Flashback on ECJ Cases C-230/08 (Dansk Transport og Logistik) – VAT is chargeable in the Member State where the goods were unlawfully introduced into the Community

On April 29, 2010, the ECJ issued its decision in the case C-230/08 (Dansk Transport og Logistik).

Context: Community Customs Code – Articles 202, 215(1) and (3), 217(1) and point (d) of the first paragraph of Article 233 – Concept of goods which are ‘seized and simultaneously or subsequently confiscated’ – Regulation implementing the Customs Code – Article 867a – Directive 92/12/EEC – Articles 5(1) and (2), 6, 7(1), 8 and 9 – Sixth VAT Directive – Articles 7, 10(3) and 16(1) – Unlawful introduction of goods – Transport of goods with a TIR carnet – Seizure and destruction – Determination of the Member State in which the customs debt is incurred and VAT and excise duty become chargeable – Extinction of the customs and tax debt

Article in the EU VAT Directive

Articles 7, 10(3), 16 in the Sixth VAT Directive (Articles 30, 70, 71, 156(1)(c) of the EU VAT Directive 2006/112/EC).

Article 30 (Taxable transactions – Importation of Goods)
‘Importation of goods’ shall mean the entry into the Community of goods which are not in free circulation within the meaning of Article 24 of the Treaty.
In addition to the transaction referred to in the first paragraph, the entry into the Community of goods which are in free circulation, coming from a third territory forming part of the customs territory of the Community, shall be regarded as importation of goods.

Article 70 (Chargeable event)
The chargeable event shall occur and VAT shall become chargeable when the goods are imported.
Article 71
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.

Article 156 (Exemptions for transactions relating to international trade)
1. Member States may exempt the following transactions:
(c) the supply of goods which are intended to be placed under customs warehousing arrangements or inward processing arrangements;

Facts

Pursuant to an authorisation from the Danish customs and tax authorities granted under Article 6 of the TIR Convention, DTL is entitled to issue TIR carnets and act as the guarantor association in connection with TIR transport operations.
The referring court is hearing three disputes relating to customs and tax debts in connection with the smuggling of cigarettes in the course of TIR operations, for which DTL had issued TIR carnets and acted as guarantor. In two of the cases in the main proceedings, the goods were transported to Denmark by sea and, in the third case, by land.
The introduction, by sea, of the goods into Community customs territory was discovered by the local customs and tax authorities on 2 May 2000. Two lorries crossed the Danish border, on board a ferry from Klaipeda, in Lithuania, which at the time of the facts in the main proceedings was not yet a Member State of the European Union. When the ferry docked in Åbenrå, those lorries were inspected by the abovementioned authorities, following which they found a large quantity of cigarettes hidden in the semi-trailers which were not enumerated in the TIR carnets.
The introduction of the goods by land was discovered by the local customs and tax authorities on 11 October 2000. A Lithuanian lorry arrived in Frøslev, a Danish town on the border between Denmark and Germany, where those authorities discovered, in addition to the goods mentioned in the TIR carnets, a large quantity of cigarettes hidden in the semi-trailer. Those goods were brought illegally into Community customs territory when crossing the border between Poland, which at the time of the facts in the main proceedings was not yet a Member State of the European Union, and Germany. They were then transported from Germany to Denmark, without being detected by the German authorities. The seals of the lorry and the semi-trailer were not broken until the customs check carried out in Denmark.
In all the cases in the main proceedings the customs authorities immediately detained the cigarettes, in accordance with the first sentence of Paragraph 83(1) of the Customs Law. The cigarettes remained in the possession of those authorities from their seizure to their destruction between November 2004 and March 2005.
By letters sent between December 2001 and August 2002, those authorities sought from the transporters, namely the Lithuanian undertakings whose names the TIR carnets were in, payment of customs duty, excise duty and VAT in respect of the smuggled cigarettes.
Since those undertakings did not reply to those letters, the customs and tax authorities decided, on 4 February 2003 in two of the cases in the main proceedings and on 16 April 2002 in the third case, that DTL, as the association acting as guarantor under the TIR Convention, was required to pay the sum corresponding to its maximum liability under the TIR carnets which it had issued for those transport operations. DTL brought an action against those decisions before the Landsskatteret (Tax Court), which upheld them.
DTL then lodged an appeal against that judgment before the Østre Landsret (Eastern Regional Court) and paid, on a conditional basis, the sum sought in two of the cases in the main proceedings, but did not pay the sum sought in relation to the third case.
The referring court considers that Paragraph 83 of the Customs Law does not expressly state whether the customs and tax debt relating to the smuggled goods exists and may be recovered where the goods are detained, seized or destroyed in accordance with that provision.

Questions

(1) Is the expression “seized and simultaneously or subsequently confiscated” in point (d) of [the first paragraph] of Article 233 of the Customs Code to be interpreted as meaning that the provision covers situations where goods detained under … Paragraph 83(1) of the Customs Law on unlawful introduction are simultaneously or subsequently destroyed by the authorities without their having left the authorities’ possession?

(2) Is the Excise Duty Directive to be interpreted as meaning that unlawfully introduced goods which are seized on importation and simultaneously or subsequently destroyed by the authorities are to be regarded as placed under “a suspension arrangement” with the effect that the excise duty is not incurred or is extinguished (see the first subparagraph of Article 5(2) and Article 6(1)(c) of the Excise Duty Directive, read in conjunction with Articles 84(1)(a) and 98 of the Customs Code, and Article 867a of the [I]mplementing [Regulation])?

Is the answer affected by whether or not a customs debt incurred on such unlawful introduction is extinguished under point (d) of [the first paragraph of] Article 233 of the Customs Code?

(3) Is the Sixth Directive to be interpreted as meaning that unlawfully introduced goods seized on importation and simultaneously or subsequently destroyed by the authorities are to be regarded as being placed under a “customs warehousing procedure” with the effect that the VAT debt is not incurred or is extinguished (see Articles 7(3), 10(3) and 16(1)(B)(c) of the Sixth Directive and Article 867a of the [I]mplementing [Regulation])?

Is the answer affected by whether or not a customs debt incurred on such unlawful introduction is extinguished under point (d) of [the first paragraph of] Article 233 of the Customs Code?

(4) Are the Customs Code, the [I]mplementing [Regulation], [the Excise Duty Directive] and the Sixth Directive to be interpreted as meaning that the customs authorities in the Member State where unlawful introduction of goods during a TIR operation is detected are competent to charge customs duty, excise duty and VAT on the operation where the authorities in another Member State, where the unlawful introduction into the Community occurred, did not detect the irregularity and consequently did not charge customs duty, excise duty and VAT (see Article 215 in conjunction with Article 217 of the Customs Code, Article 454(2) and (3) of the [I]mplementing [Regulation] then in force, [Article 7(1) of the Excise Duty Directive] and Article 7 of the Sixth Directive)?

AG Opinion

(1) ‘Seizure’ within the meaning of point (d) of the first paragraph of Article 233 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 955/1999 of the European Parliament and of the Council of 13 April 1999, requires physical control to be acquired by the national authorities upon unlawful introduction into the Community, by which the goods are taken into possession pending their confiscation. The ‘confiscation’ of goods within the meaning of that provision requires the irrevocable forfeiture of the power of disposal of the owner or of the person holding the power of disposal, irrespective of whether this is connected with a change of ownership to the State.

(2) Under Article 5(1) of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended by Council Directive 96/99/EC of 30 December 1996, unlawfully introduced goods are subject to excise duty only once they have gone beyond the area in which the first customs office inside the customs territory of the Community is situated. Seizure with the destruction of the goods before that point in time precludes the creation of excise duty liability. Once they have gone beyond that area, unlawfully introduced goods are subject to excise duty and at the same time the excise duty debt arises under Article 6(1) of that directive, without subsequent confiscation with destruction being able to result in the extinction or the suspension of the tax debt.

(3) With regard to unlawfully introduced goods the chargeable event for value added tax under Article 2(2) in conjunction with Article 7 and Article 10(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 2000/17/EC of 30 March 2000, occurs only once those goods have gone beyond the area in which the first customs office inside the customs territory of the Community is situated. Seizure with destruction of the goods before that point in time prevents the chargeable event from occurring. By going beyond that area, the chargeable event occurs and tax becomes chargeable without a subsequent seizure with destruction of the goods being able to result in the extinction of the chargeability.

(4) The Member State in which goods have been unlawfully introduced into the Community is competent to recover the customs debt and the value added tax debt, even if those goods were introduced into another Member State and were only discovered and seized there. The Member State in which the goods unlawfully introduced into the territory of the Community are held for commercial purposes at the time of seizure is competent to recover the excise duty debt.

Decision

1. A situation in which goods which are detained by the local customs and tax authorities when introduced into the customs territory of the Community in the area in which the first customs office is situated at the external border of the Community, and are simultaneously or subsequently destroyed by those authorities, without having left their possession, is covered by the concept of goods which are ‘seized and simultaneously or subsequently confiscated’ in point (d) of the first paragraph of Article 233 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 955/1999 of the European Parliament and of the Council of 13 April 1999, with the result that the customs debt is extinguished pursuant to that provision.

2. The third subparagraph of Article 5(1) and Article 6(1) of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended by Council Directive 96/99/EC of 30 December 1996, must be interpreted as meaning that goods seized by the local customs and tax authorities on their introduction into the territory of the Community and simultaneously or subsequently destroyed by those authorities, without having left their possession, must be regarded as not having been imported into the Community, with the result that the chargeable event for excise duty on them does not occur. Where goods are seized after their unlawful introduction into that territory, namely once they have gone beyond the area in which the first customs office inside that territory is situated, and simultaneously or subsequently destroyed by those authorities, without having left their possession, the excise duty on them is not to be deemed ‘to have been placed under a suspension arrangement’ for the purposes of the first subparagraph of Article 5(2) and Article 6(1)(c) of that directive, read in conjunction with Articles 84(1)(a) and 98 of Regulation No 2913/92, as amended by Regulation No 955/1999, and Article 867a of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Regulation No 2913/92, as amended by Commission Regulation (EC) No 1662/1999 of 28 July 1999, with the result that the chargeable event for excise duty on those goods occurs and, consequently, the excise duty on them becomes chargeable.

3. Articles 2(2), 7 and 10(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 1999/85/EC of 22 October 1999, must be interpreted as meaning that goods seized by the local customs and tax authorities on their introduction into the territory of the Community and simultaneously or subsequently destroyed by those authorities, without having left their possession, must be regarded as not having been imported into the Community, with the result that the chargeable event for value added tax on them does not occur and, consequently, that tax does not become chargeable. However, the second subparagraph of Article 10(3) in conjunction with Article 16(1)(B)(c) of that directive and Article 867a of Regulation No 2454/93, as amended by Regulation No 1662/1999, must be interpreted as meaning that, for goods which are seized by those authorities after their unlawful introduction into that territory, namely once they have gone beyond the area in which the first customs office inside that territory is situated, and are simultaneously or subsequently destroyed by those authorities, without having left their possession, the chargeable event for value added tax occurs and that tax is chargeable, even if those goods are subsequently placed under a customs warehousing procedure.

4. Articles 202, 215(1) and (3), and 217 of Regulation No 2913/92, as amended by Regulation No 955/1999, and Articles 7(2) and 10(3) of Sixth Directive 77/388, as amended by Directive 1999/85, must be interpreted as meaning that it is the authorities in the Member State situated at the external border of the Community at which the goods were unlawfully introduced into the customs territory of the Community which are competent to recover the customs debt and the value added tax, even if those goods were then transported to another Member State where they were discovered then seized. Articles 6(1) and 7(1) of Directive 92/12, as amended by Directive 96/99, must be interpreted as meaning that the authorities in that latter Member State are competent to recover the excise duty, provided that those goods are held for commercial purposes. It is for the national court to determine whether that condition is satisfied in the dispute before it.

Summary

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