C-77/69

1. A single flat-rate transference duty which nature and is contrary to the first is imposed on national products and paragraph of Article 95 of the EEC imported products at the same rate, but Treaty. has the effect, by reason of the different 2. The liability of a Member State under basis on which it is applied, of taxing Article 169 arises whatever the agency imported products if they have been of the State whose action or inaction is subjected to processing, more heavily the cause of the failure to fulfil its than national products at a similar stage obligations even in the case of a consti­ of processing, is of a discriminatory tutionally independent institution.

In Case 77/69

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

applicant,

ν

Kingdom of Belgium, represented by Gilbert de Klerck, acting Director of

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

Advocate-General: J. Gand

Registrar : A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

cases, of imposing on products imported 'eliminate the discrimination which the from other Member States into Belgium a system of the flat-rate transference duty duty higher than that borne by similar applicable to wood involves to the detriment home-grown products. of foreign products' : In the opinion of the Commission, duty imposed at the same rate on standing wood (a) in respect of the transference duty, the and on wood after processing amounts to Belgian Government intended by a an infringement of Article 95 of the EEC Royal Decree to fix rates differentiated Treaty, according to which no Member in accordance with the category of the State may impose on the products of other products: a rate of 18% for standing Member States any internal taxation of any trees transferred in Belgium, of 15.5% kind in excess of that imposed on similar for undressed wood (wood with bark) domestic products. transferred in Belgium by a producer In response to the first approaches of the or importer and of 12.5% for wood

Liège and Namur at the rate of 3 % or 2 %, either on the sale of cut wood or on the use (c) the alterations in the system of the flat of such cut wood by the owner for com rate duty and the abolition of registra mercial or industrial purposes. tion fees were to enter into force On 14 February 1967 the Commission simultaneously at the beginning of informed the Belgian Government that the September 1967. provincial taxes could not be the subject

The Commission insisted that the Belgian vinces of Luxembourg, Liège and Namur. Government should as rapidly as possible The Commission did not therefore consider bring into force measures enabling it to that the arrangement which the Belgian conform to the Treaty. Government proposed to make in respect On 2 June 1967 the Commission was in of the taxation system on imported wood formed of the measures which the Belgian was capable of putting an end to the Government intended to put into force to infringements found, and it commenced the

at the time of the Royal Decree However, the Commission refrained from intended to introduce the necessary lodging a reply. amendments to the system of trans­ On hearing the preliminary report of the ference duty after the vote on the law Judge-Rapporteur and the views of the abolishing the registration fee on public Advocate-General the Court decided to sales. open the oral procedure without a prepara­ tory inquiry. The parties presented oral On 28 November 1968 the Commission argument at the hearing on 10 March 1970. delivered a reasoned opinion under Article The Advocate-General delivered his opin­ 169 of the Treaty, in which it first justified ion at the hearing on 14 April 1970. the finding of a failure by the Kingdom of Belgium to comply with its obligations under Articles 95 and 97 of the EEC Treaty, III — Conclusions of the parties and then called upon it to take the necessary measures to conform to the reasoned opinion within a period of one month, such The Commission claims that the Court period being capable of being extended so should : far as necessary for compliance with parliamentary procedures. — declare that the Kingdom of Belgium, On 26 February 1969 the permanent by applying the same rate laid down by representatives of Belgium accredited to the Article 31-14 of the General Regulation Communities informed the Commission on Duties assimilated to Stamp Duties that the draft law of 27 June 1967, which (Royal Decree of 3 March 1927) to was intended to amend the system com­ home-grown wood transferred standing plained of, had been saved from lapsing by or felled and to imported wood, calcu­ lated on the value at the time of the a law of 20 December 1968 and that the Council of Ministers had decided that the declaration of entry for home use, has failed to fulfil its obligations under parliamentary procedure would be con­ tinued in respect of the said draft law and Article 95 of the EEC Treaty; that account would no longer be taken of — order the Kingdom of Belgium to pay the the provincial taxes when the new rates of costs. transference duty were subsequently fixed. By letter of 2 April 1969 the Commission The Kingdom of Belgium stated that it relied noted with satisfaction the procedure upon the wisdom of the Court.

IV— Submissions and arguments tion such as that of which it complains to of the parties Belgium in the present case should be eliminated. The Kingdom of Belgium does not dispute The submissions and arguments of the that the contested regulations impose higher parties may be summarized as follows : duties on imported wood than are imposed The Commission, after recalling the facts on home-grown wood. of the case and the voluminous corres­ It recalls that in order to remedy this state pondence exchanged with the defendant, of affairs the Government on 27 June 1967 states that the system of the flat-rate introduced into the Chamber of Repre­ transference duty, as applied in Belgium to sentatives a draft law amending the code wood, constitutes an infringement of Article of registration, mortgage and court fees. 95 of the EEC Treaty and that the in­ Its statement of reasons shows clearly that fringement has been continuing for an un­ this draft law is intended to ensure con­ reasonable time. formity with Article 95 of the EEC Treaty In respect of the provincial taxes, the in the sector of wood. Commission points out that they are levied As to the problem of provincial taxes, the only in three provinces of Belgium and that Council of Ministers agreed with the even in these provinces they are not imposed reasoned opinion of the Commission and on all cut wood, as cutting done in the State decided that account would not be taken forests is not subject to them. of them when the new rates of transference Furthermore cutting done in the provinces duty were subsequently fixed. The Royal of Luxembourg, Liège and Namur repre­ Decree to be introduced for this purpose sents only 84% of Belgian production. would be closely linked to the law to repeal As to the economic incidence of the disputed the provision relating to the registration fee taxation, the Commission points out that of 5% and would enter into force at the in 1968 Belgium imported from other same time as that law. The Belgian Govern­ Member States of the Community 648 729 ment on two occasions reminded the metric tons of wood of an approximate President of the Finance Committee of the value of 850 million francs, which was only Chamber of Representatives of its interest very slightly less than national production. in seeing the draft law — saved from lapsing As a matter of principle, the Commission in 1968 — come to fruition as soon as states that it attaches the greatest im­ possible. Under the principle of the separa­ portance to the complete achievement of tion of powers the Belgian Government has the internal market; for this purpose it is no other means of action; it finds itself important that examples of tax discrimina- facing a situation of force majeure.

4 In respect of the former, the flat-rate duty is paid, according to Article 31-14 (1) (1) and Article 31-14 (3) of the Royal Decree of 3 March 1927, at the time of sale by the producer of wood transferred standing or felled.

5 On the other hand, in respect of imported products, assessment takes place, in accordance with paragraph 3 (1) of the same article, at the time of the declaration of entry for home use, taking into account the more or less advanced state of processing, defined by paragraph 1 (2) (a) to (j).

6 According to the wording of paragraph 3 (1), 'the flat-rate duty shall cover all subsequent transfers until the arrival of the goods in the hands of the consumer or the person who submits them to an industrial process', it being understood how­ ever that 'processing of one of the products enumerated in paragraph 1 into another of those products shall not be regarded as industrial processing'.

7 It follows from this system that, because of the fact that the flat-rate duty is paid at the time of the transfer of standing or felled wood, home-grown wood is exempted from all subsequent charges arising out of the increase in value due to the proces­ sing defined by the Royal Decree.

8 The same treatment is not extended to imported wood which, under the terms of the same decree, is taxed in relation to its more advanced state of processing and assessed consequently on the basis of a higher value than that of wood transferred standing or felled.

9 The system established by Article 31-14 of the Royal Decree of 3 March 1927 thus has, as a result of this differentiation in the basis of the single flat-rate duty, the effect of taxing imported wood, if it has already undergone processing, more heavily than national products in a similar stage of processing.

15 The obligations arising from Article 95 of the Treaty devolve upon States as such and the liability of a Member State under Article 169 arises whatever the agency of the State whose action or inaction is the cause of the failure to fulfil its obligations, even in the case of a constitutionally independent institution.

16 The objection raised by the defendant cannot therefore be sustained.

17 In these circumstances, by applying a duty at the same rate, as laid down by Article 31-14 of the Royal Decree of 3 March 1927 as amended, to home-grown wood transferred standing or felled and to imported wood calculated on its value at the time of the declaration of entry for home use, the Kingdom of Belgium has failed to fulfil its obligations under Article 95 of the Treaty.

Costs

18 Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

19 The defendant has failed in its submissions.

2. Orders the defendant to pay the costs.

Lecourt Monaco Pescatore

Donner Trabucchi Strauß, Mertens de Wilmars

Delivered in open court in Luxembourg on 5 May 1970.

A. Van Houtte R. Lecourt

Registrar President