C-55/79

THE COURT

composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait, (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, G. Bosco, T. Koopmans and O. Due, Judges,

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

gives the following

COMMISSION v IRELAND

JUDGMENT

Under Article 38 (2) the new Member (ii) in any other case, the last day States retained the right to replace a of the month succeeding the customs duty of a fiscal nature or the month in which the spirits are fiscal element of any such duty by an so delivered. internal tax in conformity with Article 95 of the EEC Treaty. (c) Where spirits to which this subpara- graph applies are delivered from a Applying that provision, the Government bonded warehouse in the month of of Ireland adopted, on 16 December March in any year, no deferment of 1975, the Imposition of Duties (No 221) payment of duty as provided for in (Excise Duties) Order, 1975 (Statutory this subparagraph shall be allowed Instrument No 307, 1975), designed to in respect of the spirits." convert into excise duties, as from 1 January 1976, the customs duties of a fiscal nature or the fiscal element of Paragraph 4 (4) of the Order provides those duties on spirits, beer, wine, for the imposition, in the case of tobacco, cider, perry, matches, table deferred payment, of an additional excise waters, mineral oils, motor vehicles duty at the rate of £0.0334 per proof (including their parts and accessories), gallon of spirits. tyres and tubes. Imported spirits do not qualify for the Paragraph 4 (3) of the Order, which deferment concession and they are not applies to spirits distilled or manu- subject to the additional excise duty.

JUDGMENT OF 27. 1. 1980 — CASE 55/79

COMMISSION v IRELAND

provisions of Anicie 33 (7), on the The written procedure followed its abolition of measures which have an normal course. As the Commission effect equivalent to quantitative decides not to submit a reply, the written restrictions on imports and are not procedure was closed after the covered by other provisions adopted in submission of the Irish Government's pursuance of the EEC Treaty (Official defence. Journal, English Special Edition 1970 (I), p. 17). In accordance with the first The Court, after hearing the report of paragraph of Article 169 of the Treaty, the Judge-Rapporteur and the views of the Government of Ireland was invited the Advocate General, decided to open by the Commission to submit its obser- the oral procedure without any vations on its alleged failure to fulfil its preparatory inquiry. obligations. In its reply of 12 July 1976 the I l l — C o n c l u s i o n s of t h e p a r t i e s Government of Ireland informed the Commission that the Irish authorities The Commission claims that the Court would examine the legislation in question should: with a view to introducing any necessary amendments by way of the Finance Bill 1. Declare that by failing to repeal or 1977. amend the disputed provisions and/or refrain from continuing the disputed On 28 April 1978 the Commission practices with regard to the collection addressed to Ireland the reasoned of excise duty on spirits, beer and opinion provided for by the first made wine, the Government of paragraph of Article 169 of the EEC Ireland is in breach of Article 95 or, Treaty. It confirmed its view that the alternatively, Article 30 of the EEC Irish legislation was contrary to the first Treaty; paragraph of Article 95 or, at all events, to Article 30 of the EEC Treaty. Ireland 2. Order the Government of Ireland to was requested to take the measures pay the costs of the proceedings. necessary to comply with the reasoned opinion within one month. The Irish Government contends that the Court should: In a letter of 31 July 1975 the Government of Ireland maintained its 1. Dismiss the application; view that the measures complained of did not infringe its obligations under the 2. Order the Commission to pay the Treaty. costs of the proceedings.

(a) Producers of domestic spirits are The logical effect of this discriminatory able to take advantage of a credit period legislation must be a restriction on of, on average, slightly over six weeks in imports in favour of similar domestic respect of each payment of excise duty, products. subject to the payment of an additional excise duty, the amount of which is minimal compared with the commercial rates of interest which importers of The infringement of Article 95 spirits must bear in order to finance the payment of excise duty. (a) Article 95 aims to abolish fiscal obstacles to the importation of similar or competitive products. The prohibition of fiscal discrimination provided by it (b) Excise duty on Irish beer and suffers no exception and has primacy imported beer is charged at a different over contingent policies at the national stage of the manufacturing process: it is or Community level. Article 95 has the charged before fermentation on domestic rank of a fundamental principle of the beer, but at the time of clearance for Customs Union and permits no argument home consumption on imported beer. either for conditional application or for The delay between the pre-fermentation subordinating it to interpretative criteria stage at which duty is charged and outside Community rules. It is designed delivery for home consumption does not to guarantee the principle of neutrality normally exceed ten days; as the of taxation at the Community level. payment of excise duty on domestic beer National legislation must conform to may be deferred for several weeks, the Community law where conflict arises as, domestic producer enjoys a considerable it is submitted, it does in this case. advantage . over the importer in the payment of excise duty. (b) There is no need to have recourse to harmonization of national laws as a means of removing obstacles to trade of (c) The ' importer of made wine is a fiscal nature. It would be erroneous to clearly at a disadvantage as against the subordinate the prohibition of fiscal domestic producer: he must pay excise discrimination under Article 95 (a duties four or five weeks before the directly applicable provision) to the latter. adoption of "implementing" measures

(c) The case-law of the Court has established that Article 95 also covers The infringement of Article 30 indirect discrimination, as would arise in particular if different conditions were to be applied in relation to the methods of (a) According to the case-law of the payment of the tax with the result that Court Article 30 of the EEC Treaty may the importation of goods would be made be relied on only as a subsidiary more difficult or more expensive. argument. The purpose of Article 30 is to remove all quantitative restrictions on trade between Member States and all measures having equivalent effect. It (d) Ireland does not directly impose ranks as a fundamental principle and is higher internal taxation on products directly applicable in each Member State. imported from other Member States The exceptions to this general since the same rates of excise duty are prohibition, contained in Article 36, do imposed on similar imported and not apply in the present case. domestic products. However, according to the case-law of the Court, the Irish legislation indisputably entails indirect (b) Commission Directive N o 70/50 discrimination, since periods of credit for defines certain measures which have the payment of excise duty are accorded an effect equivalent to quantitative only to domestic producers and not to restrictions. According to the case-law of importers. The effect of this "deferment the Court all trading rules enacted by option" is to place a heavier financial Member States which are capable of burden on importers who have to finance hindering, directly or indirectly, actually payments of excise duty in advance of or potentially, intra-Community trade their domestic competitiors. Domestic are to be considered as measures having producers have virtually interest-free an effect equivalent to quantitative working capital during the deferment restrictions. period, whereas importers have to raise working capital on the open market at the current rate and indemnify Thus Article 30 of the Treaty is to be themselves at the expense of the widely interpreted. purchaser. That leads to an increase in the prices of imported products, which makes them less competitive with similar domestic products. (c) The effect of the Irish deferment provisions is to make the payment of excise duty on imported spirits, beer and wine more expensive than the payment of duty on similar domestic products. As (e) The practice of the Irish a result, the importers of these products Government in allowing the payment of must either accept lower profit margins excise duty on domestically produced or increase the prices of their products. spirits, beer and wine to be deferred, In either event, there is a danger that whilst refusing such deferment to imports would be affected. According to importers, is, the Commission submits, the case-law of the Court, in order to contrary to Article 95 of the Treaty in establish an infringement of'Article 30, it

is sufficient to show that imports are of Article 38 of the Treaty of Accession; capable of being hindered, directly or it introduced no discrimination in favour indirectly, actually or potentially. of domestic production for any of the products in question. The Government of Ireland is of the opinion that the Commission has not shown that either Article 95 or Article 30 The application ofArticle 95 could, in any way, be applicable in this case; Ireland is not in breach of either the letter or the spirit of the EEC Treaty. (a) The level of taxation is indisputably the same for imported products as for domestic products; Ireland does not The facts directly subject imported products to higher taxes than those which apply to domestic products. Imported and (a) The stage of charging of duty in domestic products are taxed at the same the case of home produced beer is early rates and on the same conditions. The in the process of production, by only difference is that, in the case of reference to the specific gravity of the domestic products, the payment of the worts before fermentation; the periods of duty may be deferred for a limited time, deferment provided for are no more than and even then subject to the payment of recognition of the fact that different a fiscal "penalty". beers require different periods of storage in the brewery premises. In the case of imported beer, duty is charged on clearance for home consumption. A (b) According to the case-law of the domestic brewer required to pay excise Court, the essential question when duty at an earlier stage would be placed applying Article 95 is whether imports at a disadvantage vis-à-vis the importer. are subject to higher taxation than domestic products. That is clearly not so in this case. Furthermore, in order to avail himself of the deferment, a manufacturer has not only to pay an additional duty of £ 0.0334 per proof gallon of spirits, (c) In any case, there are a number of but has ' to provide the Revenue factors which must be taken into Commissioners with security in the form account, in particular the penalty payable of a bond to cover payment of the duty. by producers who defer payment and the The cost of posting a bond is in the fact that they must furnish a bond as region of £3 per £1 000 of duty per security for payment of the duty. Fur- annum. thermore, with particular reference to the case of whisky, the divergent rates of exchange between the Irish and United (b) Made wine is a product of no real Kingdom Pounds confer a significant significance either in respect of imports cost advantage on the United Kingdom or domestic production of wine as ordi- distillers. There are no monetary narily understood. There is no provision compensatory amounts applicable to for deferred payment of duty on wine. spirits to offset those differences in raw material costs. Thus, without any objective justification, a cost advantage is (c) The 1975 Order was introduced by conferred on the distillers of Scotch Ireland in accordance with the provisions whisky.

(b) Article 30, concerning quantitative (a) Neither of the two provisions of the restrictions on imports and measures Treaty upon which the Commission having equivalent effect, does not, relies has any application to the present according to the case-law of the Court, case. include a case such as the present one because the concept of quantitative restrictions, or measures having equi- valent effect, does not include measures (b) In any case, it is submitted that, if of a purely fiscal nature. all the relevant factors and circumstances are taken into account in assessing the effect of those articles on the provisions the legality of which is challenged, it is evident that there is in substance no discriminatory effect vis-à-vis imported (c) The Commission's argument based products. on an alleged infringement of Directive No 50/70 is inadmissible as it was not included in the reasoned opinion. It is submitted that the only way in which the problem to which, in the view of the Commission, the Irish provisions It is in any event submitted that as a give rise can be solved is the harmo- matter of substantive Community law, nization of the relevant national legal the provisions of the Directive, provisions and administrative practices in considered separately from Article 30, the Member States pursuant to Article are not capable of providing a basis for 100 of the EEC Treaty. proceedings under Article 169 of the Treaty. Article 33 (7) of the Treaty empowered the Commission to issue directives establishing the procedure and V — Oral procedure time-table in accordance with which the Member States shall abolish, as between themselves, measures which have an effect equivalent to quotas. The The Commission, represented by Anthony Commission was not empowered by McClellan, and the Government of Article 33 (7) to interpret or extend the Ireland, represented by Nial Fennelly concept of quantitative restrictions and S. C , presented oral argument at the measures having equivalent effect. Such a hearing on 9 October 1979. question of interpretation of Article 30 is a matter for the Court of Justice alone to determine. The Advocate General delivered his opinion on 28 November 1979.

COMMISSION v IRELAND

5 The Government of Ireland claims in its defence that the detailed arrangements for levying the duty have to be adaptable to the different circumstances of home-produced products and imported products. It states that the decisive criterion is the rate of duty applied, whilst the wording of Article 95 merely prohibits the Member States from imposing on the products of other Member States taxation "in excess" of that imposed on domestic products; to introduce factors which do not appear in its wording is to do violence to that provision.

6 The Government of Ireland relies in addition upon the fact that Irish producers, as consideration for the advantage given them as regards deferment of payment, must accept corresponding disadvantages. Thus, in order to obtain deferred payment, they must pay an additional duty and furnish the authorities with security for payment. It states that it is necessary moreover to take into account the disadvantage suffered by Irish whisky producers in competition with Scotch whisky owing to the divergent exchange rates between the Irish and United Kingdom "green pounds".

7 Finally, the Government of Ireland claims once more that the discrimination complained of by the Commission must be abolished with the the context of the harmonization of tax legislation and that it does not come within the scope of Article 95.

JUDGMENT OF 27. 2. 1980 — CASE 55/79

9 Such is the case with the difference in treatment applied to the alcoholic beverages referred to in the application according to whether those beverages are produced in Ireland or imported from other Member States. Although the benefit reserved to national production in the form of facilities for deferred payment is small, the discrimination against products imported from other Member States is none the less obvious.

io As the Commission has correctly stated, the fact that Irish producers may only benefit from the facilities for deferred payment by paying additional duty and furnishing financial security does not remove that discrimination. Those two obligations are so trifling that their effect is not to compensate for the benefit reserved to Irish producers. Moreover, there is nothing to prevent the Irish authorities from imposing the same additional duty on importers and from requiring the latter to supply similar security.

n Similarly, the argument based on the difference in the rate of the Irish and United Kingdom "green pounds" must be rejected. If the Irish authorities consider that the exchange rates in question were not fixed appropriately, they should seek the remedy for that situation by the appropriate means. A monetary situation cannot be corrected by means of discriminatory tax provisions.

i2 Finally, it is necessary to reject the argument that discrimination such as that which forms the subject-matter of the application must be eliminated by the procedure for the harmonization of tax legislation under Articles 99 and 100 of the Treaty, rather than by means of Article 95. There is no doubt that obstacles to the free movement of goods may be eliminated by applying the procedure for the harmonization of tax legislation, but the implementation of the provisions of the Treaty relating thereto and in particular of Article 99 cannot be posed as a condition for the application of Article 95, which imposes on Member States with immediate effect the duty to apply their tax legislation without discrimination even before there is any harmonization.

i6 Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

i7 Since the defendant has failed in its submissions, it must be ordered to pay the costs.

On those grounds,

THE COURT

hereby:

1. Declares that by the discriminatory application to products imported from other Member States of provisions relating to deferment of payment of excise duty on spirits, beer and made-wine, pursuant in particular to the Imposition of Duties (No 221) (Excise Duties)

A. Van Houtte H. Kutscher Registrar President

OPINION OF MR ADVOCATE GENERAL REISCHL DELIVERED ON 28 NOVEMBER 1979 * Mr. President, intended to replace the customs duty of a Members of the Court, fiscal nature or the fiscal element of any such duty by an internal tax, contains the This procedure for a declaration that a following rules with effect from 1 Member State has failed to fulfil its January 1976: under Paragraph 4 (3) (b) obligations under the Treaty is directed of the Order, where domestic spirits are against the Irish system of taxation delivered from a bonded warehouse, the which provides with regard to the Revenue Commissioners may, subject to imposition of excise on spirits, beer and compliance with such conditions for what is known as "made-wine", in other securing payment of duty as they may words with regard to wine not made think fit to impose, permit payment of from grapes, a different method of the said duties to be deferred to a day payment, in spite of rates of tax which not later than: are formally the same, according to whether the products are home- "(i) in case the spirits are so delivered in produced or imported. In detail, the the month of February in any year, Imposition of Duties No 221 (Excise the 25th day of March in the same Duties) Order, 1975, Statutory year, or Instrument No 307, 1975, which, under Article 38 (2) of the Act concerning the (ii) in any other case, the last day of the Conditions of Accession and the month succeeding the month in Adjustments to the Treaties, was which the spirits are so delivered".