C-185/00

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OPINION OF MR GEELHOED — CASE C-185/00

3. Article 2(2) and (3) of Directive straightforward application of such exemp- 92/81/EEC reads as follows: tions and of preventing any evasion, avoid- ance or abuse:

'2. Mineral oils other than those for which a level of duty is specified in the rates [in] (a) mineral oils used for purposes other Directive 92/82/EEC shall be subject to than as motor fuels or as heating fuels; excise duty if intended for use, offered for sale or used as heating fuel or motor fuel. The rate of duty to be charged shall be fixed, according to use, at the rate for the equivalent heating fuel or motor fuel.

3. In addition to the taxable products listed 2. Without prejudice to other Community in paragraph 1, any product intended for provisions, Member States may apply total use, offered for sale or used as motor fuel, or partial exemptions or reductions in the or as an additive or extender in motor fuels rate of duty to mineral oils used under shall be taxed as motor fuel ' fiscal control:

4. Article 8 of Directive 92/81 reads as follows:

(c) for vehicles intended for use off the public roadway or which have not been granted authorisation for use mainly on the public highway.' 7. Article 9(1) and (3) of Directive 92/12 provides:

5. Article 3(1) of Council Directive 92/12/EEC of 25 February 1992 on the ' 1 . Without prejudice to Articles 6, 7 and 8, general arrangements for products subject excise duty shall become chargeable where to excise duty and on the holding, move- products for consumption in a Member ment and monitoring of such products, 4 State are held for commercial purpose in which lays down the arrangements for another Member State. products subject to excise duties and other indirect taxes levied directly or indirectly on the consumption of such products, states that the directive applies to mineral

In this case, the duty shall be due in the 4 — OJ 1992 L 76, p. 1. Member State in whose territory the pro-

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OPINION OF MR GEELHOED — CASE C-185/00

ducts are and shall become chargeable to oil means gas oil which has been supplied the holder of the products. with the intention that it be used for heating purposes and made recognisable in compliance with the provisions of Paragraph 7 of the law and with Decree 1547/1995 based thereon.

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COMMISSION v FINLAND

normal use and performed at the workplace Paragraph 3. The fuel levy is chargeable for or building site, for the transport of their the number of days on which the vehicle is own fuel and lubricants or for their move- used in Finland until the day on which the ment from one building site to another. use of domestic fuel oil is detected. If the Where agricultural tractors or machines for date of entry cannot be determined, a levy public works are none the less used to is chargeable for a minimum of 10 days. In transport merchandise, the use of diesel oil addition, the illegal use of domestic fuel oil, is compulsory. that is its use without the Finnish auth- orities receiving prior notification, gives rise to an investigation and possibly pro- secution for tax evasion. A court may in such circumstances sentence the offender to pay an amount in compensation equivalent to the difference between the applicable 12. Pursuant to Paragraph 25 of Law taxes on the different types of gas oil. 722/1966, compliance with these provi- sions is monitored by the police and customs authorities. Under Paragraph 28, these authorities have the power to make the necessary checks in fuel storage facil- ities and on motor vehicles to determine the quantity of fuel used in the vehicles. This 14. Paragraph 8 of Law 337/1993 sets out, provision also permits them to stop vehicles by analogy with the provisions of in order to carry out such checks. If a tank Paragraph 28 of Law 722/1966, the moni- is found to contain domestic fuel oil, they toring powers of the police and customs are required by Paragraph 27 of the law to authorities. Paragraph 11 of Law 337/1993 take the vehicle out of circulation until the prohibits the removal from Finland of a relevant penalties have been imposed. vehicle registered abroad in respect of which a fuel levy is payable for the use of domestic fuel oil instead of diesel oil.

letter it was explained that the question IV — Pleas in law and main arguments particularly concerned the application of Directive 92/81 and Directive 92/82. The Finnish authorities responded to these questions by letters of 3 October 1996 and 5 June 1997. 18. In essence, the Commission's objection is that, on acceding to the European Union, Finland did not introduce a prohibition on the use of domestic fuel oil as motor fuel, but left the system hitherto in force in Finland intact, albeit with a number of adjustments. According to the Commis- 16. On 3 December 1997 the Commission sion, Article 5 of Directive 92/82 precludes declared the Republic of Finland to be in the possibility of permitting, on payment of default. Finland responded to this by letters a surcharge and/or a fuel levy, the use of of 26 January and 4 May 1998. In the heating oil, on which a lower excise duty is second of these letters the Finnish Perma- payable, as motor fuel in vehicles equipped nent Representative refers to the amend- with diesel engines. Such additional levies ment of Law 337/1993. The Commission could not be regarded as excise duties. In its then issued a reasoned opinion on 6 August reply the Commission points out that, 1998, reiterating the arguments set out in while in theory it may be maintained that, its letter of formal notice and stating that strictly speaking, a statutory prohibition is the amendments to Law 337/1993 had no not needed to enforce the provisions of bearing on the possibility of domestic fuel Article 5(1) of Directive 92/82, in practice oil being used as motor fuel. The Finnish this prohibition is indeed necessary. The Government responded to the reasoned situation might be different if Finland could opinion by letter of 22 September 1998, guarantee that, whatever the circum- reaffirming its previous contention that the stances, fuel oil used as motor fuel would Finnish legislation is consistent with the be taxed at a rate of at least EUR 245 per 1 Community legislation concerned. 000 litres. According to the Commission, this is not, however, the case.

tion of domestic fuel oil, while at the level which the Finnish legislation poses for of the final consumer the number of checks Sweden. on traffic as compared to the number of vehicles equipped with diesel engines is too small to be regarded as adequate and effective. 5From this the Commission con- cludes that the Republic of Finland has not fulfilled its obligations under Article 8 of Directive 92/81. 23. The Swedish Government too believes that the Finnish legal system has its short- comings. It argues that this system permits domestic fuel oil to be used in vehicles equipped with a diesel engine, whether illegally or legally. In the former case, the excise duty paid — that applicable to domestic fuel oil — was certainly too low. 20. It adds that the exemptions defined in In the latter case, where the use of domestic Paragraph 17(2)(a) and Paragraph 17a of fuel oil was legal because prior notification the Finnish Law on motor vehicle tax had been given, the special surcharge permit the use of domestic fuel oil for amounting to 20 times the motor vehicle agricultural and forestry activities and for tax chargeable annually and/or the fiscal machinery used in public works. It does penalty for each day on which domestic not, however, see what form the fiscal fuel oil was used in a motor vehicle were control takes in this respect. not excise duties. They were related, after all, not to the quantity of diesel oil used but to specific periods of time. The Finnish legislation therefore disregarded Article 5(1) of Directive 92/82, which prescribed a specific minimum excise duty.

oil, which is taxed at a lower rate of excise not, broadly speaking, permit the use of duty, is prohibited. Pursuant to Article 8 of domestic fuel oil as motor fuel. Such use Directive 92/12, however, the excise duty was fiscally 'penalised' with a surcharge payable on products acquired by private pursuant to Law 722/1966 and/or a fuel individuals for their own use and trans- levy pursuant to Law 337/1993. ported by them must be charged in the Member State in which they are acquired. This means that Sweden could not charge excise duty if a Swedish private individual acquired domestic fuel oil legally in Fin- land. The Swedish Government explains that in 1996 it extended the prohibition to 26. These additional levies could not be include domestic fuel oil acquired in Fin- regarded as a payment that permitted land. However, as this was inconsistent domestic fuel oil instead of diesel oil to be with Article 8 and Article 9(3) of Directive used as motor fuel. They were in the nature 92/12, it had withdrawn this unilateral of a fiscal penalty designed to prevent prohibition. Since then organised illegal abuse. Given the amount of these fines, it trade in Finnish domestic fuel oil had again did not make economic sense to use risen very sharply. Under the applicable domestic fuel oil instead of diesel oil as Swedish legislation Finnish domestic fuel motor fuel in road transport. An ordinary oil, marked red, might be carried in the fuel passenger car would have to travel some tank or in a reserve tank with a maximum 5 000 km a day and a lorry some 3 000 km capacity of 10 litres, provided that this fuel a day to recoup the additional financial had been imported by the individual con- burden. Domestic fuel oil was therefore cerned in person for private purposes. It rarely, if ever, used as motor fuel instead of was difficult, however, to prove that an diesel oil in Finland, according to the individual had not taken on the fuel himself Finnish Government. In this context it also in Finland. This would not be the case if the points out that mere detection by the police use of domestic fuel oil as motor fuel was or customs authorities of domestic fuel also prohibited by law in Finland. oil — marked red — in a fuel tank, how- ever small the quantity, was enough for the fiscal penalties to be imposed.

must be subject in some way to special derives from the existence of illicit trade in control by an authority or that the penalties domestic fuel oil between Finland and must be related to retail sales. The Finnish Sweden, the alleged absence of effective Government points out that, of the fiscal control over the fuel used in tractors 2.7 million tonnes of domestic fuel oil used and the loss of VAT revenue were not in Finland each year, 80% is used to heat mentioned by the Commission in the pre- dwellings and other buildings. The other litigation phase and must therefore be 20% was consumed in agriculture and disregarded on the ground that they are forestry and in the performance of public inadmissible. works. According to the Finnish Govern- ment, the great distances and extreme climatic conditions, especially in the thinly populated northern part of the country, made the availability of domestic fuel oil at service stations essential. It argues that — 29. According to settled case-law, the sub- further — restrictions on the already wide- ject-matter of the proceedings brought spread distribution infrastructure might before the Court is delimited by the rea- cause supply problems. This could have soned opinion, inasmuch as the application fatal consequences in the winter period, must be founded on the grounds and pleas when temperatures sometimes fell already put forward in that opinion. 6In extremely low in the sparsely populated this instance Finland is accused of not north of the country. The aim was that the fulfilling, or not adequately fulfilling, its final consumer should not use the less obligations under Article 5(1) of Directive heavily taxed domestic fuel oil as motor 92/82 and Article 8(2) and (3) of Directive fuel. The Finnish legal system was geared to 92/81, in that the Finnish legislation does this. It was on this too that the checks not ensure that the rate of excise duty focused, and the Finnish Government applied to gas oil is appropriate to the believed they were adequate. manner in which it is consumed and not enough is done to ensure that adequate fiscal control is exercised over the use of domestic fuel oil in 'exempted' sectors.

31. In my view, however, the situation is 33. The arguments with which the Finnish different in the case of the arguments which Government contests the admissibility of the Commission has advanced in connec- the Swedish Government's intervention are tion with the consequences which the not, in my view, conclusive. Finnish system is alleged to have for the VAT base. In its application the Commis- sion contends that, where the application of the Finnish system results in excise duty not being levied on domestic fuel oil used in motor vehicles in accordance with Com- munity law, the VAT own resources base is 34. To summarise, the Swedish Govern- eroded. Pursuant to the Sixth VAT Direc- ment has submitted (1) that Finland has not tive, after all, the surcharge on motor complied properly with the Community vehicle tax and the special fuel levy did provisions on the minimum excise duty on not form part of the VAT base as defined in gas oil used as motor fuel and (2) that the the directive. However, the Commission absence of an explicit prohibition of the use neither adduced nor observed anything of domestic fuel oil in 'ordinary' road about this during the pre-litigation pro- transport makes it difficult to ensure the cedure that preceded this action. In its reply effective enforcement elsewhere of legis- the Commission states that this objection lation which is meant to implement Com- does not form part of the procedure. From munity provisions. The latter shortcoming the Finnish Government's defence it is, constituted in itself an infringement of moreover, clear that this aspect has already Community law. been mentioned in another context. From this it follows, in my view, that the arguments advanced by the Commission concerning the VAT base must be dis- regarded in this procedure. 35. The Finnish Government's first argu- ment is contrived and objectively incorrect. It is advanced in an attempt to demonstrate that the Swedish reference to Finland's failure to comply properly with the Com- 32. The same is true, to my mind, of what munity legislation is inconsistent with the the Commission has had to say about the Commission's view. I - 14200

41. The situation is, however, complicated by the fact that gas oil can be used for purposes other than as motor fuel in road transport, such as heating, industrial appli- cations (power-generating units), shipping, agriculture, forestry and civil engineering. 38. According to case-law, Article 37(4) of In respect, of such other applications the the EC Statute of the Court of Justice does not prevent an intervener from using argu- 7 — See, for example, the judgment in Case C-150/94 United ments other than those used by the party it Kingdom v Council [1998] ECR I-7235, paragraph 36, and supports, provided the intervener seeks to the case-law referred to therein.

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system defined in Directives 92/81 and motor fuel being highly susceptible to 92/82 provides for exemptions or — abuse. An important criterion for the dis- sometimes substantially — lower mini- charge of the obligation to achieve a given mum excise duties on gas oil than where result referred to above is therefore whether it is used as motor fuel. the national legislation concerned, as implemented and enforced, is able to pre- vent the use as motor fuel of gas oil which is not intended for that purpose.

COMMISSION v FINLAND

47. The consumption of red domestic fuel occasions, initially to include vehicles regis- oil for inadmissible purposes is not tered in Finland with a view to avoiding explicitly prohibited by the Finnish system discrimination and then to include foreign or associated with penalties under criminal passenger cars (tourist traffic). or administrative law, but it is subject to the range of specific fiscal charges described in points 8 to 14 above. What is prohibited is not consumption as such, but consumption without prior notification. 50. As the Finnish Government has stated, without being contradicted by the Com- mission, the combined system of the special road tax and fuel levies briefly described here is economically prohibitive for con- sumers. It therefore serves not, as the Swedish Government seems to suggest, to enable the less heavily taxed domestic fuel oil to be consumed in road transport, but to 48. It follows from this system that the prevent this. consequence of the use of domestic fuel oil as motor fuel in motor vehicles registered in Finland is that the owner or holder of the vehicle concerned is charged a road tax 20 times the applicable annual rate (Law 722/1966) and a fuel levy for each day on which a vehicle has used domestic fuel oil 51. The penalising nature of those fiscal as motor fuel (up to a maximum of levies is clear from the provision which 60 days). This special fuel levy is tripled if states that unnotified use of domestic fuel the use of domestic fuel oil as motor fuel is oil as motor fuel automatically results in a not notified in time (Law 337/1993). tripling of the special fuel levy which is already prohibitive in itself.

56. I would add in this context that even an implementing system based on adminis- 53. The result required by the directive — trative or penal prohibitions does not in that a minimum excise duty actually be itself preclude fraudulent behaviour. The levied on gas oil used as motor fuel at the level of the penalties, the intensity of the rate of EUR 245 per 1 000 litres referred to checks and the diligence with which action in Article 5(1) of Directive 92/82 — is is taken when offences are detected partly therefore achieved in principle by the Finn- determine the effectiveness of such systems. ish legal system, provided that it is appro- It is the level of the fiscal penalties in the priately implemented and enforced. Finnish system and the fact that they are chargeable by law when the inadmissible use of domestic fuel oil as motor fuel is detected that result in the system combin- ing effectiveness and deterrence.

54. The arguments advanced by the Com- mission and the Swedish Government in opposition to this view — that the system does not include a prohibitive clause and might in certain circumstances permit the 57. The Swedish Government derives a use of domestic fuel oil as motor fuel further argument from Article 3 of Direc- without the minimum excise duty of tive 95/60. 8 It takes the view that this EUR 245 per 1 000 litres being provision codifies the prohibitions arising charged — do not convince me. from Articled of Directive 92/82. I would point out in this context that any obli- gations arising from Directive 95/60 are not

60. In view of the above, the Commission 58. The problems referred to by the Swed- has not, in my opinion, succeeded in ish Government in connection with cross- showing that the Finnish legal system has frontier traffic using marked, red, gas oil implemented Community law in contra- are, strictly speaking, again not at issue in vention of Article 5(1) of Directive 92/82. this action, as the Commission itself has already acknowledged in its reply. I would add, unnecessarily perhaps, that in prin- ciple these problems can easily be solved through administrative cooperation between the Finnish and Swedish auth- orities. After all, a Swedish motorist driving around in Sweden on marked Finnish domestic fuel oil has either paid the Finnish 61. This statement means that I do not special fuel levy, which must be evident need to consider the separate arguments from the notification he has given, or he derived from national law which the Finn- has wrongfully failed to pay this levy. In the ish Government has advanced for retaining latter case he is required to pay this very the existing regime of fiscal and adminis- high fiscal levy or penalty. Given the pro- trative penalties. hibitive nature of this penalty, the con- sumption of marked Finnish domestic fuel oil can therefore be adequately controlled by the Swedish authorities in cooperation with the Finnish authorities.

62. Full compliance with the Community legislation of relevance here is not deter- mined solely by reference to the national 59. The second argument advanced by the legal system for its implementation. It is the Commission and the Swedish Government, way in which this system, which is in itself that the Finnish system results in its being compatible with Community law, is possible for domestic fuel oil to be used applied and enforced that determines 'legally' as motor fuel without the tax due whether Finland has fulfilled its obligations having been paid, is based, as I have under Article 5(1) of Directive 92/82 and already remarked, on an — overly — for- Article 8 of Directive 92/81.

64. In response to the first accusation the Finnish Government has said that Article 8 of Directive 92/81 does not specify what the fiscal control must comprise. As fiscal control over the widespread distribution system in Finland is difficult and ineffec- tive, the Finnish Government has chosen to concentrate it on the final consumer level. It points out that fiscal control at distribu- tion level cannot be effective because it is very easy to extract domestic fuel oil from the storage tanks that supply heating boilers. The same risk applies in the case 66. Nor does the basis for the Commis- of stocks held for use in agriculture and sion's second accusation seem convincing. forestry and the performance of public The Finnish Government has advanced works. strong arguments in support of the avail- ability of domestic heating oil at service stations in the thinly populated far north of the country, where weather conditions can be extreme. The vulnerability of the dis- tribution infrastructure in that area is such that it must be possible for final consumers, when necessary, to meet their domestic fuel oil needs at service stations. From the 65. As Directive 92/81 does not elaborate information submitted by the Finnish Gov- on the term 'fiscal control' in Article 8(2) ernment, which the Commission has not and (3), by stating, for example, that it contradicted, it is clear that this is a should be explicitly understood to include supplementary supply channel. Only 4% the distribution stage, the obligation to of all domestic fuel oil is sold through exercise control should be interpreted as service stations.

68. In the light of the statement of reasons submitted by the Finnish Government, I do 71. This uncontested information reveals, not consider the general objections to the among other things, that 3 943 checks were inclusion of service stations in the domestic made in 1999. In 141 cases there was fuel oil distribution chain to be decisive. I reason to take a sample. Of the samples would point out, in passing, that service taken, 125 were positive. As it is reasonable stations are also included in this distribu- to assume that these fiscal checks were not tion chain elsewhere in the Community, in made arbitrarily, but were concentrated on Austria, for example. It is true that the sectors and environments where there was presence of service stations as a link in the an increased risk of abuse, these figures do distribution chain entails certain risks of not indicate extensive illegal use of abuse, which require specific fiscal control. domestic fuel oil in road transport. This It is here that the Commission should have seems to be confirmed by the findings of a demonstrated that the specific control general check made on road transport in exercised by the Finnish authorities is eight Member States on 22 September inadequate. For this, however, its general 1999. In this action fiscal offences were objections to Finnish fiscal control, which detected in the case of 283 vehicles will be considered below, are not specific checked. Of these vehicles, three were enough. identified in Finland, two being agricultural tractors carrying merchandise on the public highway.

75. In the light of the foregoing, I propose that the Court should:

(1) dismiss the Commission's action against the Republic of Finland for failure to fulfil obligations.

(2) order the Commission to bear the costs of the procedure.

(3) order the Kingdom of Sweden to bear its own costs.

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