Commission of the European Communities v Italian Republic.
Date: 1980-02-27
4 THE ABOVE-MENTIONED PROVISIONS SUPPLEMENT , WITHIN THE SYSTEM OF THE TREATY , THE PROVISIONS ON THE ABOLITION OF CUSTOMS DUTIES AND CHARGES HAVING EQUIVALENT EFFECT . THEIR AIM IS TO ENSURE FREE MOVEMENT OF GOODS BETWEEN THE MEMBER STATES IN NORMAL CONDITIONS OF COMPETITION BY THE ELIMINATION OF ALL FORMS OF PROTECTION WHICH RESULT FROM THE APPLICATION OF INTERNAL TAXATION WHICH DISCRIMINATES AGAINST PRODUCTS FROM OTHER MEMBER STATES . AS THE COMMISSION HAS CORRECTLY STATED , ARTICLE 95 MUST GUARANTEE THE COMPLETE NEUTRALITY OF INTERNAL TAXATION AS REGARDS COMPETITION BETWEEN DOMESTIC PRODUCTS AND IMPORTED PRODUCTS .
5 THE FIRST PARAGRAPH OF ARTICLE 95 , WHICH IS BASED ON A COMPARISON OF THE TAX BURDENS IMPOSED ON DOMESTIC PRODUCTS AND ON IMPORTED PRODUCTS WHICH MAY BE CLASSIFIED AS ' ' SIMILAR ' ' , IS THE BASIC RULE IN THIS RESPECT . THIS PROVISION , AS THE COURT HAS HAD OCCASION TO EMPHASIZE IN ITS JUDGMENT OF 10 OCTOBER 1978 IN CASE 148/77 , H . HANSEN JUN . & O . C . BALLE GMBH & CO . V HAUPTZOLLAMT FLENSBURG ( 1978 ) ECR 1787 , MUST BE INTERPRETED WIDELY SO AS TO COVER ALL TAXATION PROCEDURES WHICH CONFLICT WITH THE PRINCIPLE OF THE EQUALITY OF TREATMENT OF DOMESTIC PRODUCTS AND IMPORTED PRODUCTS ; IT IS THEREFORE NECESSARY TO INTERPRET THE CONCEPT OF ' ' SIMILAR PRODUCTS ' '  WITH SUFFICIENT FLEXIBILITY . THE COURT SPECIFIED IN THE JUDGMENT OF 17 FEBRUARY 1976 IN THE     REWE CASE ( CASE 45/75 ( 1976 ) ECR 181 ) THAT IT IS NECESSARY TO CONSIDER AS SIMILAR PRODUCTS WHICH ' ' HAVE SIMILAR CHARACTERISTICS AND MEET THE SAME NEEDS FROM THE POINT OF VIEW OF CONSUMERS ' ' . IT IS THEREFORE NECESSARY TO DETERMINE THE SCOPE OF THE FIRST PARAGRAPH OF ARTICLE 95 ON THE BASIS NOT OF THE CRITERION OF THE STRICTLY IDENTICAL NATURE OF THE PRODUCTS BUT ON THAT OF THEIR SIMILAR AND COMPARABLE USE .
14 IN THE VARIOUS PROCEDURES , THE PARTIES HAVE RELIED , WITH REGARD TO THE DISTINCTION BETWEEN SEVERAL CATEGORIES OF ALCOHOLIC PRODUCT , UPON CERTAIN STATEMENTS MADE BY THE COURT OF JUSTICE IN THE JUDGMENT IN THE HANSEN & BALLE CASE , SUPRA , WHICH WAS DELIVERED AT A TIME WHEN THESE APPLICATIONS WERE PENDING . REFERENCE HAS BEEN MADE MORE PARTICULARLY TO A PASSAGE IN THAT JUDGMENT WHICH STATES AS FOLLOWS : ' ' AT THE PRESENT STAGE OF ITS DEVELOPMENT AND IN THE ABSENCE OF ANY UNIFICATION OR HARMONIZATION OF THE RELEVANT     PROVISIONS , COMMUNITY LAW DOES NOT PROHIBIT MEMBER STATES FROM GRANTING TAX ADVANTAGES , IN THE FORM OF EXEMPTION FROM OR REDUCTION OF DUTIES , TO CERTAIN TYPES OF SPIRITS OR TO CERTAIN CLASSES OF PRODUCERS . INDEED , TAX ADVANTAGES OF THIS KIND MAY SERVE LEGITIMATE ECONOMIC OR SOCIAL PURPOSES , SUCH AS THE USE OF CERTAIN RAW MATERIALS BY THE DISTILLING INDUSTRY , THE CONTINUED PRODUCTION OF PARTICULAR SPIRITS OF HIGH QUALITY , OR THE CONTINUANCE OF CERTAIN CLASSES OF UNDERTAKINGS SUCH AS AGRICULTURAL DISTILLERIES ' ' .
16 IN VIEW OF THESE OBSERVATIONS , THE COURT POINTS OUT THAT ALTHOUGH IT ACKNOWLEDGED IN THE JUDGMENT IN THE HANSEN & BALLE CASE , TAKING INTO ACCOUNT THE STATE OF DEVELOPMENT OF COMMUNITY LAW , THAT CERTAIN TAX EXEMPTIONS OR TAX CONCESSIONS ARE LAWFUL , THIS IS ON CONDITION THAT THE MEMBER STATES USING THOSE POWERS EXTEND THE BENEFIT THEREOF WITHOUT DISCRIMINATION TO IMPORTED PRODUCTS IN THE SAME CONDITIONS . IT IS NECESSARY TO EMPHASIZE THAT IT WAS ACKNOWLEDGED THAT THOSE PRACTICES WERE LAWFUL IN PARTICULAR SO AS TO ENABLE PRODUCTIONS OR UNDERTAKINGS TO CONTINUE WHICH WOULD NO LONGER BE PROFITABLE WITHOUT THESE SPECIAL TAX BENEFITS BECAUSE OF THE RISE IN PRODUCTION COSTS . ON THE OTHER HAND , THE CONSIDERATIONS EXPRESSED IN THAT JUDGMENT CANNOT BE UNDERSTOOD AS LEGITIMATING TAX DIFFERENCES WHICH ARE DISCRIMINATORY OR PROTECTIVE .

THE SUBJECT-MATTER OF THE DISPUTE AND THE ADMISSIBILITY OF THE APPLICATION