6.

Of the two parts of the first question, it is appropriate to analyse the second first, that is to say the question of the compatibility of national rules for the recovery of unduly levied charges, such as the rules in force in Italy, with the principle whereby Member States may not make the right to recover sums paid in breach of Community rules subject to conditions which render the exercise of that right virtually impossible. This aspect involves a general problem, namely the effect of the passing on of charges (or rather, perhaps, the limits within which that may have an effect) on entitlement to repayment. This part of the question should therefore be considered first. The scope and ramifications of the other part, which suggests that the rule may contain discriminatory elements, are narrower. But some clarification is necessary first. As I have already pointed out, the limitation on the Member States' powers of intervention (powers which exist only in so far as appropriate legislation has not been adopted on the basis of Article 235 of the Treaty) derives from the fact that the right to repayment of sums levied contrary to Community law is of Community origin and is therefore safeguarded by Community law. The consequence is clear: a State which exercises its residual and temporary power to regulate actions for the recovery of undue payments by laying down conditions which prima facie respect the right to repayment but in reality are likely to defeat it negates a subjective right founded on Community law; in other words it achieves a result which, by reason of the primacy of Community law over national law, is manifestly unacceptable. Let us consider therefore whether national rules such as those laid down in Article 19 of Decree-Law No 688 actually make it impossible in practice for the persons concerned to recover unduly levied charges; and let us ask in the first place what, apart from the requirement of proof, is the central feature of those rules. What truly new feature is introduced into Italian law by Article 19? In my opinion, it creates a further way of extinguishing the revenue authority's obligation to refund the undue charge to the person who paid it. The undue payment, it is true, remains the “fact” which gives rise to entitlement to the refund. But if subsequently the person who made the payment passes on all or part of the burden to third parties, his right is extinguished to the extent whether total or partial to which the charge is passed on. Thus, in particular cases, the rules depart from the general provisions of Article 2033 et seq. of the Italian Civil Code. According to the plaintiff company, those rules nullify the right to repayment for reasons deriving from the very nature of the passing on of the charge: in the great majority of cases it is impossible for either the person who paid the charge or the revenue authority to demonstrate that the financial loss indisputably suffered in every case by the person paying the unduly levied charge is offset by the incorporation of that charge in the price of the goods in question. Why is it impossible? Because, says the plaintiff, the price is subject to innumerable market forces which can be identified only in very approximate terms. It is not therefore permissible to take only one of the factors, in isolation from the others, and treat it as the sole cause of a specific portion of the price. It is never — or almost never — permissible to state that a given portion of the price is due solely to the payment of a charge of the same amount. In those circumstances, to impose upon the person who paid the charge the burden of proving that it has not been passed on and to make the repayment of unduly paid charges conditional upon such proof is tantamount to repudiating the right to repayment. This criticism is largely well founded. In the opinion which I delivered on 23 March 1983 in Case 256/81, (Pauls Agriculture v Council [1983] ECR 1723), I made a similar criticism, albeit with regard to the non-contractual liability of the Community. There I stated: “When undertakings fix prices they do not ... take into account only their own costs and the profits which they desire; their behaviour is determined by the conditions on the market. If the market situation enables the price to be set at a certain level without affecting the volume of sales, the undertaking will fix upon that level and not on others...”. The Commission now takes the same view. At the hearing, the Commission's representative stated: “The passing on of a charge... is an economic fact dependent upon numerous variables... In order to be certain that charges were passed on, supply would have to be elastic and demand would have to be... rigid, but I believe that the only product for which both those conditions are fulfilled is salt ... Where those conditions are not fulfilled, the situation is particularly uncertain and therefore proof of the passing on of the charge is difficult.” To put it more directly, to raise the passing on of charges to the status of a legal rule is possible but only if it is not forgotten that the rule is fragile and can be applied only within very clearly defined limits. Naturally, the representative of the Italian Government takes a different view. He stated that it is possible, on the basis of ordinary commercial documentation (invoices, correspondence and so forth), to establish what portion of the price is attributable to the charge unduly levied and thus to eliminate the right to repayment. But he did not say a single word about the crucial matter of the process of price formation and the infinite number of variables involved therein. This leaves intact therefore the argument that in view of the nature of the market it is usually impossible to isolate any portion of the price and link it causally to a particular cost. Moreover, in my opinion, that argument is irrefutable. And who indeed can say that, if the importer had been released from the burden of the unlawful charge, he would not have applied the same price and sold the same quantity of goods? Had that been the case, he would have obtained higher profits than those he managed to earn whilst subject to the tax. And it is on this hazardous and unpredictable basis, rather than by reference to the relative simplicity af accounting records, that Article 19 requires the person who paid the charges to furnish proof that they were not passed on. But, as I have said, counsel for the Italian Government makes no reference to those uncertainties. The fact is that his view simplifies in the extreme an exceedingly complex question; and a sign of the desire for simplification lies in the very emphasis which is placed on the informative value of ordinary commercial documentation. Let me say that that value is slight. Documents regarding costs throw some light on the profits of the entrepreneur; but to believe that they make it possible to identify all the factors on the basis of which the price is determined is ingenuous, if only because most of those factors are extraneous to the entrepreneur. It suffices to bear in mind — even though the observation may be banal — that, in a market subject to competition, the price of a particular item is affected by the production costs of all the other undertakings operating in the same sector and in particular those of the (marginal) undertakings whose costs are higher. Can all this be proved? And can it be translated into quantities and figures? I doubt it. Certainly, it is not possible to do so by producing the records which every undertaking is obliged to keep in accordance with Article 2214 et seq. of the Italian Civil Code. However, that is what the Italian legislation requires. Can it then be denied that that legislation calls for proof of a diabolically high standard? No it cannot: and counsel for the Italian Government implicitly conceded that point when he stated at the hearing that in 99 % of cases the person paying the charges is not in a position to furnish such proof because the charges have been passed on. To acknowledge entitlement to repayment (as required by Community law) and then to admit that in 99 % of cases that right cannot be exercised is, to say the least, a fine example of conflict between words and deeds.