CELEX: 62002CO0395
Language: en
Date: 2004-03-03 00:00:00
Title: Order of the Court (Fifth Chamber) of 3 March 2004.#Transport Service NV v Belgische Staat.#Reference for a preliminary ruling: Rechtbank van eerste aanleg te Antwerpen - Belgium.#Article 104(3) of the Rules of Procedure - First and Sixth VAT Directives - Principle of fiscal neutrality - Application of VAT to each production or distribution transaction - Recovery.#Case C-395/02.

Case C-395/02 
      Transport Service NV
      v
      Belgische Staat
      (Reference for a preliminary ruling from the Rechtbank van eerste aanleg te Antwerpen)
      (Article 104(3) of the Rules of Procedure – First and Sixth VAT Directives – Principle of fiscal neutrality – Application of VAT to each production or distribution transaction – Recovery)
      Summary of the Judgment
      Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Supply of goods wrongly invoiced
            as being exempt from tax – Recovery, after the event, from the taxable person making the supply – Not a breach of the principle
            of fiscal neutrality – Tax on the later sale of the goods to the end user paid to the public purse – Not relevant
      (Council Directives 67/227 and 77/388)
      The principle of the neutrality of the common system of value added tax does not preclude a Member State from recovering value
         added tax, after the event, from a taxable person which has wrongly invoiced a supply of goods as being exempt from that tax.
         It is irrelevant, in that regard, whether the value added tax on the later sale of the goods concerned to the end user has
         been paid to the public purse or not.
      
      (see para. 3, operative part)

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            ORDER OF THE COURT (Fifth Chamber)3 March 2004(1)
            
            
         
            (Article 104(3) of the Rules of Procedure  –  First and Sixth VAT Directives  –  Principle of fiscal neutrality  –  Application of VAT to each production or distribution transaction  –  Recovery)
            
          In Case C-395/02, 
          REFERENCE to the Court under Article 234 EC by the Rechtbank van eerste aanleg te Antwerpen (Belgium) for a preliminary ruling
         in the proceedings pending before that court between 
         
         
         
         Transport Service NV
         
         and
         
         Belgische Staat, third party:Bea Cars BVBA,
         
          on the interpretation of the principle of the neutrality of the common system of value added tax,
         
         
         
         
         THE COURT (Fifth Chamber),
         
          composed of: C. Gulmann, President of the Chamber, S. von Bahr (Rapporteur) and R. Silva de Lapuerta, Judges, 
         
          Advocate General: L.A. Geelhoed, Registrar: R. Grass, 
         
         after hearing the Opinion of the Advocate General,
         
         
         Order
         1
            
          By judgment of 4 November 2002, received at the Court Registry on 11 November 2002, the Rechtbank van eerste aanleg te Antwerpen
         (Court of First Instance, Antwerp) referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation
         of the principle of the neutrality of the common system of value added tax (hereinafter ‘VAT’).
         
         
         
         2
            
          That question was raised in the course of a dispute between Transport Service NV (hereinafter ‘Transport Service’) and the
         Belgian State concerning the recovery by the latter of the VAT on the supply tax-free by Transport Service of two vehicles
         to a purchaser residing in another Member State, a supply which, according to the Belgian State, has not been shown to be
         genuine.
         
         
            
               Legal background
            
         
         3
            
          Article 2 of First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning
         turnover taxes (OJ, English Special Edition, 1967 (I), p. 14), as last amended by Sixth Council Directive 77/388/EEC of 17
         May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax:
         uniform basis of assessment (OJ 1977 L 145, p. 1) (hereinafter ‘the First Directive’), is worded as follows:
         ‘The principle of the common system of value added tax involves the application to goods and services of a general tax on
         consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place
         in the production and distribution process before the stage at which the tax is charged.
          On each transaction, value added tax, calculated on the price of the goods or services at the rate applicable to such goods
         or services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components.
          The common system of value added tax shall be applied up to and including the retail trade stage.’
         
         
         
         4
            
          Under Article 2(1) of Sixth Directive 77/388, in the version thereof resulting from Council Directive 92/111/EEC of 14 December
         1992 (OJ 1992 L 384, p. 47), (hereinafter ‘the Sixth Directive’), VAT is chargeable on the supply of goods or services effected
         for consideration within the territory of the country by a taxable person acting as such.
         
         
         
         5
            
          Article 21(1)(a) of the Sixth Directive provides:
         ‘The following shall be liable to pay value added tax:
          1.       under the internal system:
                   (a)	the taxable person carrying out the taxable supply of goods or of services, other than one of the supplies of services
         referred to in (b).
                   	…
                   	Member States may provide that someone other than the taxable person shall be held jointly and severally liable for payment
         of the tax’.
         
         
         
         6
            
          The first subparagraph of Article 28(c)A(a) of the Sixth Directive provides:
         ‘Without prejudice to other Community provisions and subject to conditions which they shall lay down for the purpose of ensuring
         the correct and straightforward application of the exemptions provided for below and preventing any evasion, avoidance or
         abuse, Member States shall exempt:
         (a)     supplies of goods, as defined in Articles 5 and 28(a)(5)(a), dispatched or transported by or on behalf of the vendor or the
         person acquiring the goods out of the territory referred to in Article 3 but within the Community, effected for another taxable
         person or a non-taxable legal person acting as such in a Member State other than that of the departure of the dispatch or
         transport of the goods.’
         
         The dispute in the main proceedings and the question referred for a preliminary ruling
         
         7
            
          The referring court states that, according to an invoice of 18 January 1994, Transport Service sold two Mercedes vehicles,
         at a cost of BEF 2 061 646, to Mr Schellinck, residing in Luxembourg.
         
         
         
         8
            
          It is apparent from the judgment of referral that, following an inspection on 30 September 1998, in the course of which the
         genuineness of the supply of the vehicles in question to the Luxembourg customer was put in question, the Finance Ministry
         drew up, on 22 February 1999, a final report stating that Transport Service was liable to the Belgian State for BEF 422 637
         in respect of VAT and BEF 845 274 by way of statutory penalty and for interest for delay in payment. A final demand was served
         on that company on 26 May 1999.
         
         
         
         9
            
          On 24 June 1999, Transport Service lodged an objection to that demand. In its action against the Belgian State before the
         Rechtbank van eerste aanleg te Antwerpen, it joined Bea Cars BVBA (hereinafter ‘Bea Cars’), a company governed by Belgian
         law, as intervener and third party.
         
         
         
         10
            
          The national court makes clear that, according to the Belgian State, the supply did not take place between Transport Service
         and Mr Schellinck, but between that company and Bea Cars. Therefore no exemption from VAT can be invoked for the supply of
         the vehicles in question and, therefore, Transport Service is liable for the VAT on the supply of the two vehicles.
         
         
         
         11
            
          Transport Service contends that it sold the two vehicles to Mr Schellinck on the express order of Bea Cars. In that respect,
         it acted in good faith and has evaded no VAT. Accordingly, if the referring court should hold that it remains liable for the
         VAT, Bea Cars, which misled it, should indemnify it and compensate it for the loss which it has suffered.
         
         
         
         12
            
          Bea Cars maintains that it is not in any way concerned with the objection raised by Transport Service, or, at least, that
         it cannot be liable for any amount of VAT, penalties or interest. It states that it paid the Belgian State the VAT due in
         respect of the resale of the two vehicles in question.
         
         
         
         13
            
          In addition, both Transport Service and Bea Cars argue that the Belgian State has infringed the principle of the neutrality
         of the common system of VAT, in that it is claiming from them the payment of the VAT and a penalty, even though it is not
         in any way disputed that that tax has been paid by the end user.
         
         
         
         14
            
          In those circumstances, the Rechtbank van eerste aanleg te Antwerpen decided to stay the proceedings and to refer the following
         question to the Court for a preliminary ruling:
         ‘Does the principle of the neutrality of value added tax preclude a Member State from claiming additional VAT from a taxable
         person which has issued an invoice, correctly or otherwise, in accordance with the VAT exemption applicable to intra-Community
         supplies (Article 39(a) of the Belgian VAT Code) where it is evident that the VAT has been paid by the end user and transferred
         to the Member State by the person who drew up the invoice issued to that end user?’
         
         The question referred for a preliminary ruling
         
         15
            
          Since, in the light of its case-law, the answer to that question admits of no reasonable doubt, the Court, in accordance with
         Article 104(3) of the Rules of Procedure, informed the national court that it intended to give judgment by reasoned order
         and invited the parties referred to in Article 23 of the Statute of the Court of Justice to submit any observations which
         they might wish to make in that regard.
         
         
         
         16
            
          The Belgian State and the Commission of the European Communities stated that they had no objection. The other parties submitted
         no observations within the time-limits. 
         
         
         
         17
            
          As a preliminary point, it is appropriate to note that under Article 2(1) of the Sixth Directive VAT is chargeable on the
         supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such.
         
         
         
         18
            
          However, under the first subparagraph of Article 28(c)A(a) of the Sixth Directive the Member States are to exempt supplies
         of goods dispatched or transported, by or on behalf of the vendor or the person acquiring the goods, out of the territory
         of a Member State but within the Community, effected for another taxable person or a non-taxable legal person acting as such
         in a Member State other than that of the departure of the dispatch or transport of the goods.
         
         
         
         19
            
          It is for the national court to determine whether the supply in question in the main proceedings meets those conditions. If
         such is the case, no VAT is payable on that supply.
         
         
         
         20
            
          If the supply in question does not meet those conditions or the conditions of another exemption provided for by the Sixth
         Directive or of a derogation allowed thereunder, the Court has consistently held (see, in particular, Case C-318/96 SPAR [1998] ECR I-785, paragraph 23, and Joined Cases C‑338/97, C‑344/97 and C‑390/97 Pelzl and Others [1999] ECR I‑3319, paragraph 16), that the principle of the common system of VAT consists, by virtue of Article 2 of the
         First Directive, in the application to goods and services up to the retail stage of a general tax on consumption which is
         exactly proportional to the price of the goods and services, irrespective of the number of transactions which take place in
         the production and distribution process before the stage at which the tax is charged.
         
         
         
         21
            
          According to the fundamental principle which underlies that system resulting from Article 2 of the First and Sixth Directives,
         VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various
         cost components (see, in particular, Case C‑98/98 Midland Bank [2000] ECR I-4177, paragraph 29, and Case C-497/01 Zita Modes [2003] ECR I-0000, paragraph 37).
         
         
         
         22
            
          It follows that, since a supply of goods such as that at issue in the main proceedings does not meet the conditions of the
         first subparagraph of Article 28(c)A(a) of the Sixth Directive, or those of another exemption provided for by that directive
         or of a derogation allowed thereunder, that supply is subject to VAT under Article 2(1) of the Sixth Directive.
         
         
         
         23
            
          Under Article 21(1)(a) of the Sixth Directive VAT is chargeable under the internal system on a taxable person carrying out
         a taxable supply of goods.
         
         
         
         24
            
          Accordingly, a taxable person who effects a supply of goods such as that at issue in the main proceedings, since it does not
         meet the conditions of the first subparagraph of Article 28(c)A(a) of the Sixth Directive or those of another exemption provided
         for by that directive or of a derogation allowed thereunder, is chargeable to VAT on that transaction.
         
         
         
         25
            
          That statement is not contradicted by the principle that the common system of VAT ensures neutrality of taxation of all economic
         activities which are subject to VAT, irrespective of their purpose or results (see, most recently, Zita Modes, cited above, paragraph 38), since, under Article 17 of the Sixth Directive, the taxable person is entitled to deduct that
         tax which, as an input, has directly been borne by the cost of the various components of the price of the goods concerned
         and from which the purchaser, provided that he is a taxable person, may in his turn, as a rule, deduct the VAT which he pays
         on such goods.
         
         
         
         26
            
          The question whether the VAT on the later sale of the goods concerned to the end user has or has not been paid to the public
         purse is irrelevant in that regard.  Indeed, as has already been stated in paragraphs 20 and 21 of this order, VAT applies
         to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components,
         up to the retail stage.
         
         
         
         27
            
          As for the recovery of the VAT, it must be observed that the Sixth Directive contains no provision relating to that question.
         That directive merely defines, in Article 20, the conditions which must be complied with in order that deduction of input
         taxes may be adjusted at the level of the person to whom goods or services have been provided.
         
         
         
         28
            
          It is therefore, as a rule, for the Member States to lay down the conditions under which the tax authorities may recover VAT
         after the event, while remaining within the limits imposed by Community law.
         
         
         
         29
            
          In that regard, it must be noted that the measures which the Member States may adopt under Article 22(8) of the Sixth Directive
         in order to ensure the correct levying and collection of the tax and for the prevention of fraud must not go further than
         is necessary to attain such objectives (see, in particular, Case C‑454/98 Schmeink & Cofreth and Strobel [2000] ECR I-6973, paragraph 59; and, equally, as regards the measures adopted by the Member States in order to preserve
         the rights of the public purse, Joined Cases C-286/94, C-340/95, C‑401/95 and C‑47/96 Molenheide and Others [1997] ECR I-7281, paragraphs 46 to 48). 
         
         
         
         30
            
          In addition, as the Commission has rightly observed, it is clear from the Court’s case-law that Community law does not prevent
         Member States from treating the issuing of irregular invoices as attempted tax evasion and imposing, in such a case, fines
         or penalty payments prescribed by their domestic law (see Schmeink & Cofreth and Strobel, cited above, paragraph 62).
         
         
         
         31
            
          Therefore, the reply to the question referred for a preliminary ruling must be that the principle of the neutrality of the
         common system of VAT does not preclude a Member State from recovering VAT, after the event, from a taxable person which has
         wrongly invoiced a supply of goods as being exempt from that tax. It is irrelevant, in that regard, whether the VAT on the
         later sale of the goods concerned to the end user has been paid to the public purse or not. 
         
         
         Costs
         32
            
          The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings
         are, for the parties to the main action, a step in the proceedings pending before the national court, the decision on costs
         is a matter for that court. 
         
         
         On those grounds, 
         
         
         
            
            THE COURT (Fifth Chamber),
         
         
          in answer to the question referred to it by the Rechtbank van eerste aanleg te Antwerpen by order of 4 November 2002, hereby
         rules:
         The principle of the neutrality of the common system of value added tax does not preclude a Member State from recovering value
               added tax, after the event, from a taxable person which has wrongly invoiced a supply of goods as being exempt from that tax.
               It is irrelevant, in that regard, whether the value added tax on the later sale of the goods concerned to the end user has
               been paid to the public purse or not.  Luxembourg, 3 March 2004.
         
         
         
                  R. Grass
               
               
                  C. Gulmann
               
            
         
         
         
                  Registrar
               
               
                  President of the Fifth Chamber
               
            
      
      
          1 –
            
            Language of the case: Dutch.