C-25/67

3. Customs duties and internal taxation — Joint applicability to the same case of provisions relating thereto — Impossibility of such joint application (EEC Treaty, Article 12,13 and 95)

4. Policy of the EEC — Common rules — Tax provisions — Taxation intended to put national products and imported products in a comparable tax position — Nature of internal taxation (EEC Treaty, Article 95)

1. Cf. paragraph 4, summary, Case 28/67. work of turnover tax legislation and is 2. Cf. paragraph 5, summary, Case 28/67. designed to place all categories of prod­ ucts both domestic and imported in a 3. Cf. paragraph 4, summary, Case 57/65, comparable tax situation constitutes Rec. 1966, p. 295. 'internal taxation' within the meaning of 4. A tax which is levied within the frame- Article 95.

In Case 25/67 3

Reference to the Court under Article 177 of the Treaty establishing the European Economic Community by the Finanzgericht (Finance Court) (the competent court in taxation matters) of the Saarland for a preliminary ruling in the action pending before that court between

1 — Language of the Case: German. 2 — CMLR. 3 — In this case the Court on 16 May 1968 made an order similar to that in Case 13/67 (see p. 187).

composed of: R. Lecourt, President, A. M. Donner and W. Strauß (Rapporteur), Presidents of Chambers, A. Trabucchi, R. Monaco, J. Mertens de Wilmars and P. Pescatore, Judges,

Advocate-General: J. Gand

Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

EIERKONTOR v HAUPTZOLLAMT SAARBRÜCKEN

constitutes an average rate within the (c) Is it also necessary to take into meaning of Article 97 of the EEC account turnover tax imposed on Treaty? the means of production used to (8) Is it necessary to classify among the obtain the primary products, for comparable taxes referred to by Article example incubators or brood 95 of the EEC Treaty which are im­ hens? posed indirectly on similar domestic (11) To the extent to which Article 97 alone products: or in conjunction with Article 95 (a) Only those amounts of turnover creates no direct individual right, is the tax levied upon similar products at turnover equalization tax in whole or one or more prior stages of distri­ in part a charge having an effect bution; or equivalent to that of a customs duty (b) Also the amounts of turnover tax within the meaning of Article 11 [of imposed on raw materials or semi­ Regulation No 22 of the Council of the finished products which have been EEC on the progressive establishment used in the manufacture of similar of a common organization of the domestic products; or markets in poultry meat (Official (c) Also the amounts of turnover tax Journal of 20 April 1962, pp. 959/62 et

JUDGMENT OF 4. 4. 1968 — CASE 25/67

The fact that Article 97 is a particular case of No doubt, according to the rules of pro­ Article 95 may be inferred from the judg­ cedure applicable in Germany, the court ment of the Court of Justice in Case 57/65 which makes the order referring the matter (Rec. 1966, p. 303), according to which 'this must consider the facts of its own motion, so situation is peculiar to Article 97 and can in that it is not possible to speak of a burden of no circumstances influence the interpret­ proof properly so-called, but only of a ation of Article 95'. But even if it is con­ requirement to set out claims. Nevertheless, sidered that Article 97 is not a special case the question whether a rate is justified 'does of Article 95, strong reasons based on the not depend on an examination of facts'; it is principle of the state of the law favour the a matter rather of 'supervising a measure idea that the first of these provisions must adopted by the legislature, the competence be regarded as 'self executing'. of which is limited by Articles 95 and 97 and which, in that respect and in that respect On the sixth question only, is subject to review by the national court'. The main burden of setting out It appears from the principles and objectives claims can here devolve only upon the ad­ of the Treaty, particularly from the fact that ministration which must state in particular Article 97 refers expressly to the principles on which bases, and how, an average rate set out in Article 95, that a lawful average has been established. rate 'may only be obtained by means of a concrete comparison of charges for periods On the eighth and tenth questions close in time'. It is not possible to regard this reference as merely an indication of'the Article 95 is only intended to prevent tax general guidelines' which the national legis­ measures from affecting competition be­ lature should use as a factor in its consider­ tween the Member States on the market of ations. one of them. In the present case, the product It is not known either how the disputed rate in question is a 'primary product', 'so that was calculated and above all 'on the basis of it must clearly be established whether the what suppositions and what facts' it was comparable charge is confined to taxes assessed. It may thus be presumed that the imposed on the product itself or whether it

is necessary also to include therein all Germany by Mr Everling, Ministerialrat, charges under the heading of turnover tax, Mr Hahnfeld, Ministerialrat and Mr Bülow, which are taken into account in calculating Oberlandesgerichtsrat, and the Commission costs when the price of the primary product of the European Communities by Mr is being established'. The Finanzgericht Thiesing, Legal Adviser. favours the second opinion. Moreover, for poultry it is indispensable 'to include in the costs of production, in ad III — Summary of the observations dition to the turnover tax, taxes on live submitted by the parties con stock, slaughtering, storage and marketing cerned which enter into the calculation of costs when the selling price has to be fixed', other

particular type of customs duty. On the average rate must be evolved from a factual other hand, the equalization tax is intended comparison of taxes made with the help of to ensure fiscal equality; it is not therefore a correct and up-to-date statistical data. It is charge having equivalent effect. That is also necessary, further, to require that the same the conclusion which may be drawn from rate must be applied to imports and to the judgment given by the Court in Case exports (Article 96). Lastly, by its very 57/65. wording Article 97 applies only to rates of taxation which have been introduced after On the twelfth question 1 January 1958, on the basis of new calcu

1 % and 8 %. Having regard to that system, at the hearings on 5 and 7 December 1967. only products for which the respective The Advocate-General delivered his rates of turnover tax did not differ by more reasoned, oral opinion at the hearing on 25 than 0.5 % may be regarded as subjected to January 1968. substantially equal charges. Milchkontor was represented by Messrs Dres, Wendt, and Drager of Hamburg, the The Federal Government makes the follow Government of the Federal Republic of ing observations:

The concept of 'average rates' is closely from creating new powers, Article 97 linked with the difficulties which the calcu envisages the existence of rules prior to lation of the charges in respect of the turn entry into force of the Treaty. over tax on domestic products creates It is also of little importance that the rate of within a cumulative multi-stage tax system. the tax has not been changed for years or The first difficulty lies in the fact that it is that it was calculated on the basis of statis very hard to decide with which similar prod tical data relating to a previous period.

The com the groups of products to be brought to parison must refer to the general position gether for the fixing of average rates. There and it cannot be made precisely even after is an average rate even in the case where an lengthy calculations. Further, the facts on identical average rate is applied to products which the calculations are based (price, cost corresponding to different stages of pro factors, structure of undertakings) con duction. stantly undergo changes. It is not correct that the average rate Finally, in view of the multitude of products ('Durchschnittssatz') must be decided by to be dealt with (more than 50 000), it fol the tax levied on the product bearing the lows that it is 'impossible to require of the least tax; 'average' ('Durchschnitt') means administration' calculations which are ab

In far from being equivalent to the 'average' of cases of this type the application of Article rates calculated exactly, these rates can 97 is not taken into account. The fact amount only to an exact median for the remains that in practice rates thus fixed aggregate of a number of cases. represent in general only a minimum tax These reasons explain why in the States and they consequently conform to Article concerned all rates of equalization tax are 95. The correctness of this argument appears necessarily 'average rates' except where from the following considerations. there is in the national territory neither a The prior tax burden already imposed on similar product nor a product which may be comparable domestic products at an earlier substituted for it to be compared with the stage constitutes the ceiling which average imported product. It matters little that the rates are allowed to reach. No doubt, in rate in question was laid down before or order to decide the amount of this tax it is after the entry into force of the Treaty. Far proper to refer to estimated values and to

average values and it is necessary to do so; products' (Article 95); this applies with but that does not alter the fact that it is equal force to instances where Article 95 necessary to calculate genuine averages and alone applies. decide which are in concreto the amounts The outcome is the same when Article 97 is charged on each of the categories of pro examined in isolation. This provision gives ducts. It is only permissible to 'use flat to the Member States a discretion only to rates' ('pauschalieren') when it is a matter, the extent to which it leaves them free to within the specific framework of Article 97, decide whether they wish to fix average of deciding the tax which may be allowed in rates and form groups of products.

The 169. The reason is that 'with regard to the gathering into a 'group of products' of prod application of Article 97, the risk that Mem ucts subject to very different taxes would ber States may indulge in operations which permit manipulation with the help of which are contrary to the Treaty is particularly it would be easy to evade Articles 95 and 97. great'. This is one more proof that the A 'group of products' can be constituted observance of the objective of the Treaty, only when the products which comprise it which is ensured by the Commission, must bear approximately identical taxes.

. . indirectly on similar domestic as authorizing the usual unavoidable

estimates and calculations on a flat-rate actual comparison of the taxes. Although it basis. refers to Article 95, this is merely to avoid (b) The correctness of these considerations repetition. The fact that one provision is proved by the fact that Article 97 pro refers to another does not ipso facto imply vides special arrangements derogating from that it is subordinate to it. Moreover, this Article 169 for the procedure which the reference is only to the 'principles' set out in Article 95.

pointless. opinion of the Federal Government. (c) It is impossible to raise against this view the objection that it gives different results It makes the following observations: in each Member State. As the legal provi Article 97 leaves to the Member States a sions of the various Member States are dis considerable area of discretion in author similar, it is inevitable that certain provi izing them to establish 'average rates' for sions of the Treaty will only be applied in 'products or gfups of products'.

individuals. These principally concern mat Those difficulties are further aggravated by ter which encroach upon the national legal the fact that the various Member States systems. These legal systems constitute apply different methods of calculation to separate orders within which all legislative determine the average charge imposed on provisions are to a certain extent inter a product. dependent ; this is why the Member States Moreover the Member States have a wide were left free to insert the Community rules discretion to form groups of products, even harmoniously into their own legal systems. though a more or less arbitrary grouping of The equalization tax shows clearly the products into large groups is not author importance of these considerations. If the ized. concept of direct applicability were admit Similarly the special rules of procedure pro ted, courts would have to make far-raching vided for in the second paragraph of Article investigations to decide wehther the rate of 97 tend to indicate that only the Commission a tax were too high. This would result in too is required to ensure that the provisions of many disadvantages for all persons con this article are observed. Consequently Ar cerned. ticle 97 does not fulfil the conditions (e) Article 97 is an independent provision required for producing direct effects.

EIERKONTOR v HAUPTZOLLAMT SAARBRÜCKEN

cates that the authors of the Treaty had the more, purely legal—whether a rate of tax intention of restricting that application; it comes within this definition cannot be dis 'is therefore necessary to understand in puted. ternal taxation indirectly levied on a prod The Commission has doubts also as to the uct as including not only taxation imposed admissibility of that question, on the sub by taxes levied on products at all stages of stance of which it states that it shares the production on raw materials, semi-finished opinion of the Finanzgericht. products and possibly finished products still present in the final product, but also the

production, transport costs or sales costs. The reply to be given to the ninth question The observations of Milchkontor may be summarized as follows: is that it is possible to go back one single stage and the reply to the tenth question is The concept of a charge having equivalent

effect must be interpreted differently in Reg­ omic Community, the equalization tax ulation No 22 and in the EEC Treaty. As comes entirely within the prohibition opposed to the Treaty, the regulation also against taxes having equivalent effect every prohibits the charging of taxes on imports time and to the extent to which they increase from third countries. Article 95 of the Trea­ the price of a product beyond the increase ty does not apply to these imports and that caused by the levy. is the reason for which it cannot fulfil, in As to the second question, the answer is respect of Article 9 et seq. of the Treaty, the given by the second paragraph of Article 189 functions of a lex specialis which it would of the Treaty. have within the framework of intra-com­ The Federal Government points out that the munity trade. Court has clearly stated many times that the When it has attempted to define the concept equalization tax is not a charge having an of a charge having an effect equivalent to effect equivalent to a customs duty. customs duties, the Court has always con­ The Commission points out on the subject of sidered the effect of that tax as a decisive the eleventh question that taxes such as the criterion. It follows that the equalization equalization tax levied in Germany must in tax levied in Germany is still a charge general be regarded as internal taxation; the having an effect equivalent to a customs application of the prohibition of charges duty and is authorized only for special having equivalent effect must however be reasons on the basis of Article 95. To the reserved for cases where goods which are extent to which this article is inapplicable, not produced in a Member State and which the equalization tax therefore also falls are not in competition with another domes­ under the prohibition of charges having an tic product are subject to a tax with a pro­ effect equivalent to customs duties. hibitive effect; moreover, the equalization It is not a matter, within the framework of tax amounts to a legal entity; to the extent Regulation No 22, of avoiding discrimina­ to which in a particular case it exceeds the tion by third countries or of eliminating tax borne by similar domestic products, the certain protective effects; it is a question on part of that tax exceeding the tax in question the contrary of giving the assurance that cannot consequently be regarded as a such measures are applied exclusively by the charge having an effect equivalent to a Community. That argument is equally valid customs duty. for 'internal taxation'. When it fulfils the With regard to the twelfth question, the same purpose as Community taxes, there is principles to be deduced from the case-law a double 'offsetting'. of the Court allow the inference that an That is what happens in the case of collec­ individual may rely upon an infringement of tion of a levy and of an equalization tax. Article 11 or Regulation No 22 before It follows that, within the sphere of the national courts.

In its third question the Finanzgericht of the Saarland asks the Court to rule whether Article 97 'is an independent legislative provision or a special case of Article 95 which goes no further than altering the procedure by which the Commis­ sion is to ensure observance of the Treaty'.

The fourth question seeks to establish whether 'to the extent to which Article 97 is a special case of Article 95, the national court is entitled and required to consider whether the turnover equalization tax' levied on imports from Member States of the EEC 'is compatible with Article 95 of the EEC Treaty when the disputed rate of tax is an average rate within the meaning of Article 97'.

The fifth question of the Finanzgericht seeks to establish whether 'to the extent to which Article 97 of the EEC Treaty is an independent legislative provision, the first paragraph thereof produces direct effects and creates individual rights which national courts are bound to uphold' or whether 'Article 97 of the Treaty only gives to the Commission the right to address appropriate directives or decisions to the State concerned, in accordance with the second paragraph thereof.

It has been suggested that the Court in its judgment of 16 June 1966 in Case 57/65 has already decided by implication in favour of the direct effect of Article 97.

However as the court was not on that occasion questioned either in respect of Article 97 or concerning the relationships between that article and Article 95 it confined itself to holding that the special situation of Article 97 cannot in any event affect the interpretation of Article 95.

For the purpose of any legal review of the compatibility of the said average rates with the principles of the first paragraph of Article 95 the Finanzgericht of the Saarland asks in its eighth, ninth and tenth questions whether the taxation of certain transactions which it enumerates is covered by the expression 'internal taxation... imposed... indirectly on similar domestic products' appearing in the said first paragraph.

(2) As to the first and second questions, by virtue of the first paragraph of Article 97 it is for the Member States to establish average rates, with the Commission alone having power to intervene pursuant to the provisions of the second paragraph of Article 97, and in certain circumstances of Article 169, against the failure to con­ form to the principles set out in Article 95, without prejudice to the rights conferred by Article 170 on the other Member States.

In these circumstances, it is not for the national courts to appraise whether average rates have been established in accordance with the principles of Article 95, although it does not follow that those courts may not in any case be required to decide whether they are faced with an average rate coming under Article 97 or with a taxation coming under Article 95.

According to the wording of Article 97 its application is subject to a double con­ dition : first that the Member State levies a turnover tax based on the cumulative

multi-stage tax ysstem and secondly, that it has in fact exercised the power made available to it by the said provision and established average rates.

By the seventh question the Court is asked to say 'on whom the duty of setting out the claims and the burden of proof fall when the proceedings are concerned with the question whether a rate of tax constitutes an average rate within the meaning of Article 97 of the EEC Treaty'.

These two questions were raised only in case the Court should rule that Article 97 creates individual rights.

As this eventuality has not materialized, there is no necessity to reply to these questions.

III — The interpretation of Article 11 of Regulation No 22 of the Council (eleventh and twelfth questions)

The eleventh question of the Finanzgericht, put forward in case—as has actually happened—the Court should not recognize Article 97 as having direct effect, inquiries whether 'the turnover equalization tax is in whole or in part a charge having an effect equivalent to that of a customs duty within the meaning of Article 11' of Regulation No 22 of the Council on the progressive establishment of a common organization of the markets in poultry meat.

To the extent to which the Court agrees that such is the case the court making the reference asks in its twelfth question whether the said Article 11 creates direct individual rights which national courts must protect.

Articles 12 and 13 on the one hand and Article 95 on the other cannot be applied together to a single set of facts.

Consequently it is difficult to conclude that within the system of the Treaty one and the same charge may at the same time be a 'charge having equivalent effect' within the meaning of Articles 9, 12 and 13 and also 'internal taxation' for the purposes of Articles 95 and 97.

An equalization tax such as that which is the subject of the main action levied within the framework of turnover tax legislation and which is intended to place all categories of products both domestic and imported in a comparable tax position, amounts to internal taxation within the meaning of Article 95.

If in the case of a given imported product it were to exceed the total amount of the direct or indirect charges on the equivalent domestic product, it would then be subject to the prohibitions contained in Articles 95 and 97, but even so, would not have the nature of 'a charge having equivalent effect'.

It follows from all these considerations that the reply to the eleventh question of the Finanzgericht is in the negative.

In these circumstances the twelfth question which was raised only in case the Court might reply affirmatively to the preceding question has become irrelevant.

THE COURT

in answer to the questions referred to it by the Finanzgericht of the Saarland, by order of that court of 19 June 1967, hereby rules:

1. The first paragraph of Article 97, which applies where Member States operating a turnover tax according to the cumulative multi-stage system have actually exercised the right therein granted to them, does not create individual rights which national courts must protect; 2. In States which have exercised the power made available to them by Article 97 rates are considered as 'average rates' if they are established as such by the States in question, without prejudice to the operation of the second paragraph of that article;

3. A tax which is levied within the framework of turnover tax legislation and is designed to place all categories of products both domestic and imported in a comparable tax situation constitutes 'internal taxation' within the meaning of Article 95;

and declares:

It is for the court making the reference to decide upon the costs of the present proceedings.