1 . BY ORDER OF 20 DECEMBER 1979 WHICH WAS RECEIVED AT THE COURT ON 17 JANUARY 1980 THE FINANZGERICHT RHEINLAND-PFALZ ( FINANCE COURT OF RHINELAND-PALATINATE ) REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY TWO QUESTIONS AS TO THE INTERPRETATION OF ARTICLE 95 OF THE EEC TREATY IN ORDER TO ENABLE IT TO APPRAISE THE COMPATIBILITY WITH THE EEC TREATY OF CERTAIN PROVISIONS OF NATIONAL LEGISLATION ON THE TAXATION OF SPIRITS CONCERNING THE APPLICATION OF REDUCED RATES OF TAX TO VARIOUS CATEGORIES OF PRODUCERS .
2 THE ORDER FOR REFERENCE SHOWS THAT THE PLAINTIFF IN THE MAIN ACTION IMPORTED AND RELEASED TO THE MARKET IN 1978 A CONSIGNMENT OF COGNAC BOUGHT FROM A MAJOR FRENCH PRODUCER AND ON WHICH IT PAID ON SO DOING THE MONOPOLAUSGLEICH ( EQUALIZATION DUTY ) AT THE REGULAR RATE OF TAX THEN IN FORCE AMOUNTING TO DM 1 950 PER HECTOLITRE OF ETHYL ALCOHOL . THE PLAINTIFF INSTITUTED PROCEEDINGS AGAINST THE DECISION OF THE CUSTOMS AUTHORITIES , CLAIMING THAT THERE WAS DISCRIMINATION AGAINST THE IMPORTED SPIRITS CONTRARY , IN PARTICULAR , TO ARTICLE 95 OF THE TREATY BECAUSE CERTAIN CATEGORIES OF DOMESTIC SPIRITS QUALIFIED FOR A MORE ADVANTAGEOUS RATE OF TAX .
3 IT IS CLEAR FROM THE FILE AND FROM THE EXPLANATIONS PROVIDED BY THE PLAINTIFF IN THE COURSE OF THE PROCEDURE THAT IT IS NOT IN DISPUTE THAT THE RATE OF TAX APPLIED IN THIS MATTER BY THE CUSTOMS AUTHORITIES IN FACT CORRESPONDS TO THE GENERAL RATE OF TAX APPLICABLE TO DOMESTIC SPIRITS . THE PLAINTIFF ' S OBJECTION IS BASED ON THE FACT THAT NATIONAL LEGISLATION MAKES PROVISION FOR CERTAIN EXCEPTIONS FROM THAT GENERAL RATE FOR VARIOUS CATEGORIES OF SMALL PRODUCERS WHO BENEFIT FROM A REDUCED RATE OF TAX . IT CLAIMS THE APPLICATION OF THAT RATE OF TAX TO THE PRODUCT WHICH IT IMPORTED .
4 THE PROVISIONS FOR WHICH THE PLAINTIFF WISHES TO QUALIFY ARE CONTAINED IN ARTICLE 79 ( 2 ) OF THE LAW ON THE MONOPOLY IN SPIRITS ( GESETZ UBER DAS BRANNTWEINMONOPOL ). THESE PROVISIONS PROVIDE FOR A REDUCTION IN THE RATE OF TAX FOR THREE CATEGORIES OF PRODUCER : - ABFINDUNGSBRENNEREIEN ( DISTILLERIES FOR WHICH PRODUCTION IS ESTIMATED AT A STANDARD LEVEL FOR TAX PURPOSES ON THE BASIS OF THE AMOUNT OF RAW MATERIALS USED ); - STOFFBESITZER ( ' ' OWNERS OF THE RAW MATERIALS ' ' , THAT IS THE PRODUCERS OF FRUIT USED FOR DISTILLING ) AND - VERSCHLUSSKLEINBRENNEREIEN ( SMALL BONDED DISTILLERIES ). THE REDUCED RATE OF TAX IS RESERVED TO THOSE PRODUCERS UP TO THE LIMITS OF AN ANNUAL PRODUCTION QUOTA OF BETWEEN 50 LITRES AND 3 HECTOLITRES OF ETHYL ALCOHOL PER ANNUM FOR THE UNDERTAKINGS IN THE FIRST CATEGORY , A MAXIMUM OF 50 LITRES OF ETHYL ALCOHOL FOR THOSE IN THE SECOND CATEGORY AND A MAXIMUM OF 4 HECTOLITRES OF ETHYL ALCOHOL FOR THOSE IN THE THIRD .
5 THE GERMAN TAX AUTHORITIES DISMISSED THE COMPLAINT OF DISCRIMINATION , MAINTAINING THAT PURSUANT TO ARTICLE 151 ( 1 ) OF THE LAW ON THE MONOPOLY IN SPIRITS AS LAST AMENDED BY THE LAW OF 13 JULY 1978 ( BUNDESGESETZBLATT I , P . 1002 ), THE BENEFIT OF THE REDUCED RATES OF TAX IN ARTICLE 79 WAS EXTENDED TO ALL SPIRITS IMPORTED FROM OTHER MEMBER STATES OF THE COMMUNITY IF IT IS ESTABLISHED THAT THEY COME FROM A DISTILLERY WHOSE ANNUAL PRODUCTION DOES NOT EXCEED 4 HECTOLITRES OF ETHYL ALCOHOL . IN THE OPINION OF THE AUTHORITIES THESE ARRANGEMENTS ARE IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 95 SINCE THE TAX ADVANTAGES GIVEN TO CERTAIN CATEGORIES OF DOMESTIC SPIRITS AND CERTAIN GROUPS OF DOMESTIC PRODUCERS ARE THEREBY EXTENDED TO ALL IMPORTED SPIRITS WHICH FULFIL THE SAME CONDITIONS . THIS , ON THE OTHER HAND , DOES NOT APPLY TO THE COGNAC WHICH FORMS THE SUBJECT-MATTER OF THE DISPUTE , WHICH COMES FROM A MANUFACTURER WHOSE PRODUCTION CONSIDERABLY EXCEEDS THAT LIMIT .
6 IN THIS CONNEXION THE PLAINTIFF OBJECTS THAT THE PRODUCTION LIMIT OF 4 HECTOLITRES APPLICABLE TO IMPORTED SPIRITS UNDER ARTICLE 151 OF THE LAW ON THE MONOPOLY IN SPIRITS DOES NOT REALLY CONSTITUTE AN EQUIVALENT OF THE TAX MEASURES APPLICABLE TO NATIONAL PRODUCTION . SINCE THESE MEASURES ARE NEITHER OBJECTIVE NOR CLEAR THEY CANNOT BE TRANSFERRED AS SUCH TO THE IMPORTED PRODUCTS . IN THIS CONNEXION THE PLAINTIFF RELIES MORE PARTICULARLY ON THE FOLLOWING CIRCUMSTANCES : WITH REGARD TO THE ABFINDUNGSBRENNEREIEN , THE FACT THAT THE PRODUCTION LIMITS FIXED ON THE BASIS OF A TAX ON THE MUST MAY BE EXCEEDED BY MEANS OF A ' ' PRODUCTION SURPLUS ' ' , WHICH IS EXEMPT FROM ALL TAX AND VARIES BETWEEN 20 % AND 50 % DEPENDING ON THE YEAR ; THE PROCEDURE KNOWN AS ' ' BRENNEN IM ABSCHNITT ' ' WHEREBY THE DISTILLER MAY FREELY USE HIS DISTILLATION RIGHT WITHIN TEN-YEAR PERIODS MAKES IT POSSIBLE TO IMPROVE EVEN MORE ON THAT RESULT ; FINALLY , THE AGGREGATION OF THE DISTILLING RIGHTS OF STOFFBESITZER IN THE HANDS OF CERTAIN DISTILLERIES WHICH ENABLES THE LATTER CONSIDERABLY TO EXCEED THE LIMIT OF 4 HECTOLITRES .
7 IN ORDER TO SETTLE THIS DISPUTE THE FINANZGERICHT SUBMITTED TWO QUESTIONS WHICH ARE WORDED AS FOLLOWS : 1 . MUST THE FIRST AND SECOND PARAGRAPHS OF ARTICLE 95 OF THE EEC TREATY BE INTERPRETED AS MEANING THAT SPIRITS IMPORTED FROM THE COMMUNITY WHICH ARE COMPARABLE ( ' ' SIMILAR ' ' WITHIN THE MEANING OF THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY ) WITH DOMESTIC SPIRITS MADE FROM FRUIT ( LAW ON THE MONOPOLY IN SPIRITS , ARTICLE 27 ( 1 )), MAY , WITH REGARD TO THE TAX ADVANTAGES GRANTED TO DOMESTIC FRUIT SPIRITS BY ARTICLE 79 ( 2 ) OF THE LAW ON THE MONOPOLY IN SPIRITS , QUALIFY FOR A CORRESPONDINGLY REDUCED RATE OF MONOPOLY EQUALIZATION DUTY ONLY IF THE IMPORTED SPIRITS COME FROM A DISTILLERY WITH A SMALL ANNUAL PRODUCTION ( SMALL DISTILLERY ) WITHIN THE MEANING OF ARTICLE 79 ( 2 ) OF THE LAW ON THE MONOPOLY IN SPIRITS ( SEE ARTICLE 151 ( 1 ), THIRD SENTENCE , OF THAT LAW)? 2.IN THE CASE OF AN AFFIRMATIVE ANSWER TO QUESTION 1 : IN VIEW OF THE ADDITIONAL TAX ADVANTAGES ENJOYED BY DOMESTIC FRUIT SPIRITS ( TAX-FREE EXCESS YIELD , OVERSTEPPING OF MAXIMUM PRODUCTION LIMITS BY WAY OF AVERAGE DISTILLATION FIGURES OVER A PERIOD ), IS IT COMPATIBLE WITH THE FIRST AND SECOND PARAGRAPHS OF ARTICLE 95 OF THE EEC TREATY ( A ) THAT THE REDUCTION IN THE MONOPOLY EQUALIZATION DUTY SHOULD BE LIMITED TO THE RATES OF REDUCTION LAID DOWN IN ARTICLE 79 ( 2 ) OF THE LAW ON THE MONOPOLY IN SPIRITS ( 21 % OR 30.5 % ) OR MUST THE REDUCTION EXCEED THOSE RATES , AND ( B)THAT THE UPPER LIMIT FOR THE APPLICATION OF THE REDUCED RATE OF MONOPOLY EQUALIZATION DUTY SHOULD BE FIXED AT AN ANNUAL PRODUCTION BY A FOREIGN DISTILLERY OF 4 HECTOLITRES OF ETHYL ALCOHOL?
8 IN SUBSTANCE THESE QUESTIONS RAISE THE PROBLEM WHETHER A PROVISION SUCH AS ARTICLE 151 ( 1 ) OF THE LAW ON THE MONOPOLY IN SPIRITS , READ IN CONJUNCTION WITH ARTICLE 79 ( 2 ), CONSTITUTES A PROVISION IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 95 OF THE TREATY . IT IS NECESSARY TO PROVIDE THE FINANZGERICHT WITH THE CRITERIA OF INTERPRETATION BASED ON COMMUNITY LAW ENABLING IT TO DECIDE THAT PROBLEM .
9 IN THIS CONNEXION IT MUST BE RECALLED FIRST OF ALL THAT THE COURT , IN ITS JUDGMENT OF 10 OCTOBER 1978 IN CASE 148/77 HANSEN AND BALLE ( 1978 ) ECR 1787 , STATED THAT ' ' 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 ' ' . IT ADDED THAT ' ' 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 ' ' TO WHICH IT ADDED THAT , ' ' ACCORDING TO THE REQUIREMENTS OF ARTICLE 95 , SUCH PREFERENTIAL SYSTEMS MUST BE EXTENDED WITHOUT DISCRIMINATION TO SPIRITS COMING FROM OTHER MEMBER STATES ' ' . THAT OPINION WAS CONFIRMED IN A SERIES OF JUDGMENTS OF 27 FEBRUARY 1980 IN WHICH THE COURT REMARKED THAT ' ' ALTHOUGH IT ACKNOWLEDGED IN THE JUDGMENT IN THE HANSEN AND 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 ' ' ( SEE IN PARTICULAR THE JUDGMENT IN CASE 168/78 COMMISSION V FRENCH REPUBLIC , PARAGRAPH 16 OF THE DECISION ).
10 THE DIFFICULTIES OF INTERPRETATION EXPRESSED IN THE QUESTION FROM THE NATIONAL COURT ARE CAUSED BY THE CLOSE LINK EXISTING BETWEEN THE TAX ADVANTAGES PROVIDED FOR BY ARTICLE 79 OF THE LAW ON THE MONOPOLY IN SPIRITS AND THE METHODS OF TAXATION AND OF SUPERVISION UNDER GERMAN LAW . FOR THAT REASON IT IS PARTICULARLY DIFFICULT TO TRANSFER THOSE PROVISIONS TO THE TAX TREATMENT OF SPIRITS PRODUCED UNDER THE ARRANGEMENTS OF THE LEGISLATION OF ANOTHER MEMBER STATE . IN VIEW OF THAT SITUATION IT MUST BE STATED THAT THE REQUIREMENTS OF ARTICLE 95 OF THE TREATY ARE FULFILLED WHERE THE LEGISLATION OF A MEMBER STATE MAKES IT POSSIBLE TO APPLY TO IMPORTS OF SPIRITS FROM OTHER MEMBER STATES ARRANGEMENTS THE PRACTICAL EFFECT OF WHICH MAY BE CONSIDERED AS EQUIVALENT TO THE ARRANGEMENTS APPLIED TO DOMESTIC SPIRITS .
11 IT IS NOT FOR THE COURT , WITHIN THE FRAMEWORK OF AN APPLICATION FOR A PRELIMINARY RULING ON INTERPRETATION UNDER ARTICLE 177 , TO GIVE A JUDGMENT IN THIS MATTER ON THE GERMAN LEGISLATION SINCE THAT APPRAISAL IS RESERVED TO THE NATIONAL COURT . IT IS SUFFICIENT TO FIND IN THIS CONNEXION THAT , FROM THE POINT OF VIEW OF COMMUNITY LAW , NONE OF THE ARGUMENTS PUT FORWARD BY THE PLAINTIFF HAS BEEN OF SUCH A NATURE AS TO CAST DOUBTS ON THE COMPATIBILITY WITH THE REQUIREMENTS OF ARTICLE 95 OF ARRANGEMENTS SUCH AS THOSE WHICH ARE LAID DOWN IN ARTICLES 151 AND 79 , READ TOGETHER , OF THE GERMAN LAW .
12 THE PLAINTIFF IN THE MAIN ACTION HAS NOT SUCCEEDED IN ESTABLISHING THAT THE POSSIBILITIES OF A ' ' PRODUCTION SURPLUS ' ' AVAILABLE TO ABFINDUNGSBRENNEREIEN PERMIT THEM TO ATTAIN , OR APPRECIABLY TO EXCEED , THE ANNUAL PRODUCTION LIMIT OF 4 HECTOLITRES OR TO ACHIEVE A CONSIDERABLE REDUCTION IN THE LEVEL OF TAXATION . THIS ALSO APPLIES TO ITS OBSERVATIONS CONCERNING THE EXERCISE OF DISTILLING RIGHTS OVER TEN-YEAR PERIODS ( BRENNEN IM ABSCHNITT ) SINCE IT HAS BEEN SHOWN THAT THAT RIGHT MERELY PERMITS THE TRANSFER OF DISTILLING RIGHTS WITHIN THE TEN-YEAR PERIOD BUT NOT THEIR INCREASE . WITH REGARD TO THE DISTILLING RIGHTS OF THE STOFFBESITZER , THE GERMAN GOVERNMENT HAS STATED THAT THE DISTILLING MERELY CONSTITUTES WORK CARRIED OUT UNDER CONTRACT AND DOES NOT THUS EXTINGUISH THE IDENTITY OF THE RIGHTS GRANTED TO INDIVIDUAL HOLDERS .
13 THE PLAINTIFF IS AGAIN UNSUCCESSFUL IN THE CRITICISMS WHICH IT MAKES TO THE COURT WHEN IT CLAIMS THAT THE PROVISIONS OF ARTICLE 151 DO NOT CONSTITUTE AN EXACT TRANSPOSITION TO THE IMPORTED PRODUCTS OF THE CONDITIONS APPLICABLE TO THE VARIOUS METHODS OF PRODUCTION WHICH QUALIFY FOR PREFERENTIAL TAX TREATMENT UNDER THE GERMAN LAW . IN THIS CONNEXION IT MUST BE OBSERVED THAT THE GERMAN LEGISLATURE , BY RETAINING AS THE SOLE CRITERION FOR THE GRANTING OF THE TAX ADVANTAGES IN QUESTION THE VOLUME OF THE ANNUAL PRODUCTION OF DISTILLERIES IN OTHER MEMBER STATES , HAS AVOIDED TRANSFERRING TO IMPORTED SPIRITS A SERIES OF TECHNICAL PROCEDURES PECULIAR TO GERMAN LEGISLATION WHICH IN FACT CANNOT BE FULFILLED BY PRODUCERS OF MEMBER STATES WHOSE LEGAL SYSTEMS DO NOT CONTAIN THE EQUIVALENT OF THE PROVISIONS THE ESSENTIAL POINTS OF WHICH HAVE BEEN RECALLED ABOVE .
14 FINALLY , IT IS ALSO NECESSARY TO DISMISS THE ARGUMENT PUT FORWARD BY THE PLAINTIFF TO THE EFFECT THAT , HAVING REGARD TO THE LARGE NUMBER OF PERSONS WHO BENEFIT FROM THE PROVISIONS LAID DOWN IN ARTICLE 79 OF THE LAW ON THE MONOPOLY IN SPIRITS , THE PROPORTION OF PRODUCTION OBTAINING PREFERENTIAL TAX TREATMENT APPRECIABLY AFFECTS COMPETITION ON THE MARKET IN ALCOHOLIC PRODUCTS . IN FACT THE INFORMATION SUPPLIED IN THE COURSE OF THE PROCEDURE BY THE GERMAN GOVERNMENT , WHICH THE PLAINTIFF DID NOT SERIOUSLY CHALLENGE , SHOWS THAT THE QUANTITIES OBTAINING PREFERENTIAL TAX TREATMENT IN REALITY CONSTITUTE ONLY AN INSIGNIFICANT PROPORTION ( 5 % ) OF TOTAL DOMESTIC PRODUCTION .
15 IN VIEW OF THOSE CONSIDERATIONS THE REPLY TO THE QUESTIONS SUBMITTED MUST BE THAT ARTICLE 95 OF THE EEC TREATY , IN ITS APPLICATION TO THE TAX ADVANTAGES RESERVED BY NATIONAL LEGISLATION TO CERTAIN CATEGORIES OF SMALL-SCALE PRODUCERS OF SPIRITS , MUST BE INTERPRETED AS MEANING THAT THE REQUIREMENT OF NON-DISCRIMINATION LAID DOWN IN THE PROVISION OF THE TREATY IS FULFILLED WHERE THE ARRANGEMENTS APPLICABLE TO SPIRITS IMPORTED FROM OTHER MEMBER STATES MAY BE CONSIDERED AS EQUIVALENT TO THE ARRANGEMENTS APPLICABLE TO NATIONAL PRODUCTION , SO THAT IMPORTED PRODUCTS MAY IN FACT ENJOY THE SAME ADVANTAGES AS COMPARABLE NATIONAL PRODUCTS .
16 IN THIS CONNEXION , THE FIXING BY THE LEGISLATION OF A MEMBER STATE OF AN UPPER LIMIT FOR PRODUCTION WHICH IS IMPOSED UPON PRODUCERS OF OTHER MEMBER STATES AS A CONDITION FOR QUALIFYING FOR A REDUCTION IN THE RATE OF TAX CONFORMS TO THE REQUIREMENTS OF ARTICLE 95 OF THE EEC TREATY WHERE THAT LIMIT CORRESPONDS IN GENERAL TO THE UPPER LIMIT TO WHICH NATIONAL PRODUCERS ARE SUBJECT IN ORDER TO QUALIFY FOR THE SAME TAX ADVANTAGE . ARTICLE 95 DOES NOT REQUIRE THE MEMBER STATES TO EXTEND THE SAME ADVANTAGE TO IMPORTED PRODUCTS COMING FROM UNDERTAKINGS WHOSE PRODUCTION EXCEEDS THE PRODUCTION LIMIT THUS FIXED .