Avis juridique important

Judgment of the Court of 27 May 1981. - Amministrazione delle Finanze dello Stato v Essevi SpA and Carlo Salengo. - References for a preliminary ruling: Corte d'appello di Milano - Italy. - System of taxation applicable to spirits. - Joined cases 142 and 143/80. European Court reports 1981 Page 01413 Swedish special edition Page 00113 Finnish special edition Page 00117 Spanish special edition Page 00359

Summary Parties Subject of the case Grounds Decision on costs Operative part

1 . ACTION FOR FAILURE OF A STATE TO FULFIL ITS OBLIGATIONS UNDER THE TREATY - STAGE PRECEDING COMMENCEMENT OF PROCEEDINGS - REASONED OPINION - EFFECT RESTRICTED TO COMMENCEMENT OF PROCEEDINGS BEFORE COURT - EXEMPTION OF MEMBER STATE FROM COMPLIANCE WITH ITS OBLIGATIONS - NOT PERMISSIBLE

( EEC TREATY , ART . 169 )

2 . TAX PROVISIONS - INTERNAL TAXATION - SYSTEM OF DIFFERENTIAL TAXATION OF A DISCRIMINATORY NATURE - GRANT OF TAX ADVANTAGES SUBJECT TO CONDITIONS WHICH CAN BE SATISFIED ONLY BY DOMESTIC PRODUCTS - PROHIBITION

( EEC TREATY , ART . 95 )

3 . TAX PROVISIONS - INTERNAL TAXATION - RULE AGAINST DISCRIMINATION - DIRECT EFFECT - DATE ON WHICH RULE TOOK EFFECT

( EEC TREATY , ART . 95 )

4 . AIDS GRANTED BY MEMBER STATES - AID IN FORM OF TAX DISCRIMINATION - AUTHORIZATION - NOT PERMISSIBLE

( EEC TREATY , ARTS 92 , 93 AND 95 )

5 . COMMUNITY LAW - DIRECT EFFECT - NATIONAL TAXES INCOMPATIBLE WITH COMMUNITY LAW - REFUND - DETAILED RULES - APPLICATION OF NATIONAL LAW - TAKING INTO ACCOUNT OF ANY PASSING-ON OF TAX - WHETHER PERMISSIBLE

1 . OPINIONS DELIVERED BY THE COMMISSION PURSUANT TO ARTICLE 169 OF THE EEC TREATY HAVE LEGAL EFFECT ONLY IN RELATION TO THE COMMENCEMENT OF PROCEEDINGS BEFORE THE COURT AGAINST A STATE ALLEGED TO HAVE FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY . THE COMMISSION MAY NOT , IN THE ATTITUDE WHICH IT ADOPTS AND IN THE OPINIONS WHICH IT IS OBLIGED TO DELIVER UNDER ARTICLE 169 , EXEMPT A MEMBER STATE FROM COMPLIANCE WITH ITS OBLIGATIONS UNDER THE TREATY OR PREVENT INDIVIDUALS FROM RELYING , IN LEGAL PROCEEDINGS , ON THE RIGHTS CONFERRED UPON THEM BY THE TREATY IN ORDER TO CONTEST ANY LEGISLATIVE OR ADMINISTRATIVE MEASURES OF A MEMBER STATE WHICH MAY BE INCOMPATIBLE WITH COMMUNITY LAW .

2 . A SYSTEM OF DIFFERENTIAL TAXATION WHEREBY THE GRANT OF A TAX EXEMPTION OR THE ENJOYMENT OF A REDUCED RATE OF TAXATION IS CONDITIONAL UPON THE POSSIBILITY OF INSPECTING PRODUCTION ON NATIONAL TERRITORY IS DISCRIMINATORY IN NATURE AND AS SUCH COMES WITHIN THE PROHIBITION LAID DOWN BY ARTICLE 95 . THE EFFECT OF SUCH A CONDITION WHICH BY DEFINITION CANNOT BE SATISFIED BY SIMILAR PRODUCTS FROM OTHER MEMBER STATES IS TO PRECLUDE THOSE PRODUCTS IN ADVANCE FROM QUALIFYING FOR THE TAX ADVANTAGE IN QUESTION AND TO CONFINE THAT ADVANTAGE TO DOMESTIC PRODUCTION .

3 . UNDER THE THIRD PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY , THE RULE AGAINST DISCRIMINATION SET OUT IN THE FIRST TWO PARAGRAPHS OF THAT ARTICLE BECAME FULLY EFFECTIVE AS FROM 1 JANUARY 1962 . AFTER THAT DATE , A MEMBER STATE COULD NO LONGER BE AUTHORIZED TO MAINTAIN IN ITS TAX LAW OR FISCAL PRACTICES ANY PRE-EXISTING DISCRIMINATION IN THE SYSTEM APPLICABLE TO THE IMPORTATION OF PRODUCTS ORIGINATING IN OTHER MEMBER STATES .

4 . UNDER THE SYSTEM OF THE EEC TREATY AN AID , WITHIN THE MEANING OF ARTICLES 92 AND 93 , CANNOT BE INTRODUCED OR AUTHORIZED BY A MEMBER STATE IN THE FORM OF FISCAL DISCRIMINATION AGAINST PRODUCTS ORIGINATING IN OTHER MEMBER STATES .

5 . THE PROTECTION OF RIGHTS GUARANTEED BY THE COMMUNITY LEGAL ORDER DOES NOT REQUIRE AN ORDER FOR THE RECOVERY OF TAXES UNDULY LEVIED TO BE GRANTED IN CONDITIONS WHICH WOULD INVOLVE AN UNJUST ENRICHMENT OF THOSE ENTITLED . THERE IS NOTHING , FROM THE POINT OF VIEW OF COMMUNITY LAW , TO PREVENT NATIONAL COURTS FROM TAKING ACCOUNT IN ACCORDANCE WITH THEIR NATIONAL LAW OF THE FACT THAT IT HAS BEEN POSSIBLE FOR TAXES UNDULY LEVIED TO BE INCORPORATED IN THE PRICES OF THE UNDERTAKING LIABLE FOR THE TAX AND TO BE PASSED ON TO THE PURCHASERS .

IN JOINED CASES 142 AND 143/80

REFERENCES TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY BY THE CORTE D ' APPELLO ( COURT OF APPEAL ), MILAN , FOR A PRELIMINARY RULING IN THE ACTIONS PENDING BEFORE THAT COURT BETWEEN , ON THE ONE HAND ,

AMMINISTRAZIONE DELLE FINANZE DELLO STATO

AND ,

ON THE OTHER HAND ,

ESSEVI SPA , HAVING ITS REGISTERED OFFICE IN MILAN ( CASE 142/80 ),

AND

CARLO SALENGO , AN UNDERTAKING ESTABLISHED IN GENOA ( CASE 143/80 ),

ON THE INTERPRETATION OF ARTICLE 95 OF THE EEC TREATY IN RELATION TO THE ITALIAN LEGISLATION ON THE STATE TAX ON IMPORTED POTABLE SPIRITS ,

1 BY TWO ORDERS OF 19 FEBRUARY 1980 RECEIVED AT THE COURT ON 12 JUNE , THE CORTE D ' APPELLO ( COURT OF APPEAL ), MILAN , REFERRED TO THE COURT OF JUSTICE , PURSUANT TO ARTICLE 177 OF THE EEC TREATY , CERTAIN QUESTIONS FOR A PRELIMINARY RULING ON THE INTERPRETATION OF ARTICLES 95 AND 169 OF THE EEC TREATY IN ORDER TO DETERMINE THE COMPATIBILITY WITH THE TREATY OF THE RETENTION UNDER ITALIAN LEGISLATION OF A SYSTEM OF DIFFERENTIAL TAXATION CHARGED ON POTABLE SPIRITS DISTILLED FROM WINE .

2 IT IS APPARENT FROM THE FILE ON THE CASE THAT THE TWO UNDERTAKINGS , RESPONDENTS IN THE MAIN ACTION , IMPORTED IN THE COURSE OF THE PERIOD FROM 1 MARCH 1962 TO 1 DECEMBER 1967 , IN THE CASE OF THE FIRST UNDERTAKING , AND IN THE COURSE OF THE PERIOD FROM 18 APRIL 1960 TO 25 OCTOBER 1971 , IN THE CASE OF THE SECOND UNDERTAKING , COGNAC OF FRENCH ORIGIN ON WHICH THEY PAID TAXES FIXED BY LAW FOR ' ' FIRST CATEGORY ' ' ETHYL ALCOHOL , THAT IS TO SAY FOR SPIRITS WHICH FAIL TO MEET SPECIFIC REQUIREMENTS RELATING TO ORIGIN AND MANUFACTURE OR , IN SO FAR AS THEY ARE PRODUCED OUTSIDE THE TERRITORY OF THE STATE , CANNOT BE INSPECTED AT THE PRODUCTION STAGE .

3 THE RESPONDENTS IN THE MAIN ACTION INSTITUTED PROCEEDINGS BEFORE THE TRIBUNALE ( DISTRICT COURT ), MILAN , FOR THE RECOVERY OF THE TAXES PAID ON THE GROUND THAT ARTICLE 95 OF THE EEC TREATY HAD BEEN INFRINGED DURING THE ABOVE-MENTIONED PERIODS AND OBTAINED JUDGMENT , ON 26 JANUARY AND 1 JUNE 1978 RESPECTIVELY , AGAINST THE ITALIAN STATE FINANCE ADMINISTRATION WHICH WAS ORDERED TO REPAY THE TAXES IMPROPERLY LEVIED .

4 ON 31 AUGUST 1978 , THE STATE FINANCE ADMINISTRATION LODGED AN APPEAL AGAINST THOSE JUDGMENTS AND , IN THE PROCEEDINGS , RELIED ON THE CASE-LAW OF THE CORTE SUPREMA DI CASSAZIONE ( SUPREME COURT OF CASSATION ) WHICH , IN ITS JUDGMENTS NOS 1317 , 1318 AND 1321 OF 1 MARCH 1979 , TOOK THE VIEW THAT THE CONTESTED SYSTEM OF TAXATION WAS LAWFUL UNDER COMMUNITY LAW . THE STATE FINANCE ADMINISTRATION CONTENDED AT THAT STAGE THAT THE COMMISSION OF THE EUROPEAN COMMUNITIES ACKNOWLEDGED , IN AN OPINION DELIVERED ON 28 FEBRUARY 1969 , THAT THE ITALIAN REPUBLIC WAS ENTITLED TO IMPOSE THE TAX AS AN INSTRUMENT OF ITS AGRICULTURAL POLICY IN THE SPIRITS SECTOR AND TO MAINTAIN PROVISIONALLY THE CONTESTED SYSTEM OF DIFFERENTIAL TAXATION . IN ITS OPINION , THE COMMISSION EXPRESSLY RECOGNIZED THAT SYSTEM AS AN ' ' AID ' ' COMPATIBLE WITH THE RULES OF COMMUNITY LAW , WITH THE RESULT THAT THE STATE TAX WAS LAWFULLY LEVIED ON SPIRITS IMPORTED FROM FRANCE .

5 THE CORTE D ' APPELLO TAKES THE VIEW THAT THE FACTORS MENTIONED ABOVE ARE NOT SUCH AS RESOLVE ENTIRELY THE PROBLEM RAISED BEFORE IT . IT POINTS OUT THAT ALTHOUGH , IN ITS OPINION OF 28 FEBRUARY 1969 , THE COMMISSION ACKNOWLEDGED THAT ITALY WAS ENTITLED TO MAINTAIN AND TO APPLY THE CONTESTED SYSTEM OF TAXATION AS AN INSTRUMENT OF ITS AGRICULTURAL POLICY , SEVERAL NEW FACTORS HAVE ARISEN SINCE THAT DATE . IN THIS CONNEXION , IT REFERS TO THE JUDGMENT DELIVERED BY THE COURT ON 15 OCTOBER 1969 IN CASE 16/69 COMMISSION V ITALY ( 1969 ) ECR 377 IN WHICH IT WAS HELD THAT POTABLE SPIRITS , LIQUEURS AND OTHER SPIRITUOUS BEVERAGES WERE NOT AGRICULTURAL PRODUCTS WITHIN THE MEANING OF THE TREATY , TO THE JUDGMENT OF 10 DECEMBER 1974 IN CASE 48/74 CHARMASSON ( 1974 ) ECR 1383 IN WHICH BARRIERS TO TRADE BETWEEN THE MEMBER STATES WERE HELD TO BE INCOMPATIBLE WITH THE COMMON MARKET AFTER THE EXPIRY OF THE TRANSITIONAL PERIOD EVEN WHERE SUCH BARRIERS FORM PART OF A NATIONAL ORGANIZATION OF THE MARKET AND , FINALLY , TO THE REASONED OPINION WHICH THE COMMISSION ADDRESSED TO THE ITALIAN REPUBLIC ON 31 JULY 1978 ON DIFFERENTIAL TAXATION IN RELATION TO THE IMPOSITION BOTH OF THE STATE TAX AND OF THE MANUFACTURING TAX .

6 HAVING REGARD TO THOSE NEW FACTORS AS WELL AS TO THE ARGUMENTS ADDUCED BY THE STATE FINANCE ADMINISTRATION , THE CORTE D ' APPELLO HAS REQUESTED THE COURT TO DECLARE BY WAY OF A PRELIMINARY RULING :

' ' - FIRST , WHAT IS THE EFFECT TO BE ATTRIBUTED TO THE AFORESAID OPINIONS DELIVERED BY THE COMMISSION UNDER ARTICLE 169 OF THE EEC TREATY ; THEN WHETHER , BY APPLYING TO POTABLE SPIRITS DISTILLED FROM WINE AND IMPORTED FROM OTHER MEMBER STATES A SYSTEM OF TAXATION INCLUDING THE STATE TAX OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL ( LIT 90 000 AS FROM MARCH 1976 ), WHICH IS NOT PROVIDED FOR IN THE CASE OF SIMILIAR DOMESTIC PRODUCTS AND IS NOT CHARGED THEREON , ITALY HAS INFRINGED ARTICLE 95 OF THE EEC TREATY ;

WHETHER , AFTER THE COMMENCEMENT OF THE SECOND STAGE REFERRED TO IN THE THIRD PARAGRAPH OF ARTICLE 95 AS BEING THE FINAL DATE FOR THE ABOLITION OF NATIONAL RULES CONFLICTING WITH THE PRINCIPLE OF EQUAL TAX TREATMENT LAID DOWN IN THE FIRST AND SECOND PARAGRAPHS OF THE SAID ARTICLE , IT IS PERMISSIBLE BY WAY OF EXCEPTION FOR ITALY TO CONTINUE A PRE-EXISTING DISCRIMINATION IN RESPECT OF THE IMPORTATION OF POTABLE SPIRITS DISTILLED FROM WINE ' ' .

SOME ASPECTS OF THE BACKGROUND TO THE CASES

7 IT APPEARS FROM THE DOCUMENTS LODGED WITH THE COURT BY THE ITALIAN GOVERNMENT THAT ON 8 MAY 1968 THE COMMISSION SENT TO THE ITALIAN MINISTER FOR FOREIGN AFFAIRS THE FOLLOWING LETTER :

' ' I SHOULD BE OBLIGED IF YOU WOULD BRING TO THE ATTENTION OF THE ITALIAN GOVERNMENT THE FOLLOWING MATTERS RELATING TO TAXES ON SPIRITS .

ITALIAN LEGISLATION ON THE TAXATION OF SPIRITS PROVIDES THAT THE LATTER ARE SUBJECT TO STATE TAX AT THE RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL AND TO A MANUFACTURING TAX OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL . NUMEROUS REDUCTIONS ARE PROVIDED IN FAVOUR OF CERTAIN PRODUCTS INCLUDING POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC . THESE SPIRITS ARE EXEMPT FROM THE STATE TAXES AND ARE SUBJECT TO A MANUFACTURING TAX OF LIT 53 000 PER HECTOLITRE IN THE CASE OF POTABLE SPIRITS DISTILLED FROM WINE AND OF LIT 50 000 PER HECTOLITRE IN THE CASE OF POTABLE SPIRITS DISTILLED FROM MARC .

STATE TAX ON IMPORTED POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC IS CHARGED AT THE RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL AND MANUFACTURING TAX AT THE RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL .

THIS DIFFERENTIAL SYSTEM , WHICH PLACES IMPORTED PRODUCTS AT A DISADVANTAGE , IS CONTRARY TO ARTICLE 95 OF THE TREATY . . .

THE COMMISSION HAS ALREADY COMMUNICATED ITS OBSERVATIONS ON THESE PROBLEMS TO THE ITALIAN GOVERNMENT BY LETTER OF 4 NOVEMBER 1965 . BY LETTER OF 12 FEBRUARY 1966 FROM THE ITALIAN PERMANENT REPRESENTATION , THE ITALIAN GOVERNMENT INFORMED THE COMMISSION OF ITS VIEWS . ACCORDING TO THE ITALIAN GOVERNMENT , THE PURPOSE OF THE DIFFERENTIAL TAXATION OF SPIRITS IS TO ENABLE THE VARIOUS RAW MATERIALS FOR THE PRODUCTION OF ALCOHOL TO BE USED FOR THAT PURPOSE AND THEREBY ENSURE THE SALE OF CERTAIN RAW MATERIALS FROM WHICH ALCOHOL FOR AGRICULTURAL PURPOSES MAY BE PRODUCED . CONSEQUENTLY , THIS DIFFERENTIAL SYSTEM COULD BE ABOLISHED ONLY ONCE PROVISION FOR ITALIAN AGRICULTURAL INTERESTS IN THIS SECTOR IS MADE WITHIN THE FRAMEWORK OF THE COMMON AGRICULTURAL POLICY FOR SPIRITS . SECONDLY , THE ITALIAN AUTHORITIES CONTEND THAT DISCRIMINATION WHICH IS AT LEAST AS SERIOUS EXISTS IN THE OTHER MEMBER STATES , SUCH AS THAT RESULTING FROM THE EXISTENCE OF THE MONOPOLIES IN FRANCE AND GERMANY .

THE COMMISSION DOES NOT ALTOGETHER DENY THE EXISTENCE OF THE AGRICULTURAL PROBLEMS POSED BY SPIRITS IN ITALY . FOR THIS REASON IT MAINTAINS THAT THE DIFFERENTIAL TAXATION PROVIDED FOR UNDER ITALIAN LEGISLATION AND ATTRIBUTABLE TO THE IMPOSITION OF THE STATE TAX MAY BE PERMITTED PROVISIONALLY SINCE THE STATE TAX CONSTITUTES , IN A MANNER OF SPEAKING , AN INSTRUMENT OF ITALIAN AGRICULTURAL POLICY ON SPIRITS , ENABLING THE LATTER TO BE SOLD ON THE MARKET REGARDLESS OF THEIR ORIGIN AND IRRESPECTIVE OF THE COST OF THE RAW MATERIAL .

HOWEVER , AGRICULTURAL REQUIREMENTS CANNOT JUSTIFY ALL THE ABOVE-MENTIONED DIFFERENCES IN TAXATION BETWEEN DOMESTIC PRODUCTS AND IMPORTED PRODUCTS . THE NEEDS OF AGRICULTURE ARE ALREADY PROVIDED FOR BY THE STATE TAX PAID ON IMPORTED PRODUCTS ALONE . THEREFORE , CONSIDERATIONS OF AN AGRICULTURAL NATURE CANNOT BE RELIED UPON ALSO IN THE CASE OF THE MANUFACTURING TAX IN ORDER TO JUSTIFY DIFFERENTIAL TAXATION TO THE DETRIMENT OF IMPORTED POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC AND OF IMPORTED PRODUCTS SIMILAR TO VERMOUTH AND MARSALA .

ON THOSE GROUNDS , THE COMMISSION MAINTAINS THAT THE ITALIAN REPUBLIC HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY WITH REGARD TO THE REDUCTION IN THE MANUFACTURING TAX ON POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC AND THE REDUCTION IN THE MANUFACTURING TAX ON ALCOHOL USED IN THE MANUFACTURE OF VERMOUTH AND MARSALA . FOR THOSE REASONS , THE COMMISSION REQUESTS THE GOVERNMENT OF THE ITALIAN REPUBLIC , UNDER ARTICLE 169 OF THE TREATY , TO SUBMIT TO IT ITS OBSERVATIONS ON THE ABOVE MATTERS WITHIN ONE MONTH OF THE RECEIPT OF THIS LETTER . THE COMMISSION RESERVES THE RIGHT TO DELIVER , IF NECESSARY , AFTER TAKING NOTE OF THOSE OBSERVATIONS , THE REASONED OPINION PROVIDED FOR IN ARTICLE 169 . ' '

8 FOLLOWING THE ITALIAN GOVERNMENT ' S FAILURE TO TAKE ACTION IN RESPONSE TO THE COMMISSION ' S REQUESTS , ON 28 FEBRUARY 1969 THE COMMISSION DREW UP PURSUANT TO ARTICLE 169 OF THE EEC TREATY A REASONED OPINION CONCERNING TAXES ON THE CONSUMPTION OF SPIRITS WHICH IS FORMULATED IN THE FOLLOWING TERMS :

' ' IN ITALY , DOMESTICALLY-PRODUCED SPIRITS ARE SUBJECT TO STATE TAXES AT THE RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL AND TO A MANUFACTURING TAX OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL . NUMEROUS REDUCTIONS ARE PROVIDED FOR BY LAW , PARTICULARLY IN THE CASE OF POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC WHICH ARE EXEMPT FROM THE STATE TAX AND SUBJECT TO A MANUFACTURING TAX OF LIT 53 000 PER HECTOLITRE IN THE CASE OF POTABLE SPIRITS DISTILLED FROM WINE AND OF LIT 50 000 PER HECTOLITRE IN THE CASE OF POTABLE SPIRITS DISTILLED FROM MARC .

ON THE OTHER HAND , POTABLE SPIRITS DISTILLED FROM WINE AND FROM MARC AND IMPORTED INTO ITALY ARE SUBJECT TO STATE TAXES AT THE RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL AND TO A MANUFACTURING TAX OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL . . .

AS EARLY AS NOVEMBER 1965 THE COMMISSION DREW THE ATTENTION OF THE ITALIAN GOVERNMENT TO THE DISCRIMINATORY NATURE OF THIS SYSTEM .

SUBSEQUENTLY , BY LETTER OF 8 MAY 1968 , THE COMMISSION INITIATED , FOR INFRINGEMENT OF ARTICLE 95 OF THE EEC TREATY , THE PROCEDURE PROVIDED FOR IN ARTICLE 169 OF THE TREATY . IN ITS REPLY , GIVEN BY LETTER OF 23 JULY 1968 FROM THE ITALIAN PERMANENT REPRESENTATION , THE ITALIAN GOVERNMENT INFORMED THE COMMISSION THAT IT HAD NO INTENTION OF ABOLISHING THE DIFFERENTIAL TAXES IN QUESTION UNTIL THE NATIONAL MONOPOLIES EXISTING IN GERMANY AND IN FRANCE WERE MODIFIED AND A COMMON AGRICULTURAL POLICY WAS ESTABLISHED IN THIS SECTOR . . .

THE ARGUMENTS ADDUCED ARE NOT CAPABLE , EXCEPT IN ONE RESPECT , OF CALLING IN QUESTION THE GROUNDS ON WHICH THE VIEWS EXPRESSED BY THE COMMISSION IN ITS LETTER OF 8 MAY 1968 ARE BASED . ABOVE ALL , IT MUST BE POINTED OUT THAT IN NO CIRCUMSTANCES MAY THE MEMBER STATES RELY ON SIMILAR INFRINGEMENTS BY OTHER MEMBER STATES IN ORDER TO ESCAPE THEIR OWN OBLIGATIONS UNDER THE PROVISIONS OF THE TREATY .

AS FOR THE ARGUMENT THAT ITALY IMPLEMENTS ITS AGRICULTURAL POLICY ON SPIRITS BY RECOURSE TO TAXATION AND THAT IT WILL NOT BE ABLE TO ALTER ITS POSITION EXCEPT IN THE CONTEXT OF THE IMPLEMENTATION OF A COMMON POLICY ON SPIRITS , THE COMMISSION HAS ALREADY ACKNOWLEDGED , IN ITS ABOVE-MENTIONED LETTER OF 8 MAY 1968 , THAT ITALY WAS IN FACT ENTITLED TO IMPOSE THE TAX AS AN INSTRUMENT OF ITS AGRICULTURAL POLICY IN THIS SECTOR AND MAINTAIN PROVISIONALLY , WITHIN THAT FRAMEWORK , DIFFERENTIAL TAXATION AT THE MAXIMUM RATE OF LIT 60 000 PER HECTOLITRE OF PURE ALCOHOL RESULTING FROM THE CHARGING OF THE STATE TAX . RECOURSE TO SUCH TAXATION ENABLES SPIRITS TO BE SOLD AT A FAIRLY UNIFORM PRICE , REGARDLESS OF THEIR COST PRICE . ' '

9 THE COMMISSION PROCEEDED TO CONCLUDE IN ITS REASONED OPINION THAT , AS REGARDS VARIOUS ASPECTS OF THE TAX SYSTEM OTHER THAN THE STATE TAX , THERE WAS A FAILURE BY THE ITALIAN REPUBLIC TO FULFIL ITS OBLIGATIONS UNDER THE TREATY . IT SHOULD BE NOTED THAT THIS REASONED OPINION DID NOT RESULT IN PROCEEDINGS BEING INSTITUTED BEFORE THE COURT .

10 ON 31 JULY 1975 , THE COMMISSION SENT TO THE ITALIAN GOVERNMENT , PURSUANT TO THE FIRST PARAGRAPH OF ARTICLE 169 , A FRESH COMMUNICATION SETTING FORTH , IN THE LIGHT OF THE RULE AGAINST DISCRIMINATION CONTAINED IN ARTICLE 95 , CERTAIN CRITICISMS DIRECTED AT THE TAX SYSTEM FOR SPIRITS IN FORCE IN ITALY IN RELATION TO THE MANUFACTURING TAX , THE ORDINARY STATE TAX AND THE SPECIAL STATE TAX AND REQUESTING THE ITALIAN GOVERNMENT TO BRING TO AN END THE DISCRIMINATION WHICH THIS SYSTEM ENTAILED VIS-A-VIS PRODUCTS IMPORTED FROM OTHER MEMBER STATES .

11 SINCE THE COMMISSION WAS NOT FULLY SATISFIED WITH THE RESPONSE OF THE ITALIAN AUTHORITIES TO THIS NEW ACTION ON ITS PART , IT DELIVERED ON 31 JULY 1978 A REASONED OPINION ON DIFFERENTIAL TAXATION CONCERNING THE CHARGING OF THE MANUFACTURING TAX AND THE STATE TAX ON SPIRITS . AS BEFORE , THE REASONED OPINION WAS NOT FOLLOWED BY THE INITIATION OF PROCEEDINGS BEFORE THE COURT .

12 THE ITALIAN GOVERNMENT HAS ARGUED BEFORE THE COURT THAT THE CONTESTED SYSTEM OF TAXATION IS IN REALITY MERELY AN AID IN FAVOUR OF AGRICULTURE GRANTED IN THE FORM OF A TAX ADVANTAGE RESERVED TO DOMESTIC PRODUCTION . IT TAKES THE VIEW THAT THIS SYSTEM OF AID WAS UPHELD BY THE REASONED OPINION OF 28 FEBRUARY 1969 AND THAT , IN THE ABSENCE OF ANY MEASURE TO THE CONTRARY , THAT AUTHORIZATION STILL SUBSISTS AND MUST THEREFORE BE ACCEPTED AS BEING VALID BY THE NATIONAL COURTS . EVEN IN THE ABSENCE OF ANY AUTHORIZATION , THAT AID MAY BE MAINTAINED BY VIRTUE OF ARTICLE 93 ON THE GROUND THAT IT PREDATES THE ENTRY INTO FORCE OF THE TREATY .

SIGNIFICANCE OF THE ATTITUDES ADOPTED AND THE OPINIONS DELIVERED BY THE COMMISSION UNDER THE PROCEDURE PROVIDED FOR IN ARTICLE 169

COMPATIBILITY WITH ARTICLE 95 OF A SYSTEM OF DIFFERENTIAL TAXATION OF SPIRITS

19 THE PURPOSE OF THE SECOND PART OF THE QUESTIONS SUBMITTED IS TO ASCERTAIN WHETHER A MEMBER STATE MAY IMPOSE ON SPIRITS ORIGINATING IN OTHER MEMBER STATES A FISCAL CHARGE FROM WHICH SIMILAR DOMESTIC PRODUCTS ARE , IN WHOLE OR IN PART , EXEMPT .

20 IT IS APPARENT FROM THE ORDERS REFERRING THE QUESTIONS TO THE COURT THAT THE RELATIONSHIP OF SIMILARITY , WITHIN THE MEANING OF ARTICLE 95 , BETWEEN THE IMPORTED PRODUCT ( IN THE PRESENT CASE COGNAC OF FRENCH ORIGIN ) AND THE COMPETING DOMESTIC PRODUCT ( IN THE PRESENT CASE POTABLE SPIRITS DISTILLED FROM WINE OR FROM MARC ) IS NOT DISPUTED . ACCORDING TO THE INFORMATION SUPPLIED BY THE ITALIAN GOVERNMENT , THE DIFFERENCE IN THE TAX SYSTEM APPLIED TO THE TWO TYPES OF PRODUCT STEMS FROM THE FACT THAT IMPORTED SPIRITS , CLASSIFIED AS ' ' FIRST CATEGORY SPIRITS ' ' , ARE AS SUCH SUBJECT TO TAX AT THE FULL RATE WHEREAS THE CORRESPONDING DOMESTICALLY-PRODUCED SPIRITS ARE CLASSIFIED AS ' ' SECOND CATEGORY SPIRITS ' ' WHICH ARE EXEMPT FROM STATE TAX , IN VIEW OF THE FACT THAT ONLY SPIRITS THE MANUFACTURE OF WHICH MAY BE MADE SUBJECT TO INSPECTIONS CARRIED OUT AT THE PRODUCTION STAGE ON ITALIAN TERRITORY MAY BE CLASSIFIED IN THAT CATEGORY .

21 AS THE COURT HAS STATED IN A CONSISTENT LINE OF DECISIONS ( MOST RECENTLY IN ITS JUDGMENT OF 14 JANUARY 1981 IN CASE 104/79 CHEMICAL FARMACEUTICI SPA ), IN ITS PRESENT STAGE OF DEVELOPMENT COMMUNITY LAW DOES NOT RESTRICT THE FREEDOM OF EACH MEMBER STATE TO LAY DOWN TAX ARRANGEMENTS WHICH DIFFERENTIATE BETWEEN CERTAIN PRODUCTS ON THE BASIS OF OBJECTIVE CRITERIA , SUCH AS THE NATURE OF THE RAW MATERIALS USED OR THE PRODUCTION PROCESSES EMPLOYED . SUCH DIFFERENTIATION IS COMPATIBLE WITH COMMUNITY LAW IF IT PURSUES OBJECTIVES OF ECONOMIC POLICY WHICH ARE THEMSELVES COMPATIBLE WITH THE REQUIREMENTS OF THE TREATY AND ITS SECONDARY LEGISLATION AND IF THE DETAILED RULES ARE SUCH AS TO AVOID ANY FORM OF DISCRIMINATION , DIRECT OR INDIRECT , IN REGARD TO IMPORTS FROM OTHER MEMBER STATES OR ANY FORM OF PROTECTION OF COMPETING DOMESTIC PRODUCTS .

22 TO MAKE THE GRANT OF A TAX EXEMPTION OR THE BENEFIT OF A REDUCED RATE OF TAXATION CONDITIONAL UPON THE POSSIBILITY OF INSPECTING PRODUCTION ON NATIONAL TERRITORY CONSTITUTES , HOWEVER , A CONDITION WHICH BY DEFINITION CANNOT BE SATISFIED BY SIMILAR PRODUCTS FROM OTHER MEMBER STATES . THE EFFECT OF SUCH A REQUIREMENT IS TO PRECLUDE IN ADVANCE THOSE PRODUCTS FROM QUALIFYING FOR THE TAX ADVANTAGE IN QUESTION AND TO CONFINE THAT ADVANTAGE TO DOMESTIC PRODUCTION . IT IS THEREFORE APPARENT THAT SUCH A SYSTEM OF TAXATION IS DISCRIMINATORY IN NATURE AND AS SUCH COMES WITHIN THE PROHIBITION LAID DOWN BY ARTICLE 95 .

23 THE ANSWER TO THE SECOND PART OF THE QUESTIONS SUBMITTED SHOULD THEREFORE BE THAT A SYSTEM OF TAXATION OF SPIRITS ORGANIZED IN SUCH A WAY AS TO CONFINE EXEMPTIONS OR REDUCED RATES OF TAX TO DOMESTIC PRODUCTION ALONE CONSTITUTES DISCRIMINATION PROHIBITED BY ARTICLE 95 OF THE TREATY .

TEMPORAL EFFECT OF ARTICLE 95 AND ITS RELATIONSHIP TO THE SYSTEM OF AIDS

24 THE POINT RAISED BY THE THIRD PART OF THE QUESTIONS SUBMITTED IS WHETHER , ON THE EXPIRY OF THE PERIOD LAID DOWN BY THE THIRD PARAGRAPH OF ARTICLE 95 , A MEMBER STATE COULD HAVE BEEN AUTHORIZED TO MAINTAIN , BY WAY OF EXCEPTION , PRE-EXISTING DISCRIMINATION IN THE SYSTEM OF TAXATION APPLICABLE TO THE IMPORTATION OF POTABLE SPIRITS DISTILLED FROM WINE .

25 IT IS APPARENT FROM THE FILE ON THE CASE , LAND FROM THE ARGUMENTS ADDUCED BY THE ITALIAN GOVERNMENT IN THE PROCEEDINGS BEFORE THE COURT , THAT THE NATIONAL COURT WISHES TO ASCERTAIN WHETHER THE VIEW EXPRESSED BY THE COMMISSION IN ITS LETTER OF 8 MAY 1968 AND IN THE REASONED OPINION OF 28 FEBRUARY 1969 ON THE PROVISIONAL RETENTION OF THE SYSTEM OF SO-CALLED ' ' DIFFERENTIAL TAXATION ' ' CONCERNING THE STATE TAX MAY BE TREATED AS APPROVAL OF AN AID WITHIN THE MEANING OF ARTICLES 92 AND 93 OF THE TREATY EVEN AFTER THE EXPIRY OF THE PERIOD LAID DOWN BY THE THIRD PARAGRAPH OF ARTICLE 95 .

26 THE THIRD PARAGRAPH OF ARTICLE 95 PROVIDES THAT ' ' MEMBER STATES SHALL , NOT LATER THAN AT THE BEGINNING OF THE SECOND STAGE , REPEAL OR AMEND ANY PROVISIONS EXISTING WHEN THIS TREATY ENTERS INTO FORCE WHICH CONFLICT WITH THE PRECEDING RULES ' ' .

27 IT FOLLOWS FROM THAT PROVISION THAT 31 DECEMBER 1961 CONSTITUTES THE FINAL DATE BY WHICH THE MEMBER STATES SHOULD HAVE REMOVED FROM THEIR LEGISLATION AND FROM THEIR FISCAL PRACTICES ANY MEASURES WHICH WERE INCOMPATIBLE WITH THE RULE AGAINST DISCRIMINATION CONTAINED IN THE FIRST TWO PARAGRAPHS OF ARTICLE 95 . AS FROM THAT DATE , THEREFORE , THOSE PROVISIONS BECAME FULLY EFFECTIVE AND MAY BE RELIED UPON BY INDIVIDUALS AS AGAINST ANY MEMBER STATE .

29 THE ANSWER TO THE THIRD PART OF THE QUESTIONS SUBMITTED SHOULD THEREFORE BE THAT , UNDER THE THIRD PARAGRAPH OF ARTICLE 95 , THE RULE AGAINST DISCRIMINATION SET OUT IN THE FIRST TWO PARAGRAPHS OF THAT ARTICLE BECAME FULLY EFFECTIVE AS FROM 1 JANUARY 1962 AND THAT A MEMBER STATE COULD NO LONGER BE AUTHORIZED TO MAINTAIN AFTER THAT DATE ANY PRE-EXISTING FISCAL DISCRIMINATION IN THE SYSTEM APPLICABLE TO THE IMPORTATION OF POTABLE SPIRITS ORIGINATING IN OTHER MEMBER STATES .

TEMPORAL EFFECT OF THE PRESENT JUDGMENT

31 IN THIS REGARD , IT RELIES FIRST ON THE PRECEDENT SET BY THE JUDGMENT OF 8 APRIL IN CASE 43/75 DEFRENNE ( 1976 ) ECR 455 IN WHICH THE COURT FOUND , ON THE BASIS OF THE GENERAL PRINCIPLE OF LEGAL CERTAINTY , THAT IT HAD THE POWER TO RESTRICT , IN EXCEPTIONAL CASES , THE RIGHT OF THOSE CONCERNED TO RELY UPON ITS JUDGMENTS . AN ADDITIONAL CONSIDERATION IN THE CIRCUMSTANCES IS , ACCORDING TO THE ITALIAN GOVERNMENT , THE NEED TO PROTECT ITS LEGITIMATE EXPECTATION REGARDING THE VALIDITY OF A TAX MEASURE EXPRESSLY AUTHORIZED BY THE COMMUNITY EXECUTIVE .

32 SECONDLY , THE ITALIAN GOVERNMENT DRAWS ATTENTION TO THE FACT THAT THE TAXES AT ISSUE HAVE BEEN PASSED ON BY IMPORTERS TO THE TRADE , WITH THE RESULT THAT TO REFUND THEM WOULD IMPOSE A HEAVY BURDEN ON ITALIAN PUBLIC FINANCES WITHOUT GENERATING ANY CORRESPONDING BENEFIT FOR CONSUMERS WHO ALONE , IN THE FINAL ANALYSIS , HAVE BEEN AFFECTED BY THE TAX MEASURE IN QUESTION .

36 THE COSTS INCURRED BY THE GOVERNMENT OF THE ITALIAN REPUBLIC AND BY THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE . AS THESE PROCEEDINGS ARE , IN SO FAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED , IN THE NATURE OF A STEP IN THE ACTION PENDING BEFORE THE NATIONAL COURT , THE DECISION AS TO COSTS IS A MATTER FOR THAT COURT .

ON THOSE GROUNDS ,

THE COURT

IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE CORTE D ' APPELLO , MILAN , BY ORDERS OF 19 FEBRUARY 1980 HEREBY RULES :

1 . OPINIONS DELIVERED BY THE COMMISSION PURSUANT TO ARTICLE 169 OF THE EEC TREATY HAVE LEGAL EFFECT ONLY IN RELATION TO THE COMMENCEMENT OF PROCEEDINGS BEFORE THE COURT AGAINST A STATE ALLEGED TO HAVE FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY . THE COMMISSION MAY NOT , BY ATTITUDES ADOPTED IN THE CONTEXT OF THAT PROCEDURE , RELEASE A MEMBER STATE FROM ITS OBLIGATIONS OR IMPAIR RIGHTS WHICH INDIVIDUALS DERIVE FROM THE TREATY .

2 . A SYSTEM OF TAXATION OF SPIRITS ORGANIZED IN SUCH A WAY AS TO CONFINE EXEMPTIONS OR REDUCED RATES OF TAX TO DOMESTIC PRODUCTION ALONE CONSTITUTES DISCRIMINATION PROHIBITED BY ARTICLE 95 OF THE EEC TREATY .

3 . UNDER THE THIRD PARAGRAPH OF ARTICLE 95 OF THE EEC TREATY , THE RULE AGAINST DISCRIMINATION SET OUT IN THE FIRST TWO PARAGRAPHS OF THAT ARTICLE BECAME FULLY EFFECTIVE AS FROM 1 JANUARY 1962 . A MEMBER STATE COULD NO LONGER BE AUTHORIZED TO MAINTAIN AFTER THAT DATE ANY PRE-EXISTING FISCAL DISCRIMINATION IN THE SYSTEM APPLICABLE TO THE IMPORTATION OF POTABLE SPIRITS ORIGINATING IN OTHER MEMBER STATES .