JUDGMENT OF 1. 12. 1965 — CASE 45/64 COMMISSION v ITALY

In Case 45/64

THE COURT composed of: Ch. L. Hammes, President (Rapporteur), L. Delvaux, President of Chamber, A. M. Dormer, A. Trabucchi and R. Lecourt, Judges, Advocate-General: J. Gand Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

II — Conclusions of the parties

III — Submissions and arguments of the parties

A — Admissibility

B — The substance of the case

IV — Procedure

Grounds off Judgment

A — Admissibility

The first objection

The second objection

B — The substance of the case

The first submission

The second submission

C — Costs

I —. Facts

1. By Law No 103 or 10 March 1955, extended until 31 December 1963 by Law No 284 of 18 March 1958, the Italian Republic allowed a refund on the export of certain products of the engineering industry of the fixed and other customs duties imposed on the iron and steel products used in their manufacture.

2. As the Commission of the EEC believed that evidence existed that in practice the refunds were extended to other taxes imposed on raw materials or semi-finished products incorporated in the products of the Italian engineering industry, or even imposed independently of such use, discussions took place between the Commission and the Italian Government in late 1961 and early 1962.

3. Following these discussions, the Italian Government reduced by 35 % the amount of the refunds made on products exported to the other Member States of the Community. It also declared that it was prepared to determine as soon as possible that part of the refund relating to taxes other than turnover tax and to agree on a timetable for its gradual abolition.

4. After a fresh excnange ox correspondence and further discussions, followed by an additional reduction of 10 % of the amount of the refunds, the Commission set in motion the procedure laid down in Article 169 of the EEC Treaty by requesting the Italian Government, by letter of 6 June 1963, to submit its observations on the alleged infringement of Article 96.

5. The observations of the Italian Government were conveyed to the Commission by letter dated 11 July 1963 from its Permanent Representation at Brussels. They were not considered satisfactory, although a further reduction of 10 % had been made on 1 July 1963

6. Alter further negotiations, the Commission issued on 11 December 1963 the reasoned opinion provided for in the first paragraph of Article 169 of the EEC Treaty. This opinion gives reasons for the belief of the Commission that the Italian Republic had failed to fulfil its obligations under Article 96 and invites it to terminate by 31 December at the latest the grant of repayment of internal taxation on exported products of the engineering industry.

7. By note of 18 December 1963, the Italian Permanent Representation conveyed to the Commission the text of a draft Law intended to replace Law No 103, which had been approved by the Italian Council of Ministers and submitted to Parliament.

8. Because of the similarity which it found between the draft Law and Law No 103, the Commission informed the Italian Government by letter of 28 January 1964 that it considered as contrary to its reasoned opinion the introduction of legislation intended to perpetuate the grant of repayments which it regarded as incompatible with the Treaty.

9. The draft Law in question was, However, approved by the two Chambers of the Italian Parliament. Law No 639 on the refund of customs duties and indirect internal taxation other than the Imposta Generale sull'Entrata (turnover tax) on the export of certain industrial products was promulgated on 5 July 1964 and published in the Gazzetta Ufficiale of 5 August 1964. It came into force on that date, with retroactive effect to 1 January 1964.

10. As it considered that no break in continuity and no substantial difference existed between the repayments provided for by Law No 103, which were criticized in the reasoned opinion of 11 December 1963, and those provided for in the new Law No 639, the Commission, acting in pursuance of the second paragraph of Article 169 of the EEC Treaty, brought the matter before the Court of Justice by an application lodged on 13 October 1964 alleging the failure of the Italian Republic to fulfil its obligations under Article 96 of the Treaty.

II —. Conclusions of the parties

III —. Submissions and arguments of the parties

A —. Admissibility

1. The defendant maintains that the application is inadmissible on the ground that the subject-matter of the administrative stage and of the stage contested before the Court are different.

2. The defendant raises a second objection to the admissibility of the application, on the ground that the Commission did not allow the Italian Government an opportunity to submit its observations on the reasoning set out in the reasoned opinion and, even less, on those set out in support of the application. After stating that certain indirect taxes (registration, stamp and mortgage duties and charges on licences and concessions, motor vehicles and advertising) are not covered by Article 96 as they must be regarded as direct taxes, the Commission maintained in the reasoned opinion that these same taxes cannot be the subject of any repayment as it is impossible to identify them and to calculate their respective effects on production costs. Finally, in its application the Commission explained the non-repayable nature of the charges on the ground that they belong to a special category of indirect taxes on businesses.

B —. The substance of the case

1. On the duties benefiting from a refund and the legality of certain repayments

2. The method of repayment and the legality of the system of average rates

IV —. Procedure

A —. Admissibility

B —. The substance of the case

C —. Costs

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 96 and 169 of the Treaty establishing the European Economic Community; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby:

1 Rules that, by granting repayment of internal taxation on the products of the engineering industry exported to the territory of other Member States in respect of registration, stamp and mortgage duties, charges on licences and concessions and on motor vehicles and advertising, the Italian Republic has failed to fulfil its obligation under Article 96 of the Treaty;

2 Orders that within three months from the date on which this judgment is given the Italian Republic shall show that the amount of the flat rate repayment of internal taxation imposed on the products of the engineering industry exported to the territory of other Member States does not exceed the amount of such taxation;

3 Orders that on the expiry of this period the oral procedure on the second submission of the application shall be reopened at the request of the party which first requests it;

4 Orders the defendant to bear half the costs, the remainder of which are reserved.