JUDGMENT OF 16. 12. 1963 — JOINED CASES 2 TO 10/63 SAN MICHELE v HIGH AUTHORITY

In Joined Cases 2/63 to 10/63

THE COURT composed of: A. M. Dormer, President, Ch. L. Hammes and A. Trabucchi (Presidents of Chambers), L. Delvaux, R. Rossi (Rapporteur), R. Lecourt and W. Strauß, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

II — Conclusions of the parties

primarily

secondarily

III — Submissions and arguments of the parties

Admissibility

On the substance of the cast

A — As to the principal conclusions

1. In Cases 2, 3, 5 and 6/63

2. All cases

B — The subsidiary conclusions

IV — Procedure

Grounds of judgment

Admissibility

The substance

A — Annulment of the fines

B — Reduction of the amount of the fines

C — Annulment of the periodic penalty payments

Costs

I —. Facts

II —. Conclusions of the parties

(a). four-fifths in Cases 2, 3 and 6/63;

(b). five-sixths in Cases 4, 7, 8, 9 and 10/63:

(c). nine tenths in Case 5/63;

III —. Submissions and arguments of the parties

(a). that the Decisions addressed to the applicants in Cases 2, 3, 5 and 6/63 infringe Articles 14 and 15 of the Treaty in requiring the production of electricity invoices covering a period longer than that during which the applicants have been engaged in the iron and steel industry;

(b). all the contested Decisions are vitiated by misuse of powers in that the High Authority:

A —. As to the principal conclusions

1. In Cases 2, 3, 5 and 6/63

2. All cases

(i). that they were thenceforward discharged from their duties towards the High Authority provided for by Article 47 of the Treaty;

(ii). that the information they gave to the High Authority and the national fiscal authorities would not be further checked for its accuracy;

(iii). that they were not required to keep the electricity invoices at issue any longer because this obligation had ceased by virtue of Italian law.

(a). It is a settled legal principle that the power of fiscal authorities to correct errors or make assessments may be exercised only within the time-limits fixed by law. Under Italian law (testo unico) on tax adjustment of 29 January 1958, No 645 (Articles 32 and 35) these time-limits are three and four years respectively from the year during which the taxpayer's return was made or should have been made. Article 42 of this law stipulates further that the authorities need not take into consideration accounting documents which the person concerned refuses to produce and that a declaration that he does not possess these documents amounts to a refusal to produce them.

(b). As regards, on the one hand, the obligations prescribed in Article 47 of the Treaty which undertakings may not evade, these are two in number:

(c). As regards, on the other hand, the duty to keep the accounting documents and more especially trade invoices, there is no provision for this in the Treaty. As the Treaty is silent, reference must be made to national law, in this case the Italian law mentioned above. The references by the defendant to the commercial codes of other Member States are irrelevant because these provisions do not refer to trade invoices. The Italian law applicable in the present case is not Article 2220 of the Civil Code, because the obligation there set out is only for evidential purposes and for wholly special cases, but Article 2 of the Law of 19 June 1940, No 762, which lays down the obligation to keep accounting books and documents, trade invoices etc. for a period of five years. This is the more specific law as compared with Article 2220 of the Civil Code, derogating from the latter in accordance with the principle in toto jure generi per speciem derogatur.

(d). The obligation laid down in Article 2220 is moreover not a true obligation: this provision lays down quite simply the onere (burden) of keeping accounting documents for ten years for evidential purposes, in the sense that failure to keep them does not involve any direct sanctions but involves the loss of certain advantages to the person concerned or prevents his attaining a given objective. The person concerned is not obliged by virtue of this onere to produce accounting documents; his refusal so to do exposes him to the dangers and difficulties inherent in the official rectification undertaken by the administration within prescribed time-limits. On the other hand it is only the provisions of Article 26 of the Law of 19 June 1940 mentioned above, applicable to trade invoices subject to turnover tax, which lay down the obligation to keep these for five years.

(e). In these circumstances, since the High Authority refers to the provisions of Article 2220 of the Civil Code, it is difficult to see why it did not make an official rectification by all proper means, in particular by looking at certain accounting documents (day-books etc.) which are kept up to date and were available to it. Failure to keep the trade invoices at issue has not therefore prevented the High Authority from pursuing its aim. So this failure does not amount to an illegal act, the more so because it was brought about by the defendant itself which, after a considerable lapse of time, requires the production of invoices already shown to it.

(f). Moreover the duty of making an official rectification in such circumstances arises also under Article 2 of Decision No 13/58 of the High Authority already applied in other cases (Case 18/62) and not in the present case, despite the fact that the position of the applicants is comparable with that of the applicant in Case 18/62. The High Authority has therefore committed a misuse of powers amounting to discrimination. Moreover this Article should have been applied in the present case since the Treaty contains no provision for keeping trade invoices and accounting documents, so that the High Authority ought in these circumstances either to have applied Italian law, by distinguishing obbligo from onere or to have applied Article 2 mentioned above.

(g). Even assuming the applicants have committed an error in not keeping the invoices at issue, there is nevertheless good reason to conclude that this error was justified, the applicants being satisfied, on the one hand, that they need no longer keep these invoices and, on the other hand, that the power of rectification vested in the High Authority should be exercised within the same time-limits as those fixed for the Italian fiscal authorities. In no circumstances could such an error justify the severity of the pecuniary sanctions imposed. For the same reason it is impossible to accept as well-founded the defendant's argument that the applicant ought to have taken care to keep the invoices in question, particularly as the frequent checks already made showed, as the Court recognized in the judgment of 14 December mentioned above, that there were doubts as to the correctness of the information furnished by certain undertakings. This statement by the Court is to be regretted but must not prejudice the solution of the problem at issue in the present case.

(a). That the duty to keep accounting documents for ten years constitutes a general principle laid down not only in the Italian Civil Code but also by the commercial codes of other Member States. It is correct that the various national laws do not provide for keeping the same accounting documents, but it is also true that, whatever may be the documents contemplated, each national law fixes the same time-limits in matters of this kind;

(b). That in imposing such a duty on the applicants the High Authority did not place them under a more onerous duty than that laid down in Articles 2214 and 2220 of the Italian Civil Code.

(i). the equalization levy is not comparable with a direct tax and therefore it is impossible to see why in this matter the High Authority should observe the time-limits fixed by the law of 29 January 1958 in regard to direct taxes;

(ii). the time-limits fixed by this Law concern only the Italian fiscal authorities, and the Community could be bound by Italian law only to the extent that the Treaty so provides. It is in fact the national law of the Member States which must be adapted to the Treaties consequent upon their ratification, not vice versa.

B —. The subsidiary conclusions

(i). it is difficult to see how anyone can be held responsible for the consequences of the conduct of third parties, at all events where such conduct is outside the control of the person concerned;

(ii). these companies too are required to keep trade invoices only for the period of five years prescribed by the Law of 19 June 1940, and at the present time the nationalization of the electricity industry now in process makes it very difficult to refer to their records;

(iii). in these circumstances, the High Authority could have consulted its inspectors to whom the originals of these invoices had been shown and on the basis of the results of the verifications and checks made, could have compared these particulars with the accounting documents still available or called upon the applicants to confirm them on their own responsibility;

(iv). as soon as they learned of the judgment of 14 December 1962 and following notification of the Decisions at issue, the applicants asked the electricity supply companies for copies of the invoices required by the High Authority. These companies' answers are given in the reply in the case of each applicant.

IV —. Procedure

1. The defendant contests the admissibihty of the present applications pointing out first that they are made in fact against the Decisions of 23 February 1962 and that they bring before the Court questions already settled by it in its judgment of 14 December 1962.

2. The applicants in Cases 2/63, 3/63, 5/63 and 6/63 make the point that the contested Decisions impose pecuniary sanctions on them for not having produced the electricity invoices relating to the whole period of the operation of the equalization scheme, whilst they have been engaged in the iron and steel industry for only part of this period.

3. The defendant then makes the point that the present applications do not satisfy the conditions of admissibility set out in Article 38 (1) (c) of the Rules of Procedure of the Court, as they do not contain a brief statement of the grounds on which they are based.

4. Finally the defendant maintains that the present applications, so far as they seek a reduction of the fines and a total remission of the periodic penalty payments, are inadmissible because they contain no reference to Article 36 of the Treaty and set out no criticism of the application of this Article by the High Authority.

A —. Annulment of the fines

1. The applicants rely on Italian fiscal law to justify the alleged destructior of the electricity invoices at issue and to claim that in these circumstances they should not be held liable for not having produced the invoices in question in accordance with the Decisions of 23 February 1962.

2. The applicants further maintain that the contested Decisions discriminate against them, as pecuniary sanctions were not imposed on the applicant in Case 18/62 who was in a similar position.

3. The applicants in Cases 2/63, 3/63, 5/63 and 6/63 raise the further point that as they were not engaged in the iron and steel industry for part of the period during which the equalization scheme was in operation, the imposition of a fine for failure to produce electricity invoices relating to the whole of this period is illegal because it is unfounded and constitutes a misuse of powers.

B —. Reduction of the amount of the fines

C —. Annulment of the periodic penalty payments

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to Articles 33, 36 and 47 of the Treaty establishing the European Coal and Steel Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby declares that:

1 The applications are admissible;

2 The applications are dismissed as unfounded. Nevertheless the time limit at the end of which the periodic penalty payments imposed by the Decisions of 18 December 1962 take effect is extended to seven months from the notification of the latter;

3 Four fifths of the costs are to be borne by the applicants and the remaining one fifth thereof by the defendant.