JUDGMENT OF 13. 6. 1978 — CASE 139/77 DENKAVIT v FINANZAMT WARENDORF
In Case 139/77 REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht Münster for a preliminary ruling in the proceedings pending before that court between
THE COURT composed of: H. Kutscher, President, M. Sørensen (President of Chamber), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe and A. Touffait, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts and Issues
I — Facts and procedure
II — Summary of the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A — Observations submitted by the plaintiff in the main action
Preliminary observations
The questions referred by the Finanzgericht Münster
The first question
The second and third questions
Interpretation according to the prohibition on discrimination laid down by Community law
Interpretation according to the aims and functioning of the organization of the market in beef and veal
Interpretation in the light of Article 1 of Regulation (EEC) No 2464/69
B — Observations submitted by the defendant in the main action
C — Observations submitted by the Commission
Preliminary observations
The first question
The second question
The third question
III — Oral procedure
Decision
Costs
I —. Facts and procedure
1. When the Government of the Federal Republic of Germany took the decision on 24 October 1969 to revalue the German mark as from 27 October 1969 by 8.5 % in relation to its official parity, the Federal Republic and the Community faced the problem of compensation for the losses of income resulting for German agriculture from the linking of European agricultural prices to a common unit of account.
2. The German authorities and the Commission agreed in estimating the losses of income suffered by German agriculture as a result of the revaluation at DM 1700 million per annum. In order to compensate for those losses, the Council, by its Regulation (EEC) No 2464/69 of 9 December 1969 (Official Journal, English Special Edition 1969 (II), p. 527), authorized the Federal Republic as from 1 January 1970 to grant agricultural producers direct aid, in respect of which provision was made for contributions by the EAGGF (European Agricultural Guidance and Guarantee Fund).
3. Article 1 (1) to (3) of Regulation No 2464/69 provides as follows:
4. The Council decision of 21 January 1974 (which was notified to the Federal Republic of Germany on 24 January 1974, but not published) prolongs and amends the measure authorized by Article 1 (3) of Regulation (EEC) No 2464/69 inasmuch as the Federal Republic was provisionally authorized to grant aid to agricultural producers in the form of compensation, paid to the producer when he sells his products, subject to a maximum of 3 % of the selling price. The aid as thus amended may be paid in the same way as is provided in the regulation either by the buyer or by an agency to be appointed by the competent national authorities.
5. On 23 December 1969 the German legislature, basing itself on Regulation (EEC) No 2464/69, enacted the Aufwertungsausgleichgesetz (a law on compensation for the effects of revaluation), Article 4 of which authorized agricultural and forestry undertakings, within the meaning of Article 24 (2) of the Umsatzsteuergesetz (Law on turnover tax) in conjunction with Article 51 of the Bewertungsgesetz (Law on valuation), to reduce the turnover tax (value-added tax) by 3 %. In order to qualify as an agricultural undertaking within the meaning of the latter provisions, establishments breeding and keeping livestock must have a certain agricultural area and prove a certain ratio between the head of livestock and that area.
6. The company which is the plaintiff in the main action engages in producing feeding-stuffs and in fattening calves on substitute milk-based fodder which it produces itself. For this purpose it buys calves of about one week old and sells them for slaughter after fattening them for four months. Not having any agricultural land for the purpose of fattening its calves, the company constitutes not an agricultural undertaking but rather an industrial undertaking within the meaning of German tax law.
7. In 1974 the turnover of the plaintiff company on sales of calves which it had fattened was DM 21394474.21. In its tax return for that year, it claimed aid of DM 641834.24 (that is to say 3 % of its total turnover) under Article 4 of the Aufwertungsausgleichgesetz. By a decision of 26 March 1976, the Finanzamt (Tax Office) Warendorf, the defendant in the main action, refused to grant that aid, on the grounds that the plaintiff company is an industrial undertaking within the meaning of German tax law and not an agricultural undertaking.
8. After its objection to that decision had proved unsuccessful, the plaintiff company commenced before the Finanzgericht (Finance Court) Münster the proceedings which constitute the main action.
9. By an order of 26 September 1977, the Finanzgericht Münster stayed the proceedings and referred the following questions to the Court of Justice of the European Communities for a preliminary ruling under Article 177:
1. Under Community law does the expression agricultural producers in Article 1 (1) and (3) of Regulation (EEC) No 2464/69 include industrial livestock breeders and keepers within the meaning of German tax law?
2. If the first question is answered in the affirmative:
3. Is this prohibition directly applicable in the national sphere so that an individual trader is entitled to rely upon it before the national courts?
10. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.
II —. Summary of the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A —. Observations submitted by the plaintiff in the main action
B —. Observations submitted by the defendant in the main action
C —. Observations submitted by the Commission
1. The concept of agricultural producers appearing in Regulation (EEC) No 2464/69 of the Council of 9 December 1969 does not include industrial livestock breeders or keepers.
2. Neither the provisions of the Treaty nor Article 1 of Regulation (EEC) No 2464/69 or Article 1 of the decision of the Council of 21 January 1974 forbade the Federal Republic of Germany to exclude industrial livestock breeders or keepers from the aid intended to compensate for the losses caused to German agriculture by the revaluation of the German mark on 29 October 1969.
3. In the situation in the present case, Article 40 (3) of the EEC Treaty cannot be interpreted as meaning that it confers upon individuals a right to the grant of tax abatements which can be directly relied upon before the national courts.
III —. Oral procedure
1. By an order of 26 September 1977 which was received at the Court on 16 November 1977 the Finanzgericht Münster submitted, pursuant to Article 177 of the EEC Treaty, a series of questions on the interpretation of the concept of an agricultural producer as well as of Article 39 and the second subparagraph of Article 40 (3) of the Treay and of certain provisions of Regulation No 2464/69 of the Council of 9 December 1969 on measures to be taken in agriculture as a result of the revaluation of the German mark (Official Journal, English Special Edition 1969 (II), p. 527).
2. It emerges from the case file that the main action originates in the refusal by the Finanzamt Warendorf, the defendant in the main action, to allow the application for aid under the German law adopted pursuant to the said regulation which was submitted by the company, the plaintiff in the main action which engages in producing feeding-stuffs and in fattening calves on substitute milk-based fodder which it produces itself.
3. In order to answer the questions asked, it is necessary first to consider the origin and content of the Community rules and, to the extent to which it appears from the case file, of the national legislation at issue.
4. By a decision of 24 October 1969 the Government of the Federal Republic of Germany revalued the German mark as from 27 October 1969 by 8.5 % in relation to its official parity.
5. In the words of the first recital in the preamble to the said regulation, the revaluation of the German mark and the present unaltered value of the unit of account entail a reduction in agricultural prices expressed in German marks … from 1 January 1970; … German agriculture will thereby suffer a loss of income.
6. On 23 December 1969 the German legislature, basing itself on Regulation No 2464/69, enacted the Aufwertungsausgleichgesetz (a law on compensation for the effects of revaluation, Article 4 of which authorized agricultural and forestry undertakings, within the meaning of Article 24 (2) of the Umsatzsteuergesetz (Law on turnover tax), to reduce the amount assessable to turnover tax by 3 %.
7. The first question asks whether the expression agricultural producers appearing in Article 1 (1) and (3) of Regulation No 2464/69 includes industrial livestock breeders and keepers within the meaning of German tax law.
8. The second question asks whether Article 39 and the second subparagraph of Article 40 (3) of the Treaty, Article 1 of Regulation No 2464/69 or any other provisions of Community law forbid the Federal Republic of Germany, as a State to which the said regulation was addressed, to exclude specific classes of agricultural producers — in this case, industrial livestock breeders and keepers within the meaning of German tax law — from the grant of the aid in question.
9. For the purpose of giving an answer to the national court, the two questions should be dealt with together.
10. The plaintiff in the main action has submitted that the expression agricultural producers designates a concept the content of which must be defined by Community law.
11. Although in certain respects Article 38 and the related provisions allow the scope of the agricultural provisions of the Treaty to be defined, in other respects, particularly as regards the type of undertakings subject to the provisions in question, the concept of agriculture is not precisely defined in the Treaty.
12. The purpose of the regulation at issue is to provide compensation for losses caused by the reduction in prices for agricultural products, and it makes no distinction between methods of production, even if the losses weigh more heavily on certain classes of producers.
13. It should be pointed out that the third recital in the preamble to Regulation No 2464/69 makes provision for the Federal Republic of Germany to grant aid by way of compensation for the losses in question in the form of direct aid to agricultural producers.
14. Accordingly, it should be considered whether the Federal Republic of Germany exceeded those limits by excluding industrial livestock breeders and keepers within the meaning of German tax law from receiving the aid referred to in the regulation.
15. In providing in paragraph 1 that the objectives of the common agricultural policy shall be inter alia to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture, Article 39 does not exclude the possibility of differences of treatment between the various sectors of agricultural activity, always provided that such differences of treatment are not arbitrary and are based on objective criteria.
16. Accordingly, it must be considered whether the differentiation, for the purposes of German tax law, made by the Aufwertungsausgleichgesetz between agricultural breeders and keepers on the one hand and industrial breeders and keepers on the other, is discriminatory within the meaning of Article 40 (3) of the Treaty.
17. It appears from the case file inter alia that, because they use fodder which is mostly their own farm produce, agricultural livestock breeders and keepers within the meaning of German tax law are subject in particular to the risks inherent in working the soil.
18. It follows from the foregoing considerations that the answer to the national courts should be that neither the provisions of the Treaty nor Article 1 of Regulation No 2464/69 nor the provisions of the Council decision of 21 January 1974 forbade the Federal Republic of Germany to exclude industrial livestock breeders or keepers from the aid referred to in the said regulation.
19. Consequently, the third question has become purposeless.
20. The costs incurred by the Commission of the European Communities which has submitted observations to the Court are not recoverable.
On those grounds, THE COURT, in answer to the questions submitted to it by the Finanzgericht Münster by an order of 26 September 1977, hereby rules: