CELEX: 62000TJ0305
Language: en
Date: 2003-12-11 00:00:00
Title: Judgment of the Court of First Instance (Fifth Chamber) of 11 December 2003. # Conserve Italia Soc. coop. rl v Commission of the European Communities. # Agriculture - EAGGF - Discontinuance of financial aid - Statement of reasons - Error of assessment as to the facts - Article 24 of Regulation (EEC) No 4253/88 - Principle of proportionality. # Case T-305/00.

Case T-305/00 Conserve Italia Soc. coop. rlvCommission of the European Communities
            «(Agriculture – EAGGF – Discontinuance of financial aid – Statement of reasons – Error of assessment as to the facts – Article 24 of Regulation (EEC) No 4253/88 – Principle of proportionality)»
            
               
                  Judgment of the Court of First Instance (Fifth Chamber), 11 December 2003 
                     
                
               
            
                   
               
               
            
            Summary of the Judgment
         
         
                  1..
                  Agriculture – Common agricultural policy – Structural reform – Common measures – Improvement of the conditions under which agricultural products are processed and marketed – Obligation on the beneficiary to carry out an EAGGF-financed operation correctly – Main line financed idle for over two years – Breach – Temporary constraints not relevant  (Council Regulation No 355/77, Arts 9(1) and 10(c)) 
         
                  2..
                  Agriculture – Common agricultural policy – Structural reform – Common measures – Improvement of the conditions under which agricultural products are processed and marketed – Examination of projects for the improvement or rationalisation of the processing and marketing of those products – Exclusive competence of the Commission  (Council Regulations Nos 355/77, Arts 1(3), 3 and 9, and 4253/88, Art. 14(3)) 
         
                  3..
                  Economic and social cohesion – Structural assistance – Community financing – Withdrawal of financial assistance from the EAGGF on account of irregularities – Whether permissible  (Council Regulation No 4253/88, Art. 24(2)) 
         
                  4..
                  Agriculture – Common agricultural policy – Structural reform – Common measures – Improvement of the conditions under which agricultural products are processed and marketed – EAGGF financial assistance discontinued for breach of fundamental obligations – Proportionality  (Art. 5, third para., EC; Council Regulation No 355/77, Art. 10(c)) 
         
         1.
          It follows from Article 10(c), Article 9(1) and the fourth recital in Regulation No 355/77 on common measures to improve the
         conditions under which agricultural products are processed and marketed that the implementation of a project for modernising
         an establishment processing products in the fruit and vegetable sector and its contribution to a lasting beneficial effect
         on the processing and marketing of juices and nectars from fruits constitute a fundamental obligation which is incumbent upon
         the beneficiary of EAGGF assistance as a result of its award. When a trader applies for Community aid for a specific operation he assumes, under those provisions of Regulation No 355/77,
         and in particular under Article 10(c), the obligation to carry out correctly the operation being financed and to obtain the
         planned results.  If the main line being financed under that project is idle for over two years this means in principle that
         the project will not have the lasting economic effect sought or obtain the anticipated results as provided for in that regulation.
          Such a suspension therefore constitutes a breach of Article 10(c). Moreover, temporary constraints due to market trends and rationalisation of the undertaking which a beneficiary of EAGGF aid
         has to face are inherent in the normal commercial risks which any reasonably well-informed trader should be able to foresee.
          Hence, those factors cannot be relied upon in order to avoid the application of Regulation No 355/77. see paras 77, 80-81
         
         2.
          The Commission alone has the power to examine whether projects for the improvement or rationalisation of processing and marketing
         structures in respect of agricultural products meet the conditions of the operation and the Community regulations, under Article
         1(3) of Regulation No 355/77 on common measures to improve the conditions under which agricultural products are processed
         and marketed and Article 14(3) of Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards
         coordination of the activities of the different Structural Funds between themselves and with the operations of the European
         Investment Bank and the other existing financial instruments. Therefore, a beneficiary of EAGGF aid cannot legitimately claim
         that suspension of a production line of agricultural products financed under such projects is in accordance with the criterion
         of the proper functioning of the market, referred to in Article 3 of Regulation No 355/77, and that to continue its activities
         would have been in breach of Article 9 of Regulation No 355/77, in the absence of any communication or confirmation on the
         part of the Commission. see para. 83
         
         3.
          The system of subsidies introduced under the Community rules relies on the performance by the beneficiary of a number of obligations
         which entitles him to receive the financial aid envisaged.  If the beneficiary does not comply with all those obligations,
         Article 24(2) of Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination
         of the activities of the different Structural Funds between themselves and with the operations of the European Investment
         Bank and the other existing financial instruments authorises the Commission to reconsider the extent of the obligations it
         assumes under the decision to grant that aid. see para. 110
         
         4.
          Discontinuance of EAGGF aid is not, in principle, disproportionate where it is established that the beneficiary of that aid
         has infringed an obligation that is fundamental for the proper operation of the EAGGF.  On the one hand, the proportionality
         principle, as laid down in the third paragraph of Article 5 EC, requires that  measures adopted by Community institutions
         must not exceed what is appropriate and necessary for attaining the objective pursued.  On the other hand, infringement of
         obligations whose observance is of fundamental importance to the proper functioning of a Community system may be penalised
         by forfeiture of a right conferred by Community legislation, such as entitlement to aid. The objective of contributing to the lasting economic effect of the structural improvement of processing of juices and nectars
         from fruits, as provided for in Article 10 of Regulation No 355/77 on common measures to improve the conditions under which
         agricultural products are processed and marketed, constitutes a fundamental obligation under the EAGGF rules.  Likewise, use
         of another line forming part of a financed project for the only product in the fruit and vegetable sector whose processing
         is totally excluded from Community financing, an exclusion which applies to the beneficiary, also constitutes an infringement
         of the essential conditions for the aid granted. Therefore, actions such as suspending for more than two years the activity of the line principally financed by Community aid,
         in breach of Article 10(c) of Regulation No 355/77, or the use of another line forming part of a financed project for processing
         the only product excluded from the aid infringe obligations compliance with which is of fundamental importance for the proper
         operation of the EAGGF system, and the Commission does not exceed the limits of what is appropriate and necessary in order
         to ensure the proper operation of the system in considering that such infringements justify discontinuance of the aid. see paras 111-118
      

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)11 December 2003  (1)
         
         
               ((Agriculture – EAGGF – Discontinuance of financial aid – Statement of reasons – Error of assessment as to the facts – Article 24 of Regulation (EEC) No 4253/88 – Principle of proportionality))
               
             In Case T-305/00, 
            
            
            Conserve Italia Soc. coop. rl, established in San Lazzaro di Savena (Italy), represented by M. Averani, A. Pisaneschi and S. Zunarelli, lawyers, with an
            address for service in Luxembourg,
            
            
            applicant, 
            
            v
            Commission of the European Communities, represented by L. Visaggio, acting as Agent, assisted by M. Moretto, lawyer, with an address for service in Luxembourg,
            
            defendant, 
            
             APPLICATION for annulment of Commission Decision C (2000) 1751 of 11 July 2000 discontinuing aid from the EAGGF for Project
            No 88.41.IT.003.0, entitled  
            Modernisation of an establishment processing products in the fruit and vegetable sector at Portomaggiore (Ferrara),
            
            
            THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),
            
             composed of: R. García-Valdecasas, President, P. Lindh and J.D. Cooke, Judges, 
            
             Registrar: J. Plingers, Administrator, 
            
            
            having regard to the written procedure and further to the hearing on 3 June 2003,
         gives the following
         
         
         Judgment
            
               Legal background
             Council Regulation (EEC) No 355/77
         
         
         1
            
          Article 1(3) and Article 2 of Council Regulation (EEC) No 355/77 of 15 February 1977 on common measures to improve the conditions
         under which agricultural products are processed and marketed (OJ 1977 L 51, p. 1) provide that the Commission may grant aid
         for common measures by financing through the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF)
         projects which are included in the specific programmes drawn up in advance by the Member States and approved by the Commission,
         which are designed to develop or rationalise the treatment, processing or marketing of agricultural products.  
         
         
         2
            
          The second recital in Regulation No 355/77 states that  
         the measures to be taken in this field are ... intended to achieve the objectives set out in [Article 39(1)(a) of the EC Treaty
         (now Article 33 EC)]. The fourth recital states that  
         to be eligible for Community financing, projects must permit in particular the achievement of improvement and rationalisation
         of processing and marketing structures in respect of agricultural products and of a lasting beneficial effect on agriculture. Lastly, the seventh recital states that  
         in order to ensure that beneficiaries observe the conditions imposed at the time aid from the [EAGGF] is granted, a procedure
         should be laid down for an effective check and for the possible suspension, reduction or discontinuation of aid from the [EAGGF].
         
         
         3
            
          Article 3(1) of Regulation No 355/77, as amended by Council Regulation (EEC) No 1932/84 of 19 June 1984 (OJ 1984 L 180, p. 1),
         states that  
         the programmes must show clearly that they contribute towards achieving the objectives of the common agricultural policy and,
         in particular, towards the proper functioning of the markets in agricultural ... products.  
         
         
         4
            
          Furthermore, Article 9(1) of Regulation No 355/77, in accordance with the instructions contained in the fourth recital in
         that regulation, provides that  
         projects must contribute to improving the situation of the basic agricultural production sector in question and that  
         they must guarantee the producers of the basic agricultural product an adequate and lasting share in the resulting economic
         benefits.  
         
         
         5
            
          Lastly, Article 10(1)(c) of Regulation No 355/77 states that  
         projects must contribute to the lasting economic effect of the structural improvement aimed at by the programmes.  
         
         
         6
            
          Regulation No 355/77 was repealed on 1 January 1990 by Council Regulation (EEC) No 4256/88 of 19 December 1988 (OJ 1988 L
         374, p. 25) and by Council Regulation (EEC) No 866/90 of 29 March 1990 (OJ 1990 L 91, p. 1), apart from certain provisions
         such as Articles 9 and 10, which continued to apply on a temporary basis until 3 August 1993 for projects introduced before
         1 January 1990. 
          The 1983 information document from the Commission on the criteria for the choice of projects to be financed under Regulation
         No 355/77
         
         
         7
            
          On 10 June 1983 the Commission published information on the criteria for the choice of projects to be financed under Regulation
         No 355/77 (OJ 1983 C 152, p. 2,  
         the 1983 Information Document), in which it set out the selection and eligibility criteria that projects had to fulfil in order to qualify for aid from
         the EAGGF, and the sectors and products subject to restrictions. 
         
         
         8
            
          As regards fruit and vegetables, Title III, point B.5, paragraph 21, of the 1983 Information Document provides that  
         investments which are ineligible are those involving an increase in processing capacity for tomatoes and that  
         however, in entirely exceptional cases it is possible to finance investments effected in regions where the income of farmers
         is significantly lower than the national average and where processing capacities are insufficient and outdated.  
          Council Regulation (EEC) No 4253/88
         
         
         9
            
          On 19 December 1988 the Council adopted Regulation (EEC) No 4253/88 laying down provisions for implementing Regulation (EEC)
         No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations
         of the European Investment Bank and the other existing financial instruments (OJ 1988 L 374, p. 1). That regulation entered
         into force on 1 January 1989 and was amended on several occasions. 
         
         
         10
            
          Article 24 of Regulation No 4253/88, entitled  
         Reduction, suspension and cancellation of assistance, as amended by Council Regulation (EEC) No 2082/93 of 20 July 1993 (OJ 1993 L 193, p. 20), provides: 1. If an operation or measure appears to justify neither part nor the whole of the assistance allocated, the Commission shall
         conduct a suitable examination of the case in the framework of the partnership, in particular requesting that the Member State
         or authorities designated by it to implement the operation submit their comments within a specified period of time. 2. Following this examination, the Commission may reduce or suspend assistance in respect of the operation or a measure concerned
         if the examination reveals an irregularity or a significant change affecting the nature or conditions for the implementation
         of the operation or measure for which the Commission's approval has not been sought. 3. Any sum received unduly and to be recovered shall be repaid to the Commission. ...
         Facts
         
         11
            
          On 17 July 1987 the Commission received an application for aid from the EAGGF, dated 22 May 1987, from Colombani Lusuco SpA
         (
         Colombani), a company controlled by the Federazione italiana dei consorzi agrari (Federconsorzi), a major grouping of Italian agricultural
         cooperatives. That application was lodged by the Italian Government under Regulation No 355/77. 
         
         
         12
            
          The aid was intended to support project No 88.41.IT.003.0 for the  
         modernisation of an establishment processing products in the fruit and vegetable sector at Portomaggiore (Ferrara). The aim of the project was in particular to modernise and replace certain installations which had become technologically
         obsolete in the departments producing fruit juices and semi-processed fruit products and also to bring installations up to
         current hygiene, health and environmental standards. 
         
         
         13
            
          In its application of 22 May 1987 Colombani declared that it  
         undertook not to use the machines and other equipment installed in the complex in question for purposes other than that specified
         for at least five years from the date of the inspection to ensure they are operating properly. 
         
         
         14
            
          The Commission approved project No 88.41.IT.003.0 by Decision C (88) 1005/275 of 30 June 1988 (
         the decision to grant aid) and granted Colombani aid amounting to 697 836 871 Italian lire (ITL) towards a total investment of ITL 2 832 123 766. The
         Commission informed the beneficiary of this by a letter sent on the same date, the sixth paragraph of which expressly stated:
         If any amendments are made to the project as described in the Commission decision granting aid from the Fund, please note
         that such amendments must be submitted to the Commission ... before the new work proposed is carried out. The Commission will
         inform you as soon as possible of the outcome as regards the amendment proposal(s) and, if accepted, the relevant conditions.
         Failure to comply with the above-mentioned procedure ... or the Commission's rejection of the amendments may result in discontinuation
         or reduction of the aid.
         
         
         15
            
          In December 1989 Colombani acquired an establishment at Massa Lombarda, giving rise to the new company Massalombarda Colombani
         SpA, which thereby became the beneficiary of the aid (
         the beneficiary or  
         Massalombarda). 
         
         
         16
            
          In the spring of 1992, after Federconsorzi had been taken into receivership in 1991, the beneficiary embarked upon a major
         programme to reorganise and restructure its activities and its staff, which included inter alia concentrating production of
         fruit-based jam at the Portomaggiore establishment and concentrating production of juices and nectars from fruits at the Massa
         Lombarda establishment. 
         
         
         17
            
          In 1994 the Commission decided to check on certain projects for which the beneficiary had obtained Community aid, including
         project No 88.41.IT.003.0 concerning the Portomaggiore establishment. To that end, on 12 September 1994 the Commission requested,
         by fax addressed to the Ministero delle Risorse agricole, alimentari e forestali (
         the Italian Ministry of Agriculture) and the beneficiary, to prepare certain supporting documents and other documents in order to enable it to check during a
         forthcoming on-the-spot inspection whether the investment that had been made was in accordance with the project as approved
         and whether the conditions laid down when the project was approved had been met. The request mentioned in particular the originals
         of all the supporting documents listed in the application for payment of the aid (point 5 of the fax) and the delivery notes
         and transport documents relating to certain invoices listed in point 5 (point 9 of the fax). 
         
         
         18
            
          The Commission carried out the inspection from 26 to 30 September 1994, in the course of which certain irregularities were
         found. Those irregularities were recorded in the inspection report of 30 September 1994 (
         the report) signed by all the parties, including the representatives of the beneficiary, as follows: ...(8) The invoices indicated on the attached list (Annex 6) contain several irregularities, both as regards tax (delivery notes
         bear dates earlier than those of the corresponding invoices) and as regards compliance with Regulations No 355/77 and No 2515/85
         (notes with dates earlier than those on which the application for the Commission's contribution was received, missing notes,
         etc)....
         
         (10)
          Line 700 at the Portomaggiore establishment, for the production of juices and nectars, to which improvements were made that were accounted
         for in the above-mentioned project No 88.41.IT.003.0 was, from August 1992 onwards, mainly used for the packaging of tomato-based
         products. This followed the acquisition of the [Massa Lombarda] establishment. Such processing (of tomatoes) is excluded from
         any financing by the Guidance Section of the EAGGF.
         (11) Installations for the above-mentioned  
         Line 125 at the Portomaggiore establishment, financed under the project referred to in the preceding paragraph, were not being used
         at the time of the inspection. At the request of the officials conducting the inspection evidence was supplied that the idle
         line was operational. In essence, Messrs Malagoni and Rasi, who were in charge of the establishment, and Mr Giuseppe Piazzi
         stated that it had not been in use since August 1992 and that this was connected with the project to transfer the line in
         question to the production unit at Massa Lombarda, Via Selice, which was totally dedicated to the production of juices and
         drinks. Mr Malagoni, the Production Director, also stated that:  
         This project, which was approved in the 1994 investment plan, continues to be on hold, as are the relevant administrative
         formalities, due to the imminent transfer of the company's ownership. Suitable premises at Via Silice have already been prepared
         in order to carry out this project....
         
         
         19
            
          Point 2 of Annex 6 to the report lists the disputed invoices concerning the Portomaggiore establishment. They are the following
         seven invoices: invoice No 745 of 16 May 1988 from NIMAX, invoice No 1256 of 31 May 1990 from OCME, invoice No 17380 of 31
         May 1988 from ATLAS COPCO, invoice No 87 of 20 February 1990 from Bronzoni, invoice No 44098 of 31 December 1989 from ATLAS
         COPCO, invoice No 650 of 2 November 1990 from Gairsa and invoice No 107 of 1 October 1987 from MIT Mantovani. 
         
         
         20
            
          In October 1994 Massalombarda was acquired, and ultimately in 1997 taken over, by Frabi SpA (which subsequently became Finconserve
         SpA), the finance company within the group Conserve Italia Soc. coop. rl., which is the applicant in this case and which constitutes
         the main network of agricultural cooperatives in Italy and one of the largest in Europe. 
         
         
         21
            
          By fax sent to the Commission on 3 November 1994 the Italian authorities stated that they were in favour of initiating the
         procedure to discontinue the aid granted to the beneficiary in view of the serious irregularities that had been found. 
         
         
         22
            
          By letter of 22 May 1995 the Commission informed the beneficiary and the Italian authorities of the infringements that had
         been found and of its intention to initiate such a procedure in order to recover the incorrect payments. It requested them
         to submit their observations in that regard. The irregularities alleged against the beneficiary in relation to the present
         case are set out in the third, fourth, fifth and ninth recitals in that letter: Whereas in the course of that investigation it was established that certain invoices charged to the Portomaggiore establishment
         concern another installation or relate to a jam production line unconnected with the project;whereas one line producing juices and nectars from fruits (Line 700) was mainly used from August 1992 onwards for the packaging
         of tomato-based products, a product excluded from financing by the Guidance Section of the EAGGF;whereas one production line (Line 125), financed almost entirely under the present project, has been completely abandoned
         since August 1992;...whereas therefore, following the on-the-spot inspection, it has become apparent that Article 9(1) and (2), Article 10, Article 19(2),
         second paragraph, Article 20(1) and (2) [of Regulation No 355/77] are not being complied with.
         
         
         23
            
          On 3 August 1995 and 22 September 1995 the beneficiary submitted its observations to the Commission, stating that the irregularities
         reported were minor and did not justify discontinuance of the aid. Following talks with officials of the competent services
         of the Commission on 19 January 1996 and 22 October 1996, the beneficiary lodged further statements on 27 February 1996 and
         11 November 1996. 
         
         
         24
            
          On 11 July 2000 the Commission adopted Decision C (2000) 1751, based on Article 24(2) of Regulation No 4253/88, discontinuing
         the aid granted (
         the contested decision), considering that the observations submitted by the applicant provided no evidence to refute the irregularities found during
         the 1994 inspection and that the extent and seriousness of those irregularities justified discontinuance of the aid. 
         
         
         25
            
          The main grounds of the contested decision are as follows: Whereas:...(6) ... it has been found that certain invoices, although charged to the Portomaggiore establishment, did not in fact concern
         that establishment;(7) It was found that one line producing juices and nectars from fruits (
         Line 125, financed almost entirely under this project, has been completely abandoned since August 1992;(8) It was also found that one line producing juices and nectars from fruits (
         Line 700) included in the project was mainly used from August 1992 onwards for the packaging of tomato-based products, which were
         not provided for in the application for aid; under point B.5 No 21 of the [1983 Information Document] projects to increase
         capacity for processing tomatoes are excluded from financing by [the Guidance Section of] the EAGGF....(22) In the light of the information given above, the irregularities found affect the conditions for implementing the project
         in question....(24) Under Article 24(2) of Regulation (EEC) No 4253/88, the Commission may reduce or suspend assistance in respect of the
         operation or measure concerned if the examination reveals an irregularity or a significant change affecting the nature or
         conditions ... for which the Commission's approval has not been sought. (25) In the light of the information given above, it is necessary to discontinue the aid granted.(26) The beneficiary is required to repay the amount of ITL 697 836 871, payment of which has become devoid of purpose.
         Procedure and forms of order sought
         
         26
            
          By application lodged at the Court Registry on 21 September 2000 the applicant brought the present action. 
         
         
         27
            
          Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Fifth Chamber) decided to open the oral procedure
         and, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure, requested the Commission
         to reply to a question. The Commission complied with that request within the time-limit laid down.  
         
         
         28
            
          The parties presented oral argument and their replies to the questions from the Court at the hearing on 3 June 2003. 
         
         
         29
            
          The applicant claims that the Court should: 
         
         
         ─
             annul Commission Decision C (2000) 1751 of 11 July 2000; 
          annul Commission Decision C (2000) 1751 of 11 July 2000; 
         
         
         
         ─
             order the Commission to pay the costs. 
          order the Commission to pay the costs. 
         
         
         
         
         30
            
          The Commission contends that the Court should: 
         
         
         ─
             dismiss the application in its entirety; 
          dismiss the application in its entirety; 
         
         
         
         ─
             order the applicant to pay the costs. 
          order the applicant to pay the costs. 
         
         
         Law
         
         31
            
          The applicant puts forward six pleas in law in support of its application for annulment of the contested decision. The first
         plea alleges that there is an inadequate statement of reasons in the sixth recital in the contested decision; the second plea
         alleges incorrect assessment of the facts referred to in the sixth recital in the contested decision; the third plea alleges
         misinterpretation of the obligations assumed by the beneficiary and infringement of the Community rules relating to the proper
         functioning of the market, concerning Production Line 125 in recital 7 in the contested decision; the fourth plea alleges
         infringement and misinterpretation of the 1983 Information Document concerning Production Line 700 in recital 8 in the contested
         decision; the fifth plea alleges infringement of Article 24(2) of Regulation No 4253/88; the sixth plea alleges infringement
         of the principle of proportionality. 
          The first and second pleas: inadequate statement of reasons and an incorrect assessment of the facts in recital 6 in the contested
         decision
          Arguments of the parties
         
         
         32
            
          The applicant considers that recital 6 in the contested decision, which states that certain invoices, although charged to
         the Portomaggiore establishment, did not in fact concern that establishment, is vitiated, first, by an inadequate statement
         of reasons and, second, by an incorrect assessment of the facts found by the Commission. 
         
         
         ─
             The statement of reasons 
          The statement of reasons 
         
         
         
         
         33
            
          The applicant claims that the circumstances described in recital 6 by no means provide an adequate statement of reasons as
         required by the settled case-law of the Court of Justice and the Court of First Instance. In that regard, it contends that
         the wording of that recital makes it impossible to determine which invoices the Commission considered as not being in order
         because they were charged to another establishment. 
         
         
         34
            
          The applicant also contends that even with reference to their context the reasons stated for the contested decision are inadequate.
         Annex 6, point 2, of the report listed a total of seven invoices, whilst the letter of 22 May 1995 initiating the infringement
         proceedings contains no details in this regard, referring merely to  
         certain invoices. The Commission acknowledged for the first time in the defence (paragraph 36) that the invoices disputed in the contested
         decision were not all of the invoices listed in Annex 6, point 2, but only three of them, namely invoice No 1256/90 of 31
         May 1990 from OCME, invoice No 44098 of 31 December 1989 from ATLAS COPCO, and invoice No 107 from MIT Mantovani, which shows
         that the reasons stated for the contested measure lack certainty. 
         
         
         35
            
          The Commission disputes those arguments as being groundless. In its view it is clear from the wording of recital 6 that the
         invoices referred to in that complaint were those listed in Annex 6, point 2, that is to say, the ones where the delivery
         note confirms that the equipment was delivered to another establishment, or those where the applicant has been unable to show
         that the place of delivery was indeed the Portomaggiore establishment, namely invoice No 1256/90 from OCME, invoice No 44098
         from ATLAS COPCO and invoice No 107 from MIT Mantovani. At any event it is clear that the applicant could identify, from the
         context in which the contested decision was adopted, the three invoices referred to in connection with this complaint, since
         the applicant was present at the inspection and took an active part in the administrative procedure by disputing this complaint
         in detail several times. 
         
         
         ─
             The assessment of the facts 
          The assessment of the facts 
         
         
         
         
         36
            
          The applicant contends that the Commission was wrong to consider that the invoices referred to in recital 6 in the contested
         decision were not in order because they related to an establishment other than Portomaggiore and that that fact constituted
         a ground for discontinuing aid. The applicant attaches as an annex to the reply, with regard to the three invoices in question
         identified by the Commission in the defence, delivery notes and other supporting documents which, in its opinion, prove that
         the place where the equipment was delivered and the work carried out was indeed the Portomaggiore establishment. 
         
         
         37
            
          Thus, the applicant submits, first, that invoice No 1256/90 of 31 May 1990 from OCME, concerning modification of the programme
         for the pallet loader, is in order and that the fact that the delivery note was not addressed to the Portomaggiore establishment
         but to the Codigoro establishment was merely due to a clerical error on the part of the supplier. The invoice, the purchase
         order of 14 May 1990 and the technical report from OCME's support department of 30 May 1990 prove that the work was indeed
         carried out at the Portomaggiore establishment. 
         
         
         38
            
          Second, with regard to invoice No 44098 of 31 December 1989 from ATLAS COPCO, for the purchase of a selector, the applicant
         admits that the delivery note for that purchase was not found during the inspection and states that a copy was subsequently
         requested from the supplier. It produces the invoice, the purchase order and the delivery note in that connection in order
         to show that the selector was only for the Portomaggiore establishment. 
         
         
         39
            
          Third, with regard to invoice No 107 of 1 October 1987 from MIT Mantovani, for the delivery and installation of hydraulic
         equipment, the applicant states that this invoice is in order and that it is for work under local authority control undertaken
         on the building site at the Portomaggiore establishment. This is clear from the two delivery notes from the supplier and the
         purchase order which were produced. 
         
         
         40
            
          Furthermore, the applicant points out that at any event the total amount for the three invoices disputed by the Commission
         of ITL 4 143 120 is derisory in relation to the total amount of investment under the project (ITL 2 794 000 000) and the amount
         of the Community aid approved by the Commission (ITL 697 836 871). 
         
         
         41
            
          The Commission claims, on the basis of Article 48(1) of the Rules of Procedure, that the additional evidence in the form of
         invoices and delivery notes produced by the applicant at the reply stage is inadmissible because it was produced late without
         any reasons being given, and requests that it be excluded from the file. 
         
         
         42
            
          The Commission submits that at any event recital 6 in the contested decision is not vitiated by any error of assessment of
         the facts. In its fax of 12 September 1994 it had formally asked the applicant for the originals of the documents supporting
         the expenditure and the relevant delivery notes (points 5 and 9 of the fax), as those documents were not produced either during
         the inspection or during the administrative procedure, although the applicant had mentioned them on several occasions. The
         contested decision is therefore not vitiated by any incorrect assessment, since the Commission was not able to take those
         documents into account when it adopted the contested decision, for reasons attributable solely to the beneficiary's negligence.
         
         
         
         43
            
          At the hearing the Commission admitted that, subject to their admissibility, the documents produced by the applicant in its
         reply did demonstrate that the place where the equipment was delivered and the work carried out was indeed the Portomaggiore
         establishment. 
          Findings of the Court
         
         
         44
            
          It is appropriate to consider first of all the reasons stated for that recital, then the admissibility of the evidence produced
         by the applicant at the reply stage and, lastly, the applicant's argument alleging incorrect assessment by the Commission
         of the factual circumstances referred to in the context of that complaint. 
         
         
         ─
             The statement of reasons  
          The statement of reasons  
         
         
         
         
         45
            
          It is clear from settled case-law, first, that under Article 253 EC the reasons stated for a measure must disclose clearly
         and unequivocally the reasoning of the Community authority which adopted it, so as to make the persons concerned aware of
         the reasons for the measure and thus enable them to defend their rights, and so as to enable the Community Courts to exercise
         their supervisory jurisdiction, and, second, that the extent of the obligation to state reasons must be assessed in the light
         of its context (Joined Cases T-551/93 and T-231/94 to T-234/94  
         Industrias Pesqueras Campos and Others   v  
         Commission [1996] ECR II-247, paragraph 140; Case T-216/96  
         Conserve Italia   v  
         Commission  [1999] ECR II-3139,  
         Conserve Italia I, paragraph 117, and Case T-186/00  
         Conserve Italia   v  
         Commission [2003] ECR II-719,  
         Conserve Italia II, paragraph 95). 
         
         
         46
            
          Recital 6 in the contested decision, which alleges that certain invoices, although charged to the Portomaggiore establishment,
         did not in fact concern that establishment, does not list the invoices to which the complaint refers. It is clear, however,
         from the file and from the context in which the contested decision was taken, that the applicant was in a position to identify
         the three invoices in question, to deny they were not in order and to understand the reasoning on which the Commission's complaint
         was based. 
         
         
         47
            
          On the one hand the applicant has sufficient evidence to identify which of the invoices that were not in order provided the
         basis for the contested decision. The applicant was fully aware which seven invoices were originally disputed by the Commission
         during the inspection conducted in September 1994, on the basis of Annex 6, point 2, of the report, where each invoice is
         listed. 
         
         
         48
            
          Also, from its observations submitted on 3 August 1995 it is clear that the applicant understood the reasons for which the
         seven invoices originally disputed were regarded as not being in order, and the fact that three of them (invoice No 1256 of
         31 May 1990 from OCME, invoice No 44098 of 31 December 1989 from ATLAS COPCO, and invoice No 107 of 1 October 1987 from MIT
         Mantovani) were disputed, either because another consignee was named on the delivery note or because there were no delivery
         notes. In those observations the applicant acknowledged that the delivery note for invoice No 1256 from OCME was addressed
         to the Codigoro establishment and, as regards the two other invoices, it admitted that the delivery notes showing the actual
         place where the goods concerned were delivered or the work concerned carried out were not found, although it had mentioned
         several times that it would produce copies of them. 
         
         
         49
            
          Lastly, it should be noted that the applicant had subsequently played an active part in the administrative procedure, having
         had talks with the relevant Commission services and also having submitted additional statements on two occasions. 
         
         
         50
            
          On the other hand, it must be observed that although the applicant might still have had doubts regarding the invoices referred
         to in the context of that complaint, during the administrative procedure and in its application it denied that the seven invoices
         listed in Annex 6, point 2, to the report, including the three invoices identified by the Commission in its defence, were
         not in order. Thus the fact that the contested decision was based on only three of them, and not the seven originally disputed
         during the inspection, is irrelevant, since the applicant has been able to defend its interests and deny at any time that
         the invoices in question were not in order. 
         
         
         51
            
          It is clear therefore that there is an adequate statement of reasons for recital 6 in the contested decision within the meaning
         of Article 253 EC and the case-law cited above and that therefore the plea alleging an inadequate statement of reasons must
         be dismissed as unfounded.  
         
         
         ─
             Admissibility of the additional evidence 
          Admissibility of the additional evidence 
         
         
         
         
         52
            
          Article 48(1) and (2) of the Rules of Procedure allows a party to offer further evidence in the reply and the rejoinder, provided
         that the evidence is based on matters of law or of fact which come to light in the course of the procedure. 
         
         
         53
            
          In the present case the applicant submitted in its application that the seven invoices originally disputed by the Commission
         were in order, in the defence the Commission limited the number of invoices which it considered were not in order to three
         and the applicant, at the reply stage and after the Commission had precisely identified the invoices concerned in its statement,
         produced the supporting documents which it considered relevant in order to support its contention that the three controversial
         invoices were in order. The documents produced thus relate to facts which came to light during the procedure before the Court
         and therefore they cannot be regarded as inadmissible for the purposes of Article 48(1) of the Rules of Procedure. 
         
         
         54
            
          Those documents should therefore be declared admissible and hence the Commission's request that they should be excluded from
         the file should be rejected. 
         
         
         ─
             Assessment of the facts 
          Assessment of the facts 
         
         
         
         
         55
            
          It is clear from the file and from the Commission's statements in the context of the procedure before the Court that the Commission's
         complaint against the applicant is that the three invoices in question did not relate to the Portomaggiore establishment,
         based on the fact that the relevant delivery notes contained the name of another consignee (invoice No 1256/90 of 31 May 1990
         from OCME) or were not found during the inspection (invoice No 44098 of 31 December 1989 from ATLAS COPCO and invoice No 107
         of 1 October 1987 from MIT Mantovani). 
         
         
         56
            
          It should be pointed out straightaway that invoice No 44098 of 31 December 1989 from ATLAS COPCO and invoice No 107 of 1 October
         1987 from MIT Mantovani clearly state that the place where the goods were delivered or the work carried out was the Portomaggiore
         establishment. It is important to note that the Commission's assessment that those invoices were not in order is based exclusively
         on the fact that the relevant delivery notes were missing. 
         
         
         57
            
          Contrary to what the Commission asserts, it cannot be inferred simply from the fact that the delivery notes were missing that
         the place where the goods and the work to which those invoices related was provided was somewhere else and not the Portomaggiore
         establishment. This fact does not provide adequate evidence in support of the Commission's contention, in the absence of any
         other evidence showing that the destination was not the one stated on the invoices. Furthermore, the documents produced by
         the applicant ─ the purchase orders and delivery notes ─ confirm that the place where those goods and work were provided was
         indeed the Portomaggiore establishment. 
         
         
         58
            
          It should therefore be held that the Commission was wrong to consider that invoice No 44098 from ATLAS COPCO and invoice No
         107 from MIT Mantovani did not relate to the Portomaggiore establishment. 
         
         
         59
            
          As regards invoice No 1256/90 from OCME, the relevant delivery note found during the inspection indicated a different consignee
         (the Codigoro establishment) from that indicated on the invoice (the Portomaggiore establishment), and the applicant acknowledged
         that discrepancy, stating that it was merely due to a clerical error on the part of the supplier. Therefore, in view of the
         discrepancy between those supporting documents and in view of the decisive significance of the indication given on the delivery
         note of where the work was to be carried out, in the absence of any other evidence offered by the applicant, the Commission
         had grounds for considering that that work did not relate to the Portomaggiore establishment. 
         
         
         60
            
          The applicant produced before the Court the purchase order of 14 May 1990 and the technical report by OCME's support department
         of 30 May 1990 in order to show that the goods and work were actually for the Portomaggiore establishment. 
         
         
         61
            
          Those documents show that the only place the work was to be carried out was the Portomaggiore establishment. However, those
         documents are not such as to call into question the validity of recital 6 in the contested decision. In the light of the discrepancy
         between the invoice and the relevant delivery note, it was incumbent upon the applicant to produce those documents during
         the administrative procedure in order to dispute the Commission's assessment. 
         
         
         62
            
          Since those documents were not produced at the administrative stage it was legitimate for the Commission to state in the contested
         decision, on the basis of the documents at its disposal during the inspection, that that invoice did not relate to the Portomaggiore
         establishment. It cannot therefore be alleged that the Commission acted improperly with regard to the OCME invoice. 
         
         
         63
            
          It is clear from the foregoing that the plea alleging incorrect assessment of the facts referred to in recital 6 of the contested
         decision is partially well founded. 
          Third plea: misinterpretation of the obligations assumed by the beneficiary and infringement of the Community rules for the
         proper functioning of the market, concerning Production Line 125, in recital 7 in the contested decision
          Arguments of the parties
         
         
         64
            
          The applicant considers that recital 7 in the contested decision, which alleged that the line producing juices and nectars
         from fruits (Line 125) had been completely abandoned since August 1992, is unfounded. 
         
         
         65
            
          The applicant points out that Massalombarda had experienced various difficulties after Federconsorzi was taken into receivership
         in 1991, leading to major restructuring of the group, which resulted at the Portomaggiore establishment in the temporary stoppage
         of installations on Line 125 in order to concentrate production of juices and nectars from fruits at the Massalombarda plant.
         Moreover, a change in market trends also required concentration of the undertaking's production strategy with regard to nectars
         from fruits in order to maintain its competitiveness on the market. 
         
         
         66
            
          The applicant also contends that the complaint is not grounded in fact, since the installations on Line 125 were not  
         completely abandoned: activity was merely suspended, because the line returned to significant use following the financing, it continued to be
         available to the undertaking concerned and only temporary constraints required its suspension. 
         
         
         67
            
          The applicant submits that that temporary stoppage does not infringe the undertaking made by the beneficiary when it applied
         for the aid not to use the equipment concerned for other purposes. According to the applicant, a different interpretation
         of the undertaking, to the effect that that obligation infers that no suspension is possible, is illogical since it would
         mean that a drastic cutback in production could be regarded as allowable under the Community provisions, whilst a temporary
         stoppage justified by market requirements could not. 
         
         
         68
            
          The applicant also submits that temporary stoppage of the installations is fully in accordance with the principle of the proper
         functioning of the market which underlies the Community rules and the general principles of Community law. In that regard,
         the terms of Article 3 of Regulation No 355/77 allow for relaxation of the conditions in respect of operations being financed
         in order to take account of the functioning of the market and market trends; moreover, if activity had continued it would
         have resulted in losses not only for the undertaking concerned but also for the producers, which would have been in breach
         of Article 9 of Regulation No 355/77. 
         
         
         69
            
          Lastly, in its reply the applicant contends that the argument the Commission raised at the defence stage, that an alleged
         obligation to submit changes to the project for prior authorisation had been infringed, is inadmissible because the contested
         decision contained no reference, or any complaint against the beneficiary, to that effect. 
         
         
         70
            
          The Commission contends that the plea raised by the applicant is groundless in fact and also that it is based on a totally
         incorrect interpretation of Regulation No 355/77 and of the undertakings formally entered into by the beneficiary. The Commission
         considers that both suspension of the production line and the decision to transfer it to another establishment are circumstances
         that totally alter the project approved by the Commission; they constitute a breach of the provisions of Regulation No 355/77,
         in particular Article 10(c) thereof ─ as it explained at the hearing ─, a breach of the obligation not to use the installations
         for other purposes and a breach of the obligation to give notice and seek prior authorisation. In that regard the Commission
         contends that relying on the obligation to give prior notice does not constitute a new complaint against the applicant but
         is merely intended as a response to the applicant's arguments that stopping activity and transferring the production line
         are in accordance with the Community provisions. 
          Findings of the Court
         
         
         71
            
          The applicant contends in particular that the complaint referred to in recital 7 is unfounded because the line was not abandoned,
         and also that suspension of Line 125 fully complies with the objectives of the EC Treaty and Regulation No 355/77 and with
         the obligations assumed by the beneficiary when the aid was granted. 
         
         
         72
            
          First of all, the applicant's argument that the complaint is vitiated by an incorrect assessment of the facts because stopping
         the line did not mean that the installation was  
         completely abandoned cannot be accepted. 
         
         
         73
            
          It is clear from paragraph 11 of the report that the line had not been used since August 1992 according to the statements
         made by the persons in charge of the establishment. Nor did the applicant in its application deny the fact that the line was
         indeed suspended for over two years. Lastly, as the Commission correctly contends, the applicant did not produce any evidence,
         such as statistics or production data, to show that the line was used at all during those two years. 
         
         
         74
            
          Therefore, the fact that the installation in question was kept available for the undertaking concerned and in good operating
         order and that an operating check was made on the line during the inspection is irrelevant, since those circumstances do not
         alter the fact that the line was not used at all for over two years. Therefore, irrespective of the words used by the Commission
         in the contested decision, the Commission did not make any incorrect assessment of the facts referred to in recital 7 in the
         contested decision. 
         
         
         75
            
          Second, it is appropriate to consider the merits of the applicant's contention that suspension of the line, which was a business
         decision justified by market trends and by the situation of the undertaking concerned that came within the sphere of autonomy
         enjoyed by an undertaking as regards organising its production, is in accordance with the objectives of the EC Treaty and
         of Regulation No 355/77 and the obligations assumed by the beneficiary when the aid was granted. 
         
         
         76
            
          It should be observed first of all that as the production line was not in fact transferred there is no need for the Court
         to rule on this question. 
         
         
         77
            
          Article 10(c) of Regulation No 355/77 provides that projects must  
         contribute to the lasting economic effect of the structural improvement aimed at by the programmes. Article 9(1) provides that  
         projects must contribute to improving the situation of the basic agricultural production sector in question. The fourth recital in Regulation No 355/77 states that to be eligible for Community financing, projects must permit  
         in particular the achievement of improvement and rationalisation of processing and marketing structures in respect of agricultural
         products and of lasting beneficial effect on agriculture. It is clear therefore that the implementation of the project in question and its contribution to a lasting beneficial effect
         on the processing and marketing of juices and nectars from fruits constitute a fundamental obligation which is incumbent upon
         the applicant as a result of the award of the aid. 
         
         
         78
            
          In addition, under the obligation assumed in the letter applying for aid submitted by the beneficiary, the applicant is required,
         first,  
         not to use the machines and other equipment installed in the complex in question for purposes other than the use specified
         for at least five years from the date of the inspection to ensure they were operating properly and, second, to submit amendments of the approved project to the Commission for prior authorisation, in accordance with the
         decision granting aid. In that regard, the applicant cannot validly maintain that the Commission's argument relating to infringement
         of the latter obligation is inadmissible, since that obligation is one of the conditions linked to the award of the aid and
         underlies the EAGGF system, as is shown by Article 24(2) of Regulation No 4253/88; this is pointed out in the contested decision,
         which explains clearly in recital 22 that the irregularities found affect the conditions for implementing the project in question
         and, in recital 24, that in such cases failure to notify and obtain prior authorisation from the Commission may lead to suspension
         or reduction of the aid. 
         
         
         79
            
          The Court considers that suspending Line 125, which constitutes 97% of the overall investment under the approved project,
         for over two years constitutes a breach of the abovementioned regulations and obligations. 
         
         
         80
            
          First of all, a trader is of course free to determine the industrial policy of his undertaking and how his installations are
         going to be used, and in particular to decide to halt production when the market or the constraints being experienced by the
         undertaking so require. However, when a trader applies for Community aid for a specific operation he assumes, under the provisions
         of Regulation No 355/77, cited above, and in the present case Article 10(c), the obligation to carry out correctly the operation
         being financed and to obtain the planned results. If the main line being financed under the project is idle for over two years
         this means in principle that the project will not have the lasting economic effect sought or obtain the anticipated results
         as provided for in Regulation No 355/77. It was therefore reasonable for the Commission to consider that such suspension constituted
         a breach of Article 10(c) of Regulation No 355/77. 
         
         
         81
            
          It is also appropriate to state that the temporary constraints due to market trends and rationalisation of the undertaking
         which the applicant had to face are inherent in the normal commercial risks which any reasonably well-informed trader should
         have been able to foresee. Hence, those factors cannot be relied upon in order to avoid the application of Regulation No 355/77.
         
         
         
         82
            
          Also, in view of the extent and significance of investment under the project that was affected by the stoppage of activity
         (97%), it should be pointed out that, contrary to what the applicant contends, it was legitimate for the Commission to consider
         that that fact constituted a  
         change to the project which should have been notified and received prior authorisation, as stated in the letter accompanying the
         decision granting the aid. However, the applicant did not send the Commission any information regarding either the reorganisation
         it had undertaken or the decision to suspend the production line in question. 
         
         
         83
            
          As the Commission rightly stated, it alone has the power to examine whether projects meet the conditions of the operation
         and the Community regulations, under Article 1(3) of Regulation No 355/77 and Article 14(3) of Regulation No 4253/88. Therefore,
         the applicant cannot legitimately claim that suspension of the line was in accordance with the criterion of the proper functioning
         of the market, referred to in Article 3 of Regulation No 355/77, and that to continue its activities would have been in breach
         of Article 9 of Regulation No 355/77, in the absence of any communication or confirmation on the part of the Commission. 
         
         
         84
            
          Lastly, the obligation assumed by the beneficiary not to use the installations for other purposes is designed to prohibit
         for a period of five years any unrelated use of items for which finance has been received. The object of that condition must
         therefore be interpreted as being to ensure that the project approved and execution of the operation being financed are not
         undermined as a result of the installations being used for a purpose other than that originally established. In the present
         case, the fact that Line 125 had been idle since August 1992 constitutes improper use of the installation, which occurred
         during that period of five years, and hence an infringement of the obligation not to use the installations for other purposes.
         
         
         
         85
            
          In the light of the above the conclusion must be drawn that the Commission did not misinterpret the obligations assumed by
         the beneficiary or infringe the Community rules relating to the proper functioning of the common market as regards Production
         Line 125. 
         
         
         86
            
          The third plea must therefore be rejected. 
          The fourth plea: infringement and misinterpretation of the Community rules relating to the 1983 Information Document, concerning
         Production Line 700, in recital 8 in the contested decision
          Arguments of the parties
         
         
         87
            
          The applicant submits that recital 8 in the contested decision, which states that Line 700 was  
         mainly used for the packaging of tomato-based products, in breach of point B.5, paragraph 21, of the 1983 Information Document is
         groundless, since the alleged facts do not correspond to reality and there was no breach of that document. 
         
         
         88
            
          First, the applicant contends that Line 700 was not used  
         mainly for such packaging, it was used  
         exceptionally for such packaging. In that regard it states that the tomato season lasts for only approximately 40 days, during the months
         of August and September, and that therefore it is only during that very short period and since it is impossible to absorb
         that production in other establishments of the beneficiary that that line has on occasions been used for packaging tomato
         juice. Outside that period of exceptional use the line has been used in accordance with the project for producing juices and
         nectars from fruits. 
         
         
         89
            
          Second, the applicant argues that it is not possible to speak of  
         using installations for other purposes in the case of multipurpose installations such as Line 700. Where a line is intrinsically multipurpose the Community provisions
         should not be considered to have been infringed where it is used for the purpose stated in the project, and only exceptionally
         for seasonal work. 
         
         
         90
            
          At any event, the applicant states that the investment made in Line 700 in order to adapt it technologically to Line 125 amounts
         to only 3% (ITL 88 358 690) of the total amount of the investment project (ITL 2 822 619 947), which is a very modest amount.
         
         
         
         91
            
          In the reply the applicant disputes the evidential value of the report relied upon by the Commission. First, it disputes the
         terms of the report, since an inspection lasting four days, only one of which was spent at the Portomaggiore establishment,
         could not have sufficed to enable Commission staff to establish that the line had been improperly used  
         since August 1992. Second, the applicant contends that that finding does not constitute good evidence of the beneficiary's actions
         and lacks evidential value since the document was drawn up by Commission staff and the beneficiary did no more than countersign
         it merely to acknowledge formal receipt of the document and not to approve its content. 
         
         
         92
            
          The Commission considers that this plea is totally groundless. It is clear from the file and from the report that the Portomaggiore
         establishment had engaged in the packaging of tomato-based products since August 1992. Moreover, the report accurately recorded
         what was actually found during the inspection, which the applicant did not dispute until the reply stage. The applicant's
         argument that the document cannot be relied upon is therefore irrelevant. 
          Findings of the Court
         
         
         93
            
          As regards the applicant's argument that Line 700 was used for tomato-based products only  
         exceptionally and not  
         mainly, it should be stated first of all that point 10 of the report makes clear that from August 1992 onwards the applicant used
         that line  
         mainly for the processing of tomato-based products. The applicant, however, disputes the terms of the report on the grounds that
         it has no evidential value. 
         
         
         94
            
          In order to assess the evidential value of a document, it is necessary to determine whether the information it contains is
         credible, to take into account the origin of the document and the circumstances in which it was drawn up, and to consider
         whether it seems, on the basis of its content, sensible and reliable (see Joined Cases T-25/95, T-26/95, T-30/95 to T-32/95,
         T-34/95 to T-39/95, T-42/95 to T-46/95, T-48/95, T-50/95 to T-65/95, T-68/95 to T-71/95, T-87/95, T-88/95, T-103/95 and T-104/95
          
         Cimenteries CBR and Others   v  
         Commission  [2000] ECR II- 491, paragraph 1838). In the present case, as the report was drawn up immediately after the inspection and
         was duly signed by all the beneficiary's representatives, and also the officials from the Commission and from the Italian
         administration who were present at the inspection, the evidential value of that report and the plausibility of the irregularity
         established cannot reasonably be called into question. 
         
         
         95
            
          Nor is it apparent from that document that during the inspection the applicant disputed the report or made any comments with
         regard to the facts alleged in the report. Indeed, it is clear from the reservation expressed by the applicant in the last
         paragraph of the report with regard to sending  
         further information concerning the statements made therein that it was merely ensuring that it would be possible to supply further information and that it was not denying the findings
         made, as the Commission rightly contends. Therefore, the applicant's contention that that finding did not constitute good
         evidence of the beneficiary's actions, since its signature did not constitute approval of the document's content, and that
         it maintained during the administrative procedure that the line was used exceptionally for the packaging of tomatoes does
         not alter the evidential value of that document. 
         
         
         96
            
          Second, it is clear from the trade union agreement signed in May 1992 and produced by the beneficiary in its observations
         submitted on 3 August 1995 that it was decided at that time that the Portomaggiore establishment would carry on producing
         tomato-based products following the restructuring of the group. That document constitutes relevant evidence in support of
         the Commission's contention, although it does not show that this did in fact take place. 
         
         
         97
            
          Third, the applicant did not adduce any evidence, such as production reports or statistics relating to the products processed
         on the line in respect of the period after August 1992, to show that, with the exception of the short period of the tomato
         season, Line 700 was mainly used during the remainder of the year for the packaging of fruit juices. 
         
         
         98
            
          Therefore, the applicant's argument that the tomato season is short and hence the line was only used occasionally for such
         packaging cannot be accepted. The conclusion must therefore be that the Commission did not make an incorrect assessment of
         the facts in the eighth recital in the contested decision. 
         
         
         99
            
          As regards the applicant's argument that the 1983 Information Document was not infringed and, even if it had been, any irregularity
         would not have had any effect on the project and the aid granted, it should be pointed out that point B.5, paragraph 21, of
         the 1983 Information Document provides that  
         investments which are ineligible are those involving an increase in processing capacity for tomatoes and that  
         however, in entirely exceptional cases it is possible to finance investments effected in regions where the income of farmers
         is significantly lower than the national average and where processing capacities are insufficient and outdated.  
         
         
         100
            
          In the present case, the applicant relies on the multipurpose nature of the line in order to contend that the installation
         was not used for other purposes and, hence, that the prohibition contained in point B.5, paragraph 21, of the 1983 Information
         Document was not infringed. However, although there is no need to adjudicate on whether Line 700 was in fact used for other
         purposes, it is sufficient to point out that, as stated above, the applicant has adduced no evidence to support its contention
         that the line was used only exceptionally for the packaging of tomatoes, nor has it even shown that the installation was used
         mainly for anything but the processing of tomatoes. That argument cannot therefore be accepted. 
         
         
         101
            
          At any event, even if the applicant used the line in question only  
         exceptionally and not  
         mainly, since it was used for the only product in the fruit and vegetables sector whose processing is excluded from Community financing,
         that use also constituted a breach of the condition to which the beneficiary was subject under the 1983 Information Document.
         Indeed, as the only exception provided for in respect of that provision was not relied upon in the present case it cannot
         be taken to apply. 
         
         
         102
            
          As regards the applicant's argument that the effect of that irregularity is small in view of the limited amount of investment
         for that installation, it should be noted that the prohibition laid down in the 1983 Information Document makes no provision
         for possible off-setting or exceptions based on the amount of the investment. 
         
         
         103
            
          The Commission cannot therefore be criticised for considering that point B.5, paragraph 21, of the 1983 Information Document
         had been infringed in the present case. 
         
         
         104
            
          In the light of the above the conclusion must be drawn that the Commission did not make an incorrect assessment of the circumstances
         of fact and of law in recital 8 in the contested decision and that the fourth plea must therefore be rejected. 
          The fifth and sixth pleas: infringement of Article 24(2) of Regulation No 4253/88 and infringement of the principle of proportionality
          Arguments of the parties
         
         
         105
            
          The applicant contends first of all that the contested decision infringes Article 24(2) of Regulation No 4253/88 since there
         was no  
         significant change in the project within the meaning of that provision which might give rise to discontinuance of the aid. It adds that the
         irregularities allegedly found, even if they did take place, were not very serious and were of very little financial significance
         in relation to the total amount of the investment, nor would they have affected the proper implementation or conditions of
         the operation, since the project had been fully executed and the planned benefits obtained. 
         
         
         106
            
          The applicant contends, secondly, that at any event the contested decision infringes the principle of proportionality. 
         
         
         107
            
          First, the contested decision breaches that principle because, despite the fact that the irregularities allegedly found were
         not very serious, the Commission discontinued aid rather than merely reducing it. Furthermore, the case-law of the Court requires
         that where there is a choice of appropriate measures institutions should choose the least onerous. 
         
         
         108
            
          Second, the applicant contends that the Commission did not take into account the fact that the infringements were committed
         by a company other than the one to which the contested decision is addressed, so that the measure affects a person unconnected
         with the facts in question. On that ground the contested decision itself is neither effective nor dissuasive, as it should
         be within the terms of the case-law of the Court of Justice and of the Court of First Instance, and is clearly disproportionate
         in relation to the company to which the contested measure is addressed. 
         
         
         109
            
          The Commission disputes the arguments put forward by the applicant as being manifestly unfounded. On the one hand, Article 24(2)
         of Regulation No 4253/88 is fully applicable in the present case. On the other hand, with regard to the alleged infringement
         of the principle of proportionality, the applicant did not commit mere irregularities, it committed serious infringements
         of essential undertakings linked to the granting of the aid. Hence discontinuance was fully justified. 
          Findings of the Court
         
         
         110
            
          First it should be noted that the system of subsidies introduced under the Community rules relies in particular on the performance
         by beneficiaries of a number of obligations which entitles them to receive the financial aid envisaged. If the beneficiary
         does not comply with all those obligations Article 24(2) of Regulation No 4253/88 authorises the Commission to reconsider
         the extent of the obligations it assumes under the decision to grant aid. In the present case, as was held above, the applicant
         did not comply with its obligations under the decision to grant aid. The irregularities established in recitals 7 and 8 of
         the contested decision therefore constitute significant changes affecting the conditions of the operation for which the Commission's
         prior approval was not sought. Hence, the conditions under which Article 24(2) applies are met in full. 
         
         
         111
            
          Second, as regards the principle of proportionality, it should be noted that it is settled case-law that by virtue of that
         principle, as laid down in the third paragraph of Article 5 EC, the measures adopted by Community institutions must not exceed
         what is appropriate and necessary for attaining the objective pursued (see in particular Case 15/83  
         Denkavit Nederland  [1984] ECR 2171, paragraph 25, and Case T-260/94  
         Air Inter v  
         Commission  [1997] ECR II-997, paragraph 144, and  
         Conserve Italia I, paragraph 101).  
         
         
         112
            
          It is settled case-law that infringement of obligations whose observance is of fundamental importance to the proper functioning
         of a Community system may be penalised by forfeiture of a right conferred by Community legislation, such as entitlement to
         aid (Case 21/85  
         Maas  [1986] ECR 3537, paragraph 15, Case C-104/94  
         Cereol Italia  [1995] ECR I-2983, paragraph 24,  
         Conserve Italia I, paragraph 103, and  
         Conserve Italia II,paragraph 84). Moreover, the Court has confirmed that  
         only the possibility that an irregularity may be penalised not by reduction of the aid by an amount corresponding to that
         irregularity but by complete cancellation of the aid can produce the deterrent effect required to ensure the proper management
         of the resources of the EAGGF (Case C-500/99P  
         Conserve Italia v  
         Commission [2002] ECR I-867, paragraph 101). 
         
         
         113
            
          It is clear therefore that discontinuance of EAGGF aid is not, in principle, disproportionate where it is established that
         the beneficiary of that aid has infringed an obligation that is fundamental for the proper operation of the EAGGF. The contested
         decision should be considered in the light of those principles. 
         
         
         114
            
          In the present case, as was established above, the applicant suspended activity for over two years on the line mainly financed
         by Community aid (Line 125), in breach of Article 10(c) of Regulation No 355/77 and the applicant's obligations to give prior
         notification and not to use machines for purposes other than those specified. The applicant also used the other line to which
         the project being financed related (Line 700) for processing the only product excluded from aid. 
         
         
         115
            
          It must be observed, first, that the objective of contributing to the lasting economic effect of the structural improvement
         of processing of juices and nectars from fruits, as provided for in Article 10 of Regulation No 355/77, constitutes a fundamental
         obligation under the EAGGF rules (see to that effect Joined Cases T-61/00 and T-62/00  
         APOL and AIPO   v  
         Commission  [2003] ECR I-635, paragraph 102). The Court of Justice also stated very recently that it was important for the proper functioning
         of the system of controls set up to ensure proper use of Community funds that  
         applicants for aid provide the Commission with information which is reliable and not liable to mislead it (
         Conserve Italia   v  
         Commission, cited above, paragraph 100). Lastly, since compliance with the obligation not to use the installations for other purposes
         was an express undertaking made by the beneficiary when the application for aid was made, it constitutes an essential means
         of ensuring that the operation being financed is properly carried out, which was not complied with either. 
         
         
         116
            
          Secondly, use of Line 700 for the only product in the fruit and vegetable sector whose processing is totally excluded from
         Community financing, an exclusion which applied to the applicant, also constitutes an infringement of the essential conditions
         for the aid granted. 
         
         
         117
            
          Moreover, it should be noted that, according to the applicant's assertions (application, paragraph 40), the irregularities
         referred to in recitals 7 and 8 in the contested decision concerned 100% of the total amount of the approved investment and
         of the Community aid granted (97% for the modernisation of Line 125 and 3% for Line 700). Those irregularities therefore concern
         all of the Community aid granted. 
         
         
         118
            
          Such actions therefore infringe obligations which must be complied with in order to ensure that the EAGGF operates properly,
         and the Commission did not exceed the limits of what is appropriate and necessary in order to ensure the proper operation
         of the system in considering that such infringements justified discontinuance of the aid. 
         
         
         119
            
          Lastly, the applicant's argument that discontinuance of the aid is disproportionate since it was not the undertaking responsible
         for the irregularities established cannot be accepted. As the Court of First Instance pointed out in  
         Conserve Italia I (paragraph 107), the applicant assumed the beneficiary's rights and obligations following the purchase referred to in paragraph 20
         above. 
         
         
         120
            
          Consequently, the principle of proportionality has not been infringed. 
         
         
         121
            
          In those circumstances, the pleas alleging infringement of Article 24(2) of Regulation No 4253/88 and infringement of the
         principle of proportionality must be rejected. 
         Conclusion
         
         122
            
          Although the plea alleging incorrect assessment of the facts referred to in recital 6 of the contested decision is partly
         justified as regards invoice No 44098 from ATLAS COPCO and invoice No 107 from MIT Mantovani, the irregularities referred
         to in recitals 7 and 8 of the contested decision are so serious that they alone justify the Commission's decision to discontinue
         the aid. 
         
         
         123
            
          In the light of all the foregoing considerations, the action must be dismissed. 
         
         Costs
         124
            
          Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party's pleadings. Since the applicant has been unsuccessful, and the Commission has applied
         for costs, the applicant must be ordered to bear its own costs and those incurred by the Commission. 
         
         On those grounds, 
         
         
         
            
            THE COURT OF FIRST INSTANCE (Fifth Chamber)
         
         
          hereby:  
         
            
            1.
             Dismisses the application; 
            
            
            2.
             Orders the applicant to bear its own costs and those of the Commission.
            
            
                  García-Valdecasas 
               
               
                   Lindh
               
               
                   Cooke
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
          Delivered in open court in Luxembourg on 11 December 2003. 
         
         
         
         
                  H. Jung  
               
               
                   P. Lindh  
               
            
         
         
         
                  Registrar
               
               
                  President
               
            
         
            
         
      
          1 –
            
             Language of the case: Italian.