Opinion of Mr advocate-general Gand

Mr President,

Members of the Court,

The proceedings brought by the EEC Commission against the Italian Republic under Article 169 of the Treaty of Rome are the culmination of a long dispute between the parties over the conformity with Article 96 of the Treaty of the repayment of customs duties and of certain indirect taxation on the export of products of the engineering industry.

Let me recall the facts so far as is necessary in order to consider the pleas of inadmissibility raised by the Italian Government against the application of the Commission as well as the arguments expounded by the parties.

The Italian Law No 103 of 10 March 1955, extended until 31 December 1963 by the Law of 18 March 1958, provided for the repayment of export of the customs duty and other similar duties imposed on iron and steel products used in the processing of products of the engineering industry.

It is neither disputable nor seriously disputed that the repayment also concerned certain indirect taxes imposed on raw materials or semi-finished products. Furthermore, the amount of the repayment was fixed at a single rate for each particular tariff heading: so many lire per kilo. Repayment was thus at a flat rate.

Various complaints made to the Commission questioned the conformity of such a system with Article 96 of the Treaty which provides: Where products are exported to the territory of any Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or indirectly. From 1961, therefore, the Commission made several requests for information from the Italian Government. On 1 February 1962 the Italian Government informed the Commission that in view of the reduction in customs duties between Member States it had decided to reduce by 35 % the amount of the repayments on products exported to the other countries of the Community and that it was prepared to begin immediately to determine that part of the repayment which concerned taxes other than turnover tax (I.G.E.) and to agree on a timetable for the gradual abolition of that element. Notes were exchanged without result. Then on 3 May 1963 the Italian Government sent to the Commission a document setting out the taxes affected by repayment and calculating as an example the effect of those taxes on the cost price of certain products or groups of products. This document confirmed the view held by the Commission that the system contravened the Treaty and it began proceedings under Article 169. While justifying its basic position, the Italian Government, when invited to submit its observations, indicated that a new law was in preparation to replace Law No 103 which was to expire at the end of the year.

Thus, by issuing on 11 December 1963 the reasoned opinion in which it invited the Italian Republic to terminate by 31 December at the latest those repayments which were considered incompatible with Article 96, the Commission emphasized that it was obliged to oppose the continuance of the alleged infraction, in particular by the adoption of new legislative provisions having similar effect.

Because the Commission considered this to be the effect of Law No 639 of 5 July 1964, which took effect retroactively from 1 January 1964, it brought the matter before you on 13 October 1964. The new Law, more generous on certain points than its predecessor, provides for the repayment, still according to a single rate for each tariff heading, of the customs duties and internal indirect taxation other than turnover tax; but, continuing the development already begun, it provides that in the case of products exported to Member States there shall be a gradual reduction of up to 80 % in the amount of repayment as from 1 January 1966. The Commission considers that no substantial difference exists between this system and that established by the preceding Law which gave rise to the reasoned opinion; nor is there any break in continuity since the new Law takes effect retroactively on the expiry of the preceding one. The Commission therefore asks you to rule that this system is contrary to Article 96 of the Treaty, first, since it involves the repayment of certain duties, such as registration, stamp and mortgage duties, charges on licences and permits issued by the State and taxes on motor vehicles and advertising which, according to it, do not fall within the provisions of the said Article and, secondly, because under this system the amount of the tax to be repaid is determined according to a flat rate method, involving the fixing of an average rate per product or group of products, which again that Article does not permit.

I — Admissibility

The Italian Republic claims that this application is inadmissible on two grounds, both of which are based on the infringement of the formal requirements of Article 169 of the Treaty, which provides:

1. In the first place, it is claimed, the subject-matter of the administrative stage and that of the stage before you were not the same, since the former concerned Law No 103 of 10 March 1955 and the latter Law No 639 of 5 July 1964. The latter has not been the subject of a reasoned opinion by the Commission.

2. The defendant raises a second objection to the admissibility of the application, based on the amendments to the argument put forward by the Commission during the administrative procedure. After stating that certain duties could not give rise to repayment under Article 96 because they amounted to direct taxes, the Commission then maintained that they could not benefit from any repayment since their effect on production costs could not be calculated precisely. The defendant Government had thus been deprived of the opportunity to submit its observations, as required by the first paragraph of Article 169, on the very grounds of the reasoned opinion.

II — Substance

1. I must first set out the legal and factual situation existing at 31 December 1963, on the expiry of the formal notice sent by the Commission, and at 13 October 1964, when the Commission brought the matter before you. For this purpose I shall rely on the various documents exchanged between the parties during the administrative stage and the written procedure including, in particular, document No 16 from the Italian Government containing a method of calculating the effect of the taxation on the products of the engineering industry. To these factors I shall add some details given at the hearing in reply to the questions which you put to the parties.

2. Is such a system, which I think I have described as precisely as the state of the file permits, in accordance with Article 96 or not? This Article must be replaced in the context of Chapter II, Tax Provisions. It is the exact counterpart of the preceding Article which limits the power of a State to impose internal taxation on the products of other Member States. In both cases it is a question of preventing by means of taxes a discriminatory and preferential treatment of national undertakings. Again we must note—what is at least a tendency — that the Chapter and in particular the Article with which we are concerned emphasizes the products more than the undertakings.

I am therefore of the opinion that judgment should be given as suggested above and that the costs should be borne by the Government of the Italian Republic.

1 Translated from the French.