Judgment summary
This request for a preliminary ruling concerned the interpretation of Article 7(1), Article 7(2)(a), Article 20(2) and Article 30 of Directive 2008/118/EC and Article 27(1) and (2) of Directive 92/83/EEC [1]. It arose in proceedings between Brenntag GmbH and the Hauptzollamt Duisburg over the determination of excise duty on alcohol Brenntag had supplied to its customers in 2016 [2].
On the first question, the Court held that the cited provisions of Directive 2008/118 preclude national legislation providing for a legal fiction that, when an authorised warehousekeeper acquires possession of goods without being physically in possession of them, those goods are deemed to have been received in its tax warehouse and simultaneously to have departed from it, thereby requiring a new duty suspension arrangement to be established [44].
On the second question, the Court held that Article 27(1) and (2) of Directive 92/83 precludes national legislation refusing an exemption from excise duty on the sole ground that required documentation is missing or was drawn up or transmitted out of time, where it is established that the goods were used for exempt purposes and there is no evidence capable of arousing suspicions as to tax evasion, avoidance or fraud [53].
Background
Brenntag is a company incorporated under German law whose activity consists in the marketing of industrial and speciality chemicals [17]. The Customs Office granted it, with effect from 21 January 2011, authorisation to store alcohol under a duty suspension arrangement, and under that authorisation Brenntag was entitled to use the onward transfer mechanism (weiterbefordern) provided for in Paragraph 26(7) of the BrStV [17].
By that mechanism, goods were transported directly from Brenntag's suppliers to its customers established within German fiscal territory, without a prior physical delivery of those goods to its tax warehouse, and the onward transfer was to be regarded as the fictitious movement of the goods from Brenntag's tax warehouse to its customers or to the premises of commercial users [17].
In 2016, Brenntag acquired alcohol from suppliers established in Belgium, Germany, France and Poland, which it partially resold to customers established in Germany [18]. BCD Chemie GmbH, which belonged to the same group as Brenntag, resold some of the alcohol to customers established in Germany [18]. The alcohol was transferred directly from the suppliers' tax warehouses to Brenntag's or BCD Chemie's customers [18]. Brenntag placed the transport orders, with the exception of five deliveries, for which the transport orders were placed by the suppliers established in Belgium and in Germany [18].
In each case, the suppliers transmitted draft electronic administrative documents before the movement of alcohol began [19]. In respect of 22 deliveries, the electronic administrative documents stated, as regards the consignee and the place of delivery, only Brenntag's name, address, excise number and tax warehouse number [19]. After delivery, Brenntag sent acknowledgements of receipt to the Customs Office [19].
Following an audit, the Customs Office charged Brenntag EUR 62 633 047.55 by way of excise duty in respect of the 2016 transactions [20]. Brenntag lodged an appeal, which the Customs Office dismissed [20][21]. Brenntag then brought an action before the Finanzgericht Düsseldorf, the referring court [22].
Core dispute
The Customs Office took the view that Brenntag's taking possession of alcohol moved under a duty suspension arrangement was to be regarded, under the first sentence of Paragraph 26(7) of the BrStV, as a fictitious receipt in Brenntag's tax warehouse, simultaneously resulting in a fictitious departure, and that Brenntag should then, as new consignor, have sent a draft electronic administrative document for the onward transfer [21].
The Customs Office found that, in certain cases, Brenntag had not placed the transport orders and had not therefore indirectly taken possession of the product, which led to an irregularity during the movement under a duty suspension arrangement within the meaning of Paragraph 143(2)(5) of the BranntwMonG [21]. In other cases, the failure to submit draft administrative documents in good time and the late issue of invoices had resulted in alcohol leaving the tax warehouse without another duty suspension arrangement applying, so the alcohol was deemed released for consumption under Paragraph 143(2)(1) of the BranntwMonG [21].
The referring court asked whether Article 7(1), Article 7(2)(a), Article 20(2) and Article 30 of Directive 2008/118 preclude national legislation such as the first sentence of Paragraph 26(7) of the BrStV [25]. It also doubted whether a national authority may refuse an exemption from excise duty on the sole ground of irregular transmission of the required documentation, without verifying whether the substantive conditions for the exemption were satisfied [26].
Court findings
On the first question, the Court noted that, under Article 2 of Directive 2008/118, products including alcohol covered by Directive 92/83 are subject to excise duty at the time of production or importation, but excise duty becomes chargeable only at the time of release for consumption under Article 7(1) [29]. The departure, including irregular departure, from a duty suspension arrangement is considered a release for consumption under Article 7(2)(a) [29].
The Court observed that the duty suspension arrangement postpones the chargeability of excise duty until one of the conditions of chargeability is met [30]. It noted that Article 17(2) permits Member States to allow movement to a place of direct delivery, but that the Federal Republic of Germany had not made use of that option [31][32].
Relying on earlier case-law, the Court held that it was the actual receipt of the goods by their consignee that determined the time of delivery under Article 20(2), and that the movement under a duty suspension arrangement can end only at the time of the actual physical receipt of the goods by the relevant consignee [34][37]. A national legal fiction such as that in Paragraph 26(7) of the BrStV could not render excise duty chargeable at the time of a fictitious departure [37]. This interpretation was supported by the need for uniform application of the concepts of departure and release for consumption across Member States [38].
On Article 30, the Court held that the possibility of simplified procedures is limited to movements taking place entirely within a Member State's territory, excluding cross-border movements such as certain movements at issue [40]. It found that Article 30 refers only to procedural aspects and cannot govern the substantive conditions of the duty suspension arrangement or the end of movements, which are governed by Article 17(1) and (2) and Article 20(2), and that Article 20(2) is binding on Member States [41][42][43].
On the second question, the Court noted that the duty suspension arrangement and the exemption from excise duty are subject to different conditions [46][47]. It held that Member States, when laying down conditions for the exemptions under Article 27(1) and (2) of Directive 92/83, must observe the principle of proportionality [49]. Where required documentation is absent or irregularly transmitted, a Member State cannot refuse the exemption if the substantive conditions are satisfied on the information available [50], unless the operator intentionally participated in evasion, avoidance or abuse, or the documentation shortcoming prevented conclusive evidence that the alcohol had been used for exempt purposes [51]. The Court noted that the referring court did not indicate specific evidence of tax evasion, avoidance or fraud, and appeared to take the view that the goods were actually used for exempt purposes [52].
Outcome
The Court ruled that Article 7(1), Article 7(2)(a), Article 20(2) and Article 30 of Directive 2008/118 preclude national legislation providing for a legal fiction that, when an authorised warehousekeeper acquires possession of goods without being physically in possession of them, those goods are deemed to have been received in its tax warehouse and simultaneously to have departed from it, thereby requiring a new duty suspension arrangement to be established [44][operative part 1].
The Court further ruled that Article 27(1) and (2) of Directive 92/83 precludes national legislation refusing exemption from excise duty on the sole ground that the required documentation is missing or was drawn up or transmitted out of time, if it is established that the goods were used for exempt purposes and there is no evidence capable of arousing suspicions as to tax evasion, avoidance or fraud [53][operative part 2].
The decision on costs is a matter for the referring court [54].
Major issues / areas of contention
- Whether EU law precludes a national legal fiction of receipt into and simultaneous departure from a tax warehouse where an authorised warehousekeeper takes only indirect possession of excise goods.
- When the movement of excise goods under a duty suspension arrangement ends, and its link to release for consumption and chargeability of excise duty under Article 20(2) and Article 7 of Directive 2008/118.
- The scope of Article 30 of Directive 2008/118 on simplified procedures, and whether it can govern substantive conditions of the duty suspension arrangement.
- Whether the principle of proportionality precludes refusing an exemption from excise duty under Article 27(1) and (2) of Directive 92/83 solely because required documentation is missing or transmitted out of time.
- The relevance of intentional participation in evasion, avoidance or abuse, and of the ability to produce conclusive evidence of exempt use.