Judgment_paragraph 2.4. · Sektkellerei C.A. Kupferberg & Cie KG a.A. v Hauptzollamt Mainz (253/83)

2.4.Taxation of spirits which must be sold to the Federal Monopoly Administration under paragraph 84 (1) of the Law on the Monopoly in Spirits read together with Paragraphs 62, 63 et seq. of that Law.normal selling price for its | DM 1623.00 per hectolitre of spiritless the acquisition price (varies according to the amount by which it may be increased or reduced), average about | DM 370.00 per hectolitre of spiritnet tax | DM 1253.00per hectolitre of spiritBefore addressing the ‘broad’ issue of discrimination against spirits imported in the period from 23 February to 17 March 1976, which, in its view, is raised by the question referred to the Court, and examining that issue in the light of four different situations, each corresponding to a sub-question, Kupferberg makes a number of general points about the non-discrimination principles that are applicable in the present instance.As regards the products of Community origin (whisky, geneva, liqueurs, armagnac and pruneaux) in respect of which the prohibitions of discrimination set out in Articles 37 and 95 of the EEC Treaty have to be taken into account, Kupferberg stresses that in its judgments of 13 March 1979 (Case 86/78, Peureux v Directeur des Services Fiscaux, [1979] ECR 897) and 29 April 1982 (Case 17/81, Pabst & Riehan v Hauptzollamt Oldenburg, [1982] ECR 1331) the Court defined the scope of each of those provisions when it decided that Article 37 concerns only activities intrinsically connected with the specific business of the monopoly in question. It points out, however, that the present case concerns the taxation of imported spirits on the basis of the selling price for spirits. Given that, in its view, the fixing of the selling price for spirits (Paragraphs 88, 89 and 90 of the Law on the Monopoly in Spirits) performs a characteristic function in connection with the administration of a monopoly, Article 37 is applicable. Yet since the same price also performed a function with regard to the calculation of the tax, in so far as it determined the amount of the import duties for the period in question, Article 95 of the Treaty applies concurrently.Turning to the products from nonmember countries, sherry from Spain and port from Portugal, which come under Article 3 of the Agreement between the EEC and Spain and Article 21 of the Agreement between the EEC and the Portuguese Republic respectively, Kupferberg refers to the Court's judgment of 26 October 1982 (Case 104/81, Hauptzollamt Mainz v Kupferberg & Cie, [1982] ECR 3641), and points out that the said provisions are directly applicable and capable of conferring on individual traders rights which the courts must protect. As far as their interpretation and implementation are concerned, the provisions correspond to Article 95 of the EEC Treaty and should not be interpreted differently on the ground that the object of the free-trade agreements differs from that of the EEC Treaty. In its view, sherry and port are discriminated against by being liable to a higher rate of taxation than similar domestic products.Kupferberg goes on to argue that the issue of the ‘similarity’ of products is not crucial as regards Article 37 of the Treaty. As far as Article 95 of the Treaty and Articles 3 and 21 respectively of the free-trade agreements are concerned, the national court should be guided by the established case-law of the Court (judgments of 15 July 1982 in Case 216/81, Cogis v Amministrazione delle Finanze, [1982] ECR 2701 and of 26 October 1982, loc. cit.). In its view, whisky, geneva and liqueurs are similar to grain spirit (Kornbranntwein) and clear spirit, while armagnac, pruneaux, sherry and port largely correspond to spirits derived from fruit. It adds that the differentiation made in the Law on the Monopoly in Spirits between spirits exempted from the requirement to be sold to the Federal Monopoly Administration (Paragraph 78), spirits subject to that requirement (Paragraph 84) and spirits which may be so sold (Paragraph 76 (2)) (including spirits made from cereals, potatoes, maize, marcs, lees and musts of apples or pears) should be left out of account for the purpose of establishing similarity, since it is based solely on considerations connected with the economic management of the monopoly.Kupferberg then addresses the ‘broad’ issue of ‘discrimination against imported products’ and the first sub-question raised in the question referred to the Court, namely whether imported spirits are discriminated against for the purposes of Articles 37 and 95 of the Treaty merely because a provision of national revenue law (the Law on the Monopoly in Spirits, Paragraph 152 (1)) is interpreted and applied contrary to its plain meaning and this results in higher taxation than the application of that provision requires. Referring to the Court's judgment of 29 April 1982 (Case 17/81, Pabst & Richarz v Hauptzollamt Oldenburg, [1982] ECR 1331), it contends, first, that the legal classification in Community law of a national measure (namely the calculation of monopoly equalization duty) does not depend upon how that measure is viewed or appraised in the national context and, secondly, that Articles 37 and 95 are intended to cover all national procedures, whatever their nature, which are likely to give rise to higher taxation on imported than on domestic products.In its view, the application of a fictitious ‘normal selling price’ (DM 1833), which did not correspond to the actual selling price (DM 1683), for the purpose of calculating the monopoly equalization duty pursuant to the first sentence of Paragraph 152 (1) of the Law on the Monopoly in Spirits conflicted with Article 37 of the Treaty, without there being any need to establish whether discrimination took place against imported spirits and in favour of domestically-produced spirits. It contends that Article 37 (1) and (2), read together, require the Member States to refrain from taking any new measure restricting the scope of the articles dealing with the abolition of customs duties and quantitative restrictions. In its opinion, in view of the situation of Article 37 in the scheme of the Treaty and the reference made in Article 37 (3) to Articles 30 and 34, the prohibition extends to measures having an effect equivalent to quantitative restrictions. The interpretation and application of a national provision contrary to its clear wording amounts to a measure having equivalent effect in so far as it results in imported products being taxed at a higher rate.Apart from that, it considers that the practical implementation by the German Monopoly Administration and finance administration of Paragraph 152 of the Law on the Monopoly in Spirits also infringes the principles of nondiscrimination set forth in Articles 37 (1) and 95 of the Treaty, with the result that there is no need to have recourse to the issue of the taxation levied on similar domestic products — even though for the purposes of those articles the term ‘discrimination’ fundamentally signifies imported products being treated less favourably than domestic ones — since the provision concerning imported products (namely Paragraph 152) was interpreted and applied in a manner which was in contradiction with its wording. In its opinion, this raises a presumption that imported spirits were treated less favourably than the legislature expressly stipulated.The above also applies to Articles 3 and 21 respectively of the free-trade agreements.Lastly, according to calculations provided by Kupferberg on a preliminary basis, domestically-produced spirits are at all events subjected to lower taxation.As regards the second sub-question, namely whether imported spirits suffer discrimination compared with similar spirits which are not subject to the requirement to be sold to the Federal Monopoly Administration when the amount of monopoly equalization duty (Paragraph 152) and the amount of the spirits surcharge (Paragraph 79) are based on the normal selling price for spirits and the Administration does not calculate the tax on the basis of the actual selling price but on that of the normal selling price previously published and retained by way of fiction, Kupferberg points out that the term ‘impose’ in Article 95 (1) of the EEC Treaty does not signify merely the actual taxation levied on domestic products but also that taxation which is ‘legally permissible’. Failing this, the Member States could evade Article 95 without amending their laws in any way, simply by interpreting or applying contra legem tax provisions governing the taxation of similar domestic products. On the basis of the provisions on the amount of equalization duty (Paragraph 152) and the amount of spirits surcharge (Paragraph 79) and in view of the actual selling price of DM 1683, the amount of equalization duty should have been DM 1430 per hectolitre of spirit as against a spirits surcharge of DM 1407. Because of this, the actual discrimination worked out not at merely DM 70 per hectolitre of spirit but at DM 93. These considerations apply mutatis mutandis to liqueur wines on the basis of Articles 3 and 21 respectively of the agreements concluded with Spain and Portugal.As for the third sub-question, namely whether imported spirits suffer discrimination compared with domestic spirits which may be sold to the Federal Monopoly Administration when the calculation of the tax on imported spirits does not take account of the actual reduction of DM 150 in the normal selling price for spirits, whereas domestic spirits eligible for sale to the Federal Monopoly Administration and, in particular, grain spirits produced by distillers who market their products themselves qualify for a subsidy in the form of an aid of DM 150, on top of which they receive supplementary aid intended to cover purification expenses (about DM 30) to offset the reduction in the selling price, Kupferberg points out that the said aid, which was introduced by a circular of 24 March 1976 of the Minister for Finance, has to its knowledge not been notified to the Commission pursuant to Article 93 of the Treaty and has the effect, from a purely economic point of view, of decreasing the amount of tax on domestic grain spirit to DM 1320 per hectolitre of spirit or even less. In its view, payment of the said aid infringes Article 95 of the EEC Treaty, as the Court found in its judgments of 21 May 1980 (Case 73/79, Commission of the European Communities v Italian Republic, [1980] ECR 1533) and 29 April 1982 (Case 17/81, Pabst & Richarz v Hauptzollamt Oldenburg, [1982] ECR 1331).In its view, the above argument cannot be undermined by the Court's judgment of 13 March 1979 in Case 91/78 (Hansen GmbH v Hauptzollamt Flensburg, [1979] ECR 935), in which the Court considered that there was a causal link between the amount of aid granted to producers in the form of a guaranteed acquisition price and the selling price, owing to the intervention of the monopoly. This could not be in point in the present instance given that the distillers of grain spirits marketing their own products and receiving the aid have direct access to the market and the aid granted to them plays a crucial role in determining the market price. Moreover, in its opinion, the Deutsche Kornbranntwein-Verwertungsstelle is a marketing company subject to private law, which cannot be assimilated to the administration of the spirits monopoly.Finally, as regards the fourth sub-question, namely whether imported spirits suffer discrimination compared with domestic spirits which are subject to the requirement to be sold to the Federal Monopoly Administration, when the calculation of the tax on imported products (Paragraph 152) does not take account of the de facto DM 150 reduction in the normal selling price whereas domestic spirits sold to the Federal Monopoly Administration and the Deutsche Kornbranntwein-Verwertungsstelle are purchased at a price markedly higher (between DM 250 and DM 550) than their subsequent selling price (DM 1683), Kupferberg points out that, in view of the reduction in the normal selling price from DM 1833 to DM 1683 and the concurrent retention of the acquisition price, the Federal Monopoly Administration in reality forwent the tax on domestic spirits to the extent of DM 150 during the material time while it adopted, vis-à-vis the outside world, a structure whereby the reduction did not appear to affect the rate of taxation but rather the price of the goods, which is included in the normal price.In its view, in order to assess these circumstances in the light of Articles 37 and 95 of the EEC Treaty, it should be borne in mind that the normal selling price is a composite entity made up of the tax on spirits and the price of the goods. The acquisition price is constant and so, when the price as a whole is reduced, the reduction can only be in tax. The Federal Monopoly Administration goes into deficit to the extent of the reduction of DM 150, which has to be offset by aid. The upshot is higher indirect taxation on imported spirits.In Kupferberg's view, even if it were to be considered that the diminution in the selling price did not affect the tax component in the price but the component representing the price of the goods, the argument developed in paragraph 13 of the grounds of the judgment of 13 March 1979 (Case 91/78, Hansen GmbH v Hauptzollamt Flensburg, [1979] ECR 935) is not applicable in this case. It contends in this connection that during the period at issue the final selling price of the monopoly was not determined autonomously on the basis of considerations of commercial policy, since the Federal Monopoly Administration had no means available to it for this purpose.In conclusion, Kupferberg considers that these factors show that, leaving aside questions concerning the similarity or comparability of the products, levying an equalization duty on spirits of more than DM 1430 per hectolitre of spirit infringes Articles 37 and 95 of the EEC Treaty and Articles 3 and 21 respectively of the free-trade agreements.Accordingly, in its view the question put by the Finanzgericht should be answered as follows :Articles 37 and 95 of the EEC Treaty, Article 3 of the Agreement between the EEC and Spain and the first paragraph of Article 21 of the Agreement between the EEC and the Portuguese Republic must be understood as meaning that imported spirits suffer discrimination when the competent national authorities interpret and apply tax provisions applicable to imported products in a manner which is in contradiction with their literal meaning and with actual practice (in this case, reduction of the normal selling price) so that imported products are treated less favourably.Even when the tax on imported products is comparable with the taxes levied on similar domestic products, Community law requires the tax provisions applicable to domestic products to be interpreted and applied literally and in accordance with actual circumstances (in this case, reduction of DM 150 in the normal selling price per hectolitre of spirit).Finally, Kupferberg states that it will not put forward a possible answer to the question put by the Finanzgericht in order to cover the eventuality of the Court's basing itself definitively on a comparison between the taxes on imported products and those on domestic spirits produced by distillers of grain spirits marketing their own products and/or with spirits subject to the requirement to be sold to the Federal Monopoly Administration.In the Commission's view, although the question submitted by the Finanzgericht for a preliminary ruling is formulated with a view to obtaining a concrete decision concerning the amount of the duty to be levied on products put into free circulation by Kupferberg, it is admissible, since it enables the Court to give an answer solely on the interpretation of Community law.The Commission first points out that the object of the proceedings pending before the Finanzgericht is to establish whether Kupferberg may, according to Community law, require that spirits originating in another Member State or in a nonmember country be subjected to an equalization duty of DM 1430 instead of DM 1500 per hectolitre of spirit. It then states that, in its view, it is appropriate to answer the question first of all from the point of view of products originating in other Member States (subheading 22.09 C of the Common Customs Tariff) in the light of Articles 95 and 37 of the EEC Treaty and subsequently from that of products from Spain and Portugal (subheading 22.05 C III of the Common Customs Tariff) in the light of Article 3 and Article 21 respectively of the Agreements between the EEC and Spain and Portugal.Before embarking on an examination of the substantive issues, the Commission considers it necessary to point out that the main proceedings concern a specific period of short duration prior to the reform of the German spirits monopoly. That period commenced on 23 February 1976, the date as from which the Federal Monopoly Administration reduced the selling price for spirits and the Minister for Finance fixed the effective rate of equalization duty without employing the calculation methods laid down by the Law on the Monopoly in Spirits. The period ended on 18 March 1976, the date of the entry into force of the Law of 2 May 1976 amending the aforementioned Law and of the increase in the burden of taxation on spirits.

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

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