C-187/99

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OPINION OF MR TIZZANO — CASE C-187/99

— the processing of goods, issue, by the customs authority of the Member State in which the processing operations are to be carried out, of an inward processing authorisation ... .

— the repair of goods, including their restoration,

2. The authorisation shall be issued at the request of the person who carries out processing operations or arranges for them to be carried out. — the use of certain goods ... which are not to be found in the compensating products, but which allow or facilitate the production of those products, even if they are entirely or partially used up in the process.' This person shall supply, with his applica- tion, the information required for issue for the authorisation.

'Compensating products' means:

contained in Title II and the subject of this According to Article 15(1): reference for a preliminary ruling, reads as follows:

'... the customs authority shall fix either the rate of yield of the operation or, where ' 1 . The conditions under which the necessary, the method of determining such arrangements are used shall be set out in rate. This rate shall be determined on the the authorisation. basis of the actual circumstances in which the processing operation is, or is to be, carried out.'

2. The holder of the authorisation is required to notify the customs authority of all factors arising after the issue of the authorisation which are likely to influence 8. Next, Article 17 of the regulation pro- its continuation or contents. vides that:

3. Where the circumstances under which 'The customs authority may take any the authorisation was issued are found to measures of supervision or control which have changed, the customs authority shall it considers necessary to ensure that the amend the authorisation accordingly.' regulation is implemented correctly by the holder of the authorisation or by the operator where this is a different person.'

10. For the purposes of this case, it is also 13. On 31 August 1988, the Secretariado worth drawing attention to Council Reg- de Estado dos Assuntos Fiscais (Secretary ulation (EEC) No 3677/86 of 24 Novem- of State for Fiscal Matters) ordered an ber 1986 laying down provisions for the inspection of the premises of Eru Portu- implementation of Regulation (EEC) guesa. The inspection established that the No 1999/85 on inward processing arrange- rate of waste for the grated cheese ments. 4In accordance with Article 14 of amounted to only 1% and that, therefore, that regulation: '... authorisations shall be the rate of yield from the processing was made out in writing and shall conform to 99% and not 97% as set out in the the model set out in Annex II.' Paragraph 6 authorisation. The inspection was comple- of the model includes an entry on the rate ted in June 1990. of yield. According to the explanatory note, that entry must indicate the rate of yield or method by which the rate will be estab- lished.

14. It is clear from the order for reference that the outcome of the inspection was not disputed by Eru Portuguesa, as is apparent from the fact that, from 30 November 1988, in its requests for inward processing Facts and the questions referred for a authorisations, Eru Portuguesa gave a rate preliminary ruling of yield of 99% for the grated cheese and a rate of waste of 1%.

11. In March and April 1988, Fábrica de Queijo Eru Portuguesa L d a('Eru Portu- guesa') imported several drums and boxes of cheese intended for processing. These 15. Once the reported difference in the rate were imported under inward processing of yield had been confirmed, the Chefe de relief arrangements, after the requisite Delegaçao Aduaneira do Jardim do Tabaco authorisation had been obtained from the (the competent customs authority) calcu- customs authorities. lated the tax due on the quantity of raw material which had not been processed on the basis of a 2% over-declaration of waste by Eru Portuguesa, and demanded payment thereof in January 1992.

20. The Supremo Tribunal Administrativo decided that the outcome of the dispute depended on the interpretation of Arti- 18. In the proceedings before the latter cle 11 of Council Regulation No 1999/85 court, the main issue in dispute between the and, accordingly, submitted the following parties concerned the interpretation of questions to the Court of Justice for a Article 11 of Regulation No 1999/85. 5 preliminary ruling: According to the arguments put forward by Eru Portuguesa, and accepted in the judgment under appeal, Article 11 governs only the conditions and requirements for the issue of inward processing authorisa- tions. It does not therefore apply to cir- cumstances where the rate of yield fixed in the authorisation differs from the actual '1. Is Article 11 of Council Regulation rate of yield. According to Eru Portuguesa, No 1999/85 of 16 July 1985 concerned that is an aspect more properly related to with the conditions (obligations, rules) laid the functioning of the inward processing down in the document granting the bene- relief arrangements, which is governed by ficiary of the arrangements authorisation the provisions in Title III of the regulation. for the use (functioning) thereof? Consequently, in circumstances of the kind described above, the customs authority could not rely on Article 11(3) to alter the contents of an authorisation which had already been issued, but could only adjust the rate of yield in subsequent authorisa- tions. 2. Or, on the contrary, is it concerned with the conditions, requirements or bases for the issue of the inward processing author- 5 — See point 6 above. isation?

21. I consider that the first two questions can be answered together. By those ques- tions, the national court is essentially seeking to ascertain whether, when Arti- cle 11 of Regulation No 1999/85 requires 23. But if Article 11(2) refers both to the the beneficiary of the inward processing conditions for the issue of the authorisation relief arrangements to notify the customs and the conditions for the use of the authority of all factors arising after the arrangements, it must follow that, in per- issue of the authorisation (Article 11(2)), mitting the customs authority to amend the and when it gives the customs authority the authorisation if circumstances have chan- power to amend the authorisation accord- ingly (Article 11(3)), it is referring exclu- sively to those factors which relate to the 6 — See point 6 above. authorisation document or whether it also 7 — See point 10 above.

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24. Nor does it seem to me that this conclusion is open to challenge on the ground that, as highlighted in the judgment which is the subject of the appeal before the 26. There is no doubt that the system under Supremo Tribunal Administrativo, Arti- consideration depends on an authorisation cle 11 is to be found in Title II of Regula- issued at the request of the person con- tion No 1999/85, which concerns the issue cerned and based on the information that of the authorisation, 8whereas it is Title III person supplies. This — as the Commis- which covers the functioning of the sion points out in its observations — is a arrangements. I do not see where the mechanism clearly designed to avoid a article ought to have been located if not situation in which the customs authority at the end of Title II, together with has to make a complete check of the de Article 12 on revocation of the authorisa- facto circumstances of every operation and tion. Both articles effectively complete, therefore places on the person making the under the appropriate Title, the general application the burden of providing all the rules on authorisation, by laying down, in a requisite information. 9 structured and logical sequence, the rules governing the issue, amendment and revo- cation of authorisation.

27. The stage of issuing the authorisation 25. Solely in the light of the above con- siderations, then, it seems to me to be clearly does not complete the functioning

9 — As laid down i n the second sentence of Article 3(2) of 8 — See point 18 above. Regulation (EEC) No 1999/85. Sec point 4 of this Opinion.

28. It is in fact clear that the arrangements can function properly not only if the applicant provides the correct information but also only if the competent authority is able to carry out the necessary supervision 30. In the context of these arrangements, and controls, adjusting the authorisation in therefore, the non-payment of customs accordance with any different findings on duties is specifically designed to enable its part. Were that not the case, the Community producers to obtain the pro- conclusion would have to be that the duction materials they need at the same customs authority may not amend the cost as producers outside the Community, authorisation even if it establishes that thereby guaranteeing conditions of basic one of the conditions for the functioning equality between these producers on the of the arrangements — and, moreover, an international market. important condition, such as the rate of yield — does not correspond (or no longer corresponds) to the real economic condi- tions of the processing activity. Not only would that conclusion be paradoxical, it would be blatantly incompatible with the objective of the inward processing relief arrangements.

31. However, if the arrangements are to function properly, the conditions laid down for use of the inward processing relief arrangements must obviously be fully com- plied with to avoid the risk of distortion 29. I would point out here that the Court and abuse. That applies particularly to the has made clear that 'it appears from the

11—Case C-437/93 Tank Telefunken [1995] ECR I-1687, 10 —As provided for by Article 17 of Regulation (EEC) paragraph 18. See also Case C-325/96 Fábrica de Queijo No 1999/85. See point 8 of this Opinion. Eru Portuguesa [1997] ECR I-7249, paragraph 3.

32. On the basis of the above consideration 34. In the final analysis, these two ques- and those I set out earlier, I therefore tions raise the same issue and can therefore propose to answer the first and second be answered together. The only differences questions from the national court to the concern, in the fourth question, the refer- effect that Article 11 of Regulation ence to the principle of legal certainty, and No 1999/85 governs all elements of the the final sentence which mentions the fact inward processing relief arrangements, that that the customs authority has been super- is to say both the conditions concerning the vising and controlling the operation of Eru issue of the authorisation and the condi- Portuguesa since the inception of the tions concerning the use and functioning of arrangements in Portugal (in 1986). In fact, the arrangements themselves. the latter circumstance is very probably behind the reference to the principle of legal certainty. The sentence implies, albeit very indirectly, that the customs authority was already familiar with the real economic conditions in which the inward processing was taking place, at a point before it decided to alter the authorisation. That The third and fourth questions conduct on the part of the customs author- ity specifically gave rise to legitimate expectation on the part of Eru Portuguesa. I shall return to that point below. I should straightaway point out, however, that, save 33. The above analysis makes it easier to for the vague and fleeting allusion at the answer the remaining questions, the third end of the fourth question, there is no trace and fourth questions, submitted by the of the issue which is now being raised in the national court. By those questions, the order for reference, from which it is, if national court is essentially seeking to anything, clear that the dispute between the

36. It is clear from all of those provisions, as well as the general objectives of the system, as described above, that not only does the customs authority have the power 38. Moreover, in its written observations in unilaterally to alter the rate of yield fixed in this case, Eru Portuguesa has cited a the authorisation to reflect the economic number of factors which gave rise to reality of the operation, but it is under a legitimate expectation on its part. In parti- duty to do so — especially if, as appears to cular, in addition to challenging the meth- have happened in this case, the beneficiary ods and results of the controls carried out has failed to meet the requirement laid by the customs authority, it criticised the down in Article 11(2) to provide notifica- latter's failure to state the reasons which led it to alter the rate of yield. According to Eru Portuguesa, that is all the more serious 12 — See point 7 above. because, during 1987, that is to say the year 13 — See point 8 above. prior to that of the events which gave rise

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41. I therefore consider that it may be 40. It is, however, for the Court of Justice concluded that the beneficiary of inward to interpret the significance and scope of processing relief arrangements cannot rely the relevant Community rules. In those on legitimate expectation that the condi- terms, what has still to be emphasised, to tions fixed in the authorisation will con- complete the answer to the third and fourth tinue to apply if, even correcting earlier questions, is that even if the rate of yield decisions, the customs authority establishes was altered in order to correct an earlier that those conditions do not correspond to error of assessment by the customs author- the economic reality of the operation. ity regarding the congruence between the authorised rate of yield and the actual rate 14 — Case C-325/96 Fábrica de Queuo Eru Portuguesa [1997] of yield, Eru Portuguesa could still not rely ECR I-7249, paragraph 22.

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Conclusion

42. I therefore propose that the Court give the following answers to the questions submitted by the Supremo Tribunal Administrativo:

(1) Article 11 of Council Regulation (EEC) No 1999/85 of 16 July 1985 governs both the conditions (obligations, rules) for the use of inward processing relief arrangements which the authorisation imposes on the beneficiary of those arrangements and the conditions, requirements or bases for the issue of the authorisation.