C-411/92 · GlobalLawDB

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Judgment of the Court5 July 1994^noteIn Case C-411/92,French Republic, represented by R Pouzoulet, Deputy Director in the Legal Affairs Department of the Ministry of Foreign Affairs, and C. Chavance, Attache Principal d'Administration Centrale at the same Ministry, acting as Agents, with an address for service in Luxembourg at the French Embassy, 9 Boulevard Prince Henri,vCommission of the European Communities, represented by G. Rozet, Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of G. Kremlis, of its Legal Service, Wagner Centre, Kirchberg,THE COURT,composed of: G. F. Mancini, President of the Chamber, acting for the President, J. C. Moitinho de Almeida and M. Diez de Velasco (Presidents of Chambers), C. N. Kakouris, F. A. Schockweiler (Rapporteur), F. Grévisse, M. Zuleeg, P. J. G. Kapteyn and J. L. Murray, Judges,Advocate General: C. Gulmann,Registrar: H. von Holstein, Deputy Registrar,having regard to the Report for the Hearing,after hearing oral argument from the parties at the hearing on 19 April 1994,after hearing the Opinion of the Advocate General at the sitting on 18 May 1994,gives the following

Judgment

1By application lodged at the Court Registry on 10 December 1992 the French Republic brought an action pursuant to the first paragraph of Article 173 of the EEC Treaty for the partial annulment of Commission Decision 92/491/EEC of 23 September 1992 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1989 of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section (OJ 1992 L 298, p. 23), in so far as that decision declared certain expenditure relating to the co-responsibility levy in the cereal sector ineligible for Community financing.

2In order to remedy the structural surpluses which characterized the cereal markets, Council Regulation (EEC) No 2727/75 of 29 October 1975 on the common organization of the market in cereals (OJ 1975 L 281, p. 1), as amended, provides for a co-responsibility levy, together with an additional co-responsibility levy, applying in particular to cereals undergoing first processing.

3The second subparagraph of Article 1(2) of Commission Regulation (EEC) No 2040/86 of 30 June 1986 laying down detailed rules for the application of the co-responsibility levy in the cereals sector (OJ 1986 L 173, p. 65), as amended by Commission Regulation (EEC) No 2572/86 of 12 August 1986 (OJ 1986 L 229, p. 25), exempted from the co-responsibility levy first-stage processing carried out by a farmer on his own agricultural holding where the product obtained was used on that holding for animal feed and certain other conditions were met.

4By its judgment in Case 300/86 Van Landschoot v Mera [1988] ECR 3443, the Court declared the second subparagraph of Article 1 (2) of Regulation No 2040/86, as amended, invalid in so far as it did not provide for exemption for first processing of cereals carried out off the producer's agricultural holding or by means of machinery which did not form part of the agricultural installations of the farm, where the products of the processing were used on that farm.

5In the light of that judgment, the Commission, by Regulation (EEC) No 2324/88 of 26 July 1988 (OJ 1988 L 202, p. 39), amended Regulation (EEC) No 1432/88 of 26 May 1988 laying down detailed rules for applying the co-responsibility levy in the cereals sectors (OJ 1988 L 131, p. 37) which it had adopted to replace the abovementioned Regulation No 2040/86.

6According to the first subparagraph of Article 1(2) of Regulation No 1432/88, as amended by Regulation No 2324/88:‘... “placing on the market” means sales (including barter operations) by producers of the products referred to ... either as such or in the form of processed products, with the exception of crushed maize ears harvested with a view to their ensilage on an agricultural holding, to collection, trading and processing undertakings, to other producers and to the intervention agency’.

7Article 1(1) of Commission Regulation (EEC) No 3779/88 of 2 December 1988 on the reimbursement of the co-responsibility levy in the cereals sector provided for in Regulations (EEC) No 2040/86 and (EEC) No 1432/88 in respect of first-stage processing undertaken on a producer's account (OJ 1988 L 332, p. 17) provides:‘The competent agencies designated by the Member States shall reimburse before 30 June 1989 to producers, on application by the latter, the amounts of co-responsibility levies withheld:— ...— on operations for the processing of cereals delivered or made available to an undertaking by a producer (work under contract) for subsequent utilization on his holding by 26 July 1988 pursuant to Article 1(2) of Regulation (EEC) No 1432/88.’

8The French tax rules adopted pursuant to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common System of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) adopted a narrower construction of contract work than that under Regulation No 3779/88 in that only the processing of cereals where the same goods are returned is regarded as contract work whereas processing in which equivalent goods are returned is regarded as a double sale transaction which does not qualify for exemption from the levy.

9In order to ensure that in the event of processing with return of equivalent goods French traders qualify for the exemption from the levies under the same conditions as traders in other Member States, the Office National Interprofessionnel des Céréales (National Cereals Trades Board) set up a procedure for sales subject to a repurchase clause within the meaning of Article 1659 of the French Civil Code. The exercise by the vendor of the right of repurchase has the effect of cancelling the sale and places the parties in the position they were in before the sale, without effecting any further change.

10Under the system in France, where a producer considers that a quantity of cereals is to be reserved for him, whether for his own use or for subsequent processing, he sells it with a repurchase clause, that is to say with a clause of avoidance to the collector or processor, at the price applicable on the date of sale but with payment of the co-responsibility levy. The effect of the repurchase clause is simply to prevent the collector or processor from using the cereals thus acquired for the benefit of a third party, at least without the seller's consent. It is only where the producer does not require all the cereals subject to the repurchase clause that they are sold on the market, the levy having been paid prior to that. The cereals returned to the producer are then subject to a repayment of the levy on the grounds that they are for own use.

11In the contested decision of 23 September 1972 the Commission refused to recognize the conformity with Community law of the French authorities' reimbursement of the levies. In the Summary Report of 27 July 1992 on the results of the checks carried out for the clearance of the EAGGF Guarantee section accounts for the year 1989, the Commission states in particular that, in referring to sales, Regulation No 1432/88 aims to make cereals subject to the levy as soon as they are placed on the market, and that the only case for exemption mentioned in Regulation No 3779/88 is operations on the producer's account since they involve neither sale nor placing on the market and, consequently, no price which could affect market balance.

12In support of its action for annulment the French Republic essentially argues that the system of sale subject to a repurchase clause is the only way that processing of cereals carried out on behalf of a producer off his holding can be exempt from the levies while complying with French tax provisions. The system of sales subject to a repurchase clause does not involve the product sold actually being put on the market and therefore does not undermine the co-responsibility scheme's aim of reforming the cereal sector.

13The Commission contends that cereals sold subject to a repurchase clause are, at the time of sale, placed on the market and the price is fixed and paid so that the charge of the levies is justified. The cancellation of the sale following the exercise of the right of repurchase cannot retroactively neutralize the effect of the sale on the equilibrium of the markets and hence justify the reimbursement of the levies.

14In deciding on the merits of the application it should be borne in mind that the objective of the Community regulations governing the co-responsibility levy is to limit the structural surpluses on the cereals market and that that objective provides justification for imposing the levy only on the processing of cereals placed on the market, since the quantities of cereals remaining in a closed circuit do not contribute to the creation of surpluses (see Case 300/86, cited above, paragraph 11, and Case C-203/89 Van Landschoot v Mera [1990] ECR I-3525, paragraph 22).

15In Case C-203/89, the Court held (paragraph 24) that, having regard to the objective pursued by the co-responsibility levy, the question whether or not the products are placed on the market is the distinguishing criterion for determining whether or not traders are liable to pay the levy.

16It further stated (paragraph 25) that placing on the market occurs as soon as a producer divests himself of the cereals which he has produced to sell them to a processor, whoever he may be, even if the producer subsequently buys back the cereals from the processor in the form of processed products.

17It must be held that, under the system of sales subject to a repurchase clause set up by the French authorities, the placing of the cereals on the market occurs at the time of the sale by the producer. By increasing the volume of quantities offered on the market that sale has an effect on prices and places the producer who is selling subject to a repurchase clause in the same position as any other seller.

18The exercise of the right of repurchase, even if, under French civil law, it restores the situation existing before the sale, does not remove the effect which that sale had on the market and on the level of prices and therefore does not comply with the aim of reducing surpluses in the cereals sector. In that case, therefore reimbursement of the levy is not justified.

19Accordingly the action for annulment must be dismissed.

Costs

20Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the French Republic has been unsuccessful, it must be ordered to pay the costs.

Operative part

On those grounds,THE COURThereby:

1.Dismisses the application;

2.Orders the French Republic to pay the costs.

Delivered in open court in Luxembourg on 5 July 1994.