C-216/81

In Case 2 1 6 / 8 1

R E F E R E N C E to the C o u r t under A n i c i e 177 of the E E C T r e a t y by the First Civil Section of the T r i b u n a l e di M i l a n o [District C o u r t , Milan] for a pre- liminary' ruling in the action pending before that court between

C O G I S ( C O M P A G N I A G E N E R A L E INTERSCAMBI)

and

AMMINISTRAZIONE DELLE FINANZE DELLO STATO

on the interpretation of A n i c i e 95 of the E E C T r e a t y ,

Facts and Issues

I — Facts a n d w r i t t e n p r o c e d u r e because the spirits distilled from wine were products in competition with whisky and must be considered as similar The plaintiff ¡n the main action, with regard to the requirement of Compagnia Generale Interscambi, SpA equality of taxation. [hereinafter referred to as "Cogis"], imponed whisky from the United Thus the Court, applying that principle, Kingdom between 1965 and 1974 and held in its judgment of 27 February 1980 paid the frontier surcharge (sovrimposta (Case 169/78 Commission v Italy [1980] di confine) and the State tax (diritto ECR 385) that the tax banderoles erariale) to the customs authorities of applied by Italy to domestic spirits Milan on the basis of the amount of pure distilled from wine on payment of a tax alcohol contained in the whisky. considerably lower than that applied to imponed whisky were incompatible with With regard to the importations of Anicie 95. whisky after the accession of the United Kingdom to the EEC Treaty it The application of the principles laid considered that the taxes paid were down by that judgment entails, contrary to the provisions of the EEC according to the Tribunale di Milano, Treaty and consequently instituted recognizing that in this case the proceedings in 1976 before the Tribunale consignments of whisky imponed from di Milano [District Court, Milan] against the United Kingdom received unfav- the Amministrazione delle Finanze dello ourable, discriminator)· treatment in Stato [State Finance Administration] in comparison with that reserved for order to recover the taxes paid. domestic spirits distilled from wine.

facturing tax, qualify for considerable In accordance with Article 20 of the reductions) and Sute tax (whereas Protocol on the Statute of the Court of domestic spirits are exempt therefrom). Justice of the EEC written observations were submitted by Cogis, the plaintiff in the main action, represented bv Mario Nevertheless, on the basis of subsequent Scalzo, of the Milan Bar, by the legislation whisky is classified, under the Government of the Italian Republic, Italian legal system, not only amongst represented by Marcello Conti. Avvocato spiriu but also amongst ethyl alcohol of dello Stato [Štate Advocate General], by the first category·. That is why whisky is the United Kingdom, represented by liable to the above-mentioned taxes. J. D. Howes, Treasury Solicitor's Department, acting as Agent, and by the The court making the reference Commission, represented by its Legal concludes from this that discrimination Adviser, Antonino Abate, acting as would no longer exist if a relationship of Agent. similarity for the purposes óf Article 95 were established — as was also the view of the Court of Justice in its judgment of Upon hearing the report of the Judge- 15 April 1980 (Case 28/69 Commtmon v Rapporteur and the views of the Italy [197Ô] ECR 187) — on the basis Advocate General, the Court decided, bv that the imported product and the order of 20 January 1982, to assign the domestic product fell under the same case to the Third Chamber pursuant to classification for tax purposes. Article 95 of the Rules of Procedure and to open the oral procedure without any Since the Tribunale di Milano preparatory inquiry. considered that "the application of the principles derived from the judgment of 27 February 1980 in [the above- mentioned] Case 169/78 and the judgment of 15 April 1970 in [the above- II — O b s e r v a t i o n s submitted mentioned] Case 28/69" would lead to pursuant to Article 20 of different results it stayed the proceedings the P r o t o c o l on the Statute and, by order of 2 April 1981, put the of the Court of Justice of following question to the Court of the EEC Justice:

According to the plaintiff in the main That comparison shows that there is action, since the distillation of spirits discrimination against imponed whisky from cereals was almost non-existent in as there was against cognac (cf. in this Italy during that period the verification respect the judgment of 27 May 19S1, of equalitv of treatment in tax matters Essevi and Salengo, Joined Cases 142 and prescribed by Article 95 of the EEC 143/80 [1981] ECR 1415). Treatv must consist not in comparing imponed spirits distilled from cereals According to the plaintiff in the main with domestic spirits distilled from action the pnnciples laid down by the cereals but with spirits distilled from Coun of Justice in the judgments wine which must be considered as a delivered in Case 169/78 and Joined

their use. Articles 92 and 93 of the EEC Treaty, are also unacceptable in this case. On the basis of that criterion whisky and spirits distilled from wine must be Consequently, the plaintiff in the main considered as "similar products" since action considers that the following reply from the point of view of the consumer should be given to the question they display similar characteristics and submitted to the Court: are in competition with each other, at any rate potentially and indirectly; accordingly, the second paragraph of "By applying to imports of spirits Article 95 is applicable. distilled from cereals imponed into Italy from the United Kingdom the State tax, In so far as the prohibition of discrimi- which is not charged on domestic spirits nation contained in Anicie 95 applies to distilled from wine and marc, and the the products in question "it follows that frontier surcharge, without making it the tax system applicable to whisky subject to the reductions and abatements imported into Italy is unlawful". provided for in the case of the corresponding manufacturing tax to

JUDGMENT OF 15. 7. 19Í2 — CASE 216/81

which it has been submitted to the It is necessary therefore to take as a basis Court, is inadmissible and that it must be and reference point the tax system reformulated. chosen by the Member State for products of a given kind, with all the differences and classifications provided for by that system, as is apparent from Secondly, it recalls the Italian system of the judgment of 22 June 1976 (Case taxation of ethyl alcohol, the principal 127/75 Bobie [1976] ECR 1079), and features of which are, according to it, a not to have recourse to a general and general system in conjunction with abstract notion of similarity of products special categories which qualify for classified differently under national law. different arrangements on the basis of Thus a comparison should alwavs be the raw materials used. made between the domestic product and the imported products. This should be done separately for each tax category established within the framework of that system. Since the arrangements therefore constitute a system of differentiated taxation on products falling within one and the same general category and which It follows from the foregoing that Article may accordingly be similar or in 95 is complied with where the imported competition with each other for the products are liable to the same tax as the purposes of Article 95 of the EEC Treaty corresponding domestic products. the Iulian Government analyses the case-law of the Court in this field.

COGIS v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

(already mentioned). In its view the problem which arises is one of ascertaining whether it is lawful to restrict certain tax advantages to It follows, then, according to the Italian alcohols distilled from wine and from Government, that for a differentiated tax fruit. system for products of the same kind to be incompatible with Article 95 it is necessary either that the tax treatment of First of all, the Italian Government domestic products should not extend to remarks that the advantage is extended imponed products displaying all the to imponed products which fulfil the necessary characteristics or that the cate- same conditions. Secondly, the objective gories qualifying for different tax of that exceptional provision is not of a treatment should be determined in such a protectionist nature but is intended to wav as to result in disguised discrimi- encourage the distilling of wine, an nation. objective which is in conformity with Community law.

In the latter considers that the foregoing conclusion case the tax banderole in question was is not at variance with the judgment in related to special arrangements. In this Case 169/78 and it argues, primarily on case the taxes to which whisky is liable the basis of the Chemial and Vinal are those of the general system judgments, that the differentiated applicable to all ethyl alcohol and only taxation is not discriminatory or cenain spirits do not come under that protectionist in nature solely because of system. the fact that the product more heavily taxed is not manufactured in noteworthy quantities on the territory of the Member Accordingly, there can be no question of State if that is the result of a choice of discrimination, either from the point of economic policy the objective of which is view of the applicability to whisky of an that such production should not be prof- unfavourable system, since it forms pan itable at national level. Such a result is of the general system, or from that of an thus not contrary to Community law. alleged conferment of a tax advantage upon domestic production alone, since the advantages granted to spirits distilled The Italian Government considers that from wine or fruit apply both to this is sufficient for the purposes of the domestic products and to imponed answer to be given to the national court products.

Furthermore, it is of no consequence that other Member States and meeting, Italian production of whisky is limited at the same time, the condition of (cf. Chemial and Vinal). similarity referred to in the first paragraph of Anicie 95 of the Treaty and the conditions which In those circumstances, for the freedom national legislation lays down for of the Member States to be limited it is the application of such treatment. necessary that there should exist a genuine similarity, or at least that the products should be in competition with (b) The specific procedures for each other. That question, which con- implementing such a system of stitutes a "preliminary" issue according taxation may however be contran· to the Italian Government, has already to the requirements contained in been resolved by the Court in its the first paragraph of Article 95 if judgments of 27 February 198C (Case they are based on criteria for classi- 169/78, mentioned above, and fication which in practice dis- Commission v United Kingdom [1980] criminate between indentical or ECR 417; Commission v France [1980] similar products solely on the basis ECR 347; Commission v Denmark [1980] of their origin, domestic or foreign. ECR 447). The Court did not give a In that regard, however, the mere ruling on the question of similarity since fact that within the framework of it considered that in any case the the tax system in question the products were in competition with each goods more heavilv taxed are other. Nevertheless, whilst the Italian mostly products imported from Government accepts the decision of the other Member States does not Court of Justice it finds that it is not the suffice to constitute an infringement first paragraph of Article 95 which is of Article 95. applicable in this case but the second paragraph of that article. That provision does not provide that taxation applied to the two products must be absolutely (c) The provision of differentiated tax equal. It merely prohibits a tax system of systems for domestic and imported such a nature as to constitute a form of products which are not identical protection for domestic production. or similar but are merely in competition with each other cannot be contrary to the obligation referred to in the second paragraph Consequently the Italian Government of Article 95 unless in a given case suggests that the following reply should it is apparent that the difference be given to the question submitted to the between the charges to tax to which Court: the products are respectively subject is, having regard to all the factors influencing price formation and the "(a) Tax arrangements consisting in choice of consumers, of such a taxing more or less heavily the nature as to produce a protectionist various categories of ethyl alcohol effect for the benefit of domestic and spirits on the basis of the raw production. In that case the second materials used in their manufacture paragraph of Article 95 does not are not contrary to Article 95 of the require the abolition of all EEC Treaty provided that such differences in taxation, but merely differentiated treatment is also that such differences should be kept extended to products coming from within certain bounds so as to

prevent them from giving rise to a With regard to the conflict alleged by protectionist effect." the Tribunale di Milano to exist between Cases 169/78 and 28/69 there is no such conflict because it does not follow from the judgment delivered in Case 28/69 The United Kingdom bases itself that only products which fall under the exclusively on the judgments delivered same classification for tax purposes must on 27 February 1980. According to it, be considered as similar. That argument, the fact that the taxes in question in this which was moreover raised by Italy in case favour Italian spirits distilled from Case 169/78, was rejected by the Court wine is sufficient to establish that those (cf. paragraph 31 of the decision). taxes offend against the principle of non- discrimination contained in Article 95. Consequently the United Kingdom submits Although the problems of vine growers are important they should not be dealt "that there is nothing in the judgment in with "bv distorting the clear meaning of Case 28/69 or otherwise to suggest that Article 95". the Court should not in this case follow its decision in Case 169/78 by finding that taxes of a kind described in the In its judgments of 27 February 1980 the question referred by the Tribunale di Court, which was dealing with a group Milano infringe Article 95 of the EEC of cases, dealt with the problem of Treaty". "similarity" "on a broad basis". Since this case concerns exclusively imports of whisky into Italy it appears appropriate The Commission recalls first of all the for "the Court to rule that whisky and Italian tax systems which form the wine spirits are products which are subject-matter of the dispute in order to 'similar'"; authority for this is to be substantiate its submission that, in the found in paragraph 38 of the decision in case of the two taxes in question, the Case 168/78 (Commission v France) and discrimination arises from the criterion paragraph 10 of the decision in Case of the raw material used for the 169/78, and also in the principle laid production of spirits. down bv the Court in its judgment in Case 45/75 Rewe ([1976] ECR 181) according to which it is necessary to Whilst it is true that the Italian tax consider as similar products those which advantages apply both to domestic "have similar characteristics and meet products and to imported products, that the same needs from the point of view of is so on a purely theoretical level since, consumers". given the fact that Italy does not have any domestic production of spirits from cereals, only imported spirits distilled Nevertheless, even if the similarity of the from cereals are liable to the taxes in products were not to be upheld by the question. Court it would at least be necessary to find that the decision in Case 169/78 applied equally to this case and that the In its judgment in Case 169/78 the taxes in question afford indirect Court has held that spirits distilled from protection to Italian spirits. cereals and from wine are similar or in

Decision

1 By o r d e r of 2 April 1981 which w a s received at the C o u r t on 20 July 1981 the First Civil Section of the Tribunale di M i l a n o [District C o u r t , Milan] referred to the C o u r t for a preliminary ruling u n d e r A n i c i e 177 of the E E C T r e a t y a question on the interpretation of Article 95 of the E E C T r e a t y in o r d e r that it m a y be able to determine w h e t h e r a system of differentiated taxation applied to whisky and t o spirits distilled from wine u n d e r the tax legislation in force in Italy after the accession of the United K i n g d o m to the E E C T r e a t y is compatible with that provision.

COGIS v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

2 The dispute between the plaintiff in the main action, an undertaking which imports whisky, and the Amministrazione delle Finanze dello Stato [the Italian State Finance Administration] arose out of a claim for a refund of the frontier surcharge (sovrimposta di confine) payable on the importation of that product and corresponding to the manufacturing duty payable on spirits produced on the national territory and of the State tax [diritto erariale] calculated on the basis of the pure alcohol content of the whisky, in so far as such taxes have been levied and are higher than the taxes charged on domestic spirits or are not imposed on the latter.

3 Since the national court considered that in the light of the principles laid down by the Court of Justice in regard to the interpretation of Anicie 95. on the one hand in its judgment of 27 February 1980 Case 169/78 (Commission v Italy [1980] ECR 385) in which the Court found that the Common Customs Tariff is not decisive for the question of similarity, and on the other in its earlier judgment of 15 April 197C (Case 28/69 Commission v Italy [1970] ECR 187) in which the fact that products fall under the same classi- fication for tax purposes was considered to be an important factor in that relationship of similarity, there is a risk of reaching different results, it decided to submit the following question to the Court of Justice:

r It was stated that the first paragraph of Anicie 95 must be interpreted widely so as to cover all taxation procedures which conflict with the principle of the equality of treatment of domestic products and imponed products; in order to do so it is therefore necessary to interpret the concept of "similar products" with sufficient flexibility. Thus it is necessary to consider as "similar" products which have similar characteristics and meet the same needs from the point of view of consumers. It is accordingly necessary- to determine the scope of the first paragraph of Anicie 95 on the basis not of the criterion of the strictly identical nature of the products but on that of their similar and comparable use.

? With regard to spirits for human consumption it should be determined whether, having regard to distinguishing criteria such as the origin and method of manufacture of the beverages, their possible application and the habits of consumers throughout the Community as a whole, the products display a sufficient degree of similarity. That determination is is to be made without taking into account any purely national differentiations in taxation and without the need to refer to customs classifications. If the products are found to be similar on the basis of the above-mentioned criteria the first paragraph of Anicie 95 is applicable.

COGIS v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

9 If the condition of similarity required by the first paragraph of Article 95 is not fully met the second paragraph of that article, as was stated in the judgment in Case 169/78, has the function of covering all forms of indirect protection through taxation in the case of products which, without being similar within the meaning of the first paragraph, are nevertheless in competition, even partial, indirect or potential.

JUDGMENT OF 15. 7. 198; — CASE 216/81

Costs

i3 The costs incurred by the Government of the Italian Republic, bv the United Kingdom and by the Commission of the European Communities, which submitted obsenations 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 national court, the decision on costs is a matter for that court.

On those grounds,

T H E C O U R T (Third Chamber)

in answer to the question referred to it by the First Civil Section of the Tribunale di Milano by order of 2 April 1981, hereby rules: