Flashback on ECJ Cases – Joined cases C-226/14 (Eurogate Distribution) & C-228/14 (DHL Hub Leipzig GmbH) – No import VAT on goods removed from customs warehouse and re-exported

On June 2, 2016, the ECJ issued its decision in the joined cases C-226/14 (Eurogate Distribution) & C-228/14 (DHL Hub Leipzig GmbH).

Context: References for a preliminary ruling — Value added tax — Customs warehousing — External transit procedure — Incurrence of a customs debt as a result of non-fulfilment of an obligation — Chargeability of value added tax

Article in the EU VAT Directive

Article 7(3) of the Sixth VAT Directive (Article 61 of the EU VAT Directive 2006/112/EC)

Article 61
By way of derogation from Article 60, where, on entry into the Community, goods which are not in free circulation are placed under one of the arrangements or situations referred to in Article 156, or under temporary importation arrangements with total exemption from import duty, or under external transit arrangements, the place of importation of such goods
shall be the Member State within whose territory the goods cease to be covered by those arrangements or situations.
Similarly, where, on entry into the Community, goods which are in free circulation are placed under one of the arrangements or situations referred to in Articles 276 and 277, the place of importation shall be the Member State within whose territory the goods cease to be covered by those arrangements or situations.

Facts

Case C‑226/14

Eurogate has been authorised to operate a private customs warehouse since 2006. An IT system is used to keep stock records in that warehouse.
As warehouse keeper, Eurogate took into its private customs warehouse non-Community goods from its customers with a view to forwarding them outside the territory of the European Union. At the time of the removal of the goods from the customs warehouse, customs declarations for their re-exportation were drawn up.
During a customs inspection on 31 January 2007, it was established that removals of the goods at issue were not entered in the stock records until 11 to 126 days after the removals took place, and were thus recorded late for the purposes of the first paragraph of Article 105 of the Customs Code, read in conjunction with Articles 529(1) and 530(3) of the Implementing Regulation.
By a notice of 1 July 2008, the Hauptzollamt Hamburg-Stadt sought payment of the customs duty and import VAT for the goods which were entered late in the stock records. Eurogate challenged that notice.
Following remission of a portion of the duties, granted by a notice of 11 August 2009, the Hauptzollamt Hamburg-Stadt, by a decision of 8 December 2009, dismissed the remainder of Eurogate’s challenge as unfounded, on the ground that the late entries in the stock records had to be regarded as constituting a failure on the part of Eurogate to fulfil its obligations under the customs warehousing procedure and that, consequently, that failure had given rise to a customs debt on the basis of Article 204(1) of the Customs Code.
Eurogate brought an action before the Finanzgericht Hamburg (Finance Court, Hamburg) for annulment of the notice of 1 July 2008, as amended by the notice of 11 August 2009 and confirmed by the decision of 8 December 2009, claiming, inter alia, that the late entries of the removals from the customs warehouse in the stock records do not constitute a failure to fulfil its obligations for the purposes of Article 204(1)(a) of the Customs Code inasmuch as, in accordance with Article 105 of the Customs Code and Article 530(3) of the Implementing Regulation, the obligation to record removals in the stock records has to be fulfilled only after the discharge of the customs warehousing procedure.
The issue of the determination of the customs duties was referred to the Court of Justice in a case which gave rise to the judgment of 6 September 2012 in Eurogate Distribution (C‑28/11, EU:C:2012:533).
In paragraph 35 of that judgment, the Court held that Article 204(l)(a) of the Customs Code had to be interpreted as meaning that, in the case of non-Community goods, non-fulfilment of the obligation to enter the removal of the goods from the customs warehouse in the appropriate stock records, at the latest when the goods leave the customs warehouse, gives rise to a customs debt in respect of those goods, even if they have been re-exported.
In so far as concerns import VAT, Eurogate challenges the notice relating to that tax on the ground that, irrespective of the incurrence of the customs debt, the conditions for levying import VAT were not satisfied, since the goods concerned did not enter the economic network of the European Union.
The Hauptzollamt Hamburg-Stadt contests that argument by asserting that the incurrence of the customs debt also leads to the incurrence of the import VAT debt, since national law on turnover taxes and EU law on VAT refer to customs law.
In that regard, the national court points out that that line of argument is consistent with the case-law of the German courts with the result that the action should be dismissed on that basis, since none of the conditions for exoneration from import tax set out in Paragraph 5 of the UStG and Paragraph 1(2) of the Federal law on the exoneration from import turnover tax, in the version applicable to the facts in the main proceedings, has been satisfied.
However, the referring court harbours doubts, first, as to whether import VAT is necessarily due where an import customs debt is incurred under Article 204 of the Customs Code and, second, whether a warehouse keeper such as the applicant in the main proceedings may, where appropriate, be liable for payment of the VAT.

Case C‑228/14

On 5 January 2011, an external transit procedure T1 was opened in respect of non-Community goods. Once the procedure had been opened the goods were to be transported within the prescribed period, and at the latest by 12 January 2011, to Macao (China) through the Hanover airport customs office (Germany) or the Leipzig Airport customs office (Germany). DHL, which is a carrier of goods within the meaning of Article 96(2) of the Customs Code, failed to present the goods at the Leipzig airport customs office before they were transported to Macao.
The transit procedure could not be completed in accordance with Article 366(2) of the Implementing Regulation because the necessary documents could not be presented.
On 8 August 2011, the Hauptzollamt Braunschweig issued DHL with an import VAT assessment notice, on the basis of Article 204(1)(a) of the Customs Code, in the amount of EUR 6 002.01, to which no objection was made.
On 29 February 2012, DHL applied for repayment of the import VAT paid on the basis of that assessment notice, in accordance with Article 236 of the Customs Code.
The Hauptzollamt Braunschweig rejected the application for repayment of the import duty and DHL’s objection by decisions of 28 March and 5 July 2012.
DHL brought an action before the Finanzgericht Hamburg (Finance Court, Hamburg) claiming that no VAT could be levied on the goods in transit which had not entered the German economic network.

Questions

Case C-226/14

– Question 1: Is it inconsistent with the provisions of Directive 77/388/EEC ¹ to levy import turnover tax for goods which have been reexported as non-Community goods for which, however, a customs debt is incurred due to a breach of obligation under Article 204 of the Customs Code ² — in this case: delay in the fulfilment of the obligation to record the removal of the goods from a customs warehouse in the appropriate stock records, at the latest at the time of their removal?

In the event that Question 1 is answered in the negative:

– Question 2: Do the provisions of Directive 77/388/EEC require the levy of import turnover tax for the goods in such cases or do Member States have a margin of discretion in this respect?

and

– Question 3: Is a customs warehouse maintainer who, on the basis of a relationship involving the provision of services, stores a good from a third country in his customs warehouse without having that good at his disposal liable to pay import VAT, which is incurred as a result of his breach of obligation under the second subparagraph of Article 10(3) of Directive 77/388/EEC in conjunction with Article 204(1) of the Customs Code, even if the good is not used for the purposes of his taxable transactions within the meaning of Article 17(2)(a) of Directive 77/388/EEC?

Case C-228/14

– Is import VAT for goods which have been reexported under customs supervision as non-Community goods for which, however, a customs debt is incurred due to a breach of obligation under Article 204 of the Customs Code ¹ — in this case: failure to discharge in due time the external Community transit procedure by presentation at the competent customs office before the introduction into the third country — to be considered to be not legally owed within the meaning of Article 236(1) of the Customs Code in conjunction with the provisions of Directive 2006/112/EC, ² at least where the person used as the debtor is the person on whom the breached obligation was incumbent without him being entitled to dispose of the goods?

AG Opinion

As the main answer:

(1) Article 7(3) of the Sixth Directive and Article 61 of the VAT Directive must be interpreted as meaning that VAT is due where, at the time of their re-exportation, the goods concerned had, as a result of a customs debt incurred under Article 204 of the Community Customs Code, left the customs arrangements provided for in these articles in circumstances which support the presumption that the goods have entered the economic network of the Union.

In the alternative:

(2) The Member States do not have any discretion for the purposes of levying VAT where a customs debt has been incurred under Article 204 of the Community Customs Code.

(3) If VAT should be levied in the situations at issue, the warehouse keeper or the carrier may be the persons liable to pay that tax under national legislation, even if they do not have the right of disposal over the goods and are not entitled to deduct the VAT due.

Decision

1. Article 7(3) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, as amended by Council Directive 2004/66/EC of 26 April 2004, must be interpreted as meaning that value added tax on goods which have been re-exported as non-Community goods is not due where those goods have not been removed from the customs arrangement provided for in that provision at the date of their re-exportation but were removed from that arrangement as a result of their re-exportation, and that is the case even where a customs debt is incurred exclusively on the basis of Article 204 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 648/2005 of the European Parliament and of the Council of 13 April 2005.

2. Article 236(1) of Regulation No 2913/92, as amended by Regulation No 648/2005, read in conjunction with the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as meaning that, in a situation such as that at issue in the main proceedings, since value added tax on goods which have been re-exported as non-Community goods is not due where those goods have not been removed from the customs arrangement provided for in Article 61 of that directive, and that is the case even where a customs debt is incurred exclusively on the basis of Article 204 of Regulation No 2913/92, as amended by Regulation No 648/2005, nobody is liable for payment of the value added tax. Article 236 of Regulation No 2913/92 must be interpreted as not being applicable in situations relating to the repayment of value added tax.

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