C-13/67

JUDGMENT OF THE COURT 4 APRIL 19681

Firma Kurt A. Becher

v Hauptzollamt München-Landsbergerstraße2 (Reference for a preliminary ruling by the Finanzgericht, Munich)

Case 13/67

Summary

1. Policy of the EEC — Common rules — Tax provisions — Cumulative multi-stage tax — Average rates for imported products or groups of imported products within the meaning of the first paragraph of Article 97 — No individual rights

Hauptzollamt (Principal Customs Office) MÜNCHEN-LANDSBERGERSTRASSE,

on the interpretation of Articles 95 and 97 of the EEC Treaty,

THE COURT

composed 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. Gand

Registrar: A. Van Houtte

On 7 December 1962 the Becher undertak­ 'I — Does the first paragraph of Article 97 ing had two deliveries of Italian maize of the EEC Treaty produce direct cleared through customs and accordingly effects and create individual rights the Hauptzollamt (Principal Customs Of­ which national courts must protect fice), the defendant in the main action, or, if an average rate does not con­ claimed payment, under German law, of the form to the principles laid down in turnover equalization tax (Umsatzaus­ Article 95 of that Treaty, does the gleichssteuer or UASt, hereinafter referred only remedy lie in the right of the to as 'equalization tax') at the rate of 1.5 %. Commission to address appropriate directives or decisions to the State Becher raised an objection ('Einspruch') concerned in accordance with the through administrative channels to this charge, alleging that in this case it had the second paragraph of Article 97? same effect as a customs duty and that, II — How is the expression "average rates" therefore, it did not accord with the provi­ appearing in Article 97 of the EEC sions of Article 18(1) of Regulation No 19 of Treaty to be interpreted, and in par­ the Council of the EEC on the progressive ticular : establishment of a common organization of the market in cereals (Official Journal of 20 (a) In a cumulative multi-stage tax April 1962, p. 933). system are the rates of the turn­ This objection was rejected. Becher then over equalization tax (Umsatz­ appealed to the Finanzgericht (Finance ausgleichssteuer) deemed to con­ Court), Munich, before which it added to stitute, as a general rule, average its arguments by asserting that the provi­ rates within the meaning of Arti­ sions of German fiscal law which the defend­ cle 97? or ant customs office had applied were con­ (b) Is it necessary to check in each trary to Article 95 of the EEC Treaty for the case whether the rate of the tax is following reasons: higher or lower than the average — in Germany, deliveries of home-grown of the charge imposed either maize effected by producers and whole­ directly or indirectly by way of salers are exempt from the turnover tax, turnover tax on similar domestic therefore this is not a case of a fiscal products, for example when this charge imposed directly on domestic rate corresponds only to the products, as referred to by Article 95; charge imposed on a single stage — nor are those deliveries indirectly subject in the movement of the said to tax within the meaning of that provi­ products? sion because it is not permissible to (c) Is there an average rate when the include in the comparison levies on same rate of tax is applied to auxiliary materials ('Hilfsstoffe') and on products, corresponding to dif­ the means of production used for cre­ ferent stages of manufacture, for ating the similar domestic product; in example to cereals on the one any event these levies are negligible. hand and to baker's produce ob­ tained from them on the other? 2. Wording of the questions referred; arguments of the Finanzgericht III — What is to be understood by internal A — On 26 April 1967 the Finanzgericht, taxation imposed indirectly on sim-

ilar domestic products? Does this given to Question III). But in order to have also include the turnover tax, or, a real average rate, the products in a given where applicable, the transportation group must be subject to approximately tax on auxiliary materials, packaging equal charges. This means, where appli materials, working materials and the cable, that they must go through the same means of production used to manu number of distribution stages, and also that facture and deliver similar products, there must not be too much difference be and transport effected by third par tween them from the point of view of prior ties?'. charges on auxiliary materials etc.

uals. This principle remains applicable in II — Procedure cases where the taxpayer alleges that an average rate does not conform to Article 95. The order referring the matter was received It matters little that an inquiry into this at the Court Registry on 3 May 1967. complaint may necessitate lengthy invest The Government of the Federal Republic of igations and special methods of calculation. Germany, the Commission of the European Article 97 does not oblige a Member State Communities and the Becher undertaking to fix average rates, even though as a general submitted written observations pursuant to rule these are inevitable in a cumulative Article 20 of the Protocol on the Statute of multi-stage tax system. But if the Member the Court of Justice of the EEC and pre State decides to do so, it is hardly to be sented oral argument at the hearings on 5, 6 doubted that it will have made its calcula

distribution. In a cumulative multi-stage tax parties system, both possibilities may occur and are often inevitable. 1. Question I At all events, in order to fix an average rate it is necessary to determine what are the The observations of the Becher undertaking total charges on the similar domestic prod may be summarized as follows: ucts (this concept being understood in such The direct applicability of Article 97 is clear a sense that an affirmative answer must be from the judgment in Case 57/65.

Article 97 merely constitutes a particular unconditional obligation', as is provided for instance of Article 95; thus the national by the jugment in Case 57/65: courts have the power and the duty to check — it merely refers to the 'principles' of Arti whether the rates of taxation which the cle 95; State concerned states are average rates are — the concept of'average' presupposes that in conformity with Article 95, there may be differences in one or other The fact that the calculation of the charge direction, and indicates an assessment in imposed on domestic products may present connexion with which there is a certain difficulties does not mean that direct appli

169. The reason is that 'with regard to the it is inevitable that certain provisions of the application of Article 97, the risk that Mem Treaty will only be applied in certain States. ber States may indulge in operations which Since all the Member States are to introduce are contrary to the Treaty is particularly the value added tax prior to 1 January 1970, great'. This is one more proof that the the problems raised by Article 97 are merely observance of the objectives of the Treaty, transitional. which is ensured by the Commission, must (d) Community law contains a series of be brought about in a very special manner, provisions which are addressed exclusively in this case by the review which the national to the States, which are obliged to trans court is bound to carry out, form them into provisions addressed direct The observations of the Federal Government ly to individuals. These principally concern may be summarized as follows: matters which encroach upon the national Even if the Court of Justice were to confirm legal systems. These legal systems con

BECHER v HAUPTZOLLAMT MÜNCHEN

Consequently cerned. Article 97 does not fulfil the conditions (e) Article 97 is an independent provision, required for producing direct effects. addressed to the Member States which levy The national courts, however, have the a turnover tax calculated on a cumulative power to consider whether they are faced multi-stage tax system, and thereby governs with a case for the application of Article 97, cases in which it is impossible to make an that is to say, whether they are concerned actual comparison of the taxes. Although it with an equalization tax intended to replace refers to Article 95, this is merely to avoid the turnover tax charged according to a

to the first. It might at the most be con In this connexion it puts forward the follow sidered as a 'lex specialis' although that ing considerations: theory does not take into account the fact The term 'average' implies that a weighted that the cumulative multi-stage tax system average must be calculated. A real average is applied in five Member States. rate must of necessity involve an actual comparison of charges, based on up-to-date The Commission in effect agrees with the and reliable statistical data.

Finanzgericht. Those difficulties are further aggravated by The Federal Government makes the follow the fact that the various Member States ing observations: apply different methods of calculation to The concept of 'average rates' is closely determine the average charge imposed on a bound up with the difficulties to which a product. turnover tax on domestic products gives Moreover the Member States have a wide rise within a cumulative multi-stage tax sys discretion to form groups of products, even tem.

it is extremely difficult to determine with period. If, for all the products liable to the which similar products the imported prod equalization tax, continual examination of uct is to be compared. The domestic prod the criteria were to be made in order to take ucts are often manufactured by very dif into account any slight variations, the effort ferent production processes. The amount of would be out of proportion to the result, as the turnover tax varies in accordance with on the whole modifications to the charges, the number of commercial processes which whether up or down, would end by off the product is required to undergo. setting one another. In principle it is for the Other difficulties arise when the indirect tax legislature to decide the groups into which is determined. The comparison must relate products are to be formed in order to to the total tax and cannot be calculated establish the average rates. There is an aver precisely even after lengthy calculations. age rate even when an identical rate of Moreover, the basic factors in the calcula charge is applied to products corresponding tions (price, analysis of costs and structure to different stages of production. of the undertakings) undergo constant It is not correct that the average rate modifications. ('Durchschnittssatz') must be determined Finally, in view of the multitude of pro on the basis of the tax imposed on the prod ducts with which it is faced (more than uct with the lowest charge; 'average' 50 000), it is 'impossible to require of the ('Durchschnitt') means the median value. administration' completely accurate calcu The Commission makes the following ob lations, 'taking into account the time which

applicable. Nevertheless in practice the alent to the 'average' of rates calculated rates so fixed generally represent only a exactly, those rates can only represent an minimum charge and they consequently exact median value for an aggregate number conform to Article 95. The truth of this of cases. argument emerges from the following con These are the reasons why in the States con siderations. cerned all the rates of equalization tax are of The charge imposed at a prior stage on necessity 'average rates', unless there are in similar domestic products constitutes the the national territory no similar products or permitted ceiling for average rates.

BECHER v HAUPTZOLLAMT MÜNCHEN

marks : that it includes only products on which approximately equivalent charges are im The ratio legis of Article 95 et seq. indicates posed. Nevertheless this interpretation itself that they only refer to 'taxes pertaining to does not prevent the continued existence of the products' ('produktbezogene Steuern'), numerous factors making for uncertainty which are governed by the principle of the and this leaves a wide area of discretion to country of destination in almost all modern the Member States. tax systems. Moreover, the term 'indirectly' must nevertheless be widely interpreted,

On the other hand there should understood not only taxes which were im not be taken into consideration the charge posed, as taxes pertaining to the product, at on accessory and auxiliary materials, the all stages of its production, the raw ma means of production, transport costs and terials, the semi-finished products, and marketing costs. In investigating what the possibly the finished products which are met charge on domestic products is, it is not with in the final product, but also the taxes permissible to look to any stage beyond the borne, in the form of taxes pertaining to the primary product ('Urprodukt'). product, by the auxiliary materials, the means of production and the services (con The Federal Government makes the follow nected with production) (such as the trans

JUDGMENT OF 4. 4. 1968 — CASE 13/67

Grounds of judgment

By order dated 26 April 1967, which reached the Court on the following 3 May, the Finanzgericht, Munich, under Article 177 of the Treaty establishing the EEC, referred to the Court several questions on the interpretation of Articles 95 and 97 of the said Treaty.

Substance

In its first question the court making the reference asks the Court to state whether;

'the first paragraph of Article 97 of the EEG Treaty produces direct effects and creates individual rights which national courts must protect or whether, if an average rate does not conform to the principles laid down in Article 95 of the EEC Treaty, the only remedy lies in the right of the Commission to address appropriate directives or decisions to the State concerned in accordance with the second para­ graph of Article 97.'

BECHER v HAUPTZOLLAMT MÜNCHEN

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the Federal Republic of Germany, the Com­ mission of the European Communities and the plaintiff in the main action; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the EEC, especially Articles 95, 97 and 177;

Having regard to the Protocol on the Statute of the Court of Justice of the EEC, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; Having regard to the judgment delivered by the Court on 3 April 1968 in Case 28/67;

THE COURT

in answer to the questions referred to it by the Finanzgericht, Munich, by order of that court of 26 April 1967,

By the expression 'internal taxation imposed directly or indirectly on similar domestic products' the first paragraph of Article 95 refers to all taxation which is actually and specifically imposed on the domestic product at all earlier stages of its manufacture and marketing or which correspond to the stage at which the product is imported from other Member States;

JUDGMENT OF 4. 4. 1968 — CASE 13/67

and declares:

It is for the Finanzgericht, Munich, to make an order as to the costs of the present proceedings.

Lecourt Donner Strauß

Trabucchi Mertens de Wilmars

In Case 13/67

Reference to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Finance Court), Munich, for a preliminary ruling (given by the Court on 4 April 1968) in the action pending before that court between

FIRMA Kurt A. BECHER , Munich,

and

HAUPTZOLLAMT (Principal Customs Office) München-Landsbergerstrasse,

on the interpretation of Articles 95 and 97 of the EEC Treaty,