C-45/75

2. The first paragraph of Article 95 6. when the transitional period has produces direct effects and creates expired, the duty laid down in Article individual rights which national 37 (1) is no longer subject to any courts must protect. condition, nor can its performance or 3. A comparison must be made between effects be subject to the adoption the taxation imposed on products of any measure either by the which, at the same stage of production Community or the Member States, or marketing, have similar and, by its very nature, it is capable of characteristics and meet the same conferring on those concerned needs from the point of view of individual rights which national consumers. In this respect, the courts must protect. classification of the domestic product 7. The application of Article 37 (1) is not and the imported product under the limited to imports or exports which same heading in the Common are directly subject to the monopoly Customs Tariff constitutes an but covers all measures which are important factor in this assessment. connected with its existence and affect trade between Member States in 4. The first paragraph of Article 95 must be interpreted as prohibiting the certain products, whether or not imposition of taxation on an imported subject to the monopoly, and thus product according to a method of covers charges which would result in calculation or manner of imposition discrimination against imported which differs from those applying to products as compared with national the tax imposed on the similar products coming under the monopoly. domestic product and leads to higher However, that provision does not taxation on the imported product, prohibit the imposition of identical such as the imposition of a uniform taxation on an imported product and amount in one case and a graduated a similar domestic product, even if the amount in the other, even if such charge imposed on the latter is, in disparity only occurs in a minority of part, allocated for the purposes of cases, and that it is inappropriate to financing the monopoly, whilst the take into consideration the possibly charge levied on the imported product different effects of such taxation on is imposed for the benefit of the the price levels of the two products. general budget of the State.

on the interpretation of Article 37 (1) and the first paragraph of Article 95 of the EEC Treaty,

THE COURT

composed of: R. Lecourt, President, R. Monaco and H. Kutscher, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, P. Pescatore, M. Sørensen, Lord Mackenzie Stuart and A. O'Keeffe, Judges,

Advocate-General: G. Reischl

Registrar: A. Van Houtte

gives the following

Certain domestic alcohols, in particular application (Sprungklage) before the fruit alcohols (Article 76 BrMonG), Finanzgericht Rheinland-Pfalz. As that including those used within the country court considered that Articles 37 and 95 to produce Vermouth, are exempt from of the EEC Treaty on which the plaintiff the obligation to sell to the State based its action give rise to a question of monopoly. The exempted alcohol is interpretation, it addressed the following subject to the payment of a charge questions to the Court: known as the 'Branntweinaufschlag' (1) Are Article 37 (1) and the first (spirits surcharge) (Article 78 BrMonG). paragraph of Article 95 of the EEC The amount of this charge is determined Treaty to be interpreted as giving by the difference between the sale price nationals of the Member States from and the basic price of the monopoly the end of the transitional period alcohol, less the flat rate average amount individual rights which the national of the costs which the monopoly courts must protect? administration is spared by not taking (2) Does the levying of the part of responsibility for the alcohol. However, the monopoly equalization duty the spirits surcharge calculated in this called the Monopolausgleichspitze way is only applicable to a maximum (monopoly equalizadon margin) on annual production of 60 hectolitres of imports of Italian Vermouth violate

In applying duty known as the monopoly Article 37 (1) and the first paragraph equalization duty which is calculated in of Article 95 of the EEC Treaty, are the same way as the spirits surcharge, only the Monopolausgleichspitze on except that the flat rate overheads are not the one hand and the monopoly costs deducted. The so-called 'Monopolaus on the other to be compared with gleichspitze' (monopoly equalization one another or must it be ascertained margin) is that part of the compensatory whether the imported product is not, duty which exceeds the spirits tax. This in terms of its total price, placed in a Monopolausgleichspitze is deemd to worse position by the levying of the correspond to and to constitute Monopolausgleichspitze than the compensation for the marketing costs comparable domestic product? borne by the monopoly administration (4) In the event of the first alternative of and burdening the domestic products Question 3 being answered in the which it markets. affirmative: Is imported Italian Vermouth

REWE v HAUPTZOLLAMT LANDAU

Commission of the European Communi products which are imported from other ties and the Government of the Federal Member States and which are therefore Republic of Germany submitted written not acquired by the monopoly adminis observations in accordance with Article tration? The Commission maintains that 20 of the Protocol on the Statute of the Article 95 refers not only to charges of a Court of Justice of the EEC. purely fiscal nature but also to charges Upon hearing the report of the which contribute towards the financing Judge-Rapporteur and the views of the of a public authority such as a monopoly administration and are intended to cover Advocate-General the Court decided to open the oral procedure without holding its costs. This wide interpretation results, any preparatory inquiry. inter alia, from the judgment of the Court of Justice in Joined Cases 2 and 3/62 (Judgment of 14 December 1962, II — Observations submitted in Commission v Grand Duchy of accordance with Article 20 Luxembourg and Kingdom of Belgium, of the Protocol on the [1962] ECR 425) and the Commission concludes therefrom that the fact that

period. Since the expiry of this period 37 (1) the imposition of a charge cannot Article 37 contains a clear and absolute be questioned on the sole ground that it is intended to contribute towards duty which is independent of any intervention on the part of the Member financing the activities of a public States or the Community institutions. In authority. Some discrimination must exist. Case 6/64 (Judgment of 15 July 1964, Costa v Enel, [1964] ECR 585) the Court has already acknowledged the direct As regards Article 37 the Commission applicability of Article 37 (2) which is considers that, since the expiry of the based upon the same concept of transitional period, the prohibition on discrimination contained in Article 37 discrimination as paragraph (1). brings about the same result as the As regards the second question, after prohibition contained in Article 95.

JUDGMENT OF 17. 2. 1976 — CASE 45/75

whether the question falls within the The Commission maintains that the scope of the first paragraph of Article 95 third question has been referred because or Article 37 (1), or whether, in the light the plaintiff in the main action of its purpose, the charge must be maintained before the national court that regarded as having an effect equivalent to if the 'total price position' is considered a customs duty on imports (Judgment of it is nationally produced alcohol rather 19 June 1973, Case 77/72 Carmine than imported alcohol which is. Capolongo v Azienda Agricola Maya, discriminated against, as a result of the [1973] ECR 611 and Judgment of 18 lower prices obtaining abroad. The June 1975, Case 97/74 IGAV v ENCC, Commission considers that under the

concerning the adjustment of the state an affirmative reply must be given to the alcohol monopoly, OJ L 31 of 9. 2. 1970, first question. Like Articles 9, 12 and 37 p. 20), became inapplicable as from the (2), Article 37 (1) contains a prohibition expiry of the transitional period in spite on discrimination which, as a fully of the fact that a common market effective Community rule, is by its very organization has not yet been established. nature capable of producing direct effects Therefore, in pursuance of the principles in relations between individuals and laid down by the Court of Justice in the between the Member States and their abovementioned Cases 77/72 and 94/74 nationals. The duty to adjust monopolies the continued imposition of the progressively before the end of the Monopolausgleichspitze may constitute transitional period is also directly an infringement of the prohibition on applicable. the levying of charges having an effect equivalent to customs duties to the However, the German Government calls extent to which their imposition is attention to Article 37 (4) according to 'intended exclusively to support activities which the rule contained in paragraph (1) which specifically benefit the taxed only applies to monopolies of a domestic product.' commercial character which are designed

REWE v HAUPTZOLLAMT LANDAU

The Court has already found that pecuniary The Federal Government maintains that charges which form part of a general the essence of the second question is system of internal charges imposed Article 37 and not Article 95. This latter systematically on domestic and imported provision may not be applied to a charge products according to the same criteria on imports such as the Monopolaus are not covered by the prohibition on gleichspitze, which is levied in order to charges having an effect equivalent compensate for the fact that a monopoly to customs duties (Judgment of 14 tax is imposed on the domestic product, December 1972, Case 29/72, SpA because such internal taxation is an Marimex v Amministrazione Finan essential constituent element of the zaria dello Stato, Rec. 1972, p. 1319).

In The abandonment of the Mono this respect it must be emphasized that polausgleichspitze would also make it the tax on the domestic product and the necessary to give up seeking Monopolausgleichspitze are similar in compensation for the monopoly costs terms of public law: the amount of both (Monopolkostenausgleich), in order to charges is fixed basically according to the avoid putting domestic products into a same criteria, they are recoverable in the less favourable position than spirits same way and both benefit from the imported for consumption. The criminal law provisions protecting debts financing of these costs by the Federal arising under revenue law.

Treaty. To the extent to which Article 37 If the context of the second question is provides for the adjustment of defined in this way then, in order to monopolies of a commercial character consider whether the levying of the and not for their abolition it must be Monopolausgleichspitze accord with the acknowledged that the rules which are prohibition on discrimination contained indispensable for the existence of the in Article 37, it is necessary, in the monopoly should continue to exist.

JUDGMENT OF 17. 2. 1976 — CASE 45/75

abolition of the Monopolausgleichspitze determine the origin of the imported would lead to a distortion of the product and the quantitiy produced in its monopoly system in that it would original area of production. Furthermore, compel the State to support the in its Recommendation of 22 December monopoly at the expense of the 1969 to the Federal Republic of population as a whole rather than at the Germany OJ L 31 of 9. 2. 1970, p. 20 et expense of users. seq) the Commission advocated the use of such a system. The Federal Government suggests that the following reply be given to the In practice, the amount of the flat-rate second question: charge imposed on imported fruit-based spirits corresponds to the charge imposed The first paragraph of Article 95 must on approximately 97 % of domestic not be understood to mean that the fruit-based spirits. At all events, imposition of compensatory charges graduated internal charges are imposed within the framework of a monopoly of a for reasons of agricultural policy and in commercial character falls within the order to favour the middle classes and are

scope of that provision. Article 37 (1) therefore governed by Article 37 (4). must not be understood to mean that the

REWE v HAUPTZOLLAMT LANDAU

That provision only allows the burden As regards the third question the resulting from the imposition of internal applicant concludes from the preceding taxation to be compensated for, not the submissions that a comparison of the costs of production and marketing of the charges pursuant to the first paragraph of products. In this instance, the importer is Article 95 may only concern taxation and compelled to pay an amount which not prices. It therefore considers that in compensates for the handicap which applying Article 37 (1) and the first national producers suffer in competitive paragraph of Article 95 of the EEC terms as a result of having to bear the Treaty only the Monopolausgleichspitze costs of administering the monopoly. and the monopoly costs must be The scope of Article 95 cannot be compared. extended to allow any kind of compensation between a tax burdening imported products and a charge imposed As regards the fourth question the for economic purposes on similar applicant observes that to put products national products. originating in other Member States in a more unfavourable position than The applicant then turns to Article 37 (1) products subject to the monopoly by and maintains that the prohibition set resorting to measures which may be out therein includes that laid down in imputed to the monopoly constitutes Article 95, with the result that the discrimination within the meaning of submissions put forward with regard to Article 37 of the EEC Treaty.

Moreover, competition between domestic products the increases and reductions provided for subject to the monopoly and imported by Article 79 (2) to (6) of the "same Law products. are only taken into consideration as regards the spirits surcharge, that is, as The applicant suggests that the following regards domestic production and not as reply be given to the second question: regards the monopoly equalization duty imposed on imported products. The imposition of charges on products imported from other Member States still The applicant therefore maintains that infringes the first paragraph of Article 95 the reply to the fourth question must be and Article 37 (1) of the EEC Treaty to as follows:

At the hearing on 28 October 1975 the The applicant maintained that the applicant, represented by its Legal Branntweinausgleichspitze and the Adviser, G. Meier, the Government of Monopolausgleichspitze cover: the Federal Republic of Germany, (1) all the costs of administration and represented by M. Seidel, and the marketing incurred by the monopoly; Commission, represented by R. Wägen­ (2) the cost of valuing the alcohol bauer, developed the arguments set out purchased by the monopoly; and in the written procedure. (3) export refunds and deficit selling prices. In particular, they gave further details as to certain questions raised by the Court. In reply to a question posed by the Court the applicant also observed that the In answer to the Court's question as to monopoly costs included in the selling whether the spirits surcharge and/or the price for nationally-produced alcohol for monopoly equalization duty or a part of which the Monopolausgleichspitze is these charges (the Branntweinaufschlag­ deemed to compensate are already borne spitze (spirits surcharge margin) or the by imported alcohol, in the form of Monopolausgleichspitze) are allocated to production costs, in the State from which the monopoly administration or to other it originates, in particular where that purposes, the Government of the Federal State also applies a monopoly system. Republic of Germany stated that the Branntweinaufschlagspitze finances the The Advocate-General delivered his

monopoly while the Monopolausgleich­ opinion at the hearing on 20 November spitze which is imposed for the benefit 1975.

As regards alcohol intended for human consumption, the so-called monopoly costs also include a price component intended to cover the losses incurred by the monopoly administration through the sale at less than cost price of certain spirits intended for other purposes.

3 Under Article 76 of the abovementioned Law certain nationally-produced spirits, in particular those produced from cereals and various fruits, are not obliged to sell to the monopoly.

Thus the situation which gave rise to the action is characterized by the existence of a State monopoly covering the purchase and marketing of a product, but extending to only part of the domestic production of that product, another part being purchased and marketed by the private sector.

4 Alcohol which is exempt from the requirement to sell to the monopoly is subject to a charge known as the 'Branntweinaufschlag' (spirits surcharge) which is equal to the difference between the basic price of the monopoly alcohol and its normal sale price and which for this reason includes, in addition to the spirits tax ('Branntweinsteuer'), a contribution to the monopoly costs of an amount equal to that imposed on monopoly alcohol.

JUDGMENT OF 17. 2. 1976 — CASE 45/75

This contribution, which is known as the 'Branntweinaufschlagspitze' (spirits surcharge margin) and is equal to the 'monopoly costs' included in the sale price of monopoly alcohol intended for human consumption, is, however, reduced by a flat rate sum (DM 21 at the time of the events which gave rise to the main action) which represents the average amount of the costs saved by the monopoly administration by not taking such alcohol over.

Moreover, during the oral procedure the Federal Republic of Germany stated that 'indirectly, this protection enables the monopoly to be financed, since, if

REWE v HAUPTZOLLAMT LANDAU

this margin ('Spitze') were not levied, it would be impossible to lay the burden of the monopoly's operating costs on nationally-produced alcohol'.

However, unlike the practice applying to exempt nationally-produced alcohol, this amount is neither reduced by a flat rate figure nor subsequently proportionately reduced or increased but is determined once and for all, and the amount thus fixed also constitutes the upper limit of the proportionate increase in the Branntweinaufschlag.

However, the Government of the Federal Republic of Germany observes that, at least as regards the distilleries 'under seal' producing fruitbased spirits, the effect of the proportionate increase in the amount of the Branntweinaufschlag is that this charge and the Monopolausgleich reach the same level in the case of alcohol from distilleries producing more than 330 hectolitres per year, that is, in the case of 95 % of production.

6 As the case concerns a tax which is imposed on both imported products and similar domestic products within the context of the adjustment of a monopoly of a commercial character, it is the compatibility of this tax with Articles 95 and 37 which is at issue and which, moreover, forms the subject-matter of the action before the national court.

10 The second question asks whether the levying of the part of the monopoly equalization duty called the 'Monopolausgleichspitze' on imports of Italian vermouth infringes the first paragraph of Article 95 in so far as it is intended not to compensate by way of a duty for the tax borne by comparable domestic products but rather to cover the State monopoly's own administrative costs.

11 Although, in the context of proceedings under Article 177 of the Treaty, it is not for the Court to rule on the compatibility of the provisions of a national law with the Treaty, it does, on the other hand, have jurisdiction to provide the national court with all the criteria of interpretation relating to Community law which may enable it to judge such compatibility.

12 According to the first paragraph of Article 95 of the Treaty: 'No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products'.

The implementation of this provision implies the application of criteria by which the existence or absence of such similarity may be judged.

In this respect, the fact that the same raw material — for example, alcohol — is to be found in the two products is not sufficient reason to apply the prohibition contained in the first paragraph of Article 95, even if the charge is wholly or partially imposed with reference to that raw material; a comparison must however be made between the taxation imposed on products which, at the same stage of production or marketing, have similar characteristics and meet the same needs from the point of view of consumers.

In particular, the scope of that article could not be so extended as to allow any kind of compensation between a tax created so as to apply to imported products and a charge of a different nature imposed, for example, for economic purposes, on the similar domestic product.

However, this is not the case where the imported product and the similar domestic product are both equally subject to a government tax which is introduced and quantified by the public administration, even if a part of the charge imposed on the domestic product is, incidentally, allocated for the purposes of financing a State monopoly, whilst the charge levied on the imported product is imposed for the benefit of the general budget of the State.

15 On the other hand, the first paragraph of Article 95 is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which

lead, if only in certain cases, to higher taxation being imposed on the imported product.

This finding cannot be refuted by the claim that although the imported product is taxed at a flat rate whilst the domestic product is taxed according to a sliding scale this is because the investigations which would be necessary in the former case could not be carried out.

Even though it might indeed be impossible to introduce the same sliding scale for the increase or reduction of taxation on both domestic and imported products, it is nevertheless possible to impose a single flat rate or fixed charge on both products in order to observe the prohibition on discrimination laid down in Article 95.

As regards Article 37 (1)

18 The essential point of the questions concerning Article 37 is whether, to the extent to which it includes the Spitze (margin) calculated as outlined above, the Monopolausgleich infringes Article 37 of the Treaty.

19 In view of the finding that Article 95 of the Treaty does not prohibit taxation such as that in question, provided that it is imposed equally on the domestic product and the similar imported product, it might appear unnecessary to reply to the questions concerning the interpretation of Article 37, as they

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seem to have been put in order to discover whether, as a lex specialis, Article 37 allows an exception to be made in the case of a monopoly to the prohibition contained in Article 95.

20 However, these questions may also be intended to discover whether, even if it is brought into line with the Branntweinaufschlag, the Monopolausgleich infringes Article 37 of the Treaty on the ground that, as it is intended to cover the monopoly costs, at least in part and even if only indirectly, it constitutes discrimination regarding the conditions under which the goods are procured and marketed.

JUDGMENT OF 17. 2. 1976 — CASE 45/75

The prohibition on all discrimination in this field after the expiry of the transitional period constitutes an obligation to attain a precise result, the fulfilment of which had to be made easier by, but not made dependent on, the progressive nature of the adjustment provided for.

In this respect, it must be pointed out that under paragraph (3) of the same Article 37 the time-table for the adjustment measures was to be harmonized with the abolition of quantitative restrictions on the same products.

The provisions of the Treaty requiring Member States to abolish all discrimination within a specific period become directly applicable even where the duty has not been discharged before the expiry of that period.

Thus, when the period has expired, the duty in question is no longer subject to any condition, nor can its performance or effects be subject to the adoption of any measure either by the Community or the Member States, and, by its very nature, it is capable of conferring on those concerned individual rights which national courts must protect.

The period which the Member States were allowed for the progressive adjustment of State monopolies in order to ensure that at the end of the transitional period no discrimination exists is intended to facilitate the creation of new circumstances which are compatible with the rule and, after its expiry, cannot form an obstacle to the application of that rule.

It follows from the foregoing considerations that to extract a contribution to the monopoly costs from the imported product alone, even in the form of a duty, is in principle incompatible with the prohibition contained in Article 37 (1)

27 However, this is not the case where the imported product and the similar domestic product are both equally subject to a government tax which is introduced and quantified by the public administration, even if a part of the charge imposed on the domestic product is, incidentally, allocated for the purposes of financing a State monopoly, whilst the charge levied on the imported product is imposed for the benefit of the general budget of the State.

There is, in fact, no discrimination within the meaning of Article 37 where the imported product is subject to the same conditions as the similar domestic product subject to the monopoly.

On the other hand, both Article 95 and Article 37 of the Treaty are infringed if the charge imposed on the imported product is different from that imposed on the similar domestic product which is directly or indirectly covered by the monopoly.

The answer must therefore be that Article 37 (1) must be interpreted as meaning that the discrimination regarding the conditions under which goods are procured and marketed which is referred to therein includes the extraction of a contribution to the monopoly costs from an imported product, even in the form of a duty, but that that provision does not prohibit the imposition of identical taxation on an imported product and a similar domestic product, even if the charge imposed on the latter is, in part, allocated for the purposes of financing the monopoly, whilst the charge levied on the imported product is imposed for the benefit of the general budget of the State.

As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision as to costs is a matter for that court.

On those grounds,

THE COURT

in answer to the questions referred to it by the Finanzgericht Rheinland-Pfalz by order dated 10 April 1975, hereby rules:

1. The first paragraph of Article 95 produces direct effects and creates individual rights which national courts must protect;

2. The first paragraph of Article 95 must be interpreted as prohibiting the imposition of taxation on an imported product according to a method of calculation or manner of imposition which differs from those applying to the tax imposed on the similar domestic product and leads to higher

Donner Mertens de Wilmars Sørensen Mackenzie Stuart

Delivered in open court in Luxembourg on 17 February 1976.

A. Van Houte R. Lecourt

Registrar President