C-28/96

FAZENDA PÚBLICA v FRICARNES

J U D G M E N T O F T H E C O U R T (Fifth Chamber) 17 September 1997*

In Case C-28/96,

R E F E R E N C E to the Court under Article 177 of the EC Treaty by the Supremo Tribunal Administrativo (Portugal) for a preliminary ruling in the proceedings pending before that court between

Fazenda Pública

and

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after considering the written observations submitted on behalf of:

— the Fazenda Pública, by Maria Aldina Moreira, of the Lisbon Bar,

— the Portuguese Government, by Luís Fernandes, Director of the Legal Service of the Directorate-General for the European Communities, Ministry of For- eign Affairs, and Rui Barreira, Adviser in the Centre for Legal Studies, attached to the office of the President of the Council of Ministers, acting as Agents,

— the Commission of the European Communities, by António Caeiro, Legal Adviser, and Enrico Traversa, of its Legal Service, acting as Agents,

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referred to the Court of Justice for a preliminary ruling under Article 171 of the EC Treaty three questions on the interpretation of Articles 9, 12 and 95 of the E C Treaty and Article 33 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive').

2 Those questions were raised in proceedings between the Fazenda Pública (Portu- guese Ministry of Finance) and Fricarnes SA (hereinafter 'Fricarnes') in relation t o non-payment by the latter of charges on the marketing of meat and offal, a charge in respect of ruminants and a charge for measures to combat swine fever (herein- after 'meat marketing charges').

3 According to Article 1 of Decree-Law N o 343/86 of 9 October 1986, the charge on meat and offal is levied on fresh or frozen meat and offal and on domestically produced or imported eggs intended for public consumption. At the material time it was levied at the following rates:

'(1) ESC 3 per kg of meat and offal from cattle, pigs, goats and horses;

6 Originally, the revenue from those charges accrued to the Junta Nacional dos Produtos Pecuários (National Board for Livestock Products), an organization responsible for economic coordination set up in 1939.

? Following the Portuguese Republic's accession to the European Communities all the rights and powers of that body were transferred, by Decree-Law N o 15/87, to a newly created public body, the Instituto Regulador e Orientador dos Mercados Agrícolas (Agricultural Guidance and Stabilization Board, hereinafter 'IROMA').

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9 Upon the adoption of Decree-Law N o 282/88 of 12 August 1988, all those respon- sibilities, with the exception of the management of slaughterhouses, were trans- ferred to a new body, the Instituto Nacional de Intervenção e Garantia Agrícola (hereinafter 'INGA'), which was attached to IROMA.

io However, I R O M A continued to receive one-half of the revenue from the charges at issue in this case, the other half being allocated to I N G A .

1 1 Decree-Law N o 56/90 of 13 February 1990 then established a new specialized directorate within the Ministry of Agriculture, the Direcção-Geral dos Mercados Agrícolas e da Industria Agro-Alimentar (hereinafter 'DGMAIAA'). By the same decree-law, all the responsibilities previously held by I R O M A and I N G A (Article 6), together with numerous other specific responsibilities concerning the management and stabilization of markets in agricultural and livestock products, were transferred to D G M A I A A (Article 2).

i2 Thus, pursuant to Article 2(2) of Decree-Law N o 56/90,

1 3 Subsequently, upon the entry into force of Decree-Law N o 284/91 of 9 August 1991, 15% of the revenue from the charges in question was appropriated to D G M AI A A. The aggregate revenue from those charges, as from that year, was thus shared between D G M A I A A , I N G A and IROMA.

i4 The meat marketing charge was the subject of a procedure for failure by the Por- tuguese Republic to fulfil its Treaty obligations. However, the procedure was dis- continued on 20 November 1991 when the Commission concluded that the rev- enue from the charge was used to promote sales of the goods which bore it, without any discrimination regarding their origin. The charge in respect of rumi- nants and the one in respect of swine fever were also the subject of a procedure under Article 169 of the Treaty: the Commission considered them incompatible with Article 95 of the Treaty. That procedure was discontinued in 1994 following abolition of those three charges by the Portuguese authorities in 1993.

is I R O M A initiated a fiscal procedure for enforcement against Fricarnes to recover ESC 8 851 045 for unpaid charges on meat and offal, and charges in respect of ruminants and swine fever, payable for the year 1992.

u In proceedings before the Tribunal Tributário de Lisboa (Lisbon Tax Court) Fri- carnes contested the order resulting from that procedure, arguing that the charges in question were unconstitutional. It succeeded at first instance, but only because the court held that those charges were incompatible with Articles 9 and 12 of the Treaty.

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19 It must first be borne in mind that provisions relating to charges having equivalent effect and those relating to discriminatory internal taxation cannot be applied con- currently, so that under the system of the Treaty the same taxation cannot belong

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to both categories at the same time (Case 10/65 Deutschmann v Germany [1965] E C R 469, at 473 to 474; Case 57/65 Lütticke v Hauptzottamt Saarlouis [1966] ECR 205, at 211; and Case C-266/91 Celbi v Fazenda Pública [1993] ECR 1-4337, para- graph 9).

20 It is settled case-law that any pecuniary charge, whatever its designation or mode of application, which is imposed unilaterally on goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, consti- tutes a charge having an effect equivalent to a customs duty within the meaning of Articles 9, 12, 13 and 16 of the Treaty, even if it is not imposed on behalf of the State (see in particular Case 158/82 Commission v Denmark [1983] ECR 3573, paragraph 18).

2i Pecuniary charges under a general system of internal charges applying systemati- cally to domestic and imported products according to the same criteria, on the other hand, are covered by Article 95 et seq. of the Treaty (Celbi, cited above, paragraph 11). Those provisions prohibit a Member State from directly or indi- rectly imposing on the products of other Member States any internal taxation in excess of that imposed on similar domestic products or of such a nature as to afford protection to other domestic products, and therefore the criterion for the application of Article 95 is whether or not those charges are discriminatory or protective (see in particular Case C-17/91 Lornoy and Others v Belgium [1992] E C R 1-6523, paragraph 19).

24 It is settled case-law (see in particular Compagnie Commerciale de l'Ouest and Others, cited above, paragraph 27; Lornoy and Others, cited above, paragraph 2 1 , and Case C-72/92 Scharbatke v Germany [1993] ECR 1-5509, paragraph 10) that if the advantages stemming from the use of the revenue from a charge forming part of a general system of internal charges applying systematically to domestic and imported products fully offset the burden borne by the domestic product when it is placed on the market, that charge constitutes a charge having an effect equivalent to a customs duty, contrary to Articles 9 and 12 of the Treaty. O n the other hand, if the advantages accruing to the taxed domestic products from the use of the rev- enue from the charge only partly offset the burden borne by those products, such a charge would constitute a breach of the prohibition of discrimination laid down by Article 95 of the Treaty.

25 If the advantages for domestic production fully offset the burden borne by it, the charge levied on the product must, being a charge having an effect equivalent to a customs duty, be regarded as unlawful in its entirety; if on the contrary those advantages only partly offset the burden borne by domestic production, the charge levied on the imported product, which is legal in principle, will simply have to be reduced proportionally (Case 94/74 IGAV v ENCC [1975] E C R 699, paragraph 13, and Compagnie Commerciale de l'Ouest and Others, cited above, paragraph 27).

26 It is also clear from the case-law of the Court that for the principle concerning the offsetting of the burden to apply, the taxed product and the domestic product ben- efiting from it must be the same (Case 77/76 Cucchi v Avez [1977] ECR 987, para- graph 19, and Case 105/76 Interzuccheri v Rezzano e Cavassa [1977] ECR 1029, paragraph 12).

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3i Similarly, the national court will take into account the roles played by I R O M A and by D G M A I A A in relation to the regulation and stabilization of external trade in agricultural and livestock products, under Article 3(4)(e) of Decree-Law N o 15/87. If the expression 'external trade' covers not only trade in the products concerned with non-member countries but also intra-Community trade, that activ- ity is liable to benefit only domestic products.

32 The national court will also consider whether or not the tasks entrusted to DGMAIAA, with a view to ensuring institutional integration of the organizations representing the economic operators concerned (Article 2(2)(f) of Decree-Law N o 56/90) and drawing up programmes and plans for the purposes of applying national and Community aid schemes and financial and fiscal incentives to the agri-foodstuffs industry and to the distribution of agri-foodstuffs (Article 2(2)(i) of Decree-Law N o 56/90), benefit domestic production exclusively or, at the very least, proportionally more than imported products.

33 In view of those considerations, the answer to the first two questions must be as follows:

1. (a) Pecuniary charges under a general system of internal charges applying sys- tematically to domestic and imported products according to the same crite- ria are covered in principle by Article 95 et seq. of the Treaty.

(a) whether the revenue from the charge at issue, which is specifically intended to be used to combat diseases of livestock reared on national territory, ben- efits exclusively animals of national origin or, at least, benefits them propor- tionally more than imported animals;

(b) whether the revenue from all the charges at issue is used for stabilization only of trade with the other Member States in the products which bear the charges;

(c) whether the institutional integration of the organizations representing the economic agents concerned and the implementation of the national and

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Community aid schemes and financial and fiscal incentives in favour of the agri-foodstuffs industry and the distribution of agri-foodstuffs, to which part of the revenue from the charges in question is appropriated, benefit only domestic production or whether they benefit such production propor- tionally more than imported products.

JUDGMENT OF 17. 9. 1997 — CASE C-28/96

37 A s t h e C o u r t h e l d in t h e judgments cited a b o v e and in C a s e 295/84 Rousseau Wilmot v Organic [1985] E C R 3759, p a r a g r a p h 16), the aim p u r s u e d b y Article 33 of t h e Sixth D i r e c t i v e is t o preclude t h e i n t r o d u c t i o n of taxes, duties a n d charges w h i c h , because t h e y are levied o n the m o v e m e n t of g o o d s a n d services in a w a y c o m p a r a b l e t o value a d d e d tax, w o u l d c o m p r o m i s e the functioning of t h e c o m m o n s y s t e m of value a d d e d tax. Taxes, duties a n d charges m u s t b e regarded as being i m p o s e d o n t h e m o v e m e n t of goods a n d services in a w a y c o m p a r a b l e t o V A T if t h e y exhibit t h e essential characteristics of V A T (Dansk Denkavit and Poulsen Trading, cited a b o v e , p a r a g r a p h 11).

38 As the Court made clear in the judgments cited above, those characteristics are as follows: VAT applies generally to transactions relating to goods or services; it is proportional to the price of those goods or services; it is charged at each stage of the production and distribution process; and, finally, it is imposed on the added value of goods and services, since the tax payable on a transaction is calculated after deducting the tax paid on the previous transaction.

39 Contributions of the kind at issue in this case, which display none of those char- acteristics, are not levied on the movement of goods and services in a manner com- parable to VAT.

40 First, they apply not generally but only to certain products; second, they are not proportional to the price of those products; third, they are not charged at each stage of the production and distribution process; and, finally, they are not imposed on the added value of goods and services, so that the part of the tax paid on the previous transaction is not deductible.

T H E C O U R T (Fifth Chamber),

in answer to the questions referred to it by the Supremo Tribunal Administrativo by judgment of 4 October 1995, hereby rules:

1. (a) Pecuniary charges under a general system of internal charges applying systematically to domestic and imported products according to the same criteria are covered in principle by Article 95 et seq. of the EC Treaty.

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A charge levied without distinction on domestic and imported products constitutes a charge having an effect equivalent to a customs duty, pro- hibited by Articles 9 and 12 of the Treaty, if the revenue from it is intended to finance activities benefiting only the taxed domestic prod- ucts and if the resultant advantages fully offset the burden which the latter products bear; if those advantages only partly offset the burden borne by the domestic products, the charge constitutes discriminatory internal taxation prohibited by Article 95 of the Treaty and must be reduced proportionally.

(c) whether the institutional integration of the organizations representing the economic agents concerned and the implementation of the national and Community aid schemes and financial and fiscal incentives in favour of the agri-foodstuffs industry and the distribution of agri-foodstuffs, t o which part of the revenue from the charges in question is appropriated, benefit only domestic production or whether they benefit such produc- tion proportionally more than imported products.

3. A tax levied only on certain products, which is not proportional to the price of those products, is not charged at each stage of the production and distri- bution process and is not imposed on the added value of the products, is not in the nature of a turnover tax within the meaning of Article 33 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment.

Moitinho de Almeida Sevón Gulmann

Puissochet Wathelet

Delivered in open court in Luxembourg on 17 September 1997.

R. Grass J. C. Moitinho de Almeida