Opinion of Mr Advocate General Elmer delivered on 21 February 1995. - SA des Sucreries de Fontaine-le-Dun-Bolbec-Auffay (SAFBA) v Ministre du Budget. - Reference for a preliminary ruling: Cour administrative d'appel de Nantes - France. - Common organization of the market in the sugar sector - System for offsetting storage costs - Chargeable event for storage levy. - Case C-19/94.



European Court reports 1995 Page I-01051



Opinion of the Advocate-General

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Introduction

1. As part of the common organization of the market in the sugar sector, rules have been laid down providing inter alia for the Member States to reimburse storage costs for certain forms of sugar. That reimbursement system is financed by the Member States imposing a levy by unit of weight of sugar produced.

The question on which the Court is asked to rule in this case is whether the obligation to pay that levy arises on production of the sugar or whether it is conditional on the sugar being disposed of.

Facts of the case

2. The question arose in connection with proceedings between SAFBA (Société Anonyme des Sucreries de Fontaine le Dun-Bolbec-Auffay) and the French Ministry for the Budget concerning SAFBA' s tax position.

SAFBA has its seat in Fontaine le Dun (France) and its business is the manufacture of sugar from sugar beet. That manufacturing is seasonal, in that production takes place from September to December of the same year. The finished product is disposed of throughout the year, so that it is necessary to store certain quantities of sugar which cannot be disposed of immediately after production.

In its tax returns for the accounting years 1981 to 1983, SAFBA declared the levy on sugar produced in the accounting years in question as an expense. After the tax authorities had carried out an audit of SAFBA' s accounts for those years, SAFBA' s taxable income was raised, on the basis that the obligation to pay the levy first arose when the sugar was disposed of and that therefore it was only the levy on sugar disposed of in the accounting years in question that could be deducted as an expense in its tax returns.

3. The case is now pending before the Cour Administrative d' Appel, Nantes, to which SAFBA appealed after the Tribunal Administratif, Rouen, on 5 November 1991, dismissed SAFBA' s application for cancellation of the additional corporation tax demand for the years in question. In that connection the Cour Administrative d' Appel, Nantes, referred the following question to the Court pursuant to Article 177, with reference to the legislation cited below:

"What is the chargeable event for the levy provided for in the provisions cited above?"

The relevant Community law provisions

4. Council Regulation (EEC) No 3330/74 of 19 December 1974 on the common organization of the market in sugar, (1) as amended by Council Regulation (EEC) No 1396/78 of 20 June 1978, (2) which was in force until 30 June 1981, stated in the first and third subparagraphs of Article 8(1):

"1. Subject to ... the storage costs in respect of

° white sugar

...

manufactured from beet or cane harvested in the Community shall be reimbursed at a flat rate by the Member States.

...

The Member States shall, according to the circumstances, impose a levy:

(a) on each sugar manufacturer, as appropriate:

by unit of weight of sugar produced,

...".

With effect from 1 July 1981 the new Council Regulation (EEC) No 1785/81 of 30 June 1981 on the common organization of the market in sugar came into force. (3) The first and third subparagraphs of Article 8(2) of that regulation correspond essentially to the abovementioned provisions of the 1974 regulation, as amended in 1978.

5. According to Article 8(3)(a) of the 1974 regulation, as amended in 1978, and according to Article 8(4)(a) of the 1981 regulation, the Council is to adopt "the general rules for the implementation of this Article". Such rules are laid down in Council Regulation (EEC) No 1358/77 of 20 June 1977 laying down general rules for offsetting storage costs for sugar and repealing Regulation (EEC) No 750/68 (4). The tenth recital in the preamble to that regulation states:

"... effective control of manufacturing can best be exercised when the sugar is being marketed; ... therefore, the levy should be collected from the manufacturer at the time of marketing;"

Furthermore, in Article 6(1) and (4) of Regulation No 1358/77 it is laid down:

"1. The levy to be charged in the case referred to under (a) of the third subparagraph of Article 8(1) of Regulation (EEC) No 3330/74 shall be so fixed that, for any sugar marketing year, the estimated total of the levies shall be equal to the estimated total of the reimbursement referred to in the first subparagraph of Article 8(1) thereof.

...

4. The Member State shall collect the levy from each sugar manufacturer in respect of the white ... sugar ... , referred to under (a) of the third subparagraph of Article 8(1) of Regulation (EEC) No 3330/74, produced and marketed within his maximum quota ... "

6. Commission Regulation (EEC) No 1998/78 of 18 August 1978 laying down detailed rules for the offsetting of storage costs for sugar, (5) as amended by Commission Regulation (EEC) No 2671/81, (6) provides, in the first subparagraph of Article 12(1):

"The levy shall be incurred in respect of products as referred to in (a) of the third subparagraph of Article 8(1) of Regulation (EEC) No 3330/74 at the moment of disposal."

The second subparagraph of Article 12(1) of the implementing regulation gives a detailed definition of what should be regarded as a disposal in relation to the first subparagraph.

Procedure before the Court

7. SAFBA has claimed that it follows from (a) of the third subparagraph of Article 8(1) of Regulation No 3330/74, as amended by Regulation No 1396/78, and the corresponding third subparagraph of Article 8(2) of Regulation No 1785/81 that the event giving rise to the obligation to pay the levy is the production of sugar.

The French Government and the Commission have argued that those provisions merely lay down which persons are liable to pay the levy and the basis on which the levy is calculated. According to Article 6(4) of Council Regulation No 1358/77, the obligation to pay the levy arises, however, on the disposal of the sugar produced.

The Commission has further pointed out that even if the disposal of sugar should be regarded as the event giving rise to the obligation to pay the levy under the common organization of the market in sugar, that does not preclude national tax rules which allow sugar manufacturers to deduct the levy at an earlier point in their tax returns.

Opinion

8. A direct examination of the abovementioned provisions of Community law must support the Commission and the French Republic in their view that the levy first arises when the sugar produced is disposed of.

The third subparagraph of Article 8(1) of Council Regulation No 3330/74, as amended by Council Regulation No 1396/78, lays down the group of persons liable to pay the levy, namely sugar manufacturers, and the basis for the levy, that is, by unit of weight of sugar produced. The same is true of the third subparagraph of Article 8(2) of Council Regulation No 1785/81 of 30 June 1981.

It is expressly stated in Article 8(3)(a) of the 1974 regulation as amended in 1978 and Article 8(4)(a) of the 1981 regulation that the levy is not thereby exhaustively regulated, since the Council is to adopt general rules in that connection.

Those general rules were adopted in Regulation No 1358/77 of 20 June 1977, Article 6(4) of which, in conjunction with the tenth recital in its preamble, can be understood only as meaning that the levy is payable by the manufacturer on disposal, which is thus the event giving rise to the obligation to pay the levy, and therefore the point at which the conditions enabling the Member State in question to claim the levy from the person liable are satisfied. (7)

9. In accordance therewith the Court stated in its judgment in Case 121/83 Zuckerfabrik Franken GmbH [1984] ECR 2039 that:

"The third subparagraph of Article 8(1) of Regulation No 3330/74 of the Council merely lists the persons liable to the levy, namely sugar manufacturers, importers and refiners and, in addition, it establishes the basic unit for calculating the amount of the levy, the weight of the products in question. As regards the implementing regulation adopted by the Council, No 1358/77, its purpose is to make it clear that the levy may not be collected from sugar manufacturers until after the sugar or syrups produced have been marketed. None of those regulations contains a precise definition of the concept of disposal as the operative factor which gives rise to the obligation to pay the levy.

In those circumstances the Commission was justified in defining the said concept in the contested provision of its legislation [Article 12 of Regulation No 1998/78 of 18 August 1978] containing detailed rules for the implementation of the system for offsetting storage costs" (paragraphs 14 and 15).

10. For it to be the disposal of sugar which serves as the point at which the obligation to pay the levy arises also makes the best sense in the light of cash flow in relation to sugar production and marketing The production of sugar is not subject to other expenses, whereas the sugar manufacturers' expenses in storing sugar are reduced by reimbursement of the storage costs. Those expenses are financed by a levy which is claimed from the sugar manufacturer when the sugar is disposed of, typically by sale to a purchaser. Together there is a reduction in costs for the producers which is paid for by the consumers of sugar through the general price mechanism.

11. The case before the court which made the reference concerns the interpretation of the said Community law provisions solely to the extent that the national French tax rules are assumed to refer thereto in connection with determination of the chargeable event for the levy. As the Commission has pointed out, those Community provisions do not preclude national tax rules which allow sugar manufacturers in their declarations of income and property to deduct the levy at another and possibly earlier point in time.

Conclusion

In the light of the foregoing considerations, I would propose that the Court reply to the questions referred to it as follows:

Article 6(4) of Council (EEC) No 1358/77 of 20 June 1977 should be understood as meaning that it is disposal which is the chargeable event giving rise to the obligation to pay the levy by unit of weight of sugar produced under the third subparagraph of Article 8(1) of Council Regulation (EEC) No 3330/74 of 19 December 1974, as amended by Council Regulation (EEC) No 1396/78 of 20 June 1978, and the third subparagraph of Article 8(2) of Council Regulation (EEC) No 1785/81 of 30 June 1981.

(*) Original language: Danish.

(1) ° OJ 1974 L 359, p. 1.

(2) ° OJ 1978 L 170, p. 1.

(3) ° OJ 1981 L 177, p. 4.

(4) ° OJ 1977 L 156, p. 4.

(5) ° OJ 1978 L 231, p. 5.

(6) ° OJ 1981 L 262, p. 17.

(7) ° Cf. Article 10(1) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes ° Common system of value-added tax: uniform basis of assessment, OJ 1977 L 145, p. 1, as subsequently amended.