C-62/93

OPINION OF MR JACOBS — CASE C-62/93

OPINION OF ADVOCATE GENERAL JACOBS delivered on 9 March 1995 *

1. In this case the Administrative Court of ports of finished products loaded in ports of First Instance, Athens, seeks a ruling on EC Member States situated in the Mediterra- whether the special arrangements in the nean or in Northern Europe. The basic price Greek legislation for taxing supplies of may be defined by ministerial order as the petroleum products comply with the provi- selling price on the domestic market of prod- sions of the Sixth VAT Directive ('the Sixth ucts coming from State refineries. Directive') 1relating to the taxable amount and the right of deduction and, if not, whether those provisions have direct effect and can be relied on by a taxable person to claim a retrospective refund of tax from the date when the relevant Greek Law came into force, namely 1 January 1987.

'1. In the supply and importation of finished petroleum products, the tax referred to in this Law is to be calculated on their basic price as defined by Article 11 of [the Petro­ leum Law] and Presidential Decree 619/1985. The said basic price is increased by duties, charges, the special tax on consumers and 5. For the purposes of applying Arti­ other levies in favour of the State or third cle 24(1), the amount of annual turnover of parties, with the exception of the tax pro­ the persons referred to in paragraph 4 supra vided for in this Law. arising from the supply of petroleum prod­ ucts is to be added to the denominator of the fraction laid down by that provision. Those persons are obliged to record purchases of petroleum products in a special column in their accounts.

3. A company marketing petroleum prod­ ucts is liable to pay the tax. The questions of 6. Transport and storage services for petro­ the time at which the tax liability arises, the leum products are exempted from the tax amount of tax due and payment thereof are referred to in this Law. governed by the customs provisions in force for the levy of the special tax on the con­ sumption of petroleum products, together with which the tax provided for in the present law is levied.

7. Subject to the provisions in Article 23(4)(e), value added tax on petro­ leum products is to be deducted where the 4. In the supply of petroleum products, taxable person uses them either as a primary companies marketing petroleum, filling sta­ or secondary material in the production of tions and other retailers and distributors are goods, the supply of which is subject to that not obliged to submit returns under tax, or for the supply of taxable services ....'

'The principle of the common system of value added tax involves the application to

1. the supply of goods or services effected 2 — First Council Directive 67/227/EEC of 11 April 1967 on the for consideration within the territory of the harmonization of legislation of Member States concerning turnover taxes, OJ, English Special Edition 1967, p. 14. country by a taxable person acting as such;

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2. the importation of goods.' (b) the open market value, where no price is paid or where the price paid or to be paid is not the sole consideration for the imported goods. 9. Article 11 provides:

'A. Within the territory of the country

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tions, the taxable person shall be entitled to 11. Article 19(1) provides: deduct from the tax which he is liable to pay:

(a) value added tax due or paid in respect of goods or services supplied or to be sup- 'The proportion deductible under the first plied to him by another taxable person; subparagraph of Article 17(5) shall be made up of a fraction having:

(b) value added tax due or paid in respect of imported goods; — as numerator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions in respect of which value added tax is deductible under Article 17(2) and (3),

5. As regards goods and services to be used — as denominator, the total amount, exclu- by a taxable person both for transactions sive of value added tax, of turnover per covered by paragraphs 2 and 3, in respect of year attributable to transactions included which value added tax is deductible, and for in the numerator and to transactions in transactions in respect of which value added respect of which value added tax is not tax is not deductible, only such proportion deductible. The Member States may also of the value added tax shall be deductible as include in the denominator the amount is attributable to the former transactions. of subsidies, other than those specified in Article 11 A(l)(a).

(b) to exempt from the tax, pursuant to Article 37(6) of [the VAT Law], ser­ vices in respect of the transport and storage of petroleum products unconnected with the transport etc. 13. The Administrative Court of First of those products from the first to Instance, Athens, to which the plaintiff has another named destination?

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(2) If the reply is in the negative, that is to the relevance to the dispute of a ruling by say, if the Greek Government was not the Court on the compatibility of Arti- so entitled, are Article 11A(1) and B(l) cle 37(1) of the Law with Article 11 of the and (2) and Article 17(1) and (2) of the Sixth Directive or the compatibility of Arti- Sixth Directive unconditional and suffi- cle 37(6) of the Law with the directive. ciently clear, enabling the plaintiff com- pany to rely upon them as superior law before the Administrative Court of First Instance before which the case is pend- ing?

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with Articles 11 and 17 of the directive, a made up of the basic price of view that is shared by the Commission. The DR 190 (including the gross profit margin Greek Government, on the other hand, con­ and any taxes and duties) and VAT of tends that its legislation does not depart DR 10. 3From that price of DR 200 com­ from the Community rules, but merely lays pany Β takes a commission of DR 6 per litre. down accounting arrangements adapted to Under the Greek rules VAT is levied at a sin­ the Greek market. On that market the price gle stage, namely on importation of the of petroleum products is fixed and remains products by company A. Company A passes the same from the moment when the prod­ on to company Β the VAT paid on importa­ ucts leave the refineries to the moment when tion as a component of its selling price. they are supplied to the final consumer. The Company Β neither charges VAT on the VAT arrangements take account of this by resale of the products nor deducts VAT on providing for collection of tax on the full their purchase from company A; however, consumer price at the beginning of the mar­ the VAT is a component of company B's keting process. That price, which includes all selling price. taxes, duties, levies and charges except for the VAT itself, the profit margin of interme­ diaries in the marketing chain as well as transport and storage costs, is in conformity with Article 11. Charging and deduction of tax at later marketing stages is unnecessary since the products have been fully taxed at the first stage and the tax is passed down the 18. It is clear from the foregoing example marketing chain to the consumer in the price that the essential difference between the of the products. The Greek arrangements do Greek rules and the Community rules is that not alter the tax burden for the final con­ the former impose VAT on petroleum prod­ sumer. ucts as a single levy at the beginning of the marketing process. They are therefore con­ trary to the fundamental principle, laid down by Article 2 of the First Directive, that VAT should be imposed at all stages of production and distribution.

21. Article 1 1 A(l)(a) provides that the tax­ able amount in respect of domestic transac­ tions is in principle the consideration which has been or is to be obtained by the supplier; accordingly, Article 1 1 A(3)(b) excludes from the taxable amount price discounts and 23. Finally, Article 17(2) confers on taxable rebates allowed to the customer and persons the right to deduct VAT on goods accounted for at the time of the supply. and services in so far as they are used for the Article 11B(1) provides that the taxable purposes of taxable transactions. As already amount for imports is the price paid by the noted, company B's sales of petroleum prod­ importer where the price is the sole consid­ ucts are taxable transactions by virtue of eration, or the open market value where no Article 2 and ought to give rise to deduction price is paid or the price paid is not the sole of tax. consideration. Under Article 11B(2) Member States may alternatively adopt as the taxable amount for imports the value defined in Council Regulation (EEC) N o 803/68 of 27 June 1968 on the valuation of goods for customs purposes. 4 That regulation was replaced by Council Regulation (EEC) N o 1224/80 of 28 May 1980. 5 Under that regu­ 24. I do not share the Greek Government's lation the primary value for customs pur­ view that the differences between its rules poses is the transaction value, i. e. the price and the Community legislation can be dis­ missed as mere accounting arrangements. As I have demonstrated, the Greek rules depart from the Community legislation with respect 4 — OJ, English Special Edition 1968, p. 170. to basic notions such as taxable transactions, 5 — OJ 1980 L 134, p. 1. The relevant rules are now contained in Council Regulation (EEC) N o 2913/92 of 12 October the taxable amount and the right of deduc­ 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), which repealed Regulation N o 1224/80. tion.

28. Under the Greek rules, however, com­ pany B's sales of petroleum products would not give rise to deduction. Consequently, Article 24(1) of the VAT Law, which imple­ 26. There nevertheless remains an important ments Article 19(1) of the directive, would defect in the rules which is of direct rele­ apply. By virtue of Article 24(1), in conjunc­ vance to the dispute in the main proceedings. tion with Article 37(5) of the Law, company This may be illustrated by expanding the Β would be entitled to deduct only 20% (i. e. above example given by the Greek Govern­ DR 2 000 000) of the VAT on its general ment. Let us suppose that, during the period expenses, since its turnover giving rise to in question, 80% of company B's turnover deduction represents only 20% of its total derives from sales of petroleum products and turnover (i. e. the total of its turnover giving 20% derives from other transactions, all of rise to the right of deduction and its turn­ which are taxable. Let us suppose further over not so giving rise, namely its petroleum that during the same period company Β sales). incurs VAT of DR 10 000 000 on general expenses attributable to its business as a whole.

29. It is this aspect of the Greek legislation 27. Under the rules of the Sixth Directive which has led to the dispute in the main pro­ the tax would function normally in such a ceedings. As noted above, under the rules of case. Since there is no exemption in the Sixth the Sixth Directive the supply by a taxable Directive for supplies of petroleum products, person of petroleum products, which is a company B's entire turnover would be tax­ taxable transaction, would not lead to a able and give rise to deduction of tax. Con­ restriction of his right to deduct tax on gen­ sequently, Article 17(5), which concerns the eral expenses. The plaintiff in the main pro­ case where a taxable person purchases goods ceedings correctly concludes that it was and services partly for the purpose of trans­ wrongly refused deduction of tax on such actions not giving rise to the right of deduc­ expenses.

31. It might be objected that the Sixth Directive cannot, in the absence of imple- 33. This aspect of the Greek legislation is in mentation, impose an obligation on the fact puzzling since it does not fit in with the plaintiff to pay tax on its sales of petroleum logic of the special arrangements for petro- products since a directive can only confer leum products. The rationale for the partial rights on individuals and cannot impose disallowance of deduction of VAT under obligations on them unless implemented in Articles 17(5) and 19(1) of the Sixth Direc- national law; the output tax which would be tive, which Article 24(1) of the VAT Law is payable if the directive had been properly intended to implement, is that deduction of implemented must therefore be disregarded tax on goods and services is not justified in in calculating the refund to which the plain- so far as they are used for the purpose of tiff is entitled under the directive. However, making supplies that are not taxed. If VAT in the case of a directive such as the Sixth were deductible on the cost components of Directive, which lays down a comprehensive tax-free supplies, this would result in tax scheme of taxation, it is in my view possible avoidance. However, under the Greek rules

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the sale of petroleum products is not tax- inform the Commission of them and shall free. The products are taxed on the full con­ provide the Commission with all relevant sumer price at the beginning of the market­ information. ing process. Their sale by intermediaries does not give rise to further taxation or to deduc­ tion of tax purely for technical reasons, i. e. because under the Greek arrangements tax is charged at a single stage and is then passed 3. The Commission shall inform the other on as a hidden component of the price. Member States of the proposed measures within one month.

35. The Greek Government claims that, by bringing the entire text of the draft VAT Law to the notice of the Commission, it complied '1. The Council, acting unanimously on a with Article 27(2). The special arrangements proposal from the Commission, may autho­ were therefore tacitly approved by the rize any Member State to introduce special Council under Article 27(4). measures for derogation from the provisions of this Directive, in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance. Measures intended to simplify the procedure for charging the tax, except to a negligible 36. However, the view that it is sufficient for extent, may not affect the amount of tax due a Member State to notify the text of all or at the final consumption stage. part of its legislation without drawing atten­ tion to specific measures is inconsistent with the terms of Article 27(2) to (4) and with the procedure laid down in those provisions. The Commission is obliged to notify pro­ posed measures to the other Member States within one month. Moreover, unless the mat­ ter is raised in the Council a decision is 2. A Member State wishing to introduce the deemed to be taken two months after such measures referred to in paragraph 1 shall notification. Notwithstanding that short

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40. This question must also be given a nega­ 37. Moreover, in my view the Greek rules tive reply. could not — at least not without substantial modification — properly be authorized under Article 27. Even if one accepts the Greek Government's assertion that the rules are necessary to prevent tax avoidance or evasion, it is, as I have already explained (see paragraph 33), difficult to see why the limita­ 41. Article 11B(3) of the Sixth Directive pro­ tion on the deduction of input tax on general vides that the taxable amount is to include: expenses is a necessary part of such arrange­ ments. This aspect of the rules does not seem strictly necessary for the purpose of achiev­ ing the aim of the arrangements as required by the judgment in Commission ν Belgium. 7 '(b) incidental expenses, such as commis­ sion, packing, transport and insurance costs, incurred up to the first place of 6 — Case 324/82 [1984] E C R 1861. destination within the territory of the 7 — Cited above in note 6. country.

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"First place of destination" shall mean the used for services exempted under place mentioned on the consignment note or Article 14(1)(i). any other transport document by means of which the goods are imported into the coun­ try of importation. In the absence of such an indication, the first place of destination shall be taken to be the place of the first transfer of cargo in that country.

44. It is clear from those provisions that the reason for the exemption for services con­ Equally, the Member States may include in nected with the importation of goods in the taxable amount the incidental expenses Article 14(1)(i) is that the cost of such ser­ referred to above where they result from vices is already included, pursuant to transport to another place of destination, if Article 11 B(3)(b), in the taxable amount for the latter is known at the time when the the importation of the goods to which the chargeable event occurs.' services relate. Since, notwithstanding that exemption, VAT is deductible on goods and services used in providing such services, VAT remains fully deductible on the cost compo­ nents of the imported goods.

Question 2

50. In the second part of Question 2 the national court asks whether a taxable person may claim a refund of the tax overpaid under the Greek Law retrospectively from 1 Janu- ary 1987, the date when the Law came into force.

47. By the first part of this question the national court asks whether Article 11 A(l) and B(l) and (2) and Article 17(1) and (2) of the Sixth Directive have direct effect. 51. It may be noted that the Sixth Directive does not lay down rules concerning the time limits for claims for the refund of overpaid tax or the grounds on which such claims may be made.

48. It is clear from a reading of those provi­ sions that they meet the requirements of being unconditional and sufficiently precise. 52. The Court has held that: 'in the absence That is so notwithstanding the discretion of Community rules on the subject, it is for accorded to the Member States by the domestic legal system of each Member Article 11B(2) to adopt as the taxable amount for imports the value defined in Regulation N o 803/68. A taxable person may 8 — Case 230/87 [1988] ECR 6365. nevertheless rely on Article 11 to resist the 9 — Case C-126/88 [1990] ECR 1-1235. application of a taxable amount which con­ 10 — Case C-33/93 [1994] ECR 1-2329. 11 — Case 165/86 Leesportefeuille 'Intiem' CV ν Staatssecretaris forms neither to Article 11B(1) nor to van Financiën [1988] ECR 1471. Article 11B(2). 12 — Case C-97/90 [1991] ECR 1-3795.

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17 — Sec Reive, cited above in note 14, paragraph 5 of the judgment; San Giorgio, cited above in note 15, paragraph 12; Emmott, cited above in note 13, paragraph 54. The imposition by a Member State of a 16. See also Joined Cases C-31/91 to C-44/91 Lageder & Others [1993] ECR I-1761, paragraphs 27 to 29. reasonable time-limit for appeals in respect 18 — See San Giorgio, cited in note 15, paragraph 14 of the of a tax year cannot be considered to make judgment; Joined Cases C-6/90 and C-9/90 Francovich & Others [1991] ECR I-5357, paragraph 43. reliance on Community law virtually impos­ 19 — Article 91(2) of Legislative Decree 321 of 17-18 October 1969, Official Journal of the Greek Government A 205. 20 — Cited above in note 13, paragraph 23 of the judgment. 21 — Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treat­ 13 — Case C-208/90 Emmott ν Minister for Soniti Welfare and ment for men and women in matters of social security, OJ Attorney Cenerai [1991] ECR 1-4269. 1979 L 6, p. 24. 1 4 — See Case 33/76 Rewe ν Landwirtschaftskarnme · Suarianti 22 — Case C-338/91 Stcenhorst-Ncerings v Bestuur van de Bed­ [1976] ECR 1989, paragraph 5 of the judgment. rijfsvereniging voor Detailhandel, Ambachten en Huisvrou­ 15 — Case 199/82 Amministrazione delle Finanze dello Stato v wen [1993] ECR I-5475. SpA San Giorgio [1983] ECR 3595. 23 — Case C-140/92 Johnson v Chief Adjudication Officer [1994] 16 — Rewe, cited in note 14. ECR I-5483, paragraph 26.

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58. The question then is whether the plain­ tiff can rely on the failure of Greece to 59. That conclusion is particularly appropri­ implement the directive. In my view it fol­ ate in the case of a Member State's failure to lows from the principle that claims based on implement a directive, where the State itself Community law must not be treated less is at fault and has led the taxable person to favourably than claims based on national law make the error in question. A taxpayer must that, wherever taxable persons are entitled to be entitled to assume, when preparing his tax a refund of tax in respect of a particular tax returns, that the national legislation has cor­ year on grounds recognized by national law, rectly implemented all relevant Community that possibility must extend to claims based directives, and is therefore entitled to rely on Community law; that is so regardless of exclusively on the national legislation for the .nature of the grounds recognised by that purpose. If subsequently he discovers national law. It is not, in my view, necessary that the national legislation is defective, then to engage in the difficult and somewhat arti­ it must be open to him to seek a revision of ficial exercise of seeking a comparable claim his assessment within the time-limit laid under national law. Indeed such an approach down by national law for revision on any does not follow from the Court's case-law other ground.

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2) (a) Article 11A(1) and B(l) and (2) and Article 17(1) and (2) have direct effect and may therefore be relied upon by a taxable person before a national court in order to resist the application by national tax authorities of incompatible national law.

(b) In the absence of relevant Community rules, it is for national law to deter- mine whether a taxable person may request a refund of tax retrospectively from the date of the entry into force of a national law which is contrary to Community law. However, national procedural rules must not discrimi- nate between claims based on national law and those based on Commu- nity law and must not render excessively difficult the protection of rights guaranteed by Community law. Where national law provides for the refund of overpaid tax on grounds such as error, that provision must extend to claims based on the failure of the Member State concerned to implement correctly the Community legislation.

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