JUDGMENT OF 15. 4. 1970 — CASE 28/69 COMMISSION v ITALY

In Case 28/69

THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner, A. Trabucchi, W. Strauß (Rapporteur) 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

II — Conclusions of the parties

III — Procedure

IV — Submissions and arguments of the parties

Grounds of judgment

The first submission

The second submission

The third submission

Costs

I —. Summary of the facts

1. In a letter of 28 April 1965 addressed to the Permanent Representative of the Italian Republic, the Commission stated that Article 2 of the Italian Law No 291 of 25 May 1954, relating to the endorsing of temporary customs import certificates for batches of 100 kg of cocoa, constituted an infringement of Article 95 of the EEC Treaty. Viewed in conjunction with the rate of the Italian excise duty the said article involves imposing on imported cocoa powder a charge in excess of that which the same product would bear if it were obtained in Italy by processing unroasted cocoa beans.

2. In a letter of 19 July 1966 addressed to the Ministry of Foreign Affairs of the Italian Republic, Mr Mansholt, Vice-President of the Commission :

3. In a letter of 17 March 1967 addressed to the President of the Commission the Italian Permanent Representative :

4. In a letter of 5 July addressed to the Italian Minister of Foreign Affairs the Commission stated that the Italian Government had failed to comply with the reasoned opinion within the period fixed and declared in particular that :

5. Since the above-mentioned draft law lapsed on the dissolution of the legislature the legislative procedure had to be recommenced from the beginning.

6. On 24 June 1969 the Commission made the present application.

II —. Conclusions of the parties

(1). that by imposing on cocoa powder imported from other Member States of the EEC an excise duty in excess of that levied on the corresponding product processed in Italy by milling cocoa beans imported under the system of temporary duty-free imports, the Italian Republic has failed in its obligation under Article 95 of the Treaty establishing the European Economic Community;

(2). that by imposing on cocoa powder, cocoa butter, shells and husks imported from other Member States an excise duty in excess of that levied on corresponding products obtained in Italy by milling cocoa beans imported for domestic consumption, the Italian Republic has in this respect also failed to fulfil its obligation under the abovementioned provision;

(3). that by granting on products obtained in Italy by milling cocoa beans a refund of the excise duty in excess of the amount actually charged on entry, the Italian Republic has failed to fulfil the obligation imposed on Member States by Article 96 of the EEC Tretay ;

(4). order the defendant to bear the costs.

(1). principally, declare that the present case is devoid of object;

(2). if the conclusion set out at (1) is rejected: dismiss the Commission's application;

(3). order the Commission to bear the costs.

III —. Procedure

IV —. Submissions and arguments of the parties

(a). In accordance with Article 13 of Decree Law No 50 of 11 March 1950, which subsequently became Law No 202 of 9 May 1950, the excise duty on imports of cocoa beans and products obtained therefrom was imposed in accordance with the following scales:

(b). In accordance with Article 2 of Law No 291 of 25 May 1954 temporary imports of unroasted cocoa beans are to be given customs clearance in the following proportions per 100 kg.

(c). In view of the rates of the duty and of the ratios established, those two provisions result in the following findings when read together :

(d). It follows from these figures that every kilogramme of imported cocoa powder is subject to a discriminatory tax differential amounting to 112.50 lire (312.50—200) in comparison with the similar domestic product.

1. Having delivered a reasoned opinion on 17 January 1967 the Commission, by an application lodged on 24 June 1969, applied to the Court under Article 169 of the EEC Treaty for a declaration that the Italian Republic had failed in its obligations under Articles 95 and 96 of the Treaty.

2. The Commission claims that the Italian legislation in force when the application was made contravened Article 95, by imposing on cocoa powder imported from other Member States an excise duty (312.50 lire per kilogramme) which was higher than that imposed on the same product obtained in Italy by milling cocoa beans imported duty-free under the temporary import system (200 lire per kilogramme).

3. The defendant considers that as a result of amendments made to the Italian legislation in the course of the proceedings the Commission should be deemed to have withdrawn this complaint. It is however clear from the procedural documents that the Commission has maintained its conclusions in connexion with this submission.

4. Although the above-mentioned figures are not disputed the defendant claims that the Commission is making a comparison between products which are not similar as required by Article 95, that is, cocoa powder containing less than 1 % of butter and powder richer in oils and fats.

5. The comparison made by the Commission is based on Article 13 of Decree Law No 50 of 11 March 1950 and Article 2 of Law No 291 of 25 May 1950. The said Article 13 concerning imported powder does not make a distinction according to the oil and fat content of products. Although Article 2 of Law No 291 concerning powder produced in Italy makes express reference only to a product with a content of less than 1 % of oils and fats it nevertheless follows that the alleged discrimination existed at least with regard to that product.

6. Furthermore, products such as those in question which fall under the same classification for tax purposes must be considered as similar within the meaning of the first paragraph of Article 95.

7. Consequently the Italian Government's objection is unfounded.

8. The Italian Government further claims that account should have been taken, in respect of cocoa powder produced in Italy, of the higher manufacturing losses and costs involved in milling.

9. However, no evidence of the relevance of this argument to the present case has been adduced. Moreover, the principle of non-discrimination contained in Article 95 is valid independently of the effect of factors other than taxation on the respective production costs of the products to be compared.

10. Consequently the Italian Republic has failed to fulfil its obligation under Article 95 of the Treaty by imposing on cocoa powder imported from other Member States an excise duty in excess of that imposed on the similar product produced in Italy by milling cocoa beans imported duty-free under the temporary import system.

11. The Commission further complains that the Italian Republic has failed to fulfil its obligation under Article 95 in that its legislation imposes on cocoa powder, cocoa butter and shells and husks imported from other Member States an excise duty which is in excess of that imposed on similar products produced in Italy by the milling of cocoa beans imported for domestic consumption.

12. It is not disputed that this difference exists and that its amount is identical with the duty imposed on shells and husks imported from other Member States.

13. It is moreover agreed that such products, whether imported or produced by the Italian processing industry, are exempt from Italian excise duty if they are used for the extraction of theobromine or in the manufacture of coffee substitutes.

14. Consequently the alleged infringement could occur only if the Italian Republic in fact imported shells and husks intended for purposes other than those for which the exemption is available. The Italian Government has stated that since the legislature has prohibited the use of the products in question for the production of cocoa and chocolate it endeavoured to discourage such use by imposing a high excise duty on those products, thus entirely preventing the use of shells and husks for purposes other than those for which the exemption is available.

15. By imposing a duty of 250 or 180 lire on products with a very low commercial value the defendant has in fact precluded the sale of those products for purposes other than those for which it has provided for exemption.

16. It is therefore unnecessary to ascertain whether the shells and husks might still in exceptional cases be used for purposes other than those mentioned above.

17. It must consequently be found that since the Commission has failed to prove the infringement alleged in its second submission its application should be dismissed with regard to this point.

18. Since the Commission has formally withdrawn this submission it is unnecessary to give a ruling on it.

19/20. Under the terms of Article 69 (3) of the Rules of Procedure, where each party succeeds on some and fails on other heads the Court may order the parties to bear their own costs in whole or in part. This provision is applicable in the present case.

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 the Treaty establishing the European Economic Community, especially Articles 95 and 169; 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, especially Article 69, THE COURT hereby:

1 Rules that by imposing on cocoa powder imported from other Member States an excise duty in excess of that imposed on the similar product produced in Italy by milling cocoa beans imported duty-free under the temporary import system, the Italian Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty;

2 Dismisses the second submission;

3 Orders the parties to bear their own costs.