C-299/86

1. In its case-law, in particular the Schul· and Bergeres-Becque 2judgments, the Court 3. In proceedings for a preliminary ruling has already answered, in advance as it were, the Court is bound by the internal legal the first two questions submitted by the classification made by the national court. Corte di Appello (Court of Appeal), Genoa. Accordingly, the question of principle which Moreover, the appellant in the main arises is whether different penalties may be proceedings, the Italian Government and imposed in the two sets of circumstances the Commission are agreed on that point. referred to. However, the problem raised by the third question has not yet been decided, at any rate directly, by the Court, even though there are a number of factors in its case-law 4. According to the appellant and the which point to the solution. Commission, any offence concerning the payment of value-added tax, whether it be failure to pay tax on importation or evasion of tax on a domestic transaction, should attract identical penalties. However, the 2. Hence the importance of this case lies in Italian Government maintains that there are the third question. In that question, the differences between the two types of offence national court asks the Court of Justice, in which justify the imposition, in the first- substance, to explain to what extent mentioned case, of stricter penalties. Community law precludes any differen­ tiation as regards both the nature and the severity of the penalties imposed in the event of failure to pay value-added tax on importation or on a purely domestic trans­ 5. Before dealing with that question, action involving the same product where the however, it is appropriate to answer the rate of tax is, by virtue of Community law, arguments put forward by the Italian identical in both cases. In addition to that Government concerning the effect, if any, question of principle a specific question of Community law on national criminal law arises, namely whether under national law a in matters of tax evasion. The Italian failure to pay value-added tax on imports Government considers that, in such matters, may be treated as a smuggling offence Community law can require only the which, as a customs offence, is subject to substantive provisions of the Treaty, in particular Article 95 thereof and the * Translated from the French directives harmonizing the relevant legis­ 1 — Judgment of 5 May 1982 in Case 15/81 [1982] ECR 1409 lation, to be complied with, so that any Judgment of 21 May 1985 in Case 47/84 [1985] issue involving the imposition of national ECR 1491. 2 u — J dgm ent of 23 January 1986 in Case 39/85 [1986] penalties in the event of the infringement of those provisions would fall outside the scope

'The administrative measures or penalties It also stated in Ratti 4 that a national must not go beyond what is strictly provision which had not yet been brought necessary, the control procedures must not into line with a directive notwithstanding be conceived in such a way as to restrict the the expiry of the period prescribed therefor freedom required by the Treaty and they was inapplicable under national law even must not be accompanied by a penalty though it was enforceable by criminal which is so disproportionate to the gravity penalties. of the infringement that it becomes an obstacle to the exercise of that freedom.' 8. Community law has a twofold effect on 5 — Those principles were laid down by the Court, as regards national criminal law. Where a rule the free movement of persons, in judgments such as that of imposing a prohibition or penalty is incom­ 7 July 1976 in Case 118/75 Watson [1976] ECR 1185; 14 July 1977 in Case 8/77 Sagulo [1977] ECR 1495; and 3 patible with Community law, the legal basis July 1980 in Case 157/79 Pieck [1980] ECR 2171 and, as for the offence is removed. Where the regards the free movement of goods, in judgments such as that of 15 December 1976 in Case 41/76 Donckerwolcke [1976] ECR 1921; 30 November 1977 in Case 52/77 Cayrol [1977] ECR 2261; and 28 March 1979 in Case 3 — Judgment of 21 March 1972 in Case 82/71 [1972] 179/78 Rivoira [1979] ECR 1147. ECR 119 at p. 135, paragraph 5 of the decision. 6 — Judgment of 11 November 1981 in Case 203/80 [1981] 4 — Judgment of 5 April 1979 in Case 148/78 [1979] ECR 2595, at p. 2618, paragraph 27 of the decision. ECR 1629.

Ultimately, the case-law of the Coim inasmuch as it provided for a deferment of requires that the penalties imposed by payment of excise duties on certain national law should be 'appropriate' and alcoholic beverages manufactured in Ireland 8 'reasonable*, in other words proportionate that was more favourable than that provided to the nature of the offence. in respect of the same products imported from other Member States. In other words, contrary to the Italian Government's 10. The same principles apply with regard contention, the prohibition of discrimination to the imposition of penalties for the in fiscal matters encompasses matters that infringement of national fiscal provisions are subsidiary to the levying of the tax. concerning value-added tax. I would recall that the levying of value-added tax both on domestic transactions and on imports is 12. In explaining that non-payment of 9 provided for by the Sixth Directive. I value-added tax on importation is equated would also recall that, as the Court has with a customs offence, and consequently consistently held, value-added tax levied on attracts the penalties imposed for such an importation is not a charge having an effect offence, the Italian Government seeks to equivalent to a customs duty within the rely on certain provisions of the Sixth meaning of Articles 12 and 13 of the EEC Directive. Those provisions are, in Treaty but constitutes domestic taxation particular, the second and third subpara­ which is caught by Article 95 of the graphs of Article 10 (3) concerning the 10 Treaty; that view was reiterated by the chargeable event and the chargeability of 11 Court in Profant which involved the value-added tax on importation, Article importation of a motor vehicle as in this 11B(2) concerning the taxable amount, and case. Article 14 (1) concerning exemptions from customs duties. The first two provisions allow the Member States to apply, with 11. It is unreasonable to argue, as the regard to the chargeable event and the char­ Italian Government does, that the only geability of the tax, the rules in force effect of Community law in fiscal matters is relating to customs duties, and to take, as to impose an obligation to comply with the the taxable amount, the value specified in substantive provisions of Community law, the Community regulation on the valuation 13

DREXL

16. Admittedly, there are differences earlier to be all but decisive. between the levying of value-added tax on importation and the charging of 14. The Italian Government considers, value-added tax on domestic sales of goods, moreover, that the various obligations particularly as regards the taxable persons imposed on persons liable to value-added and the chargeable event. However, those tax on domestic transactions, such as the differences do not seem to me to be capable submission of returns, payment, invoicing of justifying the striking diversity between and registration, justify the application of a the penalties imposed in those two sets of system of penalties which differs from that circumstances. The difficulties involved in provided for with regard to importation. detecting a failure to pay value-added tax However, the Italian Government makes no on importation cannot have any effect on reference to Article 23 of the Sixth the system of penalties applicable to that Directive, which provides that 'as regards offence by penalizing it more severely than imported goods, Member States shall lay the evasion of value-added tax on domestic down the detailed rules for the making of transactions. the declarations and payments.' That article empowers the Member States to provide 17. Value-added tax is a national tax which that value-added tax charged on has been given a Community character and importation may be paid subsequently, which is used in part to fund the subject to compliance with the conditions Community's budget. Hence it is in the relating to the submission of the returns interests of the Community that failure to containing the information needed to pay value-added tax, either on domestic calculate, in particular, the chargeable transactions or upon importation, should be amount of the tax provided for in Article 22 effectively penalized. Moreover, as it was (4) which concerns the return to be aware of the problems raised by tax submitted by taxable persons who are avoidance and tax evasion, the Council subject to 'obligations under the internal adopted a directive on mutual assistance for system.' the recovery of claims resulting from oper ations forming part of the system of financing the European Agricultural

OPINION OF MR DARMON — CASE 299/86

tax 15 on the ground that the limited field of 19. It is true that the penalties applicable to application of national provisions relating to customs offences generally involve, in view the recovery of value-added tax constitutes of the damage caused to the Treasury, a 'an obstacle to the establishment and func­ punitive and a compensatory element. 21 16 tioning of the common market.' Similarly, There is nothing to prevent the imposition 17 by a directive of 6 December 1979, the of criminal penalties in the event of Council brought value-added tax within the non-payment of value-added tax, provided scope of the directive concerning mutual they are not excessive or disproportionate assistance by the competent authorities of and so constitute in themselves an obstacle the Member States in the field of direct to the exercise of the freedoms established 8 taxation 1 'in order to ensure that [indirect by the Treaty. taxes] are correctly assessed and 19 collected', and it pointed out that 'as a matter of particular urgency, mutual assistance must be extended to cover 20. Finally, it is appropriate in my view to value-added tax, both because it is a general draw the attention of the national court to tax on consumption and because it plays an the existence of two Council Directives of important part in the Community's own 28 March 1983 which have been referred to 20 resources system'. in the proceedings before the Court, one on tax exemptions within the Community for 18. Clearly there are no valid grounds for certain means of transport temporarily the view that non-payment of value-added imported into one Member State from tax on importation is more reprehensible 22 another, and the other on tax exemptions than evasion of value-added tax on applicable to permanent imports from a domestic transactions. Offences of the same Member State of the personal property of 23 nature should attract comparable penalties. individuals.