C-126/78

STAATSSECRETARIS VAN FINANCIEN

on the interpretation of certain provisions of the Second Council Directive (No 67/228/EEC) of 11 April 1967 (Official Journal, English Special Edition 1967, p. 16) on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax,

THE COURT

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

Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

A subsidiary company, Van Gend & N.V. Nederlandse Spoorwegen chal­ Loos N.V., Utrecht, together with which lenged not the amount but the legal basis N.V. Nederlandse Spoorwegen is of the assessment. It contested the regarded as one undertaking for the assessment in question before the application of the Law of 1968 provides Tariefcommissie, claiming that the inter alia a cash-on-deiivery service for which, in addition to the transport service in question was indeed ancillary charge, a separate fee termed the cash- to the carriage of goods and as such subject to tax in the Netherlands under on-delivery commission is charged. the Second Council Directive No 67/228/EEC of 11 April 1967 on the It charged the cash-on-delivery com­ harmonization of legislation of Member mission increased by the turnover tax to States concerning turnover taxes — its principals and subsequently included Structure and procedures for application the tax in its tax declarations. of the common system of value added tax (Official Journal, English Special Edition 1967, p. 16). In determining the deduction of input tax on the basis of Article 15 of the Law of 1968 N.V. Nederlandse Spoorwegen Article 6 (2) of the Directive provides: accordingly did not declare the aforesaid collection as a service within the "The rules laid down in this Directive as meaning of Article 11 of the Law of regards the taxation of the provision of

JUDGMENT OF 12. 6. 1979 — CASE 126/78

"I. If a carrier has undertaken, in The Government of the Kingdom of the addition to the transport of the Netherlands, represented by the Minister goods, to collect the price of the for Foreign Affairs, N.V. Nederlandse

NEDERLANDSE SPOORWEGEN v STAATSSECRETARIS VAN FINANCIËN

Spoorwegen, represented by S. L. buyer has not yet paid for the goods; the Buruma, and the Commission of the supplier however does not use the European Communities, represented by services of a receipt bearer, but relies its Legal Adviser, Raymond Baeyens, solely on a payment clause. Collection of acting as Agent, submitted written obser­ the debt before delivery of the goods has vations under Article 20 of the Protocol therefore become a typical (ancillary) on the Statute of the Court of Justice of transport service. To conclude: the EEC.

— Already during the appeal Van Gend Upon hearing the report of the Judge- & - Loos maintained that the cash Rapporteur and the views of the collection clause was not a service Advocate General the Court decided to separate from the carriage but an open the oral procedure after inviting the integral part thereof, so that there was Commission to give written answers to only a single contract (of carriage) and certain questions. not an agency agreement in addition to a contract of carriage as if there were two contracts instead of one.

II — Written observations sub­ mitted under Article 20 of — The Advocate General also observed the Protocol on the Statute before the Hoge Raad that according to of the Court of Justice of the accepted view of private law the the EEC contract entered into between the consignor and the carrier in the case of cash-on-delivery was considered as a single contract. It does not seem possible 1. The following are the principal obser­ for the revenue court, interpreting fiscal vations of N.V. Nederlandse Spoorwegen: provisions, unnecessarily to give civil contracts an interpretation differing from that of the accepted view of private law. (a) First Question

— Article 6 (2) and Point 10 of On being notified of that draft the Annex A; Commission could not have inferred that the Netherlands Government intended — Article 10 and Point 19 of Annex A; to continue the previous practice of exempting the cash-on-delivery com­ — Items 5 and 10 of Annex B, and mission from turnover tax. It may well be imagined that the Commission was not — Article 16 even aware of such a practice. of the aforementioned Second Directive The first part of this question must and Article 102 (1) of the EEC Treaty. therefore be answered in the negative. The second part should be considered in — The wording of Article 6 (2) of the the context of the fourth question. Second Directive and of Point 10 of Annex A thereto (especially the French (d) Fourth Question version) shows that the Member States have practically no discretion in the — The system of the provisions of the matter and reinforces the mandatory Second Directive and the annexes nature of the taxation of the services thereto are of a sufficiently legislative listed in Annex B. nature for it to be held to have a mandatory effect; this is moreover — As for the possibility allowed by necessary for the effectiveness of the directive. Article 10 (3), it should first of all be observed that the Netherlands is the only country of the Community which grants — It is apparent from the rules laid exemption from turnover tax in respect down in the said directive that the of cash-on-delivery commission. Without discretion allowed to the Member States exaggerating the importance of the to determine the exemptions which they matter it would be difficult to deny that consider necessary is very restricted and such a situation is likely to cause that the consultation expressly provided distortion. for by the rules is an essential, if not indispensable, condition and the national Secondly, there is no document in the court must ascertain in each case, if case showing that the Netherlands have called upon to do so, whether there has considered this exemption necessary. The in fact been consultation. documents show, on the other hand, that it has been sought to maintain a practice followed for some time under the former — From this point of view Questions law. III (b) and IV must be answered in the affirmative. An answer in the negative would be justified only if the words "as (c) Third Question far as possible" in Point 10 of Annex A to the Second Directive are interpreted It appears from the correspondence between Van Gend & Loos and the as meaning "provided that in the view of the Member State there is no obstacle Commission in March and April 1976 that there was no consultation within the thereto from the national point of view". Such an interpretation would really be meaning of Article 16 of the Second Directive. All that the Netherlands going too far. Government did was to consult the Commission generally about the draft — Questions III (b) and IV make no law which led to the Law of 1968. distinction between services rendered

Directive has, including also the effect on services performed before 1 January 1972; As to the question of the "consultation" referred to in Article 16 of the Second Directive, it should be observed that the Netherlands Government several times (iii) it is not possible to find that contacted the Commission in 1967 and although the wording of Article 11 (j) of the Law of 1968 was the 1968 to inform it of the developments same before and after 1 January which had taken place in the sphere of 1972 its meaning before that date adjusting the law on turnover tax to the differed from its meaning thereafter provisions of the First and Second and that therefore the national court Directives. In supplying such information is free to interpret a given legal in connexion with the provisions of the Directives of the Council of the provision variously according to whether the date by which the European Economic Community of 11 Member States were required to April 1967 on the harmonization of have adjusted their revenue laws in legislation of Member States concerning accordance with the Second turnover taxes the Netherlands Government also intended to fulfil its Directive was postponed. obligation to consult in connexion with certain provisions. The Commission never let it be known that the 2. The Netherlands Government takes correspondence relating to that infor­ the view that the only "ancillary mation did not constitute performance of services" within the meaning of Annex B, the obligation to consult: since the

JUDGMENT OF 12. 6. 1979 — CASE 126/78

— The consultation referred to in The first question should therefore be Article 16 of the Second Directive, which answered in the negative. Having regard under Article 10 (3) is obligatory for to that answer, which makes the other Member States wishing to determine questions unnecessary, the latter will be exemptions other than those provided for answered subject to that reservation. by the Directive, assumes that such Member State shall expressly and precisely give notice of the provision of (b) Second Question the Directive which requires the consul­ tation, as well as the proposed law and the Community rule from which such — The obligation contained in Article 6 proposed law derogates. In the present (2) to tax the services listed in Annex B case the Netherlands ought to have to the Second Directive is not absolute. consulted the Commission under Article Article 10 (3) allows each Member State, 10 (3) of the Second Directive; in fact subject to the consultations mentioned in that Member State merely forwarded to Article 16, to "determine the other the Commission the draft law and subse­ exemptions which it considers necess­ quently the law itself, both in their ary". The possibility of granting exemp­ entirety. In these circumstances it might tions to which Article 19 refers justifies seriously be doubted whether there was the provision in Point 10 of Annex A: proper consultation in the present case "Member States shall refrain, as far as within the meaning of Article 16 of the possible, from granting exemption from Second Directive.

(d) Fourth Question 4. The national court must have regard to the mandatory character at­ tributed to the Second Directive and ascertain whether in im­ It follows from the case-law of the Court plementing the obligations imposed that it is incompatible with the by the Directive the national auth­ mandatory character attributed by orities have remained within the Article 189 of the Treaty to a directive to limits placed by it on their prevent interested parties in principle discretion." from relying on the obligation arising therefrom (in the present case, Article 6 (2) and Annex B, item 5) before a national court to ascertain whether the The Commission states that in putting responsible national authorities, in forward the above answers it has not implementing the directive, have taken into account the fact that the last respected the limits placed by it on their three questions are asked in the alter­ discretion. native.

After making these observations the Commission proposes that the national Ill — Oral procedure court should be answered as follows:

N.V. Nederlandse Spoorwegen, rep­ "1. The collection of the sale price of resented by S. L. Buruma, the goods is not, in relation to the Government of the Federal Republic of carriage of those goods, an ancillary Germany, represented by A. Deringer service within the meaning of and J. Sedemund, and the Commission Annex B, item 5, to the Second VAT of the European Communities, Directive. represented by its Agent, R. Baeyens, submitted oral observations at the hearing on 20 March 1979.

2. In principle, ancillary services must be taxed in the same way as the transport and storage of goods to The Advocate General delivered his which they are strictly connected. opinion on 8 May 1979.

4 To answer this question the objective of the directives on turnover taxes should be recalled, together with the fact that they are based on Articles 99 and 100 of the Treaty which are concerned with the harmonization of the laws of the Member States in the interests of the establishment and functioning of the common market.

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5 The Council, in the First Directive No 67/227 of 11 April 1967 (Official Journal, English Special Edition 1967, p. 14), had regard to the following facts:

(a) that the main objective of the Treaty is to establish, within the framework of an economic union, a common market within which there is healthy competition and whose characteristics are similar to those of a domestic market;

(b) that the legislation of the Member States involving cumulative multi­ stage taxes were distorting competition and hindering the free movement of goods and services within the common market,

and, after studying the matter, adopted a common system of value added tax for all Member States.

10 If the contract for the carriage of goods on a cash-on-delivery basis is considered in the light of the aims of the directives on the harmonization of legislations of the Member States concerning turnover taxes, that question must be answered in the affirmative.

11 In stipulating that "a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system)", the national court is describing a contract involving two services, the second of which (the cash collection) is so tied up with the first (the carriage) by the intention of the parties that the performance of the two services cannot be separated, for the delivery by the carrier of the goods carried to the consignee can be effected only if the latter pays the price of the goods stipulated by the consignor and in the event of non-payment the carrier may not deliver the goods to the consignee.

12 It thus follows from this analysis that since the performance of those two services is inseparable, it is necessary, in order to achieve the objective of neutrality in competition sought by the directives on value added tax, that the collection of the price of goods carried should be treated as a service ancillary to the transport of goods and thus subject to value added tax in all Member States; in this way equality of treatment between the various modes of transport is assured and the same conditions apply to the taxation of the service in all Member States.

13 Otherwise, that is to say if the collection of the price of the goods carried were not treated as a service ancillary to the carriage of the goods, each Member State would regain its liberty to tax the cash collection service as an independent service, perhaps even having regard to the mode of transport used.

17 For the sake of completeness, however, it is necessary to mention Point 10 "Regarding Article 6 (2)" of Annex A, which is worded as follows: "Member States shall refrain, as far as possible, from granting exemption from tax in respect of the provision of the services listed in Annex B". This provision advising the Member States to avoid "as far as possible" granting exemption to the provision of services compulsorily subject to the common system must be interpreted restrictively in order to safeguard the coherence of the new system and the neutrality in competition which it seeks to establish. It follows that a Member State cannot insert into its legislation a measure exempting a service listed in Annex B save in an exceptional case which justifies an adverse effect upon neutrality in competition.

18 Since no argument has been advanced to this effect it must be concluded that the ancillary service of collection cannot be exempted from turnover tax since it appears in item 5 of Annex B, which contains the list of services compulsorily taxable under Article 6 of the Second Directive of 11 April 1967.

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19 That answer also satisfies the fourth question which is asked in the event of the second question being answered in the negative — as is the case — since the fourth question asks whether a national court must take account of Article 6 (2) of the Second Directive in conjunction with the provisions of Annex B, item 5, and that question must therefore be answered in the affir­ mative.

20 The two parts of the third question are essentially concerned with the circum­ stances in which a Member State must have recourse to the consultation procedure provided for in Article 16 of the Second Directive. That article provides that a Member State is obliged to engage in consultation only in the cases stipulated by the provisions of the Directive.

1. If a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system) the collection of that price is a service ancillary to the transport within the meaning of Annex B,

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item 5, to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes.

2. For the purposes of the application of value added tax Member States are not empowered to treat an ancillary service such as the collection of the cash-on-delivery price separately from the service of the transport of goods.

3. The national court must take account of the combined provisions of Article 6 (2) of the Second Directive and of Annex B, item 5, thereto.

Kutscher Mertens de Wilmars Mackenzie Stuart

1 — Translued from the German.