Opinion of the Advocate-General
I - Introduction
1. The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) has referred to the Court of Justice for a preliminary ruling a question on the interpretation of Article 6(1) of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (hereinafter the directive).
2. The Hoge Raad wishes in particular to know whether, when no excise duty has been paid, the mere holding of a product subject to duty can be regarded as a release for consumption within the meaning of Article 6(1) of the directive, so that the excise duty is due and chargeable.
3. The question raised by the Hoge Raad requires the Court of Justice to rule on the interpretation of the term release for consumption used in the abovementioned provision of the directive and to settle the issue of the holding of products subject to excise duty when the duty has not already been assessed and paid.
II - The facts
4. Mr Van de Water, the appellant in the main proceedings, purchased from a third party a certain amount of alcohol to make gin. He made the gin, with assistance from three other persons, in a rented shed in Barendrecht in the south of the Netherlands.
5. On 8 September 1995, in the presence of the person concerned, the competent authorities carried out a search of the shed, in the course of which they found vats containing alcohol with a strength of 96.2% vol., together with jerrycans and bottles filled with gin.
6. The officers who made the search concluded that the excise duty on the alcohol corresponding to the products in question had not been paid since none of those products was covered by customs documents or suspension certificates, and because no authorisation had been issued for the use of the shed as a tax warehouse.
7. Subsequently, Mr Van de Water received an assessment demanding the payment by him of excise duty on two counts: for manufacturing the gin he had made and for holding or possessing the alcoholic raw materials with which he intended to make more gin. His complaint to the tax inspector concerning that assessment was rejected.
III - The main proceedings and the question referred
8. Mr Van de Water appealed to the Gerechtshof te s'-Gravenhage (Regional Court of Appeal, The Hague) which, by judgment of 6 February 1998, ruled partially in his favour. As follows from the order for reference, the Gerechtshof considered that the holding of alcoholic raw materials was not subject to excise duty since there had been no departure from a suspension arrangement within the meaning of Article 6(1) of the directive.
9. Mr van de Water then immediately appealed in cassation to the Hoge Raad, without the parties ever having raised, in the course of the proceedings, the question of the possible repercussions of the directive on the case. It was the court of cassation itself that raised this question on its own initiative.
10. In the view of Hoge Raad, the mere holding of a product subject to excise duty on which duty has not been levied pursuant to the provisions of the law cannot be regarded as a release for consumption within the meaning of Article 6(1) of the directive. However, since, in its opinion, that assessment cannot be said to be free from all reasonable doubt, it has decided to request the Court of Justice to give a preliminary ruling on the following question:
Can the (mere) holding of a product subject to excise duty within the meaning of Article 3(1) of the Directive be regarded as a release for consumption within the meaning of Article 6(1) of that Directive, if and in so far as duty has not already been levied on it pursuant to the applicable provisions of Community law and national legislation?
IV - The legal context
A - Community legislation
11. Article 3(1) of the directive states:
This Directive shall apply at Community level to the following products as defined in the relevant Directives:
- mineral oils,
- alcohol and alcoholic beverages,
- manufactured tobacco.
12. In accordance with Article 5(1), the products referred to in Article 3(1) shall be subject to excise duty at the time of their production within the territory of the Community ... or of their importation into that territory.
13. Article 6 provides:
1. Excise duty shall become chargeable at the time of release for consumption ... .
Release for consumption of products subject to excise duty shall mean:
(a) any departure, including irregular departure, from a suspension arrangement;
(b) any manufacture, including irregular manufacture, of those products outside a suspension arrangement;
(c) any importation of those products, including irregular importation, where those products have not been placed under a suspension arrangement.
...
Article 9 reads:
1. Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purpose in another Member State.
...
14. Finally, Article 11(2) provides that production, processing and holding of products subject to excise duty, where the latter has not been paid, shall take place in a tax warehouse.
B - The Netherlands legislation
15. In the Netherlands, the rules on excise duty are contained in the Wet op de accijns (Law on excise duties, hereinafter the Law) of 31 October 1991, which entered into force on 1 January 1992. In order to incorporate the directive into the Netherlands legal system, the Law was extensively amended by a law of 24 December 1992, which entered into force on 1 January 1993.
16. Article 1(1) of the Law lists the goods subject to excise duty. These include, apart from wine and beer, alcoholic beverages and intermediate products.
17. According to Article 1(2) of the Law, the excise duty becomes chargeable on the release for consumption of the products subject to duty, it being understood that release for consumption means departure from the tax warehouse, that is to say, from any place in the Netherlands where, in accordance with the Law, products subject to excise duty may be manufactured, processed, held, received and dispatched under a suspension arrangement (Article 2(1) in conjunction with Article 1a(d)).
18. However, the Law also regards as release for consumption the manufacture of products subject to excise duty outside a tax warehouse, as well as the holding of such products on which duty has not yet been levied pursuant to the Law (Article 2f in conjunction with Article 5(1) of the Law). In those cases, the person responsible for the irregular manufacture or holding is liable to pay the duty from the time of manufacture of the product or from the time he began holding it (Articles 51a(f) and 52a(d)).
V - The proceedings before the Court of Justice
19. Written observations were lodged by the Netherlands Government and by the Commission within the time-limit laid down by Article 20 of the EC Statute of the Court of Justice.
20. As none of the parties asked to make oral observations, the Court decided, under Article 104(4) of its Rules of Procedure, to dispense with the oral procedure.
VI - Specific aspects of the procedural arguments before the Hoge Raad
21. As I have already noted, the Gerechtshof in The Hague partially upheld Mr Van de Water's appeal. Considering that his gin-making was an activity subject to the excise duty on alcohol, under Article 2f of the Law, it dismissed his appeal in so far as it was directed against the part of the assessment relating to the manufacture of gin. On the other hand, it upheld his appeal with regard to the alcoholic raw material since, according to that court, the holding of that raw material by the appellant was not subject to excise duty.
22. Those were the circumstances in which Mr Van de Water brought an appeal in cassation. Naturally, the object of this appeal was to have the contested judgment set aside in so far as it upheld the assessment for the manufacture of gin from 96.2% alcohol, but in no way did it seek to dispute the Gerechtshof's finding concerning the holding of the alcoholic raw material. The appellant did not raise that issue before the Hoge Raad. Accordingly, that particular decision not having been challenged by either party to the dispute, the issue was initially left out of the proceedings at the cassation stage. However, the Hoge Raad decided to raise it of its own motion. It did so because it envisaged the possibility of departing from the finding of the Gerechtshof on that point and ruling that the holding of alcoholic raw materials is also subject to excise duty.
23. I do not know - and the Court does not need to know - the full import of such a decision. I do not know whether it would lead to the setting aside of the contested judgment and the restoration of the full legal effect of the assessment in so far as it relates to the holding of alcoholic raw materials, which would be tantamount to a reformatio in peius. Nor do I know whether, on the contrary, it would be a purely declaratory and pro futuro decision intended to trace out the path for the future without affecting the particular legal situation recognised by the decision of the Gerechtshof.
24. In any event, the import of a possible decision of the Hoge Raad on this point has no bearing on the Court's reply to the question referred to it for a preliminary ruling. Its implications would have to be determined within the domain of Netherlands procedural law upon which the Court should beware of encroaching, and if I have chosen to raise this point it is for the Court's greater enlightenment since, in order to answer the question posed by the national court, it must have a comprehensive overview of all the matters of fact and of law relating to the case.
VII - Analysis of the question referred for a preliminary ruling
A. The general system of the directive
25. Excise duty is an indirect tax on consumption which, as noted by the Commission in its written observations, may have a dual purpose: first, to provide revenue and, second and no less importantly, to discourage the consumption of certain products. This duality of purpose finds expression in the directive itself and was underlined by the Court in Commission v France when it stated that its aim was to allow Member States to introduce other indirect taxes for specific, that is to say non-budgetary, purposes.
26. However, whilst this may be true, the directive is none the less much more wide-ranging. Its purpose is to contribute to the establishment of the internal market through the free movement of goods subject to excise duties. To that end, it calls for the harmonisation of the legislation of the Member States governing this type of taxation in order to ensure that chargeability of excise duties should be identical in all the Member States.
27. At the same time, as far as the free movement of goods subject to excise duties is concerned, the establishment and functioning of that internal market must be ensured without impeding the collection of those duties by the Member States. It is essential to strike a balance so that each of those objectives can be achieved without compromising the other.
28. Thus, the Community legislature has designed a system which, without sacrificing the free movement of goods, guarantees the collection of the excise duties payable: (1) by establishing common rules on the chargeability of excise duties (equality in respect of the chargeable event and uniformity in respect of chargeability); (2) by subjecting the intra-Community movement of goods subject to excise duties to conditions and guarantees which, without impeding that movement, make it possible to identify and locate on Community territory products on which excise duty has not yet become chargeable although the chargeable event has already occurred.
29. After having defined the goods to which it will apply and which may be the subject of Community provisions (mineral oils, alcohol, alcoholic beverages and manufactured tobacco), the directive establishes as a chargeable event the manufacture and importation into Community territory of the abovementioned products. It could not be otherwise since, if the system is to be effective, the products or goods subject to duty must become dutiable when they appear on the Community market, either on being imported or on being manufactured or processed in the Community.
30. As excise duty is a tax on consumption, it should become chargeable as near as possible to the end consumer. For that reason, Article 6(1) of the directive provides for the excise duty to become chargeable at the time of release for consumption or in equivalent situations; moreover, the legislature considers it essential that this should be so in all the Member States.
31. Consequently, the chargeable event coincides with the manufacture or importation into Community territory of the goods subject to excise duty and the duty becomes chargeable when they are released for consumption. As a general rule, there is a lapse of time between those two events and, more importantly, the Member State in which the excise duty is chargeable may vary as a result of the intra-Community movement of the products.
32. With such a system there must be assumed to be a gap between the moment at which the goods become subject to excise duty and the moment at which duty becomes chargeable. That gap is bridged by means of a special legal device, the so-called suspension arrangement.
B - The suspension arrangement and the intra-Community movement of products subject to excise duty
33. Article 4(c) of the directive defines the suspension arrangement as a tax arrangement applied to the production, processing, holding and movement of products, excise duty being suspended. The products in question are those for which, although the chargeable event (manufacture or importation) has already occurred, excise duty has not yet become chargeable. Whatever operation may be performed on the goods concerned, in those circumstances excise duty is not chargeable.
34. For a suspension arrangement to be effective, strict controls must be imposed to stop any leaks. In other words, in order to ensure that the tax debt is eventually collected it should be possible for checks to be carried out in production and storage facilities.
35. To that end, production, processing and holding of products subject to excise duty and placed under a suspension arrangement can only take place in a tax warehouse duly authorised by the Member State within whose territory it is situated; the proprietor of the warehouse, the authorised warehousekeeper, is required to comply with certain specific requirements and to consent to strict checks, so as to ensure that in due course the tax debt is paid by the person liable.
36. With certain exceptions, the intra-Community movement of products subject to excise duty under a duty-suspension arrangement may take place only between tax warehouses. In any event, the products must be accompanied by a document which is drawn up by the consignor and identifies the goods transferred and, where necessary, by another document certifying that excise duty has been paid in the Member State of destination or that any other procedure for collection of duty in that State has been complied with. The controls are further strengthened by the imposition of a general duty on traders in each Member State to inform their tax authorities of deliveries dispatched or received, a duty fulfilled by means of the abovementioned document.
37. Thus, between the occurrence of the chargeable event and the time at which excise duty becomes chargeable, the products subject to excise duty are isolated in such a way that they can be worked, processed, held and transported within Community territory, without excise duty ever becoming chargeable.
38. Protection ends and duty becomes chargeable as soon as any action is taken outside the suspension arrangement or an irregularity or offence is committed in the course of an intra-Community movement of goods subject to excise duty. In fact, if dutiable activities (importation or manufacture) take place outside a suspension arrangement or if departure from the arrangement occurs at a time other than the time of release for consumption, the Community legislature treats those situations in the same way as a release for consumption, thereby causing them to trigger chargeability and preventing the goods subject to excise duty from avoiding tax.
39. Finally, the suspension arrangement is discharged when for some reason or other (release for consumption proper, situations equivalent to release for consumption or the commission of irregularities or offences in the course of the intra-Community movement of the goods) duty becomes chargeable. At this point, the floodgates are opened, there no longer being any reason to monitor the products as the tax provisions have been complied with.
C - The holding of products subject to excise duty outside a suspension arrangement when duty has not already been levied
40. It was the intention of the Community legislature that no product subject to excise duty should be present on Community territory outside a suspension arrangement unless excise duty had been paid. Accordingly, under the directive, the mere holding of a product in such circumstances makes duty chargeable.
41. Under that tax system, as we have seen, operations on products subject to excise duty can only be performed in tax warehouses and the products can move only between establishments of that type. Goods can be held outside the procedure in question if, duty having become chargeable, the tax has been assessed and paid. On the other hand, if the goods are not in a tax warehouse or moving between tax warehouses and if, therefore, they exist outside a suspension arrangement without the applicable duty having previously been paid, it is because they improperly departed from that regime or were never admitted to it because they were imported or manufactured outside the system established by the directive. These are precisely the situations which the directive itself assimilates to release for consumption in Article 6(1).
42. I therefore believe that there is nothing in the directive to prevent the mere holding outside a suspension arrangement of a product subject to excise duty from being regarded as a release for consumption where the excise duty on that product has not already been paid. This is precisely the case envisaged in Article 2f of the Law which, as noted above, defines release as covering the holding of products subject to excise duty on which duty has not yet been levied pursuant to the Law, that is to say, in accordance with the rules on their manufacture, importation and disposal.
43. Admittedly, there are situations in which a product is merely being held that cannot be treated in the same way as a release for consumption and do not lead to chargeability, but these are always cases in which the goods are held within the closed and isolated environment of a suspension arrangement. Thus, the directive defines the authorised warehousekeeper as a person authorised to produce, process, hold, receive and dispatch products subject to excise duty ... excise duty being suspended ... (Article 4(a)). Referring to the concept of a tax warehouse, the directive defines it as a place where goods subject to excise duty are ... held ... under duty-suspension arrangements by an authorised warehousekeeper ... (Article 4(b)) and thus makes it the only premises on which ... holding of products subject to excise duty, where the latter has not been paid ... may take place (Article 11(2)). Finally, suspension arrangement is defined as a tax arrangement applied to the production, processing, holding and movement of products, excise duty being suspended.
44. Clearly, all these cases involve products subject to excise duty on which the duty has not already been paid being held under duty-suspension arrangements, that is to say, the goods are in a tax warehouse or moving between tax warehouses. Where the excise duty has not yet been paid, holding outside a tax warehouse, as in Mr Van de Water's case, implies that the product previously departed from a suspension arrangement or never entered one, that is to say, one of the situations mentioned in Article 6(1) of the directive applies.
45. In its written observations, the Commission notes that implicit in the question raised by the Hoge Raad is the problem posed by the fact that the assessment, insofar as it was based on the holding of alcoholic raw materials, was sent to Mr Van de Water and not to the person who sold him those raw materials and who, in the final analysis, was the one who illegally caused those raw materials to depart from the suspension arrangement. However, that decision, taken by the Netherlands tax authorities in accordance with the Law, is not the subject of the question referred to the Court and, accordingly, should not receive its attention.
46. In my view, in order to answer the question raised by the Hoge Raad it is not necessary to determine who was required to pay the excise duty.
47. In that connection, it should be borne in mind that, as the Court of Justice pointed out in its judgment in Commission v France, cited above, the harmonisation effected by the directive is only partial since it merely classifies the products, organises a system for their movement and defines the chargeability conditions.
48. The directive identifies the products which, under Community law, are subject to excise duty, while establishing the time at which the chargeable event occurs and that at which the excise duty becomes chargeable. It also specifies the State in which the excise duty is to be levied and, for some cases (not including that of Mr Van de Water), the person who must pay it.
49. The Community legislature intended that the other chargeability conditions, the duty rate and the procedure for assessing and paying the duty should be those in force on the date on which duty became chargeable in the Member State concerned. In other words, it is for each Member State to establish those conditions, rates and procedures, provided, of course, it complies with the criteria laid down in the directives on the harmonisation of duty rates and structures.
50. In the final analysis, what the Hoge Raad wishes to know is whether the holding of alcoholic raw materials by Mr Van de Water, the situation envisaged in Article 2f of the Law, may be regarded as a release for consumption within the meaning of Article 6(1) of the directive. Neither more nor less. Once this question has been answered and if the reply is in the affirmative, the responsibility for determining the person liable (in other words, the question whether Mr Van de Water should pay the excise duty or not) will fall to the Hoge Raad, which will then proceed to select and interpret the legal rules applicable.
51. I consider that the Court cannot rule on a question not put to it by the national court and that it does not need to rule for the purposes of answering the question actually posed.
VIII - Conclusion
52. In the light of the above, I propose that the Court of Justice should reply to the question referred by the Hoge Raad as follows:
Article 6(1) of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products does not prevent the mere holding of products subject to excise duty within the meaning of Article 3(1) of that directive from being regarded as a release for consumption where the said products are held outside a suspension arrangement and the excise duty has not already been levied pursuant to the applicable provisions of Community law and national legislation.
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