED AND MUST BE CONSIDERED TOGETHER . THE CONCLUSION TO BE DRAWN IN THE LIGHT OF THAT EXAMINATION IS THAT THEY MUST BE REJECTED .

25 ALTHOUGH IT IS TRUE THAT THE REDUCTIONS OF THE IMPOSTA DI FABBRICAZIONE ARE JUSTIFIED BY THE HIGH COST OF REGENERATION COMPARED WITH PRIMARY DISTILLATION , THE MORE FAVOURABLE TAX TREATMENT IS NOT IN ANY WAY JEOPARDIZED BY THE OBLIGATION TO APPLY IT WITH DUE REGARD TO ARTICLE 95 OF THE TREATY . THE TAX REDUCTIONS WHICH THUS ACCRUE TO UNDERTAKINGS ENGAGED IN THE REGENERATION OF MINERAL OIL ARE NOT IN FACT ENDANGERED BY THE OBLIGATION TO ALLOW REGENERATED OILS IMPORTED FROM THE OTHER MEMBER STATES TO BENEFIT FROM THEM .

25 ON THE OTHER HAND IT IS IMPOSSIBLE TO ACCEPT THE CONTENTION ON WHICH THE ITALIAN GOVERNMENT RELIES THAT THE SYSTEM INTRODUCED BY THE ITALIAN LAW OF 1962 AND IN PARTICULAR BY ARTICLE 12 THEREOF IS IN ACTUAL FACT ADVANCE APPLICATION OF COUNCIL DIRECTIVE NO 75/439/EEC OF 16 JUNE 1975 AND THAT THE REDUCTION OF THE IMPOSTA DI FABBRICAZIONE IS THE INDEMNITY WHICH , UNDER ARTICLE 13 OF THE DIRECTIVE , MEMBER STATES MAY GRANT TO UNDERTAKINGS ENGAGED IN THE RECOVERY , DISPOSAL OR REGENERATION OF USED OILS .

26 THERE IS NO NEED TO DECIDE THE QUESTION WHETHER THE ITALIAN REPUBLIC HAS APPLIED COUNCIL DIRECTIVE NO 75/439/EEC OR NOT AND IT IS SUFFICIENT TO POINT OUT THAT THIS DIRECTIVE DOES NOT AFFECT THE RIGHTS OF MEMBER STATES TO INTRODUCE A SYSTEM OF INTERNAL TAXATION INVOLVING REDUCED RATES OF TAX . ARTICLE 13 OF THE DIRECTIVE AUTHORIZES MEMBER STATES TO GRANT INDEMNITIES WITHOUT HOWEVER MAKING IT OBLIGATORY FOR THEM TO DO SO , BUT HAS MADE SURE THAT IF INDEMNITIES ARE GRANTED THEY DO NOT CONSTITUTE OBSTACLES TO THE FREE MOVEMENT OF GOODS . CONSEQUENTLY WHEN MEMBER STATES IMPLEMENT THE DIRECTIVE THEY ARE FREE EITHER TO GRANT THE INDEMNITIES DIRECTLY TO THE UNDER TAKINGS IN QUESTION OR TO ALLOW REGENERATED OILS TO BENEFIT FROM MORE FAVOURABLE TAX TREATMENT , OR EVEN TO COMBINE THE TWO SYSTEMS . NEVERTHELESS , IF IN THE EXERCISE OF THEIR DISCRETION IN THIS FIELD THEY OPT FOR A SYSTEM OF LOWER INTERNAL TAXATION , THEY MUST ACCEPT THE CONSEQUENCES OF THAT CHOICE AND ENSURE THAT THE SYSTEM CHOSEN COMPLIES WITH THE FUNDAMENTAL PRINCIPLE LAID DOWN IN ARTICLE 95 OF THE EEC TREATY THAT THERE MUST BE NO TAX DISCRIMINATION AGAINST IMPORTED PRODUCTS .

27 IT FOLLOWS FROM THE FOREGOING CONSIDERATIONS THAT BY MAINTAINING , PURSUANT TO LAW NO 1852 OF 31 DECEMBER 1962 MODIFYING THE TAX SYSTEM APPLICABLE TO PETROLEUM PRODUCTS , DIFFERENT RATES FOR THE IMPOSTA DI FABBRICAZIONE ( INTERNAL PRODUCTION TAX ) ON REGENERATED MINERAL OILS PRODUCED IN ITALY AND FOR THE SOVRAIMPOSTA DI CONFINE ( FRONTIER SURCHARGE ) ON REGENERATED OILS FROM OTHER MEMBER STATES , THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY .

Decision on costs

COSTS

28 UNDER ARTICLE 69 ( 3 ) OF THE RULES OF PROCEDURE THE COURT MAY ORDER THAT THE PARTIES BEAR THEIR OWN COSTS .

29 IN THE VIEW OF THE COURT , HAVING REGARD TO THE UNCERTAINTY DURING BOTH THE ADMINISTRATIVE PROCEEDINGS AND THE PROCEEDINGS BEFORE THE COURT AS TO THE REAL SCOPE OF THE COMPLAINTS MADE BY THE COMMISSION , THE PARTIES SHOULD BEAR THEIR OWN COSTS .

Operative part

ON THOSE GROUNDS ,

THE COURT

HEREBY :

1 . DECLARES THAT , BY MAINTAINING , PURSUANT TO LAW NO 1852 OF 31 DECEMBER 1962 MODIFYING THE TAX SYSTEM APPLICABLE TO PETROLEUM PRODUCTS , DIFFERENT RATES FOR THE ' ' IMPOSTA DI FABBRICAZIONE ' ' ( INTERNAL PRODUCTION TAX ) ON REGENERATED MINERAL OILS PRODUCED IN ITALY AND FOR THE ' ' SOVRAIMPOSTA DI CONFINE ' ' ( FRONTIER SURCHARGE ) ON REGENERATED OILS FROM OTHER MEMBER STATES , THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY ;

2 . ORDERS THE PARTIES TO BEAR THEIR OWN COSTS .