Judgment of the Court of 20 February 1973. - Fonderie Officine Riunite "F.O.R." v Vereinigte Kammgarn-Spinnereien "V.K.S.". - Reference for a preliminary ruling: Tribunale civile e penale di Biella - Italy. - Case 54-72.



European Court reports 1973 Page 00193

Greek special edition Page 00429

Portuguese special edition Page 00095

Spanish special edition Page 00083



Summary

Parties

Subject of the case

Grounds

Decision on costs

Operative part



Keywords

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1 . PRELIMINARY QUESTIONS - JURISDICTION OF THE COURT - LIMITS

( EEC TREATY, ART . 177 )

2 . TAXATION PROVISIONS - INTERNAL TAXATION BY ONE MEMBER STATE ON PRODUCTS COMING FROM OTHER MEMBER STATES - PRINCIPLE OF NON-DISCRIMINATION - APPLICATION TO THE BASIS OF ASSESSMENT OF TAXATION - DOUBLE TAXATION - PROHIBITION

( EEC TREATY, ART . 95 )

Summary

1 . THE COURT DOES NOT HAVE JURISDICTION UNDER ARTICLE 177 TO SETTLE A DISPUTE RELATING TO THE INTERPRETATION OF A NATIONAL LAW .

2 . THE PROHIBITION OF DISCRIMINATION AS LAID DOWN BY ARTICLE 95 RELATES NOT ONLY TO THE RATE BUT ALSO TO THE BASIS OF TAXATION . ARTICLE 95 OF THE TREATY MUST THEREFORE BE INTERPRETED AS PROHIBITING AS FISCAL SYSTEM UNDER WHICH IMPORTED GOODS ARE CHARGED TWICE WITH TURNOVER TAX, THUS BEING TREATED AS THE OBJECT OF TWO DISTINCT TRANSACTIONS DURING THE COURSE OF ONE OPERATION WHICH, FOR THE SAME NATIONAL PRODUCT AT THE SAME MARKETING STAGE, WOULD CONSTITUTE ONLY ONE CHARGEABLE OPERATION .

Parties

IN CASE 54/72

REFERENCE TO THE COURT OF JUSTICE, UNDER ARTICLE 177 OF THE EEC TREATY, BY THE TRIBUNALE AT BIELLA FOR A PRELIMINARY RULING IN THE ACTION PENDING BEFORE THAT COURT BETWEEN

FONDERIE OFFICINE RIUNITE, FOR, BIELLA, PLAINTIFF,

AND

VEREINIGTE KAMMGARN-SPINNEREIEN VKS, DELMENHORST, DEFENDANT,

Subject of the case

ON THE INTERPRETATION OF ARTICLES 30, 31 AND 95 OF THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY AND ARTICLES 2, 5, 7, 8, AND 10 OF COUNCIL DIRECTIVE 67/228/EEC OF 11 APRIL 1967 ( OJ NO 71, 14 . 4 . 1967, P . 1303/67 ),

Grounds

1 BY ORDER DATED 27 JULY 1972, RECEIVED AT THE COURT REGISTRY ON 31 JULY 1972, THE PRESIDENT OF THE TRIBUNALE AT BIELLA, REFERRED, UNDER ARTICLE 177 OF THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY, THREE QUESTIONS RELATING TO THE INTERPRETATION OF ARTICLES 30, 31, AND 95 OF THE TREATY AND OF ARTICLES 2, 5, 7, 8 AND 10 OF COUNCIL DIRECTIVE 228/67 OF 11 APRIL 1967 ON THE HARMONIZATION OF LEGISLATION OF MEMBER STATES CONCERNING TURNOVER TAXES .

AS TO THE FIRST QUESTION

2 BY THE FIRST QUESTION, IT IS ASKED WHETHER ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS PROHIBITING THE IMPOSITION OF TURNOVER TAX ON THE VALUE OF AN IMPORTED INDUSTRIAL INSTALLATION, CONSIDERED AFTER ERECTION TO BE A SEPARATE ENTITY, EVEN THOUGH ON IMPORTATION THE SEPARATE ITEMS OF MACHINERY HAVE ALREADY BEEN CHARGED WITH AN EQUALIZATION TAX, ALSO ENCOMPASSING THE TURNOVER TAX WHICH THE TAXATION AUTHORITIES INTEND TO IMPOSE ON THE VALUE OF THAT SAME INSTALLATION WHEN ERECTED .

3 IT TRANSPIRES FROM THE FILE FORWARDED BY THE NATIONAL COURT THAT THE PLAINTIFF IN THE MAIN ACTION SOLD FREE-AT-FACTORY TO A GERMAN BUYER UNERECTED MACHINERY FOR USE IN THE TEXTILE INDUSTRY, ON WHICH THE BUYER AT THE TIME OF IMPORTATION PAID TURNOVER EQUALIZATION TAX AT THE RATE OF 6 PER CENT .

THE PLAINTIFF IN THE MAIN ACTION THEN PROCEEDED TO INSTALL THE MACHINERY AND PUT IT INTO SERVICE, WHICH OPERATION WAS CHARGED, UNDER THE HEADING OF SUPPLY OF GOODS AND PROVISIONS OF SERVICES ( WERKLIEFERUNG ), WITH TURNOVER TAX AT THE RATE OF 4 PER CENT, CALCULATED ON THE ADDED VALUE OF THE SUPPLY OF SERVICES AND THE INSTALLED MACHINERY .

4 AS THE BENEFITS TAXED HAD ARISEN DURING THE PERIOD FROM 1962 TO 1967, IT FOLLOWS THAT THE QUESTIONS OF INTERPRETATION RAISED WERE DONE SO IN RELATION TO THE TURNOVER TAX, AS PROVIDED FOR BY THE GERMAN LAW OF 1 SEPTEMBER 1951 .

5 THE FIRST TWO PARAGRAPHS OF ARTICLE 95 PROHIBIT ANY MEMBER STATE FROM IMPOSING ON THE PRODUCTS OF OTHER MEMBER STATES ANY INTERNAL TAXATION IN EXCESS OF THAT IMPOSED ON SIMILAR DOMESTIC PRODUCTS OR OF SUCH A NATURE AS TO AFFORD INDIRECT PROTECTION TO OTHER DOMESTIC PRODUCTS .

SUCH A SYSTEM IS INTENDED TO ENSURE EQUALITY OF TREATMENT IN INTERNAL TAXATION .

THE PROHIBITION OF DISCRIMINATION LAID DOWN BY ARTICLE 95, THEREFORE, CONCERNS NOT ONLY THE RATE BUT ALSO THE BASIS OF TAXATION .

6 ALTHOUGH IT IS IN THE NATURE OF THE CUMULATIVE MULTI-STAGE TAX TO CHARGE SUCCESSIVELY AND WITHOUT ANY DEDUCTION THE DIFFERENT TRANSACTIONS TO WHICH A PRODUCT IS SUBJECT, ARTICLE 95 PROHIBITS THE BREAKING DOWN INTO TWO DISTINCT AND, THEREFORE SEPARATELY TAXABLE, OPERATIONS CONCERNING IMPORTED GOODS AN OPERATION WHICH, IN REGARD TO A DOMESTIC PRODUCT, WOULD CONSTITUTE A SINGLE TRANSACTION .

THIS WOULD BE THE CASE IF, HAVING AT THE FRONTIER BORNE TURNOVER TAX BY REASON OF DELIVERY, THE FOREIGN PRODUCT, WHEN INSTALLED, WAS CHARGED NOT ONLY ON THE VALUE OF THE SUPPLY OF THE SERVICES INVOLVING INSTALLATION, BUT AGAIN ON THE VALUE OF THE GOODS SUPPLIED, WHILE THE DOMESTIC PRODUCT DELIVERED AND INSTALLED UNDER THE SAME CONDITIONS WOULD ONLY BE CHARGED WITH ONE TAX, SUPPLY AND INSTALLATION BEING DEEMED TO BE A SINGLE OPERATION .

7 THE PROHIBITION OF DISCRIMINATION IS CONCERNED, THEREFORE, WITH A FISCAL SYSTEM UNDER WHICH, AS IS PRESUMED BY THE ORDER REFERRING THE MATTER, AN IMPORTED PRODUCT IS CHARGED TWICE WITH TURNOVER TAX, ON THE FOOTING THAT IT HAS BEEN THE SUBJECT OF TWO DISTINCT TRANSACTIONS, ON THE BASIS OF AN OPERATION WHICH, IN RESPECT OF A SIMILAR DOMESTIC PRODUCT AT THE SAME MARKETING STAGE, WOULD CONSTITUTE ONLY ONE CHARGEABLE OPERATION .

8 HOWEVER THE QUESTION OF WHETHER THE TURNOVER EQUALIZATION TAX ESTABLISHED BY THE GERMAN LAW OF 1 SEPTEMBER 1951 INCLUDES THE TURNOVER TAX, IN ADDITION TO EQUALIZATION FOR PRIOR CHARGES, IS A MATTER OF CONTROVERSY .

THE COURT DOES NOT HAVE JURISDICTION UNDER ARTICLE 177 TO SETTLE A DISPUTE RELATING TO THE INTERPRETATION OF A NATIONAL LAW .

WITHOUT PREJUDICE TO THE SUPERVISORY POWERS GIVEN TO THE COMMISSION UNDER ARTICLE 97 OF THE TREATY, IT IS IN THE FIRST INSTANCE FOR THE COURT COMPETENT TO APPLY THIS TAXATION LAW TO RULE IN THIS CONNECTION .

AS TO THE SECOND AND THIRD QUESTIONS

9 IT APPEARS FROM THE DOCUMENTS IN THE FILE OF THE MAIN ACTION THAT THE PROCEEDINGS BEFORE THE NATIONAL COURT ARE CONCERNED SOLELY WITH TRANSACTIONS PRIOR TO 1 JANUARY 1968 AND, CONSEQUENTLY, ONLY SUBJECT TO TURNOVER TAX, AS LAID DOWN BY THE GERMAN LAW OF 1951, BEFORE THE ENTRY INTO FORCE OF THE GERMAN VALUE ADDED TAX .

THUS THE REPLY GIVEN TO THE FIRST QUESTION MAKES IT SUPERFLUOUS TO REPLY TO THE OTHER QUESTIONS .

Decision on costs

10 THE COSTS INCURRED BY THE COMMISSION OF THE EUROPEAN COMMUNITIES AND BY THE GERMAN AND ITALIAN GOVERNMENTS, ALL OF WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT, ARE NOT RECOVERABLE .

AS THESE PROCEEDINGS ARE, INSOFAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED, A STEP IN THE ACTION PENDING BEFORE THE TRIBUNALE AT BIELLA, THE DECISION AS TO COSTS IS A MATTER FOR THAT COURT .

Operative part

THE COURT

IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE TRIBUNALE AT BIELLA, BY ORDER OF THAT COURT DATED 27 JULY 1972, HEREBY RULES :

ARTICLE 95 OF THE TREATY MUST BE INTERPRETED AS PROHIBITING A TAXATION SYSTEM UNDER WHICH IMPORTED GOODS ARE CHARGED TWICE WITH TURNOVER TAX, ON THE FOOTING THAT THEY HAVE BEEN THE SUBJECT OF TWO DISTINCT TRANSACTIONS, ON THE BASIS OF AN OPERATION WHICH, IN RESPECT OF A SIMILAR DOMESTIC PRODUCT AT THE SAME MARKETING STAGE, WOULD CONSTITUTE ONLY ONE CHARGEABLE OPERATION .