Sektkellerei C.A. Kupferberg & Cie KG a.A. v Hauptzollamt Mainz (253/83)

1.Facts and procedure

2.Summary of the written observations submitted to the Court

The defendant in the main proceedings, the Hauptzollamt Mainz, states that it is unable to understand the issue of discrimination against imported products which is raised in the question referred to the Court.In its view, given that imported and domestic products alike were subjected to a rate of DM 1500 per hectolitre of spirit (the amount of the tax on spirits) on the basis of the circular of 23 March 1976 of the Federal Minister for Finance (III A2-V 7030-32/76), the question as to whether the imported products were entitled to have applied to them a rate of DM 1430 per hectolitre of spirit, that is to say, a lower rate than that applied to domestic products, doubtless raises a problem in connection with the interpretation of Paragraphs 151 and 152 of the Law on the Monopoly in Spirits. But in no case could it imply that the provisions prohibiting discrimination contained in the EEC Treaty or in the Agreements concluded with Spain and Portugal had been infringed. Moreover, according to the Court's judgment of 7 May 1981 (Case 153/80, Rumhaus Hansen GmbH v Hauptzollamt Flensburg, [1981] ECR 1165), while the abovementioned provisions establish the principle of equal treatment, they do not oblige the Member States to accord more favourable treatment to imported products than to their own domestic products.From the wording of the reasons given in support of the reference for a preliminary ruling and in view of the citation of Articles 95 and 37 of the Treaty, the Hauptzollamt does not preclude the possibility that the Finanzgericht considers that the reduction in the monopoly's selling price may have given rise to discrimination in taxation (Article 95), or economic discrimination (Article 37), or both. In the Hauptzollamt's view, discrimination in taxation is out of the question, since all the spirits were subject, as indicated above, to one and the same rate of taxation. As for economic discrimination, the Hauptzollamt points out that, in its judgment of 13 March 1979 (Case 91/78, Hansen GmbH v Hauptzollamt Flensburg, [1979] ECR 935), the Court clearly laid down the principles applicable in the field: such discrimination would only have taken place had the monopoly's prices been abnormally low compared with those in other Member States. That was not the case in the present instance, since at the material time the prices in the other Member States were much lower than DM 1683 per hectolitre of spirit.The plaintiff in the main proceedings, Kupferberg, states by way of introduction that during the period from 23 February 1976 (date of the actual DM 150 reduction per hectolitre of spirit in the selling price of spirits applied by the Federal Monopoly Administration and the Deutsche Korn-branntwein-Verwertungsstelle [German office for the utilization of grain spirit], which is responsible for the marketing of such spirit) to 18 March 1976, the date of the entry into force of the Law of 2 May 1976 amending Paragraphs 79, 84, 151 and 152 of the Law on the Monopoly in Spirits, the taxes levied on spirits under the applicable legal rules were as follows:

1 —Article 95 of the Treaty

(a) The Commission emphasizes that during the period in question imported products were subject to an equalization duty of DM 1500 per hectolitre of spirit, which was equivalent to the tax levied on similar or competing domestic products whether they were spirits sold by the monopoly and subject to the tax on spirits or spirits not sold to the monopoly and subject to the spirits surcharge.Given that, subject to the observations set out below, the tax on spirits was identical in all three cases, namely DM 1500 per hectolitre of spirit, the tax levied on the products from other Member States did not exceed, directly or indirectly, the tax on similar domestic products. The conditions laid down in Article 95 were therefore met and so, in the Commission's view, Kupferberg is not entitled to have the rate reduced to DM 1430 per hectolitre of spirit.(b) As for Kupferberg's assertion that, in view of the provisions of the Law on the Monopoly in Spirits and having regard to the reduction in the selling price from DM 1833 to DM 1683 per hectolitre of spirit, the rate of equalization duty should have been DM 1430 instead of DM 1500 per hectolitre of spirit, the Commission points out that from the point of view of Community law it is irrelevant whether the lower selling price ought to be viewed under German law as the normal selling price for the purposes of the calculation method laid down in Paragraph 152 (1) of the said Law. All that it is necessary to determine is whether the real tax burden, that is to say, the rate of tax actually applied, is compatible with Community law.Referring to the judgments of the Court of 13 March 1979 (Case 86/78, Peureux v Directeur des Services Fiscaux, [1979] ECR 897) and 7 May 1981 (Case 152/80, Rumhaus Hansen GmbH v Hauptzollamt Flensburg, [1981] ECR 1165), it points out that although Article 95 of the Treaty does not preclude goods imported from another Member State from enjoying more favourable tax treatment than domestic goods it does not require this, since it simply prohibits imported products from being taxed more heavily than domestic products.Finally, the Commission stresses that, as regards the rate of tax actually applied in this case, the rate of DM 1500 per hectolitre of spirit was fixed by the Minister for Finance in his circular of 23 March 1976 without reference in any way to the calculation method set out in Paragraph 152 of the Law on the Monopoly in Spirits.(c) As for Kupferberg's doubts about the amount of tax actually levied on domestic spirits by the monopoly, the Commission points out that the fact that a calculation carried out on the basis of the reduced selling price actually applied by the monopoly (DM 1683 per hectolitre of spirit) and an unchanged basic price (DM 253 per hectolitre of spirit) produces an amount (DM 1430 per hectolitre of spirit) less than the tax (DM 1500) by no means signifies that the Federal Monopoly Administration was partially relieved of its obligation to levy and pay to the Treasury the whole amount of the tax. In its view, it is necessary to start from the principle that the Federal Monopoly Administration always duly levied the tax under Paragraph 84 of the Law on the Monopoly in Spirits and that it always paid the proceeds over to the Treasury in accordance with Paragraph 86.(d) However, the Commission considers that should it turn out, contrary to its belief, that the spirits sold by the monopoly were in fact less heavily taxed owing to the monopoly's being partly released from levying and paying the tax, the issue would take on a different complexion. In that regard, it points out that from an economic point of view exemption from tax to the extent of DM 70, as would be the case, would constitute no more than a partial offsetting in advance of losses incurred by the monopoly. That would be aid, and, as such, would have to be assessed in the light, not of Article 95 of the Treaty, but of Article 37. It adds that it would be wholly specious to seek to make a distinction depending on whether the tax to be paid is reduced immediately or whether it is first paid in full to the Treasury and later partly offset from general tax revenue, in so far as losses are always offset from tax revenue.The Commission considers that even if that view were not accepted, the existence of an infringement of Article 95 would still have to be established in the actual case of the spirits put into free circulation by Kupferberg. In this connection it would, in its view, be necessary to take the following factors into account:— Whisky, geneva, armagnac and pruneaux are distilled spirits which are not comparable with the spirit sold by the Federal Monopoly Administration. The only similar products on the German market, within the meaning of the first paragraph of Article 95, are those products which are not subject to the requirement to be sold to the monopoly, such as the various grain spirits (Steinhäger, for instance) and spirits derived from fruit. Those spirits are subject to the spirits surcharge, which (ignoring the specific decreases and increases mentioned under (e) below) amounted to DM 1500 per hectolitre of spirit, that is to say, it was identical in amount to the tax levied on similar imported products. Any reduction of the monopoly equalization duty by DM 70 therefore did not apply to those products.From the pricing policy practised by the monopoly, as described, neither does it appear that protection, not even indirect protection, of spirit sold by the monopoly has been practised as against the four spirits mentioned above, and hence neither does it appear that the second paragraph of Article 95 has been infringed.— At the most only the liqueur imported from the Netherlands might warrant a different line of argument in so far as spirit is used in its manufacture, as is the case in Germany. If spirit from the monopoly is used to manufacture liqueur, the German liqueur would enjoy preferential tax treatment to the extent of DM 70 per hectolitre of spirit, contrary to the first paragraph of Article 95.(e) Lastly, although this issue is not the subject of the question referred to the Court for a preliminary ruling, the Commission points out that, in order to satisfy the requirements of Article 95 of the Treaty, imported products must be eligible without discrimination for the tax concessions provided for in the Law on the Monopoly in Spirits and, in particular, in Paragraphs 79 and 79a thereof, provided that they satisfy the requisite conditions. It refers in this connection to the Court's case-law, which provides the necessary guidance to enable the Finanzgericht to decide on the matter once it has made the necessary findings of fact.

2 —Article 37 of the EEC Treaty

(a) The Commission, while leaving aside its specific observations on the reduced rates resulting from Paragraphs 79 and 79a of the Law, stresses that since the taxes actually levied in the case at issue affected imported products based on distilled spirit and domestic products in the same way, there was no discrimination regarding the conditions under which goods are procured and marketed, within the meaning of Article 37.(b) Although the Finanzgericht did not ask to what extent the actual reduction in the selling price from DM 1833 to DM 1683 per hectolitre of spirit and the loss apparently incurred by the monopoly as a result come as such within the scope of Article 37, the Commission nevertheless considers that it should tackle that question in view of the fact that it is linked to some extent with the taxation aspects of the case and was raised by Kupferberg.— It points out that the said reduction does not constitute a measure peculiar to the State monopoly but a commercial measure dictated by competition.— Since the question nevertheless arises as to what extent the German spirits monopoly, by reducing the actual selling price but keeping the basic price unchanged, practised a system of aids for national producers which should be dealt with in the context of Article 92 and Article 37 of the Treaty, the Commission stresses that that question has already been resolved by the judgment of 13 March 1979 (Case 91/78, Hansen GmbH v Hauptzollamt Flensburg, [1979] ECR 935) in which the Court ruled as follows:‘Article 37 of the EEC Treaty constitutes in relation to Articles 92 and 93 of that Treaty a lex specialis in the sense that State measures, inherent in the exercise by a State monopoly of a commercial character of its exclusive right must, even where they are linked to the grant of an aid to producers subject to the monopoly, be considered in the light of the requirements of Article 37.’‘Any practice by a State monopoly which consists in marketing a product such as spirits with the aid of public funds, at an abnormally low resale price compared to the price, before tax, of spirits of comparable quality imported from another Member State is incompatible with Article 37 (1) of the EEC Treaty.’— The Commission observes that the normal selling price of DM 1683 per hectolitre of spirit which was actually applied by the monopoly as from 23 February 1976 was consonant with the requirements of the market, as determined by the prices offered for alcohol originating in other Member States. The Commission finds therefore that it cannot be said that the monopoly charged ‘abnormally low’ prices. It followed that an importer may not avail itself of Article 37 and the change in the monopoly's selling price to claim a reduction of DM 70 per hectolitre of spirit in the import duty.— The Commission refers to the arguments, submitted by Kupferberg with a view to arriving at a different solution from that resulting from the judgment in the second Hansen case, to the effect that, since during the period between 23 February and 18 March 1976 the higher prices of the Federal Monopoly Administration were not covered by aid, the latter was obliged, in order to avoid insolvency, to reduce the tax on spirits which it had to levy and pay to the Treasury by the difference between the purchase price and the selling price (DM 70), and that there is therefore a close, direct link between the acquisition of the products by the Administration and their sale. In reply, the Commission contends that if the assumption underlying the latter statement were incorrect it would be impossible to establish a causal link between the purchase price and the selling price. Even if it were correct that would not alter the legal assessment of the case at all. On the economic level, the tax reduction could amount to nothing more than the offsetting of losses in advance, that is to say, to a sales practice of the monopoly to which the Court's observations cited above apply. The reduction in the selling price to DM 1683 per hectolitre of spirit in no way constitutes an obstacle to equal opportunities for imported spirits. On the contrary, equal opportunities for domestic spirits would be jeopardized were the tax on imported spirits reduced, as Kupferberg is asking, by a further DM 70 per hectolitre of spirit.— Finally, the Commission notes that no more is it possible to argue that the tax on imported spirit helps to finance the losses incurred by the monopoly as a result of its guaranteed purchase prices and hence is contrary to Article 95, in so far as no causal relationship and no link as regards the destination of the tax can be found between the tax which was levied and the funding of the purchase price that was guaranteed to the producer. The interposition of the monopoly in any event breaks that causal nexus and, in the final analysis, the funding of the acquisition price is invariably charged to the Federal budget.The Commission concludes from the foregoing observations that the application during the material period of a tax on imported spirits equivalent in amount (DM 1500 per hectolitre of spirit) to the tax on spirits is contrary neither to Article 95 nor to Article 37 of the EEC Treaty.

3.Oral procedure

At the sitting on 23 October 1984 Kupferberg, represented by Dr Ehle, and the Commission of the European Communities, represented by F. W. Albrecht, presented oral argument.The Advocate General delivered his opinion at the sitting on 27 November 1984.

Article 95 of the Treaty

Article 37 of the Treaty

Article 21 of the Agreement between the EEC and the Portuguese Republic

Article 3 of the Agreement between the EEC and Spain