JUDGMENT OF 29. 6. 1969 — CASE 29/68 MILCHKONTOR v HAUPTZOLLAMT SAARBRÜCKEN
In Case 29/68 Reference to the Court under Article 177 of the Treaty establishing the European Economic Community by the Finanzgericht (Finance Court), of the
THE COURT composed of: R. Lecourt, President, A. Trabucchi and J. Mertens de Wilmars, Presidents of Chambers, A. M. Donner, W. Strauß (Rapporteur), R. Monaco and P. Pescatore, Judges, Advocate-General: J. Gand Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Origin of the case
II — Terms and reasoning of the order making the reference
III — Procedure
IV — Summary of the observations submitted by the parties concerned
1. The admissibility of the questions when the Finanzgericht of the Saarland has submitted to the Court
2. The reply to be given to the questions put to the Court
A — Questions 1 and 2
B — Questions 3 and 4
C — Question 5
D — The interpretation of the first paragraph of Article 7 and the second subparagraph of Article 40(3) of the EEC Treaty
Grounds of judgment
I — The jurisdiction of the Court
II — The substance of the case
Question 1(a)
Question 1(b)
Questions 2(a), 2(b) and 2(c)
Questions 3 and 4
Question 5
The questions relating to Articles 7 and 40 of the Treaty
Ill — Costs
I —. Origin of the case
1. In March 1967 the Milch-, Fett- und Eierkontor company, (hereinafter referred to as the Milchkontor company) obtained customs clearance in Germany for slaughtered poultry imported from the Netherlands, upon which under German law the relevant customs office levied a turnover equalization tax (Umsatzausgleichsteuer — UASt; hereinafter referred to as equalization tax).
2. By an order of 19 June 1967, the Finanzgericht of the Saarland suspended proceedings and asked the Court to give a ruling in particular on the following questions:
(3). (a) By its application of 2 May 1968, the Milchkontor company, relying on Article 67 of the Rules of Procedure of the Court, has asked the latter to fill the gaps in its judgment in Case 25/67 so as to reply to Questions 2, 3, 5, 7, 8(c) and 10(a) to (c), which were submitted to it by the Finanzgericht of the Saarland in a reference which, by an order of 16 May 1968, the Court decided was inadmissible. (b) During the latter stages of the mam proceedings, the Milchkontor company pointed out that neither the German courts nor the Court of Justice had yet considered the prohibition on discrimination contained in the first paragraph of Article 7 and in the second subparagraph of Article 40(3) of the EEC Treaty and it suggested to the Finanzgericht of the Saarland that questions should be submitted to the Court on that point also. It also maintained that its appeal was well founded, notwithstanding the aforementioned judgments of the Court, claiming that it was impossible to consider the disputed rate of equalization tax as an average rate, since the Federal Republic had not exercised the power granted to it by Article 97, and pointing out that the amount of the rate which the administration intended to impose on it also precluded its being accepted as an average rate. The Hauptzollamt considers on the other hand that it follows from the preliminary rulings mentioned above that, since the disputed rate is an average rate, it cannot be challenged by undertakings liable to the tax.
II —. Terms and reasoning of the order making the reference
1. Before deciding on the appeal of the Milchkontor company the Finanzgericht of the Saarland wished to make a fresh reference to the Court and on 4 October 1968 asked it to decide by way of a preliminary ruling on the following questions, which are the subject-matter of the present case, 29/68:
2. The statement made by the Finanzgericht of the Saarland of the reasons for its order, commenting upon the questions thus raised, may be summarized as follows:
III —. Procedure
IV —. Summary of the observations submitted by the parties concerned
1. The admissibility of the questions when the Finanzgericht of the Saarland has submitted to the Court
(a). The questions currently put to the Court coincide broadly with those which the same Finanzgericht has already submitted to it at an earlier stage in the proceedings in which it has to give judgment (Case 25/67); at the very most one may say that Questions 3 and 4 currently put before the Court remain unanswered after the preliminary ruling which it gave in the said case, 25/67. Decisions which the Court gives by way of preliminary rulings bind all courts hearing the main proceedings. Consequently, it is doubtful whether it is possible to regard all the questions which are submitted to it at present as admissible.
(b). Furthermore, to a great extent those questions concern the application of the EEC Treaty and even, on certain points, the interpretation and application of national law. It appears in fact from the judgments of the Court mentioned above that the question what should be understood by average rates and how they should be fixed depends on national law.
2. The reply to be given to the questions put to the Court
A —. Questions 1 and 2
(a). The observations submitted by the Milchkontor company may be summarized as follows:
(b). The Federal Government stated the following in particular:
(c). The observations of the Commission may be summarized as follows:
B —. Questions 3 and 4
(a). The Milchkontor company puts forward the following arguments in particular:
(b). The Federal Government contends that it is appropriate to give the following answers to Questions 3 and 4:
(c). In respect of the answer to be given to Question 3 the Commission refers to the observations which it submitted in Case 25/67.
C —. Question 5
(a). The Milchkontor company states that it regrets that the Court did not reply in its judgment in Case 25/67 to the questions now put forward again. It mantains that these questions also received an unsatisfactory reply in the judgment which the Court gave in Case 28/67.
(b). The Federal Government begins by stating that, according to the argument that it has put forward in respect of the first four questions, it is not necessary for the Court to reply to Question 5, which was asked only in the alternative.
(c). The Commission states that if Question 2 is answered in the way which it recommends, it would become purposeless to reply to the first part of Question 5; in respect of the second part, it refers to the considerations which it set out in Case 25/67.
D —. The interpretation of the first paragraph of Article 7 and the second subparagraph of Article 40(3) of the EEC Treaty
(a). The Milchkontor company states in particular that individuals in the Member States may reply on the provisions in question before national courts since they contain clear and unconditional obligations, the execution of which does not require the adoption of any measure by the Member States or by the Community institutions.
(b). The Federal Government maintains that although it is undeniable that Article 7 is directly applicable, it does not apply to situations such as those postulated in the present case.
(c). The Commission too considers that Article 7 is directly applicable, but that it applies only in the absence of special rules set out in other provision of the Treaty.
1. By an order dated 4 October 1968, received at the Registry of the Court of Justice on 29 November 1968, the Finanzgericht of the Saarland, under Article 177 of the Treaty establishing the EEC, has submitted several questions for the purpose of obtaining an interpretation of Article 97 of the said Treaty.
I —. The jurisdiction of the Court
2. (1) The Government of the Federal Republic of Germany contends that Questions 1(a), 1(b), 2(a), 2(c) and 5 are inadmissible. It points out that the Court has already replied to these questions in its preliminary ruling of 4 April 1968 given in Case 25/67 on a reference made by the same court in the same main proceedings. A judgment given by the Court under Article 177 is binding on the national court hearing the case in which the decision is given.
3. An interpretation given by the Court of Justice binds the national court in question but it is for the latter to decide whether it is sufficiently enlightened by the preliminary ruling given or whether it is necessary to make a further reference to the Court.
4. (2) The German Government points out further that some of the questions raised concern only the application of the Treaty or the interpretation and application of national law. The judgment mentioned above held that according to Community legislation currently in force, in States which have exercised the power made available to them by Article 97, rates are considered as average rates if they are established as such by the States in question and the German Government deduces from this that it is for each national law to determine the scope of the concept average rates and to lay down the conditions in accordance with which such a rate must be established.
5. The concept average rate used in Article 97 of the Treaty has a Community scope.
6. This objection cannot therefore be sustained.
II —. The substance of the case
7. Although Article 95 creates direct individual rights which national courts must protect, the same is not the case with Article 97.
8. Consequently, in order to ascertain whether or not they are faced with internal taxation the conformity of which with the Treaty they are bound to ascertain, the said courts must be in a position to decide whether the Member State in question has or has not applied Article 97.
9. In Question 1(a) the court making the reference asks the Court of Justice to give an interpretation of the expression used in the first paragraph of Article 97 of the Treaty, according to which the Member States may establish average rates, provided that there is no infringement of the principles laid down in Article 95.
10. The abovementioned power, made available to Member States which levy a turnover tax calculated on a cumulative multi-stage tax system, must be understood in the light of the difficulties encountered in the application of the provisions of Article 95 within the framework of such a system.
11. In fact in such a system the aggregate amount of successive impositions of turnover tax directly or indirectly borne by domestic products, which constitutes the legal ceiling on the charge to be imposed on the imported product, may vary from one case to another, particularly by reason of the number of transactions to which various different types of a particular product are subject up to the time when they are delivered to the final consumer.
12. In order to enable the national court to decide whether the case before it is governed by Article 97, it is only necessary for it to be in a position to decide, on the one hand, whether the said case involves a turnover tax calculated on a cumulative multi-stage tax system and, on the other hand, whether the Member State has actually exercised the power made available to it by the said article.
14. It is, therefore, solely for the purpose of enabling the national court to decide whether the Member State has actually exercised the power that it is necessary to interpret the provisions of the said article which seem necessary and sufficient for the performance of that examination.
15. The question whether the power made available by Article 97 has actually been exercised in a particular case is, from the point of view of Co mm unity law, a question which national courts must decide within the context of national law.
16. If a State has exercised the power made available to it by Article 97, the rates which it has established are governed by that provision, even where it could be shown that they do not correspond to the aggregate tax burden borne by domestic products.
17. Nevertheless, that does not mean that Article 97 authorizes Member States to make an arbitrary estimate of the tax burden borne by domestic products.
18. Question 1(b) asks Whether, under a cumulative multi-stage tax system, it may be stated that a rate of tax introduced before the entry into force of the EEC Treaty and imposed upon a single stage of marketing constitutes an average rate within the meaning of Article 97 of the said Treaty.
19. In States which have exercised the power made available by Article 97, an average rate is any rate established as such by the State concerned, even if it was established prior to the entry into force of the Treaty.
20. With regard to the second part of the question, it follows from the above considerations that it is possible, although it depends on the circumstances of the case, that a rate applicable at a single stage of marketing may constitute an average rate within the meaning of Article 97.
21. It follows from all these considerations that the answer to Question 1(b) must be in the affirmative.
22. In answer to Question 2(a), the Finanzgericht wishes to be informed whether, in order to establish an average rate within the meaning of Article 97 of the EEC Treaty, it is sufficient that the body which is competent in accordance with the legal system of a Member State should declare that an existing rate of tax is an average rate.
23. According to Community law, such a declaration would constitute a sufficient proof in law that the Member State has intended to exercise the power in question.
24. Since Question 2(a) is therefore answered in the affirmative there is no need to deal with the alternatives formulated in Questions 2(b) and 2(c).
25. The third question put by the Finanzgericht asks what is meant by groups of products within the meaning of Article 97 of the Treaty.
26. By permitting Member States to establish average rates for groups of products the Treaty merely intended to indicate that the States are not bound to establish separate rates for each product.
27. Consequently, Article 97 does not exclude the possibility that products liable to a rate of turnover equalization tax which does not differ from the general rate may form a group of products within the meaning of the said Article 97.
28. The fifth question, which repeats certain questions raised by the same court in its earlier reference, was formulated only in case the Court should give a negative reply either to Question 2(a) or to Question 4.
29. As neither of these conditions has been fulfilled, there is no need to answer these questions.
30. In case the Court should consider that in establishing the disputed rate the German legislature has infringed Articles 7 and 40 of the Treaty, the Finanzgericht raises certain questions relating to the interpretation of these articles.
31. In order to decide whether it was necessary to reply to these questions the Court would first be obliged to decide upon the validity, with regard to the Treaty, of a measure of national law, which it is not competent to do within the framework of Article 177.
32. It cannot therefore admit them.
Ill —. Costs
33. The costs incurred by the Commission of the European Communities and by the Government of the Federal Republic of Germany, which have submitted their observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Finanzgericht of the Saarland, a decision on costs is a matter for that court.
On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the plaintiff in the main action, the Government of the Federal Republic of Germany and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 95, 97, 169, 173 and 177. Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Economic Community, THE COURT in answer to the questions referred to it by the Finanzgericht of the Saarland by an order of that court of 4 October 1968, hereby rules: On Question I(a):
(a) The power made available by Article 97 of the EEC Treaty permits the States concerned to tax an imported product at a single rate deemed to correspond to the aggregate tax burden borne by domestic products;
(b) The question whether, in a particular case, this power has actually been exercised is, from the point of view of Community law, a question which national courts must decide within the context of national law;
(c) If a State has exercised this power, the rates which it has established are governed by Article 97, even where it could be shown that they do not correspond to the aggregate tax burden borne by domestic products.