C-28/69

1. Products which fall under the same clas­ 2. The principle of non-discrimination con­ sification for tax purposes must be con­ tained in Article 95 is valid independent­ sidered as 'similar' within the meaning of ly of the effect of factors other than the first paragraph of Article 95 of the taxation on the respective production EEC Treaty. costs of the products to be compared.

In Case 28/69

Commission of the European Communities, represented by its Legal Adviser, Giuseppe Marchesini, acting as Agent, with an address for service in Luxembourg at the office of its Legal Adviser, Emile Reuter, 4 boulevard Royal,

applicant,

ν

Government of the Italian Republic, represented by Adolfo Maresca, Minister

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

Advocate-General : J. Gand

Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

— repeated the considerations set out in the 3. In a letter of 17 March 1967 addressed to letter of 28 April 1965; the President of the Commission the Italian Permanent Representative : — noted a further infringement of Article 95 relating solely to imports for domestic — set out the reasons which, according to consumption of specified products; he the Italian Government, justified the stated that this infringement also arose system impugned; from the operation of Law No 291, in pursuance of which finished products — added that the Italian Government processed in Italy from 100 kg of im­ 'would nevertheless continue to consider ported cocoa beans were subject to a the problems raised by the Commission', duty 3250 lire less than that levied on that 'proposals have been made for a similar imported products ; parliamentary measure to repeal Law No 291', and that the said government — observed that it followed from the said 'cannot therefore make known the law that 'where cocoa beans have been decision which it will adopt with regard imported into Italy for domestic con­ to the above-mentioned measure'. sumption, products obtained from such cocoa beans may, when re-exported, In a telex message of 10 June 1967, the benefit from a refund (28 250 lire) in Italian Permanent Representative referred excess of the charge borne by the said to the 'alleged infringement... in connexion products within the country (25 000 lire with the temporary importation of cocoa at the time of importation)', which con­ beans intended entirely for milling' and stituted an infringement of Article 96 of intimated that 'the competent Italian the Treaty; authority has given a favourable opinion on the draft law for the repeal of Law No 291 — indicated that for these reasons the Com­ which was placed before the Senate, on mission had decided to initiate the pro­ condition that it is repealed gradually over a cedure under Article 169 against Italy; period of time. Subject to such amendment being made to the draft law, the Italian — invited the Italian Government to submit Government is willing to comply with the its observations on the alleged infringe­ reasoned opinion'. ments within two months; 4. In a letter of 5 July addressed to the — stated that the Commission reserved the Italian Minister of Foreign Affairs the right to deliver a reasoned opinion Commission stated that the Italian Govern­ pursuant to Article 169 if it did not ment had failed to comply with the reasoned receive a reply within the period pre­ opinion within the period fixed and declared scribed. in particular that :

Government intends unreservedly to (2) that by imposing on cocoa powder, support the proposed legislation for cocoa butter, shells and husks imported repeal placed before Parliament, the from other Member States an excise Commission, as in all similar cases, will duty in excess of that levied on cor­ take account of the time necessary for responding products obtained in Italy parliamentary procedures to run their by milling cocoa beans imported for course. Having regard to the long period domestic consumption, the Italian which has elapsed since the date of the Republic has in this respect also failed Commission's first action in the matter to fulfil its obligation under the above­ the Commission must request an as­ mentioned provision; surance to this effect within a very short time'. (3) that by granting on products obtained in Italy by milling cocoa beans a refund The Permanent Representative of the of the excise duty in excess of the Italian Republic replied by telex message on amount actually charged on entry, the 22 September 1967 that 'the Italian Govern­ Italian Republic has failed to fulfil the ment supports the proposed legislation on obligation imposed on Member States the parliamentary measure... as originally by Article 96 of the EEC Tretay ; drafted'. (4) order the defendant to bear the costs. 5. Since the above-mentioned draft law lapsed on the dissolution of the legislature In its defence the Italian Government merely the legislative procedure had to be recom­ stated that in its view 'it appears... that the menced from the beginning. conditions for the withdrawal of the Com­ In a letter of 13 February 1969 addressed to mission's application have been fulfilled the Italian Minister of Foreign Affairs the and, pending notification from the Com­ President of the Commission intimated that mission as to whether it shares this view, the the Commission intended to bring the defendant for the moment refrains from matter before the Court 'if the infringe­ submitting further observations'. ments in question are not eliminated within In its reply the Commission declared that it a period of three months'. maintained its application. In its rejoinder the Italian Government con­ 6. On 24 June 1969 the Commission made tended that the Court should : the present application. (1) principally, declare that the present case is devoid of object; II — Conclusions of the parties (2) if the conclusion set out at (1) is rejected: dismiss the Commission's application; In its application the Commission claimed that the Court should: (3) order the Commission to bear the costs. Declare: At the hearing the Commission declared (1) that by imposing on cocoa powder im­ that it was withdrawing the third head of its ported from other Member States of the application. EEC an excise duty in excess of that levied on the corresponding product processed in Italy by milling cocoa III — Procedure beans imported under the system of temporary duty-free imports, the Italian Republic has failed in its obligation On hearing the report of the Judge-Rappor­ under Article 95 of the Treaty establish­ teur and the views of the Advocate-General, ing the European Economic Commun­ the Court decided to open the oral proce­ ity; dure without any preparatory inquiry.

The first submission: Infringement of Article — every kilogramme of cocoa powder 35 of the EEC Treaty by the imposition on obtained in Italy from cocoa beans im­ cocoa powder directly imported from other ported duty-free under the temporary Member States of an excise duty in excess of import system is liable on subsequent sale that levied on the corresponding domestic on the Italian market to an excise duty of product 200 lire; in fact, as is clear from the figu­ res given above at (b), 40 kg of cocoa In its application the Commission states the powder not re-exported are liable to the following: excise duty on 32 kg of cocoa beans, that is: 8000 lire (250 X 32); dividing this (a) In accordance with Article 13 of Decree figure by 40 the figure of 200 lire per Law No 50 of 11 March 1950, which sub­ kilogramme is obtained. sequently became Law No 202 of 9 May 1950, the excise duty on imports of cocoa (d) It follows from these figures that every beans and products obtained therefrom was kilogramme of imported cocoa powder is imposed in accordance with the following subject to a discriminatory tax differential scales: amounting to 112.50 lire (312.50—200) in comparison with the similar domestic — on unroasted cocoa beans, shells and product. husks: 25 000 lire per 100 kg; In its defence the Italian Government con­ fines itself to claiming that the Italian Par­ — on cocoa beans, roasted, unshelled: liament had, within the period prescribed 27 500 lire per 100 kg; for submitting the said defence, approved a draft law meeting the complaints made by — on cocoa, roasted, shelled, ground, in the Commission. paste or powder, cocoa butter: 31 250 In its reply the Commission admits the lire per 100 kg. adoption of this draft law removes the in­ fringement referred to in this submission. (b) In accordance with Article 2 of Law No In its rejoinder the Italian Government does 291 of 25 May 1954 temporary imports of not devote specific arguments to the Com­ unroasted cocoa beans are to be given mission's first submission ; it appears how­ customs clearance in the following pro­ ever that certain of its arguments appearing portions per 100 kg. below in connexion with the second sub­ mission are also intended to refer to this — 40 kg of cocoa butter; complaint. It indicates, as a matter of general interest, that the draft law men­ — 40 kg of cocoa powder containing less tioned in its defence has in the meantime than 1 % of such butter on which, if not become Law No 684 of 1 October 1969, re-exported, the excise duty for 32 kg of published in the 'Gazzetta Ufficiale' No 267 cocoa beans shall be payable; of 21 October 1969.

At the hearing the Commission declared that The 93 kg of products imported from other it maintained its first submission for two Member States, in the proportions shown reasons : first, because the said infringement above, are thus subject to a duty 3250 lire had continued for almost three years after in excess of that imposed on the same the expiry of the period laid down in the quantity of similar products processed in reasoned opinion and for almost four Italy from cocoa beans imported for months after the application had been domestic consumption. lodged; secondly, because the infringement The Italian Government's defence is set out persists under the new law in a new guise, as above under the first submission. the Commission explains in detail. In its reply, the Commission states that Law Also at the hearing, the Italian Government No 684 allows the said infringement to replied that since the Commission had with

complaint. This amount is calculated as follows : The excise duty levied on 100 kg of un The second submission: Infringement of roasted cocoa beans imported for domestic Article 95 resulting from the higher rate of consumption (assuming that the products excise duty on products processed from processed from the said beans are sold in the milled cocoa beans imported directly from proportion of 40 kg of butter, 40 kg of other Member States in comparison with powder and 13 kg of shells and husks with corresponding products produced in Italy 7 kg deducted for losses) now amounts to from cocoa beans imported for domestic 18 000 lire; on the other hand, the excise consumption duty levied on imports of products pro cessed from 100 kg of cocoa beans is hence forth as follows: In its application, the Commission states that on the basis of the previously cited provi

25 000 lire. intended to put an end to discriminatory On the other hand, the excise duty levied on treatment to the detriment of Italian imports of products processed abroad from producers. In fact, the same duty was 100 kg of cocoa beans is calculated as previously imposed on cocoa powder follows : with a low butter content (and conse quently of little value) as on cocoa 40kg of cocoa butter (40 x 312.50) 12 500 lire powder with a high butter content and on 40kg of cocoa powder (40 x 312.50) 12 500 lire cocoa butter; 13 kg of shells and husks (13 x 250) 3 250 lire

COMMISSION ν ITALY

ferent products, that is, cocoa powder 'uneconomical' to use them for any other containing less than 1 % of oils and fats, purpose (such as fertilizers, animal and cocoa powder containing more than fodder, etc.). Furthermore this is not 20 % of oils and fats; possible because of the chemical com­ position of the shells and husks. — Account must also be taken of losses in manufacture and of the higher costs in­ According to the Commission such con­ volved in milling; siderations are irrelevant. Furthermore, it is by no means inconceivable that shells and — The Commission has failed to give the husks should have uses other than those for proportions in which, allegedly, the duty which the exemption is available or which exempted on imported beans is re- are prohibited by the legislature. imposed on the various derived products

The first submission

2 The Commission claims that the Italian legislation in force when the application was made contravened Article 95, by imposing on cocoa powder imported from other Member States an excise duty (312.50 lire per kilogramme) which was higher

JUDGMENT OF 15. 4. 1970 — CASE 28/69

than that imposed on the same product obtained in Italy by milling cocoa beans imported duty-free under the temporary import system (200 lire per kilogramme).

3 The defendant considers that as a result of amendments made to the Italian

legislation in the course of the proceedings the Commission should be deemed to have withdrawn this complaint. It is however clear from the procedural documents that the Commission has maintained its conclusions in connexion with this sub­ mission.

10 Consequently the Italian Republic has failed to fulfil its obligation under Article 95 of the Treaty by imposing on cocoa powder imported from other Member States an excise duty in excess of that imposed on the similar product produced in Italy by milling cocoa beans imported duty-free under the temporary import system.

COMMISSION ν ITALY

The second submission

11 The Commission further complains that the Italian Republic has failed to fulfil its obligation under Article 95 in that its legislation imposes on cocoa powder, cocoa butter and shells and husks imported from other Member States an excise duty which is in excess of that imposed on similar products produced in Italy by the milling of cocoa beans imported for domestic consumption.

12 It is not disputed that this difference exists and that its amount is identical with the duty imposed on shells and husks imported from other Member States.

13 It is moreover agreed that such products, whether imported or produced by the Italian processing industry, are exempt from Italian excise duty if they are used for the extraction of theobromine or in the manufacture of coffee substitutes.

JUDGMENT OF 15. 4. 1970 — CASE 28/69

Costs

19/20 Under the terms of Article 69 (3) of the Rules of Procedure, where each party succeeds on some and fails on other heads the Court may order the parties to bear their own costs in whole or in part. This provision is applicable in the present case.

On those grounds,

Upon reading the pleadings ; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties ; Upon hearing the opinion of the Advocate-General ; Having regard to the Treaty establishing the European Economic Community, especially Articles 95 and 169; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69,

THE COURT

Delivered in open court in Luxembourg on 15 April 1970.

A. Van Houtte R. Lecourt

Registrar President