Optigen Ltd (C-354/03), Fulcrum Electronics Ltd (C-355/03) and Bond House Systems Ltd (C-484/03) v Commissioners of Customs & Excise.
Date: 2006-01-12
36. It is to be remembered first of all that the Sixth Directive establishes a common system of VAT based, inter alia, on a uniform definition of taxable transactions (Case C-305/01 MKG-Kraftfahrzeuge-Factoring  [2003] ECR I-6729, paragraph 38).
39. According to the case-law of the Court, the term covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were the owner of the property  (see, inter alia, Case C-320/88 Shipping and Forwarding Enterprise Safe  [1990] ECR I-285, paragraph 7, and Case C‑25/03 HE  [2005] ECR I-3123, paragraph 64).
41. The term ‘economic activities’ is defined in Article 4(2) of the Sixth Directive as covering ‘all’ activities of producers, traders and persons supplying services and, according to the case-law, it comprises all stages of production, distribution and the provision of services (see, inter alia, Case C-186/89 Van Tiem  [1990] ECR I-4363, paragraph 17, and MKG-Kraftfahrzeuge-Factoring , cited above, paragraph 42).
42. Finally, as regards the expression ‘taxable person acting as such’, according to the case-law, a taxable person acts in that capacity where he carries out transactions in the course of his taxable activity (see, to that effect, Case C-291/92 Armbrecht  [1995] ECR I-2775, paragraph 17, and Case C-77/01 EDM  [2004] ECR I-4295, paragraph 66).
43. As the Court held in paragraph 26 of its judgment in Case C-260/98 Commission v Greece [2000] ECR I-6537, an analysis of the definitions  of taxable person and economic activities shows that the scope of the term economic activities is very wide, and that the term is objective in character, in the sense that the activity is considered per se and without regard to its purpose or results (see also Case 235/85 Commission  v Netherlands  [1987] ECR 1471, paragraph 8, and, to that effect, inter alia Case 268/83 Rompelman  [1985] ECR 655, paragraph 19, and Case C‑497/01 Zita Modes  [2003] ECR I-14393, paragraph 38).
44. In fact, that analysis and that of the definitions of ‘supply of goods’ and ‘taxable person acting as such’ show that those terms, which define taxable transactions under the Sixth Directive, are all objective in nature and apply without regard to the purpose or results of the transactions concerned.
45. As the Court held in paragraph 24 of its judgment in Case C-4/94 BLP Group  [1995] ECR I-983, an obligation on the tax authorities to carry out inquiries to determine the intention of the taxable person would be contrary to the objectives of the common system of VAT of ensuring legal certainty and facilitating application of VAT by having regard, save in exceptional cases, to the objective character of the transaction in question.
48.  As regards the case-law relied on by the United Kingdom Government according to which a taxable person acquires that status definitively only if he made the declaration of intention to begin the envisaged economic activities in good faith (see, inter alia, Case C-400/98 Breitsohl  [2000] ECR I-4321, paragraph 39, and Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others  [2000] ECR I-1577, paragraph 46), suffice it to observe that, as the Advocate General pointed out in point 35 of his Opinion, that case-law concerns  the intention to commence and thus engage in economic activities and not the intended purpose of the economic activities themselves.
49. As regards the argument of the United Kingdom Government derived from the case-law of the Court to the effect that unlawful transactions fall outside the scope of VAT, it must be observed, first, that that case-law concerns products which by their very nature and because of their special characteristics may not be marketed or incorporated into economic channels. Second, it is settled case-law that the principle of fiscal neutrality prevents there being any general distinction as between lawful and unlawful transactions. Consequently, the mere fact that conduct amounts to an offence is not sufficient to justify exemption from VAT. That exemption applies only in specific situations where, owing to the special characteristics of certain products or certain services, any competition between a lawful economic sector and an unlawful sector is precluded (see, inter alia, Case C-158/98 Coffeeshop ‘Siberië’  [1999] ECR I-3971, paragraphs 14 and 21, and Case C-455/98 Salumets and Others  [2000] ECR I-4993, paragraph 19).
52. Nor can the right to deduct input VAT of a taxable person who carries out such transactions be affected by the fact that in the chain of supply of which those transactions form part another prior or subsequent transaction is vitiated by VAT fraud, without that taxable person knowing or having any means of knowing.
53.  As the Court has repeatedly held, the right to deduct provided for in Article 17 et seq. of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. It must be exercised immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case C-62/93 BP Supergas  v Greek State  [1995] ECR I-1883, paragraph 18, and  Gabalfrisa and Others , cited above, paragraph 43).
54. The question whether the VAT on the earlier or later sale of the goods concerned to the end-user has or has not been paid to the public purse is irrelevant to the right of the taxable person to deduct input VAT (see, to that effect, the order of the Court in Case C-395/02 Transport Service [2004] ECR I-1991, paragraph 26). The Court has consistently held that, according to the fundamental principle which underlies the common system of VAT, and which follows from Article 2 of the First and Sixth Directives, VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components (see, inter alia, Case C-98/98 Midland Bank  [2000] ECR I-4177, paragraph 29, and Zita Modes , cited above, paragraph 37).
55. Therefore, the answer to the first question referred for a preliminary ruling in each case should be that transactions such as those at issue in the main proceedings, which are not themselves vitiated by VAT fraud, constitute supplies of goods or services effected by a taxable person acting as such and an economic activity within the meaning of Articles 2(1), 4 and 5(1) of the Sixth Directive,  where they fulfil the objective criteria on which the definitions of those terms are based, regardless of the intention of a trader other than the taxable person concerned involved in the same chain of supply and/or the possible fraudulent nature of another transaction in the chain, prior or subsequent to the transaction carried out by that taxable person, of which that taxable person had no knowledge and no means of knowledge. The right to deduct input VAT of a taxable person who carries out such transactions cannot be affected by the fact that in the chain of supply of which those transactions form part another prior or subsequent transaction is vitiated by VAT fraud, without that taxable person knowing or having any means of knowing.
The second questions