C-195/87

OPINION OF MR TESAURO —CASE 195/87

OPINION OF MR ADVOCATE GENERAL TESAURO ;i_ delivered on 20 April 1989

Mr President, Under Article 1(4), point 6, of Regulation Members of the Court, (EEC) No 1579/86, that sum paid down­ stream, so to speak, by the processing undertaking 'shall be passed on to the producer'.

1. This reference for a preliminary ruling, like Case 265/87, Schräder (see my Opinion In that regard, the sixth recital of the delivered today), concerns the legality of preamble to Regulation No 2040/86 the co-responsibility levy in the cereals provides : sector. Unlike Schräder, however, it is not the validity of the levy scheme as such which is at issue, but rather one specific aspect of that scheme, namely the detailed ' ... one of the objectives of the co-responsi­ rules for passing on the levy paid by the bility levy system is to make producers more first-stage processor of the cereals to prior aware of the realities of the market; ... to transactions, as far as supply by the that end, the burden of the levy should be producer. passed on to them; ... an invoicing system which takes account of that requirement should accordingly be introduced; ... the principle whereby the levy is to be passed on is to apply notwithstanding any contractual clause to the contrary'.

To define the scope of the problem under consideration more clearly, it is necessary to examine in detail certain elements of the Consequently, Article 5(1) of the regulation scheme in question. provides :

'Operators who carry out the operations referred in Article 1(1) shall pass on the co-responsibility levy to their suppliers. The Under the rules introduced by Council levy shall also be passed on at each trans­ Regulation (EEC) No 1579/86 of 23 May action prior thereto, as far as supply by the 1986 (Official Journal 1986, L 139, p. 29) producer. and the subsequent implementing measure, Commission Regulation (EEC) No 2040/86 of 30 June 1986 (Official Journal 1986, L 173, p. 65), the co-responsibility levy Supporting documents for each of the trans­ 'shall be paid by operators who undertake actions referred to in the first subparagraph processing' of cereals (see Article 2 of shall indicate separately the amount of the Regulation (EEC) No 2040/86). levy deducted.'

2. Bearing the above in mind, we now come to an examination of the present reference However, the system of collecting the levy for a preliminary ruling, which arises from a in the form of payments from processors dispute between Cehave (Netherlands), a was originally conceived purely for reasons cereal processing undertaking, and the of expediency; the Council considered that Dutch organization which is responsible for in order to avoid difficulties in adminis­ collecting the levy (the Hoofdprodukt- tering the system — difficulties related to schap). checking a number of transactions made by individual producers — it would be preferable to collect the levy only at the stage when the cereals are finally processed (or sold into intervention or exported), despite the fact that the Commission made a The latter asked Cehave for payment of a different proposal envisaging direct payment certain sum (HFL 542 644.14) by way of of the levy by the producers. co-responsibility levy, calculated by converting the amount of the levy (expressed in ecus) into guilders at the agri­ cultural conversion rate, the so-called 'green' rate, applicable at the time for the Netherlands currency.

In practice, the system has operated in the following way: at each transaction relating to a particular batch of cereal, starting with the transaction between the producer and However, the cereals which were processed the first purchaser, a sum corresponding to had been bought by Cehave in various the levy is deducted from the purchase Member States of the Community. For each price. At the end of the marketing chain, the batch, the corresponding levy had been processing undertaking pays the levy to the deducted from the purchase price, competent national authority after having calculated using, of course, not the green deducted it from the price paid to the rate of the guilder, but the green rate of the supplier. currency of the country of the vendor.

The differences were due to the fact that the amount deducted and the amount Must those rules be interpreted as paid — even though corresponding to the meaning that the co-responsibility levy same levy in ecus — were calculated using referred to therein, which is to be the green rates applicable for the various imposed on and is payable by the currencies, and it is common knowledge undertaking which carried out that those rates take no account of the first-stage processing, must be actual exchange rates of the currencies. The calculated in the national currency of result was that the actual value of the sum the Member State in which first-stage deducted by Cehave, calculated using the processing took place, using the agri­ green exchange rate of the French franc, (a cultural conversion rate applicable in weak currency), was in the end lower than that Member State? the value of the levy to be paid, calculated using the green rate of the guilder (a strong currency). (2) If Question 1 is answered in the affirmative, must the rules referred to in that question be interpreted as In the light of those circumstances, Cehave meaning that the undertaking which challenged the decision of the Hoofdpro­ paid the co-responsibility levy may and duktschap on the payment of the levy, and must subsequently pass on to its the national court decided to stay the suppliers the negative or positive proceedings and to refer the following difference between the levy which it questions to the Court of Justice for a paid (equal to the amount of the levy preliminary ruling: expressed in ecus and converted into the national currency of the Member State in which first-stage processing took place using the agricultural '(1) The Community rules on the conversion rate applicable in that State) co-responsibility levy in the cereals and the discount which it received from sector are based on the following regu­ its suppliers (equal to the amount of the lations: levy expressed in ecus and converted

(4) If Question 2 is answered in the In the first place, the processing under­ negative, the rules referred to in taking pays, by way of levy, a sum which is Question 1 may at times lead to a calculated by converting the levy situation in which the first-stage itself — expressed in ecus — into the processor of the grain ultimately bears national currency using the agricultural a levy (the difference between the levy conversion rate. Thus, the green rate imposed on him and the lower amount applied is the green rate for the country of the discount received by him) or where processing took place. gains a benefit (the difference between the discount received by him and the lower amount of the levy imposed on him) the amount of which varies Secondly, interpreting the regulations which depending on the Member State in were in force at the time, the Court stated which the grain was produced. that the aim of the rules in question was to ensure that the levy was neutral in its effect as regards processors and that consequently Does this mean that those rules are the whole amount of the levy must be invalid inasmuch as they are contrary passed on to the supplier.

OPINION OF MR TESAURO —CASE 195/87

It follows that the processor must deduct First of all, subsequent payment of a from the purchase price, at the time of difference is, in principle, contrary to the purchase, exactly the same amount as is to logic of the scheme, the aim of which is, as be paid subsequently to the competent has been stated, to exert tangible pressure authority. That means that both the on the producer, giving him a precise indi­ deduction and the levy to be paid must be cation of the real market situation. The fact calculated using the same agricultural that the producer bears the entire levy ab conversion rate, namely — as already initio, that is to say from the moment the stated — the green rate of the country cereals are sold to the first purchaser, is where processing takes place. consistent with that aim.

With regard to the second question: the processor (who has paid the levy) may not It should also be pointed out, again in and must not ask his supplier to pay general terms, that in many cases it appears subsequently any positive or negative impossible, in practice, to pass on a positive difference. or negative difference. On the cereals

CEHAVE v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN

market, traders generally purchase from a In fact, the third question is asked only if number of producers and resell to a number the second question is answered in the of processors. Transactions between States affirmative. However, as we have seen, it is are common. Once a particular batch of possible to give a negative reply to that cereals has been processed in a particular question. Consequently, it is not even Member State, it may subsequently be necessary to reply to the third question, impossible to identify who produced any which is devoid of purpose. given quantity of cereals, the place where he is established and finally the actual amount to be charged, by way of levy, on the same cereals. The fact that it is impossible to identify subsequently the origin of cereals which have been processed, at least in The fourth question is based on a certain cases, also means that it is impossible premise — the existence of a difference, to determine both the amount of any positive or negative, between the levy differences due and the persons who are imposed on the processor and the deduction liable for payment of those amounts. made from the purchase price he paid — which is in fact false, at least with regard to the specific transaction in which the operators in question were involved. This question appears therefore to have no object.

The reason for that can be best explained with an example. Let us take the case of a It is worth pointing out that that situation British producer who sells a batch of cereals would not arise if the goods passed directly to an undertaking (for example an under­ from the producer to the processor in a taking which is also British) which markets single transaction, without using commercial the batch of cereals. From the price an intermediaries. However, a direct trans­ amount is deducted which corresponds to action of that kind is very rare in the market the co-responsibility levy calculated using in question. the agricultural conversion rate for the State of the purchaser (that is, the green rate for the pound sterling, a currency which, let us assume, is weak). The trader who purchased the cereals in turn sells the cereals to On the other hand, the difficulties described processing undertakings located in other above can be exacerbated if cereals are the Member States, for example the Nether­ object, not of one intermediate transaction, lands and Germany (countries whose but of a whole series of them involving currencies are at that time strong — which more than one country, and that is again a is likely to be the case). As we know, those consequence of a lack of correspondence Dutch and German undertakings also between the green rates applied each time deduct from the purchase price a certain and the official exchange rates for the sum by way of levy, a sum which is still the currencies concerned. same expressed in ecus but which is converted using the green rates for each of the national currencies (that is to say the guilder and the German mark). It is easy to see what the result would be in such a case, 5. Thus it appears that the system is which, let me repeat, is not purely hypo­ seriously malfunctioning and is not capable thetical. Once the amount which the of ensuring either that the levy is neutral in processors deduct from the first inter­ its effect as regards intermediaries, or that mediate purchaser (which is equal to the the whole amount of the levy is passed on amount paid to the competent body) has to the producer. been converted into sterling using the official exchange rate, it turns out to be greater (far greater in fact) than the amount which the abovementioned intermediary Those faults, which all the parties agree previously deducted in respect of the same exist, seem to conflict with the court's ruling cereals from the price paid to the producer in Versele-Laga, cited above. It is true that who sold the cereals to him. The inter­ in Versele-Laga the requirements of neutral mediary is thus at a disadvantage as a result effect and the passing on of the whole of the negative difference between the amount related to the relationship between deduction applied to him and the deduction the processor and his supplier. However, which he previously applied to the producer, there is no reason why the same his supplier. A deduction in respect of the requirements should not also be applied to cereals marketed is applied, in turn, to the the preceding stages. Those requirements producer. That deduction does not constitute essential features of the deduction

The Commission considers that two That does not necessarily mean that the additional, in fact slightly paradoxical partial compensation of the currency considerations are relevant in this context. differential, which is what the Commission is referring to when it mentions the price situation on the cereals market in the second half of 1986, is legitimate.

First, the differences arising from the application of the co-responsibility levy have less effect on trade than the imperfect correction of currency fluctuations by Assuming it is legitimate, however, I do not monetary compensatory amounts, an imper­ see how the fact that the application of fection which is, after all, tolerated. monetary compensatory amounts is

OPINION OF MR TESAURO —CASE 195/87

CEHAVE v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN

principle — which governs fiscal substitution Commission Regulation No 2040/86 must — by which when a taxable person pays a be declared invalid in so far as they do not tax instead of others, due to a chargeable guarantee, in the case of inter-State trans­ event which is attributable to those others, actions, that the levy is neutral in its effect the tax must normally be passed on to the as regards commercial intermediaries, nor taxable person to whom the chargeable that the whole levy is passed on as far as the event relates. producer.

Thus, the fact that commercial operators who are at a disadvantage because the levy 6. If that interpretation is accepted by the is not neutral may be compensated is a Court, the problem then arises of how to subjective consideration, and therefore define the effects of that declaration. irrelevant. It remains impossible to pass on in full — as laid down — the levy paid by the processor 'at each [prior] trans­ action ..., as far as supply by the producer'. The risk also remains that, in the I would observe in that regard that the in­ absence of other factors, the currency validity in question does not affect the differentials which arise during the principle of the levy as such, but only the marketing stage will distort exports by system of collecting the levy which is laid directing them towards particular currency down in and governed by Regulations Nos zones rather than others. 1579/86 and 2040/86.

I therefore believe that, in accordance with the case-law of the Court (see in particular However, in order to ensure observance of the judgment in Case 4/79 Providence the principle of effective judicial review, I Agricole de ¡a Champagne v ONIC [1980] propose that those who, before the date of ECR 2823), in the present case too, excep­ the judgment, brought legal proceedings tionally, the declaration that the rules (or an equivalent complaint) against acts governing collection of the levy referred to adopted pursuant to the regulations in the contested regulation are invalid must declared invalid should be able to rely on not be allowed to call into question the the declaration of invalidity.

I therefore conclude by proposing to the Court that the following reply be given to the national court:

'(1) Regulation (EEC) No 1579/86 and Regulation (EEC) No 2040/86 of the Commission are invalid in so far as, in the case of international transactions, they do not ensure that the levy is neutral in its effect as regards commercial intermediaries, nor that the entire levy will be passed on as far as the producer.

(2) The declaration that those regulations are invalid may not be relied upon to call into question any amounts paid, collected or deducted by way of levy, except by persons who, before the date of this judgment, have brought legal proceedings (or an equivalent complaint) against acts adopted pursuant to the regulations declared invalid.'