C-434/97

1. In this case, the Commission charges the ducts 'may be subject to other indirect- French Republic with maintaining in force taxes for specific purposes, provided that the tax on alcoholic beverages with an those taxes comply with the tax rules alcoholic strength exceeding 25% by applicable for excise duty and VAT pur- volume, introduced by Article 26 of Law poses as far as determination of the tax No 83-25 of 19 January 1983, the pro- base, calculation of the tax, chargeability ceeds of which are intended for purposes of and monitoring of the tax are concerned.' social security, and with thereby failing to fulfil its obligations under Article 3(2) of Council Directive 92/12/EEC of 25 Febru- ary 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products ('the excise duty directive') 1 and Article 20 of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol The provisions relating to the structures and alcoholic beverages ('the directive on and rates of excise duty on the products structures'). 2 subject to it are contained in specific directives. In particular, the directive on structures harmonises the excise duties on alcohol and alcoholic beverages. It provides in Article 19 that 'Member States shall apply an excise duty to ethyl alcohol', while Article 20 defines what constitutes ethyl alcohol (this includes products with an Legislative framework alcoholic strength by volume exceeding 1.2% volume which fall within CN codes 2207 and 2208, even when those products form part of a product which falls within another chapter of the CN, products of CN 2. The excise duty directive harmonised the codes 2204, 2205 and 2206 which have an system of excise duty applicable to certain actual alcoholic strength by volume exceed- products, namely mineral oils, alcohol and ing 22% volume, and potable spirits con- alcoholic beverages, and manufactured taining products, whether in solution or tobacco. Article 3(2) states that those pro- not). Article 21 of the structures directive sets out the method for calculating the excise duty in question, stating that the rate ° Original language: Italian. 1 — OJ 1992 L 76, p. 1. is to be fixed 'per hectolitre of pure alcohol 2 —OJ 1992 L 316, p. 21. at 20° C and shall be calculated by

Procedure

The French Government did not comply with the reasoned opinion. Consequently, 4. By letter of formal notice of 14 February the Commission, by a document lodged 1996, the Commission informed the French with the Court Registry on 22 December Government that, in its opinion, the social 1997, instituted proceedings against the security contribution levied on alcoholic French Government under Article 169 of beverages by the aforementioned Law was the EC Treaty (now Article 226 EC) for a not compatible with the structure of the declaration that it was in breach of its excise duties on alcohol and alcoholic obligations under the excise duty directive. I - 1132

COMMISSION V FRANCK

6. The Commission emphasises that Arti- cle 3(2) should be interpreted not as a mere reference to the prohibition of placing obstacles in the way of the free movement of goods, but as a specific condition 8. Contrary to the Commission's asser- governing the ability to derogate from the tions, the French Government submits that harmonised system, consisting in the obli- the social security contribution at present in gation on national legislative authorities to force in its legislation comes within the comply, when operating within the scope of exception set out in Article 3(2), since it is that provision, with the essential elements for a specific purpose, namely the protec- of the harmonised system of excise duty tion of public health. On this point the and VAT concerning the tax base, the French Government submits that the meth- method of calculation, chargeability and ods of calculating the national contribution monitoring, as specifically indicated in that at issue are the most appropriate to obtain provision. that result. Since this contribution is

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OPINION OF MR SAGGIO — CASE C-434/97

The parties put forward two different interpretations of this provision. According 9. With regard to the scope of the national to the Commission, it should be interpreted measure, the French Government points literally, as meaning that any 'other taxes' out that the Commission confines itself to must comply in full with the harmonised challenging its compatibility with the struc- rules laid down for excise duty (and for ture of excise duties (and therefore the VAT) which relate to determination of the possibility of bringing it within the scope of tax base and the calculation, chargeability Article 3(2)) with reference solely to pro- and monitoring of the tax. In contrast, ducts with an alcoholic strength exceeding according to the French Government, that 22% by volume, that is, those products provision allows the Member States to referred to in the second indent of Arti- provide, in regard to other indirect taxes cle 20 of the directive on structures, which on the same products, for taxation arrange- defines the term 'ethyl alcohol', and that it ments which are not the same as those of takes no account whatever of products with the excise duty (and VAT) system, subject, an alcoholic strength exceeding 1.2% by however, to the condition that this does not volume, that is to say, the products referred prejudice the proper application of the to in the first indent of Article 20, even harmonised rules either from the fiscal though these also come within the defini- point of view or from the broader aspect tion of ethyl alcohol. of the free movement of goods.

11. The argument of the Commission can- die Besteuerungsgrundsätze der Verbrauch- not be accepted. It finds no support in steuern... beachten'), because the expres- either the wording or the purpose of the sions used do not differ substantially from provision. those in the other versions and therefore, in my view, do not exclude the less rigorous interpretation. It is consequently reason- able to take the view that, while some indications may be derived from the actual wording of the provision, such indications point more towards confirmation that there is no rigorous obligation to comply with the aforementioned Community rules. Concerning the wording of the provision, I consider that, while it is true that there are slight linguistic differences between the expressions used to indicate how national legislation must comply with the relevant Community rules in order for derogating national law to comply with Article 3(2), it is also true that these differences are not In addition, according to the case-law of significant. The French version ('à condi- the Court, if there are differences between tion que ces impositions respectent les the different language versions of a provi- règles de taxation applicables pour les sion, that provision must be interpreted 'by besoins des accises'), the Italian version reference to the purpose and general ('regole applicabili ai fini delle accise') and scheme of the rules of which it forms the Spanish version ('normas aplicables en part.' 3 As we shall see later, application relación con los impuestos'), given the use of this criterion means that the provision at of the words 'pour les besoins', 'ai fini' and issue must be interpreted in such a way that 'en relación con', do not seem to require its utility is recognised and that, in this pure and simple compliance with all the respect, preference must be given to the less rules on the tax base, calculation, charge- rigorous interpretation described above. ability and monitoring of the tax concern- ing excise duty and VAT, but give relatively flexible indications on those points. Indeed, if the Community legislature had wished to impose a condition of this kind, that is, if it had wished to impose full compliance with the rules in question, it would probably have used a more definite expression, for example, in the Italian version, by referring 12. The wording of the provision offers to compliance with the rules applicable to further confirmation to the same effect, and excise duty rather than for excise duty thus contrary to the argument of the purposes, and also by using similar expres- Commission. In some language versions, sions in the other versions. In my opinion, and specifically the English, Dutch and the same conclusion must be reached on the basis of the English version ('comply with the tax rules applicable for excise duty') or 3 — Case C - 4 4 9 / 9 3 Rockfon [1995] ECRI-4291.paragraph 28, which repeats the principle expressed in Case 30/77 the German version ('sofern diese Steuern Bouchereau [1977] ECR 1 9 9 9 , paragraph 14.

Danish versions, the possibility of creating proper functioning of the internal market. 5 other taxes on products already subject to In line with this general objective the rule in excise duty is subject to cumulative com- question is designed to allow Member pliance with the rules relating to VAT and States to introduce 'other' indirect taxes those relating to excise duty: this is due to for specific purposes on products already the use of the conjunction 'and' between subject to excise duty, for example to these two forms of charges instead of the achieve effective protection of public health disjunctive 'or', which appears in other by discouraging the consumption of alco- language versions. If one were to accept the hol by means of taxation. If we were to interpretation of the Commission, which is accept that this derogating rule has the based on full compliance with the rules, scope suggested by the Commission, Mem- Member States would have to observe two ber States would have very limited room different sets of rules at the same time and for manœuvre to attain specific objectives. would consequently be unable to follow In short, according to this argument, them both fully and rigorously, which the Member States could only introduce a Commission none the less considers essen- second excise duty, parallel to the Commu- tial for the derogation to be able to apply. nity duty. Suffice it in this regard to point out that one of the essential characteristics of VAT is the fact that it is proportional to the price of the goods and services on which it is imposed, 4 whereas one of the essential characteristics of the excise duty which is If that were the case, the exception would charged on alcoholic beverages is that it is be without justification and the provision applied according to the volume of the providing for it would be unreasonable. product. In my view, this rules out a literal The same conclusion is in particular interpretation of the reference to the rules reached if we consider the relationship applicable to excise duty and VAT as being between the additional indirect taxes and a condition of the legality of national the harmonised excise duty. In fact, it is not indirect taxes. clear what the difference is, according to the Commission, between these two cate- gories of tax.

taxation in a different way to that set out in sider that the provision makes the power of the directive on structures. This argument, States to introduce other indirect taxes however, does not help to clarify the scope subject to compliance with specific obliga- of the derogation: it only explains a power tions, that is, the obligations which arise of the States which lies in the methods of from the express reference to the rules application of the harmonised excise duties, governing the excise duty system which which only provide for minimum levels. concern the tax base, calculation, charge- The end result of the Commission's inter- ability and monitoring of the tax. pretation is to deprive the rule in question of all reasonable utility, since the same effects produced by the introduction of a second excise duty could be obtained by increasing the harmonised excise duty. As the French Government points out in its defence, the Commission's interpretation It can be stated in favour of this second amounts to the reintroduction into Arti- interpretation that the provision in ques- cle 3(2), by way of a contrived interpreta- tion is not limited to requiring general tion, of the wording which the Commission compliance with the system of excise duty, had proposed at the preparatory stage, and which could confirm the interpretation which the Council rejected. 6 proposed by the French Government, but goes even further inasmuch as it specifies four general areas which Member States are required to respect when introducing other indirect taxes. The reference to these four specific areas docs not, in my view, mean that we can accept the submission of the French Government. It is, however, 14. That being so, it still remains to clarify necessary to establish the restrictions on the the meaning of the reference to the rules on action of the Member States which arise the tax base, calculation, chargeability and from the reference to the rules concerning monitoring of the taxes applicable for the these areas. purposes of excise duty, which appears in Article 3(2). Having recognised the Com- mission's submission that the provision should be interpreted strictly as being without foundation, two possible readings must be considered, the second of which can in turn be divided into formulas with Even if Article 3(2), by introducing a differing degrees of obligation: first, we can derogation from the general system of consider that, as the French Government excise duty, can only be interpreted restric- argues, the provision requires only that tively, I am still of the opinion that States do not compromise the system of compliance with the rules in question need excise duty (and VAT) when they introduce not mean that the Community rules must other indirect taxes; second, we can con- be on all fours with the rules applicable to the individual products in each category. I believe that the legality of a national tax 6 — The Commission had proposed the following wording for under Community law must be evaluated in Article 3(2): 'The products mentioned in paragraph 1 shall not be subject to any tax other than excise duty and value relation to the Community system for the added tax' (OJ 1990 C 322, p. I). entire category of products involved and

not in relation to that laid down for the cussion fulfils the conditions to which this individual product. To require total agree- provision subjects the power of States to ment between the national and Community introduce indirect national taxes. To that laws relating to an individual product end, national taxes must: (a) have a specific (wine, beer, fermented drinks other than purpose and (b) comply with the rules for wine and beer, intermediate products, as excise duty with reference to the four areas defined in Article 17 of the directive on already mentioned. structures, ethyl alcohol) would not only deprive Article 3(2) of any useful function, but would risk leading to additional forms of excise duty, contrary to the principle of a single excise duty. For example, if a Mem- ber State intended to subject an alcoholic beverage such as wine to a tax other than With regard to condition (a), I think that excise duty, for health-protection purposes, the Commission, albeit with some ambi- it could do so only on condition that it guity evident particularly during the hear- complied in full with the rules which ing, recognises that the French tax does appear in the directive on structures con- have a specific purpose, namely that of cerning alcoholic beverages, but need not health protection. Although there was no also comply to the letter with all the specific challenge on this point by the specific rules in that directive relating to Commission, the French Government has wine. However, the parameter in question emphasised that the introduction of the could not be considered to have been indirect national tax on alcoholic beverages complied with if the amount of the indirect coincided with a reduction in the consump- national tax were determined in proportion tion of the beverages concerned, that is to to the value of the product: in that case the say, beverages with an alcoholic strength national law would be totally outside the exceeding 25% by volume. reasoning of the directive, which does not envisage this method of calculation for any of the products governed by it, and there- fore would not come under the derogation set out in Article 3(2). The complaint which the Commission levels against the French Government con- cerns the failure to comply with condition (b). On this point, the Commission takes issue with the French Government in regard to the fact that the tax concerned applies only to alcoholic beverages with an alco- holic strength greater than 25% by volume and also that the amount therof is deter- mined in proportion to the quantity of the beverage. The Commission considers that such a rule is not in accordance with 15. Taking into account the proposed inter- Article 3(2), in conjunction with Arti- pretation of Article 3(2) of the excise duty cles 20 and 21 of the directive on struc- directive, it is now necessary to determine tures. In my opinion, that charge is unfoun- whether the French legislation under dis- ded. I - 1138

As matters stand, there can be no doubt Although the methods of calculation that the French legislation under examina- defined by the French legislation do not tion does not comply in all respects with tally with those set out for ethyl alcohol in the Community rules set out in the directive Articles 19 and 21 of the directive on on structures. However, in my opinion, it is structures, since the calculation is made compatible with Community law, consider- on the basis of the quantity of the beverage ing that the range of alcoholic beverages and not of its alcoholic strength, it is also subject to the French tax is within that true that for other products (wine, beer, indicated in the directive on structures. I do other fermented drinks, intermediate pro- not think that the fact that the French tax is ducts) the directive on structures takes the not also charged on alcoholic beverages quantity as the basis for the calculation. 8 with an alcoholic strength between 22% Moreover, the French tax (equivalent to and 25% by volume is such as to affect the FRF 0.84 per decilitre) is consistent with Community system. The only limit which Article 20 appears to indicate in strict terms, namely that the alcoholic beverage 7 —Article 3 of Council Directive 92/84/ILKC of 19 October 1992 on the approximation of the rates of excise duly on must have an alcoholic strength above alcohol and alcoholic bevcraucs (OJ 1992 L 316, p. 29). 1.2% by volume, is in no way compro- 8 — More specifically, the directive on structures, at Articles 9, 13 and 18, rakes as the sole reference factor 'the number of mised by the French law. hectolitres of finished product'.

19. For all of the foregoing considerations, I propose that the Court should:

— dismiss the action; and

— order the Commission to pay the costs.

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