GOVERNING THE CONSUMPTION DUTY ( DROIT DE CONSOMMATION ) AND CIRCULATION DUTY ( DROIT DE CIRCULATION ) LEVIED ON LIQUEUR WINES AND SIMILAR WINES ARE NOT COMPATIBLE WITH ARTICLE 95 OF THE TREATY . UNDER THE CODE, LIQUEUR WINES AND SIMILAR WINES ARE GENERALLY SUBJECT TO A CONSUMPTION DUTY OF FF*6*795 PER HECTOLITRE OF PURE ALCOHOL AND ALSO TO A CIRCULATION DUTY OF FF*22 PER HECTOLITRE . HOWEVER, CERTAIN SUCH WINES, NAMELY NATURAL SWEET WINES, ARE TAXED AT A RATE OF FF*2*545 AND FF*54.80, RESPECTIVELY . ACCORDING TO THE COMMISSION, THE SCHEME IS DISCRIMINATORY INASMUCH AS IT MAKES ENTITLEMENT TO PREFERENTIAL TAXATION SUBJECT TO CONDITIONS WHICH ARE LESS FAVOURABLE TO PRODUCTS IMPORTED FROM OTHER MEMBER STATES THAN TO COMPARABLE DOMESTIC ( FRENCH ) PRODUCTS .
3 REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR THE DETAILS OF THE FRENCH LEGISLATION IN QUESTION, AN ACCOUNT OF THE PROCEDURE AND THE SUBMISSIONS AND ARGUMENTS OF THE PARTIES, WHICH ARE MENTIONED OR DISCUSSED HEREINAFTER ONLY IN SO FAR AS IS NECESSARY FOR THE REASONING OF THE COURT .
CRITERION OF "TRADITIONAL AND CUSTOMARY PRODUCTION"
4 THE COMMISSION ASSERTS THAT DISCRIMINATION CONTRARY TO ARTICLE 95 OF THE TREATY ARISES FROM THE FACT THAT FRENCH LEGISLATION CONFINES THE PREFERENTIAL TAX SCHEME TO THOSE LIQUEUR WINES WHOSE PRODUCTION IS "TRADITIONAL AND CUSTOMARY ". ALTHOUGH IT OSTENSIBLY APPLIES WITHOUT DISTINCTION TO DOMESTIC PRODUCTS AND TO IMPORTS FROM OTHER MEMBER STATES, THAT REQUIREMENT CAN BE FULFILLED ONLY BY DOMESTIC PRODUCTS . FURTHERMORE, THE COMMISSION CLAIMS THAT "TRADITIONAL AND CUSTOMARY PRODUCTION" IS NOT AN OBJECTIVE CRITERION SINCE IT LEAVES THE AUTHORITIES A MARGIN OF DISCRETION IN ITS APPLICATION .
5 THE FRENCH GOVERNMENT DENIES THE EXISTENCE OF ANY DISCRIMINATION . IT CONTENDS THAT THE CONCEPT OF "TRADITIONAL AND CUSTOMARY PRODUCTION" HAS BOTH A HISTORICAL ASPECT, ALLUDING TO TIME-HONOURED PRODUCTS CLOSELY ASSOCIATED WITH A PARTICULAR LOCALITY, WHOSE LONG ANCESTRY IS PART OF THEIR FAME, AND A TECHNICAL MEANING, REFERRING TO OENOLOGICAL RULES AND PRACTICES WHICH CODIFY FAIR AND TRADITIONAL PRACTICES . MOREOVER, THE CONCEPT IS ALSO USED IN COMMUNITY LEGISLATION ON THE COMMON ORGANIZATION OF THE MARKET IN WINE .
6 IT SHOULD FIRST BE POINTED OUT THAT, AS THE COURT HAS CONSISTENTLY HELD ( SEE, MOST RECENTLY, THE JUDGMENT OF 4 MARCH 1986 IN CASE 106/84 COMMISSION V DENMARK (( 1986 )) ECR 833 ), AT ITS PRESENT STAGE OF DEVELOPMENT COMMUNITY LAW DOES NOT RESTRICT THE FREEDOM OF EACH MEMBER STATE TO LAY DOWN TAX ARRANGEMENTS WHICH DIFFERENTIATE BETWEEN CERTAIN PRODUCTS, EVEN PRODUCTS WHICH ARE SIMILAR WITHIN THE MEANING OF THE FIRST PARAGRAPH OF ARTICLE 95, ON THE BASIS OF OBJECTIVE CRITERIA, SUCH AS THE NATURE OF THE RAW MATERIALS USED OR THE PRODUCTION PROCESSES EMPLOYED . SUCH DIFFERENTIATION IS COMPATIBLE WITH COMMUNITY LAW IF IT PURSUES OBJECTIVES OF ECONOMIC POLICY WHICH ARE THEMSELVES COMPATIBLE WITH THE REQUIREMENTS OF THE TREATY AND ITS SECONDARY LEGISLATION, AND IF THE DETAILED RULES ARE SUCH AS TO AVOID ANY FORM OF DISCRIMINATION, DIRECT OR INDIRECT, IN REGARD TO IMPORTS