JUDGMENT OF CASE 325/82

Transcription

1 JUDGMENT OF CASE 325/82 provided by the Treaty; compliance with that guarantee is an essential formal requirement of the procedure under Article 169 of the Treaty. The opinion referred to in Article 169 must be considered to contain a sufficient statement of reasons when it contains a coherent statement of the reasons which led the Commission to believe that the State in question has failed to fulfil an obligation under the Treaty. 2. A Member State cannot plead the principle of reciprocity and rely on a possible infringement of the Treaty by another Member State in order to justify its own default. Nor, therefore, can a Member State rely on the principle of reciprocity to contest the admissibility of an action brought against it for failure to fulfil its obligations. 3. Directive 69/169 contains exhaustive rules on exemptions from turnover tax and excise duties applicable to goods contained in the personal luggage of travellers crossing the frontiers of the Member States. Accordingly, the provisions of the directive cover all the exemptions from such charges applicable in international travel, regardless of the country from which the travellers come. 4. By granting exemptions from turnover tax and excise duties in respect of the importation of goods contained in travellers' personal luggage and acquired free of tax on board ships entering the customs territory across the maritime frontier without their having in fact previously called at a port in another Member State or in a non-member country, a Member State infringes Directive 69/169, as amended. In Case 325/82 COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Erich Zimmermann, with an address for service in Luxembourg at the office of Oreste Montalto, a member of its Legal Department, Jean Monnet Building, Kirchberg, applicant, ν FEDERAL REPUBLIC OF GERMANY, represented by Arved Deringer and Jochim Sedemund, Rechtsanwälte, 14 Heumarkt, D-5000 Cologne 1, with an address for service in Luxembourg at the Embassy of the Federal Republic of Germany, Avenue Émile-Reuter, 778 defendant,

2 COMMISSION ν GERMANY APPLICATION for a declaration that the Federal Republic of Germany, bypermitting goods which have not borne turnover tax and excise duties to be sold during short cruises and excursions on the North Sea and the Baltic Sea to passengers who then import them tax-free into the Federal Republic of Germany on their return, has failed to fulfil its obligations under the provisions of Community law governing taxes, THE COURT composed of: J. Mertens de Wilmars, President, T. Koopmans and Y. Galmot (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, O. Due and U. Everling, Judges, Advocate General: S. Rozès Registrar: H. A. Rühi, Principal Administrator gives the following JUDGMENT Facts and Issues The facts of the case, the course of the procedure and the conclusions, submissions and arguments of the parties may be summarized as follows: Baltic Sea of various goods which are then imported into the Member States free of customs duties, agricultural levies, turnover tax and excise duties. I Facts 1. The history of the dispute This action arises out of the situation created by the tax-free sale on board ships or ferries during cruises or short excursions on the North Sea and the The facts which led the Commission to bring this action are similar to those which led the Finanzgericht [Finance Court] Hamburg to refer its first question on the matter to the Court for a preliminary ruling; the Court gave judgment on 7 July 1981 (Case 158/80 Rewe-Handelsgesellschaft Nord mbh and Rewe-Markt Steffen ν Hauptzollamt Kiel [1981] ECR 1805). In that case the 779

3 Court considered whether and to what extent the supply of goods free of customs duties and taxes on board "butter-selling ships" and the importation of such products tax-free in passengers' luggage was compatible with Community law. JUDGMENT OF CASE 325/82 The same national court referred a second question to the Court for a preliminary ruling (Case 278/82 Rewe- Handelsgesellschafi Nord mbh and Rewe- Markt Herbert Kureit ν Hauptzollämter Flensburg, Itzehoe and Lübeck-West [1984] ECR 721) seeking a ruling on the question whether tax concessions in respect of customs duties, import charges applicable to agricultural products, turnover tax and excise duties provided for in Regulation (EEC) No 1544/69 of the Council of 23 July 1969, as amended, in Regulation No 1818/75 of the Council of 10 July 1975, as amended, and in Council Directive 69/169/EEC of 28 May 1969, as amended, also apply to goods which are not in free circulation in the Member States or which have not borne any turnover tax or excise duty in the Member States or in non-member countries and which are purchased by passengers either on ferries carrying travellers between a Member State and a non-member country, on ferries carrying travellers between Member States, or on ships sailing from a port in one Member State to a port in another Member State where the passengers go ashore and then, without being charged duty, return by land to the Member State in which they began their journey. However, in this action the Court is merely asked for a declaration of failure to comply with Directive 69/169 of the Council, since the Commission alleges that the Government of the Federal Republic of Germany has granted 780 exemption from turnover tax and excise to travellers importing goods which have not been across the maritime frontier on the occasion of "excursions" (Stichfahrten) on the North Sea and Baltic Sea. According to the Commission, excursions at sea are to be interpreted as meaning sea-cruises in which the ship returns to a port in the Member State from which it sailed without the passengers' having had an opportunity to go ashore in another port for the purpose of making purchases there. 2. The Community provisions Directive No 69/169, as supplemented by the Second Council Directive, 72/230/EEC of 12 June 1972 (Official Journal, English Special Edition 1972 (II), p. 565), by the Third Council Directive, 78/1032/EEC of 19 December 1978 (Official Journal 1978, L 366, p. 28), by the Fourth Council Directive, 78/1033/EEC of 19 December 1978 (Official Journal 1978, L 366, p. 31), by Council Directive 81/933/EEC of 17 November 1981 (Official Journal 1981, L 338, p. 24) and finally by Council Directive 82/443/EEC of 29 June 1982 (Official Journal 1982, L 206, p. 35) specifies (in Article 1) the exemptions from turnover tax and excise duties applicable to goods contained in the personal luggage of travellers coming from non-member countries and (in Article 2) the limits in terms of value to such exemptions in respect of goods contained in the personal luggage of travellers coming from Member States of the Community; it also lays down (in Article 4) quantitative limits for the importation, free of turnover tax and excise duties, of the goods listed therein and finally it sets out (in Article 6) the detailed rules concerning the adoption by

4 COMMISSION ν GERMANY the Member States of the necessarymeasures as regards sales at the retail trade stage so that, subject to certain conditions and reservation, turnover tax on goods carried in the personal luggage of travellers leaving a Member State may be remitted. 3. The German provisions The exemption granted by the German customs authorities on the importation of goods is based on the Verordnung über die Eingangsabgabenfreiheit von Waren im persönlichen Gepäck der Reisenden [Order on Tax Exemptions on the Importation of Goods contained in Travellers' Personal Luggage, hereinafter referred to as "the Order on Tax Exemptions"] of 3 December 1974 (BGBl I, p. 3377), as amended by the Order of 12 December 1979 (BGBl I, p. 2150), by the Order of 9 December 1981 (BGBl I, p. 1377) and finally by the Order of 28 September 1982 (BGBl I, p. 1377). In German law a distinction is drawn between imports from other Member States, which are defined in the same way as in Community law, and "other imports". The category "other imports" in German law is wider than that of imports from a non-member country in Community law. It also covers the importation of goods acquired by travellers: In the course of air travel within the Community, in "tax-free shops" at the airport of departure (in another Member State) or on board an aircraft during a flight of which the point of departure is situated in another Member State; In the course of sea travel within the Community, on board ship where the point of departure for the crossing is situated, either in a port of another Member State (including international ferry travel, or in a German port, in which case the port of departure and the port of arrival may be the same. In both cases the imported goods in question may be: Goods from a non-member country which have not yet been cleared through customs and were previously held in a customs warehouse or in a free port under customs supervision, or Community goods exempted wholly or in part from turnover tax or excise duties and agricultural products in free circulation in respect of which export refunds have been paid (export refunds were abolished on 1 January 1981). According to Paragraph 2 (1) of the Order on Tax Exemptions, goods which travellers import in their personal luggage from time to time and solely for personal use or for consumption by their family or as a gift are, within certain limits as to quantity and value, exempted from import duties and customs duties. The Order makes a distinction between the exemption for the "grosse Transitration" [major transit allowance] and that for the "kleine Transitration" [minor transit allowance]. The exemption for the "grosse Transitration" is conditional on the ship's crossing the maritime customs frontier from the high seas and cither having left a foreign port or having remained outside the customs territory for at least eight hours (Paragraph 3 (5)). 781

5 JUDGMENT OF CASE 325/82 The exemption for the "kleine Transitration" is merely conditional upon the importation of goods on the occasion of what have become known as "Stichfahrten" (excursions), that is to say a cruise in which the ship returns, after a trip on the high seas, to the port from which it sailed. The exemption is not conditional upon the ship's sailing beyond the maritime customs frontier or upon its having either called at a foreign port or remained outside the customs territory for at least eight hours. The exemption for the "kleine Transitration" is less than that for the "grosse Transitration" The procedure prior to the application to the Court (a) By letter of 2 February 1982 the Commission requested the Federal Republic of Germany, as it did all the other Member States, to ensure that as from 1 April 1982, their legal and administrative practices complied with the aforementioned judgment of the Court of Justice in Case 158/80. By letter of 7 April 1982 the Commission initiated the procedure under Article 169 of the Treaty in respect of all the Member States and delivered a reasoned opinion to them all on 11 June The Commission confined its attention, in that procedure, to exemptions from custums duties in respect of goods coming from a non-member country and to exemptions from charges on agricultural products. All the Member States undertook to adopt the necessary measures to ensure 1 The aforementioned Order of 28 September 1982 added the following third subparagraph to Paragraph (2): "Goods which are not in free circulation and which, on their exportation, are exempt from customs duties or benefit from preferential treatment under the Common Agricultural Policy, shall not be exempt from customs duties on their importation from another Member State of the European Communities or on their entry from another German port". that with effect from 1 January 1983 no exemption from customs duties or agricultural levies and no tax exemption would be granted any longer on the sale of goods to persons travelling within the Community. (b) On 11 June 1982, the Commission delivered a further reasoned opinion to the Government of the Federal Republic of Germany concerning the continuation of "butter-buying cruises" along the German coast after Council Regulation No 3023/77 of 20 December 1977 had been declared void by the Court in its judgment of 7 July 1981, cited above. By a telex message of 31 March 1982 the Government of the Federal Republic of Germany informed the Commission that it had decided on 24 March 1982: that the Commission had not yet drawn the necessary conclusions from the Court's judgment of 7 July 1981 in relation to goods purchased free of tax in the course of intra-community travel by air and by ferry; to instruct the relevant authorities to take steps at the level of the Commission and the Council of Ministers to create the necessary conditions for the adoption of transitional rules and a legal foundation for ensuring that the measures are implemented at the same time. It accordingly requested the Commission to draw up, in agreement with the Member States, a uniform plan regulating customs clearance and taxation of goods in the course of movements of travellers within the Community. 782

6 COMMISSION ν GERMANY On 30 August 1982 the German Government also informed the Commission that it had decided to terminate, with effect from 1 January 1983, the grant of exemption from customs duties and levies in respect of goods purchased duty-free in the course of intra-community travel by air and sea (and in the course of excursions at sea. However, with regard to the abolition of tax exemptions in respect of goods purchased in the course of excursions at sea, the Government of the Federal Republic of Germany stated that it continued to take the view that the Commission, by requiring the Federal Republic of Germany alone to stop granting exemptions from turnover tax and excise duties in respect of such excursions, was not acting in conformity with the Court's judgment of 7 July 1981 since, according to the German Government, the problem must be examined in relation to the whole of the Community and in relation to all types of transport. II Written procedure By application dated 17 December 1982, received at the Court Registry on 20 December 1982, the Commission brought an action before the Court of Justice under the second paragraph of Article 169 of the EEC Treaty alleging that the Government of the Federal Republic of Germany had not complied with the second reasoned opinion dated 11 June Upon hearing the report of the Judge- Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, the Court requested the parties to reply to the following questions prior to the hearing. A Questions put to the Commission 1. The Commission is requested to indicate exactly which provisions of the German rules it is objecting to in these proceedings under Article The Commission is requested: To state whether this action has been brought in respect of laws or regulations, on the one hand, or a mere administrative practice on the part of the customs authorities, on the other hand; To produce all factual and legal evidence in support of its argument to the effect that the highest concession is granted, that is to say, the "intra-community" concession provided for in Article 2 and Article 4 (1), Column II of Directive 69/169, and not the lower "non-member country" concession provided for in Article 1 and Article 4 (1), Column I thereof, as is maintained by the Government of the Federal Republic of Germany. 3. The Commission is requested to state whether this action is directed specifically against the disposal to travellers in the course of excursions at sea of goods not charged to turnover tax and excise duty or against the fact that on their importation into the Federal Republic of Germany those goods are granted an exemption from turnover tax and excise duty. 4. The Commission is requested to produce Reasoned Opinion C 82/722, which it delivered to all the Member States on 11 June 1982, and also the results of the comparative study it states it carried out of all the tax concessions granted in the course of intra- Community transport (see Reasoned Opinion C 82/768 of ). 783

7 JUDGMENT OF CASE 325/82 Documents to be produced by the Commission 1. Its proposals for sixth and seventh directives amending Directive 69/169, submitted to the Council on 11 April 1983 (Official Journal 1983, C 114, pp. 4 and 7), which it was requested to produce in Case 278/82, together with the explanatory memorandum sent to the European Parliament. 2. The Commission is also requested to produce, if it exists, an up-to-date edition of its brochure on "Tax concessions granted to individuals on the importations of goods" issued in June Β Questions put to the Government the Federal Republic of Germany 1. Does the Federal Republic of Germany agree with the account of the German provisions given in the Commission's application (heading I, paragraph 4) and in the recital of the facts in the judgment of 7 July 1981 (Case 158/80 [1981] ECR 1805, in particular at pp and 1811, subject to the amendments made by the Third Order of 28 September 1982)? If it does not agree with that account, the Government of the Federal Republic of Germany is requested to give a detailed account of the relevant German provisions. 2. The Government of the Federal Republic of Germany is requested to state whether the German provisions in this field are applied strictly or whether the customs authorities are in practice more flexible. If they are more flexible, the German Government is invited to state the exact nature of its practices and to produce any internal administrative documents, such as circulars and departmental guidelines, on which the practices are based. of 3. The Government of the Federal Republic of Germany is requested to state the reasons for which it considers (p. 5 of its defence) that persons returning from an excursion at sea are granted not the "Community concessions" provided for in Article 2 of Directive 69/169 but more restrictive concessions, that is to say the "lower non-member country exemption" provided for in Article 1 and Article 4 (1), Column I, of the directive, or even lower exemptions. III Conclusions of the parties 1. The Commission claims that the Court should: Declare that the Federal Republic of Germany, by granting exemption from turnover tax and excise duties, by virtue of the Einreise-Freimengen-Verordnung [Entry (Duty-free Import) Order] of 3 December 1974, as amended by the Order of 28 September 1982, to travellers importing untaxed goods across the maritime customs frontier on the occassion of excursions on the North Sea and the Baltic Sea, in contravention of Council Directive 69/169/EEC, has failed to fulfil its obligations under the EEC Treaty and in particular the rules on tax exemptions for travellers; Order the defendant to pay the costs. 2. The Federal Republic of Germany contends that the Court should: Declare the Commission's application inadmissible and order it to pay the costs; In the alternative, stay the proceedings until judgment has been given in Case 278/82; In the further alternative, dismiss the application as unfounded and order the Commission to pay the costs. 784

8 COMMISSION ν GERMANY 3. By a document dated 10 March 1983 received at the Court Registry on 14 March 1983, the Commission objected to the defendant's request for a stay of these proceedings until judgment has been given by the Court in Case 278/82. IV Submissions and arguments of the parties A Admissibility of the Commission's application 1. The Government of the Federal Republic of Germany maintains that the second reasoned opinion delivered by the Commission, dated 11 June 1982 (Opinion C/82/768), was vitiated by fundamental defects and that, consequently, the Commission's application is inadmissible. (a) First, the Government of the Federal Republic of Germany considers that the reasoned opinion is insufficiently clear and contains contradictions. According to its wording it relates to "butter-buying cruises off the German coast after Council Regulation (EEC) No 3023/77 was declared invalid by the Court of Justice". In fact Council Regulation No 3023/77 relates only to customs duties and charges having equivalent effect and also to agricultural levies and other import charges applied under the Common Agricultural Policy but not to turnover tax and excise duties which are the subject of this action. (b) The German Government maintains, secondly, that although the Commission also refers in its reasoned opinion to exemptions from turnover tax and excise duties, which it alleges are granted unlawfully by the Federal Republic of Germany in respect of untaxed goods purchased in the course of "butter-buying cruises", that reference contradicts the first reasoned opinion of 11 June 1982 delivered to all the Member States. In the first reasoned opinion the Commission had in fact stated that the Court's judgment in Case 158/80 contained no decision on the question of tax exemptions, the solution to which was completely separate from that to the question of customs duties and agricultural levies. (c) Thirdly, the Government of the Federal Republic of Germany contends that the reasoned opinion delivered to it is inconsistent in so far as it states that tax exemptions granted in respect of transport by sea are always unlawful where the travellers have not stayed in a non-member country beforehand. If that were true, no tax exemptions whatsoever would exist in relation to transport by sea within the Community, which is clearly not the case. Furthermore, the excursions at sea represent only one example of cruises during which the passengers spend no time in a port of a non-member country. (d) The Government of the Federal Republic of Germany maintains, fourthly, that the reasoned opinion is insufficiently clear and is arbitrary since in its application the Commission objects only to the tax concessions granted in connection with excursions at sea which means that it is separating such excursions from the category of cruises in general in order to subject them to special treatment. Such an intention is not indicated with sufficient clarity in the reasoned opinion and such a step seems to be arbitrary and incompatible with the principle of equal treatment of comparable factual situations. That principle requires the 785

9 JUDGMENT OF CASE 325/82 Commission to take action at the same time and using the same means against both tax concessions granted in the course of excursions at sea and those granted in the course of intra- Community transport by ferry. (e) Fifthly, the Government of the Federal Republic of Germany adds that the Commission may have been mistaken with regard to the level of the tax exemptions granted by the Federal Republic of Germany after excursions at sea. It is wrong to maintain, as is stated in the reasoned opinion, that tax concessions are granted under Article 2 of the directive where the travellers have only made a token call in another Member State in the course of a seacruise. In fact, on the contrary, in such circumstances the tax exemption granted is the lower "non-member country" concession (Article 1 and Article 4 (1), Column I of the directive). Moreover, travellers returning from short cruises or cruises which do not in fact involve a call at a foreign port are granted exemptions from taxes and duties only in respect of even smaller quantities of goods. (2) The Commission takes the view that the defendant's arguments are not sufficient to show that the application is inadmissible. The objection of inadmissibility is justified only if the defendant can show that the Commission's complaint that it has acted in breach of the Treaty was expressed in an insufficiently clear manner, Ín fact and in law, in the letter of 7 April 1982 which initiatied the procedure under Article 169 of the Treaty and in Reasoned Opinion C/82/768 of 11 June If that were so the defendant would not have been able to defend itself effectively during the administrative procedure. That was not so in this case, however, since it is apparent from an examination of the aforementioned letter and reasoned opinion themselves that the Commission referred quite clearly to Directive 69/169/EEC and stated that the German rules relating to exemption from import duties in respect of goods contained in travellers' personal luggage did not comply with that directive for reasons which were explained clearly. Furthermore, the statements made by the Government of the Federal Republic of Germany in its telex messages of 31 March and 30 August 1982 prove that the defendant understood perfectly the nature of the complaint raised against it and that it was therefore in a position to present its defence. The Commission adds that the arguments put forward by the defendant in support of the objection of inadmissibility relate, in fact, to the question whether or not the application is well founded. The Commission also contends that it did distinguish between exemption from customs duties and agricultural levies, on the one hand, and exemption from turnover tax and excise duties, on the other hand. The fact that the action brought in respect of the Federal Republic of Germany's failure to fulfil its obligations relates solely to tax exemptions granted on the occasion of excursions at sea has no bearing on the admissibility of the action. Finally, the Commission was not mistaken with regard to the extent of the tax exemptions granted by the Federal Republic of Germany on the occasion of the excursions at sea. Β Substance 1. The Commission The Commission first recalls that the scope of the action for breach of Treaty obligations is restricted to the questions of the tax exemptions applicable to goods acquired by travellers in the course of the excursions at sea, as defined above. It then goes on to develop two lines of argument. 786

10 COMMISSION ν GERMANY (a) It takes the view that there is no doubt that the granting of such exemptions is contrary to Community law. Contrary to Article 2 of Directive 69/169/EEC, goods sold in the course of the excursions at sea have not been acquired subject to the general rules governing taxation on the domestic market of one of the Member States. According to the aforementioned judgment of the Court in Case 158/80, Directive 69/169/EEC, together with the subsequent directives amending it and extending its scope, introduced a complete system of exemptions in respect of goods contained in travellers' personal luggage and consequently in this field the Member States are left with only the restricted power given to them in the directives to grant exemptions. In this case the Federal Republic of Germany is granting an exemption which is not provided for in the directive and which it is therefore not empowered to grant. The Commission notes, moreover, that in its observations the Federal Republic of Germany has not disputed the correctness of that view. (b) The Commission is also concerned to refute the arguments presented by the Government of the Federal Republic of Germany. In the first place the Commission contends that Directive 69/169/EEC certainly does apply to to tax exemptions granted on the occasion of excursions at sea, contrary to the defendant's submission. It puts forward three arguments in support of that contention. (i) The actual wording of the Court's judgment in the aforementioned Case 158/80, according to which the purpose of that directive is "gradually to establish a complete system of exemptions from turnover tax and excise duty for goods contained in travellers' personal luggage", supports the contention. (ii) Whilst it is true that Directive 69/169 does not provide for the application of an exemption from turnover tax and excise duties on goods imported following excursions at sea, it is not possible to infer therefrom, as does the defendant, that the directive is not applicable since the imports in question are effected neither within the framework of travel to and from member countries nor within the framework of intra-community travel. The purpose of the directive is the "harmonization of provisions laid clown by law, regulation or administrative action relating to exemption from turnover tax and excise duty on imports in international travel" and the German Order on Tax Exemptions of 3 December 1974 makes the grant of such exemptions conditional on the entry into the national territory being effected across the maritime customs frontier. Clearly then the German legislature takes the view that international travel is involved. (iii) In any event, even if it were assumed that excursions at sea do not constitute "travel" within the meaning of Directive 69/169, the power of a Member State to grant exemption from turnover tax on the occasion of such cruises is excluded by the fact that valueadded tax is governed by Community law (in particular by the First and Sixth Directives on value-added tax). Consequently the position and arguments of the defendant are based on a fundamental misconception of the meaning and purpose of the Community provisions concerning taxes. In the second place the Commission disputes the contention that excursions at 787

11 JUDGMENT OF CASE 325/82 sea are to be treated in the same way as short sea-crossings by ferry between the ports of different Member States. According to the Commission it is an open question whether the two situations are to be treated in the same way. The question whether the grant of tax exemptions on the occasion of ferry crossings is compatible with Community law is the subject of the reference to the Court for a preliminary ruling made in Case 278/82, which is pending before the Court at the moment. However the result of that case has no effect on this one. For that reason it is not justified, in the Commission's opinion, to join the two cases. According to the Commission, the Court clearly held in the aforementioned Case 158/80 that tax exemptions granted in the course of excursions at sea are incompatible with Community law and that conclusion will not be put in doubt by the judgment given in Case 278/ The Government of the Federal Republic of Germany maintains, on the contrary, that the action against it for failure to fulfil its obligations, the subject-matter of which must, moreover, be limited to the question whether tax exemptions granted in respect of untaxed goods, acquired on excursions at sea and put into free circulation, are compatible with Community law according to the relevant customs duty provisions, is unfounded for two reasons. (a) It follows from the Court's judgment in the aforementioned Case 158/80 that Directive 69/169 contains exhaustive rules governing exemption from turnover tax and excise duties which do not cover the importation of untaxed goods acquired on excursions at sea. Such imports are effected neither in the course of travel between a non-member country and the Community (Article 1 and Article 4 (1), Column I of the directive) nor in the course of travel between Member States (Article 2 and Article 4 (1), Column II of the directive). Moreover, the Commission itself makes a distinction between excursions at sea or "butter-buying cruises", on the one hand, and travel within the Community, on the other hand. Consequently tax exemption granted under national law in respect of purchases of goods which are untaxed but which are in free circulation and which are made on the occasion of excursions at sea cannot infringe the directive since they fall outside its scope of application. (b) According to the Government of the Federal Republic of Germany, even if the Court were to regard excursions at sea as "travel", it would be necessary to consider to what extent such "excursions" differ from "short cruises" by ferry between the ports of different Member States, in the course of which it is possible to make tax-free purchases on board. Both types of travel by boat ought to be treated in the same way with regard to the rules governing tax exemptions. Indeed, in the German Government's opinion, tax exemptions granted in the context of excursions at sea may well even be less open to objection than those granted in the context of travel by aircraft or by ferry within the Community since they affect the interests of only one Member State, that is to say, the Federal Republic of Germany in this case. Therefore the principle that, in such cases, there is no absolute duty to apply the rules of Community law strictly may be inferred, by analogy, from an examination of the various Community rules. Finally, with regard to the question of tax-free purchases made in the course of 788

12 COMMISSION ν GERMANY travel by ferry within the Community, the Government of the Federal Republic of Germany refers to the arguments which it put forward in the aforementioned Case 278/82, the judgment in which could, in its opinion, anticipate that in this case. V Replies of the parties to the questions put by the Court A Question 1 The Commission's replies The Commission states that its action is directed against Paragraph 2 (2) in conjunction with the second sentence of Paragraph 3 (5) of the Order on Tax Exemptions of 3 December 1974 (BGBl I, p. 3377), as amended by the Third Order Amending the Order on Tax Exemptions of 28 September 1982 (BGBl I, pp et seq.). Paragraph 2 of the aforementioned Order lays down, in respect of certain goods, the limits as to value and quantity within which such goods may be imported by travellers free of import duties. The Order draws a distinction between "imports of goods in free circulation in a Member State of the European Communities', (subparagraph 1) and "other imports" (subparagraph 2). "Other imports" cover both imports from a non-member country and imports on the occasion of "excursions at sea" ("entry across the maritime customs frontier"). The Commission emphasizes that that follows from the second sentence of Paragraph 3 (5) of the Order which provides as follows: "Where a person enters the territory by boat... tax exemptions in respect of tobacco products, in so far as they exceed the quantities referred to in the first sentence of subparagraph (4) hereof [that is to say the minor transit allowance (kleine Transitration) in frontier-zone travel] and in respect of alcoholic beverages, coffee and tea are also subject, on the crossing of the maritime customs frontier, to the requirement that the ship must come from the high seas and either have last sailed from a foreign port or have remained outside the customs area for at least eight hours." The Commission concludes from that that if those requirements are satisfied, a traveller is, on his return from an excursion at sea, eligible for the major transit allowance (grosse Transitration), which is also granted in respect of goods imported from a non-member country. It is of the opinion that the importation of goods tax-free permitted by the aforementioned German provisions, is not intended by Directive 69/169 as amended. Since the directive contains a complete system of rules, the Federal Republic of Germany is prohibited from adopting such provisions. Question 2 The Commission states that its action is directed against legislative provisions and not against a mere administrative practice of the customs authorities. The Commission states that it did not maintain in its application that the quantities admitted tax-free into the Federal Republic of Germany in connection with excursions at sea were those permitted in intra-community travel. It stresses that the concessions granted in the case of excursions at sea are plainly those granted to travellers coining from a non-member country and that the Commission and the Federal Republic of Germany are in agreement on that point. Question 3 In the Commission's opinion there is no need to consider in this case whether the sale of tax-free goods on board ship and 789

13 JUDGMENT OF CASE 325/82 outside the German customs territory is compatible with Community law. What is important is that the importation of goods tax-free infringes Directive 69/169. Therefore, in its application, the Commission limits itself to objecting to the importation of goods free of tax and duty and not to their sale free of tax and duty on board ship. Question 4 The Commission produced all the documents requested. Β The replies given by the Federal. Republic of Germany Question 1 The Government of the Federal Republic of Germany states that it agrees with the account of the provisions of German law given by the Commission in its application and in the recital of the facts in the judgment of 7 July 1981 (Case 158/80 Rewe-Handelsgesellschafi Nord mbh and Rewe-Markt Steffen ν Hauptzollamt Kiel [1981] ECR 1805) subject to the amendments made by the Third Order of 28 September It draws attention first to the fact that the terms "große Transitration" and "kleine Transitration" do not appear in the German legal provisions and secondly to the fact that since 1966 it is no longer possible for travellers on short excursions ("Stichfahrten") on ships which remain outside the customs territory for less than eight hours to import alcoholic beverages, coffee and tea free of tax and that tobacco products may be imported free of tax only subject to the limits in force in respect of frontier-zone traffic. Question 2 The Government of the Federal Republic of Germany states that the provisions are applied strictly by the customs authorities which have no- margin of discretion. Controls are effected by random checks. Question 3 The Government of the Federal Republic of Germany contends that Article 2 (1) of Directive 69/169 makes the application of tax exemptions in the context of intra-community travel conditional on the goods' being acquired subject to the general rules governing taxation on the domestic market of one of the Member States. That requirement is not satisfied where the goods are acquired in "duty-free" shops. In that connection it is irrelevant whether the goods are purchased free of tax at an airport, on board an aircraft or ferry, or on the occasion of excursions at sea. All those cases are comparable to purchases made in a non-member country in respect of which it is irrelevant, as the Court stated in its judgment of 7 July 1981 (Case 158/80 Rewe-Handelsgesellschafi Nord mbh and Rewe-Markt Steffen ν Hauptzollamt Kiel [1981] ECR 1805, paragraphs 1 and 4 of the headnote), whether or not the goods in question were charged to tax. That was the fundamental factor which led the Federal Government not to grant, in connection with excursions at sea as with other tax-free purchases made in the course of intra-community sea and air travel, exemptions in excess of those granted in respect of travellers coming from non-member countries. The Government of the Federal Republic of Germany also draws attention to the fact that the Commission, in its new proposal for a Seventh Council Directive amending Directive 69/169, is apparently prompted by the same considerations (Article 1 (1), (2) and (3) (b) of the proposal). 790

14 COMMISSION ν GERMANY VI Oral procedure At the sitting on 20 September 1983, oral argument was presented by Professor Arved Deringer, assisted by Frank Olbertz, acting as Agents, for the Government of the Federal Republic of Germany and by Erich Zimmermann, acting as Agent, for the Commission of the European Communities. The Advocate General delivered her opinion at the sitting on 9 November Decision 1 By application lodged at the Court Registry on 20 December 1982 the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that the Federal Republic of Germany, by granting an exemption from turnover tax and excise duties to travellers importing untaxed goods across the maritime customs frontier on the occasion of excursions at sea on the North Sea and the Baltic Sea, in contravention of Council Directive 69/169/EEC of 28 May 1969 (Official Journal, English Special Edition 1969 (I), p. 232), has failed to fulfil its obligations under the EEC Treaty and in particular the rules on tax exemptions for travellers. 2 The factual and legal circumstances which led the Commission to bring this action against the Federal Republic of Germany for failure to fulfil its obligations are similar to those which led, in the first place, to the Court's judgment of 7 July 1981 (Case 158/80 Rewe-Handelsgesellschaft Nord mbh and Rewe-Markt Steffen ν Haitptzollamt Kiel [1981] ECR 1805) and, in the second place, to its judgment of 14 February 1984 (Case 278/82 Rewe- Handelsgesellschaft Nord mbh and Rewe-Markt Herbert Knreit ν Hauptzollämter Flensburg, Itzehoe and Lübeck-West [1984] ECR 721). 3 By letter of 7 April 1982 the Commission drew the attention of the authorities of the Federal Republic of Germany to the effects of the Court's aforementioned judgment of 7 July 1981 with regard to customs duties and other charges on agricultural products and also with regard to turnover tax and excise duties. Since the Government of the Federal Republic of Germany failed to reply to that letter by the prescribed date, the Commission delivered a reasoned opinion to the Federal Republic of Germany on 11 June 1982, which began with the statement that the Federal Republic of Germany, by 791

15 JUDGMENT OF CASE 325/82 unlawfully granting exemptions from customs duties and agricultural levies and also from turnover tax and excise duties to travellers importing goods across the maritime frontier who have not disembarked in another country, has failed to fulfil its obligations under the Treaty. 4 By telex message of 30 August 1982 the Permanent Representative of the Federal Republic of Germany informed the Commission that the Federal Republic had decided to terminate, with effect from 1 January 1983, the grant of exemption from customs duties and agricultural levies in respect of goods which were not in free circulation and which were acquired in the course of intra-community air and sea travel and in the course of excursions at sea. By Verordnung [Order] of 28 September 1982 (BGBl I, p. 1377) the Verordnung über die Eingangsabgabenfreiheit von Waren im persönlichen Gepäck der Reisenden [Order on Tax Exemptions on the Importation of Goods contained in Travellers' Personal Luggage] of 3 September 1974 (BGBl I, p. 3377) was amended accordingly. 5 However, with regard to the abolition of exemptions from turnover tax and excise duties in respect of goods acquired in the course of excursions at sea, the Government of the Federal Republic of Germany stated that it continued to take the view that the Commission, by requiring the Federal Republic of Germany alone to terminate those exemptions, was not complying with the Court's judgment of 7 July 1981 since, according to the German Government, the problem must be examined in relation to all the Member States and in relation to all types of maritime transport. 6 In those circumstances the Commission brought an action before the Court on 17 December 1982 alleging that the Federal Republic of Germany had failed to fulfil its obligations under the Treaty, the scope of the proceedings being confined to the grant of exemption from turnover tax and excise duties in the Federal Republic of Germany on return from excursions at sea in respect of goods acquired tax-free. Admissibility of the Commission's application 7 The Government of the Federal Republic of Germany maintains, first, that the reasoned opinion delivered to it is formulated in terms which are insufficiently clear and contains a number of contradictions and inconsistencies. 792

16 COMMISSION ν GERMANY 8 As the Court has already held on several occasions, in proceedings instituted by the Commission under Article 169 of the Treaty in respect of failure by a Member State to fulfil its obligations, the letter addressed by the Commission to a Member State formally inviting it to submit its observations and then the reasoned opinion delivered by the Commission must give the State in question an opportunity to submit its observations and constitute an essential guarantee provided by the Treaty; compliance with that guarantee is an essential formal requirement of the procedure under Article 169 of the Treaty. The opinion referred to in Article 169 must be considered to contain a sufficient statement of reasons when it contains a coherent statement of the reasons which led the Commission to believe that the State in question has failed to fulfil an obligation under the Treaty. 9 As the Commission rightly contends, the objection of inadmissibility is not well founded since the Court takes the view that the complaint that the Treaty had been infringed finally made by the Commission in its application was expressed in a sufficiently clear manner, in fact and in law, both in the letter of 7 April 1982 which initiated the procedure under Article 169 and in Reasoned Opinion 82 C/768, delivered on 11 June The defendant therefore had notice of the complaint made against it and was accordingly able to present its defence in full knowledge of the issues. 10 The Government of the Federal Republic of Germany maintains, secondly, that the Commission could not require the Federal Republic of Germany alone, and not all of the Member States, to abolish exemptions from turnover tax and excise duties granted on the return from excursions at sea. 1 1 That argument, too, is not well founded. As the Court has already held (judgment of in Case 232/78 Commission ν French Republic [1979] ECR 2729) a Member State cannot, in any circumstances, plead the principle of reciprocity and rely on a possible infringement of the Treaty by another Member State in order to justify its own default. Nor, therefore, can a Member State rely on the principle of reciprocity to contest the admissibility of an action brought against it for failure to fulfil its obligations. 793

17 JUDGMENT OF CASE 325/82 12 Thirdly, the argument put forward by the Government of the Federal Republic of Germany according to which the fact that the Commission treated excursions at sea differently from sea-crossings made by ships operating a regular service is in breach of the principle that comparable factual situations must be treated in the same way, cannot be adduced in support of an objection of inadmissibility. That argument relates to the substance of the case and can have no relevance whatsoever to the admissibility of the action. Its relevance must be considered when the Court examines the substance of the case. 13 It follows from the foregoing that the objection of inadmissibility must be rejected. The substance of the case 1 4 The Commission states that its action is directed in particular against Paragraph 2 (2) in conjunction with the second sentence of Paragraph 3 (5) of the aforementioned Order of 3 December 1974, as amended. 15 Paragraph 2 of the Order lays down in respect of a certain number of products limits as to value and quantity subject to which goods may-be imported by travellers free of import duties. The provision draws a distinction between "imports of goods put in free circulation in a Member State of the European Communities" (subparagraph 1) and "other imports" (subparagraph 2). "Other imports" cover both the importation of goods from a non-member country and the importation of goods following excursions at sea where both the point of departure and the point of arrival are ports in the Federal Republic of Germany and in the course of which the maritime customs frontier is crossed. 16 With regard to "other imports" it follows from the second sentence of Paragraph 3 (5) of the Order that where a traveller enters across the maritime customs frontier the exemption is granted in respect of certain products provided only that the ship comes from the high seas and has remained outside the customs area for at least eight hours. 17 The Commission concludes from that that the importation of goods free of turnover tax and excise duties on return from a mere excursion at sea, as 794

18 COMMISSION ν GERMANY permitted by the aforementioned German provisions, is not provided for by Directive 69/169, as amended. Consequently, since that directive was held by the Court in its aforementioned judgment of 7 July 1981 to be a complete system of rules, the Federal Republic of Germany had no power to adopt such provisions. 18 Finally, the Commission points out that its action is directed solely against the importation into the Federal Republic of Germany free of turnover tax and excise duties of goods acquired in the course of excursions at sea and not against the actual principle of selling goods free of tax on board ships involved in such excursions. 19 In reply to the Commission's argument, the Government of the Federal Republic of Germany merely maintained, in the first place, that the importation of goods on return from an excursion at sea was outside the ambit of Directive 69/169 and, in the second place, that even if it was within the ambit of the directive, it was necessary, by virtue of the principle of equality of treatment, to consider to what extent such excursions differ from regular crossings by ferry between the ports of different Member States. 20 First, according to the Government of the Federal Republic of Germany, Directive 69/169 contains provisions on exemption from turnover tax and excise duties in international travel which do not cover imports of goods acquired free of tax on the occasion of excursions at sea. Such imports are effected neither in the course of travel from a non-member country (Article 1 and Article 4 (1), Column I of the directive) nor in the course of intra- Community travel (Article 2 and Article 4 (1), Column II of the directive). 21 It should be noted that, as the Commission rightly stated, that argument rests on a misconception of the actual scope of Directive 69/169 and must be rejected. 22 Although it is true that Directive 69/169 does not expressly provide for the grant of exemption from turnover tax and excise duties in respect of imports with regard to the special case of excursions at sea, it is not possible to infer 795