AROCO, spol. s r. o. v Generální ředitelství cel (T-614/24)

Contents

Judgment of the General Court (Chamber giving preliminary rulings)22 October 2025^note(Reference for a preliminary ruling — Harmonisation of fiscal legislation — Directive 92/83/EEC — Harmonisation of the structures of excise duties on alcohol and alcoholic beverages — Excise duties — Ethyl alcohol — Exemptions — Article 27(1)(e) — Production of flavourings containing ethyl alcohol for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% — Possibility for the Member States to make that exemption subject to conditions)In Case T‑614/24,REQUEST for a preliminary ruling under Article 267 TFEU from the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic), made by decision of 6 November 2024, received at the Court of Justice on 13 November 2024, in the proceedingsAROCO, spol. s r.o.vGenerální ředitelství cel,THE GENERAL COURT (Chamber giving preliminary rulings),Composed, at the time of the deliberations, of S. Papasavvas, President, T. Pynnä, J. Laitenberger, M. Stancu (Rapporteur) and I. Dimitrakopoulos, Judges,Advocate General: M. Brkan,Registrar: V. Di Bucci,having regard to the transmission of the request for a preliminary ruling to the General Court by the Court of Justice on 29 November 2024, pursuant to the third paragraph of Article 50b of the Statute of the Court of Justice of the European Union,having regard to the fact that the case concerns the area referred to in point (b) of the first paragraph of Article 50b of the Statute of the Court of Justice of the European Union and the fact that there is no independent question relating to interpretation within the meaning of the second paragraph of Article 50b of that statute,having regard to the written part of the procedure,after considering the observations submitted on behalf of:– AROCO, spol. s r.o., by M. Vojáček, advokát,– the Czech Government, by L. Březinová, M. Smolek and J. Vláčil, acting as Agents,– the European Commission, by M. Björkland and J. Hradil, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of Article 27(1)(e) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21).

2The request has been made in proceedings between AROCO, spol. s r.o. and the Generální ředitelství cel (Directorate-General of Customs, Czech Republic) concerning the latter’s refusal to exempt from excise duty ethyl alcohol contained in flavourings sold by that company.

Legal framework

European Union law

Directive 92/83

3Article 19(1) of Directive 92/83 states:‘Member States shall apply an excise duty to ethyl alcohol in accordance with this Directive.’

4The first indent of Article 20 of that directive is worded as follows:‘For the purposes of this Directive the term “ethyl alcohol” covers:– all products with an actual alcoholic strength by volume exceeding 1.2% volume which fall within CN codes 2207 and 2208, even when those products form part of a product which falls within another chapter of the CN[ set out in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Implementing Regulation (EU) 2015/1754 of 6 October 2015 (OJ 2015 L 285, p. 1) (“the CN”)]’.

5Article 27(1) of that directive provides:‘Member States shall exempt the products covered by this Directive from the harmonised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:…(e) when used for the production of flavours for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% vol.;…’

Directive 92/12/EEC

6Article 24 of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1), as amended by Council Regulation (EC) No 807/2003 of 14 April 2003 (OJ 2003 L 122, p. 36), provided:1. The [European] Commission shall be assisted by a committee referred to as the “Committee on Excise Duties”.…4. In addition to the measures referred to in paragraph 2, the Committee shall examine the matters raised by its chairman, either on his own initiative or at the request of the representative of a Member State, concerning the application of Community provisions on excise duties.…’

The CN

7Chapter 22 of the CN includes the headings 2207 and 2208, which are worded as follows:CN code | Description… | …2207 | Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher; ethyl alcohol and other spirits, denatured, of any strength:… | …2208 | Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages:… | …

8Chapter 33 of the CN includes the following headings:CN code | Description… | …3302 | Mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry; other preparations based on odoriferous substances, of a kind used for the manufacture of beverages:330210 | – Of a kind used in the food or drink industries:| – – Of a kind used in the drink industries:| – – – Preparations containing all flavouring agents characterising a beverage:… | …

Guidelines adopted at the meeting of 12, 13 and 14 November 2003

9According to point 1 of the document of the Committee on Excise Duties entitled ‘Guidelines adopted at the meeting of 12, 13 and 14 November 2003’ (document CED No 458 of 19 November 2003), ‘the delegations accept almost unanimously that the exemption provided for in Article 27(1)(e) of Directive [92/83] applies from the production stage or the importation onwards to flavourings of CN codes 1302 1930, 2106 9020 and 3302, in the versions in force at the time th[ese] guideline[s are] adopted’.

Czech law

10Paragraph 3(i) of zákon č. 353/2003 Sb., o spotřebních daních (Law No 353/2003 on Excise Duties), in the version applicable to the dispute in the main proceedings, provides:‘For the purposes of this Law, the following definitions apply:…(i) a user of selected tax exempt products …, shall mean a natural or legal person who receives and uses selected tax exempt products …; users enjoy the status of tax entities not obliged to register.’

11Paragraph 71(1)(c) of that law states:‘Ethyl alcohol in substances intended for the flavouring of:1. beverages, where the ethanol strength in the beverages does not exceed 1.2% vol., or2. other foodstuffs, with the exception of products listed under [CN] codes 2207 and 2208,is also exempt from tax.’

12Paragraph 72(1) of that law provides:‘A user must apply in writing for a tax exemption for ethyl alcohol to which the provisions of Paragraph 71(1)(a), (c), (d), (f), and (i) apply, no later than before the execution of a document regarding the release for free circulation of the ethyl alcohol by the payer.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

13AROCO is a commercial company incorporated under Czech law that manufactures flavourings, food colourings and confectionery additives from ethyl alcohol. It sells, inter alia, flavourings falling under heading 330210 of the CN which contain ethyl alcohol (‘the flavourings in question’). Those flavourings are intended to flavour food and non-alcoholic beverages and are commonly used in small bottles.

14Following a tax inspection, the tax authority, by notices of additional assessment issued on 25 May 2021, imposed excise duty on the applicant in the main proceedings in respect of the ethyl alcohol contained in the flavourings in question, in respect of the tax period from January 2016 to June 2017, for a total amount of 736155 Czech koruny (CZK) (approximately EUR 29988), together with a penalty payment of CZK 147231 (approximately EUR 5997).

15The tax authority refused to grant the applicant in the main proceedings an exemption from excise duty on the ethyl alcohol contained in the flavourings in question, on the ground that those flavourings had been sold not only to users, within the meaning of Paragraph 3(i) of Law No 353/2003 on excise duties, namely persons who had received those products and had used them for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume, but also to persons who were not users, including retail chains which subsequently resold those flavourings to users.

16The applicant in the main proceedings lodged an objection against the notices of additional assessment issued by the tax authority, which was rejected.

17By its judgment of 13 April 2023, the Městský soud v Praze (Prague City Court, Czech Republic) dismissed the action brought by the applicant in the main proceedings against that rejection decision. That court held, in essence, that the exemption from excise duty on ethyl alcohol contained in flavourings could be granted only if those flavourings were sold to users, within the meaning of Paragraph 3(i) of Law No 353/2003 on excise duty, which entailed that those flavourings are not resold by their purchasers, but that those purchasers actually use them for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume. It also considered that that limitation of the exemption from excise duty was compatible with the objective of Directive 92/83 since it was intended to prevent any evasion, avoidance or abuse.

18The applicant in the main proceedings brought an appeal on a point of law before the referring court, the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic).

19In the first place, that court expresses doubts as to whether the Czech legislation complies with EU law. It notes that Article 27(1)(e) of Directive 92/83 was transposed into Czech law in accordance with the Czech-language version of that provision, which makes the exemption from excise duty on ethyl alcohol contained in flavourings conditional on the end-use of those flavourings’ being the preparation or production of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume. However, in other language versions of that provision, the preparation or production of those foodstuffs and beverages is envisaged only as the use for which those flavourings must be intended in order for the ethyl alcohol which they contain to be exempted.

20The referring court explains that, in the judgment of 22 December 2022, Quadrant Amroq Beverages (C‑332/21, EU:C:2022:1031), the Court of Justice held that it is the end-use to which the ethyl alcohol is put which determines the application of the exemption from excise duty and that, in that case, that use consisted, first, in the production of flavourings themselves containing ethyl alcohol and, second, in the production of non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume. However, unlike the case which gave rise to that judgment, it has not been established, in the main proceedings, that the flavourings in question were actually used for the preparation of foodstuffs or non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume. The question therefore arises whether the exemption of flavourings containing ethyl alcohol from excise duty for the purposes of Article 27(1) of Directive 92/83 may be made conditional on the end-use of those flavourings’ being the preparation of those foodstuffs and beverages.

21In the second place, if the answer to that question is in the affirmative, the referring court asks whether the conditions for exemption laid down by the Czech legislation – in so far as they provide for exemption from excise duty only in respect of persons who are the first purchasers of the flavourings when they leave the suspension arrangement and in respect of whom it has been established that they themselves used the flavourings for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume – are, in accordance with Article 27(1) of Directive 92/83, justified by specific, objective and verifiable evidence of a serious risk of evasion, avoidance or abuse, and if those conditions do not go beyond what is necessary to attain the objective which they pursue, namely to ensure the correct and straightforward application of the exemptions provided for in that provision and to prevent any evasion, avoidance or abuse. It points out, in that regard, that flavourings may, by their nature, be very easily used in an abusive manner, in particular when they are mixed with alcoholic beverages. It also considers that the concept of ‘abuse’ could be interpreted broadly, taking into account the context of Czech society and its relationship with alcohol consumption. A legal instrument transposing Article 27(1)(e) of Directive 92/83 should prevent not only misuse of the tax regime by the use of flavourings to flavour spirits, but also the unlawful production of spirit drinks.

22In those circumstances the Nejvyšší správní soud (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) Is it compatible with the obligation of a Member State to apply the exemption from duty set out in Article 27(1)(e) of [Directive 92/83] to render an exemption for additives (ethyl alcohol-based flavours falling under CN code 330210) conditional on the flavours being demonstrably used for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% [volume], and not on the fact that those additives are simply intended for that purpose?(2) Is a Member State, pursuant to Article 27(1)(e) of [Directive 92/83], entitled to set conditions for the application of an exemption from duty in order to ensure the correct and unambiguous application of these exemptions and to prevent tax evasion, avoidance or abuse, if those conditions mean that the exemption may be claimed only by the first person that acquired the flavours when they were removed from the duty suspension arrangement, that person him or herself having demonstrably used the flavours for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% [volume]?’

Consideration of the questions referred

The first question

23By its first question, the referring court asks, in essence, whether Article 27(1)(e) of Directive 92/83 must be interpreted as precluding national legislation which makes the exemption from excise duties of ethyl alcohol contained in flavourings falling within heading 330210 of the CN conditional on those flavourings’ being demonstrably used for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume, and not on the fact that those flavourings are intended for that purpose.

24Directive 92/83, which harmonises the structures of excise duties on alcohol and alcoholic beverages, provides, in Article 27(1)(e) thereof, that Member States are to exempt the products covered by that directive from the harmonised excise duty, under conditions which they are to lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse, when they are used for the production of flavourings for the preparation of foodstuffs and non-alcoholic beverages with an alcohol strength not exceeding 1.2% volume.

25It follows from the case-law of the Court of Justice that every product falling within CN headings 2207 and 2208 and with an alcoholic strength by volume exceeding 1.2% is covered by the term ‘ethyl alcohol’, within the meaning of the first indent of Article 20 of Directive 92/83, even when it forms part of a flavour which falls under CN heading 330210. Accordingly, under Article 19(1) of that directive, such a product should, in principle, be subject to the harmonised excise duty provided for by that directive, subject however to the exemption contained in Article 27(1) of that directive (judgment of 22 December 2022, Quadrant Amroq Beverages, C‑332/21, EU:C:2022:1031, paragraph 40).

26In that regard, it is necessary to consider not only the wording of Article 27(1)(e) of Directive 92/83, but also the context in which it occurs and the objectives pursued by the rules of which it is part (see, to that effect, judgments of 17 November 1983, Merck, 292/82, EU:C:1983:335, paragraph 12, and of 8 December 2022, Luxury Trust Automobil, C‑247/21, EU:C:2022:966, paragraph 47 and the case-law cited).

27In the first place, as regards the wording of Article 27(1)(e) of Directive 92/83, the Court of Justice has already held that it is not free from ambiguity since the expression ‘flavours for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% vol.’ may be interpreted as meaning that, in order for the ethyl alcohol contained in the flavourings to be exempted, those flavourings must have been produced with a view to the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume or that they must actually be used for such a preparation (see, to that effect, judgment of 22 December 2022, Quadrant Amroq Beverages, C‑332/21, EU:C:2022:1031, paragraph 41).

28In the second place, as regards the context of that provision, it should be noted that it forms part of a series of mandatory exemptions applicable to alcohol and alcoholic beverages belonging to certain particular categories subject to specific uses.

29In addition, it is apparent from the case-law of the Court of Justice that the element which determines the application of the exemption provided for under that provision is the end-use to which the ethyl alcohol is put (see judgment of 22 December 2022, Quadrant Amroq Beverages, C‑332/21, EU:C:2022:1031, paragraph 44 and the case-law cited).

30In the present case, the referring court states, in essence, that it has not been demonstrated that the actual end-use of the flavourings in question is the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume, since those flavourings were sold by the applicant in the main proceedings not only to users who themselves use those flavourings for such a preparation, but also to entities which then resell them to such users.

31In that context, it must also be borne in mind that the Court of Justice has already held that the exemption of products covered by Article 27(1) of Directive 92/83 is the rule and refusal is the exception, and that, moreover, the power granted to Member States by that provision to lay down conditions for the purpose of ‘ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse’ cannot detract from the unconditional nature of the obligation imposed by that provision to grant exemption (see judgment of 22 December 2022, Quadrant Amroq Beverages, C‑332/21, EU:C:2022:1031, paragraph 46 and the case-law cited).

32In the third place, the objective of the exemptions contained in Directive 92/83 is, in particular, to neutralise the impact of excise duties on alcohol used as an intermediate product in other commercial or industrial products (see judgment of 22 December 2022, Quadrant Amroq Beverages, C‑332/21, EU:C:2022:1031, paragraph 47 and the case-law cited).

33Moreover, point 1 of the document of the Committee on Excise Duties, entitled ‘Guidelines adopted at the meeting of 12, 13 and 14 November 2003’, states that the delegations of the Member States accept almost unanimously that the exemption provided for in Article 27(1)(e) of Directive 92/83 applies from the production stage or the importation onwards to flavourings falling, inter alia, under CN heading 3302.

34An interpretation which makes the exemption from excise duty of ethyl alcohol in flavourings conditional upon the actual end-use of those flavourings’ being the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume is liable to undermine the objective of neutralising the impact of excise duties on ethyl alcohol as an intermediate product in other commercial or industrial products. Where flavourings intended for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume are sold to persons who then resell them to persons who use them for such a preparation, the ethyl alcohol contained in those flavourings would be subject to excise duty, despite the fact that they are actually used for such a preparation.

35In the light of all the foregoing considerations, the answer to the first question is that Article 27(1)(e) of Directive 92/83 must be interpreted as precluding national legislation which makes the exemption from excise duty of ethyl alcohol contained in flavourings falling within heading 330210 of the CN conditional on those flavourings’ being demonstrably used for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume, and not on the fact that those flavourings are intended for that purpose.

The second question

36The second question, read in the light of the grounds of the order for reference, must be understood as having been raised only in the event that Article 27(1)(e) of Directive 92/83 is interpreted as allowing the exemption from excise duty of ethyl alcohol contained in flavourings falling within heading 330210 of the CN to be made conditional upon those flavourings’ being demonstrably used for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume.

37Given the answer to the first question, there is no need to answer that second question.

Costs

38Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the General Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds,THE GENERAL COURT (Chamber giving preliminary rulings)hereby rules: Article 27(1)(e) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beveragesmust be interpreted as meaning that it precludes national legislation which makes the exemption from excise duty on ethyl alcohol used in flavourings falling within heading 330210 of the Combined Nomenclature set out in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, as amended by Commission Implementing Regulation (EU) 2015/1754 of 6 October 2015, conditional on those flavourings’ being demonstrably used for the preparation of foodstuffs and non-alcoholic beverages with an alcoholic strength not exceeding 1.2% volume, and not on the fact that those flavourings are intended for that purpose.

Delivered in open court in Luxembourg on 22 October 2025.