Judgment of the Court of 26 April 1983. - Hauptzollamt Flensburg v Firma Hansen GmbH & Co. - Reference for a preliminary ruling: Bundesfinanzhof - Germany. - Tax arrangements applicable to spirits - Charging of reduced taxes. - Case 38/82.



European Court reports 1983 Page 01271



Summary

Parties

Subject of the case

Grounds

Decision on costs

Operative part



Keywords

1 . TAX PROVISIONS - INTERNAL TAXATION - GRANT OF TAX ADVANTAGES IN FAVOUR OF DOMESTIC PRODUCTS - PERMISSIBILITY - CONDITIONS - EXTENSION TO PRODUCTS IMPORTED FROM OTHER MEMBER STATES

( EEC TREATY , ART . 95 )

2 . TAX PROVISIONS - INTERNAL TAXATION - LAWFUL GRANT OF TAX ADVANTAGES FOR DOMESTIC PRODUCTS - EXTENSION TO PRODUCTS IMPORTED FROM OTHER MEMBER STATES - CONDITIONS

( EEC TREATY , ART . 95 )

Summary

1 . IN THE PRESENT STATE OF COMMUNITY LAW MEMBER STATES ARE NOT PROHIBITED FROM GRANTING TAX ADVANTAGES IN THE FORM OF EXEMPTION FROM OR REDUCTION IN DUTY IN RESPECT OF CERTAIN KINDS OF SPIRITS OR CERTAIN CATEGORIES OF PRODUCERS . HOWEVER , ARTICLE 95 OF THE TREATY REQUIRES THAT SUCH PREFERENTIAL ARRANGEMENTS BE EXTENDED WITHOUT DISCRIMINATION TO IMPORTED PRODUCTS MEETING THE SAME CONDITIONS AS THE DOMESTIC PRODUCTS FOR WHICH THE PREFERENTIAL TREATMENT IS GRANTED AND MUST NOT CONSTITUTE INDIRECT PROTECTION FOR DOMESTIC PRODUCTS .

2 . ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS MEANING THAT , IN ORDER TO QUALIFY FOR A TAX ADVANTAGE AVAILABLE TO DOMESTIC PRODUCTS WHICH IS PERMISSIBLE UNDER COMMUNITY LAW BECAUSE IT IS NOT DISCRIMINATORY INASMUCH AS THE NATIONAL PROVISIONS DO NOT PRESCRIBE FOR ITS GRANT A CONDITION WHICH ONLY DOMESTIC PRODUCTION IS CAPABLE OF FULFILLING , SPIRITS IMPORTED FROM OTHER MEMBER STATES MUST SATISFY ALL THE CONDITIONS OF THE PROVISIONS ESTABLISHING THE TAX ADVANTAGE IN QUESTION .

Parties

IN CASE 38/82

REFERENCE TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY BY THE VIITH SENATE OF THE BUNDESFINANZHOF ( FEDERAL FINANCE COURT ) FOR A PRELIMINARY RULING IN THE ACTION PENDING BEFORE THAT COURT BETWEEN

HAUPTZOLLAMT FLENSBURG

AND

FIRMA HANSEN GMBH & CO ., FLENSBURG ,

Subject of the case

ON THE INTERPRETATION OF ARTICLE 95 OF THE EEC TREATY ,

Grounds

1 BY ORDER DATED 17 DECEMBER 1981 WHICH WAS RECEIVED AT THE COURT ON 27 JANUARY 1982 THE BUNDESFINANZHOF ( FEDERAL FINANCE COURT ) REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY TWO PRELIMINARY QUESTIONS ON THE INTERPRETATION OF ARTICLE 95 OF THE TREATY IN ORDER TO PERMIT IT TO DETERMINE WHETHER THE GESETZ UBER DAS BRANNTWEINMONOPOL ( THE LAW ON THE MONOPOLY IN SPIRITS ) IN THE VERSION EXISTING PRIOR TO 1978 , WAS COMPATIBLE WITH COMMUNITY LAW .

2 THAT ORDER WAS MADE IN THE COURSE OF AN ACTION BEFORE THE BUNDESFINANZHOF BETWEEN THE HAUPTZOLLAMT ( PRINCIPAL CUSTOMS OFFICE ) FLENSBURG AND HANSEN GMBH & CO . ( HEREINAFTER REFERRED TO AS ' ' HANSEN ' ' ). THE ACTION HAS ALREADY LED TO THE REFERENCE TO THE COURT OF A FIRST SERIES OF PRELIMINARY QUESTIONS SUBMITTED BY THE FINANZGERICHT ( FINANCE COURT ) HAMBURG ON THE INTERPRETATION OF ARTICLES 227 AND 95 OF THE TREATY , TO WHICH THE COURT REPLIED IN A JUDGMENT DATED 10 OCTOBER 1978 ( HANSEN & BALLE V HAUPTZOLLAMT FLENSBURG , CASE 148/77 ( 1978 ) ECR 1787 ).

3 IT SHOULD BE RECALLED THAT THE MAIN ACTION CONCERNS THE RATE OF THE MONOPOLAUSGLEICH ( MONOPOLY EQUALIZATION DUTY ) CHARGED ON LIGHT RUM COMING FROM THE FRENCH OVERSEAS DEPARTMENTS AND FROM SURINAME . IN 1974 HANSEN WITHDREW FROM ITS WAREHOUSE A QUANTITY OF LIGHT RUM IN ORDER TO MARKET IT IN THE FEDERAL REPUBLIC OF GERMANY . THE REVENUE AUTHORITIES IMPOSED TAX ON THE RUM AT THE ORDINARY RATE WHEREAS HANSEN CLAIMED THAT UNDER ARTICLE 95 OF THE EEC TREATY THE MONOPOLY EQUALIZATION DUTY IN RESPECT OF IMPORTED SPIRITS MUST NOT EXCEED THE LOWEST RATE OF TAX IMPOSED ON GERMAN PRODUCTION OF SPIRITS DISTILLED FROM FRUIT , AND PROCEEDINGS WERE SUBSEQUENTLY BROUGHT BEFORE THE FINANZGERICHT HAMBURG .

4 IN REPLY TO THE QUESTIONS SUBMITTED BY THAT COURT THE COURT OF JUSTICE RULED IN PARTICULAR THAT :

WHERE NATIONAL TAX LEGISLATION FAVOURS CERTAIN CLASSES OF PRODUCERS OR THE PRODUCTION OF CERTAIN TYPES OF SPIRITS BY MEANS OF TAX EXEMPTIONS OR THE GRANT OF REDUCED RATES OF TAXATION , EVEN IF SUCH ADVANTAGES BENEFIT ONLY A SMALL PROPORTION OF DOMESTIC PRODUCTION OR ARE GRANTED FOR SPECIAL SOCIAL REASONS , THOSE ADVANTAGES MUST BE EXTENDED TO IMPORTED COMMUNITY SPIRITS WHICH FULFIL THE SAME CONDITIONS , TAKING INTO ACCOUNT THE CRITERIA WHICH UNDERLIE THE FIRST AND SECOND PARAGRAPHS OF ARTICLE 95 OF THE EEC TREATY .

5 FOLLOWING THAT JUDGMENT OF THE COURT THE FINANZGERICHT HAMBURG DECIDED THAT THE SPIRITS IN QUESTION WERE LIABLE TO TAX AT THE REDUCED RATE .

6 THE HAUPTZOLLAMT FLENSBURG APPEALED AGAINST THE JUDGMENT , ARGUING THAT THE REDUCED RATE OF TAX CONSTITUTED A TAX ADVANTAGE FOR WHICH ONLY SPECIFIED CATEGORIES OF DOMESTIC PRODUCERS WHO FULFILLED CERTAIN CONDITIONS QUALIFIED AND THAT CONSEQUENTLY ONLY IMPORTED SPIRITS FULFILLING THE SAME CONDITIONS MIGHT QUALIFY FOR THAT RATE .

7 ACCORDING TO THE BUNDESFINANZHOF THE CONDITIONS PRESCRIBED BY THE GERMAN LAW ON THE MONOPOLY IN SPIRITS WERE , APART FROM TECHNICAL PROCEDURES PECULIAR TO GERMAN LAW WITH REGARD TO THE TAXATION OF SPIRITS , AS FOLLOWS : THE SPIRITS IN QUESTION MUST BE DISTILLED FROM FRUIT IN A DISTILLERY MANAGED IN THE FORM OF A COOPERATIVE FRUIT FARM FROM RAW MATERIALS PRODUCED BY THE MEMBERS OF THE COOPERATIVE THEMSELVES AND THE PRODUCTION OF SUCH A DISTILLERY MUST NOT EXCEED 300 LITRES OF WINE SPIRIT DISTILLED FROM THE PRODUCTS OF A SINGLE MEMBER OF THE COOPERATIVE IN THE COURSE OF ONE FINANCIAL YEAR .

8 THE BUNDESFINANZHOF CONSIDERS THAT CERTAIN DOMESTIC PRODUCTS MAY BE PROMOTED BY THE GRANT OF A REDUCED RATE OF TAXATION IN THEIR FAVOUR PROVIDED THAT LEGITIMATE ECONOMIC OR SOCIAL PURPOSES ARE SERVED THEREBY AND THAT THE REDUCED RATE IS EXTENDED TO IMPORTED PRODUCTS FULFILLING THE SAME CONDITIONS . WITH REGARD TO THOSE CONDITIONS THE COURT STATED IN ITS JUDGMENT OF 30 OCTOBER 1980 ( SCHNEIDER-IMPORT , CASE 26/80 ( 1980 ) ECR 3469 ) THAT IN ORDER TO DECIDE WHETHER IMPORTED PRODUCTS MAY BENEFIT FROM ADVANTAGES GRANTED FOR THE DOMESTIC PRODUCT IT IS NECESSARY TO APPLY TO IMPORTED PRODUCTS CONDITIONS CONSTITUTING A GENUINE EQUIVALENT TO THE ARRANGEMENTS APPLICABLE TO THE DOMESTIC PRODUCT , BUT IT DID NOT GIVE AN UNEQUIVOCAL REPLY REGARDING THE QUESTION WHICH SPECIFIC REQUIREMENTS MUST BE LAID DOWN IN ORDER THAT IMPORTED PRODUCTS MAY QUALIFY FOR THE TAX ADVANTAGE IN QUESTION .

9 FOR THAT REASON THE BUNDESFINANZHOF SUBMITTED THE FOLLOWING QUESTIONS TO THE COURT OF JUSTICE :

' ' 1 . HAS THE IMPORTER OF SPIRITS DISTILLED FROM FRUIT OR SIMILAR SPIRITS FROM OTHER MEMBER STATES AN UNRESTRICTED LEGAL RIGHT UNDER THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY TO A DOMESTIC TAX ADVANTAGE IN RESPECT OF SPIRITS THE GRANT OF WHICH DEPENDS ON THE SPIRITS ' BEING PRODUCED IN A DISTILLERY OPERATED IN COMMON BY SEVERAL PERSONS TO PROCESS AGRICULTURAL RAW MATERIALS PRODUCED BY THEMSELVES AND ANNUALLY PRODUCING NO MORE THAN 300 LITRES OF WINE SPIRIT FROM THE RAW MATERIALS OF ANY ONE MEMBER? OR DOES THE RIGHT TO THAT ADVANTAGE DEPEND UPON THE FACT THAT THE IMPORTED SPIRITS ORIGINATE IN A DISTILLERY SATISFYING IN WHOLE OR IN PART THE CONDITIONS LAID DOWN IN THE PROVISIONS GOVERNING THE GRANT OF THE ADVANTAGE? IF PARTIAL FULFILMENT IS SUFFICIENT , WITH WHICH OF THOSE CONDITIONS MAY COMPLIANCE BE MADE A REQUIREMENT FOR EXTENDING THE ADVANTAGE TO SIMILAR SPIRITS IMPORTED FROM OTHER MEMBER STATES IF THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY IS NOT TO BE INFRINGED? MAY THE EXTENSION OF THE ADVANTAGE BE MADE SUBJECT TO THE PRODUCTION OF THE DISTILLERY IN WHICH THE IMPORTED SPIRITS ORIGINATE BEING NO GREATER THAN THE MAXIMUM PRODUCTION OF THE DOMESTIC COOPERATIVE DISTILLERY DURING A COMPARABLE PERIOD?

2.IN A CASE WHERE LIGHT RUM IMPORTED FROM OTHER MEMBER STATES IS SIMILAR BOTH TO DOMESTIC SPIRITS DISTILLED FROM FRUIT AND TO DOMESTIC BLENDED RUM OR DOMESTIC SPIRITS DISTILLED FROM GRAIN AND THE NATIONAL LAW PROVIDES , BY WAY OF LEGITIMATE DIFFERENTIATION , FOR DIFFERENT DUTIES FOR THE THREE KINDS OF PRODUCTS , DOES ARTICLE 95 OF THE EEC TREATY REQUIRE THAT THE MOST FAVOURABLE OF THE THREE RELEVANT DUTIES ON SPIRITS SHOULD BE APPLIED TO THE IMPORTED RUM? OR IS THE DETERMINANT CRITERION WITH WHICH OF THE THREE KINDS OF PRODUCTS THE IMPORTED RUM HAS MOST CHARACTERISTICS IN COMMON? IS COMPARISON WITH THE DUTY ON BLENDED RUM EXCLUDED BECAUSE THE LATTER IS PRODUCED BY THE USE OF AN IMPORTED PRODUCT ( RUM)?

' '

10 THESE QUESTIONS ARE IN FACT INTENDED TO ESTABLISH WHETHER ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS MEANING THAT SPIRITS DISTILLED FROM FRUIT OR SIMILAR SPIRITS IMPORTED FROM OTHER MEMBER STATES MUST AUTOMATICALLY QUALIFY FOR THE MOST FAVOURABLE TAX TREATMENT ACCORDED TO CERTAIN SPIRITS OF DOMESTIC ORIGIN OR WHETHER SUCH SPIRITS MUST SATISFY ONE OR MORE , OR ALL , OF THE PRESCRIBED CONDITIONS IN ORDER TO QUALIFY FOR THAT ADVANTAGE .

11 WITH REGARD TO THE IMPORTED RUM IT SHOULD BE MENTIONED THAT THAT KIND OF SPIRITS HAS BEEN CHARGED THE ORDINARY RATE OF TAX AND THAT THE ONLY PROBLEM RAISED BY THE NATIONAL COURT IS THE QUESTION WHETHER SUCH RUM MUST QUALIFY FOR THE FAVOURABLE ARRANGEMENTS MADE ONLY FOR A LIMITED PROPORTION OF DOMESTIC PRODUCTION , NAMELY SPIRITS DISTILLED FROM FRUIT .

12 IT SHOULD BE RECALLED THAT IN THE PRESENT STATE OF COMMUNITY LAW MEMBER STATES ARE NOT PROHIBITED FROM GRANTING TAX ADVANTAGES IN THE FORM OF EXEMPTION FROM OR REDUCTION IN DUTY IN RESPECT OF CERTAIN KINDS OF SPIRITS OR CERTAIN CATEGORIES OF PRODUCERS . HOWEVER , ARTICLE 95 REQUIRES THAT SUCH PREFERENTIAL ARRANGEMENTS BE EXTENDED WITHOUT DISCRIMINATION TO IMPORTED PRODUCTS MEETING THE SAME CONDITIONS AS THE DOMESTIC PRODUCTS IN RESPECT OF WHICH THE PREFERENTIAL TREATMENT IS GRANTED AND MUST NOT CONSTITUTE INDIRECT PROTECTION FOR DOMESTIC PRODUCTS .

13 AS FAR AS THE QUANTITATIVE CONDITIONS ARE CONCERNED , IN THIS CASE THE LIMITATION TO 300 LITRES , THE PROBLEM HAS BEEN RESOLVED BY THE JUDGMENT OF 7 MAY 1981 ( RUMHAUS HANSEN , CASE 153/80 ( 1981 ) ECR 1165 ) IN WHICH THE COURT STATED THAT : ' ' IF THE TAX ADVANTAGE FOR DOMESTIC PRODUCTS IS GRANTED IN TERMS OF THE QUANTITIES PRODUCED IN EACH PRODUCTION UNDERTAKING THE SAME ADVANTAGE MUST BE GRANTED IN FAVOUR OF PRODUCTS FROM PRODUCTION UNITS SITUATED IN OTHER MEMBER STATES WHICH FULFIL THE SAME QUANTITATIVE CRITERIA . ' '

14 CONSEQUENTLY , IMPORTED SPIRITS CANNOT QUALIFY FOR THE REDUCED RATE OF TAXATION DESCRIBED ABOVE UNLESS THEY FULFIL THE CONDITIONS CONCERNING THE LIMITATION OR PRODUCTION FIXED IN THIS CONNECTION BY NATIONAL LEGISLATION .

15 WITH REGARD TO THE CONDITION THAT THE SPIRITS SHOULD BE DISTILLED BY COOPERATIVES CONSISTING , AS THE BUNDESFINANZHOF HAS STATED , OF A GROUP OF SMALL-SCALE FARMERS THE REQUIREMENT THAT THE CONDITION SHOULD BE MET BY PRODUCTS IMPORTED FROM OTHER MEMBER STATES IS NOT CONTRARY TO ARTICLE 95 . SUCH A REQUIREMENT DOES NOT IN FACT CONSTITUTE A SPECIFICALLY NATIONAL CONDITION BUT MAY BE MET BY UNDERTAKINGS IN ALL MEMBER STATES PROVIDED THAT IT IS UNDERSTOOD AS REFERRING TO GROUPS OF THE SAME ECONOMIC AND SOCIAL GROUPS AS THOSE ENVISAGED BY THE NATIONAL LAW .

16 FOR THE SAME REASONS IT APPEARS THAT THE REQUIREMENT THAT EACH MEMBER OF THE COOPERATIVE SHOULD BE ENTITLED TO PRODUCE SPIRITS ONLY FROM HIS OWN RAW MATERIALS ALSO CONSTITUTES A CONDITION WHICH MAY BE REQUIRED IN ORDER THAT SPIRITS IMPORTED FROM OTHER MEMBER STATES MAY QUALIFY FOR THE TAX ADVANTAGE IN QUESTION .

17 WITH REGARD TO THE REQUIREMENT THAT THE SPIRITS TAXED AT THE LOWER RATE MUST BE PRODUCED FROM THE RAW MATERIALS SPECIFIED BY THE NATIONAL PROVISIONS , THAT IS TO SAY , FRUIT , BERRIES , WINE , WINE LEES , MUST , ROOTS OR THEIR RESIDUES , IT SHOULD BE OBSERVED THAT SUCH RAW MATERIALS ARE ALSO PRODUCED IN OTHER MEMBER STATES . CONSEQUENTLY THE NATIONAL PROVISIONS DO NOT PRESCRIBE A CONDITION WHICH ONLY DOMESTIC PRODUCTS ARE CAPABLE OF FULFILLING AND THE LEGISLATION IN QUESTION IS NOT DISCRIMINATORY .

18 THE REPLY TO THE QUESTIONS SUBMITTED BY THE BUNDESFINANZHOF SHOULD THEREFORE BE THAT ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS MEANING THAT , IN THE CASE OF A NATIONAL TAX ADVANTAGE WHICH , SINCE IT IS NOT DISCRIMINATORY , IS PERMISSIBLE UNDER COMMUNITY LAW , SPIRITS IMPORTED FROM OTHER MEMBER STATES MUST , IN ORDER TO QUALIFY FOR THAT ADVANTAGE , SATISFY ALL THE CONDITIONS OF THE PROVISION BY WHICH IT IS ESTABLISHED .

Decision on costs

COSTS

19 THE COSTS INCURRED BY THE GOVERNMENT OF THE FEDERAL REPUBLIC OF GERMANY AND BY THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE . AS THESE 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 BUNDESFINANZHOF BY ORDER OF 17 DECEMBER 1981 , HEREBY RULES :

ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS MEASNING THAT , IN THE CASE OF A NATIONAL TAX ADVANTAGE WHICH , SINCE IT IS NOT DISCRIMINATORY , IS PERMISSIBLE UNDER COMMUNITY LAW , SPIRITS IMPORTED FROM OTHER MEMBER STATES MUST , IN ORDER TO QUALIFY FOR THAT ADVANTAGE , SATISFY ALL THE CONDITIONS OF THE PROVISION BY WHICH IT IS ESTABLISHED .