JUDGMENT OF 16. 12. 1970 — CASE 13/70 CINZANO v HAUPTZOLLAMT SAARBRÜCKEN

In Case 13/70 Reference to the Court under Article 177 of the EEC Treaty by the Bundesfinanzhof (Federal Finance Court) (the highest court in taxation matters in the Federal Republic of Germany) for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, A. M. Donner and A. Trabucchi, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore and H. Kutscher Rapporteur), Judges, Advocate General: A. Dutheillet de Lamothe Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

II — Terms and reasoning of the order making the reference

III — Procedure

IV— Summary of the observations submitted under Article 20 of the Statute of the Court of Justice of the EEC

Grounds of judgment

I —. Facts

1. Under the terms of the Branntweinmonopolgesetz (the German law concerning the monopoly of ethyl alcohol obtained otherwise than by natural fermentation — hereinafter referred to as ethyl alcohol.),

2. On 11 October 1967 Francesco Cinzano & Cia GmbH (hereinafter referred to as Cinzano) deposited a consignment of 1200 litres of vermouth of French origin in a bonded warehouse; according to the information provided by the importer in its declaration, the content of spirits of wine in the goods was 15.7 % by volume. In respect of the extent to which the content of spirits of wine exceeded 10.5 % by volume, the customs office levied DM 806.83 by way of Monopolausgleich. Having failed in the administrative objection (Einspruch) which it had lodged against this imposition with the Hauptzollamt (Principal Customs Office) at Saarbrücken, Cinzano then brought proceedings in the Finanzgericht (Finance Court) of the Saarland before which it did not succeed either. The Finanzgericht considered that Article 37 (2) of the EEC Treaty did not apply in this case, as the ethyl alcohol monopoly had neither direct nor indirect effect upon the import of vermouth. As the Monopolausgleich did not have the effect of unilaterally and exclusively burdening the imported product, the Finanzgericht declared that it could not be regarded as a charge having an effect equivalent to a customs duty within the meaning of Article 12 et seq. of the EEC Treaty. According to the Finanzgericht, it must be accepted that the Monopolausgleich constituted internal taxation within the meaning of Article 95 of the Treaty and that the provisions of that article did not prevent its being levied. In the appeal on a point of law by Cinzano to the Bundesfinanzhof the company is maintaining that the levy of the Monopolausgleich is contrary to the provisions of Article 37 (2) of the EEC Treaty, because the levying of that duty after a long period during which vermouth was not taxed has an indirect influence on imports of that product. The defendant Hauptzollamt is of the same opinion as the Finanzgericht.

II —. Terms and reasoning of the order making the reference

III —. Procedure

IV—. Summary of the observations submitted under Article 20 of the Statute of the Court of Justice of the EEC

1. The question submitted to the Court originates in the fact that, as from a particular date in the course of the second stage of the Common Market, the import from other Member States of quality vermouths ready for consumption was subjected to the levy of an entry duty which had never previously been imposed. That measure had the effect of overcompensating for the gradual elimination of customs duties which had been achieved until then and of abruptly increasing the total charge payable as import taxes to approximately six times the level which it previously reached. The legislative technique used to put this measure into force consisted in making an addition to the Branntweinmonopolgesetz; the measure in question was consequently adopted by reference to the existence of the monopoly in ethyl alcohol. It follows from this that the question submitted to the Court should have been formulated in the following terms :

2. Cinzano then sets out the reasons for which it considers that the monopoly in ethyl alcohol instituted in Germany constitutes a monopoly of a commercial character within the meaning of Article 37 (1) of the EEC Treaty.

3. Cinzano maintains that the German legislation which is in question here is contrary to the provisions of Article 37 (2) of the EEC Treaty because it has greatly raised the level of the tax burden by way of import duties, which had been lowered by the abolition of customs duties achieved within the Community, and that in this manner it restricted the scope of the articles concerning the elimination of customs duties. The objective of Article 37 (2), which is clearly to prevent the standstill obligation laid down in Article 12 from being evaded by means based on rules of law concerning monopolies, and the place which that provision occupies in the general context of the Treaty show that monopoly taxes must be regarded as charges having an effect equivalent to that of customs duties within the meaning of Article 12.

1. By an order of 25 February 1970 received at the Registry on 6 April 1970, the Bundesfinanzhof has requested the Court under Article 177 of the Treaty establishing the EEC to rule whether there is an infringement of Article 37 (2) of the EEC Treaty when a Member State, in which imports of ethyl alcohol are subject to a State monopoly, imposes as from 1 April 1966 a tax (intended to offset the fiscal charge imposed on domestic ethyl alcohol) on drinks with a wine base imported from another Member State (for example vermouths) according to the content of spirits of wine exceeding a given maximum, whereas previously as a general rule it levied that tax only in cases where the original product (for example wine) had lost its particular characteristics through the addition of spirits of wine.

2. It may be seen from the file submitted that this question relates to a State monopoly which is mainly concerned with the marketing of domestic ethyl alcohol and imports of the same product. It is further stated in the grounds of the order referring the matter that the measure which is the subject of the main action is one by which after the entry into force of the Treaty the national legislature extended an existing tax to imports of products which had not hitherto been subject to it. These factors must be taken into account in deciding upon the reply to be given to the question put by the national court.

3. It was claimed that the introduction of the tax at issue does not come within Article 37 (2) because it is not covered by monopolies within the meaning of that article.

4. Article 37 (2) prohibits in particular any new measure which is contrary to the principles laid down in paragraph (1) of the same article. Combined with one another these two paragraphs show that the expression measure appearing in paragraph (2) of that article is closely linked to the definition of the activities constituting a State monopoly of a commercial character as set out in the previous paragraph.

5. This definition is worded in deliberately general terms so as to include activities by which the State concerned acts only de facto or indirectly in trade between Member States as well as activities by which, far from supervising or determining such trade, it is satisfied merely by influencing it. It follows from this that the application of Article 37 is not limited to imports or exports which are directly subject to the monopoly but covers all measures which are connected with its existence and affect trade between Member States in certain products, whether or nor subject to the monopoly.

6. It is therefore possible that the introduction, after the entry into force of the Treaty, of an import duty on a product, a constituent part of which is subject to the monopoly, may amount to a new measure within the meaning of Article 37 (2).

7. However the aforementioned provision does not prohibit every new measure, but merely one which is either contrary to the principles laid down in paragraph (1) of the same article — that is to say, which produces or aggravates discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States or which restricts the scope of the articles dealing with the abolition of customs duties and quantitative restrictions between Member States.

8. Thus it must first be ascertained whether the extension to imported products of a charge previously imposed only on similar domestic products subject to a monopoly may be regarded as amounting to discrimination regarding the conditions under which goods are procured and marketed.

9. In order to amount to discrimination regarding the conditions under which goods are procuted and marketed within the meaning of Article 37 (1), the new duty must have the effect of imposing higher charges on the imported product than on the similar domestic product. Such is not the case if the former is subject to the same charge as the second. There is therefore no discrimination within the meaning of the said article when the imported product is subjected to the same conditions as the domestic product subject to the monopoly.

10. It must, further, be established whether the new duty restricts the scope of the articles dealing with the abolition of customs duties and quantitative restrictions within the meaning of Article 37 (2).

11. As long as the said measure has the purpose merely of applying to intra-Community trade a duty which before the entry into force of the Treaty was imposed only on similar domestic products, that extension does not have the effect of putting it on the footing of a customs duty or a charge having equivalent effect. Lastly, the duty in question by its nature has nothing in common with a measure having an effect equivalent to that of a quantitative restriction.

12. It is therefore appropriate to reply to the Bundesfinanzhof that a duty levied on imports of products from other Member States linked to the existence of a State monopoly and applied for the first time after the entry into force of the Treaty does not amount to an infringement of Article 37 (2), as long as such new charge is imposed on the imported product only to the same extent as on domestic products affected by the monopoly.

13. The costs incurred by the Government of the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

14. As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Bundesfinanzhof, the 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 Cinzano, 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 37 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 Communities, THE COURT in answer to the question referred to it by the Bundesfinanzhof by an order of that court of 25 February 1970, hereby rules: