Court of Justice of the European Communities (including Court of First Instance Decisions)

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1 . OBLIGATIONS OF MEMBER STATES - FAILURE TO FULFIL SUCH OBLIGATIONS - MEASURES ADOPTED BY THE COMMISSION - SUBJECT-MATTER - GROUNDS
( EEC TREATY, ARTICLE 169 )
2 . POLICY OF THE EEC - TAX PROVISIONS - EXPORT OF PRODUCTS TO ANOTHER MEMBER STATE - INTERNAL TAXATION - TAXATION IMPOSED DIRECTLY OR INDIRECTLY ON THE PRODUCTS - CONCEPT - REPAYMENT - LEGALITY
( EEC TREATY, ARTICLE 96 )
3 . POLICY OF THE EEC - TAX PROVISIONS - EXPORT OF PRODUCTS TO ANOTHER MEMBER STATE - INTERNAL TAXATION - REPAYMENT - FLAT RATE SYSTEM - LEGALITY - PROOF - ONUS OF PROOF

1 . IN THE CASE OF A FAILURE OF A MEMBER STATE TO FULFIL ITS OBLIGATIONS UNDER THE TREATY, THE VARIOUS MEASURES ADOPTED BY THE COMMISSION IN THE ADMINISTRATIVE STAGE OF THE PROCEDURE AND THAT BEFORE THE COURT MUST RELATE TO THE SAME FAILURE AND BE BASED ON THE SAME GROUNDS .
2 . AS USED IN ARTICLE 96, THE EXPRESSION ' DIRECTLY ' MUST BE UNDERSTOOD TO REFER TO TAXATION IMPOSED ON THE FINISHED PRODUCT, WHILST THE EXPRESSION ' INDIRECTLY ' REFERS TO TAXATION IMPOSED DURING THE VARIOUS STAGES OF PRODUCTION ON THE RAW MATERIALS OR SEMI-FINISHED PRODUCTS USED IN THE MANUFACTURE OF THE PRODUCT .
DUTIES WHICH ARE NOT IMPOSED DIRECTLY OR INDIRECTLY ON EXPORTED PRODUCTS CANNOT BE THE SUBJECT OF THE REPAYMENT PROVIDED FOR IN ARTICLE 96 .
3 . IN THE APPLICATION OF ARTICLE 96, IT IS FOR A MEMBER STATE WHICH EMPLOYS A FLAT RATE SYSTEM OF REPAYMENTS OF INTERNAL TAXATION TO ESTABLISH THAT SUCH A SYSTEM REMAINS WITHIN THE MANDATORY LIMITS OF THE ARTICLE, BOTH AS REGARDS THE NATURE OF THE TAXATION TO BE REPAID AND THE AMOUNT OF SUCH REPAYMENT ON EACH OF THE PRODUCTS AFFECTED BY THE MEASURE IN QUESTION .

IN CASE 45/64
COMMISSION OF THE EUROPEAN ECONOMIC COMMUNITY, REPRESENTED BY ITS LEGAL ADVISER, GIUSEPPE MARCHESINI, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICES OF HENRI MANZANARES, SECRETARY OF THE LEGAL DEPARTMENT OF THE EUROPEAN EXECUTIVES, 2 PLACE DE METZ,
APPLICANT,
V
ITALIAN REPUBLIC, REPRESENTED BY ADOLFO MARESCA, MINISTER PLENIPOTENTIARY, DEPUTY HEAD OF THE DIPLOMATIC LEGAL DEPARTMENT OF THE FOREIGN MINISTRY, ACTING AS AGENT, ASSISTED BY PIETRO PERONACI, DEPUTY STATE ADVOCATE-GENERAL, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE ITALIAN EMBASSY, 5 RUE MARIE-ADELAIEDE,
DEFENDANT,

APPLICATION FOR A RULING THAT, BY ALLOWING CERTAIN PRODUCTS OF THE ENGINEERING INDUSTRY EXPORTED TO OTHER MEMBER STATES TO BENEFIT FROM A REPAYMENT OF INTERNAL TAXATION WHICH CONTRAVENED ARTICLE 96 OF THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY EITHER BY REASON OF THE NATURE OF THE TAX OR OF THE METHOD OF REPAYMENT, THE ITALIAN REPUBLIC HAS FAILED TO FULFIL AN OBLIGATION UNDER THE SAID TREATY,

P.864
A - ADMISSIBILITY
THE FIRST OBJECTION
THE DEFENDANT CLAIMS THAT THE APPLICATION IS INADMISSIBLE ON THE GROUND THAT IT CONCERNS LAW NO 639 OF 5 JULY 1964 AND THAT, IN BREACH OF THE FIRST PARAGRAPH OF ARTICLE 169 OF THE TREATY, THIS LAW WAS NOT THE SUBJECT OF OBSERVATIONS BY THE ITALIAN REPUBLIC OR OF A REASONED OPINION BY THE COMMISSION .
THUS THERE IS NO IDENTITY OF SUBJECT-MATTER BETWEEN THE ADMINISTRATIVE STAGE, WHICH CONCERNED LAW NO 133 OF 10 MARCH 1955, AND THE STAGE BEFORE THE COURT WHICH CONCERNS LAW NO 639 WHICH IS FUNDAMENTALLY DIFFERENT FROM THE FORMER .
IT EMERGES FROM THE DOCUMENTS IN THE FILE THAT IN BOTH THE ADMINISTRATIVE STAGE OF THE PROCEEDINGS AND THAT BEFORE THE COURT THE COMMISSION CRITICIZED THE ACTUAL APPLICATION BY THE ITALIAN GOVERNMENT OF THE SYSTEM OF REPAYMENTS ON EXPORTS, WITHOUT LIMITING THE COMPLAINTS WHICH IT THOUGHT ITSELF ENTITLED TO MAKE TO THE LEGISLATIVE MEASURES CAPABLE OF CONSTITUTING THE LEGAL BASIS OF THE SAID SYSTEM .
P.865
MOREOVER, IN ITS REASONED OPINION ISSUED ON 11 DECEMBER AND CONVEYED TO THE DEFENDANT ON 16 DECEMBER 1963, THE COMMISSION INVITED THE ITALIAN REPUBLIC TO TERMINATE BY 31 DECEMBER 1963 AT THE LATEST THE GRANT OF A REPAYMENT WHICH, FOR THE REASONS SET OUT THEREIN, CONTRAVENED ARTICLE 96 OF THE TREATY .
THE PURPOSE OF THE REASONED OPINION WAS THEREFORE, FIRST, TO ESTABLISH THAT THE ITALIAN GOVERNMENT HAD FAILED TO FULFIL AN OBLIGATION UNDER THE TREATY AND, SECONDLY, TO WARN THE DEFENDANT NOT TO CONTINUE SUCH ALLEGED INFRINGEMENT BEYOND THE DATE INDICATED, EITHER BY A MEASURE CONTINUING THE EXISTING LEGISLATION OR BY SIMILAR FUTURE LEGISLATION .
THIS OBJECTION MUST THEREFORE BE REJECTED .
THE SECOND OBJECTION
THE DEFENDANT MAINTAINS THAT THE APPLICATION IS INADMISSIBLE BECAUSE OF A SECOND INFRINGEMENT OF ARTICLE 169, CONSISTING IN THE FACT THAT IT WAS NOT GIVEN AN OPPORTUNITY TO PRESENT ITS OBSERVATIONS ON THE TRUE NATURE OF THE FAILURE COMPLAINED OF OR, AS A RESULT, UPON THE GROUNDS FOR THE REASONED OPINION AND THE BASIC ISSUES OF THE APPLICATION .
IN THIS RESPECT IT SHOULD BE STATED THAT IN THE LETTER OF 10 JUNE 1963 BY WHICH IT INVITED THE ITALIAN GOVERNMENT TO SUBMIT ITS OBSERVATIONS THE COMMISSION CLEARLY INDICATED THAT IT CONSIDERED THE SYSTEM OF REPAYMENTS ON EXPORTS OPERATED BY THE ITALIAN GOVERNMENT TO CONTRAVENE THE TREATY, FIRST, BECAUSE IT ALLOWED REPAYMENT OF CERTAIN CATEGORIES OF TAXES WHICH, CONTRARY TO ARTICLE 96, ARE IMPOSED ON THE UNDERTAKING AND NOT ON THE PRODUCTS EXPORTED AND, SECONDLY, BECAUSE IN DETERMINING THE AMOUNT OF THE REPAYMENT IT EMPLOYS A PROCEDURE WHICH INVOLVES THE FIXING OF FLAT RATES BY PRODUCTS OR GROUPS OF PRODUCTS, WHILST ARTICLE 97 LIMITS THE USE OF SUCH A METHOD TO TURNOVER TAXES CALCULATED BY A CUMULATIVE MULTI-STAGE SYSTEM .
THE REASONED OPINION AND THE APPLICATION MADE BY THE COMMISSION ARE BASED ON THE SAME GROUNDS AND ISSUES .
THE COMMISSION HAS THUS GIVEN THE ITALIAN REPUBLIC AN OPPORTUNITY TO SUBMIT ITS OBSERVATIONS AND HAS FAIRLY AND CORRECTLY APPLIED THE FIRST PARAGRAPH OF ARTICLE 169 OF THE TREATY .
THIS OBJECTION, THEREFORE, MUST ALSO BE REJECTED .
P.866
B - THE SUBSTANCE OF THE CASE
THE FIRST SUBMISSION
IT IS NOT DISPUTED BETWEEN THE PARTIES THAT IN CALCULATING THE AMOUNT OF THE REPAYMENT ALLOWED ON THE EXPORT OF PRODUCTS OF THE ITALIAN ENGINEERING INDUSTRY THERE ARE INCLUDED REGISTRATION, STAMP AND MORTGAGE DUTIES, CHARGES ON LICENCES AND CONCESSIONS, MOTOR VEHICLES AND ADVERTISING .
ACCORDING TO THE COMMISSION, REPAYMENT OF SUCH DUTIES AND CHARGES IS NOT AUTHORIZED BY ARTICLE 96 OF THE TREATY, BECAUSE THEY ARE IMPOSED NEITHER ON THE PRODUCTS AS SUCH NOR UPON THE RAW MATERIALS OR SEMI-FINISHED PRODUCTS USED IN THEIR MANUFACTURE AND BECAUSE IT WAS THEREFORE IMPOSSIBLE TO CALCULATE THE EFFECT OF EACH ONE ON THE COST PRICE OF THE PRODUCTS .
ARTICLE 96 AUTHORIZES MEMBER STATES TO MAKE REPAYMENT OF INTERNAL TAXATION ON PRODUCTS EXPORTED TO THE TERRITORY OF ANOTHER MEMBER STATE, PROVIDED THAT THE AMOUNT OF SUCH REPAYMENT DOES NOT EXCEED THE INTERNAL TAXATION IMPOSED DIRECTLY OR INDIRECTLY ON THOSE PRODUCTS .
AS USED IN ARTICLE 96, THE EXPRESSION ' DIRECTLY ' MUST BE UNDERSTOOD TO REFER TO TAXATION IMPOSED ON THE FINISHED PRODUCT, WHILST THE EXPRESSION ' INDIRECTLY ' REFERS TO TAXATION IMPOSED DURING THE VARIOUS STAGES OF PRODUCTION ON THE RAW MATERIALS OR SEMI-FINISHED PRODUCTS USED IN THE MANUFACTURE OF THE PRODUCTS .
IT IS CLEAR FROM THE LEGAL MEASURE WHICH INTRODUCES THEM AND FROM THE SUBJECT-MATTER AND NATURE OF THE REGISTRATION, STAMP AND MORTGAGE DUTIES AND THE CHARGES ON LICENCES AND CONCESSIONS, CARS AND ADVERTISING THAT THEY ARE IMPOSED UPON THE PRODUCER UNDERTAKING IN THE VERY VARIED ASPECTS OF ITS GENERAL COMMERCIAL OR FINANCIAL ACTIVITY RATHER THAN ON THE PRODUCTS AS SUCH, EITHER AT THE VARIOUS STAGES OF THEIR MANUFACTURE OR AT THE FINAL STAGE .
AS THEY ARE NOT IMPOSED DIRECTLY OR INDIRECTLY ON THE EXPORTED PRODUCTS, THE REGISTRATION, STAMP AND MORTGAGE DUTIES AND THE CHARGES ON LICENCES AND CONCESSIONS, MOTOR VEHICLES AND ADVERTISING CANNOT BE THE SUBJECT OF THE REPAYMENT PROVIDED FOR IN ARTICLE 96 .
THUS, BY INCLUDING SUCH DUTIES AND CHARGES IN THE REPAYMENT ENJOYED BY EXPORTED PRODUCTS OF THE ENGINEERING INDUSTRY, THE ITALIAN REPUBLIC IS FAILING TO FULFIL ONE OF ITS OBLIGATIONS UNDER THE TREATY .
THE SECOND SUBMISSION
THE ITALIAN REPUBLIC IS FURTHER ACCUSED OF HAVING INFRINGED ARTICLE 96 OF THE TREATY BY INTRODUCING A SYSTEM OF FLAT RATE REPAYMENTS .
THE DEFENDANT CONSIDERS THAT IT IS ENTITLED TO EMPLOY SUCH A PROCEDURE, WHICH IS NOT PROHIBITED BY ARTICLE 96, AND TO CHOOSE THE METHODS OF REPAYMENT MOST SUITED TO ITS LEGAL SYSTEM, AS ONLY THE FINAL RESULT IS OPEN TO REVIEW BY THE COMMISSION .
IT FOLLOWS FROM ARTICLE 96 THAT THE POWER OF A STATE TO RESORT TO REPAYMENTS OF INTERNAL TAXATION IS SUBJECT TO THE CONDITION, ON THE ONE HAND, THAT SUCH REPAYMENTS ARE IMPOSED ON THE PRODUCT ITSELF AND, ON THE OTHER HAND, THAT THE REPAYMENT REMAINS LOWER THAN OR EQUAL TO THE SAID TAXATION .
APART FROM THE CATEGORIES OF TAXATION REFERRED TO IN THE FIRST SUBMISSION OF THE APPLICATION, THE REPAYMENT AT ISSUE CONCERNS THE REFUND OF INTERNAL TAXATION WHICH IS WITHOUT QUESTION IMPOSED ON THE PRODUCTS .
THUS IT APPEARS NECESSARY TO ASCERTAIN ONLY WHETHER THE OTHER CONDITION IMPOSED BY ARTICLE 96 IS FULFILLED, NAMELY WHETHER IT IS REALLY A QUESTION OF REPAYMENT, IN OTHER WORDS, WHETHER THE AMOUNT OF THE REPAYMENT IS LESS THAN OR EQUAL TO THE AMOUNT OF THE TAXATION .
SUCH EVIDENCE MUST BE GIVEN TO PERMIT THE IMPLEMENTATION OF A MEASURE WHICH CONSTITUTES A TRUE REPAYMENT OF TAXATION AND WHICH IS ONLY JUSTIFIED ON THIS GROUND AND PROVIDED THAT THIS CONDITION IS FULFILLED .
FURTHER, SINCE THE ITALIAN REPUBLIC INTRODUCED A FLAT RATE SYSTEM OF ITS OWN FREE WILL, IT IS FOR THAT PARTY TO SHOW THAT THE SYSTEM ALWAYS REMAINS WITHIN THE MANDATORY LIMITS OF ARTICLE 96 .
THEREFORE, AS REGARDS THE VARIOUS PRODUCTS IN QUESTION, THE ITALIAN REPUBLIC SHOULD BE ASKED TO SUPPLY THIS INFORMATION IN WRITING TO THE COURT, SUPPORTED BY FIGURES .

UNDER THE TERMS OF ARTICLE 69(2 ) OF THE RULES OF PROCEDURE THE UNSUCCESSFUL PARTY SHALL BE ORDERED TO PAY THE COSTS .
THE DEFENDANT HAS FAILED IN ITS OBJECTIONS AND AS REGARDS THE FIRST SUBMISSION ON THE SUBSTANCE OF THE CASE .
IT MUST THEREFORE BE ORDERED TO PAY HALF THE COSTS FORTHWITH .
THE REMAINDER OF THE COSTS SHALL BE RESERVED .

THE COURT
HEREBY :
1 . RULES THAT, BY GRANTING REPAYMENT OF INTERNAL TAXATION ON THE PRODUCTS OF THE ENGINEERING INDUSTRY EXPORTED TO THE TERRITORY OF OTHER MEMBER STATES IN RESPECT OF REGISTRATION, STAMP AND MORTGAGE DUTIES, CHARGES ON LICENCES AND CONCESSIONS AND ON MOTOR VEHICLES AND ADVERTISING, THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATION UNDER ARTICLE 96 OF THE TREATY;
2 . ORDERS THAT WITHIN THREE MONTHS FROM THE DATE ON WHICH THIS JUDGMENT IS GIVEN THE ITALIAN REPUBLIC SHALL SHOW THAT THE AMOUNT OF THE FLAT RATE REPAYMENT OF INTERNAL TAXATION IMPOSED ON THE PRODUCTS OF THE ENGINEERING INDUSTRY EXPORTED TO THE TERRITORY OF OTHER MEMBER STATES DOES NOT EXCEED THE AMOUNT OF SUCH TAXATION;
3 . ORDERS THAT ON THE EXPIRY OF THIS PERIOD THE ORAL PROCEDURE ON THE SECOND SUBMISSION OF THE APPLICATION SHALL BE REOPENED AT THE REQUEST OF THE PARTY WHICH FIRST REQUESTS IT;
4 . ORDERS THE DEFENDANT TO BEAR HALF THE COSTS, THE REMAINDER OF WHICH ARE RESERVED .