1 BY AN ORDER DATED 29 APRIL 1982 WHICH WAS RECEIVED AT THE COURT ON 11 JUNE 1982 , THE FINANZGERICHT ( FINANCE COURT ) HAMBURG REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY TWO QUESTIONS CONCERNING THE VALIDITY OF COMMISSION REGULATION ( EEC ) NO 851/79 OF 30 APRIL 1979 FIXING THE EXPORT REFUNDS ON PRODUCTS PROCESSED FROM CEREALS AND RICE ( OFFICIAL JOURNAL 1979 , L 108 , P . 11 ), AND OF COMMISSION REGULATION ( EEC ) NO 1309/79 OF 29 JUNE 1979 ON THE SAME SUBJECT ( OFFICIAL JOURNAL 1979 , L 162 , P . 39 ), WHICH ARE BASED ON REGULATION ( EEC ) NO 2744/75 OF THE COUNCIL OF 29 OCTOBER 1975 ON THE IMPORT AND EXPORT SYSTEM FOR PRODUCTS PROCESSED FROM CEREALS AND FROM RICE ( OFFICIAL JOURNAL 1975 , L 281 , P . 65 ).
2 IT APPEARS FROM THE FILE ON THE CASE THAT WHEN , IN AUGUST AND SEPTEMBER 1979 , THE PLAINTIFF IN THE MAIN PROCEEDINGS EXPORTED SOME FLAKED BARLEY FALLING WITHIN TARIFF SUBHEADING 11.02 E I ( B ) 1 ( AA ) THE HAUPTZOLLAMT ( PRINCIPAL CUSTOMS OFFICE ) HAMBURG-JONAS FIXED THE REFUNDS IN ACCORDANCE WITH THE RATES SHOWN IN THE ANNEXES TO REGULATIONS NO 851/79 AND NO 1309/79 , DEDUCTING THE ADJUSTMENT PROVIDED FOR BY THE SECOND PARAGRAPH OF ARTICLE 7 OF REGULATION NO 2744/75 . IT IS NOT CONTESTED THAT THE CALCULATION MADE BY THE HAUPTZOLLAMT IS CONSISTENT WITH THE REGULATIONS CITED .
3 NONE THE LESS , THE PLAINTIFF CONTESTS THE METHOD OF CALCULATION BY WHICH THE RATES SET FORTH IN THE ANNEXES TO THE TWO COMMISSION REGULATIONS CITED ABOVE ARE ARRIVED AT . THE ANALYSIS OF THE CALCULATION OF THE REFUNDS UNDERTAKEN BY THE PLAINTIFF AND THE FINANZGERICHT DOES INDEED DISCLOSE THAT , WHILST THE ADJUSTMENT WAS CALCULATED ON THE BASIS OF A COEFFICIENT OF 2 , AS LAID DOWN BY ARTICLE 7 OF REGUALTION 2744/75 , THE REFUND ITSELF , ON THE OTHER HAND , WAS DETERMINED ON THE BASIS OF A COEFFICIENT OF 1.5 .
4 THE PLAINTIFF ARGUES THAT THE SUBSTITUTION OF THAT COEFFICIENT FOR THE COEFFICIENT FIXED IN ANNEX I TO REGULATION NO 2744/75 IS NOT WARRANTED BY ANY PROVISION OF COMMUNITY LAW AND THAT THERE IS , MOREOVER , AN ILLOGICALITY IN THE METHOD ADOPTED BY THE COMMISSION , INASMUCH AS A COEFFICIENT OF 1.5 WAS USED TO CALCULATE THE REFUND ITSELF , WHEREAS A COEFFICIENT OF 2 WAS EMPLOYED FOR CALCULATION OF THE ADJUSTMENT .
5 THE FINANZGERICHT CONSIDERS THAT THERE IS INDEED SOME DOUBT AS TO THE VALIDITY OF THE COMMISSION REGULATIONS . IT ACKNOWLEDGES THAT ARTICLE 6 ( 1 ) OF REGULATION NO 2744/75 ALLOWS THE COMMISSION A MARGIN OF DISCRETION WITH REGARD NOT ONLY TO ANY DUPLICATION OF REFUNDS APPLICABLE TO THE VARIOUS PRODUCTS OBTAINED FROM ONE AND THE SAME PROCESS BUT ALSO TO OUTLETS AND CONDITIONS OF SALE FOR PROCESSED PRODUCTS ON THE WORLD MARKET ; HOWEVER , IT WONDERS WHETHER THOSE PROVISIONS PERMIT THE COMMISSION TO DEPART FROM THE PROCESSING COEFFICIENT FIXED BY ANNEX I TO THAT REGULATION .
6 IN ORDER TO CLARIFY THAT DOUBT THE FINANZGERICHT SUBMITTED THE FOLLOWING TWO QUESTIONS : 1 . ARE THE REFUNDS FIXED IN THE ANNEXES TO COMMISSION REGULATIONS ( EEC ) NO 851/79 OF 30 APRIL 1979 AND NO 1309/79 OF 29 JUNE 1979 IN RESPECT OF FLAKED BARLEY FALLING WITHIN TARIFF HEADING 11.02 E I ( B ) ( 1 ) OF THE COMMON CUSTOMS TARIFF VALID OR DOES THE FIXING THEREOF CONTRAVENE THE PROVISIONS OF REGULATION ( EEC ) NO 2744/75 OF THE COUNCIL OF 29 OCTOBER 1975? 2 . WHAT ARE THE LEGAL CONSEQUENCES IN THE EVENT OF THE FIXING OF THE REFUNDS BEING FOUND TO BE INVALID?
7 PURSUANT TO ARTICLE 2 OF REGULATION NO 2744/75 , THE VARIABLE COMPONENT OF THE LEVY CHARGED ON PRODUCTS PROCESSED FROM CEREALS IS DETERMINED WITH REFERENCE TO THE LEVY APPLICABLE TO THE CORRESPONDING BASIC PRODUCTS , MULTIPLIED BY THE COEFFICIENTS APPEARING IN ANNEX I TO THE REGULATION .
8 IN THE CASE OF THE PRODUCT IN QUESTION , NAMELY FLAKED BARLEY , THE APPLICABLE COEFFICIENT IS 2 . IT EMERGES FROM THE EXPLANATIONS FURNISHED BY THE COUNCIL THAT THE COEFFICIENT IS BASED ON EXPERIENCE , DATING BACK TO THE TIME WHEN THE COMMON MARKET IN CEREALS WAS FIRST ORGANIZED , IN VIEW OF THE FACT THAT THE PRODUCTION OF ONE TONNE OF FLAKED BARLEY CALLS FOR THE UTILIZATION OF TWO TONNES OF THE BASIC PRODUCT .
9 ACCORDING TO THE SIXTH RECITAL IN THE PREAMBLE TO REGULATION NO 2744/75 , THE OBJECT OF THE REFUND IS TO COVER THE DIFFERENCE BETWEEN THE PRICES OF PRODUCTS WITHIN THE COMMUNITY AND THOSE ON THE WORLD MARKET . IT ADDS THAT ' ' FOR THAT PURPOSE , CRITERIA SHOULD BE ESTABLISHED FOR DETERMINING THE REFUND ESSENTIALLY ON THE BASIS OF PRICES OF THE BASIC PRODUCTS WITHIN AND OUTSIDE THE COMMUNITY AND THE OUTLETS AND CONDITIONS FOR THE SALE OF PROCESSED PRODUCTS ON THE WORLD MARKET ' ' .
10 TO THAT END , ARTICLE 6 ( 1 ) OF REGULATION NO 2744/75 PROVIDES AS FOLLOWS : ' ' THE REFUND WHICH MAY BE GRANTED ON PROCESSED PRODUCTS SHALL BE DETERMINED WITH PARTICULAR REFERENCE TO : ( A ) THE PRICES OF THE BASIC PRODUCTS USED IN CALCULATING THE VARIABLE COMPONENT OF THE LEVY ; ( B)THE QUANTITIES OF BASIC PRODUCTS USED IN CALCULATING THE VARIABLE COMPONENT OF THE LEVY ; ( C)THE POSSIBLE DUPLICATION OF REFUNDS APPLICABLE TO VARIOUS PRODUCTS OBTAINED FROM ONE AND THE SAME PROCESS AND ONE AND THE SAME PRODUCT ; ( D)OUTLETS AND CONDITIONS OF SALE FOR PROCESSED PRODUCTS ON THE WORLD MARKET . ' '
11 BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 7 OF THE REGULATION , THE AMOUNT OF THE REFUND IS ADJUSTED BY REFERENCE TO THE MOVEMENT OF THE THRESHOLD PRICES IN FORCE FOR THE BASIC PRODUCT OR PRODUCTS . THE ADJUSTMENT - WHICH OPERATES UPWARDS OR DOWNWARDS , DEPENDING ON PRICE MOVEMENTS - IS MULTIPLIED BY THE RELEVANT COEFFICIENT FIXED IN ANNEX I TO THE REGULATION .
12 IN THE CONTEXT OF THE COMMON ORGANIZATION OF THE CEREALS MARKET , REFUNDS ARE DETERMINED BY THE COMMISSION IN ACCORDANCE WITH THE ' ' MANAGEMENT COMMITTEE ' ' PROCEDURE . THE REGULATIONS WHICH THE PLAINTIFF NOW CHALLENGES WERE ADOPTED UNDER THAT PROCEDURE .
13 CONTRARY TO THE ARGUMENT PUT FORWARD BY THE PLAINTIFF , THE COMPUTATION OF THE REFUNDS ON THE BASIS OF THE LEVIES GOVERNING THE BASIC PRODUCT IS NOT AN AUTOMATIC CALCULATION PROCESS . ARTICLE 6 OF REGULATION NO 2744/75 IMPLIES A DISCRETIONARY POWER , WHICH HAS BEEN PROPERLY DELEGATED BY THE COUNCIL TO THE COMMISSION .
14 WHILST IT IS TRUE THAT SUBPARAGRAPHS ( A ) AND ( B ) OF ARTICLE 6 ( 1 ) REFER TO SPECIFIC VALUES , NAMELY THE PRICES AND THE QUANTITIES OF THE BASIC PRODUCTS USED FOR CALCULATION OF THE VARIABLE COMPONENT OF THE LEVY , THE SAME DOES NOT APPLY TO SUBPARAGRAPHS ( C ) AND ( D ), WHICH ALLOW THE COMMISSION A DISCRETIONARY POWER IN TWO RESPECTS : UNDER SUBPARAGRAPH ( C ), REGARDING THE ELIMINATION OF ANY DUPLICATION OF REFUNDS APPLICABLE TO VARIOUS PRODUCTS OBTAINED FROM ONE AND THE SAME PROCESS , WHICH NECESSARILY IMPLIES AN ALTERATION OF THE PROCESSING COEFFICIENT ADOPTED BY REGULATION NO 2744/75 ; AND UNDER SUBPARAGRAPH ( D ), REGARDING THE OUTLETS AND CONDITIONS OF SALE FOR PROCESSED PRODUCTS ON THE WORLD MARKET OR , IN OTHER WORDS , CONSIDERATIONS OF COMMERCIAL POLICY .
15 WHILST THE COMMISSION WAS REQUIRED BY ARTICLE 6 ( 2 ) TO TAKE ACCOUNT OF THE FACT THAT , ACCORDING TO EXPERIENCE , TWO TONNES OF BARLEY ARE NECESSARY TO PRODUCE ONE TONNE OF FLAKED BARLEY , IT WAS NEVERTHELESS ENTITLED TO REDUCE THE COEFFICIENT IN ORDER TO ENSURE THAT THE LATTER PRODUCT , WHEN SOLD ON THE WORLD MARKET , COULD NOT ENJOY A DUPLICATION OF REFUNDS , REGARD BEING HAD TO THE FACT THAT PROCESSING ENABLES OTHER BY-PRODUCTS TO BE OBTAINED WHICH , IN THEIR TURN , QUALIFY FOR REFUNDS . DUPLICATION SUCH AS THAT WOULD LEAD TO OVER-COMPENSATION OF THE DIFFERENCE BETWEEN THE PRICE OF THE PRODUCT IN QUESTION WITHIN THE COMMUNITY AND THE PRICE RULING ON THE WORLD MARKET , CONTRARY TO THE OBJECTIVE EXPRESSED BY THE SIXTH RECITAL IN THE PREAMBLE TO REGULATION NO 2744/75 .
16 IT THUS FOLLOWS FROM THE FOREGOING THAT THE REDUCTION OF THE COEFFICIENT FROM 2 TO 1.5 IS JUSTIFIED BY THE FACT THAT REFUNDS ARE GRANTED IN RESPECT OF BY-PRODUCTS OBTAINED FROM THE PROCESSING OF BARLEY INTO FLAKED BARLEY . HENCE THE APPLICATION OF THE LATTER COEFFICIENT DERIVES FROM THE LEGITIMATE EXERCISE BY THE COMMISSION OF THE DISCRETIONARY POWER RESERVED TO IT BY ARTICLE 6 OF REGULATION NO 2744/75 .
17 CONTRARY TO THE PLAINTIFF ' S ALLEGATIONS , THERE IS NO ILLOGICALITY IN THE FACT THAT UNDER THE SYSTEM SET UP BY REGULATION NO 2744/75 TWO DIFFERENT COEFFICIENTS ARE APPLIED FOR THE CALCULATION OF THE SAME REFUND , ACCORDING TO WHETHER THE CALCULATION RELATES TO THE REFUND ITSELF OR TO ADJUSTMENT THEREOF . REGULATION NO 2744/75 EXPRESSLY REQUIRES THAT THE COEFFICIENT CONTAINED IN ANNEX I BE APPLIED TO THE ADJUSTMENT , WHEREAS IT PERMITS THAT SAME COEFFICIENT TO BE AMENDED FOR THE PURPOSE OF FIXING THE REFUND ITSELF , IN THE LIGHT OF THE FACTORS REFERRED TO IN ARTICLE 6 . IT THEREFORE APPEARS THAT THE FIXING PROCEDURE CRITICIZED BY THE PLAINTIFF MERELY CONSTITUTES THE CORRECT APPLICATION BY THE COMMISSION AND THE NATIONAL AUTHORITIES OF THE CRITERIA SET FORTH IN REGULATION NO 2744/75 OF THE COUNCIL .
18 THUS , THE ANSWER TO BE GIVEN MUST BE THAT CONSIDERATION OF THE FIRST QUESTION RAISED BY THE FINANZGERICHT HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF COMMISSION REGULATIONS NOS 851/79 OR 1309/79 .
19 IN VIEW OF THE ABOVE ANSWER THE SECOND QUESTION IS DEVOID OF PURPOSE .