Marks & Spencer plc v Commissioners of Customs & Excise.
Date: 2008-04-10
21. It must first be stated that that question bears a direct relation to the facts submitted to the national court and is objectively required in order to resolve the dispute in the main proceedings (see, to that effect, Case C‑18/93 Corsica Ferries  [1994] ECR I-1783, paragraph 14, and Case C‑144/04 Mangold  [2005] ECR I‑9981, paragraph 34). The Commission’s contention that the first question is irrelevant must therefore be rejected as the Court has jurisdiction to rule on that question.
22. Secondly, it is important to bear in mind that, in authorising Member States to apply exemptions with refund of the tax paid, Article 28(2) of the Sixth Directive lays down a derogation to the rules which govern the standard rate of VAT (Case C-251/05 Talacre Beach Caravan Sales  [2006] ECR I-6269, paragraph 17). It is therefore correct to state that it is by reason of Community law that those exemptions, known as ‘zero-rating’, are permitted.
24. Article 28(2)(a) of the Sixth Directive can therefore be compared to a ‘stand-still’ clause, intended to prevent social hardship likely to follow from the abolition of exemptions provided for by the national legislature but not included in the Sixth Directive ( Talacre Beach Caravan Sales , paragraph 22). That optional maintenance of the previous status quo is therefore merely framed by the Sixth Directive. Consequently, it is pursuant to national legislation which does not constitute a measure for the implementation of the Sixth Directive (see, by analogy, Case C‑36/99 Idéal tourisme  [2000] ECR I-6049, paragraph 38), but the maintenance of an exemption which is permitted by that directive, regard being had to the social objectives pursued by the legislation of the United Kingdom in not making the final consumer pay VAT on everyday items of food, that Marks & Spencer may claim the exemption with refund of the tax paid at the preceding stage.
33. It must be noted at the outset that the actual wording of Article 28(2)(a) of the Sixth Directive, in the version resulting from Directive 92/77, states that the national legislation which may be maintained must be ‘in accordance with Community law’ and satisfy the conditions stated in the last indent of Article 17 of Directive 67/228. Although the addition relating to being ‘in accordance with Community law’ was made only in 1992, such a requirement, which forms an integral part of the proper functioning and the uniform interpretation of the common system of VAT, applies to the whole of the period of erroneous taxation at issue in the main proceedings. As the Court has had occasion to point out, the maintenance of exemptions or of reduced rates of VAT lower than the minimum rate laid down by the Sixth Directive is permissible only in so far as it complies with, inter alia, the principle of fiscal neutrality inherent in that system (see, to that effect, Case C-216/97 Gregg  [1999] ECR I-4947, paragraph 19, and Case C‑481/98 Commission  v France  [2001] ECR I-3369, paragraph 21).
34. It thus follows that the principles governing the common system of VAT, including that of fiscal neutrality, apply even to the circumstances provided for in Article 28(2) of the Sixth Directive and may, if necessary, be relied on by a taxable person against a national provision, or the application thereof, which fails to have regard to those principles.
35. As regards, more specifically, the right to a refund, as is apparent from the settled case-law of the Court, the right to obtain a refund of charges levied in a Member State in breach of rules of Community law is the consequence and the complement of the rights conferred directly on individuals by Community law (see in particular, to that effect, Marks & Spencer , paragraph 30 and the case-law cited). That principle also applies to charges levied in breach of national legislation permitted under Article 28(2) of the Sixth Directive.
36. The answer to the second question must therefore be that where, under Article 28(2) of the Sixth Directive, both before and after the insertion of the amendments made to that provision by Directive 92/77, a Member State has maintained in its national legislation an exemption with refund of input tax in respect of certain specified supplies but has misinterpreted its national legislation, with the result that certain supplies which should have benefited from exemption with refund of input tax under its national legislation have been subject to tax at the standard rate, the general principles of Community law, including that of fiscal neutrality, apply so as to give a trader who has made such supplies a right to recover the sums mistakenly charged in respect of them.
The third to fifth questions: possible restrictions on the right to repayment based on the principles of equal treatment and fiscal neutrality
Observations submitted to the Court
41. Community law does not prevent a national legal system from disallowing repayment of charges which have been levied but were not due where to do so would lead to unjust enrichment of the recipients (Case 104/86 Commission  v Italy  [1988] ECR 1799, paragraph 6; Case C-343/96 Dilexport  [1999] ECR I‑579, paragraph 47; and Joined Cases C-441/98 and C-442/98 Michaïlidis  [2000] ECR I-7145, paragraph 31). However, in order to comply with Community law, the principle prohibiting unjust enrichment must be implemented in accordance with principles such as that of equal treatment.
42. Furthermore, it is important to bear in mind that, where a charge has been wrongly levied under Community law and it is established that only part of the charge has been passed on, the national authorities must repay the amount not passed on (Joined Cases C-192/95 to C‑218/95 Comateb and Others  [1997] ECR I-165, paragraphs 27 and 28). However, even where the charge is wholly incorporated in the price, the taxable person may suffer as a result of a fall in the volume of his sales (see, to that effect, Comateb and Others , paragraphs 29 and 30, and Michaïlidis , paragraphs 34 and 35).
43. Accordingly, the existence and the degree of unjust enrichment which repayment of a charge which was levied though not due from the aspect of Community law entails for a taxable person can be established only following an economic analysis in which all the relevant circumstances are taken into account (see, inter alia, Case C-147/01 Weber’s Wine World and Others  [2003] ECR I-11365, paragraphs 94 to 100).
44. It will thus be for the national court to determine whether the appraisal made by the Commissioners corresponds to the analysis described in the preceding paragraph of this judgment.
– The third question
47. As regards, first, the principle of fiscal neutrality, that principle, which is a fundamental principle of the common system of VAT (see, inter alia, Case C‑454/98 Schmeink & Cofreth and Strobel  [2000] ECR I‑6973, paragraph 59), in particular precludes treating similar goods, which are thus in competition with each other, differently for VAT purposes (Case C-283/95 Fischer  [1998] ECR I‑3369, paragraphs 21 and 27, and Commission  v France , paragraph 22). It follows that those products must be subject to a uniform rate (see, to that effect, Commission  v France , paragraph 22).
48. Consequently, in a situation where an error in the rate affects a number of taxable persons and the repayment of the sums wrongly levied on account of that error depends, at least in part, on whether those taxable persons are initially in the position of creditors or debtors vis-à-vis the Treasury in respect of the VAT, those taxable persons are, in actual fact, subject to a genuine and different charge, analogous to that which could have resulted from the application of different rates of VAT to similar goods. Such a disparity is therefore contrary to the principle of fiscal neutrality, in so far as those taxable persons have marketed similar goods, a matter which it will be for the national court to determine.
49. Secondly, it is important to bear in mind that the principle of fiscal neutrality is the reflection, in matters relating to value added tax, of the principle of equal treatment (Case C-106/05 L.u.P.  [2006] ECR I-5123, paragraph 48 and the case-law cited). However, although infringement of the principle of fiscal neutrality may be envisaged only as between competing traders, as has been pointed out in paragraph 47 of this judgment, infringement of the general principle of equal treatment may be established, in matters relating to tax, by other kinds of discrimination which affect traders who are not necessarily in competition with each other but who are nevertheless in a similar situation in other respects.
51. In this connection, the general principle of equal treatment requires that similar situations are not treated differently unless differentiation is objectively justified (Joined Cases 201/85 and 202/85 Klensch and Others  [1986] ECR 3477, paragraph 9, and Idéal tourisme , paragraph 35).
59. In that regard, according to settled case-law, it is, in the absence of Community legislation, for the internal legal order of each Member State to designate the competent courts and lay down the detailed procedural rules for legal proceedings intended fully to safeguard the rights which individuals derive from Community law (see Case 33/76 Rewe-Zentralfinanz and Rewe-Zentral  [1976] ECR 1989, paragraph 5, and Case C‑224/01 Köbler  [2003] ECR I-10239, paragraph 46).
61. However, it is for the Court to indicate certain criteria or principles of Community law which must be complied with when that assessment is being made.