Report for the Hearing in Case C-208/88

I — Facts

1. Legislation

1.1. Community legislation

Council Directive 69/169/EEC of 28 May 1969 on the harmonization of provisions laid down by law, regulation or administrative action relating to exemption from turnover tax and excise duty on imports in international travel (Official Journal, English Special Edition 1969 (1), p. 232) was subsequently amended and extended by a series of further directives, most recently by Council Directive 89/220/EEC of 7 March 1989 (Official Journal 1989 L 92, p. 15). Ankle 2(1) of the directive, as amended by Council Directive 88/664/EEC of 21 December 1988 (Official Journal 1988 L 382, p. 41), provides for the possibility of applying exemption from turnover tax and excise duty on imports, as regards travel between Member States, to goods in travellers' personal luggage which fulfil the conditions laid down in Articles 9 and 10 of the Treaty, if such imports have no commercial character and the total value of the goods does not exceed ECU 390 per person. For travellers under 15 years old, the exemption is reduced to ECU 100 (Article 2(2)).

For the purposes of the application of the directive, Article 3(2) provides as follows: importations shall be regarded as having no commercial character if they: (a) take place occasionally, and (b) consist exclusively of goods for the personal or family use of travellers, or of goods intended as presents; the nature or quantity of such goods must not be such as might indicate that they are being imported for commercial reasons. Paragraph 3 of Article 3 (inserted by the fourth Council Directive 78/1033/EEC of 19 December 1978, Official Journal 1978 L 366, p. 31) defines the concept of personal luggage.

Article 4 of the directive sets quantitative limits for certain categories of goods, in particular tobacco products, alcoholic beverages, perfumes, coffee and tea. Alcoholic beverages may be imported duty free only in limited quantities (not exceeding 1.5, 3 and 5 litres, according to the type of alcoholic beverage). Beer is not subject to such limits.

Subject to the quantitative limits laid down by the aforesaid provision and having regard to the restrictions concerning travellers under 15 years old, the value of the goods listed is not taken into consideration for the determination of the exemption referred to in Articles 1 and 2.

Since its accession to the Community, Denmark has secured various derogations from Directive 69/169. The present version of those derogations was laid down by Council Directive 87/198/EEC of 16 March 1987 (Official Journal 1987 L 78, p. 53), which provides for reductions in the quantitative limits fixed in Article 4 for the importation of beverages where travellers have stayed in another country for less than 48 hours, and for a general reduction to four litres in the quantity provided for the importation of still wines.

1.2 National legislation

By Order No 365 of 9 June 1986 of the Ministry of Finance, which entered into force on 15 June 1986, Denmark decided that travellers could import free of customs and excise duties only 10 litres of beer per person and that quantities in excess of that limit would be taxable.

According to the Danish Government, that measure was adopted to deal with practices incompatible with Community legislation. Danish residents were travelling to Germany in order to import, in vans or trailers, up to 300 litres of beer which may be purchased in Germany for ECU 50. The beer so imported is largely brewed in Denmark, and much of it is resold there. Such practices arose from the difference in the level of taxes on beer which were applicable in the two countries.

Moreover, the contested measure seemed to be necessary to the Danish Government in order to avoid supervision intended in each individual case to prevent imports for commercial purposes from being able to benefit under the system established by the directive and which would have led to delays and queues at the border.

2. Background to the dispute

By letter of 29 July 1987, the Commission requested the Danish Government, pursuant to Article 169 of the EEC Treaty, to submit its observations to it regarding the incompatibility of the tax system established by Order No 365 with the provisions of Council Directive 69/169.

By letter of 29 September 1987, the Danish Government submitted various observations and supplied information in its defence.

On 25 January 1988 the Commission issued a reasoned opinion pursuant to the first paragraph of Article 169 of the EEC Treaty. It pointed out that the Danish Government had failed to fulfil its obligations under the EEC Treaty by not complying with the aforesaid directive and requested it to comply with the terms of its opinion within one month.

On 11 March 1988 the Danish Permanent Representation to the European Communities sent to the Commission in reply to the reasoned opinion a memorandum stating that the Danish authorities did not intend to take any action on the matter.

II — Written procedure and conclusions of the parties

The Commission's application was received at the Court Registry on 28 July 1988.

The written procedure followed the normal course. On 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.

The Commission, the applicant, claims that the Court should:

The Danish Government, the defendant, contends that the Court should:

III — Submissions and arguments of the parties

The Commission claims that the contested measure is contrary to the directive.

In its view, it follows from the judgments of the Court in the Butter Cruise cases (judgments in Case 158/80 Rewe v Hauptzollamt Kiel (Rewe I) [1981] ECR 1805 and in Case 278/82 Rewe v Hauptzollämter Flensburg, Itzehoe and Lübeck-West [1984] ECR 721) that the Member States are not free to legislate in respect of the matter covered by the directive. They are left with only the restrictive power given to them by the directive to grant exemptions other than those specified in the directive.

The Commission considers that, in the case of beer, the directive does not lay down quantitative limits for exemption. In order to qualify for the exemption referred to in Articles 1 and 2, therefore, the beer must be contained in travellers' personal luggage, it must fulfil the conditions laid down in Articles 9 and 10 of the Treaty, it must have been acquired subject to the general rules governing taxation on the domestic market of one of the Member States, it must be an import having no commercial character and its total value must not exceed ECU 390 per person.

According to the Commission, the Member States may not lay down a legislative presumption that importation is for commercial purposes, based on the quantity of the goods. The existence of a commercial purpose must be assessed in each individual case, having regard to the provisions of Article 3(2) of the directive.

The Commission also points out that the exemptions provided for by the directive apply only in the event of the occasional importation of goods which may be intended solely for the personal or family use of travellers or as presents. In those circumstances the importation of beer in travellers' luggage cannot be regarded as having a commercial character where the quantity imported exceeds 10 litres, which frequently represents less than a week's consumption per family.

In the Commission's view the comparison made by the Danish Government between wine and beer, whereby in fiscal terms 10 litres of beer correspond to four litres of wine, being the limit authorized by the directive in the case of wine, is not relevant since, as the Commission has shown, beer cannot be subjected to any quantitative limit.

The Commission contends that the argument that a trip made for tax reasons should not benefit under the system established by the directive is unacceptable. The directive aims, within the limits which it lays down, to abolish all the barriers, including fiscal barriers, to the free movement of goods. According to the second recital in the preamble to Directive 69/169, one of its aims is to make the populations of the Member States conscious of the reality of the common market and, in particular, of the possibility, within the framework established by the directive, of effecting purchases in other countries enabling them to acquire in another Member State quality products which they are unable to find on their own domestic market or products which are cheaper because taxes or profit margins there are lower.

The Kingdom of Denmark had been authorized by the Act of Accession to exclude beer from the exemption until 31 December 1975 where the quantity exceeded two litres. After the expiry of that time-limit, Denmark was not permitted to re-impose quantitative restrictions such as those provided for by Order No 365. That measure is not amongst those which, in accordance with the directive, Denmark is authorized to adopt by way of derogation.

The Danish Government contends in the first place that the aim of the directive is not to encourage consumers who have an opportunity to do their shopping regularly in a neighbouring State. That follows from Article 3(2) of the directive, according to which only occasional imports may be regarded as not having a commercial character, as well as from the measures which Member States may adopt pursuant to Article 5.

According to the Danish Government, Articles 2(1) and 3(2) of the directive must be interpreted as meaning that the Member States may introduce quantitative limits so as to preclude exemption where goods in excess of those limits raise a presumption that they are being imported for commercial reasons.

In the Danish Government's view, the words the nature or quantity of such goods must not be such as might indicate that they are being imported for commercial reasons in Article 3(2) support the conclusion that the fact of the goods' being imported for commercial reasons is not decisive. That method of regulating imports is not exceptional in Community law. For instance, it is generally acknowledged, as regards Article 85(1) and the first paragraph of Article 86 of the EEC Treaty, that their rules are applicable even if there is no proof that intra-Community trade has been affected. It is sufficient if the abusive conduct is capable of affecting such trade.

According to the Danish Government, moreover, that interpretation is confirmed by the English, German and French versions of Article 3(2) of the directive.

The Danish Government points out that, usually, the largest quantity of beer purchased on a single occasion by a Danish family is a crate containing a total of 10 litres of beer. Where more than 10 litres of beer are imported per person, that raises a presumption that the importation is for commercial purposes.

In support of the 10-litre limit, the Danish Government relies on the Court's judgment in Case 170/78 Commission v United Kingdom [1983] ECR 2265, and the position adopted by the Commission in that case with regard to the method of comparing the tax burden borne by wine and beer. According to the criteria advocated in that case, 10 litres of beer correspond to four litres of wine, being the maximum quantity eligible for the exemption provided for in the directive.

Finally, the Danish Government points out that, according to the case-law of the Court, the Member States are entitled to adopt the measures that are necessary to prevent any abuse of Community rules which has the effect of circumventing national legislation. That is the case here.

In that regard the Danish Government refers to the following judgments: 3 December 1974 in Case 33/74 Binsbergen v Bedrijfsvereniging Metaalnijverheid [1974] ECR 1299; 4 December 1986 in Case 205/84 Commission v Germany [1986] ECR 3755; 23 March 1982 in Case 53/81 Levinv Staatsecretaris van Justitie [1982] ECR 1035; 21 June 1988 in Case 39/86 Lair v University of Hanover [1988] ECR 3161; 21 June 1988 in Case 197/86 Brown v Secretary of State for Scotland [1988] ECR 3205; 10 January 1985 in Case 229/83 Leclerc v Au blé vert [1985] ECR 1; 11 March 1980 in Case 104/79 Foglia v Novello [1980] ECR 745 and 27 October 1981 in Case 250/80 Anklagemyndigheden v Töpfer [1981] ECR 2465.

The Danish Government considers that it is possible to draw the following conclusions from those judgments:

1 Language of the case: Danish.