C-121/83

HAUPTZOLLAMT [Principal Customs Office] WÜRZBURG ,

on the validity of certain provisions of Commission Regulation ( EEC ) No 1998 / 78 of 18 August 1978 laying down detailed rules for the offsetting of storage costs for sugar (Official Journal 1978, L 31 , p . 5) and on the in­ terpretation of the provisions of Regulation ( EEC ) No 3330 / 74 of the Council of 19 December 1974 on the common organization of the market in sugar (Official Journal 1974, L 359 , p . 1), as amended by Council Regu­ lation ( EEC ) No 1396 / 78 of 20 June 1978 (Official Journal 1978, L 170 , p. 1) and of Council Regulation ( EEC ) No 1358 / 77 of 20 June 1977 laying down general rules for offsetting storage costs for sugar and repealing Regu­ lation ( EEC ) No 750 / 68 (Official Journal 1977, L 156, p . 4 ),

ZUCKERFABRIK FRANKEN / HAUPTZOLLAMT WÜRZBURG

THE COURT ( Third Chamber )

composed of: Y. Galmot , President of Chamber , U. Everling and C . Kakouris , Judges ,

Advocate General : G. F. Mancini Registrar : P . Heim

white sugar, 1. Rules of Community law concerning the levy in respect of storage costs for raw sugar, sugar syrups obtained prior to the crystallizing stage, The subject-matter of these proceedings is the question whether the products and known as "Grundsorte-Kristallmasse" [basic-category crystalline mass] and syrups obtained by dissolving crystallized sugar, "Kläre" [clarified syrup], which are both yielded as transitional products during manufactured from beet or cane the maunfacture of invert sugar, are harvested in the Community shall be subject to the levy in respect of storage reimbursed at a flat rate by the Member costs for sugar. In order to obtain a States." better grasp of that question, it seems appropriate to begin with a brief outline In order to finance the reimbursement of of the provisions of Community law for storage costs, the Member States are to offsetting the storage costs for sugar. impose a levy which is calculated in such a way as to ensure that the total amount (a) The legal basis for offsetting reimbursed is equal to the total amount storage costs is Article 8 of Regulation levied. The third subparagraph of Article

JUDGMENT OF 15. 5. 1984 — CASE 121/83

8 (1) contains the following rules for August 1978 laying down detailed rules imposing the levy: for the offsetting of storage costs for sugar (Official Journal, L 231, p. 5) "The Member States shall, according to which provides in Article 8 (2) : the circumstances, impose a levy: " 'Syrups obtained prior to the crys­ (a) on each sugar manufacturer, as tallizing stage' means those syrups which appropriate : fall within subheading 17.02 D II of the by unit of weight of sugar produced, Common Customs Tariff and are sub­ sequently processed into solid sugar by unit of weight of syrups referred under customs control, or under to in the first subparagraph, an administrative control providing produced prior to the crystallizing equivalent safeguards, and which are stage and marketed 1 in their natural stored in special containers separated state; from the sugar manufacturing plant."

ZUCKERFABRIK FRANKEN / HAUPTZOLLAMT WÜRZBURG

In determining the levy in respect of storage costs for the months of 2. Background to the main proceedings September and October 1979, the Hauptzollamt incorporated from the Amongst the products manufactured outset, in the basis of assessment, the by the plaintiff in the main proceed "Grundsorte-Kristallmasse" which had ings, Zuckerfabrik Franken GmbH, been dissolved into clarified syrup for Ochsenfurt, in 1978 and 1979 was invert the production of invert sugar at the

the Finanzgericht München [Finance 75°C (the plaintiff calls the product Court, Munich]. The plaintiff contends "Grundsorte-Kristallmasse" [basic-cat essentially that the levy in respect of egory crystalline mass]). It is obtained by storage costs may be imposed only on separating the mother syrup from the sugar which is produced. Such sugar is crystalline magma which has been to be understood as covering only those produced by crystallization of the thick products which are finished and juice and is continously dissolved, by the marketable. Nor, moreover, should a addition of water, into syrup in the same levy be imposed on sugar in respect of manufacturing process. The syrup, which which no reimbursement is granted for is know as "clarified syrup" ["Kläre"], storage. is processed into invert sugar either immediately of after interim storage. The Hauptzollamt claims that the The Hauptzollamt (Principal Customs Finanzgericht should dismiss the action. Office) Würzburg, the defendant in the It contends, in particular, that the main proceedings, determined a levy in "Grundsorte-Kristallmasse" is a white sugar in solid form and is therefore a respect of storage costs for the months of sugar which is produced and which,

according to Community law, is subject marketed' contained in Article 6 (4) to the levy in respect of storage costs. of Regulation (EEC) No 1358/77 to be interpreted? By order of 13 May 1983, rectified by order of 2 February 1984, the Finanz­ (a) Do they include a transitional gericht München stayed the proceedings product which appears only and referred to the Court of Justice temporarily during a continuing under Article 177 of the EEC Treaty the manufacturing process? following questions for a preliminary (b) If part (a) of the third question ruling: is answered in the affirmative, is it also an important factor " 1 . Is the second subparagraph of whether such a transitional Article 12 (1) of Regulation (EEC) product can be quantified No 1998/78 valid, having regard to directly and is capable of being the enabling power contained in the stored and marketed without third sentence of Article 8 (3) of further treatment? Regulation (EEC) No 3330/74 on which it is based and to the first (c) If part (b) of the third question subparagraph of Article 6 (4) of is answered in the negative, is it Regulation (EEC) No 1358/77 in so a precondition of the charging of far as it provides, under (d), that the levy in respect of storage disposal is to mean the processing of costs pursuant to the third the sugar by the manufacturer into subparagraph of Article 8 (1) of products other than those falling Regulation (EEC) No 3330/74, within heading No 17.01 of the that the storage costs must be Common Customs Tariff? capable of reimbursement in respect of the same product in the same state?" 2. If the first question is answered in the affirmative, how is the phrase 'syrups produced prior to the crys­ 3. Procedure before the Court of Justice tallizing stage and marketed in their natural state' within the meaning of The order making the reference was the third subparagraph, under (a), of lodged at the Court Registry on 29 June Article 8 (1) of Regulation (EEC) 1983. No 3330/74, to be interpreted with In accordance with Article 20 of the regard to Article 8 (2) of Regulation Protocol on the Statute of the Court of (EEC) No 1998/78? Justice of the EEC, written observations were submitted by Zuckerfabrik Franken Does it include sugars which, during GmbH, represented by Dr Dietrich Ehle the manufacturing process, have und Partner, Rechtsanwälte, Cologne, by been dissolved by the addition of the Hauptzollamt Würzburg, represented water as a first stage towards the by Mr Johns, acting as Agent, and by the production of invert sugar? Commission of the European Com­ munities, represented by Jürgen Grun­ 3. If the second question is answered in wald, a member of its Legal Department, the negative, how are the phrases acting as Agent. 'sugar produced' within the meaning of the first indent, under (a), of the On hearing the report of the Judge- third subparagraph of Article 8 (1) Rapporteur and the views of the of Regulation (EEC) No 3330/74, Advocate General, the Court, by order as amended by Article 1 of Regu­ of 18 January 1984, assigned the case to lation (EEC) No 1396/78, and the Third Chamber, pursuant to Article 'white . . . sugar .. . produced and 95 of the Rules of Procedure, and to

open the oral procedure without any common organization of the market in preparatory inquiry. sugar. Its purpose is to ensure that throughout the entire business year the market is provided with a steady supply of sugar which is produced only during a II — Written observations few months. Manufacturers and certain traders are granted a reimbursement for 1. Background to the main proceedings each month in which they store sugar. In and the system for offsetting storage order to finance the reimbursement, a costs single levy is collected from sugar manu facturers. (a) Zuckerfabrik Franken maintains that the so-called "Grundsorte-Kristall- masse", which is a transitional product According to subparagraph 1 of Article 8 yielded during the manufacture of invert (1) of the basic regulation, No 3330/74, sugar syrup, comes into being during in the version currently in force, production only for short, scarcely reimbursement may be granted in respect definable periods. It cannot be quantified of white sugar, raw sugar, syrups accurately in units of weight and is not obtained prior to the crystallizing stage, capable of being stored or marketed and syrups obtained by dissolving crys since, in view of its high moisture tallized sugar. According to the third content and high temperature, the water subparagraph, under (a), of that article, adhering to the surface of the crystals a levy is to be imposed in respect of would evaporate and the sugar would sugar produced (white sugar or raw harden into lumps. Moreover, the sugar) and syrups produced prior to the product easily deteriorates microbially crystallizing stage and marketed in their and therefore cannot be stored or natural state, that is to say those syrups marketed also for hygienic reasons. which, contrary to the original intention, are not used for manufacturing sugar in During the same manufacturing process, solid form. The absence of a special basis the "Grundsorte-Kristallmasse" is con for imposition of the levy in respect of tinuously dissolved into clarified syrup, syrups obtained by dissolving crystallized from which liquid invert sugar (invert sugar means that, in such cases, the sugar syrup) is then produced. Clarified general basis for the levy in respect of syrup is a syrup for the purposes of the sugar which is produced is applicable.

JUDGMENT OF 15. 5. 1984 — CASE 121/83

3330/74. According to that provision a of Article 12 (1) of Commission Regu levy is to be imposed, as appropriate, "by lation No 1998/78 provides that "the unit of weight of sugar produced" or levy shall be incurred . . . at the moment "by unit of weight of syrups . . . of disposal". It follows from that produced prior to the crystallizing stage provision a contrario that a levy cannot and marketed in their natural state". (yet) be collected in respect of sugar which has not (yet) been disposed of but is still in the process of being produced The second alternative must be rejected by the manufacturer. since, even if the present case were concerned with syrups within the meaning of that provision, in any event However, the second subparagraph of they are not "marketed in their natural Article 12 (1) provides for certain

It must deduced from the provisions of the however be pointed out that the plaintiff legislation adopted by the Council and in the main proceedings has processed by the Commission for the application the transitional products not into another 'and implementation of the basic regu product but into sugar following within lation, No 3330/74. tariff heading No 17.01, with the result that the situation referred to under (a) does not arise. According to Article 6 (4) of Council Regulation No 1358/77, the Member States are to collect the levy in respect of It follows that, in the absence of an the "white and. raw sugar . . . produced actual or notional disposal under Article and marketed". On the one hand, that 6 (4) of Regulation No 1358/77 in provision repeats the requirement, laid conjunction with Article 12 (1) of Regu down by the third subparagraph of lation No 1998/78, liability to the levy Article 8 (1) of the basic regulation, that for the short-lived transitional products the sugar must be "produced". On the which have temporarily come into being other hand, however, it is more far- has not (yet) arisen and the levy becomes

payable only following actual disposal ol Accordingly, the answer to the first one of the notional forms of disposal question should be as follows: referred to in Regulation No 1998/78. "Having regard to the first sentence of Article 6 (4) of Regulation No 1358/77 2. First question and to the second indent, under (a), of the third subparagraph of Article 8 (1) of Regulaiton No 3330/74, the second This question is answered in the negative subparagraph of Article 12 (1) of Regu by Zuckerfabrik Franken and in the lation No 1998/78 is invalid, in so far as affirmative by the Hauptzollamt Würz it provides, under (d), that disposal is to burg and by the Commission. mean the processing by the manufacturer of the sugar into products other than (a) According to Zuckerfabrik Franken, those falling within heading No 17.01 of the second subparagraph, under (d), of the Common Customs Tariff." Article 12 (1) of Commission Regulation (b) The Hauptzollamt Würzburg con No 1998/78 is invalid since it goes tends that the second subparagraph, beyond the substantive shpere of the under (d), of Article 12 (1) of Regulation superior legislation enacted by the No 1998/78 merely gives concrete form Council and finds no basis in any to Article 8 (1) of the basic regulation, enabling powers conferred on the No 3330/74. Furthermore, that provision Commission by the Council. is indispensible if all the loopholes as regards the collection of the levy are to According to the wording of the above- be closed since, otherwise, it would not mentioned provisions of Regulations No be possible for the levy in respect of 1358/77 and No 3330/74, the levy in storage costs to be collected at any time respect of storage costs is intended to for solid sugar, capable of storage, which apply only to syrups produced prior to is dissolved in water by the manufacturer the crystallizing stage and marketed in and thus processed into a product falling

costs. It is clear from the rectials in the provides that disposal is to mean the preamble to Regulation No 1396/78 that processing by the manufacturer of the the obligation to pay the levy is intended sugar into products other than those to extend only to those syrups which, falling within heading No 17.01 of the since they may be marketed in their Common Customs Tariff." natural state, necessarily require storage. However, there can be said to be a (c) The Commission maintains that the "disposal" only when a product is sold, contested provision of Regulation No that is to say transferred to a third party, 1998/78 has a sufficient basis for its but not when it undergoes further adoption in the aforesaid Council regu treatment during the manufacturing lations.

JUDGMENT OF 15. 5. 1984 — CASE 121/83

Customs Tariff is closely related to de­ dissolved by the addition of water as a naturing. Since processing changes the first stage towards the production of sugar into another product it ceases to liquid invert sugar. Secondly, the syrups exist as such and cannot be recorded must be marketed in their natural state. in accounting terms. Accordingly, the However, disposal can occur only in second subparagraph, under (d), of the event of sale or of an assimilated Article 12 (1) provides that "for purposes operation and not if the syrup/sugar of calculating the amount of the levy, in immediately undergoes further treatment so far as it has not already been during the manufacturing process. incurred, disposal shall mean" pro­ cessing, for example by actual disposal to That is confirmed by the meaning and a purchaser who intends to process the purpose of the rules relating to the levy goods. in respect of storage costs. According to the recitals in the preamble to Regulation · Accordingly, the answer to the first No 1396/78, the rules for offsetting question should be as follows : storage costs were intended to apply also to syrups produced prior to the crys­ tallizing stage and marketed in their "Consideration of the question submitted natural state, since market trends in the for a preliminary ruling has disclosed no products show a significant increase in factor of such a kind as to affect the demand. It follows that storage costs are validity of the second subparagraph, payable only in respect of "finished" under (d), of Article 12 (1) of Com­ products actually produced for storage mission Regulation No 1998/78 of 18 and disposal, and not in respect of August 1978." transitional products.

ZUCKERFABRIK FRANKEN / HAUPTZOLLAMT WÜRZBURG

invert sugar and which are themselves Accordingly, the answer to the second incapable of being stored or marketed." question should be as follows:

Article 8 (2) of Regulation No 1998/78 respect of the storage costs thus incurred contains implementing provisions regard may also be granted under the conditions ing the offsetting of storage costs in laid down by Article 8 (2) of Regulation respect of syrups produced or obtained No 1998/78, in accordance with the "prior to the crystallizing stage" within basic regulation, No 3330/74. the meaning of the second indent, under (a), of the third subparagraph of Article If, in accordance with the manufacturer's 8 (1) and of the third indent of the first stated intention, the products undergo, subparagraph of Article 8 (1) of the basic after storage, further processing into regulation, No 3330/74.

storage costs. In those circumstances, the and which are stored in special levy payable in respect of the syrups containers separated from the sugar marketed in their natural state is manufacturing plant". The last-men collected in accordance with the second tioned requirement is not satisfied in the indent, under (a), of the third sub present case. paragraph of Article 8 (1) of Regulation No 3330/74 and one of the operations Accordingly, the answer to the second referred to in the second subparagraph, question should be as follows: under (d), (e), (g) or (h), of Article 12 (1) of Regulation No 1998/78 is "Sugars which during the manufacturing regarded as disposal. process have been dissolved by the addition of water as a first stage towards the production of invert sugar and If, however, solid sugar is manufactured which, contrary to the definition from the abovementioned syrups and is contained in Article 8 (2) of Commission then once again dissolved in water, the Regulation No 1998/78 of 18 August product thus formed falls within the 1978, are not subsequently processed category of "syrups obtained by dis into solid sugar under customs control, solving crystallized sugar", within the or under an administrative control meaning of the fourth indent of the first providing equivalent safeguards, and are subparagraph of Article 8 (1) of the basic not stored in special containers separated regulation, which also qualify for from the sugar manufacturing plant, are reimbursement in the event of storage. not included in the category of 'syrups' That also applies where those syrups are produced prior to the crystallizing stage intended to be used for the production and marketed in their natural state, of invert sugar. within the meaning of the second indent,

under (a), of the third subparagraph of marketed' contained in Article 6 (4) of Article 8 (1) of Regulation No 3330/74 Regulation No 1358/77 are to be of the Council of 19 December 1974." interpreted as excluding any sugar which appears only temporarily as a transitional product during a continuing manufac­ turing process." 4. Third question Zuckerfabrik Franken has adopted a position on Question 3 (b) only as a In reply to the third question, Zucker­ secondary consideration. In its view, the fabrik Franken suggests that part (a) rules for offsetting storage costs are by should be answered in the negative and no means fictitious. As is clear from the parts (b) and (c) in the affirmative. On recitals in the preamble to Regulation the other hand, the Hauptzollamt No 1396/78, those rules apply only to Würzburg and the Commission take the products which are actually capable of view that part (a) should be answered in being stored and marketed. Regulation the affirmative and part (b) in the No 1358/77 confirms that reim­ negative. The Hauptzollamt and the bursement may be granted only in Commission suggest a qualified answer respect of sugar which is "stored in a to part (c). warehouse". Furthermore, only a transitional product which can be quantified directly can give rise to an obligation to pay the levy, for otherwise (a) According to Zuckerfabrik Franken, there is no guarantee that the product the phrase "sugar produced" implies that can be quantified for the purpose of a finished product which is not merely determining the levy. temporary is involved. Thus it excludes transitional products which appear only temporarily during a continuing manu­ Accordingly, the answer to Question facturing process. The phrase "produced 3 (b) should be that the important factor and marketed" implies that the sugar is is whether the transitional product in in fact capable of being stored, disposed question can be quantified directly, is of and marketed. That is apparent from capable of being stored without further the very wording of the provisions in treatment and can be marketed. question and is confirmed by the meaning and purpose of the rules relating to storage costs. An obligation to With regard to Question 3 (t), Zucker­ pay the levy should arise only in respect fabrik Franken takes the view that sugar of sugar which is actually borne by the in respect of which no reimbursement is market in sugar as a finished product. granted for storage, cannot be subjected to a levy either. That follows from the system for offsetting storage costs in which reimbursement, as an illustration Accordingly, the answer to Question 3 of the principle of solidarity, constitutes (a) should be as follows : a consideration for the levies paid by the undertakings. Therefore only one and the same operation can give rise to a "The phrase 'sugar produced' within the grant of reimbursement and to the meaning of the first indent, under (a), of collection of a levy. the third subparagraph of Article 8 (1) of Regulation No 3330/74, as amended by Regulation No 1396/78, and the phrase Accordingly, the answer to Question 3 'white . .. sugar . .. produced and (c) should be as follows:

"The collection of the levy in respect of the quantity of white sugar subject to the storage costs under the third sub levy is a purely administrative problem paragraph of Article 8 (1) of Regulation which does not affect the question No 3330/74 presupposes that the same whether white sugar is capable of being product in the same state is liable to give stored and marketed must be disregarded rise to storage costs." since it does not affect classification of (b) The Hauptzollamt Würzburg con the sugar under the Common Customs tends that the phrase "sugar produced" Tariff. which, moreover, is also to be found in Title III ("Quota arrangements") of Question 3 (c) should also be answered Regulation No 3330/74, is to be in the negative. The objections raised by interpreted in accordance with objective the court making the reference would be entena which are to be deduced from justified only if products which, even in the provisions on classification for tariff the event of storage, would never be able purposes, and not in accordance with the to qualify for reimbursement either manufacturer's subjective assessment. before or after collection of the levy, Thus, a given product such as white were subject thereto.

Tariff. the reimbursement. With regard to the phrase "white . . . Accordingly, the answer to the third sugar . . . produced and marketed" it is question should be as follows: necessary, in the first place, to proceed on the basis that "produced", according "Sugar is to be regarded as produced or to normal usage, has the same meaning manufactured, within the meaning of as "manufactured". The rest of the Regulation No 3330/74, as amended by phrase "white . . . sugar marketed" Regulation No 1396/78, and within the establishes the time at which liability to meaning of Regulation No 1358/77, as the levy arises. soon as for the first time during the That time, however, does not affect the manufacturing process a product comes grant of reimbursement in respect of into being which is sugar within the storage costs.

The question of determining storage costs, pursuant to the third

In that connection, it is unimportant, (c) According to the Commission, it is in the Commission's opinion, "whether clear from the relationship between the such a transitional product can be phrase "sugar produced", within the quantified directly and is capable of meaning of the third subparagraph of being stored and marketed without Article 8 (1) of Regulation No 3330/74, further treatment" (Question 3 (b). and the phrase "white . . . sugar . . . produced and marketed", within the meaning of Article 6 (4) of Regulation It is unnecessary to determine the No 1358/77, that white sugar " pro­ quantity of the transitional product since, duced" or "manufactured" is subject to a for the calculation of the amount of the levy which, however, becomes payable levy, it is sufficient to determine the only upon disposal of the white sugar quantity of the finished product. That is produced or manufactured., clear, in particular, from Articles 5 to 7, 13, 15 and 16 of Regulation No 1998/78. In relation to Question 3 (a), that means that a levy is also to be paid in respect of Nor is suitability for storage an a transitional product which appears only important factor since the presence of temporarily during a continuing manu­ any crystallized water which may facturing process, where the product diminish such suitability does not affect concerned is white sugar, but that the the properties of the sugar as white sugar levy becomes payable only upon disposal within the meaning of the definition of the product or the finished product or contained in the first indent of Article 1 where one of the cases of notional (2) of Regulation No 3330/74. That disposal under the second subparagraph provision defines white sugar as of Article 12 (1) of Regulation No 1998/78 arises. ". . . sugar falling within heading No 17.01 of the Common Customs Tariff Accordingly, the answer to Question 3 and containing, in the dry state, 99.5% (a) should be as follows : or more by weight of sucrose determined by the polarimetrie method."

Question 3 (c), if slightly amended as III — Oral procedure regards its wording, should be answered in the affirmative, which is to say that liability to the levy can arise only in At the sitting on 9 February 1984 oral respect of products which, in different argument was presented by Zuckerfabrik manufacturing stages and in different Franken GmbH, represented by V. forms, qualified for reimbursement of Schiller, Rechtsanwalt of Cologne, and storage costs until the time of their by the Commission of the European disposal or until the time when one of Communities, represented by its Legal the cases of notional disposal under Adviser, J. Grunwald, acting as Agent. Article 12 (1) of Regulation No 1998/78 arose. Zuckerfabrik Franken pointed out at the That is clear from the system for sitting that it had no objection to the offsetting storage costs whose financial obligation to pay the levy as such but neutrality is assured precisely by the fact only to the time at which that obligation that storage costs are reimbursed only in arises. In its view, the levy is incurred respect of products on which a levy can only upon disposal of the invert sugar be collected following their disposal and, syrup which is obtained by processing conversely, by the fact that a levy is the clarified syrup. collected only in respect of products which, prior to their disposal, were capable of qualifying for reimbursement The Commission, having amended its of storage costs. written observations, treats clarified syrup as a product falling within heading Accordingly, the answer to Question 3 No 17.02 of the Common Customs (c) should be as follows: Tariff (and not within heading No 17.01 thereof) which is now within the scope "The collection of a levy in respect of Article 12 (1) (d) of Regulation No of storage costs for sugar which is 1998/78. In its view, the levy is therefore produced, in accordance with the first incurred as soon as the transitional products are processed into clarified indent, under (a), of the third sub­ syrup and not merely upon disposal of paragraph of Article 8 (1) of Regulation the said product or of the finished No 3330/74, presupposes that the sugar product. in question has been disposed of, within the meaning of Council Regulation No 1358/77 of 20 June 1977 in conjunction with Article 12 (1) of Commission Regu­ The last sentence of the Commission's lation No 1998/78 of 18 August 1978, proposed answer to Question 3 (a) must therefore be deleted. and that, prior to its disposal it qualified for reimbursement of storage costs under the first subparagraph of Article 8 (1) of The Advocate General delivered his Regulation No 3330/74." opinion at the sitting on 29 March 1984.

2 Those questions were raised in a dispute between the Hauptzollamt [Principal Customs Office], Würzburg, and Zuckerfabrik Franken GmbH, Ochsenfurt. In 1978 and 1979 that undertaking produced, inter aha, invert sugar (subheading 17.02 D II of the Common Customs Tariff) the primary material for which is a crystalline sugar which is yielded at an interim stage during the manufacture of white sugar. The crystalline sugar, which is known as basic-category crystalline mass (heading No 17.01 of the Common Customs Tariff), is obtained by separating by centrifugal turbine action the mother syrup from the crystalline magma which has been produced by crys­ tallization of the juice and is continuously dissolved, by the addition of water, into syrup during the same manufacturing process. The syrup, which is known as clarified syrup (subheading 17.02 D II of the Common Customs Tariff) is processed into invert sugar either immediately or after interim storage.

3 By decisions of 15 November and of 7 and 16 December 1979, the Haupt- zollamt Würzburg claimed payment from Zuckerfabrik Franken GmbH , on the basis of the Community provisions on the offsetting of storage costs for sugar, of the levies in respect of sugar produced in 1978 and 1979. The basic-category crystalline mass was incorporated in the basis of assessment for the amounts fixed by the Hauptzollamt. In its action before the Finanz­ gericht, Zuckerfabrik Franken GmbH seeks respectively the annulment of the abovementioned decisions and their amendment inasmuch as they incorporate the basic-category crystalline mass in the basis of assessment.

8 he other han On t d , the detailed rules for the implementation of the system sett g tora e cos s a e contain for off in s g t r ed in Commission Regulation No 1998/78 of 18 August 1978 cited above. Article 8 (2) of that regulation o v " syr ps ta pr ides t h a t u ob inedpriorto the crystallizing stage means those syrups which fall within subheading 17.02 D II of the Common Customs

JUDGMENT OF 15. 5. 1984 — CASE 121/83

Tariff and are subsequently processed into solid sugar under customs control, or under an administrative control providing equivalent safeguards, and which are stored in special containers separated from the sugar manufac­ turing plant".

9 The first subparagraph of Article 12 (1) of the same regulation provides that the levy is incurred in respect of the products referred to in the third sub­ paragraph, under (a), of Article 8 (1) of Regulation No 3330/74 at the moment of disposal. According to the second subparagraph of Article 12 (1), for purposes of calculating the amount of the levy, in so far as it has not already been incurred, disposal is to mean inter alia "(d) processing by the manufacturer of the sugar and syrups into products other than those falling within heading No 17.01 of the Common Customs Tariff."

10 Taking the view that its decision depended on the answer to the questions concerning the validity and interpretation of the provisions of the Community regulations referred to earlier, the Finanzgericht München stayed the proceedings and referred to the Court the following questions for a preliminary ruling:

a ion l t ( EEC ) No 3330/74 as amended by Article 1 of Regulation (EEC) No 1396/78 and white . .. sugar produced and marketed' contained in Article 6 (4) of Regulation (EEC) No 1358/77 to be interpreted?

(a) Do they include a transitional product which appears only temporarily during a continuing manufacturing process?

(b) If part (a) of the third question is answered in the affirmative, is it also an important factor whether such a transitional product can be quantified directly and is capable of being stored and marketed without further treatment?

(c) If part (b) of the third question is answered in the negative, is it a precondition of the charging of the levy in respect of storage costs s u t t he pur an o t third subparagraph of Article 8 (1) of Regulation (EEC) No 3330/74, that the storage costs must be capable of reimbursement in respect of the same product in the same state?"

First question

11 The first question seeks in substance to ascertain whether the second sub­ paragraph of Article 12 (1) of Commission Regulation No 1998/78 of 18 August 1978 is valid in so far as it provides, under (d), that disposal is to mean the processing of the sugar and syrups by the manufacturer into products other than those falling within heading No 17.01 of the Common Customs Tariff.

15 In those circumstances the Commission was justified in defining the said concept in the contested provision of its legislation containing detailed rules for the implementation of the system for offsetting storage costs. Having regard to the aim of that system, which is to ensure that the levy is collected in respect of all the products covered by the basic legislation, the Commission cannot be reproached for including in the concept of actual disposal of the products in question certain operations which produce an equivalent effect in relation to the system for offsetting storage costs, in this case the processing of the sugar or syrups into products which do not fall within heading No 17.01 of the Common Customs Tariff and are not subject to the levy.

16 The answer to the first question must therefore be that consideration of the question raised has disclosed no factor of such a kind as to affect the validity of the second subparagraph of Article 12 (1) of Commission Regulation No 1998/78 of 18 August 1978 in so far as it provides, under (d), that disposal is to mean the processing by the manufacturer of sugar into products other than those falling within heading No 17.01 of the Common Customs Tariff.

ZUCKERFABRIK FRANKEN / HAUPTZOLLAMT WÜRZBURG

Second question

i7 The second question seeks in substance to ascertain whether the phrase "syrups produced prior to the crystallizing stage and marketed in their natural state", within the meaning of the third subparagraph, under (a), of Article 8 (1) of Regulation No 3330/74 of the Council of 19 December 1974 is to be interpreted as also including syrups which, during the manufacturing process, are produced from sugars which have been dissolved by the addition of water as a first stage towards the production of invert sugar.

subparagraph of Article 8 (1) of Regulation No 3330/74 of the Council of 19 December 1974 and "white . . . sugar . . . produced and marketed" within the meaning of Article 6 (4) of Council Regulation No 1358/77 of 20 June 1977 are to be interpreted as also including a transitional product which appears only temporarily during a continuing manufacturing process, even if that product cannot be quantified directly, stored and marketed without further treatment, and whether or not the storage costs may be reimbursed in respect of that product in the same state.

22 In that regard, the plaintiff in the main proceedings considers that the very- concept "sugar produced" covers only a finished product in solid form, and not transitional products which appear only temporarily during a continuing manufacturing process. The reason for this, in its view, is that such a product, which cannot be quantified, stored or marketed, is not actually borne by the market in sugar. In any event, it is clear from the principle of the financial neutrality of the system for offsetting storage costs that only sugar in respect of which storage costs are reimbursed may be subjected to the levy which represents the consideration for the reimbursement.

23 However, the Hauptzollamt and the Commission maintain that the sugar must be regarded as a product as soon as during the manufacturing process a product which is sugar within the meaning of the Common Customs Tariff comes into being, whether or not it is a finished product and can be stored and marketed. Nor is it important to determine whether such a product can be quantified, provided that the finished product can be quantified. Finally, the financial neutrality of the system for offsetting storage costs is assured in so far as the storage costs may be reimbursed in respect of the product subject to the levy at different manufacturing stages prior to its disposal.

27 For those reasons the answer to the third question must be that the phrases sugar produced" within the meaning of the first indent, under (a), of the third subparagraph of Article 8 (1) of Regulation No 3330/74 of the Council of 19 December 1974 and "white . . . sugar . . . produced and marketed" within the meaning of Article 6 (4) of Council Regulation No 1358/77 of 20 June 1977 must be interpreted as also including a transitional product which appears only temporarily during a continuing manufacturing process, even it that product cannot be quantified, stored or marketed without further treatment, and whether or not that product, in the same state, may qualify for reimbursement of storage costs.

Costs

28 The costs incurred by the Commission of the European Communities which have submitted observations to the Court are not recoverable. As these

JUDGMENT OF 15. 5. 1984 — CASE 121/83

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,

produce cannot be quantified, stored or marketed without further treatment, and whether or not that product, in the same state, may qualify for reimbursement of storage costs.

Galmot Everling Kakouris

Delivered in open court in Luxembourg on 15 May 1984.

For the Registrar

H. A. Rühl Y. Galmot Principal Administrator President of the Third Chamber

OPINION OF MR ADVOCATE GENERAL MANCINI DELIVERED ON 29 MARCH 1984 1