Contents
In Case 7/67Reference to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Finance Court), Munich, for a preliminary ruling in the action pending before that court betweenFIRMA MILCHWERKE H. WÖHRMANN UND SOHN KG, Appeldoorn,andHAUPTZOLLAMT (Principal Customs Office) BAD REICHENHALL,THE COURTcomposed of: R. Lecourt, President, A. M. Donner and W. Strauß (Rapporteur), Presidents of Chambers, A. Trabucchi and J. Mertens de Wilmars, Judges,Advocate-General: J. GandRegistrar: A.Van Houttegives the following
Judgment
Issues of fact and of law
I —Facts
1.Summary
2.Contents of the order containing the reference; arguments of the Finanzgericht
II —Procedure
The order containing the reference was lodged at the Court Registry on 20 February 1967. The Government of the Federal Republic of Germany and the Wöhrmann undertaking submitted written observations in pursuance of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC and presented their oral observations at the hearings on 5 and 7 December 1967. The Advocate-General delivered his reasoned, oral opinion at the hearing on 25 January 1968.The Wohrmann undertaking was represented by Messrs Dres, Modest, Heeman, Gündisch and Brändel, Hamburg; the Government of the Federal Republic of Germany by Messrs Everling, Ministerialrat, Hahnfeld, Ministerialrat, and Bülow, Oberlandesgerichtsrat; and the Commission of the European Communities by its legal adviser, Mr Thiesing.
III —Summary of the observations submitted by the parties concerned
Introductory remarks
The Wöhrmann undertaking points out that the concept of ‘charge having equivalent effect’ has the same meaning in Article 12 of Regulation No 13/64 as in Articles 12 and 13 of the Treaty.The systems of levy of the market organizations of the Commission of the European Economic Community have the object of adjusting inequalities of price between imported products and national products; the imposition of customs duties or of charges having equivalent effect over and above these levies would have a discriminatory, and protectionist effect.According to the case-law of the Court the concepts of ‘charge having equivalent effect’ and ‘internal taxation’ are mutually exclusive; consequently it is appropriate to examine whether the taxation in question comes under one or other of these concepts; in order to do this it is also necessary to interpret Article 95 of the Treaty, even though it only applies to importations from other Member States.The Federal Government alleges that the questions put are only comprehensible if account is taken of the fact that the Finanzgericht has to deliver judgment with regard to an importation from a third country of products coming under one of the market organizations of the Commission of the European Economic Community.The Treaty itself does not prohibit the levying of charges having equivalent effect or of higher internal taxation in conformity with Article 95 on products coming from third countries; Regulation No 13/64 imposes such a prohibition only on charges having equivalent effect.
Question (a)
The Wöhrmann undertaking maintains that the prohibitions contained in Articles 12 and 13 of the EEC Treaty and in Article 12 of Regulation No 13/64 are intended to prevent protective duties hampering or making impossible the importation of foreign products and thus creating distortions of competition.The name by which a tax is described or the purposes for which it is intended are unimportant; only its effect is significant.Consequently it is appropriate to solve the question in the following manner: a charge must be regarded as having an effect equivalent to a customs duty on every occasion on which, in the actual case of a given product, it produces protective effects.The Federal Government points out that the question whether a tax has the same effect as a customs duty depends solely on its general purpose and a factual comparison of charges is without importance.The concept of ‘charges having equivalent effect’ has the same meaning in Article 12(2) of Regulation No 13/64 as in Article 12 et seq. of the EEC Treaty, as is clear in particular from a comparison with Article 12(1) which concerns trade between Member States.The principles applicable for the definition of the factual situations governed respectively by Article 12 et seq. and by Article 95 of the EEC Treaty are also applicable to the interpretation of Article 12(2) of Regulation No 13/64.This definition is explained by the fact that these provisions pursue different objectives; Article 12 et seq. concern the ‘free movement of goods’ and are intended to eliminate obstacles to trade whilst Article 95 is intended to avoid distortions of competition within the Common Market. The Treaty does not require the elimination of internal taxes but restricts itself to limiting their rate. In doing so it recognizes that they are of a legal nature fundamentally different from that of customs duties and charges having equivalent effect. The case-law of the Court of Justice has always taken into consideration the general purpose of the taxation in question.Even if an equalization tax is too high in a given case, it must be assessed solely in terms of Article 95. If it were otherwise, the prohibition imposed by that Article would have no independent application as far as Article 12 et seq. were concerned.An equalization tax falls under Article 95, even if the imported product in a given case does not compete with any comparable national product or one which may be substituted for it. In such a case, the charge does not have the effect of a customs duty if only because it cannot serve to protect national production. As a general rule Member States then impose internal taxation. Article 17 of the EEC Treaty expressly permits them to do so to the extent to which it is a question of products hitherto subject to customs duties of a fiscal nature.This interpretation is corroborated by Article 112 of the EEC Treaty.Regulation No 13/64 confirms these considerations. In Article 2(1) it prescribes that amongst other things account must be taken of ‘the incidence of internal duties charged on imports’ in calculating the amount of the levy. It emerges clearly from the implementing provisions that this provision also applies to the turnover equalization tax charged in Germany.The Commission points out that for ‘internal taxation’ referred to in Article 95 of the EEC Treaty, Regulation No 13/64 contains no provision corresponding to the prohibition on the charging of customs duties or charges having equivalent effect. The Member States therefore retain their freedom of action, for Article 95 is only applicable to trade in ‘the products of other Member States’. The Commission points out in detail that Article 2(1) of the abovementioned Regulation and the provisions adopted for its implementation confirm this view. In its opinion it also emerges from all these provisions that the organization of the markets in milk in the European Economic Community rests equally on the distinction between charges having equivalent effect and internal taxation and that these two concepts have here the same meaning as in the Treaty. For the definition of these concepts it is of importance to ascertain whether the charge in question is directed towards compensation with regard to similar domestic products. According to this criterion the turnover equalization tax is in principle internal taxation as is otherwise clear from the German Law on turnover tax. It may nevertheless become a charge having equivalent effect when in a given case similar domestic products are not subjected to any charge by reason for example of benefiting from an exemption from taxation. Nevertheless, in the case of the turnover equalization tax, this reservation does not have great practical importance.The turnover equalization tax constitutes a single legal entity. To the extent to which, in a given case, it exceeds the charge imposed upon similar domestic products, the fraction in excess cannot be considered as a charge having equivalent effect.
Question (b)
The Wöhrmann undertaking alleges that in Germany neither the primary product, ‘milk’, nor the product derived therefrom, ‘milk powder’, is subjected to turnover tax. Consequently the turnover equalization tax charged on the importation of powdered milk coming from abroad can at most serve to compensate for a charge imposed indirectly on similar domestic products.The judgment delivered by the Court in Case 45/64 (Rec. 1965, p. 1058) arrives at a restrictive interpretation of the expression ‘indirectly’, which has the same meaning in Article 95 and in Article 96. Parties concerned and courts must be in a position to calculate the indirect charge with precision. Thus it is only possible to take into consideration charges imposed upon a product, without regard to the structure or the method of working of the manufacturer in view of the fact that, if this were not the case, it would be impossible to establish whether domestic products or imported products were taxed in a uniform manner. Both milk and milk powder are produced by different undertakings in the most widely varying conditions.Consequently, with regard to the first alternative contained in this question, it is appropriate to decide that an equalization tax constitutes a charge having equivalent effect when neither supply of the similar domestic product nor of the primary products is directly subject to turnover tax.Although, in Case 57/65, the Court stated that Articles 12 and 13 of the EEC Treaty on the one hand and Article 95 on the other cannot be applied jointly to one and the same case, that by no means excludes the possibility of dividing up the charge in such a way that the fraction corresponding to the charge imposed on domestic products is considered as falling within Article 95 and the excess on the other hand as being of effect equivalent to a customs duty. Such a division may even in certain cases be necessary in view of the fact that the first fraction of the charge has an equalizing effect, whereas the second part on the other hand has a discriminatory effect.If the idea of such a division is rejected the tax must be considered as being in its totality a tax having equivalent effect to a customs duty because, having regard to its excessive character, it is not possible to agree that it is solely intended to be a charge of a fiscal nature.The Federal Government takes the view that Question (b) has no purpose having regard to its position on Question (a).The opinion of the Commission on this question may be deduced from its statement relating to Question (a).
Question (c)
The Wohrmann undertaking points out that for the reasons set out with regard to Question (a), it is appropriate to give a negative answer to this question. Moreover it is not possible to speak of a cumulative multi-stage tax system when the primary material, the semi-finished product and the finished product are not themselves taxed under the turnover tax.The Federal Government declares that in its view Question (c) has no purpose for the reasons set out with regard to Question (a). However, by reason of the fundamental importance of Question (c), it is appropriate to observe that, according to the unequivocal terms of Article 95 of the EEC Treaty, charges imposed indirectly on domestic products must also be taken into consideration. This must be understood as meaning any charge which makes the national product dearer, in particular one imposed on the means of production, machines, auxiliary accessory materials and energy, for otherwise this product would be subject to a disadvantage in the field of competition.The Commission points out that it is necessary to take into consideration not only any charge on the similar domestic product or the immediately preceding primary product but also, as is clear from Article 95 of the EEC Treaty, the prior indirect charge. It is true that the question of the extent to which it must be taken into account arouses doubts. However, this question is of little importance in the present case in view of the fact that there is always internal taxation when there is a question of offsetting some charge or other.
Question (d)
The Wöhrmann undertaking takes the view that it is appropriate to give an affirmative answer to this question in conformity with the judgments delivered by the Court in Joined Cases 2 and 3/62 and in Case 57/65. Furthermore, in accordance with the provisions of Regulation No 13/64, read in conjunction with Article 189 of the EEC Treaty, the said Regulation is binding in its entirety and directly applicable in all Member States.The Federal Government takes the view that Question (d) has no purpose for the reasons which it put forward with regard to Question (a).The Commission refers to the judgment delivered by the Court in Case 26/62 ([1963] E.C.R. 1 et seq.), according to which Article 12 of the EEC Treaty creates individual rights. In its view the same applies to Article 12(2) of Regulation No 13/64.
Grounds of judgment
By order of 15 February 1967, which reached the Court on 20 February 1967, the Finanzgericht, Munich, referred to the Court of Justice under Article 177 of the Treaty establishing the European Economic Community several questions relating to the interpretation of Article 12(2) of Regulation No 13/64/EEC of the Council on the progressive establishment of a common organization of the markets in milk and milk products.In Question (a) the court referring the question asks the Court to rule whether ‘the character of a charge having an effect equivalent to a customs duty within the meaning of Article 12(2) of Regulation No 13/64 is determined by the general protective purposes of the charge or else by the protective effect which it exerts in fact in the case of a given product’.This question must be examined in the light of the facts of the main action as they have been indicated by the court making the reference.From these data it emerges that the action concerns the application of an equalization tax, under the legislation relating to the turnover tax, to importation of milk products coming from a third state.In these circumstances the question put by the Court making the reference must receive an answer based only on the provisions of Article 12(2) of Regulation No 13/64, as Article 95 of the Treaty establishing the European Economic Community applies exclusively to products originating in Member States.According to Article 12(2) of the said Regulation, ‘On imports from third countries the following shall be incompatible with the application of the present Regulation:— the charging of any customs duty or charge having equivalent effect’.The question put to the Court is thus intended to inquire whether a charge imposed in the circumstances set out by the Court making the reference comes under this prohibition.Regulation No 13/64 has as its purpose in particular to substitute a uniform system of levies for all the protective measures of different kinds previously applied by Member States.In consequence, Article 12(2) of the same Regulation abolished all national measures having protective effects similar to those of the levy.Taxation such as that which is the subject of the main action, levied within the framework of legislation relating to the turnover tax, does not constitute a specific tax on imported products, but a general tax applying without distinction to all categories of products, whether domestic or imported, even if charged at the moment of importation.Such a charge, of an essentially fiscal nature, when it is imposed on importation, is intended to place in a comparable fiscal situation all categories of products whatever their origin may be.Hence, in the absence of a protective purpose, an internal tax of the type referred to by the Court making the reference cannot be considered as a charge having an effect equivalent to a customs duty within the meaning of Article 12(2) of Regulation No 13/64.In consequence, as the suppositions on which Questions (b), (c) and (d) were put have not been realized, those questions have lost their purpose.The costs incurred by the Government of the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the Finanzgericht, Munich, the decision on costs is a matter for that court.
Operative part
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