JUDGMENT OF 20. 2. 1973 — CASE 54/72 FOR v VKS
In Case 54/72 Reference to the Court of Justice, under Article 177 of the EEC Treaty, by the Tribunale at Biella for a preliminary ruling in the action pending before that Court between
THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars (Rapporteur), Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Facts and procedure
II — Observations submitted under Article 20 of the Statute
A — Observations of the Commission of the European Communities
On the first question
On the second and third questions
B — Observations of the Government of the Federal Republic of Germany
On the first question
On the second question
On the third question
C — Observations of the Italian Government
On the first question
On the second and third questions
D — Observations of FOR
I — Examination of the case in relation to the situation obtaining before 1 January 1968 (First question)
1. On the infringement of Article 95
2. On the infringement of Articles 30 et seq. of the Treaty
II — Examination of the case in relation to the situation obtaining in Germany after 1 January 1968
Grounds of judgment
As to the first question
As to the second and third questions
Costs
I —. Facts and procedure
1. Fonderie Officine Riunite (hereinafter called FOR) manufactures machinery for use in the textile industry. When selling this machinery in the Federal Republic of Germany, delivery was made free-at-factory in Biella and the duties and taxes relating to importation into Germany were, according to the invoices, to be settled by the purchases.
2. Following this refusal, FOR applied to the Tribunale at Biella for an order for payments by VKS. At the same time, it asked the court to refer to the Court of Justice for a preliminary ruling on the interpretation of various provisions of Community law which it invokes in its dispute with the German taxation authorities.
3. By order dated 27 July 1972, the President of the Tribunale at Biella referred the following questions to the Court:
4. The order referring the matter was received at the Court Registry on 31 July 1972.
II —. Observations submitted under Article 20 of the Statute
A —. Observations of the Commission of the European Communities
B —. Observations of the Government of the Federal Republic of Germany
C —. Observations of the Italian Government
D —. Observations of FOR
I —. Examination of the case in relation to the situation obtaining before 1 January 1968 (First question)
1. On the infringement of Article 95
(1). As equalization tax is paid at the frontier, the Italian machines bear a fiscal tax equal to that imposed on corresponding German machines, bought by the same purchaser.
(b). Therefore the imposition of turnover tax on the erected installation in working order results in discrimination, as the German supplier of competing machinery, when selling the installation, could be subject at most to that turnover tax, but could certainly not have imposed on him the same tax on the value of the different machines comprising the installation.
(c). While the German supplier is therefore only charged once with turnover tax under the heading of Werklieferung, from the sole fact that it is open to him to provide in his contract that he will supply the installation in an erected state, such an option is refused to the Italian contractor who is charged once at importation on the value of the machines and a second time on installation on the value of the machines and the supply of installation services.
(d). It must be concluded therefore that the legal artifice whereby the installation resulting from the erection of the machines is deemed to be a new chargeable product leads to discrimination contrary to Article 95 of the Treaty. Finally, the fact that the new German Law on value added tax allows the deduction of the taxes paid at imporation of the various machines from the tax paid on the installation when completed and in service highlights the discrimination resulting from the law of 1951, as this does not allow such a deduction.
2. On the infringement of Articles 30 et seq. of the Treaty
II —. Examination of the case in relation to the situation obtaining in Germany after 1 January 1968
1. By order dated 27 July 1972, received at the Court Registry on 31 July 1972, the President of the Tribunale at Biella, referred, under Article 177 of the Treaty establishing the European Economic Community, three questions relating to the interpretation of Articles 30, 31, and 95 of the Treaty and of Articles 2, 5, 7, 8 and 10 of Council Directive 228/67 of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes.
2. By the first question, it is asked whether Article 95 of the Treaty must be interpreted as prohibiting the imposition of turnover tax on the value of an imported industrial installation, considered after erection to be a separate entity, even though on importation the separate items of machinery have already been charged with an equalization tax, also encompassing the turnover tax which the taxation authorities intend to impose on the value of that same installation when erected.
3. It transpires from the file forwarded by the national court that the plaintiff in the main action sold free-at-factory to a German buyer unerected machinery for use in the textile industry, on which the buyer at the time of importation paid turnover equalization tax at the rate of 6 %.
4. As the benefits taxed had arisen during the period from 1962 to 1967, it follows that the questions of interpretation raised were done so in relation to the turnover tax, as provided for by the German Law of 1 September 1951.
5. The first two paragraphs of Article 95 prohibit any Member State from imposing on the products of other Member States any internal taxation in excess of that imposed on similar domestic products or of such a nature as to afford indirect protection to other domestic products.
6. Although it is in the nature of the cumulative multi-stage tax to charge successively and without any deduction the different transactions to which a product is subject, Article 95 prohibits the breaking down into two distinct and, therefore separately taxable, operations concerning imported goods an operation which, in regard to a domestic product, would constitute a single transaction.
7. The prohibition of discrimination is concerned, therefore, with a fiscal system under which, as is presumed by the order referring the matter, an imported product is charged twice with turnover tax, on the footing that it has been the subject of two distinct transactions, on the basis of an operation which, in respect of a similar domestic product at the same marketing stage, would constitute only one chargeable operation.
8. However the question of whether the turnover equalization tax established by the German Law of 1 September 1951 includes the turnover tax, in addition to equalization for prior charges, is a matter of controversy.
9. It appears from the documents in the file of the main action that the proceedings before the national court are concerned solely with transactions prior to 1 January 1968 and, consequently, only subject to turnover tax, as laid down by the German Law of 1951, before the entry into force of the German value added tax.
10. The costs incurred by the Commission of the European Communities and by the German and Italian Governments, all of which have submitted observations to the Court, are not recoverable.
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 Commission of the European Communities and the German Government; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 30, 31, 95, 97 and 177; Having regard to Council Directive 67/228/EEC of 11 April 1967, especially Articles 2, 5, 7, 8 and 10; Having regard to Council Directive 69/463/EEC of 9 December 1969, especially Article 1; Having regard to Commission Directive No 70/32/EEC of 17 December 1969 (sic), especially Article 3; 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 questions referred to it by the Tribunale at Biella, by order of that court dated 27 July 1972, hereby rules: