C-118/76

JUDGMENT OF THE COURT 28 JUNE 1977 1

Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (preliminary ruling requested by the Finanzgericht Berlin)

'Exemption from charges on grounds of natural justice'

Case 118/76

Community charge — Imposition — Exemption — Grounds of natural justice — National law — Applicability — Strict limits

The distribution of functions between On the other hand, a national authority the Community and the Member States is not entitled to apply the provisions of may justify the application, by a national its national law to an application for authority, of a rule of natural justice for exemption, on grounds of natural justice, which provision is made under its from charges due under Community law, national legislation in connexion with where to do so would alter the effect of the formalities applicable to the the Community rules relating to the imposition of a charge introduced by basis of assessment, the manner of Community law. imposition or the amount of the charge in question.

JUDGMENT OF 28. 6. 1977 - CASE 118/76

THE COURT

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

Advocate-General: G. Reischl

Registrar: A. Van Houtte

gives the following

BALKAN-IMPORT-EXPORT v HAUPTZOLLAMT BERLIN-PACKHOF

from the judgment of the Finanzgericht 2. If the answer to the first question is Berlin is at present pending before the in the negative, is there any legal Bundesfinanzhof. basis (possibly under Community law) for exemption from payment of In a letter dated 27 February 1974 a monetary compensatory amount on Balkan applied to the Hauptzollamt grounds of natural justice? Berlin-Packhof under Article 131 (1) of 3. What, in relation to the case to be the Abgabenordnung (General Reg­ decided here, is the legal principle ulation on Taxation) for exemption on resulting from such a legal basis if grounds of natural justice from payment any? of the monetary compensatory amounts 4. Which authority, if any, is em­ claimed from it It claimed that in the powered to take a decision on a present case payment of the amounts in question concerning an exemption question would lead to a result which on grounds of natural justice?' was clearly not desired by Community law and which must be corrected by The order of the Finanzgericht Berlin applying the principles of natural justice. was received at the Court Registry on Article 131 (1) of the Abgabenordnung 15 December 1976. provides that: In accordance with Article 20 of the Total or partial exemption from taxes Protocol on the Statute of the Court of and other pecuniary charges may be Justice of the EEC, written observations granted in individual cases where, in a were submitted on 22 February 1977 by given case, their recovery would be Balkan-Import-Export GmbH, the contrary to natural justice.' plaintiff in the main action, on 25 February by the Government of the That application was dismissed by Federal Republic of Germany and on decision of the Hauptzollamt 3 March 1977 by the Commission of the Berlin-Packhof of 10 July 1974. European Communities.

The first question at law intended to ensure the protection of the rights which citizens have from (a) The monetary compensatory the direct effect of Community law. That amounts imposed when the importation finding also applies to charges the was made are governed by national law. imposition of which is provided for by It is true that in levying them the Federal Community law. The distortions which Republic of Germany exercised the may result therefrom are inevitable in the authority contained in Article 1 of present state of Community law. Regulation No 974/71, but they were imposed in pursuance of the regulation The same considerations apply as regards of 14 May 1971 on the imposition of a questions of natural justice.

The fact that they were However, it establishes that the need to levied by virtue of the authority allow remission on grounds of natural conferred by Regulation No 974/71 is justice is fully acknowledged in not in itself decisive since their Community law. As long as no imposition thereunder was not Community rules have come into force mandatory but fell within the area of the and the application of the principles of discretionary power of the legislatures of natural justice has not been provided for the Member States. by implementing regulations, it is necessary to have recourse to national Decisions relating to exemptions on law governing measures adopted in grounds of natural justice from charges accordance with such principles. imposed in pursuance of Article 21 of the Zollgesetz and of the regulation on The Commission acknowledged the the levying of a compensatory amount to special need to introduce principles of protect German agriculture are governed natural justice into the area of monetary solely by German procedural law and, in compensatory amounts in Regulation No particular, by Article 131 of the 1608/74 of 26 June 1974 on special Reichsabgabenordnung. provisions in respect of monetary compensatory amounts (OJ L 170, p. 38). A decision on the first question is It is true that that regulation deals only therefore unnecessary in order for the with one particular case of exemption on national court to give judgment grounds of natural justice, but it nevertheless demonstrates the urgent (b) In its judgment of 16 December need to find a remedy for certain cases of 1976 (Case 33/76, REWE-Zentralfinanz hardship which arise in that area. eG and REWE-Zentral AG v Landwirtschaftskammer fur das In accordance with its judgment in Case Saarland), the Court of Justice held in 33/76, therefore, the Court should rule relation to charges imposed by a national that measures on the basis of natural government that in the absence of justice relating to monetary com Community rules on that subject, it is for pensatory amounts imposed when the the domestic legal system of each importation at issue in the main action Member State to determine the took place must be considered in the procedural conditions governing actions light of national law.

— In Case 18/72 the Court of Justice Regulation No 1604/68 is applicable held that the Community legislature only to imports effected after 4 June alone may lay down general exceptions 1973. It is therefore unnecessary to on legal grounds. Measures of natural consider whether it affects the national justice are exemptions granted in provisions relating to measures of natural individual cases on grounds of natural justice which are outside its area of justice. They are therefore not exceptions application. for which legal provision has been made in advance but rather assessments made As a result of the judgment of the Court in specific cases on the basis of prior of Justice in Case 33/76 there can be no importation; doubt that national provisions relating to measures adopted on grounds of natural — The intention of the Court of Justice justice are applicable until such time as was to condemn the adoption of national uniform Community provisions legislative measures of a general nature, concerning such measures have been not implementing measures adopted by adopted. the national administration.

The Government of the Federal Republic In its judgment of 24 November 1971 of Germany considers that Article 131 of (Case 30/71, Siemers & Co. v the Abgabenordnung does not permit an Hauptzollamt Bad Reichenhall, [1971] exemption from Community charges to II ECR 919) the Court accepted that the be granted in all cases but only in certain national customs authorities are entitled cases to which the provision applies. to give official information which is binding upon the administration, since (a) The rules laid down by Article 131 such a procedure in no way lays down (1) of the Abgabenordnung constitute an

charge is adversely affected in a way which is at once undesirable and Decisions according to natural justice on contrary to the aim of the law. The so-called subjective grounds should, for factors which enable the element of their part, be accepted. unfairness to be judged with certainty are The conclusion results, in the final linked to the actual facts with regard to analysis, from the fact that Community the taxation, and the effects of both law takes precedence over national law. substantive rules and procedural Provisions of internal law concerning provisions are taken into account. Such natural justice apply only within the cases must be individual cases of limits set by the tenor and aim of the hardship which were not envisaged by Community rule. Their application the legislature; difficulties caused by the cannot challenge the uniform and very objective of the taxation cannot in independent validity of the Community principle justify the adoption of measures rule. of natural justice. (c) Since grounds of natural justice of Decisions according to natural justice an objective nature are concerned, that adopted on the basis of so-called principle excludes measures of natural objective grounds may be subdivided into justice which involve a limitation on the two groups. To the extent to which the substantive content of the rule on hardship which is felt in an individual taxation in question. That finding applies case arises from the objective effect of in particular to the exemption applied the tax law, a decision based on natural for by the plaintiff in the main action. justice automatically restricts the material The national customs authorities could content of that law. In such a case the accept such an application only by result of the application of Article 131 is modifying the substance of the to restrict the substance of the legal rule. Community provision. The principle of If, on the other hand, the case of natural justice which exists in internal hardship results solely from the law does not provide any legal basis for application of a procedural provision, a such an interference with the scope of correction made in accordance with the Community law.

(d) As regards measures adopted on the Member States, which form an objective grounds of natural justice in integral part of Community law. It is order to relieve individual cases of current practice in the Member States to hardship caused by the procedural make adjustments in exceptional provisions of taxation law, in particular circumstances on the basis of natural in the matter of time-limits or formal justice. requirements, the national customs authority remains competent. The The Commission of the European adoption of rules governing the Communities emphasizes that the aim of procedure applying to the recovery of Article 131 of the Abgabenordnung is to charges is still a matter for the Member enable an individual measure of natural States: to the extent to which justice to prevail over the formal Community law does not lay down application of necessarily general criteria procedural provisions in that area it does of taxation in exceptional circumstances not restrict the internal law of procedure for which no provision has been made by of the States. That principle has been the legislature in matters of taxation. As confirmed on several occasions by the it is an exception to the principle that case-law of the Court of Justice. taxation shall be of general application, an exemption on grounds of natural (e) Article 131 of the Abgabenordnung justice may be granted only where the is in the nature of a regulating factor, application of the tax laws entails which is essential for the authorities hardship which does not result from the responsible for administering the charge essential nature of the tax in question. in question. That fact results from the Article 131 is intended to enable the tax particular features of German tax law authorities to deal with cases for which which, as a general rule, requires all the no provision has been made by the circumstances of the charge to be legislature. apparent and takes considerations of natural justice into account only when a As regards customs duties and equivalent later assessment is made. The possibility charges, an exemption on grounds of of making such an assessment cannot be natural justice is normally considered abandoned as long as no corresponding only after the sum owed by way of tax Community rules exist. However, the has been fixed. need for such rules at Community level is recognized; the Council is at present A distinction is made between

Exemption on grounds of natural justice those provisions it is impossible for each under Article 131 of the Abgaben State to exercise its own powers. ordnung is characterized by the following features: it constitutes a legal rule, the The legal basis for the imposition of purpose of which is to ensure justice in monetary compensatory amounts is to be individual cases by consideration of found in Regulation No 974/71 of the subjective or objective reasons; such Council and Regulation No 548/72 of decisions are subject to review by the the Commission.

tax or fiscal charge. The use of independent national rules of law in order to modify the basis in The main action is solely concerned with Community law for the imposition of objective grounds of natural justice. The monetary compensatory amounts would purpose of the questions referred is affect the scope of Community law in an essentially to determine whether, in that undesirable way. For a Member State to area, the Member States have retained the grant an exemption under national law power to make regulations governing on grounds of natural justice from sums exemption from charges based upon due by way of taxation which have Community law or, if not, whether previously been fixed in pursuance of a Community law contains any principle correct application of the provisions of of natural justice comparable to that to the Community law in force would be found in German law, and in that constitute an arbitrary and undesirable case, to determine its content and the intervention by that State within the area court, if any, which is empowered to of application of the Community rules in apply it. question. Furthermore, in view of the The question of national powers abovementioned serious effects of the grant of an exemption on grounds of (a) The question of the power to grant natural justice, the use of national exemptions from certain compensatory provisions cannot be justified by the charges imposed under Community law argument that they fill a 'lacuna' in on the importation into the Community Community law, since it is the very of goods from third countries is related application of Community law which has to the problem of the distribution of been challenged. legislative powers between the

II ECR 1055) and of 2 February 1977 In so far as the Community exercises (Case 50/76, Amsterdam Bulb v sovereign powers in accordance with Produktschap voor Siergewassen).

No comparison may be made with the essential factor cannot be that the effect of 'customs tariff notifications charges are 'due to the Community' but binding the administration' issued under that their imposition is based upon a Article 24 of the German Customs Law. provision or authorization which forms Such notifications represent an part of Community law. The purpose of application of the law to a specific the charge at issue is not relevant to the citizen in respect of specific goods. They question to what extent the national are in no way legislative and form part of authorities are still empowered to grant the normal machinery for applying tariff an exemption in this field in an

However, in every case The position is different as regards the references occur in specific rules national provisions of a formal and which are intended to apply to particular circumstances and are in most cases procedural nature which are necessary for the application of Community law. As linked to monetary events. long as the Community legislature has taken no steps towards harmonizing the (b) The area of application of the laws of procedure, it must rely on proposal for a regulation on the solutions adopted in that area by the repayment or remission of import duties Member States, both as regards rights to or export duties far exceeds that which, contest national measures which even in the Federal Republic of individuals may derive from Community Germany, may be regarded as falling law and as regards the fixing and within the concept of a measure of imposition by the authorities of the natural justice and, as regards structure, it Member States of charges based on is clearly distinguishable from the

It must therefore be noted that Article 131 of the Abgabenordnung cannot be States, goes beyond such 'customary put forward as the legal basis for Community law', it creates a new exemption from charges governed by Community law under which exemption Community law in so far as it is an from sums owed by way of taxation is independent national rule laying down compulsory. National provisions at an exception to the application of present in force concerning exemption Community law on objective grounds of from or repayment of charges of that natural justice. nature are, in so far as they concern the area to which Community rules have (b) In the light of the terms of the first been extended, contrary to Community question, it must be emphasized that the law and therefore inapplicable.

(c) The question arises whether the Secondary considerations legal orders of the Member States contain any common principle on the basis of Even if the Court were to reach the which Community law might recognize a conclusion that Community law allows similar unwritten principle of natural an exemption to be granted on objective justice allowing exemption, in certain grounds of natural justice, either because circumstances, from payment of a sum the Member States are empowered to owed by way of tax. Analysis of the legal make their own regulations in that area situation in the Member States shows or because a principle of Community law that it is impossible to establish the permits it, the main action cannot give existence of any such general legal rise to an exemption on grounds of principle common to the Member States natural justice. Such exemption cannot which is comparable to the provision be considered in cases such as the contained in Article 131 of the present in which the fact that certain of Abgabenordnung. the legal effects of a measure will be unfair has been accepted in advance by Furthermore, the practical application of Community law. In order to satisfy the such a principle in the context of requirements of speed and effectiveness Community law would raise virtually which are essential in a temporary insoluble problems. In order to measure it was accepted that in certain determine whether or not to allow cases the effects provided for by exemption the national authorities Regulation No 974/71 would not be responsible for levying the duties would produced or would be produced only in in each case be required to examine not part.

The questions referred ask what rules or principles of law may be applied to exemptions on grounds of natural justice from payment of monetary compensatory amounts levied on agricultural products imported from third countries.

2 The questions referred to the Court arose in the context of an action before the Finanzgericht concerning the levy of compensatory amounts on sheep's milk cheese imported from Bulgaria, during the course of which the Finanzgericht asked the Court, by an order of 19 January 1973, to give a preliminary ruling on the interpretation and validity of certain provisions of the regulations to which reference was made.

JUDGMENT OF 28. 6. 1977 - CASE 118/76

In its judgment of 24 October 1973 (Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, Case 5/73 [1973] II ECR 1091), the Court ruled that examination of the questions referred had not revealed any elements capable of affecting the validity of Regulation No 974/71 of the Council or of the implementing regulations adopted at the time by the Commission.

After the Court had given judgment the plaintiff in the main action applied to the Hauptzollamt Berlin-Packhof for exemption from the monetary compensatory amounts which it was required to pay on the ground that, in that particular case, payment of the amounts in question would lead to a result which was contrary to the objectives of the Community rules and which should be corrected by the application of the principles of natural justice enshrined in Article 131 (1) of the Abgabenordnung (General Regulation on Taxation).

of 25 October 1972, Case 96/71, R and V Haegeman v Commission of the European Communities [1972] II ECR 1005; jugdment of 4 April 1974, Joined Cases 178, 179 and 180/73, Belgian State and Grand Duchy of Luxembourg v Mertens and Others, [1974] I ECR 383; judgment of 5 May 1977, Case 110/76, Pretore of Cento v A Person or Persons Unknown).

Although that distribution of functions between the Community and the Member States may justify the application, by a tax authority, of a rule of natural justice for which provision is made under its national legislation in connexion with the formalities applicable to the imposition of a charge introduced by Community law, such a rule may not be applied in so far as its effect would be to modify the scope of the provisions of Community law concerning the basis of assessment, the manner of imposition or the amount of a charge introduced by that law.

The result is, in particular, that a national authority cannot grant an application for exemption on grounds of natural justice if the reasons for such application relate to the economic justification for the charge in question.

6 The reply to the first question must therefore be that a national customs authority is not entitled to apply the provisions of its national law to an application for exemption, on grounds of natural justice, from charges due under Community law — in this instance, monetary compensatory amounts — in so far as to apply national law would alter the effect of the Community rules relating to the basis of assessment, the manner of imposition or the amount of the charge in question.

10 The reply to be given to the second and third questions must therefore be that there is no legal basis under Community law for exemption from monetary compensatory amounts on grounds of natural justice.

11 In the light of the foregoing it is unnecessary to examine the fourth question.

Costs

12 The costs incurred by the Government of the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

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 Finanzgericht Berlin, the decision as to costs is a matter for that court.

On those grounds,

Kutscher Donner Pescatore Mertens de Wilmars Sørensen

Mackenzie Stuart O'Keeffe Bosco Touffait

Delivered in open court in Luxembourg on 28 June 1977.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE-GENERAL REISCHL DELIVERED ON 24 MAY 1977 1