JUDGMENT OF 4. 4. 1968 — CASE 20/67 KUNSTMÜHLE TIVOLI v HAUPTZOLLAMT WÜRZBURG

In Case 20/67 Reference to the Court under Article 177 of the Treaty establishing the European Economic Community by the Finanzgericht, Munich, (a court with jurisdiction in taxation matters) for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, W. Strauß (Rapporteur) and A. M. Donner, Presidents of Chambers, A. Trabucchi and J. Mertens de Wilmars, Judges, Advocate-General: J. Gand Registrar: A.Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Summary of the facts

1. Summary

2. Contents of the order referring the matter; arguments of the Finanzgericht

II — Procedure

III — Summary of the observations submitted by the interested parties

Grounds of judgment

I —. Summary of the facts

1. Summary

A —. According to Article 1 of Regulation No 19 of the Council on the progressive establishment of a common organization of the market in cereals (Official Journal of 20 April 1962, p. 933) (hereinafter referred to as Regulation No 19) A common organization of the market in cereals shall be progressively established, comprising a levy system applicable to trade between Member States and to trade between Member States and third countries (for certain categories of cereals).

B —. Between 1 July 1966 and 3 October 1966 the Kunstmühle Tivoli undertaking (hereinafter referred to as the Tivoli undertaking) cleared through customs several consignments of hard wheat from the United States of America. The customs office concerned levied a turnover equalization tax. (hereinafter referred to as the equalization tax) on these imports at 1.5 % in accordance with German law.

2. Contents of the order referring the matter; arguments of the Finanzgericht

A —. On 17 May 1967 the Finanzgericht, Munich, decided to request the Court of Justice for a, preliminary ruling on the following question:

B —. The opinion of the Finanzgericht is, in effect, as follows:

II —. Procedure

III —. Summary of the observations submitted by the interested parties

A —. If the opinion of the Finanzgericht were correct, each Member State would have the right to subject the importation of products for which the home market offers no competition to a tax fixed at an arbitrary rate. Therefore it would be open to it in certain circumstances to create obstacles to importation. This would also be the case as regards products coming from other Member States. Such a result would not be compatible with the very objectives of the Treaty, which are precisely to ensure that undertakings have the same chance of selling their goods in all parts of the territory governed by the Treaty.

B —. Taxes on the importation of products for which the home market offers no competition cannot logically equalize taxation on comparable domestic products and therefore they are not internal taxation within the meaning of Articles 95 and 97 of the Treaty. They must on the contrary be considered as charges having an effect equivalent to customs duties.

C —. Article 17(3) of the EEC Treaty does not provide any argument to the contrary. The complete elimination of customs duties and of charges having equivalent effect can sometimes be advantageous for the products of the exporting state compared with those of the importing state, especially when the foreign products are not subjected to a charge comparable to the one imposed on the domestic products. The intention of Article 17(3) is merely to give Member States power to prevent such a result by levying an internal tax instead of a customs duty of a fiscal nature which has been abolished. All it means is that an imported product can be subjected to taxation if, and only if, there are comparable domestic products in competition with it, so that the charge is thus a genuine example of internal taxation within the meaning of Article 95. The observations of the Federal Government may be summarized as follows:

A —. In distinguishing between charges having an effect equivalent to customs duties and internal taxation, the one decisive test is the general purpose of the charge in question. Therefore the turnover equalization tax must be considered as an example of internal taxation. This follows necessarily from the fact that Article 12 et seq. of the Treaty, on the one hand, and Article 95 et seq., on the other, have different objectives and lay down rules which are mutually exclusive. The Court of Justice has always accepted this point of view (judgments in Joined Cases 2 and 3/62, Joined Cases 52 and 55/65 and Case 57/65, loc. cit.; judgment in Case 10/65 [1965] E.C.R. 469).

B —. Nor can Article 95 be taken as meaning that it prohibits the levying of a turnover equalization tax in cases such as the present one.

C —. Article 17(3) of the Treaty confirms what has already been said. By definition customs duties of a fiscal nature are levied on products which are not made within the country. In allowing these duties to be converted into internal taxation, Article 17(3) must mean that the taxation in question does not have an effect equivalent to that of customs duties. From this it must also be concluded that Article 93 does not prohibit the levying of taxation on the importation of products for which the domestic market offers no competition. This is because otherwise the provision in question would have no practical point, since it is the very absence of such competition which is decisive as regards products subjected to customs duties of a fiscal nature.

A —. No answer to the question asked here is to be found in the case-law of the Court, because in the cases previously decided the imported product was in competition with comparable domestic products.

B —. In principle the levying of a turnover equalization tax on products which are not in competition with domestic products is compatible with the Treaty. In the thinking of national legislature, the turnover tax and the equalization tax relating to it are both intended as a levy on domestic consumption. This argument is also true of the products already mentioned. To exonerate products which have not been made inside the country from the equalization tax would encourage their consumption and would infringe the principle that there should be no fiscal discrimination. Contrary to the position with regard to customs duties, the only effect of levying the turnover equalization tax is to place all the products in the same situation from the fiscal point of view and to contribute to the financing of the expenditure of the State in a uniform way.

C —. Presumably turnover equalization taxes on products which are not in competition with domestic products can have effects equivalent to customs duties if they are levied at excessively high or even prohibitive rates. It matters little that they may be neither protective nor discriminatory. First, this is true also of the customs duties to which the abovementioned products are subjected. Secondly, the restriction or the elimination of the free circulation of goods is also to be included amongst the effects equivalent to customs duties. Since Article 95 makes no provision with regard to such an activity and since it is also a fact that this activity would be incompatible with the principles of the Common Market, the inevitable conclusion is that the prohibitions on imposing charges having equivalent effect are applicable here.

D —. Article 95 is not applicable here, because this case concerns imports from a third country. Therefore the Court need not decide the question whether the different uses to which hard wheat and soft wheat (a home-grown product) are put mean that the second paragraph of Article 95 is not applicable. The truth of the matter is that this question should be answered in the negative.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the Federal Republic of Germany, the Commission of the European Communities and the applicant in the main action; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the EEC, especially Articles 95 and 177; Having regard to the Protocol on the Statute of the Court of Justice of the EEC, especially Article 20; Having regard to Regulation No 19 of the Council of the EEC on the progressive establishment of a common organization of the market in cereals (Official Journal of 20 April 1962, p. 933 et seq.), especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, THE COURT in answer to the questions referred to it by the Finanzgericht, Munich, by order of that court of 17 May 1967, hereby rules: