Flashback on ECJ cases C-312/91 (Sofitam) – National rules penalizing VAT offences on imports more severely than those on domestic sales

On July 1, 1993, the ECJ issued its decision in the case C-312/91 (Sofitam).

Context: Procedural issue relating to a seizure of goods belonging to Metalsa Srl. – Reference for a preliminary ruling: Tribunale di Milano – Italy. – EEC-Austria Free Trade Agreement – Prohibition of tax discrimination

Article in the EU VAT Directive

N/A

Facts

By order of 8 November 1991, received at the Court on 2 December 1991, the Giudice per le Indagini Preliminari (Judge Responsible for preliminary enquiries) of the Tribunale di Milano (District Court, Milan) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of the first paragraph of Article 18 of the Agreement between the European Economic Community and the Republic of Austria, signed in Brussels on 22 July 1972, concluded and adopted in the name of the Community by Council Regulation (EEC) No 2836/72 of 19 December 1972 (OJ, English Special Edition 1972 (31 December ° JO L 300), p. 3).
That question was raised in connection with an action brought by Metalsa Srl against the Italian Public Prosecutor, who, by a decision of 3 July 1991 in the course of criminal proceedings against Gaetano Lo Presti, ordered the seizure of 205 885 kg of aluminium ingots, imported from Austria by Metalsa, on the ground that the company had not paid the VAT due on importation. In the context of those criminal proceedings, relating to a fraudulent importation from Austria, the seizure is merely an interim measure, whereas the aluminium ingots must be confiscated if that fraudulent importation is confirmed in final decision.
When the Public Prosecutor refused, by decision of 13 July 1991, a request for the return of the goods, Metalsa lodged an objection to that decision on 19 July 1991 with the office of the Judge responsible for preliminary enquiries of the Tribunale di Milano and requested the release of the goods, arguing that the penalty was disproportionate as compared with that imposed in respect of a VAT offence arising out of a domestic transaction.
Metalsa claimed that the disproportion amounted to a discriminatory internal fiscal measure or practice prohibited by Article 18 of the free trade agreement between the EEC and Austria. Metalsa relied on the interpretation of Article 95 of the EEC Treaty laid down by the Court of Justice in Case 299/86 Drexl [1988] ECR 1213), which it claimed should be transposed to the interpretation of Article 18 of the agreement with Austria.

Questions

Are national rules punishing offences concerning value added tax on importation more severely than those concerning value added tax on domestic sales of goods compatible with Article 18 of the Agreement between the EEC and Austria when that difference is disproportionate to the dissimilarity between the two categories of offence, having regard to the answer given to a similar question in the judgment of 25 February 1988 (Drexl) in relation to Article 95 of the EEC Treaty?

AG Opinion

Article 18, first paragraph, of the Agreement on free trade between the EEC and Austria does not require any comparison to be made between penalties imposed by Member States for tax offences on imports from Austria and penalties for tax offences on domestic transactions or on imports from other Member States. However a Member State may not impose a penalty for an offence concerning the payment of value added tax on imports from Austria which is so disproportionate to the seriousness of the offence as to pose an obstacle to the exercise of the right of free trade provided for by the Agreement.

Decision

The first paragraph of Article 18 of the Agreement between the European Economic Community and the Republic of Austria, signed in Brussels on 22 July 1972, concluded and approved, in the name of the Community, by Regulation (EEC) No 2836/72 of the Council of 19 December 1972 must be interpreted, unlike Article 95 of the EEC Treaty, as meaning that national rules which penalize offences concerning VAT on importation more severely than those concerning VAT on domestic sales of goods are not incompatible with that provision of the agreement, even if that difference is disproportionate to the dissimilarity between the two categories of offence.

Summary

The first paragraph of the Agreement between the European Economic Community and the Republic of Austria allows for national rules that penalize VAT offences on imports more severely than those on domestic sales, even if the difference is disproportionate. This is contrary to Article 95 of the EEC Treaty.

Source