C-389/95

3 — Article 4, an important provision in the circumstances of this case, concerns the grant of exemption from tax on the tem- * Original language: Italian. porary importation of private vehicles for business use. In 1 — Council Directive 83/182/EEC of 28 March 1983 on tax this specific case, conditions are laid down which are in exemptions within the Community for certain means of many aspects similar to those governing importation for pri- transport temporarily imported into one Member State from vate use: the individual importer must nave his normal resi- another (OJ 1983 L 105, p. 59). dence in a Member State other than the Member State of 2 — Case C-9/92 Commission v Greece [1993] ECR I-4467. More temporary importation; he may not use the vehicle within generally, it would seem appropriate to recall some of the the Member State of temporary importation to carry passen- principal judgments in which the Court has dealt, directly or gers for hire or reward, or for the industrial or commercial indirectly, with questions concerning the arrangements for transport of goods, whether for reward or not; the private temporary importation free of tax: Case 823/79 Carciati vehicle may not be disposed of, hired out or lent in the [1980] ECR 2773; Case 134/83 Abbink [1984] ECR 4097; Member State of temporary importation. Article 4(2) pro- Case 249/84 Profant [1985] ECR 3237; Case 127/86 Ledoux vides, in addition, that the exemption for business use is to [1988] ECR 3741, and Case C-297/89 Ryborg [1991] ECR apply for a period, continuous or not, of six months in any I-1943. twelve.

4 — The specific cases are set out in Article 5, which provides that private vehicles imported temporarily are to be exempt from tax (a) for an indefinite period where a private vehicle registered in the country of normal residence of the user is used regularly for the journey from his residence to his place of work in the territory of another Member State and vice versa and (b) for a limited period where the user is a student and the private vehicle is registered in the Member State of his normal residence, not being the Member State in which he is studying. 6. Order No D-1254/141 of the Minister for 6 5 — Article 9, 'Special arrangements', allows Member States to Finance of 1 November 1984 ('the Order') maintain and/or introduce more liberal arrangements than those provided for in the directive. In particular, they may sets the maximum period of exemption at permit, at the request of the importer, temporary importa- six months (Article 4(2)) — consecutive or tion for a period longer than that provided for by the Com- munity provisions. The legislature took care, however, to set a definite limit on the discretion allowed the Member States: in no circumstances (Article 9(2)) may they apply, in pursu- ance of the Directive, tax exemptions within the Community which arc less favourable than those which they would grant 6 — The order was subsequently amended by Order No in respect of means of transport originating in a third coun- D-247/13 of 1 March 1988, ΦΕΚ (Official Journal of the try. 1951,, B/6-4-88 Hellenic Republic 1951 ). 6-4-88).

7. The director of the Doïrani Customs issued a notice of assessment requiring the applicant to pay, pursuant to national law, 9. Considering that the applicant was justi­ DR 21 043 856 by way of customs duties, fied in his doubts as to the interpretation of other taxes and additional duties and the provisions, the national court referred DR 29 430 by way of circulation tax. Where the following four questions to the Court of the offence consists of something other than Justice for a preliminary ruling: merely failing to meet the time-limit for re-exportation, the Greek rules provide (Article 10(7)) for a twofold penalty: the cus­ toms duties and other taxes applicable at the time when the offence is found to have been committed (VAT, consumer tax, circulation tax) are payable forthwith, together with a '(1) Where certain means of transport for surcharge equal to 100% of the sum so cal­ 7 private use within the Community are culated. temporarily imported within the mean­ ing of Article 3 of Council Directive 83/182/EEC of 28 March 1983, is the exemption from tax granted for a single private vehicle or for more than one? Does the abovementioned directive in fact draw a distinction concerning the 8. Mr Klattner brought an action before the number of private vehicles which may national court for annulment of the notice of be temporarily imported free of tax according to whether they are intended for private or business use? 7 — As regards penalties, the order establishes a complex system which I shall explain, for the sake of completeness: where a vehicle is not re-exported within the specified period (Article 10(1)), it provides for (a) fixed additional duty of DR 10 000; (b) additional duty, depending on the cubic capacity of the engine, calculated for every day the vehicle has remained on Greek territory after the time-limit for re-exportation; (c) circulation taxes payable for the same period. Where, at the time when exemption is applied for, incorrect information is supplied to the authorities, the order provides (Article 10(5)) for the payment of the additional duties referred to in (a) and (b) above, calculated for every day the vehicle has remained (2) Does the Directive specifically require on Greek territory from the time it was imported. Finally, Article 10(8) provides that in the case of multiple offences, the competent Greek authorities not to the additional duties are to be charged cumulatively. restrict by legislation the parallel or

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OPINION OF MR LA PERGOLA — CASE C-389/95

The first argument concerns the wording of Finally, the Greek Government points to the the provision. The legislature used the plural need to combat tax evasion. The Directive 'means of transport' to indicate all such should, it considers, be read strictly in the means and a singular term, by contrast, to light of the need, expressly recognized by the identify among means of transport as a Court, for national laws to embody objec­ whole 'each particular category of vehicles tive, verifiable criteria for preventing eva­ 9 belonging to persons subject to special sion. It is only in exceptional circumstances 8 rules'. that double importation free of tax should be permissible.

Second, the Greek Government claims that if the legislature had intended to permit any individual to import more than one vehicle, 13. The applicant, together with the Com­ it would have limited the number. In its mission, considers on the other hand that view, unlimited imports of means of trans­ Article 3 gives the right to exemption in port are incompatible with private or busi­ respect of more than one vehicle belonging ness use which is, as we have seen, the essen­ to the same person. tial prerequisite for exemption.

The third argument, on the other hand, is 14. Here, too, the argument is based prima­ based on the purpose of the Directive. The rily on the wording: the relevant provision measure constitutes a stage in the process of uses the plural to indicate the means of harmonizing the taxation systems of the transport for which exemption may be 10 Member States and must of necessity be claimed. If the legislature had intended to interpreted as granting the right to import limit the goods eligible for exemption, there free of tax only within certain narrowly- would have been an express provision to that defined limits. effect, but there is none. That conclusion is compatible, moreover, with the purpose of

12 — The Commission's proposal of 24 October 1975, document COM (75) 527, recognized that because the relevant inter- national conventions (New York Convention of 4 June 15. As is apparent from the first recital in 1954 and the convention on the taxation of road vehicles for private use in international circulation signed in Geneva the preamble, the Directive was adopted in on 18 May 1956) were no longer appropriate to the econ- omic reality of the Community it was necessary to adopt order to eliminate the obstacles to the free measures governing the importation of vehicles onto the movement of Community residents within domestic market. The texts of those conventions arc con- tained in the UN Treaty Series, Volume 282, p. 249, and each Member State caused by the taxation Volume 339, p. 3, respectively. For a detailed examination of the provisions of those conventions, see Cardati, at p. 2775, point B(a). 13 — Commission proposal for a directive of 24 October 1975, cited above, No 1; see also the communication from the 11 — In support of this argument, the applicant gives examples of Commission of 28 July 1989 concerning the temporary obstacles to freedom of movement caused by setting a importation of a private vehicle for business or private use, quantitative limit on imports: where a vehicle is immobi- Document COM (89) 359 final, paragraph 1. lized by a road accident, or where vehicles arc used by sev- 14 — Case C-9/92, cited above, paragraph 38; sec also Cardati, eral members of a family. cited above, paragraph 9.

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18. The question under consideration can­ not, in my view, be settled on the basis of the 18 — Sec, to this effect, and purely by way of example, the Com- wording of the directive. Both the interpreta­ mission's communication cited above, in which (pp. 4 to 6) only the singular is mentioned (as indeed in the title of the tion proposed by the Hellenic Republic and Convention): thus members of the importer's family may use 'the vehicle'; a student is entitled during his studies to temporary exemption for 'his vehicle'; if 'his vehicle' is immobilized while he is abroad, the resident of one Mem- ber State may use a private vehicle registered in another 1 Member State during the time taken Tor the repairs. It 15 — Document COM (87) 14 final of 2 January 987, Commis- should be noted, however, how that uncertainty is reflected sion proposal for a directive amending Directive in the wording of provisions of national implementing leg- 83/182/EEC, paragraph 1; see also COM (89) 359 final, islation drawn up strictly with reference to the require- paragraph 1. ments of Community law. See, for example, the Irish Euro- 16 — COM (89) 359 final, paragraph 1. pean Communities (Exemption from Import Charges of 17 — See Ledoux, cited above, although it relates directly to the Certain Vehicles etc. temporarily imported) Regulations system under the Sixth Directive — Directive 83/182 not 1983 (S. I. N . 422 of 1983, section 4(i) and 5(i)); the Portu- then having been adopted —, in which the Court stated guese Decree-Law No 129/90 (DDR No 90 of 18 April that the conditions required by the Member States for 1990, Arts 2 and 4). For a specific limitation, see the French granting exemption from VAT for vehicles imported under implementing legislation. Article 5(1) of the decree of 30 temporary arrangements 'must take account, on the one December 1983, Conditions for the application of the hand, of the objectives of harmonization of the rules relat- arrangements for temporary importation of certain means ing to VAT which are (...) further progress in the effective of transport and other goods for the personal use of non- removal of restrictions on the movement of persons and resident travellers (JORF of 18 January 1985, p. 634), limits goods (...) and, on the other hand, the objective of prevent- the exemption to one vehicle only, but provides for the pos- ing evasion, avoidance or abuse in cases of temporary sibility of paying a surety, upon which more vehicles may importation' (paragraph 10). be imported.

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OPINION OF MR LA PERGOLA — CASE C-389/95

25. That is useful information. Tax-free the bureaucratic formalities which the Direc­ importation is not confined to the status of tive, as we have seen from the accompanying owner of the vehicle, and consequently the text cited above, is intended to eliminate. exercise of the right to free movement is not unduly restricted. The fact remains, however, that other important aspects of freedom of movement are unjustifiably restricted. In this connection Mr Klattner's case is a classic example. After returning to Germany to undergo medical treatment required as a result of an accident in Yugoslavia, he wished 27. I would conclude with a more general to return to Greece driving his second car. point: the prohibition laid down by the That choice, which seems to me to fall Greek legislation seems to me all the more squarely within the ambit of what a resident unjustified because multiple car ownership in individual is legitimately entitled to do under Europe today is becoming a habit — the system, was as a result of the rules laid whether or not it should be encouraged is down in the Greek legislation treated as a another matter — for many Community prohibited action for which penalties were residents. In short I consider that the free­ imposed. dom safeguarded by the Directive, namely that of unhindered movement, also includes the right to use other cars owned by the per­ 20 son concerned, should the occasion arise.

I - 2730

KLATTNER v GREEK STATE

of freedom of movement for Community consider the second. Does the Directive residents and which are therefore to be pre­ draw a distinction concerning the number of ferred to that used in the Greek system. An private vehicles which may be temporarily example, which the Court has held to be imported free of tax according to whether entirely lawful, would be to stamp the car they are intended for private or business use? 21 user's passport. This is a method which can be regarded as effective: it was ultimately a check of that sort which enabled Mr Klatt- ner's allegedly unlawful conduct to be dis­ covered.

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OPINION OF MR LA PERGOLA — CASE C-389/95

State of importation — to those imposed by 33. I do not think it necessary to linger on the directive on those who import for busi­ the first part, which seems to me to be cov­ ness purposes. ered in full by the foregoing conclusions as to the rules laid down by the Directive. I can only repeat that the Community legislation in question precludes limitation of the num­ ber of vehicles which may be imported free of tax to one per person. That having been said, the solution preferred in respect of vehicles for private use must be valid also in respect of vehicles for business use.

Question 2

34. Nor, to my mind, does the second part of the question raise any particular prob­ 24 lems. According to the Court's settled case-law concerning direct effect, the provi­ 32. The second question referred by the sions of a directive may be relied upon court in Thessaloniki also falls into two directly by an individual wherever their separate parts. subject-matter is sufficiently clear, uncondi­ 25 tional and precise.

First, the Court is asked to determine whether the Directive specifically requires the Greek authorities not to restrict the number of vehicles which may be imported free of tax.

35. A somewhat different line of argument re-exporting the vehicle after the expiry date. — here again I am at one with the Commis­ The aspects most relevant here are: (a) the sion — must be followed with regard to lawfulness of the individual elements of the Article 9. Three options are reserved for the financial penalty; (b) the lawfulness of treat­ Member States under Article 9(1), namely ing temporary importation in the same way the right to 'maintain and/or introduce more as permanent importation under the system liberal arrangements than those provided for of penalties; (c) the compatibility of the in the directive'; to 'permit temporary 100% surcharge levied under that legislation importation for a period longer (...)' than with the principle of proportionality as those referred to in Articles 3 and 4(2); to defined in Community law. Specifically, 'permit the (...) vehicles (...) to be re-hired to questions (b) and (c) call upon the Court to a resident of the Member State of importa­ assess whether the penalties are reasonable tion with a view to their re-exportation'. inasmuch as different situations, such as These powers of the Member States are unlawful temporary importation and perma­ expressly recognized and in the text of the nent importation, are treated in the same Directive there are no rights to be found way and, more generally, whether they are upon which individuals may directly rely. proportionate to the offence committed. Their legal situation is, let us say, an expecta­ tion which may be transformed into a right only when the Member State has recognized it as such in provisions implementing the directive.

The limits referred to in the case-law are contained in various decisions given by the Court concerning the domain within which the penal powers of the Member States may 29 and must be exercised. The Court has ruled that in exercising that power the Mem­ Infringement of those rules gives rise to two ber States must not only comply with the consequences. First, the customs duties and principles of equal treatment as between other taxes become payable immediately; infringements of Community law and second, a surcharge is levied, calculated on infringements of similar national law, but the total amount of those duties and taxes. they must also not impose any penalty There is a qualitative difference between the which is contrary to the principle that it two legal consequences of infringement of should be appropriate, effective and propor­ the rules: the first is a restitutory (or com­ tionate or which creates obstacles to free­ pensatory) penalty, that is to say, one doms guaranteed by the Treaty, in particular 30 intended to re-establish a situation of mate­ freedom of movement for persons: penal­ rial legality by restoring an interest — in this ties must be appropriate and necessary to 31 case, the State's interest in receiving tax rev­ achieve the aim pursued. enue — damaged by the individual's actions; the second, on the other hand, has the char­ acter of an administrative penalty in the 27 — Case 299/86 Drexl [1988] ECR 1213, paragraph 17. strict sense: a penalty, then, which is purely 28 — Cardati, cited above, paragraph 9. punitive, if I may so express it, since its pur­ 29 — Case 203/80 Casati [1981] ECR 2595, paragraph 27; Joined pose is not to protect or restore substantive Cases 286/82 and 26/83 Luisi and Carbone [1984] ECR 32 377. interests damaged by the infringement. 30 — Case C-7/90 Vandevenne [1991] ECR 1-4371, Drexl, para­ More particularly, this second penalty must graph 18, and Case C-265/88 Messner [1989] ECR 4209, paragraph 14. be placed in the category of proportional 31 — See most recently Case C-29/95 Pastoors and Trans-Cap v penalties. The legislature fixed the coefficient Belgian State [1997] ECR 1-285, paragraph 24. In connec­ tion with this point also, I think it necessary to observe (100%), and then left the basis on which the that, according to the Commission's statements in the document COM (87) 14 final, Article 11(3) had to be amended by inserting an express reference to the require­ ment that sanctions applied at national level should be com­ patible with the principle of proportionality. That is a reminder which the Commission associated with the find­ 32 — A 'punishment, technically speaking', therefore, according ings in Carciati; see pp. 10, 11 and 14 of the document to the definition given by V. Zanobini in Le Sanzioni cited. Amministrative, Turin, 1924, p. 2.

41. According to statements made at the hearing, Article 10(7) is the provision on the basis of which the Greek administrative Assimilation of temporary and permanent authorities adopted the measure in respect of importation Mr Klattner. It clearly states the individual elements which make up the penalty, includ­ ing customs duties. However, it is only means of transport from outside the Com­ munity which are subject to payment of cus­ toms duties on being imported into Greek territory. Those from within the Community are, on the other hand, exempted from that tax by virtue of the express provision of 43. The second question to be dealt with is Article 9(1) of the Treaty. Furthermore, as whether it is lawful to treat temporary and the Commission rightly observes, the rel­ permanent importation in substantially the evant international conventions permit a same way, as the provision under consider­ derogatory system for extra-Community ation does. The penalties for which Article means of transport as well, where they are 10(7) provides automatically require pay­ 34 temporarily imported. ment of the taxes from which Article 1 of the directive provides exemption, namely value added tax, circulation tax and consumer tax. As a result, for the purposes of imposing penalties, an offence consisting of unlawful temporary importation — on grounds other 42. The rule on which the sanction laid down in this case depends is therefore 35 — Moreover, this conclusion also follows, to my mind, from the partly compensatory function that the penalty must be considered to perform. It does not seem to me to be legiti- mate to employ the machinery of the law for responding to 33 — In addition to proportional penalties we may identify types illegal actions to impose those duties on such vehicles. That of administrative sanction which impose a minimum and a argument may be based on the decision in Case 118/75 maximum and those which impose fixed financial penalties. Watson and Belmann [1976] ECR 1185, in which the Court For a study of the theory in this field, see C. E. Paliero, held that an order for the deportation of persons protected A. Travi, Sanzioni Amministrative in EdD, Milan, p. 345. by Community law was incompatible with Community 34 — See Council Regulation (EEC) No 1855/89 of 14 June 1989 rules 'since (...) such a measure negates the very right on the temporary importation of means of transport (OJ conferred and guaranteed by the Treaty' (paragraphs 20 1989 L 186, p. 8). and 21).

47. However, the case I have discussed is, plainly, a borderline case. As a matter of principle, the similar treatment under consid­ 44. Taking the view that the establishment of eration cannot hold. The Court's case-law offences and the choice of the penalties relat­ bears this out. The judgment given most ing thereto are matters falling within the recently in Skanavi stated that 'treating a exclusive competence of the Member States, person who has failed to have a licence the Hellenic Republic does not consider it exchanged as if he were a person driving necessary to draw any significant distinction without a licence, thereby causing criminal between the system of penalties imposed for penalties, even if only financial in nature (...), infringements of the rules on temporary to be applied, would also be disproportion­ importation and those in respect of perma­ ate to the gravity of that infringement in 36 nent importation. view of the ensuing consequences'.

45. According to Mr Klattner, treating tem­ porary and permanent importation in the same way entails in fact double taxation, first 48. The Greek legislation is disproportion­ in the vehicle's country of origin, and then in ate, in the manner considered unlawful by Greece. the Court, precisely inasmuch as cases in which it is unarguable that the importation is temporary are penalized in the same manner as permanent importation, so that the same rules apply to situations which are not com­ 37 parable. 46. To my mind, assimilation will be lawful only where the infringement of the tempo­ rary importation rules is so serious and 36 — Case C-193/94 Skanavi and Chryssanthakopoulos [1996] manifest as to demonstrate that the person ECR 1-929, paragraph 37. concerned intended instead to import the 37 — Drexl, cited above.

According to the Greek Government, the obligation to pay a surcharge equal to the customs duties and other taxes applicable where the national legislation on tax-free importation of means of transport has been infringed, regardless of the period of time for which the means of transport in question has been imported, is not contrary to the prin­ ciple of proportionality. It claims that the In conclusion, both the case-law and the penalty has the same nature as the offence it proposed amendments to the legislation is designed to sanction, and it is necessary in clearly show that one type of importation order to ensure that the market operates nor­ may not be treated in the same way as the mally and to prevent the risk of fraud. other, as they are under the inflexible and automatic criterion laid down by the Greek legislation. The national legislature will have to accept that the importer's actual intention should be looked at, case by case.

On the other hand, the applicant argues that the surcharge imposed on him because he 38 — Ledoux, paragraph 15. 39 — Profant, paragraph 27. slightly overran the exemption period (by 16 40 — Sec COM (87) 14 final, pp. 10 and 17. days) was the same as that imposed for

I - 2737

OPINION OF MR LA PERGOLA — CASE C-389/95

Legal assessment In Drexl, where the penalties laid down by Italian law for offences concerning value added tax ('VAT') payable on domestic transactions were compared with the penal­ ties for offences concerning VAT payable on 53. Before I turn to the substance of the importation, the Court ruled that even question, I would point out that the question though the offences were distinguished by raised by the Commission is at present being different circumstances, those differences considered by the Court in another case could not justify a manifest disproportion in 44 the severity of the penalties laid down.

41 — On this point, I think it necessary to state that Mr Klatt- ner's observations are based on a misconception: he believes that the penalty was imposed because he exceeded the 43 — Commission v Greece; the application was lodged on 10 exemption period by 16 days. That statement seems to me November 1995. to be incorrect in that, as stated at the hearing, the penalty 44 — Drexl, paragraph 23; see also Case C-276/91 Commission v was ordered by the Greek administrative authorities exclus- France ('Patron') [1993] ECR I-4413. In that case also the ively pursuant to Article 10(7) which, as I have already had issue was the system of penalties laid down in French law occasion to say, concerns infringements other than mere for offences relating to the VAT payable on domestic trans- delay, which is covered by Article 10(1). actions and for offences concerning the VAT payable on 42 — Drexl, cited above. importation.

I - 2738

KLATTNER v GREEK STATE

58. If, therefore, the penalty laid down is not in itself incompatible with the principle of proportionality, one important matter 49 remains to be clarified. It is necessary to establish whether the tax system applied to 56. As regards the penalty laid down by the Greek used vehicles differs from the system Greek provisions — leaving aside the case, for imported used vehicles in a manner for examined above, of 'minor' infringements of the prohibition on temporary importation — it does not seem to me that it can be criti­ 48 — Opinion in Case 118/75, section 6, at p. 1210. cized as being contrary to the principle of 49 — A further aspect: Mr Klattner has claimed that a mechanism for calculating penalties such as that used in the Greek leg- proportionality. Even a surcharge of 100% islation leads to double taxation. It should be borne in mind may well, as the Commission itself acknowl­ that, in accordance with the judgments in Schul I and Schul II (Case 15/81 Schul v Inspecteur der Inverroechten en edges, be a penalty proportionate to the Accijnzen [1982] ECR 1409 and Casc 47/84 Staatssecretaris 47 van Financien v Schul [1985] ECR 1491), the Member State offence committed. of importation must take account of the VAT paid in the State of origin in order to prevent the goods in question from being taxed twice. To my mind, it follows that the States are to take account of the VAT paid in the country of origin when they set the amount of fine to be paid, where that amount depends on the VAT to be paid in the Member 45 — Skanavi, cited above, paragraph 37. State of importation. If it were otherwise, the system of 46 — Pastoors, cited above, paragraphs 24 to 26. penalties would go beyond its compensatory and punitive 47 — Commission's observations, p. 20. objectives and would be an unacceptable barrier to imports.

(1) It is contrary to Articles 3 and 4 of Council Directive 83 / 182 for national rules to limit the right to temporary exemption from tax to one vehicle only — whether for business or private use — for each driver.

50 — Drexl, paragraphs 22 and 23; Patron, cited above.

I - 2740

KLATTNER v GREEK STATE

(2) It is not contrary to the letter and spirit of the Directive for a provision of national penal law to impose in respect of offences under the tax-free tempo­ rary importation system financial penalties comparable to the fiscal charges provided for on permanent importation where the consequences of those offences are comparable to those produced by permanent importation. Com­ munity law does, however, preclude a penalty requiring the immediate pay­ ment of customs duties on the importation of vehicles from within the Com­ munity.

(3) It is compatible with the principle of proportionality for a provision of national law to impose in respect of offences under the tax-free temporary importation system a surcharge of 100% calculated on the amount of con­ sumer tax and other equivalent taxes. Where, however, the treatment for tax purposes of imported used cars and used cars of domestic origin is different, it is necessary to ascertain whether that difference entails as a result the imposi­ tion of manifestly disproportionate penalties for the offences found to have been committed with regard to vehicles belonging to the two categories.