On May 18, 2017, the ECJ issued its decision in the case C-154/16 (Latvijas dzelzceļš).
Context: Reference for a preliminary ruling — Community Customs Code — Regulation (EEC) No 2913/92 — Article 94(1) and Article 96 — External Community transit procedure — Liability of the principal — Articles 203, 204 and Article 206(1) — Incurrence of a customs debt — Unlawful removal from customs supervision — Non-fulfilment of one of the obligations flowing from the use of a customs procedure — Total destruction or irretrievable loss of the goods as a result of the actual nature of the goods or unforeseeable circumstances or force majeure — Article 213 — Payment of the customs debt under joint and several liability — Directive 2006/112/EC — Value added tax (VAT) — Article 2(1), Articles 70 and 71 — Chargeable event and chargeability of the tax — Articles 201, 202 and 205 — Persons liable for payment of the tax — Finding by the customs office at the destination of a freight deficit — Lower unloading device of a wagon-tank incorrectly closed or damaged
Article in the EU VAT Directive
Artciles 2(1)(d), 70, 71 of the EU VAT Directive 2006/112/EC
Article 2 (Subject matter & scope – Taxable transaction)
1. The following transactions shall be subject to VAT:
(d) the importation of goods.
Article 70 (Chargeable event – Importation of goods)
The chargeable event shall occur and VAT shall become chargeable when the goods are imported.
Article 71 ((Chargeable event – Importation of goods)
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
- The order for reference states that on 25 February 2011, the LDz, acting as principal, placed a group of tank wagons under the external Community transit procedure, within the meaning of Article 91 of the Customs Code, by producing a rail freight waybill. The cargo in transit, namely solvent, was to be transported by its carrier, Baltijas Tranzīta Serviss, to the customs office at its destination, which was the border control post at the port of Ventspils (Latvia).
- During the transportation of that cargo on Latvian territory, a leak from the lower unloading device was found in one of the tank wagons. On 28 February and 1 March 2011, standard reports, namely an inspection report and a technical assessment report, on the defects of the tank concerned and the measures taken to prevent damage were drawn up. On 1 March 2011, it was also recorded in a report of loss that 2 448 kilograms (kg) of cargo was missing from the tank concerned.
- On 10 March 2011, the Customs office of destination found a loss of cargo of 2 488 kg due to the fact that the lower unloading device of one of the wagon tanks in question had not been correctly closed or had been damaged. As the documents relating to the presentation of missing cargo and to completion of the transit procedure without irregularity had not been presented to the customs office and in the absence of evidence that the cargo deficit resulted from an act by the sender, the VID adopted a decision by which it calculated the LDz’s customs debt in the sum of Latvian Lats (LVL) 63.26 (about EUR 90.01) and its VAT debt in the sum of LVL 228.02 (about EUR 324.44). The LDz challenged that decision. The Director-General upheld that decision by a decision of 16 September 2011.
- The LDz then brought an action before the administratīvā rajona tiesa (District Administrative Court, Latvia) seeking annulment of that decision submitting that, in the instant case, many persons could be jointly liable for the customs debt, in particular those responsible for the technical operation of the carriage and the correct drawing up of the damage report. Furthermore, the LDz submitted that the VID had not taken into account the fact that the cargo deficit found had resulted from the total destruction or irretrievable loss of the goods concerned as a result of the actual nature of the goods or unforeseeable circumstances or force majeure.
- By judgment of 6 August 2013, that court dismissed the LDz’s action.
- By a judgment of 8 December 2014 the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia) dismissed the appeal brought by the LDz against the first instance judgment.
- During its examination of the appeal in cassation brought by the LDz, the Augstākās tiesas Administratīvo lietu departaments (Supreme Court, Administrative Cases Department, Latvia) entertained doubts, first of all, as to whether the VID and the lower courts were correct in law to have applied, in the present case, Article 203(1) of the customs code concerning the unlawful removal of goods from customs supervision. That court states in that regard that, on the one hand, the VID considers that paragraph 2.2 of the ‘Transit manual’ of the Commission’s Directorate-General ‘Taxation and Customs Union’ (Working Document Taxud/2033/2008-LV Rev. 4) of 15 September 2009 applies in all cases where a deficit in goods is found by the customs office of destination, whilst, on the other hand, the LDz emphasises the findings establishing, in the present case, that there was a leak of solvent from the tank concerned for a technical reason and refers to the measures taken to repair that damage.
- In that context, the referring court questions whether, in circumstances such as those at issue in the main proceedings, it would not be more appropriate to apply Article 204(1)(a) of the Customs Code, read in combination with the derogation laid down in Article 206(1) of that code, which permits the customs debt on importation not to be calculated if it is proved that the goods have been totally destroyed, which precludes the entry of those goods into EU economy.
- Next, the referring court recalls that the question of exoneration from the payment of duties on importation is linked to that of exoneration from VAT. In that regard, it takes as its starting point the principle that, because the application of the Customs Code does not require the calculation of customs duties on importation for goods which were destroyed while they were under the external Community transit procedure, and which, for that reason, did not enter the EU economy, VAT should also not be paid.
- Finally, that court notes that, even if it is sufficiently clear from Article 94(1) and Article 96(1) of the Customs Code that the principal is liable for the payment of the customs debt and even though the Court has emphasised in its case-law the importance of the liability of the principal in the context of safeguarding the financial interests of the European Union and the Member States, questions remain as to the meaning of the provisions of the Customs Code which provide for the liability of other persons as regards both the performance of the obligations under the external Community transit procedure and payment of the customs debt. Pursuant to both Article 203 of the Customs Code and Article 204 thereof, the circle of persons whose liability could be engaged as a result of the leak concerned may be wider than the principal alone.
- Questions
- Must Article 203(1) of Council Regulation (EEC) No 2913/92 1 of 12 October 1992 establishing the Community Customs Code be interpreted as meaning that it is applicable provided that the complete cargo is not presented at the customs office of destination of the external transit procedure, even if it is proved that the goods have been destroyed and irretrievably lost.
- If the reply to the first question is in the negative, may sufficient proof of the destruction of the goods and, consequently, the fact that the goods are excluded from entering the economic channels of the Member State, justify application of Article 204(1)(a) and Article 206 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, so that the amount of the goods destroyed during external transit is not included in the calculation of the customs debt?
- If Article 203(1), Article 204(1)(a) and Article 206 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code may be interpreted as meaning that customs duty on importation is payable on the amount of goods destroyed during external transit, may Article 2 (1)(d), Article 70 and Article 71 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning that value added tax must be paid together with import duties, even if actual entry of the goods into the economic channels of the Member State is excluded?
- Must Article 96 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code be interpreted as meaning that the principal is always responsible for payment of that customs debt, as stated in the external transit procedure, irrespective of whether the carrier has fulfilled its obligations under Article 96(2)?
- Must Article 94(1), Article 96(1) and Article 213 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code be interpreted as meaning that the Customs Authority of the Member State is required to declare jointly and severally liable all those persons who, in the specific circumstances, may be regarded as responsible for the customs debt together with the principal, in accordance with the provisions of the Customs Code?
- If the reply to the previous question is in the affirmative and if the laws of the Member State link the obligation to pay value added tax on importation of goods, in general, to the procedure under which goods may be released for free circulation, are Articles 201, 202 and 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax to be interpreted as meaning that the Member State is required to declare jointly and severally liable for payment of value added tax all those persons who, in the specific circumstances, may be regarded as liable for the customs debt under Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code?
- If the reply to questions 5 or 6 is in the affirmative, may Article 96(1) and Article 213 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, and Articles 201, 202 and 205 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning that if the customs authority of the Member State has, because of error, failed to hold any of the persons responsible together with the principal jointly and severally liable for the customs debt, this fact alone may justify releasing the principal from liability for the customs debt?
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 Regulation (EC) No 648/2005 of the European Parliament and of the Council of 13 April 2005 must be interpreted as meaning that it does not apply where the total volume of the goods placed under the external Community transit procedure has not been presented to the customs office of destination provided for in that procedure, owing to the total destruction or irretrievable loss of some of the goods, which is proven to a satisfactory standard.
2. Article 204(1)(a) of Regulation No 2913/92, as amended by Regulation No 648/2005 must be interpreted as meaning that where the total volume of goods placed under the external Community transit procedure has not been produced at the customs office of destination laid down in that procedure owing to the total destruction or irretrievable loss of some of the goods, proven to a satisfactory standard, that situation, which constitutes the non-fulfilment of one of the obligations under that procedure, namely to produce goods intact at the customs office of destination, gives rise, in principle, to a customs debt on importation for the part of the goods which was not produced at that customs office. It is for the national court to determine whether a circumstance such as damage to an unloading device meets, in the present case, the criteria of ‘force majeure’ or an ‘unforeseeable circumstance’, within the meaning of Article 206(1) of Regulation No 2913/92, as amended by Regulation No 648/2005, namely, whether it is an abnormal circumstance for a trader in the business of the transportation of liquid substances and extraneous to that trader, and whether the consequences could not have been avoided even if all due care had been exercised. In the context of that determination, that court must, in particular, take into account compliance, by operators such as the principal and the carrier, with the rules and obligations in force regarding the technical condition of tanks and the safety of transportation of liquid substances such as a solvent.
3. Article 2(1)(d) and Articles 70 and 71 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that VAT is not due on the totally destroyed or irretrievably lost part of goods placed under the external Community transit procedure.
4. Article 96(1)(a) in conjunction with Article 204(1)(a) and (3) of Regulation No 2913/92, as amended by Regulation No 648/2005, must be interpreted as meaning that the principal is liable for the payment of the customs debt arising in relation to goods placed under the external Community transit procedure, even if the carrier did not fulfil the obligations to which he was subject under Article 96(2) of that regulation, in particular the requirement to produce those goods intact at the customs office of destination within the prescribed period.
5. Article 96(1)(a) and (2), Article 204(1)(a) and (3) and Article 213 of Regulation No 2913/92, as amended by Regulation No 648/2005, must be interpreted as meaning that the customs authority of a Member State is not obliged to declare the joint and several liability of the carrier who, together with the principal, must be regarded as liable for payment of the customs debt.
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