CJEC, February 25, 1988, No 331-85

THE COURT,

1 By three judgments of 9 October 1985, which were received at the Court on 8, 27 and 28 November 1985, the Cour de cassation of the French Republic referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of various provisions of the EEC Treaty in order to be able to decide whether a provision of national law concerning the refund of undue payments is compatible with the Treaty.

2 That question was raised in proceedings between, on the one hand, Les Fils de Jules Bianco SA and J. Girard Fils SA (hereinafter referred to as Bianco and Girard) and, on the other hand, the Directeur général des douanes et droits indirects (director-general for customs and indirect duties) concerning the repayment of parafiscal charges introduced by two decrees of the French Republic (Decree No 78-903 of 30 August 1978, Journal Officiel de la République française of 1 September 1978, p. 3167 and Decree No 78-1043 of 2 November 1978, Journal Officiel de la République française of 3 November 1978, p. 3735) on the consumption of high-grade fuel, petrol and domestic fuel oil.

3 Bianco and Girard, whose commercial activities involve the purchase, importation and distribution of petroleum products, paid various sums by way of the charges in question to the French tax authorities. Considering that the charges levied were unlawful, in particular under Community Law, they brought three separate actions for repayment of the charges.

4 In the Case of Bianco, the Tribunaux d'instance (district Courts) of Villeurbanne and Annecy, and in the Case of Girard the Tribunal d'instance of Annecy, declared Bianco's and Girard's three actions for repayment inadmissible on the ground that the evidence that the duties in question had not been passed on to the buyers of their products required by Article 13 (V) of the 1981 Finance law of 31 December 1980 (Journal Officiel de la République française of 31 December 1980, p. 3099) had not been produced. On appeal by the plaintiff companies the three judgments delivered at first instance were upheld by the Cours d'appel (Courts of appeal) of Lyons and Chambery.

5 Article 13 (V) of the abovementioned law provides that:

"Where a person has unduly paid indirect duties governed by the general tax code or national duties and charges collected according to the procedures of the customs code, he may, except in cases of substantive error, only obtain repayment if he can demonstrate that the duties were not passed on to the buyer.

This provision applies to claims submitted in accordance with Article 1931 of the General Tax Code and Article 352 of the Customs code, including claims submitted before the date on which this law enters into force".

6 After the two companies had appealed in cassation in all three cases, the Cour de cassation stayed its proceedings and referred the following question, which was identical in all three judgments, for a preliminary ruling:

"Must the Treaty establishing the European Economic Community be interpreted as meaning that the French Republic cannot make the repayment of charges levied contrary to Community Law conditional upon the production of proof that those charges have not been passed on to the purchasers of the products that were subject to the charges and place the burden of adducing such negative proof entirely upon the natural or legal persons claiming repayment? Does the answer depend upon whether the law of 30 December 1980 has retroactive effect, the nature of the charge at issue and whether the market is free, regulated or monopolistic, either wholly or in part?"

7 Reference is made to the report for the hearing for a fuller account of the facts of the Case, the legal background to the main proceedings, the course of the procedure and the observations submitted to the Court, which are mentioned or referred to hereinafter only in so far as is necessary for the reasoning of the Court.

The first part of the question

8 The national Court asks whether the Treaty establishing the European Economic Community must be interpreted as meaning that the French Republic could not make the repayment of national charges levied contrary to Community Law conditional upon the production of proof that those charges had not been passed on to the purchasers of the products which were subject to those charges and place the burden of adducing such negative proof entirely upon the natural or legal persons claiming repayment.

9 Bianco and Girard argue that by making the admissibility of the action for repayment dependent on proof of a negative fact, namely that the charge has not been passed on to the purchaser, Article 13 (V) of the abovementioned law establishes a condition with which it is practically impossible for companies like themselves to comply.

10 The French Government considers that in reality Article 13 (V) of the abovementioned law requires proof of a positive fact, namely that the charge has in fact been borne by the business of the sellers of refined petroleum products, so that the provision does not make the exercise of the rights conferred by Community Law virtually impossible or extremely difficult.

11 The French Government's line of argument cannot be accepted. The provision contained in the French legislation at issue in fact requires traders to prove a negative fact inasmuch as where the authorities merely allege that traders have passed on the taxes, these traders must prove that they have not passed on the unduly paid parafiscal charge to other persons. The fact that the provision at issue may have been framed in positive terms is irrelevant for the person upon whom the burden of proof rests.

12 On this point it should be borne in mind that, as the Court held in its judgment of 9 November 1983 in Case 199-82 Amministrazione delle Finanze dello Stato v San Giorgio Spa [1983] ECR 3595), any requirement of proof which has the effect of making it virtually impossible or excessively difficult to secure the repayment of charges levied contrary to Community Law is incompatible with Community Law, and that this is so in particular in the Case of presumptions or rules of evidence designed to place on the taxpayer the burden of establishing that the unduly paid charges have not been passed on to other persons.

13 The answer to the first part of the question must therefore be that a Member State is not entitled to adopt provisions which make the repayment of charges levied contrary to Community Law conditional upon the production of proof that those charges have not been passed on to the purchasers of the products that were subject to the charges and to place the burden of adducing such negative proof entirely on the natural or legal persons claiming repayment.

The second part of the question

14 The national Court then asks whether the answer depends on whether or not the law of 13 December 1980 has retroactive effect, the nature of the charge at issue or whether the market is free, regulated or monopolistic, either wholly or in part.

15 It must be stressed first of all that giving retroactive effect to a provision incompatible with Community Law, of the kind at issue in the main proceedings, aggravates that incompatibility, in particular because such a rule becomes applicable to past situations in respect of which traders could not foresee that such proof would be required of them.

16 As regards the question whether the nature of the charge affects the answer to the question raised by the national Court, the French Government considers that, where indirect taxes are involved, the presumption that they have been passed on is even more justified since they are, by definition, to be borne ultimately by consumers because any business operating soundly will normally pass them on in the price of the product sold.

17 In this respect it must be stressed that, even though indirect taxes are designed in national law to be passed on to the final consumer and in commerce are normally passed on in whole or in part, it cannot be generally assumed that the charge is actually passed on in every case. The actual passing on of such taxes, either in whole or in part, depends on various factors in each commercial transaction which distinguish it from other transactions in other contexts. Consequently, the question whether an indirect tax has or has not been passed on in each Case is a question of fact to be determined by the national Court which may freely assess the evidence. However, in the case of indirect taxes, it may not be assumed that there is a presumption that they have been passed on and that it is for the taxpayer to prove the contrary. This in no way prejudges the solution of the specific problem that arises as regards the burden of proof where the taxpayer has been obliged to pass on a charge by the relevant legislation itself.

18 As regards the question whether the nature of the market - free, regulated or monopolistic, either wholly or in part - affects the answer to be given to the question referred by the national Court, the United Kingdom considers that the incompatibility found in the San Giorgio Case, cited above, applies only in a market economy based on freedom of competition; in a regulated price economy, however, traders will in practice have no discretion as to whether to pass on the charge to purchasers and will have no difficulty in furnishing the proof required by the abovementioned provision at issue.

19 In reply to that point it must be observed first of all that in Case 199-82 San Giorgio, cited above, the Court ruled on questions which may be raised with regard to a free market economy without, however, excluding the application of the principle enunciated to other types of market.

20 It must also be observed that it is quite probable, depending on the nature of the market, that the charge has been passed on. However, the numerous factors which determine commercial strategy vary from one case to another so that it is virtually impossible to determine how they each affect the passing on of the charge.

21 It must therefore be concluded that the answer does not depend on whether the national provision has retroactive effect, the nature of the charge at issue or whether the market is free, regulated or monopolistic, either wholly or in part.

Costs

22 The costs incurred by the Government of the French Republic, the United Kingdom, the Italian Republic and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of 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,

In answer to the questions submitted to it by the Cour de cassation of the French Republic by three judgments of 9 October 1985, hereby rules:

(1) The Treaty establishing the European Economic Community must be interpreted as meaning that a Member State may not adopt provisions which make the repayment of charges levied contrary to Community Law conditional upon the production of proof that those charges have not been passed on to the purchasers of the products that were subject to the charges and place the burden of adducing such negative proof entirely upon the natural or legal persons claiming repayment.

(2) The answer does not depend on whether the national provision has retroactive effect, the nature of the charge at issue or whether the market is free, regulated or monopolistic, either wholly or in part.