Summary
Parties
Subject of the case
Grounds
Decision on costs
Operative part
Keywords
1 . TAX PROVISIONS - INTERNAL TAXES - PROVISIONS OF THE TREATY - AIM
( ECC TREATY , ART . 95 )
2 . TAX PROVISIONS - INTERNAL TAXES - PROHIBITION OF DISCRIMINATION BETWEEN IMPORTED PRODUCTS AND SIMILAR NATIONAL PRODUCTS - SIMILAR PRODUCTS - CONCEPT - INTERPRETATION - CRITERIA
( EEC TREATY , ART . 95 , FIRST PARAGRAPH )
3 . TAX PROVISIONS - INTERNAL TAXES - TAXES OF SUCH A NATURE AS TO AFFORD INDIRECT PROTECTION TO OTHER PRODUCTS - COMPETING PRODUCTS - CRITERIA
( EEC TREATY , ART . 95 , SECOND PARAGRAPH )
4 . TAX PROVISIONS - INTERNAL TAXES - GRANT OF TAX BENEFITS TO NATIONAL PRODUCTS - PERMISSIBILITY - CONDITIONS - EXTENSION TO PRODUCTS IMPORTED FROM OTHER MEMBER STATES
( EEC TREATY , ART . 95 )
5 . TAX PROVISIONS - INTERNAL TAXES - SIMILAR PRODUCTS - COMPETING PRODUCTS - CRITERIA - COMMON CUSTOMS TARIFF CLASSIFICATION - NOT A DECISIVE CRITERION
( ECC TREATY , ART . 95 , FIRST AND SECOND PARAGRAPHS )
Summary
1 . WITHIN THE SYSTEM OF THE EEC TREATY , THE PROVISIONS OF THE FIRST AND SECOND PARAGRAPHS OF ARTICLE 95 SUPPLEMENT THE PROVISIONS ON THE ABOLITION OF CUSTOMS DUTIES AND CHARGES HAVING EQUIVALENT EFFECT . THEIR AIM IS TO ENSURE FREE MOVEMENT OF GOODS BETWEEN THE MEMBER STATES IN NORMAL CONDITIONS OF COMPETITION BY THE ELIMINATION OF ALL FORMS OF PROTECTION WHICH MAY RESULT FROM THE APPLICATION OF INTERNAL TAXATION WHICH DISCRIMINATES AGAINST PRODUCTS FROM OTHER MEMBER STATES . ARTICLE 95 MUST GUARANTEE THE COMPLETE NEUTRALITY OF INTERNAL TAXATION AS REGARDS COMPETITION BETWEEN DOMESTIC PRODUCTS AND IMPORTED PRODUCTS .
2 . THE FIRST PARAGRAPH OF ARTICLE 95 MUST BE INTERPRETED WIDELY SO AS TO COVER ALL TAXATION PROCEDURES WHICH CONFLICT WITH THE PRINCIPLE OF THE EQUALITY OF TREATMENT OF DOMESTIC PRODUCTS AND IMPORTED PRODUCTS ; IT IS THEREFORE NECESSARY TO INTERPRET THE CONCEPT OF ' ' SIMILAR PRODUCTS ' ' WITH SUFFICIENT FLEXIBILITY . IT IS NECESSARY TO CONSIDER AS SIMILAR PRODUCTS WHICH HAVE SIMILAR CHARACTERISTICS AND MEET THE SAME NEEDS FROM THE POINT OF VIEW OF CONSUMERS . IT IS THEREFORE NECESSARY TO DETERMINE THE SCOPE OF THE FIRST PARAGRAPH OF ARTICLE 95 ON THE BASIS NOT OF THE CRITERION OF THE STRICTLY IDENTICAL NATURE OF THE PRODUCTS BUT ON THAT OF THEIR SIMILAR AND COMPARABLE USE .
3 . THE FUNCTION OF THE SECOND PARAGRAPH OF ARTICLE 95 IS TO COVER ALL FORMS OF INDIRECT TAX PROTECTION IN THE CASE OF PRODUCTS WHICH , WITHOUT BEING SIMILAR WITHIN THE MEANING OF THE FIRST PARAGRAPH , ARE NEVERTHELESS IN COMPETITION , EVEN PARTIAL , INDIRECT OR POTENTIAL , WITH CERTAIN PRODUCTS OF THE IMPORTING COUNTRY . FOR THE PURPOSES OF THE APPLICATION OF THAT PROVISION IT IS SUFFICIENT FOR THE IMPORTED PRODUCT TO BE IN COMPETITION WITH THE PROTECTED DOMESTIC PRODUCTION BY REASON OF ONE OR SEVERAL ECONOMIC USES TO WHICH IT MAY BE PUT , EVEN THOUGH THE CONDITION OF SIMILARITY FOR THE PURPOSES OF THE FIRST PARAGRAPH OF ARTICLE 95 IS NOT FULFILLED .
WHILST THE CRITERION INDICATED IN THE FIRST PARAGRAPH OF ARTICLE 95 CONSISTS IN THE COMPARISON OF TAX BURDENS , WHETHER IN TERMS OF THE RATE , THE MODE OF ASSESSMENT OR OTHER DETAILED RULES FOR THE APPLICATION THEREOF , IN VIEW OF THE DIFFICULTY OF MAKING SUFFICIENTLY PRECISE COMPARISONS BETWEEN THE PRODUCTS IN QUESTION , THE SECOND PARAGRAPH OF THAT ARTICLE IS BASED UPON A MORE GENERAL CRITERION , IN OTHER WORDS THE PROTECTIVE NATURE OF THE SYSTEM OF INTERNAL TAXATION .
4 . WHILST COMMUNITY LAW , AS IT STANDS AT PRESENT , DOES NOT PROHIBIT CERTAIN TAX EXEMPTIONS OR TAX CONCESSIONS , IN PARTICULAR SO AS TO ENABLE PRODUCTIONS OR UNDERTAKINGS TO CONTINUE WHICH WOULD NO LONGER BE PROFITABLE WITHOUT THESE SPECIAL TAX BENEFITS BECAUSE OF THE RISE IN PRODUCTION COSTS , THE LAWFULNESS OF SUCH PRACTICES IS SUBJECT TO THE CONDITION THAT THE MEMBER STATES USING THOSE POWERS EXTEND THE BENEFIT THEREOF IN A NON-DISCRIMINATORY AND NON-PROTECTIVE MANNER TO IMPORTED PRODUCTS IN THE SAME SITUATION .
5 . THE CLASSIFICATIONS IN THE COMMON CUSTOMS TARIFF WHICH WERE DESIGNED WITH THE COMMUNITY ' S FOREIGN TRADE IN MIND , DO NOT PROVIDE CONCLUSIVE EVIDENCE AS TO WHETHER DIFFERENT PRODUCTS IN RELATION ONE TO ANOTHER ARE SIMILAR WITHIN THE MEANING OF THE FIRST PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY , OR IN COMPETITION , EVEN PARTIAL , INDIRECT OR POTENTIAL , AND SO COVERED BY THE SECOND PARAGRAPH OF THAT ARTICLE .
Parties
IN CASE 168/78
COMMISSION OF THE EUROPEAN COMMUNITIES , REPRESENTED BY ITS LEGAL ADVISER , JEAN-CLAUDE SECHE , ACTING AS AGENT , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF ITS LEGAL ADVISER , MARIO CERVINO , JEAN MONNET BUILDING , KIRCHBERG ,
APPLICANT ,
V
FRENCH REPUBLIC , REPRESENTED BY NOEL MUSEUX , ASSISTANT DIRECTOR AT THE DIRECTORATE FOR LEGAL AFFAIRS AT THE MINISTRY OF FOREIGN AFFAIRS , ACTING AS AGENT , AND PIERRE PERE , SECRETARY FOR FOREIGN AFFAIRS AT THE DIRECTORATE FOR LEGAL AFFAIRS , ACTING AS ASSISTANT AGENT , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE EMBASSY OF FRANCE ,
DEFENDANT ,
Subject of the case
APPLICATION FOR A DECLARATION THAT , BY APPLYING A DISCRIMINATORY TAX SYSTEM ON SPIRITS , THE FRENCH REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 95 OF THE EEC TREATY ,
Grounds
1 BY APPLICATION OF 7 AUGUST 1978 THE COMMISSION BROUGHT UNDER ARTICLE 169 OF THE EEC TREATY AN ACTION FOR A DECLARATION THAT , BY APPLYING DISCRIMINATORY TAXATION ON CERTAIN SPIRITS , THE FRENCH REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 95 .
2 AT THE SAME TIME , THE COMMISSION SUBMITTED TO THE COURT OF JUSTICE APPLICATIONS AGAINST THE KINGDOM OF DENMARK AND THE ITALIAN REPUBLIC RELATING TO PROBLEMS OF THE SAME NATURE . THE APPLICATIONS CONTAIN , IN ALL THREE INSTANCES , CERTAIN GENERAL CONSIDERATIONS FROM WHICH IT FOLLOWS THAT THOSE APPLICATIONS FORM PART OF A GENERAL ACTION AIMING TO ENSURE THAT THE MEMBER STATES CONCERNED COMPLY WITH THE OBLIGATIONS IMPOSED ON THEM BY THE TREATY IN THIS RESPECT . IT THEREFORE SEEMS APPROPRIATE TO CLARIFY FIRST OF ALL CERTAIN QUESTIONS OF PRINCIPLE COMMON TO THE THREE CASES AS REGARDS THE INTERPRETATION OF ARTICLE 95 IN THE LIGHT OF THE SPECIAL FEATURES OF THE MARKET IN SPIRITS .
THE INTERPRETATION OF ARTICLE 95
3 UNDER THE FIRST PARAGRAPH OF ARTICLE 95 ' ' NO MEMBER STATE SHALL IMPOSE , DIRECTLY OR INDIRECTLY , ON THE PRODUCTS OF OTHER MEMBER STATES ANY INTERNAL TAXATION OF ANY KIND IN EXCESS OF THAT IMPOSED DIRECTLY OR INDIRECTLY ON SIMILAR DOMESTIC PRODUCTS ' ' . THE SECOND PARAGRAPH OF THAT ARTICLE ADDS AS FOLLOWS : ' ' FURTHERMORE , NO MEMBER STATE SHALL IMPOSE ON THE PRODUCTS OF OTHER MEMBER STATES ANY INTERNAL TAXATION OF SUCH A NATURE AS TO AFFORD INDIRECT PROTECTION TO OTHER PRODUCTS ' ' .
4 THE ABOVE-MENTIONED PROVISIONS SUPPLEMENT , WITHIN THE SYSTEM OF THE TREATY , THE PROVISIONS ON THE ABOLITION OF CUSTOMS DUTIES AND CHARGES HAVING EQUIVALENT EFFECT . THEIR AIM IS TO ENSURE FREE MOVEMENT OF GOODS BETWEEN THE MEMBER STATES IN NORMAL CONDITIONS OF COMPETITION BY THE ELIMINATION OF ALL FORMS OF PROTECTION WHICH RESULT FROM THE APPLICATION OF INTERNAL TAXATION WHICH DISCRIMINATES AGAINST PRODUCTS FROM OTHER MEMBER STATES . AS THE COMMISSION HAS CORRECTLY STATED , ARTICLE 95 MUST GUARANTEE THE COMPLETE NEUTRALITY OF INTERNAL TAXATION AS REGARDS COMPETITION BETWEEN DOMESTIC PRODUCTS AND IMPORTED PRODUCTS .
5 THE FIRST PARAGRAPH OF ARTICLE 95 , WHICH IS BASED ON A COMPARISON OF THE TAX BURDENS IMPOSED ON DOMESTIC PRODUCTS AND ON IMPORTED PRODUCTS WHICH MAY BE CLASSIFIED AS ' ' SIMILAR ' ' , IS THE BASIC RULE IN THIS RESPECT . THIS PROVISION , AS THE COURT HAS HAD OCCASION TO EMPHASIZE IN ITS JUDGMENT OF 10 OCTOBER 1978 IN CASE 148/77 , H . HANSEN JUN . & O . C . BALLE GMBH & CO . V HAUPTZOLLAMT FLENSBURG ( 1978 ) ECR 1787 , MUST BE INTERPRETED WIDELY SO AS TO COVER ALL TAXATION PROCEDURES WHICH CONFLICT WITH THE PRINCIPLE OF THE EQUALITY OF TREATMENT OF DOMESTIC PRODUCTS AND IMPORTED PRODUCTS ; IT IS THEREFORE NECESSARY TO INTERPRET THE CONCEPT OF ' ' SIMILAR PRODUCTS ' ' WITH SUFFICIENT FLEXIBILITY . THE COURT SPECIFIED IN THE JUDGMENT OF 17 FEBRUARY 1976 IN THE REWE CASE ( CASE 45/75 ( 1976 ) ECR 181 ) THAT IT IS NECESSARY TO CONSIDER AS SIMILAR PRODUCTS WHICH ' ' HAVE SIMILAR CHARACTERISTICS AND MEET THE SAME NEEDS FROM THE POINT OF VIEW OF CONSUMERS ' ' . IT IS THEREFORE NECESSARY TO DETERMINE THE SCOPE OF THE FIRST PARAGRAPH OF ARTICLE 95 ON THE BASIS NOT OF THE CRITERION OF THE STRICTLY INDENTICAL NATURE OF THE PRODUCTS BUT ON THAT OF THEIR SIMILAR AND COMPARABLE USE .
6 THE FUNCTION OF THE SECOND PARAGRAPH OF ARTICLE 95 IS TO COVER , IN ADDITION , ALL FORMS OF INDIRECT TAX PROTECTION IN THE CASE OF PRODUCTS WHICH , WITHOUT BEING SIMILAR WITHIN THE MEANING OF THE FIRST PARAGRAPH , ARE NEVERTHELESS IN COMPETITION , EVEN PARTIAL , INDIRECT OR POTENTIAL , WITH CERTAIN PRODUCTS OF THE IMPORTING COUNTRY . THE COURT HAS ALREADY EMPHASIZED CERTAIN ASPECTS OF THAT PROVISION IN ITS JUDGMENT OF 4 APRIL 1978 IN CASE 27/77 , FIRMA FINK-FRUCHT GMBH V HAUPTZOLLAMT MUNCHEN-LANDSBERGERSTRASSE ( 1978 ) ECR 223 , IN WHICH IT STATED THAT FOR THE PURPOSES OF THE APPLICATION OF THE FIRST PARAGRAPH OF ARTICLE 95 IT IS SUFFICIENT FOR THE IMPORTED PRODUCT TO BE IN COMPETITION WITH THE PROTECTED DOMESTIC PRODUCTION BY REASON OF ONE OR SEVERAL ECONOMIC USES TO WHICH IT MAY BE PUT , EVEN THOUGH THE CONDITION OF SIMILARITY FOR THE PURPOSES OF THE FIRST PARAGRAPH OF ARTICLE 95 IS NOT FULFILLED .
7 WHILST THE CRITERION INDICATED IN THE FIRST PARAGRAPH OF ARTICLE 95 CONSISTS IN THE COMPARISON OF TAX BURDENS , WHETHER IN TERMS OF THE RATE , THE MODE OF ASSESSMENT OR OTHER DETAILED RULES FOR THE APPLICATION THEREOF , IN VIEW OF THE DIFFICULTY OF MAKING SUFFICIENTLY PRECISE COMPARISONS BETWEEN THE PRODUCTS IN QUESTION , THE SECOND PARAGRAPH OF THAT ARTICLE IS BASED UPON A MORE GENERAL CRITERION , IN OTHER WORDS THE PROTECTIVE NATURE OF THE SYSTEM OF INTERNAL TAXATION .
8 THE APPLICATION IN THIS INSTANCE OF THE CRITERION OF SIMILARITY , WHICH DETERMINES THE SCOPE OF THE PROHIBITION LAID DOWN IN THE FIRST PARAGRAPH OF ARTICLE 95 , HAS GIVEN RISE TO DIFFERENCES OF OPINION BETWEEN THE PARTIES . ACCORDING TO THE COMMISSION , ALL SPIRITS , WHATEVER THE RAW MATERIALS USED FOR THEIR MANUFACTURE , HAVE SIMILAR PROPERTIES AND IN ESSENCE MEET THE SAME NEEDS OF CONSUMERS . THEREFORE , WHATEVER THE SPECIFIC CHARACTERISTICS OF THE VARIOUS PRODUCTS COMING WITHIN THAT CATEGORY AND WHATEVER THE CONSUMER HABITS IN THE VARIOUS REGIONS OF THE COMMUNITY , SPIRITS AS FINISHED PRODUCTS REPRESENT , FROM THE POINT OF VIEW OF CONSUMERS , A SINGLE GENERAL MARKET . IT IS NECESSARY TO OBSERVE THAT THIS CONCEPT IS EXPRESSED IN THE PROPOSALS SUBMITTED BY THE COMMISSION TO THE COUNCIL FOR THE ESTABLISHMENT OF A COMMON ORGANIZATION OF THE MARKET IN ALCOHOL , BASED ON THE APPLICATION OF A SINGLE RATE OF TAX FOR ALL THE PRODUCTS IN QUESTION ON THE BASIS OF THEIR PURE ALCOHOL CONTENT .
9 THIS CONCEPT IS CONTESTED BY THE GOVERNMENTS OF THE THREE DEFENDANT MEMBER STATES . IN THEIR OPINION , IT IS POSSIBLE TO DISTINGUISH IN THE CASE OF SPIRITS VARIOUS CATEGORIES OF PRODUCT WHICH DIFFER EITHER IN TERMS OF THE RAW MATERIALS USED OR OF THEIR TYPICAL CHARACTERISTICS OR OF THE CONSUMER HABITS OBSERVED IN THE VARIOUS MEMBER STATES .
10 IN THIS CONNEXION , THE COMMISSION POINTS OUT HOWEVER THAT THE APPRAISAL OF THE CHARACTERISTICS OF THE VARIOUS ALCOHOLIC BEVERAGES , IN THE SAME WAY AS CONSUMER HABITS , IS VARIABLE IN TIME AND SPACE AND THAT SUCH FACTORS CANNOT PROVIDE VALID CRITERIA AS REGARDS THE COMMUNITY TAKEN AS A WHOLE . IT DRAWS ATTENTION MOREOVER TO THE DANGER OF HARDENING SUCH HABITS BY MEANS OF TAX CLASSIFICATIONS MADE BY THE MEMBER STATES .
11 THESE ARGUMENTS PROMPT THE FOLLOWING REPLY FROM THE COURT . THE APPLICATION OF THE PROVISIONS OF ARTICLE 95 TO SPECIFIC NATIONAL SITUATIONS FORMING THE SUBJECT-MATTER OF THE APPLICATIONS SUBMITTED BY THE COMMISSION MUST BE EXAMINED IN THE CONTEXT OF THE GENERAL STATE OF THE MARKET IN ALCOHOLIC BEVERAGES WITHIN THE COMMUNITY . IN THIS RESPECT IT IS NECESSARY TO TAKE INTO ACCOUNT THREE LINES OF THOUGHT :
( A ) IT IS IMPOSSIBLE , FIRST OF ALL , TO DISREGARD THE FACT THAT ALL THE PRODUCTS IN QUESTION , WHATEVER THEIR SPECIFIC CHARACTERISTICS IN OTHER RESPECTS , HAVE COMMON GENERIC FEATURES . ALL ARE THE OUTCOME OF THE DISTILLATION PROCEDURE ; ALL CONTAIN , AS A PRINCIPAL CHARACTERISTIC INGREDIENT , ALCOHOL SUITABLE FOR HUMAN CONSUMPTION AT A RELATIVELY HIGH DEGREE OF CONCENTRATION . IT FOLLOWS THAT WITHIN THE LARGEST GROUP OF ALCOHOLIC BEVERAGES SPIRITS FORM AN IDENTIFIABLE WHOLE UNITED BY COMMON CHARACTERISTICS ;
( B)IN SPITE OF THOSE COMMON CHARACTERISTICS , IT IS POSSIBLE TO DISTINGUISH WITHIN THAT WHOLE PRODUCTS WHICH HAVE THEIR OWN MORE OR LESS PRONOUNCED CHARACTERISTICS . THOSE CHARACTERISTICS SPRING EITHER FROM THE RAW MATERIALS USED ( IN THIS CONNEXION IT IS POSSIBLE TO DISTINGUISH IN PARTICULAR SPIRITS DISTILLED FROM WINE , FRUIT , CEREALS AND SUGAR-CANE ), OR FROM MANUFACTURING PROCESSES OR , AGAIN , FROM THE FLAVOURINGS ADDED . TYPICAL VARIETIES OF SPIRITS MAY IN FACT BE DEFINED BY THESE PARTICULAR CHARACTERISTICS , SO MUCH SO THAT SOME OF THEM ARE EVEN PROTECTED BY REGISTERED DESIGNATIONS OF ORIGIN ;
( C)AT THE SAME TIME , IT IS IMPOSSIBLE TO DISREGARD THE FACT THAT THERE ARE , IN THE CASE OF SPIRITS , IN ADDITION TO WELL-DEFINED PRODUCTS WHICH ARE PUT TO RELATIVELY SPECIFIC USES , OTHER PRODUCTS WITH LESS DISTINCT CHARACTERISTICS AND WIDER USES . THERE ARE , ON THE ONE HAND , NUMEROUS PRODUCTS DERIVED FROM WHAT ARE KNOWN AS ' ' NEUTRAL ' ' SPIRITS , IN OTHER WORDS SPIRITS OF ALL ORIGINS INCLUDING MOLASSES ALCOHOL AND POTATO ALCOHOL ; THESE PRODUCTS OWE THEIR INDIVIDUALITY ONLY TO FLAVOURING ADDITIVES WITH A MORE OR LESS PRONOUNCED TASTE . ON THE OTHER HAND , IT IS NECESSARY TO DRAW ATTENTION TO THE FACT THAT IN THE CASE OF SPIRITS THERE ARE PRODUCTS WHICH MAY BE CONSUMED IN VERY DIFFERENT FORMS , EITHER NEAT OR DILUTED OR , AGAIN , IN THE FORM OF MIXTURES . THESE PRODUCTS MAY THEREFORE BE IN COMPETITION WITH A RANGE OF VARYING SIZE OF OTHER ALCOHOLIC PRODUCTS OF MORE LIMITED USE . A CHARACTERISTIC OF THE THREE CASES BROUGHT BEFORE THIS COURT IS HOWEVER THE FACT THAT IN EACH THERE ARE , IN ADDITION TO WELL-DEFINED SPIRITS , ONE OR SEVERAL PRODUCTS WITH A BROAD RANGE OF USES .
12 TWO CONCLUSIONS FOLLOW FROM THIS ANALYSIS OF THE MARKET IN SPIRITS . FIRST , THERE IS , IN THE CASE OF SPIRITS CONSIDERED AS A WHOLE , AN INDETERMINATE NUMBER OF BEVERAGES WHICH MUST BE CLASSIFIED AS ' ' SIMILAR PRODUCTS ' ' WITHIN THE MEANING OF THE FIRST PARAGRAPH OF ARTICLE 95 , ALTHOUGH IT MAY BE DIFFICULT TO DECIDE THIS IN SPECIFIC CASES , IN VIEW OF THE NATURE OF THE FACTORS IMPLIED BY DISTINGUISHING CRITERIA SUCH AS FLAVOUR AND CONSUMER HABITS . SECONDLY , EVEN IN CASES IN WHICH IT IS IMPOSSIBLE TO RECOGNIZE A SUFFICIENT DEGREE OF SIMILARITY BETWEEN THE PRODUCTS CONCERNED , THERE ARE NEVERTHELESS , IN THE CASE OF ALL SPIRITS , COMMON CHARACTERISTICS WHICH ARE SUFFICIENTLY PRONOUNCED TO ACCEPT THAT IN ALL CASES THERE IS AT LEAST PARTIAL OR POTENTIAL COMPETITION . IT FOLLOWS THAT THE APPLICATION OF THE SECOND PARAGRAPH OF ARTICLE 95 MAY COME INTO CONSIDERATION IN CASES IN WHICH THE RELATIONSHIP OF SIMILARITY BETWEEN THE SPECIFIC VARIETIES OF SPIRITS REMAINS DOUBTFUL OR CONT
