Opinion of Mr advocate-general Roemer

Mr President,

Members of the Court,

The undertaking Fonderie Officine Riunite FOR, of Biella (Italy), plaintiffs in the national proceedings, that have led to the application for a preliminary ruling that is before us today, produces machinery for the textile industry. It has exported such machinery to the Federal German Republic during the years 1962 to 1967. In the course of such dealings it was agreed that Biella was to be the place of delivery and of payment and that the purchasers were to discharge the taxes and duties payable at the frontier on importation. This happened in the sense, that the turnover equalization tax due under the German Umsatz-steuergesetz (Law on Turnover tax) of 1 September 1951 amounting to 6 per cent of the value of the machinery was paid by the purchasers.

After importation the machines were erected with the aid of FOR 's technical personnel and transformed into installations ready to operate. The German Steuerbehörde (Tax authority) (in this case the tax office at Bentheim) sees in this event the occurence of a so-called supply of goods and provision of services (Werklieferung) by FOR in the Federal German Republic within the meaning of paragraph 3 of the German turnover tax, i.e. they take the view that the act of installation gave rise to a new marketable entity in respect of which FOR had on the basis of contractual obligations provided the main component. For that reason the Finanzamt in Bentheim considered itself obliged to demand from FOR turnover tax of an amount of 4 per cent of the total value of the erected installations (i.e. of machinery plus costs of installation) and to do so in a manner that did not permit the deduction of turnover equalization tax paid at the time of importation on the basis of the value of the machinery. This was done by tax assessments for the years 1963, 1964, 1965, 1966, 1967 and 1968 which were sent by the Finanzamt Bentheim to FOR under cover of a letter dated 21 December 1970.

Protests by FOR against this action had no success. Indeed, the tax authority not only assessed additional charges for late payment but it also implemented its threat to attach moneys due to FOR from its German customers for the purpose of recovering the tax due. In consequence there were amongst others, Vereinigte Kammgarn-Spinnereien AG of Delmenhorst, the defendants in the national proceedings, who in response to a request by the Finanzamt in Bentheim paid to the tax authorities a sum owed to the plaintiffs in the national proceedings under a contract of sale and requested from the latter a corresponding allowance.

FOR however would not agree to this. They are convinced that the German tax authorities are wrong in demanding payment of turnover tax on the basis of the total value of the erected installation, that as far as FOR was concerned there was no such tax due. They therefore brought the matter before the President of the Tribunale in Biella and pursuant to Article 633 et seq. of the Italian code of civil procedure applied for the issue of a Zahlungsbefehl (order to pay) against Vereinigte Kammgarn-Spinnereien in order thus to obtain payment of their claim for the price of goods to which they claimed to be entitled and which had been attached by the German tax authorities. In support of their point of view they maintain that since the imported machinery had already been subjected to turnover equalization tax, one has to regard the imposition of turnover tax on the value of the total installation as double taxation. This could not be reconciled with Community law; to be more precise, with Article 95 of the EEC Treaty which was directly applicable. Furthermore, one ought to regard the fact that the applicants had been subjected to German turnover tax proceedings as an infringement of Articles 30 and 31 of the EEC Treaty. Finally, they argue that to levy tax on the foreign supplier in respect of the works of installation is likewise not permissible under the Umsatz-steuergesetz (Law on turnover tax) 1967 which introduced value-added tax in the German Federal Republic with effect from 1 January 1968, since it infringes Council directives 67/227 and 67/228 of 11. 4. 1967 (OJ No 71, 14. 4. 1967) on the harmonization of legislation of Member States concerning turnover taxes.

Having regard to these arguments which arise under Community law, the President of the Tribunale in Biella following upon a suggestion by the plaintiffs suspended the proceedings and referred the following question for a preliminary ruling:

I shall now examine what there is to be said on these questions having been acquainted with the legal arguments in the course of the proceedings on the part of the plaintiffs in the national proceedings, the government of the Italian Republic, the Government of the Federal German Republic and the Commission of the European Communities.

1 Translated from the German.