JUDGMENT OF 25. 11. 1981 — CASE 4/81 HAUPTZOLLAMT FLENSBURG ν ANDRESEN

In Case 4/81 REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesfinanzhof (Federal Finance Court) for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: O. Due, President of Chamber, P. Pescatore and A. Chloros, Judges, Advocate General: G. Reischl Registrar: H.A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Written observations submitted to the Court

The fiscal function of the monopoly and its selling prices

Comparison of the margin contained in the monopoly equalization duty with the normal selling price

The nature of the fiscal element in the normal selling price

Characterization of the normal selling price

Comparison of the charges

The reply to be given to the question put

The normal selling price

The elements making up the normal selling price.

The reply to the question put

III — Oral procedure

Decision

Costs

I —. Facts and written procedure

(a). Under Article 58 of the 1922 Law, domestically produced spirit must be sold to the Federal Spirits Monopoly Administration [hereinafter sometimes referred to as the Administration] at the acquisition price (Branntweinübernahmepreis) calculated by reference to the basic price (Branntweingrundpreis) which, under Article 63 of the 1922 Law, is itself fixed by the Administration on the basis of the production costs of a distillery producing spirit from potatoes with an annual output of 500 hectolitres of ethyl alcohol. Under Article 84 of the 1922 Law the monopoly spirit is subject to the tax on spirits (Branntweinsteuer); it is marketed by the Administration at the normal selling price (regelmäßiger Verkaufspreis), which is made up of the acquisition price, the tax on spirits and the administrative and operating costs of the monopoly, the last element representing the price margin (Preisspitze). During the period in question in the main proceedings, the normal selling price of the monopoly spirit was DM 1833 per hectolitre of ethyl alcohol, the tax on spirits DM 1500, the basic price DM 253 and the acquisition price variable according to the increases or reductions in relation to the basic price.

(b). Under Article 78 of the 1922 Law, spirits, which are either exempt from the obligation to sell to the Administration under Article 76 or in breach of that obligation are not sold to it, are subject to a surcharge on spirits (Branntweinaufschlag). That surcharge represents the difference between the normal selling price of the spirit and its basic price reduced by the average amount of the costs, fixed annually by order, which the Administration saves by not acquiring the spirit. During the period in question in the main action, the normal selling price of the spirits was DM 1833 per hectolitre of ethyl alcohol, the basic price DM 253, the costs saved DM 31 and, consequently, the spirits surcharge was DM 1549 per hectolitre of ethyl alcohol.

(c). Under Article 151 (1) of the 1922 Law imported spirit is subject to a monopoly equalization duty (Monopolausgleich). During the period in issue in the main proceedings the monopoly equalization duty, which is equal to the difference between the normal selling price of the monopoly spirit (at the time DM 1833) and the basic price (at the time DM 253), was DM 1580 per hectolitre of ethyl alcohol.

II —. Written observations submitted to the Court

(a). As a fiscal monopoly, the purpose of the Administration is to raise revenue for the Federal Treasury and primarily to collect the tax on spirits, at the same time, it pursues economic objectives, and especially those of agricultural policy. The spirits monopoly derives its revenue from its selling prices, and in particular from the normal selling price; under Article 106 of the Basic Law [Grundgesetz] the Federal Government is entitled to such revenue. The monopoly's income comprises on the one hand the revenue derived from the tax on spirits and, on the other, the net profit [Reingewinn] made up of that part of the selling price which exceeds the amount of the tax on spirits.

(b). The organization of the spirits monopoly is governed by public law: it is managed by the Administration which, under the terms of Article 1 (2) of the Law on the administration of taxes (Finanzverwaltungsgesetz), is a Federal tax authority (Bundesfinanzbehörde), matters relating thereto come before the courts with jurisdiction in taxation matters [Finanzgerichtel; its selling prices are fixed by authority and are published in the Bundesanzeiger; in cases of insolvency, its claims rank pari passu with fiscal claims and are recovered in the same manner as taxes; the commission of a fraud causing loss to the Administration (Monopolhinterziehung) gives rise to the same penalties as a tax fraud. The assimilation of monopoly claims to fiscal claims extends to the actual selling price of the goods, that is to say without the tax.

(a). Of the elements making up the selling price of monopoly spirit, the monopoly equalization duty levied on imported spirits enabled the tax on spirits and the difference between the net selling price and the basic price to be offset. The margin contained in the monopoly equalization duty represents the latter element, which essentially allowed the monopoly to cover its costs and, in certain cases, to realize a net profit; the margin may also be defined as that part of the monopoly equalization duty which exceeds the tax on spirits. The margin contained in the monopoly equalization duty was levied separately where the imported product was transported to a warehouse designated for the storage of taxable spirit (Branntweinsteuerlager); only spirits taxed at the rate of the tax on spirits could be stored in such a warehouse.

(b). A comparison of the margin contained in the monopoly equalization duty with the corresponding element in the Administration's selling price reveals their uniformity on a number of points.

(a). For the purposes of this case there is no need to settle the question whether the German spirits monopoly is a fiscal monopoly. At the relevant time the intervention of the monopoly was undeniably based on commercial principles under Article 5 of the 1922 Law; notwithstanding the fact that its organization was governed by public law, in exercising the powers conferred upon it by the 1922 Law the monopoly had to apply within the confines of the law, commercial and not fiscal principles. That rule found specific application in the fixing of the selling prices and the spirits surcharge applicable to spirits exempt from the obligation to sell.

(b). With a view to ensuring the greatest possible equality of treatment of the purchaser of monopoly products and the purchaser of spirit exempt from the obligation to sell, the legislature took account of the fact that the costs of the monopoly are also borne by a manufacturer of alcohol which is not subject to the obligation to sell; that fact is clear from Article 79 of the 1922 Law which provides that in calculating the spirits surcharge a deduction is to be made in respect of the average amount of the costs which the Administration saves by not acquiring the spirit.

(c). The Administration certainly does not have complete freedom of action; it is bound in connexion with the distilling rights, which it fixes annually on the basis of foreseeable demand, to contract at prices which will ensure that its costs are covered; the same requirement exists for purchases. Those consequences flow directly not from its status as a public body but from the function which it fulfils as a monopoly.

(d). A purchaser of spirits must conclude a contract of sale with the Administration which is governed by private law under Article 433 of the German Civil Code [Bürgerliches Gesetzbuch]. In return for the service provided by the monopoly (delivery and transfer of the goods), he must furnish the quid pro quo, namely the selling price; the selling price is invoiced to the purchaser as a single amount and only the turnover tax is separately stated; the elements consisting of the selling price, taxation and the monopoly's own costs are not separately indicated; recovery of the selling price must, if necessary, be sought through the civil courts, whether or not the part of the price which remains unpaid represents the amount of the taxes alone.

(e). The Administration's position is in no way different from that of the proprietor of a distillery which is not subject to the obligation to sell and which, having acquired the raw materials, produces a distillate under its distilling right and subject to the control of the customs authorities, is taxed thereon and then calculates the selling price taking account of the purchase price of the raw materials, the taxes and its own costs in accordance with commercial principles.

(f). The fact that the Administration is not a private undertaking but a Federal authority is irrelevant. There are numerous examples of cases where by virtue of the law authorities of the State participate in economic life on commercial principles and in return for payment. The price asked by those authorities does not thereby assume the character of taxation within the meaning of Article 95 of the EEC Treaty.

(a). No part of the normal selling price asked by the Administration is of a fiscal nature. Nevertheless, it is necessary to compare the charges in the context of the application of the first paragraph of Article 95 of the EEC Treaty, since such a comparison must cover not only taxes borne directly but also those borne indirectly.

(b). A German importer of blended spirit, which is similar to the imported product, buys monopoly spirit from the Administration at the normal selling price; that price includes the tax on spirits payable by the Administration with the result that the buyer suffers the tax indirectly through the relevant part of the normal selling price (where the purchase is made under an accompanying document or for storage in a bonded warehouse, the buyer is even taxed directly as the new person liable for the tax).

(c). The question put concerns only discrimination against an imported product. There can, in any case, be no discrimination against a national product where the commercial principles laid down by law are properly applied: in calculating his price the importer's supplier too must not only take account of the prime cost but, like the monopoly, must include his own costs in accordance with commercial principles; the monopoly's costs included in the contested price margin pursuant to commercial principles find their counterpart in the portion of the importer's purchase price which reflects his supplier's own costs which have been calculated in accordance with the same principles and added to the prime cost.

(d). The imported product would in fact bear the commercial margin equal to the price margin twice if, being included first in the selling price of the importer's supplier, it had to be paid a second time in the form of a tax in order to offset the commercial margin included in the monopoly's selling price. In that regard it is not relevant that the portion covering costs included both in the monopoly's selling price and in the selling price of the importer's supplier is computed on an aggregate basis.

(a). As far as the various elements making up the normal selling price of the monopoly spirit are concerned, the only question to be settled is whether the price margin can be considered as a tax.

(b). In any event, it would not be justified to tax imported spirit to the same extent as domestic products marketed by the Administration. The Administration incurs costs in connection with the monopoly spirit which are unrelated to the imported products, particular, the costs of transporting, purifying, denaturing and storing the monopoly spirit. Those costs arise neither for imported ethyl alcohol nor for spirit produced by German distilleries which are not subject to the obligation to sell to the Administration. For the latter type of spirit the German legislature reduced the spirits surcharge margin by an amount equal to the costs saved by the Administration. The margin contained in the monopoly equalization duty levied on imported ethyl alcohol should be reduced by the same amount.

(c). In reply to the argument that if, in making the comparison of charges required by the first paragraph of Article 95, the imposition of monopoly costs on the similar domestic product were ignored, the result would be discrimination against domestic products, it may be pointed out that Article 95 does not prohibit the Member States from imposing on their domestic products taxation in excess of that borne by imported products.

III —. Oral procedure

1. By order of 2 December 1980, received at the Court on 12 January 1981, the Bundesfinanzhof [Federal Finance Court] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Article 95 of the EEC Treaty in order to enable it to assess the compatibility with that provision of the levying of a tax charge referred to as the Monopolausgleichspitze [margin contained in the monopoly equalization duty] on imported spirits pursuant to the tax legislation in force in the Federal Republic of Germany during the period prior to the adoption of the Law of 2 May 1976 amending the Law on the Spirits Monopoly.

2. It emerges from the order for reference and from the documents before the Court that on 12 January 1976 the respondent in the main proceedings requested customs clearance for home use for a consignment of blended spirit from Belgium consisting of 90% neutral spirit, comparable to German monopoly spirit, and 10% spirit derived from wine. It should be noted that at the present stage of the proceedings the tax imposed on the latter constituent is not at issue and that the dispute is confined to the tax charged on the constituent corresponding to domestic monopoly spirit.

3. It must be recalled that at the time when the product in question was imported, imported spirits were subject to a tax referred to as the Monopolausgleich [monopoly equalization duty], which was composed of two elements, namely, the equivalent of the tax on spirits amounting to DM 1500 per hectolitre and the Monopolausgleichspitze amounting to DM 80 per hectolitre. The latter element of the tax charge was the equivalent, in the calculation of the selling price of monopoly spirit, of the Preisspitze [price margin], which was obtained by deducting from the monopoly's selling price of DM 1833 per hectolitre the amount of the tax on spirits and the basic price of the spirit fixed by the Administration at DM 253 per hectolitre.

4. Andresen contests the compatibility with Article 95 of the Treaty of levying the Monopolausgleichspitze on imported spirits on the ground that that charge was the equivalent of an element included in the calculation of the monopoly's selling price, namely the Preisspitze, which in fact was not of a fiscal nature but represented the monopoly's administrative costs and other economic charges.

5. Andresen successfully brought an action before the Finanzgericht [Finance Court] Hamburg, as is clear from the judgment given by that court on 26 January 1978. In the grounds of that judgment, the Finanzgericht held that there was no relationship between the Monopolausgleichspitze, which was unquestionably of a fiscal nature, and the amount by which the monopoly's selling price exceeded the sum of the basic price and the tax on spirits. According to the Finanzgericht, although that amount is fixed by authority, it in fact represents economic charges borne by the monopoly which, as such, cannot be offset by a tax on imported spirits.

6. The Hauptzollamt [Principal Customs Office] lodged an appeal against that judgment before the Bundesfinanzhof claiming in substance that the element of the monopoly's selling price corresponding to the Monopolausgleichspitze was proportional to amounts fixed by authority and, under the special conditions of a fiscal monopoly, was passed on to the monopoly's customers as an integral part of its selling price. According to the Hauptzollamt, there can therefore be no doubt that there are elements equivalent to the Monopolausgleichspitze contained in the monopoly's selling price which are unquestionably of a fiscal nature, with the result that there is no discrimination against imported spirits.

7. In the grounds of its order for reference, the Bundesfinanzhof raises the question whether at the relevant time domestic monopoly spirit was actually subject to an internal fiscal charge equivalent to the Monopolausgleichspitze levied on imported spirits. The Bundesfinanzhof considers that in view of the various elements taken into account in determining the monopoly's selling price, namely, in addition to the tax on spirits, the acquisition price of the spirit and the monopoly's administrative and marketing costs, there is some doubt whether the element referred to as the Preisspitze, which is equivalent to the Monopolausgleichspitze charged on imported spirits, may be regarded, either wholly or partly, as a tax charge.

8. The Bundesfinanzhof draws attention to the fact that under the system applicable to domestic spirit which is not sold to the monopoly and is subject to a charge referred to as the Branntweinaufschlag [spirits surcharge], that charge is reduced by a fixed rate deduction, amounting at the time to DM 31 per hectolitre, in order to take account of the costs which the monopoly saves in the case of spirits exempt from the requirement to deliver to it. The Bundesfinanzhof does not rule out the possibility that that system may possibly serve as a basis for determining the system applicable to imported spirits.

9. In order to resolve those problems, the Bundesfinanzhof referred to the Court the following two questions :

10. During the procedure before the Court the respondent in the main proceedings maintained that since the Preisspitze included in the calculation of the monopoly's selling price is not of a fiscal nature, the imposition of the Monopolausgleichspitze on imported spirits is discriminatory in its entirety. It claims that the Preisspitze, far from constituting taxation borne by domestically produced spirit, in fact represents the monopoly's administrative and marketing costs; moreover, it serves to finance subsidies granted to national production by means of the greatly varying acquisition prices which the monopoly pays to various producers of spirits.

11. The respondent's view was initially supported by the Commission, which stated that only elements which were unquestionably of a fiscal nature could be taken into account for the purpose of comparing the taxation imposed respectively on the national and imported products. Whereas the fiscal nature of the Monopolausgleich, including the Monopolausgleichspitze, is undeniable, the composition of the monopoly's total selling price is difficult to analyse. Of the elements making up that price, only the tax itself is undoubtedly of a fiscal nature. In the case of the Preisspitze, however, any fiscal components are intermingled with those arising from the commercial administration of the monopoly. At that stage the Commission took the view that, in the interest of the clarity required for the application of the provisions of the Treaty, a fiscal charge might not be equated for the purpose of the comparison of charges under Article 95 with a component of the monopoly's selling price whose nature, fiscal or other, could not be determined with certainty.

12. In its oral observations the Commission altered its views on that point. Referring to the grounds of the order for reference of the Bundesfinanzhof, it expressed the opinion that it would be more appropriate to draw an analogy between the fiscal system applicable to imported spirits and the fiscal system applicable to domestic spirits not subject to the monopoly. Consequently, it proposes that the questions raised should be answered to the effect that the rule against discrimination contained in Article 95 would be complied with if imported spirit received the same treatment as spirit which is not subject to the monopoly, that is to say, if the Monopolausgleichspitze were reduced by the fixed rate deduction applicable to the Branntweinaufschlag. The Commission considers that that solution would have the advantage of avoiding distortion of competition in favour of imported spirits vis-à-vis domestic spirits not subject to the monopoly. In reply to a question asked by the Court, it stated that it adhered to that opinion because it considered that the first view which it put forward would call in question the Court's decision in its judgment of 17 February 1976 in Case 45/75 Rewe v Hauptzollamt Landau [1976] ECR 181.

13. The Court considers that the first view put forward by the Commission conforms more closely to the requirements of Article 95 and that there is, moreover, no inconsistency between that solution and the grounds of the judgment of 17 February 1976.

14. It must first be pointed out in that regard that since in this case the imported product is spirit which is similar to the monopoly spirit in the Federal Republic of Germany, the comparison of fiscal charges envisaged by Article 95 must be carried out with reference to the system of taxation applicable to monopoly spirit and not with reference to the system applicable to exempt spirit. Indeed, the point at issue in this case is not the similarity of two products but the structure of two systems for the taxation of an identical product which differ according to whether the product is marketed by the monopoly or is imported.

15. In order to make that comparison, it is necessary to analyse the structure of the monopoly's selling price as based on the scheme of the German legislation. It is clear from that legislation that in the computation of that price only the tax on spirits itself is unquestionably of a fiscal nature. The other two elements making up the price, namely the basic price and the Preisspitze, are fixed at the discretion of the Administration; under that method of calculation, the basic figure is constituted by the total selling price, so that the element referred to as the Preisspitze is determined by deducting from that total price the sum of the tax on spirits and the basic price. It thus becomes evident that the Preisspitze is in fact merely a residual amount which is inextricably involved in the determination by the monopoly of the total selling price and the basic price. The basic price is in turn an average price based on a fixed estimate.

16. It follows that the Preisspitze is necessarily a varying amount of indeterminate composition covering all aspects of the monopoly's commercial administration; however, it is not possible to determine the extent to which it is an element equalizing the prices paid to producers, what proportion thereof covers the administrative, management and marketing costs of the monopoly and what proportion represents a possible profit, which alone may be of a fiscal nature since it is remitted to the State Treasury.

17. It must be recalled that in its judgment of 17 February 1976, the Court considered that the scope of Article 95 could not be so extended as to allow any kind of compensation between a tax created so as to apply to imported products and a charge of a different nature imposed, for example, for economic purposes on the similar domestic product. It is true that the Court accepted that there might be an exception to that principle, but only where the imported product and the similar domestic product were both equally subject to a government tax which was introduced and quantified by the public administration. It is evident from a consideration of the foregoing that in view of the intermingling of the basic price of the spirit and the Preisspitze due to the method of calculating the monopoly selling price, any fiscal element which may be included in the Preisspitze is indeterminate to such a degree that it does not satisfy the requirement that it should be a government tax which is introduced and quantified by the public administration.

18. Thus it is clear that, in the computation of the selling price of monopoly spirit,, only the amount representing the tax on spirits may be taken into account for the purposes of the comparison of fiscal charges envisaged by Article 95 of the Treaty. Conversely, any other component of the monopoly price which is not in the nature of a fiscal charge, determined as to amount, must be excluded from that comparison. Indeed, the Preisspitze, like the basic price, corresponds, in a proportion which it is impossible to calculate, to economic charges which fall on any importer of spirits from other Member States. It follows that the levying of the Monopolausgleichspitze on imported spirits is discriminatory.

19. In view of the monopoly's discretion in fixing its prices, that is the only solution which will guarantee that the comparison of fiscal charges which is central to Article 95 is not distorted to the detriment of imported products by the impact on the level of taxation imposed on those products of non-fiscal charges, particularly economic charges, borne by the monopoly.

20. Consequently, the reply which must be given to the questions raised by the Bundesfinanzhof is that the term taxation, contained in Article 95 of the Treaty, must be regarded as covering, in so far as the selling price for spirits fixed by a national monopoly is concerned, only that part of the price which the monopoly is required by law to remit to the State Treasury as a tax on spirits, determined as to amount, to the exclusion of all other elements or charges, economic or other, included in the calculation of the monopoly selling price.

21. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT (Second Chamber), in answer to the questions referred to it by the Bundesfinanzhof by order of 2 December 1980, hereby rules: