Commission of the European Communities v Kingdom of Spain.
Date: 1999-09-16
19 In that connection, suffice it to note that such a requirement would be contrary to the general principle of respect for the rights of the defence. According to the case-law of the Court, the proper conduct of the pre-litigation procedure constitutes an essential guarantee required by the Treaty not only in order to protect the rights of the Member State concerned, but also to ensure that any contentious procedure will have a clearly defined dispute as its subject-matter (see the order of 11 July 1995 in Case C-266/94 Commission v Spain [1995] ECR I-1975, paragraph 17). Thus, once the subject-matter has been defined, the Member State has the right to raise all the pleas available to it in order to defend itself. Moreover, there is no rule of procedure which requires the Member State concerned to put forward, during the pre-litigation procedure, all the arguments in its defence, in an application based on Article 169 of the EC Treaty.
21 It must be observed in that regard, as the Court has already held in Case 222/84 Johnston [1986] ECR 1651, paragraph 26, that the only articles in which the Treaty provides for derogations applicable in situations which may involve public safety are Articles 36, 48, 56, 223 and 224 of the EC Treaty (now, after amendment, Articles 30 EC, 39 EC, 46 EC, 296 EC and 297 EC), which deal with exceptional and clearly defined cases. Because of their limited character, those articles do not lend themselves to a wide interpretation.
22 Accordingly, it is for the Member State which seeks to rely on those exceptions to furnish evidence that the exemptions in question do not go beyond the limits of such cases. In the present case, the Kingdom of Spain has not demonstrated that the exemptions provided for by the Spanish Law are necessary for the protection of the essential interests of its security. It is clear from the preamble to that Law that its principal objective is to determine and allocate the financial resources for the reinforcement and modernisation of the Spanish armed forces by laying the economic and financial basis for its overall strategic plan. It follows that the VAT exemptions are not necessary in order to achieve the objective of protecting the essential interests of the security of the Kingdom of Spain.
23 Furthermore, as the Advocate General pointed out at point 12 of his Opinion, the imposition of VAT on imports and acquisitions of armaments would not compromise that objective since the income from payments of VAT on the transactions in question would flow into the State's coffers apart from a small percentage which would be diverted to the Community as own resources.
29 In that regard, suffice it to note that, according to the case-law of the Court (Case C-35/90 Commission v Spain [1991] ECR I-5073, paragraph 7), since the Kingdom of Spain subjected supplies of armaments, munitions and equipment exclusively for military use from other Member States to the general scheme of VAT by means of Law No 30/85 which entered into force on 1 January 1986, it could no longer subsequently claim the right to continue to exempt those activities pursuant to Article 28(3)(b) of the Sixth Directive.
30 Furthermore, a retrospective exemption of the kind provided for by the Spanish legislation would be contrary to the purpose of the relevant Community provisions. It is settled case-law that the very wording of Article 28(3)(b) of the Sixth Directive precludes the introduction of new exemptions (Case 73/85 Kerrutt [1986] ECR 2219, paragraph 17, and Case C-74/91 Commission v Germany [1992] ECR I-5437, paragraph 15).