Flashback on ECJ Cases – C-273/12 (Harry Winston) – The theft of goods placed under customs warehousing arrangements gives rise to the chargeable event

On July 11, 2013, the ECJ issued its decision in the case C-273/12 (Harry Winston).

Context: Community Customs Code – Regulation (EEC) No 2913/92 – Article 206 – Incurrence of a customs debt – Theft of goods placed under customs warehousing arrangements – Notion of ‘irretrievable loss of goods as a result of force majeure’– Directive 2006/112/EC – Article 71 – Value added tax – Chargeable event – Chargeability of tax

Article in the EU VAT Directive

Article 71(1) of the EU VAT Directive 2006/112/EC.

Article 71 (Chargeable event and chargeability of VAT)
1. Where, on entry into the Community, goods are placed under one of the arrangements or situations referred to in Articles 156, 276 and 277, or under temporary importation arrangements with total exemption from import duty, or under external transit arrangements, the chargeable event shall occur and VAT shall become chargeable only when the goods cease to be covered by those arrangements or situations.
However, where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, the chargeable event shall occur and VAT shall become chargeable when the chargeable event in respect of those duties occurs and those duties become chargeable.
2. Where imported goods are not subject to any of the duties referred to in the second subparagraph of paragraph 1, Member States shall, as regards the chargeable event and the moment when VAT becomes chargeable, apply the provisions in force governing customs duties.

Facts

Following an armed robbery with hostage-taking on 6 October 2007, in the course of which items of jewellery placed under customs warehousing arrangements were stolen, the customs administration, by a collection notice of 16 November 2007, sought payment from Harry Winston of the customs duties and VAT applicable to those goods. Harry Winston, following an unsuccessful administrative complaint, brought proceedings against the customs administration with a view to having that notice set aside.
By a decision of 3 June 2009, the Tribunal d’instance du 10^e arrondissement de Paris (District Court of the 10th District of Paris) set aside the collection notice in relation to the VAT and, with regard to the customs duties, stayed the proceedings pending a ruling by the Court of Justice on two questions referred for a preliminary ruling concerning the interpretation of Article 206 of the Customs Code.
The customs administration appealed against that decision.
By judgment of 7 December 2010, the Cour d’appel (Court of appeal) first, upheld the decision of the Tribunal d’instance du 10^earrondissement de Paris which had set aside the collection notice in relation to the VAT, and, secondly, varied the decision relating to the customs debt.
In relation to the customs duties, the Cour d’appel held, basing itself on the Bulletin officiel des douanes No 6551 of 29 May 2002, that the French authorities treated the theft of goods as equivalent to their destruction or irretrievable loss within the terms of Article 206 of the Customs Code, and that that doctrine exempted the trader if he proved that the irretrievable loss – in the present case, the theft – was the result of force majeure.
The Cour d’appel thus held that Harry Winston could have taken the view, relying on the principle of legitimate expectation, that it did not have to pay customs duties in this case, subject to demonstrating that that theft was the result of force majeure. In that regard, the Cour d’appel held that the armed robbery at issue, having been unforeseeable and unavoidable by reason of its brutality and criminal characteristics, fulfilled the conditions of force majeure and had led to an irretrievable loss of the goods.
With regard to the VAT, the Cour d’appel took the view that the Court of Justice had acted correctly in holding, in its judgment in Case C‑435/03 British American Tobacco and Newman Shipping [2005] ECR I‑7077, that the theft of goods does not constitute a ‘supply of goods for consideration’ within the meaning of Article 2 of the VAT directive and cannot, therefore, as such, be subject to VAT.
The customs administration appealed in cassation. It complained that the Cour d’appel, first, had failed to investigate, as it had been requested to do, whether the Court had not been correct to hold, in its judgment in Esercizio Magazzini Generali and Mellina Agosta, that the theft of goods subject to customs duties did not extinguish the obligations relating to them and, secondly, concerning the VAT, that it gave its ruling in reliance on the judgment in British American Tobacco and Newman Shipping, even though, in the present case, the chargeable event giving rise to the tax was not a ‘supply of goods for consideration’, within the meaning of Article 2(1)(a) of the VAT directive, but an ‘importation’ referred to in Article 2(1)(d) of that directive.
The Cour de cassation points out that two new factors, which have arisen since the judgment in Esercizio Magazzini Generali and Mellina Agosta, preclude a conclusive finding that that judgment is still, for certain, part of positive law. First, the Customs Code, adopted in 1992, did not repeat the requirement of the ninth recital in the preamble to Directive 79/623, referred to in the judgment in Esercizio Magazzini Generali and Mellina Agosta, which made the extinction of the customs debt conditional on the circumstance, whether actual or presumed, that the goods did not find their way back to the economic circuit after the theft. Secondly, the Court held in its judgment in British American Tobacco and Newman Shipping that the theft of goods did not constitute a ‘supply of goods for consideration’ within the meaning of Article 2 of the VAT directive and could not therefore, as such, be subject to VAT.

Questions

(1) Is Article 206 of [the Customs Code] to be interpreted as meaning that the theft, in the circumstances of the present case, of goods held under customs warehousing arrangements constitutes the irretrievable loss of the goods and a case of force majeure, with the consequence that, in that situation, no customs debt on importation is deemed to have been incurred?

(2) Is the theft of goods held under customs warehousing arrangements such as to give rise to the chargeable event and to cause the [VAT] to become chargeable pursuant to Article 71 of the [VAT directive]?

AG Opinion

None

Decision

1. Article 203(1) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Council Regulation (EC) No 1791/2006 of 20 November 2006, must be interpreted as meaning that a theft of goods placed under customs warehousing arrangements constitutes an unlawful removal of those goods within the meaning of that provision, giving rise to a customs debt on importation. Article 206 of that regulation is capable of applying only to situations in which a customs debt is liable to be incurred pursuant to Articles 202 and 204(1)(a) of that regulation.

2. The second subparagraph of Article 71(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the theft of goods placed under customs warehousing arrangements gives rise to the chargeable event and causes value added tax to become chargeable.

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