C-34/67

JUDGMENT OF THE COURT 4 APRIL 19681

Firma Gebrüder Lück v Hauptzollamt Köln-Rheinau (Reference for a preliminary ruling by the Finanzgericht, Düsseldorf)

Case 34/67

Summary

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

2. Policy of the EEC — Common rules — Tax provisions — Taxation imposed on domestic products — Concept (EEC Treaty, Article 95)

1 — Language of the Case: German.

JUDGMENT OF 4. 4. 1968 — CASE 34/67

FIRMA GEBRÜDER LÜCK, Cologne-Braunsfeld,

and

HAUPTZOLLAMT (Principal Customs Office) KÖLN-RHEINAU

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

Issues of fact and of law

I — Summary of facts and procedure to the prohibition against discrimination laid down in Article 95 of the EEC Treaty: The facts of the case may be summarized as it alleges in fact that although the rate of follows: turnover tax is fixed at 4%, tinned fruit and vegetables manufactured by domestic pro­ 1. Origin of the case ducers are actually taxed at only 2.7%, if certain exemptions—in particular on ex­ On 12 and 28 July 1966 the plaintiff in the ports—are taken into account. Since the main action (hereinafter referred to as 'the equalization tax charged cannot therefore plaintiff') cleared through customs produce be justified in the present instance by the imported by it from Italy consisting of charges levied directly on the domestic tomato puree, tinned pears and tinned product, the deciding factor must be the beans. For tomato puree in packages 'indirect prior taxation' to which it is weighing less than 1 kg, and for the tinned subject. This amounts simply to the charge pears and beans, the relevant customs office levied by way of turnover tax on the basic levied turnover equalization tax ('Umsatz­ materials and semi-finished products used ausgleichssteuer' or 'UASt', hereinafter in the manufacture of the final product. referred to as the 'equalization tax') at a rate More especially, the plaintiff alleges the of 6%; for tomato puree in packages burden of the turnover tax applied to the weighing more than 1 kg, the tax was levied means of production and working materials at 4%. used in the manufacture of tinned foodstuffs The plaintiff took the matter to the Finanz­ is not one which can be offset under the gericht (Finance Court), Düsseldorf, claim­ first paragraph of Article 95 of the Treaty. ing in particular that the imposition of a Should the national court decide that the turnover equalization tax at 4% is contrary turnover equalization taxes of 6 % and 4 %

are contrary to Article 95 of the Treaty domestic product at earlier stages of pro­ because of their rate, the plaintiff claims duction. According to the Finanzgericht that it has no jurisdiction to fix another rate Article 97 in no way modifies the rights for the same tax and so the charges must be enjoyed by persons concerned under Article reimbursed in full, having no legal justifica­ 95. tion. Question 1 2. Content of the order making the reference; discussion by the Finanzgericht The Finanzgericht considers that, for the reasons explained by the plaintiff, there A — On 6 September 1967 the IVth Senate remain doubts as to the interpretation of the of the Finanzgericht decided to ask the concept of taxation 'imposed directly' on Court for a preliminary ruling on the follow­ domestic products. ing questions: Question 2 '1. Does the expression "imposed directly", referring to taxation on domestic prod­ ucts relate to the burden resulting from The Finanzgericht remarks that the problem the rate of tax as fixed by law, or the true of defining the concept of'indirect taxation' rate which results when the average has already been referred to the European Court of Justice. The IVth Senate is aware exemptions enjoyed by similar products or groups of similar products are taken of orders of other Finanzgerichte making into account? references to the Court, but as these concern agricultural produce it thinks that this 2. To what extent is internal taxation im­ question should nevertheless be put to the posed... indirectly on similar domestic Court in the present case because it con­ products capable of being offset in the cerns fiscal charges imposed on industrial case of industrial products? Does it goods. As the factors involved in the include the turnover tax affecting, for problem are different, the question of the instance, auxiliary materials, packaging extent to which indirect charges can be offset material, working materials and means takes on a special significance. of production and taxation resulting from finishing processes and carriage Question 3 effected by third parties? 3. What effect does the recognition of the The IVth Senate proceeds on the basis that priority of the directly applicable rules of EEC law prevails over the law of the Article 95 of the EEC Treaty have on Federal Republic. But it is uncertain as to provisions of national law which conflict the way in which Article 95 takes effect as it with them? Can such provisions simply imposes a particular course of conduct on be repealed or (in view of the third Member States but does not prescribe any paragraph of Article 95 of the Treaty) positive rule to take the place of the rules of are they void as from 1 January 1962?' national law.

German Republic and the Commission of because the taxation applicable to imports the European Communities presented their should be aligned with taxation on domestic oral observations at the hearing on 23 products, that is, products intended for use January 1968. or consumption within the national terri­ The Advocate-General delivered his opinion tory. Thus there can be no question of at the hearing on 8 February 1968. extending the comparison to exported products. Only the products which remain II — Observations submitted under on national territory compete with the im­ Article 20 of the Statute of the ported products and, consequently, only Court of Justice taxation on the former should be taken into These observations may be summarized as account. follows: The Commission notes that the It questions, moreover, whether it is necess­ Finanzgericht has not asked how far in­ ary to conclude from the decision of the dividuals can, if necessary, derive rights constitutional court that tinned fruit and from Article 97 in conjunction with Article vegetables are only in fact subject to a 2.7% 95. However, the problem is already under turnover tax.

consideration by the Court in a number of Consequently, taxation 'imposed directly' cases actually pending before it which have on domestic products should be taken to been referred for preliminary rulings (Cases mean the burden resulting from the rate of 13/67, 25/67, 28/67). taxation fixed by law, the exemptions The Commission refers the Court to its granted on export having no effect on the observations submitted in these cases to the direct taxation. effect that Article 97 of the Treaty does not The Commission, using similar arguments, entitle individuals to ask national courts to agrees with the conclusions of the Govern­ decide whether the average rate of tax fixed ment of the Federal Republic of Germany. by law is compatible with the principles set out in Article 95. Question 2

LOCK v HAUPTZOLLAMT KÖLN

The Government of the Kingdom of the — As regards the manufacture of tinned Netherlands confines its observations to food, the containers are what are known as noting that the reference made by the plain auxiliary materials, supplied by another tiff to Netherlands tax legislation is no sector of the industry. Apart from minor longer applicable. indirect taxes which can be ignored, they are The Commission considers that a logical taxed directly in respect of turnover. The application of the principle concerning the direct taxation of auxiliary materials in the country of destination requires domestic form of turnover tax also amounts to taxes to be offset in toto.

This argument does taxation on the finished product. Assuming not conflict with the judgment in Case 45/64 that, of the 6% rate of the equalization tax, on which the plaintiff relies. 2% represents indirect taxation, this would amount to DM 0.20 for 10 tins of food of a Question 3 value of DM 10; however, the direct tax for 10 tins of food costing DM 0.50 would only The Government of the Federal Republic of be DM 0.02, the rate of turnover tax being Germany states that it has grave doubts as to

Only the shows that even a 4 % equalization tax, such constitution of a Member State can make it as that levied on tins weighing more than possible to decide whether and, if so, to 1 kg, would not necessarily be absolutely what extent, a national law must be con correct, even if the rate of turnover tax on sidered void erga omnes, or simply wholly or the domestic product were as high. partially inapplicable in a particular in The Government of the Federal Republic of stance.

JUDGMENT OF 4. 4. 1968 — CASE 34/67

Article 100 of the Grundgesetz (Basic Law). the law within the Community. Thus the Question 3 should therefore be considered question put is designed to secure the inadmissible. development of a rule in the conflict of laws The Commission is also doubtful whether applicable to Community law both in the Question 3 is wholly admissible. It is for the present case and for the future. national law to determine whether, when a A finding that the provisions of national law fiscal law conflicts with Articles 95 and 97, which are contrary to those of Community the precedence of Community law must be law are of no effect, can only be of a defini­ expressed in such a way as to result in the tive nature, which amounts to a ruling that annulment of the notice of assessment to those national laws are null and void. As tax in its entirety, or only in so far as it regards Article 95 of the EEC Treaty, any exceeds the limits prescribed by Article 95. provisions of national law which conflict To that extent the question is inadmissible with the Community rules have been void but on the other hand there is nothing to since the beginning of the second stage, and prevent the Court from considering the implementing measures which have never­ question within the same limits as those theless been adopted have no foundation in with it has already applied in Case 57/65. law. If a Member State justifies a rate of tax The plaintiff considers that the question is by claiming that it is an 'average rate' within inadmissible. The effects of a provision of the meaning of Article 97, when it is clear Community law are an inherent part of the that the rate in question was fixed without provision and can only be translated into regard to the principles set out in Article 95, fact by an interpretation of the provision the tax itself must be void in its entirety. itself. In interpreting the provisions of On the other hand, there is some doubt as to Community law one must also take into the fate of implementing provisions adopted account any questions requiring a uniform after 1 January 1962 but which have not answer to ensure the uniform application of been contested.

The first question asks whether by the concept of taxation imposed directly on domestic products Article 95 refers to the burden resulting from the rate fixed by law, or the actual burden which results when average exemptions enjoyed by similar products or groups of similar products are taken into account. The question relates in particular to the exemptions or payments of drawback on domestic products intended for export, the grant of which has the effect of lightening the aggregate burden of taxation on domestic production of similar products.

Article 95 prohibits the placing of products originating in other Member States in a disadvantageous position as compared with products from the importing country which are marketed in the territory of that country. It is therefore necessary to exclude from the comparison any domestic production to the extent to which it is exported and does not take part in competition within the national territory. Thus only taxation affecting domestic products marketed in the national territory may be taken into consideration in ascertaining what taxation is imposed on domestic products and constitutes the ceiling allowed by Article 95 of the Treaty. The taxation imposed on domestic products within the meaning of Article 95 of the Treaty is therefore that which results from the application of the rate of tax fixed by law.

The third question seeks a clarification of the consequences of the precedence of Community law, that is to say, in the present case, Article 95 of the Treaty, with regard to the provisions of national law incompatible with it. The point of the question is in particular whether the national court must hold such provisions inapplicable to the extent to which they are incompatible with Community law or whether it must declare them void as from the expiry of the period prescribed by the third paragraph of Article 95.

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the Government of the Federal Republic of Germany, the Commis­ sion 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 European Economic Community, especially Articles 95, 97 and 177; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; Having regard to the judgment of the Court of Justice of 3 April 1968 in Case 28/67, delivered following reference from the Bundesfinanzhof (Federal Finance Court);

THE COURT

in answer to the questions referred to it by the Finanzgericht, Düsseldorf, by order of that court of 6 September 1967, hereby rules:

1. The first paragraph of Article 97, applicable where Member States levying a turnover tax calculated on a cumulative multi-stage tax system in fact exercise the option which it gives to them, does not create rights which national courts must protect;

2. Taxation imposed on a domestic product within the meaning of Article 95 of the Treaty means taxation imposed at the rate which results from the applica­ tion of the law;

3. Article 95 of the Treaty does not restrict the powers of the competent national courts to apply, from among the various procedures available under national law, those which are appropriate for the purpose of protecting the individual rights conferred by Community law.

A. Van Houtte R. Lecourt

Registrar President

OPINION OF MR ADVOCATE-GENERAL ROEMER DELIVERED ON 8 FEBRUARY 19681

1 — Translated from the German.