CJEC, 5th chamber, June 17, 1999, No C-166/98

THE COURT (Fifth Chamber),

1. By judgment of 21 April 1998, which was received at the Court on 29 April 1998, the Tribunal de Grande Instance (Regional Court) de Foix referred to the Court

for a preliminary ruling under Article 234 EC (ex Article 177) a question concerning the validity of Council Directive 92-83-EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21) and Council Directive 92-84-EEC of 19 October 1992 on the approximation of the rates of excise duty on alcohol and alcoholic beverages (OJ 1992 L 316, p. 29).

2. The question arose in an action brought by Société Critouridienne de Distribution (hereinafter 'Socridis') seeking relief from excise duty paid by it between May and December 1993.

3. Socridis argued before the national court that Directives 92-83 and 92-84 were incompatible with the second paragraph of Article 95 of the EC Treaty (now, after amendment, the second paragraph of Article 90 EC) because they introduced a system of taxation authorising discriminatory and anti-competitive practices which indirectly favour wine production to the detriment of beer production.

4. Article 95 of the Treaty provides:

'No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.

...'.

5. Directive 92-83 determines the scope and the method of calculating the amount of the common excise duty on the products concerned.

6. Article 3 provides that the excise duty levied by Member States on beer is to be fixed by reference to the number of hectolitre/degrees Plato or the number of hectolitres/degrees of actual alcoholic strength by volume of the finished product, and Article 9(1) provides that the duty levied on wine is to be fixed by reference to the number of hectolitres of finished product.

7. Article 5 of Directive 92-84 fixes the minimum rate of excise duty for wine as from 1 January 1993 at ECU 0 per hectolitre of product and Article 6 fixes that for beer at ECU 0.748 per hectolitre/degree Plato or ECU 1.87 per hectolitre/degree of alcohol of finished product.

8. In France, Articles 438 and 520 A of the Code Général des Impôts (General Tax Code, hereinafter 'the Code'), which were adopted in order to implement Directives 92-83 and 92/84, provide as follows:

- excise duty is to be levied at the rate of FRF 54.80/hl on sparkling wine and FRF 22/hl on other wines (Article 438 of the Code);

- a special duty shall be levied on beer at the rate of FRF 6.25 per hectolitre and per degree for beers of up to 2.8% alcohol by volume and FRF 12.50 per degree for other beers (Article 520 A of the Code).

9. Socridis argued before the national court that prior to harmonisation at Community level beer and wine were taxed in France in the same manner (by volume alone) and at similar rates (FRF 19.50/hl for beer and FRF 22/hl for wine).

10. The result of harmonisation in that country was that the way in which beer was taxed had to be altered by introducing the criterion of alcohol content, and that excise duty on beer was significantly increased.

11. Having established that the French legislation adopted in accordance with Directives 92-83 and 92-84 had the result that beer was taxed significantly higher than wine, the national court decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:

'Are Council Directives 92-83 and 92-84 on the harmonisation of excise duties invalid from the point of view of the EC Treaty and in particular the second paragraph of Article 95 of the Treaty, in that they

- fix a minimum rate of tax on beer of ECU 1.87 per degree per hectolitre

- whereas they authorise taxation of wine by reference solely to the volume, with a minimum rate of zero,

thus requiring Member States to raise the tax on beer to the said minimum rate and so bringing about the creation of tax differentials liable to give rise to discrimination as between wine and beer?'

12. Socridis challenges the validity of Directives 92-83 and 92-84 on essentially three grounds. In the first place, they are in breach of Article 95 of the Treaty, in particular the second paragraph thereof. Secondly, they are incompatible with Article 93 EC (ex Article 99) inasmuch as in one essential aspect they do not harmonise taxation but, on the contrary, increase the existing disparities between the Member States and thus the obstacles to trade resulting from those disparities. Finally, the statement of reasons in the directives do not meet the requirements of Article 253 EC (ex Article 190).

The compatibility of Directives 92-83 and 92-84 with Article 95 of the Treaty

13. Socridis submits that the second paragraph of Article 95 of the Treaty itself contains a requirement of proportionality which applies inter alia to the basis of assessment, to the method of levy and to the rate of taxation. Consequently, by taxing imported beverages more heavily than a competing national beverage a Member State is in breach of that provision of the Treaty in so far as the difference is out of proportion to the differences between the two categories of beverage concerned.

14. It argues that the differences in taxation required and motivated by Directives 92-83 and 92-84 manifestly exceed the objective differences between beer and wine.

15. Furthermore, fixing the minimum rate of excise duty on wine at zero amounts to authorising the Member States to exonerate wine permanently from all excise duty. Such an exoneration favours what is an essential product for the States in the south of Europe, where beer represents neither a sector nor a beverage which is of cultural importance. Six Member States apply that minimum, in any event: the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the Italian Republic and the Grand Duchy of Luxembourg, as well as, since the date of its accession to the Communities, the Republic of Austria.

16. The first point to note is that the general purpose of Article 95 of the Treaty is to guarantee the free movement of goods between the Member States under normal conditions of competition by eliminating all forms of protection which may result in the application of internal taxation which discriminates against products from other Member States and to guarantee that internal taxation is wholly neutral for the purposes of competition between domestic and imported products.

17. In that context, the second paragraph of Article 95 of the Treaty is intended, more specifically, to prevent any form of indirect fiscal protectionism affecting imported products which, although not similar, within the meaning of the first paragraph of Article 95, to domestic products, nevertheless compete with some of them, even if only partially, indirectly or potentially (Case 356-85 Commission v Belgium [1987] ECR 3299, paragraphs 6 and 7).

18. In that connection, only commonly consumed wines, which in general are cheap wines, have enough characteristics in common with beer to constitute an alternative choice for consumers and may therefore be regarded as being in competition with beer for the purposes of the second paragraph of Article 95 of the Treaty (Commission v Belgium, cited above, paragraph 11). Consequently, the ground of invalidity based on that provision relied on by Socridis to challenge the minimum excise duty fixed by Directive 92-84 arises only to the extent that it applies to commonly consumed wines.

19. Next, the Court has consistently held that directives do not infringe the Treaty if they leave the Member States a sufficiently wide margin of appreciation to enable them to transpose them into national law in a manner consistent with the requirements of the Treaty (see to that effect Case 5-88 Wachauf v Bundesamt für Ernährung und Forstwirtschaft [1989] ECR 2609, paragraph 22).

20. It is common ground that Directives 92-83 and 92-84 merely require Member States to apply a minimum excise duty on beer. Consequently, the Member States retain a sufficiently wide margin of discretion to ensure that the relationship of the taxes on wine and beer excludes any protection for domestic production within the meaning of Article 95 of the Treaty.

21. The plea that Directives 92-83 and 92-84 are invalid because they are incompatible with the second paragraph of Article 95 of the Treaty must therefore be rejected.

Breach of Article 93 EC

22. Arguing that the purpose of Article 93 EC is to reduce obstacles to trade resulting from differences between domestic systems of taxation, even when they are applied without discrimination, Socridis observes that any action by the Council under that provision must seek not only to reduce disparities in taxation, including those between competing products, but also to avoid sanctioning the introduction or retention of tax ratios which do not, or may not, comply with the second paragraph of Article 95 of the Treaty.

23. Socridis maintains that Directives 92-83 and 92-84 fall far short of what is necessary to bring about a minimum harmonisation of the taxes on wine and beer, with the result that the Council is in breach of Article 93 EC.

24. That argument cannot be upheld.

25. As the Advocate General rightly observed in paragraph 51 of his Opinion, the intention of the Community legislature in adopting Directives 92-83 and 92-84 was not to harmonise taxation as between wine and beer. Under the powers expressly conferred on it by Article 93 EC, and in order to ensure the establishment and operation of the internal market, the Council was seeking to harmonise, first, national legislation on excise duty applicable to wine and, secondly, that relating to excise duty on beer.

26. Furthermore, the Court has consistently held that the Community institutions are free to introduce harmonisation gradually or in stages. It is generally difficult to implement such measures because they require the competent Community institutions to draw up, on the basis of diverse and complex national provisions, common rules in harmony with the aims laid down by the Treaty and approved by a qualified majority of the Members of the Council, or even, as is the case in fiscal

matters, the unanimous agreement of the latter (see to that effect Case 37-83 Rewe-Zentrale v Landwirtschaftskammer Rheinland [1984] ECR 1229, paragraph 20, and Case C-233-94 Germany v Parliament and Council [1997] ECR I-2405, paragraph 43).

27. The plea that Directives 92-83 and 92-84 are invalid because they are incompatible with Article 93 EC must therefore be rejected.

Breach of the duty to state reasons

28. Socridis submits that there is no sufficient statement of reasons in Directives 92-83 and 92-84 justifying the use solely in the case of beer of a second criterion for taxation, namely alcohol content, or the difference between the minimum rates of excise duty fixed for wine and beer respectively.

29. As regards the criteria for the duty on beer, it is sufficient to note that it is stated in the seventh recital in the preamble to Directive 92-84 that 'the methods of taxing beer within the Member States vary, and it is possible to permit this variation to continue, in particular by laying down a minimum rate expressed as a charge related both to the original gravity and to the alcohol content of the product'.

30. As regards the difference between the minimum rates for wine and beer, that is not, strictly speaking, a measure adopted by the Council but the consequence of parallel harmonisation of domestic excise duties on wine and beer, so that it does not require any specific statement of reasons. Contrary to what Socridis maintains, and as was emphasised in paragraph 25 of this judgment, the purpose of Directive 92-84 is not to harmonise the excise duty on wine with that on beer, but to fix a minimum rate of excise duty for each of those two categories of product, as is indicated in the third recital in the preamble to that directive.

31. Consequently, the plea of breach of Article 253 EC must likewise be rejected.

32. For all those reasons, it must be held that consideration of the question referred has disclosed no factor capable of affecting the validity of Directives 92-83 and 92-84.

Costs

33. The costs incurred by the French and Spanish Governments and by the Council and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main action, a step

in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the question referred to it by the Tribunal de Grande Instance de Foix by judgment of 21 April 1998, hereby rules:

Consideration of the question referred has disclosed no factor capable of affecting the validity of Council Directive 92-83-EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and Council Directive 92-84-EEC of 19 October 1992 on the approximation of the rates of excise duty on alcohol and alcoholic beverages.