C-346/97

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OPINION OF M R FENNELLY — CASE C-346/97

weight of the aircraft in question. The 1988 alcoholic beverages' and 'manufactured Law was formally repealed, with effect tobacco'. from 1 January 1997, by Law 1996:1407. 2 Since that date aviation spirit and kerosene have been exempt from energy and carbon tax in Sweden by virtue of the 1994 års Lag om Skatt på Energi (Law on the Taxation of Energy).3 However, Article 3(2), which is central to the present case, provides that these pro- ducts 'may be subject to other indirect taxes for specific purposes, provided that those taxes comply with the tax rules applicable for excise duty and VAT pur- poses as far as determination of the tax B — The Community legislation base, calculation of the tax, chargeability and monitoring of the tax are concerned'.

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products 'shall be subject to excise duty if exemptions and of preventing any intended for use, offered for sale, or used as evasion, avoidance or abuse: heating fuel or motor fuel'; in such cases the rate of duty applicable is that which applies to the corresponding fuel in respect of which a specific reference is made in the Rates Directive. It is common case that the petroleum products at issue in the present case were intended for use and used as commercial aviation fuel; in principle, such products are thus subject to the harmonised Community excise-duty arrangements.

(b) mineral oils supplied for use as fuels for the purpose of air navigation other 6. Article 8 of the Mineral Oils Directive than private pleasure flying. provides, inter alia, for various exemptions from the abovementioned obligation to apply excise duties. The relevant provision in the present case is Article 8(1 )(b), which is worded as follows:

For the purposes of this Directive, "private pleasure flying" shall mean the use of aircraft by its owner or the natural or legal person who enjoys its use either through hire or through any '1. In addition to the general provisions set other means, for other than commer- out in Directive 92/12/EEC on exempt cial purposes and in particular other uses of excisable products, 7 and with- than for the carriage of passengers or out prejudice to other Community goods or for the supply of services for provisions, Member States shall consideration or for the purposes of exempt the following from the harmo- public authorities. nised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such

II — The national proceedings was applied only to domestic civil aviation because of Sweden's obligations under, inter alia, the 1944 Chicago Convention pursuant to which the separate national 7. The plaintiff unsuccessfully pursued an taxation by contracting parties of interna- administrative appeal against the assess- tional air navigation is prohibited. 8 ments to tax made upon it. It then brought Although the national court accepts that the present proceedings. Due to the uncer- the Mineral Oils Directive requires Mem- tainty of their outcome, the Länsrätten I ber States to exempt from harmonised Dalarnas Län (County Administrative excise duties mineral oils supplied for Court, Dalarna, hereinafter 'the national commercial use as aviation fuel, it has court') granted a deferment of payment of decided, in the light of the different views the disputed tax. canvassed before it regarding the true nature of the impugned tax and the absence of relevant Community case-law, as well as the disputes between the parties both as to the direct effect of the directive and the severability of any parts of the tax found to 8. The plaintiff submitted before the be incompatible with Community law, to national court that, viewed as a whole, it su-bmit the following questions to the was clear that the tax constituted an excise Court: duty on commercial aviation fuel. It sub- mitted that Sweden no longer had the legislative competence to maintain such a tax in force.

3. If the Mineral Oils Directive is to be applied in the present case, can the taxation measures in question be split up into EC compatible and EC incom- patible parts, owing to the fact that Swedish environmental tax is calcu- lated partly on the basis of fuel con- sumption and partly on the basis of A — The scope of the exemption obligation emissions of hydrocarbons and nitric in respect of aviation fuel oxides?'

(i) The nature of the impugned tax

III— Analysis

13. The observations submitted concerning 11. Written and oral observations were the first question show that two aspects submitted by the plaintiff and the Commis- need to be considered. Firstly, there is sion, while oral observations were also disagreement as to whether the tax is an submitted by the Riksskatteverket. environmental tax in name only, as claimed by the plaintiff, which states that it is, in truth, a straightforward tax on consump- tion of aviation fuel, or whether, as claimed by the Riksskatteverket, it serves a genuine environmental purpose by taxing emissions from aviation engines. Secondly, if the tax 12. It is clear that the fundamental question is a tax on consumption of aviation fuel, posed in the present case is whether the the issue of its compatibility with Arti- application of a national tax such as the cle 8(l)(b) of the Mineral Oils Directive

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15. Whether the tax serves the 'specific objective' of environmental protection, as claimed by the Riksskatteverket, depends 16. If the 1988 Law is not truly a tax on on whether the structure of the tax itself emissions but, rather, on fuel consumption, and, more particularly, its calculations are it is, prima facie, incompatible with the designed to encourage the use of less exemption laid down for aviation fuel by polluting aircraft engines. The first compo- Article 8(1 )(b) of the Mineral Oils Direc- nent of the calculation is a charge at a rate tive. Consequently, it is necessary to decide of SKR 1 per kilogram of aviation fuel whether Article 3(2) of the General Direc- consumed, based, apparently, (pursuant to tive permits Member States to impose such Article 6(1) of the 1988 Law) on data kept a tax and, in doing so, to consider the scope

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17. The General Directive does not define excise duties, but, as we see from Arti- cle 1(1), merely 'lays down the arrange- ments for the products subject to excise duties and other indirect taxes...' (emphasis added). This has led some, commentators to describe the approach adopted as one based on a new concept of 'general and flexible harmonisation' or on the 'smallest common denominator' of possible harmonisation. 9 The wording of Article 1 of the General 19. The national court has described the Directive includes 'other indirect taxes' on tax at issue as an excise duty. Given the the products covered by the harmonised scope of the products which may be regime. The right of Member States to subjected to such taxes and the character- impose (or continue to impose) such indir- ect taxes or non-harmonised excise duties is governed by Article 3(2) of that directive. 10 — In theory special taxes on services, such as theatre or cinema performances (see Case C-109/90 Giant v Overijse The first question referred relates to the [1991] ECR 1-1385), could be regarded as being excise duties but the notion of an excise duty has traditionally extent of that power and its limitations. been associated with taxes on goods. 11 — See Easson, Taxation in the European Community (Lon- don, 1993), p. 144. 12 — See Farmer & Lval, EC Tax Law (Oxford, 1994), p. 225. 9 — See Terra & Wattel, European Tax Law (Deventer, 1993), The diversity of such taxes, ranging from special taxes, p. 145, who cite the comments of Stubbe, 'Die Harmoni- inter alia, on coffee and light bulbs in Germany, salmon in sierung der besonderen Verbrauchssteuern in der Euro- Denmark and bananas in Italy, is illustrated by Sterdyniak päischen Gemeinschaft', ZfZV 1993, at p. 170. a.o., Vers une Fiscalité Européenne (Paris, 1991), p. 238.

20. At first glance, there would appear to be a conflict between Article 8(1 )(b) of the Mineral Oils Directive and Article 3(2) of the General Directive. The latter permits 22. It is clear from the fifth recital in the Member States to impose non-harmonised preamble to the Mineral Oils Directive that excise duties for specific purposes while the the Council intended 'to lay down certain obligatory exemptions at Community former requires them to exempt the con- level', though no reasons are recited. sumption of aviation fuel. However, I am Although Article 2(2) requires that mineral satisfied that the provisions can be recon- oils used as motor fuel be subject to the ciled. harmonised Community rate of duty set out in the Rates Directive, Article 8(1 )(b) of the Mineral Oils Directive imposes an exemption for mineral oils used as fuel in commercial aviation. I do not think that the 21. It is noteworthy that the original Com- limitation of the obligation of Member mission proposal was that the products States in Article 8(1) to exempt the mineral covered by what was to become the Gen- oils enumerated in points (a) to (c) 'from eral Directive would '... not be subject to the harmonised excise duty', which was any tax other than excise duty and value also inserted by the Council, was intended added tax'. 1 3 The Council insisted on the to impose a narrower requirement on retention of a residual power of taxation Member States than that which had been for Member States, subject, of course, to proposed by the Commission.15 The Coun- the need to respect 'the tax rules applicable cil may well have been influenced by the for excise duty'. 14 The crux of the present Chicago Convention in including the man- case is whether the tax rules to which datory exemption of aviation fuel. It chose, however, to apply the exemption equally to both international and domestic commer- 13 — Proposal for a Council directive on the general arrange- cial aviation, but, by the last subparagraph ments for products subject to excise duty and on the holding and movement of such products, at Article 3(2); of Article 8(l)(b), explicitly permitted OJ 1990 C 322, p. 1. 14 — See Article 3(2) which is quoted more fully in paragraph 4 above. The Council went beyond the amendment sug- gested by the European Parliament, which proposed that the Member States would '... retain the right to introduce 15 — Article 8(1) of the Commission's Proposal for a Council taxes other than excise duty and value added tax... directive on the harmonisation of the structures of excise provided that in trade between the Member States such duties on mineral oils (OJ 1990 C 322, p. 18), in taxes do not give rise to taxes on entry to national territory describing the obligation of the Member States to exempt nor to remission of tax on exit, nor to frontier controls' the products in question, did not expressly mention the (emphasis added); see OJ 1991 C 183, p. 123. excise duties thereby envisaged.

23. It is possible, of course, to take a narrow view of the 'tax rules' envisaged by Article 3(2) of the General Directive, which Member States must respect when introducing or applying indirect taxes on products enumerated in Article 3(1). These rules are those which concern 'determina- tion of the tax base, calculation of the tax, chargeability and monitoring of the tax'. The derogating character of this provision, however, suggests a contrary approach. The General Directive was adopted on the legal basis of Article 99 of the Treaty to serve the interests of the internal market and as part of a scheme whereby specific directives would be adopted relating to the structures and rates of duty (Article 1(2)). 17 The power of Member States to impose other indirect taxes is expressly subjected to the 24. It is true that the exemption under double limitation that any such tax serve a Article 8(1 )(b) of the Mineral Oils Direc- tive applies, according to its express terms, only to 'the harmonised excise duty' 16 — Additional support for this view may be drawn from (emphasis added), but I do not think that Article 8(4) or the Mineral Oils Directive. It contains a the Council thereby wished to allow Mem- general provision pursuant to which the Council may authorise Member States to introduce exemptions in ber States to impose other forms of indirect addition to those envisaged by Article 8(1) to (3); see most recently Council Decision 96/418/EC of 27 June taxes or excise duties. Both Articles 1(1) 1996 authorising a Member State, in accordance with and 3(2) of the General Directive show that Article 8(4) of Directive 92/81/EEC, to introduce or continue to apply exemptions from, or reductions in, the directive covers both 'excise duties and excise duties on certain mineral oils used for specific purposes; OJ 1996 L 172, p. 22. other indirect taxes'. The use of the term 17 — In Case C-408/95 Eurotunnel and Others v SeaFrance 'harmonised excise duty' in Article 8(l)(b) [1997] ECR I-6315, the Court described the Object' of the General Directive as being 'to ensure that the conditions applicable to the movement of goods subject to excise duty within the internal market without fiscal frontiers are implemented as from 1 January 1993' (paragraph 7). 18 — See paragraph 15 above.

26. As regards the second question, there 19 —Case 8/81 [1982] ECR 53 (hereinafter 'Becker'), para- is, in my view, no doubt that Article 8(l)(b) graph 25. 20 — Sixth Council Directive 77/388/EEC of 17 May 1977 on of the Mineral Oils Directive is capable of the harmonisation of the laws of the Member States being relied upon directly by a taxpayer relating to turnover taxes — Common system of value added tax: uniform basis of assessment; OJ 1977 L 145, · who asserts that, in violation of that p. 1. 21 — See Becker, loc. cit., paragraphs 32 to 34, at paragraph 32. provision, it has been subjected to excise For more recent case-law to the same effect, see Case duties. The Court has consistently held C-10/92 Balocchi v Ministero delle Finanze [1993] ECR I-5105 and Case C-62/93 BP Supergas v Creek State that, once the provisions of a directive are [1995] ECR I-1883.

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27. Consequently, I recommend that the Mineral Oils Directive applies to the tax at Court answer the second question by issue, it may be split into parts that are declaring Article 8(1 )(b) of the Mineral compatible and incompatible with Com- Oils Directive to be capable of being munity law on the basis that it could be invoked directly against State authorities viewed as being based partly on emissions such as the Riksskatteverket. of hydrocarbons and nitric oxides. The third question does not, in my opinion, arise for consideration in the present case, C — Severability where all relevant component elements in the tax are calculated on the basis of data maintained and kept by the Luftfartsverket 28. By its third question the national court regarding fuel consumption and emissions asks whether, on the assumption that the on an average flight.

(2) Article 8(l)(b) of Directive 92/81/EEC is directly effective so that it may be relied upon by an individual against a State authority before a national court.

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