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

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Tax provisions - Harmonization of laws - Exemptions from turnover tax and excise duty - Goods contained in travellers' personal luggage - Residual competence of Member States - Scope - Introduction of a minimum period for a stay abroad - Not permissible
( Council Directive 69/169 )

In regard to exemptions from turnover tax and excise duty granted in respect of goods contained in travellers' personal luggage, Member States retain only the restricted power conferred on them by Directive 69/169, as subsequently extended and amended . Since no provision is made in that directive for any derogation relating to the duration of journeys and the exemptions must be granted as soon as the traveller in question has had the opportunity to make purchases in another Member State, the application of those exemptions cannot be limited by a Member State to goods contained in the personal luggage of travellers arriving at its borders after a period of 48 hours outside its territory .

In Case C-158/88
Commission of the European Communities, represented by D . Grant Lawrence, a member of its Legal Department, acting as Agent, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of the Commission' s Legal Department, Wagner Centre, Kirchberg,
applicant,
supported by
United Kingdom of Great Britain and Northern Ireland, represented by John Collins, of the Treasury Solicitor' s Department, acting as Agent, with an address for service at the British Embassy, 14 boulevard Roosevelt, Luxembourg,
intervener,
v
Ireland, represented by Louis J . Dockery, Chief State Solicitor, acting as Agent, assisted by James O' Reilly, barrister-at-law, with an address for service in Luxembourg at the Irish Embassy, 28 route d' Arlon,
defendant,
APPLICATION for a declaration that by limiting the application of the exemptions provided for in 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, as last amended by Council Directive 85/348/EEC of 8 July 1985, to goods contained in the luggage of travellers arriving at its borders after a period of 48 hours outside its territory, Ireland has failed to fulfil its obligations under the EEC Treaty,
THE COURT
composed of : O . Due, President, F . A . Schockweiler, President of Chamber, G . F . Mancini, R . Joliet, T . F . O' Higgins, J . C . Moitinho de Almeida and G . C . Rodríguez Iglesias, Judges,
Advocate General : M . Darmon
Registrar : H . A . Ruehl, Principal Administrator
having regard to the Report for the Hearing,
after hearing the representatives of the parties at the sitting on 21 February 1990,
after hearing the Opinion of the Advocate General delivered at the sitting on 21 March 1990,
gives the following
Judgment

1 By an application lodged at the Court Registry on 1 June 1988, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that by limiting the application of the exemptions provided for in 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 ( I ), p . 232 ), as last amended by Council Directive 85/348/EEC of 8 July 1985 ( Official Journal 1985, L 183, p . 24 ), to goods contained in the personal luggage of travellers who arrive at its borders after a period of 48 hours outside its territory, Ireland has failed to fulfil its obligations under the EEC Treaty .
2 This application originates in a finding by the Commission that by the European Communities ( Customs and Excise ) Regulations 1987 ( SI No 98, 1987 ) Ireland was restricting the benefit of the exemptions provided for in Articles 1, 2 and 4 of Directive 69/169 to persons arriving at its borders after a period of 48 hours outside its territory .
3 The Commission took the view that this measure was contrary to the abovementioned provisions of the directive, which make no distinction as between travellers and provide for no restrictions based on the period spent outside the jurisdiction of a Member State; on 15 April 1987 it therefore addressed to the Irish Government a letter before action pursuant to the first paragraph of Article 169 of the Treaty . The observations of the Irish Government were not such as to alter the Commission' s view, and by a reasoned opinion dated 16 October 1987 it requested Ireland to adopt the necessary measures to comply with that opinion within a period of two months of its communication .
4 Since no such measures were taken, the Commission brought this action .
5 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
6 The Irish Government claims, first of all, that the exemptions provided for in Directive 69/169 are confined to what it calls "genuine" travellers . It became apparent that Irish nationals were making numerous journeys of a single day to Northern Ireland in order to make purchases, taking advantage of the lower VAT rates in force there and of advantageous rates of exchange (" fiscal" travellers ). This situation, it says, caused serious damage to the Irish economy . The Irish Government maintains that the adoption of the contested regulations was necessary and, in accordance with the Court' s case-law, permissible in order to correct the abuse to which the application of the directive was giving rise .
7 This argument cannot be accepted . It is clear from the Court' s case-law ( see in particular the judgment of 14 February 1984 in Case 278/82 Rewe II (( 1984 )) ECR 721, paragraph 31 ) that in the area in question Member States are left with only the restricted power given to them by the actual provisions of the directives in question . No provision is made in those directives for any derogation relating to the duration of journeys .
8 It should be added that in that same judgment the Court held that in the context of travel within the Community the exemptions available in a Member State for goods contained in the personal luggage of travellers are granted as soon as the traveller in question has in fact had an opportunity to make purchases in another Member State ( judgment of 14 February 1984 in Case 278/82, cited above, paragraph 45 ). It follows that the distinction drawn by the regulations in question between "genuine" travellers and "fiscal" travellers in order to deny the latter the benefit of the exemptions provided for in the directive is incompatible therewith .
9 Finally, it should be stated that where, on account of the economic situation in a Member State, it becomes necessary to adopt exceptional provisions making the grant of exemptions subject to a period of time spent outside national territory, such provisions may be adopted only in pursuance of a directive derogating from Directive 69/169, as was done for Denmark by Council Directive 84/231/EEC of 30 April 1984 ( Official Journal 1984, L 117, p . 42 ), or by way of protective measures, when the conditions laid down in Articles 108 and 109 of the Treaty are satisfied . However, the European Communities ( Customs and Excise ) Regulations 1987 were not adopted in pursuance of any Community directive or protective measure provided for in the Treaty .
10 The Irish Government further states, in justification of the contested measure, that the Commission did not comply with the Council' s request that it "look into the feasibility and desirability of making a distinction between 'genuine' journeys and those made purely for fiscal purposes and submit a report to it before the end of 1987, accompanied by a proposal if the problem still exists at that time" ( Declaration entered in the Minutes of the Council meeting at which Council Directive 85/348 amending Directive 69/169 was adopted ).
11 This argument must also be rejected . The contested measure was adopted on 31 March 1987, well before the expiry of the period laid down for submission of the abovementioned report, and in any event a unilateral measure of that kind cannot be justified by an alleged failure to act on the part of the Commission .
12 It must therefore be held that by limiting the application of the exemptions provided for in Council Directive 69/169 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, as last amended by Council Directive 85/348 of 8 July 1985, to goods contained in the personal luggage of travellers arriving at its borders after a period of 48 hours outside its territory, Ireland has failed to fulfil its obligations under the EEC Treaty .

Costs
13 Under Article 69(2 ) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs . Since the defendant has failed in its submissions, it must be ordered to pay the costs, including those of the intervener .

On those grounds,
THE COURT
hereby :
( 1 ) Declares that by limiting the application of the exemptions provided for in 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, as last amended by Council Directive 85/348/EEC of 8 July 1985, to goods contained in the personal luggage of travellers arriving at its borders after a period of 48 hours outside its territory, Ireland has failed to fulfil its obligations under the EEC Treaty;
( 2 ) Orders Ireland to pay the costs, including those of the intervener .