Opinion of Mr Advocate General Lenz delivered on 13 May 1993. - OTO SpA v Ministero delle Finanze. - Reference for a preliminary ruling: Corte suprema di Cassazione - Italy. - National tax on audiovisual and photo-optical products - Internal taxation - Possible incompatibility with Community law. - Case C-130/92.



European Court reports 1994 Page I-03281



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

A Facts

1. With effect from 1 January 1983 a consumption tax on audiovisual and photo-optical products was introduced in Italy. The relevant provisions are found in Article 13 of Decree-Law No 953 of 30 December 1982, which was subsequently amended and became Article 4 of Decree-Law No 53 of 28 February 1983 (hereinafter "Law No 53"). (1) The tax is levied both on products manufactured in Italy and on imported goods. With one exception, the rate of tax is 16%. (2) In the case of domestic products the tax is payable on the ex-works value (valore franco fabbrica); as a result, the costs of distribution in the Italian market are not taken into account. In the case of imported products, the value of the goods free at the national frontier (valore in dogana franco frontiera nazionale) is taken as the basis of taxation (second paragraph of Article 4 of Law No 53).

2. Under Article 3(4)(b) of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes, "customs duties and other taxes payable in the Community by reason of the importation or sale of the goods" are in principle not included in the customs value.

3. On 23 March 1983 the Ministero delle Finanze, the defendant in the main proceedings, adopted a regulation implementing Law No 53. (3) In the seventh paragraph of Article 2 of that regulation it is provided that in the case of imported goods the tax is to be levied on the customs value within the meaning of Regulation No 1224/80 plus certain other amounts. Included in those amounts that are to be added to the customs value in accordance with that provision are, above all, the charges for entry into free circulation within the Community. (4)

4. OTO SpA imported from Japan goods which fell within the scope of Law No 53 and received a demand for payment of consumption tax from the Italian customs authority. OTO SpA instituted proceedings contesting that assessment before the Tribunale (District Court), Rome. The plaintiff claimed that the tax had been wrongly calculated because the basis of assessment used by the authorities also included the amount of customs duties levied on the importation of the products into the Community. (5) The provision in the above regulation on which the Italian authorities had relied was unlawful because it infringed Article 4 of Law No 53.

5. The Tribunale Rome allowed the claim. The Ministero delle Finanze appealed against that decision and contended that Article 4 of Law No 53 infringed Community law because it led to goods that have been brought into free circulation in other Member States and then exported to Italy being treated less favourably than goods that had been imported directly from third countries. The Corte di Appello (Court of Appeal) espoused that view, and came to the conclusion that the relevant provision in Law No 53 was not applicable. Since this meant that there was nothing to prevent the provisions of the contested regulation being applied, it dismissed the plaintiff' s claim.

6. OTO SpA appealed in cassation against that judgment. The Corte Suprema di Cassazione (Supreme Court of Cassation) stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

On the basis of Article 12 of the EEC Treaty ° which prohibits the introduction between the Member States of charges having an effect equivalent to customs duties ° must a charge having an effect equivalent to a customs duty be understood as meaning only a charge which is imposed by a Member State of the Community on products imported from another Member State or as also including a tax that, albeit not affecting imports directly, makes a product coming from a non-member country de facto economically more advantageous than the same type of product coming from a Member State? Particular regard should be had to the situation where that unfavourable treatment for the Member State of the Community is due to the fact that, under the new tax, the value for tax purposes of the product admitted into the Community market by the Member State in the case of a product which was previously imported from a non-member country will be increased by the charges for that product' s entry into free circulation, which will not be the case where the product comes from a non-member country.

B Analysis

7. The Commission has rightly pointed out that the question referred to the Court of Justice by the Corte Suprema di Cassazione is a narrow one. The court of reference wants to discover whether it is compatible with Community law for a provision to treat goods from non-member countries that are exported directly to Italy more favourably than goods from non-member countries that reach Italy via another Member State.

That difference in treatment results from the fact that, under the second paragraph of Article 4 of Law No 53, the Italian consumption tax is calculated, in the case of goods from non-member countries imported directly from non-member countries, on the basis of an amount which excludes import duty, whereas that is not so in the case of similar goods imported via another Member State. (6)

8. The wording of the question referred to the Court could certainly also be interpreted to the effect that the court of reference is asking in general terms about the lawfulness of a provision which treats goods from other Member States less favourably than goods imported from non-member countries. However, that interpretation is not supported either by the facts of the case with which the Italian court is concerned or by the order for reference. As I have already mentioned, this case concerns the question whether the charges for clearance into free circulation in the Community are to be taken into account. However, such charges only arise if the product in question comes from a country which is not a member of the Community. On the other hand, as is well known, no customs duties or charges having equivalent effect can be levied on goods manufactured in a Member State and exported to Italy (cf. Article 12 of the EEC Treaty). On the basis of the facts presently before the Court, it is not apparent how the Italian provision examined here could treat products manufactured in other Member States less favourably than products imported from non-member countries.

Article 12 of the EEC Treaty

9. The court of reference asks about the compatibility of the Italian provision with Article 12 of the EEC Treaty. Article 12 prohibits the Member States from introducing between themselves any new customs duties or charges having equivalent effect and from increasing existing customs duties or charges. As the Commission has rightly stated in its written observations, Article 12 of the EEC Treaty is however not applicable to the present case. In its judgment in Case 78/76 Steinike and Weinlig (7) the Court of Justice pointed out that the essential characteristic of a charge having an effect equivalent to a customs duty, which distinguishes it from internal taxation within the meaning of Article 95 of the EEC Treaty, is that "the first is imposed exclusively on the imported product whilst the second is imposed on both imported and domestic products".

10. According to the case-law of the Court, a charge which is borne by imported goods can be regarded even as internal taxation, when there are no identical or similar domestic products. However, this presupposes that the charge in question

"relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products". (8)

The Court of Justice had to consider this question in particular in three cases concerning the Italian consumption tax on fresh bananas. In those cases there could indeed be doubt as to whether such a charge was to be regarded as internal taxation within the meaning of Article 95 of the EEC Treaty. (9) However the Court answered that question in the affirmative. (10) Those decisions are of direct relevance to the present case, because the Court suggested that that classification was also valid for the other consumption taxes levied in Italy:

"A tax on consumption of the type at issue in the main proceedings does form part of a general system of internal dues. The 19 taxes on consumption are governed by common tax rules and are charged on categories of products irrespective of their origin in accordance with an objective criterion, namely the fact that the product falls into a specific category of goods." (11)

11. The Italian consumption tax on audiovisual and photo-optical products applies to both imported and domestic products. Even if ° and there is no apparent basis for such an assumption ° certain products subject to the consumption tax were to be manufactured solely outside Italy and there were to be no identical or similar Italian products, that consumption tax would, according to the case-law set out above, be considered as internal taxation within the meaning of Article 95 of the EEC Treaty and not as a charge having an effect equivalent to a customs duty within the meaning of Article 12 of the EEC Treaty.

12. A charge that applies to both imported and domestic products can, however, represent a charge having an effect equivalent to a customs duty if the proceeds of that charge have the sole purpose of financing activities "for the specific advantage of the taxed domestic products, so as to make good, wholly (...), the fiscal charge imposed upon them". (12) There is no indication that the proceeds from the consumption tax are to be used for such a purpose in the present case.

Article 95 of the EEC Treaty

13. Only Article 12 of the EEC Treaty is mentioned in the question referred to the Court for a preliminary ruling. However it should be remembered that the Court has the duty

"to interpret all provisions of Community law which national courts need in order to decide the actions pending before them, even if those provisions are not expressly indicated in the questions referred to the Court of Justice by those courts". (13)

The documents before the Court provide no basis for concluding that the court of reference only wanted to ask about the interpretation of Article 12 of the EEC Treaty. (14)

14. Article 95 of the EEC Treaty applies also to goods from non-member countries which are in free circulation within the Community. (15) Under Article 10(1) of the EEC Treaty such goods from non-member countries are considered to be in free circulation in a Member State when the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied. Article 95 can therefore be applied to those goods only when the charges for their entry into free circulation have been paid.

Consequently, goods from non-member countries which are in free circulation in a Member State other than Italy are, for the purposes of levying the Italian consumption tax, treated in the same manner as equivalent goods manufactured in those Member States. Under the second paragraph of Article 4 of Law No 53 the consumption tax is levied in both cases on the customs value free at the national frontier. The fact that, for goods from non-member countries, that customs value also includes the costs of entry into free circulation is not the result of any discrimination by Italian law but is the logical consequence of the principle laid down in Article 10(1) of the EEC Treaty.

15. As I have already mentioned, there are no grounds for concluding that goods from other Member States (whether manufactured there or brought into free circulation there) are being treated less advantageously than products manufactured in Italy. (16)

16. Admittedly, goods from non-member countries that are brought into free circulation in other Member States, and then exported to Italy, are treated less favourably than products exported directly to Italy from the non-member country concerned. However, the Court has consistently held that the provisions of Article 95 are not applicable to (direct) imports from non-member countries. (17)

17. As the Court held in the Hansen case, the EEC Treaty does not include any provision prohibiting discrimination in the application of internal taxation to products imported from non-member countries; however, at the same time it indicated that any treaty provisions in force between the Community and the country of origin of the goods remain unaffected. (18) There are however no treaties which would forbid goods imported (directly) from non-member countries from being treated more favourably than ° particular ° goods that are in free circulation within the Community.

The common customs tariff (Articles 18 to 29 of the EEC Treaty) and the provisions on the common commercial policy (Articles 110 to 116 of the EEC Treaty)

18. In its written observations ° admittedly without going into more detail regarding the questions being examined here ° the Commission adopted the view that the provisions concerning the common customs tariff are irrelevant to the present case. I am not able to espouse that view.

19. As has already been seen, the rule in the second paragraph of Article 4 of Law No 53 results in goods originating in a non-member country being treated differently depending on whether they are exported from the non-member country directly to Italy, or reach Italy via another Member State. The amount of consumption tax that is levied on directly imported goods is less than the amount charged in respect of goods first brought into free circulation in another Member State and then exported to Italy.

This means that it is more advantageous for a manufacturer in a non-member country to export his goods directly to Italy. If, for example, the Italian market had until now been supplied by a distributor in another Member State, there now exists an incentive to deliver to Italian customers by means of direct exports to Italy. If one takes into account the fact that the audiovisual and photo-optical equipment subject to the tax are products with a not inconsiderable commercial value, the savings which could be made in this manner ought to be by no means insignificant. Since, under the eighth paragraph of Article 4 of Law No 53, the Italian consumption tax is not levied (or is refunded) for products exported from Italy, the direct effects of that tax are admittedly limited to goods destined for the Italian market. (19)

20. The form that the Italian consumption tax has adopted pursuant to Law No 53 is therefore, in my opinion, not compatible with the principles of the common customs tariff and the common commercial policy. The common customs tariff

"is intended to achieve an equalization of customs charges levied at the frontiers of the Community on products imported from third countries, in order to avoid any deflection of trade in relations with those countries and any distortion of free internal circulation or of competitive conditions". (20)

As I believe I have shown, the Italian provision gives rise to the risk of such deflections or distortions of trade.

21. It is certainly true that the customs duty laid down in the common customs tariff for the product concerned is levied at the same rate both for products from non-member countries exported directly to Italy and for products from non-member countries which reach Italy via another Member State. The difference in the fiscal burden is instead the result of the application of the Italian consumption tax. However, the Court of Justice has stated that even "charges other than customs duties as such" can infringe Community law. (21) Although the provisions regarding the setting up of the common customs tariff (Article 18 et seq. of the EEC Treaty) ° in distinction to the provisions of Articles 12 to 17 of the EEC Treaty ° do not mention charges having an effect equivalent to customs duties, it is clear from the objective of those provisions

"that Member States are prohibited from amending, by means of charges supplementing such duties, the level of protection as defined by the common customs tariff. Even if they are not protective in character the existence of such charges may be irreconcilable with the requirements of a common commercial policy". (22)

22. It is clear that that case-law cannot be applied directly to the case in point. Joined Cases 37 and 38/73 Diamant Arbeiders v Indiamex concerned a Belgian charge levied on the import of rough diamonds coming directly from non-member countries. On the other hand, the present case concerns a consumption tax which applies to both Italian and imported products. In that context the Commission, referring to the judgment in Simba, holds the view that a charge cannot be classified at the same time as internal taxation within the meaning of Article 95 of the EEC Treaty and as a charge having an effect equivalent to a customs duty within the meaning of Article 9 of the EEC Treaty. It was indeed for that reason that the Court declined, in the above decision, to examine the compatibility with the common customs tariff of the Italian consumption tax on fresh bananas. (23)

23. It seems doubtful whether that proposition is of general application. The distinction between charges having an effect equivalent to customs duties and internal taxation concerns the relations of the Member States to each other. Article 12 prohibits the Member States from applying customs duties or charges having equivalent effect in their trade with each other. Article 95 limits the Member States' scope to alter the legal position with regard to the levying of internal taxation. Such taxation may be levied, in so far as they do not pursue protectionist objectives, but goods from other Member States must be treated in the same manner as domestic products. Given the different legal consequences, that distinction is necessary and expedient. It is however questionable whether those same criteria are to be applied where the relationship between the Community and other countries is concerned.

24. In my view, it is however not necessary to go into that question in more detail here. (24) In the present case it is not the levying of the Italian consumption tax which gives rise to concerns with regard to the common customs tariff and the common commercial policy. The infringement of Community law consists rather in the partial failure to levy the charge on products from non-member countries exported directly to Italy. One could say that the Italian rule effectively grants those products a preference (even if that might not have been the intention of the Italian legislature) and thereby leads to the risk of a deflection or distortion of trade patterns.

The only way in which that infringement can be remedied is, in my opinion, to include in the taxable amount the costs of clearance into free circulation in the Community for products directly imported from non-member countries as well. In its written observations, the plaintiff in the main proceedings has put forward the view that the customs duties and costs of bringing into free circulation in another Member State should not be taken into consideration (at all) when applying the Italian consumption tax. That would certainly avoid the differences in treatment of goods imported from non-member countries. Such a course of action would however result in all products subject to the consumption tax that are imported into Italy from non-member countries then being treated more favourably than goods manufactured in the Member States of the Community. The grant of such a preference could, if necessary, be provided for by the Community legislature. In that context it should once again be recalled that under Article 10(1) of the EEC Treaty only those goods from non-member countries for which the applicable import duties and charges have been levied are considered to be in free circulation, and are accordingly to be treated in the same manner as goods from Member States.

25. That means that only the procedure for calculating consumption tax on products imported from non-member countries laid down in the regulation of 23 March 1983 is compatible with Community law. As the Italian Government has rightly stated, that procedure ensures absolutely equal fiscal treatment.

26. The Commission has raised the point that the national court has not asked about the compatibility with Community law of the regulation of 23 March 1983. In the light of the case-law of the Court (25) I am however unable to share the concerns of the Commission that the Court may not deal with that question. As I have already stated, it is only calculation of the Italian consumption tax on the basis of an amount which includes the costs of clearing non-member country products for free circulation in the Community that can be regarded as compatible with Community law. That method of calculation also gives rise to no concerns with regard to the provisions of GATT, and in particular Article III thereof. By applying the solution suggested here, goods from non-member countries, after being brought into free circulation, are treated in exactly the same manner as products from the Member States. In this context it may perhaps also be pointed out that import duties and other charges are included in the taxable amount also when calculating value added tax under the Sixth Directive. (26)

C Conclusion

27. I therefore propose that the Court give the following answer to the question submitted by the Corte Suprema di Cassazione:

(1) A charge that applies to both imported and domestic products is not a charge having an effect equivalent to a customs duty within the meaning of Article 12 of the EEC Treaty if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products. Consequently it is in the nature of internal taxation within the meaning of Article 95 of the EEC Treaty.

(2) Article 95 of the EEC Treaty does not prohibit products from non-member countries, imported directly from the non-member country, from being treated more favourably when that charge is levied than products from non-member countries that are first brought into free circulation in another Member State and then exported to the Member State levying that charge. However, such unequal treatment infringes the provisions of the EEC Treaty concerning the common customs tariff and the common commercial policy.

(3) A provision under which such a charge is levied, in the case of products from non-member countries, on an amount which includes the costs of clearing those products for free circulation in the Community is compatible with Community law.

(*) Original language: German.

(1) ° A consolidated version of Law No 53 is printed in the Official Journal of the Italian Republic (GURI) No 65 of 8 March 1983, p. 1798.

(2) ° The rate of tax is 8% for certain television sets (second paragraph of Article 4 of Law No 53).

(3) ° GURI No 83 of 25 March 1983, p. 2326.

(4) ° The seventh paragraph of Article 2 of the regulation is worded as follows: Il valore imponibile dei prodotti importati è costituito dal valore alla frontiera italiana determinato sulla base del valore in dogana ai sensi del regolamento comunitario 1224/80/CEE, aumentato degli eventuali costi ed oneri per la resa alla frontiera italiana, ivi compresi i diritti dovuti per l' immissione in libera pratica nella Comunità economica europea e diminuito delle eventuali componenti del prezzo pagato o da pagare che concernono il trasporto e la commercializzazione all' interno del territorio doganale nazionale .

(5) ° In the order making the reference for a preliminary ruling it is stated that the tax is levied on the basis of the value of the goods plus local taxes and border charges (dazi comunali e diritti di confine). It is however apparent from the pleading lodged with the Court by OTO SpA that this is a case of rather loose wording or a mistake. In that pleading OTO SpA complains that the Italian authorities levied consumption tax (also) on the amount of import duty (dazio doganale).

(6) ° On the other hand, there would be no such difference in treatment if the consumption tax were calculated in accordance with the procedure laid down in the Regulation of 23 March 1983 (see footnote 3 above). The basis of assessment for goods from non-member countries would in any event include the costs of clearing the goods for free circulation in the Community. In its written observations the Italian Government adopts the view that the interpretation of the second paragraph of Article 4 of Law No 53 can (and must) lead to the same result. Whether such an interpretation is possible must be decided by the Italian courts. The question referred to the Court is clearly based on the view that such an interpretation is not possible and the Italian regulation leads to the unequal treatment described above.

(7) ° [1977] ECR 595, paragraph 28.

(8) ° Case 193/85 Co-Frutta [1987] ECR 2085, paragraph 10.

(9) ° See my Opinion in the Co-Frutta case, cited above, p. 2095 et seq.

(10) ° Judgments in Case 184/85 Commission v Italy [1987] ECR 2013; Case 193/85 ibid. (footnote 8), paragraphs 12 to 13; judgment in Joined Cases C-228/90, C-229/90, C-230/90, C-231/90, C-232/90, C-233/90, C-234/90, C-339/90 and C-353/90 Simba [1992] ECR I-3713, paragraph 7.

(11) ° Judgment in Case 193/85 Co-Frutta, cited above, (footnote 8), paragraph 12.

(12) ° Judgment in Steinike and Weinlig, cited above, (footnote 7), paragraph 28. In that judgment the Court of Justice referred to the tax charge on the domestic products being made good wholly or in part . However, it is apparent from the more recent case-law, that only the complete making good of the tax charge leads to the charge in question being regarded as a charge having an effect equivalent to a customs duty (cf. judgment in Joined Cases C-149/91 and C-150/91 Sanders [1992] ECR I-3899, paragraph 20).

(13) ° Consistent case-law, see most recently the judgment of 18 March 1993 in Case C-280/91 Finanzamt Kassel v Viessmann [1993] ECR I-971, paragraph 17.

(14) ° Cf. in this respect the judgment in Case 247/86 Alsatel v Novasam [1988] ECR 5987, paragraph 8, in which the Court came to the conclusion that the court of reference had refused by implication to seek from the Court a ruling on the interpretation of a provision not mentioned in the question.

(15) ° See, for example, the judgment in Case 193/85 Co-Frutta, cited above, (footnote 8), paragraphs 25 and 28.

(16) ° See point 8 above.

(17) ° Judgments in Case 20/67 Tivoli [1968] ECR 199, at p. 204; Case 148/77 Hansen [1978] ECR 1787, at paragraph 23; Case C-353/90 Simba, cited above, (footnote 10), paragraph 14.

(18) ° Cited above, (footnote 17), at paragraph 24. See also the judgment in Simba, cited above, (footnote 10), at paragraphs 18 and 19.

(19) ° That does not preclude the Italian rule having an indirect effect on goods destined for other Member States. If, in the above example, the manufacturer in the non-member country decides to transfer to an Italian distributor the distribution of his goods destined for the Italian market, it may be entirely sensible to entrust the supply of other Member States also to that undertaking.

(20) ° Judgment in Joined Cases 37 and 38/73 Diamant Arbeiders v Indiamex [1973] ECR 1609, at paragraph 9 (my emphasis). See also the judgment in Case 266/81 SIOT v Ministero delle Finanze [1983] ECR 731, at paragraph 18, and the judgment in Case 51/87 Commission v Council [1988] ECR 5459, at paragraph 6.

(21) ° Judgment in Joined Cases 37 and 38/73 Diamant Arbeiden, cited above, (footnote 20), paragraph 13.

(22) ° Judgment in Joined Cases 37 and 38/73 Diamant Arbeiden, cited above, (footnote 20), paragraphs 13 and 14.

(23) ° Judgment in Joined Cases C-228/90, C-229/90 etc., Simba, cited above, (footnote 10), at paragraph 25.

(24) ° It may however be noted that even in the Court' s view that strict conceptual distinction between charges equivalent to customs duties and internal taxation only applies in principle ( en principe ) (judgment in Simba, cited above, (footnote 10), at paragraph 25).

(25) ° See point 13 above.

(26) ° Cf. Article 11 A 2(a) and B 3(a) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (OJ 1977 L 145, p. 1, last amended by Council Directive 92/77 of 19 October 1992, OJ 1992 L 316, p. 1).